Dialight Regulatory News (DIA)

12 Sep 2005 07:02

Roxboro Group PLC12 September 2005 Date: Embargoed until 07:00am Monday 12 September 2005 Contacts: Harry Tee - Group Chief Executive Alf Vaisey - Group Finance Director The Roxboro Group PLC Tel: 020 7796 4133 (12/09/05) 01480 447490 (thereafter) Alistair Mackinnon-Musson Philip Dennis Hudson Sandler Tel: 020 7796 4133 Email: roxboro@hspr.co.uk Photographs: Available upon request from Hudson Sandler (see above) THE ROXBORO GROUP PLC INTERIM RESULTS The Roxboro Group PLC, the international specialist electronics group, announcesits Interim results for the six months ending 30 June 2005. The Roxboro Group consists of two divisions: Dialight in electronic lighting andSolartron in electronic measurement. Highlights • Two major disposals have been announced raising ca. £70 million• Planned return of capital to shareholders of up to £46.6 million• Over £110 million returned since 2000• Group will consist entirely of Dialight Division going forward• Roxboro name to be changed to Dialight plc• Dialight's order book up 28% since 01 January 2005• Management and Board changes• Future strategy to be focussed entirely on Dialight's applied LED technology• Interim dividend being maintained at 3.4 pence per share - dividend going forward will reflect new Group structure Harry Tee, Group Chief Executive, said: "I am delighted that we have been able to deliver real shareholder value throughthe disposals announced this year. Added to the earlier disposal of Weston, theprice we have achieved exceeds by a significant margin the Group marketcapitalisation prior to the disposals and leaves us as a highly focussedbusiness in one of the most exciting areas within the electronics industry. That solid state lighting is going to grow strongly over the next decade is notin doubt and as a major player Dialight plc has an enormous opportunity. Our management team is committed to keeping Dialight at the forefront of thisfast emerging sector." We are pleased to report on two significant disposals that have already beenannounced, together with the very satisfactory operating performance of theGroup in the first half of the year. The disposal of Mobrey to Emerson, announced on 17 June 2005 for an anticipatedconsideration of £26.0 million (before adjustments for cash and working capital)and the subsequent recent announcement (on 25 August) of the proposed disposalof the remaining Solartron businesses to Ametek for £42.05 million means that onthe completion of the Ametek transaction Roxboro will have achieved disposalsaggregating to around £70 million in the current year. Taking these two disposals with that of Weston in June 2003, the Group will haverealised over £125 million in cash, a premium of 40% over the marketcapitalisation of the whole Group prior to the Weston transaction. Subject to shareholders' approval and the agreement of the Court of ourpreviously announced capital reduction plan, it is the Board's intention toreturn up to £46.6 million to ordinary shareholders. Following this return,total cash returned to Shareholders since 2000 will have amounted to over £110million. The remaining Group will be focussed entirely on the applied LEDtechnology sector, with particular emphasis on the emerging market for solidstate lighting. Accordingly, the Board believes it is appropriate that the nameof the Group is changed to Dialight plc. Operating Results Group turnover for the six months to 30 June 2005 was relatively flat inSterling terms at £58.3 million (2004: £59.2 million), although Dialight's orderbook strengthened by 28% from the start of the year. Group profit before tax was£5.4 million (2004: £5.7 million). Group operating cash flows were £4.2 million representing 75% of operatingprofit (2004: £9.0 million) and adjusted earnings per share 11.2 pence per share(2004: 12.0 pence per share). The Group ended the period with net cash of £5.2million, which was significantly enhanced in July with the receipt of the Mobreyproceeds of £26.0 million. The interim dividend will be maintained at 3.4 pence per share and will be paidon 20 October 2005 to shareholders on the register at 23 September 2005. TheBoard intends that the dividend policy adopted by the Company going forward willbe appropriate to reflect the new profile and growth potential of Dialight plc. BUSINESS REVIEW Operationally the Solartron division performed marginally ahead of prior yearbut with the completion of the Mobrey disposal to Emerson taking place on 15July and the exchange of contracts for the Ametek transaction on 25 August 2005it is inevitable that the management team spent a significant proportion oftheir time on these transactions for much of the first half. Order intake was 3% up on the same period in the prior year with sales up 5%,and at a similar level to the second half of 2004. A continuing good performance at the Metrology business where sales andoperating profits exceeded the prior year was offset to some extent by aslightly weaker performance from Mobrey. ISA secured a number of new oil and gasprojects resulting in an overall increase in orders received of 36%. Mobrey is now part of Emerson Process Management and, subject to a regulatoryclearance and shareholders' approval, the remainder of Solartron will becomepart of Ametek, another US corporation, before the end of September. Dialight Division The entire business activity of Roxboro will now consist of the DialightDivision. To reflect this, once the disposal of Solartron has completed, thecompany's name will be changed to Dialight plc. Dialight saw a 28% increase in its order book since the start of the year, withorders received increasing by 11% over the second half of 2004 when the marketwas particularly strong. This healthy situation reflects the improvement in demand for Dialight'sindicator product line, as the general electronics sector improved, howevervolumes remained lower than those achieved in the first half of 2004. Demand for the indicator product line is driven by electronic componentdistributors such as Arrow, Allied and Farnell as well as OEMs such as Cisco,Lucent, Nokia and Dell. Although the order book at the end of the period wasstrong, phasing meant that sales in the first half were marginally lower thanthe first half last year when demand was particularly strong. Exports to Asia remained constant as production at Contract Manufacturers whoproduce for the OEMs remained at similar levels but distribution within the USAimproved as the US economy gained strength. Gross margins increased slightly on the indicator product line despite somematerial cost increases resulting from increased fuel costs. The Signals product line showed an 8% growth in orders received even though thefirst half of 2004 benefited from the substantial one-off contract secured fromthe FAA. Excluding this contract, underlying growth was therefore around 20%.Sales were constrained in the first quarter by inclement weather and snow stormsin the northern states, making it impossible to install traffic signals. Secondquarter sales were substantially stronger and sales for the first half wereclose to the same level of the prior year which included the FAA contract. Demand for obstruction lights incorporating solid state lighting technologycontinued to increase as the benefits of this new technology became apparent tousers of broadcast towers and other end-user customers. A trading agreement wassigned with Flash Technologies, the US market leader in obstruction lighting,and sales through Flash grew steadily in the first half. Strong demand for obstruction lights also drove good growth in Europe forSignals products. European demand for solid state traffic signals has been slowto take off but growth through OEMs is expected to increase as the new Eclipseproduct range comes into production. Dialight performed less well in its European operations as a result of delays ingetting the new Eclipse traffic signal fully approved and accepted by regulatoryauthorities and OEMs. Sales of solid state lighting rail signals continues to grow steadily with newbusiness from New York City Transit for a further consignment of signals and inEurope with the Danish Rail. Dialight has introduced a number of high-end illumination products and isworking with Rosco, Hydrel and Polaris. Solid state lighting is likely to beused initially in low cost feature lighting which will quickly becomecommoditised as volumes increase. There are, however, many applications wherethe need is for a more sophisticated product and it is in this market Dialighthas introduced its first illumination products. By way of example, working with Hydrel, an installation was completed at theWynn Resort in Las Vegas in which Dialight provided underwater lighting withSpectramixTM colour mixing technology for the "Lake of Dreams", the key centralentertainment feature. Many other similar colour mixing projects are expected tobe developed by lighting engineers over the next few years and Dialightanticipates taking a significant share of this emerging market. Tunnel and bridge lighting applying either colour or white light will also growthe use of solid state lighting as safety and longevity are imperatives in this,as in other, applications. Dialight is launching a range of solid state explosion-proof fixtures inconjunction with Crouse Hinds, part of Cooper Industries, and the US marketleader for lighting in hazardous environments. These will be used inenvironments such as oil refineries and mining. Strong demand for obstruction lights, particularly in Poland, was encouragingand projects with Danish railways should bring future benefits. The overall Dialight results were disadvantaged in the first half by increasedpension contributions at BLP, its UK subsidiary. Strategy The disposal of the Solartron businesses marks the end of Roxboro's involvementin electronic measurement technology, a strategy, which has led to therealisation of over £125 million in shareholder value through a series ofdisposals over the past two years. The remaining Group is now highly focussed, based on a single core business,namely Dialight and to reflect this, the Group's name will therefore shortly bechanged to Dialight plc, when a corporate strategy, based entirely on theapplied LED technology and in particular solid state lighting, will be pursued. Dialight plans to expand geographically, strengthening its position in Europeand most importantly will seek to advance a leadership position in the emergingsolid state lighting market. The Board believes LED technology will increasingly be seen as a disruptivetechnology in the lighting industry and Dialight plans to occupy the spacebetween the LED producers and the fixture manufacturers who have little or noknowledge of applied LED technology. Dialight is already one of the largest users of LEDs in the world and willcontinue to develop relationships with lighting companies, adding value to theLED and supplying solid state lighting modules to the fixture producers. Board Changes Following the proposed disposal of Solartron, as announced on 25 August, theBoard will be reorganised and after eight years as Chairman it is appropriatethat I retire at the EGM to be held on 29 September and be succeeded as Chairmanby Harry Tee, who will hand over his duties as Group Chief Executive to RoyBurton, who has led Dialight for the past three years. Jeff Hewitt will become Deputy Chairman and Robert Jeens, together with BillWhiteley, will remain as non-executive directors. Alf Vaisey, currently Finance Director, will also retire from the Board, to besucceeded by Cathy Buckley who has worked with Alf for the past six years andwho also has been the Company Secretary. Cathy is a Chartered Accountant whoqualified with KPMG, spending 12 years with the firm post qualification prior tojoining Roxboro. On behalf of the Board and all shareholders, I would like topay tribute to Alf's work and to thank him for the enormous contribution he hasmade to the Group over the past nine years and in seeing through the Board'sstrategy. Outlook There has been no significant change in the markets serviced by the Group sincethe preliminary results announcement in March 2005. The electronics sector improved in the first half of the current year whencompared with the second half in the prior year, and the resulting growth indemand for Dialight's indicator products experienced in the first half isexpected to continue through the second half. Taken together with encouragingdemand for Dialight's solid state lighting products, the prospects for Dialightremain positive. Overall, the Board views the future of Dialight with confidence as it pursuesits strategy focussed entirely on solid state lighting technology and the highgrowth opportunities it brings in order to generate long-term Shareholder value. SIR ALAN COCKSHAW INTERNATIONAL FINANCIAL REPORTING STANDARDS The European Union has approved the application of International FinancialReporting Standards (IFRS) for listed companies for periods beginning on orafter 1 January 2005. Roxboro has adopted IFRS from 1 January 2005, havingpreviously reported its financial results under UK GAAP. As permitted underIFRS1, the Group deferred the adoption of IAS 32, Financial Instruments:Disclosure and Presentation and IAS 39, Financial Instruments: Recognition andMeasurement, until 1 January 2005. The comparative information for the year ended 31 December 2004 and the sixmonths ended 30 June 2004 have been restated to apply IFRS with the exception ofIAS 32 and IAS 39. Schedules are included at Appendix 1. Set out in Appendix 2 are the Group Profit and Loss Accounts, Balance Sheets andCashflow Statements under UK GAAP. CONSOLIDATED INCOME STATEMENTFor the period ended 30 June 2005 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000Revenue - Continuing operations 25,820 28,157 55,268 - Discontinued operations 32,501 31,025 63,584 58,321 59,182 118,852 Cost of sales (39,507) (39,680) (78,418)Gross Profit 18,814 19,502 40,434 Distribution costs (7,512) (7,891) (15,760) Administrative expenses (5,739) (5,848) (11,959) Operating profit - Continuing operations 1,516 1,770 4,455 - Discontinued operations 4,047 3,993 8,260 5,563 5,763 12,715 Net finance costs (213) (109) (189) Profit before tax - Continuing operations 1,404 1,679 4,299 - Discontinued operations 3,946 3,975 8,227 5,350 5,654 12,526 Taxation (1,972) (2,039) (4,290) Profit for the year attributableto shareholders - Continuing operations 608 828 2,249 - Discontinued operations 2,770 2,787 5,987 3,378 3,615 8,236 Earnings per shareBasic 11.2p 12.0p 27.4pDiluted 11.1p 11.9p 27.1p The accompanying Notes form an integral part of these Interim FinancialStatements CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the period ended 30 June 2005 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000Exchange difference on 833 (510) (1,077)translation of foreignoperationsActuarial losses on defined (612) (596) (1,194)benefit pension schemesTax on items taken directly in 269 170 340equity Net expense recognised directly 490 (936) (1,931)in equity Profit for the period 3,378 3,615 8,236 Total recognised income and 3,868 2,679 6,305expense for the period The accompanying Notes form an integral part of these Interim FinancialStatements STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITYFor the period ended 30 June 2005 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000Shareholders' equity at start of 50,487 47,553 47,553periodImpact of adoption of IAS32 and 39 (2,090) - -At start of period restated 48,397 47,553 47,553 Total recognised income and 3,868 2,679 6,305expense for the period Dividends (2,288) (2,112) (3,178)Issue of ordinary shares - 73 75B Shares redeemed - (89) (268) Shareholders' equity at 30 June 49,977 48,104 50,4872005 CONSOLIDATED BALANCE SHEETAs at 30 June 2005 (unaudited) 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000Non-current assetsIntangible assets 4,096 18,054 19,254Property, plant & equipment 5,922 12,284 11,463Deferred tax asset 2,618 3,187 2,619 12,636 33,525 33,336 Current assetsInventories 8,392 15,026 15,404Trade and other receivables 12,642 24,741 25,363Cash and cash equivalents 1,711 5,787 6,819Assets classified as held 49,054 - -for resale 71,799 45,554 47,586 Current liabilitiesTrade and other payables (7,472) (16,144) (16,644)Loans and borrowings - (37) (51)Tax liabilities (767) (1,628) (977)Liabilities classified as (13,467) - -held for resale Net current assets 50,093 27,745 29,914 Total assets less current 62,729 61,270 63,250liabilities Non-current liabilitiesTrade and other payables (800) (1,912) (1,667)falling due after more than one year Retirement benefit (9,681) (11,190) (11,030) obligationsLoans and borrowings (2,232) - -Deferred tax liability (39) (64) (66) Net assets 49,977 48,104 50,487 EquityCalled-up share capital 569 3,027 2,849Share premium account 6,049 6,049 6,049Retained earnings 2,940 (1,165) 1,217Capital redemption reserve 40,419 40,193 40,372Equity attributable to the 49,977 48,104 50,487shareholders of the parent CONSOLIDATED CASH FLOW STATEMENTFor the period ended 30 June 2005 (unaudited) 6 months ended 6 months ended 12 months ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000Cash flows from operatingactivities Operating profit 5,563 5,763 12,715 Depreciation and other 846 1,494 2,993amortisation (Increase)/Decrease in (116) 894 238inventories (Increase)/Decrease in trade (2,923) 379 (1,076) and other receivablesIncrease in trade and other 828 503 654payables Cash generated from 4,198 9,033 15,524operations Net interest payable (256) (113) (189)Income tax expense (1,263) (1,375) (3,583)Operating cash flow 2,679 7,545 11,752 Cash flows from investingactivities Capital expenditure and (1,429) (665) (1,299)financial investment Development costs (1,020) (921) (2,129) Proceeds from sale of - 5 13tangible fixed assets Purchase of intangible - (50) -assets Net cash used in investing (2,449) (1,631) (3,415)activitiesFree cash flow 230 5,914 8,337 Cash flow from financingactivities Proceeds from the issue of - 73 74share capital B Shares redeemed (48) (89) (267) Dividends paid (2,288) (2,112) (3,135) Net cash used in financing (2,336) (2,128) (3,328)activitiesNet (decrease)increase in (2,106) 3,786 5,009cash and cash equivalentsCash and cash equivalents at 6,768 1,968 1,968the beginning of the periodEffect of exchange rates in 514 (4) (209)cash Cash held as asset held for (3,465) - -sale Cash and cash equivalents atthe end of the period 1,711 5,750 6,768 Significant Accounting PoliciesFor the period ended 30 June (unaudited) Basis of preparationThe Interim Financial Statements the interim consolidated financial statementsof the Group for the six months to 30 June 2005 prepared in accordance with theaccounting policies set out below. From 1 January 2005, the Group is required to prepare consolidated financialstatements in accordance with accounting standards adopted for use in EuropeanUnion ("EU"). The Group previously prepared consolidated financial statements inaccordance with UK GAAP until 31 December 2004. Details with respect to theGroup's transition from UK GAAP to IFRS, including accounting policies used,reconciliations and descriptions of the effect of the transition on the Group'snet income, equity, and cash flows are provided in Appendix 1. The financial information presented in this statement has been prepared byapplying all IFRS that have been published to date that are applicable to theGroup, including International Accounting Standard (IAS) and interpretationsissued by the International Accounting Standards Board (IASB) and itscommittees. These are subject to amendment by the IASB and subsequentendorsement by the European Commission and are therefore subject to possiblechange. This could result in the need to change the basis of accounting orpresentation of certain financial information from that presented in thisannouncement. It is possible, therefore, that further changes will be requiredbefore final comparative information for the year ending 31 December 2005 ispublished. The financial information presented now is unaudited. The financial statements have been prepared on the historical cost basis, exceptfor the revaluation of certain financial instruments. The significant accountingpolicies are set out below. These policies have been consistently applied to all the periods presentedexcept for those relating to the classification and measurement of financialinstruments. The Group has made use of the exemption under IFRS 1 "First TimeAdoption of International Financial Reporting Standards" to only apply IAS 32"Financial Instruments: Disclosure and Presentation", and IAS 39 "FinancialInstruments: Recognition and Measurement", with effect from 1 January 2005. Thepolicies applied to Financial Statements for 2004 and 2005 are disclosedseparately below. The impact of the implementation of IAS 32 and IAS 39 onequity as at 1 January 2005 is provided in Note 8. These Interim Financial Statements do not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985. The comparative figures for the year ended 31 December 2004 are not thecompany's statutory accounts for that financial year. Those accounts, which wereprepared under UK Generally Accepted Accounting Practices, have been reported onby the company's auditors. The statutory accounts for the year ended 31 December 2004 have been deliveredto the Registrar of Companies and include an audit report which was unqualifiedand did not contain a statement under either Section 237(2) or 237(3) of theCompanies Act 1985. Basis of consolidationSubsidiaries 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. Segmental reportingThe 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. GoodwillBusiness combinations are accounted for by applying the purchase method. Theexcess of the cost of the business combination over the acquirer's interest inthe net fair value of the identifiable assets, liabilities and contingentliabilities, recognised in accordance with IFRS 3 constitutes goodwill, and isrecognised as an asset. Where this excess is negative, it is recognised directlyin the income statement. After initial recognition, goodwill is measured at cost less any accumulatedimpairment losses, until disposal or termination of the previously acquiredbusiness (including planned disposal or termination where there are indicationsthat the value of the goodwill has been permanently impaired), when the profitand loss on disposal or termination will be calculated after charging the grossamount, at current exchange rates, of any such goodwill through the incomestatement. Goodwill is allocated to cash generating units and is no longeramortised but is tested at least annually for impairment. Goodwill arising on acquisition before 1 January 2004, the date of transition toInternational Financial Reporting Standards, has been retained at the previousUK GAAP amounts, subject to being tested for impairment at that date. TheGroup's policy up to and including 31 December 1997 was to eliminate goodwillarising upon acquisitions to reserves. Under IFRS 1 and IFRS 3, such goodwillwill remain eliminated against reserves and is not included in determining anysubsequent profit or loss on disposal. Intangible assets excluding goodwill Intangible assets are valued at cost less any accumulated amortisation and anyaccumulated impairment losses. Costs that are directly associated withidentifiable development projects whereby research findings are applied to aplan or design for the production of new or substantially improved products andprocesses is capitalised if the product or process is technically andcommercially feasible and the Group has sufficient resources to complete thedevelopment. The expenditure capitalised includes the cost of material, directlabour and an appropriate proportion of overheads. Intangible assets will beamortised over their useful lives, which for current projects are between fiveand ten years. Expenditure on research activities is recognised in the income statement as anexpense is incurred. Current assets and liabilities held for sale Current assets and liabilities are classified as held for sale if their carryingamount will be recovered through a sale transaction rather than throughcontinuing use. This condition is met when the sale is highly probable, theasset is available for immediate sale in its present condition, and managementare committed to the asset disposal. Current assets classified as held for sale,are measured at the lower of carrying amount and fair value less costs to sell. Inventories Inventories are measured at the lower of cost and net realisable value. The costof inventories comprises all costs of purchase, costs of conversion and othercosts incurred in bringing the inventories to their location and condition atthe balance sheet date. Items are valued using the first in, first out method.When inventories are used, the carrying amount of those inventories arerecognised as an expense in the period in which the related revenue isrecognised. Provision for write-downs to net realisable value and losses ofinventories are recognised as an expense in the period in which the write-downor loss occurs. Reversals are recognised as a reduction in the amount ofinventories recognised as an expense in the period in which the reversal occurs. Provisions A provision is recognised when there is a present legal or constructiveobligation as a result of a past event; it is probable that an outflow ofeconomic benefits will be required to settle the obligation; and a reliableestimate can be made of the amount of the obligation. If these conditions arenot met, no provision is recognised. Retirement benefit obligationsThe Group has various defined benefit pension and defined contribution pensionplans. Payment to defined contribution pension plans are charged as an expense as theyfall due. The Group's net obligation in respect of defined benefit pension plans iscalculated separately for each plan by estimating the amount of future benefitthat employees have earned in return for their service in the current and priorperiods; that benefit is discounted to determine its present value, and the fairvalue of any plan assets deducted. The calculation is performed by independentqualified actuaries. All actuarial gains and losses as at 1 January 2004, the date of transition toIFRS's, were recognised in the balance sheet. In respect of actuarial gains andlosses that arise subsequent to 1 January 2004 in calculating the Group'sobligation in respect of each plan, they are recognised in full in the period inwhich they occur. They are recognised outside the income statement, and arepresented in the statement of recognised income and expense. Past service costis recognised immediately to the extent that the benefits have already vested,and otherwise is amortised on a straight-line basis over the average perioduntil the benefits become vested. The retirement benefit obligation recognised in the balance sheet represents thepresent value of the defined benefit obligation as reduced by the fair value ofscheme assets. Any assets resulting from this calculation is limited to pastservice cost, plus the present value of any refunds and reductions in futurecontributions to the plan. Taxation Current taxes for current and prior methods, to the extent unpaid, arerecognised as a liability. If the amount already paid in respect of current andprior periods exceeds the amount due for those periods, the excess is recognisedas a current asset. Deferred taxes are provided in full using the balance sheet liability method, ontemporary differences between the carrying amount of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes.Deferred taxes are not calculated on the following temporary differences: (i)the initial recognition of goodwill and (ii) the initial recognition of assetsand liabilities that affect neither accounting nor taxable profit. The amount ofdeferred tax provided is bases on the expected basis of realisation orsettlement of the carrying amount of assets and liabilities, using tax ratesenacted or substantially enacted at the balance sheet date. A deferred tax assetis recognised only to the extent that it is probable that future taxable profitswill be available against which the unused tax losses and credits can beutilised. Deferred tax assets are reduced to the extent that it is no longerprobable that the related tax benefit will be realised. Foreign currency translationIncome statements of foreign entities are translated into sterling at theweighted average exchange rates for the period and balance sheets are translatedinto sterling at the exchange rate ruling on the balance sheet date. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as local currency assets and liabilities of the foreignentity and are translated at the closing rate. Foreign currency transactions are accounted for at the exchange rate prevailingat the date of the transactions. Gains and losses resulting from the settlementof such transactions and from the translation of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement.Exchange movements arising from the re-translation at closing rates of theopening balance sheets and results of subsidiaries are taken to the translationreserve. Other exchange movements are taken to the income statement. Equity Where the Company (or its subsidiaries) re-acquires its own equity instruments,those instruments are deducted from equity as treasury shares. Where such equityinstruments are subsequently sold, any consideration received is recognised inequity. Financial instruments and hedge accounting From 1 January 2004 to 31 December 2004, financial instruments used as hedges inthe financing and financial risk management of the Group were accounted for asfollows: Forward foreign exchange contracts which hedged currency assets and liabilitieswere recognised in the financial statements together with the assets andliabilities they hedged. The contract rate was used for translation. Foreignexchange contracts which hedged future sales and purchases were not recognisedin the financial statements until the transaction they hedged was itselfrecognised. If a foreign exchange ceased to be hedge, then any gain or loss wastaken to the income statement. From 1 January 2005, in accordance with IAS 39, financial instruments arerecorded initially at fair value. Subsequent measurement depends upon thedesignation of the instrument. Foreign exchange contracts are classified as heldfor trading. Changes in the fair value of derivative financial instruments that aredesignated and effective as hedges of future cash flows are recognised directlyin equity and any ineffective portion is recognised immediately in the incomestatement. If the cash flow hedge is a firm commitment or forecasted transactionresults in the recognition of an asset or a liability, then, at the time theasset or liability is recognised, the associated cumulative gain or loss isremoved from equity and recognised in the income statement in the same period orperiods which the hedged forecast transaction affects profit or loss. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated, or exercised, or no longer qualifies for hedge accounting. At thattime, any cumulative gain or loss recognised in equity is transferred to netprofit or loss for the period. The fair values of derivative financial instruments are determined based onmarket forward interest and exchange rates at the balance sheet date. The impact of this change in accounting policy is detailed in Note 8. Share capitalShare capital is classified as a liability if it is redeemable or if dividendsare not discretionary. Dividends thereon are recognised in the income statementas interest expense. DividendsDividends on preference shares are recognised as a liability and expressed on anaccruals basis. Other dividends are recognised as a liability in the period inwhich they are declared. Net Financing CostsNet financing costs comprise interest receivable, interest payable on borrowingsinterest on pension assets and liabilities, dividends on redeemable preferenceshares, foreign exchange gains and losses, and gains and losses on hedginginstruments that are recognised in the income statement. 2. Assets held for saleOn 17 June 2005 and 25 August 2005 the Group announced the sale of the Mobreydivision and Solartron division respectively. The results of the Mobrey andSolartron divisions are shown as discontinued operations on the ConsolidatedIncome Statement. At 30 June 2005 the Mobrey and Solartron divisions comprised assets (includinggoodwill) of £49,054,000 and liabilities of £13,467,000. These amounts have beenclassified and assets and liabilities held for sale on the balance sheet. 3. Net finance costs 6 months ended 6 months ended 12 months ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000Interest income 24 - 5Net foreign exchange gain - - -Expected return on assets in 897 874 1,741the pension scheme 921 874 1,746Interest expense (39) (11) -Net foreign exchange losses (47) - -Interest charge on pension (1,048) (970) (1,935)scheme liabilities Net finance cost (213) (107) (189) 4. TaxationThe tax charge of £1,972,000 for the half year to 30 June 2005 reflects theanticipated effective tax rate for the year ending 31 December 2005. 5. DividendsThe directors have declared an interim dividend of 3.4p (2004: 3.4p) payable 20October 2005 to shareholders on the register on 23 September 2005. 6. Earnings per share 2005 2004 2004 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December £'000 £'000 £'000Profit on ordinary activities 3,378 3,615 8,236after taxation Number Number NumberWeighted average number of shares 30,102,090 30,080,700 30,091,000Diluted effect of share options 353,800 174,600 248,000Diluted weighted average number of 30,455,890 30,255,300 30,339,000shares Pence Pence PenceBasic earnings per share 11.2 12.0 27.4 Diluted earnings per share 11.1 11.9 27.1 7. Intangible assets Concessions, Goodwill Development Total patents, costs licences and trademarks £'000 £'000 £'000 £'000 Costs Balance at 1 January 2005 573 15,555 3,772 19,900Other acquisitions - - - 1,020 1,020internally developedTransferred to assets held - (12,165) (3,807) (15,972)for sale Effects of foreign exchange - (156) - (156)movement Balance at 30 June 2005 573 3,234 985 4,792 Amortisation and impairmentlosses Balance at 1 January 2005 (398) - (248) (646) Amortisation for the period (95) - (123) (218) Transferred to assets heldfor sale - - 168 168 Balance at 30 June 2005 (493) - (203) (696) Carrying amounts At 30 June 2005 80 3,234 782 4096 At 31 December 2004 175 15,555 3,524 19,254 8. Reconciliation of movement Share Share Translation Capital Retained Totalin shareholders equity capital premium reserve redemption earnings reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2005 2,849 6,049 (1,077) 40,372 2,294 50,487Impact of adoption of IAS32 and (2,280) - - - 190 (2,090)39 At 1 January 2005 as restated 569 6,049 (1,077) 40,372 2,484 48,397 Profit for the periodattributable to equity holders - - - - 3,378 3,378of the companyNet expense recognised directlyin equity (See Statement of - - 833 - (343) 490Recognised Income and Expense) Dividends to shareholders - - - - (2,288) (2,288) Transfer to capital redemption - - - 47 (47) - Balance at 30 June 2005 569 6,049 (244) 40,419 3,184 49,977 Balance at 1 January 2004 3,115 5,976 - 40,104 2,473 51,668Impact of adoption of IFRS - - - - (4,115) (4,115) At 1 January 2004 as restated 3,115 5,976 - 40,104 (1,642) 47,553 Profit for the periodattributable to equity holders - - - - 8,236 8,236of the companyNet expense recognised directlyin equity (See Statement of - - (1,077) - (854) (1,931)Recognised Income and Expense) New share issue 2 73 - - - 75Transfer to capital redemption (268) - - 268 (268) (268) reserveDividends to shareholders - - - - (3,178) (3,178) Balance at 31 December 2004 2,849 6,049 (1,077) 40,372 2,294 50,487 Appendix 1 EXPLANATION OF THE TRANSITION TO IFRS APPLICATION OF IFRS 1 The Group's financial statements for the year ended 31 December 2005 will be thefirst annual financial statements that comply with International FinancialReporting Standards "IFRS". These Financial Statements have been prepared asdescribed in the Statement of Significant Accounting Policies - Basis ofPreparation, being the policies which the Group expects to adopt in its 2005Consolidated Financial Statements. The Group's transition date is 1 January 2004. The Group prepared its openingIFRS balance sheet as at the date. The reporting date of these Interim FinancialStatements is 30 June 2005. The Group's IFRS adoption date is 1 January 2005. In preparing these Interim Financial Statements, the Group has applied themandatory exemptions and certain of the optional exemptions from fullretrospective application of IFRS. BASIS OF ACCOUNTING - TRANSITION TO IFRS First time adoption of IFRS (IFRS 1)This Standard has been issued to assist the first time adoption of IFRS. TheStandard allows alternative treatments for certain areas of the financialstatements during the initial transition period: Business combinations The Group has made the elective exemption that allows goodwill in respect ofacquisitions made prior to 1 January 2004 to remain as stated under UK GAAP. IAS 38, Intangible Assets IAS 38 requires the costs incurred on development projects that meet certaincriteria to be recognised as intangible assets in the balance sheet. The Group'spolicy under UK GAAP is to expense all such costs as they are incurred. Theapplication of the IAS 38 criteria results in the costs of a number of currentand recent development projects being recognised as intangible assets in thebalance sheet under IFRS. However, it has not been possible in all cases toassess accurately whether costs expensed under UK GAAP prior to the IFRStransition date met the IAS 38 criteria for recognition at the time they wereincurred. IFRS does not permit such assessments to be performed retrospectivelyand with the benefit of hindsight, so where contemporary records wereinsufficiently detailed or unavailable it has not been possible to recognise theasset under IAS 38. Procedures are now in place to monitor research anddevelopment projects against the IAS 38 criteria and recognise their costs asintangible assets when they meet those criteria. Under IAS 38, intangible assets will be amortised over their useful lives, whichfor current development projects are between five and ten years. The Group doesnot expect any of its intangible assets to have indefinite useful lives. Employee benefits IFRS requires that a balance sheet asset or liability must be shown in respectof defined benefit pension schemes. Actuarial gains and losses arise when theactual returns on scheme assets differ from those initially expected by theactuary. The Group will adopt the exemption in IFRS 1 allowing all actuarialgains and losses arising before 1 January 2004 to be shown in the openingbalance sheet at 1 January 2004. In the future, actuarial gains and losses willbe included in the Statement of Recognised Income and Expense. Cumulative translation differencesIn the Group financial statements the results of overseas subsidiaries aretranslated into Sterling at the average exchange rate. The balance sheet istranslated at the closing rate. This leads to exchange gains and losses beinggenerated on consolidation. IFRS requires translation differences on therevaluation of the assets and liabilities of overseas subsidiaries to be takendirectly to reserves. On the disposal of an overseas entity, exchange differences previously taken toreserves will be transferred to the income statement as part of the profit/losson disposal of that entity. The elective exemption in IFRS 1 means that any translation differences prior tothe date of transition (1 January 2004) do not need to be analysedretrospectively and so the deemed cumulative translation differences at thisdate can be set to £nil. Thus, any cumulative translation differences arisingprior to the date of transition are excluded from any future profit/loss ondisposal of any entities. The Group will adopt this exemption. Share-based payment (IFRS 2)The Group has chosen to adopt the exemption whereby IFRS 2, Share-Based Payment,is applied only to awards made after 7 November 2002. Financial instruments (IAS 32 and 39)The Group has chosen to adopt the exemption delaying the implementation of IAS32, Financial Instruments: Disclosure and Presentation, and IAS 39, FinancialInstruments: Recognition and Measurement. These will be first applied in theyear ending 31 December 2005. Presentation of financial information The primary statements within the financial information contained in thisdocument have been presented in accordance with IAS 1, Presentation of FinancialStatements. Segmentation Under IAS 14, Segment Reporting, the Group's existing geographical segmentsreported under UK GAAP will remain the primary reported segments. EXPLANATION OF IFRS ADJUSTMENTS The following paragraphs explain the key adjustments made to the financialresults for the year ended 31 December 2004, in order to reflect IFRS. Employee benefits (IAS 19) Long term The primary long term employee benefits are pensions, which were accounted forunder SSAP 24 with accompanying disclosures prepared using FRS 17. Under SSAP24, the costs of providing benefits was charged against the operating profitover the period during which the Group expected to benefit from the employeesservices. The application of SSAP 24 resulted in a prepayment of £0.6m as at 31December 2004, and this asset is eliminated as a result of the adoption of IAS19. The IAS 19 approach is similar to FRS 17. In summary, IAS 19 requires that theGroup's pension deficits be recorded as balance sheet liabilities. The Group haselected to adopt the amendment to IAS 19, which allows the impact of changes inthe actuarial value of the deficits to be recorded in the Statement ofRecognised Income and Expenses rather than the income statement. Annual chargesto the income statement will comprise service costs and a finance cost. Thefollowing is a table summarising the main impacts of IAS 19, FRS 17 and SSAP 24with regard to the pension schemes. Profit and loss Profit and loss account account 6 months ended Year ended 31 30 June 2004 December 2004 IAS 19 SSAP24 IAS 19 SSAP 24 £'000 £'000 £'000 £'000Defined benefit schemesUK 992 916 497 434US (193) 438 (184) 334Pre-tax cost 799 1354 313 768 Balance sheet Balance sheet 31 December 2004 30 June 2004 IAS 19 FRS17 IAS 19 FRS17 £'000 £'000 £'000 £'000Defined benefit schemesUK (8,548) (8,548) (7,836) (7,836)US (2,482) (2,482) (3,354) (3,354)Deficit in the scheme (11,030) (11,030) (11,190) (11,190)Deferred tax asset 3,507 3,507 3,626 3,626Net pension liability (7,523) (7,523) (7,564) (7,564) Business combinations and goodwill (IFRS 3)A business combination occurs when one entity gains control of another. Theacquired assets and liabilities should be stated at fair value in the books ofthe acquirer (if appropriate) or in the Group accounts. The excess of thepurchase price over the cost is classified as goodwill on the face of thebalance sheet in the Group accounts. Goodwill should not be amortised but shouldbe reviewed, at least annually, for impairment and carried in the balance sheetat cost less any accumulated impairment losses. For goodwill already inexistence at the transition date to IFRS the goodwill amortisation alreadyrecognised will not be adjusted. The impact on the income statement for the yearended 31 December 2004 is that goodwill amortisation of £0.9m that waspreviously charged during 2004 is now removed. Events after the balance sheet date (IAS 10)Under IAS 10, dividends on ordinary shares declared after the balance sheet dateshould not be accrued. This is a change from the current treatment under UKGAAP. This means that each dividend will be charged in the period in which it isapproved rather than in the period to which it relates. Income taxes (IAS 12)Under UK GAAP deferred tax was provided on the basis of timing differencesbetween accounting profit and taxable profit. IAS 12 requires that deferredtaxation is based on temporary differences between the carrying value of anasset or liability and its tax base. The impact of IFRS on the total tax charge to the Group's Income Statement forthe year ended 31 December 2004 is an increase of £828,000 to £4.3m. Theeffective tax rate for the Group is unchanged at 34.0%. 31.12.04 30.06.04 Tax charge Tax charge £'000 £'000Total tax charge under UK GAAP 3,462 1,598 Total tax charge under IFRSIncrease in deferred tax on employee 217 178benefits Increase in deferred tax on 611 263capitalised development costsTotal tax charge under IFRS 4,290 2,039 The impact of IFRS on deferred tax in the balance sheet is as follows: 2004 2004 At 31 December At 30 June £'000 £'000Net deferred tax asset - UK GAAP 316 426 IFRS adjustments: Deferred tax on pension deficit 3,508 3,625Deferred tax on development costs (1,046) (711) Rollover Gain (159) (153)Net deferred tax asset - IFRS 2,619 3,187 Net deferred tax liability - UK - -GAAP IFRS adjustments: Rollover Gain 41 47Deferred tax on development costs 25 17Net deferred tax liability - IFRS 66 64 Other changes There are a number of other minor changes. These have no material effect oneither reported profits or net assets. DISTRIBUTABLE RESERVES The Company has considerable distributable reserves under both UK GAAP and IFRS. CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2004 IFRS adjustments Development Employee UK GAAP Costs Benefits Goodwill IFRS £'000 (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000Revenue 118,852 118,852Cost of sales (80,521) 1,987 116 - (78,418)Gross Profit 38331 1,987 116 - 40,434 Distribution costs (15,777) - 17 - (15,760) Administrative (13,501) - 616 926 (11,959)expenses Operating profit 9,053 1,987 749 926 12,715 Financial income 5 - - - 5 Financial expenses - - (194) - (194) Net financing income 5 - (194) - (189) Profit before tax 9,058 1,987 555 926 12,526 Income tax expense (3,462) (611) (217) - (4,290) Profit for the year 5,596 1,376 338 926 8,236attributable toshareholders Earnings per share Basic 18.3p 27.4pDiluted 18.2p 27.1p CONSOLIDATED INCOME STATEMENTFor the half year ended 30 June 2004 IFRS adjustments Development Employee UK GAAP Costs Benefits Goodwill IFRS £'000 (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000Revenue 59,182 - - - 59,182 Operating profit 3,879 868 553 463 5,763 Net financing costs (11) - (98) - (109) Profit before tax 3,868 868 455 463 5,654 Income tax expense (1,598) (263) (178) - (2,039) Profit for the year 2,270 605 277 463 3,615attributable toshareholders Earnings per share Basic 7.4p 12.0pDiluted 7.4p 11.9p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the year ended 31 December 2004 IFRS adjustments Development Employee UK GAAP Costs Benefits Goodwill IFRS £'000 (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000Foreign exchange (1,195) - 104 14 (1,077)translationdifferencesActuarial loss on - - (1,194) - (1,194)defined benefitpension schemesTax on items taken - - 340 - 340directly to equityNet income recognised (1,195) - (750) 14 (1,931)directly in equity Profit for the year 5,596 1,376 338 926 8,236 Total recognised 4,401 1,376 (412) 940 6,305income and expensefor the year CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the half year ended 30 June 2004 IFRS adjustments Development Employee UK GAAP Costs Benefits Goodwill IFRS £'000 (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000Foreign exchange (399) - 52 (163) (510)translationdifferencesActuarial loss on - - (596) - (596)defined benefitpension schemesTax on items taken - - 170 - 170directly to equityNet income recognised (399) 0.0 (374) (163) (936)directly in equity Profit for the year 2,270 605 277 463 3,615 Total recognised 1,871 605 (97) 300 2,679income and expensefor the year CONSOLIDATED BALANCE SHEETAs at 31 December 2004 IFRS adjustments Development Employee UK Costs Benefits Goodwill Dividend Other IFRS GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-currentassets Intangible assets 14,347 3,524 - 1,383 - - 19,254Property, plant & 11,463 - - - - - 11,463 equipmentTrade and other 635 - (635) - - - -receivables falling due aftermore than oneyearDeferred tax 316 (1,046) 3,508 - - (159) 2,619asset 26,761 2,478 2,873 1,383 - (159) 33,336Current assetsInventories 15,404 - - - - - 15,404Trade and other 25,363 - - - - - 25,363receivables Cash and cash 6,819 - - - - - 6,819equivalents 47,586 - - - - - 47,586Currentliabilities Trade and other (18,932) - - - 2,288 - (16,644) payables Loans and (51) - - - - - (51)borrowingsTax liabilities (1,212) - 235 - - - (977)Net current assets 27,391 - 235 - 2,288 - 29,914 Total assets less 54,152 2,478 3,108 1,383 2,288 (159) 63,250currentliabilities Non-currentliabilities Trade and other (1,667) - - - - - (1,667)payables falling due after morethan one year Retirement - - (11,030) - - - (11,030)benefitobligationsDeferred tax - (25) - - - (41) (66)liability Net assets 52,485 2,453 (7,922) 1,383 2,288 (200) 50,487 EquityCalled-up share 2,849 - - - - - 2,849capital Share premium 6,049 - - - - - 6,049account Retained earnings 3,215 2,453 (7,922) 1,383 2,288 (200) 1,217Capital 40,372 - - - - - 40,372redemptionreserve Equity 52,485 2,453 (7,922) 1,383 2,288 (200) 50,487attributable tothe shareholdersof the parent CONSOLIDATED BALANCE SHEETAs at 30 June 2004 IFRS adjustments Development Employee UK GAAP Costs Benefits Goodwill Dividend Other IFRS (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-currentassets Intangible assets 14,906 2,405 - 743 - - 18,054Property, plant & 12,284 - - - - - 12,284 equipmentTrade and other 59 - (59) - - - -receivables falling due aftermore than oneyearDeferred tax 426 (711) 3,625 - - (153) 3,187asset 27,675 1,694 3,566 743 - (153) 33,525 Current assetsInventories 15,026 - - - - - 15,026Trade and other 24,741 - - - - - 24,741receivables Cash and cash 5,787 - - - - - 5,787equivalents 45,554 - - - - - 45,554 Currentliabilities Trade and other (17,167) - - - 1,023 - (16,144) payables Loans and (37) - - - - - (37)borrowingsTax liabilities (1,650) - 22 - - - (1,628) Net current 26,700 - 22 - 1,023 - 27,745assets Total assets less 54,375 1,694 3,588 743 1,023 (153) 61,270currentliabilities Non-currentliabilities Trade and other (1,912) - - - - (1912)payables falling due after morethan one year Retirement - - (11,190) - - - (11,190)benefitobligationsDeferred tax - (17) - - - (47) (64)liability Net assets 52,463 1,677 (7,602) 743 1,023 (200) 48,104 EquityCalled-up share 3,027 - - - - - 3,027capital Share premium 6,049 - - - - - 6,049account Retained earnings 3,194 1,677 (7,602) 743 1,023 (200) (1,165)Capital 40,193 - - - - 40,193redemptionreserveEquityattributable to 52,463 1,677 (7,602) 743 1,023 (200) 48,104the shareholdersof the parent CONSOLIDATED BALANCE SHEETAs at 31 December 2003 IFRS adjustments Development Employee Costs Benefits Goodwill Dividend Other IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-currentassets Intangible assets 15,464 1,537 - 442 - - 17,443Property, plant & 13,100 - - - - - 13,100equipment Deferred tax 488 (462) 3,656 - - (156) 3,526asset 29,052 1,075 3,656 442 - (156) 34,069 Current assetsInventories 16,118 - - - - - 16,118Trade and otherreceivables 25,391 - (85) - - - 25,306Cash and cashequivalents 4,332 - - - - - 4,332 45,841 - (85) - - - 45,756 Currentliabilities Trade and other (17,868) - - - 2,075 - (15,793) payables Loans and (2,364) - - - - - (2,364)borrowingsTax liabilities (1,486) - 32 - - - (1,454) Net current 24,123 - (53) - 2,075 - 26,145assets Total assets less 53,175 1,075 3,603 442 2,075 (156) 60,214currentliabilities Non-currentliabilities Trade and other (1,507) - - - - (1,507)payables falling due after morethan one year Retirement - - (11,110) - - - (11,110)benefitobligationsDeferred tax - - - - - (44) (44)liability Net assets 51,668 1,075 (7,507) 442 2,075 (200) 47,553 EquityCalled-up share 3,115 - - - - - 3,115capital Share premium 5,976 - - - - - 5,976accountRetained earnings 2,473 1,075 (7,507) 442 2,075 (200) (1,642)Capital 40,104 - - - - 40,104redemptionreserveEquityattributable tothe shareholders 51,668 1,075 (7,507) 442 2,075 (200) 47,553of the parent CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2004 IFRS adjustments Development Employee UK GAAP Costs Benefits Goodwill Other IFRS (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 £'000 £'000Cash flows from operatingactivitiesOperating profit 9,053 1,987 749 926 - 12,715Amortisation of 1,117 - - (926) - 191intangiblesDepreciation and other 2,660 142 - - - 2,802amortisation Decrease in inventories 238 - - - - 238Increase in trade and (1,076) - - - - (1,076)other receivables Increase in trade and 1,209 - (555) - - 654other payables Cash generated from 13,201 2,129 194 - - 15,524operations Net interest payable 5 - (194) - - (189)Income tax expense (3,583) - - - - (3,583)Operating cash flow 9,623 2129 - - - 11,752 Cash flows from investingactivitiesCapital expenditure and (1,299) - - - - (1299)financial investment Proceeds from sale of 13 - - - - 13tangible fixed assetsDevelopment costs - (2,129) - - - (2,129)Net cash used in (1,286) (2,129) - - - (3,415)investing activitiesFree cash flow 8,337 - - - - 8,337 Cash flows from financingactivitiesProceeds from the issue 74 - - - - 74of share capitalShares redeemed (267) - - - - (267)Dividends paid (3,135) - - - - (3,135) Net cash used in (3,328) - - - - (3,328)financing activitiesNet decrease in cash and 5,009 - - - - 5,009cash equivalents Cash and cash equivalents 1,968 - - - - 1,968at the beginning of theyear Effect of exchange rates (209) - - - - (209)in cash Cash and cash equivalents at the end of the year 6,768 - - - - 6,768 CONSOLIDATED CASH FLOW STATEMENTFor the half year ended 30 June 2004 IFRS adjustments Development Employee UK Costs Benefits Goodwill Other IFRS GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 £'000 £'000Cash flows from operatingactivitiesOperating profit 3,879 868 553 463 - 5,763Amortisation of 558 - - (463) - 95intangibles Depreciation and other 1,346 53 - - - 1,399amortisation Decrease in inventories 894 - - - - 894Decrease in trade and 379 - - - - 379other receivables Increase in trade and 958 - (455) - - 503other payablesCash generated from 8,014 921 98 - - 9,033operations Net interest payable (15) - (98) - - (113)Income tax expense (1,375) - - - - (1,375)Operating cash flow 6,624 921 - - - 7,545 Cash flows from investingactivitiesCapital expenditure and (665) - - - - (665)financial investmentDevelopment costs - (921) - - - (921)Proceeds from sale of 5 - - - - 5tangible fixed assetsPurchase of intangible (50) - - - - (50)assetsNet cash used in (710) (921) - - - (1,631)investing activitiesFree cash flow 5,914 - - - - 5,914 Cash flows from financingactivitiesProceeds from the issue 73 - - - - 73of share capitalB Shares redeemed (89) - - - - (89)Equity dividends paid (2,112) - - - - (2,112) Net cash used in (2,128) - - - - (2,128)financing activities Net decrease in cash and 3,786 - - - - 3,786cash equivalents Cash and cash equivalents 1,968 - - - - 1,968 at the beginning of the year Effect of exchange rates (4) - - - - (4)in cashCash and cash equivalents 5,750 - - - - 5,750at the end of the year Appendix 2Group Profit and Loss Account - UK GAAPUnaudited interim results for the half year ended 30 June 2005 2005 2004 2004 6 months ended 6 months ended 12 months ended 30-Jun 30-Jun 31-Dec £'000 £'000 £'000 TurnoverContinuing 25,820 28,157 55,268operationsDiscontinued 32,726 31,025 63,584operations 58,546 59,182 118,852Operating profit before goodwillamortisationContinuing 1,241 1,090 3,459operationsDiscontinued 2,903 3,347 6,711operations 4,144 4,437 10,170Goodwill (558) (558) (1,117)amortisation Operating Profit after goodwillamortisationContinuing 1,066 915 3,107operationsDiscontinued 2,520 2,964 5,946operations 3,586 3,879 9,053Net interest 24 (11) 5 Profit on ordinary activities before taxation 3,610 3,868 9,058Tax on profit on ordinary (1,571) (1,598) (3,462)activities Profit for the 2,039 2,270 5,596financial period Dividends (1,062) (1,060) (3,391)Retained profit 977 1,210 2,205 Pence Pence PenceDividends per ordinary 3.4 3.4 11.0shareEarnings perordinary shareBasic 6.6 7.4 18.3Adjusted 8.5 9.3 22.0Diluted 6.6 7.4 18.2 Group Balance Sheets UK GAAPUnaudited interim resultsat 30 June 2005 2005 2004 2004 6 months ended 6 months ended 12 months ended 30-Jun 30-Jun 31-Dec £'000 £'000 £'000 Fixed assetsIntangible assets 13,789 14,906 14,347Tangible assets 11,823 12,284 11,463 25,612 27,190 25,810Current assetsStock 15,879 15,026 15,404Debtors 29,537 25,226 26,314Cash at bank and 5,260 5,787 6,819in hand 50,676 46,039 48,537Creditors amounts falling duewithin one yearBorrowings (42) (37) (51)Other creditors (20,029) (18,817) (20,144) (20,071) (18,854) (20,195) Net current assets 30,605 27,185 28,342 Total assets less current 56,217 54,375 54,152liabilities Provisions for liabilities and (1,663) (1,912) (1,667)charges 54,554 52,463 52,485 Capital andreservesCalled up share 2,801 3,027 2,849capitalShare premium 6,049 6,049 6,049accountCapital redemption 40,419 40,193 40,372reserveProfit and loss 5,285 3,194 3,215account 54,554 52,463 52,485 Group Statements of Cash Flows - UK GAAPUnaudited interim results for the half year ended 30 June2005 2005 2004 2004 6 months ended 6 months ended 12 months ended 30-Jun 30-Jun 31-Dec £'000 £'000 £'000 Cash flow from operating 2,980 8,014 13,201activities Returns on investments and servicingof financeInterest paid (15) (57) (90)Interest received 39 42 95 Net cash flow from returns on investment 24 (15) 5and servicing of finance Taxation (1,263) (1,375) (3,583) Capital expenditure and financial investmentPurchase of tangible fixed (1,429) (665) (1,299)assetsSale of tangible fixed assets - 5 13 Net cash outflow from investing activities (1,429) (660) (1,286) Acquisitions and DisposalsPurchase of intangible - (50) -assets - (50) - Dividends paid (2,331) (2,112) (3,135) Cash (outflow)/inflow before use of liquid (2,019) 3,802 5,202resources and financing FinancingIssue of ordinary share - 73 74capitalRedemption of 'B' shares (48) (89) (267)Capital element of finance lease - (7) (7)rental payments (2,066) (23) (200) (Decrease)/Increase in cash in the period (2,066) 3,779 5,002 Reconciliation of net cash flow to movements in net cash(Decrease)/Increase in cash in (2,066) 3,779 5,002the periodCash outflow from change in debt and lease - 7 7financingChange in net cash resulting from cash flows (2,066) 3,786 5,009Translation 516 (4) (209)differenceMovement in net cash in the (1,550) 3,782 4,800periodNet cash at beginning of 6,768 1,968 1,968periodNet cash at end of period 5,218 5,750 6,768 - ENDS - This information is provided by RNS The company news service from the London Stock Exchange