E2V.L Regulatory News (E2V)

4 Dec 2006 07:01

e2v technologies PLC04 December 2006 e2v technologies plc Interim results for six months to 30 September 2006 e2v technologies plc, a leading developer and manufacturer of high-technologyelectronic components and sub-systems to the medical & science, aerospace &defence, and commercial & industrial sectors, announces its interim results forthe six months ending 30 September 2006: Highlights • Turnover of £67.8m (2005: £49.1m) • Adjusted profit before tax* and net finance costs of £7.4m (2005: £4.5m) • Profit after taxation of £2.6m (2005: £2.0m) • Basic earnings per share of 4.60p (2005: 3.55p) • Interim dividend of 2.2p per share (2005: 2.0p) • Acquisition of the Grenoble facility for £74.0m • Order book of £141m 6 months ended 6 months ended Year ended 30 September 2006 30 September 2005 31 March 2006 £ million £ million £ million Turnover 67.8 49.1 112.3Profit before tax and net finance costs 5.1 3.7 13.8Adjusted* profit before tax and net finance costs 7.4 4.5 15.4Profit after taxation 2.6 2.0 8.1Total shareholders' equity 57.1 37.9 43.7Net borrowings (77.8) (26.8) (17.8)Earnings per share - basic 4.60p 3.55p 14.81pAdjusted earnings per share - basic 7.67p 4.56p 16.89p *Before amortisation of acquired intangibles, voluntary severance payments,share-based payment charges, integration costs and non-recurring costsassociated with the acquisition. Commenting on the results, Keith Attwood, Chief Executive said: "e2v's half year results demonstrate considerable progress, delivering growthboth organically and through acquisition. "Our Grenoble facility has significantly strengthened e2v's product portfolioand scale. Integration is proceeding to plan and we remain confident in theoutlook for the enlarged business". Further enquiries: E2v technologies plcKeith Attwood, Chief Executive Today: 0207 554 1400Mike Hannant, Finance Director Thereafter: 01245 493 493Website: www.e2v.com Gavin Anderson & CompanyKeith Brookbank/ Fergus Wylie Tel: 0207 554 1400 NOTES FOR EDITORS: e2v technologies is a leading designer, developer and manufacturer of specialised components and subsystems, falling within two product groups: o Electronic tubeso Sensors and Semiconductors These products enable some of the world's leading OEMs to deliver innovative systems for medical and science, aerospace and defence, and commercial and industrial applications. For the year ended 31 March 2006, e2v achieved sales of £112m and is listed on the London Stock Exchange (e2v.l). In July 2006 e2v technologies plc acquired a leading designer, manufacturer and distributor of specialised electronic components and sub-systems, based in Grenoble, France. The acquisition represents an opportunity to strengthen the Group's position as a major global provider of specialised electronic components and subsystems. e2v's products are supplied into three core market areas: o Medical & Science: Sensor technology includes imaging sensors for intra-oral and panoramic dental X-ray, mammography, life science applications and X-ray microscopy. Electronic tubes are the enabling technology behind radiotherapy cancer treatments, microwave medical therapy and high-energy physics. o Aerospace & Defence: Sensor technology includes military surveillance, targeting and guidance, space-based imaging and astronomy, radar & electronic warfare and broadband data converters and microprocessors for aerospace applications. Electronic tubes provide the enabling technology behind radars, electronic countermeasures (ECM), electronic warfare and satellite communications. o Commercial & Industrial: Sensor technology includes marine radars, industrial safety sensors, automotive radars and alarms, thermal imaging cameras used by fire fighters, CCD and CMOS high resolution line scan cameras for industrial inspection. Electronic tubes provide enabling technology behind TV broadcast, satellite communications, marine radar and food & industrial processing. The overall purpose of the business is to grow sustainable shareholder value whilst appropriately meeting the expectations of customers, people, partners, suppliers and the wider community. e2v's vision is to create value through bright ideas in technology and materials science. The Company's mission is to place customers at the heart of the business, providing enabling products of premium quality that extend technical barriers and enhance the competitive position of our partners. e2v has approximately 1,800 employees worldwide with three UK based manufacturing sites in Chelmsford, Lincoln and High Wycombe, and one in Grenoble, France. In addition e2v has sales offices in the UK, USA, Germany and France, as well as a network of distributors and representatives covering other key territories. Further information on e2v technologies plc is available from its website,www.e2v.com Review of the half year RESULTS OVERVIEW On 31 July the Group completed the acquisition of the business formerly known asAtmel Grenoble SAS for £74m. The Grenoble facility forms part of the enlarged sensor product group, which has been renamed as sensors and semiconductors. The results for the half year include two months trading from the Grenoble facility. The integration plan for the Grenoble facility is on schedule with themajority of the costs to be incurred in the second half of the year. The acquisition was financed by the placing of 5,511,727 shares at a price of£2.40, raising £12.8m, and additional bank borrowings that were negotiated withour existing bankers of Lloyds TSB and Barclays together with new banks HSBC andABN AMRO. The negotiations resulted in an increased borrowing facility of up to£150m for general corporate purposes, including further acquisitions, and as at30 September £92m had been utilised. Sales at £67.8m increased by 38.1% over last year and adjusted* profit beforetax and net finance costs increased by 65.1% to £7.4m (2005: £4.5m). Profitbefore tax for the half year was £3.7m (2005: £2.8m). The Grenoble acquisitioncontributed sales of £13.1m and adjusted* profit before tax and net financecosts of £2.4m. Organic sales growth was 10.8%, excluding the impact of current and prior year acquisitions. Adjusted* basic earnings per share increased by 68.2% to 7.67p (2005: 4.56p) andbasic earnings per share increased by 29.6% to 4.60p (2005: 3.55p). The majordifference in these two growth rates is due to amortisation of acquiredintangible assets. The amortisation charge for the half year amounted to £1.6m(2005: £0.1m). The total fees paid in relation to the acquisition were £3.6m and£0.3m of this was charged to the income statement with the remainder beingcapitalised as debt of £1.7m and investments of £1.6m. The Group continues tofocus on improving productivity and the organic sales growth of 10.8% wasachieved with a 2% reduction in headcount. Net borrowings at 30 September amounted to £77.8m (2005: £26.8m), the netincrease being primarily due to an increase in borrowings to finance theacquisition. The need to finance trade debtors of the Grenoble facility, which were notacquired as part of the transaction, reduced the cash generated from operationsto £3.3m (2005: £9.6m). The acquisition of the Grenoble facility has reduced the Group's exposure toexchange rate movements in the Euro but the level of exposure to the US$ hasincreased. Whilst the average US$ exchange rate has weakened by over 3% and theEuro by over 1% the Group's hedging policy has resulted in a profit on exchangeof £0.8m for the first half. Exchange rate movements have reduced reportedrevenues by £0.5m, when compared with the previous year. Dividend The board has declared an interim dividend of 2.2p per share. (2005: 2.0p) Business Overview Overall sales grew by 38.1% to £67.8m with sales of sensors and semiconductorsnow exceeding that of electronic tubes. £13.5m of this growth was due to thecurrent and prior year acquisitions and £5.2m was organic growth. The organicgrowth achieved by the sensors and semiconductors product group was 5.2% to£22.7m (2005: £21.6m). Sales of the electronic tubes product group grew by 15.2%to £31.0m (2005: £26.9m). The order book at 30 September 2006 amounted to £141.4m (2005: £79.0m) of which£48.7m related to the Grenoble facility. Of this amount £82.6m is for deliveryin the current financial year (2005: £46.4m) and £27.9m relates to Grenoble. Sensors and semiconductors Sales of sensors and semiconductors at £36.8m were 65.8% higher than last year,driven primarily by the current and prior year acquisitions. Organicgrowth amounted to 5.2% with the Grenoble facility delivering sales of £13.1m inthe two months since acquisition and the x-ray detector business at the HighWycombe facility delivering sales of £1.0m, compared with £0.6m last year,following the acquisition in July 2005. Adjusted* profit before tax and netfinance costs grew by 71% to £4.0m (2005: £2.3m) with £2.4m of this generated bythe Grenoble facility. The growth in sales increased the operating profit marginto 10.8% (2005:10.5%). The order book for sensors and semiconductors increased to £94m (2005: £45.2m)of which £48.7m is attributable to Grenoble. Orders due for delivery thisfinancial year amounted to £58.1m (2005: £26.9m). £42.0m of this was related toGrenoble. ____________*Before amortisation of acquired intangibles, voluntary severance payments, share-based payment charges, integration costs and non-recurring costs associated with the acquisition. Medical and Science Sales grew by 42.9% to £11.9m (2005: £8.3m) with £3.4m of growth being providedby the Grenoble facility, which extended the e2v product offering to includepanoramic x-ray dental sensors as well as imaging technology utilised in othermedical applications. Overall the dental x-ray imaging market continues to grow,particularly in the USA, but the levels of growth vary by OEM. They are allchasing the same market resulting in overstocking in some cases. In consequencethe UK facility has seen an overall reduction in intra-oral dental sales but theGrenoble facility has seen growth. This is the only sector where the productofferings of the two facilities overlap, although the Grenoble facility suppliesa wider range of products, including CMOS imaging technology. e2v is now wellplaced to exploit the dental x-ray market with a wider product range andextended alternative technologies. Increased demand for our Queens Award winning L3VisionTM technology, utilised inimaging systems for life science applications, resulted in sales growth of 22%to £4.6m (2005: £3.7m). Following on from the growth of 17% achieved in the lastfinancial year. Whilst overstocking at a major customer impacted sales from the x-ray detectorfacility at High Wycombe in the first half, the product range was increased bythe completion of the development of a range of electronically cooled solidstate silicon drift detectors and interest from customers has been high.Additionally a US service facility had been established at the existing e2vpremises, near New York. Aerospace and Defence Significant programme wins, such as the GAIA project for ESA and a number ofdefence applications for solid state microwave components, as well as thecontribution from the Grenoble facility, resulted in sales in this sector morethan doubling to £14.7m (2005: £7.1m). £4.9m of this growth was provided byGrenoble who primarily supply a range of high reliability micro-processors andbroadband data converters. The GAIA program generated sales of £2.1m in the first half, leaving the balanceof the contract of £8.7m to be delivered by 2008. Sales of imaging technology to certain Middle East countries have been adversely impacted by the refusal of export licences. The order book for this sector at 30 September 2006 amounted to £48.1m (2005:£22.3m), of which £20.4m was related to the Grenoble facility. £35.7m (2005:£12.2m) of this order book is due for delivery this financial year and £19.8m ofthis is from Grenoble. Commercial and Industrial Sales of £10.2m (2005: £6.8m) represent a 50% increase with Grenoble providingsales of £4.8m. Grenoble products supplied into this market sector includesensors and cameras for use in industrial imaging applications and RFtransmitters that ultimately send household meter readings to remotecollection points. Organically, sales have declined by 20.7% dueto lower sales to the fire and automotive sectors. In fire there hasbeen lower demand for the REDS product as well as the Argus thermal imagingcamera. A new camera was launched in April 2006 and whilst orders have beentaken, deliveries will commence in earnest in the second half of this financialyear. In the automotive sector demand for adaptive cruise control from consumersremains flat and the take up of microwave alarms by a new US customer has been slower than anticipated. Electronic Tubes Sales in the electronic tubes product group grew by 15.2% to £31.0m (2005:£26.9m) with strong growth achieved in both the aerospace and defence andmedical and science sectors. This robust performance is a result of continuedproduct development and the successful implementation of our strategy toincrease our scope of supply. Operating profit increased by 18.7% to £3.3m(2005: £2.8m) and operating margin increased to 10.8% (2005: 10.5%). The order book for the electronic tube business amounted to £47.5m (2005:£33.8m) with £24.4m (2005: £19.4m) of this due for delivery this financial year. Medical and Science Strong demand from our radiotherapy OEM customers, who in some cases also supplythe x-ray sources for cargo screening and the success of providing a compactmodulator in addition to the traditional magnetron products, has resulted insales growing by 31.3% to £11.4m (2005: £8.7m). We continue to establish our credentials in the "Big Science" market for RFsubsystems and, although we have secured £0.8m of orders in this sector, salesin the first half were not significant Aerospace and Defence Program wins for radar upgrades, together with the on-going demand from the UK MOD and others for an electronic sub-system introduced last financial year, have increased sales by 20.8% to £7.6m (2005: £6.3m). We continue to be the sole source of Travelling Wave Tubes for the Defensive Aids Sub System for the Typhoon platform and have maintained a strong position on a similar US program (IDECM), which moves into Low Rate Initial Production this financial year. Sales into China continue to be limited by the lack of export licences granted by the UK government. At 30 September 2006 the order book amounted to £20.0m (2005: £18.0m) and £15.9m(2005: £13.9m) of this is due for delivery this financial year. Commercial and Industrial This sector continues to be the most competitive of the three market sectors forelectronic tube products but continuing strong demand for Marine Radarcomponents resulted in sales of £12.0m (2005: £11.9m). Whilst marine radar grewby 12.6% the remaining sectors were flat. These include products supplied tohigh power UHF terrestrial TV transmitter markets in the USA, where a declinewas anticipated following the roll-out of digital TV, but has yet tomaterialise. Sales into the general industrial market and commercial satellitecommunications market were flat. International development The e2v Grenoble business exported 84% of products sold in the two months postacquisition with 6% being exported to the UK. Its export profile is similar toour UK based business but with more emphasis on Europe. In the first half the UKbusiness exported 74% of products sold. An important element of the integration of the Grenoble activity is thedevelopment of the sales organisation. The Grenoble business, via its previousparent company Atmel, utilised numerous distributors as well as its own salesforce to sell it's products and we anticipate utilising these established 3rdparty's distributors. Opportunities for synergies continue to be explored tomaximise the sales opportunities and these include the opening of an AsiaPacific office early in 2007. North America remains a significant market for the Group and sales increased by27% to £22.5m (2005: £17.7m), £3.1m of which was contributed by the Grenoblefacility. Sales into Europe (including the UK) amounted to £38.2m (2005: £26.9m)and represents 56% of turnover, whilst the North American market represented33%. Capital Investment and Research and Development Capital expenditure on property, plant and equipment amounted to £4.0m (2005:£3.4m) whilst expenditure on software was £0.5m (2005: £0.6m). In total, capitalexpenditure amounted to 6.6% of sales (2005: 8.2% half year, 6.9% full year).Whilst all the software expenditure was for the continuing implementation of SAPinto the UK operations, £3.7m of the remainder was in the UK and £0.3m was inFrance. We continue to invest in both the electronic tube and sensors andsemiconductors product groups, particularly in our high performance imagingfacilities. In the second half of the year, the company will focus on land andbuildings as work commences on the refurbishment of part of the Chelmsford siteand we further develop our plans to potentially relocate the Lincoln facility toan alternative site during 2008. Work on the Chelmsford site will commence inDecember 2006 and is scheduled for completion by summer 2007. The total invested in research and development amounted to £8.2m (2005: £6.2m)of which £4.2m (2005: £3.5m) was funded by the business, however the charge inthe income statement amounted to £3.8m. This is due to £1.0m of costs beingcapitalised and a charge for amortisation of £0.6m on previously capitalised R&Dexpenditure under International Financial Reporting Standards. The principal areas of investment in the UK continue to be in high performanceimaging technology, in particular new products utilising the low light level (L3Vision) and CMOS technology for a range of scientific, space, astronomy andmedical sectors. In addition investment was made in delivering enhancedfunctionality for microwave alarms as well as a range of sensor andsemiconductor products and electronic tubes, including those for radiotherapy. The business continues to fund a biosensors "blue sky" program for lifesciences, and potentially medical diagnostic markets and invested a further£0.4m in the half year. In the second half e2v will be exploring options topartner with organisations, or form a strategic alliance, to further develop thetechnology and strengthen our channels to market. Outlook Management attention continues to be focussed on efficiencies and costmanagement in the face of rising input costs. A strong order book as well as the strengthened product portfolio and scale inthe business gives the board confidence in the outlook for the current financialyear. Following the successful acquisition of the Grenoble facility, the Group continues to seek suitable acquisitions in all geographies, as part of its strategy for growth. George Kennedy Keith AttwoodChairman Chief Executive Officer Independent review report to e2v technologies plc INTRODUCTION We have been instructed by the Company to review the financial information forthe six months ended 30 September 2006 which comprises the Group incomestatement, Group statement of total recognised income and expense, Group balancesheet, Group cash flow statement and the related notes 1 to 9. We have read theother information contained in the Interim Report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. DIRECTORS' RESPONSIBILITIES The Interim Report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the Interim Report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual financial statements exceptwhere any changes, and the reasons for them, are disclosed. REVIEW WORK PERFORMED We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof Group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied, unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. REVIEW CONCLUSION On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. Ernst & Young LLPCambridge1 December 2006 GROUP income statementFor the six months ended 30 September 2006 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Note £000 £000 £000Revenue from operations 2 67,782 49,081 112,276 Cost of sales (46,338) (33,591) (74,521)---------------------------------------------------------------------------------------------------------Gross profit 21,444 15,490 37,755Research and development costs (3,772) (2,580) (4,928)Distribution costs (4,994) (4,754) (9,463)---------------------------------------------------------------------------------------------------------Amortisation of intangible assets arising on (1,601) (78) (369)acquisitionsCost associated with acquisition (289) - -Integration costs (50) - -Voluntary severance payments - (497) (819)Share based payment charges (290) (182) (450)Other administrative costs (5,314) (3,696) (7,961)---------------------------------------------------------------------------------------------------------Administrative expenses (7,544) (4,453) (9,599)---------------------------------------------------------------------------------------------------------Profit before tax and net finance costs 2 5,134 3,703 13,765Finance income 155 32 95Finance costs 3 (1,619) (945) (1,944)---------------------------------------------------------------------------------------------------------Profit before taxation 3,670 2,790 11,916Tax on profit on ordinary activities 4 (1,052) (837) (3,768)---------------------------------------------------------------------------------------------------------Profit for the period from continuing operations attributable to equity shareholders 2,618 1,953 8,148----------------------------------------------------------------------------------------------------------Earnings per share - basic 6 4.60p 3.55p 14.81pEarnings per share - diluted 6 4.57p 3.54p 14.74pAdjusted earnings per share - basic 6 7.67p 4.56p 16.89pAdjusted earnings per share - diluted 6 7.62p 4.54p 16.82p GROUP STATEMENT OF TOTAL RECOGNISED INCOME AND EXPENSE For the six months ended 30 September 2006 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000----------------------------------------------------------------------------------------------------------Exchange difference on retranslation of foreign operations (129) 443 322Tax on items taken directly to or transferred from equity 152 187 220Loss on cash flow hedges (56) (1,270) (715)----------------------------------------------------------------------------------------------------------Net income/(expense) recognised directly in equity (33) (640) (173)Profit for the period 2,618 1,953 8,148----------------------------------------------------------------------------------------------------------Total recognised gains and losses relating to the period 2,585 1,313 7,975----------------------------------------------------------------------------------------------------------Effects of changes in accounting policy----------------------------------------------------------------------------------------------------------Net gain on cash flow hedges on first time adoption of IAS 39 - 308 308---------------------------------------------------------------------------------------------------------- GROUP balance sheetat 30 September 2006 30 September 30 September 31 March 2006 2005 2006 Note £000 £000 £000AssetsNon-current assetsProperty, plant and equipment 33,354 20,831 21,320Intangible assets 88,173 22,074 22,372Deferred income tax assets 3,332 550 2,006--------------------------------------------------------------------------------------------------------- 124,859 43,455 45,698Current assetsInventories 38,561 22,229 20,839Trade and other receivables 32,477 24,189 25,561Other financial assets 510 91 11Cash 12,508 5,457 8,087--------------------------------------------------------------------------------------------------------- 84,056 51,966 54,498---------------------------------------------------------------------------------------------------------Total assets 208,915 95,421 100,196--------------------------------------------------------------------------------------------------------- LiabilitiesCurrent liabilitiesTrade and other payables (40,335) (19,429) (22,138)Other financial liabilities (563) (1,067) (6,607)Income tax payable (799) (7,454) (1,505)Provisions (4,894) - (2,691)--------------------------------------------------------------------------------------------------------- (46,591) (27,950) (32,941)---------------------------------------------------------------------------------------------------------Net current assets 37,465 24,016 21,557--------------------------------------------------------------------------------------------------------- Non-current liabilitiesOther financial liabilities (90,301) (24,793) (19,905)Provisions (1,056) (3,679) (1,070)Deferred income tax liabilities (13,825) (1,097) (2,543)--------------------------------------------------------------------------------------------------------- (105,182) (29,569) (23,518)---------------------------------------------------------------------------------------------------------Net assets 2 57,142 37,902 43,737--------------------------------------------------------------------------------------------------------- Shareholders' equityOrdinary share capital 3,073 2,796 2,796Share premium 39,896 27,301 27,309Capital redemption reserve 274 274 274Investment in own shares held by employee benefit trust (9) (10) (9)Hedge reserve (172) (521) (134)Foreign currency translation 92 209 221Retained earnings 13,988 7,853 13,280---------------------------------------------------------------------------------------------------------Total shareholders' equity 57,142 37,902 43,737--------------------------------------------------------------------------------------------------------- GROUP Cash Flow statement For the six months ended 30 September 2006 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Note £000 £000 £000 Net cash flows from operating activities Profit before tax and net finance costs 5,134 3,703 13,765Adjustments to reconcile to net cash inflows fromoperating activities:Depreciation of property, plant and equipment 4,237 2,367 4,863Amortisation of intangible assets 2,764 1,042 2,371Share-based payment charges 290 182 450Increase in inventories (2,848) (2,396) (1,125)(Increase)/decrease in trade and other receivables (5,243) 3,545 1,957(Decrease)/increase in trade and other payables (1,731) 1,063 4,204Increase/(decrease) in provisions 659 87 (16)-----------------------------------------------------------------------------------------------------------Cash generated from operations 3,262 9,593 26,469Income taxes paid (2,870) (2,120) (3,266)-----------------------------------------------------------------------------------------------------------Net cash flows from operating activities 392 7,473 23,203Investing activitiesInterest received 155 32 95Purchase of property, plant and equipment (3,954) (3,439) (6,525)Purchase of software (528) (572) (1,278)Proceeds on disposal of property, plant and - 3 55equipmentExpenditure on product development (1,023) (458) (1,308)Acquisition of subsidiary undertaking, net of cash 8 (64,553) (4,974) (4,974)acquired------------------------------------------------------------------------------------------------------------Net cash outflow from investing activities (69,903) (9,408) (13,935)------------------------------------------------------------------------------------------------------------Financing activitiesInterest paid (1,236) (909) (1,852)Equity dividends paid (2,334) (2,143) (3,246)Issue of ordinary share capital, net of expenses 12,864 - 8New bank loans raised 92,595 7,600 5,100Transaction costs of new bank loans raised (1,735) - -Repayment of borrowings (26,100) (1,250) (5,250)Repayments of obligations under finance leases (15) (7) (42)------------------------------------------------------------------------------------------------------------Net cash inflow/(outflow) from financing activities 74,039 3,291 (5,282)------------------------------------------------------------------------------------------------------------Net increase in cash and cash equivalents 4,528 1,356 3,986Cash and cash equivalents at beginning of period 8,087 4,069 4,069Effect of foreign exchange (107) 32 32-----------------------------------------------------------------------------------------------------------Cash and cash equivalents at end of period 9 12,508 5,457 8,087----------------------------------------------------------------------------------------------------------- Notes to the interim report 1. Basis of preparation These interim financial statements have been prepared in accordance with theaccounting policies set out in the Company's 2006 Annual Report and wereapproved by the Board of Directors on 1 December 2006. The Group has not appliedIAS 34 'Interim Financial Reporting', which is not mandatory for UK groups, inthe preparation of these interim financial statements. The financial information in these interim financial statements does notconstitute statutory financial statements as defined in Section 240 of theCompanies Act 1985. The Group's 2006 Annual Report has been filed with theRegistrar of Companies and the auditor's report on those financial statementswas not qualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985. The Interim Financial Statements are unaudited but have been formally reviewedby the auditors, Ernst & Young LLP, and their report to the Company is set outon page 5. The financial information contained in this interim report does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. 2. Segmental analysis Turnover is attributable to two continuing activities, being the supply ofelectronic tubes and subsystems, and the supply of sensor and semiconductorcomponents and subsystems. An analysis of turnover, profit before tax and net finance costs and net assetsby activity is given below: 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000RevenueSensors and semiconductorsMedical and Science 11,910 8,335 20,707Aerospace and Defence 14,703 7,066 15,316Commercial and Industrial 10,174 6,786 14,135----------------------------------------------------------------------------------------------------------- 36,787 22,187 50,158-----------------------------------------------------------------------------------------------------------Electronic tubes Medical and Science 11,388 8,674 18,768Aerospace and Defence 7,596 6,290 19,042 Commercial and Industrial 12,011 11,930 24,308 ----------------------------------------------------------------------------------------------------------- 30,995 26,894 62,118-----------------------------------------------------------------------------------------------------------Total 67,782 49,081 112,276 ResultSensors and semiconductors 3,987 2,332 10,061Electronic tubes 3,349 2,820 7,322Difference on exchange 780 (147) (631)Voluntary severance payments - (497) (819)Share based payment charges (290) (182) (450)Amortisation of intangible assets arising on acquisitions (1,601) (78) (369)Costs associated with acquisition (289) - -Integration costs (50) - -Other unallocated overheads (752) (545) (1,349)Total unallocated overheads (2,002) (1,449) (3,618) 5,134 3,703 13,765Net assetsSensors and semiconductors 114,995 19,976 21,748Electronic tubes 16,539 16,891 19,283Central unallocated net (liabilities)/assets (74,392) 1,035 2,706----------------------------------------------------------------------------------------------------------- 57,142 37,902 43,737-----------------------------------------------------------------------------------------------------------Central unallocated net assets comprise certain fixed assets, debtors,creditors, loan notes, net debt and taxation. 2. Segmental analysis (continued) An analysis of turnover, profit before tax and net finance costs and net assetsby geographical market is given below: 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000Group turnoverTurnover by destinationUnited Kingdom 15,139 11,950 31,472North America 22,502 17,732 37,492Europe 23,103 14,926 32,924Rest of the world 7,038 4,473 10,388----------------------------------------------------------------------------------------------------------------- 67,782 49,081 112,276----------------------------------------------------------------------------------------------------------------- Turnover by originUnited Kingdom 31,774 27,948 66,124North America 19,294 17,697 37,415Europe 16,714 3,436 8,737---------------------------------------------------------------------------------------------------------------- 67,782 49,081 112,276----------------------------------------------------------------------------------------------------------------- Net assetsUnited Kingdom 35,138 32,902 31,139North America 7,480 4,172 9,493Europe 14,524 828 3,105----------------------------------------------------------------------------------------------------------------- 57,142 37,902 43,737----------------------------------------------------------------------------------------------------------------- 3. Finance costs 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Bank loan interest 1,279 899 1,850Finance charges payable under finance leases - - 2Amortisation of debt issue costs 340 46 92-------------------------------------------------------------------------------------------------------------- 1,619 945 1,944-------------------------------------------------------------------------------------------------------------- Included in finance costs for the six months to 30 September 2006 is thewrite-off of debt issue costs of £276,000 relating to the early repayment ofloans. 4. Taxation The tax charge for the period has been calculated on the basis of the Directors'best estimate of the annual effective tax rate for the year. 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 United Kingdom 419 314 3,498Overseas 633 523 270------------------------------------------------------------------------------------------------------------ 1,052 837 3,768------------------------------------------------------------------------------------------------------------ 5. Dividends 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Final dividend for 2006: 4.25p (2005: 3.90p) per share 2,334 2,143 2,145Interim dividend for 2006: 2.00p per share - - 1,101------------------------------------------------------------------------------------------------------------- 2,334 2,143 3,246------------------------------------------------------------------------------------------------------------- The number of shares owned by the employee benefit trust is 884,239 (884,239 at30 September 2005 and 31 March 2006). The employee benefit trust has waived itsright to receive dividends. On 1 December 2006 the Board declared an interimdividend of 2.2p per share (2005: 2.00p). The interim ordinary dividend is to bepaid on 12 January 2007 to shareholders on the register at close of business on15 December 2006. 6. Earnings per share The calculated basic and diluted earnings per share is based on the following: 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Profit for the period 2,782 1,953 8,148------------------------------------------------------------------------------------------------------------ Adjusted earnings per share is arrived at using the following earnings and sharenumbers: 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Profit for the period 2,618 1,953 8,148 Acquisition costs 289 - -Integration costs 50 - -Abnormal interest charges 276 - -Amortisation of acquired intangible assets 1,601 78 369Share-based payment charges 290 182 450Voluntary severance costs - 497 819Tax impact of itemised administrative expenses above (761) (204) (491)------------------------------------------------------------------------------------------------------------- 4,363 2,506 9,295------------------------------------------------------------------------------------------------------------- Weighted average number of shares No. 000 No. 000 No. 000 For basic and adjusted earnings per share 56,891 55,002 55,018Exercise of options 362 194 250------------------------------------------------------------------------------------------------------------For diluted earnings per share 57,253 55,196 55,268------------------------------------------------------------------------------------------------------------ The adjusted earnings per share is considered to more appropriately reflect theunderlying performance of the business. This reflects that the costs highlightedabove are expected to be either non-recurring or not comparable between periods. 7. Consolidated statement of changes in shareholders' equity 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Note £000 £000 £000 Opening equity 43,737 38,242 38,242Adjustment for implementation of IAS 32/39 - 308 308-----------------------------------------------------------------------------------------------------------Opening balance for the period as adjusted 43,737 38,550 38,550Total recognised income for the period/year 2,585 1,313 7,975Dividends on equity shares 5 (2,334) (2,143) (3,246)New share capital subscribed 12,864 - 8Share based payment charges 290 182 450-----------------------------------------------------------------------------------------------------------Closing equity 57,142 37,902 43,737----------------------------------------------------------------------------------------------------------- 8. Acquisition of subsidiary undertaking On 31 July 2006 the Company acquired the entire share capital of e2vsemiconductors SAS (formerly Atmel Grenoble SAS) Limited for a cost of £74million. The initial valuation of the fair value of net assets acquired,including cash of £9 million, amounted to £39 million. The resulting goodwill onacquisition was £35 million. 9. Analysis of movements in net debt 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Cash at beginning of period 8,087 4,069 4,069Loans at beginning of period (25,841) (25,851) (25,851)-------------------------------------------------------------------------------------------------------------Net debt at beginning of period (17,754) (21,782) (21,782) Increase in cash 4,528 1,356 3,986Loans advanced (92,595) (7,600) (5,100)Loans repaid 26,115 1,250 5,202Loan issue costs capitalised 1,735 - -Amortisation of capitalised loan issue costs (368) (46) (92)Exchange differences 513 32 32-------------------------------------------------------------------------------------------------------------Total movement in net debt (60,072) (5,008) 4,028 Cash at end of period 12,508 5,457 8,087Loans at end of period (90,334) (32,247) (25,841)-------------------------------------------------------------------------------------------------------------Net debt at end of period (77,826) (26,790) (17,754)------------------------------------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange