Zetex Plc
21 February 2008
Zetex plc - 2007 Preliminary results
2007 2006 Change
REPORTED RESULTS
Group revenue US$k 126,810 124,134 +2,676
£k 64,638 67,168 -2,530
Adjusted gross margin % 32.9% 30.5% +2.4%
Adjusted operating profit £k 3,993 2,787 +1,206
Reported profit before income tax £k 7,749 1,601 +6,148
EBITDA £k 15,315 9,057 +6,258
Dividend incurred per share p 2.15 2.15 -
UNDERLYING RESULTS
Adjusted operating profit at constant currency £k 5,496 2,787 +2,709
Effect of inventory level change £k (765) (4,240) +3,475
Underlying adjusted operating profit at constant currency £k 6,261 7,027 -766
BALANCE SHEET
Net cash balance £k 15,847 9,966 +5,881
Inventory £k 14,656 14,180 +476
Capitalised R&D £k 4,256 3,600 +656
• Adjusted operating profits up 43 per cent to £4.0 million despite
adverse currency impact of £1.5 million
• Adjusted EPS up from 2.59p to 4.13p
• US$ revenue growth of 2.2 per cent, creditable given 3 per cent decline
in market
• Adjusted gross margin increased from 30.5 per cent to 32.9 per cent
helped by improved operational efficiencies
• Reported operating profit up 395 per cent to £7.2 million
• Cash balances up 59 per cent to £15.8 million
• Continued to increase R&D and invest in sales resources, especially in
Asia, Taiwan to drive further growth
• Final recommended dividend maintained at 1.45p taking the 2007 dividend
per share to 2.15p
Commenting on the outlook, Liz Airey, Chairman, said:
'During 2007, Zetex made significant progress in executing the group's reshaped
strategy, increasing market penetration against the backdrop of a difficult
market whilst improving operational efficiencies.
The financial results for 2007 reflect the early fruits of the hard work that
has gone in to improving Zetex' financial performance. They are a credit to our
management team in the light of the substantial headwinds of difficult markets
and a weak dollar experienced by the group during the year.
Market conditions during 2008 will continue to be challenging, in particular in
the first half as global economic growth is expected to be slow. Industry
analysts forecasts vary widely but generally expect that growth in 2008 will
occur primarily during the second half. As a result of the significant progress
made in repositioning and strengthening the group, the board continues to
anticipate that market penetration will grow in 2008. However, recognising the
difficult market conditions, first half revenues are not expected to be
significantly ahead of the second half of 2007, growth being delivered in the
second half as conditions improve and new products gain traction.'
Enquiries:
Zetex plc
Liz Airey, Chairman
Hans Rohrer, CEO 21 February 020 7638 9571
Thereafter 0161 622 4700
Citigate Dewe Rogerson
Toby Mountford, Justin Griffiths 020 7638 9571
Chairman's statement
During 2007, Zetex made significant progress in executing the group's reshaped
strategy, increasing market penetration against the backdrop of a difficult
market whilst improving operational efficiencies.
The group increased product investment targeted at those areas which promise the
best returns, and further strengthened its sales and engineering force to better
exploit international markets particularly in the Far East.
The financial results for 2007 reflect the early fruits of the hard work that
has gone in to improving Zetex' financial performance. They are a credit to our
management team in the light of the substantial headwinds of difficult markets
and a weak dollar experienced by the group during the year.
Group financial results
Revenue for the year was $126.8 million (£64.6 million), an increase of 2.2 per
cent (2006: $124.1 million (£67.2 million)), against a market decline in Zetex'
sector of 3 per cent. Group adjusted operating profit rose to £4.0 million
(2006: £2.8 million), an increase of 43 per cent. Revenues would have been
higher by another $8 million but for one US distributor going into Chapter 11
and another losing a major customer of its own, making these results all the
more creditable whilst still increasing investment in R&D and sales.
After the share of the profit of the associate, net finance income of £0.6
million and adjusted items of £3.2 million profit, which principally relates to
the disposal of Gem Mill and the pension curtailment. Group profit before tax
for 2007 was £7.7 million (2006: £1.6 million). After a taxation expense of
£0.4 million (2006: £0.9 million credit), the profit from continuing operations
attributable to shareholders was £7.3 million (2006: £2.5 million).
Earnings per share was 7.28p (2006: 2.54p) and 7.23p on a diluted basis (2006:
2.52p). Adjusted earnings per share was 4.13p (2006: 2.59p).
Dividend
On 14 September 2007, the board paid an interim dividend of 0.70p per share in
respect of 2007. At the Annual General Meeting to be held on 28 April 2008, the
board will be recommending a final dividend of 1.45p per share in respect of the
2007 financial year. This will be paid on 6 June 2008 to shareholders on the
register at the close of business on 9 May 2008. The total dividend in respect
of 2007 financial year will therefore be unchanged from that for 2006 at 2.15p
per share.
Board change
Nick Hawkins resigned as a director and CFO on 20 February 2008 to take up an
opportunity to become CFO of a larger company on a pre-IPO basis. The board
recently announced the appointment of Chris Smith as Chief Financial Officer of
Zetex plc with effect from May 2008.
Chris Smith, ACA (age 44), is currently European Finance Director at Scapa Group
plc, an international adhesive tape manufacturing business. Prior to his role at
Scapa he held a number of roles at Courtaulds plc and Akzo Nobel, the
international specialist coatings, fibres and chemicals group, including seven
years based in Germany and Hong Kong. Chris brings to Zetex over 15 years of
senior operational finance experience in a variety of industries and
geographies.
Foreign currency
The board uses hedging arrangements designed to cover unmatched surplus
currencies, mostly relating to US dollars. The hedging arrangements enabled
Zetex to achieve an average rate of US$ 1.92 / £ in 2007 compared to an average
spot rate of US$ 2.00 / £. Hedging arrangements comprise forward contracts,
collars and options. The commercially effective hedging policy has limited the
impact of the weakening US dollar on the consolidated income statement during
the year.
The board's policy on currency hedging continues to aim to protect the group in
the short- to medium-term against exchange rate movements and to provide a level
of currency certainty for operational purposes.
For 2008 the group has hedged around 95 per cent of its 2008 net revenues at a
rate of US$1.97 / £.
Further information on the group's foreign exchange hedging arrangements can be
found in the chief executive officer's business review.
Pension scheme
At 31 December 2007, the Zetex Group Pension Scheme (the 'Pension Scheme')
showed an IFRS deficit of £5.2 million (2006: £8.2 million) as calculated under
IAS 19. The Pensions Committee of the board has been working with the trustees
of the Pension Scheme to manage the pensions liability. Following a consultation
with employees and the trustees, the defined benefit section of the Pension
Scheme was closed to future accrual on 1 September 2007. This reduced the
pension fund deficit by £2.2 million. A defined contribution section of the
Pension Scheme was opened for future employer and employee contributions.
The triennial valuation of the pension scheme took place on 5 April 2007 which
showed a funding deficit of £4.7 million (under the scheme specific funding
measure). Agreement has been reached with the trustees on a repayment plan to
extinguish the remaining scheme specific funding deficit over the years 2009 to
2012. A special contribution of £1 million was made in September 2007 and a
further £1 million will be made in 2008, thereby reducing the deficit further.
Outlook
Market conditions during 2008 will continue to be challenging, in particular in
the first half as global economic growth is expected to be slow. Industry
analysts forecasts vary widely but generally expect that growth in 2008 will
occur primarily during the second half. As a result of the significant progress
made in repositioning and strengthening the group, the board continues to
anticipate that market penetration will grow in 2008. However, recognising the
difficult market conditions, first half revenues are not expected to be
significantly ahead of the second half of 2007, growth being delivered in the
second half as conditions improve and new products gain traction.
Liz Airey
Chairman
21 February 2008
Chief executive officer's business review
Market Environment
The market for semiconductors grew around 2 per cent in 2007. The first half
demand was impacted by excess inventory, and growth in the second half was not
as strong as forecast. Worthy of note is that the market for discrete and analog
products shrunk by 3 per cent, with double digit unit growth being more than
offset by average selling price decline.
This time last year I was quite critical about the forecasted recovery as I felt
it did not have a solid foundation. Industry spokesmen have adopted a very
conservative to negative view about 2008. However, I am more optimistic as I do
see the industry in better shape than when we entered 2007.
With inventories generally at the right level and limited new capacity ramping
up, demand and supply seem to be more balanced than for a long time.
With the uncertainty regarding the overall worldwide economy, it is however
prudent to plan for only moderate growth for the industry.
Most market researchers are currently forecasting around 6 per cent growth for
the industry.
Revenue, Profit and Channels
Despite this difficult market environment, Zetex managed to achieve growth with
revenues of $126.8 million, up by $2.7 million or 2.2 per cent from 2006.
Adjusted operating profit was up from 2006 by 43 per cent from £2.8 million to
£4.0 million.
Almost all the financial metrics have been adversely impacted by the significant
strengthening of sterling versus the dollar. A further examination of this
impact is provided below.
Strengthening our distribution network is essential to fully exploit our product
portfolio. As part of this strategy we added two distributors in the first half
in Asia and two distributors in Europe in the second half.
Whilst these additions did not contribute significantly to our revenues in 2007,
these new distributors are now trained and active in the market place and we
expect to see a positive impact on our revenues during the course of this year.
Inventory and cash
The group continued to improve its cash position and cash reserves increased by
59 per cent to £15.8 million.
As previously reported, we plan to keep our inventory in a band between £14
million and £15 million. The inventory at the end of 2007 was £14.7 million. We
continued to improve the mix and kept aligning it with our selling strategies.
Markets, growth prospects, trends
As in previous reports, I will expand on some of the technologies and products
on which we focus. First I want to cover some market trends relevant for Zetex.
I am very pleased to see some of the expectations we have had at Zetex for some
time, turning into reality.
Reflecting on 2007, the progress made in solid state lighting technologies has,
in many ways, gone beyond our expectations. The efficiency improvement of LED
technology has encouraged the traditional lighting industry to believe that
LED's are becoming a mainstream light source. This has initiated a whole series
of new R&D programs to embrace much more aggressively the development of
mainstream LED lighting fixtures.
Looking forward to 2008, I believe that it will be the year when solid state
lighting starts to become the future of general lighting.
Most of these programs are still in an early stage but are progressing well.
Moreover because energy efficiency is high on the agenda of governments wanting
to act on climate change issues, this will drive legislation and encourage
support initiatives.
The group, with its strong product portfolio and customer engagements, is in a
good position to further capitalise on these accelerating developments.
In August I described some of the initiatives to upgrade our design and selling
capabilities. After our initial focus in Asia we expanded this and I am pleased
to report further progress by adding two distributors in Europe.
These initiatives are starting to show a tangible impact which we expect to
accelerate during the course of the year.
Research and development
New products are the life blood of our industry. We increased our investment in
R&D from £6.6 million in 2006 to £7.2 million in 2007, of which £4.3 million was
capitalised. This represents 11 per cent of revenues and whilst this was broadly
in line with our longer term strategic plan, we moderated spending in line with
slower than anticipated market growth.
As forecast in August, we completed the verification of our digital audio chip
set in Q4, and expect production silicon to become available as planned in Q3 of
2008. We continue to win further quality customers, although the necessary
technical support of this disruptive technology initially limits the number of
new engagements. This situation will continue until the final revision of the
chip set becomes available, as mentioned above, in Q3 2008. This will be the
foundation of a robust set of reference designs, reducing the required day to
day technical support.
We continue to work hard to enrich our portfolio of high brightness LED drivers.
One of the highlights was the announcement of the first dedicated chipset for a
high volume LED based retrofit alternative to a light bulb called in the
industry MR16.
This chipset was announced in November and in order to shorten the time to
revenue, the group followed up with the robust reference design at the very
beginning of the year. In the meantime, we shipped over a hundred evaluation
boards to more than 30 different customers. Whilst it is exciting to be
providing disruptive technologies for very high volume applications, the design
in cycle and production ramp is considerable and tends to be in the 24 month
range. As previously reported we do expect revenues from these technologies in
Q4 2008 accelerating in 2009.
We continued to strengthen our industry leading high performance bipolar
discrete portfolio by adding products targeting specific high volume application
where the technology brings value to the customer and their end product. We are
in the process of releasing more than a dozen MOSFETs designed using a foundry
based process, and we are demonstrating real progress in using third party IP
and manufacturing sources.
I would like to draw to your attention the progress that we are making with our
products for the digital broadcasting systems (DBS) market. As previously
reported, we command a market share of above 50 per cent for circuits
incorporated in the low noise block (LNB) of satellite antenna dishes. Whilst
these products contributed towards our fixed costs, they are having a negative
impact on average gross profit margins, as prices were driven down primarily by
enterprises reverse engineering Zetex' products. We did engage in a program
converting and adding functionality to our DBS products using advanced foundry
technologies. I am very pleased to report that the company executed well and the
design-in of the new products is gaining traction quickly. We expect to see
improved DBS margins in the fourth quarter of 2008.
Financial review
Results
Group revenue in 2007 increased by $2.7 million or 2.2 per cent to $126.8
million (£64.6 million). The market Zetex serves declined 3 per cent in the same
period. The significant changes in US dollar to sterling rates resulted in a
decline in sterling terms of £2.8 million.
Adjusted operating profit was strongly ahead of the prior year at £4.0 million,
an increase of 43 per cent and equivalent to a return on sales of 6.2 per cent.
Overall, operating profit was impacted by £1.5 million as a result of currency
changes, after benefiting £1.3 million from hedge contracts.
At constant currency and before inventory overheads movement, underlying return
on sales was 9.7 per cent (2006:10.5 per cent).
Revenue
Revenue growth would have been higher but for the group's second largest
distributor in the USA filing for Chapter 11 bankruptcy, which was reported at
the interim stage. Additionally, our largest US OEM lost its position with a
major customer during the year for technical reasons unrelated to Zetex.
Together, these accounted for a reduction in revenue in excess of US$8.0
million. Consequently, USA revenue was 11 per cent lower year on year.
Excluding these account losses, revenue in the Americas was 34 per cent up on
2006 in dollar terms, demonstrating strong underlying growth.
Asia revenue started to show the benefit of investment in field sales and
applications staff with revenue ahead 4 per cent, again in dollar terms. The
European region enjoyed good real growth although the transfer of a major
account to Zetex USA reduced the US dollar net growth to just 1 per cent.
As a result, regional revenue was 50 per cent generated in Asia, 36 per cent in
Europe and 14 per cent in USA (2006: 49 per cent, 37 per cent and 14 per cent
respectively).
Zetex continued its drive towards servicing previous smaller OEM customers
through distribution channels and, as a result, grew distribution revenue to 66
per cent of total revenue.
The group has for a number of years adopted a prudent approach to recognition of
distributor revenue, only recognising it in the consolidated income statement
when the products have been sold on by the distributor to the end customer, even
though the distributors have only limited return rights. In this way, $2.3
million of revenue was not recognised in the results for 2007, equivalent to
approximately £0.4 million gross profit, larger numbers than in previous years
(2006: $0.1 million and £0.1 million respectively) as distribution business
becomes more significant to the group as a whole.
In the case where the distributor has no return or cancellation rights, this
revenue is recognised on shipping.
Research & development
R&D is a crucial investment in future growth.
In 2007, the group increased investment in R&D to £7.2 million (2006: £6.6
million), representing 11.1 per cent of revenue (2006: 9.8 per cent). Absolute
expenditure was 9 per cent higher than the previous year.
The group has stringent criteria before capitalising R&D. Of the £7.2 million
(2006: £6.6 million) overall expenditure, £4.3 million (2006: £3.6 million) was
capitalised as product, process or package development, an increase reflecting
the enhanced quality of investment in new products designed to bring economic
benefit in the years ahead. £2.9 million (2006: £3.0 million) expensed direct to
the consolidated income statement.
Additional charges expensed to the consolidated income statement are asset
impairment £0.6 million (2006: £0.5 million) and amortisation of £1.7 million
(2006: £1.4 million).
Therefore, the overall consolidated income statement charge relating to R&D
totalled £5.2 million (2006: £4.9 million).
Sales and marketing
As part of our reshaped strategy, we have deliberately increased investment in
field sales and applications engineers, particularly in Asia. A new sales office
was opened in Taipei during the year. Further heads were recruited in marketing
and application engineering. In local currency terms, people costs in our
regional sales and applications offices increased by 11 per cent. It is
expected that these investments should start to bear fruit in 2008 and beyond.
Adjusted items
Adjusted items comprise such costs or profits that the board believes should be
brought to the attention of shareholders as a result of being unusual in nature
or non-recurring, or simply items that merit separate disclosure. Principal
amongst these items for the year under review were:-
Relocation and rationalisation costs £0.3 million (2006: £0.4 million)
This represents costs related to the support costs, including security costs, of
the previous operating site, Gem Mill, in Chadderton, UK. This was sold during
the year. Also included in this total are residual pension-related costs
related to the previous Trend business that was disposed in 2004;
Profit on sale of Gem Mill site £2.0 million (2006: £nil)
In April 2007, the group completed the disposal of the Gem Mill property. This
profit represents the difference between sale proceeds and book value less
associated sale costs;
Pension curtailment £2.2 million (2006: £nil)
As previously announced, the group made significant alterations to its pension
arrangements in relation to the defined benefit scheme, the key changes being
replacing the link to final salary by reference to fixed current salary plus RPI
and replacing future accrual into the defined benefit scheme by fixed percentage
contributions into a defined contribution scheme;
Corporate advisor costs £0.3 million (2006: £nil)
During 2007, one off costs were incurred in relation to corporate advisors.
Cash flow analysis
During 2007 the net cash position has increased from £10.0 million to £15.8
million at 31 December 2007. Strong working capital management coupled with the
proceeds from the sale of Gem Mill, resulted in the improved cash position.
Inventory increased from £14.2 million to £14.7 million in the year as a part of
deliberate policy to support new product initiatives. A change in the mix of
inventory had an adverse profit impact of £0.8 million (2006: £4.2 million).
Improvements in working capital management generated a £1.9 million cash inflow
in the year.
The board continues to believe that it is necessary to maintain an appropriate
level of net cash going forward to provide both the flexibility to pursue
investment opportunities and to sustain technology development programmes
through cyclical industry downturns.
In more detail, the principal drivers behind the improvement of cash flow were:-
• profit before tax (excluding Gem Mill and pensions curtailment) +£3.6 million
• sale of Gem Mill +£3.0 million
• defined benefit Pension Scheme special contribution -£1.0 million
• dividends paid -£2.2 million
• excess of depreciation and amortisation over capital expenditure +£2.0 million
• working capital management +£1.9 million
Capital expenditure (including capitalised development costs) was higher at £6.1
million (2006: £5.4 million).
Balance sheet analysis
Our total capital investment in the year totalled £6.3 million (2006:£4.9
million), of which £2.1 million (2006: £1.3 million) was committed to tangible
assets, £3.5 million (2006: £2.2 million) related to product development and
£0.7 million (2006: £1.4 million) to the development of our technology
platforms. The main tangible capital expenditure related to various specific
capital projects in our foundry at Zetex Technology Park.
Another key operational goal is to maintain or improve the inventory turns,
which had already been significantly reduced in 2006. Overall inventory was
marginally higher at the year end as part of a deliberate strategy to support
sales initiatives, although the mix was skewed towards lower overhead bearing
products, hence the consolidated income statement charge of £0.8 million.
Measured in turns on a like for like basis, inventory turns improved by over 10
per cent from Q4 2006 to Q4 2007.
The group's previous operating site at Gem Mill was sold to a national house
builder and, as a consequence, the current asset for sale in the 2006
consolidated balance sheet is no longer on the 2007 consolidated balance sheet.
Working capital was £1.9 million lower reflecting increased creditor days from
44 to 58. Debtor days increased slightly from 40 days to 41 days, although
there was positive cash flow of £0.5 million (2006: outflow of £1.3 million).
Tax
In our interim report we indicated that the group's medium term effective tax
rate should be in the range 15 per cent-25 per cent.
The total effective tax rate for 2007 was a 5.3 per cent charge (2006: 58.5 per
cent credit). It should be noted that there were a number of one off items
including the Gem Mill sale, pension deficit reduction and movement in German
tax rate which have all impacted this.
The group generates taxable profits and losses in several jurisdictions,
principally the UK, Germany, USA and Hong Kong and consequently benefits from
overseas tax rate differentials.
Dividend
The charge to retained earnings for 2007, under IFRS, represents the amounts
paid during the financial year, being the final dividend for 2006 of 1.45p per
share and the interim dividend for 2007 of 0.70p per share. The total amount
paid was £2.2 million (2006: £2.2 million).
The board is recommending an unchanged final dividend of 1.45p per share for
2007.
Currency hedging
The group's principal revenue currency is US dollars followed by Euros.
Conversely, the currency of the largest component of the cost base is pounds
sterling, then US dollars and Euros. Consequently, the group is exposed to
fluctuations in exchange rates.
In order to protect its short- to medium-term cash flows and hence
profitability, the group has adopted a formal policy of foreign currency
hedging. The key aspects of this policy are as follows:
• objective is to smooth the effect of currency movements on the
consolidated income statement;
• cover must be taken for the following 18 months and may be extended by a
further six months;
• minimum cover levels range from 90 per cent for the current and following
quarter to 20 per cent for the quarter furthest out;
• permitted instruments are restricted to forward contracts, vanilla options
and collars.
It is not the policy of the group to take speculative positions on currency.
The group does not undertake any hedging of its consolidated balance sheet.
For 2008 the group has hedged approximately 95 per cent of its 2008 forecast
revenues at a rate of US$ 1.97 / £.
Defined benefit pension scheme
The group operates both a defined contribution and defined benefit pension
scheme. The defined benefit pension scheme was closed to new members in 2002.
Note 9 to the financial statements sets out the accounting basis of the defined
benefit pension scheme under IAS 19.
As previously indicated in September 2007, the group made certain changes to its
pensions arrangements. Principal amongst these were the change from final
salary link to August 2007 salary plus RPI (capped) and the replacement of
future accruals into the defined benefit scheme by payments to a defined
contribution scheme. These changes resulted in a one-off curtailment effect of
£2.2 million.
At the end of 2007 scheme assets were valued at £59.4 million (2006: £58.4
million) compared to actuarial benefit obligations totalling £64.6 million
(2006: £66.7 million). The resulting IAS19 deficit of £5.2 million at 31
December 2007 was lower than the £8.2 million deficit at 31 December 2006
largely as a result of the changes to the scheme explained above, although it
should be noted that the deficit may and will change as a result of fluctuating
equity markets.
The current investment strategy of the trustees is a 60:40 split in favour of
equities. The last triennial valuation was performed as at 5 April 2007 and the
valuation has been completed and the next triennial valuation is due on 5 April
2010.
The way forward
Our industry is cyclical, although the amplitudes appear to be more moderate
than in the past. While we deal with the realities of the markets we keep
focused on what has the potential to make the difference, execute our strategies
and effectively deal with stumbling blocks along the way.
I am confident about the long and mid term growth potential of the semiconductor
industry. The biggest unknown factor remains the uncertainty of worldwide
economic developments.
While certain newer products have the potential to achieve high growth even
under difficult market conditions, the majority of our portfolio is still
subject to general market forces.
One of my personal objectives is to reduce time to first revenues and breakeven.
This is the drive behind numerous reference designs targeting high volume
applications introduced to the market during the fourth quarter.
Whilst admittedly this objective is only partially under our control, we must
keep focused on this in order to create and accelerate value creation for our
shareholders.
I believe that the industry is in a good position to capitalise on the continued
volume growth.
I want to thank all of our employees for their commitment, skills and help and
support I have received over the course of the year.
Hans Rohrer
CEO
21 February 2008
Consolidated income statement
Year ended 31 December 2007
2007 2007 2007 2006 2006 2006
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
adjusted adjusting reported adjusted adjusting reported
items items
Revenue 64,638 - 64,638 67,168 - 67,168
Cost of sales (43,384) - (43,384) (46,682) - (46,682)
Gross profit 21,254 - 21,254 20,486 20,486
Adjusted item: bad debt - (310) (310) - - -
Gross profit 21,254 (310) 20,944 20,486 - 20,486
Non direct operating costs (17,261) - (17,261) (17,699) - (17,699)
Operating profit 3,993 (310) 3,683 2,787 - 2,787
Adjusted items:
Relocation and rationalisation costs - (292) (292) - (364) (364)
Severance costs - - - - (861) (861)
Sale of Gem Mill - 1,954 1,954 - - -
Share based payments - (86) (86) - (135) (135)
Pension scheme curtailment - 2,235 2,235 - - -
Corporate advisory costs - (325) (325) - - -
Operating profit pre share of associate's
profit 3,993 3,176 7,169 2,787 (1,360) 1,427
Share of post tax profits of associate
accounted for using the equity method 17 - 17 24 - 24
Operating profit 4,010 3,176 7,186 2,811 (1,360) 1,451
Finance revenue 721 - 721 314 - 314
Finance costs (158) - (158) (164) - (164)
Profit before income tax 4,573 3,176 7,749 2,961 (1,360) 1,601
Income tax (409) 937
Profit for the period attributable to
equity holders of the parent 7,340 2,538
Earnings per share 7.28 2.54p
Diluted earnings per share 7.23 2.52p
All results relate to continuing operations
Consolidated balance sheet
As at 31 December 2007
2007 2006
£ 000 £ 000
Assets
Non current assets
Property, plant and equipment 26,833 30,310
Intangible assets 15,093 13,055
Deferred tax 5,601 5,901
Investment in associate 69 37
47,596 49,303
Current assets
Inventories 14,656 14,180
Current tax 313 159
Trade receivables and prepayments 9,091 9,744
Derivative financial instruments - 1,151
Cash and cash equivalents 16,252 10,730
40,312 35,964
Assets held for sale - 947
40,312 36,911
Total assets 87,908 86,214
Liabilities
Current liabilities
Bank loans and overdrafts 405 764
Current portion of long term liabilities 230 316
Trade and other payables 11,488 9,630
Current tax 855 1,031
12,978 11,741
Non current liabilities
Derivative financial instruments 197 -
Deferred tax 6,739 8,037
Provisions 231 231
Defined benefit pension scheme 5,196 8,240
Long term liabilities 961 761
13,324 17,269
Total liabilities 26,302 29,010
Net assets 61,606 57,204
Equity
Share capital 5,212 5,198
Share premium 36,255 36,093
Own equity instruments (4,420) (4,731)
Foreign exchange differences (1,194) (1,174)
Net unrealised gains and losses 210 892
Retained earnings 25,543 20,926
Equity shareholders' funds 61,606 57,204
Consolidated statement of recognised income and
expenditure
Year ended 31 December 2007
2007 2006
£ 000 £ 000
Profit for the period attributable to equity holders of the parent 7,340 2,538
Foreign exchange loss on translation of foreign subsidiaries (20) (1,239)
Actuarial (loss)/gain on defined benefit pension scheme (483) 2,373
Foreign exchange (loss)/gain from hedging activities (197) 1,253
Foreign exchange (gain)/loss transferred from equity (1,151) 1,016
Income tax credit/(charge) on items taken directly to equity 666 (1,277)
Net (expense)/income recognised directly in equity (1,185) 2,126
Recognised income relating to the period 6,155 4,664
Consolidated cash flow statement
Year ended 31 December 2007
2007 2006
£ 000 £ 000
Operating activities
Net profit for the period before income tax 7,749 1,601
Adjustments for:
Depreciation and impairment of property, plant and equipment 5,617 5,720
Amortisation and impairment of intangible assets 2,512 1,886
Finance cost 158 164
Finance revenue (721) (314)
Profit on sale of property, plant and equipment (1,954) (1)
Share based payments 86 135
Change in value of associate (50) (24)
(Increase)/decrease in inventories (422) 5,758
Decrease/(increase) in receivables 508 (1,263)
Increase/(decrease) in payables 1,772 (1,616)
Difference between pension contributions paid and amounts recognised in the (3,978) (487)
consolidated income statement
Cash flows from operating activities 11,277 11,559
Income tax paid (882) (319)
Net cash flows from operating activities 10,395 11,240
Investing activities
Purchase of property, plant and equipment (1,800) (1,184)
Investment in intangible assets (4,256) (4,213)
Proceeds from sale of property 2,995 -
Finance revenue 721 314
Net cash flows from investing activities (2,340) (5,083)
Financing activities
Issue of ordinary shares 176 552
Sale of own shares held in ESOT 152 20
Finance lease principal repayments (256) (453)
Dividends paid to group shareholders (2,168) (2,148)
Finance cost (158) (164)
Net cash flows from financing activities (2,254) (2,193)
Increase in cash and cash equivalents 5,801 3,964
Movement in cash and cash equivalents
At start of the period 9,966 6,010
Increase in the year 5,801 3,964
Effect of exchange rate changes on cash balances 80 (8)
At end of the period 15,847 9,966
Company balance sheet
As at 31 December 2007
2007 2006
£ 000 £ 000
Fixed assets
Investments 38,000 38,000
Current assets
Receivables 974 3,642
Cash and cash equivalents 4,908 5,515
5,882 9,157
Creditors: amounts falling due within 1 year (932) (542)
Net current assets 4,950 8,615
Total assets less current liabilities 42,950 46,615
Provisions for liabilities and charges (154) (231)
Net assets 42,796 46,384
Equity
Share capital 5,212 5,198
Share premium 36,255 36,093
Own equity instruments (4,420) (4,731)
Retained earnings 5,749 9,824
Equity shareholders' funds 42,796 46,384
Segmental analysis
The group's geographical segments are based on the location of the group's assets. Sales to
external customers disclosed in geographical segments are based on the geographical location of its
customers.
The 2006 full year analysis has been restated so the United States of America is disclosed
separately from the rest of the Americas. Total revenue figures remain unchanged and there is no
impact on the consolidated income statement.
All results relate to continuing operations
2007 2006
£ 000 £ 000
restated
Revenue by destination
Net segment sales
United Kingdom 6,338 5,027
United States of America 8,779 9,786
Continental Europe 17,245 19,847
Asia Pacific 31,456 31,834
Other geographical areas 820 674
64,638 67,168
Revenue by origin
Segment sales
United Kingdom 61,321 60,689
United States of America 10,515 13,131
Continental Europe 25,798 26,800
Asia Pacific 29,146 28,670
Other geographical areas - -
Inter-segment sales
United Kingdom (54,823) (55,522)
United States of America (7,319) (6,600)
Continental Europe - -
Asia Pacific - -
Other geographical areas - -
Sales to external customers 64,638 67,168
2007 2006
£ 000 £ 000
Profit/(loss) by origin
Segment profit before income tax
United Kingdom 3,773 (1,093)
United States of America 272 22
Continental Europe 1,241 1,163
Asia Pacific 1,899 1,359
Other geographical areas 1 -
Net finance income 563 150
Profit before income tax 7,749 1,601
Income tax (409) 937
Net profit for the year 7,340 2,538
Assets and liabilities
Segment assets
United Kingdom 70,175 55,627
United States of America 1,334 2,199
Continental Europe 6,505 11,949
Asia Pacific 4,136 8,723
Unallocated assets (including tax) 5,758 7,716
Total assets 87,908 86,214
Segment liabilities
United Kingdom 16,708 12,671
United States of America 228 1,747
Continental Europe 1,422 4,957
Asia Pacific 152 101
Unallocated liabilities (including tax) 7,792 9,534
Total liabilities 26,302 29,010
2007 2006
£ 000 £ 000
Other segment information
Capital expenditure on tangible assets
United Kingdom 1,836 1,015
United States of America 5 4
Continental Europe 196 234
Asia Pacific 21 10
Depreciation of tangible assets
United Kingdom 5,176 5,296
United States of America 6 7
Continental Europe 363 396
Asia Pacific 31 21
Amortisation of intangible assets
United Kingdom 1,476 1,080
Continental Europe 419 338
Impairment of intangible and tangible assets
United Kingdom 307 468
Continental Europe 369 -
This information is provided by RNS
The company news service from the London Stock Exchange