Final Results

Volex Group PLC 02 June 2004 Embargoed until 7.00am. 2 June 2004 VOLEX GROUP p.l.c. Preliminary Announcement of Group Results for the Financial Year Ended 4 April 2004 Volex Group p.l.c., the international electrical and electronic cable assemblies group, today announces its preliminary results for the financial year ended 4 April 2004. Financial Highlights: • Sales increased by 4% (7% excluding foreign currency impact) to £238m • H2 sales increased 11% over H1 • Operating profit of £2.5m (1) (before goodwill amortisation and exceptional operating items) • Cash generation from operating activities: - pre exceptional cashflows £8.1m - post exceptional cashflows £5.6m • Net borrowings reduced by over £7m to £32m • All banking covenants met and financing in place to 30 June 2005 • Basic loss per ordinary share (39.1)p (2003 - (44.3)p) (1) The operating loss after charging goodwill amortisation and exceptional operating items was a reported operating loss of £4.5m (2003 - loss of £9.0m). The Chairman of Volex, Dom Molloy, commented: 'Our focus on aggressive cost alignment, cash generation and debt reduction, while broadening the customer and market base of the business, is reflected in the positive underlying operating results for the year. The market environment has improved, so has our ability to capitalise on opportunities developed and presented. The financial structure of the Group continues as a priority for the Board. Assuming a continuation of the current positive market environment, the steps already taken to establish a more appropriate, cost effective and efficient operation with improved margins throughout, will enable the Group to realise enhanced returns for our shareholders. ' Ends For further information, please contact: Volex Group p.l.c. Today: 020 7067 0700 Thereafter: 01925 830101 Dom Molloy, Chairman John Corcoran, Group Chief Executive David Hudson, Group Finance Director Weber Shandwick Square Mile 020 7067 0700 Chris Lynch / Josh Royston VOLEX GROUP p.l.c. Preliminary Announcement of Group Results for the Financial Year Ended 4 April 2004 The results for the financial year ended 4 April 2004 reflect achievement of the year's targets of improving profitability and generating cash to further reduce debt. We have continued our strategy to drive cost from the business by leveraging our global profile of low cost manufacturing facilities and, after three difficult years, the Group is starting to realise these benefits in an improving market environment. Despite the market uncertainty and caution that prevailed through most of the period, the Group achieved successive quarter on quarter improvements in revenue and profit throughout the financial year. Action continued across our high-cost locations to migrate products to more cost-effective facilities with the result that 85% of production is now supported from low-cost regional centres. While this did affect the trading performance of the Group in the first half, the benefits of these actions were realised in the second half of the financial year and along with an 11% revenue improvement over H1, the Group exits the reported year at much improved underlying operating profit performance. Having generated £8.1m(2) of cash from operations before exceptional outflows in the course of the year, £2.5m of which was in respect of the previously announced cessation of manufacturing in Ireland, the level of debt has been further reduced and over £18m has now been taken from the debt level over the last two years. All banking covenants were met and financing is in place for the new business year. The financial health of the Group was a key priority and it remains our prime focus. (2) Cash from operations after exceptional operating cashflows is £5.6m (2003 - £13.1m) Global Markets The cable assembly business continues to reflect a challenging set of dynamics: consolidation and outsourcing, dramatic reduction by our customers of their supply base and the shift from regional to global supply sourcing. In response, the Group has developed a stronger global dimension across the strategically important functions of supply chain management, global account management and information technology. The market is improving. Our customers' businesses are improving reflected in a healthier order book for the Group. However, the experiences of our customers through the most sustained downturn in the industry's history are manifested in a short-term approach to demand creation and fulfilment, lead-times and service requirements. Volex continues to use its global presence, its product breadth and its account management strength to improve its offering to existing and potential customers. Our focus on meeting customer requirements wherever they need to be supported continues to position the Group well within the industry. The Group experienced a much more stable demand environment through the year and in the second half witnessed a positive level of growth in all of its major sectors. This was evidenced in a more robust order book, albeit the demand needed to be satisfied in a shorter time period. The telecoms market recovered slowly from its dramatic decline in the recent financial years as operators re-instituted investment for network expansion and to offset concerns on network degradation. The return to financial health for most of our telecom OEM (Original Equipment Manufacturers) customers bore further testament to the modest recovery within the sector. Wireline spending remained depressed but the Wireless spending improved through the end of the first half of our financial year. The recovery was first evidenced in Europe, with North America lagging some months behind. The investments required in Asia to meet dramatically increasing demand for such services now needs to translate from contract award by the operators to full delivery in the installation. Demand for information technology server and networking products initially remained at low levels, but enterprise spending has improved and these products are increasingly being driven towards commoditisation and standardisation. The PC market is accelerating with this increased business demand. Solid growth in the second half of 2003 continued into 2004. Aggressive pricing and the increasing deployment of mobility products also supported this improvement. The consumer electronics market continued to offer strength and opportunity for the Group. Both consumer spending and the continuing migration to digital products were sustained throughout the year. The rate of technology churn, the rapid product introduction cycle and the global product approvals portfolio enabled Volex to match its technical competence from design to volume with the demands of the sector. The consumer appliance sector was more adversely affected by currency movements and did not demonstrate acceptable growth, although a concentration on small harness capability allowed access to some new and potentially significant customers. The specialist, niche harness segment was relatively stable throughout the year. Focusing on the market for off-highway equipment, specialist vehicles and aerospace harness systems, the division's engineering expertise was leveraged into existing and new customers. However, the rate of new business development did not compensate for slight weakness in demand. Regional Operations Sales improved over the prior year by 4%, but more significantly the second half was 11% up on the first and 14% improved on the same period in the prior financial year and represents the third successive half-year of growth. In the Americas, the first half revenue levels were weaker than expected due to the poor rate of recovery in the market there and the translation effect into sterling sales. However, the second half improved by 13% over the first in local currency. This was attributable to a better economic environment particularly in the electronics sector and some new programs secured during the first half. The cost base for the Group in North America was also addressed as the migration of volume manufacturing from facilities in the US and Canada to Mexico and Asia was effected. The benefits of this were realised in the fourth quarter and will flow through to the new financial year. The final quarter also recorded a return to profitability for the region. This, with demonstrated quarterly growth, the completion of the manufacturing strategy and the improved demand environment will allow the unit to deliver profit improvement throughout the forthcoming year. Total sales in Asia improved by 23% over the previous year in local currency. Much of this was attributable to our power cord sales and focus on some key customer groupings such as the Japanese headquartered companies. The technology content was also significant and designed-in engineered product represented 25% of power cord sales. The success of this strategy was manifested in a significant improvement in profitability. The migration of the multi-national companies to the region was also a contributor and while other regions within the Group were impacted, our presence in Asia ensured that we maintained the business within the Group as it moved into countries such as China where we have had a presence for over 11 years. While total sales in Europe improved by 17% over the prior year in local currency, the region experienced some initial difficulties in the transfer of high-mix, high-end technologies and products to Eastern Europe. All manufacturing has now ceased in Ireland and has been transferred to our low cost facilities in Croatia and Poland. As a result, the region returned to profitability in the second half of the year. The power cord organisation was aligned into Volex Asia, where the entire portfolio of power products was being supported from a technical and supply perspective. This enabled a focus on data, telecommunications and medical sectors which could be best serviced from our mainland Europe facilities. The market in these sectors is improving and the full-year benefit of actions taken during the reported period will directly impact the return on incremental revenues. The specialised harness business was slightly negative year-on-year and our focus continued on developing low-cost manufacturing support from Estonia and China. Consolidation continues in this sector at both the customer and competitor level and this improved sourcing capability for the business allows it to offset the impact of such dynamics. The market sector remains relatively stable and dramatic growth is not expected in the medium term. The Future Our strategy is unchanged: with an improving trading environment we must increase our profitability and generate sufficient cash to further reduce our debt and fuel the growth opportunities presented by increased demand and improving share. The industry has experienced an unprecedented period of sustained downturn and as we emerge, we must not only secure the gains, but take advantage of all opportunities that improve the value return to our shareholders. We have extended our service offering, developed technology coverage, invested in economies of scale and have an enhanced position within our customer base. Our drive is not just for revenue growth but the quality of that revenue and ensuring that Volex is appropriately rewarded for the value we extend to our customers. With the experience of the recent past, we remain cautious on the robustness of the recovery, but that caution drives us to intensify our focus on cost while not inhibiting the growth potential with existing and future new accounts. We have a product and service offering that extends the value proposition beyond the capability of many of our competitors'. We continue to develop a leading supply chain capable of supporting global customers globally and are committed to leveraging our independence of connector and cable solutions to offer the customer opportunities for design and component substitution cost reductions. We also continue the drive to expand our customer base and increased market segment penetration, reducing the impact of segment and/or customer demand fluctuations. Action has been taken and we emerge a stronger and leaner organisation. What has not changed is a passion for providing value to our customers in whatever location they choose to do business. FINANCIAL REVIEW Turnover for the year at £238.4m was 4% up over last year, despite a £7m negative currency effect. A geographical review of sales by destination showed sales in Asia increase by 14% and as a percentage of Group sales increase by 3 percentage points to 28%. Sales to customers in the Americas fell by 14% over last year and represented 31% of Group sales (2003 - 38%). Sales in Europe as a whole increased by 4 percentage points to 41%. A comparison of Group sales by origin or manufacturing location, based on total sales including intra-Group trading (i.e. output at selling prices) showed a year on year improvement in Asia of 14% accounting for 32% of the Group's output (2003 - 28%). America's output declined by 13% in value over the previous year and accounted for 31% of Group output (2003 - 36%), while output in Europe improved by 3% and accounted for 37% of Group output (2003 - 36%). An analysis of sales by product category and market sector is given in note 1 to the results. The Group recorded an operating profit (pre goodwill amortisation and exceptional operating items) for the year of £2.5m(3) (2003 - £0.6m). The translation of foreign currency operating profits into Sterling had an adverse impact of £0.6m. Despite this the Group's gross profit margin remained at over 14%, similar to last year as the Group maintains its efforts to reduce its overheads and resulting break-even sales level. (3) The operating loss after charging goodwill amortisation and exceptional operating items was a reported operating loss of £4.5m (2003 - loss of £9.0m) During the first half of the year, the Group initiated the cessation of all manufacturing operations in Ireland with production being transferred to our low cost locations in Croatia and Poland. This exercise was completed during the second half of the year. There were closure costs associated with the cessation of manufacturing in Ireland of £3.0m which are treated as a one-off charge separately identified as an exceptional operating item. This restructuring exercise will result in annualised cost savings of some £2m. Following a year-end market valuation review there has been a write-down to the valuation of the Irish facility producing a further exceptional asset impairment charge of £3.4m. In addition the Group also sold its North American facility at Dartmouth, Massachusetts which had ceased manufacturing in 2002. A loss of £0.3m was realised on this disposal. Finance charges (net) include interest costs of £3.1m similar to last year and amortisation costs relating to the 2002 refinancing of £0.7m (2003 - £0.5m). The result for the financial year after tax was a loss of £11.2m (2003 - loss of £12.7m). Taxation The tax charge for the year resulted in an effective composite rate of 34.3% (2003 tax credit - 7.0%). This charge relates to taxes paid in countries in which we made a profit. The tax charge has been materially affected by losses arising in certain countries for which tax credit has not been recognised this year. To the extent that the Group generates profit in these countries in future periods, the losses will be recoverable and there will be a consequential positive effect on the effective tax rate in those future periods. Different tax rates apply to the Group's world-wide operations, the highest rate relating to the North American operations, with lower than average tax rates currently applying in Asia and Ireland. Earnings Per Share Basic loss per share this year of (39.1)p compares with (44.3)p in the prior year. Whilst the headline loss per share shows a significant deterioration from (7.3)p to (38.0)p per share this is distorted by the higher than normal tax charge as referred to above. The underlying loss per share before tax of (4.7)p has improved from (10.6)p in the prior year, which is consistent with the performance of the Group's trading operations. Funds Flow During the year there was a net inflow of funds before financing of £1.1m, comprising inflows of £5.6m from operations, £1.7m from the disposal of fixed assets and asset held for resale and £0.2m from tax, in part offset by outgoings of £2.2m on capital expenditure, and £4.1m on interest/financing costs. Currency translation of £5.2m impacted favourably on the debt position during the year. Capital Expenditure Fixed asset additions in the Group totalled £2.5m (2003 - £2.4m) during the year, a multiple of depreciation of 0.39 times compared with 0.35 times last year. This level of spend was part of the Group's action programme to reduce borrowings and spending was prioritised on essential replacement and refurbishment, new business opportunities and low cost regional capacity. Borrowings The Group's net borrowings at the end of the year were £31.7m (2003 - £38.8m). These borrowings resulted in a year-end gearing ratio of net borrowings to shareholders' funds of 97.5% (2003 - 86.0%). The Company's present bank facilities remain available until the end of June 2005 and continue to provide the Group with adequate funding for its foreseeable requirements. Employees The average number of employees increased year on year, by 11% to 9,297 (2003 - 8,353). The average cost per employee reduced by 18%. This percentage reduction reflects the Group's continuing strategy to transfer production to lower cost environments. At the year-end 55% (2003 - 51%) of our employees were in Asia, 26% (2003 - 28%), in the Americas and 19% (2003 - 21%) in Europe. Volex Group plc Preliminary Announcement of Group results for the financial year to 4 April 2004 A. Consolidated Profit and Loss Account For the financial year ended 4 April 2004 (30 March 2003) 2004 2003 Notes £'000 £'000 Turnover Continuing operations 1 238,353 230,066 Cost of sales (204,108) (195,995) ------------ ----------- Gross profit 34,245 34,071 Other operating expenses (net) 2 (38,767) (43,083) ------------ ----------- Operating profit pre goodwill amortisation and impairment and exceptional operating items 2,486 573 Exceptional operating items 3 (6,680) - Amortisation of goodwill (328) (933) Impairment of goodwill - (8,652) ---------- ----------- Operating loss - continuing operations (4,522) (9,012) ------------ ----------- Finance charges - interest (net) 5 (3,140) (3,084) - refinancing costs 6 - (1,000) - amortisation of debt issue costs 7 (683) (509) ------------ ----------- (3,823) (4,593) ----------- ---------- Loss on ordinary activities before taxation (8,345) (13,605) Tax on loss on ordinary activities 8 (2,861) 948 ---------- ---------- Loss for the financial year (11,206) (12,657) ---------- ---------- Dividends paid on non-equity shares 9 - (6) Other finance costs of non-equity shares 9 (6) - ------------ ----------- Loss for the financial year transferred from reserves (11,212) (12,663) ------------ ----------- Underlying loss per ordinary share (before tax) 10 (4.7)p (10.6)p Underlying loss per ordinary share (after tax) 10 (14.7)p (7.3)p Headline loss per ordinary share 10 (38.0)p (7.3)p Basic loss per ordinary share 10 (39.1)p (44.3)p Diluted loss per ordinary share 10 (39.1)p (44.3)p B. Consolidated Statement of Total Recognised Gains and Losses For the financial year ended 4 April 2004 (30 March 2003) 2004 2003 £'000 £'000 --------- --------- Loss for the financial year (11,206) (12,657) Unrealised deficit on revalued freehold and leasehold buildings - (1,419) Currency variations (2,335) (100) --------- --------- Total recognised losses relating to the year (13,541) (14,176) --------- --------- C. Group Balance Sheet At 4 April 2004 (30 March 2003) 2004 2003 £'000 £'000 Fixed assets Goodwill 3,798 4,374 Tangible assets 23,872 33,844 --------- --------- 27,670 38,218 --------- --------- Current assets Stocks 29,345 29,219 Debtors 50,358 52,938 Properties held for resale - 1,482 Cash at bank and in hand 11,919 13,728 ---------- -------- 91,622 97,367 Creditors: amounts falling due within one year Borrowings (3,883) (3,815) Other (43,292) (38,792) ---------- -------- Net current assets 44,447 54,760 ---------- -------- Total assets less current liabilities 72,117 92,978 Creditors: amounts falling due after more than one year Borrowings (39,586) (47,845) --------- --------- Net assets 32,531 45,133 --------- --------- Capital and reserves Called-up share capital 7,465 7,231 Reserves 25,066 37,902 --------- --------- Shareholders' funds* 32,531 45,133 --------- --------- Gearing** 98% 86% * Including non-equity interests of £80,000 (2003 - £80,000) ** Net debt excluding debt issue costs/shareholders' funds D. Consolidated Cash Flow Statement For the financial year ended 4 April 2004 (30 March 2003) 2004 2003 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 5,614 13,059 (see note 12a) Return on investments and servicing of finance Interest received 218 221 Interest paid (3,358) (2,770) Refinancing costs (1,000) (3,294) Interest element of finance lease rentals 10 (15) Preference dividends paid - (6) Net cash outflow from returns on investments and servicing of finance (4,130) (5,864) Taxation UK corporation tax received 240 600 Overseas tax (paid)/received (36) 1,779 Tax received 204 2,379 Capital expenditure Purchase of tangible fixed assets (2,243) (2,255) Sale of tangible fixed assets and current asset investments 470 301 Disposal of assets held for resale 1,189 - Net cash outflow from capital expenditure (584) (1,954) Acquisitions and disposals Purchase of subsidiary undertakings - (279) Net cash outflow from acquisitions - (279) ------------------------------------ Cash inflow before financing 1,104 7,341 Financing Issue of ordinary share capital 939 - Repayment of loans (3,136) (6,039) Capital element of finance lease rentals (25) (43) Net cash outflow from financing ( 2,222) (6,082) ------------------------------------ (Decrease)/increase in cash in the year (1,118) 1,259 ------------------------------------ Note 1 Segment information External sales Total sales Turnover by geographical area by destination by source 2004 2003 2004 2003 £'000 £'000 £'000 £'000 United Kingdom 41,343 42,230 31,590 31,619 Other Europe 56,457 42,689 66,604 63,547 -------- -------- ------- -------- Total Europe 97,800 84,919 98,194 95,166 The Americas 74,695 87,182 81,272 93,475 Asia 65,858 57,965 82,716 72,368 Less: Inter-divisional (23,829) (30,943) ------------------------------------ 238,353 230,066 238,353 230,066 Turnover by product category 2004 2003 £'000 £'000 Data/telecommunications 109,503 96,142 Powercords 98,056 101,860 Harnesses 30,794 32,064 ----------------------- 238,353 230,066 Turnover by market sector 2004 2003 £'000 £'000 Data/telecommunications 123,069 111,661 Consumer appliances 44,413 48,914 Consumer electronics 40,392 38,094 Vehicle and aerospace 30,479 31,397 ----------------------- 238,353 230,066 Operating profit, profit before tax and net assets by geographical area and by class of business are not given as such disclosure is considered by the Directors to be seriously prejudicial to the interests of the Group. Note 2 Other operating expenses (net) 2004 2003 Other operating expenses (net) comprise: £'000 £'000 Selling and distribution expenses 15,482 15,435 Administrative expenses - goodwill amortisation 328 933 - impairment of goodwill - 8,652 - exceptional operating items 6,680 - - other 16,320 18,657 Other operating income (43) (594) ----------------------- Other operating expenses (net) 38,767 43,083 Note 3 Exceptional operating items 2004 2003 £'000 £'000 Cessation of manufacturing in Ireland 2,991 - Impairment of Irish manufacturing facility 3,396 - Loss on disposal of current asset investment 293 - ----------------------- 6,680 - This cost includes the restructuring of the continuing operations of the group's European manufacturing activities, the write down to market value of the Irish facility at Castlebar, Co. Mayo and the loss on disposal of the US facility at Dartmouth, Massachusetts, USA, which had ceased manufacturing in 2002. The taxation effect of these exceptional items was £nil. Note 4 Exchange rates The principal exchange rates used in the preparation of the accounts are: Average % Year End % 2004 2003 Change 2004 2003 Change United States dollar 1.68 1.54 9.09 1.83 1.57 16.56 Singapore dollar 2.91 2.72 6.98 3.07 2.78 10.43 Euro 1.44 1.54 (6.49) 1.51 1.46 3.42 Canadian dollar 2.29 2.39 (4.18) 2.41 2.30 4.78 Brazilian real 4.99 4.48 11.38 5.29 5.28 0.19 Swedish krona 13.17 14.33 (8.09) 13.92 13.43 3.65 Note 5 Finance charges - interest (net) 2004 2003 Net interest costs represent: £'000 £'000 Interest receivable on bank deposits (218) (221) Interest payable on bank loans and overdraft 3,358 3,305 ------ ------ Finance charges - interest (net) 3,140 3,084 Note 6 Finance charges - refinancing costs The prior year refinancing costs of £1,000,000 represent the expenses incurred in 2003 on re-negotiating the Group's bank facilities with its major lenders. Note 7 Finance charges - amortisation of debt issue costs Amortisation costs of £683,000 (2003 - £509,000) represents the amortisation of the debt issue costs capitalised in the prior year on re-negotiating the Group's bank facilities. Note 8 Tax on loss on ordinary activities 2004 2003 The tax charge/(credit) is based on the loss for the financial year and comprises: £'000 £'000 Current Tax UK corporation tax - 434 Foreign tax 1,840 516 Adjustments in respect of previous years UK corporation tax 735 - Foreign tax (134) (759) ------ ------ Total current tax 2,441 191 Deferred taxation Origination and reversal of timing differences (208) (1,139) Decrease in estimate of recoverable deferred tax asset 628 - ------ ------ Total deferred tax 420 (1,139) ------ ------ Total tax on loss on ordinary activities 2,861 (948) The differences between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation tax to the loss before tax is as follows: 2004 2003 £'000 £'000 Group loss on ordinary activities before tax (8,345) (13,605) Tax on loss on ordinary activities at standard UK corporation tax rate of 30% (2003 - 30%) (2,503) (4,082) Effects of: Expenses not deductible for tax purposes 1,449 3,487 Capital allowances in excess of depreciation 619 277 Timing differences 52 (90) Lower tax rates on overseas earnings (636) (287) Non-utilisation of losses 2,859 1,645 Adjustments to tax charge in respect of previous periods 601 (759) ------ ------ Group current tax charge for the year 2,441 191 ------ ------ Note 9 Dividends paid on non-equity shares and other 2004 2003 finance costs of non-equity shares £'000 £'000 Dividends paid on non-equity shares Non-equity shares: Cumulative preference dividends - interim paid of nilp per share (2003 - 3.75p per share) - 3 - final paid of nilp per share (2003 - 3.75p per share) - 3 - 6 Other finance costs of non-equity shares - interim accrued of 3.75p per share (2003 - nilp per share) 3 - - final accrued of 3.75p per share (2003 - nilp per share) 3 - 6 - Note 10 Loss per ordinary share The calculations of loss per share are based on the following losses and numbers of shares: 2004 2003 £'000 £'000 Loss for the financial year (11,206) (12,657) Preference Dividends - (6) Other finance costs of non-equity shares (6) - ------ ------ Basic loss (11,212) (12,663) Goodwill amortisation and impairment 328 9,585 Finance restructuring costs - 1,000 ------ ------ Headline loss (10,884) (2,078) ------ ------ Exceptional operating items 6,680 - ------ ------ Underlying loss (after tax) (4,204) (2,078) ------ ------ Tax 2,861 (948) ------ ------ Underlying loss (before tax) (1,343) (3,026) ------ ------ Weighted average number of shares: No. of Shares No. of Shares For basic and diluted loss per share 28,650,462 28,602,637 Underlying loss per share (before tax - full) (4.7)p (10.6)p Underlying loss per share (after tax - full) (14.7)p (7.3)p Headline loss per share (full) (38.0)p (7.3)p Basic loss per share (full) (39.1)p (44.3)p Diluted loss per share (full) (39.1)p (44.3)p Headline loss per share has been calculated on the basis of continuing activities before goodwill amortisation, goodwill impairment and exceptional refinancing costs in each case net of tax. Underlying loss per share before and after tax have been calculated on the basis of headline loss before exceptional operating items. The directors consider that these give a better understanding of the Group's loss per share in the year and the prior year. As the Group recorded a loss per share, the share options are anti dilutive. Note 11 Reconciliation of Movements in Consolidated Shareholders' Funds 2004 2003 £'000 £'000 Loss for the financial year (11,206) (12,657) Dividends paid - (6) --------- --------- Loss for the financial year transferred from reserves (11,206) (12,663) Unrealised deficit on revalued freehold and leasehold buildings - (1,419) Currency variations (2,335) (100) New share capital subscribed 939 - --------- -------- Net decrease in shareholders' funds (12,602) (14,182) Opening shareholders' funds 45,133 59,315 ------ ------ Closing shareholders' funds 32,531 45,133 Note 12 Consolidated cash flow statement a. Reconciliation of operating loss to net cash inflow 2004 2003 from operating activities £'000 £'000 Operating loss (4,522) (9,012) Depreciation charges and impairment 9,766 6,758 Goodwill amortised and impaired 328 9,585 Government grants (150) (128) Loss on sale of tangible fixed assets and asset held for resale 293 5 (Increase)/decrease in stocks (1,376) 5,793 Increase in debtors (2,788) (2,664) Increase in creditors 4,063 5,058 Cash impact of fundamental restructuring - (2,336) ------ ------ Net cash inflow from operating activities 5,614 13,059 Net cash inflow from operating activities pre cash outflows from exceptional operating items 8,067 13,059 Cash outflows from exceptional operating items (2,453) - ------ ------ Net cash inflow from operating activities 5,614 13,059 ------ ------ b.Analysis of net debt: 31 March Other Non-cash Exchange 4 April 2003 Cash Flow Changes Movement 2004 £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 13,728 (866) - (943) 11,919 Overdraft (2,756) (252) - 37 (2,971) ------ (1,118) ------ Debt due after one year (48,716) 3,057 - 6,007 (39,652) Debt due within one year (1,035) 79 - 137 (819) Finance Leases (25) 25 (216) - (216) ------ 3,161 ----------------------------------------------------------- Net debt (38,804) 2,043 (216) 5,238 (31,739) 2004 2003 c. Reconciliation of net cash flow to movement in net debt: £'000 £'000 (Decrease)/Increase in cash in the financial year (1,118) 1,259 Cash outflow from decrease in debt & lease financing 3,161 6,082 ------ ------ Change in net debt resulting from cash flows 2,043 7,341 New finance leases (216) - Translation difference 5,238 4,264 ------ ------ Movement in net debt in the financial year 7,065 11,605 Net debt - beginning of financial year (38,804) (50,409) ------ ------ Net debt - end of financial year (31,739) (38,804) ------ ------ Note 13 Miscellaneous (i) The current and prior year results set out in this announcement are non-statutory accounts within the meaning of Section 240 of the Companies Act 1985. (ii) The results for the financial year ended 4 April 2004 are extracts from the 2004 Group accounts which, if adopted by members in General Meeting on 22 July 2004 will be filed with the Registrar of Companies. The auditors have reported on these accounts; their report was unqualified and did not contain statements under S237(2) or (3) Companies Act 1985. (iii) The results for the financial year ended 30 March 2003 are extracts from the 2003 Group statutory accounts, which have been reported upon without qualification by the auditors and have been delivered to the Registrar of Companies. (iv) The preliminary announcement has been prepared using the accounting policies stated in the Annual Report and Accounts for the financial year ended 30 March 2003. There have been no changes to the accounting policies in the financial year ended 4 April 2004. This information is provided by RNS The company news service from the London Stock Exchange

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