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Company Wolfson Microelectronics PLC
TIDM WLF
Headline

Fourth Quarter and Full Year Results

Released 07:00 05-Feb-2014
Number 3030Z07

RNS Number : 3030Z
Wolfson Microelectronics PLC
05 February 2014
 



5 February 2014

Wolfson Microelectronics plc

Fourth Quarter and Full Year Results to 29 December 2013

Strong Mobile Audio Hub growth in a challenging market

Wolfson Microelectronics plc ("Wolfson" or "the Company" or "the Group"), a world leader in Audio Solutions for consumer electronic products, announces unaudited fourth quarter and audited full year results for 2013.

 

Fourth quarter 2013 financial summary:

·    Revenue of $42.0m (Q4 2012: $56.1m)

·    Gross margin of 42.2% (Q4 2012: 43.9%)

·    Underlying* operating loss of $4.5m (Q4 2012: $1.5m profit)

·    Operating loss** of $8.5m (Q4 2012: $0.5m profit)

·    As previously announced, restructuring implemented to deliver annualised savings of $10.0m. Severance and asset write down now $2.6m

 

Full year 2013 financial summary:

·    Revenue flat at $179.4m (2012: $179.7m)

·    Gross margin of 42.3% (2012: 46.9%)

·    Underlying* operating loss of $12.6m (2012: $2.9m loss)

·    Operating loss** of $20.3m (2012: $9.3m loss)

·    Underlying* diluted loss per share of 9.0 cents (2012: 1.0 cents loss)

·    Diluted loss per share of 14.1 cents (2012: 5.2 cents loss)

·    Cash and short-term deposits at 29 December 2013 of $25.9m (29 Sept 2013: $26.7m;

30 Dec 2012: $48.0m), no debt

·    Three-year $25m committed working capital facility signed post year-end

 

Full year 2013 operational summary:

·    Revenue impacted by a very volatile mobile phone market and faster-than-expected transition to 4G (LTE) smartphones benefitting a competitor

·    Gross margin affected by sales of an individual part to a single customer, which is now being replaced by a higher margin, higher value part

·    Mobile Audio Hub sales grew nearly 40% year-on-year and MEMS microphone sales grew 70% year-on-year offset by declines in legacy products

·    Overheads reduced by approximately 10%  fully effective from end of Q1 2014

·    Launched 18 new products and rapidly developed the Wolfson Partner Programme to expand the third party software ecosystem around Wolfson Audio Hubs

·    Continued to see higher value design-ins with adoption lead-in time increasing, but should result in longer adoption lifetime 

·    Continued expansion in China and now shipping to the majority of the indigenous smartphone and tablet OEMs

·    Strongest-ever position with Samsung, underpinned by the multi-year IP Licence and a Component Supply Agreement that has established Wolfson as a primary audio partner and a major component supplier. Product adoptions in phones, including the GALAXY S4 3G and GALAXY Win LTE smartphones, in a number of GALAXY cameras and in many tablet computers

Outlook:

In Q1 2014, the Company anticipates:

 

·    Along with normal seasonality, revenue will continue to be moderated by customer inventory run-downs

·    Revenue to be in the range of $28m to $36m, depending on customer new product ramps and product sell-through

·    Gross margin to increase to around 45% depending on product and customer mix

 

Looking further ahead:

 

·    Revenue growth is expected to be heavily weighted to the second half of the year as customers' new products launch with Wolfson's new Audio Hubs

·    Wolfson expects to benefit as new LTE platforms come to market  

·    Gross margin is expected to improve as mix shifts to higher margin Audio Hubs

·    A lower cost base, coupled with expected improvements in gross margin and a return to revenue growth, support a determined push to full year profitability

·    Wolfson's addressable market continues to increase as smart device applications, requiring Audio Hub and MEMS microphone products, proliferate; more components and functions are integrated into Wolfson's advanced Audio Hub platform; and the number of multi-microphone applications accelerates

 

Commenting on the results, Mike Hickey, CEO of Wolfson Microelectronics, said:

 

"Overall, looking back on a year where we anticipated strong growth, we were disappointed with full year revenue that ended flat year-on-year, with strong sales in the first half being offset by a weaker second half performance. This was caused by a faster-than-anticipated transition from 3G to 4G (LTE) smartphones, which benefited a competitor that was also the dominant supplier of the LTE platforms deployed in 2013, and a very volatile end market environment.

 

"We expect to resume our growth trajectory in the second half of 2014 as customer phone inventories unwind; customers' new products launch with Wolfson's next generation, higher content Audio Hubs; and we benefit as new LTE platforms come to market. We have secured a $25m bank facility to support this anticipated growth."

 

 

* Underlying full year results exclude: charges for the amortisation of acquired intangible assets (2013: $1.4m; 2012: $1.7m) and share-based compensation charges, including associated payroll taxes (2013: $1.6m; 2012: $3.3m); an exceptional charge (2013: $0.6m; 2012: $1.4m). Also, in 2013, severance costs and asset write-down expense of $2.4m and $1.7m respectively are excluded (2012: $nil). The term "underlying" is not defined in IFRS and therefore may not be comparable with similarly titled measures reported by other companies. Underlying measures are not intended as a substitute for, or a superior measure to, IFRS measures.

** After exceptional charge for 2013 of $0.6m (2012: after exceptional charge of $1.4m) of which $nil in Q4 2013 (Q4 2012: $1.4m charge).

 

 

 

 

 

 



 

Enquiries:

 

Wolfson Microelectronics


Mike Hickey, CEO

Mark Cubitt, CFO

020 7618 9100 On the day

0131 272 7000 Thereafter



Luther Pendragon


Harry Chathli, Claire Norbury

020 7618 9100

 

 

 

Mike Hickey, CEO, and Mark Cubitt, CFO, will be hosting a presentation to investors and analysts at 0900 GMT at JP Morgan, Holborn Bars, 138-142 Holborn, London EC1N 2NQ. An audio webcast of the Wolfson Microelectronics plc Full Year Results presentation can be heard LIVE on Wednesday 5 February 2014 from 0900 GMT via: www.wolfsonmicro.com/investor

 

Additionally, there is a dial-in facility: UK free phone: 0808 237 0035; US toll free: 1 866 928 6048; International: +44 (0)203 426 2886. A replay of the conference call is available from 1130 GMT on UK free phone: 0808 237 0026; International: +44 (0)203 426 2807 or US toll free: 1 866 535 8030; Access Code: 645539#



 

Operational Review

 

Full-year 2013 revenue was flat year-on-year at $179.4m (2012: $179.7m). Overall, strong sales in the first half of 2013 were offset by a weaker second half performance. This was mainly caused by a very volatile market environment, slow end customer product sell-through on a few key product launches for Wolfson and a faster-than-anticipated transition from 3G to 4G (LTE) smartphones. Whilst Wolfson products are fully compatible with all LTE platforms, a competitor that includes audio as part of its own overall LTE platform had a strong initial position given its dominance of the LTE platforms deployed in 2013.

 

During the year, sales to mobile phone applications grew by almost 3% year-on-year to $97.0m (2012: $94.0m), despite sales to the Company's second largest customer in 2012 reducing to zero in the second half of 2013 and down by 75% year-on-year. Mobile Audio Hubs sales grew strongly, up nearly 40% year-on-year to 75% of annual revenue. 

 

Mobile phone revenue, dominated mostly by smartphone applications, is the Company's largest contributor at 54% of revenue. Tablet sales were down around 40% year-on-year due to customer sell-through issues in an increasingly competitive market.

 

MEMS microphone revenue grew 70% year-on-year to around 5% of total 2013 revenue. MEMS microphone production for second generation products ramped strongly, and a number of successful design-ins for MEMS microphones are expected to have a material impact on revenue in 2014.

 

Sales to home audio applications increased, driven predominantly by strong sales in televisions. Gaming increased, as expected, due to the launch of brand leaders' next-generation gaming consoles. Sales to digital still cameras, portable media players and portable navigation devices were down year-on-year, primarily due to the continued convergence of these applications into smartphones and tablets.

 

Revenue from legacy products continued to decline and represented less than 20% of total 2013 revenue, with most applications now fully transitioned to the fast-growing Mobile Audio Hubs and MEMS microphone product lines.

 

In 2013, the Company secured over 120 significant new design-ins, of which almost 90% were for its audio solutions and 9% were for its MEMS microphone products. Design-ins now tend to be higher content and addressed at a system level. This gives longer lead-time, higher individual value, increased 'stickiness' and longer lifetime. These design-ins were predominantly for mobile phones, smartphones, tablets, gaming and, increasingly, for other smart devices (including voice command solutions for domestic appliances) as well as for home audio devices and automotive in-car infotainment systems.

 

The Company's addressable market is growing fast as its audio solutions address a greater value share of the end-product bill of materials. Audio Hubs are increasing in content, including adding Sensor Hub functionality and delivering more user features, which is boosting their selling prices. There is also a proliferation of smart devices, including devices on the person (wearables, mobile phones, tablets), in the home ('Internet of Things') and in the car, many of which are voice-controlled or require advanced audio or real world interface solutions that can be delivered by Wolfson Audio Hubs and MEMS technologies. These factors, coupled with an increasing number of multi-microphone applications, means Wolfson now estimates that its addressable market will grow to around $7bn by 2016, with a compound annual growth rate of 50% from 2011 to 2016.

 



 

Product Development

Wolfson launched 18 new products in 2013. Eight devices were added to the Company's family of Audio Hubs. These included theWM8280, a high performance low power Audio Hub solution with audio digital signal processor (DSP) and class-leading earpiece and stereo headphone ANC, enabling a reduction in background noise by up to 90%. This product is the ideal platform to deliver 'always on' voice control for smartphones and other devices at ultra-low power, removing the need for physical button-push activation, as required in current voice control applications. Wolfson also introduced the WM5102S Audio Hub solution with innovative Master Hi-Fi filters to bring premium high fidelity 24-bit 192 kHz audio playback to mobile devices, enabling consumers to experience the depth, richness and clarity of studio master recordings.

 

Wolfson's category-defining Audio Hubs, currently in their third generation having moved down the geometry nodes, have now become an integration platform in end consumer products. By integrating discrete components from the audio signal paths in consumer products into its Audio Hubs, Wolfson can reduce the overall product bill of material for customers while, at the same time, providing a powerful, low battery drain, processing platform to add advanced differentiating features. In this way, Wolfson is able to add features, increase its share of board functions and attract higher selling prices whilst reducing overall end product costs. As a result, as high-end smartphone features go down the smartphone pricing tiers, Wolfson Audio Hubs offer very competitive feature / cost trade-off options at all smartphone price tiers.

 

Wolfson increased its MEMS microphone family with the launch of four new high performance matched analogue microphones in small footprint packages. These offer high signal-to-noise ratio (SNR), low power consumption and tight sensitivity tolerances, making them ideal for multi-microphone applications. 

 

In addition, Wolfson announced six new products for its Ez2 suite of software solutions, which run on Wolfson's existing Audio Hub products, such as the WM8280, and deliver a wide range of end user features. The Ez2 suite includes software features that uniquely combine to provide a complete 'mouth-to-ear' audio experience.

 

The six new products introduced in 2013 are as follows:

·    Ez2 control integrates Sensory's TrulyHandsfree Voice Control to deliver 'always on' voice control for smartphones and other devices at ultra-low power, removing the need for physical button-push activation as required in current voice control applications

·    Ez2 hear Rx ANC delivers up to 20dB of noise reduction during mobile calls and, when integrated into a smartphone or tablet, removes the need for expensive noise cancelling headsets, as low-cost headsets with one additional MEMS microphone built-in to each bud will provide a real cost-effective in-box noise cancellation headset solution

·    Ez2 listen allows the user to experience hi-fi audio from mobile devices. Wolfson overcomes compromised speakers in portable products with Ez2 listen, including many sound enhancement features; for example, 5.1 Virtual Surround Sound, base and treble boost to allow music to be enjoyed at the highest quality

·    Ez2 grouptalk delivers outstanding quality hands-free speakerphone calling experience from a smartphone or tablet. Whether it is a one-to-one call, or a group call, Ez2 grouptalk software enables those speaking on a hands-free call to move up to five metres away from the device and their voices will still be picked up perfectly clearly, regardless of external environment noise, resulting in rich, clear conversations

·    Ez2 facetalk enables outstanding audio quality during video calls on smartphones, tablets and also PCs and TVs, ideal when in a noisy office or living room

·    Ez2 record enables richer, clearer, stereo-widened sound to be recorded on mobile devices and reduces the audibility of self-generated noise from microphones and other device equipment such as zoom lenses, processing the audio signal to ensure that the sound captured from the environment is as natural as possible 

 

Product Adoption by Existing and New Customers

Adoption of Wolfson's audio products by existing and new customers continued to grow in 2013, where progress was made particularly in mobile phones, smartphones and tablets:

·    Samsung selected a Wolfson Audio Hub for its new GALAXY S4 smartphone, GALAXY Win LTE phone, its latest range of GALAXY cameras, and many new tablet computers

·    Samsung also selected a Wolfson DAC for its new ATIV Book 9 2014 Edition laptop

·    First deployment of a Wolfson Audio Hub alongside a Qualcomm application processor and LTE baseband modem, with Sharp adopting Wolfson's WM5102 for its new range of AQUOS smartphone and tablet devices

·    First deployment of Wolfson's WM5102 Audio Hub with on-board transmit-path and receive-path noise reduction software and Wolfson's ANC technology in the WM2000, alongside an Intel® Atom Clover Trail+ processor, in a flagship smartphone, with Lenovo selecting Wolfson for its latest flagship smartphone, the IdeaPhone K900

·    In addition to Lenovo and other current Chinese customers, a further nine Chinese electronics manufacturers, giving a total of fourteen, selected Wolfson audio solutions for their new smartphones. This increases Wolfson's participation in the Chinese smartphone market, which is the world's largest and fastest-growing smartphone market, and Wolfson now ships to the majority of the indigenous Chinese mobile phone manufacturers

·    A Tier 1 manufacturer has selected a Wolfson audio solution for its latest tablet

·    Two major Japanese electronics companies selected Wolfson audio solutions for their latest smartphones and tablet

·    Vestel, a Turkish consumer electronics and professional appliances manufacturing company, selected a Wolfson Audio Hub for a range of its tablet computers

 

Market penetration also continued to increase in other applications with many new Wolfson product adoptions launched, including:

·    Two leading-brand manufacturers selected Wolfson's audio solution for their next generation of gaming products

·    LG adopted Wolfson's Audio Hub solution for its latest voice-activated range of Roboking vacuum cleaners and voice-controlled refrigerators

·    A Chinese mobile headset manufacturer selected Wolfson's reference design ANC headset for its latest product

·    Sony selected a Wolfson high performance audio solution for its new portable headphone amplifier

·    Three Japanese multinational corporations selected Wolfson audio solutions for their latest home audio products

·    Three Japanese digital still camera companies selected Wolfson audio solutions for their latest models

·    Two major Japanese car audio manufacturers and three major Chinese car audio manufacturers selected Wolfson's audio solutions for their car infotainment systems

·    A leading consumer electronics manufacturer selected Wolfson audio technology for its latest range of Blu-ray players

·    A leading Chinese electronics manufacturer selected Wolfson audio technology for its latest digital video camera

·    A leading Chinese developer of Global Positioning System (GPS) technology selected Wolfson audio technology for its latest portable navigation device

·    A global computer OEM selected Wolfson's imaging solution for its latest printer

 

Wolfson Partner Programme

Building on Wolfson's ultra-low power silicon hardware platforms, the Company has entered into several collaborative programmes to expand Wolfson's audio solutions and offer customers a variety of options to differentiate their products across the tiers, including:

 

·    Waves Audio, a world-leading developer of software-based audio signal processing tools, porting its MaxxAudio® Mobile sound processing software onto Wolfson's WM0011 audio digital signal processor (DSP). This solution helps to bring exceptional audio quality and extended playback time to laptops, tablets and mobile devices

 

·    Sensory, a leader in speech technology for consumer products, providing its TrulyHandsfree Voice Control solution for Wolfson's Ez2 control software feature to deliver 'always on' voice control for smartphones and other devices at ultra-low power, removing the need for physical button-push activation as required in current voice control applications

 

·    Elliptic Labs, a leader in ultrasonic touchless gesturing for consumer electronics devices, porting its ultrasonic gesture control solution onto Wolfson's WM8280 audio solution designed for smartphones and tablets

 

·    Fortemedia, a leader in voice processing technology, providing its ForteVoice software for Wolfson's WM8280 audio DSP platform. This partnership delivers innovative new experiences to smartphone and tablet manufacturers and users, utilising Fortemedia's advanced multi-microphone voice processing technology

 

·    NXP Software, a world leader in mobile voice and multimedia software, porting its LifeVibes VoiceExperience 4.0 technology onto Wolfson's WM8280 Audio Hub, using Wolfson's industry-leading Audio Digital Signal Processor (ADSP) platform, offering a solution for mobile devices that provides natural speech for any calling use cases, including speakerphone calls, even in the noisiest environments

 

·    Symphony Teleca (STC), a global innovation and development services company, became a software professional services partner. The engagement between Wolfson and STC enables software from Wolfson, Wolfson's customers or other third-parties to be successfully ported onto Wolfson's hardware platforms - such as the WM8280 Audio Hub solution - and helps to reduce the time-to-market

 

·    ComHear Inc., an audio processing and wearables company, teamed up with Wolfson to deliver wonderfully rich and clear audio experiences for the wearable consumer audio space. The first product to be released, a Wolfson reference design headset using ComHear's innovative EarPuff® earbuds, features a unique combination of both companies' technologies, and integrates ComHear's Kinetic Audio Processing (KAP) software onto Wolfson's WM8280 Audio Hub solution with ambient noise cancellation (ANC). The headset is especially adapted for wearable presentation devices such as ComHear's Playbutton, a fully customisable MP3 digital music player in a branded, wearable button



 

Financial Review

 

The financial results of the Group for the 52 week period ended 29 December 2013 are summarised in the table below. 

 




52 week period ended 29 December 2013

52 week period ended 30 December 2012




            $m

% revs

            $m







Revenue


179.4


179.7








Gross profit (IFRS)


76.0

42.3 %

84.2






Overheads






Research & Development

(54.2)

30%

(51.1)


Distribution & Selling

(21.9)

12%

(23.3)


Administration


(12.5)

7%

(12.7)







Underlying* operating  loss

(12.6)

-7%

(2.9)

-2%








Share-based compensation

(1.6)

1%

(3.3)


Amortisation charges

(1.4)

1%

(1.7)


Severance recognised in overheads

(2.4)

1%

-


Asset write down recognised in overheads

(1.7)

1%

-


Exceptional item:





- pension past service cost    

(0.6)

-

(1.4)







Operating loss


(20.3)

-11%

(9.3)

-5%







Net financing expense


(0.1)


(0.1)







Loss before tax


(20.4)

-11%

(9.4)

-5%







Income tax credit


4.0


3.3







Loss after tax


(16.4)

-9%

(6.1)

-3%







Diluted loss per share (cents)


(14.1)


(5.2)

Underlying diluted loss per share (cents)


(9.0)


(1.0)

Average £/$ exchange rate


             1.59


               1.55 


 

* Underlying results exclude: charges for the amortisation of acquired intangible assets (2013: $1.4m; 2012: $1.7m) and share-based compensation charges, including associated payroll taxes (2013: $1.6m; 2012: $3.3m) and an exceptional charge (2013: $0.6m; 2012: $1.4m).  Also, in 2013, severance costs and asset write-down expense of $2.4m and $1.7m respectively are excluded (2012: $nil). The term "underlying" is not defined in IFRS and therefore may not be comparable with similarly titled measures reported by other companies.  Underlying measures are not intended as a substitute for, or a superior measure to, IFRS measures.  Reconciliations of underlying measures to IFRS measures for operating expenses and operating loss in respect of each period are provided in the tables below.

 

 

 


Operating expenses: reconciliation from Underlying to IFRS

Underlying

Share-based compensation

(including associated payroll taxes)

Amortisation  of acquired intangible assets

Severance costs

Asset write down

Exceptional charge

IFRS

           

$m

$m

$m

$m

$m

$m

$m

52 weeks ended 29 December 2013








Distribution and selling costs

(21.9)

(0.4)

-

(0.6)

(1.7)

-

(24.6)

Research & Development expenses

(54.2)

(1.1)

(1.4)

(1.7)

-

-

(58.4)

Administrative expenses

(12.5)

(0.1)

-

(0.1)

-

-

(12.7)

Past service cost on defined benefit plan

-

-

-

-

-

 (0.6)

(0.6)


_______

______

_______

_______

_______

_______

_______


(88.6)

(1.6)

(1.4)

(2.4)

(1.7)

(0.6)

(96.3)


             

             

             

             

             

             

             









52 weeks ended 30 December 2012








Distribution and selling costs

(23.3)

(0.6)

-

-

-

-

(23.9)

Research & Development expenses

(51.1)

(2.1)

(1.7)

-

-

-

(54.9)

Administrative expenses

(12.7)

(0.6)

-

-

-

-

(13.3)

Past service cost on defined benefit plan

-

-

-

-

-

 (1.4)

(1.4)


_______

______

_______

_______

_______

_______

_______


(87.1)

(3.3)

(1.7)

-

-

(1.4)

(93.5)


             

             

             

             

             

             

             


















Operating loss: reconciliation from Underlying to IFRS 

 



52 weeks ended

52 weeks ended



29 December 2013

30 December 2012

           


$m

$m





Underlying operating loss 


(12.6)

(2.9)

Share-based compensation and related payroll taxes

Amortisation of acquired intangible assets


(1.6)

(1.4)

(3.3)

(1.7)

Severance costs recognised in overheads


(2.4)

-

Asset write down recognised in overheads


(1.7)

-

Exceptional charge


(0.6)

(1.4)



_______

_______

Operating loss (IFRS)


(20.3)

(9.3)



_______

_______





 

Segmental Performance

Audio Hubs Products

The Company focuses on high performance Audio Hubs, including Audio System-on-Chip (SoC), noise reduction and sound enhancement software. Revenue at $136.4m in 2013 accounted for 76% of Company revenue (2012: 75%). Within this segment, Audio Hubs sold into mobile applications increased by almost 40%, whilst Audio Hubs in non-mobile applications fell by 8%, reflecting the strong growth in smartphones and tablet computers, but weaker demand in most other application markets.

 

Gross margin for this reportable segment fell to 41.1% in 2013 from 46.6% in 2012, reflecting a very competitive price for one particular part when sold to one particular customer, a trend which is now reversing as volume sales of that part are replaced by the Company's latest Audio Hub products with higher gross margins.

 

Discrete and Power Products

This segment comprises simpler audio products (ADCs, DACs), power management integrated circuits, imaging parts and MEMS microphones. Revenue at $43.0m in 2013 accounted for 24% of Company revenue (2012: 25%) and declined by 5% in the year from $45.5m in 2012. Within this segment, MEMS microphones grew 70%, to revenue of $8.8m, equating to 5% of total Company revenue. In Q4 2013, MEMS microphones accounted for 10% of total Company revenue compared with less than 2% in Q1 2013. The other components of this segment fell in the year by 15%, suffering from a lack of differentiation and further commoditisation. This was the focus of the recent Company restructure, resulting in Wolfson no longer investing in these products, apart from MEMS microphones.

 

Gross margin for this reportable segment fell to 46.7% in 2013 from 47.5% in 2012, reflecting the higher proportion of MEMS sales where the Company has experienced production ramp issues impacting on initial yields and manufacturing variances. As the process matures, this is expected to improve.

 

Other Products

Other Products comprises the sale of complete headset products and royalties thereon. This segment is fundamentally different from the other segments as it relates to sales of finished consumer products rather than the sale of integrated circuit components. Revenue in both 2013 and 2012 represented less than 1% of Company revenue.

 

Revenue

Company revenue in 2013 was broadly flat at $179.4m (2012: $179.7m), but this comprised very strong growth of 32% in the first half of the year, followed by a weak second half with revenue down 21% as demand from key customers slowed markedly, compared with the same periods in 2012. The largest customer in 2013 represented 47% of revenue (2012: 32%), ranging from 62% in Q1 2013 to 32% of revenue in Q4 2013.

 

Gross Profit

Company gross profit in 2013 was $76.0m, down 10% from the previous year (2012: $84.2m), mirroring the fall in gross margin from 46.9% to 42.3%. This was primarily impacted by a high volume part sold to one customer, combined with a higher proportion of the business in 2013 being lower margin MEMS products. Gross margins are already recovering to nearer traditional levels, as higher value Audio Hub products ramp, a profile which is expected to continue as the Company moves through 2014.

 

Operating Expenses

Total underlying overheads, excluding amortisation of acquired intangibles, share-based compensation charges (and associated payroll taxes), severance, asset write offs and exceptional charge amounted to $88.6m in 2013, compared with $87.1m in 2012, an increase of $1.5m, or 1.7%. As a result of the restructure announced in Q4 2013, the projected underlying overheads in 2014 are expected to fall to around $80m, with any variability primarily in the research and development spend. The individual overhead categories are explained further in the following paragraphs.

 

The Company's continuous investment in research and development and best-in-class engineering tools is imperative to Wolfson's growth strategy and long-term competitiveness. Expenditure on research and development, excluding charges such as amortisation and share-based compensation charges, increased by 6% to $54.2m or 30% of revenue (2012: $51.1m or 29% of revenue). The increase in this category of costs of $3.1m in 2013 primarily reflects the greater complexity of the products now being designed by the Company, resulting in higher mask costs on lower technology node tape-outs, software and subcontract DSP costs relating to these newer products and costs associated with MEMS products. For 2014, research and development costs are expected to fall to around $48m post the restructure, spread fairly evenly through the year.

 

Underlying distribution and selling expenses fell by $1.4m to $21.9m or 12% of revenue (2012: $23.3m or 13% of revenue). This primarily reflects supply chain efficiencies. For 2014, the expected cost is around $20m post the restructure, with a slight weighting to the second half of the year on freight and packaging costs associated with increased forecast volume.

 

Underlying administrative expenses were marginally lower in 2013, at $12.5m or 7% of revenue (2012: $12.7m or 7% of revenue). For 2014, administrative expenses are expected to be around $12m, spread evenly through the year.

 



 

Operating Loss

Underlying operating loss was $12.6m (before severance, asset write offs and exceptional charge), compared with a loss of $2.9m in 2012 before exceptional charge. The IFRS operating loss was $20.3m in 2013 (2012: $9.3m loss).

 

Share-based compensation charges, calculated in accordance with IFRS 2, and associated payroll taxes amounted to $1.6m in 2013, compared with $3.3m in 2012. The decrease reflects new share-based awards in 2013 being offset by a credit of $2.0m recognised in respect of the executive long-term incentive plan awards granted in 2011 that will lapse due to the non-market performance conditions not being achieved. Based on the share price as at 29 December 2013 and planned share-based awards for 2014, the share-based compensation charge in 2014, including the associated payroll taxes, is estimated to be approximately $4m, slightly second-half weighted.

 

Total intangible asset amortisation charges recognised in 2013, primarily in respect of the Dynamic Hearing acquisition in 2011, amounted to $1.4m (2012: $1.7m). The charge for 2013 is expected to fall to $1.2m, spread evenly through the year.

 

Severance charges of $2.4m (Q1 2013: $1.5m; Q4 2013: $0.9m) were incurred firstly in Q1 2013 to allow for a skills transition to a higher proportion of software engineers and then with the restructure in Q4 2013 to lower the overall cost base of the Company. An asset write down (impairment loss on property, plant and equipment) of $1.7m was recognised in Q4 2013 on redundant assets associated with MEMS. Also, an exceptional charge of $0.6m (in addition to the $1.4m charge in Q4 2012) was booked in Q1 2013 for the accounting cost of the enhanced transfer value in respect of the defined benefit pension scheme.

 

Financial income amounted to $0.1m, with finance expenses of $0.2m, resulting in net finance expense in 2013 of $0.1m (2012: $0.1m net expense). These sums include non-cash income and expenses associated with the defined benefit pension scheme and notional interest on the acquisition deferred consideration. The net interest income, in cash terms, was $0.1m (2012: $0.2m).

 

Taxation

The total effective tax rate was 19.4% credit (2012: 35% credit), primarily reflecting the benefit from allowances on research and development expenditure, offset by certain expenses that are not deductible for tax purposes and the lower UK corporate tax rate applicable to the recognition of deferred tax. The effective tax rate will benefit from the introduction of the UK Patent Box regime from 1 April 2013, although no credit has been recognised at this stage.

 



Cash Flow & Balance Sheet

Summarised Consolidated Cash Flow



52 weeks ended 29 December 2013

2013

2012


$m

$m

Loss before tax

(20.4)

(9.4)

Depreciation & amortisation

11.8

9.5

Net finance expense

0.1

0.1

(Loss)/earnings before interest, tax, depreciation and amortisation

(8.5)

0.2

Share-based compensation charge

1.7

2.6

Change in working capital:



-     decrease / (increase) in inventories/receivables

9.5

(10.1)

-     (decrease) / increase in payables/provisions

(13.9)

10.6

Payments to Defined Benefit Pension scheme

(2.1)

-

Foreign exchange

0.3

(0.3)

Income taxes received

0.1

-

Net cash flow from operating activities

(12.9)

3.0

Capital expenditure

(7.5)

(6.1)

Free cash flow

(20.4)

(3.1)

Proceeds of new issue shares

0.2

0.6

Deferred consideration 

(1.8)

(3.2)

Interest received

-

0.2

Foreign exchange (losses) / gains

(0.1)

0.1

Net cash outflow

(22.1)

(5.4)

Opening cash balances*

48.0

53.4

Closing cash balances*

25.9

48.0

*includes cash and cash equivalents and short-term deposit balances

Cash and short-term deposits amounted to $25.9m at 29 December 2013 (30 December 2012: $48.0m).

 

Net cash outflow from operating activities was $12.9m (2012: $3.0m inflow), driven by trading losses, working capital outflow and pension deficit correction payments.

 

The Company paid $1.8m (2012: $3.2m) for deferred consideration as acquisition milestones were achieved, with a further payment of $0.8m to be made in Q1 2014, which is likely to be the final payment.

 

Cash outflow on capital expenditure amounted to $7.5m (2012: $6.1m) and relates primarily to software licenses on CAD (Computer Aided Design) tools.

 

The value of inventory held at 29 December 2013 was $24.2m or 91 days inventory (30 December 2012: $24.7m or 65 days inventory). It is anticipated that inventory levels will be in the range of 70 to 120 days in 2014 in order to meet fluctuations in demand. Trade receivables amounted to $25.5m or 51 days sales outstanding at 29 December 2013 (30 December 2012: $33.9m or 49 days sales outstanding). It is expected that the number of days sales outstanding will average around 50 in 2014. Trade payables at 29 December 2013 amounted to $11.0m or 29 days purchases which is unusually low and reflects the slowdown in fresh inventory builds, and consequential reduction in trade payables balance, as a result of the fall off in demand from key customers (30 December 2012: $24.3m or 52 days purchases). It is anticipated that the number of days purchases will be in the range of 30 to 50 days in 2014.

 

Treasury and Foreign Exchange

Nearly all revenue and cost of goods sold are denominated in US dollars, so there is a natural and effective hedge down to the gross margin level. However, approximately 70% of operating costs are denominated in Sterling, and this represents a structural currency exposure derived from the UK base of the Company. During 2013, there was currency hedging in place throughout the year, ranging up to twelve months forward in time, with an average rate over the year of $1.59 to £1 (2012: $1.55 to £1). It is estimated that during 2013 and going into 2014, every one cent decrease in the US dollar/Sterling exchange rate (i.e. weakening of Sterling) has the effect of decreasing the Company's overheads and increasing operating result by $300,000 on an annualised basis. To give some short-term certainty, the vast majority of the Sterling-dominated overheads for all of 2014 have been hedged at an average rate of $1.56 to £1 (ranging from 1.53 in H1 to 1.60 in H2), resulting in a reduction in overheads cost of around $1m in 2014 over 2013 purely due to exchange rates.

 

Defined Benefit Pension Scheme

During the year a $2.1m payment was made into the closed defined benefit pension scheme (2012: nil) in respect of the cost of the Enhanced Transfer Value (ETV) offer. The impact of the accepted ETV offers was to reduce the assets and liabilities of the scheme by around a third, equivalent to $11m.  Under the schedule of contributions agreed with the Trustees of the scheme, a further $1.6m payment is due in April 2014.

 

 



Q4 2013

 

The Group's financial performance for Q4 2013 is summarised below.

 




Q4 2013 (Unaudited)

Q3 2013 (Unaudited)

Q4 2012 (Unaudited)




$m

% revs

$m

% revs

$m

% revs

Revenue


42.0


43.9


56.1











Gross profit (IFRS)


17.7

42.2%

19.2

43.8%

24.6

43.9%

Overheads









Research & Development

(13.4)

32%

(13.5)

31%

(13.7)

24%


Distribution & Selling

(5.4)

13%

(5.7)

13%

(6.1)

11%


Administration


(3.4)

8%

(3.0)

7%

(3.3)

6%










Underlying* operating  (loss) / profit

(4.5)

-11%

(3.0)

-7%

1.5

3%











Share-based compensation

(1.1)

3%

0.3

-1%

0.8

-1%


Amortisation charges

(0.3)

1%

(0.3)

1%

(0.4)

1%


Severance recognised in overheads

(0.9)

2%

-

-

-

-


Asset write down recognised in overheads

(1.7)

4%

-

-

-

-


Exceptional item :








-pension past service cost


 -

-

 -

 -

(1.4)

2%

Operating (loss) / profit


(8.5)

-20%

(3.0)

-7%

0.5

1%










Net financing expense


-


-


(0.4)











(Loss) / profit before tax


(8.5)

-20%

(3.0)

-7%

0.1

-










Income tax credit


1.6


0.5


1.0











(Loss) / profit after tax


(6.9)

-16%

(2.5)

-5%

1.1

2%










Average £/$ exchange rate


 1.60 


 1.60 


    1.55











 

*Underlying Q4 results exclude: charges for the amortisation of acquired intangible assets (Q4 2013: $0.3m; Q4 2012: $0.4m) and share-based compensation charges, including associated payroll taxes (Q4 2013: $1.1m; Q4 2012: $0.8m credit). In Q4 2012 an exceptional charge of $1.4m was excluded (Q4 2013: $nil). Also, in Q4 2013, severance costs and asset write-down expense of $0.9m and $1.7m are excluded (Q4 2012: $nil). Underlying results are reconciled to the results reported in accordance with IFRS in notes 5 and 6 to the financial information.

 

Revenue for Q4 2013 amounted to $42.0m, a decline of 4% from Q3 2013 revenue of $43.9m (Q4 2012: $56.1m). The 25% decline against the prior year reflects the sharp slowdown at certain key customers from the middle of the year. The largest customer represented 32% of Q4 2013 revenue, compared with 35% in Q3 2013 and 36% in Q4 2012.

 

Gross profit was $17.7m, compared with $19.2m in Q3 2013 (Q4 2012: $24.6m). In Q4 2013 gross margin fell to 42.2% from 43.8% in Q3 2013 (Q4 2012: 43.9%) primarily as a result of the higher proportion of MEMS business. The overall gross margin is expected to return to near traditional levels as the Company progresses through 2014.

 

Total underlying operating expenses were $22.2m in Q4 2013, flat on Q3 2013 (Q4 2012: $23.1m). Excluded from underlying expenses are: i) Share-based compensation, calculated in accordance with IFRS 2, and associated payroll taxes, which amounted to a $1.1m charge in Q4 2013, against a credit of $0.3m in Q3 2013 due to the lapsing of executive awards (Q4 2012: $0.8m credit); and ii) Amortisation charges relating to the intangible assets arising from acquisitions in prior years, which amounted to $0.3m in Q4 2013, the same as Q3 2013 and $0.4m in Q4 2012; and (iii) severance charge of $0.9m in Q4 2013 (Q3 2013: nil, Q4 2012: nil); and iv) an asset write down of $1.7m on redundant assets associated with MEMS (Q3 2013: nil, Q4 2012: nil).

 

Underlying operating loss in Q4 2013 was $4.5m, compared with a $3.0m loss in Q3 2013 (Q4 2012: $1.5m profit). This decline in the operating result, compared with Q3 2013, results from the lower revenues and slight fall in gross margins explained above.

 

The IFRS operating loss was $8.5m in Q4 2013 compared with a $3.0m loss in Q3 2013(Q4 2012: $0.5m profit), being adversely impacted by the severance and asset write down recognised in that period.

 

 

 

 

 

 




Condensed consolidated income statement









For the period ended 29 December 2013


2013



2012




52-week period from 31 December 2012 to 29 December 2013


52-week period from 2 January 2012

to 30 December 2012



Before exceptional charge

Exceptional charge

(note 4)

Total


Before exceptional charge

Exceptional charge

(note 4)

Total







(Restated)^


(Restated)^


Notes

$'000

$'000

$'000


$'000

$'000

$'000

Revenue

3

179,436

-

179,436


179,749

-

179,749

Cost of Sales


(103,457)

-

(103,457)


(95,536)

-

(95,536)



_______

_______

_______


_______

_______

_______

Gross profit

3

75,979

-

75,979


84,213

-

84,213

Distribution and selling costs

5

(24,604)

-

(24,604)


(23,902)

-

(23,902)

Research and development expenses

5

(58,334)

-

(58,334)


(54,839)

-

(54,839)

Administrative expenses

5

(12,731)

-

(12,731)


(13,382)

-

(13,382)

Past service cost on defined benefit plan

4

-

(600)

(600)


-

(1,400)

(1,400)



_______

_______

_______


_______

_______

_______

Operating loss

6

(19,690)

(600)

(20,290)


(7,910)

(1,400)

(9,310)










Financial income


95

-

95


258

-

258

Financial expenses


(178)

-

(178)


(271)

-

(271)



_______

_______

_______


_______

_______

_______

Net financing expense


(83)

-

(83)


(13)

-

(13)



_______

_______

_______


_______

_______

_______

Loss before tax


(19,773)

(600)

(20,373)


(7,923)

(1,400)

(9,323)

Income tax credit

7

3,815

138

3,953


2,946

322

3,268



_______

_______

_______


_______

_______

_______

Loss for the period attributable

to the Owners of the Company


(15,958)

(462)

(16,420)


(4,977)

(1,078)

(6,055)



               

               

               


               

               

               

Basic loss per share (cents)

8



(14.07)




(5.20)





               




               

Diluted loss per share (cents)

8



(14.07)




(5.20)





               




               

 

The results for the 52-week period ended 29 December 2013 and for the 52-week period ended 30 December 2012 have been extracted from the financial statements for those periods. These financial statements have been reported on by the Company's auditors.

^ Restated for change in accounting policy on adoption of IAS 19 (2011).  Refer to Note 1 (b).

Condensed consolidated income statement









For the period ended 29 December 2013


Q4 2013



Q4 2012



Q3 2013

(continued)


13-week period from 30 September 2013 to 29 December 2013

 

13-week period from 1 October 2012 to 30 December 2012

 

13-week period from 1 July 2013 to 29 September 2013





Before exceptional charge

Exceptional charge

(note 4)

Total







(Restated)^


(Restated)^





(Unaudited)


(Unaudited)

(Unaudited)

(Unaudited)


(Unaudited)


Notes

$'000


$'000

$'000

$'000


$'000

Revenue

3

42,027


56,063

-

56,063


43,925

Cost of Sales


(24,290)


(31,453)

-

(31,453)


(24,702)



_______


_______

_______

_______


_______

Gross profit

3

17,737


24,610

-

24,610


19,223

Distribution and selling costs

5

(7,528)


(5,638)

-

(5,638)


(5,684)

Research and development expenses

5

(14,957)


(14,056)

-

(14,056)


(13,833)

Administrative expenses

5

(3,774)


(3,066)

-

(3,066)


(2,709)

Past service cost on defined benefit plan

4

-


-

(1,400)

(1,400)


-



_______


_______

_______

_______


_______

Operating (loss) / profit

6

(8,522)


1,850

(1,400)

450


(3,003)










Financial income


7


7

-

7


10

Financial expenses


(19)


(363)

-

(363)


(44)



_______


_______

_______

_______


_______

Net financing expense


(12)


(356)

-

(356)


(34)



_______


_______

_______

_______


_______

(Loss) / profit before tax


(8,534)


1,494

(1,400)

94


(3,037)

Income tax credit

7

1,646


632

322

954


554



_______


_______

_______

_______


_______

(Loss) / profit for the period attributable

to the Owners of the Company


(6,888)


2,126

(1,078)

1,048


(2,483)



               


               

               

               


               

Basic (loss) / earnings per share (cents)

8

(5.90)




0.90


(2.13)



               




               


               

Diluted (loss) / earnings per share (cents)

8

(5.90)




0.89


(2.13)



               




               


               

The results for the 52-week period ended 29 December 2013 and for the 52-week period ended 30 December 2012 have been extracted from the financial statements for those periods. These financial statements have been reported on by the Company's auditors. The quarterly information is not audited.

^ Restated for change in accounting policy on adoption of IAS 19 (2011).  Refer to Note 1 (b).

 

Condensed consolidated statement of comprehensive income






For the period ended 29 December 2013

Q4 2013

Q4 2012

Q3 2013

2013

2012


13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July 2013 to 29 September 2013

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012



(Restated)^



(Restated)^


(Unaudited)

(Unaudited)

(Unaudited)




$'000

$'000

$'000

$'000

$'000







(Loss) / profit for the period

(6,888)

1,048

(2,483)

(16,420)

(6,055)


_______

_______

_______

_______

_______

Other comprehensive income:






Items that will never be reclassified to profit or loss:






Actuarial gain / (loss) on net defined benefit obligations

472

1,427

-

2,403

(504)

Increase in defined benefit liabilities recognised in accordance with IFRIC 14

(300)

-

-

(2,400)

-

Movement in unrecognised surplus on defined benefit plan

(301)

-

(107)

(2,236)

301

Deferred tax on net defined benefit items recognised in equity

(11)

(330)

(50)

398

16


_______

_______

_______

_______

_______


(140)

1,097

(157)

(1,835)

(187)


_______

_______

_______

_______

_______

Items that are or may be reclassified subsequently to profit or loss:






Foreign exchange translation differences on foreign operations

1

(12)

(2)

(5)

(2)

Effective portion of changes in fair value of cash flow hedges

765

(417)

3,091

1,768

773


_______

_______

_______

_______

_______


766

(429)

3,089

1,763

771


_______

_______

_______

_______

_______

Other comprehensive income for the period

626

668

2,932

(72)

584


_______

_______

_______

_______

_______

Total comprehensive income for the period attributable

to the Owners of the Company

(6,262)

1,716

449

(16,492)

(5,471)


              

              

              

              

              







 

The results for the 52-week period ended 29 December 2013 and for the 52-week period ended 30 December 2012 have been extracted from the financial statements for those periods. These financial statements have been reported on by the Company's auditors. The quarterly information is not audited.

^ Restated for change in accounting policy on adoption of IAS 19 (2011).  Refer to Note 1 (b).                                                                                   



 


Condensed consolidated balance sheet




As at 29 December 2013

As at 29 December 2013

As at 29 September 2013

As at 30 December 2012



(Unaudited)



$'000

$'000

$'000

Assets




Property, plant and equipment

20,501

22,848

24,142

Intangible assets

32,073

32,605

32,360

Deferred tax assets

17,403

15,851

13,386


_______

_______

_______

Total non-current assets

69,977

71,304

69,888


_______

_______

_______

Inventories

24,221

30,762

24,702

Trade and other receivables

28,899

29,896

37,805

Other investments, including derivatives

2,389

1,624

621

Short-term deposits

-

5,000

28,000

Cash and cash equivalents

25,886

21,674

19,974


_______

_______

_______

Total current assets

81,395

88,956

111,102


_______

_______

_______

Total assets

151,372

160,260

180,990


              

              

              

Equity




Issued share capital

194

194

194

Share premium account

61,430

61,347

61,253

Capital redemption reserve

503

503

503

Hedging reserve

2,389

1,624

621

Retained earnings

60,429

66,434

77,339


_______

_______

_______

Total equity attributable to equity holders of the parent

124,945

130,102

139,910


_______

_______

_______

Liabilities




Employee benefits

3,900

3,600

1,676

Other payables

483

367

1,622


_______

_______

_______

Total non-current liabilities

4,383

3,967

3,298


_______

_______

_______

Income tax payable

78

98

80

Trade and other payables, including derivatives

20,966

25,528

37,702

Provisions

1,000

565

-


_______

_______

_______

Total current liabilities

22,044

26,191

37,782


_______

_______

_______

Total liabilities

26,427

30,158

41,080


_______

_______

_______

Total equity and liabilities

151,372

160,260

180,990


              

              

              

 

The results for the 52-week period ended 29 December 2013 and for the 52-week period ended 30 December 2012 have been extracted from the financial statements for those periods. These financial statements have been reported on by the Company's auditors. The quarterly information at 29 September 2013 is not audited.



 

 

Condensed consolidated statement of changes in equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

Share premium

Capital redemption reserve

Hedging reserve

Retained earnings

Total Equity

 

$'000

$'000

$'000

$'000

$'000

$'000

Balance at 2 January 2012

193

60,699

503

(152)

80,541

141,784

 







Loss for the period, as restated

-

-

-

-

(6,055)

(6,055)

Other comprehensive income, as restated:







Actuarial loss on net defined benefit obligations

-

-

-

-

(504)

(504)

Movement in unrecognised surplus on defined benefit plan

-

-

-

-

301

301

Deferred tax on net defined benefit items recognised in equity

-

-

-

-

16

16

Foreign exchange translation differences on foreign operations

-

-

-

-

(2)

(2)

Effective portion of changes in fair value of cash flow hedges

-

-

-

773

-

773

 

______

______

______

______

______

______

Total comprehensive income for the period

ended 30 December 2012

-

-

-

773

(6,244)

(5,471)


______

______

______

______

______

______

Equity settled share-based payment transactions

-

-

-

-

2,626

2,626

Deferred tax on equity settled share-based payment transactions recognised in equity

-

-

-

-

423

423

Share options exercised by employees

1

554

-

-

-

555

Company shares acquired by employee trust

-

-

-

-

(7)

(7)

 

______

______

______

______

______

______

Total contributions by and distributions to owners of the Company

1

554

-

-

3,042

3,597

 

______

______

______

______

______

______

 







Balance at 30 December 2012

194

61,253

503

621

77,339

139,910

 

             

             

             

             

             

             

 







 

$'000

$'000

$'000

$'000

$'000

$'000

Balance at 31 December 2012

194

61,253

503

621

77,339

139,910

 







Loss
for the period

-

-

-

-

(16,420)

(16,420)

Other comprehensive income:







Actuarial
gain on net defined benefit obligations

-

-

-

-

2,403

2,403

Movement in unrecognised surplus on defined benefit plan

-

-

-

-

(2,236)

(2,236)

Increase in defined benefit liabilities recognised in accordance with IFRIC 14

-

-

-

-

(2,400)

(2,400)

Deferred tax on net defined benefit items recognised in equity

-

-

-

-

398

398

Foreign exchange translation differences on foreign operations

-

-

-

-

(5)

(5)

Effective portion of changes in fair value of cash flow hedges

-

-

-

1,768

-

1,768


______

______

______

______

______

______

Total comprehensive income for the period

ended 29 December 2013

-

-

-

1,768

(18,260)

(16,492)

 

______

______

______

______

______

______

Equity settled share-based payment transactions

-

-

-

-

1,674

1,674

Deferred tax on equity settled share-based payment transactions recognised in equity

-

-

-

-

(322)

(322)

Share options exercised by employees

-

177

-

-

-

177

Company shares acquired by employee trust

-

-

-

-

(2)

(2)

 

______

______

______

______

______

______

Total contributions by and distributions to owners of the Company

-

177

-

-

1,350

1,527

 

______

______

______

______

______

______

 







Balance at 29 December 2013

194

61,430

503

2,389

60,429

124,945

 

             

             

             

             

             

             

 



 

Condensed consolidated statement of cash flows

 

 

 

 

 

For the period ended 29 December 2013

Q4 2013

Q4 2012

Q3 2013

2013

2012

 

13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July

2013 to 29 September 2013

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December 2012

 

 

(Restated)^

 

 

(Restated)^

 

(Unaudited)

(Unaudited)

(Unaudited)

 

 

 

$'000

$'000

$'000

$'000

$'000

Cash flow from operating activities

 

 

 

 

 

(Loss) /profit for the period

(6,888)

1,048

(2,483)

(16,420)

(6,055)

Adjustments for:






Depreciation, amortisation and impairment loss on property, plant and equipment

4,280

2,111

2,550

11,839

9,499

Loss on disposal of property, plant and equipment

35

-

-

35

-

Foreign exchange loss / (gain)

74

(182)

(215)

292

(283)

Net financing expense

12

356

34

83

13

Equity-settled share-based payment expenses / (credits)

1,141

(651)

(353)

1,674

2,626

Income tax credit

(1,646)

(954)

(554)

(3,953)

(3,268)

 

______

______

______

______

______

 

(2,992)

1,728

(1,021)

(6,450)

2,532

Decrease / (increase) in inventories

6,541

624

4,248

481

(1,801)

Decrease / (increase) in trade and other receivables

1,001

(2,715)

877

9,059

(8,266)

(Decrease) / increase in trade and other payables

(2,724)

1,283

(4,375)

(12,457)

11,769

Decrease in provisions and employee benefits

(460)

(412)

(17)

(3,576)

(1,154)

 

______

______

______

______

______

Cash generated from / (absorbed by) the operations

1,366

508

(288)

(12,943)

3,080

Income tax (paid) / received

(40)

(28)

(9)

64

(31)

 

______

______

______

______

______

Net cash inflow / (outflow) from operating activities

1,326

480

(297)

(12,879)

3,049

 

______

______

______

______

______

Cash flow from investing activities






Interest received

10

49

10

106

225

Acquisition of property, plant and equipment

(591)

(477)

(619)

(1,945)

(2,360)

Acquisition of intangible assets

(1,586)

(665)

(2,368)

(5,812)

(3,788)

Proceeds from the sale of property, plant and equipment

180

-

-

180

-

Deferred consideration on acquisitions in prior periods

(173)

(800)

-

(1,773)

(3,200)

Amounts withdrawn from short term deposits

5,000

7,000

3,000

28,000

5,000

 

______

______

______

______

______

Net cash inflow / (outflow) from investing activities

2,840

5,107

23

18,756

(4,123)

 

______

______

______

______

______

Cash flow from financing activities






Proceeds from the issue of share capital

83

82

3

177

555

Company shares acquired by employee trust

-

-

-

(2)

(7)

Interest paid

-

(6)

(4)

(14)

(29)

 

______

______

______

______

______

Net cash inflow / (outflow) from financing activities

83

76

(1)

161

519

 

______

______

______

______

______

Net increase / (decrease) in cash and cash equivalents

4,249

5,663

(275)

6,038

(555)

Cash and cash equivalents at start of period

21,674

14,233

21,847

19,974

20,409

Effect of exchange rate fluctuations on cash held

(37)

78

102

(126)

120

 

______

______

______

______

______

Cash and cash equivalents at end of period

25,886

19,974

21,674

25,886

19,974

 

             

             

             

             

             

Cash and cash equivalents at end of period

25,886

19,974

21,674

25,886

19,974

Short-term deposits at end of period

-

28,000

5,000

-

28,000

 

______

______

______

______

______

Total cash and short-term deposits at end of period

25,886

47,974

26,674

25,886

47,974

 

             

             

             

             

             

The results for the 52-week period ended 29 December 2013 and for the 52-week period ended 30 December 2012 have been extracted from the financial statements for those periods. These financial statements have been reported on by the Company's auditors.

The quarterly information is not audited. ^ Restated for change in accounting policy on adoption of IAS 19 (2011).  Refer to Note 1 (b).

Notes to the preliminary announcement

 

1.   Basis of preparation

 

The condensed consolidated financial information set out above contains the financial information of Wolfson Microelectronics plc (the "Company") and its subsidiaries (together referred to as the "Group") for the thirteen and fifty-two week periods ended 29 December 2013. The comparative periods are the thirteen and fifty-two week periods ended 30 December 2012.

 

This preliminary announcement was authorised for issue by the Board of Directors on 4 February 2014.

 

A copy of this preliminary announcement is available on the Company's website at www.wolfsonmicro.com.

 

The financial information set out in this announcement for the fifty-two week period ended 29 December 2013 and the fifty-two week period ended 30 December 2012 does not constitute the Company's statutory accounts for those periods within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the fifty-two week period ended 30 December 2012 are available on the Company's website at www.wolfsonmicro.com and have been delivered to the Registrar of Companies, and those for the fifty-two week period ended 29 December 2013 will be delivered in due course. Both sets of accounts have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The auditors have reported on those financial statements; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

 

The financial information set out in this announcement has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("adopted IFRS"). The financial information is presented in US dollars rounded to the nearest thousand.

 

Except as described below under 'Changes in accounting policies', this condensed set of financial information has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the fifty-two week period ended 30 December 2012.

 

As permitted by IAS 1: Presentation of Financial Statements, the Group has disclosed additional information in respect of exceptional items on the face of the income statement, for the fifty-two week period ended 29 December 2013 and the fifty-two week period ended 30 December 2012, in order to aid understanding of the Group's financial performance. An item is treated as exceptional if it is considered that by virtue of its nature, scale of incidence and being of such significance that separate disclosure is required for the financial statements to be properly understood.

 

a)     Use of estimates and judgements

 

In the process of applying the Group's accounting policies, management necessarily makes judgements and estimates that have a significant effect on the amounts recognised in the condensed financial information. Actual results may differ from these estimates. Changes in the assumptions underlying the estimates could result in a significant impact to the financial information. The most critical of these accounting judgement and estimation areas were noted in the Company's consolidated financial statements for the fifty-two week period ended 30 December 2012.

 

b)     Changes in accounting policies

 

The following changes in accounting policies are reflected in the Group's consolidated financial statements as at, and for the fifty-two week period ended, 29 December 2013. The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application for the Group's financial statements of 31 December 2012:

·      IAS 19 Employee Benefits (2011) (see (i))

·      Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) (see (ii))

·      IFRS 10 Consolidated Financial Statements (2011) (see (iii))

·      IFRS 11 Joint Arrangements (see (iii))

·      IFRS 13 Fair Value Measurement (see (iv))

 

The nature and the effect of the changes are further explained below.



 

1. Basis of preparation (continued)

b)  Changes in accounting policies (continued)

i)     Defined benefit plan

 

As a result of IAS 19 (2011), the Group has changed its accounting policy with respect to the basis for determining the income or expense relating to its defined benefit pension scheme.

 

In accordance with IAS 19 (2011), the Group determines the net interest expense (income) for the period on the net defined benefit liability (asset) by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset) at the beginning of the annual period, taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability (asset) now comprises:

·      Interest cost on the defined benefit obligation; and

·      Interest income on plan assets.

 

Previously, the Group determined interest income on plan assets based on their long-term rate of expected return. Further details of the effect of this change are set out in Note 1 (b)(v) below.

 

ii)    Presentation of items of other comprehensive income

 

As a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its condensed consolidated statement of comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has also been re-presented accordingly. The adoption of this amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.

 

iii)   Subsidiaries

 

There are no changes to the accounting for subsidiaries within the Group as a result of IFRS 10 (2011). The Group has no other investments in the current or prior periods and therefore IFRS 10 (2011) has no impact on the Group's assets and liabilities.

The Group has no interests in joint arrangements in the current or prior periods therefore IFRS 11 has no impact on the Group's assets and liabilities.

 

iv)    Fair value measurement

 

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 Financial Instruments: Disclosures.

 

In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively, and has not provided any comparative information for new disclosures. The change in fair value measurement guidance had no significant impact on the measurements of the Group's assets and liabilities.

 

v)     Summary of quantitative impact

 

The above changes did not impact the financial position of the Group as at 29 December 2013 or at the end of the prior periods. The following table summarises the impact resulting from the above changes in accounting policies on the Group's comprehensive income and cash flows.

 



 

1. Basis of preparation (continued)

b)  Changes in accounting policies (continued)

v) Summary of quantitative impact (continued)

 

Condensed consolidated income statement: Effect of changes in accounting policies : Defined benefit plan (see Note 1 (b)(i) above)

 

Q4 2013

Q4 2012

Q3 2013

2013

2012

 

13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July

2013 to 29 September

2013

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 

$'000

$'000

$'000

$'000

$'000


 

 

 

 

 

Financial income

(70)    

6    

-    

(150)    

27    


______

______

______

______

______

Net financing expense

(70)    

6    

-    

(150)    

27    


______

______

______

______

______

(Loss) / profit before tax

(70)    

6    

-    

(150)    

27    

Income tax credit

14    

(1)    

-    

32    

(6)    


______

______

______

______

______

Overall decrease / (increase)

in (loss) / profit for the period

(56)

5

-

(118)

21


             

             

             

             

             

 

Condensed consolidated statement of comprehensive income: Effect of changes in accounting policies: Defined benefit plan (see Note 1 (b)(i) above)

 

Q4 2013

Q4 2012

Q3 2013

2013

2012

 

13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July

2013 to 29 September

2013

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 

$'000

$'000

$'000

$'000

$'000


 

 

 

 

 

(Loss) / profit for the period

(56)    

5    

-    

(118)    

21    

Actuarial gain / (loss) on net defined benefit obligations

70    

(6)    

-    

150    

(27)    

Deferred tax on net defined benefit items recognised in equity

(14)    

1    

-    

(32)    

6    


______

______

______

______

______

Overall impact on total comprehensive income for the period

-    

-    

-    

-    

-    


             

             

             

             

             

 

 

Condensed consolidated statement of cash flows: Effect of changes in accounting policies: Defined benefit plan (see Note 1 (b)(i)  above)

 

Q4 2013

Q4 2012

Q3 2013

2013

2012

 

13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July

2013 to 29 September

2013

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 

$'000

$'000

$'000

$'000

$'000


 

 

 

 

 

(Loss) / profit for the period

(56)   

5    

-    

(118)    

21    

Net financing expense

70   

(6)    

-    

150    

(27)    

Income tax credit

(14)   

1    

-    

(32)    

6    


______

______

______

______

______

Overall increase in net cash inflow / (outflow) from operating activities

-    

-    

-    

-    

-    


             

             

             

             

             

 



 

1. Basis of preparation (continued)

 

c)     Restatement of comparatives

 

As a result of IAS 19 (2011), the Group has changed its accounting policy with respect to the basis for determining the income or expense relating to its defined benefit pension scheme. While this change did not impact the financial position of the Group as at 29 December 2013 or at the end of the prior periods, the amounts for financial income, income tax credit, actuarial gain / (loss) on net defined benefit obligations and deferred tax on net defined benefit items recognised in equity at 30 December 2012 have been restated accordingly, as detailed in Note 1 (b)(v) above.

 

2.   Accounting policies

 

a)     Basis of consolidation of the Group

 

The financial information consolidates the results of and net assets of Wolfson Microelectronics plc and its subsidiaries. Subsidiaries are included in the consolidated financial statements from the date on which control commences to the date that control ceases.

 

b)     Income tax

 

The UK government's budget for 2013 announced that the main rate of UK corporation tax was reduced from 24%, for the tax year ending 31 March 2013, to 23% for the tax year commencing 1 April 2013, then a reduction to 21% will be effective from 1 April 2014 with a further reduction to 20% effective from 1 April 2015.

Deferred tax balances as at 29 December 2013 are recognised at a rate of 20%.

 

3.   Segment information

 

The chief operating decision-maker is the Chief Executive Officer ('CEO') of the Company. The CEO reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

 

The Group has three operating segments which are based on product groups. The Group has two reportable segments which reflect the organisational structure in the internal reporting as used by the CEO in order to assess performance and allocate resources. These two reportable segments are the Group's Audio Hubs and Discrete and Power Products segments which are reported separately to the chief operating decision-maker to allow greater management focus on the Audio Hubs strategy. The following summary describes the operations in the Group's reportable segments:

 

                Audio Hubs - this segment includes the supply and sale of Wolfson's Audio Hubs high performance audio integrated circuit solutions. Audio Hubs are feature-rich devices which contain many of Wolfson's audio technologies combined into a single Hub device.

 

Discrete and Power Products - this segment includes the supply and sale of integrated circuits which are discrete components, such as: Analogue-to-Digital Converters; Digital-to-Analogue Converters; and this segment also includes those components which are power management integrated circuits and the silicon microphone devices based on Micro-Electro-Mechanical Systems ('MEMS') technology.

 

The other operating segment does not meet any of the quantitative thresholds for determining a reportable segment in the periods presented and, accordingly, the relevant revenue and segment gross profits are shown as 'other operating segment'.

 

The CEO assesses the performance of the operating segments based on revenue and a measure of gross profit. Segment gross profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of the segment. The gross profit measurement basis excludes the effects of non-recurring expenditure from operating segments, such as restructuring costs and exceptional inventory write downs. Interest income and expenditure are not included in the result for each operating segment that is reviewed by the CEO. Other information provided to the CEO is measured in a manner consistent with that in the financial statements. The segment information is prepared using accounting policies consistent with those of the Group as a whole. There were no inter-segment transactions in the periods presented.

 

The assets and liabilities of the Group are not reviewed by the chief operating decision-maker on a segment basis. Therefore none of the Group's assets and liabilities are segmental assets and segmental liabilities respectively and all are unallocated for segmental disclosure purposes.

 

All segments are continuing operations.

3.   Segment information (continued)

 

 

 

Q4 2013

Q4 2012

Q3 2013

2013

2012

 

13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July

2013 to 29 September

2013

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 

$'000

$'000

$'000

$'000

$'000

Segment revenue:

 

 

 

 

 

Audio Hubs

27,533

41,614

30,631

136,371

134,092

Discrete and Power Products

14,477

14,404

13,291

42,973

45,477

Other operating segment

17

45

3

92

180


______

______

______

______

______

Total revenue for the period

42,027

56,063

43,925

179,436

179,749


             

             

             

             

             

Segment gross profit:






Audio Hubs

11,353

17,483

13,273

55,996

62,518

Discrete and Power Products

6,436

7,153

5,955

20,065

21,642

Other operating segment

(52)

(26)

(5)

(82)

53


______

______

______

______

______

Total gross profit for segments in the

period

17,737

24,610

19,223

75,979

84,213


             

             

             

             

             

 

 

 

A reconciliation of gross profit to total (loss) / profit before income tax is provided as follows:

 

 

Q4 2013

Q4 2012

Q3 2013

2013

2012

 

13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July

2013 to 29 September

2013

52-week period from 31 December

2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 


(Restated)



(Restated)

 

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

Gross profit for segments

17,737

24,610

19,223

75,979

84,213


______

______

______

______

______

Gross profit for the period

17,737

24,610

19,223

75,979

84,213

Corporate overheads

(26,259)

(22,760)

(22,226)

(95,669)

(92,123)

Exceptional charge

-

(1,400)

-

(600)

(1,400)


______

______

______

______

______

Operating (loss) / profit for the period

(8,522)

450

(3,003)

(20,290)

(9,310)

Financial income

7

7

10

95

258

Financial expense

(19)

(363)

(44)

(178)

(271)


______

______

______

______

______

(Loss) / profit before tax

(8,534)

94

(3,037)

(20,373)

(9,323)


             

             

             

             

             

 



 

3.   Segment information (continued)

 

Reportable segments' assets are reconciled to total assets as follows:

 


As at 29 December 2013

As at 29 September 2013

As at 30 December 2012


$'000

$'000

$'000

Total assets for reportable segments

-

-

-

Assets for other operating segments

-

-

-

Goodwill and acquired intangible assets:

from acquisition of  Sonaptic Limited

20,637

20,594

20,037

Goodwill and acquired intangible assets:

from acquisition of Oligon Limited

4,024

4,024

4,204

Goodwill and acquired intangible assets:

from acquisition of Dynamic Hearing Pty Limited

4,860

5,137

6,040

Other unallocated assets

121,851

130,505

150,709


_______

_______

_______

Consolidated total assets

151,372

160,260

180,990


              

              

              

 

4.   Exceptional charge

 

Exceptional charge recognised in the 52 week and 13 week periods ended 30 December 2012:

Past service cost on defined benefit plan

As reported in the consolidated financial statements for the fifty-two week period ended 30 December 2012, in November 2012 the Company initiated an Enhanced Transfer Value (ETV) offer to the 83 deferred members of the Company's defined benefit pension scheme and this offer closed in February 2013. As the ETV offer was likely to result in a cash contribution by the Company into the scheme in the first half of 2013, the Company estimated (for accounting purposes) the projected level of take up of the ETV offer and, as a result, recognised an exceptional charge of $1.4 million in the thirteen and fifty-two week periods ended 30 December 2012. The charge reflected the estimated accounting cost of the ETV compared to the net IAS 19 liability for relevant deferred members of the scheme. Further details regarding the defined benefit pension scheme are contained in note 9 (a).

 

Exceptional charge recognised in the 52 week period ended 29 December 2013:

Past service cost on defined benefit plan

Following the closure of the ETV offer in February 2013, the actual accounting cost of the ETV to be recognised was $2.0 million. Therefore the difference of $0.6 million between this actual accounting cost and the estimated cost of $1.4 million, recorded as at 30 December 2012 for those members that decided to take up the offer, has been recognised as an exceptional charge in the Company's financial statements in the fifty-two week period ended 29 December 2013.


 

5.   Operating expenses: reconciliation from Underlying to IFRS

 

 

 

 

Underlying

Share-based compensation (including related payroll taxes)

Amortisation of acquired intangible assets

Severance

costs

Impairment loss on property, plant & equipment (Asset write down)

Exceptional charge

IFRS

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

 





 

 


Year 2013

52-week period from 31 December 2012 to 29 December 2013








Distribution and selling costs

(21,843)

(465)

-

(583)

(1,713)

-

(24,604)

Research and development expenses

(54,175)

(1,080)

(1,360)

(1,719)

-

-

(58,334)

Administrative expenses

(12,541)

(97)

-

(93)

-

-

(12,731)

Past service cost on defined benefit plan

-

-

-

-

-

(600)

(600)


______

______

______

______

______

______

______


(88,559)

(1,642)

(1,360)

(2,395)

(1,713)

(600)

(96,269)


             

             

             

             

             

             

             









Year 2012

52-week period from 2 January to 30 December 2012








Distribution and selling costs

(23,266)

(636)

-

-

-

-

(23,902)

Research and development expenses

(51,065)

(2,041)

(1,733)

-

-

-

(54,839)

Administrative expenses

(12,748)

(634)

-

-

-

-

(13,382)

Past service cost on defined benefit plan

-

-

-

-

-

(1,400)

(1,400)


______

______

______

______

______

______

______


(87,079)

(3,311)

(1,733)

-

-

(1,400)

(93,523)


             

             

             

             

             

             

             

 

 



 

5. Operating expenses: reconciliation from Underlying to IFRS (continued)

 

 

Underlying

Share-based compensation (including related payroll taxes)

Amortisation of acquired intangible assets

Severance

costs

Impairment loss on property, plant & equipment (Asset write down)

Exceptional charge

IFRS

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

 





 

 


Q4 2013

13-week period from 30 September to 29 December 2013








Distribution and selling costs

(5,380)

(252)

-

(183)

(1,713)

-

(7,528)

Research and development expenses

(13,447)

(614)

(277)

(619)

-

-

(14,957)

Administrative expenses

(3,401)

(280)

-

(93)

-

-

(3,774)


______

______

______

______

______

______

______


(22,228)

(1,146)

(277)

(895)

(1,713)

-

(26,259)


             

             

             

             

             

             

             









Q4 2012

13-week period from 1 October to 30 December 2012








Distribution and selling costs

(6,123)

485

-

-

-

-

(5,638)

Research and development expenses

(13,701)

48

(403)

-

-

-

(14,056)

Administrative expenses

(3,350)

284

-

-

-

-

(3,066)

Past service cost on defined benefit plan

-

-

-

-

-

(1,400)

(1,400)


______

______

______

______

______

______

______


(23,174)

817

(403)

-

-

(1,400)

(24,160)


             

             

             

             

             

             

             









Q3 2013

13-week period from 1 July to 29 September 2013








Distribution and selling costs

(5,669)

(15)

-

-

-

-

(5,684)

Research and development expenses

(13,588)

33

(278)

-

-

-

(13,833)

Administrative expenses

(2,980)

271

-

-

-

-

(2,709)


______

______

______

______

______

______

______


(22,237)

289

(278)

-

-

-

(22,226)


             

             

             

             

             

             

             


6.   Operating (loss) / profit: reconciliation from Underlying to IFRS

 

Q4 2013

Q4 2012

Q3 2013

2013

2012

 

13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July

2013 to 29 September

2013

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

Underlying operating (loss) / profit

(4,491)    

1,436     

(3,014)    

(12,580)     

(2,866)     

Share-based payment expenses / (credit) and related payroll taxes

(1,146)    

817     

289    

(1,642)     

(3,311)    

Amortisation of acquired intangible assets

(277)

(403)

(278)

(1,360)

(1,733)

Severance costs recognised in overheads

(895)

-

-

(2,395)

-

Impairment loss on property, plant and equipment recognised in overheads

(1,713)

-

-

(1,713)

-

Exceptional charge:






- Past service cost on defined benefit plan

-

(1,400)

-

(600)

(1,400)


______

______

______

______

______

Operating (loss) / profit (IFRS)

(8,522)

450

(3,003)

(20,290)

(9,310)


             

             

             

             

             

 

7.   Income tax credit

The income tax credit for the fifty-two week period ended 29 December 2013 is a total effective tax rate of 19.4% (a credit) (2012: credit of 35%). This reflects the UK corporation tax rate applicable for that 52-week period of 23.25% as favourably impacted by tax allowances on research and development expenditure but offset by the adverse effect of disallowable expenses and the lower UK corporate tax rate now applicable to the recognition of deferred tax.

 

8.   Earnings per share

 

Q4 2013

Q4 2012

Q3 2013

2013

2012

 

13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July

2013 to 29 September

2013

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 


(Restated)^



(Restated)^

 

$'000

$'000

$'000

$'000

$'000

(Loss) / profit for the period attributable to

equity shareholders (basic and diluted)

(6,888)    

1,048    

(2,483)    

(16,420)    

(6,055)    

Share-based payment expenses and related payroll taxes*

879    

(617)   

(221)    

1,260    

2,500    

Amortisation of acquired intangible assets*

213

303

213

1,044

1,308

Severance costs recognised in overheads*

687

-

-

1,838

-

Impairment loss on property, plant and equipment recognised in overheads*

1,315

-

-

1,315

-

Exceptional charge*

-

1,078

-

462

1,078


______

______

______

______

______

Underlying (loss) / profit for the period attributable to equity shareholders

(basic and diluted)

(3,794)

1,812

(2,491)

(10,501)

(1,169)


             

             

             

             

             


cents

cents

cents

cents

cents

Basic (loss) / earnings per share

(5.90)

0.90

(2.13)

(14.07)

(5.20)


             

             

             

             

             

Diluted (loss) / earnings per share

(5.90)

0.89

(2.13)

(14.07)

(5.20)


             

             

             

             

             

Underlying basic (loss) / earnings per share

(3.25)

1.55

(2.13)

(9.00)

(1.00)


             

             

             

             

             

Underlying diluted (loss) / earnings per share

(3.25)

1.54

(2.13)

(9.00)

(1.00)


             

             

             

             

             

* After the estimated tax impact of this item

^ Restated for change in accounting policy on adoption of IAS 19 (2011).  Refer to Note 1 (b)

 

8. Earnings per share (continued)

The weighted average number of ordinary shares used in the calculation of basic and diluted (loss) / earnings per share for each period were calculated as follows:

 

 

Q4 2013

Q4 2012

Q3 2013

2013

2012

 

13-week period from 30 September 2013 to 29 December 2013

13-week period from 1 October 2012 to 30 December

2012

13-week period from 1 July

2013 to 29 September

2013

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 

No. of shares

No. of shares

No. of shares

No. of shares

No. of shares

 

 

 

 

 

 

Issued ordinary shares at start of period

116,724,729

116,589,853

116,717,504

116,643,442

116,308,427

Effect of shares issued during the period from exercise of employee share options

49,740

40,020

1,597

66,711

168,804


______

______

______

______

______

Weighted average number of ordinary shares

at end of period - for basic (loss) / earnings per share and for diluted loss per share

116,774,469

116,629,873

116,719,101

116,710,153

116,477,231







Effect of dilutive share options in issue

488,815

962,469

572,353

671,707

989,619


______

______

______

______

______

Weighted average number of ordinary shares

at end of period - for diluted earnings per share

117,263,284

117,592,342

117,291,454

117,381,860

117,466,850


             

             

             

             

             

 

 

9.   Employee benefits

 

a)     Defined benefit obligations

 

The defined benefit pension obligation is calculated using an actuarial update as at 29 December 2013. The Company makes contributions to a UK-based defined benefit plan that provides pension benefits for UK employees upon retirement. The defined benefit plan and actuarial assumptions are based on sterling denominated assets and liabilities. The plan was closed to new entrants with effect from 2 July 2002. The plan closed to future accrual with effect from 30 April 2011 and therefore the Company is no longer required to pay contributions in respect of future accrual.

 

Enhanced Transfer Value offer

In November 2012, the Company initiated an Enhanced Transfer Value (ETV) offer to the 83 deferred members of this scheme and this offer closed in February 2013. Details of the accounting treatment of this ETV offer are contained in note 4. During 2013, the Company paid $2.1 million into the defined benefit pension scheme in respect of the ETV offers which were accepted by some of the deferred members of this pension scheme.  The total past service cost (of $2.0 million) recognised in the consolidated income statement of the Group in 2013 ($0.6 million) and in 2012 ($1.4 million) in respect of the ETV offer reflects the cost, over and above the value of the IAS 19 liabilities, of settling the benefits.  The impact of the accepted offers was to reduce the scheme assets and obligations by approximately $11 million, or approximately one third, thereby reducing the buyout deficit by around $4.5 million.

 

Recognised liability for defined benefit obligations

For the purposes of IAS 19, the full actuarial valuation as at 29 February 2012 has been updated on an approximate basis to 29 December 2013 by a qualified actuary.

Since the defined benefit pension scheme is closed to future accrual and since there will no longer be regular contributions to the scheme, there is some uncertainty regarding the recoverability of the net asset, being the IAS 19 net surplus on the scheme as at 29 December 2013. Accordingly the surplus of $2.2 million on the defined benefit pension scheme as at 29 December 2013, calculated in accordance with IAS 19 (as revised in 2011), has not been recognised. The total amount due under the current schedule of contributions is approximately $3.9 million as at 29 December 2013.  In accordance with IFRIC 14, the present value of this remaining commitment (being $3.9 million) was recognised as a liability as at 29 December 2013.  There was a similar commitment at 30 December 2012 in respect of the schedule of contributions in place at that date.

 

The main reason for the decrease in the present value of funded obligations as at 29 December 2013, compared to the position as at 30 December 2012, was the impact of the Enhanced Transfer Value offer which closed in February 2013 (see above) and the increase in the discount rate assumption from 4.30% to 4.60%.

 

9.   Employee benefits (continued)

 

 

At 29

December

2013

At 30 December 2012

 

$'000

$'000

 

 

 

Present value of funded obligations

(22,662)    

(31,142)   

Fair value of plan assets

24,898

30,966


______

______

Net surplus / (liability) for defined benefit obligations

2,236    

(176)   

Unrecognised surplus

(2,236)

-

Increase in liabilities recognised in accordance with IFRIC 14

(3,900)

(1,500)


______

______

Recognised liability for defined benefit obligations

(3,900)  

(1,676)  


             

             

 

The (expense) / gain is recognised in the following line items in the income statement:

 

 

2013

2012

 

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 

 

(Restated)^

 

$'000

$'000

Current and past service costs:

 

 

Distribution and selling costs

(6)    

-    

Research and development expenses

(18)

-

Administrative expenses

(7)

-

Exceptional charge for past service costs (note 4)

(600)

(1,400)


______

______

Total current and past service costs

(631)    

(1,400)   


             

             

Exchange differences:



Distribution and selling costs

(19)

2

Research and development expenses

(52)

7

Administrative expenses

(21)

3


______

______

Total exchange differences (loss) / gain

(92)

12


             

             




Financial income

-

15

Financial expense

(49)

-


             

             

 

The Company also has a Group Personal Pension Plan which is a defined contribution pension scheme.

 

b)     Share-based payments

 

The share-based payment expense recognised for each period, in accordance with IFRS 2 Share-based Payment, was:

 

 

2013

2012

 

52-week period from 31 December 2012 to 29 December 2013

52-week period from 2 January 2012 to 30 December

2012

 

$'000

$'000


 

 

Total expense recognised in personnel expenses during the period

1,687

2,676


             

             

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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