Laird Regulatory News (LRD)

29 October 2015

Q3 Trading Update, Redesigning our Operating Model and Capital Markets Day

1. Trading Update

Laird PLC today announces its trading update for the third quarter from 1 July to 30 September 2015. Unless otherwise stated the trends and figures highlighted below refer to the three months ended 30 September 2015, the third quarter of the company's financial year, and the corresponding period for last year.

Group Performance

Revenue in sterling for the third quarter grew by 7% to £160m (Q3 2014: £150m). In US$, third quarter revenue was down 1% at $248m (Q3 2014:$251m) and on an organic1 basis in constant currency, US$ revenue grew 1%.

Progressively, for the nine months to 30 September, revenue grew 16% to £466m (Q3 2014: £402m). On an organic1 basis in constant currency, US$ revenue grew 8%.

Divisional Performance

Performance Materials

Performance Materials revenue in the third quarter was unchanged year on year, at £101m. In US$, revenue was 7% lower at $157m (Q3 2014: $168m) and on an organic1 basis in constant currency, US$ revenue was 5% lower. 

This division delivered strong results in the first half, but performance in the third quarter was impacted by weaknesses in the telecoms market and the timing of smartphone product launches.

Wireless Systems

Wireless Systems revenue in the third quarter grew 21% to £59m (Q3 2014: £49m). In US$, revenue was $92m (Q3 2014: $82m) and on an organic1 basis in constant currency, US$ revenue grew by 14%. 

We delivered another good quarter of growth with strong vehicle antenna sales. This was supported by good performance across a number of other areas, including equipment sales into the rail industry and aftermarket revenues in the mining and industrial sectors.

2. Redesigning our Operating Model

Today, we are outlining our plans for a step-change in our capabilities to create and capture value from opportunities in the very exciting growth markets in which we operate.

Laird has made considerable progress over the past three years in laying strong foundations in leadership development, culture, strategy and governance, underpinning strong revenue growth over this period. We now have the clarity of strategy and organisational capabilities to tackle the last key foundation that underpins our business and that is the operating model. 

Over the next 18 months, we will reshape Laird, simplifying our manufacturing capabilities in Europe and North America in our largest facilities to reinforce our ability to deliver reliable fulfilment and speed, while leveraging our cost base. We will align and consolidate our regional design, engineering, sales and distribution activities closer to our customers to drive innovation and further improve time to market. We will simplify our operating model to focus on key activities that enable our differentiation strategy, and we will leverage common process and operational scale where these can add significantly to our growth.

We do not anticipate a significant overall reduction in headcount, but a significant reduction in our site footprint, where we currently operate in 52 sites globally. This is a crucial step in our continued evolution and we anticipate pre-tax cash costs (P&L) to be up to $60m, to deliver this change, a significant investment in the Group. We anticipate that much of this cost will be treated as an exceptional cost. We will deliver pre-tax cash savings of at least $20m per annum, once fully implemented. We will self-fund this investment and there will be no impact on the dividend or our ability to execute any future acquisitions.

We now begin the process of consultation with our people and this programme will run through 2016, being completed during 2017. We will provide fuller guidance at our Results in March, but we expect the impact to 2016 earnings will be neutral, with material benefits being delivered progressively through 2017.

3. Capital Markets Day

Today Laird will be hosting a Capital Markets Day, which will focus on substantial growth potential in our key markets and how Laird can deliver superior performance in those markets. We will also cover in more detail the rationale for the step changes we are making to our operating model.

Commentating on today's news David Lockwood, Chief Executive, said:

"We have delivered a solid performance this quarter, underpinned by an increasingly diversified business, exemplified by the strength and growing importance of our Wireless Systems division. We are performing particularly well in connected transport, where we offer excellent solutions in a strong market, with technology playing an increasingly important role in the customer proposition. Other important markets, such as telecoms and smartphones, have become more challenging in recent months, although in the longer term we remain very well positioned to benefit from the inexorable trends for increased connectivity and ever smaller and higher performance smartphone devices.

"In the shorter term, we expect full year earnings to be broadly in line with consensus, (prior to exceptional costs, detailed above).

"The changes announced today in redesigning our operating model mean that Laird will be in an even stronger position to benefit from developments around the Enterprise Internet of Things, as technology plays an increasingly central and sophisticated role in our lives."

1Organic constant currency growth is calculated in US$ on a pro-forma basis, restating prior year comparatives as if acquisitions were owned for the equivalent period in the preceding year, and applying prior year exchange rates to convert current year revenues to US$.

About Laird PLC:

Laird is a global technology company providing systems, components and solutions that protect electronics from electromagnetic interference and heat, and that enable connectivity in mission-critical wireless applications and antennae systems. Laird is a global leader in the field of innovative radio frequency ("RF") engineering.

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