For best results when printing this announcement, please click on the link
below:
http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20140610:nRSJ1990Ja
RNS Number : 1990J
Gooch & Housego PLC
10 June 2014
For immediate release 10 June 2014
GOOCH & HOUSEGO PLC
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2014
Gooch & Housego PLC (AIM:GHH), the specialist manufacturer of optical
components and systems, today announces its interim results for the six months
ended 31 March 2014.
Year ended 30 September HY2014 HY2013 Change FY2013
Revenue (£m) 34.4 29.0 18.6% 63.3
Adjusted profit before tax (£m)1 5.1 3.8 34.2% 9.7
Adjusted basic earnings per share (pence)1 15.9 12.7 25.2% 32.0
Interim dividend per share (pence) 2.6 2.3 13.0% 6.3
Net cash (£m) 2.3 0.7 228.6% 5.7
Statutory profit before tax (£m) 3.7 3.3 12.1% 8.3
Basic earnings per share (pence) 11.0 11.2 (1.8%) 27.7
1 Adjusted for amortisation of acquired intangible assets, site closure costs,
the impairment of goodwill and the gain on bargain purchase in relation to
Spanoptic Limited.
Operational highlights
· Strong performance from Aerospace & Defence and Industrial divisions
· Acquisition of Spanoptic in October 2013 adds complementary precision
optics business
· Acquisition of Constelex in November 2013 strengthens Systems
Technology Group
· Systems Technology Group successful in securing contracts and funded
projects
· Rationalisation of manufacturing and R&D sites initiated
· Investment in R&D up 19%; 4 patents granted and 6 filed so far this
year
· Solid order book of £29.7 milion at the end of the period
· Net cash of £2.3 million at period end after investing £5.5 million
(net) in acquisitions
Gareth Jones,Chief Executive of Gooch & Housego PLC, commented on the
results:
"Gooch & Housego's markets continue to exhibit attractive, long-term
structural growth drivers as photonic technology is adopted across an
increasingly wide range of application areas. We continue to invest in our
business with confidence to position it for sustainable long-term growth."
For further information please contact:
Gooch & Housego PLC Gareth Jones / Andrew Boteler 01460 256 440
Buchanan Mark Court / Gabriella Clinkard 020 7466 5000
Investec Bank plc (Nomad & Broker) Patrick Robb / David Anderson 020 7597 5169
Operating and Financial Review
Performance Overview
In the six months to 31 March 2014, the business has once again delivered
profitable growth and improving margins in less than buoyant market
conditions. The trend towards a more evenly balanced business has continued,
reflecting not only our strategy of diversification and our efforts to develop
new opportunities in Aerospace & Defence and Life Sciences, but also our
success in growing the business in our "new industrial" markets.
REVENUE
Six months ended 31 March 2014 2013
£'000 % of total £'000 % of total
Industrial 18,917 55% 16,404 56%
Aerospace and Defence 10,218 30% 7,437 26%
Life Sciences 3,608 10% 3,142 11%
Scientific Research 1,679 5% 2,006 7%
Group Revenue 34,422 100% 28,989 100%
Group revenue for the half year was a record £34.4 million, an increase of
£5.4 million, or 19% over the comparative period last year. On a constant
currency basis revenue was 22% higher. Excluding the impact of acquisitions,
Group revenue increased by 7% compared with the same period last year.
In our industrial market, revenues were 15% up on the corresponding period
last year and up 5% excluding the impact of acquisitions. A solid
performance in our industrial laser market was supplemented by better demand
from the telecommunications and semiconductor sectors.
Aerospace & Defence produced an excellent result with revenues up 37% on an
absolute basis and 22% after excluding the impact of acquisitions. This
growth has been driven by strong sales of sub-assemblies for defence
applications and continued buoyancy in the sales of navigation components for
the civil aerospace market. Budgetary constraints in the US continue to
create headwinds, although these are having less of an impact on established
programmes.
Life Sciences revenues were up 15% in absolute terms compared with the same
period last year, but were flat excluding acquisitions.
In line with our expectations, constrained government spending continues to
adversely affect our Scientific Research market (economically the smallest
part of our business) with revenues down 16%.
Order intake in the first half of the year has been solid. The order book at
31 March 2014 was £29.7 million and the Company has booked £34.5 million in
orders since 1 October 2013.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
Operating Profit Net finance costs Taxation Earningsper share
Half Year to 31 March 2014£000 2013£000 2014£000 2013£000 2014£000 2013£000 2014pence 2013pence
Reported 3,956 3,643 (293) (320) (1,031) (841) 11.0 11.2
Amortisation of acquired intangible assets 775 427 - - (221) (113) 2.3 1.5
Gain on bargain purchase (1,039) - - - - - (4.4) -
Impairment of goodwill 1,538 - - - - - 6.5 -
Restructuring costs 172 - - - (58) - 0.5 -
Adjusted 5,402 4,070 (293) (320) (1,310) (954) 15.9 12.7
Adjusted profit before tax was £5.1 million, 34% better than the £3.8 million
reported last year. This reflects the overall increased volume in our
Aerospace & Defence business, which has driven benefits in the operational
gearing of this segment. The two acquisitions that were made in the six
months to 31 March 2014 have contributed £0.6 million to the profit before tax
in this period.
Operational and Strategy Review
Products and Markets - Industrial
Gooch & Housego's principal industrial markets are industrial lasers,
telecommunications, metrology, sensing and semiconductor manufacturing.
Industrial lasers are used in a diverse range of precision material processing
applications ranging from microelectronics to automotive.
Business in our industrial laser market was solid in the first six months of
the year, underpinned by good business in our acousto-optic components for
fibre lasers and in our semiconductor businesses. Sales of precision optics
and acousto-optics into the semiconductor market were excellent in the six
months to 31 March 2014, being 22% higher compared with the equivalent period
last year.
The industrial laser market is continuing to evolve and grow, driven by the
success of the fibre laser. Gooch & Housego anticipated these changes with the
development of a family of products for fibre laser applications, including
the Fibre-Q, with the result that the Company today is benefitting from these
market trends. Recent innovations have enabled Gooch & Housego to keep up with
the demanding requirements of this cost sensitive application, paving the way
for greater market penetration. In other applications, most notably
fibre-optic sensing, the Fibre-Q is proving to be a key enabling technology
that is now being deployed by a number of our key customers.
While sales of products for fibre laser applications have been growing
steadily, demand for the traditional acousto-optic Q-switch products has
remained solid, sales of which represented only 10% of our total business
during the period under review. A consequence of these market dynamics is a
consolidation in the variety of acousto-optic products required to meet
customer needs. In response to these changes, and as a result of the steady
improvements in productivity that the Company has made to the production of
these products, Gooch & Housego no longer needs to maintain three separate
acousto-optic manufacturing facilities. The decision has, therefore, been
made to close the Melbourne, Florida, operation and to transfer the business
to the Company's facilities in Ilminster, UK, and Palo Alto, California. It
is expected that this process will be largely complete by the end of the
current financial year. The closure of the Melbourne site is expected to
entail a cash cost of $1.2 million and deliver annual cash savings of $1.0
million.
In telecommunications, sales of lithium niobate wafers for modulation
applications exceeded our forecast and completely offset weaker demand for
high-reliability products for undersea cable infrastructure projects that were
again delayed due to uncertainties over funding. Indications are that this
market is poised to recover as funding is released for new projects.
Products and Markets - Aerospace and Defence
The Aerospace & Defence market for Gooch & Housego is characterised by
high-value, long-term programmes involving the main US and European defence
contractors. During the first six months of 2014, the Company has seen a
healthy increase in its Aerospace & Defence business, with a significant
proportion of revenues coming from sub-assemblies. Gooch & Housego's
precision optics and acousto-optic technologies have contributed most to the
Aerospace & Defence markets in the last six months, with navigation, range
finding and target designation being the principal applications.
Gooch & Housego continues to regard Aerospace & Defence as a growth market and
we are investing accordingly. During the past twelve months, Space Photonics
has emerged as a significant new application area in which Gooch & Housego has
the opportunity to develop a market leading position by leveraging its unique
expertise in fibre optics, semiconductor lasers and precision optics. These
skills are particularly sought after in the rapidly evolving field of
satellite laser communications, guidance and control systems. With support and
encouragement from UK, European and US space agencies, Gooch & Housego has
successfully bid on several development programmes, and has more in the
pipeline. Our recently established Systems Technology Group (STG) has been
instrumental in realising these opportunities, which are focussed on the
application of our core component technologies in complex sub-systems as we
seek to move up the value chain. This is consistent with our strategy of
delivering growth by migrating from component supplier to solutions provider
at the systems level. We expect Space Photonics to become an increasingly
important sub-set of the Aerospace & Defence market.
Products and Markets - Life Sciences
Gooch & Housego's three principal Life Sciences revenue streams are derived
from diagnostics (fibre-optic modules for optical coherence tomography (OCT)
applications), surgery (Q-switches for surgical lasers) and biomedical
research (acousto-optics for microscopy applications). In each application
area the Company is making steady progress in moving up the value chain and is
currently selling sub-systems as well as components to several of our larger
customers.
Whilst in absolute terms this market sector grew by 15% in the six months to
31 March 2014, compared with the equivalent period last year, when the impact
of acquisitions is taken into account, Life Sciences revenue was flat. The
principal commercial application of OCT systems is retinal imaging, and Gooch
& Housego continues to be the leading provider of fibre optic solutions
(products and design services) to this industry.
Following inconclusive discussions with potential commercial partners earlier
this year, it was decided to mothball the Group's work on cancer diagnostics
using hyperspectral imaging and to close its research facility in New Jersey.
The cost of closing this facility was £0.8 million, of which £0.7 million
related to non-cash costs (£0.6 million of goodwill impairment). It is
expected that the closure of this facility will result in a cash saving of
£0.3 million per annum. Gooch & Housego will continue to develop and
manufacture hyperspectral imaging products from its Orlando facility.
Products and Markets - Scientific Research
The key application in Scientific Research is laser inertial confinement
fusion ("laser fusion"), where lasers are used to create the conditions found
in the core of a star. In addition to pure research in high energy and plasma
physics, these vast laser systems are being used to investigate whether this
technology could provide clean, carbon-free energy to reduce dependency on
fossil fuels. The first of these facilities is now complete, although progress
in demonstrating the potential of the technology as an energy source has been
slow. Gooch & Housego is continuing to supply crystals for the second facility
and expects ongoing business to service replacement and maintenance
requirements.
Strategy
Gooch & Housego has developed, and measures itself, on a set of strategies to
deliver long term, sustainable growth for its shareholders. These can be
categorised into two broad pillars: "Diversification" and, "Moving up the
Value Chain". In seeking to achieve its strategic goals Gooch & Housego uses
a variety of tools, including investment in R&D to deliver organic growth,
acquisitions, market focused business development and strategic partnerships.
In the first six months of the current financial year, Gooch & Housego
invested £2.9 million in R&D. This represents 8.4% of revenue and is 19%
higher than the same period last year (2013: £2.4m).
As the Company moves up the value chain, know-how and trade secrets no longer
provide adequate protection. As a result, protecting intellectual property by
means of patents is becoming increasingly important. Gooch & Housego has an
Intellectual Property Committee, comprising senior R&D and management
personnel and chaired by the Chief Technology Officer, that meets on a
quarterly basis and whose remit is to identify and protect commercially
relevant intellectual property. So far this year four patents have been
granted and a further six inventions have patents that are in the process of
being filed.
Diversification: Gooch & Housego seeks to develop, through R&D and
acquisition, a presence in new markets that offer the potential for
significant growth as a result of their adoption of photonic technology,
whilst also reducing exposure to cyclicality in any particular sector. In the
current period Gooch & Housego has grown its business in its core Industrial,
Aerospace & Defence and Life Sciences markets. Moreover, the business has
continued to invest in its quality systems and business development in order
to strengthen its position in these markets in the future.
Moving up the Value Chain: Gooch & Housego seeks to move up the value chain to
more complex sub-assemblies and systems through leveraging its excellence in
materials and components, and by providing photonic design and engineering
solutions for our customers. Gooch & Housego is progressively making the
transition from components supplier to solutions provider. A significant
proportion of our business in the Aerospace & Defence market now comes from
the sale of sub-systems rather than discrete components.
Fifteen months ago the Company introduced a new initiative to accelerate this
process with the formation of the STG, which provides design and engineering
services and leads Gooch & Housego's participation in a number of funded
research programmes. Its initial focus has been on opportunities to take
Gooch & Housego up the value-chain in the fields of Space Photonics and
optical coherence tomography for biomedical imaging applications. During the
period under review, Gooch & Housego has made significant investments in the
STG in the form of a dedicated new facility at the Company's Torquay site, the
acquisition of Constelex and an increase in headcount to eleven with a broad
range of skills in project management, design and modelling of complex optical
and electronic systems.
Vertical integration: Vertical integration is a key strategic objective, not
merely a by-product of moving up the value chain. In the field of photonics,
certain materials (e.g. optical crystals), and materials processing operations
(polishing, thin-film coating, fused-fibre processes etc.) have a critical
bearing on the performance, cost and reliability of the final product, whether
it is a component such as the Q-switch or a complex satellite communications
system. Gooch & Housego has established a portfolio of world-class photonic
products and capabilities that enable it to provide uniquely integrated
solutions for the most demanding applications.
Gooch & Housego will continue to evaluate acquisition opportunities that have
the potential to accelerate delivery of the Company's strategic objectives.
Having established a presence in its target markets, Gooch & Housego is now
focussing on moving up the value chain in each of those markets. Acquisition
opportunities that enhance the Company's ability to wrap electronics and
software around core photonic products to yield system-level solutions are of
greater relevance today than those that merely broaden Gooch & Housego's range
of component capabilities. The acquisition of Constelex is a good example of
this strategy in action, paving the way to translate Gooch & Housego's
leadership in space qualified fibre optic components (unit values typically in
the $100 to $1,000 range) into a family of erbium-doped fibre amplifier
systems for satellite communications with unit values up to $100,000.
Cash Flow and Financing
In the six months to 31 March 2014 Gooch & Housego generated cash from
operations of £4.9 million, compared with £2.8 million in the same period of
2013.
The Company's strategies of diversifying into industries such as Aerospace &
Defence and Life Sciences and moving up the value chain inherently put demands
on working capital. Our customers in Aerospace & Defence require safety
stocks to be held and the move to systems and sub-systems lead to Gooch &
Housego managing longer supply chains and carrying higher levels of inventory.
In recognising these upward pressures on working capital, Gooch & Housego has
introduced a number of initiatives to help reduce this impact. Excluding the
impact of acquisitions, inventories have remained stable and trade debtors
have reduced by £0.9 million. Capital expenditure on property, plant and
equipment was £0.9 million in the period (2013: £1.0 million). The main fixed
asset additions were in relation to expanding our Torquay facilities and
equipment to accommodate the STG.
During the period to 31 March 2014, £5.5 million, net of cash acquired, was
invested in relation to the acquisitions of Spanoptic Limited and Constelex
Limited.
Cash, cash equivalents and bank overdrafts as at 31 March 2014 amounted to a
net positive cash position of £12.0 million, compared to £12.1 million at 30
September 2013.
Since 30 September 2013, the Company's net cash position has reduced from £5.7
million to £2.3 million, following the acquisition of Spanoptic Limited and
Constelex Limited
At 31 March 2014, the Group's banking facilities with its bankers, the Royal
Bank of Scotland, comprise an $18 million dollar denominated term loan (of
which $4.5 million is drawn), a £3.1 million sterling denominated term loan
(of which £1.8 million is drawn), an $8 million revolving credit facility
(undrawn as at 31 March 2014) and a fully drawn $8 million capital expenditure
facility. All facilities are committed until April 2015, subject to certain
covenant provisions.
Staff
The Company workforce increased from 581 at 30 September 2013 to 644 at the
end of March 2014. This increase is was largely due to the acquisitions of
Spanoptic Limited and Constelex Limited.
Dividends
The Directors have declared an interim dividend of 2.6p per share (2013: 2.3p
per share), a 13% increase on the prior period, which is reflective of the
Directors' confidence in the Company's long term growth. This will be payable
on 21 July 2014 to shareholders on the register as at 27 June 2014.
Prospects
Whilst the strengthening of sterling in recent months represents a headwind to
growth, Gooch & Housego's markets continue to exhibit attractive, long-term
structural growth drivers as photonic technology is adopted across an
increasingly wide range of application areas. We continue to invest in our
business with confidence to position it for sustainable long-term growth.
Julian BloghChairman10 June 2014 Gareth JonesChief Executive Officer10 June 2014 Andrew Boteler Chief Financial Officer 10 June 2014
Unaudited interim results for the 6 months ended 31 March 2014
Group Income Statement Note Half Year to Half Year to Full Year to 30 Sep 2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
£'000 £'000 £'000
Revenue 5 34,422 28,989 63,252
Cost of revenue (20,960) (17,674) (37,635)
Gross profit 13,462 11,315 25,617
Research and Development (2,577) (2,423) (4,913)
Sales and Marketing (2,301) (2,218) (4,666)
Administration and other expenses (5,179) (4,078) (8,814)
Other income 551 1,047 1,727
Operating profit 5 3,956 3,643 8,951
Net finance costs (293) (320) (608)
Profit before income tax expense 3,663 3,323 8,343
Income tax expense 6 (1,031) (841) (2,151)
Profit for the period 2,632 2,482 6,192
Earnings per share 7 11.0p 11.2p 27.7p
Reconciliation of operating profit to adjusted operating profit:
Half Year to Half Year to Full Year to 30 Sep 2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
£'000 £'000 £'000
Operating profit 3,956 3,643 8,951
Amortisation of acquired intangible assets 775 427 875
Acquisition costs - - 164
Restructuring costs 172 - 278
Gain on bargain purchase: Spanoptic Limited (1,039) - -
Impairment of goodwill (including CDI closure) 1,538 - -
Adjusted operating profit 5,402 4,070 10,268
Group Statement of Comprehensive Income Half Year to Half Year to Full Year to 30 Sep 2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
£'000 £'000 £'000
Profit for the period 2,632 2,482 6,192
Other comprehensive income
Fair value adjustment of interest rate swap net of tax 5 41 90
Currency translation difference (837) 1,841 (364)
Other comprehensive (expense)/income for the period (832) 1,882 (274)
Total comprehensive income for the period 1,800 4,364 5,918
Unaudited interim results for the 6 months ended 31 March 2014
Group Balance Sheet 31 Mar 2014 31 Mar 2013 30 Sep 2013
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 24,339 21,523 21,456
Intangible assets 20,697 21,130 19,821
Deferred income tax assets 3,462 4,203 3,830
48,498 46,856 45,107
Current assets
Inventories 13,976 14,188 13,390
Income tax assets 508 - 420
Trade and other receivables 14,106 13,515 12,706
Cash and cash equivalents 12,016 11,672 14,558
40,606 39,375 41,074
Current liabilities
Trade and other payables (9,929) (10,569) (10,461)
Borrowings (7,972) (6,082) (5,726)
Income tax liabilities (131) (841) (307)
Provision for other liabilities and charges (272) (324) (271)
(18,304) (17,816) (16,765)
Net current assets 22,302 21,559 24,309
Non-current liabilities
Borrowings (1,698) (4,879) (3,113)
Deferred income tax liabilities (2,536) (618) (1,330)
Derivative financial instruments (32) (83) (34)
(4,266) (5,580) (4,477)
Net assets 66,534 62,835 64,939
Shareholders' equityCapital and reserves
attributable to equity shareholders
Called up share capital 4,760 4,491 4,620
Share premium account 15,420 14,757 15,213
Merger reserve 2,671 2,671 2,671
Hedging reserve (74) (128) (79)
Cumulative translation reserve (1,697) 1,347 (860)
Retained earnings 45,454 39,697 43,374
Equity Shareholders' Funds 66,534 62,835 64,939
Unaudited interim results for the 6 months ended 31 March 2014
Statement of Changes in Equity Share Share Merger Hedging reserve Retained earnings Totalequity£000
capital premium reserve £000 £000
account account £000
£000 £000
At 1 October 2012 4,382 14,311 2,671 (169) 37,371 58,566
Profit for the period - - - - 2,482 2,482
Other comprehensive income for the period - - - 41 1,841 1,882
Total comprehensive income for the period - - - 41 4,323 4,364
Dividends - - - - (712) (712)
Proceeds from shares issued 109 446 - - (33) 522
Fair value of employee services - - - - 235 235
Tax charge relating to share option schemes - - - - (140) (140)
109 446 - - (650) (95)
At 31 March 2013 (unaudited) 4,491 14,757 2,671 (128) 41,044 62,835
At 1 October 2013 4,620 15,213 2,671 (79) 42,514 64,939
Profit for the period - - - - 2,632 2,632
Other comprehensive income for the period - - - 5 (837) (832)
Total comprehensive income for the period - - - 5 1,795 1,800
Dividends - - - - (950) (950)
Proceeds from shares issued 140 207 - - (120) 227
Fair value of employee services - - - - 122 122
Tax credit relating to share option schemes - - - - 396 396
140 207 - - (549) (202)
At 31 March 2014 (unaudited) 4,760 15,420 2,671 (74) 43,757 66,534
Unaudited interim results for the 6 months ended 31 March 2014
Group Cash Flow Statement Half Year to Half Year to Full Year to 30 Sep 2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
£'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 4,905 2,794 10,130
Income tax paid (582) (53) (882)
Net cash generated from operating activities 4,323 2,741 9,248
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired) (5,532) (20) (22)
Purchase of property, plant and equipment (853) (896) (2,032)
Sale of property, plant and equipment 88 - 67
Purchase of intangible assets (74) (56) (202)
Interest received 3 6 15
Net cash used in investing activities (6,368) (966) (2,174)
Cash flows from financing activities
Drawdown of acquisition borrowing facility 4,971 - -
Repayment of borrowings (1,704) (1,694) (3,394)
Proceeds from issues of share capital 123 522 1,044
Dividends paid to ordinary shareholders (950) (712) (1,229)
Interest paid (230) (269) (505)
Net cash generated by / (used in) financing activities 2,210 (2,153) (4,084)
Net increase / (decrease) in cash, cash equivalents and revolving credit facility 165 (378) 2,990
Cash, cash equivalents and revolving credit facility at beginning of the period 12,088 9,235 9,235
Exchange (losses) / gains on cash and revolving credit facility (237) 180 (137)
Cash, cash equivalents and revolving credit facility at the end of the period 12,016 9,037 12,088
Cash, cash equivalents and revolving credit facility at the end of the period
are made up of:
Half Year to Half Year to Full Year to 30 Sep 2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
£'000 £'000 £'000
Cash and cash equivalents 12,016 11,672 14,558
Revolving credit facility - (2,635) (2,470)
Cash, cash equivalents and revolving credit facility at the end of the period 12,016 9,037 12,088
Notes to the Group Cash Flow Statement Half Year to Half Year to Full Year to30 Sep 2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
£'000 £'000 £'000
Profit before income tax 3,663 3,323 8,343
Adjustments for:
- Amortisation of acquired intangible assets 775 427 875
- Impairment of goodwill 1,538 - -
- Gain on bargain purchase: Spanoptic Limited (1,039) - -
- Amortisation of other intangible assets 79 84 168
- Depreciation 1,227 1,042 1,949
- Profit on disposal of property, plant and equipment 25 - 91
- Share based payment obligations 122 235 341
- Finance income (3) (6) (15)
- Finance costs 296 326 623
Total adjustments 3,020 2,108 4,032
Changes in working capital
- Inventories (72) (786) (1,328)
- Trade and other receivables 877 (562) (1,208)
- Trade and other payables (1,507) (1,189) (538)
- Provisions for liabilities and charges (1,076) (100) 829
Total changes in working capital (1,778) (2,637) (2,245)
Cash generated from operating activities 4,905 2,794 10,130
Reconciliation of net cash flow to movements in net debt
Half Year to Half Year to Full Year to30 Sep 2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
£'000 £'000 £'000
Increase / (decrease) in cash in the period 165 (378) 2,990
Drawdown of acquisition facility (4,971) - -
Repayment of borrowings 1,704 1,694 3,394
Changes in net debt resulting from cash flows (3,102) 1,316 6,384
Finance leases acquired (257) - -
Translation differences (14) (282) (342)
Movement in net debt in the period / year (3,373) 1,034 6,042
Net cash/(debt) at start of period 5,719 (323) (323)
Net cash at end of period 2,346 711 5,719
Analysis of net debt
At 1 Oct 2013 Cash flow Exchange movement Non-cash movement At 31 Mar 2014
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 14,558 (2,305) (237) - 12,016
Revolving credit facility (2,470) 2,470 - - -
12,088 165 (237) - 12,016
Debt due within 1 year (3,256) (4,971) 346 - (7,881)
Debt due after 1 year (3,113) 1,605 (123) - (1,631)
Finance leases - 99 - (257) (158)
Net cash 5,719 (3,102) (14) (257) 2,346
Notes to the Interim Report
1. Basis of Preparation
The unaudited Interim Report has been prepared under the historical cost
convention and in accordance with International Financial Reporting Standards
("IFRS"), as adopted by the European Union.
The Interim Report was approved by the Board of Directors and the Audit
Committee on 10 June 2014. The Interim Report does not constitute statutory
financial statements within the meaning of the Companies Act 2006 and has not
been audited.
Comparative figures in the Interim Report for the year ended 30 September 2013
have been taken from the Group's audited statutory financial statements on
which the Group's auditors, PricewaterhouseCoopers LLP, expressed an
unqualified opinion. The comparative figures to 31 March 2013 are unaudited.
The Interim Report will be announced to all shareholders on the London Stock
Exchange and published on the Group's website on 10 June 2014. Copies will be
available to members of the public upon application to the Company Secretary
at Dowlish Ford, Ilminster, Somerset, TA19 0PF.
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 30 September 2013, as described in
those financial statements.
2. Application of IFRS
Adoption of new standards
During the current reporting period there were no new standards or amendments
which had a material impact on the net assets of the Group.In addition,
standards or amendments issued but not yet effective are not expected to have
a material impact on the net assets of the Group. However, the Group is
closely monitoring the IASB projects on Contract Revenue recognition and the
Lease accounting overhaul as they could potentially have a material impact on
the Group's results.
3. Estimates
The preparation of interim financial statements requires management to make
estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgments made by management in applying the Company's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements for the year ended 30
September 2013.
4. Financial risk management
The Company's activities expose it to a variety of financial risks, market
risk (including currency risk, cash flow interest rate risk and price risk),
credit risk and liquidity risk.
The interim condensed consolidated financial statements do not include all
financial risk management information and disclosures required in the annual
financial statements and should be read in conjunction with the Company's
annual financial statements as at 30 September 2013.
There have been no changes to the risk management policies since the year
end.
5. Segmental analysis
Aerospace & Defence Life Sciences Industrial Scientific Research Corporate Total
For half year to 31 March 2014 £'000 £'000 £'000 £'000 £'000 £'000
Revenue
Total revenue 10,218 3,608 20,935 1,679 - 36,440
Inter and intra-division - - (2,018) - - (2,018)
External revenue 10,218 3,608 18,917 1,679 - 34,422
Divisional expenses (8,460) (3,023) (14,591) (1,592) (222) (27,888)
EBITDA¹ 1,758 585 4,326 87 (222) 6,534
EBITDA % 17.2% 16.2% 22.9% 5.2% - 19.0%
Depreciation and Amortisation (286) (129) (765) (45) (79) (1,304)
Operating profit before amortisation of acquired intangible assets and impairment of goodwill 1,472 456 3,561 42 (301) 5,230
Amortisation of acquired intangible assets and impairment of goodwill - - - - (1,274) (1,274)
Operating profit 1,472 456 3,561 42 (1,575) 3,956
Operating profit margin % 14.4% 12.6% 18.8% 2.5% - 11.5%
Aerospace & Defence Life Sciences Industrial Scientific Research Corporate Total
For half year to 31 March 2013 £'000 £'000 £'000 £'000 £'000 £'000
Revenue
Total revenue 7,437 3,142 18,430 2,006 - 31,015
Inter and intra-division - - (2,026) - - (2,026)
External revenue 7,437 3,142 16,404 2,006 - 28,989
Divisional expenses (6,658) (2,617) (12,799) (1,433) (286) (23,793)
EBITDA¹ 779 525 3,605 573 (286) 5,196
EBITDA % 10.5% 16.7% 22.0% 28.6% - 17.9%
Depreciation and Amortisation (281) (124) (558) (80) (83) (1,126)
Operating profit before amortisation of acquired intangible assets 498 401 3,047 493 (369) 4,070
Amortisation of acquired intangible assets - - - - (427) (427)
Operating profit 498 401 3,047 493 (796) 3,643
Operating profit margin % 6.7% 12.8% 18.6% 24.6% - 12.6%
¹EBITDA = Earnings before interest, tax, depreciation and amortisation.
All of the amounts recorded are in respect of continuing operations.
5. Segmental analysis continued
Analysis of revenue by destination
Half year to 31 Mar 2014(Unaudited) Half year to 31 Mar 2013(Unaudited)
£'000 £'000
United Kingdom 6,807 4,093
America 14,604 12,940
Continental Europe 7,733 7,491
Asia-Pacific 5,278 4,465
34,422 28,989
6. Income tax expense
Analysis of tax charge in the period
Half Year to31 Mar 2014 Half Year to Full Year to 30 Sep 2013 (Audited)
(Unaudited) 31 Mar 2013
(Unaudited)
£'000 £'000 £'000
Current taxation
UK Corporation tax 526 740 1,263
Overseas tax 404 52 238
Adjustments in respect of prior year tax charge - 86 (304)
Total current tax 930 878 1,197
Deferred tax
Origination and reversal of temporary differences 101 (1) 677
Adjustments in respect of prior year deferred tax - (36) 234
Impact of tax rate change in 2013 to 20% - - 43
Total deferred tax 101 (37) 954
Income tax expense per income statement 1,031 841 2,151
The tax charge for the six months ended 30 March 2014 is based on the
estimated effective rate of the tax for the Group for the full year to 30
September 2014. The estimated rate is applied to the profit before tax.
7. Earnings per share
The calculation of earnings per 20p Ordinary Share is based on the profit for
the period using as a divisor the weighted average number of Ordinary Shares
in issue during the period. The weighted average number of shares is given
below.
Half Year to Half Year to Full Year to 30 Sep 2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
No. No. No.
Number of shares used for basic earnings per share 23,864,426 22,123,658 22,376,650
Dilutive shares 125,595 1,652,880 1,097,927
Number of shares used for dilutive earnings per share 23,990,021 23,776,538 23,474,577
A reconciliation of the earnings used in the earnings per share calculation is
set out below:
Half Year to Half Year to Full Year to
31 Mar 2014 (Unaudited) 31 Mar 2013 30 Sep 2013
(Unaudited) (Audited)
£'000 p per £'000 p per £'000 p per
share share share
Basic earnings per share 2,632 11.0p 2,482 11.2p 6,192 27.7p
Adjustments net of income tax expense:
Amortisation of acquired intangible assets 554 2.3p 329 1.5p 650 2.9p
Goodwill impairment 1,538 6.5p - - - -
Gain on bargain purchase: Spanoptic Limited (1,039) (4.4)p - - - -
Acquisition costs - - - - 122 0.5p
Restructuring costs 114 0.5p - - 206 0.9p
Total adjustments net of income tax expense 1,167 4.9p 329 1.5p 978 4.3p
Adjusted basic earnings per share 3,799 15.9p 2,811 12.7p 7,170 32.0p
Basic diluted earnings per share 2,632 11.0p 2,482 10.4p 6,192 26.4p
Adjusted diluted earnings per share 3,799 15.8p 2,811 11.8p 7,170 30.5p
Adjusted earnings per share before amortisation and adjustments has been shown
because, in the opinion of the Directors, it more accurately reflects the
trading performance of the Group.
8. Dividend
The Directors have declared an interim dividend of 2.6 pence per share for the
half year ending 31 March 2014. This dividend has not been accounted for
within the period to 31 March 2014 as it is yet to be paid.
Half Year to Half Year to Full Year to 30 Sep 2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
£'000 £'000 £'000
Final 2013 dividend paid : 4.0p per share 950 712 -
2013 Interim dividend paid : 2.3p per share - - 517
- More to follow, for following part double click ID:nRSJ1990Jb