Interim Results
Stanelco PLC
19 June 2002
STANELCO PLC - INTERIM ANNOUNCEMENT
* Stanelco, the Rf (radio frequency) applications group, announces that, on
balance, progress was made in the six months ended 30 April 2002.
* On turnover 31.6% down at £2,151,000, underlying pre-tax profit was 50.5%
lower at £274,000, whilst reported pre-tax profit was 9.4% down at £501,000.
* Demand for the core activity - the manufacture of furnaces and supply of
related consumables for the manufacture of optical fibre - was substantially
reduced due to the state of the telecommunications market, as predicted in the
preliminary announcement of 4 February. However, Stanelco's optical fibre
activity has remained profitable and cash generative and the Group has
significantly increased its share of the available market and signed key supply
agreements.
* In December 2001, Stanelco entered into agreements with R P Scherer (the world
leader in softgel capsule technology) to commercialise Stanelco's technology for
heat sealing soft gel pharmaceutical capsules, with a resultant very significant
increase in the rate of progress subsequently.
* Reflecting the agreements with R P Scherer, period end net cash increased to
£1,604,000 from £637,000.
* Following 12 months of intensive development and testing in conjunction with
potential customers, Stanelco has developed a new product for welding high-end
waste containers made of plastic, generating a significant contract and
extensive enquiries.
* Stanelco's first sale of equipment based upon the plastic proof welding method
was made in the period to a well known domestic kettle manufacturer.
* It is the Directors' current intention to propose at the AGM a dividend per
share of 0.02p - double that paid last year.
* Ian Balchin, Chief Executive, stated 'We expect to see improvements in the
turnover and underlying profitability during the second half of the year and to
be able to generate significant growth in turnover and profit as our new
applications are commercialised.'
Enquiries:
Stanelco PLC 01489-570991
Ian Balchin (Chief Executive)
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166
CHIEF EXECUTIVE'S STATEMENT
Our aim is simple, to create a valuable technology business based upon Radio
Frequency ('Rf') applications.
On balance, progress was made in the period. Demand for the activity which
currently generates substantially all the Group's turnover - the manufacture of
furnaces and supply of related consumables for the manufacture of optical fibre
- was substantially reduced due to the state of the telecommunications market,
as predicted in the Company's preliminary announcement of 4 February 2002, and
as a result profits suffered. However, significant progress has been made, both
during the period and subsequently, in the development of three businesses also
based on Rf technology - pharmaceutical capsules, high-end waste packaging and
plastic welding.
Results
On turnover 31.6% down at £2,151,000 (2001: £3,145,000), underlying pre-tax
profit was 50.5% lower at £274,000 (2001: £553,000), following the
capitalisation of research and development costs totalling £295,000 (2001: nil)
permitted by progress in the development of the Group's new businesses.
Including an exceptional credit of £227,000 referred to below, the reported pre-
tax profit was £501,000 (2001: £553,000). Basic earnings per share were 0.029p
(2001: 0.058p) on an underlying basis and 0.052p (2001: 0.058p) on a reported
basis.
Period end net cash increased to £1,604,000 (2001: £637,000) following the
receipt during the period of £1,113,000 in respect of the issue of ordinary
shares in the Company and its subsidiary, InGel Technologies Limited. Net
interest received in the period also increased, to £21,000 (2001: £13,000).
A review of the investment the Company made, in February 2000, in the internet
venture known as 'LogistiGO' has resulted in an agreement for the repayment of
approximately £250,000. Following receipt of this sum, the Company will no
longer have any interest in LogistiGO.
Dividend
The Directors' current intention is to propose a final dividend of 0.02p per
share, double last year's dividend.
Optical Fibre
The Group's optical fibre activity has remained profitable and cash generative
through a period of significantly reduced demand, which affected equally
furnaces and consumables. We significantly increased our share of the available
market (where we are already the largest independent operator globally) and have
signed key supply agreements.
We continue to develop new and improved Rf furnace equipment to enable our
customers to both improve the quality of fibre they manufacture and lower its
unit cost. We are expecting to introduce new Rf applications to this market over
the next few months which, if successful, should expand the available market
significantly for us. We are also in the process of recruiting additional sales
staff. We are not, however, anticipating a recovery in the global
telecommunications market during the second half of the year.
We have taken action to reduce both manufacturing and overhead costs. In
particular, nine redundancies made in the period, of which seven were made in
March, at a total cost of £31,000, are expected to generate annualised savings
of some £210,000.
InGel Technologies
As reported previously, during December 2001 we entered into agreements with
R.P. Scherer Corporation (a subsidiary of Cardinal Health Inc.) concerning our
technology for heat sealing soft pharmaceutical gel capsules, which will make
production much faster and more economical whilst enabling use of substances
other than gelatine, which has raised concerns following the BSE scare and has
other disadvantages.
Since that time, there has been a very significant increase in the rate of
progress towards commercialising the Company's capsule making technology. I am
pleased to report that:
* the first patents have now been granted covering the formation of ingestible
capsules using Rf technology;
* we have established proof of concept in the R&D stage and will now construct a
pilot scale machine capable of producing large batch sizes for stability and
clinical trials;
* R.P. Scherer Corporation (which in December 2001 acquired 3% of the Company,
and 5% of InGel with a deferred payment to acquire an additional 5% of InGel)
has committed a full-time team of people in support of InGel, working as part of
the team with our own staff; additionally, it has nominated both Tom Stuart, its
Regional President, Americas, and Dr. Richard Yarwood, its Regional President,
Europe, to the InGel Board;
* we have agreed the relocation of InGel to premises designed for pharmaceutical
operations;
* our best estimates are that we expect InGel to start generating revenues
within the next 18 months; and
* other applications capable of early revenue generation are currently being
investigated
Waste Packaging
I am pleased to report that, following 12 months of intensive development and
testing in conjunction with potential customers, we have developed a new product
for welding high-end waste containers made of plastic.
The equipment has recently been demonstrated successfully at six exhibitions in
the UK and at the date of this report we have enquiries for circa £4 million of
equipment in the UK.
We anticipate that the equipment has significant potential in overseas markets,
to which end we are currently looking for suitable overseas partners.
Plastic Welding
We have developed a very reliable Rf method of rapidly joining together
thermoplastics to form a high integrity, hermetic, burst-proof weld. Our first
sale of equipment based upon this method has been made in the period to a well-
known domestic kettle manufacturer. We are currently investigating the potential
of this market and expect to develop further applications for this technology.
Start-ups and Acquisitions
We are actively considering a range of start-up businesses based upon new and
improved applications of Rf technology.
Prospects
At the date of this report, the order book stands at £628,000 and in addition we
have concluded a contract to supply £800,000 of waste packaging products.
We expect to see improvements in the turnover and underlying profitability
during the second half of the year and to be able to generate significant growth
in turnover and profits as our new applications are commercialised.
Ian Balchin
Chief Executive 19 June 2002
UNAUDITED INTERIM CONSOLIDATED ACCOUNTS
SUMMARISED PROFIT AND LOSS ACCOUNT
for the six months ended 30 April 2002
Six months Six months
ended ended Year ended
30 April 2002 30 April 2001 31 October 2001
£'000 £'000 £'000
Turnover 2,151 3,145 6,013
______ ________ _______
Operating results before exceptional items 253 775 1,688
Exceptional item 227 (235) (664)
______ ______ ______
Operating profit 480 540 1,024
Net interest receivable 21 13 31
______ ______ _______
Profit on ordinary activities before taxation 501 553 1,055
Tax on profit on ordinary activities (155) (166) (299)
Profit on ordinary activities after taxation 346 387 756
Minority interest 7 - -
______ ______ ______
Profit for the period 353 387 756
Dividends - - (69)
______ ______ ______
Retained profit for the period 353 387 687
______ ______ ______
Earnings per share
Basic earnings per share (pence) 0.052 0.058 0.113
______ ______ ______
Fully diluted earnings per share (pence) 0.051 0.058 0.113
______ ______ ______
Underlying earnings per share
Basic earnings per share (pence) 0.029 0.058 0.113
______ _____ ______
Fully diluted earnings per share (pence) 0.029 0.058 0.113
______ ______ ______
Dividend per share ( pence) - - 0.01
______ ______ ______
NOTES
1. Earnings per share
The basic earnings per share is based on an attributable profit after tax of
£353,000 (2001: £387,000) and on the weighted average ordinary shares in issue
during the period of 682,845,377 (2001: 666,224,850). The fully diluted earnings
per share are based on an attributable profit after tax of £353,000 (2001:
£387,000) and on the diluted share holding of 688,993,320 ( 2001: 666,224,850).
The underlying basic earnings per share is based on an attributable profit
after tax of £198,000 (2001: £387,000) and on the weighted average ordinary
shares in issue during the period of 682,845,377 (2001: 666,224,850). The
underlying fully diluted earnings per share are based on an attributable profit
after tax of £198,000 (2001: £387,000) and on the diluted share holding of
688,993,320 ( 2001: 666,224,850).
2. Exceptional item
The exceptional item comprises a gross amount of £250,000, less expenses of
£23,000.
3. Research and development expenditure of £295,000 (2001: £235,000) has been
incurred in the period. Of this expenditure £295,000 (2001: nil) has been
capitalised as an intangible asset to be amortised against future revenues.
Expenditure of this type is only capitalised where the Board is certain that
future revenues will exceed the costs incurred over the expected product life in
accordance with Statement of Standard Accounting Practice No 13.
4. The figures for the year ended 31 October 2001 are an abridged statement of
the full Group Accounts for that year which have been delivered to the Registrar
of Companies and 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 2001 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.
5. Copies of this statement are being sent to all shareholders and will be
available to the public at the Company's registered office.
UNAUDITED INTERIM CONSOLIDATED ACCOUNTS
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
for the six months ended 30 April 2002
Six months Six months Year
ended ended Ended
30 April 2002 30 April 2001 31 October 2001
£'000 £'000 £'000
Profit for the financial period 353 387 756
Dividends - - (69)
______ ______ ______
353 387 687
Issue of 20,604,900 ordinary 0.1p shares in Stanelco Plc 567 - -
Issue of 500 ordinary 1p shares in Ingel Technologies Limited 535 - -
______ ______ ______
Net addition to shareholders' funds 1,455 387 687
Opening shareholders' funds 1,181 494 494
______ ______ _______
Closing shareholders' funds 2,636 881 1,181
______ ______ ______
The issue of shares in Stanelco Plc and Ingel Technologies Limited was at a
premium to R.P.Scherer Corporation.
UNAUDITED INTERIM CONSOLIDATED ACCOUNTS
CONSOLIDATED BALANCE SHEET
at 30 April 2002
At 30 April 2002 At 31 October 2001
£'000 £'000 £'000 £'000
Fixed assets
Tangible assets 365 322
Intangible assets 295 -
______ 660 ______ 322
Current assets
Stocks 439 816
Debtors 1,202 798
Cash at bank and in hand 1,605 777
______ ______
3,246 2,391
Creditors: amounts falling due
within one year 1,141 (1,482)
______ ______
Net current assets 2,105 909
______ ______
Total assets less current liabilities 2,765 1,231
Provisions for liabilities and charges (108) (50)
______ ______
2,657 1,181
______ ______
Capital and reserves
Called up share capital 687 666
Share premium account 1081 -
Profit and loss account 868 515
______ ______
Shareholders' funds 2,636 1,181
Minority interest 21 -
______ ______
2,657 1,181
______ ______
The Interim Accounts were approved by the Board on 19 June 2002.
Signed on behalf of the Board of Directors
Ian H Balchin (Chief Executive)
Barrie C Hozier (Finance Director)
UNAUDITED INTERIM CONSOLIDATED ACCOUNTS
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 April 2002
Six months Six months
ended ended Year ended
30 April 2002 30 April 2001 31 October 2001
Note £'000 £'000 £'000
Net cash inflow from operating activities 1 52 147 444
Returns on investment and servicing of finance
Interest received 24 14 32
Finance lease interest paid (1) (1) (1)
______ ______ ______
Net cash inflow from returns on investments and
servicing of finance 23 13 31
______ ______ ______
Taxation
Corporation tax refunded/(paid) 6 - (68)
Capital expenditure and financial investment
Purchase of tangible fixed assets (87) (65) (177)
Sale of tangible fixed assets 1 1 3
Purchase of intangible fixed assets (295) - -
______ ______ ______
Net cash outflow from capital expenditure and
financial investment (381) (64) (174)
______ ______ ______
Financing
Issue of ordinary share capital 1,130 - -
Capital element of finance lease rentals (2) (5) (7)
______ ______ ______
Net cash inflow/(outflow) from financing 1,128 (5) (7)
______ ______ ______
Increase in cash 2 828 91 226
______ ______ ______
UNAUDITED INTERIM CONSOLIDATED ACCOUNTS
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 April 2002
RECONCILIATION OF OPERATING PROFIT TO THE NET CASH INFLOW FROM OPERATING ACTIVITIES
Six months Six months Year ended
ended ended 31 October
30 April 2002 30 April 2001 2001
£'000 £'000 £'000
Operating profit for the period 480 540 1,024
Depreciation of tangible fixed assets 44 41 91
(Profit)/loss on disposal of tangible fixed assets (1) 2 3
Decrease/(increase) in stocks 377 77 (374)
(Increase) in debtors (404) (449) (345)
(Decrease)/increase in creditors due within one year (439) (64) 44
(Decrease)/increase in provision for liabilities
and charges (5) - 1
______ ______ ______
Net cash inflow from operating activities 52 147 444
______ ______ ______
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Six months Six months Year ended
ended ended 31 October
30 April 2002 30 April 2001 2001
£'000 £'000 £'000
Increase in cash in the period 828 91 226
Cash outflow from financing 2 5 7
______ ______ ______
Change in net debt resulting from cash flows 830 96 233
Net funds at beginning of period 774 541 541
______ ______ ______
Net funds at end of period 1,604 637 774
______ ______ ______
ANALYSIS OF CHANGES IN NET FUNDS
At 1 November 2001 Cash Flow At 30 April 2002
£'000 £'000 £'000
Cash in hand and at bank 777 828 1,605
Finance leases (3) 2 (1)
______ ______ ______
774 830 1,604
______ ______ ______
At 1
November 2000 Cash Flow At 30 April 2001
£'000 £'000 £'000
Cash in hand and at bank 551 91 642
Finance leases (10) 5 (5)
______ ______ ______
541 96 637
______ ______ _______
At 1 At
November 2000 Cash Flow 31 October 2001
£'000 £'000 £'000
Cash in hand and at bank 551 226 777
Finance leases (10) 7 (3)
______ ______ ______
541 233 774
______ ______ ______
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