Interim Results
Stanelco PLC
10 September 2007
10th September 2007
Stanelco Plc ('Stanelco','the Company' or 'the Group')
Interim Results for the six months ended 30 June 2007
Highlights
• Revenues £3.9m; trading loss before exceptional items (£1.7m)
• Cash position £9.7m
• Loss per share (0.11p)
• John Standen appointed as Non-Executive Chairman and Paul Mines
appointed as Chief Executive Officer
• Continued review of operations
John Standen, Chairman said:
'Our new CEO, together with his team, have put considerable efforts into
identifying the areas we must focus on to deliver shareholder value and these
are the areas that we plan to put most effort into over the next two years to
deliver tangible results. We are in the process of structuring the business
accordingly. Our priority is to grow our product sales and we remain encouraged
by market trends.'
- Ends -
For further information please contact:
Jonathon Brill/Caroline Stewart, Tel: +44 (0) 20 7831 3113
Financial Dynamics
Chairman's Statement
Financial performance
Group revenues increased from £2.6m to £3.9m for the period ended 30 June 2007
compared with the 6 months ended 30 April 2006.
This increase is due to sales of biodegradable resin at the Group's Biotec
subsidiary which have grown by 28.6%, driven by increasing sales to SPhere.
The Group has taken measures to reduce its costs and to reorganise internally in
order to focus on growing its sales. The headcount at its headquarters has
halved since last year and running costs have reduced accordingly.
The Group made a loss before exceptional items of £1.7m compared with a loss of
£2.3m for the 6 months to 30 April 2006.
Business management
The six months to 30 June 2007 have seen significant re-evaluation of the
Stanelco business activities by the Board.
Building on the preliminary review of the business operations of the Company
announced on 29 May, Paul Mines, the CEO, and his team have continued their
rigorous examination of where value lies in each of the business areas.
This has resulted in changes to the Group's approach, organisation and structure
that are summarised below. Whilst some conclusions can now be drawn about
strategic direction, the review has also identified areas where further analysis
and decision making is required by the Board.
Considering each of the business areas individually:
Biotec
The Biotec subsidiary at Emmerich in Germany is a 50/50 Joint Venture with
SPhere S.A. Stanelco holds a 'Golden Share' in this arrangement that is due to
expire on 31 December 2009.
Biotec has seen considerable change to its operations in the first half with
£1.3m investment in new production capacity. Technical commissioning is still
to be completed but the effective capacity is now 7,500 tonnes per annum.
The Board is monitoring patent challenges lodged against some of Biotec's
products and continues, with SPhere, to evaluate the significance of these
challenges.
Stanelco BioPlastics
A single Stanelco BioPlastics operating unit has been established which
incorporates Biotec, the global sales function for BioPlastic resins, and the
Aquasol products and technologies.
BioPlastic products formerly sold under the Starpol brand are now being marketed
as BioPlast products in line with Biotec and SPhere branding.
The European sales team has been strengthened with the addition of an
experienced sales consultant in the markets of Continental Europe.
A substantial internal reorganisation has taken place within the UK operations
with some job losses and significant changes in responsibilities and objectives.
However, it is clear to the Board that a number of obstacles still remain to
achieving sustainable sales growth from the BioPlastics business. These are
being addressed by your Board and further updates will be provided in due
course.
Aquasol
The Aquasol products and technologies are being developed and marketed within
Stanelco BioPlastics.
Following a review of the Aquasol patent portfolio by PricewaterhouseCoopers and
subsequent analysis and market testing by the Group, the main areas of focus for
future development have been identified.
Stanelco RF Applications
The radio frequency applications business remains robust with some areas
identified as having good potential growth prospects. Sales in the first 6
months of £0.5m were maintained at the same level as the corresponding period
last year.
To develop this business we have recruited a General Manager who will have
responsibility for leading the business, identifying new areas for development
and growth, and creating a clearly defined path forward.
Assets and cash
We have also reviewed our intangible assets and goodwill. Since there has been
no further progress in developing a sales stream from our Greenseal technology,
it has been decided to fully impair this intangible asset resulting in an
exceptional charge of £0.5m. Other intangible assets have also been impaired
totalling £0.2m. Furthermore, a review of the patent portfolio in the Aquasol
subsidiary has determined that an impairment charge of £1.6m against the £2.1m
goodwill held on the Group's balance sheet is required. The Group also made a
£0.3m profit on disposal of certain assets of Adept.
The Group started the period with cash balances of £12.9m. During the period it
released £3.2m in respect of the final stage payment for the Biotec acquisition,
having received £1.6m from joint owner SPhere. £1.4m of the funds were held in
escrow at 30 June 2007 and used to settle the balance of the liability after the
period end. Biotec obtained £1.3m of asset finance and the balance of funding
was used to fund the working capital of the Group. The Group closed the period
with cash balances of £9.7m.
Shareholders' funds reduced by £3.5m to £19.6m in the 6 month period.
Future Outlook
Our CEO, together with his team, have put considerable efforts into identifying
the areas we must focus on to deliver shareholder value and these areas must be
given further support over the next two years to deliver tangible results. We
remain encouraged by market trends and customer interest in the Company's RF
Applications and BioPlastic business areas.
The outlook for the second half remains consistent with the trading statement
released on 29 May 2007. The Biotec division remained the core source of the
Group's sales for the period and is subject to some variability as this market
develops.
Generating sales growth in the BioPlastics business remains the single most
important focus for the Group and rests on matching product capability and price
with the growing but as yet incohesive demand for sustainable plastics.
John Standen
Chairman
10 September 2007
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Audited
Unaudited Unaudited 14 month
6 months 6 months period ended
ended ended 31 December
30 June 2007 30 April 2006 2006
Note £'000 £'000 £'000
Revenue 3,868 2,620 6,670
Cost of sales (2,709) (1,539) (4,668)
Gross profit 1,159 1,081 2,002
Distribution costs (69) (87) (220)
Administrative expenses (2,793) (3,331) (8,201)
Loss from operations before (1,703) (2,337) (6,419)
exceptional items
Exceptional items 3 (2,006) - (8,416)
Loss from operations (3,709) (2,337) (14,835)
Investment revenue 289 39 134
Finance costs (55) (34) (163)
Loss before tax (3,475) (2,332) (14,864)
Tax - - 446
Loss for the period (3,475) (2,332) (14,418)
Attributable to:
Equity holders of the Parent (3,366) (2,341) (14,289)
Minority interest (109) 9 (129)
Retained for the period (3,475) (2,332) (14,418)
Earnings per share
Basic and diluted loss 1 (0.117) (0.249) (1.179)
per share - pence
CONDENSED CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2007
Note Unaudited Unaudited Audited Audited
At 30 June At 30 June At 31 December At 31 December
2007 2007 2006 2006
£'000 £'000 £'000 £'000
Non-current assets
Goodwill 12,484 14,067
Other intangible assets 206 979
Property, plant and equipment 4,296 4,018
16,986 19,064
Current assets
Inventories 3,480 1,854
Trade and other receivables 1,931 1,152
Amounts due on part disposal - 1,597
of subsidiary
Funds held in escrow 4 1,371 -
Corporation tax 439 439
Cash and cash equivalents 9,680 12,916
16,901 17,958
Total assets 33,887 37,022
Current liabilities
Trade and other payables 2,086 1,479
Amounts due to third party in 4 1,371 3,194
respect of purchase of
subsidiary
Promissory notes 5,218 5,205
Obligations under finance 253 40
lease
Bank overdrafts and loans - 5
Short term provisions 607 857
9,535 10,780
Non-current liabilities
Obligations under finance 1,014 27
lease
1,014 27
Total liabilities 10,549 10,807
Net assets 23,338 26,215
CONDENSED CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2007 (CONTINUED)
Unaudited Audited
At At
30 June 2007 31 December 2006
£'000 £'000
Equity
Share capital 3,012 2,978
Share premium account 38,207 37,932
Shares to be issued 487 800
Share options reserve 904 1,016
Hedging and translation reserves 231 243
Retained losses (23,194) (19,826)
Equity attributable to equity holders of the 19,647 23,143
parent
Minority interest 3,691 3,072
Total equity 23,338 26,215
The Interim Accounts were approved by the Board of Directors and authorised for
issue on 10 September 2007
They were signed on behalf of the Board of Directors by:
Paul Mines (Chief Executive Officer)
Clive Warner (Finance Director)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 30 JUNE 2007
Share Share Shares to Share Hedging &
capital premium be issued options translation
account reserve reserves
£'000 £'000 £'000 £'000 £'000
Balance at 1 November 2005 929 19,899 1,050 393 19
Exchange differences arising - - - - (196)
on translation of overseas
operation
Net income recognised - - - - (196)
directly in equity
Loss for the period - - - - -
Total recognised income and - - - - (196)
expense for the period
New share capital subscribed 15 1,407 - - -
Share option charges in - - - 254 -
period
Share options exercised in - - - (41) -
period
Balance at 30 April 2006 944 21,306 1,050 606 (177)
Balance at 1 January 2007 2,978 37,932 800 1,016 243
Exchange differences arising - - - - (12)
on translation of overseas
operation
Net income recognised - - - - (12)
directly in equity
Loss for the period - - - - -
Total recognised income and - - - - (12)
expense for the period
New share capital subscribed 34 275 - - -
Minority share of increase - - - - -
in subsidiaries capital
reserve
Shares issued in respect of - - (313) - -
purchase of subsidiary
Share option (credit) in - - - (112) -
period
Balance at 30 June 2007 3,012 38,207 487 904 231
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 30 JUNE 2007
(CONTINUED)
Retained losses Attributable to Minority interest Total equity
equity holders of
the parent
£'000 £'000 £'000 £'000
Balance at 1 November 2005 (5,600) 16,690 2,498 19,188
Exchange differences arising on - (196) - (196)
translation of overseas operation
Net income recognised directly in - (196) - (196)
equity
Loss for the period (2,341) (2,341) 8 (2,333)
Total recognised income and (2,341) (2,537) 8 (2,529)
expense for the period
New share capital subscribed - 1,422 - 1,422
Share option charges in period - 254 - 254
Share options exercised in period 41 - - -
Balance at 30 April 2006 (7,900) 15,829 2,506 18,335
Balance at 1 January 2007 (19,826) 23,143 3,072 26,215
Exchange differences arising on (2) (14) 47 33
translation of overseas operation
Net income recognised directly in (2) (14) 47 33
equity
Loss for the period (3,366) (3,366) (109) (3,475)
Total recognised income and (3,368) (3,380) (62) (3,442)
expense for the period
New share capital subscribed - 309 - 309
Minority share of increase in - - 681 681
subsidiaries capital reserve
Shares issued in respect of - (313) - (313)
purchase of subsidiary
Share option (credit) in period - (112) - (112)
Balance at 30 June 2007 (23,194) 19,647 3,691 23,338
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Unaudited Unaudited Audited
6 months 6 months 14 month period
ended ended ended
30 June 30 April 31 December
2007 2006 2006
Note £'000 £'000 £'000
Net cash outflow from operating activities 6 (3,568) (3,551) (6,926)
Investing activities
Interest received 289 39 134
Proceeds on disposal of property, plant and 565 7 34
equipment
Investment in intangible assets (7) (582) (1,406)
Purchase of property, plant and equipment (823) (1,262) (2,067)
Purchase of Biotec Holdings GmbH (1,823) - (3,438)
Part disposal of Biotec Holdings GmbH 1,597 - 1,719
Net cash used in investing activities (202) (1,798) (5,024)
Financing activities
Repayment of bank overdrafts and loan (5) (14) (132)
capital
Repayment of obligations under finance lease (100) (42) (83)
Proceeds (costs) of issue of ordinary share (4) 1,422 19,682
capital
Proceeds from minority share of increase in 681 - 682
subsidiaries capital reserve
Proceeds from finance lease 1,300 76 76
Funds held in escrow 4 (1,371) - -
Net cash from financing activities 501 1,442 20,225
Net (decrease)/ increase in cash and cash (3,269) (3,907) 8,275
equivalents
Cash and cash equivalents at beginning of 12,916 4,396 4,396
period
Effect of foreign exchange rate changes 33 (197) 245
Cash and cash equivalents at end of period 9,680 292 12,916
NOTES TO THE CONDENSED CONSOLIDATED INTERIM ACCOUNTS
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Notes
1. Earnings per share from continuing operations
The basic loss per share is based on a loss after tax of £3,475,000 (2006:
£2,332,000) and on the basic weighted average ordinary shares in issue during
the period of 2,982,371,367 (2006: 937,779,292).
2. Research and development expenditure
Research and development expenditure of £nil (2006: £582,000) has been incurred
in the period. Of this expenditure £nil (2006: £582,000) has been capitalised as
an intangible asset to be amortised against future revenues. Expenditure of this
type is only capitalised where the Board is of the opinion that future revenues
will exceed the costs incurred over the expected product life in accordance with
International Accounting Standard 38.
3. Exceptional Items
Exceptional items:
Unaudited Unaudited Audited
6 months 6 months 14 month
ended ended period ended
30 June 30 April 31 December
2007 2006 2006
£'000 £'000 £'000
Impairment of other intangibles assets 674 - 5,529
Impairment of goodwill 1,590 - -
Impairment of inventories - - 1,416
Bad debt provision - - 66
Provision for costs related to strategic review - - 709
Impairment of property plant and equipment - - 696
(Profit) on disposal of property plant and (258) - -
equipment
2,006 - 8,416
Further details on these items are explained in the Chairman's statement.
An impairment review on the goodwill arising on the consolidation of Aquasol has
resulted in an impairment charge of £1,590,000 reducing the value of the
goodwill to £500,000 for this asset. The basis of this goodwill valuation
followed a review of the patent portfolio within the Aquasol subsidiary and was
determined by assessing the estimated present value of foreseeable future
revenues.
4. Post balance sheet
At 30 June 2007 funds of £1,371,000 where held in an escrow account in respect
of the final payment to the vendors of Biotec Holdings GmbH. The corresponding
liability of £1,371,000 is recorded in current liabilities. Following the end of
the accounting period these funds have been released form escrow and the final
amounts due for the acquisition of Biotec Holdings GmbH have been discharged.
5. Changes in accounting policies
The principal accounting policies of the Group have remained unchanged as in the
Group's 2006 Annual Report and Financial Statements.
6. Notes to condensed consolidated cash flow statement
Unaudited Unaudited Audited
6 months 6 months 14 month
ended ended period ended
30 June 30 April 31 December
2007 2006 2006
£'000 £'000 £'000
Loss from operations (3,709) (2,337) (14,835)
Adjustment for:-
Amortisation and impairment of 2,363 221 6,032
intangible fixed assets
Depreciation of property, plant and 234 246 1,276
equipment
Share based payments (112) 254 686
(Profit)/loss on disposal of (254) 6 49
property, plant and equipment
(Decrease) in provisions (250) (1,244) (596)
Operating cash flows before movement (1,728) (2,854) (7,388)
in working capital
(Increase)/decrease in inventories (1,626) (540) 750
(Increase)/decrease in receivables (779) (28) 218
Increase/(decrease) in payables 595 (144) (461)
Cash utilised by operations (3,538) (3,566) (6,881)
Corporation tax received - 49 59
Interest paid (30) (34) (104)
Net cash (outflow) from operating (3,568) (3,551) (6,926)
activities
New finance leases in the period of £1.3m are funding property, plant and
equipment.
7. Contingent liabilities
As reported in the annual report for the year ended 31 December 2006 an
un-quantified claim has been made against the Company by an individual following
their departure from the Company during that period. The Board continue to
strenuously believe the claim is unfounded, and accordingly no provision has
been made.
As reported in the trading statement issued on 29 May 2007, the Board is
monitoring patent challenges lodged against some of Biotec's products and
continues with SPhere to evaluate the significance of these challenges.
8. Condensed Consolidated Interim Accounts
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The results for the period are unaudited. The financial information for
the year to 31 December 2006 and the six months ended 30 April 2006 has been
extracted from the group's 2006 Annual Report and the 2006 interim report. The
2006 Annual Report has been filed with the Registrar of Companies. The audit
report on the Annual Report 2006 was unqualified and did not contain a statement
under Section 237 (2) or (3), of the Companies Act 1985.
This interim statement is being sent to all shareholders and is also available
upon request from the Company Secretary, Stanelco plc, Starpol Technology
Centre, North Road, Marchwood, Southampton, SO40 4BL or viewed at
http://www.stanelcoplc.com/investor_reports.html.
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