RNS Number:8457S
AEA Technology PLC
04 December 2003
4 December 2003
AEA TECHNOLOGY PLC
Results for the Half Year Ended 30 September 2003
FINANCIAL SUMMARY
*Turnover #119.3 million
*Operating profit #1.2 million
*Operating profit: Core Businesses #8.5 million
*Profit before tax #0.4 million
*Earnings per share 0.5p
*Adjusted earnings per share 2.0p
*Interim dividend per share 1.5p
BUSINESS HIGHLIGHTS
*Return to overall profitability
*Good performance by Rail and Environment
*Development Businesses in profit for first time as a group
*Nuclear Science sale essentially completes exit from nuclear industry
Commenting on the results, Chairman Peter Watson said:
"AEA Technology continues to make progress and has now returned to
profitability. Rail has performed well despite some market turbulence. The
business has taken a further step forward in establishing itself as the leading
hi-tech supplier to the industry by signing a new 15 year strategic alliance
with Network Rail. Environment is delivering improved growth as it focuses on
providing more programme work for more government departments.
"The Development Businesses - Battery Systems, Accentus and QSA - continued to
progress and for the first time have moved into profit as a group. They are now
positioned to take advantage of the opportunities open to them and their
financial performance is expected to progress. The sale of Nuclear Science
essentially completes our exit from the UK nuclear industry.
"The company is now sharper and in a stronger position to deliver improved
returns for our shareholders. Rail and Environment are second half weighted and
we are confident in the outlook for the full year.
"However, more remains to be done to drive growth and we are determined to
maintain progress."
For further information contact:
Mark Herbert 07770 381 608 (mobile)
Bell Pottinger 0207 861 8621
Catherine Lees 07836 298 811 (mobile)
Bell Pottinger 0207 861 3877
High resolution images are available for the media to view and download free of
charge from www.vismedia.co.uk
CHAIRMAN'S STATEMENT
AEA Technology continues to make good progress. These results, in which the
Company returned to profit at the half year, build on the progress we have made
through focusing on the growth businesses, Rail and Environment. As a result,
the Company is now sharper and in a stronger position to continue to deliver
improved returns for our shareholders. However, more still remains to be done in
continuing to drive growth opportunities in all of our businesses.
Returning to profitability
In November 2000 the Company stated that it would continue to focus on two
businesses, Rail and Environment, and exit the UK nuclear industry. The
continued focus on Rail and Environment is beginning to deliver significant
improvements in performance.
Rail continues to grow business with the major players in the sector like
Network Rail. This is a result of its strong technical position, broad portfolio
of products and services and in-depth market knowledge. Rail has seen the
benefit of the increased investment in research and development delivering new
products and services. For example AEAT's e-PLD , an improved system for
automated passenger counting on trains, addresses the new SRA mandate for at
least 25% fleet coverage of such systems on all new Train Operating Company
(TOC) franchises.
The Environment business produced a strong performance in the UK, with Momenta,
the programme management business, winning a number of significant contracts.
Environment has demonstrated its ability to transfer its expertise of turning
policy into practice into other sectors such as transport and education. The
business will continue to pursue vigorously opportunities arising from other
administrations - for example the US Department of Energy and the Scottish
Executive.
Battery Systems, Accentus and QSA have continued to make progress and for the
first time have moved into profit as a group. In addition, the focus on project
performance and reducing costs within Nuclear Programmes led to a significant
reduction in first half losses. On 2 December, the Group disposed of its Nuclear
Science business based at Windscale. It is estimated that the disposal will give
rise to a super exceptional loss of around #8.0 million, but will generate cash
in the second half. This disposal essentially completes the exit from the UK
nuclear industry.
Performance summary
The Company's turnover was #119.3 million, down from #129.3 million last year as
a result of the divestment programme. Operating profit was #1.2 million, a
turnaround from the #12.4 million loss for the prior half year.
Rail and Environment made good progress in the first half, with combined
turnover for the two businesses up 9% at #73.9 million (2002: #67.9 million).
Operating profit at #8.5 million was impacted by an increase in pension costs of
#0.9 million across the two businesses. Excluding the increase in pension costs,
operating profit would have been #9.4 million (2002: #8.4 million) an increase
of 12%.
The portfolio of development businesses returned a profit of #0.2 million
compared to a loss of #4.9 million at the last half year. The management actions
taken during the last financial year are delivering a strong improvement in
performance. Accentus' losses were substantially reduced. Sales in Battery
Systems have risen 22% on the prior half year. QSA nearly tripled operating
profit compared with the prior year.
Nuclear Programmes reduced losses to #1.8 million (2002: #9.1 million) having
made good progress in resolving legacy issues.
Management
In the last financial year, the management team was restructured to reflect the
new shape of the Company. This team is performing well and in the next six
months will build on the progress made in the first half by focusing on:
*Further improving our commercial acumen
*Enhancing our intellectual capital
*Retaining tighter controls over projects
*Seeking strategic growth opportunities and acquisitions
The central executive team directly manages a number of small businesses and
start-ups that are held for realisation of value in the short term. These
activities are reported in a newly identified segment called Central Programmes.
It is still the aim to improve the financial performance by also driving down
central costs.
During the first half of this financial year, the Board was further strengthened
by the appointment of two new non-executive Directors, Dr Paul Golby, Chief
Executive of Powergen UK plc, and Rodney Westhead, Group Chief Executive of
engineering consultancy Ricardo Group plc.
Dividend
It is the Board's intention to move towards distributions of around a third of
earnings once the disposal programme is complete. In the meantime, the Directors
have agreed to an interim dividend of 1.5p per share to be paid on 2 February
2004.
Outlook
The development businesses are now positioned to take full advantage of the
opportunities open to them and their financial performance is expected to make
progress.
In Scotland we have established a technical centre at Glengarnock, near Glasgow
for the Rail, Environment and Battery Systems businesses to provide us with
greater access to the increasingly important Scottish market. In the first half,
both Rail and Environment performed broadly in line with management
expectations. Both businesses are second half weighted and the Board is
confident on the outlook for the full year.
OPERATING REVIEW
RAIL
AEAT Rail is the leading supplier of advanced technology and expertise to the UK
railways where the industry challenge is to run more trains on the existing
infrastructure whilst improving performance, safety and value for money. The
cost of improving the infrastructure is very high and will take time to deliver
results. There is, therefore, increased demand for AEAT's technical solutions
that can have an immediate and more cost-effective impact on today's railways.
WheelChex , which detects damaged wheels, has contributed to a 37% reduction in
rail breaks over the past two years, each of which causes delays and potentially
fatal accidents. In Europe, the trend towards privatisation and outsourcing is
resulting in further opportunities for the Rail business.
Performance
In the first six months, sales grew by 14% from #36.9 million to #42.2 million.
This increase is due to both organic growth and acquisition and was against a
backdrop of continued industry transition. Operating profit was #5.1 million
compared with #5.2 million for the prior year. This reflects an increased
pension charge of #0.4 million across the business, as well as a further #0.4
million increase in research and development (R&D) investment.
Business highlights
In the UK, despite the continued industry transition, the key drivers of
performance, safety and reliability remain unchanged. Rail has signed a
strategic alliance with Network Rail, which will improve the understanding of
Network Rail's challenges and priorities. This will enable Rail to apply its
technical and product development expertise in the areas where they can generate
the greatest improvements.
Continued investment in R&D is producing a stream of new products and services.
An improved passenger load determination product called e-PLD has been
introduced which provides a fully automated, real-time 'train to desk' method of
counting the number of passengers travelling on trains. With safety a key
industry driver, a quick door-release system is being installed on the Great
Western fleet that enables passengers to exit to carriage vestibules in the
event of an incident.
In Europe, the Dutch subsidiary Rail BV continues to exploit technical solutions
originally developed for the UK market. One example is the installation of
SmartSander on Dutch trains to alleviate the perennial problem of leaves on the
line. In Spain, AEAT's position has been strengthened through its relationship
with Indra, a leading company in air traffic control systems. The two companies
are collaborating on the installation of condition monitoring systems for
Spain's high speed train link between Madrid and Barcelona.
Platform for growth
The strategic alliance with Network Rail will both ensure that AEAT's skills are
focused on Network Rail's priorities and that Network Rail understands the
abilities of AEAT's key staff. It puts AEAT in a prime position for delivering
technology solutions across the entire railway system. It reflects a new
approach to resolving some of the challenges facing the UK rail industry.
The privatisation and separation of the London Underground development will
present more opportunities for AEAT. As the underground system becomes separated
into different accounting units, AEAT can draw upon its experience with the
national rail network to provide system-level expertise in the areas of track
and rolling stock engineering and management across the different commercial and
technical interfaces.
Rail's success in Spain with the subsidiary Global SA, and in the Netherlands
with Rail BV has demonstrated the benefit of getting closer to the customer.
The establishment of a new technology facility near Glasgow will build on this
and provide greater access to the Scottish market.
Outlook
We anticipate increased activity across the UK rail market and the outlook for
our chosen markets in Europe remains good. Our employees have world class
expertise, and our increased expenditure on research and development, along with
the unique agreement with Network Rail will ensure we stay at the forefront of
the industry. We are well positioned to benefit across all sectors of our
business.
OPERATING REVIEW
ENVIRONMENT
AEAT Environment is the leading supplier of environmental consulting services to
the UK Government and agencies. The business focuses on the development of
environmental policy, its dissemination and its translation into practical
solutions. In doing so we are maintaining our approach of leveraging our
experience and expertise in the high margin 'resource management' end of the
market.
Performance
Turnover in the Environment business showed a modest increase at #31.7 million
(2002: #31.0 million). Operating profit was #3.4 million against #3.2 million on
the prior year. The true performance, however, is masked by an increase in
pension costs of #0.5 million this year, despite which the UK business reported
a double digit increase in operating profit for the first time.
Business highlights
UK Government investment in the environment remains strong. It continues to
increase as devolved administrations and regional governments seek to implement
their environmental agendas. Momenta, the programme management business set up
in 2001 is reaping the benefits of the investment made during the last two
years. It has seen strong growth as government bodies started to turn
environmental policy into practice.
Significant contracts won include the SAFED (Safe And Fuel Efficient Driving)
programme which seeks to improve road safety and decrease fuel consumption by
altering the driving behaviour of lorry drivers. To date over 100 trainers have
been appointed in line with the aim of training 4000 drivers over the next 12
months. In addition, Momenta was awarded the Schools Sports Co-ordinator
programme which will enable all sections of the community in England to have
equal access to sports facilities and activities.
The business has continued to build on its presence in Scotland with the
establishment of a technical centre near Glasgow so that it can respond locally
to that growing market and the opportunities arising from devolved government.
In the energy sector, for instance, work is being undertaken for the Scottish
Executive, Highlands & Islands Enterprise, and the Carbon Trust, as well as for
private sector clients. There is a team of energy staff in Glasgow, and this is
planned to grow further given Scotland's commitment to developing its large
renewable energy resource.
More generally in the UK, business in both the public and private sector is
growing. Industry continues to react to new energy legislation and fiscal
incentives designed to deliver the UK's targets. Even large organisations find
it difficult to identify the resources to interpret the legislation and respond
to opportunities. Environment's Future Energy Solutions business provides advice
to companies such as EDF Energy and Safeway on renewable energy, energy saving
and the EU emissions trading scheme.
In the public sector, the air quality business Netcen continues to be very
successful in maintaining its premier position as the main adviser to UK
Government in this area. Three contracts, including the National Atmospheric
Emissions Inventory worth over #1.5 million, came up for renewal during the
first half of the year and were all won under competitive tendering.
AEAT's air pollution information services saw increased activity this summer.
During the August heat wave, air pollution across many areas of the UK reached
the highest levels for several years generating prolonged, national media
interest. Netcen was very much involved in disseminating air pollution
information and worked closely with its main customer, DEFRA to handle numerous
TV, radio and press requests for interviews, briefings and expert opinion on the
situation.
Overseas the Kinectrics business continues to make progress in a more
challenging market, but remains on track to deliver improved margins.
Platform for growth
The diversity of the programmes won by Momenta demonstrates its success in
managing programmes for an increasingly wide range of customers. Whereas
Environment was originally focused on the energy and environment markets
(markets in which the business still has a dominant position), the creation of
Momenta resulted in significant contracts in the transport, education and health
markets as well as opening up a range of other opportunities. It is now
recognised that the opportunities in these markets are greater than those in the
UK environment software field. Consequently, the small software activity
Lexware, bought at the beginning of the calendar year, has been transferred to
Central Programmes.
Outlook
The outlook for Environment remains positive. We anticipate continued strong
growth in our target markets which we are well positioned to capitalise on.
OPERATING REVIEW
DEVELOPMENT BUSINESSES
Battery Systems
Battery Systems is a business which provides portable power solutions to
customers who require superior performance. The business products are batteries
and chargers as well as technical consultancy. These premium products deliver
superior power, temperature performance, intelligence and reliability.
Sales in the Battery Systems business rose from #4.5 million to #5.5 million.
Operating losses have decreased from #1.7 million to #1.3 million, and the
business continues to make financial progress.
Business highlights include the successful commencement of volume manufacturing
of batteries and chargers which will make a significant contribution to
improving the performance in the second half. Market demand for advanced
portable power solutions remains strong as customers in market sectors like
defence are increasingly looking towards electronics to improve their
performance.
In May, Battery Systems signed an agreement with FMC Lithium to jointly develop
and licence the next generation rechargeable battery technology.
Accentus
Accentus is AEAT's intellectual property business which owns a number of world
leading patent protected technologies.
Strong management action taken in the second half of the last financial year has
paid off in the first six months. The business reported a loss of #0.2 million
against a loss of #3.8 million for the prior year, with turnover marginally
lower at #7.2 million (2002: #7.8 million). Accentus remains on target to
broadly break even at the full year.
The business has been significantly de-risked. Management is focusing on fewer
technologies, and adopting a more commercial approach to securing contracts. The
development of our Gas To Liquid (GTL) technology is progressing well. Accentus'
GTL competitive advantage is that its process is able to be easily scaled down
onto areas where space is at a premium, for example floating production systems
or ships. In the first half the improvements were made in recovering increased
quantities of valuable gasoil and significantly reducing production plant size.
The plasma programme which includes Electrocat continues to progress well. The
technology for treating oxides of nitrogen and particulates is expected to have
applications beyond the automotive sector. While the automotive market will be
driven by legislation, other sectors including defence may well offer more
immediate opportunities because of the technical advantages this technology can
bring on the battlefield.
In October the company announced the launch of a battery recycling facility in
Golspie, Scotland. This jointly funded (55% Highlands & Islands Enterprise and
45% AEA Technology) R&D project establishes Europe's first centre for recycling
Lithium-ion batteries. The technology is being developed by Accentus with a plan
to achieve commercial operation late in 2004.
QSA
QSA supplies high performance radiation sources and services for industrial,
medical, security and research markets.
QSA continues to perform well. Operating profit was #1.7 million, compared with
#0.6 million in the prior year, on a turnover of #17.0 million (2002: #17.1
million).
A major step forward has been made in relation to the smoke detector market,
with the signing of a new manufacturing agreement with Sprue Aegis plc. This
builds on an existing successful contract to manufacture the Sprue Aegis
FireAngel smoke detector for the UK market and extends the range of product
supply for sale across the broader US and European markets.
DISPOSAL PROGRAMME
Nuclear Programmes
The strategy to exit the UK nuclear industry at minimum cost is now essentially
complete. Turnover decreased from #13.6 million to #11.4 million and operating
losses decreased to #1.8 million compared with #4.3 million in the previous
year.
On 2 December the Nuclear Science business based at Windscale was sold to BNFL.
The closure of the facilities at Harwell scheduled for March 2004 is proceeding
to plan and this business has been significantly de-risked.
FINANCIAL REVIEW
Introduction
In the six months to 30 September 2003 the Group continued to focus on its Core
businesses, to invest in its Value Development businesses, and to progress with
the disposal of the remainder. The segmental analysis in note 3 has been
provided on this basis.
Operating results
The Group's operating profit of #1.2 million (2002: #12.4 million loss) has been
analysed on the face of the consolidated profit and loss account into continuing
operations (#1.9 million profit) and discontinued operations (#0.7 million
loss). The main element of the discontinued operations was Nuclear Science, the
Nuclear Programmes Windscale facility which was disposed of on 2 December 2003.
A segmental analysis of turnover and operating profit before and after
exceptional operating items is given in note 3.
The Core business profits of Rail and Environment have increased from #8.4
million to #8.5 million despite suffering a #0.9 million increase in pension
costs. Each of the three businesses within Value Development progressed well to
give a combined profit of #0.2 million in place of the #4.9 million loss
reported last half-year. Nuclear Programmes losses were cut from #4.3 million to
#1.8 million as we continue to minimise the cost of our exit from this activity.
Losses of #1.4 million (2002: #0.2 million profit) were incurred on small
start-ups and fledgling businesses that are managed directly by the central
executive team under the heading Central Programmes. Central costs were
contained at #4.3 million.
Pension costs
Pension charges to profit have risen from #4.6 million to #5.6 million with a
#0.9 million increase arising in the core businesses. From January 2003 the
contributions into the Company scheme were increased to 17.5%, in line with the
actuary's recommendation at that time.
Profit on ordinary activities before taxation
Profit before taxation of #0.4 million (2002: #0.9 million) reflects the #0.2
million profit on disposal of businesses as shown in note 10. The profit on
disposal of businesses in 2002 of #16.6 million includes #18.2 million on the
sale of Hyprotech.
Interest
The net interest charge was #1.0 million (2002: #2.9 million). The 2002 #2.9
million charge included a one off payment of #2.3 million related to repayment
of the US Private Placement in July 2002.
Taxation
The overall tax charge on the profit before taxation was #0.3 million (2002:
#2.2 million credit) giving an effective tax rate of 150% before disposal of
businesses. The effective tax rate is high because the Group has not recognised
any additional deferred tax asset in respect of taxable losses incurred by
certain UK companies, whereas tax is payable on profits realised in various
overseas jurisdictions.
At 30 September the deferred tax asset was #13.7 million (2002: #17.3 million).
No tax is payable in respect of businesses that were disposed of in the
half-year.
Cash flow and borrowings
Net debt has increased by #23.2 million to #36.1 million as shown in note 9.
The increase in debt is explained by the cash movements shown in the
consolidated cash flow statement. There is a #19.2 million outflow in free cash
(2002: #19.2 million) that includes payments of #7.1 million on restructuring
expenditure that was charged to profit in prior periods (2002: #7.8 million).
The #4.0 million spend on disposals and acquisitions includes #2.6 million
deferred payment for The Engineering Link Limited which was purchased on 18
October 2002, and #1.1 million of costs related to the disposal of CFX that was
completed on 26 February 2003.
Dividends and dividend policy
It is the Board's intention to move towards distributions of around one third of
earnings once the disposal programme is completed. In this further year of
transition the Directors propose an interim dividend of #1.0 million equivalent
to 1.5p per share to be paid on 2 February 2004.
Post balance sheet events
On 2 December, the Group disposed of its Nuclear Science business based at
Windscale. It is estimated that the disposal will give rise to a super
exceptional loss of around #8.0 million, but will generate cash in the second
half.
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
Continuing Discontiunued
operations operations Total
Half-year Half-year Half-year
2003 2003 2003
FOR THE HALF-YEAR ENDED 30 SEPTEMBER Notes #m #m #m
---------------------------------- ------ -------- --------- ----------
Turnover
Group and share of joint ventures 2,3 114.5 4.8 119.3
Less: share of joint ventures (0.1) - (0.1)
---------------------------------- ------ -------- --------- ----------
114.4 4.8 119.2
Operating costs
Operating costs (113.9) (7.0) (120.9)
Less 2003 provision on termination
of operations 1.5 1.5 3.0
Exceptional operating charges - - -
(112.4) (5.5) 117.9
----------------------------------- ------ -------- --------- ----------
Group operating profit/(loss) 2.0 (0.7) 1.3
Share of operating (loss)
in joint ventures & associates (0.1) - (0.1)
----------------------------------- ------ -------- --------- ----------
Total operating profit/(loss)
Group and share of joint ventures 2,3 1.9 (0.7) 1.2
Profit on sale of businesses 10 - 0.2 0.2
Loss on termination of operations 10 - - -
----------------------------------- ------ -------- --------- ----------
Profit/(loss) on ordinary activities
before interest and taxation 1.9 (0.5) 1.4
-------- ---------
Net interest payable (1.0)
----------------------------------- ------ -------- --------- ----------
Profit/(loss) on ordinary activities
before taxation 0.4
Taxation on ordinary activities 4 (0.3)
----------------------------------- ------ -------- --------- ----------
Profit/(loss) on ordinary activities
after taxation 0.1
Minority interest - Equity 0.2
----------------------------------- ------ -------- --------- ----------
Profit/(loss) for the financial period 0.3
Dividends 5 (1.0)
----------------------------------- -------- --------- --------- ----------
(Loss) for the financial period (0.7)
----------------------------------- -------- -------- --------- ----------
Earnings per share(pence) 7 0.5p
Adjusted earnings per share (pence) 7 2.0p
IIMR earnings per share (pence) 7 (1.3)p
Diluted earnings per share (pence) 7 0.5p
----------------------------------- ------ -------- --------- ----------
There is no material difference between the profit/(loss) on ordinary activities
before taxation and the retained (losses) for the periods stated above, and
their historical cost equivalents.
The continuing and discontinued results for the half-year ended 30 September
2002 and the year ended 31 March 2003 have been restated to reflect the
continuing position of the Group at 30 September 2003.
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
Continuing Discontinued
operations operations
Half-year Half-year Total
2002 2002 Half-year
restated restated 2002
FOR THE HALF-YEAR ENDED 30 SEPTEMBER Notes #m #m #m
----------------------------------- ------ -------- --------- ----------
Turnover
Group and share of joint ventures 2,3 105.4 23.9 129.3
Less: share of joint ventures (0.3) - (0.3)
------------------------------------ ------ -------- --------- ----------
105.1 23.9 129.0
Operating costs
Operating costs (109.3) (28.0) (137.3)
Less 2003 provision on termination
of operations 0.1 0.7 0.8
Exceptional operating charges - (4.8) (4.8)
(109.2) (32.1) (141.3)
------------------------------------ -------- --------- ----------
Group operating profit/(loss) (4.1) (8.2) (12.3)
Share of operating profit/(loss) in
joint ventures & associates (0.1) - (0.1)
------------------------------------- -------- --------- ----------
Total operating profit/(loss):
Group and share of joint ventures 2,3 (4.2) (8.2) (12.4)
Profit on sale of businesses 10 - 16.6 16.6
Loss on termination of operations 10 (0.1) (0.3) (0.4)
------------------------------------- ------ -------- --------- ----------
Profit/(loss) on ordinary activities
before interest and taxation (4.3) 8.1 3.8
-------- ---------
Net interest payable (2.9)
------------------------------------- ------ -------- --------- ----------
Profit/(loss) on ordinary
activities before taxation 0.9
Taxation on ordinary activities 4 2.2
------------------------------------- ------ -------- --------- ----------
Profit/(loss) on ordinary activities
after taxation 3.1
Minority interest - Equity -
------------------------------------- ------ -------- --------- ----------
Profit/(loss) for the financial period 3.1
Dividends 5 (45.7)
------------------------------------- ------ -------- --------- ----------
(Loss) for the financial period (42.6)
------------------------------------- ------ -------- --------- ----------
Earnings per share (pence) 7 3.7p
Adjusted earnings per share (pence) 7 (9.6)p
IIMR earnings per share (pence) 7 (12.9)p
Diluted earnings per share (pence) 7 3.7p
------------------------------------- ------ -------- --------- ----------
There is no material difference between the profit/(loss) on ordinary activities
before taxation and the retained (losses) for the periods stated above, and
their historical cost equivalents.
The continuing and discontinued results for the half-year ended 30 September
2002 and the year ended 31 March 2003 have been restated to reflect the
continuing position of the Group at 30 September 2003.
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
Continuing Discontinued
operations operations
Year ended Year ended Total
31 March 31 March Year ended
2003 2003 31 March
restated restated 2003
(audited) (audited) (audited)
FOR THE HALF-YEAR ENDED Notes #m #m #m
30 SEPTEMBER
------------------------- ------ -------- --------- ----------
Turnover
Group and share of joint 2,3 229.2 43.1 272.3
ventures
Less: share of joint (1.3) - (1.3)
ventures
------------------------- ------ -------- --------- ----------
227.9 43.1 271.0
Operating costs
Operating costs (231.4) (47.7) (279.1)
Less 2003 provision on
termination of operations 0.5 1.1 1.6
Exceptional operating (1.2) (5.0) (6.2)
charges
(232.1) (51.6) (283.7)
------------------------- ------ -------- --------- ----------
Group operating profit/
(loss) (4.2) (8.5) (12.7)
Share of operating (loss)
in joint ventures &
associates (0.1) - (0.1)
------------------------- ------ -------- --------- ----------
Total operating profit/
(loss):
Group and share of joint
ventures 2,3 (4.3) (8.5) (12.8)
Profit on sale of 10 - 20.0 20.0
businesses
Loss on termination of 10 (5.8) (2.9) (8.7)
operations
------------------------- ------ -------- --------- ----------
Profit/(loss) on ordinary
activities (10.1) 8.6 (1.5)
before interest and -------- ---------
taxation
Net interest payable (3.9)
------------------------- ------ -------- --------- ----------
Profit/(loss) on ordinary
activities before taxation (5.4)
Taxation on ordinary 4 (2.1)
activities
------------------------- ------ -------- --------- ----------
Profit/(loss) on ordinary
activities (7.5)
after taxation
Minority interest - Equity (0.6)
------------------------- ------ -------- --------- ----------
Profit/(loss) for the (8.1)
financial period
Dividends 5 (48.2)
------------------------- ------ -------- --------- ----------
(Loss) for the financial (56.3)
period
------------------------- ------ -------- --------- ----------
Earnings per share (pence) 7 (10.5)p
Adjusted earnings per 7 (19.0)p
share (pence)
IIMR earnings per share 7 (23.8)p
(pence)
Diluted earnings per 7 (10.5)p
share (pence)
------------------------- ------ -------- --------- ----------
There is no material difference between the profit/(loss) on ordinary activities
before taxation and the retained (losses) for the periods stated above, and
their historical cost equivalents.
The continuing and discontinued results for the half-year ended 30 September
2002 and the year ended 31 March 2002 have been restated to reflect the
continuing position of the Group at 30 September 2003.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (UNAUDITED)
Year ended
31 March
Half-year Half-year 2003
2003 2002 (audited)
FOR THE HALF-YEAR ENDED 30 #m #m #m
SEPTEMBER
--------------------------- -------- --------- ---------
Profit/(loss) for the financial 0.3 3.1 (8.1)
period
Currency translation differences
on foreign (1.2) (0.8) (0.4)
currency net investments
--------------------------- -------- --------- ---------
Total gains/(losses) recognised (0.9) 2.3 (8.5)
since 1 April
--------------------------- -------- --------- ---------
CONSOLIDATED BALANCE SHEET (UNAUDITED)
Year ended
31 March
Half-year Half-year 2003
2003 2002 (audited)
AS AT 30 SEPTEMBER Notes #m #m #m
------------------------- ------ -------- --------- ----------
Fixed assets 72.6 62.7 74.6
------------------------- ------ -------- --------- ----------
Current assets
Stocks and work in progress 22.1 17.1 18.7
Debtors falling due after 25.6 32.1 27.5
more than one year
Debtors falling due 81.5 89.2 79.1
within one year
Cash at bank and in hand 10.3 10.8 29.2
------------------------- ------ -------- --------- ----------
139.5 149.2 154.5
Creditors: amounts
falling due within one (133.1) (133.2) (150.3)
year
------------------------- ------ -------- --------- ----------
Net current assets 6.4 16.0 4.2
------------------------- ------ -------- --------- ----------
Total assets less current 79.0 78.7 78.8
liabilities
Creditors: amounts falling
due after more than one
year
Borrowings (0.3) (0.2) (0.3)
Other creditors (12.6) (2.0) (4.4)
Provisions for (45.4) (43.2) (51.5)
liabilities and charges
--------------------------- ------ -------- --------- ----------
Net assets 20.7 33.3 22.6
------------------------- ------ -------- --------- ----------
Capital and reserves
Called up share capital 8.2 8.7 8.2
Share premium 10.6 10.5 10.6
Capital redemption 0.7 0.2 0.7
reserve
Profit and loss account 0.1 13.9 1.9
------------------------- ------ -------- --------- ----------
Equity shareholders' 8 19.6 33.3 21.4
funds
Minority interests - Equity 1.1 - 1.2
------------------------- ------ -------- --------- ----------
20.7 33.3 22.6
------------------------- ------ -------- --------- ----------
The Interim report was approved by the Board on 3 December 2003.
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Year ended
31 March
Half-year Half-year 2003
2003 2002 (audited)
FOR THE HALF-YEAR ENDED 30 SEPTEMBER Notes #m #m #m
------------------------------------ ------ ---------- ---------- ----------
Cash flow from operating
activities
Operating profit/(loss) 1.3 (12.3) (12.7)
Amortisation of 1.3 0.8 1.9
intangible fixed assets
Depreciation of tangible 3.1 4.0 7.8
fixed assets
Impairment of intangible 0.2 - 0.2
fixed assets
Loss on sale of tangible 0.5 - 0.5
fixed assets
Loss on termination of - - (8.7)
operations
(Increase)/Decrease in
stocks and work in progress (3.1) 2.0 0.4
Decrease in debtors 2.1 17.9 25.6
(Decrease) in creditors (13.2) (20.3) (3.7)
(Decrease)/Increase in provisions
relating to operating activities (6.5) (3.3) 4.1
------------------------------------ ------ ---------- ---------- ----------
Net cash (outflow)/inflow
from operating activities (14.3) (11.2) 15.4
Dividends from joint ventures - - 0.1
Returns on investments and
servicing of finance (1.1) (3.2) (4.5)
Taxation (0.6) 0.5 (0.7)
Capital expenditure and (3.2) (5.3) (10.1)
financial investment
------------------------------------ ------ ---------- ---------- ----------
Free cash (outflow)/inflow (19.2) (19.2) 0.2
Disposals and acquisitions (4.0) 56.6 57.4
Equity dividends paid - (44.6) (45.7)
------------------------------------ ------ ---------- ---------- ----------
Cash (outflow)/inflow (23.2) (7.2) 11.9
before financing
Financing 4.9 (20.7) (20.8)
------------------------------------ ------ ---------- ---------- ----------
Decrease in cash 9 (18.3) (27.9) (8.9)
------------------------------------ ------ ---------- ---------- ----------
The #14.3 million cash outflow from operating activities includes #7.1 million
outflow in respect of restructuring costs charged to the profit and loss in
previous periods (#7.8 million for the half-year to 30 September 2002 and #12.8
million for the year ended 31 March 2003). These payments account for the #6.5
million provision movement and #0.6 million of the creditor movement.
NOTES TO THE INTERIM REPORT
1.BASIS OF PREPARATION AND PRIOR YEAR ADJUSTMENTS
The Interim report has been prepared using accounting policies consistent with
the Annual report and accounts for the year ended 31 March 2003.
The interim results are unaudited but have been reviewed by the auditors. The
full year figures are extracted from the Annual report and accounts for the year
ended 31 March 2003 on which the auditors gave an unqualified opinion. A copy of
the Accounts has been filed with the Registrar of Companies.
The Interim report does not constitute statutory accounts within the meaning of
Section 240 of the Companies Act 1985.
2.GEOGRAPHICAL ANALYSIS
Turnover can be analysed by geographical destination as follows:
Half-year Half-year Year ended
2003 2002 31 March 2003
#m #m #m
---------------------- ----------- ----------- -----------
Government 17.3 12.3 31.9
Public sector 7.8 10.3 19.4
Private sector 45.6 49.0 103.4
---------------------- ----------- ----------- -----------
Total UK 70.7 71.6 154.7
Europe 16.3 17.8 37.2
North America 25.7 31.3 61.7
Rest of the World 6.6 8.6 18.7
---------------------- ----------- ----------- -----------
119.3 129.3 272.3
---------------------- ----------- ----------- -----------
Turnover can be analysed by geographical origin as follows:
Year ended
Half-year Half-year 31 March
2003 2002 2003
#m #m #m
---------------------- ----------- ----------- -----------
UK 76.6 81.0 180.2
Europe 14.8 15.1 26.9
North America 23.9 29.4 57.6
Rest of the World 4.0 3.8 7.6
---------------------- ----------- ----------- -----------
119.3 129.3 272.3
---------------------- ----------- ----------- -----------
The Group's share of joint venture's turnover increased turnover both to and
from the Rest of the World by #0.1 million (#0.3 million for the half-year to 30
September 2002 and #1.2 million for the year ended 31 March 2003) and to and
from the UK by nil (nil for the half-year to 30 September 2002 and #0.1 million
for the year ended 31 March 2003).
Operating profit/(loss) can be analysed by geographical origin as follows:
Year ended
Half-year Half-year 31 March
2003 2002 2003
#m #m #m
---------------------- ----------- ----------- -----------
UK (1.3) (13.6) (16.2)
Europe 0.9 (0.6) 1.2
North America 0.5 1.1 0.5
Rest of the World 1.1 0.7 1.7
---------------------- ----------- ----------- -----------
1.2 (12.4) (12.8)
---------------------- ----------- ----------- -----------
The Group's share of joint venture's operating losses reduced the operating
profit from the Rest of the World by #0.1 million (#0.1 million for the
half-year to 30 September 2002 and nil for the year ended 31 March 2003) and
increased the loss from the UK by nil (nil for the half-year to 30 September
2002 and #0.1 million for the year ended 31 March 2003).
Net operating assets can be analysed by geographical origin as follows:
Year ended
Half-year Half-year 31 March
2003 2002 2003
#m #m #m
---------------------- ----------- ----------- -----------
UK 18.9 47.7 24.5
Europe 2.7 - (1.2)
North America 17.3 8.5 8.1
Rest of the World 4.8 3.8 4.1
---------------------- ----------- ----------- -----------
43.7 60.0 35.5
---------------------- ----------- ----------- -----------
3.SEGMENTAL ANALYSIS OF TURNOVER AND OPERATING PROFIT/(LOSS)
Half-year Year ended
Half-year 2002 31 March 2003
2003 restated restated
TURNOVER: CLASS OF BUSINESS #m #m #m
---------------------- ----------- ----------- -----------
Rail 42.2 36.9 84.4
Environment 31.7 31.0 64.5
---------------------- ----------- ----------- -----------
Core business 73.9 67.9 148.9
Battery Systems 5.5 4.5 9.6
Accentus 7.2 7.8 17.2
QSA 17.0 17.1 35.9
---------------------- ----------- ----------- -----------
Value development 29.7 29.4 62.7
Nuclear Programmes 11.4 13.6 30.1
Divested businesses (pre 1 - 14.9 22.1
April 2003)
Central Programmes 1.7 1.0 3.3
Central Costs 2.6 2.5 5.2
---------------------- ----------- ----------- -----------
TOTAL 119.3 129.3 272.3
---------------------- ----------- ----------- -----------
Inter-segment sales, which have been eliminated in the analysis above, amounted
to #9.0 million for the half-year to 30 September 2003 (#10.7 million for the
half-year to 30 September 2002 and #25.9 million for the year ended 31 March
2003).
Half-year 2002 Year ended 31
March 2003
Before Exceptional Before Exceptional
Half-year exceptional operating exceptional operating
2003 items charges Total items charges Total
Total restated restated restated restated restated restated
#m #m #m #m #m #m #m
-------------- ------- -------- -------- ------ -------- -------- -------
Rail 5.1 5.2 - 5.2 11.2 - 11.2
Environment 3.4 3.2 - 3.2 7.1 - 7.1
-------------- ------- -------- -------- ------ -------- -------- -------
Core 8.5 8.4 - 8.4 18.3 - 18.3
business
Battery
Systems (1.3) (1.7) - (1.7) (3.0) - (3.0)
Accentus (0.2) (3.8) - (3.8) (6.7) (1.2) (7.9)
QSA 1.7 0.6 - 0.6 2.6 - 2.6
-------------- ------- -------- -------- ------ -------- -------- -------
Value
development 0.2 (4.9) - (4.9) (7.1) (1.2) (8.3)
Nuclear
Programmes (1.8) (4.3) (4.8) (9.1) (6.1) (5.0) (11.1)
Divested
businesses
(pre 1 April
2003) - (2.7) - (2.7) (3.1) - (3.1)
Central
Programmes (1.4) 0.2 - 0.2 0.1 - 0.1
Central (4.3) (4.3) - (4.3) (8.7) - (8.7)
Costs
-------------- ------- -------- -------- ------ -------- -------- -------
TOTAL 1.2 (7.6) (4.8) (12.4) (6.6) (6.2) (12.8)
-------------- ------- -------- -------- ------ -------- -------- -------
Central Programmes is a newly identified segment representing small businesses
and start-ups managed directly by the central executive, held for realisation of
value in the short term.
The business segment figures have been restated to reflect the new
organisational structure splitting out Central Programmes and Central Costs.
The exceptional operating charge of #4.8 million for the half-year ended 30
September 2002 and #5.0 million for the year ended 31 March 2003 represents
write-off of work in progress (#3.6 million) and legal costs on two Nuclear
Engineering contracts with Hunting BRAE at Aldermaston (#1.2 million for half-
year ended 30 September 2002 and #1.4 million for year ended 31 March 2003).
The #1.2 million exceptional charge in Accentus relates to #1.1 million for
redundancies and a #0.1 million asset write-off arising from the rationalisation
of the business.
Turnover and operating profit/(loss) relating to discontinued operations may be
analysed by segment as follows:
Year ended
Half-year 2003 Half-year 2002 31 March 2003
Operating Operating
Operating Turnover Profit/(loss) Turnover Profit/(loss)
Turnover (loss) restated restated restated restated
#m #m #m #m #m #m
---------------- ------- ------- ------- ------- -------- --------
Accentus - - 1.8 (1.0) 2.8 (2.6)
QSA 0.2 - 0.8 0.1 1.6 0.2
Nuclear
Programmes 4.6 (0.7) 6.4 (4.6) 16.6 (3.0)
Divested
businesses
(pre 1 April
2003) - - 14.9 (2.7) 22.1 (3.1)
---------------- ------- ------- ------- ------- -------- --------
TOTAL 4.8 (0.7) 23.9 (8.2) 43.1 (8.5)
---------------- ------- ------- ------- ------- -------- --------
4.TAXATION
The taxation charge for half-year ended 30 September 2003, of #0.3 million is
calculated on an entity by entity basis giving an effective tax rate of 150%,
before disposal of businesses. The effective tax rate is high because the Group
has not recognised any additional deferred tax asset in respect of taxable
losses incurred by certain UK companies, whereas tax is payable on profits
realised in various overseas jurisdictions.
The taxation charge is wholly comprised of a current year corporation tax charge
of #0.3 million.
The taxation charge on disposal of businesses is nil (#0.9 million for the
half-year to 30 September 2002 and #0.9 million for the year ended 31 March
2003).
The taxation credit in respect of exceptional operating charges was nil (#1.4
million for the half-year ended 30 September 2002 and #4.2 million for the year
ended 31 March 2003).
5.DIVIDENDS
An interim dividend of 1.5p (2002: 1.4p) per share will be paid on 2 February
2004 to shareholders registered at the close of business on 5 January 2004. The
shares become ex-dividend on 31 December 2003.
6.PENSIONS
The pension charge for the group for the six months to 30 September 2003 was
#5.6 million (2002: #4.6 million). The closing net pension asset was #9.4
million (2002: #10.9 million).
7.EARNINGS PER SHARE
Earnings per share is calculated as follows:
Half-year Half-year Year ended
2003 2002 March 2003
-------------------------- --------- --------- ---------
Profit/(loss) for the period 0.3 3.1 (8.1)
(#m)
Weighted average number of
ordinary 67.5 83.4 77.2
shares for the period (m)
Earnings per share (p) 0.5p 3.7p (10.5)p
-------------------------- --------- --------- ---------
Adjusted earnings per share
Adjusted earnings per share is based on the profit for the period before the
amortisation of goodwill and before exceptional items.
Half-year Half-year Year ended
2003 2002 31 March 2003
#m #m #m
-------------------------- --------- --------- ---------
Profit/(loss) for the 0.3 3.1 (8.1)
financial period
Amortisation of goodwill 1.3 0.8 1.9
Exceptional operating charges - 4.8 6.2
Profit on sale of businesses (0.2) (16.6) (20.0)
Loss on termination of - 0.4 8.7
operations
Tax on exceptional items and - (0.5) (3.4)
disposals --------- --------- ---------
--------------------------
Adjusted profit / (loss) 1.4 (8.0) (14.7)
-------------------------- --------- --------- ---------
IIMR earnings per share
The Institute of Investment Management and Research earnings per share is
calculated as follows:
Half-year Half-year Year ended
2003 2002 restated 31 March 2003
#m #m #m
-------------------------- --------- --------- ---------
Profit/(loss) for the 0.3 3.1 (8.1)
financial period
Release of provisions for
operating (3.0) (0.8) (1.6)
losses on termination
Impairment of intangible 0.2 - 0.2
fixed assets
Loss on sale of tangible 0.5 - 0.5
fixed assets
Profit on sale of (0.2) (16.6) (20.0)
businesses
Loss on termination of - 0.4 8.7
operations
Amortisation of goodwill 1.3 0.8 1.9
Redemption penalty on - - 2.3
long-term debt
Taxation on above items - 2.3 (2.3)
-------------------------- --------- --------- ---------
IIMR adjusted (loss) (0.9) (10.8) (18.4)
Weighted average number of 67.5 83.4 77.2
ordinary
shares for the period (m)
IIMR earnings per share (p) (1.3)p (12.9)p (23.8)p
-------------------------- --------- --------- ---------
Diluted earnings per share
Diluted earnings per share is calculated as follows:
Half-year Half-year Year ended
2003 2002 31 March 2003
-------------------------- --------- --------- ---------
Profit/(loss) for the period 0.3 3.1 (8.1)
(#m)
Weighted average number of 69.0 83.9 77.4
ordinary
shares for the period (m)
Diluted earnings per share (p) 0.5p 3.7p (10.5)p
-------------------------- --------- --------- ---------
8.RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
Half-year Half-year Year ended
2003 2002 31 March 2003
FOR THE HALF-YEAR ENDED 30 #m #m #m
SEPTEMBER --------- --------- ---------
--------------------------
Opening equity shareholders' 21.4 48.7 48.7
funds
Repurchase of shares - (4.5) (9.6)
New share capital issued - 0.6 0.6
Profit/(loss) for the period 0.3 3.1 (8.1)
Dividends (1.0) (45.7) (48.2)
Goodwill written back to
profit on disposals 0.1 31.9 38.4
Currency translation
differences on (1.2) (0.8) (0.4)
foreign currency net
investments
-------------------------- --------- --------- ---------
Closing equity shareholders' 19.6 33.3 21.4
funds
-------------------------- --------- --------- ---------
The dividends paid in the half-year to 30 September 2002 and the year ending 31
March 2003 include a special dividend of #44.7 million, declared on 30 August
2002 at 50.0p per share.
9.RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half-year Half-year Year ended
2003 2002 31 March 2003
MOVEMENT IN NET DEBT IN #m #m #m
THE PERIOD
-------------------------- --------- --------- ---------
(Decrease) in cash in the
period (18.3) (27.9) (8.9)
Cashflow from
(increase)/decrease in (4.9) 16.6 11.7
debt
-------------------------- --------- --------- ---------
Change in net debt
resulting (23.2) (11.3) 2.8
from cash flow
Loans acquired on - - (0.3)
acquisitions
Opening net (debt) at 1 April (12.9) (15.4) (15.4)
-------------------------- --------- --------- ---------
Closing net (debt) (36.1) (26.7) (12.9)
-------------------------- --------- --------- ---------
At 1 April 2003 Cash flow At 30 Sept 2003
ANALYSIS OF NET DEBT #m #m #m
-------------------------- --------- --------- ---------
Cash net of overdraft 28.2 (18.3) 9.9
Debt due after one year (0.3) - (0.3)
Debt due within one year (40.8) (4.9) (45.7)
-------------------------- --------- --------- ---------
(12.9) (23.2) (36.1)
-------------------------- --------- --------- ---------
10.SALE OF BUSINESSES AND TERMINATION OF ACTIVITIES
Disposals completed during the period were as follows:
Date Percentage of
Name share capital disposed of
------------------------ -------------- ------------------
Monserco Ltd 16 May 2003 100%
Stat Attack - Industrial division 27 June 2003 N/A
trade and assets
------------------------ -------------- ------------------
The net assets disposed of and the related sales proceeds were as follows
Monserco Other Total
#m #m #m
------------------------ ---------- ---------- ----------
Sale proceeds net of disposal costs 0.5 0.1 0.6
Net assets disposed of (0.2) - (0.2)
Goodwill written off - (0.2) (0.2)
------------------------ ---------- ---------- ----------
Profit/(loss) on disposal 0.3 (0.1) 0.2
------------------------ ---------- ---------- ----------
Businesses disposed of during the half-year to 30 September 2003 are included
within discontinued activities.
11.POST BALANCE SHEET EVENTS
On 2 December 2003 the Group disposed of its interests in the trade and assets
of its Nuclear Programmes operations at Windscale. The sale will give rise to an
estimated #8.0 million super exceptional loss in the second half of the
financial year.
12.SHAREHOLDER INFORMATION
The Interim report is being sent to all shareholders in December 2003 and copies
are available to the public at the Registered Office of the Company at 329
Harwell, Didcot, Oxfordshire, OX11 0QJ. The Interim report will also be made
available on the Company's website. The Company's registered number is 3095862.
We offer shareholders a Dividend Reinvestment Plan (DRIP) under which
shareholders can reinvest their cash dividends in ordinary shares in the
Company, bought in the market at competitive dealing rates. If you have elected
to join the DRIP, there is no further action for you to take.
If you would like to join for the first time, please contact our Registrars at
the address below. Completed forms returned to the Registrars by 12 January 2004
will apply to the interim dividend payable on 2 February 2004.
Lloyds TSB Registrars
The Causeway
Worthing
West Sussex
BN99 6DA
Telephone 0870 600 3970
FINANCIAL CALENDAR
Year End 31 March 2004
Dividend
Interim 2 February 2004
Final 1 October 2004
Results
Interim announcement 4 December 2003
Full year preliminary results announcement June 2004
Report and accounts circulation June 2004
Annual General Meeting 22 July 2004
The latest financial information on AEA Technology is available on the internet:
www.aeat.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FSWESDSDSESE
