Interim Results

Stanelco PLC 29 June 2001 Embargoed for release at 07h30 on Friday 29 June 2001 STANELCO PLC UNAUDITED INTERIM CONSOLIDATED ACCOUNTS FOR THE SIX MONTHS ENDED 31 APRIL 2001 CHIEF EXECUTIVE'S STATEMENT Our aim is to continue to develop the Stanelco group into a valuable technology business..... RESULTS Firstly, I am pleased to report that Stanelco Fibre Optics Limited, the trading company of the group, achieved a turnover of £3,145,000 (30 April 2000: £2,068,000) resulting in an operating profit at subsidiary level of £ 593,000 (30 April 2000: £425,000). After deducting the holding company costs of £53,000 (30 April 2000: £24,000) we achieved a record group operating profit of £540,000 (30 April 2000: £ 401,000). After interest and taxation charges there is a profit for the group of £387,000 for the first six months of this year (30 April 2000: £287,000). FUTURE PROSPECTS Whilst the telecommunications equipment sector appears to be in decline, at present, the optical fibre-manufacturing sector is growing. We anticipate outpacing the growth of this sector whilst maintaining profits and positive cash flow. Enquiries continue at a strong level, and the group continues to have a growing order book. Our capital equipment business is growing strongly whilst sales of consumables have levelled out. The prospects for the second half and beyond are very encouraging. You may recall that we are targeting three areas in order to improve and grow the existing business: - Low risk improvements We have become the leading independent supplier of both the zirconia and graphite type furnaces for optical fibre manufacture. Our improvement work concentrates on our core furnace technology and customer-specific requirements. In conjunction with customers and suppliers, we are striving to continuously improve - focusing on the benefits to customers over the lifetime of the products so that we can deliver the best value solutions. 'Optimise the cube' With the rapid growth of our fibre optic subsidiary we seriously looked at our options to expand and decided that we can create the best shareholder value and a more robust business by optimising our current manufacturing facility. Consequently we are looking to optimise all aspects of our efficiency. Shortly we shall be commissioning an additional 25% of factory space. We have increased the level of formal and on-the-job staff training. Other areas actively being improved include, materials requirement and planning (MRP), factory workflow, administration and contractual arrangements with both customers and suppliers. - Diversification into new markets based upon core competencies In my last report I mentioned the novel use of our heating technology for certain healthcare applications and that in anticipation of positive results we had established a new subsidiary called InGel Technologies Limited to commercialise this technology. I am now able to report more openly about what we are doing. We have developed and patented technology that enables us to form capsules from most ingestible polymer materials. We regard this as a platform-technology with many potential applications. The first applications we have been pursuing are the development of new dose-forms for pharmaceuticals. It is now possible to encapsulate new pharmaceutical formulations that were not compatible with gelatine. Our technology enables gelatine to be replaced as the encapsulation material. We believe this is important. Gelatine is a complex and versatile material, well known but little understood by most consumers. We believe that consumer awareness about what gelatine is and how it is made is likely to grow quickly. It is made almost exclusively from the bones and skin of cows and pigs making it unsuitable for many people on ethical and religious grounds. There is concern too regarding the possibility of a link with Creutzfeldt-Jakob Disease (CJD). Although gelatine manufacturers have tightened the control on the gelatine manufacturing process to minimise the chances of infected material entering the food chain, a risk is still present - real or perceived. By replacing gelatine with a material derived from plants, such as a cellulose derivative, using our technology could offer a zero risk of such infected material being consumed. We can form accurately dosed capsules using Radio frequency (Rf) technology to join the two halves of the capsule together. Rf technology is already a well-accepted process in the pharmaceutical industry - being used to attach foils to blister packs - it sterilises as it seals and is compatible with pharmaceutical Good Manufacturing Practice (GMP). We have been working closely with Accentus plc (www.accentus.co.uk), a wholly owned subsidiary of AEA Technology plc (www.aeat.co.uk), who are advising and supporting the development of intellectual property and pharmaceutical industry professionals that have firsthand experience of the capsule manufacturing industry for pharmaceutical, health and nutritional applications. We have developed and successfully demonstrated an automated prototype machine. Work has begun on the first production machines and Stanelco is approaching potential capsule equipment manufacturers and capsule manufacturing partners to share in the worldwide commercialisation. We expect the first pharmaceutical products to be on the shelves within three years. As development progresses we shall attempt to quantify the opportunity. - Start-ups, spinouts and acquisitions The group continues to actively consider appropriate acquisitions. When the risk, to the group, from taking on a new business activity is relatively low compared to the return, we intend to start up, spin out and acquire such new technology businesses. There are a number of such opportunities currently being progressed. Entrepreneurs are invited to consider working with Stanelco as a possible vehicle for enabling their venture to happen. Investor Relations I hope that you like the more open style the company is adopting. Further information about Stanelco plc can be found on our main website (www.stanelcoplc.com) which we will update with announcements and press releases as they occur. Thanks Again, I would particularly like to thank our employees for their hard work and determination to make Stanelco an ever better company. Ian Balchin Chief Executive 29 June 2001 SUMMARISED PROFIT AND LOSS ACCOUNT For the six months ended 31 April 2001 Six months Six months Year ended 31 ended 30 April ended 30 April October 2001 2000 2000 £'000 £'000 £'000 Turnover 3,145 2,068 3,602 Operating profit 540 401 283 Interest receivable 13 1 16 Profit on ordinary 553 402 299 activities before taxation Tax on profit on (166) (115) (55) ordinary activities Retained profit on 387 287 244 ordinary activities after tax Earnings per share 0.058 0.0431 0.0370 (pence) Notes 1 The earnings per share is based on an attributable profit after tax for the period of £387,000 (2000: £287,000) and on the number of ordinary shares in issue during the period of 666,224,850 (2000: 666,224,850). 2 The figures for the twelve months ended 31 October 2000 are an abridged statement of the full Group Accounts for that year which have been delivered to the Registrar of Companies on which the auditors made an unqualified report and which did not contain a statement under Section 237 of the Companies Act 1985. The principal accounting policies of the group have remained unchanged from those set out in the group's 2000 annual report and financial statements. The financial information set out in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The interim financial information in this report has been neither audited nor reviewed by the company's auditors. 3 Copies of this statement are being sent to all shareholders today and will be available to the public at the company's registered office. CONSOLIDATED BALANCE SHEET AT 30 APRIL 2001 At 30 April 2001 At 31 October 2000 £'000 £'000 £'000 £'000 Fixed assets Tangible assets 263 242 Current assets Stocks 365 442 Debtors 902 453 Cash at bank and in 642 551 hand 1,909 1,446 Creditors: amounts (1,264) (1,167) falling due within one year Net current assets 645 279 Total assets less 908 521 current liabilities Creditors: amounts (3) (3) falling due after more than one year (24) (24) 881 494 Capital and reserves Called up share capital 666 666 Profit and loss account 215 (172) Shareholders' funds 881 494 CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 APRIL 2001 Note Six months Six months Year ended 31 ended 30 ended 30 April October April 2001 2000 2000 £'000 £'000 £'000 Net cash inflow from 1 147 589 719 operating activities Returns on investments and servicing of finance Interest received 14 4 20 Interest paid - (1) (1) Finance lease (1) (2) (3) interest paid Net cash inflow from 13 1 16 returns on investments and servicing of finance Taxation Corporation tax paid - - (61) Capital expenditure and financial investment Purchase of tangible (65) (52) (177) fixed assets Sale of tangible 1 1 4 fixed assets Net cash outflow (64) (51) (173) from capital expenditure and financial investment Financing Repayments of - (90) (90) borrowing Capital element of (5) (11) (19) finance lease rentals Net cash inflow from (5) (101) (109) financing Increase in cash 2 91 438 392 NOTES TO THE UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 APRIL 2001 1 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES Six months Six months Year ended 31 ended 30 ended 30 October April April 2001 2000 2000 £'000 £'000 £'000 Operating profit for the 540 401 283 period/year Depreciation of tangible 41 26 70 fixed assets Loss on disposal of tangible 2 2 8 fixed assets 77 (38) (260) (Increase)/decrease in debtors (449) 70 351 (Decrease)/increase in (64) 128 255 creditors due within one year Provision for liabilities and - - 12 charges Net cash inflow from 147 589 719 operating activities 2 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Six months Six months Year ended 31 October ended 30 ended 30 April April 2001 2000 2000 £'000 £'000 £'000 Increase in cash in the 91 438 392 period/year Cash outflow from 5 101 109 financing Change in net debt 96 539 501 resulting from cash flows Inception of finance - - - leases Movement in net debt in 96 539 501 the period/year Net funds at beginning of 541 40 40 period/year Net funds at end of 637 579 541 period/year 3 ANALYSIS OF CHANGES IN NET FUNDS At 1 Cash flow Non-cash At 30 April November movements 2001 2000 £'000 £'000 £'000 £'000 Cash in hand and at bank 551 91 - 642 551 91 - 642 Finance leases (10) 5 - (5) 541 96 - 637 At 1 Cash flow Non-cash At 30 April November movements 2000 1999 £'000 £'000 £'000 £'000 Cash in hand and at bank 274 323 - 597 Overdraft (115) 115 - - 159 438 597 Debt (90) 90 - - Finance leases (29) 11 - (18) 40 539 - 579

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