7th Mar 2005 07:30
Hydro International PLC07 March 2005 HYDRO INTERNATIONAL plc PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 CHAIRMAN'S STATEMENT Hydro International, the supplier of vortex and related technologies for controland treatment of stormwater and wastewater, announces its preliminary resultsfor the year ended 31 December 2004. PerformanceHydro recorded further advances in 2004. Turnover increased by 5% to £12.5m andunderlying profit before tax* (which excludes exceptional net licence income) by8% to £1,212,000. Net cash balances grew by 24% to £2.6m. As previouslypredicted, our rate of growth has not been as high as in the last two years, dueprincipally to expenditure phasing in the UK regulated water sector coupled withthe decision to increase investment particularly in our US sales and marketingactivities. Business Review Our UK operation performed strongly in 2004 benefiting from a buoyant stormwatermarket and a substantial opening order book for screening products generated bythe regulated water sector spend on Asset Management Plan 3 (AMP 3). Whilst AMP4 (which replaces AMP 3 from April 2005) would appear to offer relatively lesspotential than its predecessor, opportunities exist for both screening productsand grit removal equipment not only within England but also from Scottish andIrish markets which are not regulated by OFWAT.There has been continuing growth in the stormwater business that marketssolutions into the construction industry. Environmental legislation is becomingboth more stringent and widespread and Hydro's current range of products is wellplaced in this market, offering a comprehensive solution for the management ofstormwater associated with new build developments. The focus in the US during 2004 has been to expand our direct sales force forstormwater products. The number of regional sales managers has been doubled,although the full impact on turnover will not be evident until 2005. Sales inthis sector were up 10% year on year and encouragingly the closing order book at31 December 2004 increased by 20%. In the wastewater treatment market we have completed our geographical coveragethrough independent sales representatives. Whilst 2004 did not have the samenumber of high value contracts as 2003, a record number of proposals were issuedin the year and the closing order book at 31 December 2004 was 30% higher. Additional products have recently been added to enhance our portfolio. Duringthe year we completed the development of the First Defense(R) - acost-effective, simple hydrodynamic vortex separator that complements ourexisting product range for removing sediments and floatables from stormwaterrunoff. In December 2004 we completed the intellectual property acquisition ofthe Upflow Filter TM technology for finer pollutant removal. Bob Andoh and his team have made significant progress in entering the UScombined sewer overflow (CSO) market. Bob has been in the US since August 2003and sales of several screening products have already been made. In December wereceived an order for $0.5 million of CSO products for Clinton, Pennsylvania . We have continued our strategic aim to expand the business geographicallyoutside our two core markets. Our licensee in Korea, DI Corporation, has soldtheir first products, and further progress is expected. In Japan we haveexpanded the scope of our licence agreement with JFE Engineering Corporation toinclude wastewater applications. The European markets identified in Poland andIreland are beginning to show encouraging signs and promise potential inforthcoming years. Dividend Supported by a continuing strong underlying performance and increasing cashreserves, the directors propose a final dividend payment of 1.7 pence per share.This represents a 13% increase over last year's 1.5 pence per share andunderlines the Board's intention to continue with final dividend payments wheresuch a distribution is considered appropriate. AIM ListingFollowing consultation with our professional advisers, the decision has beentaken to move Hydro International's listing from the Official List to the AIMmarket. Over recent years the Official List has increasingly focussed on largercapitalised companies, and we believe that the AIM market will be moreappropriate for a smaller capitalised company such as Hydro. An additionalreason for the move to the AIM market comes from the increasing opportunities weare seeing for strategic consolidation in the market in which we operate.Capitalising on these opportunities through business acquisition issignificantly easier and less costly from the AIM market than from the OfficialList. We expect to announce the transition in the near future. ProspectsThe UK market is a changing environment, with the regulated water industrytransitioning from AMP3 to AMP4. Whilst opportunities remain for our municipalmarket products, the focus of the UK business is now more on the stormwatermarket and on expanding into European markets, notably Ireland and Poland. TheUS offers substantial opportunities. Additional expenditure on direct salesresources is anticipated to show increasing returns in 2005, as should theenhanced geographical coverage of our independent sales representatives. Although the market factors referred to above suggest that the first half of2005 will be less buoyant than the first six months of 2004 we remain confidentthat there are sufficient opportunities to make further progress in 2005 as awhole. StaffI would like to congratulate the Hydro team in attaining such a commendableperformance in 2004. Roger LockwoodChairman4 March 2005 * The profit before tax is reduced by net licence income of 2004 £nil (2003: £101,000) to arrive at the underlying profit before tax. See Group Profit and Loss Account Preliminary ResultsConsolidated Profit and Loss AccountYear ended 31 December 2004 Audited Audited 2004 2003 £000 £000 -------- ---------Turnover - continuing operations 12,450 11,827 -------- ---------Gross profit 5,236 5,135 -------- ---------Total administrative expenses (4,111) (4,047)Exceptional other operating income - 101- net licence income -------- ---------Operating profit - continuing operations 1,125 1,189Net interest receivable 87 36 -------- ---------Profit on ordinary activities before taxation 1,212 1,225Taxation on profit on ordinary activities (375) (359) -------- ---------Profit for the financial year 837 866Dividends proposed (235) (206) -------- ---------Retained profit for the financial year 602 660 -------- ---------Earnings per ordinary share 6.08p 6.35pDiluted earnings per ordinary share 5.92p 6.15p -------- --------- 1) Basis of preparation The preliminary announcement has been drawn up using the same accountingpolicies as for the year ended 31 December 2003. 2) Intangible fixed assetsPatents are valued at cost on acquisition and amortisation is provided so as towrite off the cost of the intangible fixed asset by equal annual instalmentsover their estimated useful life. 3) Earnings per share The earnings per ordinary share for each year have been calculated on the profitafter tax for the year, divided by the weighted average number of ordinaryshares in issue in the relevant year. The number of ordinary shares used in thecalculation is 13,765,176 shares (2003 - 13,621,616 shares). The dilutedearnings per ordinary share is calculated after the inclusion of share optionsand the weighted average of ordinary shares used in the calculation is14,152,872 (2003 -14,078,371) 4) Status of information The financial information set out above does not constitute the Group'sstatutory accounts for the years ended 31 December 2004 or 2003, but is derivedfrom those accounts. Full audited accounts of Hydro International plc for the twelve months ended 31December 2004 will be dispatched to shareholders within the next 10 days andcopies will be available from the Company's registered office from 11 March2005. The audited accounts will be delivered to the Registrar of Companiesfollowing the Annual General Meeting. Enquiries Keith Marshall, Director/Company Secretary, Hydro International plc (01275)878371 Statement of Total Recognised Gains and LossesYear ended 31 December 2004 Audited Audited 2004 2003 £000 £000 -------- ---------Profit for the financial year 837 866Currency translation differences on foreign (10) (26)currency net investments -------- ---------Total recognised gains and losses related to the year 827 840 -------- --------- Reconciliation of Movement in Group Shareholders' Funds Year ended 31 December 2004 Audited Audited 2004 2003 £000 £000 -------- ---------Total recognised gains and losses relating to the year 827 840Dividend (235) (206)Proceeds from issue of new shares 30 41 -------- ---------Net increase in shareholders' funds 622 675Opening shareholders' funds 3,146 2,471 -------- ---------Closing shareholders' funds 3,768 3,146 -------- --------- Consolidated Balance Sheets31 December 2004 -------- --------- Audited Audited 2004 2003 £000 £000 -------- ---------Fixed assets 126 92Intangible assets 643 708Tangible assets -------- --------- 769 800 -------- ---------Current assets 165 276Stocks 2,914 3,123Debtors 2,639 2,130Cash and short term deposits -------- --------- 5,718 5,529 -------- ---------Creditors: amounts falling due (2,709) (3,174)within one year -------- ---------Net current assets 3,009 2,355 -------- ---------Total assets less current 3,778 3,155 liabilities (10) (9) Creditors: amounts falling due after more than one year -------- ---------Net assets 3,768 3,146 -------- ---------Capital and reserves 690 685Called up share capital 850 825Share premium 2,228 1,636Profit and loss account -------- ---------Total equity shareholders' funds 3,768 3,146 -------- --------- Consolidated Cash Flow StatementYear ended 31 December 2004 ------- ------- Notes Audited Audited 2004 2003 £000 £000 ------- -------Net cash inflow from operating activities (1) 1,246 1,202 ------- -------Returns on investments and servicing of finance 86 38Interest received (1) (3)Interest paid ------- -------Net cash inflow from returns on 85 35investments and servicing of finance ------- -------Taxation (507) (24)UK corporation tax paid (5) (36)Overseas tax paid Net cash outflow on taxation (512) (60) ------- -------Capital expenditure and financial investment (62) (194)Payments to acquire tangible fixed assets (58) (41)Payments to acquire intangible fixed assets - 17Receipts from sale of tangible fixed assetsNet cash outflow from capital expenditure (120) (218)and financial investment ------- -------Equity dividends paid (206) (135) ------- -------Cash inflow before management of liquid 493 824resources and financing ------- -------Management of liquid resources 385 (789)Net decrease/(increase) in short term deposits ------- -------Financing (4) (27)Repayment of borrowings 30 41Issue of ordinary share capital ------- -------Increase in cash in the year (2) 904 49 ------- ------- Notes to the Consolidated Cash Flow StatementYear ended 31 December 2004 (1) Reconciliation of the operating profit to net cash inflow from operating activities 2004 2003 £000 £000 -------- ---------Operating profit 1,125 1,189Depreciation charges 134 124Amortisation charges 24 24Decrease/(increase) in stocks 111 (199)Decrease/(increase) in debtors 201 (381)(Decrease)/increase in creditors (349) 446Profit on sale of fixed assets - (1) -------- ---------Net cash inflow from operating activities 1,246 1,202 -------- --------- (2) Reconciliation of net cash flow to movement in net funds 2004 2003 £000 £000 -------- ---------Increase in cash in the year 904 49Cash (outflow)/inflow from movements (385) 789in short term deposits 4 27Cash outflow from the reduction in debt -------- ---------Change in net funds resulting from cash flows 523 865New finance leases (7) (9)Translation differences (10) (26) -------- ---------Movement in net funds in the year 506 830Net funds at 1 January 2,117 1,287 -------- ---------Net funds at 31 December 2,623 2,117 -------- --------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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