Final Results

Spirent PLC 28 February 2001 Spirent plc 782 -28 February 2001 RECORD GROWTH Spirent plc, the international network technology company, today announces its audited Preliminary Results for the year ended 31 December 2000. Highlights £ million 2000 1999 Growth % 1999 Restated+ Turnover 697 545 28 Operating profit* 138 90 53 Profit before taxation* 125 89 40 Headline earnings per share (pence) 12.61 9.18 37 Final dividend per share (pence) 3.00 2.89 4 + Before goodwill amortisation and exceptional items * Restated for share split, rights issue and to show Interconnection as a joint venture * Communications group increased turnover by 152 per cent to £289 million 1999 £115 million) and operating profit* by 129 per cent to £99 million (1999 £43 million). Organic growth was 73 per cent and 68 per cent respectively. * 72 per cent of continuing operating profit* generated by Communications group (1999 51 per cent, 1998 30 per cent). * Record investment in new product development of £60 million - 9 per cent of turnover (1999 £39 million - 7 per cent, 1998 £27 million - 6 per cent). * Systems group profit impacted by continued investment in aerospace software development and on-going rationalisation among aviation customers. First deliveries made of new commercialised aviation software. * Return on sales* increased by 3.3 percentage points to 19.8 per cent (1999 16.5 per cent). * Performance of Zarak Systems (acquired in September) and Hekimian Laboratories (acquired in December) in line with expectations. Commenting on the results, Nicholas Brookes, Chief Executive, said: 'Spirent's outstanding performance has been achieved through the excellence of our innovative technology and our presence in the sweet spot of the telecom market. 'Our communications business has shown encouraging growth for the first two months of this year, despite the current well publicised telecom industry uncertainties. 'We believe our customers will concentrate increasingly on next generation high speed networks to remain competitive. We are uniquely positioned to meet their critical needs on a global basis, with our extensive suite of leading edge communications testing products and monitoring systems. 'Therefore, we expect Spirent to continue to outperform.' The company disclaims any intention or obligation to revise or update any forward-looking statements contained in this press release, regardless of whether those statements may be affected as a result of new information, future events or otherwise. A recording of this morning's results presentation will be available for viewing on the Spirent plc website (www.spirent.com/investors) from 15.00 London time (10.00 EST). Nicholas Brookes and Eric Hutchinson will today host a results conference call at 16.00 London time (11.00 EST). This may be accessed by dialling +44 (0)20 8240 8240 and quoting 'Spirent Results'. A recording of the call will be available until 21 March by dialling +44 (0)20 8288 4459, access code 687642. Enquiries: Nicholas Brookes, Chief Executive Spirent plc On 28/02/01 Eric Hutchinson, Finance Director +44(0)20 7404 5959 Thereafter +44 (0)1293 767676 Jon Coles/Rupert Young Brunswick London +44 (0)20 7404 5959 Sara Strong/Nina Pawlak New York +1 212 333 3810 Background Note: Spirent plc is an international network technology company providing state- of-the-art solutions with a focus on high growth, high margin activities. Our Communications group unites leading edge performance analysis technology with network operations expertise, enabling customers to accelerate the development, deployment and assurance of next generation network equipment and services worldwide. www.spirent.com Spirent is quoted on the London Stock Exchange, ticker SPT. The Company operates a Level 1 American Depository Receipt programme (ticker: SPNUY; CUSIP number: 84856M100). For information, contact Brian Heston, The Bank of New York, American Depositary Receipts, 101 Barclay St, 22 West, New York, NY 10286 Phone: (212) 815 3938, Fax: (212) 571 3050, email: bheston@bankofny.com www.adrbny.com CHAIRMAN'S & CHIEF EXECUTIVE'S REVIEW This has been a year of significant growth and achievement for Spirent plc. Spirent Communications today unites leading edge performance analysis technology with network operations expertise, enabling customers to accelerate the development, deployment and assurance of next generation network equipment and services worldwide. Strategic Progress In 2000, Spirent plc derived 72 per cent of its continuing operating profit from its Communications group (1999 51 per cent, 1998 30 per cent), a clear demonstration of the substantial progress we have made in refocusing our business on high growth, high margin, high technology activities. We continued to expand our technology portfolio through internal development and acquisition. Our expertise across the full range of advanced communications technologies has enabled our introduction of a new generation of integrated test systems. These award-winning products directly address the needs of the market and have confirmed our leading position in our industry. Our £1.17 billion acquisition of Hekimian Laboratories in December has taken our Communications group into the highly complementary field of network monitoring which helps ensure the optimal running of large scale, live communications networks. The combination of Hekimian with our telecom test business will enable us to play a leading role in the development of network monitoring systems for next generation networks, a market expected to enjoy strong growth over coming years. We continue to move all our businesses up the value chain to position Spirent at the leading edge of technology, where there are attractive opportunities for differentiation and profitable growth. Financial Performance We achieved a strong financial performance, with turnover rising 28 per cent to £696.7 million (1999 £544.5 million) and operating profit growing 53 per cent to £137.9 million (1999 £90.0 million). Organic growth in turnover and operating profit was 26 per cent and 31 per cent respectively. Profit before taxation, amortisation and exceptional items increased 40 per cent to £124.6 million (1999 £89.0 million). After charging goodwill amortisation of £25.7 million and exceptional items, reported profit before taxation was £81.8 million (1999 £73.7 million). Headline earnings per share rose 37 per cent to 12.61 pence (1999 9.18 pence). Return on sales increased by 3.3 percentage points to 19.8 per cent (1999 16.5 per cent), reflecting the increasing proportion of our earnings arising from high margin communications activities. Note: Operating profit as referred to in the text is stated before goodwill amortisation and exceptional items Operating Highlights The year saw a very strong performance from our Communications group, with turnover increasing by 152 per cent to £289.2 million (1999 £114.7 million) and operating profit by 129 per cent to £98.6 million (1999 £43.0 million). Organic growth in each was 73 per cent and 68 per cent respectively. A series of highly successful product launches maintained Spirent Communications' record for first-to-market innovation. These included a number of integrated solutions that harness our expertise in multiple technologies. Many of our latest products were recognised through major industry awards including '2000 Product of the Year' by Internet Telephony magazine, 'Best of Show' at the Networld + Interop trade fair in Atlanta and 'Most Innovative' product by InternetWeek magazine. The integration of our telecoms test operations under the Spirent Communications identity proceeded well, with close collaboration on product development and the launch of a unified sales force and marketing programme. A strengthened management team is well placed to drive the business forward. In addition to internal development of new systems, we continued our strategy to acquire 'best in class' companies in complementary technologies. Hekimian has brought us an excellent market position in network monitoring systems which help network operators meet their obligations of service reliability, a critical concern in the development of next generation networks and services. Net-HOPPER, acquired in November, complements Hekimian's technology through its network test access systems. Zarak Systems, acquired in September, added a leading position in voice testing to our telecom test business and has strengthened our offering in the Voice over IP market. Our communications portfolio now addresses the full range of the technology lifecycle, from component design through to network optimisation. This establishes a broad and profitable base for our Communications business, which is now the engine of Spirent's growth and development. The Network Products group made good progress in developing its telecoms- related business in 2000, which now represents 23 per cent of its turnover (1999 13 per cent). The group's network application range was substantially broadened in February through the acquisition of RW Data, a leading UK manufacturer of network connectivity systems. Good progress has been made in globalising this product range to capitalise upon our worldwide HellermannTyton network. The performance of the Systems group was principally impacted by our continued investment in the development and commercialisation of our aerospace information and software systems. The first versions of our civil aerospace software were delivered to customers during the year. Our performance was also negatively affected by continued airline consolidation and rationalisation by aircraft manufacturers. The Sensing Solutions group achieved good growth in turnover, although operating profit was impacted by our investment in Korea and a slowdown in the Heating Ventilation and Air Conditioning market. Identity In 2000 we responded to the needs of our markets and reflected the changing nature of our business by launching the Spirent identity to replace a myriad of unrelated trading names across our business. We now have a consistent identity for businesses sharing common expertise and customers. Our new identity has been well received by customers, employees, partners and investors and has already proved to be of considerable commercial benefit. Investment We invested £60.3 million in new product development, an increase of 54 per cent. New product development within our Communications group rose 140 per cent to £34.7 million. Net capital expenditure was £37.5 million (1999 £33.2 million). This increase reflects the investment in providing suitable facilities and equipment to facilitate growth in our rapidly expanding businesses. Board and Senior Management Following completion of the acquisition of Hekimian from Axel Johnson, we were delighted to welcome as a non-executive director Goran Ennerfelt, President and Chief Executive of Axel Johnson AB. As a result of the acquisition, Axel Johnson has an 11.7 per cent shareholding in Spirent. The Board was also strengthened in April through the addition of Richard Moley as a non-executive director. Dick has brought extensive experience of the communications industry from his successful career as founding Chairman, Chief Executive Officer and President of Stratacom Inc and his subsequent role as Senior Vice President and Board member of Cisco Systems Inc. Since retiring from Cisco he has been involved with a range of communications technology ventures. Reflecting our increasing focus on communications activities, we have appointed Barry Phelps, President of Spirent Communications' Telecom Test division, and Des Wilson, President of the Network Monitoring division, to the Operations Management team of Spirent plc. They join My Chung, President of Spirent Communications. Dividend As indicated in the rights issue circular, the Board recommends a final dividend of 3.00 pence, an increase of 4 per cent over that for 1999 (2.89 pence). This will give a total dividend for the year of 4.35 pence, an increase of 5 per cent. The final dividend will be paid to shareholders registered at the close of business on 11 May 2001. People Inspiring Innovation We are committed to maintaining Spirent as a dynamic and exciting environment in which the best engineering talent can excel. Through attractive training opportunities, investment in new product development and competitive remuneration and incentives we are building on our culture of technological innovation. Our decentralised structure allows our businesses the maximum possible flexibility. This encourages our people to keep close to their customers, be responsive and achieve the leaps of imagination through which great products and service can be realised. Our principal strength lies in the dedication and ingenuity of Spirent's employees. We would like to thank them for their achievements in meeting the challenges of our markets and in contributing to the transformation of Spirent to become a world leading network technology business. Outlook Spirents outstanding performance has been achieved through the excellence of our innovative technology and our presence in the sweet spot of the telecom market. Our communications business has shown encouraging growth for the first two months of this year, despite the current well publicised telecom industry uncertainties. We believe our customers will concentrate increasingly on next generation high speed networks to remain competitive. We are uniquely positioned to meet their critical needs on a global basis, with our extensive suite of leading edge communications testing products and monitoring systems. Therefore, we expect Spirent to continue to outperform. OPERATING REVIEW Communications £ million Growth Organic growth % 2000 1999 % _____________________________________________________________________ Turnover 289.2 114.7 152 73 Operating profit 98.6 43.0 129 68 Return on sales (per cent) 34.1 37.5 The year saw significant growth and strategic progress by our Communications group. The Telecom Test division achieved turnover of £283.7 million, a rise of 147 per cent (73 per cent organic), and operating profit of £97.1 million, an increase of 126 per cent (68 per cent organic). As advised at the Interim stage, return on sales decreased as a result of our planned investment in product development, marketing and business development activities. Investment in new product development by the Communications group totalled £34.7 million, an increase of 140 per cent. The integration of the Telecom Test operations under the common identity of Spirent Communications proceeded well. In addition to close collaboration on product development, the operations successfully implemented a common visual style to literature, websites, materials and products, and launched a unified advertising programme. The new identity has been well received in the market and is helping us raise awareness of our broad and highly regarded product range. As a consequence, our integrated Telecom Test sales force has made excellent progress in introducing our latest products to new and existing customers. The group continued to expand its technology portfolio through internal development and acquisition. A series of successful product launches helped Spirent Communications to maintain its record of first-to-market innovation and further increase its array of industry awards. Honours received in the year included '2000 Product of the Year' from Internet Telephony magazine for the SmartVOIPQoS (trade mark) system, 'Best of Show' at the Networld + Interop trade fair in Atlanta for the Layer 1 optical test system and 'Most Innovative's product by InternetWeek magazine for the Gigabit Ethernet over Copper SmartCard (trade mark). Other product innovations in the year included systems for ATM OC-48, Quality of Service in all market areas, VDSL line simulation, 2.5G and 3G wireless, and the first Packet over SONET OC- 192 test system. The acquisition of Zarak added voice and telephony expertise to our existing Telecom Test capabilities. This is enabling our development of new performance analysis solutions for the fast growing Voice over IP market. Note: Operating profit as referred to in the text is stated before goodwill amortisation and exceptional items Our acquisition of Hekimian has added a major new dimension to the group. Hekimian is a leading US manufacturer of network monitoring systems that help ensure that large scale, live networks function at optimal levels of performance. This addresses a central concern of network operators who are increasingly required to deliver specified levels of service to individual customers, guaranteed by detailed Service Level Agreements. Hekimian has a strong position in this market, with a well-established product portfolio and strong relationships with incumbent and competitive network operator customers. Hekimian is complemented by the network test access technology of Net- HOPPER. This provides non-intrusive access to network traffic and allows these circuits to be tested by remotely sited performance analysis equipment. Hekimian and Net-HOPPER comprise a new Network Monitoring division within Spirent Communications, which provides an exceptional strategic fit with our existing Telecom Test capabilities. The Telecom Test division's focus on the R&D labs of network equipment manufacturers gives the Network Monitoring division visibility of new technologies coming down the line for deployment in the network. Together, these divisions will enable Spirent Communications to take a leading position in network monitoring systems for next generation networks. In the short period since the acquisition of Net-HOPPER in November and Hekimian in December, the Network Monitoring division achieved turnover of £5.5 million and operating profit of £1.5 million, a return on sales of 27.3 per cent. The Communications group's senior management has been further strengthened through several appointments. Des Wilson, formerly President & CEO of Hekimian, has been appointed President of the Network Monitoring division. Geoff Zeidler, Director of Business Development for Spirent plc since 1997, has been appointed President of Europe and Wireless. Jim Schleckser transferred from the Sensing Solutions group to become Vice President of Business Development in North America. Network Products £ million Growth Organic growth % 2000 1999 % _____________________________________________________________________ Turnover 181.4 155.4 17 8 Operating profit 25.3 21.5 18 2 Return on sales (per cent) 13.9 13.8 The Network Products group made good progress in developing its telecoms- related business in 2000, which at £41.1 million now represents 23 per cent of its turnover (1999 £20.8 million -13 per cent). The group's network application range was substantially broadened in February 2000 through the acquisition of RW Data, a leading UK manufacturer of network connectivity systems. Good progress has been made in globalising this product range to capitalise upon our worldwide HellermannTyton manufacturing and sales network. Successful product launches were held in Germany in December and in the United States in January 2001 and further market introductions are planned this year. Our ability to serve direct customers and distribution partners on a worldwide basis through our strong market position in all principal global regions provided an important advantage in our sales drive. We saw good growth in continental Europe and Brazil as a result of continued success in automotive and industrial applications. Elsewhere, the downturn in the US truck market depressed orders for our North American business. The further weakening of the euro exacerbated the already challenging conditions for UK exports. Through our associated company in Japan we further strengthened our strong market position which contributed to an excellent increase of 17 per cent in our share of associates' profits. Systems £ million Change Organic change % 2000 1999 % _____________________________________________________________________ Turnover 122.4 121.4 1 (3) Operating profit 2.5 8.5 (71) (68) Return on sales (per cent) 2.0 7.0 The Systems group reported a reduction in operating profit, principally due to our continued investment in the development and commercialisation of our aerospace information and software systems. We also continued to see delays in major capital investment by the aviation industry as a result of airline consolidation and rationalisation by aircraft manufacturers. During the year, we undertook a restructuring programme at a cost of £0.8 million. The aerospace business took an important step in extending its software into the civil market by launching AuRA (trade mark), a new version of its GOLD (trade mark) Maintenance Repair and Overhaul (MRO) system. AuRA is specifically designed to meet the needs of commercial customers and in 2000 was delivered to regional US carriers Sun Country, Frontier and most recently USA 3000. GOLD, the defence MRO system, was selected to support the US Air Force C5 and F22 programmes and is being adapted to offer additional functionality at Boeing Military Aircraft and Missile manufacturing sites. We also saw good progress in the development of our Aviation Information Solutions business. This included sales to UPS and Atlas Airlines of our On- board Performance Systems, which help pilots with a range of calculations necessary for take-off and landing. FedEx took delivery of our Airborne File Servers in order to improve the management of information and software applications aboard its aircraft. KLM took delivery of our On-board Maintenance Terminals to improve the efficiency of fault logging and maintenance turnarounds. The Systems group's position sensors business performed strongly in the year with major aerospace sales to TRW Lucas, Embraer and Boeing. In addition, our airborne smoke detection systems and in-flight entertainment power supply business performed well throughout the year. Our motion control business continued to perform strongly in the medical mobility market, where it holds a leading position, and has successfully transitioned its technology into the industrial mobility and access platform market. Sensing Solutions £ million Growth Organic change 2000 1999 % % _________________________________________________________________________ Turnover 90.7 72.1 26 14 Operating profit 11.3 11.1 2 (2) Return on sales (per cent) 12.5 15.4 The Sensing Solutions group achieved good growth in turnover although operating profit was impacted through our investment in sales and marketing in Korea, a slowdown in the Heating Ventilation and Air Conditioning market and a one-off cost of £1.5 million from product line rationalisation undertaken in the final quarter. Good strategic progress was made during the year. We extended our humidity sensing capabilities into the European building controls market. Additional temperature capabilities were gained through a new venture with LG in Korea, giving us access to world class infrared sensing technologies. Our global presence and expertise in multiple technologies have helped us secure several important contracts. We gained approval as a supplier to Nissan in recognition of our co-ordinated temperature capabilities in the United States, Europe and Japan. Following a group-wide marketing drive in the automotive sensors market, we were selected to develop new relative humidity and temperature sensors for Mack's latest diesel truck engines. We were also able to capitalise on our reputation for automotive temperature sensors to be selected by Delphi and Visteon to develop relative humidity sensors. We opened a new facility for our Korean temperature operation, establishing a world class manufacturing base to expand the business domestically and across Asia Pacific. Interconnection Joint Venture Our share of turnover increased by 13 per cent to £76.0 million (1999 £67.0 million) and our share of operating profit rose by 40 per cent to £13.3 million (1999 £9.5 million). The business continued to trade well with healthy growth in most market segments and positive customer reaction to its latest product launches. FINANCIAL REVIEW The substantial change in the profile of our business is clear from the figures: 72 per cent (1999 51 per cent, 1998 30 per cent) of continuing operating profit now comes from our Communications group. Figures for the Communications business are broken down into its two divisions, Telecom Test and Network Monitoring. Total cost of acquisitions in 2000 was £1,543.9 million of which £984.7 million was paid in shares. This, together with the rights issue which raised £522.7 million net of expenses, substantially strengthened our balance sheet. The changed shape of the balance sheet has reduced the ratio of borrowings against shareholders' funds to 18 per cent. Net borrowings of £326.4 million represent 1.8 times reported earnings before interest, taxation, depreciation, amortisation and exceptional items (1999 2.2 times). Reported interest cover before amortisation and exceptional items was 5.3 times (1999 8.0 times). The reduction in cover reflects the full year impact of borrowings drawn down in July 1999. Financial Results Headline PBTA £ million 2000 1999 _______________________________________________________________________ Profit before taxation 81.8 73.7 Goodwill amortisation 25.7 8.6 Exceptional items: Acquisition retention bonuses 2.2 - Loss on disposal of operations 18.1 6.7 (Profit) on disposal of tangible fixed assets (3.2) - _______________________________________________________________________ Headline profit before taxation 124.6 89.0 _______________________________________________________________________ Earnings before interest, taxation, depreciation, amortisation and exceptional items rose by 45 per cent from £123.7 million to £179.0 million. Goodwill amortisation increased from £8.6 million in 1999 to £25.7 million this year, reflecting the full year impact of acquisitions made in 1999 together with those made in 2000. The goodwill charge for 2001 is expected to be in the region of £92.4 million at current exchange rates. The loss on disposal of £18.1 million (1999 £6.7 million) includes the reversal of £19.9 million of goodwill previously written off. The increase in net interest charge from £12.8 million to £29.3 million reflects the full year impact of the borrowings incurred to finance 1999 acquisitions. Note: Operating profit as referred to in the text is stated before goodwill amortisation and exceptional items The effect of exchange rate translation was positive, increasing turnover by £28.4 million and profit before taxation by £6.1 million. Comparative figures for earnings per share and dividend per share have been restated to reflect the impact of the 3 for 1 share split in May and the bonus element of the 5 for 24 rights issue in December. Basic earnings rose from 6.67 pence to 7.40 pence, an increase of 11 per cent, after charging goodwill amortisation and exceptional items. Basic earnings benefited from property disposals that realised a gain of £3.2 million and a £6.4 million exceptional tax credit in respect of previously accrued purchase consideration. Headline earnings per share grew 37 per cent, from 9.18 pence to 12.61 pence. Trading Performance The second half of 2000 showed the acceleration in positive trends in our business and the effect of the acquisitions completed in the second half year of Zarak, Net-HOPPER and Hekimian. This reflects the strong underlying performance of the Communications business with organic growth in operating profit over the first half year of 37 per cent and 63 per cent over the second half of 1999. The acquisitions contributed £29.8 million of turnover and £8.4 million of operating profit in the second half year. On a proforma basis, taking into account the full year results for the businesses acquired in 2000, Spirent Communications' Telecom Test division would have had turnover of £305.3 million and operating profit of £106.3 million and Network Monitoring would have had turnover of £121.3 million and operating profit of £30.3 million. The results include a £2.2 million exceptional charge to operating expense in respect of acquisition retention bonuses, arising out of acquisitions made in 2000 which, although akin to purchase consideration, are regarded as compensation under FRS7. The acquisition retention bonuses have been excluded from headline earnings per share. The corresponding charges are expected to be in the region of £9.0 million for 2001 and £6.0 million for 2002. Taxation The effective rate of taxation, after adjusting for goodwill amortisation and exceptional items, decreased to 30.3 per cent (1999 32.7 per cent). This is due to the tax benefit arising on the exercise of stock options by US employees and a reduced tax burden in overseas jurisdictions. Given the existing source of profits and prevailing exchange rates a sustainable rate of 31 per cent is expected. The reported rate of taxation at 37.4 per cent (1999 41.0 per cent) reflects the one-off benefit of a £6.4 million tax credit on the deferred payment in respect of the acquisition of Adtech. Cash Flow Cash Generation 2000 1999 £ million _______________________________________________________________________ Net cash flow from operating activities 125.7 101.7 Less cash outflows on: - Dividends and interest (net) (48.9) (37.0) - Tax paid (22.2) (17.7) - Capital expenditure (net of disposals) (37.5) (33.2) - Capital repayment of finance leases (0.6) (1.5) _______________________________________________________________________ Cash inflow 16.5 12.3 _______________________________________________________________________ High growth rates required increased investment in working capital. In the second half year of 2000, £14.1 million was invested to fund working capital as a result of growth. There has been no change in inventory turn in the period and days receivable outstanding have improved. Capital expenditure levels are expected to increase modestly in 2001. Cash outflow on acquisitions was £549.7 million whilst cash inflow secured from divestments was £13.1 million. Acquisition spend included £16.3 million for the final payment in respect of Adtech acquired in 1997. Cash flow in 2001 will be impacted by the deferred cash payment of $20.0 million in July in respect of Netcom. The first tranche repayment of $24.0 million of term loan debt was made in January 2001. Cash advances of £22.0 million were made to the employee share ownership trust to purchase shares in Spirent plc in order to fund incentive plans. Dividend The final dividend of 3.00 pence per share (1999 2.89 pence), as indicated at the time of our recent rights issue, will result in the dividend for the year of 4.35 pence per share being covered 2.4 times by headline earnings (1999 2.2 times). Consolidated Profit & Loss Account Ongoing Acquis- Disposals Total Total itions 2000 2000 2000 2000 1999 £ £ £ £ £ million million million million million As restated (1) Turnover: Group and share of joint venture 723.3 36.4 13.0 772.7 611.5 Less: share of joint venture's turnover (76.0) - - (76.0) (67.0) ======= ========= ========= ======= ======== Turnover 647.3 36.4 13.0 696.7 544.5 ======= ========= ========= ======= ======== Operating profit 110.6 (0.8) 0.2 110.0 81.4 _________________________ _______ _________ _________ _______ ________ Exceptional item - acquisition retention bonuses - 2.2 - 2.2 - Goodwill amortisation 17.6 8.1 - 25.7 8.6 Operating profit before goodwill amortisation and acquisition retention bonuses 128.2 9.5 0.2 137.9 90.0 _________________________ _______ _________ _________ _______ ________ Income from interests in: Joint venture 13.3 - - 13.3 9.5 Associates 2.7 - - 2.7 2.3 Exceptional items: Loss on disposal of operations - - (18.1) (18.1) (6.7) Profit on disposal of tangible fixed assets 3.2 - - 3.2 - _______ _________ _________ _______ ________ Profit before interest 129.8 (0.8) (17.9) 111.1 86.5 _______ _________ _________ Net interest payable (29.3) (12.8) _______ ________ Profit before taxation 81.8 73.7 Taxation 30.6 30.2 _______ ________ Profit after taxation 51.2 43.5 Minority shareholders' interest - equity 0.1 - Minority shareholders' interest - joint venture 0.4 - _______ ________ Profit attributable to shareholders Dividends: 50.7 43.5 Interim 8.8 8.1 Proposed final 27.3 19.0 _______ ________ Total dividends 36.1 27.1 _______ ________ Profit retained 14.6 16.4 ======= ======== Basic earnings per share(2) 7.40p 6.67p Headline earnings per share (2) 12.61p 9.18p Diluted earnings per share (2) 7.18p 6.39p _______ ________ Net dividend per share (2) Interim (2) 1.35p 1.24p Proposed final (2) 3.00p 2.89p _______ ________ Total dividend 4.35p 4.13p ======= ======== (1) The 1999 figures have been restated to reflect the change in accounting treatment for the Group's interest in Interconnection. (2) Earnings and dividend per share have been adjusted for the effect of the bonus element of the rights issue and the 3 for 1 share split. Consolidated Statement of Total Recognised Gains and Losses 2000 1999 £ £ million million Profit attributable to shareholders 50.7 43.5 Exchange adjustment on subsidiaries, joint venture and associates 8.8 (3.9) Taxation on exchange adjustment (1.7) - _______ _______ Total recognised gains and losses 57.8 39.6 ======= ======= Consolidated Balance Sheet 2000 2000 1999 1999 £ £ £ £ million million million million as as restated restated (1) (1) Intangible assets 1816.8 321.3 Tangible assets 136.2 107.0 Investments Investment in joint venture Share of gross assets 64.5 54.1 Share of gross liabilities (23.8) (19.2) _________ _________ 40.7 34.9 Investment in associates 12.9 11.9 Other investments 33.4 12.3 _________ _________ 87.0 59.1 Current assets Stocks 136.2 69.3 Debtors 206.8 112.5 Investments 3.9 51.0 Cash at bank and in hand 28.6 37.7 _________ _________ 375.5 270.5 _________ _________ Current liabilities Creditors due within one year 199.6 119.6 Loans and overdrafts 19.8 150.0 _________ _________ 219.4 269.6 _________ _________ Net current assets 156.1 0.9 _________ _________ Assets less current liabilities 2196.1 488.3 Long term liabilities: Creditors due after more than (355.6) (233.4) one year Provision for liabilities and charges (2.1) (0.7) _________ _________ Assets less liabilities 1838.4 254.2 ========= ========= Financed by: Shareholders' funds - equity 1834.7 250.3 Minority shareholders' interest 3.7 3.9 - equity _________ _________ Total equity 1838.4 254.2 ========= ========= (1) The 1999 figures have been restated to reflect the change in accounting treatment for the Group's interest in Interconnection. Consolidated Cash Flow Statement 2000 1999 £ million £ million as restated (1) Net cash inflow from operating activities 125.7 101.7 Dividends received from: - joint venture 1.1 1.3 - associates 0.4 1.1 Returns on investments and servicing of finance (22.7) (13.9) Taxation (22.2) (17.7) Capital expenditure and financial investment (59.5) (39.8) Acquisitions and disposals (536.6) (232.9) Equity dividends paid (27.7) (25.5) Management of liquid resources 50.6 (44.8) Financing 480.2 284.2 ________ _______ Net cash (outflow)/inflow (10.7) 13.7 ======== ======= Reconciliation of Net Cash Flow to Movement in Net Borrowings Net cash (outflow)/inflow (10.7) 13.7 Cash flow from the change in debt and lease financing 47.9 (277.5) Issue costs on new long term loans - 2.7 Cash flow from the change in liquid resources (50.6) 44.8 ________ _______ Movement arising from cash flows (13.4) (216.3) Loans and finance leases acquired with (2.3) (27.2) subsidiaries Loan to acquire subsidiary (13.9) - Loans and finance leases disposed of with subsidiaries - 0.3 New finance leases (2.5) (7.3) Exchange adjustment (19.7) 6.1 ________ _______ Movement in net borrowings (51.8) (244.4) Net borrowings at 1 January (274.6) (30.2) ________ _______ Net borrowings at 31 December (326.4) (274.6) ======== ======= (1) The 1999 figures have been restated to reflect the change in accounting treatment for the Group's interest in Interconnection. Analysis of Results 2000 1999 £ % £ million % million Segmental Analysis as restated (1) Turnover Telecom Test 283.7 41 114.7 25 Network Monitoring 5.5 1 - - _______ ___ _______ ___ Communications 289.2 42 114.7 25 Network Products 181.4 27 155.4 34 Systems 122.4 18 121.4 26 Sensing Solutions 90.7 13 72.1 15 _______ ___ _______ ___ 683.7 100 463.6 100 === === Disposals 13.0 80.9 _______ _______ 696.7 544.5 ======= ======= Operating profit Telecom Test 97.1 71 43.0 51 Network Monitoring 1.5 1 - - _______ ___ _______ ___ Communications 98.6 72 43.0 51 Network Products 25.3 18 21.5 26 Systems 2.5 2 8.5 10 Sensing Solutions 11.3 8 11.1 13 _______ ___ _______ ___ 137.7 100 84.1 100 === === Disposals 0.2 5.9 _______ _______ 137.9 90.0 Acquisition retention bonuses (2.2) - Goodwill amortisation (25.7) (8.6) _______ _______ 110.0 81.4 ======= ======= Geographical Analysis Turnover by source Europe 183.3 27 160.3 35 North America 461.7 67 275.6 59 Asia Pacific, Rest of Americas, Africa 38.7 6 27.7 6 _______ _______ 683.7 100 463.6 100 === === Disposals: Europe 6.0 29.3 North America 7.0 48.5 Asia Pacific, Rest of Americas, Africa - 3.1 _______ _______ 696.7 544.5 ======= ======= Operating profit Europe 19.4 14 22.8 27 North America 115.9 84 61.5 73 Asia Pacific, Rest of Americas, Africa 2.4 2 (0.2) - _______ ___ _______ ___ 137.7 100 84.1 100 === === Disposals: Europe 0.5 2.3 North America (0.3) 3.6 _______ _______ 137.9 90.0 Acquisition retention bonuses (2.2) - Goodwill amortisation (25.7) (8.6) _______ _______ 110.0 81.4 ======= ======= (1) The segmental and geographical analyses have been restated to reflect the change in accounting treatment in respect of the Group's interest in Interconnection and the effects of disposals. The above financial information does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The comparative financial information, as restated, is based on the statutory accounts for the financial year ended 31 December 1999. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2000, which include an unqualified audit report, will be circulated to shareholders on 26 March 2001. The Annual General Meeting will be held on 9 May 2001 and subject to the approval of the shareholders the final dividend will be paid on 4 June 2001 to shareholders registered at the close of business on 11 May 2001.

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