News

September 17, 2002

REG-Roxboro Group PLC Interim Results

Date/Range: 17-SEP-2002

Short Abstract: THE ROXBORO GROUP PLC INTERIM RESULTS

 

The Roxboro Group PLC, the international specialist electronics company, today
announces interim results for the six months ended 30 June 2002.

The Roxboro Group is built upon two distinct core competences: electronic
lighting and electronic measurement. In both these fields, Roxboro”s companies,
Dialight in lighting, and Solartron & Weston in measurement, are acknowledged
leaders.

H1 2002                    H1 2001
(£m)                       (£m)

Sales                                                                         79.2                       91.9
Operating profit before goodwill amortisation        4.9                       10.6
Profit before tax                                                              3.8                        9.5
Adjusted EPS                                                                  5.3p                      11.4p
Dividend                                                                      3.1p                       3.1p

>     Solartron performed well in first half year
>     Dialight and Weston experiencing weak markets
>     New President and CEO appointed at Dialight
>     Market for electronic lighting products now extending beyond traffic –
contracts signed with US Airforce and New York City Transit
>     Cost base at Weston significantly reduced
>     Weston continuing to drive into the power gas and turbine market

Mr Harry Tee, Group Chief Executive, said:

“Despite difficult trading conditions in key markets, Roxboro continues to trade
profitably and to generate cash.  Our balance sheet is strong and our immediate
focus is to support our customers while keeping costs under control but also
continuing to invest in the opportunities we see in the longer term.”

CHAIRMAN & CHIEF EXECUTIVE”S STATEMENT
6 MONTHS TO 30 JUNE 2002

As anticipated in statements made earlier in the year, the first half result
fell short of that in the same period last year, with the trading environment
for two of Roxboro”s three operating businesses being weak in the first half of
the year.  As has been highly publicised, both the aerospace sector, in which
Weston operates, and the telecommunications industry, in which Dialight
operates, have experienced, and continue to experience, very difficult trading
conditions. Additionally, trading conditions in the United States for electronic
lighting modules for traffic lights changed.  The energy sector, on the other
hand, has remained reasonably solid allowing Solartron, Roxboro”s third
business, to produce an improved performance.

The Group financial performance showed a marked reduction when compared to the
same period last year but a lesser reduction when compared to the second half of
2001.  Group sales were £79.2m (2001: £91.9m) while operating profits before
goodwill amortisation were £4.9m (2001: £10.6m).  Adjusted Earnings per Share
(pre goodwill amortisation) were 5.3p (2001: 11.4p).  Cash flow from operations
was £4.75m (2001: £8.3m). Capital expenditure was £1.33m while £4.4m was
invested in the purchase of Garufo GmbH, the German electronic lighting company
which has now been successfully integrated into Dialight.

The Board proposes to maintain the interim dividend at 3.1p.  The dividend will
be paid on 21 October 2002 to shareholders on the register on 27 September 2002.

Although the current performance of the Group is disappointing, shareholders
will be aware of the difficult and unpredictable conditions prevailing in many
of our markets.  In this environment management priorities are to control costs
tightly while maintaining excellent customer service and continuing to invest in
marketing and product development to ensure that we emerge from these difficult
times stronger than when we entered them.

Across the Group further lean manufacturing and Six Sigma activity continue to
be a priority under the umbrella of Roxboro”s RoBusT programme. It is these
initiatives that continue to drive improvement in our customer service, quality,
working capital management and manufacturing efficiency, and will underpin the
Group”s operating performance in the future.

Operational Review

Dialight

6 months ended                 6 months ended
30 June 2002                   30 June 2001
£K                             £K
Sales                         29,297                         36,370
Operating Profit              75                             4,675

At Dialight operating profits fell from £4.7m in the first half of last year to
virtual break-even in the first half of this year.  There were two reasons for
this.  The continuation of very low demand from the telecoms sector for the
Opto-Electronic Division”s products resulted in sales being over 30% lower than
the same period last year. This business is highly volume sensitive and any
change in volume has a significant effect on profits.  The second reason was the
changes that took place in the US market for electronic lighting modules for
traffic lights. Demand temporarily slowed as certain subsidies were removed
while increasing competition resulted in the market price for a standard traffic
light module falling sharply.  Dialight has responded however by winning a
number of recent bids and renegotiating all key supply agreements to reduce
material costs. Additionally, all traffic product line assembly is being
transferred to our Mexican plant, further reducing costs. The company plans to
launch a new, more competitive range of lighting modules for this market early
in 2003. Dialight is the market leader, with more installed products than any of
its competitors, and is committed to retaining its market leadership in the
sector.  Just over 20% of US traffic lights have now been converted to
electronic lighting technology, leaving a substantial volume yet to be modified.

The market for electronic lighting products is extending beyond traffic
applications. Successes in airfield and rail products will result in new growth
for Dialight and much of the company”s future development will be in higher
margin products.  The US Airforce has placed its first contract to have runway
and taxiway lights at a US Airforce base converted as a trial and New York City
Transit has placed a contract for railway signals, also the first of its kind.

We consider the events of the first half of this year as a hiatus in the
development of our position in the electronic lighting sector rather than a
material change.  As with every new technology, prices fall as volumes increase
and with such a large potential market the entry of competitors was inevitable.

In Europe, the introduction of electronic lighting in a wide range of
applications is making steady progress and the acquisition of Garufo GmbH early
in the year has strengthened our position in this market.

In July Dialight also acquired the design and IP rights of a UK approved
electronic lighting module for traffic lights from Microsense.  Dialight now has
the ability to supply approved traffic products across Europe.

With the long term growth opportunities presented by Dialight, it was decided
some time ago that a management change was required at the top of the company.
After an extensive search, Roy Burton was appointed President and CEO in July
this year. Having previously been responsible for a $1 billion revenue division
of Thomas & Betts, Roy”s experience of managing and growing a substantial
business will be invaluable to Roxboro.

Weston

6 months ended                 6 months ended
30 June 2002                   30 June 2001
£K                             £K

Sales                         16,398                         20,190
Operating Profit              2,052                          3,438

In the aerospace sector, Weston saw orders and sales fall as a result of the
terrorist attacks in the United States 12 months ago and the slowdown in the
world”s economy generally.  Sales were down from £20.2m to £16.4m and operating
profits from £3.4m to £2.1m.  Early management action was taken to counteract
the loss of volume by reducing operating costs, leading to a significant
reduction in the workforce. Investment in R&D, however, was maintained.

Weston”s major customers include the world”s three largest aero-engine
manufacturers, as well as major aero-equipment manufacturers, and sales to these
OEMs has fallen and will fall further in the second half due to reductions in
certain programmes. Rolls-Royce, one of Weston”s biggest customers has forecast
that it will build 36% fewer engines in 2002 than 2001 as a result of the market
downturn.  Weston”s OEM demand is forecast to improve in 2003, driven by the
Rolls-Royce Trent 500 and new Pratt & Whitney and Hamilton Sundstrand
programmes.

The supply of spares into the aftermarket has historically been an important
element of Weston”s business but current market demand is largely being
satisfied from inventory held at distributors, carriers and repair operators.
Pull-through demand at Weston will not improve materially until these stocks
have been run down over the remainder of the current year.

Shipments of pressure scanning systems held up well, as new export markets were
opened up, compensating for the slowdown in the US and European markets.

In this challenging environment Weston has won incremental business on new and
existing programmes at Rolls-Royce, Pratt & Whitney and Hamilton Sundstrand.  In
parallel Weston has continued its drive into the power gas turbine market
started last year and remains confident of the sector”s ability to offer long
term growth as the company”s market share increases.  Development work on new
programmes such as the Rolls-Royce Tay, among others, has been maintained at
both the  UK and US sites.

Solartron

6 months ended                 6 months ended
30 June 2002                   30 June 2001
£K                             £K

Sales                         33,493                         35,378
Operating Profit              4,163                          3,771

Solartron”s performance in the first half was encouraging with a profit
improvement over the prior year. Sales were £33.5m and operating profits were up
to £4.2m from £3.8m last year, with the first half of this year benefiting from
the successful completion of substantial Dualstream II contracts in the Mexican
Gulf.

The results at Mobrey showed good improvement as our management disciplines and
actions resulted in much higher levels of efficiency and customer service.
Mobrey now achieves on-time delivery to our customers of better than 95%, a
material improvement from when we acquired the company two years ago and more in
line with Roxboro”s standards.  This will result in better customer loyalty and
increased business over time.

Our Wet Gas metering technology developments embodied in the Dualstream I and
Dualstream II products continue to gain wider acceptance in both sub-sea and
topside, gas metering, and well management applications. The technology is
gaining world-wide interest with Dualstream I having already gained a large
installed base. The new Dualstream II product, introduced in 2001, has moved the
technology into the more demanding allocation metering application area where in
2002 significant progress has been made in the North Sea, the Gulf of Mexico,
Argentina and the Middle East.  Dualstream II technology is being either
operated or is currently being commissioned by a number of major oil & gas
companies such as BP, Shell and British Gas, among others.  Our growing range of
wet gas meters will continue to offer exciting opportunities for growth and as
more units become operational, the benefits of the technology will accelerate
acceptance in what is a very demanding but equally cautious market.

Outlook

Historically, Dialight has been our most profitable business but it is also
highly volume sensitive.  With current weak demand for telecoms equipment from
our OEM customers being supplied largely from their existing inventory,
production volumes at Dialight are lower than they have been for many years with
no immediate sign of improvement.  Our expectation is that pull-through demand
will not improve before next year and the overall telecoms market will not
improve for some time.  The Signals Division of Dialight is expected to show an
improvement next year with road, rail and airport products all making a
contribution.

At Weston, while OEM sales will continue to be weak, aftermarket recovery and
new programmes are expected to result in an improved performance next year,
although the second half of the current year will show a continuation of the
reductions seen over the past year.

At Solartron, the first half benefited from the successful completion of the
substantial Dualstream II contracts in the Mexican Gulf which the company will
not enjoy in the second half.  Overall, industrial markets remain fragile, which
is likely to be reflected in the second half.

Operational efficiency, customer service and cost control continue to be the
immediate management priorities.  As demand improves and volumes begin to
increase again the Group”s operational gearing will work to our benefit.

The Board remains confident in the strategies being pursued and in the longer
term opportunities for Roxboro but takes a cautious view of the near term.

The Group has a strong balance sheet and positive operating cash flow and we
continue to manage the short term tightly while investing in long term growth
opportunities.

SIR ALAN COCKSHAW                                      H.L. TEE
Chairman                                               Chief Executive

Group Profit and Loss Account

Unaudited interim results for the half year ended 30 June
2002

Restated *      Restated*
2002           2001           2001
6 months ended 6 months ended      12 months
ended
30 June        30 June    31 December
Notes            £”000          £”000          £”000

Turnover
Continuing operations                                                78,331         91,938        174,934
Acquisition                                                             857              –              –
2(a)            79,188         91,938        174,934

Operating profit before goodwill amortisation                         4,863         10,561         16,327
Goodwill amortisation                                                 (527)          (480)          (950)

Operating profit                                                      4,336         10,081         15,377

Operating profit
Continuing operations                                                 4,487         10,081         15,377
Acquisition                                                           (151)              –              –
2(b)             4,336         10,081         15,377

Net interest payable                                                  (447)          (501)          (978)

Profit on ordinary activities before taxation                         3,889          9,580         14,399
Tax on profit on ordinary activities                   4            (1,419)        (3,593)        (5,408)

Profit for the financial period                                       2,470          5,987          8,991

Dividends                                                           (1,759)        (1,766)        (5,682)
Retained profit                                                         711          4,221          3,309

Pence          Pence          Pence
Dividends per share                                    6                3.1            3.1           10.0
Earnings per share
Basic                                                  7                4.4           10.6           15.9
Adjusted                                               7                5.3           11.4           17.6
Diluted                                                7                4.3           10.5           15.8

* Restated on adoption of FRS 19 (see Note 1)

Group Balance Sheet
Unaudited interim results at 30 June 2002

Restated *    Restated *
2002          2001          2001
30 June       30 June   31 December
£”000         £”000         £”000

Fixed assets
Intangible assets                                      19,394        17,303        16,833
Tangible assets                                        23,996        24,946        24,542
Investments                                                16            16            16
43,406        42,265        41,391
Current assets
Stock                                                  27,196        25,195        25,022
Debtors                                                31,178        38,372        31,583
Cash at bank and                                        5,561         5,166         6,708
in hand
63,935        68,733        63,313
Creditors
Amounts falling due within one year
Borrowings                                           (20,564)         (171)      (15,142)
Other creditors                                      (25,476)      (29,778)      (27,439)
(46,040)      (29,949)      (42,581)

Net current assets                                     17,895        38,784        20,732

Total assets less current liabilities                  61,301        81,049        62,123

Creditors
Amounts falling due after more than
one year
Borrowings                                               (17)      (17,626)         (117)
Provisions for liabilities and charges                (1,824)       (1,397)       (1,868)
59,460        62,026        60,138

Capital and reserves
Called up share capital                                   568           567           567
Share premium account                                   5,841         5,816         5,822
Capital redemption reserve                                 51            51            51
Profit and loss account                                53,000        55,592        53,698
59,460        62,026        60,138

* Restated on adoption of FRS 19 (see Note 1)

Group statement of total recognised gains and losses

Unaudited interim results for the half year ended 30 June
2002

Restated *     Restated *
2002            2001           2001
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                        2,470           5,987          8,991
shareholders
Currency translation differences on foreign currency net          (1,401)           1,464            488
investments
Total gains recognised in the                                       1,069           7,451          9,479
period

Prior year adjustment in respect of adoption of FRS 19                490
(Note 4)

Total recognised gains and losses                                   1,559

* Restated on adoption of FRS 19 (see Note 1)

Reconciliation of movements in shareholders” funds

Unaudited interim results for the half year ended 30 June
2002
Restated *     Restated *
2002            2001           2001
6 months ended  6 months ended      12 months
ended
30 June         30 June    31 December
£”000           £”000          £”000

Total recognised gains and                                          1,069           7,451          9,479
losses
Dividends                                                         (1,759)         (1,766)        (5,682)
Shares issued                                                          12             272            272

Net change to shareholders”                                         (678)           5,957          4,069
funds
Balance brought forward (originally £59,648,000                    60,138          56,069         56,069
before adding prior year adjustment of
£490,000)
Balance carried forward                                            59,460          62,026         60,138

* Restated on adoption of FRS 19 (see Note 1)

Group Statement of Cash Flows

Unaudited interim results for the half year ended 30 June
2002

2002           2001           2001
6 months ended 6 months ended      12 months
ended
30 June        30 June    31 December
Notes            £”000          £”000          £”000

Cash flow from operating activities
Net cash inflow from trading operations               3              4,750          8,325         19,807
Outflow related to 2000 exceptional items                                –          (940)          (940)
Cash flow from operating activities                                  4,750          7,385         18,867

Returns on investments and servicing of finance
Interest paid                                                        (519)          (706)        (1,167)
Interest received                                                       50            192            223
Net cash outflow from returns on investment and servicing            (469)          (514)          (944)
of finance

Taxation                                                             (908)        (2,489)        (5,189)

Capital expenditure and financial investment
Purchase of tangible fixed assets                                  (1,332)        (3,312)        (6,182)
Sale of tangible fixed assets                                           42            105            554

Net cash outflow from investing activities                         (1,290)        (3,207)        (5,628)

Acquisitions and Disposals
Purchase of Subsidiary Undertaking                                 (4,389)              –              –
Equity dividends paid                                              (3,916)        (3,687)        (5,445)

Cash (outflow)/inflow before use of liquid resources and           (6,222)        (2,512)          1,661
financing

Financing
Issue of ordinary share capital                                         12            272            272
Loan advances                                                        5,437            500              –
Loan repayments                                                          –          (140)        (3,786)
Capital element of finance lease rental payments                      (17)           (45)           (79)
5,432            587        (3,593)

Decrease in cash in the period                                       (790)        (1,925)        (1,932)

Reconciliation of net cash flow to movements in
net debt

Decrease in cash in the period                                       (790)        (1,925)        (1,932)
Cash (inflow)outflow from change in debt and                       (5,420)          (315)          3,865
lease financing
Change in net debt resulting from cash flows                       (6,210)        (2,240)          1,933
Translation difference                                               (259)            176             83
Movement in net debt in the                                        (6,469)        (2,064)          2,016
period
Net debt  at beginning of period                                   (8,551)       (10,567)       (10,567)
Net debt at end of period                                         (15,020)       (12,631)        (8,551)

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 2001, with the exception of the policy on deferred tax.

Financial Reporting Standard (FRS) 19 – “Deferred Tax” has been adopted in
the interim statement and the comparative figures for both the six month
period ended 30 June 2001 and year ended 31 December 2001 have been restated
accordingly.  The effect on the profit after tax and Group”s net assets is
shown in Note 4 and the effect on earnings per share in Note 7.

2) Segmental information
Turnover, operating profit and net assets are
analysed below:

2002           2001           2001
6 months ended 6 months ended      12 months
ended
30 June        30 June    31 December
£”000          £”000          £”000

a) Turnover
By geographical destination:
UK                                                                  17,011         18,233         35,364
North America                                                       36,783         48,046         90,005
Other European countries                                            15,791         16,460         32,745
Rest of the world                                                    9,603          9,199         16,820
79,188         91,938        174,934

By geographical origin:
UK                                                                  42,762         47,568         93,097
USA                                                                 34,845         42,881         79,502
Other European countries                                             7,398          6,962         13,788
85,005         97,411        186,387
Inter-segment sales                                                (5,817)        (5,473)       (11,453)
79,188         91,938        174,934

By business operation:
Dialight                                                            29,297         36,370         65,921
Solartron                                                           33,493         35,378         68,801
Weston                                                              16,398         20,190         40,212
79,188         91,938        174,934

Notes to the Financial Report

2) Segmental information
(continued)

2002           2001           2001
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                                                                   5,558          6,914         11,725
USA                                                                    633          4,958          7,522
Other European                                                          99             12          (158)
countries
Operating profit before central costs and                            6,290         11,884         19,089
goodwill amortisation
Central costs                                                      (1,427)        (1,323)        (2,762)
Goodwill amortisation                                                (527)          (480)          (950)
Operating profit on ordinary activities                              4,336         10,081         15,377

By business operation:
Dialight                                                                75          4,675          6,223
Solarton                                                             4,163          3,771          6,348
Weston                                                               2,052          3,438          6,518
Operating profit before central costs and                            6,290         11,884         19,089
goodwill amortisation
Central costs                                                      (1,427)        (1,323)        (2,762)
Goodwill amortisation                                                (527)          (480)          (950)
Operating profit on ordinary activities                              4,336         10,081         15,377

Notes to the Financial Report

2) Segmental information
(continued)
Restated *     Restated *
2002           2001           2001
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                                                                  31,699         33,954         32,894
USA                                                                 21,370         21,126         20,746
Other European countries                                             1,329          1,210            893
54,398         56,290         54,533
Unallocated central net assets                                       5,062          5,736          5,605
59,460         62,026         60,138

By business operation:
Dialight                                                            23,048         21,796         20,052
Solartron                                                           18,428         20,583         20,118
Weston                                                              12,922         13,911         14,363
54,398         56,290         54,533
Unallocated central net assets                                       5,062          5,736          5,605
59,460         62,026         60,138

* Restated on adoption of FRS 19 (Note 1)

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

2002           2001           2001
6 months ended 6 months ended      12 months
ended
30 June        30 June    31 December
£”000          £”000          £”000

Operating profit                                                     4,336         10,081         15,377
Depreciation                                                         2,545          2,508          5,068
Goodwill amortisation                                                  527            480            950
Loss/(Profit) on sale of                                                22          (102)          (379)
tangible fixed assets
Increase in stocks                                                 (2,409)        (3,051)        (3,257)
Decrease/(increase) in debtors                                         405        (3,962)          2,432
(Decrease)/increase in creditors                                     (558)          2,322          (420)
Other non cash items                                                 (118)             49             36
Net cash inflow from operating                                       4,750          8,325         19,807
activities

Notes to the Financial Report

4)     Taxation

The tax charge of £1,419,000 for the half year to 30 June 2002 reflects the
anticipated effective tax rate for the year ending 31 December 2002.  The
tax charge for the half year to 30 June 2001 and year ended 31 December 2001
have been restated for FRS19.

FRS 19 – “Deferred Tax” has been adopted for the first time in this interim
statement.  FRS 19 requires full provision for deferred tax.  Previously,
the Group had adopted an approach of partial provision. The change in policy
has been accounted for as a prior year adjustment and previously reported
figures have been restated accordingly.  The effect has been to increase
profit after tax by £5,000 (six months ended 30 June 2001 a reduction of
£259,000, year ended 31 December 2001 a reduction of £221,000) and to
increase net assets at 30 June 2002 by £495,000 (30 June 2001 £448,000,
31 December 2001 £490,000).

5)        Acquisition

On 28 February 2002 the Group acquired the entire issued share capital of
Garufo GmbH for consideration (including costs) of e5.5million.  In addition
the Group purchased for e1.6million the freehold land and buildings
previously leased by Garufo GmbH.  The provisional fair value of net assets
acquired (including the freehold property) amounted to e2million.

6)     The directors have declared an interim dividend of  3.1p (2001: 3.1p)
payable on 21 October 2002 to shareholders on the register on
27 September 2002.

7)    Earnings per share attributable to equity shareholders are based upon
the weighted average number of shares in issue during the period of
56,754,000  (30 June 2001 56,665,000 shares; 31 December 2001 56,705,000
shares).  The diluted earnings per share are based upon the weighted average
number of shares in issue during the period as adjusted for options
outstanding.

Restated *       Restated *
2002           2001             2001
6 months ended 6 months ended  12 months ended
30 June        30 June      31 December
Pence          Pence            Pence

Reconciliation to adjusted earnings per share:
Basic earnings per share                                   4.4           10.6           15.9
Goodwill amortisation                                      0.9            0.8            1.7
Adjusted earnings per share                                5.3           11.4           17.6

* Restated on adoption of FRS 19 (see Note 1)

The effect on basic, adjusted and diluted earnings per share for the half
year to 30 June 2002 has been an increase of 0.01p.

The effect on earnings per share for the six months ended 30 June 2001 a
reduction from 11.0p to 10.6p, and for the year ended 31 December 2001 a
reduction from 16.2p to 15.9p.

Adjusted earnings per share have been reduced from 11.9p to 11.4p for the
six months ended 30 June 2001 and for the year ended 31 December 2001 from
17.9p to 17.6p.

Diluted earnings per share have been reduced from 11.0p to 10.5p for the six
months ended 30 June 2001 and for the year ended 31 December 2001 from
16.2p to 15.8p.

8)        The financial information for the financial year ended
31 December 2001 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.

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