25th Oct 2007 07:00
Elektron PLC25 October 2007 For immediate release 7 am 25 October 2007. ELEKTRON PLC Interim results for the period ended 31 July 2007 Elektron PLC ("Elektron"), the fast expanding AIM quoted Engineered Componentsmanufacturer announces results for the half-year ended 31 July 2007. Key Points: • Turnover from continuing operations up 21% to £15.6 million (2006: £13.0 million) • Operating profits before exceptional items up 8% to £1.3 million (2006: £1.2 million) • Profit before taxation from continuing activities up 72% to £1.1 million (2006: £0.64 million) • Earnings per share on continuing operations up 128% to 1.37p (2006: 0.60p) • Net gearing reduced to 13% from 63% at 31 January 2007 • Transfer of Arcolectric production to China anticipated to produce future annualised cost savings of circa £1.0 million from 1 February 2009. • Expected annualised sales of circa £40 million in 2008 following acquisition of Sifam For further information please contact: Adrian Girling Roland CornishExecutive Chairman ChairmanElektron PLC Beaumont Cornish LimitedTel: 01708 336309 Tel: 020 7628 3396 Chairman's Statement Summary We had a good first half. The transfer of the Bulgin manufacturing processes to Tunisia is now completeand has produced excellent financial results whilst Arcolectric has continued tosuffer as a result of the weakness of the US Dollar and higher metal prices. Thedivision has produced a return of 11.2% on sales of £11.3m. We have announced to our Arcolectric employees that we will be moving the majorparts of the West Molesey manufacturing operation to China by 23 December 2008,the lease break date. This will result in us reducing our UK Arcolectric spacerequirement from 81,000 square feet to 36,000 sq feet and UK employee numbers bycirca 100 staff. The revenue cost of the move, which will involve taking a leaseon a new factory in Shenzhen, is expected to be in the region of £1.4 millionwith a further £0.6 million of capital costs and is anticipated to result incost savings of circa £1.0 million per annum from 1 February 2009. The continuing Howle businesses produced a return of 3.4% on sales of £4.3million. This is well below our target for the future and is largely due tooperating with inefficient ageing plant, which is in the process of beingreplaced. Howle Carbides in particular should have good prospects once newinvestment has taken place. We mentioned in our 2007 Annual Report that we saw this year as a period ofconsolidation involving management and organisational changes. Following theacquisition of Sifam Instruments in September 2007 we have commenced an internalre-organisation to create three divisions within the Group each with a dedicatedmanaging director. The operations of the Bulgin and Arcolectric brands will be transferred into anew division named Elektron Components, which will have annual sales of about£24 million. Howle Holdings, which was acquired in October last year, has seen its two lossmaking businesses and freeholds sold, leaving the two profitable businesses forus to expand. Howle Carbides and Titman Tip Tools will form the Hard MetalComponents division, which will have annual sales of about £8 million. Sifam Instruments Limited, which was acquired in September 2007, is presentlybeing managed by me until such time as we have recruited a managing director.Sifam designs, manufactures and sells nano-positioning systems, electrical andelectronic measuring instruments and moulded control knobs and will form theInstrumentation division with annual sales of about £8 million. By making thenecessary investment in engineering resources for new product development, wesee good opportunities for organic growth in the medium term. Financial results Group sales have increased by 21% to £15,630,000. Group operating profits of £1,267,000, before exceptional items, were 8% aheadof those in the first half of last year. Gross margins were 37% compared with38% the previous year, the reduction being due to the addition of the lowermargin Howle businesses. We expect to bring Howle margins to a satisfactorylevel in due course as mentioned above. We incurred exceptional costs of £85,000 in the period relating to abortedacquisition costs and redundancy costs in Titman Tip Tools. Group profits before taxation from continuing businesses have increased by 72%to £1,108,000. The taxation credit has arisen from a review of the underlying tax positionrelating to the fair value exercise carried out on the acquisition of HowleHoldings. This has resulted in a one-off tax credit of £328,000. The underlyingtax charge for the period is £252,000 representing a rate of 23%. At 31 July 2007, net borrowings had decreased to £1,189,000 from £5,038,000, thereduction principally arising from the sale and leaseback of the Howle freeholdproperties. Gearing at the period end reduced to 13% from 63% at 31 January 2007. Acquisitions We continue to investigate acquisition opportunities with a view to acceleratingElektron's growth. Earnings per share and dividends The earnings per share from continuing businesses, before exceptional costs,were 1.45p compared with 1.08p in 2006. Basic and diluted earnings per share oncontinuing businesses after exceptional costs were 1.37p (2006: 0.60p). The Board has considered the payment of an interim dividend, but in the light ofcurrent projects has decided to retain cash. Providing progress continues to bemade the Directors intend to consider an increase in the dividend at year-end. Employees I should like to thank all of our staff for their enthusiasm and hard work,particularly those at Arcolectric who have continued to work diligently andprofessionally in the light of the announcement that the factory would be movingthe majority of its operations to China. Outlook Having established a track record of steadily improving pre-exceptionaloperating results based mainly on cost reductions we are now looking toaccelerate our investment in new product development. We are excited thatElektron now owns a selection of leading brand names, namely Arcolectric,Bulgin, Digitron, Howle Carbides, Sifam, Teco, Titman and Queensgate, all wellknown and respected in the markets they serve, through which new products willbe promoted to achieve organic growth. Orders received to date, for continuing businesses, are currently up 41% on thistime last year and we are well placed to continue progress. Adrian Girling Executive Chairman Group Income Statement Unaudited Interim Results to 31 July 2007 Unaudited Unaudited Audited Half year to Half year to Year to 31 July 31 July 31 January 2007 2006 2007 £'000 £'000 £'000 Revenue from continuingoperations 15,630 12,954 26,010Cost of sales (9,824) (8,077) (16,662) --------- --------- ---------Gross profit 5,806 4,877 9,348Net operating expenses(including exceptional items) (4,624) (4,221) (8,753) --------- --------- ----------------------------------------------------------------------------------------- Operating profit before exceptional items 1,267 1,173 1,874Exceptional items (85) (517) (1,279)-------------------------------------------------------------------------------- Operating profit from continuing 1,182 656 595operationsFinance income 31 23 49Finance costs (105) (36) (131) --------- --------- ---------Profit before taxation fromcontinuing operations 1,108 643 513 Taxation on continuing operations 76 (174) (21) --------- --------- ---------Profit after taxation fromcontinuing operations 1,184 469 492 Loss after taxation fromdiscontinued operations (9) - (85) --------- --------- --------- Profit attributable toshareholders 1,175 469 407 --------- --------- --------- Earnings per share - basic 1.35p 0.60p 0.50p - diluted 1.35p 0.60p 0.50p --------- --------- ---------Earnings per share continuingoperations - basic 1.37p 0.60p 0.61p - diluted 1.37p 0.60p 0.61p --------- --------- --------- Group Balance Sheet Unaudited Interim Results at 31 July 2007 Unaudited Unaudited Audited 31 July 31 July 31 January 2007 2006 2007 £'000 £'000 £'000AssetsNon-current assetsProperty, plant and equipment 3,136 2,096 3,683Deferred tax 62 285 - ---------- --------- ---------Total non-current assets 3,198 2,381 3,683 ---------- --------- ---------Current assetsInventories 5,335 3,282 4,974Trade and other receivables 7,744 5,188 10,506Cash and cash equivalents 1,746 2,421 858 ---------- --------- --------- 14,825 10,891 16,338Assets held for sale 1,160 - 1,253 ---------- --------- ---------Total current assets 15,985 10,891 17,591 ---------- --------- ---------Total assets 19,183 13,272 21,274 ---------- --------- --------- Equity and liabilitiesEquity attributable to equity holders of the parentCalled - up share capital 4.336 3,916 4,336Share premium 244 244 244Merger reserve 1,047 - 1,047Capital redemption reserve 106 105 106Other reserves 57 59 54Retained earnings 3,389 2,568 2,214 ---------- --------- ---------Total equity 9,179 6,892 8,001 ---------- --------- --------- Non-current liabilitiesLong-term borrowings 333 160 286Long-term provisions 251 269 251Deferred income tax liabilities - - 63 ---------- --------- ---------Total non-current liabilities 584 429 600 ---------- --------- --------- Current liabilitiesTrade and other payables 5,026 3,350 4,609Short-term borrowings 2,260 1,087 5,385Current portion of long-term borrowings 342 288 225Current tax payable 566 644 895Short-term provisions 146 582 500 ---------- --------- ---------Total current liabilities 8,340 5,951 11,614Liabilities directly associated withassets held for sale 1,080 - 1,059 ---------- --------- ---------Total current liabilities 9,420 5,951 12,673 ---------- --------- ---------Total liabilities 10,004 6,380 13,273 ---------- --------- --------- Total equity and liabilities 19,183 13,272 21,274 ---------- --------- --------- Group Cash Flow Statement Unaudited Interim Results to 31 July 2007 Unaudited Unaudited Audited 31 July 31 July 31 January 2007 2006 2007 £'000 £'000 £'000 Cash flows from operating activitiesProfit before taxation (continuing activities) 1,108 643 513Loss before taxation (discontinued activities) (16) - (104) -------- -------- --------Profit before taxation 1,092 643 409Adjustments for:Depreciation charge 616 481 1,019Interest receivable (31) (23) (49)Interest expense 147 36 184(Profit)/loss on disposal of fixed assets (32) - 57Goodwill impairment - - (5) -------- -------- --------Operating profit before working capitalchanges 1,792 1,137 1,615 (Increase)/decrease in inventories (376) (15) 113Decrease/(increase) in trade and otherreceivables 3,344 (626) (14)Increase in trade and other payables 110 477 17Decrease in provisions (364) - -Other non-cash movements 5 429 364 -------- -------- --------Cash generated from operations 4,511 1,402 2,095Interest paid (147) (36) (184)Taxation paid (85) (394) (457)------------------------------------------------------------------------------Net cash inflow from continuing operations 4,343 972 1,553Net cash outflow from discontinued operations (64) - (99)------------------------------------------------------------------------------Net cash inflow from operatingactivities (total) 4,279 972 1,454 -------- -------- -------- Cash flows from investing activitiesSale of subsidiary operations 80 - 100Acquisition of subsidiaries - - (1,655)Purchase of property, plant and equipment (459) (419) (610)Proceeds of sale of property, plant andequipment 33 - 4Interest received 31 23 49 -------- -------- --------Net cash used in investing activities (315) (396) (2,112) -------- -------- -------- Cash flows from financing activitiesPurchase of own shares - (132) (132)Movement in long term borrowings (146) 214 (2,224)Movement in short term borrowings (3,067) 329 2,906New capital leases 146 - 164Payment of hire purchase and financeliabilities (9) (280) (638)Dividends paid - - (274) -------- -------- --------Net cash used in financing activities (3,076) 131 (198) -------- -------- -------- Net increase/(decrease) in cash and cashequivalents 888 707 (856)Cash and cash equivalents at thebeginning of period 858 1,714 1,714 -------- -------- --------Cash and cash equivalents at the end ofperiod 1,746 2,421 858 -------- -------- -------- Group statement of changes in equity Unaudited Interim Results to 31 July 2007 Share Share Merger Capital Other Translation Retained Total Capital Premium Reserve Redemption Reserves Earnings £000 £000 £000 Reserve £000 Reserve £000 £000 £000 £000At 1 February 2007 4,336 244 1,047 106 73 (19) 2,214 8,001 Transfer fromincome and expense - - - - - - 1,175 1,175account Employee share scheme - - - - 14 - - 14transfer Exchange differences - - - - - (11) - (11) At 31 July 2007 4,336 244 1,047 106 87 (30) 3,389 9,179 Notes to the Unaudited Interim Results to 31 July 2007 1. Accounting Policies The interim financial information has been prepared on the basis ofInternational Financial Reporting Standards (IFRS). Full details of accountingpolicies will be included in the Annual Report for the year ending 31 January2008. These are not expected to be materially different from those set out inthe Group's statutory accounts for the year ended 31 January 2007. Fixed annual charges are apportioned to the interim period on the basis of timeelapsed. Other expenses are accrued in accordance with the same principles usedin the preparation of the annual accounts. The Group has not applied IAS 34, Interim Financial Reporting, which is notmandatory for UK Groups, in the preparation of these interim financialstatements. 2. Other information The financial information in this statement does not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985. Thefinancial information in respect of the year ended 31 January 2007 has beenextracted from the statutory accounts, which have been filed with the Registrarof Companies. The auditors' report on those accounts was unqualified and did notcontain a statement under Section 237 of the Companies Act 1985. Copies of the interim results will be sent to shareholders and are available todownload from the Group's website www.elektronplc.com. Hard copies are availablefree of charge from the Company's registered office at Melville Court, SpilsbyRoad, Romford, Essex RM3 8SB. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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