Filtronic Regulatory News (FTC)

23 Jul 2007 07:00

Filtronic PLC23 July 2007 FILTRONIC PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MAY 2007 Filtronic plc, the wireless communications and electronic defence equipmentcompany, announces its Preliminary Results for the year ended 31 May 2007. Revenue from continuing operations was £73.5m (2006 £63.0m), with an operatingloss before exceptional items of £5.3m (2006 £10.9m). Operating loss afterexceptional items was £27.6m (2006 £10.2m). Discontinued operations recorded aprofit of £76.7m (2006 £18.9m). Earnings per share were 60.36p compared with8.03p in 2006. Highlights • Revenue from continuing UK operations £65.4m (2006 £49.5m)• Reduced operating loss from continuing UK operations before exceptional items £3.4m (2006 loss £11.8m)• Year end cash £118.3m (2006 net debt £12.7m)• Point to Point revenue up 93% year on year and 10% margin• UK Defence good recovery in second half• Compound Semiconductors' operating loss much reduced• Disposals realised £144.5m for Wireless Infrastructure business, further £11.3m for Handset division and £2.8m for properties• Pension scheme liabilities reduced in size by 35%, at a cost of £5.3m in 2007/8 post the year end Summary of Outlook for the Group The Board is committed to defining the future of Compound Semiconductors andresolving the issues that stand in the way of a cash return. Once these areachieved, progress of the UK Defence and Point to Point businesses and reducedcentral costs indicate that the group should return to profit during this year. Enquiries: Filtronic plcJohn Poulter, Chairman Tel: 01274 415 306Charles Hindson, Chief Executive Tel: 01274 415 306 / Mob: 07800 706 319 Parkgreen Communications Ltd Tel: 020 7479 7933Paul McManus Mob: 07980 541 893 Chairman's Statement The year ended 31 May 2007 produced revenue from continuing operations of £73.5mand operating losses before exceptional items of £5.3m compared with the prioryear of £63.0m and £10.9m respectively. The group profit for the period was£45.0m compared to £6.0m in the prior year. Cash at the year end was £118.3mcompared with net debt of £12.7m at the 31 May 2006. A full breakdown of theyear is shown in the financial statements, notes and narratives which follow. Having detailed the many events impacting the performance of Filtronic in myreport to shareholders at the interim stage, I shall concentrate in thiscommentary on the activities of the second half of the year to avoid repetition. Since the half year the shares received in part consideration for the WirelessInfrastructure business, completed in October 2006, were sold, yielding net cashproceeds of £144.5m. Our review of activities resulted in the decision to exit the small loss-makingUS defence business and discussions are at an advanced stage with a prospectivepurchaser. Similarly, overheads have been reduced and surplus property has been sold. TheWaterfront building, previously occupied by the headquarters and the WirelessInfrastructure business, is on the market. Of the three continuing operations, both the Point to Point and the UK Defencebusinesses performed well. The former in particular has achieved substantialgrowth as a result of exploiting its particular niche. Actions taken to reduce costs and widen margins enabled Compound Semiconductorsto produce a near-breakeven result in the second half. The total impact of thecapital expansion reversal referred to at the half year was £7.1m. Excludingthis, and completion of the capital expenditure commitments, the unit delivereda positive cash flow in the half year. Subsequently, the main customer formobile handset switch products advised us of its intention to in-source all itsfuture requirements, resulting in Filtronic announcing a significant headcountreduction at the Newton Aycliffe facility. The objective for the remaining Compound Semiconductors business, serving adiverse range of customers, is to be at least break even and cash-neutral. Thescale of the operation in a volatile and capital-intensive environment, setagainst the small size of the parent company, indicates that sale to anothercompany in the same or adjacent markets would provide the optimum solution forcustomers, employees and shareholders. The company is engaged in discussions tothat end but, in the event that these prove unfruitful, the Board will pursueother options. A further non cash impairment of £20.1m has been made in thecarrying value of Compound Semiconductors, reducing it to £17.9m, reflecting thedecision referred to above. The consequent provision against the carrying valuein the company accounts has eliminated the distributable reserves. As noted above, the group has £118.3m in cash and the Board remains committed topursuing a return of cash to shareholders in line with the intention expressedin the EGM circular related to the Wireless Infrastructure disposal. Theprerequisites remain expiry of the product liability obligations to PowerwaveTechnologies, Inc. associated with the disposal and the need to reach agreementwith the trustees of the Filtronic defined benefit pension scheme on themagnitude of a cash injection into the fund as a necessary precursor toshareholder approval and a court approved reorganisation of reserves. Theformer will be time expired in October. The company has made an offer ofenhanced transfer values to deferred members, resulting in a reduction of 35%in the size of the scheme liabilities as at 30 November 2006. Furtherdiscussions are now being held with the trustees of the scheme with the aim ofproviding an additional cash contribution to the scheme consistent with theintended return of cash to shareholders. A further consequence of the lack of distributable reserves is that the companywill not pay a final dividend. Looking ahead, the Board is committed to defining the future of CompoundSemiconductors and resolving the issues that stand in the way of a cash return.Once these are achieved, progress of the UK Defence and Point to Pointbusinesses and reduced central costs indicate that the group should return toprofit during this year. In addition to the Board changes detailed in the interim statement, RichardBlake retired at the beginning of March and Iain Gibson will resign at the AGM.I should like to thank directors who have retired from the Board over the pastyear, as well as all staff in the business who have had to accommodate the manychanges in the group. John PoulterChairman23 July 2007 Chief Executive's Operating Review Summary The course of the year has resulted in many changes for the group, after thedisposal of the Wireless Infrastructure business to Powerwave Technologies, Inc.The previous expansion plan for Compound Semiconductors was stopped. Point toPoint and UK Defence have delivered growth and good operating performances. Continuing operations The segmental analysis of the operating results for continuing operations is asfollows: Revenue Operating (loss) Operating before exceptional (loss) itemsYear ended 31 May 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £mCompound Semiconductors 30.3 20.8 (1.5) (7.3) (29.0) (5.1)Defence Electronics 24.2 32.1 (0.6) 2.1 (3.4) 0.6Point to Point 22.4 11.6 2.2 (0.4) 2.2 (0.4)Central Services - - (4.8) (4.2) (5.2) (4.2)Inter segment (3.4) (1.5) - - - -Unallocated pension credit/(charge) - - (0.6) (1.1) 7.7 (1.1) ----- ----- ----- ----- ----- ----- 73.5 63.0 (5.3) (10.9) (27.7) (10.2) ----- ----- ----- ----- ----- ----- Compound Semiconductors The Compound Semiconductors business operates a Gallium Arsenide (GaAs)fabrication facility at Newton Aycliffe in the UK that specialises in producingpHEMT GaAs wafers which are used in switches for mobile telephones, a range ofcomponents and complex Monolithic Multifunctional Integrated Circuits (MMICs)for communication equipment and defence applications. The decision was made in the last financial year to expand the facility. Thisexpansion was stopped in the light of market developments. Subsequent to theyear end, we announced that our predominant customer had decided to in-sourcefully and that its requirements for switches would cease in September 2007; thiswill result in a substantial reduction in the level of activity for the CompoundSemiconductor business. During the financial year, Compound Semiconductors achieved revenues of £30.3m,split equally across the half financial years, and reduced operating lossesthrough margin and overhead control to near breakeven for the second half of thefinancial year. By stopping the expansion plan in December 2006, the capital expenditure,including cancellation costs, was restricted to £13.4m and its termination wascompleted in the year. Excluding this capital expenditure, there was a cashinflow of £5.8m in the second half. In light of the expected lower level of activity, the carrying value of theCompound Semiconductors business has been impaired to £17.9m in both theconsolidated and company's accounts. The objective for this division is totrade on at least a break even and cash neutral basis on a reduced level ofturnover arising from the broadening customer base, with negligible capitalexpenditure. Defence Electronics The Defence Electronics division consists of two separately managed activitiesin the UK and the US. The UK Defence business supplies complex components and subsystems that areprincipally used in the defence market including military communications, radarand sensing equipment. It is well positioned to provide partial or complete "antennae to digital interface" solutions for the receiver systems required insuch equipment. Its customers are typically the world-wide, prime contractors for defenceequipment into which it supplies at component or sub-assembly, and increasinglyat the major subsystems, levels. Its products are used to intercept, identify,analyse, generate and transmit radio frequency, microwave and millimetre wavesignals. UK Defence's expertise is in novel RF and microwave circuit design, coupled witha strong capability in advanced digital signal processing and a sound knowledgeof system requirements and system engineering. It is not dependent on anysingle technology or manufacturing technique, using the most appropriateresource on a product by product basis. Its research and developments activities, in the UK and Australia, are driven byboth customer funded development activities and by technology research contractsundertaken directly with Government agencies. It is a member of the UK EMRSDefence Technology Centre and the Electronic Warfare and Radar Towers ofExcellence, enabling it to work in partnership with the wider UK defenceindustry, academia and MoD to advance ideas and concepts which will eventuallybe pulled through to enhance future MoD equipment capabilities. UK Defence grew its underlying turnover by 18% compared with last financialyear, excluding the major contracts that effectively came to a close last year,and improved its operating profit margin to 8% for this year with the strongerperformance in the second half of the financial year. The order book at theyear end was stable, with overdue orders reduced in the second half year. It isexpected to show revenue growth over the coming year. The US Defence business achieved revenues of £8.1m and made an operating loss of£1.9m, and discussions for its sale are at an advanced stage. Point to Point The Point to Point business designs and manufactures customised microwaveelectronic sub assembly components that are integrated by OEMs into point topoint (PTP) radios. These radios provide the backhaul links for telecomnetworks particularly for the mobile basestation market. Customers require abroad radio portfolio in order to provide global coverage of the licensedcommunication bands. Point to Point applies specialised microwave technology and radio expertise todevelop custom solutions for each OEM customer. It provides a broad productrange of frequency bands underpinned by cost effective designs in order to offerhighly competitive volume supply across two product lines - microwavetransceiver modules and filters. These products are integrated by the customerinto the radio. Point to Point has developed proprietary semiconductor device technology thatenables a high level of product integration. These devices are manufacturedboth in Filtronic's in-house semiconductor division and at a third partyfoundry. This provides significant cost advantage compared to the normal levelof product integration by reducing the complexity of manufacture of transceivermodules. It has a full portfolio of filters required to channelise the licensed frequencybands in the radio. These products are optimised to meet market needs for highvolume supply with short lead times. Point to Point has expanded its customer base and has three main customers whichare global market leading OEMs. It believes itself to be in the top twomerchant suppliers of transceivers and diplex filters by global volume share inthe point to point market. Several additional products are being developed andqualified, some of which have entered production late in the financial year.Expansion of its portfolio with its current customer base and volume demandgrowth from these customers has enabled Point to Point to increase its revenue93% compared with last financial year and achieve operating margins of 10% inthe year. It is expected to show further growth in the coming year. Discontinued operations Wireless Infrastructure The shares in Powerwave Technologies, Inc. ("Powerwave"), which were received oncompletion of the sale of the Wireless Infrastructure business, were disposed ofin the second half of the financial year for £53.4m, bringing the net cashconsideration received to £144.5m. We have provided for a product liability claim that has now been settled. Wehave not been notified of other material outstanding product liability claims,although Powerwave has the right to do so until 16 October 2007. Handset Products Deferred consideration of £11.3m was received during the year, bringing thetotal consideration received for the Handset Products division to £55.5m. Group matters Central costs were reduced further in the second half of the financial year,resulting in an forward run rate of £3m a year. Two freehold properties were disposed of in the year with cash receipts of£2.8m, resulting in a book loss of £0.4m. The main remaining surplus propertyto operational requirements is the Waterfront site in Saltaire, UK; this isbeing marketed. Finance The group repaid its bank facilities of £18.0m on completion of the sale of theWireless Infrastructure business. The group ended the year with cash on deposit of £118.3m, receiving interestpayments of £2.8m on cash balances subsequent to the sale of the WirelessInfrastructure business. Capital expenditure The group's capital expenditure in the year for continuing operations was£14.4m, of which £13.4m was within Compound Semiconductors, completing thecurtailed expansion programme. Employees At 31 May 2007, the group employed 801 people, of which 71 were in the USDefence business and 340 in the Compound Semiconductors business. Pension scheme The profile of the defined benefit pension scheme operated by Filtronic ("thescheme") has changed during the year. We have previously reported the change to a career average revalued earningsbasis in August 2006 and a contribution of £4.6m by the group at that time. Afurther contribution of £1m was made in March 2007 to complete the group'sobligations arising from this change. The group made an offer to deferred members of the scheme of transfer valuesenhanced to the level of the IAS 19 valuation as at 30 November 2006, whichclosed after the year end on 30 June 2007. Some 320 members have now acceptedthe offer. On a proforma IAS 19 basis as at 30 November 2006, this would haveresulted in a reduction of 35% in the size of the scheme liabilities. This willinvolve further funding of £5.3m from the group to be paid in the year ended 31May 2008. Charles HindsonChief Executive23 July 2007 Consolidated Income Statementfor the year ended 31 May 2007 2007 2006Continuing operations note £000 £000 Revenue 1, 2 73,501 62,992 ====== ====== Operating loss before exceptional items (5,300) (10,877)Exceptional items 3 (22,360) 732 --------- ---------Operating loss 1, 2 (27,660) (10,145) (Loss)/gain on sale of property (415) 523Loss on sale of investments 13 (6,518) -Finance income 14 5,221 1,706Finance costs 15 (3,839) (4,934) --------- ---------Loss before taxation (33,211) (12,850)Taxation 1,491 - --------- ---------Loss for the period from continuing (31,720) (12,850)operationsProfit for the period from discontinued 16 76,715 18,861operations --------- ---------Profit for the period 44,995 6,011 ====== ====== Basic and diluted (loss)/earnings per shareContinuing operations 24 (42.55) p (17.17) pDiscontinued operations 24 102.91 p 25.20 p --------- ---------Basic and diluted earnings per share 24 60.36 p 8.03 p ====== ====== The profit for the period is attributable to the equity shareholders of theparent company Filtronic plc. Consolidated Statement of Recognised Income and Expensefor the year ended 31 May 2007 2007 2006 £000 £000 Profit for the period 44,995 6,011 --------- --------- Actuarial gain/(loss) on defined benefit pension scheme 562 (2,849)Transfer to income from translation reserve related to business 61 (42)disposalCurrency translation movement arising on consolidation 47 (531) --------- --------- 670 (3,422) --------- --------- --------- ---------Total recognised income and expense for the period 45,665 2,589 ====== ====== The total recognised income and expense for the period is attributable to theequity shareholders of the parent company Filtronic plc. Consolidated Balance Sheetat 31 May 2007 2007 2006 £000 £000Non-current assetsGoodwill - 2,723Property, plant and equipment 26,089 69,248Deferred tax - 2,249 --------- --------- 26,089 74,220 --------- ---------Current assetsInventories 10,625 33,623Trade and other receivables 16,268 67,615Income tax receivable - 550Cash and cash equivalents 118,267 5,293 --------- --------- 145,160 107,081 --------- --------- --------- ---------Total assets 171,249 181,301 --------- ---------Current liabilitiesBank revolving credit - 18,000Trade and other payables 23,944 41,412Income tax payable - 1,764 --------- --------- 23,944 61,176 --------- ---------Non-current liabilitiesDefined benefit pension 6,954 20,585Deferred income 2,140 4,475Deferred tax - 688 --------- --------- 9,094 25,748 --------- --------- --------- ---------Total liabilities 33,038 86,924 --------- --------- --------- ---------Net assets 138,211 94,377 ====== ======EquityShare capital 7,432 7,484Share premium 139,253 139,172Capital redemption reserve 58 -Translation reserve 660 698Other reserve - 6,237Accumulated losses (9,192) (59,214) --------- ---------Total equity 138,211 94,377 ====== ====== The total equity is attributable to the equity shareholders of the parentcompany Filtronic plc. Consolidated Cash Flow Statementfor the year ended 31 May 2007 2007 2006 note £000 £000Cash flows from operating activities Profit for the period 44,995 6,011Gain on sale of discontinued operations (80,139) (14,146)Taxation (860) 1,390Finance costs 4,078 4,934Finance income (5,221) (1,706)Loss on sale of investments 6,518 -Loss/(gain) on sale of property 415 (523) --------- ---------Operating loss 27 (30,214) (4,040)Defined benefit pension (credit)/charge (5,649) 3,624Defined benefit pension contributions paid (7,695) (2,561)Share-based payment 567 240Goodwill impairment 2,653 -Plant and equipment impairment 17,511 -Depreciation 8,252 11,744Loss on sale of plant and equipment 7,316 402Licence fee released to income (2,335) (2,335)Government grants released to income - (3,920)Movement in inventories (3,201) (3,215)Movement in trade and other receivables 381 1,490Movement in trade and other payables 1,719 1,086 --------- ---------Cash flow from operations (10,695) 2,515Taxation received/(paid) 88 (1,998) --------- ---------Net cash from operating activities 27 (10,607) 517 --------- --------- Consolidated Cash Flow Statementfor the year ended 31 May 2007 2007 2006 note £000 £000 Net cash from operating activities 27 (10,607) 517 --------- ---------Cash flows from investing activitiesProceeds from sale of property 2,750 3,508Proceeds from sale of plant and equipment 334 348Interest received 2,850 172Acquisition of property, plant and equipment (16,605) (14,422)Proceeds from sale of discontinued operations 105,252 44,138Proceeds from sale of investments 53,391 - --------- ---------Net cash from investing activities 27 147,972 33,744 --------- ---------Cash flows from financing activitiesBank revolving credit (repaid)/drawn (18,000) 18,000Bank loan repaid - (44,000)Bank loan renewal fee paid (508) (543)Interest paid (575) (1,841)Shares issued 87 -Shares bought back (1,137) -Dividends paid (1,348) (2,021) --------- ---------Net cash from financing activities 27 (21,481) (30,405) --------- --------- Increase in cash and cash equivalents 115,884 3,856Currency exchange (loss)/gain on sale of discontinued (2,784) 1,007operations Currency exchange movement (126) (175)Opening cash and cash equivalents 5,293 605 --------- ---------Closing cash and cash equivalents 118,267 5,293 ====== ====== Notes to the Preliminary Financial Informationfor the year ended 31 May 2007 1 Business segment analysis continuing operations 2007 2006 £000 £000RevenueCompound Semiconductors 30,323 20,756Defence Electronics 24,196 32,079Point to Point 22,364 11,631Inter segment (3,382) (1,474) --------- --------- 73,501 62,992 ====== ======Operating (loss)/profitCompound Semiconductors (28,999) (5,114)Defence Electronics (3,431) 564Point to Point 2,234 (382)Central Services (5,208) (4,150)Unallocated pension credit/(charge) 7,744 (1,063) --------- ---------Operating loss (27,660) (10,145)(Loss)/gain on sale of property (415) 523Loss on sale of investments (6,518) -Finance income 5,221 1,706Finance costs (3,839) (4,934) --------- ---------Loss before taxation (33,211) (12,850)Taxation 1,491 - --------- ---------Loss for the period from continuing operations (31,720) (12,850) ====== ====== The operating loss is stated after crediting the release of deferredincome as follows: 2007 2006 £000 £000Compound Semiconductors- licence fee 2,335 2,335- government grants - 3,440Defence Electronics- government grants - 64 --------- --------- 2,335 5,839 ====== ====== 2 Geographical origin segment analysis continuing operations 2007 2006 £000 £000RevenueUnited Kingdom 65,004 49,453United States of America 8,159 14,026Australia 619 -Inter segment (281) (487) --------- --------- 73,501 62,992 --------- --------- Operating lossUnited Kingdom (23,278) (8,803)United States of America (4,556) (1,342)Australia 174 - --------- ---------Operating loss (27,660) (10,145)(Loss)/gain on sale of property (415) 523Loss on sale of investments (6,518) -Finance income 5,221 1,706Finance costs (3,839) (4,934) --------- ---------Loss before taxation (33,211) (12,850)Taxation 1,491 - --------- ---------Loss for the period from continuing operations (31,720) (12,850) ====== ====== 3 Exceptional items Operating loss is stated after charging/(crediting) exceptional items asfollows: 2007 2006 note £000 £000 Compound Semiconductors assets impairment 4 20,111 -Loss on disposal of plant and equipment 5 7,057 -Closure costs 6 - 406Government grants released 7 - (2,717)Goodwill impairment 8 2,653 -Inventory write down 9 - 1,516Redundancy costs 10 521 -Share-based payments 11 333 63Pension past service credit 12 (8,315) - --------- --------- 22,360 (732) ====== ====== 4 Compound Semiconductors assets impairment 2007 2006 £000 £000 Plant and equipment impairment 17,511 -Inventory impairment 2,600 - --------- --------- 20,111 - ====== ====== Following an impairment review, the plant and equipment and inventory at the UKCompound Semiconductors facility was impaired. The impairment resulted from thereduction in the scale of the business, due to the decision of the principalcustomer to in-source its switch production from September 2007. 5 Loss on disposal of plant and equipment 2007 2006 £000 £000 Loss on disposal of plant and equipment 7,057 - ====== ====== A loss on disposal of plant and equipment at the UK Compound Semiconductorsfacility was incurred as a result of the curtailment of the expansion plan atthe facility. 6 Closure costs 2007 2006 £000 £000 Closure costs - 406 ====== ====== Closure costs were incurred in closing the Compound Semiconductors facility inCalifornia, USA. 7 Government grants released 2007 2006 £000 £000 Government grants released - (2,717) ====== ====== During the year ended 31 May 2006, deferred government grants of £2,717,000,related to the UK Compound Semiconductors facility, were released to incomefollowing the renegotiation of their arrangements. 8 Goodwill impairment 2007 2006 £000 £000 Goodwill impairment 2,653 - ====== ====== Following an impairment review the goodwill related to Sage Laboratories, Inc.was impaired. Sage Laboratories, Inc. is located in the United States ofAmerica and forms part of the Defence Electronics division. 9 Inventory write down 2007 2006 £000 £000 Inventory write down - 1,516 ====== ====== An inventory write down in the US Defence Electronics business arose as a resultof its strategic repositioning and after its move to a new facility. 10 Redundancy costs 2007 2006 £000 £000 Redundancy costs: UK Compound Semiconductors 132 - UK Defence Electronics 158 - UK Central Services 231 - --------- --------- 521 - ====== ====== 11 Share-based payments 2007 2006 £000 £000 Share option expense:Compound Semiconductors 155 48Central Services 178 15 --------- --------- 333 63 ====== ====== All outstanding share options vested on the completion of the sale of theWireless Infrastructure business on 16 October 2006. Consequently all theremaining share-based payment cost was charged in the period. Notes to the Preliminary Financial Informationfor the year ended 31 May 2007 12 Pension past service credit 2007 2006 £000 £000 Pension past service credit (8,315) - ====== ====== In August 2006 the defined benefits pension scheme was changed from a finalsalary basis to a career average revalued earnings basis. This resulted in apast service credit, due to a reduction in the past service pension liabilities. 13 Loss on sale of investments 2007 2006 £000 £000 Proceeds from sale of Powerwave shares 53,391 -Value of Powerwave shares consideration at completion of the (59,909) -sale of Wireless Infrastructure business --------- ---------Loss on sale of investments (6,518) - ====== ====== On 16 October 2006 the company received 17,700,000 shares in PowerwaveTechnologies, Inc. common stock, as part of the consideration for the sale ofthe Wireless Infrastructure business. All the shares were sold in the sixmonths ended 31 May 2007. 14 Finance income 2007 2006 £000 £000 Interest income 2,850 172Expected return on pension scheme assets 2,371 1,534 --------- --------- 5,221 1,706 ====== ====== 15 Finance costs 2007 2006 £000 £000 Interest expense 575 1,841Bank loan renewal fee 508 543Interest on pension scheme liabilities 2,646 2,058Currency exchange losses 110 492 --------- --------- 3,839 4,934 ====== ====== 16 Profit for the period from discontinued operations 2007 2006Discontinued operations note £000 £000 Revenue 17, 18 58,039 174,714 ====== ======Operating (loss)/profit before exceptional (2,320) 7,362items Exceptional items 19 (234) (1,257) --------- ---------Operating (loss)/profit 17, 18 (2,554) 6,105Finance costs 22 (239) - --------- ---------(Loss)/profit before taxation (2,793) 6,105Taxation (631) (1,390) --------- ---------(Loss)/profit after taxation (3,424) 4,715Gain of sale of discontinued operations 23 80,139 14,146 --------- ---------Profit for the period from discontinued 76,715 18,861operations ====== ====== 17 Business segment analysis discontinued operations 2007 2006 £000 £000RevenueWireless Infrastructure 58,039 161,069Handset Products - 13,645 --------- --------- 58,039 174,714 ====== ======Operating (loss)/profitWireless Infrastructure (2,554) 5,907Handset Products - 198 --------- ---------Operating (loss)/profit (2,554) 6,105Finance costs (239) - --------- ---------(Loss)/profit before taxation (2,793) 6,105Taxation (631) (1,390) --------- ---------(Loss)/profit after taxation (3,424) 4,715Gain on sale of discontinued operations 80,139 14,146 --------- ---------Profit for the period from discontinued operations 76,715 18,861 ====== ====== The operating (loss)/profit is stated after crediting the release of deferredincome as follows: 2007 2006 £000 £000 Wireless Infrastructure - government grants - 416 ====== ====== 18 Geographical origin segment analysis discontinued operations 2007 2006 £000 £000RevenueUnited Kingdom 24,170 68,327Finland 8,654 42,056Hungary 7,427 3,402United States of America 14,816 39,000China 22,720 72,220Australia - 1,481Inter segment (19,748) (51,772) --------- --------- 58,039 174,714 ====== ======Operating (loss)/profitUnited Kingdom (4,331) (6,856)Finland (1,201) (1,751)Hungary 2,206 (412)United States of America 738 1,685China 34 14,693Australia - (1,254) --------- ---------Operating (loss)/profit (2,554) 6,105Finance costs (239) - --------- ---------(Loss)/profit before taxation (2,793) 6,105Taxation (631) (1,390) --------- --------- (Loss)/profit after taxation (3,424) 4,715Gain on sale of discontinued operations 80,139 14,146 --------- ---------Profit for the period from discontinued operations 76,715 18,861 ====== ====== 19 Exceptional items discontinued operations Operating (loss)/profit from discontinued operations is stated after chargingexceptional items as follows: 2007 2006 note £000 £000 Closure costs 20 - 1,080Share-based payments 21 234 177 --------- --------- 1,257 234 ====== ====== 20 Closure costs discontinued operations 2007 2006 £000 £000 Closure costs - 1,080 ====== ====== Closure costs were incurred in closing the Wireless Infrastructure facility inAustralia. 21 Share-based payments discontinued operations 2007 2006 £000 £000Share options expense:Wireless Infrastructure 234 (4)Handset Products - 181 --------- --------- 234 177 ====== ====== All outstanding share options vested on the completion of the sale of theWireless Infrastructure business on 16 October 2006. Consequently all theremaining share-based payment cost was charged in the period. 22 Finance costs discontinued operations 2007 2006 £000 £000 Currency exchange losses 239 - ====== ====== 23 Gain on sale of discontinued operations 2007 2006 £000 £000Gain on sale of:Handset Products business - 14,146Wireless Infrastructure business 80,139 - --------- --------- 80,139 14,146 ====== ====== On 16 October 2006 the Wireless Infrastructure business was sold for $185,000,000cash and 17,700,000 shares of Powerwave Technologies, Inc. common stock. Thecash consideration was covered by forward foreign exchange contracts when thesale was agreed in September 2006. This fixed the cash consideration at£96,925,000. Following completion of the sale of the Wireless Infrastructurebusiness a product liability claim was made by one of its customers. Afterinvestigation and negotiations, the claim has been settled for £5,750,000. Thesale is analysed as follows: £000Consideration and costsCash consideration 99,709Currency exchange loss on consideration (2,784) ---------Cash consideration after currency exchange loss 96,925Powerwave shares consideration 59,909Sale costs (6,720)Product liability costs (5,750)Currency translation adjustment (61) --------- 144,303 ======Assets and liabilities soldProperty, plant and equipment 23,082Deferred tax asset 2,269Inventories 26,342Trade and other receivables 39,506Cash and cash equivalents 406Trade and other payables (26,306)Income tax payable (460)Deferred tax liability (675) ---------Net assets sold 64,164Gain on sale of the Wireless Infrastructure business 80,139 --------- 144,303 ====== 24 Basic and diluted (loss)/earnings per share 2007 2006 £000 £000(Loss)/profit for the periodContinuing operations (31,720) (12,850)Discontinued operations 76,715 18,861 --------- ---------Profit for the period 44,995 6,011 ====== ====== 000 000 Basic and diluted weighted average number of shares 74,543 74,842 ====== ======Basic and diluted (loss)/earnings per shareContinuing operations (42.55) p (17.17) pDiscontinued operation 102.91 p 25.20 p --------- ---------Basic and diluted earnings per share 60.36 p 8.03 p ====== ====== 25 Dividends The dividends recognised in equity and paid during the period were as follows: 2007 2006 Per share £000 £000 Final dividend year ended 31 May 2005 1.80p - 1,347Interim dividend year ended 31 May 2006 0.90p - 674Final dividend year ended 31 May 2006 1.80p 1,348 - --------- --------- 1,348 2,021 ====== ====== 26 Reconciliation of movements in total equity 2007 2006 £000 £000 Opening total equity 94,377 93,569Total recognised income and expense for the period 45,665 2,589Share-based payments 567 240Dividends (1,348) (2,021)Shares issued 87 -Shares bought back (1,137) - --------- ---------Closing total equity 138,211 94,377 ====== ====== 27 Note to the consolidated cash flow statement 2007 2006 £000 £000Operating lossContinuing operations (27,660) (10,145)Discontinued operations (2,554) 6,105 --------- --------- (30,214) (4,040) ====== ======Net cash from operating activitiesContinuing operations (9,873) (6,828)Discontinued operations (734) 7,345 --------- --------- (10,607) 517 ====== ======Net cash from investing activitiesContinuing operations 44,835 (4,257)Discontinued operations (2,115) (6,137)Sale of discontinued operations 105,252 44,138 --------- --------- 147,972 33,744 ====== ======Net cash from financing activitiesContinuing operations (21,481) (30,405) ====== ====== This information is provided by RNS The company news service from the London Stock Exchange