Restore Regulatory News (RST)

14 Jun 2005 07:00

Radstone Technology PLC14 June 2005 FOR IMMEDIATE RELEASE 14 June 2005 RADSTONE TECHNOLOGY PLC Preliminary Results "Continued growth" Radstone Technology, the world's leading independent supplier ofhigh-performance, embedded computer products for defence and aerospaceapplications today announces preliminary results for the year ended 31 March2005. Key Points Turnover up 14% to £49.9m (2004: £43.7m). Group Profit before tax, goodwill and exceptional items increased 15% to £8.5m(2004: £7.4m). Normalised Earnings per share * up 5% to 21.54p (2004: 20.50p). Basic Earningsper share up from 5.00p to 26.12p Final dividend of 2.7p per share increasing the total dividend by 20% to 3.6p(2004: 3.0p). Order book ended the year at a record level at £86.5m (2004 : £79.3m) $26.5m multi-year production order from Raytheon Octec Ltd (acquired in July 2004) has been earnings enhancing. EMS business showed a substantial improvement in results during the year,following our reorganisation of the business, with a contribution of 18.7% of sales (2004 : 9.8%) * Calculated after adjusting profit after tax for the effect of goodwillamortisation and exceptional items. Jeff Perrin, Chief Executive commenting on the results said: "The US defence market remains strong and its increasing investment intechnology to achieve a complete network centric battlefield, with armed forcesthat are equipped for rapid deployment, will mean that Radstone is well placedto benefit from our customers' requirements for high performance embeddedcomputing. The Group has invested substantially in new facilities, it has developed andbrought to market new products and it has increased its market reach throughtargeted acquisitions. We have continued to deliver improved financialperformance; have a record order book and a healthy balance sheet and so beginthis financial year in a strong position." For further information: Radstone Technology 01327-359444Jeff Perrin, Chief Executive Web: http://www.radstone.co.ukKevin Boyd, Group Finance Director Buchanan Communications 020 7466 5000Tim Thompson or Nicola Cronk Email : nicolac@buchanan.uk.com Chairman's Statementfor the year ended 31 March 2005 I am pleased to report a strong set of results from the Radstone Group. Groupprofit before tax, goodwill and exceptional items recorded its ninth successiveyear of improvement, increasing by 15% to £8.5m from £7.4m last year (seecalculation in note 4). Sales in the Embedded Computing business were adversely affected by the weak USdollar (explained in detail in the Financial Review). As a result the 14%increase in sales to £50m was mainly due to the additional deliveries from Octecacquired in July 2004 and a full year's contribution from ICS acquired inSeptember 2003. Basic earnings per share under FRS14 were 26.12p (2004: 5.00p). Normalisedearnings per share (see calculation in note 1) increased by 5% to 21.54p (2004:20.50p). New orders received during the year to 31 March 2005 totalled £54.4m and theorder book ended the year at a record level at £86.5m, (2004: £79.3m). Dividend In light of the underlying performance of the Group and the directors' intentionof creating shareholder value through a progressive dividend policy, your boardis recommending a final dividend of 2.7p per ordinary share, giving a dividendof 3.6p for the year, which represents an increase of 20% . This will be paidon 28 September to shareholders on the register on 9 September 2005. New Product Development This was a strong period for new product introductions, ensuring that Radstoneremains at the forefront of its industry. Over the past year we have continuedto invest significant resources in product development, which reached a recordlevel of £6.1m (2004: £4.5m) equivalent to 12.2% (2004: 10.3%) of turnover. Corporate Activity In July 2004 we completed the acquisition of Octec Ltd based in Bracknell, UK,for a total consideration of £10.8m. The consideration payable on completionwas £10.7m and a further £0.1m was paid in May 2005 on achievement of profittargets for the 12 months to January 2005. To finance the acquisition,approximately £6.5m was raised by way of a placing of shares and the balancefrom existing banking facilities. It was especially pleasing to note, that theenhancement by Octec of our earnings per share, met our short-term expectationat the time of the acquisition. I welcome the employees of Octec to the Radstone Group. In our interim report we gave details of the changes that had been negotiatedwith the vendors of ICS with respect to their earn-out agreement. This detailedthat during September 2004, following the successful completion of theintegration of ICS, agreement was reached with Dr. Dipak Roy, the founder andformer shareholder of ICS, that he resign his position as President of ICS. Aspart of the agreement, Radstone paid to the vendors C$7.5m (approximately £3.3m)in lieu of a payment of C$5.0m (approximately £2.2m) in January 2005 and apotential payment of up to C$5.0m in January 2006. ICS continues to perform inline with expectations at the time of the acquisition. During January 2005 we purchased through DaqScribe Technology Inc. (oursubsidiary specialising in mechanical test and measurement), the trade andassets of SavvyCorp for $167k. SavvyCorp offers a complete high performance,low cost data acquisition system solution and high bandwidth signal conditioningmodules to measure pressure, temperature and other sensor inputs. In March 2005 we sold SensorCom Inc., a small system integrator, to itsmanagement team for $1.6m. SensorCom joined the Radstone Group as part of theacquisition of ICS Ltd, of which it was a subsidiary, in September 2003. ICShad previously acquired SensorCom for $285k in September 2002. It had becomeapparent that strategically our core engineering development and manufacturingbusinesses and SensorCom's integration business were not a good fit andtherefore your board made the decision to divest itself of the business. Facilities Construction of a new purpose built 75,000 sq. ft. freehold facility withinTowcester was completed on schedule and to budget in early May 2004. Our owninternal fit-out took a further three weeks and we relocated in early June withminimal disruption to production. This modern state-of-the-art facility, withits increased capacity is a major competitive advantage for the Group. With the large majority of our business emanating from customers in the UnitedStates, we took the decision to open, in November 2004, an engineering designcentre near Boston, Massachusetts. This will be home to a team of design anddevelopment engineers in addition to front line customer service and supportstaff. This will complement the existing Radstone sales and support officeslocated throughout the USA. Our vision for the future sees us continuing todevelop our presence still further in North America. Outlook The US defence market remains strong and its increasing investment in technologyto achieve a complete network centric battlefield, with armed forces that areequipped for rapid deployment, will mean that Radstone is well placed to benefitfrom our customers' requirements for high performance embedded computing. The Group has invested substantially in new facilities, it has developed andbrought to market new products and it has increased its market reach throughtargeted acquisitions. Radstone has continued to deliver improved financialperformance; it has a record order book and a healthy balance sheet and sobegins this financial year in a strong position. Operations Review Embedded Computing 2005 2004 £'000 £'000Total sales (all external) 41,822 33,181Gross profit 23,663 19,602Contribution (Note 2) 11,435 10,046 In July 2004, Radstone acquired Octec Ltd, a UK company based in Bracknell. Thecompany designs and manufactures image processors and video trackers for theembedded computing market. Octec's core competency in advanced image processingand video tracking software and algorithms is highly complementary to Radstone'scomputer subsystem expertise. These are new application areas for Radstone andare a significant step in our strategy of supplying a wider range of systemsolutions to our customers. Strategically, the test and measurement market is a growth area for us and wehave taken advantage of the opportunity to acquire IP that will furtherstrengthen our offering, by purchasing the trade and assets of SavvyCorp throughDaqScribe Technology Inc., our subsidiary specialising in this market. Development of new leading-edge products continues to be a key differentiatorbetween Radstone and its competitors. Investment in development amounted to£6.1m (2004: £4.5m) representing 14.6% (2004: 13.6%) of Embedded Computingsales. During the year we introduced fifteen new products; among these was theG4DSP-XE, the most advanced PowerPC digital signal processing board available.Also introduced was the Adept-104 from Octec, which is a small form factor boardwith very low power consumption, offering unique architecture for imageprocessing; targeting UAV applications as well as other security andsurveillance applications. Finally ICS developed its first rugged product, theICS PMC-571, a rugged software radio mezzanine transceiver card, which is thefirst product in the world to offer wide bandwidth analog to digital and digitalto analog conversion capabilities at software radio frequencies on a rugged PMCcard. In November 2004 we opened a new engineering design centre near BostonMassachusetts. By May 2005 we had announced our first software product fromthis facility - Axis. This is a powerful suite of software tools that allowssystem designers to develop complex, highly capable solutions using multipleprocessors in order to deliver the processing power required in the mostadvanced military applications. The tools hide the complexities anddifficulties of making multiple processors operate together, to allow ourcustomer's engineers to concentrate on the solution and thereby reduceengineering timescales. This product delivers a powerful competitive advantageto Radstone. Two strategic alliances were announced during the year. The first with UltraElectronics Datel, involves collaboration in the development of flightcertifiable board support packages for our single board computers in accordancewith DO-178B, the de facto standard in certifying all new aviation software.This strengthens further Radstone's position in the growing avionics market.The second alliance is with Parker Hannifin and involves collaboration on thedevelopment of a range of rugged, liquid-cooled solutions for sub-systems thatfeature higher power levels from faster processors and thus require increasedheat dissipation. The first product to be developed under this alliance wasreleased to the market in January 2005. Sales for the Embedded Computing business included £4.8m attributable to OctecLtd. The continuing weakness of the US dollar, the unit's main trading currency,affected organic growth as reported in sterling. In constant dollars andexcluding Octec, Embedded Computing sales grew by £6.5m, equivalent to 19.6%. Sales were more heavily weighted towards the second half of the year than inprevious years. This was due to the component supply and production issues,highlighted at the time of our interim results announcement and subsequentlyresolved during quarters 3 and 4. Excluding Octec, 70% of shipments occurred inthe second half of the year, compared with 58% in 2004. In our main US market, deliveries of £29.0m represented 58% of Group salescompared with 53% in 2004. Major US programme deliveries were MLRS (HarrisCorporation), Firefinder (Northrop Grumman), ATFLIR (Raytheon Systems), ADCAP(Raytheon Systems) and Abrams Tank CEEP (General Dynamics). Gross profit increased to £23.7m compared with £19.6m last year (+20.9%), duemainly to the additional gross profit from Octec of £3.0m. The reduction ingross profit margin from 59.0% to 56.7% was due to the effect of the weak USdollar and our hedging instruments. In constant dollar terms the margin wouldhave been similar to the previous year. Contribution decreased to 27.3% of sales (2004: 30.3%), due to the effect of theUS dollar and our hedging instruments. Electronic Manufacturing Services (EMS) 2005 2004 £'000 £'000Total sales 8,800 11,327Sales to Embedded Computing (735) (787)External sales 8,065 10,540Gross profit 1,873 1,392Contribution (Note 2) 1,644 1,114 Following on from the reorganisation of our EMS business in November 2003 we nowhave a more efficient and tightly focused unit, targeting customers that requiresmall to medium batch sizes of complex electronic assemblies. This has resultedin a substantial improvement in results during the year, returning acontribution of 18.7% of sales compared with 9.8% in 2004. The majority of the activity in the year was for commercial customers involvedin industrial control, test & measurement, civil surveillance, electronicdisplays and electronics for motor sports. Current high levels of quotation andenquiry activity from defence system integrators would indicate that for thecurrent year 2006, they will represent a greater proportion of third party salesthan the 7% achieved in 2005. As part of the reorganisation in 2003-04 mentioned earlier, we made the decisionto target only high added value contracts that met strict criteria with respectto low volume high complexity assemblies which had the effect of reducing thirdparty sales by £2.4m to £8.1m this year. Together with the cost savingsintroduced this increased the gross profit by £0.5m, so that the gross profitmargin on sales rose substantially from 12.3% to 21.3%. During the year our EMS business achieved the accreditation ISO 14001, therebydemonstrating their commitment to achieving best standards for environmentalmanagement. Orders The order book at 31 March 2005 totalled a record £86.5m, an increase of 9% insterling terms from the £79.3m achieved in 2004. New orders booked totalled £54.4m in 2005, compared with £58.9m in 2004. Octeccontributed £4.8m to this total in 2005. UK orders for the Group totalled £18.3m, below last year by £12.5m due to thereceipt in 2003-04 of a £14m multi-year production contract. No major UKmulti-year production contract was received in 2004-05. Orders from mainland Europe of £4.6m and the Far East of £1.3m, increased by £3mand £0.4m respectively compared to last year. Radstone in the USA had another excellent year for new orders received, withbookings of $69.1m. This included a multi-year production order from Raytheonfor $26.7m on a torpedo upgrade programme that was in addition to $5.5m receivedin the first half of the year on the same programme. The previous year's USorder intake was $55.1m and included the largest single order to-date for $41mon a multi-year production programme for delivery over seven years. Order intake for the EMS business, which is all UK based declined by £1.9m asthe unit, in line with its current strategy, targeted only those customers thatrequire small to medium batch sizes of complex electronic assemblies. Financial Review Overview Analysis of this year's result is complicated by the weakening of the US dollar,which moved from an average exchange rate of 1.71 in the prior year to 1.85. Asapproximately 79% of the Embedded Computing division's sales in the year were inUS dollars, the weakness in the dollar has had considerable impact on the year'sresults. The effect on profit before tax for the year is estimated to be £1.9m. Group sales of £49.9m comprised £41.8m from the Embedded Computing division and£8.1m from EMS. Embedded Computing benefited from sales of £4.8m from OctecLimited, which was acquired in July, but suffered a reduction of £2.7m inconstant dollar terms due to the fall in the US dollar. In EMS, which has verylittle dollar exposure, turnover was down 23%, which was anticipated, due to theeffects of the restructuring carried out in the previous year which focused thedivision on low volume high complexity work. Reported gross margins in Embedded Computing fell to 56.7% from 59.0%.Stripping the effects of hedging out of both years, margins in constant dollarswere up slightly reflecting the positive contribution of Octec which produced agross margin of 64.4% in its nine months with the Group. Within the EMS business gross margins improved from 12.3% to 21.3% as a resultof the efficiencies gained from the closure of the Hawarden operation, theconsolidation of the two businesses on the one site at Milton Keynes and a moretargeted product mix of high added value contracts. In absolute terms, Group gross profits increased by £4.5m to £25.5m.Expenditure on development, sales, marketing and administration increased by£2.8m with the result that operating profit (before goodwill amortisation of£1.4m) increased by £1.7m to £9.5m, a 22% improvement. This represented anoperating profit margin before goodwill of 19.1% of sales, compared to 17.8%last year. In constant dollar terms the operating profit margin would have been23% representing growth of 48%. EBITDA (see note to the consolidated cash flow statement) at £11.6m was 20.4%above last year. The first half of the year generated £0.8m and the second half£10.8m; compared with £2.3m and £7.3m respectively. Exceptional items in the year relate to the profit on the sale of the Group'sWater Lane site and the profit on disposal of SensorCom Inc. The disposal ofthe Water Lane site which took place in July 2004 generated a profit of £2.3m. SensorCom joined the Radstone Group as part of the acquisition of ICS Limited,of which it was a subsidiary, in September 2003. Based in Annapolis, Maryland,the company is a small systems integrator with a different focus from the otherelements of Radstone's embedded computing division and therefore the Board ofRadstone decided to divest the business to its current management team. ICSacquired SensorCom for $0.3m in September 2002 and it has been sold for $1.6million. Net assets, at disposal, after the payment of a $0.4m dividend to theGroup, were approximately $0.1m. The disposal generated an exceptional profitbefore tax of £0.6m. In the year to 31 March 2005, SensorCom contributed £0.2mto the profit before tax of the Group. Interest charges have grown by £0.6m to £1.0m due to the increased borrowingused to finance the construction of the new facility in Towcester and theacquisitions of ICS and Octec. The tax charge of £2.4m represents 23.4% of the pre-tax profit compared to 57.4%in 2004. This improved percentage reflects the exceptional gain on the sale ofthe Water Lane facility which was not subject to tax. Before exceptionals andgoodwill the tax rate was 25.3% in 2005 and 27.6% in 2004. The basic earnings per share (FRS14) of 26.12p were boosted by the exceptionalprofits in the year whereas last year's at 5.00p were depressed by theexceptional closure costs of the Hawarden facility in that year. The normalisedearnings per share (see calculation in note 1) were 21.54p, a 5.1% increasecompared to last year. Adjusted for the decline in the dollar, the normalisedearnings per share would have been 26.4p, a 29% increase. Cash flow Cash flow from operating activities was £8.3m compared to £9.1m last year. After deducting net interest and tax payments of £0.9m and £2.1m respectivelyand capital expenditure (excluding construction of the new property) of £2.4m,free cash flow amounted to £2.9m. From the free cash flow a dividend of £1.0mwas paid and final payments of £2.3m on the construction of the new building.Cash received from the sale of the Water Lane site was £3.9m resulting in a cashinflow of £3.5m before acquisitions and financing. The £10.6m paid for Octec, net of cash acquired and costs, was financed by £6.2mfrom the proceeds of a placing of shares and the balance from cash resources andshares issued to vendors. The acquisition of the intellectual property of Savvy Corp cost £0.1m, while thenet cash effect of the disposal of SensorCom was an inflow of £0.8m In our interim report we gave details of the changes that had been negotiatedwith the vendors of ICS with respect to their earn-out agreement. This resultedin a payment to the vendors of CAN$7.5m (£3.3m) during the year in lieu of apayment of CAN$5.0m in January 2005 and a potential payment of up to CAN$5.0m inJanuary 2006. A net repayment of loans totalling £1.7m left the Group with net debt of £16.6mat year end, compared with net debt of £19.5m at the half year and net debt of£12.7m at the same time last year. Investment A further £2.3m was spent in completing the new facility in Towcester.Underlying capital expenditure (excluding the new building) was a net £2.4mcompared with £1.7m in 2004 and reflects the increased size of the Group postthe ICS and Octec acquisitions. Company funded development expenditure grew to £6.1m (2004: £4.5m), representing14.6% of sales for the Embedded Computing business (2004: 13.6%). Consistentwith the Group's established policy, all product development was chargeddirectly to the profit and loss account. Liquidity Net debt of £16.6m equates to gearing of 36% compared to 48% at the half yearand 39% at the end of the prior year. Current and quick ratios were 2.2 and 1.5respectively, compared to 2.3 and 1.7 last year. Interest was covered 9.2 timescompared to 19.8 times last year. The total dividend for the year is covered6.7 times (4.4 times excluding exceptionals) compared to 1.5 times last year(5.5 times excluding exceptionals). The Group seeks to reduce financial risk and to ensure sufficient liquidity isavailable to meet foreseeable needs. Our policy is to maintain a balancebetween continuity of funding and flexibility through the cost-effective use ofborrowings with a range of maturities. Performance Normalised earnings per share, (see calculation in note 1), which is indicativeof underlying performance, grew by 5.1% to 21.54p (2004: 20.50p). In constantdollar terms these would have been 26.4p. The return (being operating profit before goodwill - see note to the cash flowstatement) on average capital employed fell from 23.2% to 17.6%. Return (beingprofit after tax excluding exceptional items) on opening equity of 15.2% wasbelow last year's 20.8%. Both of these falls are due in the main to the effectof the dollar on the year and to a lesser extent the capitalised goodwill onrecent acquisitions. Treasury With a substantial percentage of revenue in United States dollars, hedgingforeign exchange fluctuations against this currency is recognised by thedirectors as a key responsibility. While this exposure is naturally hedged bypurchases of components in US dollars and the local costs of our US operations,there still remains a net exposure to be hedged. In the year, the net exposurewas approximately $40m which was protected from the dollar's weakness to someextent by the prudent use of various financial instruments. The hedged rateachieved was approximately £1:US$1.7 compared to a sales weighted rate of £1:US$1.87. At 31 March 2004 there were £0.8m of unrealised net gains on forward foreigncurrency contracts and options (2004: £1.8m of net gains) covering US dollars.None of these was recognised at the balance sheet date. All unrealised netgains are expected to be dealt with in the profit and loss accounts for theperiods ending 31 March 2006 and 31 March 2007. Since unrealised gains or losses are calculated by marking to market forwardforeign currency contracts and options, which are used to calculate foreigncurrency prices for our products, the off-set for these unrealised amounts isthe sales which will result from the physical delivery of these products. Translation exposure arising on the consolidation of the Group's US and Canadianassets is hedged by use of US and Canadian dollar loans in the UK parentcompany. The net effect of these are taken directly to reserves as allowedunder SSAP20, ensuring that only trading transaction gains and losses on foreignexchange are represented in the profit and loss account. The interest rate exposure on the US dollar, Canadian dollar and sterling loansare managed by a number of interest rate swaps. International Financial Reporting Standards Radstone Technology PLC will be required to adopt International FinancialReporting Standards (IFRS) when preparing its group accounts for the year ended31 March 2006. The applicable standards have been identified and procedures reviewed to ensurethat the relevant data is being captured to allow us to report under the newstandards in our interim report for the year ending 31 March 2006. Consolidated Profit & Loss Accountfor the year ended 31 March 2005 Notes Continuing Acquisition 2005 2004 £'000 £'000 £'000 £'000 Turnover 45,093 4,794 49,887 43,721 Cost of sales (22,595) (1,756) (24,351) (22,727) Gross profit 22,498 3,088 25,536 20,994 Administration costsAdministration (3,539) - (3,539) (3,391)Development (4,824) (1,282) (6,106) (4,525)Goodwill (994) (366) (1,360) (806)Total administration costs (9,357) (1,648) (11,005) (8,722) Distribution costs - sales and marketing (5,837) (514) (6,351) (5,309) Operating profit 7,304 876 8,180 6,963Exceptional gain on disposal of freehold land and buildings 2,271 -Exceptional gain on disposal of subsidiary undertaking 641 -Exceptional cost on closure of operation - (3,508)Net interest payable (1,035) (393) Profit on ordinary activities before taxation 10,057 3,062 Taxation (2,355) (1,759) Profit for the financial year 7,702 1,303 Dividends (1,142) (842) Retained profit for the year 6,560 461 Basic earnings per share 1 26.12p 5.00pNormalised earnings per share 1 21.54p 20.50pDiluted earnings per share 1 25.97p 4.97p Statement of total recognised gains and losses £'000 £'000 Profit for the financial year 7,702 1,303Exchange rate adjustment 505 (461)Total gains recognised relating to the year 8,207 842 There is no material difference between the profit reported above and thatcalculated on the historical cost basis. All results arise from continuing operations. Balance Sheetsat 31 March 2005 Group Company Notes 2005 2004 2005 2004 £'000 £'000 £'000 £'000Fixed assetsGoodwill 28,662 20,613 - -Intangible assets 46 76 42 76Total intangible assets 28,708 20,689 42 76Tangible assets 16,843 15,350 10,950 10,337Investments - - 38,651 26,492 45,551 36,039 49,643 36,905 Current assetsStocks 11,219 9,266 - -Debtors falling due after more than one year 423 - 151 151Debtors 17,451 13,870 5,063 6,158Cash at bank and in hand 4,304 9,150 10,774 17,096 33,397 32,286 15,988 23,405 Creditors: amounts falling due within one yearBank and other borrowings 3,759 2,733 2,703 1,400Other creditors 11,366 11,112 3,756 4,681 15,125 13,845 6,459 6,081Net current assets 18,272 18,441 9,529 17,324Total assets less current liabilities 63,823 54,480 59,172 54,229 Creditors: amounts falling due after more than one yearBank and other borrowings 17,099 19,134 16,475 18,051Other creditors - 2,066 - 2,066 17,099 21,200 16,475 20,117 Provisions for liabilities and charges 252 366 561 6,221Net assets 46,472 32,914 42,136 27,891 Capital and reservesCalled up share capital 3,787 3,503 3,787 3,503Share premium account 25,099 19,962 25,059 19,962Revaluation reserve - 218 - 218Merger reserve 1,388 199 1,388 199Profit and loss account 16,669 9,386 12,333 4,363Own shares (431) (354) (431) (354)Equity shareholders' funds 3 46,472 32,914 42,136 27,891 Consolidated Cash Flow Statementfor the year ended 31 March 2005 2005 2004 £'000 £'000Operating activitiesNet cash inflow from operating activities 8,338 9,056 Returns on investments and servicing of financeInterest received 160 160Interest paid (987) (447)Interest paid on finance leases (57) (83) (884) (370) TaxationUK Corporation tax paid (1,261) (1,673)Overseas tax paid (875) (1,222) (2,136) (2,895) Capital expenditure and financial investmentPurchase of tangible fixed assets (4,701) (10,470)Proceeds from disposal of tangible fixed assets 3,908 10Purchase of intangible fixed assets (5) (55) (798) (10,515) Acquisitions and disposalsPurchase of subsidiary undertaking (12,501) (18,503)Net cash acquired with subsidiary 1,979 1,706Deferred consideration on purchase of subsidiary undertaking (3,254) -Purchase of trade and assets (92) -Disposal of subsidiary undertaking 832 -Net cash disposed of with subsidiary (251) -Costs of terminating subsidiary activity - (125) (13,315) (16,922) Equity dividends paid (954) (689) Net cash (outflow)/inflow before financing (9,749) (22,335) FinancingIssue of ordinary share capital 6,170 10,593Purchase of own shares (152) (230)Proceeds from disposal of own shares 75 220 6,093 10,583New loans 1,118 18,289Repayment of loans (2,013) (556)Repayment of loan notes (480) (281)Repayment of principal under finance leases (289) (490) (1,664) 16,962 4,429 27,545(Decrease)/increase in cash (5,320) 5,210 Note to the Consolidated Cash Flow Statement Reconciliation of operating profit to net cashinflow from operating activities Operating profit 8,180 6,963Amortisation of goodwill 1,360 806 Operating profit before goodwill 9,540 7,769Amortisation of intangible fixed assets 40 36Depreciation of tangible fixed assets 1,972 1,792 Ebitda 11,552 9,597Loss/(profit) on disposal of tangible fixed assets 4 (2)(Increase)/decrease in stocks (1,576) 962(Increase)/decrease in debtors (3,132) 1,017Increase/(decrease) in creditors 1,490 (2,518) Net cash inflow from operating activities 8,338 9,056 Notes: 1 Earnings per share 2005 2004 pence pence per share per share Basic earnings per share 26.12 5.00 Normalised earnings per share 21.54 20.50 Diluted earnings per share 25.97 4.97 The calculation of basic and diluted earnings per share is based on the profitfor the year after tax of £7,702,000 (2004: £1,303,000). Normalised earningsper share is calculated after adjusting profit after tax for the effect ofgoodwill amortisation and exceptional items and in the directors' opinion ismore indicative of underlying performance. The reconciliation of basic tonormalised earnings per share is as follows: 2005 2004 pence pence per share per share Basic earnings per share 26.12 5.00Goodwill written off 4.61 3.10Exceptional gain on disposal of freehold land and buildings (7.91) -Exceptional gain on disposal of subsidiary undertaking (1.28) -Exceptional cost on closure of operation - 12.40 Normalised earnings per share 21.54 20.50 The weighted average number of shares in issue during the year used in thecalculation of earnings per share is as per the following table: 2005 2004 '000 '000 Weighted average for year - basic and normalised earnings per share 29,488 26,041Calculation of shares under option per FRS14 170 202Weighted average for year - diluted earnings per share 29,658 26,243 2 Segmental information The analysis by geographical area of destination of the Group's turnover, all ofwhich relates to continuing operations, is set out below: 2005 2004 £'000 £'000 United Kingdom 10,931 12,975Rest of Europe 6,399 4,881USA 28,960 23,336Rest of World 3,597 2,529 49,887 43,721 Class of business The Group operates in two classes of business being Embedded Computing andElectronic Manufacturing Services. An analysis of the trading performance andnet assets of each class of business is detailed below. Turnover Embedded Electronic Manufacturing Computing Services Total 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 Total sales 41,822 33,181 8,800 11,327 50,622 44,508Inter-segment sales - - (735) (787) (735) (787) External sales 41,822 33,181 8,065 10,540 49,887 43,721 Cost of sales (18,159) (13,579) (6,192) ( 9,148) (24,351) (22,727) Gross profit 23,663 19,602 1,873 1,392 25,536 20,994Operating costs (excluding goodwill and central overheads) (12,228) (9,556) (229) (278) (12,457) (9,834)Contribution 11,435 10,046 1,644 1,114 13,079 11,160 Administration cost - goodwill (1,360) (620) - (186) (1,360) (806)Exceptional item 641 - - (3,508) 641 (3,508) 10,716 9,426 1,644 (2,580) 12,360 6,846Administration cost - central overhead (3,539) (3,391)Exceptional item - central 2,271 -Net interest payable (1,035) (393) Profit before taxation 10,057 3,062 Segmental net assets/ (liabilities) 21,151 13,781 (2,619) 3,063 18,532 16,844 Central net assets 45,378 29,719Current and deferred taxation (1,413) (931)Net obligations under finance leases (665) (931)Loan notes (net) 291 (736)Cash, bank loans and overdrafts (15,651) (11,051)Net assets 46,472 32,914 Central overheads have not been allocated between the classes of business as todo so would be impracticable and misleading. Geographical segment In the directors' opinion, the disclosure of segmental information for turnover,profit before taxation and net assets by origin, would be seriously prejudicialto the interests of the Group. As a consequence, this information in itsentirety has not been disclosed as permitted by SSAP25. 3 Reconciliation of movements in consolidated shareholders' funds 2005 2004 £'000 £'000 Profit for the financial year 7,702 1,303Dividends paid and proposed (1,142) (842)Exchange rate adjustment 505 (461)New share capital subscribed 6,208 11,348Costs of acquisition of subsidiary undertaking (105) (384)Merger reserve arising on acquisition of subsidiary company 467 199Purchase of own shares (152) (230)Disposal of own shares 75 220 Net movement in shareholders' funds 13,558 11,153Opening shareholders' funds 32,914 21,761Closing shareholders' funds 46,472 32,914 4. Normalised Profit Before Tax 2005 2004 £'000 £'000 Profit on ordinary activities before taxation 10,057 3,062Goodwill 1,359 806Exceptional items (2,912) 3,508 Group profit before tax, goodwill & exceptional items 8,504 7,376 5. The comparative figures for the year to 31 March 2004 do not constitute fullaccounts within the meaning of Section 240 of the Companies Act 1985. Fullaccounts for that period, which received an unqualified audit report and did notcontain a statement under Section 237(2) or Section 237(3) of the Companies Act1985, have been delivered to the Registrar of Companies. The financialinformation set out in the preliminary statement of results for the year ended31 March 2005 does not constitute statutory accounts within Section 240 of theCompanies Act 1985. The Group's statutory accounts for the year ended 31 March2005 have not yet been filed with the Registrar of Companies. The Company'sauditors have issued an unqualified report on those financial statements. Theirreport contains no statement under Section 237(2) or Section 237(3) of theCompanies Act 1985. 6. Copies of the 2005 Report and Accounts will be sent to shareholders in duecourse. Further copies will be available from the registered office of RadstoneTechnology PLC, Tove Valley Business Park, Towcester, Northants NN12 6PF. This information is provided by RNS The company news service from the London Stock Exchange