Interim Results
Radstone Technology PLC
10 November 2004
10 November 2004
Interim Results
Radstone Technology, the world's leading independent supplier of
high-performance, embedded computer products for defence and aerospace
application today announces Interim results for the six months ended 30
September 2004.
Key Points
• Sales of £16.5m (2003: £18.5m) reflect increased second-half bias
• Profit before tax of £1.1m (£1.2m) includes the exceptional £2.3m gain
from the sale of land from our former facility in Towcester.
• Basic earnings per share of 5.23 pence (2003 : 3.15 pence)
• Order book for future delivery increased by 16 % to £85.9m (2003 :
£74.3m)
• Octec acquired in July, performed in line with expectations
contributing sales of £1.2m and profit before tax of £0.3m.
• Increase of 20% in Interim dividend to 0.90p per share (2003 : 0.75p)
• Strong start to the second half
Jeff Perrin, Chief Executive commenting on the results said:
"As outlined at the AGM, trading is expected to be weighted towards the second
half of this year. An encouraging start to this period, coupled with an
increased order book for deliveries in the second-half, gives us confidence of a
strong performance for the remainder of the year.".
For further information:
Radstone Technology 01327-359444
Jeff Perrin, Chief Executive Web: http://www.radstone.co.uk
Kevin Boyd, Group Finance Director
Buchanan Communications 020 7466 5000
Tim Thompson or Nicola Cronk Email : nicolac@buchanan.uk.com
Chairman's Statement
for the six months ended 30 September 2004
Results
Results for the six months reflect the position outlined at our AGM, that the
phasing of production schedules on a number of major long-term programmes
towards the second half of this year will result in a higher proportion of
deliveries than normal being made in the last two quarters of the year to 31
March 2005. This phasing has been accentuated by teething problems on a new
automated production process and problems with a component from a
customer-nominated supplier that did not meet Radstone's quality standards.
Both these issues adversely affected deliveries during September, although
October deliveries gave a strong start to the second half.
Sales for the Group were £16.5m compared to £18.5m last year. Lower overhead
costs reduced the loss before tax to £0.6m (2003: profit £1.4m) excluding
exceptional items and goodwill amortisation. The exceptional gain from the
sale of land from our former facility in Towcester was £2.3m and, together with
a goodwill charge of £0.6m, produced a profit before tax for the Group of £1.1m
(2003: £1.2m). In July we completed the acquisition of Octec Ltd and, during
the period to 30 September, it performed in line with expectations contributing
sales of £1.2m and profit before tax of £0.3m.
Gross profit margins in the period decreased from last year's 41.6% to 39.8%,
reflecting the effect of the lower deliveries on a largely fixed production cost
base. Overhead costs, on a like for like basis (excluding acquisitions)
decreased by 5% compared to last year. Basic earnings per share were 5.23p
(2003: 3.15p). Normalised loss per share (see note1) was 1.54p (2003: profit
3.88p).
During the first half of the year the Group received new orders of £20.9m
including a contribution of £2.4m from Octec (2003: £30.1m). The figure for
last year included two multi-year production contracts for Embedded Computing
products totalling £17.0m.
The order book for future delivery ended the period at £85.9m, 8% above the
level at the start of this year and 16% above the same time last year. The
amount of the order book scheduled for delivery in the second half of this year
is £26.2m, compared to an equivalent figure of £18.5m twelve months ago. Last
year orders both booked and shipped within the second half of the year were
£6.7m.
Business Development
Embedded Computing
2004 2003
£'000 £'000
Third party sales 12,374 13,299
Gross profit 5,620 7,336
Contribution 711 2,954
Excluding acquisitions, sales on a like for like basis decreased by 28%, mainly
due to the production delays mentioned earlier which we expect to recover in the
second half.
Development expenditure at £2.1m was a similar level to last year and
represented 16.9% of sales. In the first six months of the year we introduced
six new products to the market, a similar number to last year.
In October we opened a US technology centre in Billerica, Massachusetts, which
will be used to expand our design engineering and support presence in what is
our most important market. The new facility is expected to be fully operational
by the end of 2004 and will complement the existing Radstone sales and support
offices located throughout the USA.
During September further progress was made in easing the flow of military
technical information between the USA and the UK, after the US Congress voted to
grant the UK preferred status for defence export licences.
Order intake at £17.7m compared to £25.6m last year. The previous year included
two major multi-year production contracts with a combined total of £17m. The
major order received this year was for $5.5m from Raytheon on the MK-48 Advanced
Capability (ADCAP)/Advanced Common Torpedo (ACOT) upgrade programme. This
brings the total value of orders received on this programme to $11.7m.
Electronic Manufacturing Services
2004 2003
£'000 £'000
Total sales 4,395 5,565
Sales to Embedded Computing (284) (375)
External sales 4,111 5,190
Gross profit 923 361
Contribution 818 219
As a result of the consolidation last year into a single new facility, annual
costs were reduced by approximately £1.5m and this is fully reflected in these
results. The EMS business is now a more efficient and tightly focused business
unit, concentrating on higher margin business and capable of producing a much
improved contribution to the Group at a lower level of sales. Order intake for
the period was £3.2m (2003: £5.6m).
Financial
Operating cash inflow for the half-year was £1.8m (2003: £5.5m), in the first
six months. Financing payments increased to £0.3m (2003: £46k) due to the
increased borrowing of the Group used to fund our new facility and the two
recent acquisitions. Taxes paid in the period were £0.9m (2003: £0.9m).
Expenditure on fixed and intangible assets, was £3.3m (2003: £3.5m). This
included £3.1m in final payments for completion and the fit-out of the new
building. Excluding the payments on the new building, underlying capital
expenditure at £0.2m, was below the same period last year (£0.7m). The net
proceeds received on the disposal of the Water Lane site were £3.9m.
In the period £0.1m (2003: £0.2m) was expended on the purchase of the Company's
own shares for its Share Incentive and bonus plans for the year ended 31 March
2004.
From the resultant free cash flow of £1.1m (2003: £0.8m) a dividend payment of
£0.7m (2003:£0.5m) was made to shareholders on 29 September 2004.
Payment for the acquisition of Octec of £10.5m, including costs, was financed by
£6.2m from the proceeds of a vendor placing and the balance from cash reserves.
As a result of an agreement with the vendors of ICS, detailed below, a payment
of C$6.0m (approximately £2.6m) was made to the principal vendors in the period.
The balance of C$1.5m (approximately £0.7m) will be paid to the minority
vendors in the second half of the year.
Net debt at 30 September 2004 was £19.5m (2003: £6.6m). Gearing was 48% at 30
September 2004 compared to 20% at 30 September 2003 and 39% at 31 March 2004.
Interactive Circuits and Systems Ltd ("ICS")
During September, following the successful completion of the integration of ICS,
agreement was reached with Dr. Dipak Roy, the founder and former shareholder of
ICS, that he resign his position as President of ICS. The Board of Radstone
would like to thank Dr. Roy for his contribution since Radstone's acquisition of
ICS in September 2003 and to wish him well in the future.
As part of the agreement, Radstone agreed to pay C$7.5m (approximately £3.3m) in
final settlement of the additional consideration relating to the acquisition.
The maximum aggregate additional consideration payable in respect of the two
years ending 30 September 2004 and 30 September 2005 under the acquisition
agreement was C$10m (approximately £4.4m). Performance by ICS to September 2004
would have required the maximum payment of C$5m (approximately £2.2m), under the
terms of the original earn-out agreement.
Dividend
An interim dividend of 0.90 pence per share, a 20% increase over last year
(2003: 0.75p), will be paid on 17 January 2005 to shareholders on the register
on 17 December 2004.
Outlook
For the reasons mentioned earlier, trading is expected to be weighted towards
the second half to an even greater extent than in prior years. Our order book
gives us confidence of a strong performance for the remainder of the year.
Rhys Williams
Chairman
Consolidated Profit & Loss Account
for the six months ended 30 September 2004
6 months 6 months
to 30/9/04 to 30/9/03 12 months
(neither (neither to 31/3/04
audited nor audited nor (audited)
reviewed) reviewed)
£'000 £'000 £'000 £'000
Turnover
Continuing 15,285 18,489 43,721
Acquisition 1,200 - -
16,485 18,489 43,721
Cost of sales (9,942) (10,792) (22,727)
Gross profit 6,543 7,697 20,994
Distribution costs - sales and marketing (2,926) (2,328) (5,309)
Administration costs
Administration (1,730) (1,741) (3,391)
Development (2,088) (2,196) (4,525)
Goodwill (590) (178) (806)
Total administration costs (4,408) (4,115) (8,722)
Operating (loss)/profit
Continuing (1,059) 1,254 6,963
Acquisition 268 - -
(791) 1,254 6,963
Exceptional gain on disposal of
freehold land and buildings 2,271 - -
Exceptional cost on closure of operation - - (3,508)
Net interest payable (404) (79) (393)
Profit on ordinary activities before taxation 1,076 1,175 3,062
Taxation 432 (409) (1,759)
Profit for the period 1,508 766 1,303
Dividends (324) (211) (842)
Retained profit for the period 1,184 555 461
Basic earnings per share 5.23p 3.15p 5.00p
Normalised (loss)/earnings per share (1.54)p 3.88p 20.50p
Diluted earnings per share 5.20p 3.13p 4.97p
Statement of total recognised gains and losses
£'000 £'000 £'000
Profit for the period 1,508 766 1,303
Exchange rate adjustment 461 61 (461)
Total gains recognised relating to the period 1,969 827 842
There is no material difference to the profit reported above and that calculated
on the historical cost basis.
All results arise from continuing activities.
Consolidated Balance Sheet
at 30 September 2004
As restated
at 30/9/04 at 30/9/03 at 31/3/04
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Fixed assets
Goodwill 29,088 23,889 20,613
Intangible assets 83 64 76
Total intangible assets 29,171 23,953 20,689
Tangible assets 16,524 9,546 15,350
45,695 33,499 36,039
Current assets
Stocks 12,847 10,270 9,266
Debtors 12,037 10,528 13,870
Cash at bank and in hand 3,395 8,706 9,150
28,279 29,504 32,286
Creditors: amounts falling due
within one year
Bank and other borrowings 4,586 2,832 2,733
Other creditors 9,745 9,713 11,112
14,331 12,545 13,845
Net current assets 13,948 16,959 18,441
Total assets less current liabilities 59,643 50,458 54,480
Creditors: amounts falling due after
more than one year
Bank and other borrowings 18,289 12,499 19,134
Other creditors - 4,791 2,066
18,289 17,290 21,200
Provisions for liabilities and charges 322 183 366
Net assets 41,032 32,985 32,914
Capital and reserves
Called up share capital 3,786 3,488 3,503
Share premium account 25,761 19,828 19,962
Revaluation reserve - 218 218
Merger reserve 666 - 199
Profit and loss account 11,249 10,002 9,386
Own shares (430) (551) (354)
Equity shareholders' funds 41,032 32,985 32,914
Consolidated Cash Flow Statement
for the six months ended 30 September 2004
6 months 6 months 12 months
to 30/9/04 to 30/9/03 to 31/3/04
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Operating activities
Net cash inflow from operating activities 1,799 5,480 9,056
Servicing of finance
Interest received 76 81 160
Interest paid (314) (82) (447)
Interest paid on finance leases (31) (45) (83)
(269) (46) (370)
Taxation
UK Corporation tax paid (349) (904) (1,673)
Overseas tax paid (616) - (1,222)
(965) (904) (2,895)
Capital expenditure
Purchase of tangible fixed assets (3,312) (3,506) (10,470)
Disposal of tangible fixed assets 3,905 6 10
Purchase of intangible fixed assets (5) - (55)
588 (3,500) (10,515)
Acquisitions and disposals
Purchase of subsidiary undertaking (12,514) (18,552) (18,503)
Net cash acquired with subsidiary 1,979 1,706 1,706
Deferred consideration on purchase of subsidiary
undertaking (2,569) - -
Costs of terminating subsidiary activity - - (125)
(13,104) (16,846) (16,922)
Equity dividends paid (681) (479) (689)
Net cash outflow before financing (12,632) (16,295) (22,335)
Financing
Issue of ordinary share capital 6,167 10,815 10,593
Purchase of own shares (128) (210) (230)
Proceeds from disposal of own shares 52 3 220
6,091 10,608 10,583
New loans - 10,013 18,289
Repayment of loans (962) (298) (556)
Repayment of loan notes (279) - (281)
Repayment of principal under finance leases (144) (207) (490)
(1,385) 9,508 16,962
4,706 20,116 27,545
(Decrease)/increase in cash (7,926) 3,821 5,210
Consolidated Cash Flow Statement Note
for the six months ended 30 September 2004
6 months 6 months 12 months
to 30/9/04 to 30/9/03 to 31/3/04
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Reconciliation of operating (loss)/profit to
net cash inflow from operating activities
Operating (loss)/profit (791) 1,254 6,963
Amortisation of goodwill 590 178 806
Operating (loss)/profit before goodwill (201) 1,432 7,769
Amortisation of intangible fixed assets 19 22 36
Depreciation of tangible fixed assets 932 894 1,792
Ebitda 750 2,348 9,597
Loss/(profit) on disposal of tangible fixed assets 3 (1) (2)
(Increase)/decrease in stocks (3,069) 493 962
Decrease in debtors 3,903 4,850 1,017
Increase/(decrease) in creditors 212 (2,210) (2,518)
Net cash inflow from operating activities 1,799 5,480 9,056
Other Notes to the Interim Statement
1. Principal accounting policies
A restatement has been made to the balance sheet at 30 September 2003 to
reflect the adoption of UITF abstract 38 Accounting for ESOP trusts. This has
had the effect of reducing net assets at 30 September 2004 by £430,000 (2003:
£551,000)
2. Earnings per share
6 months 6 months 12 months
to 30/9/04 to 30/9/03 to 31/3/04
Basic earnings per share 5.23p 3.15p 5.00p
Normalised (loss)/earnings per share (1.54)p 3.88p 20.50p
Diluted earnings per share 5.20p 3.13p 4.97p
The calculation of basic and diluted earnings per share is based on the
following profit for the period after tax:
6 months 6 months 12 months
to 30/9/04 to 30/9/03 to 31/3/04
£'000 £'000 £'000
Profit after tax 1,508 766 1,303
Normalised earnings per share is calculated after adjusting the profit after tax
for the effect of goodwill amortisation and exceptional items and is more
indicative of underlying performance. The reconciliation of basic to normalised
(loss)/earnings per share is as follows:
6 months 6 months 12 months
to 30/9/04 to 30/9/03 to 31/3/04
Basic earnings per share 5.23p 3.15p 5.00p
Goodwill written off 2.04p 0.73p 3.10p
Exceptional item (8.81)p - 12.40p
Normalised earnings per share (1.54)p 3.88p 20.50p
The weighted average number of shares in issue during the period used in the
calculation of earnings per share is as per the following table:
6 months 6 months 12 months
to 30/9/04 to 30/9/03 to 31/3/04
'000 '000 '000
Weighted average shares for basic and
normalised earnings per share 28,838 24,324 26,041
Calculation of shares under option per FRS14 160 164 202
Weighted average shares for
diluted earnings per share 28,998 24,488 26,243
3. 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 2004 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.
4. 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 2004.
5. Copies of the 2004 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, Tove Valley Business Park, Towcester, Northants NN12
6PF.
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