Gooch & Housego Regulatory News (GHH)

27 Nov 2007 07:00

Gooch & Housego PLC27 November 2007 For immediate release 27 November 2007 Gooch & Housego PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 HIGHLIGHTS Sales and profit ahead of expectations Gooch & Housego PLC, the specialist manufacturer of optical components andsystems, today announces preliminary results for the year ended 30 September2007. Financial highlights •Group turnover increased by 20.9% to £30.67m (2006: £25.36m) •Profit before tax and goodwill amortisation increased by 22.0% to £7.11m (2006 restated: £5.83m) •Basic earnings per share increased by 29.9% to 24.3p (2006 restated: 18.7p) •Group operating profits improved by 24.0% to £6.72m (2006 restated: £5.42m) •Total dividend increased by 7.1% to 4.5p (2006: 4.2p) Operational highlights •Strong revenue and profit growth in acousto-optics and precision optics •Acquisition of SIFAM Fibre Optics Limited •Launch of ChromoDynamics biomedical imaging system •Global sales and product management teams appointed •Appointment of Peter Quinn as Chief Financial Officer •New UK factory and headquarters nearing completion Gareth Jones, Chief Executive of Gooch & Housego PLC, commented: "We have delivered a notable increase in revenues and profits in a year in whichGooch & Housego has made a significant acquisition, initiated a majorreorganisation and made substantial investments in facilities and productdevelopment. I would like to thank everyone who has contributed to thistremendous result." For further information: Gooch & Housego PLC 01460 52271 Gareth Jones Buchanan Communications 020 7466 5000 Tim Thompson / Susanna Gale Oriel Securities Limited 020 7710 7600 Andrew Edwards/Scott Richardson Brown Gooch & Housego PLC Chairman's Statement 2007 For Gooch & Housego 2007 has been a year that has seen continued growth of thetraditional business set against a background of change as we put in placepeople and systems to take the company forward. We have completed an importantacquisition, strengthened the Board and senior management team, and are nearingcompletion of two major projects - the construction of a new UK facility and thereorganisation of Gooch & Housego into a globally integrated business. We havecontinued to perform well despite the challenges that we have set ourselves. Acquisitions continue to be part of our strategy and a number of opportunitieshave been considered this year. The acquisition of SIFAM was significant andtimely. It has broadened the technology and product portfolio of Gooch &Housego, created opportunities for new product development and contributed keypeople and skills at a time when we are establishing new management structuresas an integrated business. We have made a number of changes to the Board in the past year. Terry Scribbins,previously Director of Operations in Ilminster, joined the board as ChiefOperating Officer in December 2006. More recently, Peter Quinn has joined theBoard and will be taking up the position of Chief Finance Officer following theretirement of Ian Bayer at the end of 2007. Most recently, Paul Heal has agreedto join the Board as a non-executive director with effect from January 2008. Iwould like to thank members of the Board for their contribution this year, andwish Ian Bayer a happy retirement. I would also like to thank the entireworkforce for making this another record year. Over the past year we have reinforced Gooch & Housego's already strong positionin its sector and we have a number of exciting projects and opportunities thatwe believe will underpin future growth. We have plenty of work still to do but Iremain optimistic and believe that the company is well placed to take advantageof opportunities that it creates and that present themselves. Dr Julian Blogh Chairman Chief Executive's Review 2007 Over the past year we have made considerable progress in our drive to transformGooch & Housego from a group of small but exceptional companies into a worldleading, globally integrated business of sufficient critical mass to provide asolid foundation for our next phase of growth. At the same time we havemaintained growth in revenues and profits and been active in acquisitions andnew product development to underpin future growth. Performance For the year ended 30 September 2007, Group turnover increased by 20.9% to£30.67m (2006: £25.36m), despite the impact of the weakening US Dollar. Profitbefore tax, after charging amortisation of £0.47m (2006 restated: £0.38m),increased by 21.6% to £6.64m (2006 restated: £5.46m). Profit before tax andgoodwill amortisation increased by 22.0% to £7.11m (2006 restated: £5.83m).Basic earnings per share rose by 29.9% to 24.3p (2006 restated: 18.7p) whilebasic earnings per share before goodwill amortisation increased by 28.8% to26.8p (2006 restated: 20.8p). Group operating profits improved by 24.0% to £6.72m (2006 restated: £5.42m). A Globally Integrated Business The way in which we now plan and manage Gooch & Housego as an integrated opticalsolutions provider is reflected in this review, which for the first time reportson the performance of the business under two groupings that reflect theirproducts and markets - "Components and Materials", and "Instrumentation and LifeSciences". Comprising Gooch & Housego UK Ltd (G&H UK, located in Ilminster, UK), ClevelandCrystals Inc (CCI; Cleveland, Ohio), NEOS Technologies Inc (NEOS; Melbourne,Florida), Landwehr Electronic GmbH (LE; Norderstedt, Germany), and SIFAM FibreOptics Ltd (SIFAM; Torquay, UK), the Components and Materials businessesmanufacture highly complementary optoelectronic components and materials. Theyserve the same markets, they frequently share the same customers, and as weharmonise products and manufacturing activities there is increasingcross-fertilisation between operations. Similarly, the Instrumentation and Life Sciences businesses, comprising OptronicLaboratories Inc (OLI; Orlando, Florida) and ChromoDynamics Inc (CDI; Lakewood,New Jersey), offer similar collaborative opportunities in respect of themanufacture high-value optical measurement and imaging instruments. The linksbetween these businesses are equally strong, with OLI providing designengineering and manufacturing services to CDI. Although a wide range of marketsand applications are addressed it is the emerging life sciences market that iscurrently offering the greatest potential. Over the last year we have established global sales, product management,strategic marketing and new product introduction organisations spanning ourComponents and Materials activities. Our objectives are to drive growth byengaging with our key customers as a strategic supplier, improving ourunderstanding of the world market and extending our geographic reach. Theinformation gained will be used to fine tune our new product development andinform our acquisitions strategy. To achieve these objectives we have strengthened the senior management team andhave been fortunate in being able to benefit from the influx of experience thatcame with the acquisition of SIFAM. In parallel we are putting in place the IT,communications and financial infrastructure needed to operate as a globallyintegrated business. These efforts will culminate in the launch of the new,re-branded Components and Materials business in January 2008. Financial Results Components and Materials The contribution of the Components and Materials businesses to Group turnoverincreased from £22.05m in 2006 to £27.54m this year. This increase in sales was led by G&H UK and NEOS, where sales increased to£8.66m and £7.80m respectively (2006: £7.52m and £6.38m respectively). LE increased sales by 28.8% to £3.28m (2006: 2.54m) while CCI sales were downslightly to £5.40m (2006: £5.60m) due to the impact of the US Dollar's movementagainst Sterling. SIFAM, which was acquired on 4 May 2007, contributed sales of£2.40m for the 5 months from the date of acquisition to 30 September 2007. Components and Materials contributed £7.90m (2006 restated: £6.08m) to operatingprofits. Notably G&H UK and NEOS increased operating profit by over 30% andcontributed £3.27m and £3.03m respectively. Instrumentation and Life Sciences OLI, currently the only trading company in this segment, contributed £3.13m(2006: £3.32m) to Group turnover, with the apparent year-on-year reductionresulting from the impact of the US Dollar's movement against Sterling. Instrumentation and Life Sciences suffered a loss of £0.15m (2006 restated:profit £0.27m) in the year. The loss is due to a full year of research anddevelopment expenditure at CDI where costs increased to £0.51m (2006: £0.16m). Taxation An overall tax rate of 32.8% (2006 restated: 38.1%) was recorded for the year.The year-on-year reduction is a result of adjustments in respect of prior years,additional costs being tax deductible and the use of capital allowances acquiredwith SIFAM. The overall tax rate is above the UK corporation tax rate of 30% dueto overseas profits, predominantly US-based, being taxed at a higher rate. Balance Sheet The Group balance sheet remains strong with shareholders funds increasing by£6.48m to £25.53m. Intangible assets increased to £6.68m as a result of the acquisition of SIFAM.Tangible assets increased due to the building of the new Ilminster factory.Working capital has also increased as a result of a 20.9% increase in Groupturnover and the impact of the acquisition of SIFAM. Cash flows The Group cash flows remain strong with cash inflow from operating activitiesincreasing by 14.1% to £6.54m. The movement from net funds of £2.90m to net debtof £0.98m primarily results from the cash element of the purchase price of SIFAM(£2.35m) and £4.43m spent on plant, property and equipment, predominantly thenew G&H UK factory in Ilminster. Dividends Reflecting the Group's continuing strong performance, the Directors areproposing a final dividend of 3.0p making a total for the year of 4.5p. Thisrepresents an increase of 7.1% over last years total of 4.2p and is covered 5.8times by post tax earnings. The shares are expected to go ex-dividend on 5thDecember 2007, and following approval at the Annual General Meeting on 13thFebruary 2008, the dividend will be paid to shareholders on 14th February 2008. Trading Looking back over the year from a trading point of view we have been successfulin increasing revenues in all of our Components and Materials activities and inall of our key geographical markets, despite increasingly unpredictable marketconditions as the year progressed. Components and Materials Acousto-optics We experienced a significant increase in demand for acousto-optics that resultedin a noteworthy performance by our Melbourne facility, closely followed by ourproduction unit in Ilminster. We were able to respond to this increase in demandby coordinating optics and electronics manufacturing activities in Melbourne,Ilminster and Norderstedt. A further benefit of this global approach to theacousto-optic market has been a reduction in lead times. Precision Optics The manufacture of precision optical components and optics made from crystallinematerials such as quartz was the business upon which Gooch & Housego was foundednearly sixty years ago, and it remains one of our core competencies today.Output from the Ilminster facility has increased over the past year, driven bythe internal demand for optical elements for our acousto-optics business and oursuccess in expanding into the European and US markets. This increase has beenachieved despite the space constraints that apply until we are able to relocateto the new Ilminster factory early next year. Electro-Optics and Non-Linear Materials We have reinforced our leading position in the electro-optic (Pockels cell)market during the past year as a result of sales wins achieved through acombination of quality, performance and reliability. Our primary market fornon-linear optics is the supply of very large aperture crystals for the world'slargest laser systems that are being constructed for nuclear fusion research.Although a very specialised market, our Cleveland facility leads the world inthis technology and output has increased this year with laser systems underconstruction in the US and Europe. Fibre Optics As a result of the acquisition of SIFAM in May this year, Gooch & Housego nowhas a strategically important fibre optics capability, the rationale of which isdiscussed elsewhere in this review. The integration of SIFAM has progressedwell, with the business exceeding its earnings forecast in the five months thatit has been part of the Group. Instrumentation and Life Sciences Instrumentation The traditional high-end optical measurement instrumentation business ofOptronic Laboratories Inc (OLI) has seen a small US$ revenue growth and flatprofits (resulting in small decreases after currency translation). Whiledisappointing, this result is not unexpected and is behind the decision todevelop new products that will open up new, high growth markets, particularly inlife sciences. In addition to working with ChromoDynamics Inc (CDI) on thedevelopment of a biomedical imaging system, OLI will be introducing a newproduct in January 2008, aimed at the microscopy and life sciences market. Biomedical Imaging CDI has made excellent progress over the past year and has passed several keymilestones. In particular, CDI has completed development of its initialbiomedical imaging system, the HSi300, which is currently being evaluated inresearch, microscopy and molecular diagnostics applications. A proof of conceptstudy assessing the potential for the HSi300 to assist in the diagnosis of earlystage cancer has been successfully completed. UK Factory and Corporate Headquarters One of the most significant investments we are currently making is theconstruction of the new factory and corporate headquarters in Ilminster. Thedevelopment has progressed rapidly, particularly during the last six months, andis on target for handover from the developers commencing in December 2007. Therelocation will be phased over approximately two months to minimise disruption.Where necessary we have built up buffer stocks to maintain continuity of supplyto our customers. The new factory will be one of the most significant milestonesin the history of Gooch & Housego in Ilminster, and will facilitate a new era ofgrowth. Acquisitions and New Product Development Over the past year we have continued to take a proactive approach toacquisitions. We see growth being driven by a combination of organic new productdevelopment and acquisitions. The acquisition of SIFAM addressed both of theseobjectives and brought a guided wave optics capability that perfectlycomplements the conventional optics expertise of Gooch & Housego. Fibre optics is becoming a ubiquitous technology, and for Gooch & Housego to beable to provide its customers with a complete range of optical solutions it isessential that we have an in-house capability. In fact, in SIFAM we have a worldclass capability, which will help us to take a leading market position andmaintain a competitive edge. SIFAM and Gooch & Housego share many customers and are active in the same marketsectors. Both companies have developed on parallel courses over the last fiveyears, and have shared ambitions to reach up the value chain through thedevelopment of a systems capability, while taking care not to compete withexisting customers. Perhaps the most obvious area in which G&H and SIFAM have complementarycapabilities is the manufacture of components for industrial and medical lasersystems. G&H is the leading manufacturer of components for traditional solidstate lasers. SIFAM is a leading supplier of fused fibre optic combiners, acritical component in all fibre lasers. The acquisition therefore reinforces ourposition as a leading supplier to the laser industry. SIFAM will also play an important role in our new product development plans.There are a number of exciting new products that we can now bring to market byleveraging the combined capabilities of SIFAM and the other members of theGroup, in applications ranging from biomedical imaging to laser components. Directors and Employees I would like to thank my fellow directors and employees for their contributionto another successful year for Gooch & Housego, and for their help andunderstanding in implementing the considerable changes that are taking place. I would particularly like to thank Ian Bayer, Finance Director, who will beretiring at the end of 2007. Ian has been with the company for eight years andhas made a major contribution to our successes over that period. On behalf ofeveryone in the company I would like to wish Ian a happy, healthy andwell-earned retirement. I would also like to take this opportunity to welcome Peter Quinn and Paul Healto the board. Peter will formally take over as Chief Financial Officer witheffect from 2nd January 2008 following Ian Bayer's retirement. Peter bringsextensive experience in financial and operational roles in technologybusinesses, including several NASDAQ quoted US companies. Paul Heal will jointhe board on 2nd January 2008 as a non-executive director. Paul has been aPartner with PricewaterhouseCoopers for more than twenty years and the Board andits committees will benefit from his financial and corporate governanceexperience. Prospects We will continue to invest in our core competencies, reach up the value chainand deliver growth through the introduction of new products (supported by astrong intellectual property portfolio) and by acquisition. Our established products continue to be in demand, and we have a pipeline of newproducts at various stages of development. With these products we will seek toreinforce our position in our established markets, and with others, such asthose under development at CDI, OLI and SIFAM we aim to gain a foothold in thepotentially high growth biomedical market. Notwithstanding the less predictable market conditions referred to earlier Ibelieve the Group is well positioned for continued growth. Gareth Jones Chief Executive Officer Group Profit and Loss AccountFor the year ended 30 September 2007 ----------- ----------- Restated 2007 2006 unaudited unaudited £000 £000 ----------- -----------Turnover 30,674 25,364Trading expenditure excluding goodwill amortisation (23,490) (19,559) ----------- -----------Operating profit before goodwill amortisation 7,184 5,805Goodwill amortisation (466) (381) ----------- -----------Operating profit 6,718 5,424Interest receivable and similar income 181 123Interest payable and similar charges (258) (96) ----------- -----------Profit on ordinary activities before taxation 6,641 5,451Tax on profit on ordinary activities (2,179) (2,079) ----------- -----------Profit for the financial year 4,462 3,372 ----------- ----------- Basic earnings per 20p ordinary share 24.3p 18.7pDiluted earnings per 20p ordinary share 23.3p 18.3p ----------- ----------- All operations undertaken by the Group during the current year are continuing.The results of the acquisition made during the year have not been separatelydisclosed on the face of the profit and loss account as they are not consideredto be material to the Group result. The results of the acquired entity have,however, been separately disclosed in the segmental reporting disclosure in note2. GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 30 September 2007 ----------- ----------- 2007 Restated unaudited 2006 £000 unaudited £000 ----------- -----------Profit for the financial year 4,462 3,372 ----------- -----------Currency translation differences on foreigncurrency net investments (567) (496) ----------- -----------Total recognised gains and losses for thefinancial year 3,895 2,876 ----------- -----------Prior year adjustment FRS 20 "Share-based Payment" 178 -----------Total recognised gains and losses since last annual 4,073report ----------- No note of historical cost profit for the Group has been presented as thedifferences between the reported profit and the historical cost profit isimmaterial. GROUP BALANCE SHEET As at 30 September 2007 Restated 2007 2006 -------- -------- -------- -------- unaudited unaudited unaudited unaudited £000 £000 £000 £000 -------- -------- -------- -------- FIXED ASSETSIntangible assets 6,679 5,225Tangible assets 12,134 6,516 -------- -------- -------- -------- 18,813 11,741CURRENT ASSETSStocks 5,081 3,875Debtors 7,404 4,473Asset held for resale 548 -Cash at bank and in hand 5,428 4,060 -------- -------- -------- -------- 18,461 12,408 -------- -------- -------- --------CREDITORS: amounts falling due withinone year (10,531) (4,396) -------- -------- -------- --------NET CURRENT ASSETS 7,930 8,012 -------- -------- -------- -------- TOTAL ASSETS LESS CURRENTLIABILITIES 26,743 19,753 CREDITORS: amounts falling due aftermore than one year (1,213) (679)PROVISIONS FOR LIABILITES ANDCHARGES - (24) -------- -------- -------- --------NET ASSETS 25,530 19,050 -------- -------- -------- -------- CAPITAL AND RESERVESCalled up share capital 3,785 3,600Share premium account 3,719 3,404Merger reserve 2,671 -Revaluation reserve 308 308Profit and loss account 15,047 11,738 -------- -------- -------- --------EQUITY SHAREHOLDERS' FUNDS 25,530 19,050 -------- -------- -------- -------- GROUP CASH FLOW STATEMENT For the year ended 30 September 2007 2007 2006 -------- -------- -------- -------- unaudited unaudited £000 £000 £000 £000 -------- -------- -------- -------- Net cash inflow from operating 6,547 5,734activities Returns on investments and servicing offinanceInterest received 183 123Interest paid (247) (63)Interest element of hire purchase (16) (33)contracts -------- -------- -------- --------Net cash (outflow)/ inflow from returnson investment and servicing of finance (80) 27 TaxationUK tax paid (787) (321)Overseas tax paid (1,904) (1,613) -------- -------- -------- --------Cash outflow from taxation (2,691) (1,934) Capital expenditure and financialinvestmentPurchase of tangible fixed assets (4,430) (1,753)Sale of tangible fixed assets 12 6 -------- -------- -------- --------Net cash outflow from capitalexpenditure and financial investment (4,418) (1,747) AcquisitionsAcquisition of subsidiary (2,350) (689)Net cash acquired on acquisition 581 24 -------- -------- -------- --------Net cash outflow from acquisition (1,769) (665) Equity dividends paid (785) (720) -------- -------- -------- --------Cash (outflow)/inflow before financing (3,196) 695 FinancingIssue of share capital 371 -Increase in borrowing - 169Repayment of bank loans (57) (274)Capital element of hire purchase (172) (128)contracts -------- -------- -------- --------Net cash inflow/(outflow) from financing 142 (233) -------- -------- -------- --------(Decrease)/increase in cash in the year (3,054) 462 -------- -------- -------- -------- NOTES TO THE CASH FLOW STATEMENTFor the year ended 30 September 2007 (i) Reconciliation of operating profit to net cash inflow from operatingactivities Restated 2007 2006 unaudited unaudited £000 £000 -------- --------Operating profit 6,718 5,424Amortisation of goodwill 466 381Depreciation 708 541Loss on disposal of tangible fixed assets 6 67Share-based Payment (FRS 20) 199 320Increase in stocks (812) (154)Increase in debtors (1,651) (1,139)Increase in creditors 913 294 -------- -------- 6,547 5,734 -------- -------- (ii) Reconciliation of net cash inflow to movements in net funds/(debt) 2007 unaudited 2006 £000 £000 -------- --------(Decrease)/increase in cash in the year (3,054) 462Cash outflow from decrease in debt and lease financing 229 402 -------- --------Changes in net debt resulting from cash flows (2,825) 864Debt acquired with subsidiary (879) -New hire purchase contracts - (169)Translation differences (178) (165) -------- --------Movement in net funds in the year (3,882) 530Net funds at beginning of year 2,901 2,371 -------- --------Net (debt)/funds at end of year (981) 2,901 -------- -------- (iii) Analysis of net funds/(debt) Debt acquired At 30 September At with subsidiary 1 October 2006 Exchange Non-cash 2007 movement movement Cash flow -------- -------- -------- -------- -------- -------- £000 £000 £000 £000 £000 £000Cash inhand 4,060 1,592 (224) - - 5,428and atbankBank (269) (4,646) - - - (4,915)overdrafts -------- -------- -------- -------- -------- -------- 3,791 (3,054) (224) - - 513Debt duewithin 1 (29) 57 2 (74) (105) (149)yearDebt dueafter (512) - 43 (805) 105 (1,169)1 yearHire (349) 172 1 - - (176)purchase -------- -------- -------- -------- -------- --------Netfunds/ 2,901 (2,825) (178) (879) - (981)(debt) -------- -------- -------- -------- -------- -------- NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 September 2007 1. Basis of preparation The unaudited financial information contained in this preliminary announcementdoes not comprise statutory accounts within the meaning of Section 240 of theCompanies Act 1985. The figures in this preliminary announcement have been prepared under generallyaccepted accounting policies in the United Kingdom. The accounting policiesadopted are those set out in the Annual Report and Accounts for the year ended30 September 2006 which include the unqualified report of the independentauditors and which have been filed with the Registrar of Companies, with theexception of the adoption of Financial Reporting Standard 20 ("FRS 20") asdescribed below. The Group has adopted FRS 20 "Share-based Payment" during the current financialyear which has resulted in a change in accounting policy. Consequently, thecomparative figures for the year to 30 September 2006 have been restated. The adoption of FRS 20 has resulted in an increase in Group employee costs of£198,815 for the year to 30 September 2007 and £320,229 for the comparative yearto 30 September 2006. An equivalent amount has been credited to reserves in eachyear. Due to share based payments tax treatment not mirroring the accounting treatmenta deferred tax asset arises each time an expense is charged to the profit andloss account. As a result a deferred tax asset of £111,577 has been recognisedin the Group balance sheet at 1 October 2005, which reduces the deferred taxliability by that amount. An equivalent amount has been credited to reserves. In the year to 30 September 2006 the deferred tax asset increased by £66,125,resulting in a further reduction of the deferred tax liability. The balancesheet has been restated to reflect this change and the corresponding credit of£66,125 has been taken to the profit & loss account. NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 September 2007 2. Segmental reporting Total Inter-segment Group Operating Turnover Sales Turnover Profit/(loss) ------- ------- ------- ------- ------- ------- ------- ------- Restated 2007 2006 2007 2006 2007 2006 2007 2006 £000 £000 £000 £000 £000 £000 £000 £000 ------- ------- ------- ------- ------- ------- ------- -------Components &MaterialsGooch &Housego UKLtd* 10,983 9,124 (2,321) (1,603) 8,662 7,521 3,266 2,402NeosTechnologiesInc. 8,360 6,950 (564) (572) 7,796 6,378 3,033 2,305ClevelandCrystals Inc. 5,411 5,630 (8) (24) 5,403 5,606 1,289 1,355LandwehrElectronicGmbH 3,701 2,830 (424) (286) 3,277 2,544 106 19Sifam FibreOptics Ltd 2,444 - (42) - 2,402 - 209 - ------- ------- ------- ------- ------- ------- ------- ------- 30,899 24,534 (3,359) (2,485) 27,540 22,049 7,903 6,081Instrumentation & LifeSciencesOptronicLaboratoriesInc. 3,326 3,496 (192) (181) 3,134 3,315 359 428ChromodynamicsInc. - - - - - - (505) (157) ------- ------- ------- ------- ------- ------- ------- ------- 3,326 3,496 (192) (181) 3,134 3,315 (146) 271 Gooch &Housego headoffice - - - - - - (1,039) (928) ------- ------- ------- ------- ------- ------- ------- -------Group total 34,225 28,030 (3,551) (2,666) 30,674 25,364 6,718 5,424 ------- ------- ------- ------- ------- ------- Net interest(payable)/receivable (77) 27 ------- -------Profit onordinaryactivitiesbeforetaxation 6,641 5,451 ------- ------- * The comparative results for Gooch & Housego UK Ltd reflect the trading of thebusiness whilst it was part of the Gooch & Housego PLC statutory entity. The analysis above is presented at the Components & Materials andInstrumentation & Life Sciences divisional level and further analysed by theindividual businesses in the corporate structure. ------- ------- 2007 2006The analysis of turnover by destination is as follows: £000 £000 ------- -------United Kingdom 3,023 2,886North America 15,286 12,463Continental Europe 6,551 5,480Other 5,814 4,535 ------- ------- 30,674 25,364 ------- ------- NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 September 2007 3. Acquisition On 4 May 2007, the Group acquired 100% of the ordinary share capital of SifamFibre Optics Limited, a company which is the global leader in fibre opticstechnology. Sifam Fibre Optics Limited and its 100% owned subsidiary, SifamLimited are based in the United Kingdom and were acquired for a totalconsideration of £5,150,000 including acquisition costs. The fair value of thenet assets acquired was £3,243,000 resulting in £1,907,000 of goodwill arisingon acquisition. The goodwill is being amortised over 10 years. 4. Taxation Analysis of tax charge for the year: Restated 2007 2006 unaudited unaudited £000 £000 -------- --------Current taxationUK Corporation tax 233 445Double tax relief - (17)Overseas tax 2,016 1,732Adjustments in respect of prior year tax charge (135) (64) -------- --------Total current tax 2,114 2,096 Deferred taxOrigination and reversal of timing differences 65 (17) -------- --------Total deferred tax 65 (17) -------- --------Tax on profit on ordinary activities 2,179 2,079 -------- -------- The tax effect of share based payments has resulted in a reduction of tax onprofit on ordinary activities of £174,000 (2006 Restated: £66,000) NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 September 2007 5. Dividends 2007 2006 £000 £000 -------- --------Interim dividend paid: 1.5p per share (2006:1.4p) 281 252Final 2006 dividend paid in 2007: 2.8p per share (2006:2.6p) 504 468 -------- -------- 785 720 -------- -------- The directors have proposed a final dividend of £567,734 for the year ended 30September 2007 which is 3.0p per share. This dividend has not been accounted forwith the 2007 financial year as it is yet to be approved. 6. Earnings per share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of Ordinary sharesoutstanding during the year. The weighted average of Ordinary shares in issueduring the year was 18,337,144 (2006: 17,999,162). All share options for which the performance criteria has been met at 30September 2007 and 30 September 2006 which have an exercise price lower than theaverage market price of the Group's share price in the period since issue havebeen included in the diluted weighted average number of shares. The dilutiveweighted average number of shares in issue during the year was 19,170,388 (2006:18,435,688). A reconciliation of the earnings used in the earnings per share calculation isset out below Restated 2007 2006 -------- -------- unaudited unaudited unaudited unaudited £000 p per share £000 p per share -------- -------- -------- --------Basic earnings 4,462 24.3p 3,372 18.7pGoodwill amortisation 466 2.5p 381 2.1p -------- -------- -------- --------Basic earnings before goodwillamortisation 4,928 26.8p 3,753 20.8p -------- -------- -------- -------- Diluted earnings 4,462 23.3p 3,372 18.3pGoodwill amortisation 466 2.4p 381 2.1p -------- -------- -------- --------Diluted earnings beforegoodwill amortisation 4,928 25.7p 3,753 20.4p -------- -------- -------- -------- Basic and diluted earnings per share before goodwill amortisation has been shownbecause, in the opinion of the Directors, it more accurately reflects thetrading performance of the Group. NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 September 2007 7. Assets held for resale In December 2006, the Group exchanged contracts for the sale of its existing UKfactory and headquarters for a total cash consideration of £1,500,000. The saleis contracted to complete by 31 March 2008 and is expected to generate a profiton disposal of approximately £950,000 less selling costs. As a result, theproperty has been reclassified as an asset held for sale at 30 September 2007. 8. Called up share capital 2007 2006 2007 2006 unaudited unaudited unaudited unaudited No. No. £000 £000 -------- -------- -------- --------AuthorisedOrdinary shares of 20p each 24,000,000 24,000,000 4,800 4,800 -------- -------- -------- -------- 2007 2006 2007 2006 No. No. £000 £000 -------- -------- -------- --------Allotted, issued and fully paidOrdinary shares of 20p eachAt 1 October 17,999,162 17,999,162 3,600 3,600Allotted under share option 277,892 - 56 -schemesAllotted on acquisition ofsubsidiary 647,399 - 129 - -------- -------- -------- --------At 30 September 18,924,453 17,999,162 3,785 3,600 -------- -------- -------- -------- The value of the shares allotted on the acquisition of Sifam Fibre OpticsLimited was £2,800,000. The excess of £2,671,000 over the nominal value of theshare capital issued has been credited to the merger reserve. Consideration received for the shares allotted under share option schemes during2007 was £370,985 (2006: £nil). Included in the allotment under share option schemes are 214,400 20p ordinaryshares allotted to directors. NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 September 2007 9. Reconciliation of movements in equity shareholders' funds Restated 2007 2006 unaudited unaudited £000 £000 -------- --------Profit on ordinary activities before taxation 4,462 3,372Dividends paid in the year (785) (720) -------- -------- 3,677 2,652Share-based Payments 199 320Shares issued under share option schemes 371 -Shares issued on the acquisition of subsidiary 2,800 -Other recognised gains and losses (567) (496) -------- --------Net addition to shareholders' funds 6,480 2,476 Opening shareholders' funds as previously reported 18,872 16,462Prior year adjustment - FRS 20 "Share-based Payments" 178 112 -------- --------Opening shareholders' funds restated 19,050 16,574 -------- --------Closing shareholders' funds 25,530 19,050 -------- -------- This information is provided by RNS The company news service from the London Stock Exchange