Final Results - Year Ended 31 December 1999
Roxboro Group PLC
13 March 2000
Contacts: Harry Tee - Group Chief Executive
Alf Vaisey - Group Finance Director
The Roxboro Group PLC
Telephone: 01223 424626
Alistair Mackinnon-Musson
Philip Dennis
Square Mile Communications
Telephone: 0171 601 1000
THE ROXBORO GROUP PLC
Preliminary Results
The Roxboro Group PLC, the Cambridge based controls
technology group, is pleased to announce it's preliminary
results for the year ended 31 December 1999.
* Turnover up at £124.8m (1998: £114.2m)
* Underlying operating profit* up at £19.2m (1998:
£17.2m)
* Underlying EPS* up at 22.5p (1998: 21.6p)
* Operating cash flow up to £18.7m (1998: £16.7m)
* Dividend up to 8.7p (1998: 8.0p)
* 39% improvement in H2 pre-tax profits
* Norwich and ISA acquisitions completed; Mobrey
acquisition completed in January 2000
* Order book 34% up
* before non-recurring costs and goodwill
Harry Tee, Chief Executive said:
'The Group has produced a solid performance despite the
weakness of the petrochemical sector. The strength of the
communications market was a major factor in the growth of
our US based electro-optics business, in addition to the
very strong sales growth of their solid state traffic light
products. The integration of Mobrey is progressing well
following its acquisition in January.'
Chairman and Chief Executive's Report
Overall, the Roxboro Group produced a solid performance in
1999. We are particularly pleased with the Group's
performance in the second half which showed a 39% pre-tax
profit improvement over the first half and 22% up on the
same period last year.
Before non-recurring costs and goodwill, Group operating
profit increased to £19.2 million (1998: £17.2m). Turnover
increased to £124.8m (1998: £114.2m) while pre-tax profits
before non-recurring costs and goodwill increased to £18.9m
(1998: £17.5m). Underlying earnings per share improved to
22.5p (1998: 21.6p). The company also generated increased
operating cashflow of £18.7m in the year. The Board is
therefore recommending a final dividend of 5.9p, bringing
the total dividend for the full year to 8.7p, an increase
of 9% over 1998.
These results provide a strong indication the Roxboro
Growth Plan, based on shared knowledge, skills, facilities,
people, resources and contacts, is continuing to achieve
our defined goals.
During the year the Group made a number of investments each
of which will benefit the Group in the future. These
include the acquisition of Norwich Aero Products and ISA
Controls, and the purchase of the Farnborough site, on
which Solartron and Weston are based. These investments,
totaling £23.1m, together with an increased spend on
capital equipment of £5.7m, resulted in year-end debt of
£10.2m (1998: £11.9m net cash)
At the year-end the Group order book was 34% higher than at
the same period last year.
Components Division (Comprising Dialight Corp and BLP
Components)
1999 1998 Increase
Turnover £52.6m £45.5m 15.6%
Operating
Profit £8.9m £7.5m 18.7%
The Components Division recorded strong profitable growth
during the year. Our United States business, Dialight,
which addresses the communications and transportation
markets, advanced significantly, securing important
contracts in the fast-growing data communications field and
strengthening its grip on the expanding United States
market for solid state traffic lights. Likewise, BLP
continued to build its position in the automotive and
utilities sectors with contracts to supply its innovative
switching devices.
The components market strengthened progressively during
1999 and the division was able to achieve its fourth
successive year of good growth, with a record order book by
the year-end. Overall the division achieved an 19% growth
in operating profits. Dialight's Transportation product
group, which leads the emerging market for solid state
traffic signals, made a good debut contribution to profits.
The Components Division's performance is largely
attributable to Dialight, which benefited from increased
demand for its products in both its business groups.
Dialight's Status Communications Group specialises in
producing visual and electro-optical devices for the
Information and Communications Technology (ICT) sector.
Dialight's products are found in cellular telephony,
computer networks, cable modems and other communications
products, a market sector that enjoyed strong growth in
1999. Firm contracts are now in place with some of the
leading companies in this sector, including Lucent, Cisco,
3Com, Nokia, Nortel and Microsoft, for whom Dialight is
providing a key electro-optical component for their new
IntelliEye mouse.
After three years of investment, Dialight's other business
group, Transportation Group, achieved a profit following
another year of 40% growth in sales. This success is due to
expanding sales of Dialight's solid state traffic light
technology, for which there is now rising demand across the
United States as individual states recognise the cost and
reliability benefits of Dialight's products. Dialight LED
traffic lights are now in use in 30 states, including
California, New Jersey and New York. Since this product
line was introduced in 1996 sales have grown to around
$15million and continue to show excellent future potential.
The fast pace of development in Light Emitting Diode (LED)
technology is opening up new opportunities for solid state
lighting techniques, including white light, across a wide
range of applications. Dialight, as the clearly identified
United States market leader in the application of LED
technology, is well placed to capture a significant share
of these developing markets.
BLP, the UK-based manufacturer of customised electro-
magnetic devices, had a difficult year, due to a
combination of slow demand from UK industry and direct
exports being depressed by the strength of Sterling. The
company's product range is fundamentally strong however,
and remains highly attractive to the utilities and
automotive industries.
Sensors Division (comprising Weston Aerospace, Norwich Aero
Products Inc Pressure Systems Inc and Solartron Metrology)
1999 1998 Increase
Turnover £48.3m £43.1m 12%
Operating
Profit £10.4m £9.3m 12%
Following four years of continuous growth, the Sensors
Division achieved another good performance in 1999 ending
the year with a record order book. This outstanding
performance is largely attributable to excellent
operational improvements and continued buoyancy in the
aerospace sector.
The Sensors Division was strengthened at the beginning of
the year with the acquisition of Norwich Aero Products, a
US based supplier of temperature sensors for the aerospace
industry. This important initiative provides the Group with
additional and complementary product development and a
manufacturing base in the world's largest aerospace market.
In the future, this development is expected to produce
excellent opportunities for our aerospace activities in the
United States market.
Weston, our primary aerospace business, continued to
improve its operational performance through the application
of highly effective management techniques aimed at
improving service to customers. Weston has doubled in size
over the past four years and transformed itself into the
preferred supplier of temperature sensors to many of the
world's engine manufacturers equipment producers and
airlines.
This status has enabled Weston to win an important order
from Rolls-Royce to supply the entire suite of
thermocouples and speed sensors for the new Trent 500
engines, due to reach production in 2001. The company has
also signed an LTA (long term agreement) with TRW
Aeronautical Systems Group to supply the pressure sensors
for all their FADEC requirements including the Trent 500,
700 and 800 engines.
Technological superiority has also enabled Weston to grow
its share of the temperature measurement aftermarket, which
is approximately five times as big as the Original
Equipment Manufacturers sector. New customers in 1999
include KLM, Lufthansa and JAL.
The aerospace industry, having been buoyant for the past
four years, is predicted to level off during 2000. The
combined presence of Weston and Norwich will, we believe,
enable us to maintain our long term growth trend, both in
the OEM and aftermarkets.
Solartron Metrology also picked up after a relatively weak
start to the year. The company is a clear world leader in
the manufacture of gauging sensors for quality control
systems throughout the engineering industries, where they
are used to check the precise dimensions of manufactured
parts. Margins and volumes improved over 1998, and the
company further increased its market share.
Pressure Systems Inc, had a disappointing year due to a
slow down in sales to NASA. The new Quartzonic range of
products grew well, however, and production is planned to
expand further in the current year.
Instrumentation Division (Comprising Solartron and ISA
Controls)
1999 1998
Turnover £24.0m £25.6m
Operating
Profit £1.3m £2.6m
The Instrumentation Division had a difficult year in a very
depressed market, particularly in the first half. First
half losses, however, including restructuring costs of
£0.3m, were transformed into a second half profit of £1.7m,
giving a full year result of £1.3m. At the year-end the
total order book was virtually unchanged from the previous
year.
Solartron, whose business dominates the Instrumentation
Division, designs and manufactures a range of transducers
and instruments that are widely used throughout the petro-
chemical industries to measure flow, density and viscosity.
A new Managing Director was appointed at Solartron with a
brief to restore the cost base to more competitive levels
and develop a more cohesive forward strategy. We took the
opportunity to restructure and re-focus the division, with
the objective of reducing costs and broadening its
proposition to the marketplace
This led to the acquisition in June of ISA Controls Ltd, a
UK manufacturer of specialist flow and temperature
measurement products which adds considerable product
strength to our offering into the oil and gas industry.
The close parallels between the product ranges of ISA and
Solartron have created significant opportunities for cost-
effective cross-selling in the future.
Mobrey
In January, Roxboro acquired the seven companies that
comprise the Mobrey Group, from Meggitt plc for £22.95
million cash consideration. The Mobrey Group manufacture
level, pressure and flow instruments for use in process and
energy applications, and increases the Instrumentation
Division's product range, enhances its research and
development capability, and broadens its channels to
market. The integration of Solartron and Mobrey is well
underway and will result in the combined cost base being
reduced by no less than £3.5 million, some of which will
benefit the group late in the current year. Restructuring
and integration costs of £5.5 million will be incurred
primarily in the first half of the current year.
We anticipate the petrochemical sector will release
previously postponed capital projects during the current
year, and that the Instrumentation Division, now
strengthened with the addition of ISA Controls and the
Mobrey companies, will be able to capitalise on this
revival although improvement is not anticipated until the
second half at the earliest.
Market Focus
Over the past five years, Roxboro has grown both
organically and through acquisition. The strategy has been
designed to develop a group that is well balanced across
three main markets, with each business focusing on growing
niche market sectors. Roxboro has now developed to a point
where our Group structure can be simplified significantly.
To achieve the clarity we seek, we are planning to re-
organise the Group into three business entities and focus
our activities under three brands. This will also reflect a
new management structure. This will be organised as
follows:
* The Solartron Group, comprising Solartron Mobrey,
Solartron Metrology, Solartron Analytical and Solartron ISA,
will be focused on the energy and process industries. The
Managing Director of this group will be Allan Imrie who
has managed Solartron for the past year, having spent his
entire career in the Instrumentation market.
* The Weston Group, comprising Weston Temperature
Measurement, Weston Engine Accessories and Weston Pressure
Systems, will address the aerospace sector for both
airborne and ground test applications. Richard Wood, who
has led Weston Aerospace for the past four years, will
manage the Weston group.
* The Dialight Group will comprise Dialight Electro-
Optics, Dialight Transportation and BLP. The group
will continue to address its key growth markets in
communications, traffic signals, transportation and metering.
Dialight will be led by Mike Kirchoff, who is based in the
United States, and has been CEO of Dialight for the past two years.
From what is currently eight separate companies, three
strong, focussed groups will emerge led by three
experienced managing directors and capitalising on three
powerful industry brand names.
The result of these changes will be a clearer alignment
between the businesses and their target markets, and a
Group structure that is more transparent and more
meaningful both to customers and shareholder.
Strategy
Following the 1999 restructuring exercise in the
Instrumentation Division, Roxboro is well positioned in all
its markets. There is always room for further improvement
in operational efficiency, however. The Kaizen and Six
Sigma techniques, which have raised the performance of our
operations so successfully in recent years, are being
rolled out across our new acquisitions, with the objective
of turning each of our companies into the preferred
supplier in its own field.
The Group's strategy remains focused on identifying growing
niche sectors in our markets. Our primary markets are
Communications and Transport through Dialight, Energy and
Process through Solartron, and Aerospace through Weston.
Within our chosen markets, we will continue to strive for
outstanding results on behalf of our shareholders and
customers alike.
Outlook
The trading outlook is positive. The data communications
sector is experiencing rapid and sustained growth, creating
further substantial new opportunities for our electro-
optical components. In the transport sector, we anticipate
healthy advances in the use of our solid-state lighting
technology, particularly in the United States. The Asian
economic revival has been sustained, and the buoyancy of
the oil price is likely to trigger a growth in capital
expenditure on previously delayed projects, from which we
would expect the re-based Solartron Group to benefit.
Following the acquisition of Mobrey, the anticipated
integration costs of £5.5m will be incurred in the current
year, largely in the first half. Some of the benefits of
this restructuring will begin to flow through late in the
year, with the full benefit in 2001.
In view of the encouraging signs in our key markets and
with a strong order book at the start of the year, the
board remains confident of Roxboro's prospects.
Sir Alan Cockshaw Harry Tee
Chairman Chief Executive
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 31 December 1999
1999 1998
£'000 £'000
-------- --------
Turnover
Continuing operations 118,402 114,233
Acquisitions 6,434 -
-------- --------
124,836 114,233
Cost of sales (78,091) (71,493)
-------- --------
Gross profit 46,745 42,740
Distribution costs (16,786) (15,745)
Administrative (10,726) (9,813)
expenses
Non-recurring (778) -
operating costs
Goodwill amortisation (274) -
-------- --------
Operating profit
Continuing operations 17,619 17,182
Acquisitions 562 -
-------- --------
18,181 17,182
Net interest (329) 273
(payable)/receivable
-------- --------
Profit on ordinary
activities before 17,852 17,455
taxation
Tax on profit on
ordinary activities (6,057) (5,204)
-------- --------
Profit on ordinary
activities
after taxation 11,795 12,251
Minority interest - (135)
-------- --------
Profit for the
financial
year attributable to
members
of the parent 11,795 12,116
company
Dividends (4,901) (4,495)
-------- --------
Retained profit for
the financial year 6,894 7,621
-------- --------
Pence Pence
Earnings per share
- basic 20.9 21.6
- adjusted 22.5 21.6
- diluted 20.7 21.1
-------- --------
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December 1999
1999 1998
£'000 £'000
-------- --------
Profit for the year
attributable to
equity
shareholders 11,795 12,116
Currency translation
differences on
foreign
currency
net investments 362 (42)
-------- --------
Total gains recognised
in the year 12,157 12,074
-------- --------
GROUP BALANCE SHEET
at 31 December 1999
1999 1998
£'000 £'000
-------- --------
Fixed assets
Intangible assets 6,572 -
Tangible assets 32,561 15,030
Investments 39 39
-------- --------
39,172 15,069
-------- --------
Current assets
Stocks 13,770 10,692
Debtors 24,686 19,898
Cash at bank and in 4,531 15,125
hand
-------- --------
42,987 45,715
Creditors:
Amounts falling due
within one year
Borrowings (13,966) (3,222)
Other creditors (21,968) (19,545)
-------- --------
(35,934) (22,767)
Net current assets 7,053 22,948
-------- --------
Total assets less
current liabilities 46,225 38,017
-------- --------
Creditors:
Amounts falling due
after more than one
year
Borrowings (771) (7)
Provisions for
liabilities
and charges (741) (731)
-------- --------
44,713 37,279
Minority interests - (217)
-------- --------
44,713 37,062
-------- --------
Capital and reserves
Called up share 563 562
capital
Share premium account 4,893 4,590
Capital redemption 51 51
reserve
Other reserves - -
Profit and loss 39,206 31,859
account
-------- --------
44,713 37,062
-------- --------
GROUP STATEMENT OF CASH FLOWS
for the year ended 31 December 1999
1999 1998
£'000 £'000
-------- --------
Cash flow from
operating
activities 18,714 16,680
Returns on investments
and servicing of
finance
Interest paid (635) (461)
Interest received 363 734
-------- --------
Net cash
(outflow)/inflow
from returns on
investment
and servicing of (272) 273
finance
-------- --------
Taxation (7,234) (4,370)
-------- --------
Capital expenditure
and financial
investment
Purchase of tangible
fixed assets (19,580) (3,948)
Sale of tangible fixed 106 1,371
assets
-------- --------
Net cash outflow from
investing activities (19,474) (2,577)
Acquisitions and
disposals
Purchase of subsidiary
undertakings (7,342) -
Sale of subsidiary (194) -
undertaking
-------- --------
(7,536) -
Equity dividends paid (4,611) (4,213)
-------- --------
Cash (outflow)/inflow
before use of liquid
resources
and financing (20,413) 5,793
Financing
Issue of ordinary 304 39
share capital
Loan advance 13,500 -
Loan repayments (3,801) (4,734)
Capital element of
finance lease rental
payments (60) (34)
-------- --------
9,943 (4,729)
-------- --------
(Decrease)/increase in
cash in the year (10,470) 1,064
-------- --------
Reconciliation of net
cash flow to movements
in net debt
(Decrease)/increase in
cash in the year (10,470) 1,064
Cash outflow from
decrease
in debt and lease (9,639) 4,768
financing
-------- --------
Change in net debt
resulting
from cash flows (20,109) 5,832
Loans and finance
leases
acquired with
subsidiary
undertakings (1,345) -
Loan notes issued (590) -
Translation difference (58) 12
-------- --------
Movement in net
(debt)/cash
in the year (22,102) 5,844
Net cash at beginning 11,896 6,052
of year
-------- --------
Net (debt)/cash at end (10,206) 11,896
of year
-------- --------
NOTES TO THE ACCOUNTS
1. Segmental information
Turnover, operating profit and net assets are
analysed below:
1999 1998
£'000 £'000
a) Turnover
By geographical destination:
UK 29,974 28,192
USA 65,334 58,050
Other European 15,896 15,876
countries
Rest of the world 13,632 12,115
-------- --------
124,836 114,233
-------- --------
By geographical origin:
UK 66,882 65,988
USA 63,137 54,996
Other European 1,763 1,791
countries
-------- --------
131,782 122,775
Inter-segment sales (6,946) (8,542)
-------- --------
124,836 114,233
-------- --------
By Business operation:
Components 52,608 45,538
Sensors 48,256 43,125
Instrumentation 23,972 25,570
-------- --------
124,836 114,233
-------- --------
b) Operating profit
1999 1998
£'000 £'000
-------- --------
By geographical origin:
UK 11,946 11,861
USA 8,814 7,675
Other European (152) (155)
countries
-------- --------
Operating profit
before
central costs and
goodwill 20,608 19,381
amortisation
Central costs (2,153) (2,199)
Goodwill amortisation (274) -
-------- --------
Operating profit on
ordinary activities 18,181 17,182
-------- --------
By business operation:
Components 8,904 7,548
Sensors 10,368 9,282
Instrumentation 1,336 2,551
-------- --------
Operating profit
before
central costs and
goodwill 20,608 19,381
amortisation
Central costs (2,153) (2,199)
Goodwill amortisation (274) -
-------- --------
Operating profit on
ordinary activities 18,181 17,182
-------- --------
c) Net assets
By geographical origin:
UK 19,220 13,971
USA 11,862 9,251
Other European (99) -
countries
-------- --------
30,983 23,222
Unallocated central 13,730 13,840
net assets
-------- --------
44,713 37,062
-------- --------
By business operation:
Components 13,500 11,624
Sensors 12,651 6,170
Instrumentation 4,832 5,428
-------- --------
30,983 23,222
Unallocated central 13,730 13,840
net assets
-------- --------
44,713 37,062
-------- --------
1999 1998
2 Operating Profit £'000 £'000
-------- --------
a) Reconciliation of
operating
profit to net cash
inflow from
operating
activities
Operating profit 18,181 17,182
Depreciation charges 4,301 3,564
Goodwill amortisation 274 -
Profit on sale of
tangible
fixed assets (26) (232)
(Increase)/decrease in
stocks (2,337) 91
Increase in debtors (3,084) (3,230)
Increase/(decrease) in
creditors 1,314 (718)
Other non cash items 91 23
-------- --------
Net cash inflow from
operating activities 18,714 16,680
-------- --------
b) Non-recurring costs £'000
Operating profit is
stated after
charging
the following
non-recurring costs:
Aborted acquisition 189
costs
Re-organisation costs 270
Costs in respect of a
successful defence
of a litigation case 319
--------
778
--------
3. The directors have proposed a final dividend of 5.9p
(1998: 5.4p) which is subject to shareholder approval at
the annual general meeting on 19 April 2000, and if
approved will be payable on 25 April 2000 to shareholders
on the register on 24 March 2000.
4. Earnings per Share
The calculation of earnings per ordinary share is
based on profit of £11,795,000 (1998: £12,116,000) and
on 56,302,832 (1998: 56,175,075) ordinary shares,
being the average number of ordinary shares in issue
during the year.
The diluted earnings per share is based on profit for
the year of £11,795,000 (1998: £12,116,000), and on
57,015,007 (1998: 57,413,185) ordinary shares,
calculated as follows:
1999 1998
Thousands Thousands
-------- --------
Basic weighted average
number of shares 56,303 56,175
Dilutive potential
ordinary shares:
Employee share options 712 1,238
-------- --------
57,015 57,413
-------- --------
Reconciliation to adjusted earnings per share
Pence
Basic earnings per 20.9
share
Non-recurring
operating
costs 1.1
Goodwill amortisation 0.5
--------
Adjusted earnings per 22.5
share
--------
5. The Annual Report and Accounts for the year ended 31
December 1999, which were approved by the Board of
Directors on 13 March 2000 includes an unqualified audit
opinion and accounts will be dispatched to shareholders on
24 March 2000. The accounts will be available from that
date from the Company Secretary at the Company's registered
office, Byron House, Cambridge Business Park, Cambridge,
CB4 4WZ.
6. The above financial information does not constitute
statutory accounts as defined in section 240 of the
Companies Act 1985. The comparative financial
information for the year ended 31 December 1998 is
abridged and has been extracted from the statutory
accounts, on which the auditors issued an unqualified
opinion, and which have been delivered to the Registrar
of Companies.
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