(ITK.L) Intelek PLC Buy/Sell

Operational:

Chairman, David Bramwell, commented:

"Our current appraisal, taking into account new product introductions, indicates that the Group remains on course in the execution of its strategy and is well positioned to take advantage of any upturn as the global economy recovers."

For further information, please contact:

INTELEK today : 020-7466-5000

Ian Brodie, Chief Executive thereafter : 01793-827000 Kevin Edwards, Finance Director

Mike Fletcher, Paul Lines
Buchanan Communications 020-7466-5000

Charles Ryland/Suzanne Brocks
CHAIRMAN'S INTERIM STATEMENT

Financial Results

I am pleased to report underlying (pre-exceptional) profit before tax for the half year of £1.33 million (2008: £2.05 million) on sales of £16.9 million (2008: £18.8 million), with underlying earnings per share of 1.07p (2008: 1.64p). This reflects a resilient performance in the face of the global downturn dramatically affecting commercial markets. Although the year started slowly, all three divisions have demonstrated a much stronger performance in the second quarter. We remain confident in the future of the group which is becoming increasingly aligned with large defence and security programmes and away from the commercial sector.

Trading

Satellite Communications Equipment - Paradise Datacom

Sales: £8.2m (2008: £8.1m)

Operating Profit: £1.63m (2008: £1.65m)

Paradise Datacom's sales increased by 2% over the same period last year to £8.2m. Government programmes provided the backbone of deliveries in the first six months. However, we experienced a reduced level of activity in the commercial satcom market resulting in 16% reduction in dollar volumes. Despite strong competition in the market, Paradise Datacom maintained margins through operational efficiencies and sales of software upgrades to previous modem customers. As a consequence of these healthy margins, a firm control of overheads and the more favourable exchange rate, operating profit for the half year was in line with the previous year at 20% of sales.

Paradise Datacom has continued to benefit from regular orders on long term defence programmes. On one programme for high power amplifiers, $3 million of orders have been taken since the start of year, including $0.7 million received in October. In the commercial market, we have seen some signs of recovery, with stronger order volumes in Russia, South Asia and Latin America towards the end of the half year. We would expect this to continue in the second half, supported by new product introductions.

The first deliveries of modems with the embedded Paired Carrier Multiple Access (PCMA) feature, licensed from ViaSat Inc, were made in September to trial customers and encouraging reports have been received. The PCMA technology reduces the customer's bandwidth requirement by up to 50%, providing much needed operational cost savings.

The amplifier research team is nearing completion of the first full PowerMax system, the world's highest power SSPA system, which will be demonstrated to major customers at our Pennsylvania site. Advance marketing of PowerMax at a number of trade shows resulted in encouraging levels of interest from major defence and telecom companies.

Our Phoenix design centre, which was established in the last twelve months, has now completed a new family of converter products. In addition, a joint project with Labtech Microwave has resulted in the release of new Ka Band low noise amplifiers (LNAs).

The order book has been maintained at $4.6 million. We would expect order intake to rise in the second half judging from the wide range of high value opportunities currently being nurtured and the significant opportunities addressable by our recently introduced new products. Paradise Datacom should be able to build on a solid first half.

Microwave Components and Manufacturing Services - Labtech

Sales: £3.6m (2008: £3.7m)

Operating Profit: £0.03m (2008: £0.05m)

Sales and profit were in line with 2008 levels. Labtech's business model has continued to evolve towards specialist defence and communications companies, leaving behind the commodity telecoms sector, sales for which were down 67%. The new business included high specification radio-link PCBs, further growth in defence sales and a substantial increase in sales to Air Traffic Control (ATC) customers, all validating Labtech's change in strategy.

Up to the end of October, Labtech has taken £1.5 million of orders for radio link PCBs. The most prominent ATC success has been Labtech's recent contract to supply a range of microwave PCBs and antennas to a major European ATC radar supplier. This has started well, and has made a key contribution to the half year sales. Labtech also won a strategically important order to supply detector log video amplifiers (DLVAs) to a major European equipment manufacturer for use in a naval electronic defence system. The entire order is deliverable in the second half year.

At the end of the first half year, the order book had increased by 15% to £2.9 million, some £1.2 million higher than the equivalent figure at September 2008.

Aerostructures - CML

Sales: £5.1m (2008: £7.1m)

Operating Profit: £0.35m (2008: £1.20m)

As anticipated, CML has had a challenging first half due to the well publicised reductions in the corporate jet market. Sales reduced by £2.0 million in total, of which £1.6 million was in corporate jets, primarily the Hawker 987 programme. As a result of prompt action to reduce both capacity and overheads in line with market conditions, CML generated an operating profit of £0.35 million.

There are some indications that the corporate jet market is levelling off, but recovery is expected to be slow. Build rates for the large commercial aircraft market, particularly those for Airbus, have stabilised and are forecast to remain at current levels for the foreseeable future. The military sector continues to be robust, with programmes that CML currently supports, such as the Joint Strike Fighter and C27J Spartan, being maintained at expected levels of production. £0.4 million of deliveries have been made so far this year on the JSF programme and £0.8 million of orders were received in October for the next stage, which will be delivered by October 2010.

CML also enjoyed notable success in the quick turn-round delivery of £0.4 million of carbon fibre components to support the A400M test flight programme. This work package has demonstrated CML's support capability and helps position them for opportunities on new Airbus build programmes.

The order book stands at £6.9 million of which £4.2 million will be delivered this year.

Funding

Net debt closed at £5.1 million, compared with £3.8 million at the year end and at September 2008. £0.5 million of the increase is funding for the pension transfer programme and restructuring actions taken across the Group. Inventory levels have been reduced by 21% since the year end, however working capital has increased elsewhere as some customers and suppliers are requiring enhanced terms in these challenging times. We would expect the Group position to improve in the second half of the financial year. Gearing levels remain comfortable with interest cover for the first half year at 17.3 times. The net pension scheme deficit has remained static at £4.4 million.

Dividend

The Board of Directors has confidence in the performance of our businesses and has decided to maintain the interim dividend at 0.165p per Ordinary share (2008: 0.165p). This dividend will be paid on 20 January 2010 to shareholders on the register at 18 December 2009.

Strategy

Our core strategy is to provide technology for the transmission of voice, video and data. Our focus is on the defence, security, telecommunications and broadcast sectors. We will also continue to develop our profitable aerostructures business. The Group will grow organically within our chosen markets through sound investment in product development, capital equipment and enhanced geographic coverage. We will continue to encourage the professional development of our staff enhanced, where necessary, by the recruitment of key additional personnel with complementary skills. In order to supplement organic growth, we will seek suitable acquisitions within our core activity.

Prospects

Paradise Datacom has delivered a resilient performance in the first half, with margins holding up impressively. We are excited by a range of recently launched products that are expected to benefit the second half. We should also see growth in market share from our focus on significant opportunities in the government sector.

Labtech has grown its order book by over 70% from the level at the same time last year, and is well placed following its switch towards specialist defence and communications business.

CML's programmes are now showing signs of stability and orders are in hand to cover most of the projected sales in the second half. Having taken prompt action to reduce costs earlier in the year, we expect CML to build on the steady improvements in performance seen in the first half to produce a strong finish to the year.

In difficult economic conditions, we have taken steps across the Group to contain costs and further develop our market position, producing a resilient result for the first half. Our current appraisal, taking into account new product introductions, indicates that the Group remains on course in the execution of its strategy and is well positioned to take advantage of any upturn as the global economy recovers.

David M Bramwell

Chairman

16 November 2009

Condensed consolidated income statement (unaudited)
For the six months ended 30 Half year to 30 September Year to 31 March

September 2009

Note £000 £000 £000
Sales 2 16,939 18,754 39,276
Cost of goods sold (12,141) (12,742) (26,698)
Gross profit 4,798 6,012 12,578
Selling and administrative (1,718) (2,484) (5,280)

expenses before exceptional items
Exceptional operating items (190) - (417)
Selling and administrative (1,908) (2,484) (5,697)

expenses
Research and development (1,401) (1,157) (2,667)

expenses

Underlying operating profit 2 1,679 2,371 4,631
Exceptional operating items 3 (190) - (417)
Operating profit 1,489 2,371 4,214
Interest receivable 2 5 12
Interest payable (99) (159) (258)
Expected return on pension 7 285 443 898

scheme assets
Interest on pension scheme 7 (533) (613) (1,203)

obligations

Finance costs - net (345) (324) (551)
Underlying profit before 2 1,334 2,047 4,080

taxation
Exceptional operating items (190) - (417)
Profit before taxation 1,144 2,047 3,663
Taxation 4 (374) (655) (1,138)
Profit for the period 2 770 1,392 2,525

attributable to equity shareholders
Earnings per share - basic 5 0.91p 1.64p 2.97p
Earnings per share - diluted 5 0.91p 1.64p 2.96p

Condensed consolidated statement of comprehensive income (unaudited) For the six months ended 30 September 2009
Half year to 30 September Year to 31 March

£000 £000 £000
Profit for the period 770 1,392 2,525

Other comprehensive income:
Foreign exchange translation (810) 54 1,782

differences
Net gain/(loss) on hedge of net investment in 265 172 (889)

foreign subsidiary
Actuarial gains and losses 7 (319) 18 (1,907)

on defined benefit pension plan
Deferred tax on actuarial 89 (4) 534

gains and losses
Total comprehensive income/(expense) for the period (5) 1,632 2,045

attributable to equity shareholders

Condensed consolidated balance sheet (unaudited) As at 30 September 2009
30 September 30 September 31 March

Note £000 £000 £000

Goodwill 13,776 13,543 14,025
Intangible assets 388 363 486
Property, plant and equipment 5,525 5,760 5,911
Deferred tax assets arising on 7 1,728 1,347 1,698

pension obligation
Other deferred tax assets 799 703 836
Total non-current assets 22,216 21,716 22,956
Inventories 4,830 4,103 6,104
Trade and other receivables 7,491 7,164 7,493
Current tax assets 146 - -
Cash and cash equivalents 570 200 1,013
Total current assets 13,037 11,467 14,610
Total assets 35,253 33,183 37,566

Defined benefit pension 7 (6,169) (4,811) (6,063)

obligation
Borrowings (3,488) (3,359) (2,987)
Deferred tax liabilities (939) (532) (974)
Deferred government grants (193) (77) (200)
Total non-current liabilities (10,789) (8,779) (10,224)
Borrowings (2,173) (653) (1,811)
Trade and other payables (4,890) (6,252) (7,688)
Current tax liabilities - (151) (47)
Provisions and other liabilities (49) (12) (179)
Total current liabilities (7,112) (7,068) (9,725)
Total liabilities (17,901) (15,847) (19,949)
Net assets attributable to equity 17,352 17,336 17,617

shareholders SHAREHOLDERS' EQUITY
Issued capital 4,369 4,369 4,369
Own shares (418) (429) (418)
Other reserve 3,411 3,411 3,411
Distributable reserves 9,990 9,985 10,255
Total equity 17,352 17,336 17,617

Condensed consolidated statement of changes in equity (unaudited) For the six months ended 30 September 2009
Distributable reserves
Share capital Own shares Other reserves Hedging reserve Translation reserve Retained earnings Net
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2009 4,369 (418) 3,411 (858) 1,527 9,586 17,617
Total comprehensive - - - 265 (810) 540 (5)

income/(expense) for the period
Dividends paid - - - - - (260) (260)
At 30 September 2009 4,369 (418) 3,411 (593) 717 9,866 17,352
At 1 April 2008 4,369 (429) 3,411 31 (255) 8,837 15,964
Total comprehensive - - - 172 54 1,406 1,632

income/(expense) for the period
Dividends paid - - - - - (260) (260)
At 30 September 2008 4,369 (429) 3,411 203 (201) 9,983 17,336
At 1 April 2008 4,369 (429) 3,411 31 (255) 8,837 15,964
Total comprehensive - - - (889) 1,782 1,152 2,045

income/(expense) for the period
Disposal of own shares - 11 - - - - 11
Dividends paid - - - - - (403) (403)
At 31 March 2009 4,369 (418) 3,411 (858) 1,527 9,586 17,617

Condensed consolidated cash flow statement (unaudited)
For the six months ended 30 September 2009 Half year to 30 September Year to 31 March

Note £000 £000 £000

Cash flows from operating activities
Cash generated from operations 8 (237) 1,287 3,160
Interest paid (99) (153) (258)
Interest received 2 5 12
Tax paid (395) (143) (397)
Net cash from operating activities (729) 996 2,517

Cash flows from investing activities
Proceeds from sale of property, plant and equipment - - 34
Purchases of property, plant, equipment and intangible assets (47) (298) (1,224)
Capital grants received - - 129
Net cash used in investing activities (47) (298) (1,061)

Cash flows from financing activities
Share issues - - 12
Increase in bank loans 115 44 123
Finance lease payments (316) (342) (704)
Dividends paid 6 (260) (260) (403)
Net cash used in financing activities (461) (558) (972)
Net (decrease)/increase in cash and cash (1,237) 140 484

equivalents
Cash and cash equivalents at start of period 57 192 192
Effect of foreign exchange rates 101 (211) (619)
Cash and cash equivalents at end of period 9 (1,079) 121 57
(a) The financial information contained herein does not constitute statutory accounts within the meaning of
Section 240 of the Companies Act 1985.
(b) The statutory accounts for the year ended 31 March 2009, which have been delivered to the Registrar of
Companies, carry an unqualified report by the auditors and do not contain a statement under Section 237(2)
or section 237(3) of the Companies Act 1985.
(c) Copies of this Statement are being sent to Shareholders. Further copies are available from the Company
Secretary, PO Box 25, South Marston Park, Swindon, SN3 4TR, and it is also available on our web site, http:
//www.intelek.plc.uk.

Notes to the Interim Report (unaudited) For the six months ended 30 September 2009 1. Basis of preparation

This interim financial report has been prepared using the accounting policies and methods of computation applied in the Company's most recent annual financial statements.

2. Segment reporting

Business segment Half year ended 30 September Year to 31 March

Sales Profit Margin Sales Profit Margin Sales Profit Margin
£000 £000 % £000 £000 % £000 £000 %
Satellite 8,203 1,630 20% 8,080 1,646 20% 18,338 3,631 20%

communications -

Paradise Datacom

Microwave Components 3,633 31 1% 3,696 45 1% 7,302 4 0%

& Manufacturing

Services - Labtech

Aerostructures - CML 5,128 351 7% 7,104 1,198 17% 13,865 2,049 15%
Eliminate (25) (126) (229)

intra-segment

trading

Continuing 16,939 2,012 12% 18,754 2,889 15% 39,276 5,684 14%

operations

Central costs (333) (518) (1,053)
Underlying operating 1,679 10% 2,371 13% 4,631 12%

profit

Net finance costs (345) (324) (551)
Underlying profit 1,334 8% 2,047 11% 4,080 10%

before tax

Exceptional items (190) - (417)
Taxation (374) (655) (1,138)
Total for the period 16,939 770 18,754 1,392 39,276 2,525

Intra-segment sales are at prevailing market rates.
Half year ended Year to
30 September 31 March

Geographical markets - sales by destination £000 £000 £000
UK 7,470 8,005 15,884
Rest of Europe 1,650 3,047 6,922
North America 4,650 3,097 7,173
Rest of World 3,169 4,605 9,297
16,939 18,754 39,276

3. Exceptional operating items
Half year to 30 September Year to 31 March

Note £000 £000 £000
Gain arising on transfers from the defined benefit pension scheme - - 106
Asset impairment and restructuring (a) (131) - (470)
Cost incurred on aborted transactions and dormant companies (b) (59) - (53)

(a) During the six months to September 2009, actions were taken to reduce headcount, particularly at CML, resulting in redundancy costs. Costs in the year to 31 March 2009 related to restructuring at Labtech,

comprising £116k for redundancy costs and £354k for impairment of assets.

(b) During the period, and in the prior year, the Company undertook studies for acquisition and disposal that did not come to fruition.

4. Taxation

Tax for the interim period is based on effective tax rates expected to be applicable to the full year. This is estimated at 32% for underlying profit and 28% for other gains/(losses) (2008: 32% and 28% respectively).
Half year ended 30 September Year to 31 March

£000 £000 £000
Current taxation (207) (400) (567)
Deferred taxation (167) (255) (571)
(374) (655) (1,138)

5. Earnings per Share

Basic earnings per share were calculated based on the profit for the period divided by the weighted average number of ordinary shares outstanding during the period, excluding those held by the Employees Share Trust and those held by

Directors that remain subject to performance conditions (84,936,000 (2007: 84,761,000)). There were 330,500 exercisable share options in existence at the period end (2008: 340,500) the exercise price for which is below the average

fair value of 14.8p per share of the ordinary shares in issue during the period. These create a dilution in shares of 79,000 (2008:103,000).

Excluding exceptional items, the underlying earnings per share for the period were:
Half year ended 30 September Year to 31 March 2009

Earnings EPS Earnings EPS Earnings EPS
£000 p £000 p £000 p
Profit for the year 770 0.91 1,392 1.64 2,525 2.97
Add back: exceptional operating items 190 0.22 - - 417 0.49
Tax on these items (53) (0.06) - - (117) (0.14)
Underlying 907 1.07 1,392 1.64 2,825 3.32

6. Dividends

The following dividend payments have been made on the ordinary 5p shares in issue: Half year ended 30 September Year to 31 March

Rate Date Shares in issue £000 £000 £000
Final 2007/08 0.30p 24 September 2008 87,376,072 262 262
Interim 2008/09 0.165p 21 January 2009 87,376,072 144
Final 2008/09 0.30p 23 September 2009 87,376,072 262
Less: Dividends paid to employee share trust (2) (2) (3)

At 30 September 2009, the 2009 interim dividend had not been approved by the Board and as such was not included as a liability. The dividend is expected to be £144,000 and will be paid in January 2010.

7. Defined benefit pension
Half year ended 30 September 31 March

£000 £000 £000
Gross deficit at start of period (6,063) (5,212) (5,212)
Contributions 461 553 1,066
Finance costs (248) (170) (305)
Curtailment and settlement gain - - 295
Actuarial gain/(loss) (319) 18 (1,907)
Gross deficit at end of period (6,169) (4,811) (6,063)
Deferred tax asset 1,728 1,347 1,698
Net deficit (4,441) (3,464) (4,365)

The defined benefit plan was revalued by the Company in line with advice from the scheme actuary as at 30 September 2009. The

principal assumptions were:

Inflation 2.70 3.70 2.70
Discount rate 5.43 7.30 6.83

The discount rate is obtained from the iBoxx indices for AA corporate bonds.

Mortality: The September valuation uses the assumptions used in the preceding March valuation, as set out in the Annual Report.

8. Cash generated from operations
Half year ended 30 September 31 March

£000 £000 £000
Underlying operating profit 1,679 2,371 4,631
Depreciation and amortisation 642 673 1,394
Pension contribution paid towards deficit (461) (553) (1,066)
Deferred income (8) (1) (7)
Profit on disposal of property, plant and - - (3)

equipment

Decrease/(increase) in inventories 881 (214) (1,521)
Increase in receivables (264) (480) (467)
(Decrease)/increase in payables (2,254) (464) 313
Net cash flow before exceptional items 215 1,332 3,274
Pension transfer project (147) (23) -
Other exceptional operating items (305) (22) (114)
Cash generated from operations (237) 1,287 3,160

9. Reconciliation of net cash flow to movement in net debt
Half year ended 30 September 31 March

£000 £000 £000
Net (decrease)/increase in cash and cash (1,237) 140 484

equivalents

Effect of foreign exchange rates 101 (211) (619)
Repayment of finance leases 316 342 704
Cash inflow from debt (115) (44) (123)
Changes in net debt resulting from cash (935) 227 446

flows

New finance leases (371) (175) (367)
Net movement in debt (1,306) 52 79
Opening debt (3,785) (3,864) (3,864)
Closing debt (5,091) (3,812) (3,785)

Analysis of net debt:

Cash at bank 570 200 1,013
Bank overdraft and loans (4,399) (2,635) (3,592)
Finance leases (1,262) (1,377) (1,206)
Total net debt (5,091) (3,812) (3,785)

Reconciliation of cash and cash

equivalents:

Cash and cash equivalents per balance 570 200 1,013

sheet

Bank overdrafts included within 'current (1,649) (79) (956)

liabilities-borrowings'

Cash and cash equivalents per cash flow (1,079) 121 57

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

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