Final Results
Stanelco PLC
28 February 2005
Stanelco plc
Preliminary Results for the Year ended 31 October 2004
Highlights
28 February 2005
• Turnover of £1.3 million (2003: £1.8 million)
• Loss on ordinary activities before taxation of £2.8 million (2003: loss
£0.6m)
• Considerable investment and progress with tray-lidding RF sealing platform
technology. Positive discussions continuing with Asda following signing of
exclusive 60 day agreement
• Frogpack(TM) patented and distributors appointed
• Excellent progress with new product innovations using RF platform
technology and biodegradeable materials including Cradlewrap(TM), Solutape
(TM), airbag packaging and starch food packaging
• Agreement reached with Cardinal Health regarding long term investment in
InGel Technologies
• Cash position strengthened since year-end through placing of 38 million
shares for £4.8 million
Philip Lovegrove, Chairman of Stanelco, commented: 'It has been a good year for
the company, with substantial advances and progress as we pursue our strategy of
developing our technologies to establish new processes and products.
'The business is now in an improved financial position and is well placed to
reap the benefits of all the hard work in 2004. We look forward to the year
ahead with optimism for the business and its shareholders alike, as we move
towards acceptance and commercialisation of our technologies.'
For further information please contact:
Ian Balchin, Chief Executive,
Stanelco Tel: 02380 867100
Jonathon Brill/Billy Clegg
Financial Dynamics Tel: 020 7831 3113
CHAIRMAN'S STATEMENT FOR THE YEAR ENDED 31 OCTOBER 2004
During the year under review, the Board has been pleased to see substantial
advances towards fulfilling the strategy that was outlined in my previous
Chairman's statement, which indicated that significant developments to enter new
markets based on our patented radio frequency (RF) technology were starting to
bear fruit. It is therefore pleasing to be able to inform shareholders that
these developments, based on the Group's substantial investment in research and
development, have not only continued, but have gathered pace, with the result
that a variety of products and processes are nearing commercialisation.
The Board's overall strategy has been to transform the Group from a manufacturer
and supplier of capital goods into cyclical markets, into an intellectual
property business, exploiting the Group's core technologies. The most advanced
applications at present are our RF tray-lidding and thermoforming processes
aimed at the global food packaging industry.
The accounts for the year show a loss for the Group of £2.8m on turnover of
£1.3m, which reflects an operating loss of £1.2m (before exceptionals) resulting
from the continuing low level of orders in the historic businesses and costs
associated with developing the Group's strategic transformation. £1.7m of the
disclosed loss includes expenditure incurred in the move to new premises and
costs incurred in actively protecting the Group's intellectual property rights.
The Board is currently not in a position to recommend a dividend for the period
in question, but intends to consider payments as soon as it is appropriate to do
so.
Two corporate transactions of note were agreed in the calendar year of 2004.
Aquasol, which specialises in packaging design for water soluble and
biodegradable materials, was acquired and the joint venture with Cardinal Health
on InGel, has been successfully re-negotiated.
Positive additions to the Board have been made in the period and thereafter
which will assist us in executing the Group's new strategy. Terry Robins has
been appointed Chief Operating Officer with a specific remit to assist the group
in achieving final commercialisation of its tray-lidding and thermoforming
product suite. Terry spent over 30 years working for J. Sainsbury plc, latterly
as Packaging Innovations Manager. Robert Boardman has been appointed Finance
Director, having been Finance Director at Durlacher Corporation plc and
previously at Altium Capital. Barrie Hozier will be retiring as a Non-Executive
Director at the Annual General Meeting on 22 April 2005, and I would like to
take this opportunity to thank him for his contribution and wish him well in his
retirement.
Since the financial year-end, the Board, advised by KBC Peel Hunt, has placed
38,000,000 shares at 12.825p, raising £4.8m before expenses. The proceeds of
this placing will be used primarily for working capital relating to existing
development projects.
Shareholders will appreciate that huge efforts have been required of the
management and staff in what has been a very busy and active time. Our thanks go
to them and particularly to Howard White and Ian Balchin for the leadership they
have exercised.
The Group is currently concentrating on capitalising on its technological
leadership in a variety of products, markets and applications. The Chief
Executive's review gives a more detailed analysis of our prospects. The Board is
extremely encouraged at the progress made by the Group in the last 18 months and
it looks forward to further progress in this financial year.
Philip Lovegrove, Chairman
28 February 2005
CHIEF EXECUTIVE'S STATEMENT FOR THE YEAR ENDED 31 OCTOBER 2004
The Stanelco group of companies (the 'Group') has brought together expertise in
radio frequency (RF) technology, RF applications and biodegradable material
sciences to create a revolutionary range of packaging technologies.
Our philosophy is simple;
New products and processes must offer solutions and applications which;
give higher added value
are greener and more environmentally sustainable than those they replace
have protectable intellectual property rights
Stanelco develops the products and processes to a demonstration stage and then
works with partners in order to reach the markets; and under these circumstances
Stanelco will usually seek to license its technology. Stanelco invests
considerable time and resources in ensuring its technologies are protected via
layers of patents wherever possible.
In this way we believe we will minimise commercial risk and preserve the optimum
value for shareholders.
Products and processes offering the prospect of near term revenue generation are
given priority access to the Group's resources.
Tray-lidding & Thermoforming
During the year Stanelco has applied its RF sealing platform technology to the
welding of recyclable plastic 'mono-materials' for tray lidding and
thermoforming, specifically in the food packaging area. This process offers
substantial financial benefits to food pack houses, supermarkets and an improved
end product for consumers.
The process replaces heat-sealing as the method for sealing plastic film lids on
to plastic trays for food packaging, especially where modified atmosphere
packaging (MAP) is employed. MAP is used to extend the life of the product and
so requires high integrity hermetic sealing. The current process of heat sealing
has numerous drawbacks. It requires a laminated layer of polyethylene (PE) to
act as a sealing layer. It is usually unable to reliably seal through
contamination and is energy inefficient. By using Stanelco's sealing technology
it is possible to offer enormous savings to both packagers and supermarkets
alike by;
Eliminating the PE layer to reduce the cost of each tray by up to 20%
Vastly reduced wastage rates, resulting from the ability to seal through
contamination
Utilising a mono material so that trays become fully recyclable
Applying RF energy only during the sealing process, providing a further energy
saving of up to 70%
Stanelco's RF sealing process has passed all electromagnetic compatibility tests
(EMC) and its state of the art electronics achieve emission rates that are
substantially lower than the European Union and United States recommended
levels. In fact, our units currently emit less RF than the average mobile
telephone.
At the time of writing we are in advanced negotiations with Asda Stores.
Stanelco has granted Asda an option until 10 April 2005 to consider entering
into an exclusive arrangement for a minimum of 1 year for the UK and Ireland to
introduce Stanelco's RF sealing technology to Asda's supplier base. Clearly, if
things progress well with Asda, we would hope to introduce similar arrangements
with Asda's US parent Walmart, and its affiliate in Germany.
The Group continues to negotiate with a number of equipment manufacturers,
including Reiser, in regard to the roll out of our tray-lidding and
thermoforming technology.
Stanelco will license the technology to the end user and will retain ownership
of the patented RF generator and control system. End users will pay a yearly
licence fee that will include maintenance of the system and ongoing user
training and operational technology updates. Patents in regard to key aspects of
this technology have been applied for.
Starpol(TM)
Starpol(TM) is a range of materials that utilises a technology that enables
starch and PVA (polyvinyl alcohol) to be combined in any proportion to form a
homogenous material. Our subsidiary Adept Polymers developed these materials to
both lower the cost of water-soluble and biodegradable materials and to produce
materials with improved properties over those currently available. We intend to
incorporate these materials in several of our new applications such as
CradleWrap(TM). Patents in regard to key aspects of this technology have also
been applied for.
Frog Pack(TM)
Frog Pack(TM) is a patent applied for box designed to replace traditional
packaging used for transporting delicate and/or valuable items that are
vulnerable to damage in transit due to crushing or shock, such as electronics,
car parts, glass items, compact discs, flowers, foodstuffs, medicines and
medical devices. Its' unique design incorporates the unique SAAP (shock
absorbing arcuate panels) technology developed by Aquasol.
The registered design ensures that the optimum energy is absorbed and dissipated
through the package and not the product, no matter which face of the pack
receives the impact. At the time of writing Stanelco has appointed its first two
distributors.
More details can be found at www.frogpack.com
CradleWrap(TM)
CradleWrap(TM) is a new range of biodegradable air cushion packaging. The first
product, CradleWrap(TM) Heavy Duty is a wrapping material containing air bubbles
designed to absorb high impact. It is currently going through its final stages
of testing and should soon be ready for manufacture on a pilot production line
which we have installed. The material has already been demonstrated to hold its
air bubbles for longer and to provide impact resistance greater than ten times
that of competing products. Given these properties we expect CradleWrap(TM) to
replace polyurethane foam for some applications.
CradleWrap(TM) technology is an example of the kind of product that can be
rapidly developed through a combination of the skills that now exist within the
Group.
Solutape(TM)
Following the acquisition of Aquasol the group was able to accelerate
development of a 100% water-soluble adhesive. This now gives rise to a new range
of applications such as labels, tapes and films coated with the new adhesive
formulation.
Work is progressing with initial applications and we expect this to move to
volume production during 2005.
Biodegradable airbag packaging
We are currently exploiting our low cost Starpol(TM) biodegradable materials to
develop a range of air pillows used as packaging to fill voids. We are working
closely with an internationally recognised air pillow manufacturer with a view
to partnering with them to commercialise this technology.
Food containers
We announced during the year that we were working on biodegradable food
containers, made predominantly from starch materials. Work on the first product
is now reaching an advanced stage and if successful we hope to license it during
the next year.
Traditional RF business
During the year we supplied what we believe was the world's largest RF furnace
for making optical fibre to Japan. The market for this kind of furnace is
showing little sign of recovering with customers keen to minimise capital
expenditure. We have now outsourced all manufacture of these items but retain
control of the intellectual property. We have, however, seen a useful recovery
in the demand for consumable items for RF furnaces.
We continue to make sales of mobile RF welding units for sealing industrial
plastic bags. These units are three times more energy efficient than the
heat-sealing units that they are designed to replace and give a high integrity
seal. Applications include the sealing of waste bags for transit.
InGel Technologies
InGel Technologies Limited (InGel) was established to commercialise Stanelco's
edible capsule making technology.
Certain patents relating to this technology have been the subject of litigation
between our subsidiary Stanelco RF Technologies Limited and BioProgress
Technology Limited. The litigation relates to events which took place in the
late nineteen nineties and centres on the entitlement to three families of
patents. The court found that one of the families (making capsules from two
water-soluble films using RF) belonged to BioProgress (except for some of the
claims in the patent which were awarded jointly to Stanelco and BioProgress) and
two of the families were found to belong to Stanelco (manufacture of capsules
using rotary RF technology and the making of two compartment capsules using RF).
For reasons which Stanelco does not accept, it was found to have breached its
duty of confidence to BioProgress. As a consequence of the courts decision,
Stanelco also has a liability to BioProgress in respect of costs and damages,
although these have not yet been assessed. However, in the light of further
evidence that has been identified since the original hearing, and on the basis
of legal advice received, Stanelco believes that it will be able to continue to
pursue this area of technology. Stanelco will also be seeking leave to appeal
the court's judgement.
Since the year-end Stanelco has agreed a modified arrangement with Cardinal
Health in relation to its investment in InGel Technologies Limited (InGel).
Cardinal Health invested further in InGel shares, in return for a sum of
approximately £410,000 and other benefits, and depending upon certain criteria
being met within two years, a possible further investment of up to approximately
£410,000. As a result of this transaction Cardinal's ownership in InGel has
increased in from 5% to 7.6%, and will increase if the further criteria are met,
to 10%.
InGel is important but, no longer a key element in the success of the Group and,
in mitigation until matters are resolved, we have reduced the resource on this
project.
Financial Review
The Group has invested considerable financial resources in the development and
protection of its technologies in line with its strategy. £1.5m has been
invested in research and development during the year. £1.7m has been incurred in
the restructuring of the Group's business and the defence of patents.
Outsourcing of elements of our traditional business has enabled us to move into
more suitable and cost effective premises. Together with the drop-off in trading
in the traditional RF business, this has given rise to a loss for the year of
£2.8m. The Group's balance sheet has strengthened, with an increase in net
assets of £3.4m and a cash inflow of £0.7m for the year.
The Group has been able to fund its acquisitions, restructuring and investment
in technology primarily by the issue of shares. Approximately 130 million shares
were issued during the year at an average of 3.03 pence per share.
The Board has continued to monitor costs carefully and whilst administrative
costs have risen from £1.3m to £1.7m during the year, this increase comes at a
time when the number of employees, many of which directly contribute to the
Group's development of its technology platform, has grown from 36 to 44.
I am pleased to report that the placing of 38 million shares for £4.8m in cash
in February 2005 means that the Group has strengthened its balance sheet further
and now has the financial resources to accelerate investment in its technologies
as they progress towards commercialisation.
Outlook
In the light of the Board's confidence that the Group's tray-lidding and
thermoforming technology will start to fulfil its huge potential, we continue to
view the forthcoming year with optimism and look forward to being in a position
to make further announcements regarding progress towards our first commercial
orders for the technology soon. We are confident that negotiations with Asda
Stores will continue to proceed towards agreement and that the first food
packages sealed with our tray-lidding technology will reach supermarket shelves
imminently.
Thank You
Thank you again to the team of hard working people at Stanelco who in
partnership with our customers and suppliers continue to improve our business.
Ian H Balchin
Chief Executive
28 February 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
31 OCTOBER 2004
Note 2004 2003
£'000 £'000
Turnover
Continuing operations 1,211 1,851
Acquisitions 121 10
----- -----
1 1,332 1,861
Cost of sales (797) (1,028)
----- -----
Gross profit 535 833
Distribution costs (41) (31)
Administrative expenses (1,682) (1,319)
Exceptional Costs of change of strategy, restructuring
items : and
1 (1,669) (130)
actions in patent defence
----- -----
OPERATING LOSS
Continuing operations (2,787) (563)
Acquisitions (70) (84)
----- -----
(2,857) (647)
Interest receivable and similar income 14 24
Interest payable and similar charges (3) -
----- -----
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (2,846) (623)
Taxation 59 156
----- -----
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (2,787) (467)
Minority interest 4 2
Dividends (7) (70)
----- -----
RETAINED LOSS FOR THE YEAR (2,790) (535)
===== =====
Basic and diluted loss per share - pence 2 (0.370) (0.068)
===== =====
All transactions arise from continuing operations.
All recognised gains and losses are included in the profit and loss account.
CONSOLIDATED BALANCE SHEET AS AT 31 OCTOBER 2004
Note At 31 October 2004 At 31 October 2003
£'000 £'000 £'000 £'000
FIXED ASSETS
Intangible assets 5,567 1,586
Tangible assets 918 502
----- -----
6,485 2,088
CURRENT ASSETS
Stock 610 537
Debtors 651 515
Cash at bank and in hand 920 264
----- -----
2,181 1,316
CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR (1,292) (648)
----- -----
NET CURRENT ASSETS 889 668
----- -----
TOTAL ASSETS LESS CURRENT 7,374 2,756
LIABILITIES
CREDITORS: AMOUNTS FALLING
DUE AFTER MORE THAN ONE YEAR (159) -
PROVISIONS FOR LIABILITIES AND
CHARGES 4 (1,093) (82)
----- -----
6,122 2,674
===== =====
CAPITAL AND RESERVES
Called up share capital 832 702
Share premium account 5,209 1,597
Shares to be issued 2,500 -
Profit and loss account (2,442) 348
----- -----
SHAREHOLDERS' FUNDS 6,099 2,647
Minority interest - equity interest 23 27
----- -----
6,122 2,674
===== =====
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 OCTOBER 2004
2004 2003
Note £'000 £'000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES 5 (731) (367)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 14 23
Interest paid (3) -
----- -----
NET CASH INFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE 11 23
----- -----
TAXATION
Corporation tax paid - (4)
----- -----
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Investment in intangible fixed assets (1466) (619)
Sale of tangible fixed assets 79 33
Purchase of tangible fixed assets (280) (144)
----- -----
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (1,667) (730)
----- -----
ACQUISITIONS AND DISPOSALS
Cash at bank acquired with subsidiary 59 256
----- -----
EQUITY DIVIDENDS PAID
Dividends paid (79) (65)
----- -----
FINANCING
Issue of ordinary share capital 2,919 -
Capital element of finance lease payments (3) -
New bank loan 150 -
Repayment of loan capital (3) -
----- -----
NET CASH INFLOW FROM FINANCING 3,063 -
----- -----
----- -----
INCREASE/ (DECREASE) IN CASH 6 656 (887)
===== =====
NOTES
1. TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
2004 2003
£'000 £'000
Turnover
Sales are made from the United Kingdom into the following geographical
markets:
United Kingdom 647 800
Europe 98 373
Asia 472 379
North America 40 304
Rest of world 75 5
----- -----
1,332 1,861
===== =====
The world-wide activities of Stanelco plc are highly integrated and,
accordingly, it is not possible to present geographical segment information for
Profit Before Tax without making internal allocations, some of which are
necessarily subjective.
The net assets for the United Kingdom are as stated in the Consolidated Balance
Sheet.
2004 2003
£'000 £'000
The profit on ordinary activities before taxation is stated after charging/(crediting):
Depreciation, amortisation and impairment:
Intangible fixed assets, owned 348 59
Tangible fixed assets, owned 157 122
Tangible fixed assets, leased 14 -
Goodwill on investments 60 -
Loss on disposal of tangible fixed assets 68 -
Auditors' remuneration:
audit work 46 17
non-audit work 29 8
Hire of plant and machinery 5 4
Operating lease rentals: Land and buildings 123 62
Loss on foreign exchange transactions 2 -
Exceptional items
Costs of change of strategy, restructuring and patent defence, more
details of which are set out in the Chief Executives Statement. 1669 -
Bad debt provision - 130
===== =====
And after crediting:-
Profit on disposal of tangible fixed assets - (5)
===== =====
2. EARNINGS PER SHARE
The calculation of earnings per share and diluted earnings per share is based on
the loss after tax for the year of £(2,787,000) (2003: £(467,000) and a weighted
average of 753,303,455 (2002: 691,032,490) ordinary shares in issue.
3. DIVIDEND
The directors do not recommend the payment of a dividend.
4. PROVISIONS FOR LIABILITIES AND CHARGES
Deferred tax Warranty Other Total
provision provision provisions
£'000 £'000 £'000 £'000
At 1 November 2003 64 18 - 82
Utilised in the year (64) (18) - (82)
Provided in year - 12 1,081 1,093
----- ----- ----- -----
At 31 October 2004 - 12 1,081 1,093
===== ===== ===== =====
At 1 November 2002 195 15 - 210
Utilised in the year (131) (15) - (146)
Provided in year 18 - 18
----- ----- ----- -----
At 31 October 2003 64 18 - 82
===== ===== ===== =====
The warranty provision is for expected warranty claims on products sold during
the financial year by Stanelco RF Technologies Limited (formerly Stanelco Fibre
Optics Limited). It is expected that this expenditure will be incurred in the
next financial year.
Other provisions relate primarily to best estimates of the costs incurred and
committed in respect of the recent change of strategy, restructuring and actions
in defence of patents.
5. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
2004 2003
£'000 £'000
Operating loss (2,857) (647)
Amortisation and impairment of intangible fixed assets 348 59
Depreciation of tangible fixed assets 171 129
Amortisation of goodwill 60 -
Loss / (profit) on sale of tangible fixed assets 68 (5)
(Increase)/ decrease in stocks (61) 120
(Increase)/ decrease in debtors (98) 314
Increase/ (decrease) in creditors 563 (340)
Increase in provision for liabilities and charges 1,075 3
----- -----
Net cash outflow from operating activities (731) (367)
===== =====
6. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2004 2003
£'000 £'000
Increase/ (decrease) in cash in the year 656 (887)
Cash inflow from increase in debt lease financing (144) -
New finance leases (54) -
----- -----
Change in net debt resulting from cash flows 458 (887)
Net funds at 1 November 2003 264 1,151
===== =====
Net funds at 31 October 2004 722 264
===== =====
7. ANALYSIS OF CHANGES IN NET FUNDS/DEBT
1 November Cashflow Acquisition Other non- 31 October
2003 (excl. cash and cash changes 2004
overdrafts)
£'000 £'000 £'000 £'000 £'000
Cash in hand and at bank 264 656 - - 920
-----
656
Bank loan - (147) - - (147)
Finance leases - 3 - (54) (51)
----- ----- ----- ----- -----
264 512 - (54) 722
===== ===== ===== ===== =====
8. CONTINGENT LIABILITIES
Certain patents relating to Stanelco's edible capsule making technology has been
the subject of litigation between our subsidiary Stanelco RF Technologies Ltd
and BioProgress Technology Limited, more details of which are set out in the
Chief Executives Statement.
The Board have made provision against the estimated costs associated with this
litigation and its possible outcomes based on legal advice.
9. REPORT AND FINANCIAL STATEMENTS
The information relating to the year ended 31 October 2004 is extracted from the
audited accounts that have not yet been filed at Companies House and on which
the auditors issued an unqualified opinion.
The information relating to the year ended 31 October 2003 is extracted from the
audited accounts that have been filed at Companies House and on which the
auditors issued an unqualified opinion.
The above financial information does not constitute statutory accounts within
the meaning of Section 240 of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
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