Final Results
Tuesday, 3 July 2012
ANITE PLC
Final results for the year ended 30 April 2012
Anite plc ("Anite" or "the Company"), the leading provider of software solutions to the international wireless and leisure travel industries, today announces its final results for the year ended 30 April 2012.
Financial highlights (adjusted) 1
· Order intake up 30% to £152.0m (2011: £116.6m)
· Closing order book up 35% to £114.5m (2011: £84.9m)
· Revenue up 31% to £122.5m (2011: £93.7m)
· EBITDA up 54% to £34.2m (2011: £22.2m)
· Operating profit up 64% to £28.8m (2011: £17.6m)
· Operating margin of 24% (2011: 19%)
· Profit before tax up 75% to £28.0m (2011: £16.0m)
· Diluted earnings per share up 76% to 6.7p (2011: 3.8p)
· Net cash of £16.9m (April 2011: £27.7m) after £21.6m swap liability settled in the year
Statutory results
· Revenue from continuing operations up 31% to £122.5m (2011: £93.7m)
· Profit for the year of £18.5m (2011: £9.4m)
· Basic earnings per share up 97% to 6.5p (2011: 3.3p)
· Diluted earnings per share up 94% to 6.0p (2011: 3.1p)
Dividend
· Proposed final dividend up 53% to 1.125p (2011: 0.735p) - total 1.50p (2011: 1.05p)
Operating highlights1
· Wireless revenue as a whole contributed 84% of Group revenue (2011: 79%)
- record R&D investment up 32% to £17.0m (2011: £12.9m)
Handset Testing:
- strong growth for 2G/3G, up 29%, and LTE, up 102%, on the previous year: LTE now represents 44% of Handset Testing's revenue (2011: 34%);
- revenue up 54% to £76.4m (2011: £49.6m) and operating profit up 115% to £21.5m (2011: £10.0m);
- order intake up 33% to £79.4m (2011: £59.6m); closing order book £24.9m (2011: £21.7m)
Network Testing:
- Invex products gaining traction: benchmarking product launched at end of H1;
- revenue up 8% to £26.0m (2011: £24.1m) and operating profit down 17% to £5.3m (2011: £6.4m);
- order intake up 13% to £26.0m (2011: £23.0m)
· Travel:
- signed multi-year contract with Thomas Cook Group to implement @com in UK and Ireland;
- revenue £20.1m (2011: £20.0m) and operating profit up 10% to £4.6m (2011: £4.2m);
- closing order book £89.6m (2011: £63.2m), book-to-bill ratio 2.3 (2011: 1.7)
1Adjusted results are for continuing operations before share-based payments, amortisation of acquired intangible assets, restructuring costs, other gains and losses and recycled hedge losses.
Christopher Humphrey, Chief Executive, said:
"This was an exceptional year for Anite in terms of financial results. At the same time, each of our businesses made significant operational progress.
"The fundamental drivers for all of our businesses continue to be favourable. Each has good market positions, products and people to pursue multiple growth opportunities.
"We have started the current year well, ahead of last year and we are well placed to deliver sustainable organic growth."
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For further information, please contact: |
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Anite plc |
www.anite.com |
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Christopher Humphrey, Chief Executive Richard Amos, Group Finance Director |
01252 775200 |
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MHP Communications |
020 3128 8100 |
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Reg Hoare/Giles Robinson/Naomi Lane |
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An analysts' meeting will be held today at 9.15 for 9.30am at the London Stock Exchange,
10 Paternoster Square, London, EC4M 7LS
Notes to editors
Anite plc, an international software and solutions company, operates in two defined markets. We focus
on providing mobile device and network testing systems to the Wireless market, and reservation and
e-commerce solutions to the leisure travel industry. Both are based on our comprehensive knowledge of the sectors, and on our proprietary systems.
Our 500 staff work with many of the world's leading wireless and travel companies from our headquarters in the UK, and from offices in 15 countries throughout Europe, the Americas, Asia and the Middle East.
This preliminary results announcement contains forward-looking statements. These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors that may cause actual results to differ from any future results or developments expressed or implied from the forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement and, save to the extent required by the applicable law or regulation, we do not undertake any obligation to update or renew any forward-looking statement.
Final results for the year ended 30 April 2012
All references to adjusted profit relate to continuing operations for the period, before share-based payments, amortisation of acquired intangible assets, restructuring costs, other gains and losses and recycled hedge losses. See the attached income statement and notes for details. A reconciliation of adjusted results to reported statutory results is given in the Financial Review.
Chairman's statement
Introduction
I am pleased to report that Anite had an exceptional year in terms of its financial results, which comfortably exceeded the Board's expectations. While the highlight of the year was Handset Testing's particularly strong performance, driven mainly by a significant increase in revenue for LTE products, each of our three businesses, Handset Testing, Network Testing and Travel, made significant operational progress.
Strategy and progress
We continue to make good progress with our strategy to position Anite as a global leader in Wireless test software, and to take advantage of the opportunities that will emerge from the development and roll-out of LTE technology.
The Board believes that our Wireless division operates in a long-term growth market, which has high barriers to entry and relatively few major competitors. This enables it to generate good profit margins and returns on investments. Wireless contributed an increased proportion of total Anite revenue - 84% (2011: 79%).
Our strategy for Travel is to increase its long-term value as it changes its business model. Its @com product is the only proven large-scale reservation system on the market today and is at the beginning of a potential 20-year product lifecycle. It sits at the very heart of our customers' businesses and offers them greater efficiency and reduced costs. The addition, in recent years, of TUI Central Europe and UK, and Thomas Cook UK to Travel's expanding customer base represented significant landmarks in strengthening and improving its market position and in building long-term revenue visibility.
In both divisions, Wireless and Travel, the Board anticipates that the majority of growth will be organic: it will come from underlying growth in their respective markets, investment in their products to win market share, and lengthy and cumulative product lifecycles. In addition, the Board is committed to maintaining market leadership by continuing to invest in R&D.
Finally, it is the Board's intention that we should maintain a strong financial position, to provide financial flexibility, through a combination of retaining a net cash position while having access to appropriate bank facilities through a new five-year £20m revolving credit facility signed in October 2011.
Results summary
The Group's results were well ahead of the previous year and both divisions reported strong underlying profitability: our Wireless division, as a whole, reported an adjusted operating margin of 26% (2011: 22%) while our Travel division reported 23% (2011: 21%).
Overall Group adjusted operating profit was up 64%, to £28.8m (2011: £17.6m), on revenue up 31%, to £122.5m (2011: £93.7m).
Adjusted diluted earnings per share were up 76%, to 6.7p (2011: 3.8p).
Robust cash generation enabled us to maintain a strong financial position at the year-end. Net cash, as at 30 April 2012, was £16.9m (April 2011: £27.7m). The reported level of net cash followed the settlement on 31 October 2011 of the £21.6m swap liability.
Dividend
In recognition of the significant growth in earnings per share over the past two years, the Board is recommending a significantly increased final dividend of 1.125p per share, an increase of 53% on the previous year (2011: 0.735p per share). This will result in a total dividend for the year of 1.50p per share, a 43% increase on the previous year's total dividend (2011: 1.05p per share). It is proposed that the final dividend be paid on 23 October 2012 to shareholders on the register at 28 September 2012.
The Board recognises that as a result of the significant proposed increase in the final dividend this year, the ratio of payment between interim and final dividends has become unbalanced from the normal one third: two thirds ratio. It intends to address this in the current financial year and return it to the more normal ratio.
Overall, the Board's intention is to maintain a progressive dividend policy, broadly in line with earnings growth, and to retain strong dividend cover.
People
On behalf of the Board, I recognise that Anite's success in recent years has been built on the deep industry expertise of our committed and hard-working staff. It is their know-how and experience that keeps us at the forefront of our industries.
Summary and outlook
Anite reported strong results and made good progress in all three businesses in the year.
In particular the LTE opportunity has added an additional layer to our expertise: we are now a leading force in two significant handset-testing sub-markets - 2G/3G and LTE. As a result, Handset Testing is in a better position to take advantage of larger markets than in the past and is capable of achieving double-digit revenue growth for the immediate future.
Based on the opportunities available to each of our businesses, Anite is well placed to deliver sustainable organic growth and increased shareholder value.
Clay Brendish
Chairman
Chief Executive's review
Overview
Anite had an exceptional year - revenue and profit both increased substantially - and we made good operational progress in all three businesses.
While the continuing uncertainties surrounding the global economy are likely to result in a more challenging economic environment over the next few years, the underlying drivers for our Wireless division - the inexorable increase in mobile data and smartphones and in the complexity of devices and networks as new technology is introduced - will continue, and will undoubtedly create more requirements for testing. To ensure that we will be ready to take advantage of the opportunity this offers, our total R&D spend during the year was a record £17m, a 32% increase year-on-year.
That investment, combined with the commitment and quality of our people, our credibility and long-standing relationships with major customers, and our rapid response to changes in customer and market demand will, we believe, ensure that we are well placed to deliver sustainable growth over the long term.
Performance
The principal driver of the growth in revenue and profit that resulted in our improved margins was the strong demand in the Handset Testing business for LTE (4G) systems, as well as a higher-than-expected demand for 2G/3G products.
Growth in Handset Testing came from two product areas. First from Conformance Testing (CT), which continues to be our key product area and accounted for around half of Handset Testing revenue. Here, customers invested in LTE equipment to support the early stages of the mandatory testing phase of LTE devices. In addition, they also bought 2G and 3G products to test the backwards compatibility of devices, rather than using existing systems which they have tended to keep exclusively for 2G/3G devices. Growth also came from our second major growth driver, Interoperability Testing (IOT), which also covers 2G/3G and LTE (4G). Overall sales of LTE technology products grew by 102%, to 44% of Handset Testing revenue, helping drive overall Handset Testing revenue growth of 54% and more than doubling its operating profits.
In a highly technological market, we further established our proprietary LTE hardware platform, Anite 9000, and continued to develop our products and strategy to support the next generation of mobile technology, beyond LTE to LTE-Advanced (LTE-A), which we expect to accelerate over the next few years.
Although Network Testing's operating profit was below that of last year, its order intake and revenue increased - particularly in the second half of the year - in what are extremely competitive markets. With the exception of the US - which was an early adopter of 4G - LTE (4G) network roll-outs are expected to take off around the world over the next few years. Last year's acquisition of the Invex product lines expanded our portfolio of scanner and benchmarking products, although the later-than-planned launch of the updated benchmarking platform pushed sales into the second half of the year and that, in turn, held back profits.
Our Travel business continued to make good progress and successfully negotiated the difficult market conditions that existed across Europe. During the year, it diversified its customer base when it won another major order for @com - from one of the world's largest tour operators, Thomas Cook Group - with the result that @com was further endorsed in the eyes of other major international tour operators. That is resulting in an encouraging sales pipeline across Europe and farther afield. The business has increased its order book to £89.6m of contracted revenue, has significant longer-term opportunities with TUI and Thomas Cook, and is better positioned for future growth.
Our markets
Anite is structured into two market-facing divisions: Wireless, which comprises two separately managed businesses - Handset Testing and Network Testing - and Travel:
· Handset Testing provides specialist laboratory-based systems, hardware and software to enable manufacturers to design new chipsets and devices effectively, to bring high-quality devices to market quickly, and to enable network operators to meet end-customers' needs by ensuring that devices meet their quality expectations in real-life situations;
· Network Testing provides the technology that enables operators of mobile phone networks to test their networks' efficiency and effectiveness - and to ensure consistently high quality for users of mobile devices - by carrying out live testing with a wide range of devices; and
· Travel provides reservation and administration systems that help companies, primarily in the leisure sector, to run their businesses more efficiently and to reduce back office costs.
Group strategy
Our overriding objective is to continue to deliver shareholder value by focusing on our Wireless division where we seek to maintain our position as market leader in testing solutions. This division has strong growth drivers, an equally strong market position and exhibits good potential for long-term growth. We will continue to grow the Wireless division by maintaining technological and market leadership, broadening our product set and executing our product strategy to support the next generation of technology.
In addition, we expect to build further value into our Travel business. We will achieve this by continuing to evolve its business model: first, by transitioning customers from legacy technology to its new, more-flexible and scalable platform; and second, by delivering more large implementations with associated multi-year support contracts that will provide long-term recurring revenue, profit visibility and growth.
Outlook
The past year was an exceptional one for the Group, driven by the growth in revenue and profits in the Handset Testing business.
Looking ahead, the fundamental drivers for all our businesses continue to be favourable. This gives us confidence in our ability to achieve future growth although, given that the Wireless pipeline visibility is inherently low, we remain conservative with our guidance.
The sustained growth in the mobile telecommunications market will undoubtedly create more requirements for testing and our focus and continued investment in R&D will, we believe, enable us to maintain our technology leadership in Handset Testing. In the current year, we expect to benefit from both of our key growth engines: the continued development of the Conformance Test market and also an increase in demand for Interoperability Testing. These factors are expected to lead to revenue growth in Handset Testing in the low to mid teen percentage range.
In Network Testing we expect mid single digit percentage growth in revenue at constant currency. We expect the success of our benchmarking product to offset any impact from competitive pressures and we are well positioned to take advantage of LTE roll-outs as they accelerate.
We have been transitioning our Travel business over the past few years, with the objective of building on its strong market position and optimising the value of its long-term product lifecycle. Around 75% of our expected revenue for the current year is already contracted and the pipeline of additional opportunities is encouraging. Performance in the current year - in which we will focus on delivering the major @com implementations that we have contracted for over the past two years - is expected to be similar to the one just completed, with low single digit percentage revenue growth.
Our businesses have good market positions, products and people to pursue multiple growth opportunities. We have started the current year well, ahead of last year and we are well placed to deliver sustainable organic growth.
Christopher Humphrey
Chief Executive
Our businesses
Wireless
Market trends
The mobile telecommunications market continues its relentless growth: people throughout the world are moving from desktop computers to mobile devices - smartphones and tablets - to send emails, access the internet, shop, transfer money, control other devices and watch videos, and constantly expect those devices to do more, and more quickly.
As a result, the volume of data traffic generated by mobile devices is increasing dramatically: it has grown 33-fold in the past five years, and is projected to grow a further 18-fold in the next five. In particular, changes in content-viewing habits have resulted in a surge in video traffic - currently 50% of mobile data traffic; it is expected to be 70% by 2016¹.
The number of handsets sold around the world is forecast to reach 3 billion a year by 2020 - up from 1.7 billion today. It is also forecast that smartphones will continue to replace feature phones: by 2020 the number of smartphone units sold each year is expected to reach 2.5 billion - up from 0.4 billion in 2011².
LTE (4G) - a new, more-efficient technology - is not only expected to alleviate the network overload caused by this increase in mobile data traffic, but also to meet network operators' constant need to reduce costs and improve the quality of experience for their customers; 327 operators, in 99 countries, are currently investing in LTE, and at least 144 LTE networks are expected to be in commercial service in 59 countries over the next few years³.
While the roll-out of LTE commercial networks continues - and far outstrips the rate at which previous 3G technology was taken up - the speed of adoption is influenced by a number of factors: spectrum allocation from governments; legacy technology on networks; and economic pressures that constrain the investment necessary to upgrade the infrastructure. LTE roll-out has begun in North America, Asia Pacific and in some countries in mainland Europe. While we do not expect LTE to be implemented in the UK until 2013/14, this slow roll-out will not affect our business since our customers are based all over the world, from the US to China. Indeed, 97% of our Wireless revenue last year came from outside the UK.
Despite the growth in LTE there are, however, still relatively few LTE subscribers worldwide: the majority of the six billion mobile phone subscriptions are still 2G (GSM). Only 15% (890 million) are 3G (WCDMA) devices and, at the time of writing, only just over 17 million 4G (LTE), the majority of which are in North America3. While production of the now-dominant 2G phones will slow down, shipments of 3G and 4G devices will continue to increase.
In time, we expect manufacturers to rationalise the number of different models they produce. Advances in technology will, however, always result in new models and devices that are more complex to design and produce and that need more tools to test them effectively, and bring them to market quickly. Despite the efficiency of the new testing systems, we estimate that a typical LTE device requires 20-25% more testing than a 3G one: each new technology has to be compatible with legacy technology, and work on different frequencies around the world. The industry is only now entering the mandatory testing phase for LTE devices and, to date, only 19 LTE devices have been certified this year whereas 300 to 400 2G/3G devices were certified in each of the past three years4. This phase will require each manufacturer to significantly increase their testing capacity as network roll-outs accelerate.
Nor is the industry standing still: it is anticipating future demands that will result in more testing opportunities. LTE Advanced (LTE-A) - the next stage in LTE's evolution - delivers even faster data rates. It will provide super-fast wireless broadband, delivered in gigabytes rather than megabytes. The industry is currently building consensus on the capability and features of LTE-A and deployment is expected to begin during 2013.
1 Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011-2016, February 2012
2 Jefferies Mobility 2010, September 2011
3 GSA - Evolution to LTE Report, June 2012
4 GCF Terminal List, May 2012
Strategy
Our strategy in both Wireless businesses is to position Anite as a global leader in Wireless test solutions by focusing on the areas in which we specialise. We will continue to invest in early R&D, to keep our highly specialised products at the leading edge and to have the latest technology available for our customers as soon as they need it. In addition, we will look to expand our testing capabilities into adjacent markets, as we have already achieved with IOT, benchmarking and scanners. In meeting customers' and market demands, our primary focus will be on internally developed products, but we may supplement these with carefully selected small acquisitions, as appropriate.
We believe this commitment to our customers, and to the market, will enable us to maintain our leadership and will deliver further growth in revenue and profit as the market continues to develop.
Opportunities for growth
We will offer an increasing range of products to enable our Wireless customers, worldwide, to exploit changes in technology. In Handset Testing, this includes maintaining our market-leading CT capability, and increasing our IOT offer as we expand the number of new operator eco-systems worldwide, and ensuring that our Development Testing (DT) solutions continue to anticipate and meet the demands of end-customers and industry bodies. We will develop into adjacent markets, as appropriate to meet our major customers' demands.
In Network Testing, we augmented our testing tools when we launched benchmarking and scanner products, with the objective of establishing them as market-leading products. While there will not be a significant volume of LTE business for Network Testing until commercial networks are rolled out, we are in the enviable position of having the most comprehensive LTE product portfolio on the market. We have already sold LTE equipment to network equipment manufacturers and operators in North America and mainland Europe, and expect to make progress in this area in the coming year.
We continue to support products that address legacy technologies, the demand for which has proved to be more sustained than expected. Our current focus is, however, principally on LTE, although we are already planning for the next generation, LTE-Advanced.
Wireless: Handset Testing
Our Handset Testing business has been a world leader for 20 years. It enables chipset and device manufacturers to test their products' viability, to improve their quality, and to reduce their time-to-market, and enables network operators to tailor devices to their individual network configurations.
During the complex process of developing new radio chipsets or handsets - using old or new radio technology - it is not possible to use existing networks to establish whether prototypes work to the required standards. Our system not only tests newly developed devices' radio function by wiring them to simulated networks, it also changes the radio simulation to test their overall performance in hundreds of everyday scenarios. Each new technology evolution has to be compatible with previous technologies to enable any device to function across the entire network and in different countries.
Business model
Our Handset Testing business employs highly specialised engineers (employees and short-term contractors) to develop its products - often in collaboration with customers, as we both seek to tackle the challenges presented by new technologies. Our products are built around a core hardware and software platform, on which one of Handset Testing's own applications is loaded. For certain applications, customers buy additional test scripts - which run exclusively on our systems - that enable them to test their devices against specific simulated scenarios and characteristics.
We sell our products, worldwide, through a directly employed sales force. Software sales are most commonly made using perpetual licences. In addition, customers buy annual maintenance and support contracts that entitle them to upgrade to new software releases, which reflect development in underlying Wireless standards. Once acquired, customers will often operate systems and pay for support for as long as ten years.
As mobile phone technology advances, our systems - which have a long lifespan and are easy to use - can be used in conjunction with newer technology.
Handset Testing solutions
We focus on Conformance Testing (CT) - which ensures that devices are certified as complying with minimum industry standards and are able to deliver the service expected of them - Development Testing (DT) - working in collaboration with our customers as they develop viable early-stage devices - and Interoperability Testing (IOT) - simulating real-world network conditions to ensure that devices function as expected on different network configurations.
Our solutions test the entire range of devices - from second generation (2G) through to the latest fourth generation (4G). New mobile devices must contain legacy as well as new-generation technology to enable them to maintain a connection across a variety of networks. This creates a significant level of commercial protection for us, since new entrants to the test market would have to be able to provide a comprehensive range of test cases for 2G, 3G and 4G.
We are now developing our technology to support LTE-Advanced, which is significantly faster than LTE, in preparation for the time when it can be supported by the networks.
The market is driven by certification schemes that are administered by the standard setters - such as the Global Certification Forum (GCF), a partnership of mobile network operators, mobile device manufacturers and the test industry, which has created an independent certification programme to help ensure interoperability between mobile devices and networks, worldwide. We have consistently led the LTE conformance-testing market in both verified and validated test cases.
IOT has grown significantly as a result of the world's larger network operators realising that, while in theory a mobile network exists in a standard form, in reality the combination of different manufacturers, handsets and radio technology, results in inconsistencies. This can lead to customer churn if subscribers' experience variable quality - and it costs an operator significantly more to acquire a new subscriber than to retain an existing one.
Field-testing of devices - the traditional method of IOT, which is carried out when a device is materially complete - involves performing drive tests to assess the device's behaviour. Network simulation, which involves re-creating field tests of devices in the laboratory, is rapidly gaining momentum because it enables testing to be more focused, more repeatable and subsequently reduces test time and related costs. Manufacturers need to test their devices against real network conditions as early as possible; the later into the lifecycle they are, the more it costs to fix a bug. Laboratory-based IOT can be carried out at various phases of a device's lifecycle, even at the early development stage.
Network operators can perform IOT testing either in-house or by managed supply-chain testing, which is often referred to as a "carrier acceptance scheme". Larger network operators are beginning to take much stronger control of their supply chains, as evidenced by the increasing number of carrier acceptance schemes we are running, by pushing quality assurance back onto the device manufacturers. Our IOT product includes carrier test scripts customised to specific network configurations. By reducing post-launch IOT bugs, it reduces time and cost-to-market. As a result of using our system, one customer cut its time to launch new devices by 50%.
Wireless: Network Testing
Our Network Testing business provides products - under the Nemo brand - for network operators and network infrastructure manufacturers to measure the coverage and quality of mobile phone networks. It enables operators, or their subcontractors, to ensure that customers' ability to make telephone calls, send an SMS or receive and send data is as unimpaired as possible. By identifying anomalies in the radio network, it also enables operators to fix reception problems and to maintain a consistent quality of experience for subscribers.
Business model
Network Testing develops and sells highly specialised software to mobile network operators and service companies to help them install, monitor and maintain their mobile networks around the world. It employs a direct sales force in strategically important locations but, given the diverse geographic locations of customers, it also uses a network of distributors to sell and support its products. Our solutions are developed by our own highly specialist radio technology engineers. The products are usually incorporated in, and run on, commercially available third-party hardware and are sold with a perpetual software licence that includes a period of warranty and support (usually 12 months).
Customers are given the option to extend the warranty, but the relatively short lifecycle of most products means that recurring revenue is not as high as in the other Anite businesses. However, once network operators have made the initial investment in a suite of products to test their networks, they usually make follow-on purchases as their needs expand and it becomes necessary to replace equipment that has become damaged in the harsh environment in which they typically operate, or as mobile phone technologies evolve.
Network Testing solutions
We offer our customers one of the strongest and most versatile ranges of network testing products available. Our network measurement tools are designed to meet the needs of all our customers, regardless of their internal processes and means of testing. The tools provide a wide range of information, from call quality and data download and upload speeds, to signal reliability, the interaction of neighbouring cells, and the efficiency with which devices "hand-off" from one cell to another as they move in a vehicle, on foot or in a building.
Our products range from Nemo Handy, an easy-to-use handheld device that can be used for indoor and outdoor testing, to Nemo Autonomous, which provides a cost-effective, unmanned continuous stream of data. Nemo Outdoor is a powerful laptop-based solution, used for "drive testing" by an engineer who travels around an area - at all times of the day and night, and in all weather conditions - to compare coverage and quality. As devices need to handle increasing volumes of data, our test systems need to be able to process and portray the more complex problems that occur in today's networks.
The software embedded in our products enables network operators and their sub-contractors to manage and analyse vast quantities of data, quickly and efficiently, either on our post-processing analyser or on third-party processing tools.
We sell to around 130 countries and continued to develop our network of local distributors during the year. In addition to their sales function, these partners offer technical help to customers.
Towards the middle of the year, Network Testing launched the recently acquired Invex benchmarking product. It enables a large number of devices to be measured simultaneously without radio interference and we are receiving good feedback from initial sales. The predecessor to the new Invex product was predominately sold in the North American market - our international sales coverage will enable it to be sold around the world to reach a far larger market. The scanning receiver product, which we acquired at the same time, is highly competitive and has also been well received by customers.
Travel
Market trends
Travel provides reservations systems that enable leisure travel companies - including tour operators, specialist holiday companies, leisure park operators, accommodation providers, and cruise and ferry operators - to run their businesses more efficiently. The challenging economic environment continues to exert pressure on the industry; consumers have tighter budgets, costs are rising and geopolitical events are creating an ever-changing challenge over destinations.
In addition, as a result of the trend for on-line travel agents and dynamic packaging, our customers demand more from their IT systems. (Dynamic packaging enables consumers to buy their own flights and accommodation, rather than buying pre-defined packages, which are priced according to current availability.) Our technology directly addresses the industry's core issues in this highly pressurised environment: it helps them reduce costs by retiring legacy IT platforms and automating processes, offers high-speed and accurate holiday searching, and gets their own differentiated products to market as quickly as possible.
We are well positioned to succeed in this new world. The inherent flexibility of our industry-leading @com reservation and e-business system creates the means for traditional tour operations to co-exist with dynamic packaging by enabling destination and pricing flexibility, and reducing time-to-market.
Strategy
Our strategy is to maintain and develop our products to exploit our technological leadership and capitalise on our customer relationships in the mid- and upper-tier leisure travel market. To this end, we will continue to develop and launch new @com modules to meet changing market needs. We will also continue to deliver successful and substantial projects to our major customers, which should lead to further opportunities - for add-ons and new territories - in these very large organisations. We will work to convert our strong sales pipeline, in a manner to suit resources and timescales, which should enable profitable growth of the business into the future. We will seek to increase the proportion of support and maintenance revenue from existing projects to provide future stability and profitability.
Opportunities for growth
Our @com solution is currently the only successful, and proven, large-scale leisure travel reservation system on the market. TUI's and Thomas Cook's commitment to @com has increased the product's reputation, and has led to wider interest across and beyond Europe, where inflexible legacy solutions still abound. There is also increasing interest outside the European package-holiday heartland; we plan to benefit from this either by working with our existing major customers, who are seeking footholds in these markets, or by selling to new, large customers.
Business model
Anite Travel software engineers develop systems, which are based around a common core of code and functionality, for leisure travel companies to manage their full business lifecycles. Individual implementations can involve significant work to develop interfaces that enable Travel's software to communicate with other systems in the customer's existing system landscape. Bespoke business functionality enhancements undertaken for individual customers can be added to core functionality if appropriate, and offered to existing customers as part of their upgrade pattern, thus ensuring continual development of the system and maintenance of a common code base. Since individual implementations for customers are broadly similar they can be supported by a single team, although some customers require a dedicated resource.
The systems are sold by an in-house sales team. Contract arrangements vary, but typically involve an upfront licence fee, and charges for development and implementation to get the system live and operational in customers' environments. Part of the sales process involves a customer-funded detailed gap analysis, which identifies any gaps between the functionality of our current product and the customer's requirements.
Once live, the systems may be in operation for more than 15 years: replacing them creates considerable disruption and business continuity risk for the customer. Once live, the customer will require significant maintenance and support as well as potential for annual licences depending on the structure of the overall contract. This is generally contracted for a fixed minimum term of five years. In addition there will be on-going business functionality improvements demanded by customers as the market sector evolves. Travel also provides a facility for hosting customers' infrastructures at its own data centre; this, again, is typically contracted on the basis of multi-year agreements.
Travel solutions
@com, which sits at the heart of leisure travel companies' businesses, enables them to operate efficiently in today's cost-pressured environment. Our e-business suite takes them through the entire range of operations required by the demanding and ever-changing travel market, and enables them to contract with hoteliers, and to gather internal and third-party inventory to form the basis of package holidays. These can be flexibly priced and, if required, can link to yield management systems to present holidays for sale - through the internet, travel agents and call centres - by a variety of search methods supported by content management and Customer Relationship Management (CRM) modules.
As an operator sells holiday packages, @com records the transactions and produces documentation, updates prices and availability, optimises inventory and produces complete financial records that can be fed into the organisation's financial and management information systems.
Geopolitical and economic pressures over recent years have resulted in leisure travel companies focusing on the need to improve their cost bases, in what was already a low-margin sector. The key attribute of our market-leading @com suite is its ability to make a substantial reduction to back-office costs through improved efficiency, flexibility and user control. This enables faster reaction to market changes, speedier price updates and significantly improved time-to-market for new offers or late deals.
Our @com suite also helps operators manage the travel market's technology challenges, as internet and mobile data continue to drive consumer behaviour. The ability to combine traditional package holidays with dynamic packaging or third-party flights, hotels and other components, enables on-line travel agents to use @com in combination with traditional tour operations.
Initially @com supported the wider field of retail holiday systems in travel agents, inventory aggregation and internet-based selling tools, as more holidays were being sold over the internet. Developments in high-speed search and multiple message sets - that are able to feed the demand for faster and more accurate data on the web and onto mobile devices - have now moved Anite directly into those markets and have created opportunities to gain a bigger share of customers' IT spend.
Review of operations
The past 12 months delivered strong financial results, with exceptional growth rates in revenue and adjusted operating profit of 31% and 64% respectively compared with the prior year.
The growth was primarily delivered by Handset Testing, which benefitted from a stronger-than-anticipated demand for both LTE and 2G/3G technology products. In Network Testing, revenue increased, particularly in the second half of the year, although profits were affected by the investment being made in the Invex benchmarking and scanner products, acquired in the previous year.
Following the declines of the previous two years, Travel had a more encouraging year, delivering slightly improved adjusted operating profit on revenue that was in line with the prior year. More importantly for the future of the business, Travel increased its closing order book by 42%.
Wireless: Handset Testing
The adjusted results for the Handset Testing business show exceptional year-on-year growth. Order intake grew 33%, to £79.4m (2011: £59.6m), revenue increased by 54%, to £76.4m (2011: £49.6m), and adjusted operating profit more than doubled, to £21.5m (2011: £10.0m). The closing order book in the business increased 15%, from £21.7m at the start of the year to £24.9m at 30 April 2012.
A significant proportion of the revenue growth in Handset Testing came from increased sales of LTE-compatible products, such as the Anite 9000 LTE hardware platform. Revenue from LTE products, which more than doubled to £33.9m (2011: £16.7m), represented 44% of Handset Testing revenue in the year, compared with 34% in the prior period. The level of growth achieved by LTE products was at the top of the range of the expectations we had had for the technology at the start of the year and was a reflection of the developments in the overall industry, where operators are demonstrating an increased commitment to rolling-out the new technology, and chipset and device manufacturers are seeking to support this commitment by introducing compatible devices.
In addition to the growth in LTE products, we also achieved growth in 2G/3G technologies. Here, we had anticipated a year of flat revenue growth as we expected spend to shift to LTE technologies. In practice, we achieved growth of 29%, to £42.5m (2011: £32.9m), in these older technologies. Much of this growth emanated from customers buying systems to test for backwards-compatibility functionality at the same time as equipping for LTE testing.
From a market perspective, there was good growth for our traditionally strong Conformance Testing CT) product which grew over 50% and now accounts for around half of Handset Testing's revenue. The most significant growth was, however, achieved in the newer area of Interoperability Testing (IOT), which grew nearly 80% year-on-year and now accounts for approximately 40% of Handset Testing's revenue
On a regional basis, Asia Pacific revenue increased 78%, to £30.3m (2011: £17.0m), making it our biggest region. This growth was driven by the significant investment Asia Pacific manufacturers are making in developing smartphones. EMEA revenue increased 32%, to £17.3m (2011: £13.1m) while the Americas increased 48% to £28.8m (2011: £19.5m).
Handset Testing's net revenue margin (revenue, less third-party hardware costs as a percentage of revenue) fell, as predicted, to 71% (2011: 75%). This was the result of an increased proportion of hardware costs in the product mix. In the future, as the LTE product-mix develops, we expect this percentage to start to increase as we sell a greater proportion of software and support.
The business continued to invest in R&D during the year: enhancement of the Anite 9000 platform continued, as did investment in CT and IOT applications. Throughout the past year, Anite continued to lead the market on numbers of validated LTE conformance test scripts and currently has around 380 scripts validated by the standards bodies. The range of what we offer in this area is helping us to win significant share in the early stages of the LTE conformance test market. In IOT, we increased our range of scripts for the small number of carrier acceptance programmes that we had in place, as well as progressing programmes with a number of potential new operators, including China Mobile, the world's largest mobile operator.
Maintaining our position at the forefront of the technology is critical to the continued success of our business. The cash spent on R&D projects increased to £13.0m (2011: £10.2m), with the bulk of the increase being spent on our hardware platform and IOT. A planned increase in spend on writing LTE CT and IOT scripts resulted in a net capitalisation of R&D costs of £0.7m (2011: £1.0m), with the result that the profit and loss charge for R&D increased in the period to £12.3m (2011: £9.2m). Other fixed costs in Handset Testing increased by £2.5m to £20.7m (2011: £18.2m). The majority of the increase resulted from higher staff costs, predominantly in supporting the larger number of systems installed at customer sites. Headcount in Handset Testing was 211 employees at the year end (2011: 180) and 56 contractors (2011: 45) an increase of 19% in total headcount compared with the 54% increase in revenue.
As a result of the factors described above, Handset Testing's operating margin increased eight percentage points to 28% (2011: 20%).
Wireless: Network Testing
Network Testing increased its order intake by 13%, to £26.0m (2011: £23.0m), while revenue increased by 8%, to £26.0m (2011: £24.1m). This business has no significant closing order book. Adjusted operating profit fell by 17%, to £5.3m (2011: £6.4m), as a result of the increased R&D cost base following the acquisition of the Invex benchmarking and scanner products in January 2011.
Market conditions for network testing products were relatively difficult as operators once again tightened budgets, following a period in the prior year when they caught up on previously deferred spending. This, in turn, led to significant competitive pressure, but despite this negative market trend, Network Testing performed well and increased its revenue.
The business benefitted from the previous year's re-invigoration of the sales function and the continuing improvements to its distributor network. Part of the growth in revenue came from the Invex benchmarking product, which was only partially developed at the time of its acquisition in January 2011 and was completed and launched just before the end of the first half of this financial year. Subsequent sales of the product were achieved in the second half of the year and the pipeline of opportunities at the year end is encouraging. Other developments included further enhancements to the scanner product acquired at the same time as the benchmarking product and sales were extremely successful in the year. In addition, all Network Testing products are now compatible with LTE technology and the business had some limited early success in helping operators with roll-out programmes, even though the market is still embryonic.
Network Testing's revenue in EMEA decreased slightly to £11.8m (2011: £12.2m). In the Americas, however, it benefitted from its increased presence, following the Invex acquisition, and grew by 21%, to £6.8m (2011: £5.6m). In Asia it grew by 17% to £7.4m (2011: £6.3m) a reflection of the region's growth in the mobile industry.
The benefit of having an in-house scanner offset some price erosion caused by market conditions with the result that net revenue percentage was down only slightly, at 70% (2011: 72%). R&D costs increased to £3.7m (2011: £2.2m), including £0.4m of capitalised development (2011: 0.5m), mainly as a result of the extra R&D facility that came with the Invex acquisition in January 2011. During the year, significant upgrades were launched to existing products, including drive testing, handheld and analysis tools. The hand-held Nemo Handy-A product line was enhanced by several new LTE-capable devices and by the launch of the first tablet-based variant. The development of the Nemo Invex benchmarking product line included support for the latest LTE devices. Development of the Nemo FSR1 scanning receiver focused on improving LTE measurement capabilities and expanding supported frequencies. These developments ensure that Network Testing's product portfolio supports the very latest LTE measurement capabilities for both LTE-FDD and LTE-TDD technologies on all the major frequency bands in use worldwide. Other fixed costs increased by 7%, to £9.3m (2011: £8.7m). Most of this was additional sales and marketing costs to support the bigger business. Headcount at the year-end was 113 (30 April 2011: 103).
Overall, after the factors above, operating margins for the Network Testing business remained healthy at 20%, albeit down from the 27% achieved in the prior year.
Travel
The Travel division had a good year as reflected in its financial results. Order intake was very strong, up 37% to £46.6m (2011: £34.0m), with revenue flat at £20.1m (2011: £20.0m) and adjusted operating profit up 10% at £4.6m (2011: £4.2m). The closing order book was up to £89.6m (2011: £63.2m), with the intake in the year representing a book-to-bill ratio of 2.3 times (2011: 1.7 times). Over the past two financial years, more than £40m has been added to Travel's closing order book, an important driver of value in the business.
The major orders signed in the past 12 months included follow-on work for TUI Central Europe, following the successful implementation of the @com system, and the award of a contract from Thomas Cook to implement @com in its UK mainstream business. Around £16m of the closing order book is expected to be delivered in the current financial year, with the balance due for delivery over the next ten years.
In addition to the initial implementation for Thomas Cook, the other key feature of the year was the continued progress on the contract signed last year with TUI to implement @com in their UK mainstream business. 40% of Travel's revenue was of a recurring nature (2011: 41%), being either managed services or software maintenance/support revenue. Licence sales in the year were £3.0m (2011: £1.5m). We expect the proportion of recurring revenue to increase in the future as the large projects currently in development go live and migrate to a maintenance and support phase.
In the year, 61% of Travel's revenue came from the @com product (2011: 51%) and 60% (2011: 56%) came from the UK; 39% (2011: 42%) from Europe and 1% (2011: 2%) from the rest of the world. More than six million passengers a year now book their holidays on @com systems in the UK and across continental Europe.
The net revenue percentage was essentially unchanged at 96% (2011: 95%) while fixed costs fell £0.1m from the previous year. Headcount remained relatively stable during the year at 163 (2011: 167).
Overall, Travel's operating margin increased two percentage points over the prior year, to 23%.
Other Group costs
The divisional performances above are stated before unallocated corporate costs which include an element of head office staff costs, Directors' remuneration, professional fees and other non-operational costs. During the year, unallocated Group costs decreased by £0.4m to £2.6m (2011: £3.0m), largely because of the non-recurrence of a one-off property cost incurred in the prior year.
Financial review
As previously explained in the report, the year ended 30 April 2012 was one of exceptional growth for the Group; this resulted in good cash generation which, in turn, led to a stronger balance sheet. During the year the Group's outstanding swap liability was settled and new bank facilities were signed. Although they are currently unused they give the financial flexibility necessary as the Group continues to develop.
Principal accounting policies
The principal accounting policies are unchanged. There were two new standards and a number of minor improvements to existing standards in the year, but none of these had a material impact on the Group's results.
Financial results
Revenue from continuing operations was up 31% at £122.5m (2011: £93.7m) and adjusted profit before tax increased 75% to £28.0m (2011: £16.0m).
Reconciliations of adjusted EBITDA, of £34.2m (2011: £22.2m), to the operating profit, of £22.5m (2011: £13.9m), and adjusted operating profit, of £28.8m (2011: £17.6m), to the reported profit before tax for the year, of £22.2m (2011: £12.2m), are set out in the tables below. The reconciling items are those that, in the opinion of the Board, are either one-off in nature or are non-cash related and are not, therefore, indicative of the Group's underlying trading. In the opinion of the Board, the adjusted results give a better representation of the underlying performance of the Group.
Reconciliation of operating to statutory results
|
|
2012 |
2011 |
|
|
£m |
£m |
|
Adjusted EBITDA |
34.2 |
22.2 |
|
Depreciation |
(3.3) |
(2.8) |
|
Amortisation of intangible assets |
(2.1) |
(1.8) |
|
Adjusted operating profit |
28.8 |
17.6 |
|
Share-based payments |
(2.9) |
0.1 |
|
Amortisation of acquired intangible assets |
(3.3) |
(3.6) |
|
Restructuring costs |
(0.1) |
(0.2) |
|
Operating profit |
22.5 |
13.9 |
|
|
2012 |
2011 |
|
|
£m |
£m |
|
Adjusted operating profit |
28.8 |
17.6 |
|
Net finance charges, excluding recycled hedge losses |
(0.8) |
(1.6) |
|
Adjusted profit before tax |
28.0 |
16.0 |
|
Share-based payments |
(2.9) |
0.1 |
|
Amortisation of acquired intangible assets |
(3.3) |
(3.6) |
|
Restructuring costs |
(0.1) |
(0.2) |
|
Other gains and losses |
0.5 |
- |
|
Net finance charges: recycled hedge losses |
- |
(0.1) |
|
Profit from continuing operations before tax |
22.2 |
12.2 |
Currency effects
Movements in exchange rates in the year had an overall mildly positive effect on the results compared with the previous year. Year-on-year, the average exchange rate for the US dollar weakened 2% against sterling, from £1 = US$1.57 to £1 = US$1.59, although the average rate of the euro strengthened by 1%, from £1 = €1.18 to £1 = €1.17. The net effect of these changes on the translation of results from overseas subsidiaries was to reduce revenue by £0.1m with no impact on adjusted operating profit. There was no significant impact on any of the individual businesses.
The closing exchange rates at the year end, which affect the conversion of foreign exchange-denominated balance sheet items - such as cash, and trade debtors and creditors - saw mixed movements of the foreign currencies against sterling. The closing rate for the euro was £1 = €1.226 (2011: £1 = €1.123), an appreciation of 9% on the previous year; the closing exchange rate for the US dollar was, however, £1 = US$1.626 (2011: £1 = US$1.666), a depreciation of 2% on the previous year.
Where possible, exposures associated with foreign currency balance sheet accounts are hedged or minimised by converting into local currencies, as are the transactional effects of business units trading in currencies other than their local currency. In the year, these exposures net of hedging impacts had, combined, an approximate net £0.9m positive profit effect compared with a corresponding net £0.3m positive profit effect in the previous year, resulting in £0.6m overall positive year-on-year impact on operating profit. Network Testing and Travel each benefited by £0.3m.
Revenue
Revenue from continuing operations increased in the year by 31% to £122.5m (2011: £93.7m). The growth in revenue was principally achieved by the Handset Testing business; Network Testing also grew and Travel reversed the trend of the previous two years by achieving flat revenue. Details of this are set out in the Review of operations. On a geographic basis, revenue by destination showed significant increases in sales to the Americas (primarily North America) and to Asia Pacific, which - in a reflection of the importance of the region to the Wireless industry - has become our most significant region. Revenue in the UK and EMEA also increased in absolute terms, but fell as a proportion of overall Group revenue. The proportions of total revenue by region were: UK 13% (2011: 16%); EMEA 27% (2011: 32%); Americas 29% (2011: 27%); and Rest of World (mainly Asia) 31% (2011: 25%).
In revenue by type, the principal changes in the year were strong growth in sales of software licences and hardware/third-party equipment, which increased by 44% to £83.6m (2011: £58.0m). Recurring revenue (software maintenance and managed services) increased 15% to £31.0m (2011: £27.0m) with the proportion of recurring revenue 25% (2011: 29%).
Cost of sales and gross profit
Cost of sales increased by 31%, to £50.1m (2011: £38.2m), in line with increases in revenue. As a result, the gross margin remained constant at 59%, with gross profit at £72.4m (2011: £55.5m). Within cost of sales, the costs of hardware and third-party products sold on to customers increased 47% to £30.4m (2011: £20.7m). Most of the increase came from the growth in the Handsets business. Other cost of sales, mainly staff costs directly associated with the delivery of revenue and to support the growing number of installed systems, increased 13% to £19.7m (2011: £17.5m).
Operating expenses
Total operating expenses in the period increased 20% to £49.9m (2011: £41.6m), considerably less than the corresponding increase in revenue and gross profit. A detailed breakdown of operating expenses is given in note 2.5.
Within the total operating expenses are one-off and non-cash items not charged to adjusted operating profit and underlying operating expenses that are charged to adjusted operating profit. The latter totalled £43.6m (2011: £37.9m).
Within the £5.7m increase in underlying operating expenses, R&D costs incurred by the Wireless businesses increased by £4.6m to £16.0m (2011: £11.4m) with both businesses contributing to the increase. In response to accelerating requirements from customers, the Handset Testing business increased investment in its LTE hardware and software platform during the year. It also increased investment in the development of its IOT product. An increase in R&D investment by the Network Testing business was primarily due to the full-year effect of the additional resource acquired with the Invex product line, in January 2011. Across both businesses, £2.6m of R&D costs were capitalised in the year (2011: £2.7m), mainly on conformance test cases in Handsets Testing and the Invex benchmarking chassis in Network Testing. Amortisation of capitalised R&D increased to £1.6m (2011: £1.2m).
Other underlying operating expenses increased £1.2m, to £27.6m (2011: £26.4m). The main increase was in distribution costs, particularly in the Handset Testing business, to support the larger installed base of testing systems at customer sites.
After underlying operating expenses, adjusted operating profit was £28.8m (2011: £17.6m), an increase of 64%. Adjusted EBITDA was up 54%, at £34.2m (2011: £22.2m).
One-off and non-trading operating expenses excluded from adjusted profit calculations totalled £6.3m (2011: £3.7m). These included amortisation of acquired intangible assets of £3.3m (2011: £3.6m) and a charge for share-based payments of £2.9m, compared with an abnormal credit of £0.1m in the prior year, which also included a charge of £0.3m for the costs associated with acquiring the Invex product line. The share-based payment charge in the year included a £1.4m cost for providing for employers' NI liabilities (2011: £0.2m). This was particularly high because of the strong increase in the share price over the year.
After these non-operational costs, the Group reported an overall statutory operating profit of £22.5m (2011: £13.9m).
Other gains and losses
Other gains and losses, which are excluded from the calculation of adjusted profit before tax, were a gain of £0.5m in the current year (2011: £nil). These represented gains recorded on the ineffective portions of cash flow and net investment hedges that related to the hedging arrangements settled in November 2011.
Group finance costs
Despite having an excess of cash over financial borrowings throughout the year, the Group incurred a net finance charge of £0.8m (2011: £1.7m). This was principally because the borrowings that were in the capital structure that was in place until 30 November 2011, were fixed at the relatively high long-term rates available when the facilities were put in place in 2006, while surplus cash earned interest only at current low rates. The position normalised following the expiry of those facilities, with a net £nil charge for the remaining five months of the year, as the small amount of interest earned on surplus cash offset the fees incurred for the new five-year bank facilities.
Taxation
The tax charge for the year on continuing operations was £6.0m (2011: £3.3m). The tax rate on the statutory operating profit was 26.9% (2011: 26.8%). The underlying adjusted tax rate on adjusted profit before tax is 26.9% (2011: 27.7%).
Shareholder returns
After taking account of the factors described above, adjusted basic earnings per share were 7.2p (2011: 4.0p), an increase of 80%; adjusted diluted earnings per share similarly increased 76% to 6.7p (2011: 3.8p). The statutory basic earnings per share for continuing operations was 5.7p (2011: 3.1p).
As explained in the Chairman's Statement, the Board is proposing a significantly increased final dividend of 1.125p per share (2011: 0.735p), making a total for the year of 1.50p (2011: 1.05p), which is covered 4.8 times by adjusted basic earnings.
Balance sheet
Inventories
The carrying value of inventories held by the Wireless businesses has increased significantly from £4.7m, at 30 April 2011, to £10.2m, at 30 April 2012. This reflects the increasing importance of hardware to both Wireless businesses. The majority of the increase is in Handset Testing where, at the year end, the business was also carrying higher-than-normal inventories of Anite 9000 systems and components in order to ensure continuity of supply in the face of high demand and extended lead times for certain key components. Inventory in Network Testing also increased over the year to support the Invex benchmarking product launched at the end of the first half.
Trade and other receivables
Trade and other receivables increased 3% to £32.9m at 30 April 2012 (30 April 2011: £31.9m). Within this, trade debtors, net of provisions, decreased 4% to £24.2m (2011: £25.3m) despite revenue increasing 31%. The improvement is largely a result of phasing of year end debtors: debtor days at 30 April 2012 were 59 days (30 April 2011: 76 days). Accrued income (revenue taken to the Income statement, but not yet invoiced to customers) increased by £1.4m, to £4.2m (2011: £2.8m), due to the timing of payment schedules on long-term contracts in both Handset Testing and Travel.
Trade and other payables
Trade and other payables increased 24% to £37.7m at 30 April 2012 (30 April 2011: £30.5m). This is mainly as a result of the increase in overall business over the course of the year, which resulted in a significant increase in trade creditors. In addition, there was a £2.5m increase in deferred income (amounts invoiced to customers, but not yet recognised as revenue in the Income statement), to £14.8m (2011: £12.3m). This predominantly represents an increase in pre-billed maintenance contracts in Handset Testing.
Provisions
Provisions reduced by £2.5m to £5.8m at 30 April 2012 (30 April 2011: £8.3m). The main reductions were in the £0.6m deferred consideration provision for the Invex acquisition, which was settled in the year, and the property provision where £2.1m was paid out in the year. This included an amount paid to change the lease arrangements for the Travel business's Slough headquarters, where we have secured longer-term security of tenure over the floor-space required, settled existing dilapidation responsibilities, and released early surplus space back to the landlord.
Cash flow
Cash generated from operations was £31.0m (2011: £17.2m). This represented a conversion of 91% of adjusted EBITDA (2011: 77%). Cash generated by operations was affected by the decrease in provisions and by a net working capital increase of £1.2m (2011: increase of £3.3m). The latter was mainly caused by the increase in inventory, although it was partially offset in trade creditors as described above.
Net payments for finance costs were £0.9m (2011: £1.7m) while tax payments increased to £5.4m (2011: £2.0m), a reflection of the increased profits.
The cross-currency swap liability was finally settled on 31 October 2011 by payment of the capped amount of £21.6m. In addition, the deferred consideration of £0.6m related to the acquisition of Invex, was paid during the year.
Capital expenditure in the period increased significantly to £5.6m (2011: £3.5m). Significant purchases included £2.9m (2011: £1.6m) on Anite 9000 development equipment. As described above, a further £2.6m (2011: £2.7m) was incurred on capitalised development expenditure.
Dividends paid to shareholders totalled £3.2m (2011: £2.8m). An additional £1.6m (2011: £5.4m) was incurred on the purchase of shares for the Company's employee benefit trust. The gross cash balance also decreased by £10.0m (2011: £5.0m) as a result of the payment of the final amount outstanding on the long-term loan following its expiry in November 2011. This had no impact on the Group's net cash, which is stated net of borrowings.
After these movements, net cash decreased by £10.8m (2010: net cash decrease of £2.1m). The net cash balance at 30 April 2012 was, as a result, £16.9m (30 April 2011: £27.7m). With no borrowing outstanding at 30 April 2012, this also represents the gross cash balance (30 April 2011: £37.7m).
Borrowings and facilities
During the year, the Group arranged new banking facilities, including a revolving credit facility of £20.0m (2011: £20.0m) and a net overdraft facility of £5.0m (2011: £5.0m). The revolving facility is due to expire on 31 October 2016 and the overdraft is due for renewal on 31 July 2012. The Group has no drawings against its banking facilities at 30 April 2012 (2011: net borrowings of £10.0m).
In view of the current strong cash position, the availability of banking facilities, the maturity profile of debt obligations and forecast cash position over the next 18 months, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, Anite continues to adopt the going concern basis in preparing the consolidated financial statements.
Richard Amos
Group Finance Director
Consolidated income statement
|
|
|
2012 |
2011 |
|
|
Note |
£000 |
£000 |
|
Continuing operations |
|
|
|
|
Revenue |
2.1 |
122,546 |
93,694 |
|
Cost of sales |
|
(50,105) |
(38,184) |
|
Gross profit |
|
72,441 |
55,510 |
|
Distribution costs |
|
(12,463) |
(11,358) |
|
Research and development |
|
(17,096) |
(12,838) |
|
Administrative expenses |
|
(20,383) |
(17,354) |
|
Operating expenses |
2.5 |
(49,942) |
(41,550) |
|
Operating profit before share-based payments, amortisation of acquired intangible assets and restructuring costs |
2.2 |
28,772 |
17,660 |
|
Share-based payments |
6 |
(2,889) |
126 |
|
Amortisation of acquired intangible assets |
|
(3,340) |
(3,582) |
|
Restructuring costs |
3 |
(44) |
(244) |
|
Operating profit |
2.2 |
22,499 |
13,960 |
|
Other gains and losses |
4 |
487 |
19 |
|
Finance income |
5 |
353 |
484 |
|
Finance charges |
5 |
(1,152) |
(2,242) |
|
Profit from continuing operations before tax |
|
22,187 |
12,221 |
|
Tax expense |
7 |
(5,974) |
(3,270) |
|
Profit from continuing operations |
|
16,213 |
8,951 |
|
Profit from discontinued operations |
|
2,253 |
484 |
|
Profit for the year |
|
18,466 |
9,435 |
|
Profit attributable to equity holders of the parent |
|
18,466 |
9,435 |
|
Continuing and discontinued operations |
|
|
|
|
Earnings per share - basic |
8 |
6.5p |
3.3p |
|
- diluted |
|
6.0p |
3.1p |
|
Continuing operations |
|
|
|
|
Earnings per share - basic |
8 |
5.7p |
3.1p |
|
- diluted |
|
5.3p |
2.9p |
Consolidated statement of comprehensive income
|
|
|
2012 |
2011 |
|
|
Note |
£000 |
£000 |
|
|
|
|
|
|
Retained profit for the year |
|
18,466 |
9,435 |
|
Exchange differences arising on translation of foreign operations |
|
(6,745) |
1,941 |
|
Cash flow hedges |
|
237 |
404 |
|
Recycling of fair value loss on cash flow hedges to profit or loss |
5 |
42 |
133 |
|
Tax charge taken directly to other comprehensive income |
7 |
(193) |
(559) |
|
Total comprehensive income |
|
11,807 |
11,354 |
Consolidated statement of changes in equity
|
|
Issued share capital |
Share premium account |
Own shares |
Merger reserve |
Capital redemption reserve |
Other reserves |
Retained earnings |
Total |
|
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
Balance at 1 May 2010 Changes in equity for the year to 30 April 2011 |
33,652 |
25,500 |
(3,895) |
722 |
2,741 |
(6,748) |
25,978 |
77,950 |
|
|
Total comprehensive income for the year |
- |
- |
- |
- |
- |
1,919 |
9,435 |
11,354 |
|
|
Issue of share capital |
28 |
60 |
- |
- |
- |
- |
- |
88 |
|
|
Purchase of own shares into employee benefit trust |
- |
- |
(5,351) |
- |
- |
- |
- |
(5,351) |
|
|
Gain on sale of shares from employee benefit trust |
- |
- |
17 |
- |
- |
- |
(12) |
5 |
|
|
Recognition of equity-settled share-based payments after tax |
- |
- |
- |
- |
- |
- |
480 |
480 |
|
|
Dividend paid |
- |
- |
- |
- |
- |
- |
(2,826) |
(2,826) |
|
|
Balance at 30 April 2011 |
33,680 |
25,560 |
(9,229) |
722 |
2,741 |
(4,829) |
33,055 |
81,700 |
|
|
Changes in equity for the year to 30 April 2012 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
- |
- |
- |
- |
- |
(6,659) |
18,466 |
11,807 |
|
|
Issue of share capital |
22 |
68 |
- |
- |
- |
- |
- |
90 |
|
|
Purchase of own shares into employee benefit trust |
- |
- |
(1,628) |
- |
- |
- |
- |
(1,628) |
|
|
Gain on sale of shares from employee benefit trust |
- |
- |
875 |
- |
- |
- |
(871) |
4 |
|
|
Recognition of equity-settled share-based payments after tax |
- |
- |
- |
- |
- |
- |
3,299 |
3,299 |
|
|
Dividend paid |
- |
- |
- |
- |
- |
- |
(3,171) |
(3,171) |
|
|
Balance at 30 April 2012 |
33,702 |
25,628 |
(9,982) |
722 |
2,741 |
(11,488) |
50,778 |
92,101 |
|
Consolidated balance sheet
|
|
|
2012 |
2011 |
|
|
Note |
£000 |
£000 |
|
Non-current assets |
|
|
|
|
Goodwill |
|
54,280 |
58,690 |
|
Other intangible assets |
|
15,892 |
19,254 |
|
Property, plant and equipment |
|
10,967 |
9,226 |
|
Deferred tax assets |
|
4,489 |
2,491 |
|
|
|
85,628 |
89,661 |
|
Current assets |
|
|
|
|
Inventories |
9 |
10,195 |
4,722 |
|
Trade and other receivables |
10 |
32,856 |
31,939 |
|
Derivative financial assets |
|
92 |
486 |
|
Current tax assets |
|
157 |
224 |
|
Cash and cash equivalents |
12 |
16,947 |
37,667 |
|
|
|
60,247 |
75,038 |
|
Total assets |
|
145,875 |
164,699 |
|
Current liabilities |
|
|
|
|
Trade and other payables |
11 |
(37,741) |
(30,538) |
|
Bank borrowings |
|
- |
(9,995) |
|
Current tax payable |
|
(7,666) |
(8,257) |
|
Derivative financial liabilities |
|
- |
(22,394) |
|
Provisions |
13 |
(4,899) |
(4,794) |
|
|
|
(50,306) |
(75,978) |
|
Non-current liabilities |
|
|
|
|
Deferred tax liabilities |
|
(2,527) |
(3,561) |
|
Provisions |
13 |
(941) |
(3,460) |
|
|
|
(3,468) |
(7,021) |
|
Total liabilities |
|
(53,774) |
(82,999) |
|
Net assets |
|
92,101 |
81,700 |
|
Equity |
|
|
|
|
Issued share capital |
14 |
33,702 |
33,680 |
|
Share premium account |
|
25,628 |
25,560 |
|
Own shares |
|
(9,982) |
(9,229) |
|
Merger reserve |
|
722 |
722 |
|
Capital redemption reserve |
|
2,741 |
2,741 |
|
Other reserves |
|
(11,488) |
(4,829) |
|
Retained earnings |
|
50,778 |
33,055 |
|
Total equity |
|
92,101 |
81,700 |
The financial statements of Anite plc (Company no. 01798114) were approved by the Board on 2 July 2012 and signed on its behalf by:
Christopher Humphrey
Chief Executive
Richard Amos
Group Finance Director
Consolidated cash flow statement
|
|
|
2012 |
2011 |
|
|
Note |
£000 |
£000 |
|
|
|
|
|
|
Profit for the year |
|
|
|
|
Continuing operations |
|
16,213 |
8,951 |
|
Discontinued operations |
|
2,253 |
484 |
|
|
|
18,466 |
9,435 |
|
Adjustments for: |
|
|
|
|
Tax charge - continuing and discontinued |
7 |
3,721 |
2,786 |
|
Other (gains) and losses |
4 |
(487) |
(19) |
|
Net finance charges |
5 |
799 |
1,758 |
|
Depreciation of property, plant and equipment |
|
3,280 |
2,722 |
|
Amortisation of intangible assets |
|
2,154 |
1,796 |
|
Amortisation of acquired intangible assets |
|
3,340 |
3,582 |
|
Profit on disposal of property, plant and equipment |
|
(74) |
- |
|
Share-based payments charge/(credit) |
6 |
2,889 |
(126) |
|
Decrease in provisions |
|
(1,907) |
(1,458) |
|
Operating cash flows before movements in working capital |
|
32,181 |
20,476 |
|
Increase in inventories |
|
(5,473) |
(115) |
|
Increase in receivables |
|
(894) |
(7,260) |
|
Increase in payables |
|
5,160 |
4,071 |
|
Increase in working capital |
|
(1,207) |
(3,304) |
|
Cash generated from operations |
|
30,974 |
17,172 |
|
Interest received |
|
509 |
190 |
|
Interest paid |
|
(1,381) |
(1,899) |
|
Income taxes paid |
|
(5,413) |
(2,012) |
|
Net cash generated from operating activities |
|
24,689 |
13,451 |
|
Cash flow from investing activities |
|
|
|
|
Settlement of cross-currency swap |
|
(21,591) |
- |
|
Purchase of product line and deferred consideration paid |
|
(622) |
(1,263) |
|
Purchase of property, plant and equipment |
|
(4,952) |
(2,836) |
|
Proceeds from sale of property, plant and equipment |
|
76 |
- |
|
Purchase of software licences |
|
(697) |
(631) |
|
Expenditure on capitalised product development |
|
(2,629) |
(2,657) |
|
Net cash used in investing activities |
|
(30,415) |
(7,387) |
|
Cash flow from financing activities |
|
|
|
|
Issue of ordinary share capital |
|
90 |
88 |
|
Purchase of own shares into employee benefit trust |
|
(1,628) |
(5,351) |
|
Proceeds from sale of own shares from employee benefit trust |
|
4 |
5 |
|
Dividend paid to Company's shareholders |
15 |
(3,171) |
(2,826) |
|
Repayment of bank loans |
|
(10,000) |
(5,000) |
|
Net cash used in financing activities |
|
(14,705) |
(13,084) |
|
Net decrease in cash and cash equivalents |
12 |
(20,431) |
(7,020) |
|
Effect of exchange rate changes |
|
(289) |
(116) |
|
Cash and cash equivalents at 1 May |
|
37,667 |
44,803 |
|
Cash and cash equivalents at 30 April |
12 |
16,947 |
37,667 |
1 STATEMENT OF ACCOUNTING POLICIES
a) Basis of preparation
The preliminary results have been prepared under the historical cost convention and in accordance with current International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations. This announcement does not, however, contain sufficient information to comply with all the disclosure requirements of IFRS.
The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions in certain areas that affect the reported amounts in the financial statements. Although these estimates and assumptions are based on management's best knowledge, the actual results ultimately may differ from those estimates.
The statutory accounts for 2012 have been prepared following accounting policies consistent with those for the year ended 30 April 2011. These can be found on our website www.anite.com. The financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.
The financial information set out in this announcement does not constitute statutory accounts within the meaning of Sections 434 to 436 of the Companies Act 2006 and is an abridged version of the Group's financial statements for the year ended 30 April 2012, which were approved by the directors on 2 July 2012. Statutory accounts for the year ended 2011 have been delivered to the Registrar of Companies, the auditors have reported on those accounts, their report was unqualified and did not contain statements under Section 498 of the Companies Act 2006. Statutory accounts for the period ended 30 April 2012 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts, their reports were unqualified and did not contain statements under Section 498 of the Companies Act 2006.
The preliminary announcement for the year ended 30 April 2012 was approved by the Board of Directors on 2 July 2012.
2 Revenue and segmental information
2.1 Revenue from operations
|
|
|
2012 |
2011 |
|
|
Note |
£000 |
£000 |
|
|
|
|
|
|
Own product software licences |
|
52,561 |
39,198 |
|
Hardware and other third-party product |
|
30,959 |
18,779 |
|
Bespoke services, systems integration and implementation of software products |
|
7,908 |
7,720 |
|
Managed services |
|
4,552 |
4,467 |
|
Software maintenance and support |
|
26,566 |
22,572 |
|
Other |
|
- |
958 |
|
Revenue from operations |
2.2 |
122,546 |
93,694 |
|
Finance income |
5 |
353 |
484 |
|
Total revenue |
|
122,899 |
94,178 |
2.2 Operating segments - primary basis
The Group is organised into four operating segments: Handset Testing, Network Testing, Travel and Group. With the exception of Group, which performs the head office function, each operating segment derives its revenue from the development, installation and support of products, mainly software, relating to its relevant industry sector.
Operating segment information under the primary reporting format is as disclosed in the tables below:
|
|
Handset Testing |
Network Testing |
Total Wireless |
Travel |
Group |
Total |
|
Year ended 30 April 2012 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
|
External revenue |
76,423 |
26,044 |
102,467 |
20,079 |
- |
122,546 |
|
Internal revenue |
- |
- |
- |
- |
1,583 |
1,583 |
|
Total revenue |
76,423 |
26,044 |
102,467 |
20,079 |
1,583 |
124,129 |
|
Segment adjusted1 profit/(loss) before tax |
21,458 |
5,311 |
26,769 |
4,622 |
(3,376) |
28,015 |
|
Net finance charges before recycled hedge loss |
- |
- |
- |
- |
757 |
757 |
|
Segment adjusted1 operating profit/(loss) |
21,458 |
5,311 |
26,769 |
4,622 |
(2,619) |
28,772 |
|
Share-based payments |
(695) |
(36) |
(731) |
69 |
(2,227) |
(2,889) |
|
Amortisation of acquired intangible assets |
- |
(3,340) |
(3,340) |
- |
- |
(3,340) |
|
Restructuring costs |
- |
- |
- |
- |
(44) |
(44) |
|
Segment operating profit/(loss) |
20,763 |
1,935 |
22,698 |
4,691 |
(4,890) |
22,499 |
|
Other gains and losses |
- |
- |
- |
- |
487 |
487 |
|
Finance income |
- |
- |
- |
- |
353 |
353 |
|
Finance charges |
- |
- |
- |
- |
(1,152) |
(1,152) |
|
Profit/(loss) from continuing operations before tax |
20,763 |
1,935 |
22,698 |
4,691 |
(5,202) |
22,187 |
|
Tax expense |
- |
- |
- |
- |
(5,974) |
(5,974) |
|
Profit/(loss) from continuing operations |
20,763 |
1,935 |
22,698 |
4,691 |
(11,176) |
16,213 |
|
Profit from discontinued operations |
- |
- |
- |
- |
2,253 |
2,253 |
|
Profit/(loss) for the period |
20,763 |
1,935 |
22,698 |
4,691 |
(8,923) |
18,466 |
|
|
|
|
|
|
|
|
|
|
Handset
Testing
|
Network
Testing
|
Total Wireless
|
Travel
|
Group
|
Total
|
||||
|
Year ended 30 April 2011
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
||||
|
|
|
|
|
|
|
|
||||
|
External revenue
|
49,543
|
24,148
|
73,691
|
20,003
|
–
|
93,694
|
||||
|
Internal revenue
|
–
|
–
|
–
|
–
|
1,370
|
1,370
|
||||
|
Total revenue
|
49,543
|
24,148
|
73,691
|
20,003
|
1,370
|
95,064
|
||||
|
Segment adjusted1 profit/(loss) before tax
|
10,003
|
6,420
|
16,423
|
4,206
|
(4,594)
|
16,035
|
||||
|
Net finance charges before recycled hedge loss
|
–
|
–
|
–
|
–
|
1,625
|
1,625
|
||||
|
Segment adjusted1 operating profit/(loss)
|
10,003
|
6,420
|
16,423
|
4,206
|
(2,969)
|
17,660
|
||||
|
Share-based payments
|
314
|
(112)
|
202
|
28
|
(104)
|
126
|
||||
|
Amortisation of acquired intangible assets
|
–
|
(3,582)
|
(3,582)
|
–
|
–
|
(3,582)
|
||||
|
Restructuring costs
|
–
|
(281)
|
(281)
|
–
|
37
|
(244)
|
||||
|
Segment operating profit/(loss)
|
10,317
|
2,445
|
12,762
|
4,234
|
(3,036)
|
13,960
|
||||
|
Other gains and losses
|
–
|
–
|
–
|
–
|
19
|
19
|
||||
|
Finance income
|
–
|
–
|
–
|
–
|
484
|
484
|
||||
|
Finance charges
|
–
|
–
|
–
|
–
|
(2,242)
|
(2,242)
|
||||
|
Profit/(loss) from continuing operations before tax
|
10,317
|
2,445
|
12,762
|
4,234
|
(4,775)
|
12,221
|
||||
|
Tax expense
|
–
|
–
|
–
|
–
|
(3,270)
|
(3,270)
|
||||
|
Profit/(loss) from continuing operations
|
10,317
|
2,445
|
12,762
|
4,234
|
(8,045)
|
8,951
|
||||
|
Profit from discontinued operations
|
–
|
–
|
–
|
–
|
484
|
484
|
||||
|
Profit/(loss) for the period
|
10,317
|
2,445
|
12,762
|
4,234
|
(7,561)
|
9,435
|
||||
|
|
|
|
|
|
|
|
|
|||
1 Segment adjusted operating profits are stated prior to the adjusting items of share-based payments, amortisation of acquired intangible assets and restructuring costs.
2.3 Other information
|
Year ended 30 April 2012 |
Handset Testing |
Network Testing |
Total Wireless |
Travel |
Group |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
|
Total assets |
38,599 |
61,687 |
100,286 |
11,700 |
33,889 |
145,875 |
|
Including: |
|
|
|
|
|
|
|
Capital additions in the year |
6,799 |
1,016 |
7,815 |
435 |
119 |
8,369 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA calculation |
|
|
|
|
|
|
|
Segment adjusted operating profit/(loss) |
21,458 |
5,311 |
26,769 |
4,622 |
(2,619) |
28,772 |
|
Depreciation |
2,454 |
233 |
2,687 |
433 |
160 |
3,280 |
|
Amortisation of intangible assets |
1,701 |
366 |
2,067 |
56 |
31 |
2,154 |
|
Adjusted EBITDA |
25,613 |
5,910 |
31,523 |
5,111 |
(2,428) |
34,206 |
|
|
|
|
|
|
|
|
|
Year ended 30 April 2011 |
Handset Testing |
Network Testing |
Total Wireless |
Travel |
Group |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
|
Total assets |
29,811 |
65,794 |
95,605 |
12,161 |
56,933 |
164,699 |
|
Including: |
|
|
|
|
|
|
|
Capital additions in the year |
4,578 |
1,113 |
5,691 |
114 |
131 |
5,936 |
|
Capital acquired in the year |
- |
1,792 |
1,792 |
- |
- |
1,792 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA calculation |
|
|
|
|
|
|
|
Segment adjusted operating profit/(loss) |
10,003 |
6,420 |
16,423 |
4,206 |
(2,969) |
17,660 |
|
Depreciation |
1,466 |
138 |
1,604 |
606 |
512 |
2,722 |
|
Amortisation of intangible assets |
1,367 |
200 |
1,567 |
189 |
39 |
1,795 |
|
Adjusted EBITDA |
12,836 |
6,758 |
19,594 |
5,001 |
(2,418) |
22,177 |
|
|
|
|
|
|
|
|
2.4 Geographic segment - secondary basis
The operating segments operate in four principal geographic areas, as set out below.
The following analysis of the Group's revenue is based on the geographic location of customers, irrespective of the origin of the goods or services. The corresponding segment assets are based on the geographic location of the assets.
|
|
Total Revenue |
|
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
United Kingdom |
15,341 |
15,242 |
|
EMEA - excluding United Kingdom |
33,557 |
29,674 |
|
The Americas |
35,700 |
25,126 |
|
Rest of the World |
37,948 |
23,652 |
|
|
122,546 |
93,694 |
|
|
Non-current assets |
|
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
United Kingdom |
14,265 |
16,950 |
|
EMEA - excluding United Kingdom |
65,557 |
68,967 |
|
The Americas |
1,213 |
1,172 |
|
Rest of the World |
104 |
81 |
|
|
81,139 |
87,170 |
|
Unallocated - deferred tax |
4,489 |
2,491 |
|
|
85,628 |
89,661 |
2.5 Operating expenses
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Distribution costs |
|
|
|
- amortisation of acquired intangible assets |
2,243 |
2,211 |
|
- other underlying operating expenses |
10,220 |
9,147 |
|
|
12,463 |
11,358 |
|
Research and development |
|
|
|
- amortisation of internally generated assets |
1,622 |
1,230 |
|
- other underlying operating expenses |
14,377 |
10,237 |
|
|
15,999 |
11,467 |
|
- amortisation of acquired intangible assets |
1,097 |
1,371 |
|
|
17,096 |
12,838 |
|
Administrative expenses |
|
|
|
- share-based payments |
2,889 |
(126) |
|
- restructuring costs |
44 |
244 |
|
- other underlying operating expenses |
17,450 |
17,236 |
|
|
20,383 |
17,354 |
|
Total operating expenses |
49,942 |
41,550 |
|
|
|
|
|
Analysed as: |
|
|
|
- amortisation of acquired intangible assets |
3,340 |
3,582 |
|
- restructuring costs (note 3) |
44 |
244 |
|
- share-based payments (note 6) |
2,889 |
(126) |
|
One-off and non-trading operating expenses excluded from adjusted profit |
6,273 |
3,700 |
|
- amortisation of internally generated assets |
1,622 |
1,230 |
|
- other underlying operating expenses |
42,047 |
36,620 |
|
Total operating expenses |
49,942 |
41,550 |
3 RESTRUCTURING COSTS
Restructuring costs incurred in the year relate to the net impact on the property provision of changes in the provisions for non-operational properties that were originally charged within restructuring costs.
The restructuring costs incurred in the prior period relate to the acquisition costs for the purchase of the Invex product line.
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Net property provision established / (released) |
44 |
(37) |
|
Costs incurred on acquisition of product line |
- |
281 |
|
|
44 |
244 |
4 OTHER GAINS AND LOSSES
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Hedge ineffectiveness on cash flow hedges |
236 |
404 |
|
Hedge ineffectiveness on net investment hedge |
286 |
237 |
|
Change in the fair value of derivative assets outstanding at year end (Options) |
(53) |
(775) |
|
Change in the fair value of derivative liabilities outstanding at year end (Forwards) |
18 |
153 |
|
|
487 |
19 |
The gains arising as a result of hedge ineffectiveness are derived from the differences in the movement in the fair values of both the interest rate and cross-currency swaps and the hypothetical derivative that represented the market value of the swap on the date of designation.
5 Net finance charge
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
|
|
|
|
Finance income |
|
|
|
Interest receivable and similar income |
26 |
15 |
|
Interest on short-term deposits |
237 |
412 |
|
Interest on extended payment terms |
90 |
57 |
|
Total finance income |
353 |
484 |
|
|
|
|
|
Finance charges |
|
|
|
Bank loans and overdrafts |
(84) |
(202) |
|
Other loans/commitment fees¹ |
(106) |
(82) |
|
Losses on financial instruments in a hedging relationship: |
|
|
|
- Interest rate swaps and caps - cash flow hedges |
(478) |
(952) |
|
- Cross-currency swaps - net investment hedge |
(347) |
(691) |
|
Other interest |
(3) |
(36) |
|
Unwinding of discount on provisions ² |
(92) |
(146) |
|
|
(1,110) |
(2,109) |
|
Recycling of fair value loss on cash flow hedges |
(42) |
(133) |
|
Total finance charges |
(1,152) |
(2,242) |
|
|
|
|
|
Net finance charge |
(799) |
(1,758) |
|
|
|
|
|
Adjusted net finance charge before recycled hedge loss |
(757) |
(1,625) |
|
Recycling of fair value loss on cash flow hedges |
(42) |
(133) |
|
Net finance charge |
(799) |
(1,758) |
1 Finance charges on other loans/commitment fees include amortisation of issue costs of £5,000 (2011: £28,000).
2 The unwinding of discount on provisions (note 13) relates to property and deferred consideration provisions.
6 SHARE-BASED PAYMENTS
Cash-settled share-based payment arrangements
The Group does not operate separate cash-settled share-based payment arrangements; the employers' NIC liability arising on the outstanding awards is, however, treated as such an arrangement for accounting purposes.
The employers' NIC liability on the outstanding awards at 30 April 2012 was £1,787,000 (2011: £483,000), which is fully provided for in the accounts.
The Group recognised the following total expense/(credit) in relation to both equity-settled and cash-settled share-based payment arrangements during the year.
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Equity-settled |
1,481 |
(305) |
|
Cash-settled |
1,408 |
179 |
|
|
2,889 |
(126) |
7 Income tax expense
|
|
Continuing operations |
Discontinued operations |
Total |
|||
|
|
2012 |
2011 |
2012 |
2011 |
2012 |
2011 |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Current tax |
|
|
|
|
|
|
|
UK corporation tax |
4,071 |
922 |
- |
- |
4,071 |
922 |
|
Foreign tax |
2,774 |
2,495 |
- |
- |
2,774 |
2,495 |
|
|
6,845 |
3,417 |
- |
- |
6,845 |
3,417 |
|
Adjustments in respect of prior years |
|
|
|
|
|
|
|
UK corporation tax |
86 |
(27) |
(2,253) |
(484) |
(2,167) |
(511) |
|
Foreign tax |
- |
83 |
- |
- |
- |
83 |
|
|
86 |
56 |
(2,253) |
(484) |
(2,167) |
(428) |
|
Total current tax expense/(credit) |
6,931 |
3,473 |
(2,253) |
(484) |
4,678 |
2,989 |
|
Deferred tax |
|
|
|
|
|
|
|
UK |
(180) |
700 |
- |
- |
(180) |
700 |
|
Foreign |
(777) |
(903) |
- |
- |
(777) |
(903) |
|
Total deferred tax credit |
(957) |
(203) |
- |
- |
(957) |
(203) |
|
Total income tax expense/(credit) |
5,974 |
3,270 |
(2,253) |
(484) |
3,721 |
2,786 |
The profit after tax from discontinued operations of £2,253,000 (2011: £484,000) relates to the release of tax provisions made in prior years.
UK corporation tax is calculated at 25.84% (2011: 27.84%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Charged/(credited) to equity |
|
|
|
Deferred tax relating to the translation adjustment to acquired intangibles |
(257) |
75 |
|
UK corporation tax relating to foreign exchange |
450 |
484 |
|
Income tax relating to components of other comprehensive income |
193 |
559 |
|
Deferred tax relating to share-based payments |
(1,818) |
(785) |
|
|
(1,625) |
(226) |
Factors affecting tax charge for the year
The tax assessed on the profit on ordinary activities for the year is different from the standard rate of corporation tax in the UK. The differences are explained below:
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Profit before tax |
|
|
|
Continuing operations |
22,187 |
12,221 |
|
Tax on Group profit at standard UK corporation tax rate of 25.84% (2011: 27.84%) |
5,733 |
3,402 |
|
Effects of: |
|
|
|
Disallowed expenses and non-taxable income (net) |
301 |
(214) |
|
Ineligible depreciation |
82 |
111 |
|
Change in UK tax rate |
178 |
129 |
|
Prior year adjustment in relation to deferred tax |
(59) |
232 |
|
Short term timing differences |
(452) |
(559) |
|
Tax losses carried forward |
18 |
5 |
|
Utilisation of tax losses |
(238) |
(66) |
|
Higher tax rates on overseas earnings |
147 |
80 |
|
Deferred tax not provided |
178 |
94 |
|
Adjustments to current tax charge in respect of previous periods |
86 |
56 |
|
Income tax expense for year |
5,974 |
3,270 |
|
Tax rate for continuing operations |
26.9% |
26.8% |
The Group earns its profits in the UK and overseas. The tax rate used for tax on profit on ordinary activities is 25.84% (2011: 27.84%), being the standard rate for UK corporation tax, as the Group's head office is in the UK. As a result of the reduction in the prospective rate of UK corporation tax, the tax charge for the year was increased by £178,000 (2011: £129,000). Some components of the Group's overseas profits are likely to be taxed at an effective rate that is higher than the UK rate. Other components, because of the availability of losses brought forward in certain countries, are likely to be taxed at a lower rate.
8 Earnings per share
The calculations of earnings per share are based on the Group profit for the year, adjusted profit1 and weighted average number of shares in issue:
|
|
Basic |
Diluted |
||
|
|
2012 |
2011 |
2012 |
2011 |
|
EPS summary |
|
|
|
|
|
Basic EPS |
6.5p |
3.3p |
6.0p |
3.1p |
|
Basic EPS for continuing operations |
5.7p |
3.1p |
5.3p |
2.9p |
|
Adjusted EPS2 |
7.2p |
4.0p |
6.7p |
3.8p |
|
|
2012 |
2011 |
2012 |
2011 |
|
|
Pence per share |
Pence per share |
£000 |
£000 |
|
Profit for the year |
6.5 |
3.3 |
18,466 |
9,435 |
|
Profit from discontinued operations |
(0.8) |
(0.2) |
(2,253) |
(484) |
|
Profit for the year on continuing operations |
5.7 |
3.1 |
16,213 |
8,951 |
|
Reconciliation to adjusted profit: |
|
|
|
|
|
Other gains and losses (net of tax) |
(0.1) |
- |
(361) |
(14) |
|
Recycled hedge losses3 (net of tax) |
- |
- |
31 |
96 |
|
Amortisation of acquired intangible assets (net of tax) |
0.9 |
0.9 |
2,472 |
2,650 |
|
Share-based payments (net of tax) |
0.7 |
(0.1) |
2,103 |
(337) |
|
Restructuring costs (net of tax) |
- |
0.1 |
32 |
254 |
|
Adjusted profit1 |
7.2 |
4.0 |
20,490 |
11,600 |
1 Profit from continuing businesses before other gains and losses, recycled hedge losses, amortisation of acquired intangible assets, share-based payments and restructuring costs.
2 Earnings per share on adjusted profit1 have been included to give a clearer understanding of the results of the continuing businesses.
3 Recycled hedge losses relate to the recycling of fair value losses on cash flow hedges reclassified from equity to profit or loss in the year.
Diluted EPS for discontinued operations is 0.7p (2011: 0.2p).
|
Number of shares ('000) |
2012 |
2011 |
|
Weighted average number of shares in issue used to calculate basic earnings per share |
283,597 |
289,781 |
|
Effect of dilutive ordinary shares |
|
|
|
- SAYE and share option schemes |
24,255 |
15,351 |
|
Number of shares used to calculate diluted earnings per share |
307,852 |
305,132 |
9 Inventories
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Electronic components |
10,195 |
4,722 |
Inventories are stated at lower of cost and net realisable value and after write-downs of £2,375,000 (2011: £nil).
10 Trade and other receivables
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Current assets |
|
|
|
Trade debtors |
25,229 |
26,590 |
|
Less: provision for impairment of trade receivables |
(983) |
(1,255) |
|
Trade debtors net of provision |
24,246 |
25,335 |
|
Other receivables |
1,555 |
1,572 |
|
Prepayments |
2,810 |
2,218 |
|
Accrued income |
4,245 |
2,814 |
|
|
32,856 |
31,939 |
11 Trade and other payables
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Trade creditors |
8,988 |
5,134 |
|
Other taxes and social security |
1,740 |
1,385 |
|
Deferred income |
14,767 |
12,349 |
|
Accruals |
11,870 |
11,282 |
|
Other creditors |
376 |
388 |
|
|
37,741 |
30,538 |
12 Net CASH
|
|
|
2012 |
2011 |
|
|
|
£000 |
£000 |
|
Cash and cash equivalents |
|
16,947 |
37,667 |
|
Bank borrowings - current |
|
- |
(9,995) |
|
Net cash |
|
16,947 |
27,672 |
|
A reconciliation of the movement in net cash for the year is as detailed below: |
|
|
|
|
|
|
2012 |
2011 |
|
|
|
£000 |
£000 |
|
Net cash at 1 May |
|
27,672 |
29,836 |
|
Net decrease in cash and cash equivalents |
|
(20,431) |
(7,020) |
|
Unamortised issue costs of bank borrowings |
|
(5) |
(28) |
|
Decrease in bank borrowings |
|
10,000 |
5,000 |
|
Exchange movement |
|
(289) |
(116) |
|
Net cash at 30 April |
|
16,947 |
27,672 |
13 Provisions
|
|
Deferred |
Warranties |
Property |
Other |
Group |
|
|
consideration |
|
provision |
provisions |
total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
At 1 May 2011 |
599 |
3,210 |
4,445 |
- |
8,254 |
|
Release of provision |
- |
- |
(218) |
- |
(218) |
|
Established during the year - operating expenses |
- |
- |
99 |
300 |
399 |
|
Established during the year - restructuring costs |
- |
- |
44 |
- |
44 |
|
Utilised during the year |
(622) |
- |
(2,132) |
- |
(2,754) |
|
Unwinding of discount |
- |
- |
92 |
- |
92 |
|
Exchange movement |
23 |
- |
- |
- |
23 |
|
At 30 April 2012 |
- |
3,210 |
2,330 |
300 |
5,840 |
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Analysed as: |
|
|
|
Current liabilities |
4,899 |
4,794 |
|
Non-current liabilities |
941 |
3,460 |
|
|
5,840 |
8,254 |
The warranty provision has been made to cover any potential claims made by disposed businesses during the contractual warranty period. It is expected to be utilised in one to three years.
The property provision is in respect of all properties surplus to business requirements and dilapidation provisions for properties currently in use. The provision is calculated in accordance with IAS 37. It is expected to be utilised in one to three years.
Other provisions include contractual provisions that are expected to be utilised within one year.
14 share capital
|
|
Ordinary shares of 11.25p each |
Deferred redeemable shares of £1 each |
||
|
|
||||
|
|
||||
|
|
Number |
£000 |
Number |
£000 |
|
Authorised: |
|
|
|
|
|
At 30 April 2011 & 2012 |
355,555,556 |
40,000 |
50,000 |
50 |
|
Allotted, issued and fully paid: |
|
|
|
|
|
At 30 April 2011 |
298,936,276 |
33,630 |
50,000 |
50 |
|
Issued during the year |
195,603 |
22 |
- |
- |
|
At 30 April 2012 |
299,131,879 |
33,652 |
50,000 |
50 |
15 Dividends
Dividends paid during the year are set out below:
|
|
Payment date |
2012 |
2012 |
2011 |
2011 |
|
|
|
pence |
|
pence |
|
|
|
|
per share |
£000 |
per share |
£000 |
|
For the year ended 30 April 2010 |
|
|
|
|
|
|
Final dividend |
26 October 2010 |
|
|
0.650 |
1,905 |
|
For the year ended 30 April 2011 |
|
|
|
|
|
|
Interim dividend |
18 February 2011 |
|
|
0.315 |
921 |
|
Final dividend |
25 October 2011 |
0.735 |
2,101 |
|
|
|
For the year ended 30 April 2012 |
|
|
|
|
|
|
Interim dividend |
17 February 2012 |
0.375 |
1,070 |
|
|
|
|
|
|
3,171 |
|
2,826 |
At the AGM on 13 September 2012, a final dividend in respect of the year ended 30 April 2012 of 1.125p per share (expected total £3,365,000) is to be proposed.
This information is provided by RNS
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