Laird revenues up but earnings fall behind in first half

Laird posted its half-year results for the six months to 30 June on Friday, with a 15.2% increase in revenue to £352.5m as a result of growth in majority of the business and acquisitions.

The FTSE 250 form saw organic constant currency revenue decrease 3.6% mainly due to strong H1 2015 comparative in Performance Materials

It reported 5.5% organic growth in Wireless Systems, or 11.9% excluding WACS, and strong operating cash conversion of 120%, up from 94% at the same time last year.

Operating profit fell behind by 31% during the period to £21.1m, and underlying profit before tax fell 39% to £16.4m.

Underlying basic earnings per share were 4.6p, a 42% decline, while statutory profit before tax was £6.2m, compared with £21.6m a year ago.

The board declared an interim dividend of 4.53p per share, up 3% on the first half of 2015.

Laird saw its net debt increase, which its said reflects the cost of acquiring Novero and investment in the operating model re-design

Profit in the first half was lower due to “challenges”, the board said, with actions being taken to address them.

In the Novero division, the board identified challenges in due diligence as requiring “greater and deeper intervention” to fully resolve.

“Although no new issues have been identified, the cost of this intervention is at the high end of our expectations, albeit mitigated by contingencies in internal plans, creating a £3.5m loss in H1,” the board said in a statement.

It said actions are in place to substantially improve performance and deliver modest profitability in 2017 with industry standard margins from 2018

In the meantime the combined capabilities of the strengthened business have been well received by customers, it added.

Laird said there has been a significant uplift in order book and pipeline for automotive at Novero

In WACS, Laird said a rapid and substantial downturn in US rail freight markets due to commodity and energy prices has had a significant impact on revenues in the division.

It confirmed actions have been taken to mitigate the impact of the downturn and manage profitability in the second half of the year.

“The majority of our business continued to perform as expected in the first half,” said chief executive David Lockwood.

“Despite the impact of the smartphone cycle and the sales decline in WACS organic constant currency revenue fell by just 3.6%, demonstrating that our strategy of diversification across markets and customers has provided us with a strong platform to counter such sales headwinds.”

Lockwood said the reduction in first half profit and margins was disappointing, but remained confident in the action that has already been taken to address it.

“These actions, together with the improved contribution of LSR, and the currency tailwind at current rates means that the board's expectations for the full year are broadly unchanged.”