E2V.L Regulatory News (E2V)

23 Jun 2005 07:01

e2v technologies PLC23 June 2005 23 June 2005 e2v technologies plc Maiden Preliminary Results for year ended 31 March 2005 e2v, a leading developer and manufacturer of high-technology electroniccomponents and sub-systems supplied into niche markets within the medical &science, aerospace & defence, and commercial & industrial sectors, announces itsmaiden preliminary results. e2v was admitted to the Official List of the LondonStock Exchange in July 2004 and is a constituent of the techMARK AllShare Index. HIGHLIGHTS •Group sales break through £100m mark for the first time •Strong performance from sensors with reported sales growth of 9%. Growth in all sectors but in particular from high performance imaging products for medical and science applications •Good underlying profit performance despite adverse currency impact of a weak US$ •Operating profit, before goodwill and exceptional items up 7.5% at £12.4m (2004: £11.5m). Exceptional costs of £1.9m relating to the flotation reduce reported operating profit to £9.2m (2004: £9.9m) •Maiden final dividend of 3.9p per share in line with guidance given at time of flotation •Prospects look encouraging with excellent engagement with key customers for some important programmes Keith Attwood, Chief Executive, commented: "Our first full set of results as a listed company show that good progress hasbeen made, despite the challenges of a weak US dollar. Our two businesses,sensors and electronic tubes, have developed in line with our expectations withour sensors business performing particularly strongly and our tube businessproviding solid recurring revenues. Prospects for the new financial year areencouraging, with two significant contract awards since the year end, and we areactively pursuing acquisition targets". Enquiries: e2v technologies plcKeith Attwood, Chief Executive Today: 020 7554 1400Mike Hannant, Finance Director Thereafter: 01245 493493 Website: www.e2v.com Gavin Anderson & CompanyKeith Brookbank/ Charlotte Stone Tel: 020 7554 1400 Results Overview Group sales at £100.5m (2004 : £97.6m) broke through the £100m mark for thefirst time, representing a significant milestone for the group, with year onyear growth at reported exchange rates of 3% (7% at constant exchange rates).Operating profit (before amortisation of goodwill and exceptional items) was inline with expectations at £12.4m (2004 : £11.5m), representing a 7.5% increaseyear on year, despite the continued weakness of the US$ relative to sterling andthe increased sales contribution from the United States and other US$denominated markets. Gross margins, were maintained year on year at 34.5% despite the adverse impactof exchange rate movements. The US$ to £ average exchange rate weakened from$1.70 to $1.85 between the two reporting periods, consequently reducing thereported value of US$ sales, principally to the USA, by £3.7m. The 7.5% growth in operating profit (before amortisation of goodwill andexceptional items) is a function of both sales growth and our continuedattention to internal efficiencies. Operating profit per employee increased 7.1%against the prior year Operating profit (after amortisation of goodwill and exceptional items) was£9.2m (2004 : £9.9m), the decline due to the £1.9m of IPO costs incurred atflotation. Profits after interest and tax amount to £2.2m (2004: £3.3m). Whilst the order book for the group at 31 March 2005 was £74m, compared with£78m at 31 March 2004, this was primarily due to timing issues with the receiptof programme orders and the practise of placing multi-year orders in certainsectors, such as radiotherapy within electronic tubes. Since year end majorcontract wins from Dentrix for dental CCD's and ESA for Space CCD's havestrengthened the order book and our major radiotherapy OEM's are expected toplace follow on orders, in 2006, as their current orders placed between 2002 and2004 are completed. Overall, the order book represents normal levels ofvisibility for this business. The sensors product group's order book was £33.8m (2004 : £33.4m) reflectingincreases within the Medical and Science sector. For the electronic tube productgroup the order book amounted to £40.2m (2004 : £44.9m). The difference year onyear reflects the phasing of radiotherapy orders in the Medical and Science sector, mentioned above. Net borrowings at 31 March 2005 were £21.8m (2004 : £44.3m), whilst net cashflow from operating activities, after exceptionals, was £10.8m (2004 : £20.2m). The difference compared to last year is primarily due to the unwinding of a particularly favourable working capital position at 31 March 2004, (when the financing of government contracts was in advance of commitments to suppliers and extended terms had been negotiated on capital expenditure contracts) together with the requirement to fund the flotation costs. Net cash outflow before financing was £3.2m (2004 : inflow £6.3m), primarily due to the lower cash flow from operating activities and the exceptional interest payments, associated with the capital restructuring prior to flotation in July 2004. Dividend Following the interim dividend of 0.63 pence per share, the Board has declared afinal dividend of 3.9p per share payable to shareholders on the register at theclose of business on 19 August 2005, in line with guidance given during theflotation and reflecting the proportion of the year that the Company has beenlisted. It is proposed to pay the final dividend on 13 September 2005. BUSINESS OVERVIEW SENSORS Sensors product group sales grew by 9.1% to £48.1m year on year at reportedexchange rates (13.2% at 'like for like' exchange rates). This growth cameacross all market sectors, primarily driven by our high performance imagingproducts. The strong growth in this area more than offset the anticipatedreduction in sales of our Argus fire-fighters thermal imaging camera, within theCommercial & Industrial sector, which benefited in 2004 from an exceptional UKgovernment procurement programme. Medical and Science Sales in this sector continued the strong performance seen in the first half ofthe year, growing by 23% to £15.5m (2004 : £12.5m). Over the last three years,we have seen in excess of a two fold increase in sales for this sector. The growth in 2005 has been dominated by our continued success in the dentalsector, where customers in the USA and mainland Europe have been seeking toincrease volumes throughout the second half of the year. e2v supplies devicesused for digital dental x-ray imaging, which is virtually real-time and offerslower radiation exposure when compared to traditional film based systems. Yearon year, we have seen sales into the dental sector increase by 37% at reportedrates of exchange. This demand has continued into the first half of 2005, wherewe are undertaking actions to expand capacity at our manufacturing facility. Product supplied into instrument manufacturers servicing the needs of lifescience companies working on, for example, drug discovery, has also seenpositive growth of 15% year on year at reported rates of exchange. Aerospace and Defence Overall, sales in this sector grew by 4.2% to £16.8m (2004 : £16.1m).Significant growth of 13% was achieved in high performance imaging but there wasan 8% decline for solid state microwave devices. The 13% growth in high performance imaging was largely driven by continuedstrong performance in the space and astronomy sectors as deliveries were made toa number of European programmes. The development phase of the European SpaceAgency (ESA) star mapping programme, 'GAIA', was completed in the second halfand we were extremely pleased to win the contract in June 2005 for the firstphase of the production element of this programme for €14.3m. Cameras using ourultra high sensitivity L3VisionTM devices achieved over £1m of sales for theyear to this sector, a ten fold increase against 2004, primarily forsurveillance applications. The 8% decline in sales of our solid state microwave devices used in defenceapplications reflects the completion of a number of relatively small individualprogrammes, rather than a material change in our competitive position. Neworders continue to be booked for tranche 2 of the Typhoon (Eurofighter)programme, and there has been significant bidding activity associated with ourelectronic safety and arming unit (ESAU) technology for a number of differentmissile platforms. Commercial and Industrial Overall, sales in this sector grew by 2.7% to £15.9m (2004 : £15.5m). Continued progress is being made in our component supply into Adaptive CruiseControl systems in the automotive sector. Sales doubled year on year, to amodest £1m. This market remains very much in its infancy, and is anticipated todouble again in the current year. Also in automotive we saw positive growth inour microwave car alarm business, acquired the previous year, and thisacquisition contributed £1.4m of sales growth. We were also successful inwinning a new customer in the form of Daimler Chrysler. Whilst we supplied thistechnology to MG Rover annual sales in 2004/05 amounted to less than £0.2m.Their outstanding liability at the year end is not material. Following the particularly large order from the UK government in 2004, sales ofour Argus thermal imaging camera were 37% down at £4.9m (2004 : £7.7m). This waspartly offset by growth in our Radio Evacuation and Distress System (REDS), alsoservicing the fire-fighter/emergency services market, which achieved sales of£1.7m (2004 : £1.0m). We are partnering with one of the world's leadingsuppliers of breathing apparatus (BA) to supply our sub-system integrated into aBA platform. To date, we are actively achieving sales in the USA and arecurrently engaged in a development programme with this partner to launch asystem for operation in Europe and Asia during the latter part of the currentfinancial year. ELECTRONIC TUBES Electronic tube product group sales at £52.4m were £1.0m below last year's levelat reported rates of exchange, but grew a modest 2.2% at 'like for like'exchange rates. This was consistent with the half year, where the impact of defence spendingcuts in the UK and a more difficult environment for export licences withinAerospace & Defence, was not completely offset by the growth achieved in theCommercial & Industrial sector. Medical and Science Overall, sales in this sector showed growth of 0.8% to £18.2m (2004 : £18.0m). In the radiotherapy sector we saw flat revenues for our Magnetron electronictubes. This reflects a degree of overstocking by some of our OEM customers in2004 and the weakness of the US$. Our compact modulator product supplied toTomoTherapy Inc, delivered strong growth, achieving sales in excess of £1.3m(2004 : £0.4m). This US based customer continues to achieve market success withits unique radiotherapy system. There are now over 30 systems in clinicaloperation and many more being commissioned. Also in this sector, we saw positive year on year growth of equipment suppliedinto a microwave endometrial ablation application, which is a quick andrelatively simple alternative treatment for menorrhagia (excessive menstrualbleeding). Whilst sales more than doubled to £1.5m, as the customer launched theproduct in the USA, we do not expect similar performance levels in the currentfinancial year now that initial demand has been met. Investment world wide in the next generation of major scientific facilities innational laboratories over the next decade will be significant. During the last12 months e2v has secured early engagement in a number of key projects. Within acollaboration agreement with Daresbury Laboratory in the UK, the firstprototypes of a high frequency Inductive Output Tube (IOT) were supplied to the£150m 4GLS (Fourth Generation Light Source) project. This accelerator basedlight source, the very first of perhaps a dozen of its kind in the world, willprovide intense Infra-red, ultra violet and soft X-ray radiation for the studyof protein folding and chemical reactions / molecular interactions in real time.e2v also won the first contract for a new class of RF Klystron for CornellUniversity in the USA to drive the injector LINAC that will feed into theirversion of a 4GLS system. Aerospace and Defence Overall, sales in this sector showed a decline of some 19% to £10.8m (2004 : £13.4m). Our electronic tube business to the defence sector has suffered from the UKgovernment's decision to scale back the Tornado fleet and other radar platforms.In addition, we have continued to see a tighter export license environment, forcertain Asian territories, which has further constrained sales. More positively during the second half of the year, we won a contract for thesupply of travelling wave tubes (TWTs) for the Typhoon towed decoy system andhave won all contracts let to date for this platform. This strengthens ourposition with North American system integrators, Raytheon and BAE Systems forthe next generation US Navy and Airforce fast jet towed decoy programmes. Weexpect to see further progress on these large projects during the latter part of the current financial year although the timing of defence related projects is never certain. Commercial and Industrial Overall, sales in this sector showed growth of 6.4% to £23.5m (2004 : £22.1m). Growth was achieved across a number of different sectors, including industrialapplications and marine radar. We supply radio frequency (RF) sources to a number of OEMs that manufacturemarine radars for commercial and leisure vessels. We have seen over 15% growthin this sector to £4.3m (2004 : £3.7m), and growth is continuing into thecurrent financial year. A project is well underway to increase manufacturingcapacity to match demand. Sales in high power switching products used in broadcast, industrial heating andlaser applications have grown 25%, year on year, to £3.1m (2004 : £2.5m) acrossmany individual customers. We have also been successful in strengthening our position with key EuropeanOEMs for power tubes in industrial applications and here we have seen growth ofover 11% to £3.8m (2004 : £3.5m) as well as the introduction of an upgraded highefficiency amplifier for terrestrial broadcast primarily for the US, UHF TVtransmitter market. INTERNATIONAL DEVELOPMENT In the year ended 31 March 2005, 75% (2004 : 69%) of sales were derived fromexports to over 50 different countries. Across the business, continued strongperformance in the United States reflects our ability to win business in theface of US domestic competition. Sales to the US at £35.8m (2004 : £30.3m),represent a year on year growth of over 18% at reported exchange rates, and 30%at 'like for like' rates. This remains by far our largest single geographicmarket, but our success increases our exposure to transactional risk associatedwith exchange rate fluctuations. In the rest of the world, sales grew to £39.7m (2004 : £37.4m), representing a6% increase year on year. In addition to our existing routes to market, inJanuary 2005 we established a business development office in China to help e2vtechnologies make the most of the opportunities created by this rapidlyexpanding economy. CAPITAL INVESTMENT AND RESEARCH DEVELOPMENT Key capital expenditure projects included infrastructure and buildingmaintenance, manufacturing plant expansion at Chelmsford and continuedinvestment in IT, including the SAP system implementation. In manufacturing, themain area of investment has been in the expansion of the wafer fabricationfacility for our high performance imaging products at Chelmsford. This will continue throughout the current financial year, as we seek to maintainsufficient capacity to meet the demands of our customers, particularly fordental x-ray within Medical and Science and space science projects withinAerospace and Defence. Other notable manufacturing capital projects include the creation of a semiautomated assembly line for specialised components used in Adaptive CruiseControl radar for the automotive sector at Lincoln Our Research and Development spend into product maintenance/support and newproducts was broadly divided into £2.0m for electronic tubes and £3.3m forsensors. High performance imaging absorbs the majority of R&D expenditure in the sensorsproduct group. In particular, we continue to invest in our L3VisionTM ultra highsensitivity devices and cameras, which are proving successful in our markets. IFRS The interim accounts for the six months ending 30 September 2005 are the firstresults the Group will be required to produce under IFRS. The Group will publisha re-statement under IFRS for the year ended 31 March 2005 prior to theannouncement of the interim accounts. OUTLOOK As we come to the end of the first quarter for the current financial year, wecontinue to see strong demand for our high performance imaging technology, bothfor space science programmes and for use in dental x-ray systems. In theelectronic tubes product group, marine radar components and devices forbroadcast transmitters are experiencing positive demand also. We have an ongoing programme to focus on productivity improvements, which willunderpin further profit growth, particularly during the second half of the year. Finally, we continue to actively pursue 'bolt-on' acquisitions to accelerate thegrowth profile of the business. Overall, e2v is well placed to deliver continuedgrowth. GROUP PROFIT AND LOSS ACCOUNTFor the year ended 31 March 2005 Year ended Year ended 31 March 31 March Notes 2005 2004 £000 £000 TURNOVER 2 100,547 97,566Cost of sales (65,892) (63,886) -------- --------GROSS PROFIT 34,655 33,680 Research and development (5,280) (5,417)Distribution costs (9,357) (9,664) Amortisation of intangible assets (1,237) (1,084)Restructuring costs 5 - (124)Environmental costs 5 - (402)Costs associated with the management buy out 5 - (60)Initial Public Offering costs 5 (1,901) -Other administrative expenses (7,633) (7,074)Administrative expenses (10,771) (8,744) -------- --------OPERATING PROFIT 3 9,247 9,855 Net interest payable 6 (4,941) (5,212) -------- --------PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 4,306 4,643Tax on profit on ordinary activities 7 (2,058) (1,362) -------- --------PROFIT FOR THE FINANCIAL YEAR 2,248 3,281Dividends 8 (2,490) - -------- --------RETAINED (LOSS)/PROFIT FOR THE FINANCIAL YEAR (242) 3,281 ======== ======== Earnings per share - basic 9 4.59p 9.19pEarnings per share - diluted 9 4.58p 9.19pEarnings per share - adjusted 9 11.07p 10.33pDividend per ordinary share 8 4.53p 0.0p GROUP STATEMENT OF TOTAL RECOGNISED GAINS & LOSSESFor the year ended 31 March 2005 Year ended Year ended 31 March 31 March 2005 2004 £000 £000 Profit for the financial year attributable to members ofthe parent company 2,248 3,281 Exchange difference on retranslation of net assets ofsubsidiary undertaking (44) (265) Exchange difference on retranslation of inter-company (100) (519)loans -------- --------TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE PERIOD 2,104 2,497 ======== ======== GROUP BALANCE SHEETat 31 March 2005 Notes 2005 2004 £000 £000FIXED ASSETSIntangible assets 10 10,273 11,509Tangible assets 11 23,879 21,920 ------- ------- 34,152 33,429 ------- -------CURRENT ASSETSStock 12 19,053 21,657Debtors 13 26,493 25,313Cash at bank and in hand 4,069 4,475 ------- ------- 49,615 51,445CREDITORS: amounts falling due within one year 14 (25,435) (25,552) ------- -------NET CURRENT ASSETS 24,180 25,893 ------- -------TOTAL ASSETS LESS CURRENT LIABILITIES 58,332 59,322 CREDITORS: amounts due after more than one year 15 (19,693) (47,195) PROVISIONS FOR LIABILITIES AND CHARGES 16 (4,201) (5,063) ------- ------- 34,438 7,064 ======= ======= CAPITAL AND RESERVESCalled up share capital 2,796 278Share premium account 27,301 2,376Capital redemption reserve 274 -Investment in own shares held by Employee Benefit Trust (10) -Profit and loss account 4,077 4,410 ------- -------EQUITY SHAREHOLDERS' FUNDS 34,438 7,064 ======= ======= GROUP STATEMENT OF CASH FLOWSFor the year ended 31 March 2005 Year ended Year ended 31 March 31 March 2005 2004 Notes £000 £000 Net cash inflow from operating activities 17(a) 10,788 20,212 -------- --------Returns on investment and servicing of financeInterest received 154 298Interest paid (4,271) (2,928)Capitalised loan issue costs (460) - -------- -------- (4,577) (2,630) -------- --------TaxationCorporate tax paid (1,006) (672)Overseas tax paid (554) (316) -------- -------- (1,560) (988) -------- --------Capital expenditure and financial investmentPayments to acquire tangible fixed assets (7,567) (8,290)Receipts from sales of tangible fixed assets 22 13 -------- -------- (7,545) (8,277) -------- --------Acquisitions and disposalsPurchase of business - (2,016) -------- -------- - (2,016) -------- -------- Equity dividends paid (347) - -------- --------Net cash (outflow)/inflow before management ofliquid resources and financing (3,241) 6,301 -------- -------- FinancingIssue of ordinary share capital 27,707 14Redemption of shares (12) -New long-term loans 27,500 -Long-term loan repayment (52,207) (7,906) -------- -------- 2,988 (7,892) -------- --------Decrease in cash 17(b) (253) (1,591) ======== ======== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2005 2004 Notes £000 £000 Decrease in cash (253) (1,591)Cash flow from decrease in loans 24,707 7,906Issue costs on new long term loans 460 - ------- -------Decrease in net debt resulting from cash flows 24,914 6,315Issue of payment in kind notes - (1,743) Amortisation of debt issue costs (2,236) (378) Exchange differences (153) (732) ------- ------- 22,525 3,462Movement in net debtOpening net debt at 1 April (44,307) (47,769) ------- -------Closing net debt at 31 March 17(b) (21,782) (44,307) ======= ======== NOTES TO THE FINANCIAL STATEMENTS 1. BASIS OF PREPARATION The preliminary announcement has been prepared on the basis of the accountingpolicies set out in the most recently published financial statements of theGroup for the year ended 31 March 2004. The financial information set out inthis announcement with regard to e2v technologies plc and its subsidiaries doesnot constitute statutory accounts for the year ended 31 March 2004 or 31 March2005 within the meaning of section 240 (1) of the Companies Act 1985, but isderived from those accounts. Statutory accounts for the Group for the yearended 31 March 2004 have been delivered to the Registrar of Companies, and thosefor the year ended 31 March 2005 will be delivered following the Company'sAnnual General Meeting. The auditors have reported on those accounts; theirreports were unqualified and did not contain statements under section 237(2) or(3) of the Companies Act 1985. 2. TURNOVER Turnover, which is stated net of value added tax, represents amounts invoiced tothird parties, except in respect of long-term contracts where turnoverrepresents the sales value of work done in the year, including estimates inrespect of amounts not invoiced. Turnover in respect of long-term contracts iscalculated as that proportion of total contract value which costs incurred todate bear to total expected costs for that contract. Turnover is attributable to two continuing activities, being the supply ofsensor components and subsystems, as well as the supply of electronic tubes andsubsystems. The acquisition of the Dynex sensor business during the previousyear is considered immaterial for disclosure purposes, hence no analysis ofcontinuing acquisitions is made. An analysis of turnover, operating profit and net assets by activity is givenbelow. Year ended Year ended 31 March 31 March 2005 2004 £000 £000Group turnoverSensors- Medical and Science 15,457 12,537- Aerospace and Defence 16,753 16,079- Commercial and Industrial 15,890 15,473 ------ ------ 48,100 44,089 ------ ------Electronic Tubes- Medical and Science 18,182 18,032- Aerospace and Defence 10,770 13,357- Commercial and Industrial 23,495 22,088 ------ ------ 52,447 53,477 ------ ------Total 100,547 97,566 ======= ======Operating profit- Sensors 15,265 12,154- Electronic Tubes 13,465 14,885- Central Overheads (17,582) (16,598)- Exceptional Items - Central overheads (1,901) (586) ------ ------ 9,247 9,855 ======= =======Net assets- Sensors 16,588 15,974- Electronic Tubes 15,781 13,006- Central unallocated net assets/(liabilities) 2,069 (21,916) ------ ------ 34,438 7,064 -------- -------- Central unallocated net assets/(liabilities) comprise certain fixed assets, debtors, creditors, loan notes, net debt and taxation. An analysis of turnover, profit and net assets by geographical market is givenbelow. Year ended Year ended 31 March 31 March 2005 2004 £000 £000Group turnoverTurnover by destinationUnited Kingdom 25,081 29,893United States 35,802 30,313Rest of the world 39,664 37,360 ------ ------ 100,547 97,566 ======= ======Turnover by origin:United Kingdom 56,824 60,566United States 36,836 30,910Rest of the world 6,887 6,090 ------ ------ 100,547 97,566 ======= ====== Operating profit by originUnited Kingdom 6,265 8,649United States 2,727 1,062Rest of the world 255 144 ------ ------ 9,247 9,855 ====== ====== Net assets by originUnited Kingdom 31,176 5,437United States 2,718 1,275Rest of the world 544 352 ------ ------ 34,438 7,064 ======= ======3. OPERATING PROFIT Year ended Year ended 31 March 31 March 2005 2004 £000 £000The operating profit is stated after charging:Depreciation of own fixed assets 5,588 5,419Auditors' remuneration - audit services (company £77,500 151 84 2004: £10,000) - non audit services 322 11Operating lease rentals - land and buildings 211 182 - plant and machinery 312 355Amortisation of patents and goodwill 1,237 1,084Initial Public Offering costs 1,901 -Environmental provision - 402Restructuring costs - 124Costs associated with the management buy-out - 60Product warranty costs 2,545 2,632 ------ ------Non audit services includes £25,000 (2004: £11,000) in respect of IFRSconsultancy services, and further assurance services and £297,000 (2004: £nil)in respect of IPO fees. In addition, the auditors received additional non auditfees of £360,000 relating to the IPO which have been charged against the sharepremium account. 4. STAFF COSTS Year ended Year ended 31 March 31 March 2005 2004 £000 £000 Wages and salaries 31,174 30,571Social Security costs (including US healthcare) 3,571 3,400Other pension costs 1,241 1,080UITF17 charge in respect of share based payments 65 - ------ ------ 36,051 35,051 ======= ======The average number of employees(including executive directors) during the year was asfollows: No. No. Manufacturing 891 881Administration 405 411 ------ ------ 1,296 1,292 ====== ====== 5. OPERATING EXCEPTIONAL ITEMS On 23 July 2004 the Group was admitted to the London Stock Exchange. The costsincurred with the admission and associated funding amounted to £4,043,000, ofwhich £1,682,000 has been set against share premium and £460,000 will beamortised as interest charges over five years. The remaining £1,901,000 has beencharged in arriving at the operating profit. The effect of the exceptional itemon the amount charged to the profit and loss account for taxation is a decreasein the charge for the year of £167,000. In the year to 31 March 2004, the Group made provision for environmental costsamounting to £402,000 in relation to ground restoration required by theEnvironmental Protection Act. The effect on the taxation charge in the profitand loss account in respect of this provision was a reduction of £121,000. Inaddition the Group incurred restructuring costs amounting to £124,000 and costsassociated with the management buy out of £60,000. The effect on the taxationcharge in the profit and loss account in respect of these charges was areduction of £55,000. 6. NET INTEREST PAYABLE Year ended Year ended 31 March 31 March 2005 2004 £000 £000 Interest payable on overdrafts and bank loans 2,310 3,134Interest payable on other loans 549 1,998Amortisation of issue costs on debt* 2,236 378 ------ ------ 5,095 5,510Interest receivable (154) (298) ------ ------ 4,941 5,212 ====== ====== * Included within the balance of £2,236k for the year ended 31 March 2005 is an amount of £2,050k which relates to accelerated amortisation of debt issue costs arising as a result of early settlement of debt. 7. TAX ON PROFIT ON ORDINARY ACTIVITIES Year ended Year ended 31 March 31 March 2005 2004 £000 £000(a) The tax charge represents: UK corporation tax - current 792 1,177 - prior year - (268) ------ ------ 792 909Foreign Tax 1,069 390 ------ ------Total current tax (7b) 1,861 1,299Deferred tax - origination and reversal of timing differences 197 63 ------ ------ 2,058 1,362 ====== ====== (b) The tax assessed on the profit on ordinary activities for the year varies from the standard rate of corporation tax in the United Kingdom ("UK"). The differences are explained below: Year ended Year ended 31 March 31 March 2005 2004 £000 £000 Profit on ordinary activities before tax 4,306 4,643 ------ ------Profit on ordinary activities multiplied by standard rate ofcorporation tax in the UK of 30% (2004: 30%) 1,292 1,393Effect of:Disallowed expenses and non-taxable income 728 318Research and development tax credit (225) (192)Depreciation in arrears of capital allowances (168) (45)Higher taxes on overseas earnings 185 111Other timing differences 34 (18)Tax under/(over) provided in previous years 15 (268) ------ ------ 1,861 1,299 ====== ======(c) Deferred tax is provided at 30% in the financial statementsas follows: 2005 2004 £000 £000 Capital allowances in advance of depreciation 622 425Short term timing differences - - ------ ------Provision for deferred tax (note 16) 622 425 ====== ====== There are no unprovided deferred tax balances. (d) Factors affecting future tax charges The tax charge in future periods is likely to continue to be affected by theGroup's overseas tax rates which are higher than those in the UK, primarilybecause of profits earned in North America which form a substantial part of theGroup's income. This is partially offset by the Group's continuing investment inresearch and development activities on which enhanced tax allowances willcontinue to be claimed, so long as UK tax legislation permits. 8. DIVIDENDS Year ended Year ended 31 March 31 March 2005 2004 £000 £000 Interim dividend paid - 0.63p per share (2004: nil) 347 -Final dividend proposed - 3.90p per share (2004: nil) 2,143 - ------- -------Total dividends paid and proposed 2,490 - ======= ======= The final dividend is payable on 13 September 2005 to shareholders registered on19 August 2005. The interim and final dividends are net of the dividend payableto the Employee Benefit Trust. The number of shares held by the Employee BenefitTrust at 31 March 2005 was 968,091. 9. EARNINGS PER ORDINARY SHARE The calculation of earnings per share is based on earnings of £2,248,000 (2004:£3,281,000) being the profit for the financial year and on the number of sharesnoted below: Year ended Year ended 31 March 31 March 2005 2004 £000 £000Adjusted earnings per share is arrived at usingthe following earnings Profit for the financial year 2,248 3,281Exceptional items 1,901 586Exceptional interest charges 2,050 -Tax impact of exceptional items (782) (176) ------- -------Adjusted earnings 5,417 3,691 ======= =======Weighted average number of shares No.000 No.000 For basic and adjusted earnings per share 48,944 35,720Exercise of options 94 - ------- -------For diluted earnings per share 49,038 35,720 ------- ------- The adjusted earnings per share is considered to more appropriately reflect theunderlying performance of the business. 10. Intangible fixed assets Patents Goodwill Total £000 £000 £000Cost:At 31 March 2004 107 13,189 13,296Exchange adjustments - 1 1 ------- ------- -------At 31 March 2005 107 13,190 13,297 ======= ======= =======Amortisation:At 31 March 2004 11 1,776 1,787Provided during the year 10 1,227 1,237 ------- ------- -------At 31 March 2005 21 3,003 3,024 ======= ======= =======Net book value:At 31 March 2005 86 10,187 10,273 ======= ======= =======At 31 March 2004 96 11,413 11,509 ======= ======= ======= Intangible assets are being amortised as follows: Goodwill of £11,299,000 arising on the acquisition of the Marconi AppliedTechnologies Division in July 2002 is being amortised evenly over the directorsestimate of its useful economic life of 12 years.Goodwill of £399,000 arising on the acquisition of the High Power Satcombusiness from Siemens in 1999 was being amortised evenly over its estimateduseful economic life of 20 years. After an impairment review in the year ended31 March 2004, this has been adjusted to 15 years. The outstanding balance isbeing amortised evenly over the remaining 10 years. Goodwill of £1,491,000 arising on the acquisition during the year to 31 March2004 of the automotive security business from Dynex is being amortised evenlyover the directors' estimate of its useful economic life of 6 years. Inaccordance with the Group's accounting policy, an impairment review has beencarried out on the carrying value of this goodwill and the directors considerthat no impairment write down is required. Patents were being amortised evenly over their useful economic life of 20 years.After an impairment review in the year ended 31 March 2004 this has beenadjusted to 15 years. The outstanding balance is being amortised evenly over theremaining 10 years. 11. TANGIBLE FIXED ASSETS Office equipment, Assets Freehold land & Plant & fixtures & under buildings machinery fittings construction Total £000 £000 £000 £000 £000Cost: At 31 March 2004 1,017 19,536 5,318 4,005 29,876Additions - 2,700 2,023 2,844 7,567Disposals (56) (1,030) (1,197) - (2,283)Reclassifications between categories - 9 (9) - -Transfers from payments on account - 1,779 1,529 (3,308) -Difference on exchange - - 1 - 1 ------- ------- ------- -------- -------As at March 2005 961 22,994 7,665 3,541 35,161 ------- ------- ------- -------- -------Depreciation: At 31 March 2004 211 6,170 1,575 - 7,956Provided during the year 91 3,904 1,593 - 5,588Disposals (51) (1,017) (1,193) - (2,261)Reclassifications between categories - 4 (4) - -Difference on exchange - - (1) - (1) ------- ------- ------- -------- -------At 31 March 2005 251 9,061 1,970 - 11,282 ------- ------- ------- -------- -------Net book value:As at March 2005 710 13,933 5,695 3,541 23,879 ======= ======== ======= ======== ======= At 31 March 2004 806 13,366 3,743 4,005 21,920 ======= ======== ======= ======== ======= 12. STOCK 2005 2004 £000 £000 Raw materials and consumables 9,836 7,367Work in progress 1,311 6,799Contracts work in progress 3,722 2,631Contracts payments on account (382) (799)Finished goods and goods for resale 4,566 5,659 ------ ------ 19,053 21,657 ====== ====== The implementation of the SAP IT system has resulted, in the current year,in components that are located on the factory floor, which were previously being reported as work in progress, being re-designated as raw materials and consumables. 13. DEBTORS 2005 2004 £000 £000 Trade debtors 24,068 22,160 Other debtors 981 540 Prepayments and accrued income 1,444 2,613 Amounts receivable from subsidiary - - Undertakings ------ ------ 26,493 25,313 ====== ====== 14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2005 2004 £000 £000 Current instalments due on loans 6,158 1,587 Bank overdraft - - Payments received on account 2,106 3,448 Trade creditors 9,516 11,839 Other taxation and social security costs 1,428 863 Other creditors 1,457 1,724 Accruals and deferred income 2,125 5,882 Corporation tax 502 209 Proposed dividend 2,143 - ------ ------ 25,435 25,552 ====== ======