Diploma Regulatory News (DPLM)

26 Nov 2007 07:00

Diploma PLC26 November 2007 12 CHARTERHOUSE SQUARE LONDON EC1M 6AX TELEPHONE: +44 (0)20 7549 5700 FACSIMILE: +44 (0)20 7549 5715 FOR IMMEDIATE RELEASE 26 November 2007 ANNOUNCEMENT OF PRELIMINARY RESULTS FOR YEAR ENDED 30 SEPTEMBER 2007 2007 2006 £m £m Revenue 140.7 128.2 +10% Operating profit* 22.1 19.4 +14% Profit before tax+ 22.3 31.2 -29% Adjusted profit before tax* 23.3 20.4 +14% Free cash flow+ 13.2 24.3 -46% Pence Pence Basic earnings per share+ 63.6 105.5 -40% Adjusted earnings per share* 69.8 62.8 +11% Total dividends per share 27.0 23.0 +17% Free cash flow per share+ 58.7 108.2 -46% * before sale of property and amortisation of acquisition intangible assets + the comparative amount in 2006 includes a profit of £11.1m (cash proceeds of £11.0m) on the sale of property • Revenue and adjusted profit before tax increased by 10% and 14%, respectively; driven by strong performance of Controls businesses and improved Group operating margins to 15.7% (2006: 15.1%). • Four acquisitions completed during the year for a total cash investment of £31.6m; three of these completed in August, with the full impact to be seen in FY2008. • Underlying organic growth in revenue and operating profit of 7% and 14% respectively; contribution from acquisitions in 2007 largely offset by adverse currency effects on translation of results of overseas businesses. • Strong free cash flow of £13.2m; year end cash funds reduced by £24.3m to £12.4m, after acquisitions and other investments in businesses. • Final dividend of 18.0p per share (2006: 15.0p); total dividend for year up 17% at 27.0p (2006: 23.0p); the Directors will seek shareholders' approval at the AGM on 17 January 2008 for 4 for 1 bonus issue of ordinary shares. Commenting on the results for the year, Bruce Thompson, Diploma's Chief Executive said: "The Group delivered another year of double digit growth and strong free cash flow in 2007, despite the negative impact from adverse currency effects. The four acquisitions completed during 2007 are expected to make a strong contribution to further growth in 2008." Notes: Diploma PLC uses alternative performance measures as key financial indicators to assess the underlying performance ofthe Group. These include adjusted profit before tax, adjusted earnings per share and free cash flow. The narrative inthis Announcement is based on these alternative measures and an explanation is set out in note 2 to the consolidatedfinancial statements in this Preliminary Announcement. For further enquiries please contact: Bruce Thompson, Chief Executive Officer 020 7549 5700Nigel Lingwood, Group Finance Director 020 7549 5705Ian Seaton, Bankside Consultants 020 7367 8891 NOTE TO EDITORS: Diploma PLC is an international group of specialised distribution businesses operating in three sectors: Life Sciences - Suppliers of consumables, instrumentation and related services for research, environmental and clinical applications. Principal companies are Anachem and the a1-envirosciences group in Europe and Somagen and AMT in Canada. Seals - Suppliers of hydraulic seals, kits and components for heavy mobile machinery. Principal companies are the Hercules Fluid Power Group in North America and FPE and M Seals in Europe. Controls - Suppliers of specialised wiring, connectors and control devices for technically demanding applications. Principal companies are the IS-Group in the UK and US, Sommer Filcon in Germany and Hawco in the UK. Within each of these sectors, the Diploma businesses serve industry segments with long term growth potential and with the opportunity for sustainable superior margins through the quality of customer service, depth of technical support and value adding activities. Further information on Diploma PLC can be found at www.diplomaplc.com PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 CHAIRMAN'S STATEMENT In 2007 Diploma made good progress in delivering strong shareholder valuethrough a combination of organic growth and acquisition. The underlying organicgrowth in revenue and operating profit was 7% and 14% respectively, with aparticularly strong performance from the Controls businesses. Four newcquisitions were completed during the year for a total cash investment of£31.6m; three of these acquisitions were completed in August 2007 and the fullimpact will be seen in the 2008 results. Results Group revenue increased by 10% to £140.7m (2006: £128.2m) and operating profit,before the sale of property and amortisation of acquisition intangible assets,increased by 14% to £22.1m (2006: £19.4m). Operating margins strengthened to15.7% (2006: 15.1%) as the larger scale of the businesses resulted in increasedrevenues without a proportionate increase in operating costs. Acquisitions completed during the year contributed £7.7m to revenues and £0.9mto operating profit, but these contributions were largely offset by the adversecurrency effects from the translation to UK sterling of the results of theoverseas businesses. Adjusted profit before tax increased by 14% to £23.3m (2006: £20.4m), whileheadline IFRS profit before tax was £22.3m. This compared with last year'sheadline IFRS figure of £31.2m, which included exceptional property profits of£11.1m. Adjusted earnings per share grew by 11% to 69.8p (2006: 62.8p) andheadline IFRS earnings per share were 63.6p. Strong free cash flow of £13.2m was generated during the year, benefiting fromcontinuing attention on management of working capital. The Group spent £31.6m ofits cash resources on acquiring businesses during the year and invested afurther £2.2m in IT facilities, field equipment and warehouse infrastructure.Following these investments, the Group's cash funds reduced by £24.3m during theyear to £12.4m at 30 September 2007. Dividends The Directors are recommending an increased final dividend of 18.0p per share(2006: 15.0p). This increases the total dividend payment for the year by 17% to27.0p (2006: 23.0p). Subject to approval at the Annual General Meeting ("AGM"),the final dividend will be paid on 24 January 2008 to shareholders on theregister at the close of business on 7 December 2007. Bonus Issue of Shares The Directors will be seeking the approval of shareholders at the forthcomingAGM to make a bonus issue of 4 shares for each share currently held. TheDirectors anticipate that the effective reduction in the Group's quoted shareprice will improve liquidity in its shares and reduce share price volatility.The proposed timetable is set out in note 9 of this Announcement and furtherdetails will be sent out in a separate AGM Circular to shareholders. Management and Employees In January 2007 we welcomed Ian Grice to the Board as a Non-Executive Director,following Lord Stewartby's retirement on 10 January 2007. We look forward to thecontribution Ian will make to the development of the Group, given his experiencein senior positions in industry. We again send our best wishes to Lord Stewartbyfor a long and happy retirement. I should also like to welcome to the Group the employees of the businesses wehave acquired this year and look forward to the contribution they will make tothe future growth of the Group. At the same time I would like to record mythanks to all our existing employees whose hard work and commitment have beenessential to the achievement of another successful year. Outlook The new financial year has started positively in each of the Group's corebusiness sectors. Demand has remained firm in Europe and Canada, in thespecialised market segments in which the Group's businesses operate. In the US,the Group's businesses continue to deliver a resilient performance against thebackground of economic uncertainty. The four acquisitions completed during 2007 fit well with the strategy ofbuilding more substantial broader based businesses in the Group's three coresectors. These acquisitions are expected to make a strong contribution tofurther growth in 2008. REVIEW OF OPERATIONS LIFE SCIENCES The Life Sciences businesses made further advances in 2007. Sector salesincreased by 14% to £44.7m (2006: £39.2m) and operating profit increased by 8%to £6.6m (2006: £6.1m). Investment in several new growth initiatives led to amodest reduction in operating margin to 14.8% (2006: 15.6%). The results were boosted by the acquisitions of CBISS in October 2006 and AMT inAugust 2007. Together these contributed £6.0m to revenues and £0.7m to operatingprofit, which more than offset the negative effects on translation of thedepreciation of the Canadian dollar against UK sterling. Excluding the impact ofacquisitions, currency effects and a prior year supplier termination payment,sector sales and operating profits showed modest underlying growth. During the year, the continuing a1-envirosciences business was integrated withthe newly acquired CBISS business. Both Anachem and the expandeda1-envirosciences group invested in new ERP IT systems with an aggregateexpenditure of £0.6m. Anachem showed solid progress in its traditional pipettes and tips business,benefiting from continued investment in sales and marketing. Anachem achievedthe ISO 14001 environmental standard during the year and is well placed to matchthe environmental requirements of its customers. The recently introducedfiltration products also continued to grow with a good monthly rate of newcustomer additions. Instrumentation sales had a slower second half, impacted by the move to directsales coverage in the US for the Reactarray business. The service businesshowever showed good growth with a number of new contracts established. Inparticular, the flagship maintenance contract for Pfizer's main R&D facility inKent was re-secured in a global bidding process. a1-envirosciences group was boosted by the acquisition of CBISS in October 2006.The flow of new orders for larger Continuous Emission Monitoring Systems ("CEMS") began midway through the year and continued through the summer. Furtherorders from Energy from Waste ("EFW") producers were supplemented by the firstlarge order from the electricity generating sector, as well as orders from theemerging Biomass generation sector. These project successes have generated ahealthy orderbook to take into the 2008 financial year and will also contributeto continued growth in service revenues. The a1-safetech containment products continued to make solid progress with salesgains in the UK, Germany and other countries in Europe. The encouraging interestgenerated for a number of newly developed containment products is now beingconverted into orders. The a1-envirotech analyser business did not match thestrong performance in 2006, but strong gains were registered in Germany with anew range of elemental analysers. The new range of own brand sulphurhexafluoride ("SF6") gas monitors are being rolled out to the National Grid inthe UK and specialist sub-dealers are being appointed in Continental Europe, theUS and Asia. Somagen maintained sales and operating profits, against a strong 2006comparative. The additional capital funding from the Provinces in 2005 and 2006was not repeated in 2007 and Somagen also suffered from the effects of supplierconsolidation. During 2006, two of Somagen's suppliers were acquired with asubsequent loss of sales in 2007 and more recently another supplier, Biosite,has been acquired by Inverness Medical Innovations. Somagen successfully implemented a number of sales and marketing initiativesdesigned to replace the lost sales from supplier consolidation. There weresolid performances from all of the established product lines, with sales ofinfectious disease and allergy products a particular highlight. The newlyintroduced range of haemostasis products from Trinity Biotech also boostedproduct sales and, with a high service content, contributed to strong growth inservice revenues. AMT, acquired in August 2007 and based in Kitchener, Ontario, is a leadingdistributor of specialty electrosurgery and endoscopy products to hospitalsacross Canada. AMT supplies specialised equipment and consumables to physiciansin hospitals who are carrying out surgical procedures. Products include surgicalsmoke evacuation, conductivity pads, electrodes, generators, probes and flexibleendoscopic accessories. AMT has also established a business to serve the growingmarket for vessel sealing products. A large proportion of AMT's revenues comes from multi-year customer contractswith hospitals and buying groups. Building on this base-load of business, AMT islooking to broaden its product offering by signing up new suppliers. It is alsoleveraging its position in electrosurgery by expanding into other surgicaldisciplines and markets. SEALS The Seals business benefited from a stronger second half performance andachieved full year sales in UK sterling terms of £36.0m (2006: £35.9m).Operating profits increased by 5% to £5.8m (2006: £5.5m). The acquisition of M Seals in August 2007 contributed £0.7m to revenues and£0.1m to operating profit. Against this, there was the much larger negativeimpact on translation of a 10% weakening of the US dollar relative to UKsterling. Excluding the impact of the acquisitions and on a constant currencybasis, the continuing businesses grew sales and operating profit by 5% and 10%respectively. Within the North American businesses, the integration of back office functions,including purchasing and planning, and further investment in warehouseequipment, have driven an increase in sector operating margins to 16.1% (2006:15.3%). Hercules Fluid Power Group continued to deliver good growth in sales andoperating profits in US dollar terms. The core Hercules business put in astrong second half performance to give overall year on year growth. In the US,Hercules' primary sales tools are its market leading catalogues and experiencedsales staff, backed up by excellent stock availability. During the year,Hercules published updated catalogues with a total of 3,200 pages, including1,000 pages in Spanish. The investment in sales and marketing, as well as thefocus on Heavy Construction and the Aftermarket, protected the business from thegenerally weaker domestic market conditions. International sales from Clearwater grew by 40%, benefiting from increased salesfocus and resources and the weaker US dollar. Hercules has now opened arepresentative office ("RO") in Tianjin, close to Beijing. The RO will initiallyserve Hercules' cylinder manufacturing customers and give valuable in-countryexperience to prepare for a broader offering targeted at the Aftermarket. In Canada, sales were maintained at prior year levels. This was a creditableperformance, given the generally unhelpful market conditions in Eastern Canadaand the consolidation of Hercules' Western operations into Edmonton, followingthe closure of the Vancouver office in the first quarter. The Bulldog business delivered strong growth and further enhanced its presencein the Aftermarket for engine parts for heavy mobile equipment. The principaldriver for growth has been international sales which now represent 66% ofBulldog's sales. The weaker US dollar has been helpful, but equally importanthave been the increased focus on productive sales territories, monthly marketingcommunications and high customer service standards. The business has alsobenefited from investment to extend the product line and to install highcapacity, automated gasket cutting equipment. HKX sales are driven most strongly by the sales of new excavators. Excavatorsales were significantly down on the prior year record levels and orders weredelayed due to market uncertainty and in anticipation of new modelintroductions. HKX's existing larger customers experienced this slowdown, butHKX was still able to generate sales growth by further market penetration. Theproduct concept offered by HKX is still relatively new and the business was ableto use its expanded field sales force to penetrate and grow in new accounts. With the market for new excavators still depressed, HKX will continue to targetnew accounts, as well as focus on operators looking to increase machineutilisation by fitting alternative attachments to their existing fleets ofexcavators. FPE sales benefited from the small bolt-on acquisition of Hydraflow in March2007. The principal driver for growth however, came from the increased focus onexport business which grew by over 25%. The acquisition of M Seals was completed in August 2007. M Seals is a leadingdistributor of industrial seals based in Espergaerde, close to Copenhagen inDenmark. Some 80% of sales are in Denmark and the remaining 20% in Sweden (whereM Seals has a sales office), China and other overseas markets. M Seals has a solid level of existing business built on multi-year supplyagreements with key customers. Products range from the finest precision sealsfor hearing aids to large heavy duty seals for wind power mills. M Seals is agood example of a well run and profitable, specialised seal distributor withvalue added activities. CONTROLS The Controls businesses delivered an outstanding performance in 2007 with salesincreasing by 13% to £60.0m (2006: £53.1m) and operating profit increasing by24% to £9.7m (2006: £7.8m). The significant growth in the businesses had apositive impact on operating margins which increased to 16.2% (2006: 14.7%). The sector growth has been largely organic since the Euro exchange rate hasremained broadly unchanged and the acquisition of Cabletec in August 2007contributed only £1.0m of sales and £0.1m of operating profit to the 2007results. Sommer Filcon increased sales and operating profits by over 25% with theprincipal driver of growth being the major contract successes in the Filconconnector business. Deliveries for the Eurofighter Tranche 2 project peaked inthe year, but Filcon also supplied other military projects, including theTornado up-grade, Tiger and NH90 helicopters and various missile programmes. There were also successes in non military projects. Filcon benefited from thefirst shipments of connectors for the Transrapid trains being built for theextension of the track in Shanghai. Filcon also supplied connectors into anumber of Motorsport teams in Formula 1, DTM Masters and other racing series. Sommer benefited from the general strengthening of the German manufacturingsector and continued its steady growth in the supply of specialised wire, cableand heat shrink tubing to its target Aerospace & Defence, Medical and Motorsportsegments. Sommer is also selectively expanding its supplier base and concludedan agreement with a Spanish supplier of specialised cable protection productsfor aerospace and defence applications. The IS-Group continued to grow strongly with good contributions across allbusiness segments. The core IS-Rayfast("ISR") business continued to benefitfrom strong Defence industry sales, both from supplying the Urgent OperationalRequirements ("UORs") for the military, but also from project work, includingarmoured vehicle refits and weapons system upgrades. Marine sales were alsosteady as ISR continued to supply the Type 45 destroyer and Astute submarineprogrammes. These programmes will bring continuing business to ISR as both arewell established in their build programmes. In addition, sales into the PowerGeneration market continued to grow. International sales continued to grow with increases in both direct export salesand from sales in the role of master distributor for ISR's major supplier. Therepresentative office in China is now fully operational and the focus is ondeveloping the strong customer relationships which will be the key to long termsuccess. Cabletec, acquired in August 2007 and based in Western-super-Mare, is a supplierof wiring and interconnect products to the Aerospace (both civil and military),Rail and Commercial Electronics industries. Cabletec's traditional business isthe distribution of a range of specialised wiring and harness components, verysimilar to those supplied by ISR. The customer base for these products is againthe Tier 2 and Tier 3 sub-contractors and MRO service providers. In addition,Cabletec supplies a range of manufactured products, including flexible braidedproducts and multi-core cables which give greater access to the Tier 1 OEMS. Theacquisition of Cabletec will broaden the IS-Group product portfolio and addfurther depth with its proven added value and niche manufacturing skills. IS-Motorsport ("ISM") and Clarendon delivered strong double digit growth. In theUK, these businesses delivered an excellent performance in an industry whichcontinues to focus on cost reduction. An example of the customer-focusedapplication support provided this year, has been the development of a newlightweight, smaller diameter wire, which will contribute to growth in 2008.Success has also been achieved supplying to F1 teams in Continental Europe. In the US, ISM has now established itself across all the key racing series,including IRL, NASCAR, ALMS, Grand-Am and Champcar. The new sales office inNorth Carolina will open in January 2008, with its principal focus on NASCARcustomers. The market conditions for Hawco in the UK remain challenging, with competitiveand pricing pressures bearing down on UK manufacturing. Hawco is working hard tomitigate the effects with several customer focused initiatives, including aContractor Guide and the promotion of the "Quick Pick" range of fast movingproducts. In addition, resources have been trimmed to match activity levels,with the sales operations now consolidated into Guildford. FINANCIAL REVIEW IFRS and alternative performance measures The Group's consolidated financial statements have been prepared in accordancewith IFRS since 1 October 2004. There have been no changes to the Group'saccounting policies this year and no new IFRSs have been adopted at 30 September2007; however, in accordance with IAS 32 and with guidance issued by theInternational Financial Reporting Interpretations Committee ("IFRIC") inNovember 2006, the Group has recognised in the consolidated balance sheet at 30September 2007, a liability of £11.8m for the net present value of theDirectors' current estimate of the future payments it will need to make toacquire the minority shareholdings in Somagen, AMT and M Seals. The comparativeperiod has not been restated as the amounts are not material. The impact of IFRS on the financial statements continues to highlight to theDirectors the importance of alternative financial performance measures. Thesemeasures, which are not defined in IFRS, are used by the Board for internalmanagement reporting purposes to assess the underlying operational performanceof the Group and its businesses. As such, the Board believes these performancemeasures are important and should be considered alongside the IFRS measures. Thealternative performance measures, which have been used in this Announcement, aredescribed in note 2. Results for the year Revenue increased by 10% to £140.7m and operating profit, before the sale ofproperty and amortisation of acquisition intangible assets, increased by 14% to£22.1m. The results included an aggregate contribution to revenue and operatingprofit of £7.7m and £0.9m respectively, from the businesses acquired during thefinancial year. The principal currencies in which the Group operates all weakened against UKsterling during the financial year, in particular the US dollar, which weakenedby 10%. This deterioration in average rates led to an effective reduction inrevenue and operating profits of £4.7m and £0.9m respectively, on translation ofthe results of the Group's overseas businesses. However the relative strength of UK sterling, the Euro and the Canadian dollar againstthe US dollar, brought some benefit to the gross margins of businesses whichsourced products from the US. Operating margins, before amortisation of acquisition intangible assets, againimproved in 2007 to 15.7% from 15.1% last year. Improved operating margins inthe Seals and Controls sectors more than offset a weaker margin in the LifeSciences sector. After generating interest income of £1.2m on cash funds held during the year,adjusted profit before tax increased by 14% to £23.3m (2006: £20.4m). Taxation The Group's adjusted effective tax charge represented 32.2% (2006: 29.9%) ofadjusted profit before tax. Last year's effective tax rate benefited from prioryear tax credits of £0.6m; excluding the impact of these prior year tax credits,the effective tax rate would have been 32.8%. These rates compare with acorporate tax rate of 30% in the UK and approximately 36% on profits earned inNorth America and Germany. The UK, Germany and Canada have confirmed that it istheir intention to reduce their respective national corporate tax rates from2008 and beyond. The impact of these reduced rates has been taken into accountin calculating deferred tax at 30 September 2007. Earnings and dividends Adjusted earnings per share increased 11% to 69.8p compared with 62.8p lastyear. The Board has proposed a final dividend of 18.0p per share, which willgive a total dividend for the year of 27.0p, an increase of 4.0p, or 17% on lastyear. The dividend for the year is covered 2.6 times by adjusted earnings. Free cash flow The Group's free cash flow, which is before expenditure on dividends andbusiness combinations, was £13.2m compared with £24.3m last year. Last year'sfree cash flow included £11.0m from the sale of the Stamford land. Operating cash flow increased by £2.1m to £23.0m. A seasonal reduction inworking capital of £3.7m in the second half of the year limited the year on yearincrease in working capital to £1.1m, despite an underlying increase inrevenues. A significant upgrade in IT facilities in the UK Life Sciencesbusinesses, costing £0.6m, led to expenditure on tangible assets of £2.2m, being22% above the annual depreciation charge of £1.8m. Other additions included£0.5m of field equipment for the Life Sciences business, £0.3m for furtherwarehouse automation and tooling, and £0.6m on improvements to the general ITinfrastructure across the Group. Cash tax paid of £8.0m (2006: £7.1m) represented an effective tax cash rate of34.3%; the Group's Employee Benefit Trust also took advantage of a weaker shareprice during part of the year to acquire a further 147,515 shares in the Groupat a cost of £1.3m (2006: £0.1m). After spending £31.6m on the acquisition of businesses, as described below, theGroup's cash funds reduced by £24.3m to £12.4m at 30 September 2007. Acquisitions The Group spent £31.1m of its cash resources in acquiring several businessesduring the financial year and £0.5m of deferred consideration was paid to thevendors of HKX, acquired last year. The acquisitions included CBISS, which wasacquired in October 2006 and AMT, Cabletec and M Seals, which were acquired inAugust 2007. Full details of each of these businesses are set out in note 8 ofthis Announcement. With the exception of M Seals, the terms of each acquisitionprovide for additional consideration to be payable in 2008, depending on thefinancial performance of each business in the year. The maximum amount ofdeferred consideration payable in 2008 is £2.2m, of which £1.7m has beenprovided in the financial statements at 30 September 2007. The Group owns 80% of Somagen, 75% of AMT and 90% of M Seals and retains put/call options to acquire the outstanding share capital in these companies; theseoptions can be exercised between 1 October 2007 and 31 December 2012. Theconsideration will be based upon a multiple of operating profits at the time ofexercise of the option. The Group's current best estimate of the likely amountspayable in future years to acquire these minority interests is £11.8m; thisamount has been included as a liability in the balance sheet at 30 September2007. A corresponding entry has been made to deduct £11.8m from retainedearnings, in the absence of any guidance in IFRS. In future years, thisestimate will be reassessed and any changes to the estimate will be charged orcredited to the income statement, as part of finance income or expense, asrequired by IFRS. During the year the outstanding 5% share capital of Hawco wasacquired for cash proceeds of £0.7m. Since 30 September 2007, the Group has secured a revolving advance facility of£20m to continue to pursue appropriate acquisition opportunities. Land at Stamford Following the sale last year of the former brickworks site of Williamson Cliff(referred to as Phase 3 of the Stamford land), the Group retains approximately150 acres of farm and former quarry land in Stamford, which in the opinion ofthe Directors is unlikely to be worth more than £0.5m in its present condition.The Directors do not expect that there will be any further disposal of this landin the foreseeable future. Acquisition intangible assets and goodwill The Directors completed an assessment of the fair value of the intangible assetsidentified in each of the acquired businesses and these were valued in aggregateat £18.7m. These assets included both strong "customer relationships" and "supplier relationships", which are considered key to the future success of theacquired businesses and were valued on acquisition at £9.1m and £8.5m,respectively. The amount paid for these businesses, in excess of the value ofthe tangible and intangible assets, represented goodwill of £14.2m. Thisgoodwill largely comprises the value, in each of the businesses, which relatesto both the product know-how held by the employees and to the prospects forsales growth in the future from both new customers and new products. Goodwillalso includes £5.6m in respect of deferred tax, which under IFRS, must berecognised on the intangible assets identified in the acquired businesses.Acquisition intangible assets will be amortised over their expected usefuleconomic lives of between five and fifteen years; goodwill is not amortised. The Directors have carried out an impairment review of the total Group goodwillof £42.7m held at 30 September 2007 and are satisfied that none of this goodwillhas been impaired. Pensions Pension benefits to employees are provided through defined contribution schemesat an aggregate cost in 2007 of £0.7m (2006: £0.6m). In addition, in the UK, theGroup retains a small number of legacy defined benefit pension schemes which areclosed to future accrual. At 30 September 2007 the deficit in these retirementbenefit obligations had reduced significantly to £1.6m (2006: £4.7m). A smallincrease in the margin between the rate used to discount the liabilities and theassumed inflation rate, together with the benefit from higher investment returnsand the Group's cash contributions of £0.3m, led to this reduction in thepension liability. During the year, a formal actuarial valuation of the legacy Anachem scheme wascompleted. This showed a significant improvement in the ongoing cash fundingposition, since the last valuation, to 91% (2006: 69%). As a result the ongoingcash contribution to the Anachem scheme has been reduced to £120,000 p.a. from£251,000 p.a. The company will continue to meet all of the expenses of runningthe scheme. The aggregate retirement benefit obligations, net of deferred tax, at 30September 2007 was £1.2m (2006: £3.3m) which equates to 1.3% of totalshareholders' equity. Shareholders' equity The impact of having to deduct from retained earnings, the estimated amountpayable in future years to the outstanding minority shareholders, has led to anet reduction in shareholders' equity of £2.2m to £90.7m at 30 September 2007;shareholders' equity is now equivalent to 400p per share compared with 410p lastyear. The Group's return on trading capital employed, which is defined in note 2of this Announcement, has improved to 24.2%, from 23.9% last year. The Board has confirmed that it intends to seek shareholders' approval at theAGM to increase the number of ordinary shares in issue by a 4 for 1 bonus issue.This will proportionately reduce the market price of an ordinary share and it isanticipated will improve the liquidity of the Group's shares. A proposedtimetable for the issue of the bonus shares is set out in note 9 of thisAnnouncement. CONSOLIDATED INCOME STATEMENTfor the year ended 30 September 2007 2007 2006 Note £m £m REVENUE 3,4 140.7 128.2Cost of sales (90.1) (82.4) Gross profit 50.6 45.8Distribution costs (4.2) (3.7)Administration costs (24.3) (22.7)Amortisation of acquisition intangible assets (1.0) (0.3) OPERATING PROFIT before sale of property 3,4 21.1 19.1Profit on sale of property 3 - 11.1 OPERATING PROFIT 21.1 30.2Finance income 1.2 1.0 PROFIT BEFORE TAX 22.3 31.2Tax expense 5 (7.5) (7.0) PROFIT FOR THE YEAR 14.8 24.2 Attributable to: Shareholders of the Company 14.3 23.7 Minority interests 0.5 0.5 14.8 24.2EARNINGS PER SHARE Basic and diluted earnings 6 63.6p 105.5p All activities both in the current and previous year, relate to continuingoperations. Alternative Performance Measures (note 2) 2007 2006 Note £m £m Profit before tax 22.3 31.2 Less: Profit on sale of property - (11.1) Add: Amortisation of acquisition intangible assets 1.0 0.3 ADJUSTED PROFIT BEFORE TAX 23.3 20.4 ADJUSTED EARNINGS PER SHARE 6 69.8p 62.8p CONSOLIDATED BALANCE SHEETas at 30 September 2007 2007 2006 £m £mNON-CURRENT ASSETSGoodwill 42.7 28.0Acquisition intangible assets 20.1 2.0Other intangible assets 1.0 0.6Property, plant and equipment 11.7 9.5Deferred tax assets 1.5 3.4 77.0 43.5 CURRENT ASSETSInventories 27.4 22.9Trade and other receivables 26.0 20.4Cash and cash equivalents 12.4 36.7 65.8 80.0 CURRENT LIABILITIESTrade and other payables (27.1) (20.9)Current tax liabilities (3.0) (2.9)Other liabilities (4.8) (0.5) (34.9) (24.3) NET CURRENT ASSETS 30.9 55.7 TOTAL ASSETS LESS CURRENT LIABILITIES 107.9 99.2 NON-CURRENT LIABILITIESRetirement benefit obligations (1.6) (4.7)Other liabilities (8.7) -Deferred tax liabilities (5.1) - NET ASSETS 92.5 94.5 EQUITYShare capital 1.1 1.1Capital redemption reserve 0.2 0.2Translation reserve 0.6 0.7Hedging reserve (0.6) -Retained earnings 89.4 90.9 TOTAL SHAREHOLDERS' EQUITY 90.7 92.9Minority interests 1.8 1.6 TOTAL EQUITY 92.5 94.5 CONSOLIDATED STATEMENT OFRECOGNISED INCOME AND EXPENSEfor the year ended 30 September 2007 2007 2006 £m £m Exchange rate adjustments on foreign currency net investments (0.1) (1.5)Changes in fair value of cash flow hedges (0.6) 0.1Actuarial gains/(losses) on defined benefit pension schemes 2.7 (0.6)Deferred tax (0.6) 0.2 Net income /(expense) recognised directly in equity for the year 1.4 (1.8)Profit for the year 14.8 24.2 TOTAL RECOGNISED INCOME AND EXPENSE FOR THE YEAR 16.2 22.4 Attributable to: Shareholders of the Company 15.8 21.9 Minority interests 0.4 0.5 16.2 22.4 Other Changes in Share Capital Translation Hedging Retained TotalShareholders' Equity capital redemption reserve reserve earnings reserve £m £m £m £m £m £mAt 1 October 2005 1.1 0.2 2.2 (0.1) 71.9 75.3 Total recognised income and expensefor the year attributable toshareholders - - (1.5) 0.1 23.3 21.9Share-based payments expense - - - - 0.5 0.5Purchase of own shares - - - - (0.1) (0.1)Dividends - - - - (4.7) (4.7) At 30 September 2006 1.1 0.2 0.7 - 90.9 92.9 Total recognised income and expensefor the year attributable toshareholders - - (0.1) (0.6) 16.5 15.8Share-based payments expense - - - - 0.5 0.5Purchase of own shares - - - - (1.3) (1.3)Future purchases of minority interests - - - - (11.8) (11.8)Dividends - - - - (5.4) (5.4) At 30 September 2007 1.1 0.2 0.6 (0.6) 89.4 90.7 CONSOLIDATED CASH FLOW STATEMENTfor the year ended 30 September 2007 2007 2006 Note £m £mCASH FLOWS FROM OPERATING ACTIVITIESCash flow from operations 7 23.0 20.9Finance income received 1.1 1.0Tax paid (8.0) (7.1) NET CASH FROM OPERATING ACTIVITIES 16.1 14.8 CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of subsidiaries (net of cash acquired) 8 (31.1) (7.0)Deferred consideration paid 8 (0.5) (1.0)Proceeds from the sale of property, plant and equipment 0.6 11.0 Purchase of property, plant and equipment (1.6) (1.3)Purchase of other intangible assets (0.6) (0.1) NET CASH (USED IN)/FROM INVESTING ACTIVITIES (33.2) 1.6 CASH FLOWS FROM FINANCING ACTIVITIESDividends paid to shareholders (5.4) (4.7)Dividends paid to minority interests (0.3) (0.3)Purchase of own shares (1.3) (0.1) NET CASH USED IN FINANCING ACTIVITIES (7.0) (5.1) NET (DECREASE)/INCREASE IN CASH AND CASHEQUIVALENTS (24.1) 11.3 Cash and cash equivalents at beginning of year 36.7 25.7Effect of exchange rates on cash and cash equivalents (0.2) (0.3) CASH AND CASH EQUIVALENTS AT END OF YEAR 12.4 36.7 Alternative Performance Measures (note 2) 2007 2006 £m £mNET (DECREASE)/INCREASE IN CASH AND CASHEQUIVALENTS (24.1) 11.3 Add: Dividends paid to shareholders 5.4 4.7 Dividends paid to minority interests 0.3 0.3 Acquisition of subsidiaries (net of cash acquired) 31.1 7.0 Deferred consideration paid 0.5 1.0 FREE CASH FLOW 13.2 24.3 NOTES TO THE PRELIMINARY ANNOUNCEMENTfor the year ended 30 September 2007 1. GENERAL INFORMATION Diploma PLC is a public limited company registered and domiciled in England andWales and listed on the London Stock Exchange. The address of the registeredoffice is 12 Charterhouse Square, London, EC1M 6AX. The consolidated financialstatements comprise the Company and its subsidiaries (together referred to asthe "Group") and were authorised by the Directors for publication on 26 November2007. The statements are presented in UK sterling, with all values rounded tothe nearest one hundred thousand, except where otherwise indicated. The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS"), as adopted by the EuropeanUnion, and in accordance with the Companies Act 1985, as applicable to companiesreporting under IFRS. The accounting policies have been consistently applied in2007 and the comparative period. The financial information set out in this Preliminary Announcement, which hasbeen extracted from the audited consolidated financial statements, does notconstitute the Group's statutory financial statements for the years ended 30September 2007 and 2006. Statutory financial statements for the year ended 30September 2006 have been delivered to the Registrar of Companies. The statutoryfinancial statements for the year ended 30 September 2007, which were approvedby the Directors on 26 November 2007, will be delivered to the Registrar ofCompanies following the Company's Annual General Meeting. The auditors have reported on the consolidated financial statements for theyears ended 30 September 2007 and 2006. The reports were unqualified and didnot contain a statement under Section 237(2) or (3) of the Companies Act 1985. The Company's Annual General Meeting will be held at 12.00 midday on 17 January2008 in the Brewers Hall, Aldermanbury Square, London, EC2V 7HR. The Notice ofMeeting will be set out in a separate Circular to shareholders. 2. ALTERNATIVE PERFORMANCE MEASURES The Group uses a number of alternative (non-Generally Accepted AccountingPractice ("non-GAAP")) financial measures which are not defined within IFRS.The Directors use these measures in order to assess the underlying operationalperformance of the Group and as such, these measures are important and should beconsidered alongside the IFRS measures. The following non-GAAP measures arereferred to in this Preliminary Announcement. 2.1 Adjusted profit before tax On the face of the consolidated income statement, "adjusted profit before tax"is separately disclosed, being defined as profit before tax and before the costsof restructuring or rationalisation of operations, the profit or loss relatingto the sale of property, fair value remeasurements under IAS 32 and IAS 39 inrespect of future purchases of minority interests, and the amortisation andimpairment of intangible assets. The Directors believe that adjusted profitbefore tax is an important measure of the underlying performance of the Group. 2.2 Adjusted earnings per share Adjusted earnings per share is calculated as the total of adjusted profit, lessincome tax costs, but excluding the tax impact on the items included in thecalculation of adjusted profit and the tax effects of goodwill in overseasjurisdictions, less profit attributable to minority interests, divided by theweighted average number of ordinary shares in issue during the year. TheDirectors believe that adjusted earnings per share provides an important measureof the underlying earning capacity of the Group. 2.3 Free cash flow On the face of the consolidated cash flow statement, "free cash flow" isreported, being defined as net cash flow from operating activities, after netcapital expenditure on fixed assets, but before expenditure on businesscombinations and dividends paid to both minority shareholders and the Company'sshareholders. The Directors believe that free cash flow gives an importantmeasure of the cash flow of the Group, available for future investment. 2.4 Trading capital employed In the segment analysis in note 3, "trading capital employed" is reported, beingdefined as net assets less cash and cash equivalents and after adding backretirement benefit obligations, deferred tax, amounts in respect of futurepurchases of minority interests and adjusting for goodwill in respect of therecognition of deferred tax on acquisition intangible assets. Return on tradingcapital employed is defined as being adjusted profit before finance income andtax, divided by trading capital employed plus all historic goodwill and asadjusted for the timing effect of major acquisitions and disposals. TheDirectors believe that return on trading capital employed is an importantmeasure of the underlying performance of the Group and of each of thebusinesses. 3. BUSINESS SEGMENT ANALYSIS For management reporting purposes, the Group is organised into three mainbusiness segments, Life Sciences, Seals and Controls. These segments form thebasis of the primary reporting format disclosures below. Segment revenuerepresents revenue to external customers; there is no inter-segment revenue.Segment results, assets and liabilities include items directly attributable to asegment, as well as those that can be allocated on a reasonable basis. Life Sciences Seals Controls Total 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £mRevenue - continuing operations 38.7 39.2 35.3 35.9 59.0 53.1 133.0 128.2 - acquisitions 6.0 - 0.7 - 1.0 - 7.7 - Total revenue 44.7 39.2 36.0 35.9 60.0 53.1 140.7 128.2 Segment - continuingoperating operations 5.9 6.1 5.7 5.5 9.6 7.8 21.2 19.4profit - acquisitions 0.7 - 0.1 - 0.1 - 0.9 - Total segment operating profit 6.6 6.1 5.8 5.5 9.7 7.8 22.1 19.4 Amortisation of acquisition intangible assets (0.6) - (0.3) (0.3) (0.1) - (1.0) (0.3) 6.0 6.1 5.5 5.2 9.6 7.8 21.1 19.1Profit on sale of property - 11.1 OPERATING PROFIT 21.1 30.2 Segment assets exclude cash and cash equivalents, deferred tax assets andcorporate assets that cannot be allocated on a reasonable basis to a businesssegment. Segment liabilities exclude retirement benefit obligations, deferredtax liabilities and corporate liabilities that cannot be allocated on areasonable basis to a business segment. These items are shown collectively inthe following analysis as "unallocated assets" and "unallocated liabilities",respectively. In 2006 the Group sold 12.2 acres of land in Stamford, East Midlands forconsideration of £11.5m, after expenses. Tax of £0.9m was provided on the gainof £11.1m, having taken account of available capital losses. Life Sciences Seals Controls Total 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m Operating assets 20.8 15.2 18.4 17.4 23.8 20.0 63.0 52.6Goodwill 23.4 13.8 7.4 4.7 11.9 9.5 42.7 28.0Acquisition intangible assets 12.4 - 5.4 2.0 2.3 - 20.1 2.0 56.6 29.0 31.2 24.1 38.0 29.5 125.8 82.6 Unallocated assets:- Deferred tax assets 1.5 3.4- Cash and cash equivalents 12.4 36.7- Corporate assets 3.1 0.8 TOTAL ASSETS 142.8 123.5 Operating liabilities (11.3) (7.5) (4.1) (3.6) (11.1) (9.3) (26.5) (20.4)Unallocated liabilities:- Deferred tax liabilities (5.1) -- Retirement benefit obligations (1.6) (4.7)- Future purchases of minorities (11.8) -- Corporate liabilities (5.3) (3.9) TOTAL LIABILITIES (50.3) (29.0) NET ASSETS 92.5 94.5 Other segment informationCapital expenditure 1.3 0.5 0.5 0.7 0.4 0.2 2.2 1.4Depreciation (includingsoftware) 0.9 0.8 0.6 0.6 0.3 0.2 1.8 1.6 ALTERNATIVE PERFORMANCE Life Sciences Seals Controls TotalMEASURES (note 2) 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m Net assets 92.5 94.5Add/(less):- Deferred tax, net 3.6 (3.4)- Retirement benefit obligations 1.6 4.7- Future purchases of minorities 11.8 -- Cash and cash equivalents (12.4) (36.7)- Adjustment to goodwill (3.9) - (1.1) - (0.6) - (5.6) - GROUP TRADING CAPITAL EMPLOYED 91.5 59.1 Add: Corporate liabilities, net 2.2 3.1 SEGMENT TRADING CAPITAL EMPLOYED 41.4 21.5 26.0 20.5 26.3 20.2 93.7 62.2 4. GEOGRAPHIC SEGMENT ANALYSIS Revenue Segment Gross assets Trading capital Capital operating profit* employed expenditure 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m £m £m United Kingdom 66.6 58.7 8.8 7.2 55.8 63.0 26.6 16.6 1.2 0.4Rest of Europe 25.1 20.2 4.3 3.4 22.5 11.8 16.4 8.6 0.3 0.1North America 49.0 49.3 9.0 8.8 64.5 48.7 48.5 33.9 0.7 0.9 140.7 128.2 22.1 19.4 142.8 123.5 91.5 59.1 2.2 1.4 * before amortisation of acquisition intangible assets 5. TAXATION The Group's adjusted effective tax charge represented 32.2% (2006: 29.9%) ofadjusted profit before tax. Last year's effective tax rate benefited from prioryear tax credits of £0.6m; excluding the impact of these prior year tax credits,the effective tax rate would have been 32.8%. These rates compare with acorporate tax rate of 30% in the UK and approximately 36% on profits earned inNorth America and Germany. 6. EARNINGS PER SHARE Basic and diluted earnings per share Basic and diluted earnings per ordinary share are calculated on the basis of theweighted average number of ordinary shares in issue during the year of22,494,786 (2006: 22,468,648) and the profit for the year attributable toshareholders of £14.3m (2006: £23.7m). There were no potentially dilutiveshares. Adjusted earnings per share Adjusted earnings per share, which is defined in note 2, are calculated asfollows: 2007 2006 2007 2006 pence pence per share per share £m £mProfit before tax 22.3 31.2Tax expense (7.5) (7.0)Minority interests (0.5) (0.5)Earnings for the year attributable to shareholders of the Company 63.6 105.5 14.3 23.7 Profit on sale of property, net of tax - (45.3) - (10.2) Amortisation of acquisition intangible assets 4.4 1.3 1.0 0.3Tax effects on goodwill and acquisition intangible assets 1.8 1.3 0.4 0.3 ADJUSTED EARNINGS 69.8 62.8 15.7 14.1 7. RECONCILIATION OF CASH FLOW FROM OPERATIONS 2007 2006 £m £mProfit for the year 14.8 24.2Depreciation 1.8 1.6Amortisation of acquisition intangible assets 1.0 0.3Share-based payments expense 0.5 0.5Finance income (1.2) (1.0)Profit on disposal of property - (11.1)Tax expense 7.5 7.0 Operating cash flow before changes in working capital 24.4 21.5Increase in inventories (0.2) (1.6)Increase in trade and other receivables (1.2) (0.1)Increase in trade and other payables 0.3 1.4Cash paid into defined benefit schemes (0.3) (0.3) CASH FLOW FROM OPERATIONS 23.0 20.9 8. ACQUISITIONS AMT Vantage Holdings Inc On 28 August 2007, the Group acquired 75% of the share capital of AMT VantageHoldings Inc ("AMT"), a leading distributor of speciality electrosurgery andendoscopy equipment and related consumables to hospitals across Canada. Theinitial consideration was £13.2m (C$27.8m), net of cash acquired and includingacquisition expenses. Further deferred consideration, up to a maximum of £1.2m(C$2.5m), will be payable in November 2008, depending on the operating profit ofAMT achieved in the twelve months ending 30 September 2008. Other acquisitions On 10 October 2006, the Group acquired 100% of CBISS Limited ("CBISS"), aleading supplier of equipment and services for environmental monitoring andcontrol in the United Kingdom. The initial consideration was £4.5m, net of cashacquired and including acquisition expenses. Further deferred consideration, upto a maximum of £0.5m, will be payable in November 2008, depending on theoperating profits of CBISS achieved in the twenty four months ending 30September 2008. On 3 August 2007, the Group acquired 100% of Cabletec Interconnect ComponentsSystems Limited ("Cabletec"), a leading supplier of wiring and connectorproducts to the aerospace, defence and commercial electronic industries in theUnited Kingdom. The initial consideration was £5.9m, net of cash acquired andincluding acquisition expenses. Further deferred consideration, up to a maximumof £0.5m, will be payable in November 2008, depending on the gross profit ofCabletec achieved in the twelve months following acquisition by the Group. On 22 August 2007, the Group acquired 90% of M Seals A/S ("M Seals"), a leadingdistributor of industrial seals in Denmark. The consideration, including debtacquired and acquisition expenses, was £6.5m (DKK70.7). On 26 June 2007, the Group acquired the outstanding 5% of the ordinary sharecapital of its subsidiary HA Wainwright (Group) Limited for cash considerationof £0.7m. In addition to these acquisitions during the year, the Group alsoacquired certain trade assets, including supply agreements, for aggregateconsideration of £0.3m. In February 2007, deferred consideration of £0.5m (US$1.0m) was paid to thevendors of HKX Inc, in final settlement of their performance payment. The consideration paid for all of the acquisitions set out above was paid incash and met from the Group's existing cash resources. Future purchases of minority interests The Group also retains put/call options to acquire the outstanding minorityshareholding in Somagen, AMT and M Seals. Under IAS 32 (Financial Instruments:Presentation) and IAS 39 (Financial Instruments: Recognition and Measurement),these put/call options are designated as "financial instruments". As such, thenet present value of the estimated future payments under the put option must beshown as a financial liability, with a corresponding entry to equity as adeduction against retained earnings. At the end of each financial year, theestimate of this financial liability will be reassessed and any change in valuemust be charged, or credited, in the income statement, as finance income orexpense. The estimate of these future payments are dependent on the underlyingperformance of the businesses and on movements in foreign exchange rates. At 30 September 2007, this financial liability was £11.8m (2006: £Nil), of which£3.1m falls due within one year. Set out below is an analysis of the net book value and provisional fair value ofthe net assets acquired and the consideration payable in respect of theacquisitions completed during the year. AMT Other Total Book Fair Book Fair Book Fair value value value value value value £m £m £m £m £m £mAcquisition intangible assets - 9.4 - 9.3 - 18.7Property, plant & equipment 0.5 0.5 1.8 2.1 2.3 2.6Inventories 0.8 0.9 2.6 2.6 3.4 3.5Trade and other receivables 1.3 1.7 3.4 3.4 4.7 5.1Trade and other payables (1.2) (1.7) (3.8) (3.9) (5.0) (5.6)Deferred tax on intangible assets - (3.2) - (2.4) - (5.6) 1.4 7.6 4.0 11.1 5.4 18.7Minority's share of net assets (0.4) 0.3 (0.1) Net assets acquired by Group 7.2 11.4 18.6Goodwill arising on acquisition 7.2 7.0 14.2 14.4 18.4 32.8 Satisfied by:Cash paid 13.1 18.7 31.8Cash acquired (0.3) (1.0) (1.3)Expenses of acquisition 0.4 0.2 0.6Net cash paid 13.2 17.9 31.1Provision for deferred considerationpayable 1.2 0.5 1.7 Total consideration 14.4 18.4 32.8 AMT The fair values in respect of intangible assets are due to the recognition of£4.0m in respect of customer relationships and £5.4m in respect of supplierrelationships which have been independently valued. Goodwill represents thevalue of expected growth in the business from new sales activity and from theassembled work force. Goodwill also includes £3.2m in respect of a deferred taxliability which must be recognised on the valuation of acquisition intangibleassets. The adjustments to the constituents of trading capital employed relateto a combination of valuation adjustments and adjustments to bring theaccounting policies of AMT onto the same basis as those of the Group. Thevaluation adjustments are provisional and are based on managements' bestestimates. The fair value adjustments relating to this acquisition will befinalised in the 2008 financial statements. From the date of acquisition to 30 September 2007, AMT contributed £0.8m torevenue and £0.2m to operating profit, before amortisation of acquisitionintangible assets. If the acquisition of AMT had been made at the beginning ofthe financial year, AMT would have contributed £8.0m to revenue and £0.3m toprofit after tax. Profit after tax takes into account the amortisation ofacquired intangible assets, together with related tax effects and should not beviewed as indicative of the results of operations that would have occurred, ifthe acquisition had been made at the beginning of the year. Other acquisitions The fair values in respect of intangible assets are due to the recognition of£5.1m in respect of customer relationships, £3.1m in respect of supplierrelationships and £1.1m in respect of databases, all of which have beenindependently valued. Goodwill represents the aggregate of the value ofexpected growth in the business from new sales activity, the benefit ofsynergies and the assembled work force. Goodwill also includes £2.4m in respectof a deferred tax liability which must be recognised on the valuation ofacquisition intangible assets. The adjustments to the constituents of tradingcapital employed relate to a combination of valuation adjustments andadjustments to bring the accounting policies of the acquired businesses onto thesame basis as those of the Group. The valuation adjustments are provisional andare based on managements' best estimates. The fair value adjustments relatingto these acquisitions will be finalised in the 2008 financial statements. From the date of acquisition to 30 September 2007, these acquired businessescontributed £6.9m to revenue and £0.7m to operating profit, before amortisationof acquisition intangible assets. If the acquisition of the acquired businesseshad been made at the beginning of the financial year, the acquired businesseswould have contributed £16.9m to revenue and £0.1m to profit after tax. Profitafter tax takes into account the amortisation of acquired intangible assets,together with related tax effects and should not be viewed as indicative of theresults of these acquired operations that would have occurred if theseacquisitions had been made at the beginning of the year. 9. PROPOSED BONUS ISSUE OF ORDINARY SHARES The Directors have today announced their intention to seek shareholders'approval at the Annual General Meeting on 17 January 2008 for a 4 for 1 bonusissue of ordinary shares. Full details of this proposed bonus issue will beincluded in a separate Circular to shareholders setting out the business to beconducted at the Annual General Meeting. The expected timetable of principalevents relating to the bonus issue is as follows: Time and date Annual General Meeting 12.00 midday on 17 January 2008 Latest time to be eligible for Bonus Issue (holders of ordinary Close of business onShares entered on register of members) 18 January 2008 New ordinary shares issued, allotted and admitted to By 8.00 a.m. on 21 January 2008the Official List and dealings commence CREST accounts credited and share certificates issued 25 January 2008and posted to shareholders If circumstances result in the expected timetable being changed, shareholderswill be informed by announcement to the UK Listing Authority and byadvertisement in the UK press, and such announcement will include details ofdates relevant for the purposes of dealings and settlement. 10. DIVIDENDS Subject to approval at the Annual General Meeting, a proposed final dividend of18.0p per share (2006: 15.0p) will be paid on 24 January 2008 to ordinaryshareholders on the register at the close of business on 7 December 2007. Thebonus shares will not rank for the final dividend. 11. EXCHANGE RATES The following exchange rates have been used to translate the results of theoverseas businesses: Average Average Closing Closing 2007 2006 2007 2006 US Dollar 1.98 1.80 2.04 1.87Canadian Dollar 2.18 2.05 2.02 2.08Euro 1.48 1.46 1.43 1.47 This information is provided by RNS The company news service from the London Stock Exchange