2016 Full Year Results

RESULTS SUMMARY

Revenue

£352.5m

Profit before tax

£16.4m

Underlying earnings per share

4.6p

Interim Dividend

4.53p

Trading overview
  • Group revenue was up 27% on a reported basis, but was marginally down -0.4% on an organic constant currency basis year on year, with organic constant currency growth of 4% in the Wireless Systems Division offset by a decline of 3% in Performance Materials.
  • Group underlying operating profit at £61.9m (2015: £80.7m) was adversely affected by weaker sales and margin pressures in the Precision Metals business, the challenging environment for the WACS business supplying wireless automation controls into the US rail freight sector and the losses related to the Novero acquisition during the initial operational and financial turnaround period.
  • Underlying profit before tax of £51.1m (2015: £73.1m) was marginally better than our previous guidance.
  • Statutory loss after tax was impacted by a £155.5m non-cash impairment of goodwill within the Wireless Systems Division.
  • Net debt at year end was £344.6m (2015: £200.0m). Net debt to EBITDA was 3.2 times (based on average exchange rates) which was within our pre-existing covenant limits.
  • No final dividend will be paid in respect of 2016 as previously indicated, therefore the total dividend for 2016 will be the interim dividend of 4.53p (2015: 13.0p).

Rights Issue

  • The Group has announced a Rights Issue in a separate announcement today. This is expected to raise up to £185m in gross proceeds and approximately £175m of net proceeds.
  • The proceeds from the Rights Issue will be used to reduce borrowings under the revolving credit facilities and will strengthen the Group’s financial position, enabling it to continue to invest in its previously announced operational improvement programme and in opportunities for future growth.
Operational New Divisional Structure

New Divisional Structure

  • The Group has taken a number of steps in the last quarter of 2016 and early part of 2017 to improve the focus and management of the company. We have moved from a two division and seven business unit structure, to a simplified three division structure, effective from 1 January 2017. The new structure better reflects the different focus required in each of the divisions in order to drive value. These are outlined below:

    Performance Materials (PM)
    This new division comprises a cluster of material technologies and end markets which have been a key growth driver over recent years, with good cash generation. The technologies that will now be included in this division are Precision Metals, Electromagnetic Interference (EMI) materials, Thermal, Magnetic & Ceramic products and Model Solution (delivering rapid prototyping capabilities). By moving the engineered thermal systems business from this division into the Wireless and Thermal Systems division we have created a more focused material technologies business. A business that is better able to leverage the competitive advantages of our technologies portfolio and focus on end markets where we add most customer value.

    Connected Vehicle Solutions (CVS)
    The combination of the Telematics business and Novero creates a division focused on the fast-growing connected automotive market. CVS is a growing business which has taken a step change through recent investment, offering OEMs a full connectivity solution, from antenna to telematics control units (TCU). Visibility of sales is good and this is reflected in the growth of the pipeline since the acquisition of Novero, the next step is to ensure that we also drive operational gearing benefits to improved profitability as we deliver on this revenue growth.

    Wireless and Thermal Systems (WTS)
    The new WTS division represents several discrete but related technologies across a range of end markets and brings together industrial and commercial antennae, commercial wireless connectivity, industrial control systems and engineered thermal management systems. These four areas can generally be characterised as offering “low volume, high value-add” products and systems, providing engineered wireless solutions serving specific, high quality markets. The division will drive growth through better market and competitive insights and product integration.

  • A number of senior management changes have also been made to strengthen the leadership of these divisions, including the appointments of Kevin White heading the Wireless and Thermal Systems division from January 2017 and Carmen Chua leading Performance Materials from February 2017.
Outlook

Outlook

  • Despite the disappointing performance in 2016 there are a number of factors which leave us well placed in 2017 including:
    • The previously announced operational improvement programme remains on track to deliver annualised savings of at least US$20m from 2018, with US$15m expected in 2017.
    • The Novero integration is now complete and Novero is expected to deliver modest profitability in 2017.
    • Actions taken to gradually improve operational efficiency and profitability in the Performance Materials division and specifically Precision Metals.
    • A review of the growth and value creation options for the Performance Materials division.

Tony Quinlan, Chief Executive Officer, commented

"2016 was a disappointing year, where challenging conditions in certain key end markets were compounded by discrete but material inefficiencies in our own operations. These overshadowed a solid performance in much of our business.

We have taken corrective actions, including putting in place a substantially new leadership team and establishing a clearer structure to optimise our strong technology and engineering. We are reducing overheads and driving a forensic approach to improving the efficiency and profitability of our operations. In the near-term, we are wholly focused on delivering a strong profit uplift alongside establishing a business model which can deliver long-term, sustainable, revenue and earnings growth. The rights issue announced today is a key step in strengthening the group balance sheet in order to support this growth."