REG-Roxboro Group PLC Interim Results
Date/Range: 8-SEP-2003
Short Abstract: THE ROXBORO GROUP PLC INTERIM RESULTS
The Roxboro Group PLC, the international specialist electronics group, announces
its results for the six months ending 30 June 2003.
2003 2002
£m £m
Turnover 73.3 79.2
Operating Profit* 4.8 4.9
Trading Profit + 4.5 4.4
Profit on Disposal of Weston 15.6 –
Pre-tax Profit 19.5 3.9
Cash Flow from Operating Activities 7.1 4.7
Basic EPS 31.6p 4.4p
Adjusted EPS 5.5p 5.3p
Interim Dividend 3.1p 3.1p
* pre-goodwill, profit on disposal and interest
+ pre-goodwill, profit on disposal and after interest
KEY POINTS
– Disposal of Weston completed
– Substantial return of capital to shareholders
– Operational result meets expectations
– Strong cash position and balance sheet
– Dividend maintained
– U.S. production reorganisations completed
– Shares Consolidated
Commenting on the results, Harry Tee, Group Chief Executive, said:
“It was good to be able to realise the true value of Weston and return
substantial capital to shareholders. Operationally we believe the worst is now
behind us. At our continuing businesses, our order books are looking healthier,
particularly at Dialight where our Signals production has now been transferred
to Mexico”.
Weston Disposal
The single most important event in the first half of 2003 was the successful
disposal of Weston to Esterline Technologies Inc, which completed on 11 June,
enabling a substantial return of capital to shareholders.
The value generated by our management of Weston was realised despite the severe
downturn in the industry in recent years. Furthermore, the gross consideration
achieved of £55.7 million equated to 61% of the market capitalisation of the
entire group (including Weston) at the time of the disposal and generated a
profit on the disposal of £15.6 million.
Through the issue of redeemable preference B shares, £42.6 million was made
available for return to shareholders. The disposal was therefore excellent for
Roxboro’s shareholders and was a good outcome for Weston and its employees, who
are now part of a larger specialist aerospace group.
Financial Results
Operationally, Roxboro’s trading in the first six months was in line with the
same period last year despite very difficult market conditions, redundancy costs
amounting to £700k and the loss of two weeks’ trading at Weston. Additionally,
significant disruption costs were incurred at Dialight, as the relocation of all
Signals assembly operations to Mexico was completed.
Overall, group turnover was £73.3 million (2002: £79.2 million), a reduction of
7% of which 2% was due to currency translation movements, yet operating profits
were held steady at £4.8 million (2002: £4.9 million) as a direct result of the
efficiency improvement programmes introduced last year. When the profit on the
Weston disposal is taken into account, profit before tax was £19.5 million
(2002: £3.9 million). Adjusted earnings per share increased 4% to 5.5 pence
(2002: 5.3 pence) and basic earnings per share increased to 31.6 pence (2002:
4.4 pence) which includes the profit on disposal.
Weston’s result in the first half benefited from previously implemented cost
reduction programmes. Turnover in Weston up to the point of disposal was down
11% to £14.6 million (2002: £16.4 million) but operating profit increased to
£2.8 million (2002: £2.1 million) as a result of the lower cost base.
Group cash flow from operational activities was strong at £7.1 million (2002:
£4.7million) and the Group’s balance sheet was substantially strengthened as a
result of the disposal of Weston. At the end of the period Roxboro had net cash
of £42.0 million, however, £39.8 million of this was returned to shareholders in
July immediately after the period end, through B share redemptions.
Nevertheless, the Group now has a stronger balance sheet and is debt free.
The board proposes to pay a maintained interim dividend of 3.1 pence per share.
The dividend will be paid on 16 October 2003 to shareholders on the register on
19 September 2003.
Operational Review
Continuing Operations
Solartron
2003 2002
£m £m
Sales 31.1 33.5
Operating Profit 2.8 4.2
The business environment in which Solartron operates globally, deteriorated in
the first half of the year and as a result turnover declined to £31.1m (2002:
£33.5m) and operating profit reduced to £2.8 million (2002: £4.2 million). It
should be remembered however the first half of last year benefited from a profit
contribution of over £650k from the completion of the final phase of the Canyon
Express project at Solartron ISA, while the first half of the current year was
impacted by redundancy costs of over £300k. Taking both those factors into
account the underlying performance of the division was relatively flat.
Generally, investment in the oil and gas sector serviced by Solartron was hit by
market uncertainties with many projects being postponed or cancelled.
Additionally, the economies of the United States and Europe were weak and demand
reduced. Investment in the Middle East market, however, began to bear fruit
when a £600k contract was secured in Iran to supply flow and level
instrumentation for a major gas field development project.
Activity in some other regions was better and towards the end of the period
Solartron was successful in securing a £1.0 million contract to provide
Dualstream II systems for the Sakalin gas field in Russia through AMEC in the
UK. These systems will be supplied over the next year and bring to over 30 the
number of Dualstream II systems ordered since the product was first introduced
two years ago.
A new family of ultrasonic level and flow instrumentation, the MSP900 series,
was introduced in the period and was well received by customers. This product
range will contribute to accelerating Solartron’s growth in the United States
continuous level measurement market.
The service activity at Solartron is showing good profitable growth and a number
of significant contracts were won from UK water companies to audit and then
upgrade their flow instrumentation. This is an important contributor to the
Solartron business and shows real opportunities for growth.
Sales of Solartron’s analytical instruments into China, a fast developing market
for these products, is showing some signs of improvement after a difficult first
half.
Solartron continued to make steady progress in the metrology sector with a
number of new products introduced.
Dialight
2003 2002
£m £m
Sales 27.6 29.3
Operating Profit 0.4 0.1
The overall result at Dialight was negatively impacted by losses incurred at BLP
in the UK, which is suffering from very weak demand. The Signals Division,
which now incorporates Garufo, saw flat sales because of reduced demand in the
United States, however losses were more than halved over the same period last
year. The Opto-Electronics Division continued to operate profitably with sales
in local currency up 15% on the first half and up 17% on the second half of last
year. The translation into sterling was however adversely affected by movements
in exchange rates. Redundancy costs amounting to £400k were also incurred in
the first half of the year as a result of the relocation of the Signals
Division’s production to Mexico.
Despite a slower US market, order intake at the Signals Division showed an
improvement over the first half of 2002. The order position in Europe was
particularly encouraging. The relocation of all the U.S. production of the
Signals division to Mexico and most importantly the setting up of a Mexican
supplier base was completed in the first half but not without difficulty.
Significant disruption was experienced as new suppliers were brought on stream
and although these will result in substantial cost reductions in the near term,
they had a negative impact on results in the first half as suppliers struggled
to meet our volume requirements. A new Vice President Operations with excellent
“Lean manufacturing” experience was appointed in June and he has immediately set
about improving the performance not only of Dialight’s assembly operations but
also of the supplier base. The worst is now behind us and Dialight should begin
to see the benefits of these programmes in the second half.
Contracts were secured in North Carolina and Texas for “expanded view” traffic
signal products which are suspended on overhead span wires at intersections.
These products utilised 5mm LED technology because of the specification required
by customers but Dialight has now developed an extended view product
incorporating the latest Lumiled Luxeon LEDs, which will meet customers’
requirements and give Dialight a competitive advantage. This and a number of
other traffic products were launched at the International Traffic show held in
the USA in August.
As a result of the poor economic environment in the United States, overall
demand for traffic modules was weaker as State budgets were impacted by lower
tax income. However, the sale of electronic lighting modules for traffic lights
in Europe increased by a factor of 5 over the same period last year. This
indicates a strong trend towards the new technology lighting modules by traffic
system OEMs in Europe where the US model of major city wide retrofit programmes
is not expected to be followed. The newly named Dialight Garufo GmbH, our
European specialist company in this field, is well placed to serve the many OEMs
in Europe supplying traffic systems incorporating electronic lighting modules in
place of traditional light sources. Intersections using Dialight Garufo’s
electronic lighting technology can now be found from Belgrade and Budapest to
Rostock and Reykjavik, and also in London and Edinburgh.
In the United States progress in the airfield segment was slowed as the FAA
introduced new requirements associated with the power supplies used with the LED
runway and taxiway lights. New power supplies were designed and a number have
passed the FAA requirements with others yet to come. A number of airports in
the USA have subsequently indicated a desire to change their taxiway lighting
over the next few years to LED based products.
The vehicle lighting market slowed somewhat as OEMs, particularly bus producers
reduced output as a direct result of the economic situation in the USA. Dialight
is compensating for the reduced volume by increasing the range of LED products,
both external and internal, which it is offering vehicle OEMs.
Whilst the general electronics industry and telecoms market saw a continuation
of the weak demand experienced over the past two years, sales were up when
compared with the first half of last year and showed a 13% uplift when compared
with the second half. Order intake also improved on the second half of the
prior year showing a gain of 18% with some OEM’s beginning to show increasing
demand. There is, however, no clear sign of a market recovery with distribution
channels, which account for a significant proportion of Dialight’s sales,
remaining flat.
The Luxeon Design Centre was successfully launched in the first half and
positions Dialight in the space between the LED producer and the OEM that wishes
to adopt the new high brightness LED Technology in its products. Dialight
brings its unique set of skills to this emerging market need as white light
LED’s become increasingly available with all the advantages of longevity and
reduced energy consumption. Among the applications being currently developed
by Dialight for specific customers are elevator lighting, internal lighting for
coaches and trains, mixed colour theatre lighting and point-of-sale display
lighting,
LED lighting is forecast to reduce energy consumption in the United States alone
by roughly 17 billion watts of power by 2025 with a saving of over $100 billion.
It is for this reason the New Generation Lighting Initiative is being forced
by the US Government. Dialight will have a growing role to play in bringing
this new electronic lighting technology into everyday use.
Central Costs
In anticipation of the disposal of Weston action was taken early in the year to
reduce Central costs which show a 22% reduction when compared with the first
half of last year.
Outlook
Following the disposal of Weston, Roxboro is now focused on the operations of
Solartron and Dialight, both operating in quite distinct markets.
Solartron’s markets appear to have stabilised and there are some signs of
improvement. Currently good progress in important markets in Asia and Eastern
Europe is being constrained by weak demand in the United States and Western
Europe.
Following the operational changes at Dialight, its performance is expected to
improve. The Opto Electronic Division has returned to growth and with new
opportunities emerging in the lighting and vehicle sectors for high brightness
LED products the Division is expected to continue on its recovery path next
year. Continued investment in the Signals Division will also begin to show
benefits, as the lower cost base and new product introductions begin to take
effect.
Whilst to a significant extent the pace of progress of Roxboro in the second
half will depend upon the performance of the US economy, the Board maintains its
confidence in the quality of and prospects for its businesses.
Sir Alan Cockshaw Harry Tee
Chairman Chief Executive
8 September 2003
Group Profit and Loss Account
Unaudited interim results for the half year ended
30 June 2003
2003 2002 2002
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
Notes £’000 £’000 £’000
Turnover
Continuing operations 58,666 62,790 124,657
Discontinued 14,606 16,398 31,370
operations
2(a) 73,272 79,188 156,027
Operating profit before goodwill
amortisation
Continuing operations 1,999 2,811 5,159
Discontinued 2,836 2,052 3,394
operations
4,835 4,863 8,553
Goodwill amortisation
Continuing operations (556) (435) (913)
Discontinued operations (84) (92) (184)
(640) (527) (1,097)
Operating Profit after goodwill
amortisation
Continuing operations 1,443 2,376 4,246
Discontinued operations 2,752 1,960 3,210
Operating Profit 2(b) 4,195 4,336 7,456
Profit on disposal of discontinued 5 15,586 – –
operations
Profit on ordinary activities before interest and 19,781 4,336 7,456
taxation
Net interest payable (303) (447) (883)
Profit on ordinary activities before 19,478 3,889 6,573
taxation
Tax on profit on ordinary activities 4 (1,557) (1,419) (2,491)
Profit for the financial period 17,921 2,470 4,082
Dividends (932) (1,759) (5,675)
Retained profit 16,989 711 (1,593)
Pence Pence Pence
Dividends per share 7 3.1 3.1 10.0
Earnings per share
Basic 8 31.6 4.4 7.2
Adjusted 8 5.5 5.3 9.1
Diluted 8 31.6 4.3 7.2
Group Balance Sheet
Unaudited interim results at 30 June 2003
2003 2002 2002
30 June 30 June 31 December
£’000 £’000 £’000
Fixed assets
Intangible assets 15,945 19,394 19,454
Tangible assets 14,081 23,996 22,122
Investments 16 16 16
30,042 43,406 41,592
Current assets
Stock 18,919 27,196 23,906
Debtors 26,720 31,178 29,279
Cash at bank and in hand 42,082 5,561 7,747
87,721 63,935 60,932
Creditors
Amounts falling due within one year
Borrowings (60) (20,564) (19,442)
Other creditors (22,590) (25,476) (25,208)
(22,650) (46,040) (44,650)
Net current assets 65,071 17,895 16,282
Total assets less current liabilities 95,113 61,301 57,874
Creditors
Amounts falling due after more than
one year
Borrowings – (17) (7)
Provisions for liabilities and charges (1,563) (1,824) (1,843)
93,550 59,460 56,024
Capital and reserves
Called up share capital 43,168 568 568
Share premium account 5,930 5,841 5,841
Capital redemption reserve 51 51 51
Profit and loss account 44,401 53,000 49,564
93,550 59,460 56,024
Group statement of total recognised gains and losses
Unaudited interim results for the half year ended 30 June
2003
2003 2002 2002
6 months ended 6 months ended 12 months
ended
30 June 30 June 31 December
£’000 £’000 £’000
Profit for the period attributable to equity 17,921 2,470 4,082
shareholders
Currency translation differences on foreign currency net (729) (1,401) (2,987)
investments
Total gains recognised in the 17,192 1,069 1,095
period
Reconciliation of movements in shareholders’ funds
Unaudited interim results for the half year ended 30 June
2003
2003 2002 2002
6 months ended 6 months ended 12 months
ended
30 June 30 June 31 December
£’000 £’000 £’000
Total recognised gains and 17,192 1,069 1,095
losses
Dividends (932) (1,759) (5,675)
Shares issued 69 12 13
Bonus issue expenses (467) – –
Goodwill written back on 21,664 – –
disposal
Net change to shareholders’ 37,526 (678) (4,567)
funds
Balance brought forward 56,024 60,138 60,591
Balance carried forward 93,550 59,460 56,024
Group Statement of Cash Flows
Unaudited interim results for the half year ended 30 June
2003
2003 2002 2002
6 months ended 6 months ended 12 months
ended
30 June 30 June 31 December
Notes £’000 £’000 £’000
Cash flow from operating activities 3 7,068 4,750 12,975
Returns on investments and servicing of finance
Interest paid (502) (519) (985)
Interest received 198 50 103
Net cash outflow from returns on investment and servicing (304) (469) (882)
of finance
Taxation (1,151) (908) (1,789)
Capital expenditure and financial investment
Purchase of tangible fixed assets (997) (1,332) (2,415)
Sale of tangible fixed assets 41 42 82
Net cash outflow from investing activities (956) (1,290) (2,333)
Acquisitions and Disposals
Disposal of Subsidiary undertakings 53,581 – –
Purchase of Subsidiary undertaking – (4,389) (4,357)
Purchase of intangible assets (50) – (473)
53,531 (4,389) (4,830)
Equity Dividends paid (3,916) (3,916) (5,675)
Cash inflow/ (outflow) before use of liquid resources and 54,272 (6,222) (2,534)
financing
Financing
Issue of ordinary share capital 69 12 13
Loan advances (repayments) – 5,437 4,216
Capital element of finance lease rental payments (10) (17) (26)
59 5,432 4,203
Increase/(Decrease) in cash in the period 54,331 (790) 1,669
Reconciliation of net cash flow to movements in net funds/
(debt)
Increase/(Decrease) in cash in 54,331 (790) 1,669
the period
Cash (inflow)/outflow from change in debt and 10 (5,420) (4,190)
lease financing
Change in net debt resulting from cash flows 54,341 (6,210) (2,521)
Translation difference (617) (259) (630)
Movement in net debt in the 53,724 (6,469) (3,151)
period
Net debt at beginning of period (11,702) (8,551) (8,551)
Net funds/(debt) at end of period 42,022 (15,020) (11,702)
Notes to the Financial Report
1) Basis of preparation of interim financial information
The interim financial information has been prepared on the basis of the accounting policies set out in
the group’s statutory accounts for the year ended 31 December 2002,
2) Segmental information
Turnover, operating profit and net assets are
analysed below:
2003 2002 2002
6 months ended 6 months ended 12 months
ended
30 June 30 June 31 December
£’000 £’000 £’000
a) Turnover
By geographical destination:
UK 16,241 17,011 32,787
North America 30,451 36,783 71,596
Other European countries 16,662 15,791 31,439
Rest of the world 9,918 9,603 20,205
73,272 79,188 156,027
By geographical origin:
UK 40,083 42,762 83,180
USA 30,229 34,845 69,205
Other European countries 8,393 7,398 14,945
78,705 85,005 167,330
Inter-segment sales (5,433) (5,817) (11,303)
73,272 79,188 156,027
By business operation:
Dialight 27,567 29,297 59,812
Solartron 31,099 33,493 64,845
Discontinued operations – Weston 14,606 16,398 31,370
73,272 79,188 156,027
2) Segmental information
(continued)
2003 2002 2002
6 months ended 6 months ended 12 months
ended
30 June 30 June 31 December
£’000 £’000 £’000
b) Operating profit
By geographical
origin:
UK 5,075 5,558 9,492
USA 940 633 2,435
Other European (64) 99 (351)
countries
Operating profit before central costs and amortisation of 5,951 6,290 11,576
intangible assets
Central costs (1,116) (1,427) (3,023)
Amortisation of intangible assets (640) (527) (1,097)
Operating profit on ordinary activities 4,195 4,336 7,456
By business operation:
Dialight 355 75 1,014
Solartron 2,760 4,163 7,168
Discontinued operations – Weston 2,836 2,052 3,394
Operating profit before central costs and amortisation of 5,951 6,290 11,576
intangible assets
Central costs (1,116) (1,427) (3,023)
Amortisation of intangible assets (640) (527) (1,097)
Operating profit on ordinary activities 4,195 4,336 7,456
2) Segmental information
(continued)
2003 2002 2002
6 months ended 6 months ended 12 months
ended
30 June 30 June 31 December
£’000 £’000 £’000
c) Net assets
By geographical origin:
UK 20,612 31,699 30,167
USA 16,271 21,370 19,428
Other European countries 1,339 1,329 1,558
38,222 54,398 51,153
Unallocated central net assets 55,328 5,062 4,871
93,550 59,460 56,024
By business operation:
Dialight 21,722 23,048 23,678
Solartron 16,500 18,428 16,682
Discontinued operations – Weston – 12,922 10,793
38,222 54,398 51,153
Unallocated central net assets 55,328 5,062 4,871
93,550 59,460 56,024
3) Reconciliation of operating profit to net cash inflow from operating
activities
2003 2002 2002
6 months ended 6 months ended 12 months
ended
30 June 30 June 31 December
£’000 £’000 £’000
Operating profit 4,195 4,336 7,456
Depreciation 2,137 2,545 4,870
Amortisation of intangible 640 527 1,097
assets
(Profit)/Loss on sale of tangible fixed assets (24) 22 56
Decrease/(Increase) in stocks 297 (2,409) 498
(Increase)/Decrease in debtors (931) 405 1,644
Increase/(Decrease) in creditors 767 (558) (2,635)
Other non cash items (13) (118) (11)
Net cash inflow from operating 7,068 4,750 12,975
activities
4) Taxation
The tax charge of £1,557,000 for the half year to 30 June 2003 reflects the anticipated effective tax
rate for the year ending 31 December 2003. The tax charge arising from the disposal of the Weston
division has been estimated at £166,000.
5) Disposal
On 11 June 2003 the Group completed the disposal of the entire issued share capital of Weston Aerospace,
Norwich Aero Products Inc, Pressure Systems Inc and Pressure Systems International Limited for a gross
cash consideration of £55 million and on a debt and cash free basis.
£’000
Net assets disposed of :
Intangible assets 2,869
Tangible assets 6,790
Stocks 4,520
Debtors 4,877
Cash at bank 1,237
Creditors (3,656)
Provision for Liabilities and charges (579)
Net Assets 16,058
Goodwill previously written off to reserves 21,664
Profit on disposal 15,586
53,308
Proceeds comprise:
Cash* 55,679
Expenses (estimated) (2,371)
Net proceeds 53,308
The cash flow arising on the disposal was as
follows:
Cash received 55,000
Less expenses paid (182)
Less net cash in businesses sold (1,237)
Net cash in flow on disposal of businesses 53,581
*Cash includes the initial consideration and the cash and corporation tax adjustments in accordance with the Sale
and Purchase Agreement.
6) Capital Reorganisation
On 30 June 2003 the group completed a capital reorganisation which comprised the following:
A bonus issue of 56,800,170, redeemable non-cumulative preference shares of 75p each (“B” shares)
through the capitalisation of a sum of £42,600,127 from the Company’s Other Reserve. One “B” share was
issued for each ordinary share held by Qualifying Holders on 27 June 2003.
A share capital consolidation whereby for each existing 1p ordinary share held, the shareholder received
100/189 ordinary shares of 1.89p. Following the capital consolidation on 30 June 2003, there were
30,053,000 ordinary shares of 1.89p each in issue.
7) Dividends
The directors have declared an interim dividend of 3.1p (2002: 3.1p) payable on 16 October 2003 to
shareholders on the register on 19 September 2003.
8) Earnings per share.
2003 2002 2002
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
£000 £000 £000
Profit on ordinary activities after taxation 17,921 2,470 4,082
Amortisation of goodwill 612 527 1,097
Profit on disposal of discontinued operations (after (15,420) – –
taxation)
Profit on ordinary activities after taxation and
before amortisation of goodwill and disposal of
discontinued operations 3,113 2,997 5,179
Number Number Number
Weighted average number of 56,648,500 56,754,000 56,754,000
shares
Diluted effect of share options 400 63,400 –
Diluted weighted average number of shares 56,648,900 56,817,400 56,754,000
Pence Pence Pence
Basic earnings per share
Before amortisation of goodwill and disposal
of discontinued operations
5.5 5.3 9.1
After amortisation of goodwill and disposal of
discontinued operations
31.6 4.4 7.2
Diluted earnings per share
Before amortisation of goodwill and disposal 5.5 5.3 9.1
of discontinued operations
After amortisation of goodwill and disposal of 31.6 4.3 7.2
discontinued operations
9) Events since the balance sheet date
On 7 July 2003 and 18 July 2003 the company redeemed a total of 53,104,565 “B” shares at a cash cost of
£39,828,423. Following redemption of the “B” shares, the cash and reserves of the Company and Group
have reduced by £39.8m
10) The financial information for the financial year ended 31 December 2002 are not the company’s
statutory accounts for that financial year. Those accounts have been reported on by the company’s
auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and
did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985.
11) Shareholder Information
Market values of Ordinary shares and “B” shares for Capital Gains Tax purposes are as follows:
First day of trading market values
30 June 2003
Ordinary shares: 218.5p
“B” Shares: 75.5p
Redemption of B Shares
The next redemption date is 31st December 2003, any shareholders wishing to redeem part or the whole of
their holding should notify the Company’s Registrars by 1st December 2003. Notification to the
Company’s Registrars should be by completing the reverse side of the B share certificate and forwarding
the certificate to the Company’s Registrars to arrive no later than 1st December. Shareholders who
maintain their holding through CREST should contact the Company’s Registrars for advice on the method
of redemption.
– Ends –
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