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Interim Results

e2v profits fall

07 November 2016 07:44

e2v technologies' revenues and profits fell in the six months to the end of September in challenging trading conditions.

Revenue was £102.8m (H1 2016: £109.5m), a reduction of 6.1%, including £8.2m benefit from FX.

In Imaging, there were some delays in order placement in Professional Imaging and certain Space Imaging programme milestones moved into the second half.

In the prior period, Imaging's revenue included £2.6m for the thermal imaging business which was sold in October 2015. RF Power saw some improvement in demand in radiotherapy, more than offset by lower demand in industrial.

Semiconductors saw strong order intake in the second quarter, particularly in its lower margin lines. SP Devices contributed £1.1m to revenue in the period, in line with expectations.

Overall, the Group saw demand improve in the second quarter and achieved stronger order intake.

Gross profit margin was slightly lower than the comparable period, at 37% (H1 2016: 38%).

The reduction in revenue was largely offset by good cost discipline in the first half.

The movement in exchange rates resulted in a positive £0.2m swing compared with the comparable period, with lower losses on the translation of working capital and on exchange contracts of £1.3m (H1 2016: £1.5m). The trading performance reflected a modest contribution from SP Devices, in line with our expectations.

Adjusted operating profit of £12.0m (H1 2016: £20.3m) represents a margin of 11.7% (H1 2016: 14.3%). This reflects the lower gross margin and the planned increase in its selling and marketing resources in the US and Asia to support our customers in these regions. Net R&D was £6.1m, 5.9% of revenue (H1 2016: £6.7m).

The group said: "Net borrowings at 30 September 2016 were £17.8m (H1 2016: £20.3m), which represents a better than expected reduction from the previous year end net borrowings of £21.1m.

"Net borrowings were after the payments for dividend and tax, along with earn out payments in relation to the acquisition of AnaFocus of £1.6m. Operating cash generation was £18.9m (H1 2016: £13.4m). The increase in operating cash generation was primarily due to good cash collection.

"This was partially offset by planned increase in inventory in Professional Imaging and RF Power to support their expected increased activity in the second half, and progress on milestones on Space Imaging programmes that are now targeted to be delivered by the end of the financial year. In Semiconductors the inventory increase was higher than planned, which is being addressed by the new management. As a result of the overall planned inventory increase, capital expenditure was reduced accordingly."

The board has announced an interim dividend of 1.7 pence per share an increase of 6.3%, which, it says, reflecting confidence in the outlook for full year earnings. This will be paid on 20 December to shareholders on the register as at 18 November.

Group chief executive Steve Blair said: "We have delivered a resilient performance in the first half in what continued to be challenging trading conditions. We made good strategic progress and the fundamentals of the business continued to improve, and we actively managed areas of under performance.

"Our objectives for the second half are to continue the positive momentum from the second quarter in Professional Imaging and Semiconductors, where we have good order cover and pipeline visibility, and progress our operational improvement plan in RF Power. Within Space Imaging, we expect to deliver on a number of technically challenging programmes, and anticipate securing three key follow-on orders, although the timings of these awards is not within our control. We start the second half with order cover of 72%, in line with last year.

"Whilst we remain cautious about the broader economic environment, the improved order intake in the second quarter supports an anticipated stronger second half performance. We expect the full year operating margin to be maintained at last year's level and year end net borrowings of c.£8m. However, due to the increased possibility of further delays to the anticipated follow on orders in Space Imaging, the Board now believes the trading performance for the current financial year may be modestly below our previous expectations.

"We are continuing to build momentum for growth in the areas we have prioritised for investment, and we have put in place solid foundations to provide a platform to deliver a resilient performance in the medium term."

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