Interim Results

Radstone Technology PLC 06 November 2002 Interim Results for the six months ended 30 September 2002 STRONG GROWTH CONTINUES AT RADSTONE Radstone Technology PLC ("Radstone", LSE:RST), the leading supplier of high-performance, rugged computer products to the defence and aerospace industries, today announces its Interim Results for the six months ended 30 September 2002. Highlights • PBT increases by £1.73m to £675,000 (30 September 2001: loss of £1.05m) • EPS increases by 4.97p to 2.35p (2001: loss per share 2.62p) • Turnover increased by 18% to £18.4m (30 September 2001: £15.5m) • Order book for H2 delivery ahead 16% to £19.5m (September 2001: £16.8m) • £2,958k of free cash flow generated • Significant contract wins during the period: • £2.67m Aselsan Pedestal Mounted Stinger System • Lockheed Martin LAMPS project extended for further 5 years Rhys Williams, Chairman, commented: " This has been an excellent period for Radstone Technology. We are benefiting from strong growth in both sales and margins. " The Company's profile in the rugged computer market is growing, with an increasing number of system integrators choosing Radstone products. Our spending on R&D is strengthening further our market position. We have added eight new product lines in this period alone. " Defence spending, and particularly high-technology smart weaponry spending is a growing part of national budgets world-wide. The surge in orders following the US defence review continues. Our ruggedised computer systems are being adopted extensively by US defence contractors. " Additionally, we are now seeing enquiries from defence contractors in important emerging territories such as India, China and Turkey. Coupled with the continuing strong demand from our core UK and US markets, we believe the future for Radstone is promising. - ends - Date: 6 November 2002 For further information please contact: Radstone Technology PLC City Profile Group Charles Paterson, Group Managing Director Ed Senior Jeff Perrin, Finance Director Simon Courtenay 01327-359444 020-7448-3244 Web: www.radstone.com E-mail: edward.senior@city-profile.com Chairman's Statement for the six months ended 30 September 2002 Results I am pleased to announce that the first half of the year has been very positive for the Company. A sales increase of 19%, coupled with a significant margin improvement, resulted in profit before tax of £675,000 compared to a loss of £1,045,000 last year. Sales for the six months ended 30 September 2002 were £18,402,000, compared to £15,523,000 last year. Gross profit margins in the period increased strongly from last year's 28.5% to 35.6%, reflecting the effects of lower component prices and higher sales on a relatively fixed cost of production. With overheads increasing by 8% driven by an 11% increase in R&D, lower interest costs due to the strong cash generation and a tax charge of 31%, basic earnings per share were 1.96p (2001: loss per share 3.02p). Normalised earnings per share were 2.35p (2001: loss per share 2.62p) During the first half of the year we received new orders of £25,665,000, a 65% increase over the £15,589,000 achieved in the corresponding period last year. Despite a book to bill ratio of 1.39, the order book for future delivery ended the period at £75,122,000, only 2% above the level at the beginning of the year. As I set out in my AGM statement, the total was adversely affected by the weakness of the US dollar. The effect in sterling of dollar devaluation at the half year was equivalent to an order book reduction of £5.5 million. Our existing foreign exchange instruments ensure that our expectations for the periods to 31 March 2004 are not affected. The amount of the order book scheduled for delivery in the second half of this year is £19,548,000, compared to an equivalent figure of £16,800,000 twelve months ago. Last year the total orders that were both booked and shipped within the second half of the year was £8,900,000. Business Development Embedded Computing 2002 2001 £'000 £'000 Third party sales 12,786 9,471 Gross profit 5,794 3,837 Contribution 1,776 218 Sales increased by 35%, reflecting more normal trading conditions than those prevailing during the equivalent period last year. The higher sales level, together with lower component prices and relatively stable production costs, resulted in an improvement in gross profit margin from 40.5% to 45.3%. The development of new and improved products continues to represent our principal barrier against growing international competition and I am pleased to report that the period saw no fewer than eight major new hardware introductions. These included PMC-StarLite, Radstone's first StarFabric inter-board interconnect module and IMP1A, a high performance 3U CompactPCI processor targeted at the military avionics market place. A further five new product introductions are planned in the second half of the financial year. The Company's profile within the industry has grown substantially during the year, driven partly by the quality of recent product innovations and partly as a consequence of corporate activity within the market sector, which positions Radstone clearly as the largest and most capable independent supplier. This has translated to a high level of enquiry activity, not only in the traditional UK and US markets but also in important emerging territories such as India, China and Turkey, where the capability of our product range is now fully appreciated. Order intake at £16,847,000 was 38% above last year. During the period, an agreement was completed with Lockheed Martin, extending the present LAMPS production arrangements for a further 5 years and introducing the Company's products to other programmes. Electronic Manufacturing Services 2002 2001 £'000 £'000 Total sales 6,029 6,463 Sales to Embedded Computing (413) (411) External sales 5,616 6,052 Gross profit 750 582 Contribution 588 370 Sales were 7% below last year, reflecting the difficult UK trading environment in which Foundation Technology currently operates, although as a result of the restructuring actions taken in the early months of the period, the business returned a significantly improved contribution compared to last year. With the traditional customers continuing to scale back their requirements, a key management aim has been to develop customers in new market areas, exploiting the strengths of the business in terms of process capability, quality and responsiveness. The success of these efforts is evident in the strong order intake of £8,818,000 for the half year, 115% above the equivalent prior year figure. Over £3million of these orders are for delivery in the next financial year. Financial Operating cash inflow for the period was £4,871,000 (2001: outflow £1,218,000), representing the effect of cash generated from the high level of deliveries in the fourth quarter last year. Additional funds of £11,000 were received from the exercise of share options. Payments for servicing finance and taxation were respectively £172,000 and £725,000 (2001: £227,000 and £448,000). Expenditure on fixed assets net of disposals, including those that are leased was £625,000 (2001: £969,000), with an additional £63,000 paid for software licences (2001: £Nil). £90,000 was expended on the purchase of the Company's own shares for the employee Share Incentive Plan which commenced in April 2001 and as part of the directors' and senior managers' bonus plan for the year 2002. Following our return to the dividend list, a payment of £238,000 was made to shareholders on 30 September 2002. The resultant cash inflow, increased by a £220,000 exchange rate movement on net foreign borrowings, produced a £3,189,000 decrease in net debt from 31 March 2002 to £4,840,000. Gearing was 26% at 30 September 2002 compared to 55% at 30 September 2001 and 43% at the end of last year. Investment in product development increased by 11% to £1,846,000, representing 10.0% of Group sales and 14.4% of Embedded Computing sales (2001: £1,667,000, representing 10.7% of Group sales and 17.6% of Embedded Computing sales). On 5 November 2002 we announced that the Company had exchanged contracts on the sale of its freehold property at Water Lane, Towcester for a cash consideration of £4,100,000, which will be paid on completion. The consideration compares with a net book valuation of £1,348,000 at 31 March 2002. An alternative location has been identified and relocation of the businesses at the Water Lane site into local purpose-built facilities is expected to take place within the next two years. As mentioned in my statement in the Annual Report, the Board does not consider it appropriate to pay an interim dividend due to the weighting of earnings between the two halves of the year. Provided that we continue to make good progress in the remainder of the year, we expect to be able to recommend an increased final dividend. Outlook For the EMS business, the third quarter will be a particularly busy period, although at this stage fourth quarter deliveries seem likely to fall back to the levels experienced in the first half. As I indicated last year, sales growth is unlikely in this part of our business until an industrial recovery is experienced in the UK. In contrast, the Embedded Computing business is likely to see a strong second half with sales volumes at levels similar to last year. The Company is well placed for the future. We enjoy an excellent reputation in the marketplace and, as I indicated in the Annual Report, Radstone is now the partner of choice for an increasing number of system integrators. The scale, duration and strategic significance of these developments continues to give your Board confidence for the future and we look forward to reporting further progress at the time of our Preliminary Announcement. Rhys Williams Chairman Consolidated Profit & Loss Account for the six months ended 30 September 2002 6 months 6 months 12 months to 30/9/02 to 30/9/01 to 31/3/02 (neither (neither (audited) audited nor audited nor reviewed) reviewed) £'000 £'000 £'000 Turnover 18,402 15,523 41,204 Cost of sales (11,858) (11,104) (25,501) __________ __________ __________ Gross profit 6,544 4,419 15,703 Administration costs Administration (1,397) (1,315) (2,528) Development (1,846) (1,667) (3,474) Goodwill (93) (93) (186) __________ __________ __________ Total administration costs (3,336) (3,075) (6,188) Distribution costs - sales and marketing (2,334) (2,164) (4,443) __________ __________ __________ Operating profit/(loss) 874 (820) 5,072 Net interest payable (199) (225) (497) __________ __________ __________ Profit/(loss) on ordinary activities before taxation 675 (1,045) 4,575 Taxation (211) 330 (1,451) __________ __________ __________ Profit/(loss) for the financial year 464 (715) 3,124 Dividend - - (238) __________ __________ __________ Retained profit/(loss) for the period 464 (715) 2,886 __________ __________ __________ Basic earnings/(loss) per share 1.96p (3.02)p 13.19p __________ __________ __________ Normalised earnings/(loss) per share 2.35p (2.62)p 13.97p __________ __________ __________ Diluted earnings/(loss) per share 1.95p (3.02)p 13.12p __________ __________ __________ Turnover and operating profit/(loss) all relate to continuing operations._ Consolidated Balance Sheet at 30 September 2002 at 30/9/02 at 30/9/01 at 31/3/02 (neither (neither (audited) audited nor audited nor reviewed) reviewed) £'000 £'000 £'000 Fixed assets Goodwill 3,194 3,379 3,286 Intangible assets 85 68 50 __________ __________ __________ Total intangible assets 3,279 3,447 3,336 __________ __________ __________ Tangible assets 5,743 6,039 5,967 Own shares 325 217 235 __________ __________ __________ 9,347 9,703 9,538 __________ __________ __________ Current assets Stocks 11,279 12,784 11,773 Debtors 10,225 9,388 15,273 Cash at bank and in hand 162 716 672 __________ __________ __________ 21,666 22,888 27,718 __________ __________ __________ Creditors: amounts falling due within one year Bank and other borrowings 1,735 6,042 4,828 Other creditors 7,242 8,979 10,030 __________ __________ __________ 8,977 15,021 14,858 __________ __________ __________ Net current assets 12,689 7,867 12,860 __________ __________ __________ Total assets less current liabilities 22,036 17,570 22,398 Creditors: amounts falling due after more than one year Bank and other borrowings 3,267 2,829 3,873 __________ __________ __________ Net assets 18,769 14,741 18,525 __________ __________ __________ Capital and reserves Called up share capital 2,980 2,977 2,977 Share premium account 9,517 9,509 9,509 Revaluation reserve 218 218 218 Profit and loss account 6,054 2,037 5,821 __________ __________ __________ Equity shareholders' funds 18,769 14,741 18,525 __________ __________ __________ Consolidated Cash Flow Statement for the six months ended 30 September 2002 6 months 6 months 12 months to 30/9/02 to 30/9/01 to 31/3/02 (neither (neither (audited) audited nor audited nor reviewed) reviewed) £'000 £'000 £'000 Operating activities Net cash inflow/(outflow) from operating activities 4,871 (1,218) 788 __________ __________ __________ Servicing of finance Interest received 7 13 17 Interest paid (116) (174) (420) Interest paid on finance leases (63) (66) (137) __________ __________ __________ (172) (227) (540) __________ __________ __________ Taxation UK Corporation tax paid (725) (193) (957) Overseas tax paid - (255) (295) __________ __________ __________ (725) (448) (1,252) __________ __________ __________ Capital expenditure Purchase of tangible fixed assets (628) (543) (1,265) Disposal of tangible fixed assets 3 - - Purchase of own shares (90) (70) (88) Purchase of intangible fixed assets (63) - - __________ __________ __________ (778) (613) (1,353) __________ __________ __________ Equity dividends paid (238) - - __________ __________ __________ Net cash inflow/(outflow) before financing 2,958 (2,506) (2,357) __________ __________ __________ Financing Issue of ordinary share capital 11 9 9 Repayment of loans (250) (250) (500) Repayment of principal under finance leases (247) (269) (503) __________ __________ __________ (486) (510) (994) __________ __________ __________ Increase/(decrease) in cash 2,472 (3,016) (3,351) __________ __________ __________ Consolidated Cash Flow Statement Note for the six months ended 30 September 2002 6 months 6 months 12 months to 30/9/02 to 30/9/01 to 31/3/02 (neither (neither (audited) audited nor audited nor reviewed) reviewed) £'000 £'000 £'000 Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from operating activities Operating profit/(loss) 874 (820) 5,072 Amortisation of goodwill 93 93 186 Amortisation of intangible fixed assets 28 18 36 Depreciation of tangible fixed assets 832 720 1,516 Loss on disposal of tangible fixed assets 8 1 5 Decrease/(increase) in stocks 494 (2,774) (1,763) Decrease/(increase) in debtors 5,340 2,734 (3,755) Decrease in creditors (2,798) (1,190) (509) __________ __________ __________ Net cash inflow/(outflow) from operating activities 4,871 (1,218) 788 __________ __________ __________ Other Notes to the Interim Statement 1 Earnings/(loss) per share 6 months 6 months 12 months to 30/9/02 to 30/9/01 to 31/3/02 Basic earnings/(loss) per share 1.96p (3.02)p 13.19p __________ __________ __________ Normalised earnings/(loss) per share 2.35p (2.62)p 13.97p __________ __________ __________ Diluted earnings/(loss) per share 1.95p (3.02)p 13.12p __________ __________ __________ The calculation of basic and diluted earnings/(loss) per share is based on the following profit/(loss) for the period after tax: 6 months 6 months 12 months to 30/9/02 to 30/9/01 to 31/3/02 £'000 £'000 £'000 Profit/(loss) after tax 464 (715) 3,124 __________ __________ __________ Other Notes to the Interim Statement for the six months ended 30 September 2002 Normalised earnings/(loss) per share is calculated after adjusting the profit/ (loss) after tax for the effect of goodwill amortisation and is more indicative of underlying performance. The reconciliation of basic to normalised earnings/ (loss) per share is as follows: 6 months 6 months 12 months to 30/9/02 to 30/9/01 to 31/3/02 Basic earnings/(loss) per share 1.96p (3.02)p 13.19p Goodwill written off 0.39p 0.40p 0.78p __________ __________ __________ Normalised earnings/(loss) per share 2.35p (2.62)p 13.97p __________ __________ __________ The weighted average number of shares in issue during the period used in the calculation of earnings/(loss) per share is as per the following table: to 30/9/02 to 30/9/01 to 31/3/02 '000 '000 '000 Weighted average shares for basic and normalised earnings/(loss) per share 23,686 23,699 23,696 Calculation of shares under option per FRS14 146 - 123 __________ __________ __________ Weighted average shares for diluted earnings/(loss) per share 23,832 23,699 23,819 __________ __________ __________ FRS14 requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. For a loss making company with outstanding options, net loss per share would only be increased by the exercise of out-of-the-money options. The diluted earnings per share of (3.03)p disclosed in the Company's Interim Report for the six months ended 30 September 2001 was calculated in accordance with the requirements of FRS14. As it seems inappropriate to assume that option holders would act irrationally and exercise out-of-the-money options, consensus opinion is that in the absence of any other diluting future share issues, diluted earnings per share is equal to basic earnings per share in loss making periods. The comparative disclosure for diluted earnings per share for the six months ended 30 September 2001 has therefore been amended to (3.02)p. 2 The above accounts do not constitute full accounts within the meaning of S.240 of the Companies Act 1985. All figures for the year to 31 March 2002 are abridged. Full accounts, on which the report of the auditors was unqualified and did not contain a statement under S.237 (2) or S.237 (3) of the Companies Act 1985, have been delivered to the Registrar of Companies. The results for the six months to 30 September are neither audited nor reviewed. 3 The interim financial information has been prepared on the basis of accounting policies consistent with those applied in the financial statements for the year to 31 March 2002. 4 Copies of the 2002 Interim Report and Accounts will be sent to shareholders in due course. Further copies will be available from the registered office of Radstone Technology PLC, Water Lane, Towcester, Northants NN12 6JN. This information is provided by RNS The company news service from the London Stock Exchange

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