Statement re Interim Results

25th Nov 2009 07:00



SEPURA PLC

INTERIM RESULTS ANNOUNCEMENT

FOR THE  HALF YEAR ENDED 30 SEPTEMBER 2009

Sepura plc (the "Company"), a leading global provider of TETRA digital mobile radios, today announces its interim results for the six month period ended 30 September 2009.

An analyst presentation of the interim results will be held today at 9.00 am at the offices of Goldman Sachs, Peterborough Court, 133 Fleet Street, London.

 

 

Summary Financial Information	30 September 2009 £'000 (Unaudited)	30 September 2008 £'000 (Unaudited)	% change
Total revenue	31,576	32,897	- 4%
EBITDA	6,970	8,416	-17%
Operating profit	2,012	4,958	- 59%
Diluted EPS	1.6p	2.7p	- 41%
Net funds	£3.2m	£0.6m	+ 433%
Adjusted diluted EPS (excluding capitalisation of R&D)	1.1p	1.1p	-
Interim dividend	0.42p	0.42p	-

  Philip Nolan, Chairman of Sepura, commenting on the first half performance and outlook, said:

"The Company has delivered a solid performance in achieving financial results in line with its forecasts, during a period when customer budgets continue to be under close scrutiny.

Our earnings outlook for the remainder of this financial year remains unchanged. Further out we are cautiously optimistic that we will see continued revenue growth in 2010/2011."

The Interim Report to Shareholders will be issued on 8 December 2009.

FOR FURTHER INFORMATION PLEASE CONTACT:

Sepura Tel: 01223 876 000

Philip Nolan, Chairman

Gordon Watling, Chief Executive Officer

Steve Mole, Chief Financial Officer

Powerscourt (Media Enquiries) Tel: 020 7250 1446

Paul Durman / Rob Greening

CAUTIONARY STATEMENT:

This Interim Results announcement contains certain forward-looking statements with respect to the operations, performance and financial condition of Sepura. By their nature, future events and circumstances can cause results and developments to differ from those anticipated. Nothing in this Interim Results announcement should be construed as a profit forecast. No undertaking is given to update the forward-looking statements whether as a result of new information, future events or otherwise. 

NOTES TO EDITORS:

About Sepura

Sepura is a global leader in the design, development and supply of TETRA (TErrestrial Trunked RAdio) digital mobile radios. These are secure communication devices dedicated to professional front-line services and first-responder personnel users, predominantly in the public safety sector (i.e. police, fire, ambulance and rescue), but also in the transport, military, utilities and commercial sectors.

TETRA technology facilitates reliable radio communications at all times and offers secure voice and data transmissions - free from the possibility of eavesdropping. It is mission critical and often life saving benefits such as these that are driving and accelerating the continued migration from analogue to digital communication networks. TETRA has now become the dominant and fastest growing digital Private Mobile Radio standard in the world and is present in more than 100 countries.

Sepura is focused solely on TETRA radio terminals and accessories. Our vision is to become the number one supplier of TETRA radios globally and we are making good progress in this strategic direction.

Based in Cambridge, England and employing some 300 employees, Sepura was admitted to the Official List of the London Stock Exchange on 3 August 2007.

For further information please visit www.sepura.com.

CHAIRMAN'S STATEMENT

The Company has delivered a solid performance in achieving financial results in line with its forecasts, during a period when customer budgets continue to be under close scrutiny. In the period, we grew our market share of shipments and recorded major new contract wins. We have continued to develop important new products but with greater efficiency and hence reduced cost. At the same time we have been able to invest in sales and marketing, while reducing costs elsewhere across the business.

Independent estimates by IMS indicate that Sepura has grown its market share of shipments in EMEA to 40%.

We are encouraged by our major contract wins this year, especially in the important German market. Here we have won the majority of volumes which were awarded, against exacting technical requirements. In addition we have won contracts for nationwide deployments in Portugal and Lithuania. These and other contract awards represent a strong platform for revenue growth from 2010 onwards as customers order against these contracts.

We have completed the restructuring outlined at year end and reduced our cash operating costs by 12% for the half year. We also significantly reduced our capital expenditure. Our operating cash flow remains healthy and our balance sheet remains strong. The Board is declaring an interim dividend of 0.42p per share.

As previously announced Stephen Mole joined the Group as Chief Financial Officer on 19 October replacing Stephen Crowther, who stepped down after 6 years with Sepura.  I would like to thank Stephen Crowther for his contribution to the Group's success, wish him well for the future and welcome Stephen Mole to the Board.

Our earnings outlook for the remainder of this financial year remains unchanged. Further out we are cautiously optimistic that we will see continued revenue growth in 2010/2011.

 

INTERIM MANAGEMENT REPORT

The results for the first six months of the year are in line with our forecasts. Our market share gains in EMEA failed to compensate for the decline in volumes shipped in the overall TETRA market. Consequently our volumes have declined by just under 9%, our revenue by 4% and our gross margin by six percentage points. In response, we have managed to reduce our cash operating costs by 12% for the half year. We also significantly reduced our capital expenditure. Thus despite the revenue decline our operating cashflow (EBITDA minus capex) was £1.6m compared to £0.7m in the same period last year.

Whilst managing our costs, we have secured significant contracts to underpin our future growth. We continue to win the majority of volumes in Germany and in this period we won contracts for 40,000 terminals in Hamburg and Saxony. We have now won seven out of the nine states which have tendered. We have also been awarded a national framework contract in Portugal to supply up to 40,000 radios over the next three years and a new contract to supply 2,000 radios in Lithuania. Although none of these contracts generated revenue in the first half of this year, we expect deliveries on all to commence before year end and to make a material contribution in future years.

foreign EXCHANGE

Foreign exchange rates, primarily the strengthening of the Euro compared to the same period last year, have impacted the first half results. This was beneficial to revenue, but detrimental to the cost of goods purchased in Euros. Overall the impact of foreign exchange movements has reduced the gross margin by 2% compared with last year. After allowing for the benefit of Euro-denominated overheads the net effect on operating profit for the first half was minimal.

Revenue

	Half-year ended30 September 2009	Half-year ended30 September 2008	Year ended31 March 2009
Revenue (£000s)	31,576	32,897	74,100
Volumes (000s of units)	54.0	59.3	125.5
ARPUS (1) (£)	585	554	591

(1) Average Revenue Per Unit Shipped

Revenues for the period were in line with expectations at £31.6m, down 4% despite the strength of the Euro compared to the first half of last year. On a constant currency basis revenues would have decreased by 10%. Total volumes decreased 9% as many TETRA markets were affected as forecast by a combination of economic pressures and delays in infrastructure deployment. However, independent data shows our market share in EMEA increased to 40% for the nine months to 30 September 2009 despite the difficult environment, and we shipped to a total of 62 countries, including four new territories. Of these Pakistan was the most significant with 10,000 radios delivered in fulfilment of the order originally placed during 2007.

The UK remained our largest market, and we delivered 16,000 radios as the replacement cycle continued as expected. Other major markets during the period included Germany, where we supplied 8,000 radios to German customers under existing framework contracts. A further 21,000 radios remain to be called off under these as the BD-BOS network deployment continues. Some 3,000 radios were delivered in Italy as the infrastructure roll-out resumed, and Spain and Sweden continued to demonstrate high levels of demand for our radios.

The increase in ARPUS of 6% compared to the first six months of last year reflects the strengthening of the Euro, without which ARPUS would have fallen by 1%.

  Gross Margin

Our overall gross margin was 47%. As we purchase the majority of our products in Euros, foreign exchange has had a significant impact, and on a constant currency basis the gross margin would have been 49%. The remainder of the decline compared to last year was due to customer and product mix, including the ongoing UK replacement business.

We expect pricing to remain competitive in the current economic climate, and we have continued to work with our suppliers to reduce the underlying costs of our products. The transfer of our European production to MELECS in April, combined with sourcing additional volumes from TCB, our manufacturing partner in China, are important steps in our longer-term strategy of protecting our margins.

Research and Development

Innovation remains at the heart of our offering, and we have continued to work closely with our customers and partners to develop the products and features they need. During the period we launched our Handset-Based Console, which frees valuable dashboard space by combining the functionality of a traditional radio console with a telephone handset. We also partnered with BMW to integrate our mobile radio's display with BMW's iDrive screen for use in police vehicles. We have extended the STP8000 range by developing a simplified user interface for markets which require less functionality while retaining the core STP rugged build and audio performance.

Gross expenditure during the period on R&D totalled £6.4m (2009: £7.5m), of which 74% (2009: 73%) was capitalised. The decrease reflected both the impact of the restructuring announced on 31 March 2009, and the completion of development work on the STP8000 and SRH3900 products. We have commenced the amortisation of the costs associated with these key products following their launch, with the result that total amortisation increased from £2.5m to £3.9m and the total R&D charge in the income statement increased by 24% to £5.5m (2009: £4.5m).

Selling, Marketing and Distribution Costs and Administrative Expenses

During the period we completed the restructuring of our cost base announced on 31 March 2009, which will improve efficiency and generate resources to invest in key emerging markets.  This has had an immediate impact on our overheads, with selling, marketing and distribution costs falling 8% to £4.4m (2008: £4.8m) and administrative expenses reducing by 10% to £2.9m (2009: £3.2m).

Our strategy to reinvest these cost savings is underway, with additional sales resources recruited in the Middle East, Latin America and Asia, leading to the opening of our Malaysian office in October. We continued in our role as sole Platinum Sponsor to The TETRA World Congress, and once again hosted our own "Talk TETRA" conference for end-users and partners.

Taxation

The Group continues to benefit from research and development credits, which reduce the tax charge in the income statement relative to the standard UK rate of Corporation Tax of 28%. The timing of our eligible expenditure, relative to trading profits, generated a tax credit of £0.3m during the period (2009: charge of £1m). The Group has unutilised trading losses of approximately £30m to offset against future UK trading income.

Earnings Per Share

Our basic and diluted EPS for the period was 1.6p, compared to 2.7p for the six months ended 30 September 2009. After excluding the impact of capitalising our research and development costs, adjusted diluted EPS was flat at 1.1p (2009: 1.1p).

Dividends

The Board has declared a dividend of 0.42 pence per Ordinary share. This interim dividend will be payable on 7 January 2010 to those shareholders on the register at 4 December 2009.

  Cashflow and Financing

We generated £5.5m (2008: £7.7m) of operating cash during the period under review, excluding the settlement of restructuring costs incurred last year of £1m. Operating cashflows included a net increase in working capital of £1.5m (2008 £0.8m), due primarily to the settlement of creditors relating to inventory purchases at the end of last year which were needed to support the high level of year-end sales, and to provide buffer stock during the transfer of production to MELECS. Inventory levels fell by £1.2m compared to the end of the year as this buffer stock was utilised and as our programme of improving inventory management continued.

R&D expenditure capitalised during the period totalled £4.7m, while other capital expenditure totalled £0.7m, down from £5.5m and £2.3m respectively compared to the six months ended 30 September 2008. The latter period included significant costs on the STP8000 product which was launched last year, and the final instalment of £1m relating to the buy-out of one of our IPR licences.  Other significant cash outflows during the half-year included £1.6m of scheduled repayments and net interest on our borrowings, and £1.2m in relation to last year's final dividend.

Our cash balances at 30 September 2009 were £12.1m (2008: £12.5m), and our net funds, after deducting outstanding borrowings, were £3.2m (2008: £0.6m). Our borrowings comprise a term loan, of which £9m was outstanding at 30 September 2009 with scheduled capital repayments of £3m a year for the next three years. We also have £15m of undrawn committed credit facilities which are available until September 2012. Net interest cover was 15 times (2008: 17), and the Group was ungeared at the end of the period.

RETAINED EARNINGS

During the period under review retained earnings increased by £1.2m to £37.0m.

Share Capital

No shares were issued during the half-year under review. Options previously granted over 1.3m Ordinary shares lapsed or were forfeited during the period. The Company issued its second annual invitation to staff to participate in the all-employee SAYE scheme, which resulted in a further grant of options over 2.8m shares.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Group for the first six months and the remaining six months of the financial year continue to be those stated on Page 18 of the Group's 2009 Annual Report and Accounts, which are summarised as follows:

 

Note		Half-year ended30 September		Year ended31 March 2009
		2009 £'000 (Unaudited)	2008 £'000 (Unaudited)	Before non-recurring items£'000 (Audited)	Non-recurring items 1£'000 (Audited)	Total  £'000 (Audited)
Revenue		31,576	32,897	74,100	-	74,100
Cost of sales		(16,734)	(15,449)	(35,214)	-	(35,214)
Gross profit		14,842	17,448	38,886	-	38,886
Selling, marketing and distribution costs		(4,410)	(4,806)	(9,352)	(397)	(9,749)
Research and development costs		(5,513)	(4,458)	(10,020)	(1,727)	(11,747)
Administrative expenses		(2,846)	(3,271)	(6,500)	(378)	(6,878)
Other (losses) gains		(61)	45	(7)	-	(7)
Operating profit		2,012	4,958	13,007	(2,502)	10,505
Financial income		31	250	364	-	364
Financial expense		(167)	(534)	(869)	-	(869)
Net financial expense		(136)	(284)	(505)	-	(505)
Profit before income tax		1,876	4,674	12,502	(2,502)	10,000
Income tax credit (expense)	6	280	(979)	(1,970)	701	(1,269)
Profit / total comprehensive income for the period attributable to equity holders		2,156	3,695	10,532	(1,801)	8,731
Earnings per share (p)
Basic	7	1.6	2.7	7.7	(1.3)	6.4
Diluted	7	1.6	2.7	7.6	(1.3)	6.3

1 Non-recurring items comprise restructuring costs and impairment charges.

The results above relate to continuing operations.

 

For the half-year ended 30 September 2009 (Unaudited)	Share capital £'000	Retained earnings £'000	Total £'000
At 1 April 2009	68	35,761	35,829
Profit / total comprehensive income for the period	-	2,156	2,156
Excess tax on share option scheme	-	275	275
Employee share option scheme: value of employee services	-	(27)	(27)
Dividends paid to shareholders	-	(1,160)	(1,160)
At 30 September 2009	68	37,005	37,073

For the half-year ended 30 September 2008 (Unaudited)
At 1 April 2008	68	28,520	28,588
Profit / total comprehensive income for the period	-	3,695	3,695
Excess tax on share option scheme	-	246	246
Employee share option scheme: value of employee services	-	103	103
Dividends paid to shareholders	-	(1,160)	(1,160)
At 30 September 2008	68	31,404	31,472

CONDENSED CONSOLIDATED HALF-YEAR BALANCE SHEET

	Note	30 September 2009 £'000 (Unaudited)	30 September 2008 £'000 (Unaudited)	31 March 2009 £'000 (Audited)
Assets
Non-current assets
Intangible assets	9	23,496	21,660	22,747
Property, plant and equipment	9	3,556	4,493	4,208
Deferred tax asset		2,978	2,876	2,411
Total non-current assets		30,030	29,029	29,366
Current assets
Inventories		8,952	8,689	10,196
Trade and other receivables		19,357	13,383	21,414
Derivative financial instruments		-	45	-
Cash and cash equivalents		12,090	12,538	15,771
Total current assets		40,399	34,655	47,381
Total assets		70,429	63,684	76,747
Liabilities
Current liabilities
Borrowings	10	(2,952)	(2,952)	(2,952)
Derivative financial instruments		(61)	-	(7)
Finance lease liabilities		-	(126)	-
Trade and other payables		(16,397)	(12,645)	(22,177)
Income tax payable		(462)	(442)	(479)
Provisions		(767)	(427)	(1,734)
Total current liabilities		(20,639)	(16,592)	(27,349)
Non-current liabilities
Borrowings	10	(5,902)	(8,853)	(7,378)
Trade and other payables		(6,033)	(6,119)	(5,382)
Provisions		(782)	(648)	(809)
Total non-current liabilities		(12,717)	(15,620)	(13,569)
Total liabilities		(33,356)	(32,212)	(40,918)
Net assets		37,073	31,472	35,829
Shareholders' equity
Ordinary share capital	11	68	68	68
Retained earnings		37,005	31,404	35,761
Total shareholders' equity		37,073	31,472	35,829

The condensed consolidated financial statements were approved by the Board and authorised for issue on 24 November 2009 and are signed on its behalf by:

Gordon Watling Stephen MoleChief Executive Officer Chief Financial Officer

 

	Note	Half-year ended 30 September 2009 £'000 (Unaudited)	Half-year ended 30 September 2008 £'000 (Unaudited)	Year ended 31 March 2009 £'000 (Audited)
Profit before income tax		1,876	4,674	10,000
Adjustments for:
Depreciation charges		855	825	1,806
Loss on disposal of property, plant and equipment		-	1	1
Amortisation charges		4,103	2,633	5,949
Impairment of intangible assets		-	-	1,231
Equity settled share based payment charge		(27)	103	209
Loss (gain) on derivative financial instruments		54	(45)	35
Financial income		(31)	(250)	(364)
Financial expense		167	534	869
Cash generated from operations before movements in working capital		6,997	8,475	19,736
Decrease (increase) in inventories		1,244	(192)	(1,699)
Decrease (increase) in trade and other receivables		2,057	2,737	(5,355)
(Decrease) increase in trade and other payables		(4,762)	(3,462)	5,053
(Decrease) increase in provisions		(994)	140	1,608
Movements in working capital		(2,455)	(777)	(393)
Cash generated from operations		4,542	7,698	19,343
Income taxes paid		(29)	-	-
Net cash generated from operating activities		4,513	7,698	19,343
Cash flow from investing activities
Interest received		31	250	364
Purchase of property, plant and equipment		(564)	(1,313)	(1,755)
Capitalised development costs		(4,718)	(5,463)	(10,861)
Purchase of other intangible assets		(134)	(956)	(1,175)
Proceeds on disposal of property, plant and equipment		-	1	10
Net cash used in investing activities		(5,385)	(7,481)	(13,417)
Cash flow from financing activities
Repayments of borrowings		(1,500)	(1,500)	(3,000)
Interest paid		(149)	(511)	(821)
Dividends paid to shareholders		(1,160)	(1,160)	(1,733)
Repayment of capital element of finance leases		-	(105)	(198)
Net cash used in financing activities		(2,809)	(3,276)	(5,752)
Net (decrease) increase in cash and cash equivalents		(3,681)	(3,059)	174
Cash and cash equivalents at the beginning of the period		15,771	15,597	15,597
Cash and cash equivalents at the end of the period	12	12,090	12,538	15,771

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFOR THE HALF-YEAR ENDED 30 SEPTEMBER 2009

1. General information

Sepura plc ("the Company") is a public limited company incorporated and domiciled in England and Wales, whose Ordinary shares of £0.0005 each are traded on the Main Market of the London Stock Exchange. The Company's registered office is Radio House, St Andrew's Road, Cambridge, CB4 1GR, England.

The condensed consolidated financial statements were approved for issue on 24 November 2009.

The condensed consolidated financial statements do not constitute the statutory accounts of the Company within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2009 have been delivered to the Registrar of Companies. The auditors have reported on those accounts and their report was not qualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

2. Basis of preparation

The condensed consolidated financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 "Interim financial reporting" as adopted by the European Union. The condensed consolidated financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2009, which have been prepared in accordance with IFRS as adopted by the European Union. The methods of computation and presentation, expect as set out in Note 3 below, applied in the preparation of the most recent Annual Report have been followed in the preparation of these condensed consolidated financial statements.

3. Significant accounting policies

The accounting policies adopted are consistent with those of the financial statements for the year ended 31 March 2009, as described in those financial statements, except for the adoption of the following accounting standards which have become effective for the year ending 31 March 2010:

4. Segmental reporting

IFRS 8 defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. IFRS 8 also sets out the process by which operating segments may be amalgamated into reportable segments because they share the same economic characteristics due to the nature of the products sold, the production processes used and the type of customer for the products.

4. Segmental reporting (continued)

In adopting IFRS 8 the Board has concluded that the Company has a single reportable segment, being the design, development and supply of TErrestrial Trunked RAdio ("TETRA") digital mobile radios. In reaching this conclusion the Board has considered the following:

5. EBITDA

Earnings before interest, tax, depreciation and amortisation has been calculated as follows:

	Half-year ended 30 September 2009 £'000 (Unaudited)	Half-year ended 30 September 2008 £'000 (Unaudited)	Year ended 31 March 2009 £'000 (Unaudited)
Operating profit , excluding non-recurring items	2,012	4,958	13,007
Depreciation (see Note 9)	855	825	1,806
Amortisation (see Note 9)	4,103	2,633	5,949
EBITDA	6,970	8,416	20,762

6. Income tax (credit) expense

The income tax (credit) expense for the period is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full year. The tax charge for the period is lower than the standard rate of Corporation Tax in the UK, which is 28% (2009: 28%). The differences are explained below:

	Half-year ended 30 September 2009 £'000 (Unaudited)	Half-year ended 30 September 2008 £'000 (Unaudited)	Year ended 31 March 2009 £'000 (Audited)
Profit before income tax	1,876	4,674	10,000
At standard rate of Corporation Tax in the UK	525	1,309	2,800
Effects of:
Research and development enhanced expenditure	(836)	(362)	(1,601)
Expenses not deductible for tax purposes	27	28	62
Effect of overseas tax rates	4	4	8
Total tax (credit) expense	(280)	979	1,269

  7. Earnings per share

Basic earnings per share has been calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of shares of the Company. For diluted earnings per share, the weighted average number of shares is adjusted to allow for the conversion of all dilutive equity instruments.

	Half-year ended 30 September 2009 (Unaudited)	Half-year ended 30 September 2008 (Unaudited)	Year ended 31 March 2009 (Audited)
Earnings attributable to ordinary shareholders (£'000)	2,156	3,695	8,731
Number of shares
Basic weighted average number of shares ('000)	136,479	136,412	136,412
Effect of dilutive securities:
Employee incentive plans ('000)	906	1,063	1,913
Diluted weighted average number of shares ('000)	137,385	137,475	138,325
Basic EPS (p)	1.6	2.7	6.4
Diluted EPS (p)	1.6	2.7	6.3

Adjusted earnings per share

The Group presents adjusted earnings per share figures which exclude the impact of non-recurring costs incurred in the current and prior periods. Adjusted earnings per share has been based on adjusted basic earnings for each financial period and on the same number of diluted weighted average shares in issue as the GAAP earnings per share calculation above.

	Half-year ended 30 September 2009 £'000(Unaudited)	Half-year ended 30 September 2008 £'000 (Unaudited)	Year ended 31 March 2009 £'000 (Audited)
Earnings attributable to ordinary shareholders	2,156	3,695	8,731
Restructuring costs, net of tax	-	-	1,801
Adjusted earnings attributable to ordinary shareholders excluding restructuring costs	2,156	3,695	10,532
Adjusted basic EPS excluding restructuring costs (p)	1.6	2.7	7.7
Adjusted diluted  EPS excluding restructuring costs (p)	1.6	2.7	7.6

 

 

7. Earnings per share (continued)

The Group also presents an adjusted earnings per share figure which excludes the capitalisation of R&D costs (together with associated amortisation and net of UK Corporation Tax at the standard rate). This adjusted earnings per share figure has been based on adjusted basic earnings for each financial period and on the same number of diluted weighted average shares in issue as the GAAP earnings per share calculation above.

	Half-year ended 30 September 2009 £'000(Unaudited)	Half-year ended 30 September 2008 £'000 (Unaudited)	Year ended 31 March 2009 £'000 (Audited)
Adjusted earnings attributable to ordinary shareholders excluding restructuring costs	2,156	3,695	10,532
Reversal of capitalised R&D and associated amortisation, net of UK Corporation Tax at 28% (2008: 28%)	(611)	(2,159)	(3,806)
Adjusted earnings attributable to ordinary shareholders excluding capitalised R&D and restructuring costs	1,545	1,536	6,726
Adjusted diluted EPS excluding capitalised R&D and restructuring costs(p)	1.1	1.1	4.9

8. Dividends

During the period the Company paid a final dividend in respect of the financial year ended 31 March 2009 of 0.85p per Ordinary share, totalling £1,160,000.

An interim dividend for the financial year ending 31 March 2010 of 0.42p per Ordinary share has been declared payable by the Company on 7 January 2010 to shareholders on the register at the close of business on 4 December 2009.  The declared dividend has not been included as a liability in these condensed consolidated financial statements.

  9. Capital expenditure

Half-year ended 30 September 2009(Unaudited)	Capitalisation of development costs £'000	Software and similar licences £'000	Total intangible assets £'000 £'000	Property, plant and equipment £'000 £'000
Net book value at 1 April 2009	20,968	1,779	22,747	4,208
Additions	4,718	134	4,852	203
Amortisation or depreciation charge	(3,870)	(233)	(4,103)	(855)
Net book value at 30 September 2009	21,816	1,680	23,496	3,556

Major additions to property, plant and equipment comprised test and IT equipment.

Half-year ended 30 September 2008(Unaudited)	Capitalisation of development costs £'000	Software and similar licences £'000	Total intangible assets £'000 £'000	Property, plant and equipment £'000 £'000
Net book value at 1 April 2008	16,913	1,849	18,762	4,270
Additions	5,463	68	5,531	1,050
Amortisation or depreciation charge	(2,464)	(169)	(2,633)	(825)
Disposals	-	-	-	(2)
Net book value at 30 September 2008	19,912	1,748	21,660	4,493
Year ended 31 March 2009(Audited)	Capitalisation of development costs £'000	Software and similar licences £'000	Total intangible assets £'000 £'000	Property, plant and equipment £'000 £'000
Net book value at 1 April 2008	16,913	1,849	18,762	4,270
Additions	10,861	304	11,165	1,755
Amortisation or depreciation charge	(5,575)	(374)	(5,949)	(1,806)
Disposals	-	-	-	(11)
Impairment	(1,231)	-	(1,231)	-
Net book value at 31 March 2009	20,968	1,779	22,747	4,208

  10. Borrowings

On 27 October 2006 the Group entered into a £30,000,000 multi-currency term loan and revolving facilities agreement with a floating interest rate of 1.5% over LIBOR. £15,000,000 was drawn down against the facility on 27 October 2006, and is repayable in 60 equal quarterly instalments commencing in December 2007. The outstanding capital at 30 September 2009 was £9,000,000 (30 September 2008: £12,000,000; 31 March 2009: £10,500,000), and unamortised issue costs were £146,000 (30 September 2008: £195,000; 31 March 2009: £170,000).

The unused facility of £15,000,000 expires on 11 September 2012.

11. Share capital

The Company did not issue any Ordinary shares of £0.0005 each during the period and accordingly at the end of the period the Company's issued share capital comprised 136,478,580 Ordinary shares of £0.0005 each (30 September 2008: 136,476,200 and 31 March 2009: 136,478,580).

12. Reconciliation of cash flows to movements in net funds (debt)

	Half-year ended 30 September 2009 £'000 (Unaudited)	Half-year ended 30 September 2008 £'000 (Unaudited)	Year ended 31 March 2009 £'000 (Audited)
Net (decrease) increase in cash and cash equivalents	(3,681)	(3,059)	174
Repayment of borrowings	1,500	1,500	3,000
Repayment of finance lease liabilities	-	105	198
Changes in net (debt) funds resulting from cash flows	(2,181)	(1,454)	3,372
Amortisation of debt issue costs	(24)	(23)	(48)
Loss on disposal and repurchase of financial assets amortised over the course of the finance lease	-	42	75
Net movements in net (debt) funds	(2,205)	(1,435)	3,399
Net funds at the beginning of the period	5,441	2,042	2,042
Net funds at the end of the period	3,236	607	5,441
Net funds comprise:
Cash and cash equivalents	12,090	12,538	15,771
Borrowings	(8,854)	(11,805)	(10,330)
Finance lease liabilities	-	(126)	-
	3,236	607	5,441

13. Seasonality

The Group's financial results have not historically been subject to any significant seasonal trends.

14. Contingent liabilities

During previous periods the Group issued performance bonds to customers totalling £340,000 which have not been provided for in these accounts since no actual liability is expected to arise.

15. Post balance sheet events

There have been no post balance sheet events of any significance.

  Statement of Directors' responsibilities

A copy of the condensed consolidated financial statements of the Group is placed on the Company's website. The Directors are responsible for the maintenance and integrity of information on the Company's website. Information published on the internet is accessible in many countries with different legal requirements. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.

The Directors confirm that to the best of their knowledge:

The Directors of the Group are listed in the Group's Annual Report for the year ended 31 March 2009 with the exception of the following changes after the end of the period: Stephen Crowther resigned on 2 October 2009 and Stephen Mole was appointed on 19 October 2009. A list of the current directors is maintained on the Sepura website: www.sepura.com.

By order of the Board,

Gordon Watling

Chief Executive Officer

Stephen Mole

Chief Financial Officer

24 November 2009

  INDEPENDENT REVIEW REPORT TO SEPURA PLC

Introduction

We have been engaged by the Company to review the condensed consolidated financial statements in the half-yearly financial report for the six months ended 30 September 2009, which comprises the condensed consolidated half-year statement of comprehensive income, condensed consolidated half-year statement of changes in equity, condensed consolidated half-year balance sheet, condensed consolidated half-year statement of cash flows and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements in the half-yearly financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

Cambridge

24 November 2009

ENDIR PUGGWGUPBGBC

---

Related Shares:

SEPU.L