Spirent plc Interim Results for the Six Months to 30 June 2002.Business Editors LONDON--(BUSINESS WIRE)--Aug. 28, 2002 Spirent plc (LSE LSE - Language Sensitive Editor : SPT (Sectors Per Track) The number of sectors in one track. ; NYSE NYSE See: New York Stock Exchange : SPM SPM - Sequential Parlog Machine ), a leading international network technology company, today announced its interim results for the six months to 30 June June: see month. 2002. Turnover was down 32 per cent and operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. was down 56 per cent compared with the first six months of 2001. Because of the fundamental downward shift in the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. market since the first half of 2001, we believe it is more meaningful to compare our first half 2002 results on a sequential One after the other in some consecutive order such as by name or number. basis with the second half of 2001. On this basis, our results for the first six months of 2002 showed a 25 per cent increase in operating profit generated by ongoing businesses on a 4 per cent increase in turnover from ongoing businesses compared with the second half of 2001.
Highlights
Six Six Six
months months months
to to to
(pound)million 30 June 31 Dec- 30 June
ember
2002 2001 2001
Turnover 311.0 342.9 458.9
Operating profit(a) 35.2 33.5 79.4
Profit before taxation(a) 31.4 27.3 73.6
Headline earnings per share(a)(b) (pence) 2.42 2.22 5.54
Interim dividend per share (pence) 1.35 1.35
- Turnover from ongoing businesses of (pound)298.4 million was up 4 per cent and operating profit of (pound)34.9 million was up 25 per cent. Turnover from divestments was (pound)12.6 million and operating profit was (pound)0.3 million.
- Communications group turnover increased by 3 per cent to(pound)179.8 million with operating profit up 26 per cent at(pound)26.2 million.
- Communications group return on sales improved to 14.6 per cent compared with 11.9 per cent.
- Network Products group turnover improved by 7 per cent to (pound)84.7 million and operating profit was up 33 per cent to(pound)7.7 million.
- All groups were cash generative with cash generation from operations of (pound)40.7 million.
- Net debt reduced to (pound)143.2 million at 30 June 2002. Interest cover for the six months to 30 June 2002 was 5.8 times(a).
- Since June we have invested (pound)46.1 million in cash in the purchase of certain assets of the remote special services test product line of Anritsu and the acquisition of Caw Networks to enhance our Communications group's product offering.
(a) Before goodwill amortisation Noun 1. amortisation - the reduction of the value of an asset by prorating its cost over a period of years amortization reduction, step-down, diminution, decrease - the act of decreasing or reducing something 2. and exceptional items (b) Headline earnings Headline Earnings A basis for measuring earnings per share implemented by the Institute of Investment Management and Research. This method accounts for all the profits and losses from operational, trading, and interest activities, that have been discontinued or acquired at any per share for the six months to 30 June 2001 has been restated to exclude all exceptional items and attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk taxation Commenting on the results, Nicholas Nicholas, Russian grand duke Nicholas (Nikolai Nikolayevich) (nyĭkəlī` nyĭkəlī`əvĭch), 1856–1929, Russian grand duke and army officer; first cousin of Czar Alexander III and grandson of Czar Brookes Brookes is a surname, and may refer to
"Spirent showed a decrease in sales and operating profit relative to the first half of 2001, but delivered a resilient See resiliency. sequential performance from ongoing businesses, with a 25 per cent increase in operating profit compared with the second half of last year. In tough market conditions, Spirent has generated cash and increased market share and profitability. "In the Communications group, our focus on the current needs of the telecommunications market ensures we are in-step with our customers, providing them with solutions to analyse an·a·lyse v. Chiefly British Variant of analyze. analyse or US -lyze Verb [-lysing, -lysed] or -lyzing, and assure next-generation networks and deliver cost-efficiencies. Our Network Products business, which is less exposed to the telecommunications market, achieved an encouraging performance in the first half. "The telecommunications market at this time shows no signs of improvement and remains unpredictable but we believe we are strategically well positioned to respond to our customers' evolving needs."
- ends -
Enquiries
Nicholas Brookes, Chief Executive Spirent plc +44 (0)1293 767676
Eric Hutchinson, Finance Director
Investor Relations
Catherine Nash Spirent plc +44 (0)1293 767676
Media
Jon Coles/Rupert Young Brunswick (London) +44 (0)20 7404 5959
Lauren Teggelaar Brunswick (New York)+1 212 333 3810
About Spirent Spirent plc is an international network technology company providing state-of-the-art systems and solutions for a broad range of customers worldwide. Our Communications group is a worldwide provider of integrated performance analysis and service assurance systems for next-generation network technologies. Spirent's solutions accelerate the development and deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of network equipment and services by emulating real-world conditions and assuring end-to-end end-to-end a pattern of anastomosis in which severed ends are matched and united, in contrast with other patterns such as end-to-side or side-to-side. Usually applied to anastomosis of the intestine. performance of large-scale large-scale adj. 1. Large in scope or extent. 2. Drawn or made large to show detail. large-scale Adjective 1. wide-ranging or extensive 2. networks. Our Network Products group provides innovative solutions for fastening, identifying, insulating, organising, routing and connectivity A generic term for connecting devices to each other in order to transfer data back and forth. It often refers to network connections, which embraces bridges, routers, switches and gateways as well as backbone networks. that add value to electrical and communication networks in a wide range of applications. Our Systems group offers integrated product solutions for the aerospace, power controls and environmental markets. Further information about Spirent plc can be found at www.spirent.com Spirent plc is listed on the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. (ticker ticker An automated quotation system on which security transactions are reported after they occur on an exchange floor. Even though the newer systems are electronic and no longer actually tick, the name of the old mechanical device has stuck. : SPT) and on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. (ticker: SPM; CUSIP number CUSIP Number An identification number assigned to all stocks and registered bonds. The Committee on Uniform Securities Identification Procedures (CUSIP) oversees the entire CUSIP system. Notes: This system is used in the U.S. and Canada. : 84856M209) with one American Depositary Receipt American Depositary Receipt (ADR) Certificates issued by a US depository bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue. representing four Ordinary shares. Spirent and the Spirent logo are trademarks of Spirent plc. All other trademarks or registered trademarks are held by their respective companies. All rights reserved. This press release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. (as that term is defined in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Private Securities Legislation Reform Act 1995) that are based on current expectations or beliefs, as well as assumptions about future events. You can identify these statements by their use of words such as "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "should," "may," "assume" and other similar words. You should not place undue reliance on our forward-looking statements, which are not a guarantee of future performance and are subject to factors that could cause our actual results to differ materially from those expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by these statements. Such factors include: aggressive competition; our ability to develop and commercialise new products and services and realise product synergies; our ability to focus on growth areas in the relevant markets; risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the acquisition or sale of businesses and our subsequent ability to integrate businesses; our reliance on third party manufacturers and suppliers; our exposure to liabilities for product defects; our reliance on proprietary technology; our ability to attract and retain qualified personnel; risks of doing business internationally; risks of downturns and continued downturns in the markets in which we participate; and other risks described from time to time in Spirent plc's Securities and Exchange Commission periodic reports and filings. We undertake no obligation to update our forward-looking statements, whether as a result of new information, future events or otherwise.
INTERIM REPORT FOR THE SIX MONTHS TO 30 JUNE 2002
Notes:
1. Organic change is the change at constant currencies excluding
the impact of acquisitions and divestments.
2. Operating profit and return on sales are stated before
goodwill amortisation and exceptional items.
Operating Review
Communications Six Six
months months
(pound)million Six months to to to Compared with
30 June 31 Dec- 30 June six
2002 ember 2001 months to
2001 31December 2001
Change Organic
% change(1)
%
----------------------------------------------------------------------
Turnover:
Performance Analysis 100.0 104.2 141.3 (4) (3)
Service Assurance 79.8 71.2 113.9 12 13
--------------------------------------------------------------------
179.8 175.4 255.2 3 3
Operating profit(2):
Performance Analysis 7.0 5.7 33.0 23 24
Service Assurance 19.2 15.1 29.6 27 29
--------------------------------------------------------------------
26.2 20.8 62.6 26 27
Return on sales(2) (per cent):
Performance Analysis 7.0 5.5 23.4
Service Assurance 24.1 21.2 26.0
Communications group 14.6 11.9 24.5
--------------------------------------------------------------------
Our Communications group as a whole achieved a 3 per cent increase in turnover and a 27 per cent increase in operating profit on an organic basis in the first six months of 2002 compared with the second half of 2001. Return on sales Return on sales A measurement of operational efficiency equalingnet pre-tax profits divided by net sales expressed as a percentage. return on sales The portion of each dollar of sales that a firm is able to turn into income. improved to 14.6 per cent compared with 11.9 per cent in the second half of 2001 benefiting from the cost reductions taken last year and continuing tight cost control. This creditable cred·it·a·ble adj. 1. Deserving of often limited praise or commendation: The student made a creditable effort on the essay. 2. Worthy of belief: a creditable story. first half result was achieved against a backdrop Backdrop may refer to:
adj. 1. Capable of being demonstrated or proved: demonstrable truths. 2. Obvious or apparent: demonstrable lies. cost-efficiencies and unique spread of technologies of our products. Performance Analysis Our Performance Analysis division saw a small drop in turnover in the first six months of 2002 relative to the second half of 2001, but despite continuing reductions in customers' capital expenditure budgets, the order intake intake /in·take/ (in-tak´) the substances, or the quantities thereof, taken in and utilized by the body. intake, n the substance or quantities thereof taken in and used by the body. rate has remained at about (pound)50 million per quarter for the last four quarters. The improvement in return on sales from 5.5 per cent in the second half of 2001 to 7.0 per cent was largely due to cost-savings but these were partially off-set by a change in product mix in the first six months of 2002. We have seen weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. in the higher margin ATM/frame
relay relay, electromechanical switch operated by a flow of electricity in one circuit and controlling the flow of electricity in another circuit. A relay consists basically of an electromagnet with a soft iron bar, called an armature, held close to it. and voice sides of the business due to a shift in customer
spending. However, sales of our industry-first integrated wireless
CDMA-2000 position location test system enabled us to more than double
our wireless business over the first half of 2001. We also experienced
good growth in the first half in our web, storage area network and
10-gigabit Ethernet EthernetTelecommunications networking protocol introduced by Xerox Corp. in 1979. It was developed as an inexpensive way of sending information quickly between office machines connected together in a single room or building, but it rapidly became a standard computer test products. We continue to invest in product development in areas where we see opportunities for growth and where our customers are increasingly concentrating their investments, namely third generation wireless, local, storage and metro area This article is about the music production team. For the article about population centers, see metropolitan area. Metro Area are a Brooklyn-based dance music production team composed of Morgan Geist and Darshan Jesrani. networks and the web. In addition, we are enhancing the scalability How much a system can be expanded. See scalable. scalability - How well a solution to some problem will work when the size of the problem increases. For example, a central server of some kind with ten clients may perform adequately but with a thousand clients it , automation and ease-of-use of existing products in line with customer demand. New products launched in the first six months of 2002 included our 40-gigabit optical transport test system, CDMA-2000 wireless test solutions, and an integrated IPv6 conformance con·for·mance n. Conformity. Noun 1. conformance - correspondence in form or appearance conformity agreement, correspondence - compatibility of observations; "there was no agreement between theory and test solution. We saw encouraging progress in Asia in the first six months of 2002, particularly in China and Japan, where customers are focusing on delivering wireline and wireless data services using the new IPv6 protocol which we address through our comprehensive IPv6 solutions portfolio. In August 2002 we completed the acquisition of Caw Networks, Inc. (Caw). Caw's products provide solutions for testing the integrity, security and reliability of websites and web-based applications See Web application. . Combined with our expertise in the physical, data and network layers, we are now able to provide customers with fully integrated solutions for real-world capacity assessment of web equipment, networks and applications. The acquisition of Caw also provides us with products and sales capabilities to address the important enterprise market. Service Assurance Our Service Assurance division achieved 13 per cent organic growth in turnover over the second half of 2001 and 29 per cent organic growth in operating profit. Return on sales improved to 24.1 per cent compared with 21.2 per cent in the second half of 2001, partially due to an increased software and services component. There was a significant reduction in order book levels during the first quarter of 2002 due to seasonality and a change in customer ordering patterns. The order book at 30 June 2002 stood at (pound)46 million. The growth in turnover was driven by continuing projects with our major customers particularly in special (private line) services and the first full scale deployment of CenterOp Sentry with Verizon Communications
Verizon Communications, Inc. Inc. for fault management of their nationwide DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary network in the US. During the first six months of 2002 we launched two further additions to CenterOp, our operations support systems Operations Support Systems (also called Operational Support Systems or OSS) are computer systems used by telecommunications service providers. The term OSS most frequently describes "network systems" dealing with the telecom network itself, supporting processes such product suite. CenterOp for CPN CPN Communist Party of Nepal CPN Commercial Property News CPN Civic Practices Network CPN Calling Party Number CPN Community Psychiatric Nurse (UK) CPN Cisco Powered Network CPN Connaitre et Proteger la Nature (Converged Packet Networks) is a solution for the service assurance of packet-based services over existing ATM and evolving IP infrastructures, and CenterOp for Optical is the first service assurance solution to bridge the gap between legacy provider optical networks and evolving next-generation optical networks. Both these solutions are aimed at next-generation networks and will enable customers to achieve timely and cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. deployment of their new services, while reducing operational costs in their existing infrastructure. The Service Assurance division continues to generate most of its turnover from North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. but we have made progress in addressing the opportunities presented by DSL deployment programmes among European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. incumbent Refers to an entity that is currently in power. For example, in politics, the "incumbent senator" is the person who holds that office today. An "incumbent company" is an organization that has been providing goods and services for some time. See ILEC. operators and have strengthened our European sales and marketing presence to support these efforts. In July July: see month. 2002 we completed the acquisition of Anritsu Anritsu Corporation (アンリツ株式会社 Company US's (Anritsu) remote special services test product line which is a well-established product family with a significant installed customer base at service providers such as BellSouth
Network Products
(pound)million Six Six Six
months to months to months to Compared with
30 June 2002 31 Decem- 30 June six months to
ber 2001 2001 31 December
2001
Change Organic
% change(1)
%
------------------------------------ --------- --------- ---- -------
Turnover 84.7 79.2 91.2 7 11
Operating profit(2) 7.7 5.8 9.5 33 34
Return on sales(2) (per cent) 9.1 7.3 10.4
------------------------------------ --------- --------- ---- -------
Our Network Products group achieved an encouraging performance in the first six months of 2002 with turnover up 11 per cent organically reflecting market share gains and seasonality in the business. The results of the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). actions taken in 2001 have also benefited operating profit for the first six months of 2002 with return on sales increasing to 9.1 per cent. On a geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. basis we have seen market share gains in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). as a result of a focused marketing effort but
sales in South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. and Japan are weak reflecting the poor economic
conditions in those regions.In telecommunications, the markets for our broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). and local area network (LAN (Local Area Network) A communications network that serves users within a confined geographical area. The "clients" are the user's workstations typically running Windows, although Mac and Linux clients are also used. ) products continued to decline as enterprise IT budgets have shrunk shrunk v. A past tense and a past participle of shrink. shrunk Verb a past tense and past participle of shrink shrunk, shrunken shrink and service providers have cut back on spending. However, we have increased our penetration The successful unauthorized breach of a security perimeter. See penetration test. into new markets and secured new distribution channels which have benefited our performance in this sector. Following on from a successful introduction of our 'Network Sciences' product line in North America, we have begun delivering our LAN products under this name in the German market. The first six months of the year also saw further launches of product upgrades and modifications under the HellermannTyton name in the UK market. We have a long and successful relationship with Verizon Logistics logistics In military science, all the activities of armed-force units in support of combat units, including transport, supply, communications, and medical aid. The term, first used by Henri Jomini, Alfred Thayer Mahan, and others, was adopted by the U.S. and in recognition of our performance in 2001 they named HellermannTyton as 'Supervendor of the Year'. We also received Communications News magazine's 'Editor's Choice' award for our Spirit 2100 portable printing system displayed at the SUPERCOMM 2002 trade show. Sales to the automotive sector continue to be an important factor in the group's progress with product introductions for new models at a number of car makers and first tier suppliers increasing our market share, particularly in Europe and South America, and driving growth in the first six months of 2002. After a severe downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. , the US truck market is showing signs of recovery and with incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. new products accepted onto new and existing vehicle platforms we expect to benefit from the pick-up pick-up Noun 1. a small truck with an open body used for light deliveries 2. Informal a casual acquaintance made for a sexual purpose 3. Informal a. in this sector. Additionally, in the first six months of the year we launched two new systems expanding our range of fixing application tools. Sales to the general industrial sector, distributors and wholesalers continue to be affected by general economic trends but against this background we have continued to increase our market share. Our recent three year contract to supply ties to Consignia as their first vendor operating by means of XML XML in full Extensible Markup Language. Markup language developed to be a simplified and more structural version of SGML. It incorporates features of HTML (e.g., hypertext linking), but is designed to overcome some of HTML's limitations. e-procurement (Electronic-PROCUREMENT) Purchasing online. E-procurement systems are used to obtain materials and parts via the Web or using traditional EDI standards either for internal manufacturing (direct procurement) or office supplies and equipment (indirect procurement). is our largest single contract ever received in the UK.
Systems
(pound)million Six Six Six Compared with
months to months to months to
30 June 2002(a) 31 Decem- 30 June six months to
ber 2001(a) 2001(a)
31 Decem-
ber 2001
Change Organic
% change(1)
%
-------------------------------- ---------- ------------ ------ ------
Turnover 33.9 32.6 35.5 4 4
Operating profit(2) 1.0 1.4 0.9 (29) (27)
Return on sales(2)(per cent)2.9 4.3 2.5
-------------------------------- ---------- ------------ ------ ------
(a) Ongoing businesses
In the first six months of 2002 we completed the divestments of the aerospace component businesses and Switching Systems Switching systems (communications) The assemblies of switching and control devices provided so that any station in a communications system may be connected as desired with any other station. International (SSI (1) See server-side include and single-system image. (2) (Small-Scale Integration) Less than 100 transistors on a chip. See MSI, LSI, VLSI and ULSI. 1. (electronics) SSI - small scale integration. 2. ) from the Systems group and the results for the six months to 30 June 2002 and 2001 and 31 December December: see month. 2001 above have been adjusted to show the performance of the ongoing businesses within this group. On an organic basis compared with the second half of 2001, turnover was up 4 per cent and operating profit down 27 per cent partly due to reorganisation Noun 1. reorganisation - the imposition of a new organization; organizing differently (often involving extensive and drastic changes); "a committee was appointed to oversee the reorganization of the curriculum"; "top officials were forced out in the cabinet costs charged in the first six months of 2002. Spirent Systems' Maintenance, Repair and Overhaul Maintenance, Repair and Overhaul or MRO is a multi-billion dollar industry which works on international authorization rules to deliver a safe airline operation and to assure reliability and availability of customer fleets. (MRO MRO In currencies, this is the abbreviation for the Mauritanian Ouguiya. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) software solutions for the aerospace industry (AuRATM and GOLDTM) continued to win new business in both the civil and military sectors of the market. During the first six months of 2002 new contracts were secured with TNT TNT: see trinitrotoluene. TNT in full trinitrotoluene Pale yellow, solid organic compound made by adding nitrate (−NO2) groups to toluene. Express and the UK Ministry of Defence. Market acceptance of Spirent's Aviation Information Solutions (AIS (1) (Accounting Information System) The human and machine resources within an organization that are responsible for collecting and processing the daily transactions and preparing financial reports. ) was evidenced by Qantas Airway's decision to select Spirent to supply both hardware and software for their new Airbus fleet. The AIS business also received the Boeing (language) BOEING - An early system on the IBM 1130. [Listed in CACM 2(5):16, May 1959]. Quality 100 Award which recognises Boeing's top 100 suppliers for quality performance and reflects our ability to consistently deliver quality products over time. Our power controls business, which develops and manufactures digital position controls primarily for use in vehicles for the disabled, had a very good first half consolidating its market leading position whilst developing small industrial vehicle applications. The environmental business, which supplies pollution monitoring equipment to the US energy plant construction market, has suffered from the general economic slow-down in the US. Interconnection in·ter·con·nect v. in·ter·con·nect·ed, in·ter·con·nect·ing, in·ter·con·nects v.intr. To be connected with each other: The two buildings interconnect. v.tr. Joint Venture Our share of turnover from the WAGO WAGO (88.7 FM) is a radio station broadcasting a christian format. Licensed to Snow Hill, NC, USA, it serves the Greenville-New Bern, NC area. In addition, they have translators in Rose Hill, NC at 100.5 FM and in Jacksonville, NC at 101.1 FM. They also owned WZGO(91. joint venture was (pound)37.1 million for the first six months of 2002, 11 per cent down on the first six months of 2001. Operating profit for the first six months of 2002 was (pound)2.8 million, compared with (pound)6.6 million in the first six months of 2001. The effect of the current economic slow-down was experienced in WAGO's major markets in Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). and Japan and more significantly in the US, where domestic sales of the US business were 15 per cent below the same period in 2001. New products currently under design will complete the existing range for the interconnection and electronic market and are expected to help increase market share in the process automation area. The new range of patent approved products for the building installation sector launched last year in the German and Swiss domestic markets has experienced good acceptance in the construction business and important reference projects were won in the first six months of 2002. The joint venture is closely monitoring and controlling its cost base and the overall investment strategy is now in line with the worldwide economic situation as well as meeting the challenge of market demand for new products.
Financial Review
(pound)million Six months to Six months to Six months
30 June 2002 31 December 2001 to 30 June
2001
----------------------------------------------------------------------
Turnover
Ongoing businesses 298.4 287.2 381.9
Divestments and discontinued
operations 12.6 55.7 77.0
----------------------------------------------------------------------
Group 311.0 342.9 458.9
----------------------------------------------------------------------
Operating profit(2)
Ongoing businesses 34.9 28.0 73.0
Divestments and discontinued
operations 0.3 5.5 6.4
----------------------------------------------------------------------
Group 35.2 33.5 79.4
----------------------------------------------------------------------
Return on sales(2)
(per cent)
Ongoing businesses 11.7 9.7 19.1
Divestments and discontinued
operations 2.4 9.9 8.3
Group 11.3 9.8 17.3
----------------------------------------------------------------------
Turnover for the first six months of 2002 of (pound)311.0 million was down 32 per cent over the first six months of 2001 and 9 per cent below the second half of 2001. However, on an ongoing business basis, after adjusting for the effect of the disposals of Sensing Solutions in 2001 and our aerospace component businesses and SSI earlier this year, turnover of (pound)298.4 million for the first six months of 2002 was up 4 per cent over the comparable figure for the second half of 2001. Operating profit before goodwill amortisation and exceptional items of (pound)35.2 million for the first six months of 2002 was down 56 per cent compared with the same period in 2001. For ongoing businesses, operating profit of (pound)34.9 million for the first six months of 2002 increased by 25 per cent over the second half of 2001. The results for the first six months of 2002 include a full six month benefit from the cost reduction measures initiated in the second half of 2001. We continue to pursue cost-savings where opportunities are identified. Return on sales of 11.3 per cent for the first six months of 2002, although significantly below the 17.3 per cent reported for the same period in 2001, increased by 1.5 percentage points compared with the second half of 2001 due in part to our cost reduction measures. The return on sales achieved by our Communications group has improved over the second half of 2001 by 2.7 percentage points and by our Network Products group by 1.8 percentage points. Reported loss before taxation was (pound)22.4 million after charging exceptional items of (pound)27.1 million compared with a loss of (pound)242.8 million after exceptional charges of (pound)269.7 million for the first six months of 2001. The effects of currency translation, primarily due to the weakness of the US dollar, reduced turnover by (pound)4.8 million and profit before taxation, goodwill amortisation and exceptional items by (pound)0.3 million in the first six months of 2002. A 1 per cent movement in the US dollar against sterling maintained over the whole year would affect reported profit before taxation by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. (pound)0.4 million. We have continued to invest in our businesses for future growth with product development in the first six months of 2002 at (pound)40.5 million or 13.0 per cent of sales. By comparison, for the first six months of 2001 we invested (pound)50.9 million or 11.1 per cent of sales. An exceptional charge of (pound)2.3 million for acquisition retention bonuses has been reported in the first six months of 2002 and no further operating exceptional charges arose in the period. An exceptional loss of (pound)24.8 million is reported on the disposal of our aerospace component businesses and SSI, after the effect of reinstating (pound)38.1 million of goodwill previously charged to reserves. It was not necessary to make any further significant provisions in respect of excess inventories or receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed beyond those taken in the year to 31 December 2001. The effective rate of taxation for the first six months of 2002 decreased to 28.7 per cent (full year 2001 29.4 per cent) and we expect this rate to be sustainable. Headline earnings per share of 2.42 pence pence n. Chiefly British A plural of penny. pence Noun a plural of penny USAGE: Since the decimalization of British currency and the introduction of the abbreviation p, decreased by 56 per cent compared with earnings per share for the first six months of 2001 of 5.54 pence. Compared with headline earnings per share for the second half of 2001 of 2.22 pence, this represents a 9 per cent increase. The weighted average number of shares outstanding at 30 June 2002 was 920.5 million (full year 2001 915.1 million). After charging goodwill amortisation and exceptional items, basic loss per share for the six months to 30 June 2002 was 3.42 pence (2001 loss 28.47 pence). Net debt at 30 June 2002 closed at (pound)143.2 million, reduced from (pound)179.1 million at 31 December 2001. This represents 13 per cent of shareholders' funds (full year 2001 16 per cent) and 1.3 times earnings before interest, taxation, depreciation, goodwill amortisation and exceptional items (full year 2001 1.2 times). Interest cover, adjusted for goodwill amortisation and exceptional items, was 5.8 times (full year 2001 5.4 times). The effect of currency translation reduced net borrowings by (pound)5.7 million at 30 June 2002. At 30 June 2002 we had confirmed undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely facilities available to us of (pound)190 million under the syndicated bank facility. Since 30 June 2002 we have invested (pound)46.1 million in cash in the purchase of certain assets of the remote special services test product line of Anritsu and the acquisition of Caw. We were cash flow positive in all our groups in the first six months of 2002 with operating cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. of (pound)40.7 million. This was 24 per cent below operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for the first half of 2001 due to the slow-down in trading and substantially below that for the second half of 2001. Operating cash inflow in the second half of 2001 had however been influenced by a number of initiatives which, together with a continued slow-down in trading, had the effect of improving working capital by (pound)47.5 million in that period. Net interest payments in the first six months of 2002 were (pound)6.1 million compared with (pound)15.6 million for the same period of 2001 as a result of the reduction in borrowings and a fall in interest rates. We have significantly reduced our capital expenditure budget, spending (pound)14.1 million in the first six months of 2002 compared with a spend of (pound)30.1 million for the first half of 2001. This level of spend is below our depreciation charge. Cash proceeds, net of expenses, of (pound)41.5 million were received in the first six months of 2002 from divestments. Dividend The interim dividend for the first six months of 2002 has been maintained at 1.35 pence per share. This is payable on 4 November November: see month. 2002 to Ordinary shareholders (14 November 2002 for ADR ADR - Astra Digital Radio holders) on the register at the close of business on 11 October October: see month. 2002. Acquisitions In July 2002 we completed the purchase of certain assets of the remote special services test product line of Anritsu for a cash consideration of (pound)16.8 million. In August 2002 we completed the acquisition of Caw for an initial consideration of (pound)29.3 million in cash and (pound)2.7 million in a combination of Spirent restricted shares and options. In addition, deferred consideration up to a maximum value of approximately (pound)39.2 million, expected to be satisfied by the issue of a maximum of 32.7 million Spirent shares at current exchange rates, is payable on an earn-out Earn-out Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement. basis dependent upon the revenues and certain technological milestones achieved by Caw for the year ending 31 December 2003. Divestments In April 2002 we completed the sale of our aerospace component businesses from within the Systems group to Curtiss-Wright The Curtiss-Wright Corporation (NYSE: CW) was once a leading aircraft manufacturer of the United States, but has since become a component manufacturer, specializing in actuators, controls, valves, and metal treatment. Corporation for a cash consideration of (pound)42.1 million. In May 2002 we announced the sale of SSI for which we have received a cash consideration of (pound)5.0 million. These businesses contributed revenues for the period up to divestment divestment to strip one's investment from an entity. of (pound)12.6 million with a combined operating profit of (pound)0.3 million. The proceeds from the divestments have been used to fund further investments in the expansion of the Communications group. Board We were very saddened by the sudden death of our Non-executive non-executive adj non-executive director → direttore m senza potere esecutivo Chairman, Dr George George, river, c.345 mi (560 km) long, rising in a lake on the Quebec-Labrador boundary, E Canada. It flows N through Indian Lake (125 sq mi/324 sq km) to Ungava Bay (an arm of Hudson Strait). Sarney, on 30 April 2002. He made an important contribution to the transformation of the Company into a focused network technology group. We were also sad to learn of the death of Ray Parsons Parsons, city (1990 pop. 11,924), Labette co., SE Kans.; inc. 1871. It is a shipping point for dairy products, grain, and livestock. Manufactures include ammunition, wire and paper products, plastics, and appliances. , Life President, in April 2002. He was a founder member, with Jack Bowthorpe, of the Company and was previously Group Managing Director and Executive Chairman. On 7 May 2002 we announced the appointment of James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. Wyness as Acting Chairman. Mr Wyness is the senior independent Non-executive Director A non-executive director (NED, also NXD) or outside director is a member of the board of directors of a company who does not form part of the executive management team. He or she is not an employee of the company or affiliated with it in any other way. and Chairman of the Audit Committee of Spirent plc. We have instigated a search process to find a successor 1. SuccessoR - A language for distributed computing derived from SR. ["SuccessoR: Refinements to SR", R.A. Olsson et al, TR 84-3, U Arizona 1984]. 2. successor - daughter for the role of Non-executive Chairman and hope to announce an appointment before the end of the year. Our People Our performance in the first six months of 2002 is testament to the drive and dedication of our outstanding workforce. Our people have worked hard to minimise Verb 1. minimise - represent as less significant or important downplay, understate, minimize inform - impart knowledge of some fact, state or affairs, or event to; "I informed him of his rights" the impact of continuing poor market conditions and, through a focus on new technology and customer service, to lay the ground for growth. We remain committed to maintaining an environment within Spirent that nurtures and rewards achievement and within which people can excel. We thank all our employees for their considerable achievements in the year to date. Outlook The telecommunications market at this time shows no signs of improvement and remains unpredictable but we believe we are strategically well positioned to respond to our customers' evolving needs.
Consolidated Profit and Loss Account
Year to
(pound)million Notes Six months to 30 June 31
December
----------------------------------------------------------------------
2002 2001 2001
Before Exceptional Total Total Total
exceptional items
items
Turnover:
Group and
share of
joint venture 348.1 - 348.1 500.6 880.1
Less: share
of joint
venture's
turnover (37.1) - (37.1) (41.7) (78.3)
---------------------------------------------
Turnover 1,2 311.0 - 311.0 458.9 801.8
---------------------------------------------
Operating
profit/(loss) 1,2 8.5 (2.3) 6.2 (233.2)(733.2)
----------------------------------------------------------------------
Operating
exceptional items
Goodwill impairment - - - 247.6 724.6
Other 3 - 2.3 2.3 18.3 34.9
Goodwill amortisation 26.7 - 26.7 46.7 86.6
Operating profit
before goodwill
amortisation
and exceptional
items 1,2 35.2 - 35.2 79.4 112.9
----------------------------------------------------------------------
Income from
interest in
joint venture 2.8 - 2.8 6.6 9.6
(Loss)/income
from interests
in associates
less goodwill
amortisation (0.1) - (0.1) 0.7 1.2
---------------------------------------------
Operating profit/
(loss) of
the Group,
joint venture and
associates 11.2 (2.3) 8.9 (225.9)(722.4)
Non-operating
exceptional
items
(Loss)/profit
on disposal and
closure of
operations - (24.8) (24.8) (3.8) 14.5
---------------------------------------------
Loss before interest 11.2 (27.1) (15.9) (229.7)(707.9)
------------------
Net interest payable (6.5) (13.1) (22.8)
----------------------
Loss before taxation (22.4) (242.8)(730.7)
Taxation 5 9.0 17.2 32.6
---------------------
Loss after taxation (31.4) (260.0)(763.3)
Minority shareholders'
interest 0.1 0.1 0.2
---------------------
Loss attributable to
shareholders (31.5) (260.1)(763.5)
Dividends 12.5 12.5 40.0
---------------------
Loss for the period (44.0) (272.6)(803.5)
---------------------
Basic and diluted
loss per
share
(pence) 4 (3.42) (28.47)(83.43)
Headline earnings
per share+
(pence) 4 2.42 5.54 7.76
Net dividend
per share
(pence) 1.35 1.35 4.35
+ Headline earnings per share for the six months to 30 June 2001 has
been restated to exclude all exceptional items and attributable
taxation
Consolidated Statement of Total Recognised Gains and Losses
Year to
(pound)million Six months to 30 June 31December
--------------- --------
2002 2001 2001
Loss attributable to shareholders (31.5) (260.1) (763.5)
Gain on lapsed options 4.0 - 3.3
Exchange adjustment on subsidiaries, joint
venture and associates (9.7) 10.4 (0.2)
UK current taxation on exchange adjustment - (0.3) (2.6)
--------------- --------
Total recognised gains and losses (37.2) (250.0) (763.0)
--------------- --------
The interim dividend is payable on 4 November 2002 to Ordinary
shareholders (14 November 2002 for ADR holders) on the register at the
close of business on 11 October 2002.
Consolidated Balance Sheet
(pound)million At 30 June At 31 December
-------------------------------
----------------
2002 2001 2001
Fixed assets
Intangible assets 943.4 1,544.8 987.7
Tangible assets 123.5 151.0 137.6
Investment in
joint venture
Share of gross assets 72.1 68.4 69.0
Share of gross
liabilities (24.8) (26.9) (24.7)
------- -------- -------
47.3 41.5 44.3
Investment in
associates 18.5 12.7 18.3
Other investments 32.2 35.3 34.1
------- -------- -------
98.0 89.5 96.7
-------- -------- ---------
Total fixed assets 1,164.9 1,785.3 1,222.0
Current assets
Stocks 74.5 123.8 93.1
Debtors 139.0 179.0 143.4
Investments 0.1 0.6 0.3
Cash at bank and
in hand 26.0 44.5 27.6
------- -------- -------
239.6 347.9 264.4
------- -------- -------
Current liabilities
Creditors due within
one year 138.9 146.8 166.8
Loans and overdrafts 3.1 20.7 11.2
------- -------- -------
142.0 167.5 178.0
------- -------- -------
Net current assets 97.6 180.4 86.4
-------- -------- ---------
Assets less current
liabilities 1,262.5 1,965.7 1,308.4
Long term liabilities
Creditors due after
more than one
year (179.9) (387.0) (210.1)
Provisions for
liabilities and
charges (1.3) (2.9) (1.5)
-------- -------- ---------
Assets less liabilities 1,081.3 1,575.8 1,096.8
-------- -------- ---------
Shareholders' funds -
equity 1,079.3 1,571.9 1,094.4
Minority interests -
equity 2.0 3.9 2.4
-------- -------- ---------
1,081.3 1,575.8 1,096.8
-------- -------- ---------
The interim financial information has been prepared on the basis
of the accounting policies set out in the Group's 2001 statutory
accounts. The interim financial information is unaudited but has been
reviewed by the auditors.
The comparative financial information for the year to 31 December
2001 is based on the statutory accounts for that period. Those
accounts, upon which the auditors issued an unqualified opinion, have
been delivered to the Registrar of Companies.
The interim report for the six months to 30 June 2002 was approved
by the Directors on 28 August 2002. The above financial information
does not constitute statutory accounts as defined in Section 240 of
the Companies Act 1985.
Consolidated Cash Flow Statement
Year to
(pound)million Six months 31
to 30 June December
-------------------------
2002 2001 2001
Net cash inflow from operating activities 40.7 53.9 141.2
Dividends received from joint venture 0.2 1.7 1.6
Dividends received from associates 0.2 0.2 0.2
Returns on investments and servicing of
finance (6.1) (15.6) (23.9)
Taxation (6.4) (13.2) (21.0)
Capital expenditure and financial
investment (14.1) (30.2) (57.7)
-------- ---------
--------------------------
Cash inflow/(outflow) before acquisitions
and disposals, equity dividends and
financing 14.5 (3.2) 40.4
Acquisitions and disposals 41.5 23.9 149.6
Equity dividends paid (27.6) (27.4) (39.8)
Management of liquid resources 0.2 3.3 3.6
Financing (32.2) 19.4 (152.8)
--------------------------
Net cash (outflow)/inflow (3.6) 16.0 1.0
--------------------------
Reconciliation of Net Cash Flow to Movement in Net Debt
Year to
(pound)million Six months 31
to 30 June December
--------------------------
2002 2001 2001
Net cash (outflow)/inflow (3.6) 16.0 1.0
Cash outflow/(inflow) arising from the
change in debt and lease financing 34.5 (17.8) 157.7
Cash inflow arising from the decrease in
liquid resources (0.2) (3.3) (3.6)
--------------------------
Movement arising from cash flows 30.7 (5.1) 155.1
New finance leases (0.5) - (0.8)
Exchange adjustment 5.7 (15.4) (7.0)
--------------------------
Movement in net debt 35.9 (20.5) 147.3
Net debt at 1 January (179.1) (326.4) (326.4)
--------------------------
Net debt (143.2) (346.9) (179.1)
--------------------------
Notes
1. Segmental Analysis
(pound)million Six months to Year to
30 June 31 December
-----------------------------------------
2002 % 2001 % 2001 %
Turnover
Performance Analysis 100.0 34 141.3 37 245.5 37
Service Assurance 79.8 27 113.9 30 185.1 28
-----------------------------------------
Communications 179.8 61 255.2 67 430.6 65
Network Products 84.7 28 91.2 24 170.4 25
Systems 33.9 11 35.5 9 68.1 10
-----------------------------------------
298.4 100 381.9 100 669.1 100
--- --- ----
Divested operations:
Systems 12.6 30.4 55.9
Discontinued operations:
Sensing Solutions - 46.6 76.8
-----------------------------------------
311.0 458.9 801.8
-----------------------------------------
Operating profit/(loss)
Operating profit before
goodwill amortisation
and exceptional
items
Performance Analysis 7.0 20 33.0 45 38.7 39
Service Assurance 19.2 55 29.6 41 44.7 44
------------------------------------------
Communications 26.2 75 62.6 86 83.4 83
Network Products 7.7 22 9.5 13 15.3 15
Systems 1.0 3 0.9 1 2.3 2
------------------------------------------
34.9 100 73.0 100 101.0 100
--- --- ----
Divested operations:
Systems 0.3 1.8 3.8
Discontinued operations:
Sensing Solutions - 4.6 8.1
-----------------------------------------
35.2 79.4 112.9
-----------------------------------------
Goodwill amortisation
Performance Analysis (9.7) (14.9) (24.6)
Service Assurance (16.0) (30.0) (58.7)
------------------------------------------
Communications (25.7) (44.9) (83.3)
Network Products (0.7) (0.7) (1.5)
Systems (0.1) (0.1) (0.2)
------------------------------------------
(26.5) (45.7) (85.0)
Divested operations:
Systems (0.2) (0.2) (0.4)
Discontinued operations:
Sensing Solutions - (0.8) (1.2)
------------------------------------------
(26.7) (46.7) (86.6)
------------------------------------------
Operating exceptional items
Goodwill impairment
Performance Analysis - (192.2) (192.2)
Service Assurance - (55.4) (532.4)
------------------------------------------
Communications - (247.6) (724.6)
------------------------------------------
Other
Performance Analysis (0.6) (15.2) (26.8)
Service Assurance (1.4) (1.9) (4.6)
Network Products (0.3) (1.2) (2.9)
Systems - - (0.6)
------------------------------------------
(2.3) (18.3) (34.9)
------------------------------------------
Operating profit/(loss) 6.2 (233.2) (733.2)
------------------------------------------
2. Geographical Analysis
(pound)million Six months to 30 June Year to 31 December
2002 % 2001 % 2001 %
-------------------------------------------
Turnover by market
Europe 70.9 24 84.4 22 154.0 23
North America 183.5 61 250.3 66 429.5 64
Asia Pacific,
Rest of Americas,
Africa 44.0 15 47.2 12 85.6 13
------ ---- ----- --- ------ ---
298.4 100 381.9 100 669.1 100
------ ---- ----- --- ------ ---
Divested operations:
Europe 4.6 13.7 24.7
North America 7.3 14.1 27.0
Asia Pacific,
Rest of Americas,
Africa 0.7 2.6 4.2
------ ---- ------ --- ------ ---
12.6 30.4 55.9
------ ---- ------ --- ------ ---
Discontinued operations:
Europe -- 12.5 20.7
North America -- 27.9 45.7
Asia Pacific,
Rest of Americas,
Africa -- 6.2 10.4
------ ---- ------ --- ------ ---
-- 46.6 76.8
------ ---- ------ --- ------ ---
311.0 458.9 801.8
------ ---- ------ --- ------ ---
Turnover by source
Europe 76.1 26 79.3 21 150.9 23
North America 210.3 70 287.7 75 491.5 73
Asia Pacific,
Rest of Americas,
Africa 12.0 4 14.9 4 26.7 4
------ ---- ------ --- ------ ---
298.4 100 381.9 100 669.1 100
------ ---- ------ --- ------ ---
Divested operations:
Europe 6.3 18.2 32.8
North America 6.3 12.2 23.1
Asia Pacific,
Rest of Americas,
Africa -- -- --
------ ---- ------ --- ------ ---
12.6 30.4 55.9
------ ---- ------ --- ------ ---
Discontinued operations:
Europe -- 12.4 20.6
North America -- 29.2 48.3
Asia Pacific,
Rest of Americas,
Africa -- 5.0 7.9
------ ---- ------ --- ------ ---
-- 46.6 76.8
------ ---- ------ --- ------ ---
311.0 458.9 801.8
Operating profit/(loss)
by source
Operating profit before goodwill
amortisation and exceptional
items
Europe 11.2 32 9.4 13 17.9 18
North America 23.1 66 62.1 85 81.5 81
Asia Pacific,
Rest of Americas,
Africa 0.6 2 1.5 2 1.6 1
------ ---- ------ --- ------ ---
34.9 100 73.0 100 101.0 100
------ ---- ------ --- ------ ---
Divested operations:
Europe 0.5 1.5 3.7
North America (0.2) 0.3 0.1
Asia Pacific,
Rest of Americas,
Africa -- -- --
------ ---- ------ --- ------ ---
0.3 1.8 3.8
------ ---- ------ --- ------ ---
Discontinued operations:
Europe -- 1.1 2.3
North America -- 3.7 6.3
Asia Pacific,
Rest of Americas,
Africa -- (0.2) (0.5)
------ ---- ------ --- ------ ---
-- 4.6 8.1
------ ---- ------ --- ------ ---
35.2 79.4 112.9
------ ---- ------ --- ------ ---
Goodwill amortisation
Europe (0.6) (0.7) (1.4)
North America (25.8) (44.9) (83.5)
Asia Pacific,
Rest of Americas,
Africa (0.1) (0.1) (0.1)
------ ---- ------ --- ------ ---
(26.5) (45.7) (85.0)
------ ---- ------ --- ------ ---
Divested operations:
Europe -- -- --
North America (0.2) (0.2) (0.4)
Asia Pacific,
Rest of Americas,
Africa -- -- --
------ ---- ------ --- ------ ---
(0.2) (0.2) (0.4)
------ ---- ------ --- ------ ---
Discontinued operations:
Europe -- (0.1) (0.1)
North America -- (0.6) (0.9)
Asia Pacific,
Rest of Americas,
Africa -- (0.1) (0.2)
------ ---- ------ --- ------ ---
-- (0.8) (1.2)
------ ---- ------ --- ------ ---
(26.7) (46.7) (86.6)
------ ---- ------ --- ------ ---
Operating exceptional items
Goodwill impairment
North America -- 247.6) (724.6)
Other
Europe (0.3) (1.2) (2.5)
North America (2.0) (17.1) (32.1)
Asia Pacific, Rest of
Americas, Africa -- -- (0.3)
------ ---- ------ --- ------ ---
Operating profit/
(loss) by source 6.2 (233.2) (733.2)
------ ---- ------ --- ------ ---
Average exchange rates
US dollar 1.45 1.44 1.44
Euro 1.61 1.61 1.61
3. Operating Exceptional Items - Other
Year to
(pound)million Six months to 30 June 31 December
-----------------------------------------
2002 2001 2001
Stocks and debtors
provisions - 14.9 19.4
Reorganisation costs - 0.5 11.3
Acquisition retention
bonuses 2.3 2.9 4.2
------------------------------------------
2.3 18.3 34.9
Tax effect of exceptional
items (0.7) (5.7) (10.3)
------------------------------------------
1.6 12.6 24.6
------------------------------------------
4. (Loss)/Earnings per Share
(Loss)/earnings per share is calculated by reference to the
(loss)/earnings for the period and the number of Ordinary shares in
issue during the period as follows:
Year to
(pound)million Six months to 30 June 31 December
------------------------------------------
2002 2001 2001
Basic and diluted loss
attributable to
shareholders (31.5) (260.1) (763.5)
------------------------------------------
Exceptional items
Goodwill impairment - 247.6 724.6
Other 2.3 18.3 34.9
Goodwill amortisation 26.7 46.7 86.6
Exceptional item - loss/
(profit) on disposal and
closure of operations 24.8 3.8 (14.5)
Attributable taxation
on exceptional items (0.7) (5.7) (10.3)
Attributable taxation on the
disposal of operations 0.7 - 13.2
------------------------------------------
Headline earnings
attributable to
shareholders 22.3 50.6 71.0
------------------------------------------
Weighted average number
of Ordinary shares in issue
basic, headline and
diluted (million) 920.5 913.7 915.1
------------------------------------------
5. Taxation
Year to
(pound)million Six months to 30 June 31 December
------------------------------------------
2002 2001 2001
UK taxation 3.4 6.4 7.3
Overseas taxation 4.6 7.9 22.1
------------------------------------------
8.0 14.3 29.4
Share of joint venture's
taxation 0.9 2.6 2.7
Share of associates'
taxation 0.1 0.3 0.5
------------------------------------------
9.0 17.2 32.6
------------------------------------------
6. Reconciliation of Operating Profit/(Loss) to Net Cash Inflow
from Operating Activities
Year to
(pound)million Six months to 30 June 31December
--------------- ---------
2002 2001 2001
Operating profit/(loss) 6.2 (233.2) (733.2)
Depreciation 18.0 17.2 37.2
(Profit)/loss on disposal of tangible fixed
assets (0.1) 0.3 2.1
Goodwill impairment - 247.6 724.6
Amortisation of goodwill 26.7 46.7 86.6
Acquisition retention bonuses, non-cash 0.2 0.3 0.4
Deferred income released (3.7) (18.8) (17.8)
(Increase)/decrease in debtors (9.6) 3.6 29.2
Decrease in stocks 2.9 15.4 27.8
Increase/(decrease) in creditors 0.1 (25.2) (15.7)
--------------- ---------
Net cash inflow from operating activities 40.7 53.9 141.2
--------------- ---------
7. Net Income under US GAAP
Six months Year to
(pound)million to 30 June 31
December
---------------- ---------
2002 2001 2001
Loss attributable to shareholders in
accordance with UK GAAP (31.5) (260.1) (763.5)
---------------- ---------
Adjustments:
Goodwill and other intangible fixed
assets (a) 16.5 (78.4) (70.5)
Stock-based compensation (b) (0.3) 16.9 18.3
Disposal of operations (c) 16.6 0.1 35.8
Other differences between UK GAAP and
US GAAP (d) 5.7 2.4 6.2
---------------- ---------
Total adjustments 38.5 (59.0) (10.2)
---------------- ---------
Net income/(loss) as adjusted to
accord with US GAAP 7.0 (319.1) (773.7)
---------------- ---------
Arising from:
Continuing operations 15.6 (321.4) (816.4)
Discontinued operations (e)
Result for the period (net of tax) 0.3 2.3 2.9
(Loss)/profit on disposal (net of
tax) (8.9) - 39.8
---------------- ---------
Net income/(loss) 7.0 (319.1) (773.7)
---------------- ---------
Earnings per share (pence)
Basic:
Continuing operations 1.69 (35.17) (89.21)
Discontinued operations (e) (0.93) 0.25 4.66
---------------- ---------
0.76 (34.92) (84.55)
---------------- ---------
Diluted:
Continuing operations 1.67 (35.17) (89.21)
Discontinued operations (e) (0.93) 0.25 4.66
---------------- ---------
0.74 (34.92) (84.55)
---------------- ---------
(a) Goodwill and other intangible fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → Under UK GAAP UK GAAP United Kingdom Generally Accepted Accounting Principles , goodwill arising on acquisitions prior to 1998 was written off to retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. on acquisition. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Financial Reporting Standard No. 10, goodwill arising on acquisitions subsequent to 1 January January: see month. 1998 is capitalised and amortised over its estimated useful economic life which is defined as the period over which the value of the underlying business acquired is expected to exceed the values of its identifiable net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. and is presumed to be limited to 20 years. In reconciling to US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , amounts of goodwill arising on acquisitions prior to 1998 written off to retained earnings on acquisition, have been capitalised and amortised over their estimated useful economic lives, until 1 January 2002. Under US GAAP, with the adoption of US Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) 142, effective 1 January 2002, goodwill is no longer amortised but is subject to periodic review for impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. . Prior to 1 January 2002 purchased goodwill was amortised over the estimated period which benefits from the original purchased goodwill, which was typically in the range of seven to ten years. Other intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. included in, and accounted for as, goodwill under UK GAAP but reclassified under US GAAP continue to be amortised over their individually determined estimated useful economic lives, subject to the provisions of SFAS 141, which clarifies the criteria criteria (krītēr´ē  ),n. to recognise these intangible assets separately from goodwill. In the six months to 30 June 2002 these differences resulted in a UK-US GAAP adjustment to increase income under US GAAP by (pound)16.5 million. In the six months to 30 June 2001, goodwill and other intangible assets were being amortised under US GAAP over periods which were predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. shorter than under UK GAAP. In addition, a UK-US GAAP adjustment was made to increase the UK GAAP impairment charge by (pound)10.3 million. Together these resulted in a UK-US GAAP adjustment to decrease income under US GAAP for the six months to 30 June 2001 by (pound)78.4 million. (b) Stock-based compensation Under UK GAAP, no compensation expense arises under the Company's various share option plans. However, UK corporate governance UK Corporate Governance has influence Corporate governance regulation in the European Union and United States. A detailed analysis of several UK corporate governance reports, in particular ESOS Energy Security Operating System ESOS Engine Shutdown Override Switch plan includes certain performance criteria, which result in variable accounting under US GAAP. In reconciling to US GAAP we have elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. to use the intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. basis of calculating compensation expense for this plan, determined by reference to the Company's share price at each period end. In addition, an expense arises under US GAAP in respect of the Zarak Amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and Restated Stock Option Plan, based upon the intrinsic value of unvested stock awards at the date of acquisition, recognised over the remaining future vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period. In the six months to 30 June 2002 these differences resulted in a UK-US GAAP adjustment to decrease income under US GAAP by (pound)0.3 million (2001 (pound)16.9 million increase to income). (c) Disposal of operations The different treatment of goodwill arising on acquisitions prior to 1998 under UK GAAP and US GAAP, together with the use of different goodwill amortisation periods and the adoption of SFAS 142, result in adjustments to profit or losses on disposals of businesses as the determination of the profit or loss on disposal takes into account the unamortised balance of goodwill released. In addition, under US GAAP, the profit or loss on disposal is stated net of any related cumulative currency retranslation differences. In the six months to 30 June 2002 these differences resulted in a UK-US GAAP adjustment to the loss on disposal calculation of (pound)16.6 million (2001 (pound)0.1 million). (d) Other differences between UK GAAP and US GAAP Further accounting differences relating to taxation, derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. financial instruments, vacation VACATION. That period of time between the end of one term and beginning of another. During vacation, rules and orders are made in such cases as are urgent, by a judge at his chambers. accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. and pensions were identified. In aggregate for the six months to 30 June 2002 these adjustments resulted in additional income under US GAAP of (pound)5.7 million (2001 (pound)2.4 million). (e) Discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. Under UK GAAP, the disposal of our aerospace component businesses and SSI from the Systems group during the six months to 30 June 2002 do not qualify to be treated as discontinued operations. Under US GAAP, in accordance with SFAS 144, they qualify as components of an entity and are therefore presented as discontinued operations. The presentation of net income from discontinued operations for the six months to 30 June 2001 reflects both these disposals and the disposal of Sensing Solutions in November 2001. |
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