News

September 6, 2004

REG-Roxboro Group PLC Interim Results

Date/Range: 6-SEP-2004

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 2004.

The Roxboro Group consists of two world leading activities: Solartron in
electronic measurement and Dialight in electronic lighting.

Financial Highlights

–    Turnover of continuing operations up 1% to £59.2 million and by 7% at
constant currency
–    Profit before tax (excluding goodwill) of continuing operations up 161% to
£4.4 million
–    Operating margin before goodwill recovered to 7.5%
–    Adjusted EPS before goodwill up by 69% to 9.3 pence per share
–    Interim dividend up 10% to 3.4 pence
–    Operational cash flows  up to £8.0 million being 181% of operating profit

Operational Review

–    Dialight profitability significantly improved – up 6.5 fold from weak
2003 result
–    Solartron profit advanced 21%
–    Dialight’s Mexican facility now contributing well
–    Far East region particularly buoyant
–    New product introduction pace increases

Harry Tee, Group Chief Executive, said:

“I am delighted to report the return to growth of the Group.  Both our key
activities made good progress in the first half with profits up markedly on the
first half last year.  It is also very pleasing to again report strong cash
generation.

The relocation of much of our US production to Mexico in 2003 was difficult, but
the operational performance has now greatly improved and the benefits are
beginning to be seen in our results

Solartron’s project visibility in the oil and gas sector has improved and
Dialight’s volumes continue to be higher than last year.  Taking these factors
we are well positioned to continue our progress in the second half.”

Financial Results

We are pleased to report that the positive sentiments in our statements of
earlier in the year are reflected in the Group’s results for the first six
months.

Group turnover for the six months to 30 June 2004 increased by 7% at constant
currency and in Sterling terms 1% to £59.2 million (2003: £58.7 million).  For
the continuing businesses, group profit before tax (after goodwill) was £3.9
million (2003: £1.1million), an excellent improvement of 240% over last year.

Group operating cash flows were strong at £8 million representing 181% of
operating profit (2003: £7.1 million) and benefited from the continued
operational improvements brought about by our RoBusT (Roxboro Business
Techniques) initiatives which have become part of Roxboro’s culture.

Adjusted earnings per share advanced 69% to 9.3 pence per share (2003: 5.5 pence
per share).  The Group ended the period with net cash of £5.7 million. The
interim dividend will increase by 10% to 3.4 pence per share (2003: 3.1 pence)
and will be paid on 14 October 2004 to shareholders on the register at 17
September 2004.

Business Review

Solartron and Dialight both made a strong contribution to the group’s overall
performance.  Solartron’s operating profit advanced by 21% on similar turnover
to last year, while Dialight’s operating profit improved by a factor of 6.5
times from its relatively weak performance in the same period in 2003.

Solartron
6 months ended 30th June
2004                    2003
£m                     £m

Sales                                     31.0                   31.1
Operating Profit                          3.3                     2.8

At Solartron, following a slow start the activity level picked up markedly and
the business completed the first half with operating profits 21% ahead of the
same period in 2003.  Although the bulk of Solartron’s products are manufactured
in the UK, a good proportion of its sales are into the US market or other
dollar-denominated sales, such as those into the oil and gas sector.  The recent
weak US Dollar relative to Sterling has therefore limited Solartron’s ability to
grow turnover and to secure an increasing share of the US market.  However,
greater operating efficiencies, driven largely by our RoBusT initiatives,
management of overheads and a trend to higher margin products, meant that
operating margins improved to 11% from 9% last year.  Equally the company’s
ability to generate cash was enhanced by RoBusT, with operating cash flows of
£4.7 million, which was 139% of operating profits

Sales into the Far East improved by 30% over the same period last year and the
company has further strengthened its sales channels in the USA, Middle East and
Far East regions and it is anticipated this will add further growth in these
strategically important markets.

Mobrey/ISA

Some project related work, particularly in the oil and gas sector, was delayed
by customers for a variety of reasons but visibility on these projects improved
at the half-year point.  Some of these are now expected to be awarded in the
second half although not all are expected to contribute to turnover in the
current year.  Among the projects recently secured by the business were an
initial $500k contract to provide fluid analysis equipment to China Petroleum
and a $1.5 million contract for level and flow measuring equipment for the South
Pars Gas Field development in Iran.  Both were joint bids between the Mobrey and
ISA Divisions of Solartron and gave the customer the opportunity to purchase
their fluid analysis requirements from one supplier.

A new range of water ingress sensor products has been introduced, designed to
address the opportunity created by recent legislation requiring all bulk carrier
vessels to be fitted with the technology for safety reasons.

Metrology

Strong sales in the US market, despite the strength of Sterling, more than
compensated for weaker sales in Europe and were driven by investment in the
automotive sector and new product introductions.

A new innovative bore gauge product launched in March has been specified on the
Chrysler world engine programme and by American Axle. Sales into Israel also
increased as the company’s gauging probes are being used by Techjet, a joint
venture company in which Rolls Royce is a partner. Solartron continues to be the
world’s largest producer of gauging probes and the only producer of digital
gauging devices which will increasingly replace analogue devices in service.

Analytical

Following a weak first quarter, sales in the second quarter improved by 28%,
with sales into the Far East being particularly strong. An entirely new
analytical instrumentation platform, which has been in development for the past
two years, will have its primary launch in the second half of the year. The
introduction of this product family will effectively double the size of
Solartron’s available market in the sector and will, over time, improve margins.

Last year Solartron improved its operating profit in the second half by 39% and
while this level of improvement is not expected in the current year, we are
confident of a strong overall performance by the business.

Dialight
6 months ended 30th June

2004                          2003
£m                            £m

Sales                                    28.2                          27.6
Operating Profit                          2.3                           0.4

Sales at Dialight showed improvement in constant currency of 13% when compared
with 2003, however, this was diluted to some extent by the strength of Sterling.
Both the Opto-electronics and Signals divisions of Dialight demonstrated
excellent profit improvement.

Cash generation at Dialight was also exceptionally strong, at £4.9 million, as
the company began to derive the benefits of its move to Mexico in 2003.  This,
together with our RoBusT programme, is improving operating efficiencies and all
the key performance indicators at Dialight.

Opto-Electronics

Dialight was able to take advantage of some market recovery due to its unique
market position in the value added LED indicator market.  Sales through major
distributors in both Europe and the USA, strengthened as their markets improved
in the early part of the year.  Direct sales to OEM’s also grew at double digit
pace.  The recovery in the telecommunications/networking equipment sector drove
growth in sales to contract manufacturers and OEMs alike.  While there was the
normal pricing pressure from contract manufacturers based in China, margins in
the OE division showed an overall improvement as material costs were reduced and
efficiencies improved.  While growth in sales through distributors slowed
somewhat at the end of the period, OEM demand continued to be strong into the
third quarter.

Dialight continues to innovate new LED indicator products for OEMs and launched
a new dual height surface mounted device incorporating novel optical technology
specifically for the server market where two-high yellow and green LEDs are used
extensively to indicate channel status.

Signals

Sales of signals products also grew strongly in the period but the greatest
change was to the profitability of the product lines, which are now benefiting
from their move to Mexico, completed last year.  Production costs have been
significantly reduced across all main product lines and the Mexican operations
are showing significantly improved performance.

While there continues to be some price erosion in road signals modules the
segment is now more stable and with Dialight successfully reducing material
costs, the signals business showed a good improvement in gross margins.  The
rail signalling segment continues to grow steadily with further sales to New
York Transit and increasing sales to OEMs for solid state level crossing lights.
Sales in the aviation line grew well in the period assisted by a Federal
Aviation Authority contract to supply Solid State obstruction lights, which were
shipped in the first half.

In Europe, Dialight is making steady progress in the introduction of its LED
signalling products in road, rail and obstruction lights.  The latest LED
traffic product, Eclipse, was introduced earlier in the year and a number of
traffic system OEMs now have the product installed in field trials.
Expectations are high that the lower price point of the Eclipse range will
accelerate adoption in Europe where the specifications have, until now, resulted
in a more expensive product.

With the increasing use of LED technology in signalling applications, in which
Dialight is a world leader, we expect the Signals Division to continue to
demonstrate good growth as the technology captures market share in road, rail
and obstruction applications.

Illumination

Dialight’s activities in Illumination are at the start-up phase but have
exciting prospects.  Some volume shipments of light engines to OEM’s have begun
but the market is at an early stage in its development

The adoption of Solid State or electronic lighting will be driven by the
significant advantages the technology brings, including greater efficiency and
lower power consumption, greater reliability and longer life and better colour
characteristics capable of being digitally controlled to give a full spectrum of
colour, including shades (or temperatures) of white light such as warm white or
cold white.

To this end Dialight launched Spectramix(TM) at the Las Vegas Light Fair earlier
in the year and patent applications have been made on a number of the features
Spectramix(TM) offers.

Spectramix(TM) allows a Solid State electronic light installation, in any
environment, to change colour dynamically and move progressively through the
colour spectrum or to instantly change from one colour or shade to another.
Applications will include architectural, hotel and restaurant, retail and
merchandising, theatre and studio, signage and eventually domestic lighting
applications.

As the lighting industry begins its transition to Solid State lighting, Dialight
is, we believe, uniquely positioned to be a major player in the emerging
Illumination market, in the same way as the company has already developed in the
Indication and Signalling segments.

BLP

BLP made steady progress, and a modest contribution to profits, in the first
half and continues to see strong interest from US utilities in its X-PulseTM
remote connect/disconnect product for domestic electricity meters, which
utilises local pager networks to provide the remote signal. A significant number
of units are on field trials throughout the USA and production is anticipated to
begin towards the end of the year.

Outlook

Oil and gas operators have recently forecast to increase investment in capital
projects by in excess of 10%, and as a result Solartron has seen considerable
improvement in the visibility of projects in this sector. While the strong
momentum in demand for Dialight’s Opto-Electronic indicator products slowed a
little in the summer months as distributors reduced inventories, volumes
remained above those in the previous year.  Overall the businesses continue to
benefit from operational improvements driven in large part by the Group’s RoBusT
programmes, together with the benefits of lower production costs in Mexico.

Given these factors the Group is well positioned to continue to make progress in
the second half.

Sir Alan Cockshaw                                  Harry Tee
Chairman                                           Group Chief Executive
06 September 2004

Group Profit and Loss Account

Unaudited interim results for the half year ended 30 June 2004

2004            2003            2003
6 months ended  6 months ended 12 months ended
30 June         30 June     31 December
Notes              £’000           £’000           £’000

Turnover

Continuing operations                                                   59,182          58,666         122,173
Discontinued operations                                                      –          14,606          14,606
2(a)             59,182          73,272         136,779

Operating profit before goodwill amortisation

Continuing operations                                                    4,437           1,999           5,437
Discontinued operations                                                      –           2,836           2,836
4,437           4,835           8,273

Goodwill amortisation                                                    (558)           (640)         (1,202)

Operating Profit after goodwill amortisation

Continuing operations                                                    3,879           1,359           4,235

Discontinued operations                                                      –           2,836           2,836

Operating Profit                                       2(b)              3,879           4,195           7,071

Profit on disposal of discontinued operations                                –          15,586          15,585

Profit on ordinary activities before interest and taxation               3,879          19,781          22,656

Net interest payable                                                      (11)           (303)           (326)

Profit on ordinary activities before taxation                            3,868          19,478          22,330

Tax on profit on ordinary activities                    4              (1,598)         (1,557)         (2,612)

Profit for the financial period                                          2,270          17,921          19,718

Dividends                                               5               (1,060)           (932)         (3,042)

Retained profit                                                          1,210          16,989          16,676

Pence           Pence           Pence
Dividends per ordinary share                            5                  3.4             3.1            10.0

Earnings per ordinary share
Basic                                                   6                  7.4            31.6            45.4
Adjusted                                                6                  9.3             5.5            12.6
Diluted                                                 6                  7.4            31.6            45.4

Group Balance Sheet
Unaudited interim results at 30 June 2004

2004           2003           2003
30 June        30 June    31 December
£’000          £’000          £’000
Fixed assets

Intangible assets                                                   14,906         15,945         15,464

Tangible assets                                                     12,284         14,081         13,100
Investments                                                              –             16              –
27,190         30,042         28,564
Current assets
Stock                                                               15,026         18,919         16,118
Debtors                                                             25,226         26,720         25,879
Cash at bank and in hand                                             5,787         42,082          4,332
46,039         87,721         46,329
Creditors

Amounts falling due within one year
Borrowings                                                            (37)           (60)        (2,364)
Other creditors                                                   (18,817)       (22,590)       (19,354)
(18,854)       (22,650)       (21,718)

Net current assets                                                  27,185         65,071         24,611

Total assets less current liabilities                               54,375         95,113         53,175

Provisions for liabilities and charges                             (1,912)        (1,563)        (1,507)
52,463         93,550         51,668

Capital and reserves
Called up share capital                                              3,027         43,168          3,115
Share premium account                                                6,049          5,930          5,976
Capital redemption reserve                                          40,193             51         40,104
Profit and loss account                                              3,194         44,401          2,473
52,463         93,550         51,668

Group statement of total recognised gains and losses
Unaudited interim results for the half year ended 30 June 2004

2004           2003               2003
6 months ended 6 months ended    12 months ended
30 June        30 June        31 December
£’000          £’000              £’000

Profit for the financial period                                   2,270          17,921             19,718
Currency translation differences on foreign currency net           (399)          (729)            (2,281)
investments
Total gains recognised in the                                      1,871         17,192             17,437
period

Reconciliation of movements in shareholders’ funds
Unaudited interim results for the half year ended 30 June 2004

2004           2003               2003
6 months ended 6 months ended    12 months ended
30 June        30 June        31 December
£’000          £’000              £’000

Total recognised gains and losses                                  1,871         17,192             17,437
Dividends                                                         (1060)          (932)            (3,042)
New share capital                                                     73             69                 97
subscribed
Share issue expenses                                                   –          (467)              (459)
Goodwill previously taken to profit and loss                           –         21,664             21,664
account
(89)              –           (40,053)
Redemption of B Shares
Net change to shareholders’ funds                                    795         37,526            (4,356)
Balance brought forward                                           51,668         56,024             56,024
Balance carried forward                                           52,463         93,550             51,668

Group Statement of Cash Flows
Unaudited interim results for the half year ended 30 June 2004

2004           2003            2003
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               8,014          7,068         10,562

Returns on investments and servicing of finance
Interest paid                                                        (57)          (502)          (529)
Interest received                                                      42            198            216

Net cash outflow from returns on investment and servicing            (15)          (304)          (313)
of finance

Taxation                                                          (1,375)        (1,151)        (1,867)

Capital expenditure and financial investment
Purchase of tangible fixed assets                                   (665)          (997)        (1,726)
Sale of tangible fixed assets                                           5             41            101

Net cash outflow from investing activities                          (660)          (956)        (1,625)

Acquisitions and Disposals

Disposal of Subsidiary undertakings                                     –         53,581         52,654

Purchase of intangible assets                                        (50)           (50)           (50)
(50)         53,531         52,604

Dividends paid                                                    (2,112)        (3,916)        (4,883)

Cash inflow before use of liquid resources and financing            3,802         54,272         54,478
Financing

Issue of ordinary share capital                                        73             69             97

Share issue expenses                                                    –              –          (459)

Redemption of ‘B’ shares                                             (89)              –       (40,053)
Loan advances (repayments)                                              –              –       (17,065)
Capital element of finance lease rental                               (7)           (10)           (20)
payments
(23)             59       (57,500)

Increase/ (Decrease)  in cash in the period                         3,779         54,331        (3,022)

Reconciliation of net cash flow to movements in net funds
/(debt)
Increase/(Decrease)  in cash in                                     3,779         54,331        (3,022)
the period
Cash outflow from change in debt and lease                              7             10         17,085
financing
Change in net debt resulting from cash flows                        3,786         54,341         14,063
Translation                                                           (4)          (617)          (393)
difference
Movement in net debt in the                                         3,782         53,724         13,670
period
Net cash/ (debt) at beginning                                       1,968       (11,702)       (11,702)
of period
Net cash at end of period                                           5,750         42,022          1,968

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 2003.

2) Segmental information

Turnover, operating profit and net assets are analysed below:

2004           2003            2003
6 months ended 6 months ended 12 months ended
30 June        30 June     31 December
£’000          £’000           £’000

a) Turnover
By geographical destination:
UK                                                                11,281         16,241         28,562
North America                                                     23,769         30,451         56,005
Other European countries                                          13,986         16,662         31,367
Rest of the world                                                 10,146          9,918         20,845
59,182         73,272        136,779

By geographical origin:
UK                                                                30,381         40,083         71,397
USA                                                               25,535         30,229         58,882
Other European countries                                           7,141          8,393         15,698
63,057         78,705        145,977
Inter-segment sales                                              (3,875)        (5,433)        (9,198)
59,182         73,272        136,779

By business operation:
Dialight                                                          28,157         27,567         57,916
Solartron                                                         31,025         31,099         64,257
Discontinued operations – Weston                                       –         14,606         14,606
59,182         73,272        136,779

2004           2003            2003
6 months ended 6 months ended 12 months ended
30 June        30 June     31 December
£’000          £’000           £’000

b) Profit before interest  and
taxation

By geographical
origin:
UK                                                                  3,533          5,075          9,004
USA                                                                 2,622            940          1,944
Other European                                                      (498)           (64)          (445)
countries
Operating profit before central costs and amortisation of           5,657          5,951         10,503
intangible assets
Central costs                                                     (1,220)        (1,116)        (2,230)
Amortisation of intangible                                          (558)          (640)        (1,202)
assets
Operating profit on ordinary activities                             3,879          4,195          7,071
Profit on disposal of discontinued operations                           –         15,586         15,585
Profit before interest and taxation                                 3,879         19,781         22,656

By business
operation:
Dialight                                                            2,310            355          1,071
Solartron                                                           3,347          2,760          6,596
Discontinued operations – Weston                                        –          2,836          2,836
Operating profit before central costs and amortisation of           5,657          5,951         10,503
intangible assets
Central costs                                                     (1,220)        (1,116)        (2,230)
Amortisation of intangible assets                                   (558)          (640)        (1,202)
Operating profit on ordinary activities                             3,879          4,195          7,071

Profit on disposal of discontinued operations                           –         15,586         15,585
Profit before interest and
taxation                                                            3,879         19,781         22,656

2004           2003            2003
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                                                                 19,170         20,612         21,099
USA                                                                12,730         16,271         14,770
Other European countries                                            1,684          1,339          1,693
33,584         38,222         37,562
Unallocated central net assets                                     18,879         55,328         14,106
52,463         93,550         51,668

By business operation:
Dialight                                                           17,809         21,722         20,406
Solartron                                                          15,775         16,500         17,156
33,584         38,222         37,562
Unallocated central net assets                                     18,879         55,328         14,106
52,463         93,550         51,668
Notes to the Financial Report

3) Reconciliation of operating profit to net cash inflow from operating
activities

2004           2003            2003
6 months ended 6 months ended 12 months ended
30 June        30 June     31 December
£’000          £’000           £’000

Operating profit                                                    3,879          4,195          7,071
Depreciation                                                        1,351          2,137          3,390
Amortisation of intangible                                            558            640          1,202
assets
Profit on sale of tangible fixed assets                               (5)           (24)           (59)
Decrease in stocks                                                    894            297          2,462
Decrease/ (Increase) in debtors                                       379          (931)        (1,988)
Increase/ (Decrease) in                                               543            767        (1,713)
creditors
Increase/ (Decrease) in                                               415           (13)            197
provisions
Net cash inflow from operating                                      8,014          7,068         10,562
activities

4)  Taxation

The tax charge of £ 1,598,000 for the half year to 30 June 2004 reflects
the anticipated effective tax rate for the year ending 31 December 2004.

5)  Dividends

The directors have declared an interim dividend of 3.4p  (2003: 3.1p)
payable on 14 October 2004 to shareholders on the register on  17
September 2004.

2004          2003          2003
6 months      6 months     12 months
ended         ended         ended
30 June       30 June   31 December
£’000         £’000         £’000

Equity Dividends on ordinary
Shares
Interim proposed 3.4p (2003:                              1,023           932           932
3.1p)
Final proposed Nil (2003:                                     –             –          2075
6.9p)
1023           932          3007

Non Equity Dividends on B
shares
Paid                                                         37             –            35

1060           932          3042

6)    Earnings per share.
2004           2003            2003
6 months ended 6 months ended 12 months ended
30 June        30 June     31 December
£000           £000            £000

Profit on ordinary activities after non equity                     2,233         17,921         19,683
dividends & taxation
Amortisation of goodwill                                             558            640          1,202
Profit on disposal of discontinued operations (after                   –       (15,420)       (15,419)
taxation)

Profit on ordinary activities after non-equity
dividends &  taxation and before amortisation of
goodwill and disposal of discontinued operations                   2,791          3,141          5,466

Number         Number         Number
Weighted average number of                                    30,080,700     56,648,500     43,324,000
shares
Dilutive effect of share                                         174,600            400         15,000
options
Dilutive weighted average number of shares                    30,255,300     56,648,900     43,339,000

Pence          Pence          Pence
Basic earnings per share
Before amortisation of goodwill and disposal
of discontinued operations                                           9.3            5.5           12.6
After amortisation of goodwill and disposal of
discontinued operations                                              7.4           31.6           45.4

Diluted earnings per share
Before amortisation of goodwill and disposal                         9.2            5.5           12.6
of discontinued operations
After amortisation of goodwill and disposal of                       7.4           31.6           45.4
discontinued operations

7)   The financial information for the financial year ended 31 December
2003 is 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.

8)    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

– ENDS –

This information is provided by RNS
The company news service from the London Stock Exchange