Dialight Regulatory News (DIA)

18 Sep 2006 07:02

Dialight PLC18 September 2006 Date: Embargoed until 07:00 am Monday 18 September 2006 Contacts: Roy Burton - Group Chief Executive Cathy Buckley - Finance Director Dialight PLC Tel: 01480 447490 Alistair Mackinnon-Musson Nicola Savage Hudson Sandler Tel: 020 7796 4133 Email: dialight@hspr.com DIALIGHT PLC Interim results for the six months ended 30 June 2006 Dialight plc, the UK based leader in applied LED technology, announces itsInterim Results for the six months ended 30 June 2006. Dialight consists of two business segments: • Components comprising indication products and electromagnetic components • Signals / Illumination which includes Traffic and Rail Signals, Obstruction Lights and the new Solid State Lighting products of the Group Highlights • Continuing operations • Turnover up 16% to £30m • Order intake up 24% year on year • Operating profit up 53% to £2.3m • Earnings per share up 63% to 5.2p • Interim dividend of 1.75 pence per share • Successful acquisition and integration of Lumidrives Roy Burton, Group Chief Executive, said "I am pleased to report both our Components and Signals/Illumination segmentsincreased sales, order intake and profit contribution." "The relocation of our European traffic light production to the UK and thedeveloping relationship we have with key European traffic systems OEMs willenable us to build further our presence in the European solid state trafficsignal market, as adoption rates accelerate." "The Lumidrives acquisition and the recently announced license agreement providean excellent platform for expansion in the growing Solid State Lighting market." "With continuing healthy demand, the Board considers the Group to be wellpositioned to make progress in the second half." Overview This is the first period of reporting Dialight as a stand alone business focusedon Applied LED technology and the emerging solid state lighting market. We arepleased to report improved performance for the first half of the year in bothbusiness segments, Components and Signals/Illumination, with increased sales,order intake and profit contribution in each. As previously announced, Lumidrives, a leading supplier of solid state lightingfixtures and components, was acquired in January 2006 and we can confirm thesuccessful integration of this company into the Group. In addition, we havecompleted the transfer of the Group's traffic light manufacturing facility fromWang, Germany to Newmarket, UK. The operation is now well organised to servicethe expansion of the European traffic business. Our US subsidiary signed alicense agreement with Color Kinetics, an important strategic step for our solidstate lighting business in architectural, entertainment and general lightingapplications in North America. Financial Results Revenue for the six months to 30 June 2006 increased by 16% to £30 million(2005: £25.8 million) and operating profit increased by 53% to £2.3 million(2005: £1.5 million). Basic earnings per share rose by 63% to 5.2 pence pershare (2005: 3.2 pence). During the first half of the year the Group had a net cash outflow of £4.3million after the payment of £2.5 million for the acquisition of Lumidrives,payment of the 2005 final dividend of £0.9 million and £0.3 million to fund thepurchase of 156,000 shares for the Employee Share Plan. Working capital absorbed£2.4 million with inventory increasing by £4.2 million from the start of theyear. Unallocated overheads represent all costs other than direct material,direct labour and sales commission. The increase in unallocated costs over lastyear is due principally to the addition of Lumidrives to the Group andadditional employment costs partly offset by a reduction to corporate costs of£0.5 million. Business Review Components Orders in the Components segment showed a 30% increase for the half versus theprior year, including two sizeable one-off orders for electromagnetic disconnectproducts, most of which have been delivered in the first half. As commented onin March, the general electronics market is seeing a healthy increase inactivity which has increased demand for our indicator products. Overall, sales in the period showed a 27% increase versus the first half of2005. Our business maintained the same strong sales channel position boththrough the major electronic distributors and direct to the major OEMs and therehas been no significant change to contribution margins. The Restriction of useof Hazardous Substances regulations have now become mandatory in Europe and allrequired shipments are fully compliant. Signals/ Illumination The Signals/Illumination segment showed an 18% increase in orders and anunderlying growth in sales of 13%, before the impact of a contract cancellationin the US traffic market (6% increase after the cancellation). Contributionincreased by 12% over the comparative period. This segment is driven by the adoption rate of high brightness LEDs inapplications such as traffic lights, rail signals and aircraft obstructionlights, where coloured LEDs provide major energy savings; and by industrialwhite lighting where the long life and reliability of LEDs provide safety andmaintenance cost benefits. Our traffic light business in the relatively mature North American market doesnot vary significantly from period to period. However, in this half there hasbeen the introduction of a new ITE (Institute of Traffic Engineers) standard fortraffic lights in the US. Dialight introduced a preliminary version of thislight early in 2005 and followed this with an upgraded more efficient signal inJune. Whilst adoption of this new standard is not mandatory, it is expected thatadoption will accelerate in the second half of 2006. Significantly, we are thefirst supplier to conform fully to the new standards which gives Dialight theopportunity to build advantage over its competitors. To conform to the newstandard posed a significant challenge to our optical and thermal engineerswhich we are pleased to say they have overcome, with the design of an efficientand cost effective signal. Inventory rose in the period, particularly of traffic related material. This waslargely due to the transition between standards and the requirement, for theforeseeable future, to continue to supply product to our customers under boththe old and new standards. We expect inventory to reduce to normal levels duringthe remainder of the year as the balance of customer demand for product underthe old and new standards stabilises. We will, however, be shipping to both oldand new standards for some time. The European traffic business started the year slowly due to adverse weatherconditions but showed a healthy upturn during the second quarter. The assemblyof traffic lights was transferred successfully from Germany to Newmarket in theUK and output performance targets reached, making us confident of deliveringproduct against the expected growth in demand. The costs of this transfer, incurred in the first half, are expected to berecovered in the second half of the year. We remain optimistic for the prospectsof the European traffic business in particular, through our relationship withSiemens and other major traffic OEMS. We believe we are taking market share aswell as seeing an enhanced adoption due to the introduction of the new GermanOCIT standard. To date adoption of LED based traffic lights across all Europeanterritories has been relatively low, nevertheless, our customer base isexpanding as we gain further customer specific approvals and we are currentlyworking on custom products for the UK market. In Asia we have identified a number of "regulated" markets for LED trafficlights where products of the quality and specification of Dialight's can beappropriately specified and where the value proposition is recognised. We aretargeting these markets for product approval. There exists a market in certainAsian countries for "unregulated" and therefore low price, low specification LEDproducts, but this is not a market which we plan to pursue. Our rail business remains steady. In Europe initial shipments were made toDanish Rail although further deliveries are held pending a final review by thesafety authorities. Discussions continue with a number of rail authorities inboth Europe and Asia but we expect the adoption of LED rail signals to be slowerthan for our other markets due to the inherent conservatism of the railindustry. Aircraft obstruction lights have been a successful application for red LEDs forthe past four years. Dialight was the first manufacturer to qualify a light forthis application and has been a pioneer in the market. We sell our productacross global markets to operators of broadcast and telecommunications towers,wind towers and latterly oil refineries. At the end of 2005, we introduced a RedBeacon which is qualified for hazardous locations such as oil refineries andoffshore platforms. Sales of obstruction lights were flat on last year; however 2005 did benefitfrom significant demand from Poland where the adoption of LED obstruction lightswas high. This year the geographical spread of our customer base and sales hasincreased significantly. During the half, we qualified our new low power beaconto the Federal Aviation Authority specification and have shipped the firstvolumes of Hazardous Location Beacons to a number of refineries in the USA. Acquisition and Licensing In January of this year, in line with our solid state lighting strategy, wecompleted the acquisition of Lumidrives Limited, a UK based supplier of solidstate lighting fixtures and modules. Lumidrives gives Dialight a position in theEuropean Solid State Lighting market for Architectural and Entertainmentapplications. Sales in 2005 were over £3 million, almost entirely in Europe andprimarily through other lighting OEMs. The business has performed well sinceacquisition, in line with our expectations and has expanded sales of its ownproducts in Europe. We are now seeing some benefit from taking complementary 'Dialight' products through these channels. As previously mentioned, Lumidrives sales have been primarily in Europe. Anexciting opportunity for solid state lighting exists in the North Americanmarket and Dialight has developed products and technologies to address thisopportunity. In June of this year at the request of our customers, we concludeda license agreement with Color Kinetics. There had been uncertainty in theUnited States lighting industry regarding ownership of intellectual property inrelation to colour mixing and the application of LED technology. As a result ofthis agreement, Dialight is able to provide its US customers with the licensedintellectual property of Color Kinetics enhanced by Dialight's own products,technology and intellectual property including those of Lumidrives. We haveopened up new sales channels in North America and are driving our full productrange into that market. As with the European market, our strategy is to sellthrough the major lighting OEMs and to that end discussions are proceeding. In addition to OEM sales, there has been increasing interest in solid statelighting from the major electronics distributors. Future Electronics has beenaddressing this market for some time as the exclusive distributor for PhillipsLumileds. Arrow Electronics has launched a lighting initiative as has PremierFarnell. Dialight has long standing relationships with these distributorsthrough its components business and the first orders from these distributorshave been received for the Lumidrives range of lighting related modules. Dividend Following the disposal of the Solartron businesses last year the Board announcedthe future dividend policy would be designed to reflect the new profile andgrowth potential of the continuing Group. The final dividend for 2005 was 3pence per share, which based on our historic pattern, would have followed aninterim dividend for 2005 of 1.5 pence for the continuing Group. In light of the performance of the Group your Board recommends an interimdividend of 1.75 pence per share to be paid on 26 October 2006 to allshareholders registered on 29 September 2006. Outlook Demand for the Group's Components products continues to be in line with theencouraging levels achieved in the first half, although it is recognised thisbusiness segment remains sensitive to overall world market levels of demand. TheLumidrives acquisition and the recently announced license agreement position uswell in the growing solid state lighting market. The prospects for the European traffic market are good, especially with ourfocus on developing our relationships with key traffic systems OEMs. Our othermarkets remain promising, driven by the adoption of LED technology based onstrong value propositions. The weakness of the US Dollar, in which two-thirds ofour sales are denominated, will if maintained at current levels, have a modestadverse impact on our expected growth in sterling terms. With continuing healthy demand the Board considers the Group to be wellpositioned to make progress in the second half. CONSOLIDATED INCOME STATEMENTFor the period ended 30 June 2006 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 Note £'000 £'000 £'000 Continuing operationsRevenue 3 29,997 25,820 56,129 Cost of sales (22,240) (19,099) (41,432) Gross Profit 7,757 6,721 14,697 Distribution costs (2,221) (2,198) (4,485) Administrative expenses (3,224) (3,007) (6,266) Operating profit 3 2,312 1,516 3,946 Financial income 1,104 723 2,201Financial expense (835) (835) (1,691) Net financing income 4 269 (112) 510 Profit before tax 2,581 1,404 4,456 Income tax expense 5 (961) (442) (1,403) Profit after tax from continuing operations 1,620 962 3,053 Profit from discontinued operations, net of 11 - 2,416 24,945tax Profit for the year attributable to equityholders of the parent- Continuing operations 1,620 962 3,053- Discontinued operations - 2,416 24,945 1,620 3,378 27,998 Earnings per shareBasic 7 5.2p 11.2p 92.2pDiluted 7 5.2p 11.1p 92.2p Continuing operations Basic 7 5.2p 3.2p 10.1pDiluted 7 5.2p 3.2p 10.1p The accompanying Notes form an integral part of these Interim FinancialStatements CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the period ended 30 June 2006 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Exchange difference on translation of foreign (947) 833 1,100operationsExchange realised on disposal of businesses - - (13)Actuarial losses on defined benefit pension - (612) (1,266)schemesTax on items taken directly in equity - 269 424 Net expense recognised directly in equity (947) 490 245 Profit for the period 1,620 3,378 27,998 Total recognised income and expense for the 673 3,868 28,243period attributable to equity holders of theparent Effect of change in accounting policyImpact of adoption of IAS32 and 39 (net of tax) to:- retained earnings: Cash flow hedges 190 190- share capital: Reclassification of preference shares (2,280) (2,280)Attributable to members (2,090) (2,090) The accompanying Notes form an integral part of these Interim FinancialStatements CONSOLIDATED BALANCE SHEETAs at 30 June 2005 (unaudited) 30 June 2006 30 June 2005 31 December 2005 Note £'000 £'000 £'000AssetsProperty, plant & equipment 5,752 5,922 5,983Intangible assets 8 7,274 4,096 4,321Deferred tax asset 1,873 2,618 2,405 Total non-current assets 14,899 12,636 12,709 Inventories 10,805 8,392 6,742Trade and other receivables 13,493 12,642 16,685Cash and cash equivalents 5,517 1,711 9,829Assets classified as held for resale - 49,054 - Total current assets 29,815 71,799 33,256Total assets 44,714 84,435 45,965 LiabilitiesLoans and borrowings (2,196) (2,232) (2,213) Trade and other payables (9,335) (7,472) (7,477) Tax liabilities (942) (767) (3,364) Liabilities classified as held for resale - (13,467) - Total current liabilities (12,473) (23,938) (13,054) Employee benefits (2,408) (9,681) (3,104)Provisions (871) (800) (890)Deferred tax liability (52) (39) (53) Total non-current liabilities (3,331) (10,520) (4,047)Total liabilities (15,804) (34,458) (17,101)Net assets 28,910 49,977 28,864 EquityIssued share capital 9 591 569 587Share premium 9 546 6,049 -Other reserves 9 (901) 40,175 29Retained earnings 9 28,674 3,184 28,248 Total equity 28,910 49,977 28,864 CONSOLIDATED CASH FLOW STATEMENTFor the period ended 30 June 2006 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000Operating activitiesProfit for the year 1,620 3,378 27,998Adjustments for:Financial income (1,104) (921) (2,399)Financial expense 835 1,134 1,993Income tax expense 961 1,972 2,742Share based payments 68 - -Gain on disposal of discontinued operations - - (22,022)Depreciation of property, plant and equipment 636 628 1,423Amortisation of intangible assets 317 218 567 Operating cash flow before movements in working 3,333 6,409 10,302capital(Increase)/decrease in inventories (4,197) (116) 1,017Decrease/(increase) in trade and other receivables 136 (2,923) (3,115)Increase/(decrease) in trade and other payables 1,562 828 (168)Decrease in pension liabilities (452) - (418) Cash generated from operations 382 4,198 7,618Income taxes paid on profit on ordinary activities (511) (1,263) (2,777)Income tax paid on gain on disposals (2,397) - (5,237)Interest paid (832) (1,177) (1,986) Net cash from operating activities (3,358) 1,758 (2,382) Investing activitiesInterest received 1,104 921 2,399Acquisition of business net of cash acquired (2,449) - -Disposal of discontinued operations - - 65,689Capital expenditure (602) (1,429) (2,228)Expenditure on development (507) (1,020) (1,505)Sale of tangible fixed assets - - 44 Net cash (utilised)/generated from investing (2,454) (1,528) 64,399activities Financing activitiesDividends paid (937) (2,288) (3,341)Proceeds from the issue of shares - - 2,089Transfer from/(to) "Restricted Cash" 2,813 - (4,000)Special contributions to pension funds - - (7,374)Preference shares redeemed (17) (48) (67)Own shares acquired (308) - -Return to shareholders following disposal of - - (46,524)businesses Net cash generated by/(used in) financing 1,551 (2,336) (59,217)activities Net (decrease)/increase in cash and cash (4,261) (2,106) 2,800equivalents Cash and cash equivalents at 1 January 9,829 6,768 6,768Effect of exchange rates on cash held (51) 514 261Cash held as asset held for sale - (3,465) - Cash and cash equivalents at end of period 5,517 1,711 9,829 Significant Accounting PoliciesFor the period ended 30 June 2006 (unaudited) 1) Basis of preparation The consolidated interim financial statements have been prepared on thehistorical cost basis except for the revaluation of certain financialinstruments. The financial information for the six months ended 30 June 2006 andthe comparative figures for the six months ended 30 June 2005 are unaudited andhave been prepared applying the accounting policies and presentation that wereapplied in the preparation of the company's published consolidated financialstatements for the year ended 31 December 2005 except for the following changes:As required by the Listing Rules of the Financial Services Authority, as aresult of the endorsement by the EU of new or changed IFRSs that are applicableor available for early adoption in the preparation of the company's nextconsolidated financial statements for the year ending 31 December 2006, thedirectors have changed their accounting policies in respect of the amendment toIAS39. Where Dialight plc, the company enters into financial guarantee contractsto guarantee the indebtedness of other companies within its group, the companyconsiders these to be insurance arrangements, and accounts for them as such. Inthis respect, the company treats the guarantee contract as a contingentliability until such time as it becomes probable that the company will berequired to make a payment under the guarantee. The company does not expect theamendment to have any impact on the financial statements for the periodcommencing 1 January 2006. In respect of the Defined Benefit plans no actuarial gains or losses wererecognised in the period. There will be a full review performed at the year endand any actuarial gains and losses arising will be recognised through thestatement of recognised income and expense at that date. The comparative figures for the year ended 31 December 2005 does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. A copyof the statutory accounts for that year have been delivered to the Registrar ofCompanies and include an audit report which was unqualified and did not containa statement under either Section 237(2) or 237(3) of the Companies Act 1985. Basis of consolidation Subsidiaries are entities controlled by the Group. The financial statements ofsubsidiaries are included in the consolidated financial statements from the datecontrol commences until the date that control ceases. 2) Accounting estimates and judgements The preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income and expense.Actual results may differ from the estimates. Except as described below, in preparing these interim financial statements, thesignificant judgements made by management in applying the Group's accountingpolicies and the key sources of estimation uncertainty were the same as thosethat applied to the consolidated financial statements as at and for the yearended 31 December 2005. - Recoverable amount of intangible assets related to the acquisition ofLumidrives (see note 10). 3) Segmental reporting The Group's primary reporting format is business segments and its secondaryformat is geographical segments. A business segment is a component of the Groupthat is engaged in providing a group of related products and is subject to risksand returns that are different from those other business segments. Ageographical segment is a component of the Group that operates within aparticular economic environment and this is subject to risks and returns thatare different from those of components operating in other economic environments. Business segments The Group comprises the following business segments: - • Components comprising the indication businesses and the electromagnetic components. • Signals/Illumination which includes Traffic and Rail Signals, Obstruction Lights and Solid State Lighting products. All revenue relates to the sale of goods. The contribution shown belowrepresents sales less direct costs incurred by each business segment. Business segmentsSix months ended 30 June 2006 Components Signals/ Illumination Total £'000 £'000 £'000 Revenue 15,790 14,207 29,997Contribution 7,564 5,162 12,726Unallocated expenses (10,414)Operating profit 2,312Net financing income 269Profit before tax 2,581 Six months ended 30 June 2005 Components Signals/ Illumination Total £'000 £'000 £'000 Revenue 12,423 13,397 25,820Contribution 6,365 4,611 10,976Unallocated expenses (9,460)Operating profit 1,516Net financing income (112)Profit before tax 1,404 Year ended 31 December 2005 Components Signals/ Illumination Total £'000 £'000 £'000 Revenue 26,564 29,565 56,129Contribution 13,313 9,902 23,215Unallocated expenses (19,269)Operating profit 3,946Net financing income 510Profit before tax 4,456 The tables above exclude the segmental results of the Solartron businesses whichwere sold in 2005. 4. Net financing income 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Interest income 193 24 717Expected return on assets in the pension schemes 911 699 1,484 1,104 723 2,201Interest expense (43) (9) (42) Interest charge on pension scheme liabilities (792) (826) (1,649) (835) (835) (1,691)Net financing income 269 (112) 510 5. Income tax expense The tax charge of £961,000 for the half year to 30 June 2006 reflects theanticipated effective tax rate for the year ending 31 December 2006. 6. Dividends During the period the following dividends were paid: 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Final - 3.0p (2005:7.6p) per ordinary share 937 2,288 2,288Interim - 3.4p per ordinary share - - 1,053 937 2,288 3,341 The following dividends were declared/proposed at the balance sheet date: 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 3.0p final dividend proposed - - 9371.75p (2005:3.4p) interim dividend declared 547 1,053 - 547 1,053 937 7. Earnings per share The calculation of basic earnings per share is based on the profit for theperiod of £1,620,000 (2005:£3,378,000) and a weighted average number of ordinaryshares outstanding during the six months ended 30 June 2006 of 31,219,000 (2005:30,102,000). 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Profit on ordinary activities after taxation-Continuing 1,620 962 3,053 -Total 1,620 3,378 27,998 Number Number NumberWeighted average number of shares 31,219,000 30,102,000 30,369,000Diluted effect of share options - 354,000 2,000Diluted weighted average number of shares 31,219,000 30,456,000 30,371,000 The weighted average number of shares used in the basic earnings per sharecalculation excludes 156,000 shares held by the Dialight Employees' ShareOwnership Plan Trust. 8. Intangible assets Concessions, Goodwill Development Total patents, licences costs and trademarks £'000 £'000 £'000 £'000 Costs Balance at 1 January 2006 573 3,291 1,470 5,334Acquisition through business combinations 664 2,112 - 2,776Other acquisitions - internally developed - - 507 507Effects of foreign exchange movement - 19 (43) (24) Balance at 30 June 2006 1,237 5,422 1,934 8,593 Amortisation and impairment losses Balance at 1 January 2006 (573) - (440) (1,013)Amortisation for the period (83) - (234) (317)Effects of foreign exchange movement - - 11 11Balance at 30 June 2006 (656) - (663) (1,319) Carrying amounts At 30 June 2006 581 5,422 1,271 7,274 At 31 December 2005 - 3,291 1,030 4,321 9. Reconciliation of movement in Other Reserves Retained Earningscapital and reserves Share Share Trans- Capital Reserve for Profit Total capital premium lation redemption own shares and loss account reserve reserve account £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2006 587 - 10 19 - 28,248 28,864Profit for the period - - - - - 1,620 1,620Net expense recognised directly inequity (See Statement of RecognisedIncome and Expense) - - (947) - - - (947)Share based payments 68 68Dividends to shareholders (937) (937)B Shares redeemed - - 17 - (17) -New shares issued 4 546 - - - 550Own shares purchased - - - (308) - (308) Balance at 30 June 2006 591 546 (937) 36 (308) 28,982 28,910 Balance at 1 January 2005 2,849 6,049 (1,077) 40,372 - 2,294 50,487Impact of adoption of IAS32 and 39 (2,280) - - - 190 (2,090) At 1 January 2005 as restated 569 6,049 (1,077) 40,372 - 2,484 48,397 Profit for the period - - - - - 3,378 3,378Net expense recognised directly inequity (See Statement of RecognisedIncome and Expense) - - 833 - - (343) 490Dividends to shareholders - - - - - (2,288) (2,288)B Shares redeemed - - - 47 - (47) - Balance at 30 June 2005 569 6,049 (244) 40,419 - 3,184 49,977 The reserve for own shares comprises the cost of the Company's shares held bythe Group. At 30 June 2006 the number of shares held by the group through theShare Ownership Trust was 156,000 (2005: nil). The market value of these sharesat 30 June 2006 is £321,000. In 2005 the Company underwent a Capital reorganisation following which a totalof £27 million was returned to shareholders. 10. Acquisition of subsidiary On 11 January 2006 the Group acquired the entire issued share capital ofLumidrives Limited for a total consideration of £3million. The considerationwas satisfied in part by cash of £2.5million and the balance of £0.5millionsatisfied by the issue of 223,578 Dialight plc shares. The ordinary shares wereissued at a price of £2.46 being the market price of the 1.89p ordinary sharesat the close of business immediately preceding completion. The subsidiarycontributed £0.2million to the group profit since acquisition. The acquisition had the following effect on the Group's assets and liabilities(the fair value adjustments are considered provisional): Acquisition amounts £'000 Property, plant and equipment 39Intangible assets (see note 8) 664Inventories 383Trade and other receivables 426Cash and cash equivalents 77Deferred tax liabilities 3Trade and other payables (628)Net identifiable assets and liabilities 964Goodwill on acquisition (see note 8) 2,112Consideration 3,076Consideration satisfied by the issue of shares 550Consideration satisfied by cash 2,526Cash acquired (77)Net cash outflow 2,449 The goodwill recognised on the acquisition is attributable mainly to the skillsand technical talent of the acquired businesses management and workforce. 11. Discontinued operations In 2005 the Group sold its entire Solartron business segment. The Solartronbusiness was classified as "discontinued operations" in both the 2005 interimand full year accounts. The comparative income statement has been restated to show the profit fromdiscontinued operations separately on one line. Profit attributable to the discontinued operations for the six months ended 30June 2005 and year ended 31 December 2005 was as follows: 6 months ended 12 months ended 30 June 2005 31 December 2005 £'000 £'000 Revenue 32,501 39,023 Cost of sales (20,408) (24,639) Gross Profit 12,093 14,384 Distribution costs (5,314) (6,381) Administrative expenses (2,732) (3,637) Operating profit 4,047 4,366 Net finance costs (101) (104) Profit before tax 3,946 4,262 Income tax expense (1,530) (1,339) Profit after tax but before gain on sale (net of tax) 2,416 2,923 Gain on sale of discontinued operations, net of tax - 22,022 Profit for the period 2,416 24,945 This information is provided by RNS The company news service from the London Stock Exchange