RNS Number:5127M
AEA Technology PLC
19 June 2003
19 June 2003
AEA TECHNOLOGY PLC
Results for the Year Ended 31 March 2003
Financial Summary
(#million) 2003 2002 change
*Core turnover 149.3 124.7 +20%
*Total turnover 272.3 334.4 -19%
*Pensions charge 11.0 6.3
*Core operating profit* 19.8 19.5 +2%
*(Loss)/profit before tax (5.4) 13.5
*Year end net debt 12.9 15.4
*Earnings per share (10.5)p 25.3p
*Dividend per share 5.1p 3.8p +34%
* Before exceptional operating items of nil (2002: #2.0 million) and The
Engineering Link restructuring costs #1.6 million (2002: nil).
Business highlights
*A year of delivery positioning the business for a return to overall
profitability
*Strong cash performance - net debt at a five-year low
*Good performance by Rail and Environment businesses in difficult markets
*Good progress in Battery Systems and QSA
*Accentus rationalisation completed
*Current disposals programme almost complete
*#54.3 million returned to shareholders
Commenting on the results, Chairman Peter Watson said:
"This has been a turnaround year for AEA Technology. The Company is now more
focused and financially stronger.
"During the year, our core businesses delivered good performances and the
outlook for them remains good. In Rail, we anticipate increased activity across
the UK. We have recently signed a five year framework agreement for the
provision of technical consultancy support for Network Rail. We have continued
to invest in new technology and today announce a new real-time system for
measuring the number of passengers using trains, information which is essential
for the management of a modern rail network. In Holland we have just won our
first major orders for products originally developed for the UK rail market.
"In the Environment business we anticipate continued strong growth in a market
which continues to be driven by governments seeking to honour international
commitments and respond to domestic pressure. We have successfully retained
contracts with the UK Government worth #7 million over the next three years for
the UK Renewables and Clean Coal Programme.
"The business has come through a difficult period during which we have learnt
some hard lessons. We still need to do more, but we are now stronger and
confident about the future."
For further information contact:
Mark Herbert 07770 381608 (mobile)
Bell Pottinger 0207 554 5572
Catherine Lees 0207 861 3877
Bell Pottinger 07836 298811 (mobile)
CHAIRMAN'S STATEMENT
This has been a year of delivery in which we started to build on a solid base of
achievement. However, much more remains to be done to accelerate performance and
achieve our goal of delivering improved shareholder value.
We will achieve this by continuing to focus on customers who demand the best and
place a high value on our advanced technology and specialist knowledge. For
example in Rail, we have the most advanced signalling technology. In
Environment, our specialist knowledge is unparalleled and underpins the policy
advice we offer and the programmes we implement.
Our approach is to grow organically and through acquisition while maintaining
good margins. Consistent, high quality earnings are essential if we are to
deliver what you, our shareholders, rightly demand.
Performance
Overall, our core Rail and Environment businesses performed well in challenging
conditions.
Total turnover for both businesses was #149.3 million (up 20%). Operating
profits (before the charge of #1.6 million relating to The Engineering Link
restructuring) were #19.8 million (up 2%) and were impacted by an increase in
pension costs of #3.4 million. Without this, operating profit would have been
#23.2 million (up 19%).
However, I am determined that we continue to accelerate performance.
Within the development businesses, Battery Systems made good progress and is on
target for profit next year. QSA performed well and strong action was taken to
rectify the unsatisfactory situation in Accentus. Good progress was also made in
resolving legacy issues in Nuclear Programmes.
The three development businesses turned over a total of #62.7 million and made
an operating loss (before exceptional operating charges) of #7.1 million.
It is essential that we build on the positive steps taken in these businesses
and Nuclear Programmes last year.
Financial overview
Overall Group turnover was #272.3 million (2002: #334.4 million) with a pre-tax
loss of #5.4 million (2002: pre-tax profit of #13.5 million).
The overall operating loss (before exceptional operating charges of #6.2 million
and The Engineering Link restructuring of #1.6 million) was reduced to #5.0
million (2002: operating loss of #9.6 million before exceptional operating
charges), despite an increase in pension charge across the whole group of #4.7
million. We were helped by a significant reduction in central items of #5.9
million, but at #7.9 million these remain too high and we are focused on
reducing these further.
Elsewhere, there were losses from our continued investment in Accentus and
Battery Systems which are in a development phase and in businesses within our
disposal programme.
Year-end net debt is at a five year low at #12.9 million and operating cash
inflow before exceptional items increased by #23.0 million to #28.2 million.
It is proposed that a final dividend of 3.7p per share is paid bringing the
dividend for the year to 5.1p (2002: 3.8p). This follows a return of capital to
shareholders in the year of #54.3 million, comprising a special dividend of
#44.7 million and #9.6 million through the share buy back programme.
Management
During the year, the senior management team was restructured to reflect the new
shape of the Group and to increase the pace of change. With our disposal
programme now largely completed, the structure of the Group going forward will
be much simpler.
Under the new structure, the Rail and Environment businesses report directly to
me. The development businesses report to Andrew McCree who retains his
responsibility for Human Resources and Corporate Affairs. He was also appointed
Group Managing Director of AEA Technology. During the year, Charles Hippsley was
appointed to the main Board as Director, Business Development. David Lindsay
continues in his role as Group Finance Director.
This team will accelerate performance by focusing on:
*Further increasing our commercial acumen
*Enhancing our intellectual capital
*Developing first class technology
*Improving our strong market knowledge
*Seeking out acquisitions
During the year we strengthened our Rail business with the acquisition of The
Engineering Link and our Environment business with the acquisition of Lexware
International.
There are excellent opportunities for growth in our core businesses which we are
determined to take.
Disposals
The current disposal programme is nearing completion following the divestment of
the two divisions of our Engineering Software business, Hyprotech in May for
#66.2 million and CFX in February for #16.3 million. The Group is making
progress on exiting the UK nuclear industry through its remaining disposal, that
of the Nuclear Science business.
Priorities
My priority for this year is to increase shareholder value by:
*Driving growth in the core businesses
*Accelerating value delivery from the development businesses
*Minimising the cost of exiting the UK nuclear industry
*Reducing costs in line with the new Group structure
Thank you
I would like to thank all our employees for their hard work throughout the year.
There is no doubt that we have made progress. However, more effort will be
needed in the coming year if we are going to continue this improvement. With
increased focus we will move further towards fulfilling the potential of this
Company and delivering to our shareholders.
Outlook
The outlook in our two core businesses remains good. Progressive modernisation
of the UK rail network demands the type of innovative solutions that only we can
deliver to improve safety, reliability and performance. Our Environment business
will continue to formulate, implement and disseminate policy. It will benefit
from new opportunities arising from the devolved administrations such as the
Scottish Executive. Both businesses continue to be strongly cash generative.
Battery Systems has made good technical progress in the last year and is
positioned to deliver strong growth in its portable power market. QSA is
performing well and Accentus, having been streamlined, is now positioned to
capitalise on its developing technologies.
OPERATING REVIEW
Overview
Our Rail and Environment businesses have established a strong position in their
chosen markets through their people, products and market reputation. The
challenge for the management team is to build on this and create more value in
the coming year. To achieve this, priority will be given to:
*Improving our commercial acumen
*Building on our project management skills
*Accelerating the delivery of new innovative technology
*Exploiting our international presence
Within the development businesses, Battery Systems continued to make good
progress and remains on track to record a profit in the next financial year.
Significantly, it now has a proven volume manufacturing capability. QSA
delivered a strong performance with medical sales increasing substantially and
prospects remain good for the coming year. At Accentus, the management team
focused on certain key technologies and closed the remaining business units,
significantly reducing the cost base.
In Nuclear Programmes, the management engaged in tough commercial negotiations
in order to exit the UK industry in a timely but lowest-cost manner. Significant
progress was made.
We have demonstrated what can be achieved through practical and commercially
driven actions in poorly performing businesses like Accentus and Nuclear
Programmes. This must be replicated across the Group if we are to deliver the
improvements in day to day operational performance that will, in their turn,
deliver increased shareholder value. We have made a start but much more is
needed.
Rail
Vision and strategy
Rail's vision is to be recognised as Europe's leading technology adviser and
supplier. Our strategy is to lead the market in terms of expertise, technology
and scope of offering. We will do this by leveraging our intellectual capital
and delivering it through smart systems across high margin growth segments.
While the focus is on the UK, we plan to build our presence in selected European
markets.
Performance
Rail had a turnover of #84.4 million (up 12%) and an operating profit (before
The Engineering Link restructuring costs of #1.6 million) of #12.8 million, (up
5%) resulting in an operating margin of 15.2%. Operating profits were adversely
affected by an increase in pensions charge for the business of #1.4 million.
This was our fourth consecutive year of organic growth and underlined the robust
nature of our business model.
This has been a transitional year for the UK rail network with Network Rail
emerging from the administration of Railtrack with new strategies and new senior
management. There have been delays in the Train Operator re-franchising
programme, reductions in Strategic Rail Authority (SRA) budgets and delays on
London Underground PPP. Despite these challenges, we produced a good performance
based on our strong market position as a provider of advice and key technical
services to all parties. We were awarded a five year framework agreement for the
provision of technical consultancy support to Network Rail and we also benefited
from our growing position as a provider of national-scale software systems.
During the year we completed the successful acquisition and integration of The
Engineering Link into our UK rail business. This consolidates our position as
the premier supplier of technical advice to the rolling stock market and extends
our access to an increasingly pan-European freight market.
In the UK, the rail system continues to be under pressure from rising passenger
numbers and freight volumes and the need to improve safety, reliability and
performance. We are well placed to provide the appropriate solutions.
We further enhanced and implemented our VISION(R) network simulation software, CCF
(the rail performance management system), IECC (our electronic signal control
system), Capacity Management and TrackMaster(R) decision support tools. In
addition, today we have announced our new Electronic Passenger Load
Determination System (e-PLD), which can supply information on passenger usage
direct to planning and marketing managers. It does this by measuring the total
weight of passengers on a train and dividing by an average person's weight. This
announcement follows calls from the Strategic Rail Authority for just such a
solution to the issue of measuring passenger usage on the rail network.
In continental Europe, legislation supporting the separation of integrated
national railways into distinct accounting units for infrastructure and rolling
stock operations, gathered pace, as did the development of high speed routes.
These trends stimulated growth in our European subsidiaries. In the Netherlands
our Rail business delivered record levels of services and products to the Dutch
rail market. In Spain, the highlight was a major contract to supply
infrastructure asset condition monitoring systems (PanChex(R) and WheelChexTM ) to
the new Madrid-Barcelona high speed line. In France our subsidiary ERSA
continues to develop its position as a leading supplier of simulation and test
tools for ERTMS, working on behalf of all the major industry players.
Future growth
Our offering to the market is at the high value end. We are the only supplier to
provide such a complete portfolio of services and products - from adviser to
provider, from economics to engineering and from track to train. We deliver
performance savings and safety improvement throughout the network. We take a
systems approach, turning consultancy into products, products into systems and
systems into solutions.
In the UK we are adding increasing value by integrating our systems and
solutions and by working in partnership with our key customers. Our ability to
deliver more value from existing, proven, national-scale systems is in line with
market requirements and demand.
In Europe the trends towards outsourcing, privatisation and the development of
open high-speed rail networks are already stimulating an increasing demand for
smart condition monitoring and tracking systems and this will continue in an
increasing number of European markets over the next decade.
Priorities
Our priority is to accelerate growth within the business by:
*Consolidating and enhancing our position in the UK
*Extending our position in Europe
*Delivering new high value technology and products
*Identifying suitable, earnings enhancing acquisitions
Outlook for the market
Following a year of transition, we anticipate increased activity across the UK
rail market while the outlook for our chosen markets in Western Europe remains
good. We are well positioned to benefit across all sectors of our business.
Environment
Vision and strategy
Environment's vision is to be recognised as a leading provider of energy and
environmental solutions to governments, agencies and industry in Europe and
North America. Our strategy is to focus on public sector customers who are
driving and defining the marketplace and on high added value niches in the
private sector such as environmental information management systems. We will
also build on our presence in North America where we expect energy and
environment markets to grow. We will achieve this through our portfolio of
distinct but complementary business units, underpinned by common technical and
project management skills.
Performance
Sales were up 31% at #64.9 million. Operating profit was #7.0 million (down 4%),
resulting in an operating margin of 10.8%. Operating profit was affected by an
increase in pensions charge for the business of #2.0 million and by the loss of
a major contract in the Momenta programme management business unit at the end of
the previous financial year. This impacted the first half of this financial
year. However, there was a strong second half performance from Momenta.
Future Energy Solutions (FES) and EHS Solutions also made good progress as did
Kinectrics following its acquisition last year. In addition, proposed increases
in environmental spend by the Scottish Executive represented a significant
opportunity for the business which recently announced plans to establish a
Scottish operation.
Our five business units - FES, Netcen, Momenta, EHS Solutions and Kinectrics -
all made good progress during the year.
FES maintained its role as a key supplier to Government. Following the first
competitive tender for the UK renewables and coal programmes, we successfully
retained these contracts worth #7 million over the next three years. Netcen
continued to provide DEFRA with specialist air quality policy and technical
support, securing #4.5 million of new contracts during the year.
Momenta had important wins in the transport and health sectors, endorsing the
strategy to broaden the application of our programme management skills. The most
important of these was the National Joint Registry, valued at #3.8 million. This
involves managing data from all hospitals in England and Wales on hip and knee
replacements. Our North American energy and environment business Kinectrics had
a good full first year as part of Environment and enjoyed considerable success
in the United States where orders grew significantly.
During the year we acquired Lexware International, a market-leading environment,
health and safety software company. This was an important step in our strategy
to build our EHS Solutions business into a market leader. Lexware enhances our
capabilities by adding its SHE2000 health and safety software to our product
range as well as bringing a wider customer base and access to new markets.
Future growth
The global market continues to be driven by governments seeking to honour
international commitments and respond to domestic pressure. This legislative
framework will accelerate private sector spending. Current trends are towards
integrated or smart solutions which prevent pollution from arising in the first
place.
In February 2003, the Government published its Energy White Paper: Our energy
future - creating a low carbon economy. This confirmed the continuing importance
of sustainable energy to deliver a cut in CO(2) emissions of 60% by 2050, with
real progress by 2020. Environment's core areas of expertise are highly relevant
to the paper, and FES's work was quoted several times. A major theme is the
increasing role of renewable energy and we are well placed to play a significant
role in this developing market.
The recent UK Budget extended the already substantial package of measures aimed
at balancing economic growth with environmental improvement. Waste management
featured highly, which creates a further opportunity for us in terms of the
consultancy, technologies and processes we can provide.
Priorities
Our priority is to accelerate growth within the business by:
*Maintaining our strong market position in the UK
*Driving organic growth, particularly in the private sector
*Seeking out acquisitions which add value and strengthen our market
positions
Outlook for the market
The outlook for our markets remains positive. We anticipate continued strong
growth in our target markets which we are well positioned to capitalise on.
The Development Businesses
Overall, it has been a year of progress for our three development businesses.
They turned over a total of #62.7 million and made an operating loss (before
exceptional operating charges) of #7.1 million.
Battery Systems
The business continues to progress. The second half of the financial year saw an
improved financial performance and we are on course to make a profit next year.
A significant achievement was the production of 162,000 batteries for the BOWMAN
programme, demonstrating our volume manufacturing capability.
During the year we won a strategically significant contract in the medical
market with Wilson Greatbatch Technologies, a leading manufacturer of power
supplies for medical devices.
Further progress was made with a number of OEMs in the military and homeland
security markets which should lead to new orders next year. Production of
chargers for the BOWMAN programme is due to start next year at our new Glasgow
facility.
Turnover was #9.6 million (2002: #7.0 million) and operating loss #3.0 million
(2002: #4.2 million).
Accentus
The restructuring of the business which was begun in the second half of the
financial year is now complete. Headcount has reduced from 128 to 42 in the UK.
Certain businesses have been closed and the cost base significantly reduced. We
expect next year to be broadly break even.
Turnover was #17.2 million (2002: #23.4 million) and the operating loss (before
exceptional operating charges) was #6.7 million (2002: #4.0 million).
QSA
QSA delivered a very strong performance in the second half, especially in
Germany, China and the US as the benefits of improving sales were not offset by
historical losses in the UK. The UK business has been rationalised and has
effectively exited the UK transferring our manufacturing capacity to Germany,
China and the US.
Prospects in the medium term continue to look strong and the business is
actively pursuing the increasing demand for highly specialised engineered
isotopes which have the capacity to target different forms of cancerous cells.
Significant progress was made in the medical market as capabilities improved and
further commercial arrangements were developed with emerging players in the
specialist worldwide nuclear medicines market.
Turnover was #35.9 million (2002: #35.4 million) and operating profit #2.6
million (2002: operating loss of #0.9 million before exceptional operating
charges).
Disposal Programme
Nuclear Programmes
Turnover decreased from #33.3 million to #30.1 million and operating loss before
exceptional operating charges increased from #5.8 million to #6.3 million.
However, losses have been stemmed and there was considerable improvement in
Nuclear Programmes over the last six months. The business has been significantly
de-risked and we expect progress to be maintained next year. The improvement is
due to much better product performance as a number of contracts with technical
difficulties have been resolved and close attention paid to costs. Overall, much
effort has been put into improving the commercial acumen at all levels in this
area and consequently, we are starting to see real benefits in financial
performance. The programme for exiting the UK nuclear industry remains on
schedule. We expect to have substantially exited it during the coming year but
the highest priority is on ensuring the lowest cost of exit.
Engineering Software
Turnover decreased from #46.6 million to #15.7 million and operating loss was
#3.5 million (2002: #0.6 million before exceptional operating charges). These
figures reflect the impact of the sale of Hyprotech, our process simulation
software business to Aspen Technology Inc. for #66.2 million during May 2002.
CFX our computational fluid dynamics business delivered an increased turnover on
the prior year and a reduced operating loss due to the successful introduction
of a new core product CFX-5. CFX was sold to Ansys Inc. in February 2003 for
#16.3 million.
FINANCIAL REVIEW
Introduction
During the year the Group continued to focus on its core Rail and Environment
businesses, to invest in its value development businesses namely Accentus,
Battery Systems and QSA and to dispose of the remainder by closure or
divestment. The resultant acquisitions and disposals together with the closure
of non-core businesses limit the meaningfulness of year on year comparisons.
This review seeks to highlight the transactions and trends in operating results
that will aid interpretation of the Group's performance.
Operating results
The Groups operating loss of #6.6 million (2002: #9.6 million) before
exceptional operating items has been analysed on the face of the Consolidated
Profit and Loss Account into discontinued operations (#5.8 million) and
continuing operations (#0.8 million). The main elements of the discontinued
operations are the Hyprotech and CFX businesses which were divested during the
year and an exceptional operating charge of #5.0 million on a Nuclear
Engineering contract as described in note 4. A segmental analysis of turnover
and of operating profit before and after exceptional items is given in note 3.
The reportable segments have been revised to better reflect how the businesses
are managed in accordance with the Group's strategy.
The operating loss principally arises from continued investment in Accentus and
Battery Systems which are in a development phase and incurring losses, and
further losses in businesses within the disposal programme. The core businesses
continue to generate profit and have achieved growth in both turnover and
operating profit before charging pension costs, which have increased
significantly as described below.
Pension costs
The actuary to the Company pension scheme carried out an actuarial valuation as
at 31 March 2002. Due to sustained falls in equity markets the surplus that
existed at 31 March 2000 has been eroded resulting in a deficit of #20.6
million. This has led to an increase in the Company charge to profit in respect
of pensions from #3.8 million in 2002 to #8.2 million. Of this increase #3.2
million arose in the core businesses.
In January 2003 the contributions into the Company scheme were increased to
17.5% in line with the actuary's recommendations at that time.
(Loss)/Profit on ordinary activities before taxation
The loss before taxation was #5.4 million (2002: profit before taxation #13.5
million) after reflecting an exceptional net profit of #11.3 million (2002:
#47.8 million) on sale and closure of businesses during the year. The largest
divestment, Hyprotech, generated a profit on disposal of #17.6 million whilst
other disposals resulted in a net profit of #2.4 million.
Acquisitions
Acquisitions made in the year are detailed in note 11. Environment acquisitions
generated #0.4 million of sales and a loss of #0.1 million in the year. The
Engineering Link Limited added #4.8 million of sales within Rail in the six
months since its acquisition but generated a loss of #1.3 million due to #1.6
million of restructuring cost necessary to integrate it into the main Rail
business.
Exceptional items
The profit on disposals and costs of termination of operations mentioned above
contributed respectively a net exceptional profit of #20.0 million (2002: #53.7
million) and a loss of #8.7 million (2002: #5.9 million). These items relate to
discontinuing business streams and are reported below operating profit. Further
details of the disposals and their impact on operating profit are given in notes
6 and 12.
In addition further steps were taken within the continuing business streams to
restructure the Group in order to focus on areas of strength, eliminate
loss-making activities, reduce costs and rationalise the Group. As a result
exceptional operating charges of #1.2 million (2002:
#21.1 million) were incurred in respect of redundancy costs and asset write-offs
in Accentus arising from continuing rationalisation of products and services
following review by management of the strategic direction of the business.
As reported in the Interim Report an exceptional operating charge of #5.0
million was incurred in respect of unrecoverable costs on a Nuclear Engineering
contract with Hunting BRAE at Aldermaston. This has been included within
discontinued activities.
Research and development
Research and development expenditure increased by #2.6 million to
#14.2 million after adjusting for a #6.6 million decrease resulting from the
disposal of our Engineering Software businesses.
Interest
Net interest charges include a one off payment of #2.3 million on repayment of
the US Private Placement in July 2002. Excluding this payment net interest
decreased from #3.6 million to #1.6 million, due to a reduction in average net
debt.
Taxation
The overall tax charge of #2.1 million (2002: credit #8.8 million) includes a
charge of #0.9 million in respect of the profits on disposal of businesses.
The remaining charge of #1.2 million arises because a deferred tax asset has not
been recognised in respect of certain losses in the UK whereas a tax charge is
recognised in respect of overseas profits. At 31 March the deferred tax asset
was #13.7 million (2002: #13.0 million).
Cash flow and borrowings
Year-end net debt has reduced by #2.5 million to #12.9 million (2002: #15.4
million) as a consequence of cash received on disposals and hence net interest
paid has decreased from #4.1 million to #1.9 million. In addition a #2.3
million one off payment was made on repayment of the US Private Placement in
July 2002. Due to the seasonality of the business net debt balances are usually
low at the year end and hence net debt has reduced from the September 2002
balance of #26.7 million.
The operating cash inflow, before exceptional items, of #28.2 million is an
improvement of #23.0 million on the prior year. In addition a cash outflow of
#12.8 million was incurred in respect of exceptional operating charges and
closure costs with a further #22.6 million to be spent in future years in
respect of these items. The key factors contributing to the cash flow
improvement are a decrease in the operating loss combined with reduced working
capital levels. During the year the credit control function was devolved from
the central credit control team to the businesses and as a result cash
collection has increased significantly reducing debtor days from 67 days to 56
days. In addition good payment terms on contracts has resulted in the receipt of
large element of income in advance in a number of businesses.
Purchases of tangible fixed assets totalled #10.4 million (2002: #9.2 million).
The increase in capital expenditure is due to further investment in the Battery
Systems' manufacturing facility, new premises in Derby for Rail and a facility
in Germany for the production of Yttrium-90 mainly for use in the medical
industry. Disposals of tangible fixed assets totalled #0.3 million (2002: #1.1
million).
A tax refund of #2.1 million was received in the year as a result of losses
arising in the UK. After paying #1.6 million of overseas tax, mainly in Germany
and Hong Kong, #0.3 million in respect of The Engineering Link Limited and #0.9
million of tax arising on disposals the net tax payment was #0.7 million, a
decrease of #2.3 million on the prior year.
Purchases of subsidiaries totalled #8.0 million (2002: #7.6 million) which
represented #0.8 million deferred payments on acquisitions made in previous
years and #7.2 million relating to acquisitions made during the year. The principal
acquisitions in the year were in Rail and Environment. Rail acquired The
Engineering Link Limited for #10.7 million, of which #5.5 million has been paid
to date. The acquisition in Environment was Lexware International Limited for
#1.6 million. The Group disposed of several businesses during the year to
enhance further the focus on its core activities (note 12). The net cash
receipts from these disposals amounted to #65.0 million (2002: #83.0 million)
generating a profit on disposal of #20.0 million (2002: #53.7 million). The
principal disposals were Hyprotech, net cash #56.9 million, and CFX, net cash
#11.7 million. Further cash outflows of an estimated #12.4 million will be
incurred in future years on these disposals as accrued outstanding costs are
paid and in the current year costs of #6.4 million have been paid in respect of
accruals on prior year disposals.
Included in the financing cash outflow of #20.8 million (2002: #39.8 million) is
#9.6 million of cash paid in respect of the share buy back. In July 2002 the
existing $75 million private placement was repaid at a net cost of #2.3 million
resulting in an increased cash outflow for returns on investment and servicing
of finance and a financing cash outflow of #46.3 million. The Group is now
funded by a #35 million UK revolving credit facility, of which #35 million was
drawn down in the period, and bank overdraft facilities.
The Group finances its operations through a combination of retained profits,
bank overdrafts and a revolving credit facility. At the year end all available
committed facilities were drawn down and these facilities expire on 18 June 2003
with any amounts drawn at that date repayable in June 2004. The Company has
negotiated replacement facilities of #60 million expiring in June 2004 of which
#50 million need not be repaid until June 2005.
Return of capital, dividends and dividend policy
On 30 August 2002 a Special Dividend of #44.7 million was declared and to date
we have bought shares in the market at a cost of #9.6 million under the share
buy back authority approved by shareholders in July 2002.
It is the Board's intention to move towards distributions of around one third of
earnings once the disposal programme is completed. In this year of transition
the Directors have proposed a final dividend of 3.7p per share bringing the
total dividend for the year to #3.5 million equivalent to 5.1p per share.
Shareholders' return and value
Earnings per share decreased to (10.5)p (2002: 25.3p). After adjusting for
exceptional operating charges, profit on sale of businesses, loss on termination
of operations and amortisation of goodwill earnings per share fell to (19.0)p
(2002: (11.4)p).
During the year AEA Technology shares fell from 260.5p per share at 1 April 2002
to 128.5p per share at 31 March 2003. The Company's shares ranged in price from
124.0p in March 2003 to 295.7p in May 2002.
Share consolidation
On 29 July 2002 a share consolidation reduced the number of shares in issue at
that date from 89,489,686 ordinary shares of 10p each to 73,218,834 ordinary
shares of 12 2/9 p each.
Consolidated profit and loss account
Continuing Discontinued
Continuing Discontinued operations operations
operations operations Total 2002 2002 Total
2003 2003 2003 restated restated 2002
FOR THE YEAR Notes #m #m #m #m #m #m
ENDED 31 ------- ------- ------- ------- ------- -------
MARCH
Turnover
Group and
share of
joint
ventures 2,3,5 244.0 28.3 272.3 224.0 110.4 334.4
Less: share
of joint
ventures (1.3) - (1.3) (2.0) (1.0) (3.0)
------- ------- ------- ------- ------- -------
242.7 28.3 271.0 222.0 109.4 331.4
Operating
costs ------- ------- ------- ------- ------- -------
Operating
costs (243.9) (35.2) (279.1) (229.2) (112.0) (341.2)
Less 2002 provision
on termination of
operations 0.5 1.1 1.6 - - -
Exceptional
operating
charges 4 (1.2) (5.0) (6.2) (19.9) (1.2) (21.1)
------- ------- ------- ------- ------- -------
(244.6) (39.1) (283.7) (249.1) (113.2) (362.3)
------- ------- ------- ------- ------- -------
Group
operating
loss (1.9) (10.8) (12.7) (27.1) (3.8) (30.9)
Share of operating
(loss)/profit in
joint ventures (0.1) - (0.1) - 0.2 0.2
------- ------- ------- ------- ------- -------
Total
operating
loss: Group
and share of
joint
ventures 1-5 (2.0) (10.8) (12.8) (27.1) (3.6) (30.7)
Profit on
sale of
businesses 12 - 20.0 20.0 0.1 53.6 53.7
Loss on
termination
of
operations 6 (5.8) (2.9) (8.7) (4.5) (1.4) (5.9)
------- ------- ------- ------- ------- -------
(Loss)/profit on
ordinary activities
before interest and
taxation (7.8) 6.3 (1.5) (31.5) 48.6 17.1
------- ------- ------- ------- ------- -------
Interest
receivable
and similar
income 1.1 1.8
------- ------- ------- ------- ------- -------
Redemption on
repayment of
long-term debt (2.3) -
Interest
payable (2.7) (5.4)
------- ------- ------- ------- ------- -------
Interest
payable and
similar
charges (5.0) (5.4)
------- ------- ------- ------- ------- -------
(Loss)/
profit on
ordinary
activities
before
taxation 3 (5.4) 13.5
Taxation on
ordinary
activities 7 (2.1) 8.8
------- ------- ------- ------- ------- -------
(Loss)/
profit on
ordinary
activities
after
taxation (7.5) 22.3
Minority
interests -
Equity (0.6) 0.1
------- ------- ------- ------- ------- -------
(Loss)/
profit for
the
financial
year (8.1) 22.4
Dividends 8 (48.2) (3.4)
------- ------- ------- ------- ------- -------
(Loss)/
retained
profit for
the year (56.3) 19.0
------- ------- ------- ------- ------- -------
Earnings per
share
(pence) 9 (10.5)p 25.3p
Adjusted
earnings per
share
(pence) 9 (19.0)p (11.4)p
IIMR
earnings per
share
(pence) 9 (23.8)p (25.6)p
Diluted
earnings per
share
(pence) 9 (10.5)p 25.1p
------- ------- ------- ------- ------- -------
There is no material difference between the (loss)/profit on ordinary activities
before taxation and the (loss)/retained profit for the year stated above, and
their historical cost equivalents.
The continuing and discontinued results for the year ended 31 March 2002 have
been restated to reflect the continuing position of the Group at 31 March 2003.
Statement of total recognised gains and losses
2003 2002
FOR THE YEAR ENDED 31 MARCH #m #m
-------- --------
(Loss)/profit for the financial year (8.1) 22.4
Currency translation differences on foreign currency
net investments (1) (0.4) 0.1
-------- --------
Total recognised gains and losses for the year (8.5) 22.5
Prior year adjustment - (22.2)
-------- --------
Total (losses)/gains recognised since 1 April (8.5) 0.3
-------- --------
1. Included within this is #463,000 credit (2002: #11,361 credit) in respect of
exchange differences on foreign currency borrowings that
have been used to hedge equity investments. The tax credit on this is nil
(2002: nil).
The prior year adjustment relates to adjustments made to the opening profit and
loss reserve at 1 April 2001 on implementation of Financial Reporting Standard
18: Accounting Policies and Financial Reporting Standard 19: Deferred Taxation.
Reconciliation of movements in equity shareholders' funds
2003 2002
FOR THE YEAR ENDED 31 MARCH Notes #m #m
-------- --------
Equity shareholders' funds at 1 April 48.7 23.9
(Loss)/profit for the financial year (8.1) 22.4
Dividends 8 (48.2) (3.4)
Repurchase of shares (9.6) -
New share capital issued 0.6 1.4
Goodwill written back to profit on
disposals 38.4 4.3
Currency translation differences on foreign
currency net investments (0.4) 0.1
-------- --------
Equity shareholders' funds at 31 March 21.4 48.7
-------- --------
Balance sheets
Group Company
AT 31 MARCH 2003 2002 2003 2002
#m #m #m #m
-------- -------- -------- --------
Fixed Assets
Intangible assets - 0.3 - -
Intangible assets - goodwill 31.6 29.7 0.2 -
Tangible assets 39.7 39.5 20.3 20.0
Investments 2.9 2.9 127.3 148.2
Investment in associates 0.1 - - -
Investments in joint ventures: 0.3 0.3 - -
-------- -------- -------- --------
Share of gross assets 1.2 3.2 - -
Share of gross liabilities (0.9) (2.9) - -
-------- -------- -------- --------
74.6 72.7 147.8 168.2
-------- -------- -------- --------
Current assets
Stocks and work in progress 18.7 19.2 5.3 7.8
Debtors falling due after more
than one year 27.5 27.7 25.7 26.1
Debtors falling due within one
year 79.1 125.1 57.0 65.8
Cash at bank and in hand 29.2 38.9 11.1 21.1
-------- -------- -------- --------
154.5 210.9 99.1 120.8
Creditors: amounts falling due
within one year (150.3) (139.7) (129.3) (77.8)
-------- -------- -------- --------
Net current assets/(liabilities) 4.2 71.2 (30.2) 43.0
-------- -------- -------- --------
Total assets less current
liabilities 78.8 143.9 117.6 211.2
Creditors: amounts falling due
after more than one year
Borrowings (0.3) (46.8) (2.1) (48.7)
Other creditors (4.4) (1.9) (0.1) (0.1)
Provisions for liabilities and
charges (51.5) (46.5) (35.3) (33.1)
-------- -------- -------- --------
Net assets 22.6 48.7 80.1 129.3
-------- -------- -------- --------
Capital and reserves
Called up share capital 8.2 8.9 8.2 8.9
Share premium 10.6 9.9 10.6 9.9
Capital redemption reserve 0.7 - 0.7 -
Merger reserve - - 25.0 25.0
Other reserve - - 49.1 49.1
Profit and loss account 1.9 29.9 (13.5) 36.4
-------- -------- -------- --------
Equity shareholders' funds 21.4 48.7 80.1 129.3
Minority interests - Equity 1.2 - - -
-------- -------- -------- --------
22.6 48.7 80.1 129.3
-------- -------- -------- --------
Approved by the Board on 18 June 2003.
Consolidated cash flow statement
2003 2002
For the year ended 31 Notes #m #m #m #m
March -------- -------- -------- --------
Net cash inflow/
(outflow) from
operating activities 15.4 (3.4)
Dividends from joint
ventures 0.1 0.2
Returns on investments
and servicing of
finance
Interest received 1.1 1.9
Interest paid (5.3) (6.0)
Dividends paid to
minority interests (0.3) (0.3)
-------- -------- -------- --------
(4.5) (4.4)
Taxation
Corporation tax paid (0.7) (3.0)
Capital expenditure and
financial investment
Sale of tangible fixed
assets 0.3 1.1
Purchase of tangible
fixed assets (10.4) (9.2)
Sale of fixed asset
investment - 0.1
Purchase of fixed asset
investments - (0.1)
-------- -------- -------- --------
(10.1) (8.1)
-------- -------- -------- --------
Free cash flow 0.2 (18.7)
Acquisitions and
disposals
Sale of subsidiaries/
businesses 73.3 83.0
Net cash disposed with
subsidiaries (8.3) -
Purchase of
subsidiaries (8.0) (7.6)
Net cash acquired with
subsidiaries 0.5 4.9
Purchase of associate (0.1) -
-------- -------- -------- --------
57.4 80.3
Equity dividends paid (45.7) (9.9)
Cash inflow before
management of liquid
resources and financing 11.9 51.7
Management of liquid
resources - -
Financing
Issue of shares 0.5 1.4
Repurchase of shares (9.6) -
Borrowings drawn down 35.0 1.2
Repayment of loans (46.7) (42.4)
-------- -------- -------- --------
Net cash outflow from
financing activities (20.8) (39.8)
-------- -------- -------- --------
(Decrease)/increase in
cash in the year 10 (8.9) 11.9
-------- -------- -------- --------
Reconciliation of operating loss to net cash inflow/(outflow) from operating
activities
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2003 2003 2003 2002 2002 2002
#m #m #m #m #m #m
------- ------- ------- ------- ------- -------
Operating
loss (6.5) (6.2) (12.7) (9.8) (21.1) (30.9)
Amortisation
of
intangible
fixed
assets 1.9 - 1.9 2.0 - 2.0
Depreciation
of tangible
fixed
assets 7.8 - 7.8 7.4 - 7.4
Impairment
of tangible
fixed
assets 0.1 0.1 0.2 0.2 0.5 0.7
Loss on sale
of tangible
fixed
assets - 0.5 0.5 0.1 - 0.1
Loss on
termination
of
operations - (8.7) (8.7) - (5.9) (5.9)
(Increase)/
decrease in
stocks and
work in
progress (3.3) 3.7 0.4 (5.3) 0.2 (5.1)
Decrease/
(increase)
in debtors 25.6 - 25.6 (0.5) 0.1 (0.4)
Increase/
(decrease)
in
creditors 1.5 (5.2) (3.7) 9.8 6.0 15.8
Increase in 1
provisions
relating to
operating
activities 1.1 3.0 4.1 1.3 11.6 12.9
------- ------- ------- ------- ------- -------
Net cash
inflow/
(outflow)
from
operating
activities 28.2 (12.8) 15.4 5.2 (8.6) (3.4)
------- ------- ------- ------- ------- -------
The cash inflow from operating activities includes an outflow of #1.7 million in
respect of current year exceptional operating items and costs on termination of
operations. This comprises #0.1 million of redundancies, legal fees of #1.2
million, and #0.4 million of closure costs. Of the total exceptional profit and
loss items #4.2 million have no cash impact. The remaining cash flows of #9.0
million will be incurred over the next one to four years. In addition a cash
outflow of #11.1 million has been incurred in respect of 2001 and 2002
exceptional items. This comprises #1.4 million of rent, #0.9 million
decommissioning and waste costs, #6.9 million of redundancies, #1.7 million of
closure costs and #0.2 million of contract costs.
Group share of operating (losses)/profits in joint ventures are accounted for in
the profit and loss account for the period. Cash flows arising from these
entities are accounted for on receipt of dividends as recorded in the Group Cash
Flow Statement. Dividends from joint ventures accounted for in the year ended 31
March 2003 represent Group share of profit after tax in respect of the current
and previous years.
notes
1. The financial information set out above for the year ended 31 March 2003 does
not constitute the statutory accounts for the year but is derived from those
accounts. The statutory financial statement for the year, on which the auditors
issued an unqualified report, will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
The comparative financial information is based on the Group's accounts for the
year ended 31 March 2002, adjusted for the split of continuing and discontinued
activities, which were delivered to the Registrar of Companies and on which the
auditors issued an unqualified report.
The Preliminary Announcement has been prepared on the basis of the accounting
policies set out in the Annual Report and Accounts for the year ended 31 March
2002, other than changes necessary to implement the following new accounting
standard:
*UITF 34: Pre Contract Costs (minimal impact on the results for the year
and no prior year adjustment required).
2. Geographical analysis
Turnover can be analysed by geographical destination as follows:
Continuing Discontinued
Continuing Discontinued operations operations
operations operations Total 2002 2002 Total
2003 2003 2003 restated restated 2002
#m #m #m #m #m #m
-------- -------- -------- -------- -------- --------
Government 31.4 0.5 31.9 31.6 18.1 49.7
Public
sector 12.7 6.7 19.4 10.0 11.2 21.2
Private
sector 98.8 4.6 103.4 92.0 29.0 121.0
-------- -------- -------- -------- -------- --------
Total UK 142.9 11.8 154.7 133.6 58.3 191.9
Europe 31.2 6.0 37.2 29.3 13.8 43.1
North
America 54.6 7.1 61.7 47.5 20.4 67.9
Rest of the
World 15.3 3.4 18.7 13.6 17.9 31.5
-------- -------- -------- -------- -------- --------
244.0 28.3 272.3 224.0 110.4 334.4
-------- -------- -------- -------- -------- --------
Turnover can be analysed by geographical origin as follows:
Continuing Discontinued
Continuing Discontinued operations operations
operations operations Total 2002 2002 Total
2003 2003 2003 restated restated 2002
#m #m #m #m #m #m
-------- -------- -------- -------- -------- -------
UK 165.3 14.9 180.2 177.3 65.8 243.1
Europe 23.3 3.6 26.9 19.2 4.7 23.9
North
America 49.7 7.9 57.6 21.6 38.5 60.1
Rest of
the
World 5.7 1.9 7.6 5.9 1.4 7.3
-------- -------- -------- -------- -------- -------
244.0 28.3 272.3 224.0 110.4 334.4
-------- -------- -------- -------- -------- -------
The Group's share of joint ventures' turnover increased turnover both to and
from the UK by #0.1 million (2002: nil), North America by nil (2002: #1.0
million) and to and from the Rest of the World by #1.2 million (2002: #2.0
million).
2. Geographical analysis (continued)
Operating (loss)/profit can be analysed by geographical origin as follows:
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2003 2003 2003 2002 2002 2002
#m #m #m #m #m #m
-------- -------- -------- -------- -------- --------
UK (10.0) (6.2) (16.2) (17.5) (21.0) (38.5)
Europe 1.2 - 1.2 1.7 - 1.7
North
America 0.5 - 0.5 4.4 (0.1) 4.3
Rest of
the
World 1.7 - 1.7 1.8 - 1.8
-------- -------- -------- -------- -------- --------
(6.6) (6.2) (12.8) (9.6) (21.1) (30.7)
-------- -------- -------- -------- -------- --------
Included within the UK operating loss before exceptional items shown above is a
loss of #4.4 million relating to discontinued operations, Europe loss of #1.3
million, North America profit of #0.5 million and Rest of the World loss of #0.6
million (2002: UK loss of #7.1 million, Europe loss of #0.1 million, North
America profit of #5.0 million, Rest of the World loss of #0.2 million).
The Group's share of joint ventures' operating (loss)/profit increased operating
loss in the UK by #0.1 million (2002: nil) and profit in North America by nil
(2002: #0.2 million).
Net operating assets/(liabilities) can be analysed by geographical origin as
follows:
2003 2002
#m #m
--------- --------
UK 24.5 54.1
Europe (1.2) 4.9
North America 8.1 2.6
Rest of the World 4.1 2.5
--------- --------
35.5 64.1
--------- --------
The Group's share of joint ventures' net operating assets decreased net
operating assets in the UK by #0.1 million (2002: nil) and increased net
operating assets in the Rest of the World by #0.3 million (2002: #0.3 million).
3. Segmental analysis by class of business
Inter-
Total Inter- Total segmental External
turnover segmental External turnover turnover turnover
2003 turnover turnover 2002 2002 2002
2003 2003 restated restated restated
TURNOVER: #m #m #m #m #m #m
CLASS OF ------ -------- -------- -------- -------- --------
BUSINESS
Rail 85.0 (0.6) 84.4 76.0 (0.7) 75.3
Environment 65.6 (0.7) 64.9 50.3 (0.9) 49.4
------ -------- -------- -------- -------- --------
Core
business 150.6 (1.3) 149.3 126.3 (1.6) 124.7
------ -------- -------- -------- -------- --------
Battery
Systems 9.6 - 9.6 7.3 (0.3) 7.0
Accentus 18.6 (1.4) 17.2 25.2 (1.8) 23.4
QSA 35.9 - 35.9 35.4 - 35.4
------ -------- -------- -------- -------- --------
Value
development 64.1 (1.4) 62.7 67.9 (2.1) 65.8
------ -------- -------- -------- -------- --------
Engineering
Software 64.1 (1.4) 62.7 67.9 (2.1) 65.8
Nuclear
Programmes 34.9 (4.8) 30.1 37.5 (4.2) 33.3
------ -------- -------- -------- -------- --------
Disposal
programme 50.6 (4.8) 45.8 84.4 (4.5) 79.9
Divested
businesses - - - 50.4 (1.7) 48.7
(pre 1 April
2002)
Central
items 32.9 (18.4) 14.5 29.9 (14.6) 15.3
------ -------- -------- -------- -------- --------
Total 298.2 (25.9) 272.3 358.9 (24.5) 334.4
------ -------- -------- -------- -------- --------
The Group's share of joint ventures' turnover increased turnover in Rail by #0.1
million (2002: nil), Accentus by #1.2 million (2002: nil) and in Nuclear
Programmes by nil (2002: #3.0 million).
3. Segmental analysis by class of business (continued)
Before
Before exceptional Exceptional
exceptional Exceptional items items Total
items items Total 2002 2002 2002
2003 2003 2003 restated restated restated
#m #m #m #m #m #m
OPERATING
PROFIT/
(LOSS):
CLASS OF
BUSINESS
------- -------- -------- -------- -------- --------
Rail 11.2 - 11.2 12.2 (0.5) 11.7
Environment 7.0 - 7.0 7.3 (1.5) 5.8
------- -------- -------- -------- -------- --------
Core
business 18.2 - 18.2 19.5 (2.0) 17.5
------- -------- -------- -------- -------- --------
Battery
Systems (3.0) - (3.0) (4.2) - (4.2)
Accentus (6.7) (1.2) (7.9) (4.0) (1.0) (5.0)
QSA 2.6 - 2.6 (0.9) (0.4) (1.3)
------- -------- -------- -------- -------- --------
Value
development (7.1) (1.2) (8.3) (9.1) (1.4) (10.5)
------- -------- -------- -------- -------- --------
Engineering
Software (3.5) - (3.5) (0.6) (1.0) (1.6)
Nuclear
Programmes (6.3) (5.0) (11.3) (5.8) (11.2) (17.0)
------- -------- -------- -------- -------- --------
Disposal
programme (9.8) (5.0) (14.8) (6.4) (12.2) (18.6)
------- -------- -------- -------- -------- --------
Divested
businesses - - - 0.2 - 0.2
(pre 1 April
2002)
Central
items (7.9) - (7.9) (13.8) (5.5) (19.3)
------- -------- -------- -------- -------- --------
Total
operating
loss (6.6) (6.2) (12.8) (9.6) (21.1) (30.7)
Profit on
sale of
businesses - 20.0 20.0 - 53.7 53.7
Loss on
termination
of
operations - (8.7) (8.7) - (5.9) (5.9)
------- -------- -------- -------- -------- --------
(Loss)/profit
before
interest (6.6) 5.1 (1.5) (9.6) 26.7 17.1
Net interest
payable (3.9) - (3.9) (3.6) - (3.6)
------- -------- -------- -------- -------- --------
(Loss)/profit
before
taxation (10.5) 5.1 (5.4) (13.2) 26.7 13.5
------- -------- -------- -------- -------- --------
The Group's share of joint ventures' operating profit decreased operating profit
in Rail by #0.1 million (2002: nil) and increased Nuclear Programmes by nil
(2002: #0.2 million).
The business segment figures have been restated to reflect the new
organisational structure splitting out the
Future Technologies and Nuclear Technology businesses.
Future Technologies included four elements: Battery Systems and Accentus, now
included in value development businesses; an element that has been divested; an
element transferred to Nuclear Programmes for divestment; and Forensic Alliance
Limited, that was managed in Central items prior to disposal.
Nuclear Technology included four elements: Nuclear Engineering and Nuclear
Consulting (now included in Divested businesses); QSA (now shown separately in
value development businesses); and Nuclear Programmes (now within the disposal
programme).
In previous years corporate overheads were allocated based on the businesses'
use of operational capital. Following changes to the organisational and
management structure the directors consider that a more appropriate method is to
allocate overheads based on the involvement of corporate senior management in
the operations of the businesses. Corporate overheads of #2.3 million (2002:
#2.4 million) have been allocated and the prior year analysis restated.
Turnover relating to discontinued operations may be analysed by segment as
follows:
2002
2003 restated
#m #m
------ --------
Rail - 0.6
Accentus 2.8 2.8
QSA 1.2 1.0
Engineering Software 15.7 46.6
Nuclear Programmes 2.1 3.8
Central items 6.5 6.9
Divested businesses - 48.7
------ --------
Total 28.3 110.4
------ --------
3. Segmental analysis by class of business (continued)
Operating (loss)/profit relating to discontinued operations may be analysed by
segment as follows:
Before Before
exceptional exceptional Exceptional Exceptional
items items Total items 2002 items Total
2003 2003 2003 restated 2002 2002
#m #m #m #m restated restated
#m #m
-------- -------- -------- -------- -------- --------
Rail - - - - - -
Accentus (2.7) - (2.7) (2.2) - (2.2)
QSA 0.1 - 0.1 0.1 - 0.1
Engineering
Software (3.3) - (3.3) (0.6) (1.0) (1.6)
Nuclear
Programmes (0.3) (5.0) (5.3) 0.1 (0.2) (0.1)
Central
items 0.4 - 0.4 - - -
Divested
businesses - - - 0.2 - 0.2
-------- -------- -------- -------- -------- --------
Total (5.8) (5.0) (10.8) (2.4) (1.2) (3.6)
-------- -------- -------- -------- -------- --------
Net operating assets/(liabilities) may be analysed by class of business as
follows
Total
Total 2002
2003 restated
NET OPERATING ASSETS/(LIABILITIES): CLASS OF #m #m
BUSINESS -------- --------
Rail 28.3 21.8
Environment 2.9 (0.9)
-------- --------
Core business 31.2 20.9
-------- --------
Battery Systems (2.0) 10.1
Accentus (4.4) 3.3
QSA 2.7 6.9
-------- --------
Value development (3.7) 20.3
-------- --------
Engineering Software (0.7) 3.3
Nuclear Programmes (11.6) (1.6)
-------- --------
Disposal programme (12.3) 1.7
-------- --------
Central items 20.3 21.2
-------- --------
Net operating assets 35.5 64.1
Net borrowings (12.9) (15.4)
-------- --------
Net assets 22.6 48.7
-------- --------
The Group's share of joint ventures' net operating assets decreased operating
assets in Rail by #0.1 million (2002: nil) and increased operating assets in
Accentus by #0.3 million (2002: #0.3 million).
4. Exceptional operating charges
Exceptional operating charges relating to the continuing business streams
comprise #1.1 million for redundancies and a #0.1 million asset write-off
arising from the rationalisation of the Accentus business.
Within the discontinued operations the exceptional operating charge of #5.0
million represents the write off of work in progress (WIP) and legal costs on
two Nuclear Engineering contracts with Hunting BRAE at Aldermaston.
These exceptional operating charges can be analysed as follows:
WIP Asset
Redundancy write-off write off Other Total
#m #m #m #m #m
------- ------- ------- ------- -------
Accentus 1.1 - 0.1 - 1.2
Nuclear
Programmes - 3.6 - 1.4 5.0
------- ------- ------- ------- -------
1.1 3.6 0.1 1.4 6.2
------- ------- ------- ------- -------
The impact of exceptional items on taxation is disclosed in note 7.
5. Operating results of acquisitions
Acquisitions during the year had the effect of increasing turnover by #5.4
million and operating loss by
#1.4 million and decreasing net operating assets by #0.7 million as detailed
below:
Net
operating
Operating (liabilities)/
Turnover loss assets
#m #m #m
-------- -------- --------
Rail 4.8 (1.3) (1.1)
Environment 0.4 (0.1) -
Nuclear Programmes 0.2 - 0.4
-------- -------- --------
Total 5.4 (1.4) (0.7)
-------- -------- --------
Acquisitions during the year had the following impact on operating costs:
Nuclear Total
Programmes
Rail Environment #m 2003
#m #m #m
-------- -------- -------- --------
Cost of sales 2.0 0.5 0.1 2.6
Administrative
expenses 4.1 - 0.1 4.2
Research and
development - - - -
Net other operating
income - - - -
-------- -------- -------- --------
6.1 0.5 0.2 6.8
-------- -------- -------- --------
Included within the operating costs of acquisitions are #1.6 million relating to
the restructuring and integration into AEA Technology plc of The Engineering
Link Limited (#0.7 million redundancy, #0.9 million other restructuring costs).
6. Loss on termination of operations
In focusing and rationalising the Group various business streams have been
discontinued in the year or the decision to exit has been announced and
activities will terminate over the next twelve months. The costs relating to
these closures and provisions for future costs comprise redundancy payments,
asset impairments, contract balance write offs and provisions for future
operating losses. The split by segment is as follows:
2003
#m
----------
Accentus 1.8
Nuclear Programmes 5.8
Central items 1.1
----------
Total 8.7
----------
The results of business streams that have been discontinued by 18 June 2003 are
included in discontinued operations. Turnover for these operations was #3.9
million (2002: #3.0 million) and operating loss pre exceptional operating
charges was #2.9 million (2002: #2.2 million).
7. Taxation
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
TAXATION ON 2003 2003 2003 2002 2002 2002
(LOSS)/
PROFIT ON
ORDINARY
ACTIVITIES
#m #m #m #m #m #m
------- ------- ------- ------- ------- -------
United
Kingdom
corporation
tax at 30%
(2002: 30%):
Current 4.3 (4.3) - - - -
Deferred
taxation (0.2) - (0.2) (5.0) (7.7) (12.7)
Overseas
deferred
taxation 0.2 - 0.2 (0.2) - (0.2)
Overseas
taxation 2.4 0.9 3.3 3.8 - 3.8
Under/(over)
provision in
respect of
prior years:
Current 0.1 - 0.1 0.3 - 0.3
Deferred (1.3) - (1.3) - - -
taxation ------- ------- ------- ------- ------- -------
5.5 (3.4) 2.1 (1.1) (7.7) (8.8)
Share of
joint
ventures
taxation - - - - - -
------- ------- ------- ------- ------- -------
5.5 (3.4) 2.1 (1.1) (7.7) (8.8)
------- ------- ------- ------- ------- -------
The table below reconciles the UK standard rate of Corporation tax of 30% on
(loss)/profit on ordinary activities before taxation to the Group's current
taxation charge:
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2003 2003 2003 2002 2002 2002
#m #m #m #m #m #m
------- ------- ------ ------- ------- -------
(Loss)/profit
on ordinary
activities
before
taxation (10.5) 5.1 (5.4) (13.2) 26.7 13.5
Expected
taxation
charge at UK
Corporation
tax rate
of 30% (2002:
30%) (3.1) 1.5 (1.6) (3.9) 8.0 4.1
Income not
taxable 2.9 (5.1) (2.2) - (18.2) (18.2)
Expenses not
deductable
for tax
purposes 2.5 0.2 2.7 1.8 2.5 4.3
Effect of
losses not
available for
relief 6.9 - 6.9 5.2 7.7 12.9
Utilisation
of tax
losses (1.6) - (1.6) 0.1 - 0.1
Net effect of
higher and
lower tax
rates on
overseas
earnings (0.6) - (0.6) 0.6 - 0.6
Under
provision in
respect of
prior years 0.1 - 0.1 0.3 - 0.3
Reversal of
timing
differences (0.3) - (0.3) - - -
------- ------- ------ ------- ------- -------
Current
taxation
charge for
the year 6.8 (3.4) 3.4 4.1 - 4.1
------- ------- ------ ------- ------- -------
8. Dividends
The Directors recommended a final dividend of 3.7p per share (2002: nil).
Together with the interim dividend of 1.4p per share and the Special Dividend of
50.0p per share this gives a total for the year of 55.1p per share (2002: 3.8p
per share). The final dividend will be paid on 1 October 2003 to those
shareholders on the register at 4 July 2003.
9. Earnings per share
Earnings per share is calculated for both the current and previous years using
the (loss)/profit for the year. The earnings per share calculation is based on
77.2 million shares (2002: 88.7 million shares), being the weighted average
number of ordinary shares in issue for the year. As the share consolidation that
took place in July 2002 was combined with a Special Dividend so that the overall
commercial effect was that of a share repurchase at fair value no adjustment has
been made to the prior year earnings per share figures.
9. Earnings per share (continued)
The adjusted earnings per share is based on the (loss)/profit for the year
before the amortisation of goodwill and exceptional items.
2003 2002
#m #m
-------- --------
(Loss)/profit for the financial year (8.1) 22.4
Amortisation of goodwill 1.9 1.9
Exceptional operating charges (note 4) 6.2 21.1
Profit on sale of businesses (note 12) (20.0) (53.7)
Loss on termination of operations (note 6) 8.7 5.9
Tax on exceptional items (note 7) (3.4) (7.7)
-------- --------
Adjusted loss (14.7) (10.1)
-------- --------
A reconciliation of earnings per share with the Institute of Investment
Management and Research (IIMR) earnings per share is as follows:
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2003 2003 2003 2002 2002 2002
#m #m #m #m #m #m
------- -------- ------ ------- -------- ------
(Loss)/profit
for the
financial
year (14.3) 6.2 (8.1) (12.0) 34.4 22.4
Release of
provisions
for operating
losses on
termination (1.6) - (1.6) - - -
Impairment of
tangible
fixed
assets 0.1 0.1 0.2 0.2 0.5 0.7
Loss on sale
of tangible
fixed
assets - 0.5 0.5 0.1 - 0.1
Profit on
sale of
subsidiaries/
businesses - (20.0) (20.0) - (53.7) (53.7)
Loss on
termination
of
operations - 8.7 8.7 - 5.9 5.9
Amortisation
of goodwill 1.9 - 1.9 1.9 - 1.9
Redemption
penalty on
long-term
debt - 2.3 2.3 - - -
Taxation on
above items - (2.3) (2.3) - - -
------- -------- ------ ------- -------- ------
IIMR adjusted
loss (13.9) (4.5) (18.4) (9.8) (12.9) (22.7)
------- -------- ------ ------- -------- ------
Diluted earnings per share is based on the (loss)/profit for the year and 77.4
million shares (2002: 89.1 million shares). The number of shares is equal to the
weighted average number of ordinary shares in issue adjusted to assume
conversion of all dilutive potential ordinary shares. The Company has only one
category of dilutive potential ordinary shares: those share options granted to
employees where the exercise price is less than the average market price of the
Company's ordinary shares during the year.
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2003 2003 2003 2002 2002 2002
-------- -------- ------ -------- -------- ------
Earnings
per share
based
on
(loss)/
profit
for the
financial
year (21.5)p 11.0p (10.5)p (13.5)p 38.8p 25.3p
Adjusted
earnings
per
share
based on
adjusted
loss (19.0)p - (19.0)p (11.4)p - (11.4)p
IIMR
earnings
per share
based (18.0)p (5.8)p (23.8)p
on IIMR
adjusted
loss (11.1)p (14.5)p (25.6)p
-------- -------- ------ -------- -------- ------
Diluted
earnings
per
share (21.5)p 11.0p (10.5)p (13.5)p 38.6p 25.1p
-------- -------- ------ -------- -------- ------
10. Reconciliation of net cash flow to movement in net debt
2003 2002
MOVEMENT IN NET DEBT IN THE YEAR #m #m
-------- --------
(Decrease)/increase in cash in the year (8.9) 11.9
Cash flow from decrease in debt 11.7 41.2
-------- --------
Change in net funds resulting from cash flow 2.8 53.1
Loans acquired on acquisitions (0.3) (0.7)
Net debt at 1 April (15.4) (67.8)
-------- --------
Net debt at 31 March (12.9) (15.4)
-------- --------
Acquisitions
At 1 April and At 31 March
2002 Cash flow disposals 2003
ANALYSIS OF #m #m #m #m
NET DEBT -------- -------- -------- --------
Cash in hand
and at bank 38.9 (9.7) - 29.2
Bank
overdrafts (1.8) 0.8 - (1.0)
-------- -------- -------- --------
37.1 (8.9) - 28.2
Debt due after
one year (46.8) 46.8 (0.3) (0.3)
Debt due
within one
year (5.7) (35.1) - (40.8)
-------- -------- -------- --------
(15.4) 2.8 (0.3) (12.9)
-------- -------- -------- --------
11. Acquisitions and goodwill
Acquisitions completed during the year were as follows:
Percentage of
share capital
name date acquired
------------- -------------
The Engineering Link Limited 18 October 2002 100%
Lexware International Limited 6 January 2003 100%
Tecnovex (assets and trade) 6 February 2003 n/a
------------- -------------
All acquisitions were accounted for using acquisition accounting. All goodwill
arising on these acquisitions has been capitalised as an intangible asset and is
finalised on all acquisitions except The Engineering Link Limited.
The total consideration on acquisitions, including acquisition costs and
deferred consideration, was #12.4 million, the fair value of net assets acquired
was #0.7 million giving total goodwill on acquisitions of #11.7 million.
12. Sale of subsidiaries/businesses
Disposals completed during the year were as follows:
Percentage of
share capital
Name Date disposed of
------------- -------------
Imaging Centre (assets and trade) 21 April 2002 n/a
Hyprotech 31 May 2002 100%
AEA Technology (Thailand) Limited 20 June 2002 100%
Sub-surface (assets and trade) 31 July 2002 n/a
Forensic Alliance Limited 31 October 2002 100%
CFX 26 February 2003 100%
------------- -------------
The net assets disposed of totalled #42.4 million, the related sale proceeds
were #62.4 million giving a profit on disposal of #20.0 million.
The net assets disposed and the related profit on the disposal of CFX are
provisional as completion accounts have not yet been finalised.
The results of all disposals are included in discontinued activities. Turnover
in respect of disposals was
#23.2 million (2002: #57.4 million) and operating loss pre exceptional operating
charges was #3.0 million
(2002: #0.4 million).
13. Contingent liabilities
AEA Technology plc guarantees the credit facilities, overdraft facilities, BACS
facilities and leasing obligations for certain subsidiary companies. At 31 March
2003 these guarantees totalled #5.1 million (2002: #9.9 million).
The Group has contingent liabilities in respect of contracts entered into in the
normal course of business and in respect of the disposal of businesses and
subsidiaries. It is not expected that these will have a material effect on the
financial position of the Group.
14. Post balance sheet events
On 16 May 2003 the Group disposed of Monserco Limited for consideration of #0.6
million, resulting in a profit on disposal in the region of #0.2 million to be
recorded in May. Turnover of #1.2 million (2002: #1.0 million ) and an operating
profit of #0.1 million (2002: #0.1 million) have been included within
discontinued operations.
15. Annual Accounts and Annual General Meeting
Copies of the Annual Report and Accounts will be sent to shareholders in June
2003 and will be available from the Company's registered office, 329 Harwell,
Didcot, Oxfordshire, OX11 0QJ.
The Annual General Meeting will be held at 2pm on 24 July 2003 at Eversheds LLP,
Senator House,85 Queen Victoria Street, London, EC4V 4JL.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UKRBROORNARR
