RNS Number:7940M
First Technology PLC
26 June 2003
26 June 2003
Preliminary Results for the year ended 30 April 2003
ROBUST PERFORMANCE IN A DIFFICULT YEAR
* Against the backdrop of continued global economic and political
uncertainty, the Group has produced a robust performance in a
difficult year
* Gas sensing turnover increased by 5% year-on-year to #25.5 million,
helped by a strong performance from the sale of industrial sensor
safety applications
* Safety and Analysis Division had a record year with turnover
increasing by 24% in US Dollar terms
* In Automotive and Special Products there were some significant
gains in key product areas
* Over 6% of turnover continues to be spent on Research and Development
* Final dividend increased to 6.1p per share (2002: 5.8p per share) making a
total dividend for the year of 9.5p per share (2002: 9.0p per share), up 5.6%
* Total Group turnover was #127.6 million (2002: #137.0 million)
* Strong cash generation with net cash of #0.1 million at the year end (2002
net debt: #12.3 million)
* Gross margin improved to 40.8% (2002: 39.9%) and operating margin*
maintained above 20%
* Profit before tax* was #25.5 million (2002: #28.7 million)
* Adverse currency movements on translation reduced turnover by #4.1 million
and operating profit by #1.1 million
John Shepherd, Chief Executive, commented: "I am very pleased to have joined
First Technology at this stage in the company's evolution. It is my intention to
build on the company's 20-year legacy of profitable growth through continued
investment in quality acquisitions and advanced technologies to create the high
quality products our customers demand. This is still the key to delivering
consistently high returns to our shareholders and fuelling the future growth of
the Group."
Fred Westlake, Chairman, commented: "Compared to our peer group, we continue to
enjoy healthy profit margins, strong cash generation and a high return on
capital employed. Our search for suitable acquisitions, for which we are well
placed, continues. The Board believes that our clear focus, established strategy
and new product pipeline means we are well-positioned to benefit when our
markets improve."
*Before exceptional reorganisation and integration costs and goodwill items
For further information, please contact:
John Shepherd, Chief Executive Lulu Bridges
Oliver Burns, Finance Director Justin Griffiths
First Technology PLC Tavistock Communications
Tel: 020 7600 2288 Tel: 020 7600 2288
High resolution photographs are available to the media free of charge at
www.newscast.co.uk (+44 (0)20 7608 1000)
CHAIRMAN'S STATEMENT
My interim statement was made against a backdrop of global economic and
political uncertainty. However, I did allude to the comforting facts that a
significant proportion of our products were sold into legislated markets and
that we enjoyed strong international market positions in the increasingly
important sectors of safety and the environment. I am pleased to say that such
factors, along with strong management control, have resulted in a robust
performance in a difficult year; it is particularly pleasing to note that, once
again, our operating margin in relation to on-going items was above 20% and we
ended the year debt free. Profit before tax on the same basis was #25.5 million
(2002: #28.7 million) and headline earnings per share was 27.2 pence per share
(2002: 30.0 pence). I do not include in "on-going items" the exceptional
reorganisation and integration costs or goodwill items.
Approximately half of our sales are in the US, where the sluggishness of that
market linked to a significant weakening of the US dollar during the year, had a
negative effect on our overall performance. The effect of adverse currency
movements on the translation of the results of our overseas operations was to
reduce the turnover figure by #4.1 million and to lower the operating profit
figure by #1.1 million. Added to which, the lead up to the Iraqi war and the war
itself, coming as they did in our normally strong last quarter, had a dampening
effect on demand.
Cash Flow
Once again, the business proved to be resilient, especially in its cash
generating abilities. After capital expenditure and acquisition payments of #6.8
million and the payment of #6.9 million in dividends, the Group had net cash of
#0.1 million at the year end compared with a net debt figure of #12.3 million at
the previous year end.
Dividends
Given the continuing strong cash generation of the business, your Board has
decided to recommend an increase in the final divided to 6.1 pence per share
(2002: 5.8 pence) bringing the total dividend for the year to 9.5 pence per
share (2002: 9.0 pence), an increase of 5.6% which is covered 2.8 times by
headline earnings (i.e. profit after tax excluding goodwill items and
exceptional costs).
If approved, the final dividend will be paid on 7th October 2003 to shareholders
on the register at the close of business on 5th September 2003.
Board Changes
On 10th March 2003, John Shepherd joined the Board as Chief Executive having
previously been with Smiths Group plc, where his last position was as Managing
Director of Smiths Detection. John brings considerable experience in the
building and management of profitable international technology based businesses.
I have no doubt our business will gain considerably from his leadership. For
more information on John and his appointment and my own position going forward I
would refer you to our company announcement of 18th February 2003, a copy of
which is posted on our website.
Corporate Governance
First Technology has always been committed to high ethical standards and takes
pride in its open dialogue with investors, employees and customers. The Board
accepts the principles embodied in the Combined Code introduced in June 1998 and
makes every effort to apply them, taking into account the size of the business.
Your Board has discussed the recent draft recommendations of the Higgs and Smith
reports. Whilst we are committed to proper corporate governance, we are
concerned that some of the recommendations may be inappropriate for smaller
companies such as ours, leading to excessive added costs without providing any
substantive improvements in corporate governance. Modifications have been mooted
and it is to be hoped that the final document meets the concerns that many
companies have expressed.
We have always linked the remuneration of our Executives to the profitability of
the business. Consequently no bonuses are being paid to my Executive Director
colleagues or myself in respect of the year being reported.
Environmental Management
In my last interim statement I spoke of the strong belief of the Board that
sound environmental policy contributes to our competitive strength and is to the
benefit of all stakeholders. At that time, five of our eight major operating
sites had achieved certification of the internationally recognised environmental
management standard, ISO 14001. I now am pleased to report that the remaining
three sites also achieved certification in the second half of the year.
Outlook
We remain firmly committed to our strategy of creating and supporting innovative
products and services in our chosen global markets of safety and the
environment.
Our never-ending effort to reduce costs led to increased production in the
Dominican Republic and component sourcing in the Far East. These are trends
which will continue.
All the signs are that the various factors which are currently having an adverse
effect on global economic activity will be with us for some time to come. This
makes it difficult to forecast revenue and profitability in the near term.
Compared to our peer group, we continue to enjoy healthy profit margins, strong
cash generation and a high return on capital employed. Our search for suitable
acquisitions, for which we are well placed, continues.
Your Board believes that our clear focus, established strategy and new product
pipeline means we are well positioned to benefit when our markets improve.
Fred Westlake
Chairman
CHIEF EXECUTIVE'S STATEMENT
Since joining the Company on 10th March, I have been very positively impressed
by the strategy, operations, people and products of First Technology. I am
confident that the inherent strengths of our technology base, manufacturing
process knowledge and workforce commitment give us the ability to build on the
resilience of the business and resume profit growth.
MARKETS
The automotive market worldwide has gone through another difficult period in the
last twelve months. In North America, the major US manufacturers influenced the
market with a series of customer incentives which helped to increase vehicle
production by 2.1% from fiscal year 2002 and thereby had a positive influence on
our shipments. Similar incentives have not been evident in Europe where car
production decreased 0.3% from last year. Despite the incentives, North American
inventories at Ford, GM and Daimler Chrysler increased to a level of over 70
days - up from about 60 days a year ago. Intense price pressures from customers
and the trend to further integration of sensor functions continue.
The Gas Sensing market continues to grow and demand for our products remains
strong, especially in the petrochemicals, mining and automotive emissions
segments. We are also capitalising on some opportunities to sell our products
into adjacent markets such as domestic boiler flue gas monitoring. We have made
significant further inroads into the fast growing Chinese market.
The automotive Safety and Analysis market has also been buoyant this year. All
three of the major markets (Japan, Europe and the US) have seen year-on-year
growth. The drivers were increases in Side Impact Dummy (SID) crash testing,
consumer vehicle rating programmes and further regulatory standard upgrades.
NEW TECHNOLOGY
One of the hallmarks of First Technology is our track record of successful
investment in new technologies which result in the innovative new products
demanded by our customers. Over the last year we have continued to invest
significant resources in new technology development to a value of #8 million or
more than 6% of turnover. In addition, our search for the best available
technologies has led us to collaborate with QinetiQ in the UK - the science and
technology powerhouse recently formed from the British Government defence
research establishments.
In automotive, this continued collaboration has led to the joint development of
a Passive Occupant Sensing Infrared Camera (POSIC) which has been very
positively received by customers as a potential low cost solution to the
regulated requirement in the US scheduled for implementation in 2006 for
detecting the size and position of passengers. Encouraging feedback has been
received from Original Equipment Manufacturers ("OEM's") and in-car trials are
planned in collaboration with customers later this year. This patented
technology still requires further development and field-testing but it is one we
are becoming increasingly optimistic about in regard to future potential.
Another co-development effort with QinetiQ involves a very low cost battery-less
in-tyre air pressure sensor. Although this market is already crowded with a
number of players and technologies, we are investigating supplying a low cost
component to an existing system supplier in a partnership arrangement. This
route to market would provide a quicker, simpler method that should allow us to
evaluate the potential of this technology with a small investment.
In our optical encoder group we have been disappointed in the last year or two
with some delays of promised programmes as sophisticated steering systems get
pushed out by cost sensitive OEM's and delays in 42V architecture. However, we
have continued to work on refinements and validations of our steering sensors
and are now seeing renewed activity as the benefits of the more advanced
steering systems seem to be getting the attention of the OEM's.
We have recently invested in upgrading the technology used in our condensation
sensor to sense rain as well. We are now developing a multi function sensor with
the condensation and rain features combined with our well recognised solar/
twilight/tunnel sensing abilities to provide the market with a sensor that
should provide a very cost effective product to the OEM's.
During the period we have also continued our collaboration with the Swatch Group
in Switzerland on the development of a gyroscope for inclusion in advanced
vehicle dynamic sensing systems and we plan to demonstrate this to customers
shortly.
The investment in gas sensing continues to pay dividends, with 24% of 2002/3
sales coming from products launched in the last two years. Key new products
include the new MICROceLTM range of small sensors. The first of these postage
stamp-sized sensors, the MICROpeLTM catalytic bead device, was launched in May
2003. A number of industrial safety instrumentation manufacturers are currently
designing this sensor and its family members into new instruments for launch in
2003 and 2004, to exploit the reduced size and weight offered by this family of
devices.
Other new sensors entering the market place include a module for insertion into
boiler flues to detect abnormal and unsafe oxygen and carbon monoxide levels,
using our exclusive solid state sensing technology. The US alone manufactures
about 3.3 million domestic boilers per year and detecting toxic carbon monoxide
leakage at its source is important when many of these systems heat and circulate
air from the boiler around the house. A leading US boiler manufacturing partner
is currently evaluating the device and we hope to see the first significant
sales for this application in 2004.
We are also investing in the development of biosensors to detect hazardous
airborne substances in industrial environments. Areas of opportunity include
industrial processes using potentially harmful enzymes, such as in the baking
industry and the manufacture of washing powders, as well as industrial airborne
products from mould in air ducts and concealed in structural panelling (an
increasingly common problem in buildings, especially in North America). We have
teamed up with and taken an equity stake in a UK based biotechnology company to
develop and evolve its established technology into sensors specifically for
industrial applications. The first product for launch in 2004 will be a sensor
for subtilisin, an enzyme which is hazardous to workers engaged in the
manufacture of 'biological' detergents.
In Safety and Analysis, new product development remains an important focus in
order to keep pace with constantly changing crash environment methods and
procedures. Key developments in the last year include the iDummyTM which
redefines the concept of a dummy. iDummyTM changes the product to an integrated,
intelligent dummy with in-dummy data acquisition, sensors, cabling and network
with no umbilical cord and no additional mass. WorldSID (a side impact dummy) is
the first dummy to include the iDummyTM capabilities.
Demand for new dummy sensors is increasing and to meet this demand we are
actively developing several new products.
OPERATIONS
Gas Sensing
The Gas Sensing division had another strong year, with sales increasing by 5%
year-on-year to #25.5 million. During 2002/03 the US Dollar weakened
significantly and, as approximately half of the sales are in that currency,
there was significant erosion of the Sterling value of sales. At comparable
exchange rates, total sales grew by 7%.
The growth was helped by a very strong performance from the sale of sensors for
industrial safety applications, with these sales increasing by 11% during the
year. This increase arose from internal organic growth in the regulated and
legislated industrial safety markets, combined with taking market share from
direct and vertically-integrated competitors. Demand from the major markets in
this segment remained strong throughout the year, particularly from the
petrochemical, mining and municipal areas, and sales of catalytic bead
combustible gas sensors (pellistors) increased by 31%.
Rapidly growing sales of our IRidium(R) infrared sensor module family also helped
sustain growth. Over 2,000 modules were sold to a number of vehicle exhaust gas
analyser manufacturers in 2002/03. The portable analyser incorporating IRidium(R)
100 manufactured by OTC, a subsidiary of the US SPX Corporation, has been
particularly successful. During the year, several other analyser manufacturers
in the US, Europe and the Far East completed the design of the unit into their
new products. Thus, sales of this sensor module are expected to continue growing
as these new analysers are launched. Sales of the nitric oxide automotive
exhaust gas sensor for the US regulated market continued to dominate this small,
but significant, niche in 2002/03.
China continues to be an exciting area of growth for our safety, flue-gas
emissions and automotive sensors. Total sales to the Far East in 2002/03
increased by 44%. The lower-specification IRidium(R) 50 infrared sensor module was
launched successfully at a major trade show in China and achieved its first
sales there during the year. There is now a number of very promising prospects
currently sampling the device for incorporation into locally manufactured
analysers. Many Chinese cities have extensive pollution problems, exacerbated by
the growing number of cars used as the middle-class becomes more prosperous and
the Chinese authorities seem determined to reduce city pollution by 2008 (when
they host the Olympic Games). Much of the enforcement of the existing emissions
regulations is done by local police forces, equipped with portable exhaust
analysers, and the IRidium(R) 50 will serve this market very well.
We are continuing to focus significant sales and marketing resources on China
and the Far East and anticipate sustained strong growth in 2003/04 and beyond.
Other Manufacturing
Automotive and Special Products
In Automotive and Special Products we made some significant gains in key product
areas. In US Dollar terms, the solar/twilight sensor business at Ford was up by
30%, tunnel/twilight sensor business was up 70% overall and our 4-Zone solar
sensor business increased 35% at Daimler Chrysler. These gains have been offset
somewhat by continued intense price pressure.
We have continued to make significant investments in new product development in
order to offset the reducing sales of one of our original and most profitable
products - the Fuel Cut Off (FCO) switch. The rate of reduction in FCO sales is
partly dependent on how quickly the function is taken up by the airbag sensors
and is, therefore, difficult to forecast.
Excluding last year's one-off cooling fan project for Ford, overall
electromechanical product sales increased by 10% in US Dollar terms, with sales
of our circuit protection devices for domestic heating systems performing
particularly well showing a 32% increase overall from last year.
The market for our communications ceramic products continues to be depressed and
any turn around from this three year decline is difficult to predict. However,
there was a small increase in sales over prior year in the second half. The
other ceramic based products - Supplemental Vehicle Heaters - have fared much
better with shipments more than doubling from the prior year. Prospects for this
product range are good.
We have added further impetus to reducing our cost of operations during the year
and have focussed on three primary tasks:
* Further reduction of FCO costs
* Improvement of margins and cash flow
* Speeding up introduction of new products
During the year we implemented the difficult decision of discontinuing
manufacturing at our Farnborough UK facility. This will result in net annual
savings of #0.9 million.
Despite the tough market conditions and the resultant intense price pressure we
have managed to hold, and in many cases increase, the operating margins of our
automotive products. We have achieved this through further intensification of
our Lean Manufacturing initiatives by dedicating more resources to the
never-ending task of eliminating waste and improving the flow in our processes.
We have continued to increase production in our Dominican Republic facility
which we have recently expanded for the second time in three years.
In response to the current US trend of cutting costs and features from vehicles,
we continue to aim for the development of products which will be either required
on future vehicles or bring additional value for OEM's by combining
functionality. Overall, in this division, we dedicate more than 6% of revenue to
new product development in order to fuel the growth of the business.
New products and applications introduced in the last year include:
* Battery Cut Off devices for a dual voltage North American vehicle.
* Twilight (Headlight Control) sensor for a US produced Japanese vehicle.
* Combination Solar (Climate Control) and Twilight sensor for a US produced
Japanese vehicle.
* Combined Tunnel and Twilight sensor on Audi A8.
* The first Air Quality Sensor commitment from Ferrari who will also take
the First Technology solar/twilight and condensation sensors.
* A dual zone solar sensor for multiple European customers.
* A combined solar twilight sensor for Volvo.
All of these products have either recently started shipment or will start in the
next eighteen months.
Safety and Analysis
This division had a record year with sales up 24% in US Dollar terms. All three
of the major markets (Japan, Europe and the US) enjoyed year-on-year increases
in shipments despite the fact that the overall automotive market remained
difficult.
Consumer vehicle ratings and safety awareness remain the drivers for this
business. Key items which have continued to drive the business forward include
EuroNCAP adopting the ES-2 (mid-size male) dummy to rate vehicles in side impact
crash tests, the US Insurance Institute for Highway Safety (IIHS) adopting the
SIDIIs (small female) to rate vehicles in side impact crash tests and also
adopting a new test that represents a sports utility vehicle or truck because of
the growing number of truck to car side impact crashes in the US.
In the US the government announced plans to upgrade the current side impact
standard following the lead of the consumer test programmes. The new ES-2 and
SIDIIs dummies are proposed candidates to be used in tests mandated by this
standard. The proposed rule will address new injury areas including the head and
abdomen. In Europe, regulators are considering upgrading the European side
impact standard using our ES-2 dummy. These pending US and European rule changes
are positive developments for future sales.
During the last year, the WorldSID programme came to fruition with the shipment
of 7 pre-production dummies. These dummies represent the second version of this
new product and were shipped to most of the world's OEM's. The prototypes will
be tested and evaluated during the next several years, after which consumer
tests or legislation will drive the extent of additional sales.
Sales of the First Technology Safety Systems (FTSS) virtual dummy software,
known as the Finite Element Models (FEM), continued to grow for the fourth
straight year improving 40% on top of last year's 50% increase in local currency
terms. The FEM's are the standard test device to optimise restraint systems in
pre-production simulations. Virtual crash tests provide additional test data to
evaluate new regulations and restraint designs. Our customers are demanding more
complex models which require upgrades to earlier FEM's developed five years ago.
This range of products provides a useful aftersales income stream.
Another key driver for growth is our continuing push to provide local technical
support near our customers in the US, Far East and Europe. Service Centres in
Liberty, Ohio, Nagoya, Japan, Heidelberg, Germany and Delft, Netherlands
continue to expand our ability to provide full service and repair facilities to
meet customer demands. Recent awards to these service centres include a new
contract at Honda America located in Ohio. This multi-year contract is the first
OEM customer and it is worth $1 million over three years. Toyota awarded FTSS
Japan a calibration contract to service dummies and instrumentation, which is
worth $300,000. Toyota suppliers are expected to follow Toyota's lead. Renault
selected FTSS Germany to service FTSS dummies in a contract also worth $300,000.
Within our instrumentation company (HITEC) we have recently secured a large
order to supply instrumentation for a torque sensitive power assisted wheelchair
which will enter the market this year. This and other medical applications will
provide this business with good growth opportunities.
Component Distribution (RDI)
Trading throughout the period was exceptionally difficult. In common with many
other European distribution companies, RDI's business was adversely affected by
the downturn in the IT, electronics and telecoms sectors, whilst sales to
automotive customers were affected by pricing pressures. Last autumn a
reorganisation of the Group's automotive and distribution activities took place
which transferred those activities not related to third party component
distribution to other parts of the Group and focussed RDI on its core activity.
RDI has been slimmed down to 43 staff and is positioned to benefit from the
upturn in the market whilst minimising its cash exposure in the interim.
I am very pleased to have joined First Technology at this stage of the Company's
evolution. Fred Westlake has led the Company for almost 20 years of profitable
growth and I take this opportunity to thank him on behalf of the shareholders
and employees for making the Company what it is today and, on behalf of Fred, I
thank them for the support they have given him and their continued commitment.
It is my intention to continue to build on this legacy through continued
investment in quality acquisitions and advanced technologies to create the high
quality products our customers demand. This is still the key to delivering
consistently high returns to our shareholders and fuelling the future growth of
the group.
John Shepherd
Chief Executive
FINANCIAL REVIEW
Group Performance
Total Group turnover of #127.6 million was 7% lower than the prior year figure
of #137.0 million. Of this #9.4 million decline, #4.1 million is due to adverse
currency translation. Gas Sensing turnover grew by 5% but, because almost half
of this segment's revenues is made in US Dollars, the Sterling value of these
revenues was adversely affected by the weakness in the US Dollar relative to
Sterling. Within Other Manufacturing, sales of crash dummies and related
products grew strongly in local currency, especially in the second half of the
year. However, last year's turnover for Other Manufacturing included #5.5
million for two product lines that have been discontinued during the year and
for which sales of only #0.9 million were recorded in the current year. Sales of
the mature fuel cut off product also fell by #2.7 million, in line with
expectations. Component Distribution turnover fell by 17% (22% in local
currency), which reflects the very poor trading conditions in the telecom and
electronics sectors in France.
Gross profit fell by #2.6 million to #52.1 million, although the gross margin
grew to 40.8% of turnover (2002: 39.9%). Operating expenses before goodwill and
exceptional costs increased by 4% to #25.6 million (2002: #24.6 million). Within
operating expenses, gains from foreign exchange transactions were #0.7 million
lower in the period compared to last year, whilst the Group benefited from a
number of small non-recurring items in the prior year which reduced 2002 costs.
Despite the difficult trading environment in which we are currently operating,
the Board believes that it is vital to continue to invest in new product
development. We have therefore continued to spend over 6% of turnover on R&D
activities and a number of the current projects are discussed further in the
Chief Executive's Review.
During the first half year, the Group announced that it was ceasing
manufacturing activities at the Farnborough site and reorganising the operations
of RDI in Paris. This has involved the transfer of all European logistics for
the Automotive and Special Products division from Paris to Farnborough. These
actions were successfully completed during the second half-year. Due to the
continuing poor trading of the Component Distribution business it was decided to
make further cost reductions in Paris in the second half. The total exceptional
charge for all of these actions was #1.5 million before tax. The Group expects
to achieve annualised savings of at least this amount in future years.
Excluding the exceptional costs and goodwill items, the Group operating profit
fell by 12% to #26.5 million (2002: #30.1 million). Of this #3.6 million
decline, #1.1 million is due to adverse currency translation and a further #0.7
million was due to lower gains on foreign exchange transactions referred to
above. The operating margin was 20.8% (2002: 22.0%).
Profit before tax (PBT) fell to #10.4 million (2002: #19.7 million), due to
lower turnover, increased exceptional items of #1.5 million (2002: #0.3 million)
and the goodwill impairment charge of #4.9 million (2002: #nil). PBT, excluding
exceptional costs and goodwill items, fell by 11% to #25.5 million (2002: #28.7
million). Interest expenses of #1.0 million (2002: #1.4 million) arose primarily
on the balance of borrowings made to finance previous year acquisitions.
Interest expenses include the amortisation of up-front facility fees, commitment
fees on the undrawn portion of the bank facilities and a charge for the fair
valuation of an interest rate swap. The interest charge was covered more than 11
times or, excluding goodwill items, more than 25 times.
Tax
The tax charge for the year was 19.5% of profit before tax and goodwill items
(2002: 21.1%). No tax relief is available on the amortisation of goodwill. The
current year charge includes a credit of #0.4 million (2002: #1.0 million)
related to prior year items. The underlying tax rate (i.e. excluding the prior
year credit) has been reduced to 21.2% (2002: 24.6%) The Group continues to
benefit from its operations in lower tax environments and an efficient corporate
structure.
Earnings Per Share (EPS) and Dividends
Basic EPS for the year were 7.6p per share (2002: 18.2p). The basic EPS figure
includes non-cash losses of 11.5p per share (2002: 11.5p) related to goodwill
amortisation, 6.5p (2002: nil) related to goodwill impairment, and a loss of
1.6p per share (2002: 0.3p) related to exceptional costs, net of tax credit. Our
preferred measure of 'Headline EPS' (i.e. excluding goodwill items and
exceptional costs, net of tax credit) fell by 9.3% to 27.2p per share (2002:
30.0p).
The Board is recommending a final dividend of 6.1p per share (2002: 5.8p), an
increase of 5% which, together with the interim dividend already paid of 3.4p
per share (2002: 3.2p), will make a total dividend for the year of 9.5p per
share (2002: 9.0p), if approved. The dividend is covered 2.8 times by headline
earnings (2002: 3.3 times).
Goodwill Impairment
In accordance with UK Accounting Standard FRS 11, Impairment of Fixed Assets and
Goodwill, the directors have reviewed the carrying value of goodwill on the
consolidated balance sheet.
Given the operating performance of the Component Distribution business in the
current year and that the directors do not consider it likely that this business
will show any significant improvement within the medium term, it has been
decided to write down fully the unamortised goodwill attributed to this business
on acquisition, totalling #0.9 million.
The directors have also reviewed the solid state gas sensor products acquired
with the purchase of Capteur Sensors and Analysers Ltd., three years ago. The
development of the market for this product range has taken longer than expected.
The directors believe that there are good prospects for solid state products in
the future. Since the volumes and timing of these revenues are less predictable
in current circumstances, the value of the unamortised portion of goodwill that
arose on the acquisition has been reduced by 50% (equivalent to #4.0 million).
Balance Sheet
Net assets fell by #2.7 million to #160.7 million (2002: #163.4 million),
including goodwill of #138.3 million (2002: #151.9 million). The effect of
translation rates on net assets was negligible because foreign currency
borrowings effectively hedged overseas net assets. Working capital, (excluding
corporate income taxes and items related to deferred consideration), was reduced
by more than #2 million to #17.5 million and the ratio of working capital to
annualised turnover improved to 13.7% from 14.4%. Overall return on capital
employed (as measured by PBT before goodwill and exceptional items as a
percentage of net tangible assets) exceeded 100%.
At the balance sheet date, the Group had net cash of #0.1 million (2002 net
debt: #12.3 million). The Group had undrawn committed multi-currency facilities
under its revolving credit facility of #33.3 million at year end.
Pension Accounting
The Group adopted FRS 17 last year. The decline in market values of equities and
falling investment returns over the recent past have resulted in deficits
arising on both of the Group's defined benefit schemes, but the movement in the
deficit arising from actuarial losses is now reflected in the Statement of Total
Recognised Gains and Losses, rather than distorting the underlying operating
performance of the Group. The deficit on the value of the defined benefit
schemes' assets compared to their liabilities has increased during the year by
#1.0 million to a figure of #2.9 million, before the associated deferred tax
credit.
Cash Flow
The Group generated #29.8 million (2002: #34.6 million) of net cash inflow from
operating activities. Capital investment, excluding the cost of acquisitions,
was #5.1 million (2002: #4.1 million). This figure includes a trade investment
of #0.5 million. Cash outflows on acquisitions totalled #1.7 million (2002: #4.0
million), all of which comprised deferred payments related to previous years'
acquisitions. Other cash demands included dividends of #6.9 million (2002: #6.5
million) and corporate taxes of #4.3 million (2002: #3.3 million).
Management of Financial Risk
Funding, interest rate, foreign currency and credit risks are the financial
risks faced by the Group. The Group operates a central Treasury activity,
responsible for all debt and liquidity management, interest rate and foreign
exchange requirements. Treasury activity is the responsibility of the Finance
Director. Treasury is not a profit centre and does not undertake speculative
financial transactions or utilise off balance sheet financing vehicles.
Summary
Over the past few years, First Technology has considerably broadened its product
offerings through investment in both organic growth and carefully targeted
acquisitions. As a result, the Group has been able to withstand the current
period of economic uncertainty and the maturing of some of our older products.
The Group has been a consistent generator of cash; over the past three years,
the Group has invested #24 million in R & D for its product range as well as
paying over #19 million to shareholders in the form of dividends. Over the same
period, net debt of #37 million has been extinguished. Consequently, First
Technology has a firm financial basis on which to face future challenges and to
deliver growth in shareholder value.
Oliver Burns
Finance Director
NOTE: The average rates used to translate the results of the US, Euroland and
Japanese subsidiaries were $1.55/# (2002: $1.43/#), Euro1.54/# (2002: Euro1.63/#), and
Yen 188/# (2002: Yen 181/#).
FIRST TECHNOLOGY PLC
UNAUDITED PRELIMINARY RESULTS ANNOUNCEMENT
Group Profit and Loss Account
for the year ended 30th April 2003
Note
2003 2002
#'m #'m
Turnover 2 127.6 137.0
Cost of sales (75.5) (82.3)
-------- --------
Gross profit 52.1 54.7
Operating costs
Integration costs - (0.3)
Reorganisation costs (1.5) -
Goodwill:
- amortisation 8 (8.7) (8.7)
- impairment 8 (4.9) -
Other operating costs 3 (25.6) (24.6)
Total operating costs 3 (40.7) (33.6)
-------- --------
Operating profit 11.4 21.1
Finance charges (net) 4 (1.0) (1.4)
-------- --------
Profit on ordinary activities
before taxation 10.4 19.7
Tax on profit on ordinary
activities 5 (4.7) (6.0)
-------- --------
Profit for the financial year 5.7 13.7
Dividends paid and proposed 6 (7.2) (6.8)
-------- --------
Retained (loss)/profit for the
financial year (1.5) 6.9
======== ========
Headline earnings per share 7 27.2p 30.0p
Basic earnings per share 7 7.6p 18.2p
Diluted basic earnings per share 7 7.6p 18.2p
Dividends per share 6 9.5p 9.0p
Profit on ordinary activities before
taxation, goodwill items,
reorganisation and integration
costs #25.5m #28.7m
All trading activities arise from
continuing activities.
Group Balance Sheet
as at 30th April 2003
Note 2003 2002
#'m #'m
Fixed assets
Intangible assets 8 138.3 151.9
Tangible assets 16.8 17.8
Investments 0.5 -
-------- --------
155.6 169.7
Current assets
Stocks 13.9 11.8
Debtors 24.8 28.9
Cash at bank and in hand 3.8 3.2
-------- --------
42.5 43.9
Creditors: amounts falling due
within one year
Bank loans and overdrafts 9 (3.7) (6.7)
Other creditors (31.2) (32.6)
-------- --------
(34.9) (39.3)
-------- --------
-------- --------
Net current assets 7.6 4.6
-------- --------
Total assets less current
liabilities 163.2 174.3
-------- --------
Creditors: amounts falling due
after more than one year
Bank loans 9 - (8.8)
Other creditors (0.5) (0.8)
-------- --------
(0.5) (9.6)
-------- --------
Net assets excluding pension
liability 162.7 164.7
Pension liability (2.0) (1.3)
-------- --------
Net assets including pension
liability 160.7 163.4
======== ========
Capital and reserves
Called up share capital 10 7.5 7.5
Share premium account 48.7 48.7
Merger reserve 69.6 69.6
Profit and loss account 11 34.9 37.6
-------- --------
Equity shareholders' funds 160.7 163.4
======== ========
Statement of Total Recognised Gains and Losses
for the year ended 30th April 2003
2003 2002
#'m #'m
Profit for the financial year 5.7 13.7
Foreign currency translation (0.1) (0.6)
Actuarial loss recognised in
the pension schemes (1.6) (2.7)
Deferred tax thereon 0.5 0.8
-------- --------
Total recognised gains and losses
relating to the year 4.5 11.2
======== ========
Group Cash Flow Statement
for the year ended 30th April 2003
Note
2003 2002
#'m #'m
Net cash inflow from operating
activities 29.8 34.6
Returns on investments and servicing
of finance 12 (0.7) (1.3)
Taxation 12 (4.3) (3.3)
Capital expenditure and financial
investment 12 (5.1) (4.1)
Acquisitions and disposals 12 (1.7) (4.0)
Equity dividends paid (6.9) (6.5)
-------- --------
Net cash inflow before financing 11.1 15.4
Financing 12 (10.6) (17.2)
-------- --------
Increase/(decrease) in cash in the year 0.5 (1.8)
======== ========
Reconciliation of operating profit to net cash
inflow from operating activities
2003 2002
#'m #'m
Operating profit 11.4 21.1
Depreciation and amortisation charges 18.4 14.1
(Increase)/decrease in stocks (2.5) 1.7
Decrease in debtors 3.1 1.4
Increase/(decrease) in creditors 1.0 (3.1)
Loss on disposal of fixed assets - 0.2
Adjustment for pension funding (0.6) (0.6)
Exchange differences (1.0) (0.2)
-------- --------
Net cash inflow from operating activities 29.8 34.6
======== ========
Notes to the Unaudited Preliminary Statement
for the year ended 30th April 2003
1. The results for the year ended 30th April 2003 are unaudited.
The results for the year ended 30th April 2002 as shown in this statement, do
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985, but have been derived from the full audited financial
statements for the year ended 30th April 2002. These have been filed with the
Registrar of Companies. The report of the auditors on the financial statements
for the year ended 30th April 2002 was unqualified and did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985.
Accounting policies are consistent with those applied for the audited financial
statements for the year ended 30th April 2002.
2. Segmental information
All trading activities arise from continuing operations.
(a) Turnover by origin:
2003 2002
#'m #'m
UK 43.7 37.7
Europe 19.7 24.8
North America 58.5 68.9
Japan 5.7 5.6
-------- --------
127.6 137.0
======== ========
(b) Turnover by activity:
2003 2002
#'m #'m
Gas sensing 25.5 24.3
Other manufacturing 93.7 102.7
Component distribution 8.4 10.0
-------- --------
127.6 137.0
======== ========
(c) Turnover by destination:
2003 2002
#'m #'m
UK 7.4 7.0
Rest of Europe 45.0 44.2
North America 62.0 73.2
Asia 11.2 9.6
South America 0.9 1.6
Other 1.1 1.4
-------- --------
127.6 137.0
======== ========
(d) Profit by origin:
Year ended 30th April 2003
Operating Reorganisation Goodwill Goodwill Operating
profit costs amortisa- impair- profit
before tion ment
goodwill,
and
exceptional
items
#'m #'m #'m #'m #'m
UK 11.4 (0.8) (4.9) (4.0) 1.7
Europe 0.9 (0.6) (0.2) (0.9) (0.8)
North America 13.1 (0.1) (3.6) - 9.4
Japan 1.1 - - - 1.1
-------- -------- -------- -------- --------
Total 26.5 (1.5) (8.7) (4.9) 11.4
-------- -------- -------- --------
Finance charges (net) (1.0)
--------
Profit on ordinary activities before tax 10.4
========
Year ended 30th April 2002
Operating Integration Goodwill Operating
profit costs amortisa- profit
before tion
goodwill
and
exceptional
items
#'m #'m #'m #'m
UK 12.7 (0.3) (4.9) 7.5
Europe 1.3 - (0.2) 1.1
North America 15.0 - (3.6) 11.4
Japan 1.1 - - 1.1
-------- -------- -------- --------
Total 30.1 (0.3) (8.7) 21.1
-------- -------- --------
Finance charges (net) (1.4)
--------
Profit on ordinary
activities before tax 19.7
========
(e) Profit by activity:
Year ended 30th April 2003
Operating Re Goodwill Goodwill Operating
profit organisation amortisa- impair- profit
before costs tion ment
goodwill,
and
exceptional
items
#'m #'m #'m #'m #'m
Gas sensing 8.5 - (4.9) (4.0) (0.4)
Other
manufacturing 18.0 (0.8) (3.7) - 13.5
Component
distribution - (0.7) (0.1) (0.9) (1.7)
-------- -------- -------- -------- --------
Total 26.5 (1.5) (8.7) (4.9) 11.4
-------- -------- -------- --------
Finance charges (net) (1.0)
--------
Profit on ordinary activities before tax 10.4
========
Year ended 30th April 2002
Operating Integration Goodwill Operating
profit costs amortisa- profit
before tion
goodwill
and
exceptional
items
#'m #'m #'m #'m
Gas sensing 9.4 (0.3) (4.9) 4.2
Other manufacturing 20.0 - (3.7) 16.3
Component distribution 0.7 - (0.1) 0.6
-------- -------- -------- --------
Total 30.1 (0.3) (8.7) 21.1
-------- -------- --------
Finance charges (net) (1.4)
--------
Profit on ordinary
activities before tax
19.7
========
(f) Net assets by origin:
2003 2002
#'m #'m
UK 11.6 9.1
Europe 3.7 4.0
North America 17.7 20.2
Japan 0.6 1.1
-------- --------
Net operating assets 33.6 34.4
Net cash/(debt) 0.1 (12.3)
Taxation (4.7) (4.9)
Dividends (4.6) (4.4)
Pension scheme liability (2.0) (1.3)
Goodwill 138.3 151.9
-------- --------
Net assets 160.7 163.4
======== ========
(g) Net assets by activity:
2003 2002
#'m #'m
Gas sensing 8.7 8.8
Other manufacturing 22.9 22.6
Component distribution 2.0 3.0
-------- --------
Net operating assets 33.6 34.4
Net cash/(debt) 0.1 (12.3)
Taxation (4.7) (4.9)
Dividends (4.6) (4.4)
Pension scheme liability (2.0) (1.3)
Goodwill 138.3 151.9
-------- --------
Net assets 160.7 163.4
======== ========
3. Operating costs
2003 2002
#'m #'m
Distribution costs 5.6 6.1
-------- --------
Administrative expenses:
- Other administration costs 20.0 18.5
- Reorganisation and integration costs 1.5 0.3
- Goodwill 13.6 8.7
-------- --------
Total administrative expenses 35.1 27.5
-------- --------
Total operating costs 40.7 33.6
======== ========
2003 costs of #1.5 million relate to the restructuring of First Technology
Automotive in the UK and the Group's distribution business, Realisations et
Diffusion pour l'Industrie (RDI) in France. First Technology Automotive ceased
manufacture in the UK from Spring 2003, although it continues to perform R&D
engineering activities together with the European logistics function, which was
transferred from RDI. Prior year costs of #0.3 million relate to additional
costs incurred in completing the integration of Capteur Sensors and Analysers
Limited (Capteur), acquired in 2001, with City Technology Limited.
4. Finance charges (net)
2003 2002
#'m #'m
Interest payable on bank loans and overdrafts (1.0) (1.6)
Interest receivable - 0.1
Other finance income - 0.1
-------- --------
(1.0) (1.4)
======= =======
Included within interest payable is an amount of #0.1 million (2002: #0.1
million) relating to the amortisation of facility fees and #0.1 million (2002:
#nil) in respect of the fair value of an interest rate swap (see Note 9).
Other finance income comprises the net of the expected return on the pension
scheme assets and the interest cost on the pension scheme liabilities.
5. Tax on profit on ordinary activities
2003 2002
#'m #'m
Current tax
UK corporation tax 2.2 3.0
Foreign tax 2.1 4.4
------- -------
4.3 7.4
Adjustment in respect of prior years
UK corporation tax (0.6) (1.2)
Foreign tax 0.3 (0.7)
------- -------
Total current tax 4.0 5.5
Deferred tax
Origination and reversal of timing differences - current
year 0.8 (0.4)
Origination and reversal of timing differences - prior
year (0.1) 0.9
------- -------
Total deferred tax 0.7 0.5
------- -------
Total tax on profit on ordinary activities 4.7 6.0
======= =======
6. Dividends
2003 2002
#'m #'m
Interim dividend - paid 3.4p per share (2002: 3.2p) 2.6 2.4
Final dividend - proposed 6.1p per share (2002: 5.8p) 4.6 4.4
------- -------
7.2 6.8
======= =======
The final dividend is payable on 7th October 2003 to shareholders on the
register on 5th September 2003.
7. Earnings per share
The weighted average number of shares used to calculate the basic, headline and
diluted earnings per share is as follows:
2003 2002
Number Number
Weighted average number of shares in issue
for basic and headline earnings per share 75,346,990 75,218,455
Dilutive effect of share options 33,340 71,627
---------- ----------
Weighted average number of shares
in issue for diluted earnings per share 75,380,330 75,290,082
========== ==========
The earnings used to calculate the basic, diluted and headline earnings per
share are as follows:
2003 2003 2003 2002 2002 2002
Basic Diluted Basic Diluted
#'m pence pence #'m pence pence
Profit for the
financial year 5.7 7.6 7.6 13.7 18.2 18.2
Add back:
goodwill items 13.6 18.0 18.0 8.7 11.5 11.5
Add back:
exceptional
integration
and
reorganisation
costs, net of
tax credit 1.2 1.6 1.6 0.2 0.3 0.3
-------- -------- -------- -------- -------- --------
Headline earnings 20.5 27.2 27.2 22.6 30.0 30.0
======== ======== ======== ======== ======== ========
Headline earnings per share of 27.2p (2002: 30.0p) is considered by the
directors to be a more meaningful measurement of financial performance than
basic earnings per share, as it excludes goodwill and exceptional items.
8. Intangible fixed assets
Goodwill as at 30th April 2003 is analysed as follows:
#'m
Cost
1st May 2002 and 30th April 2003 173.4
--------
Amortisation
1st May 2002 21.5
Charge for the year 8.7
Impairment losses 4.9
--------
30th April 2003 35.1
--------
Net book value
30th April 2003 138.3
========
30th April 2002 151.9
--------
Goodwill is being amortised over 20 years. Goodwill of #9.6m remains written off
against reserves.
In accordance with FRS 11 "Impairment of fixed assets and goodwill", the Group
regularly monitors the carrying value of its fixed assets. The review performed
during the year ended 30th April 2003 resulted in an impairment loss of #0.9
million in relation to RDI's passive electronic component distribution business
in France and #4 million in relation to the solid state gas sensing products
acquired with Capteur. The discount rate used to evaluate future cash flows from
Capteur's solid state activity was 11.5%.
9. Bank loans and overdrafts
2003 2002
#'m #'m
Repayable:
Within one year 3.7 6.7
Between one and two years - 8.8
------- -------
Total 3.7 15.5
======= =======
At 30th April 2003 the Group had an unsecured multi-currency revolving credit
facility of US $59 million. On 25th June 2002 the term loan facility of US $18
million existing as at 30th April 2002 was converted into an amortising
revolving credit facility. All facilities are repayable on 30th April 2004. As
at the year end US $3 million and Sterling #1.8 million were drawn down. The
facilities carry interest at 1.1% above LIBOR.
In October 2001, the Group entered into an interest rate swap to fix the
interest rates on approximately half the drawings under its bank facilities. As
a result of the accelerated repayment of debt, the fair value of the obligations
under the swap was charged to interest payable in the year ended 30th April 2003
(see Note 4).
10. Share capital
Ordinary 10p shares Number #'m
1st May 2002 75,342,292 7.5
Shares issued 7,489 -
---------- -----
30th April 2003 75,349,781 7.5
========== =====
The shares issued in the year were in connection with the Group's share option
schemes.
11. Profit and loss account
2003 2002
#'m #'m
1st May 2002 37.6 33.2
Retained (loss)/profit for the year (1.5) 6.9
Foreign currency translation (0.1) (0.6)
Actuarial loss recognised (1.6) (2.7)
Deferred tax on actuarial loss 0.5 0.8
-------- --------
30th April 2003 34.9 37.6
======== ========
Foreign currency translation is stated after a related tax credit of #0.4
million (2002: charge of #0.3 million).
Included within the profit and loss account reserve is #(2.0) million (2002: #
(1.3) million) relating to the pension liability net of deferred tax.
12. Analysis of cashflows
2003 2002
#'m #'m
Returns on investments and
servicing of finance
Interest paid (0.7) (1.4)
Interest received - 0.1
------- -------
Net cash outflow from returns on
investments and
servicing of finance (0.7) (1.3)
------- -------
Taxation
UK corporation tax paid (2.4) (0.1)
Overseas tax paid (1.9) (3.2)
------- -------
Taxation paid (4.3) (3.3)
------- -------
Capital expenditure and
financial investment
Purchase of tangible fixed assets (4.6) (4.1)
Purchase of trade investments (0.5) -
------- -------
Net cash outflow from capital
expenditure and financial
investment (5.1) (4.1)
------- -------
Acquisitions and disposals
Acquisition of businesses
(see below) (1.7) (4.0)
------- -------
Net cash outflow from acquisitions
and disposals (1.7) (4.0)
------- -------
Financing
Issue of ordinary shares
(net of costs paid) - 0.6
Drawdown/(repayment) of revolving
credit facility 1.0 (11.5)
Repayment of term loans (11.6) (6.3)
------- -------
Net cash outflow from financing (10.6) (17.2)
------- -------
The cash outflow in the year in respect of the acquisition of businesses relates
to deferred consideration due to the vendors of TNO Crash Dummies BV and Ogle
TNO Safety Products Limited acquired in September 1999. The cash outflow for the
acquisition of businesses in the previous year relates to deferred consideration
of which the majority was due to the vendors of Capteur.
13. Analysis and reconciliation of net debt
1st May Cash Non-Cash Exchange 30th April
2002 flow movement movement 2003
#'m #'m #'m #'m #'m
Cash at bank
and in hand 3.2 0.1 - 0.5 3.8
Overdrafts (0.7) 0.4 - 0.1 (0.2)
------ ------ ------ ------ ------
2.5 0.5 - 0.6 3.6
Debt due
Within
1 year (6.0) 3.8 (1.9) 0.6 (3.5)
Debt due
After
1 year (8.8) 6.8 1.8 0.2 -
------ ------ ------ ------ ------
Net cash/(debt) (12.3) 11.1 (0.1) 1.4 0.1
====== ====== ====== ====== ======
2003 2002
#'m #'m
Increase/(decrease) in cash in
the year 0.5 (1.8)
Cash outflow from decrease in debt 10.6 17.8
------- -------
Decrease in net debt relating
from cashflows 11.1 16.0
Amortisation of facility fees (0.1) (0.1)
Translation differences 1.4 0.1
------- -------
Decrease in net debt in the year 12.4 16.0
Net debt at 1st May (12.3) (28.3)
------- -------
Net cash/(debt) at 30th April 0.1 (12.3)
======= =======
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAPKSADXDEFE