Interim Results

Elektron PLC 18 September 2006 For immediate release 18 September 2006. ELEKTRON PLC Interim results for the period ended 31 July 2006 Elektron PLC ('Elektron'), the AIM quoted Engineered Components manufacturer announces results for the half-year ended 31 July 2006. Key Points: • Turnover up 17% to £12,954,000 (2005: £11,112,000) • Operating profits before exceptional items up 11% to £1,173,000 (2005: £1,057,000) • Cash generated from operations up 25% to £972,000 (2005: £776,000) • Transfer of remaining Bulgin production to Tunisia anticipated to produce future annualised cost savings of £900,000. • Underlying earnings per share before exceptional costs up 11% to 1.08p (2005: 0.97p) • Net cash increased to £886,000 from £443,000 at 31 January 2006 For further information please contact: Adrian Girling Roland Cornish Executive Chairman Chairman Elektron PLC Beaumont Cornish Limited Tel: 020 8477 9300 Tel: 020 7628 3396 Chairman's Statement The first half of the current financial year has seen good progress in our long term plans to develop the Group. The recent past has seen us successfully transition from a UK manufacturer incurring losses to a profitable UK and offshore manufacturer with much lower costs of production. The closure of the Barking based Bulgin factory later this year and consequent transfer to our Tunisian factory will elicit further annualised savings in the region of £900,000. We have also been taking action to secure future growth in revenue streams by investing in sales and product development capability. In particular, we have recruited sales managers in Beijing and Shanghai to target opportunities in China as well as designing and developing a number of new electronic products which will be exhibited at the Electronica exhibition in November. Financial results Group sales have increased by 17% with increases in all the markets we serve. Domestic sales were up 15% to £4.3 million, European sales by 15% to £4.3m, North American sales by 20% to £2.1 million and rest of the world by 22% to £2.2 million. Group operating profits of £1,173,000 before exceptional items were 11% ahead of those in first half of last year. Gross margins have remained steady at 38% as a result of increasing metal prices offset by a reduction in labour costs and product mix. The dramatic increases in raw material costs have allowed us to persuade customers in most of our markets to accept price increases, the benefits of which should be seen in the second half. Since the year-end, moulding plant and machinery used by Bulgin has begun to be transferred to Tunisia following the leasing of additional space and it is expected that this process will be largely completed by our coming year-end. Consequently, all Bulgin manufacturing will cease at Barking and the factory vacated by March 2007. This will incur one-time revenue costs of £1 million of which £476,000 has been incurred in the first half. The weakening of the US dollar has impacted and we have incurred a loss on foreign currency transactions and translations of £91,000 compared with a gain of £75,000 in the comparative period last year. Cash generated from operations was up 25% on the corresponding period to £972,000. £419,000 was spent on plant and equipment, £280,000 on repayment of hire purchase and lease finance obligations and £132,000 on purchase of own shares. At 31 July 2006, net funds, being cash less borrowings, had increased to £886,000. Acquisitions In the Annual Report I stated that the Board was optimistic about concluding a transaction in the current year. At that time we were considering two opportunities having reached agreements on price subject to due diligence. The first opportunity, which is a manufacturer of components in Europe and Tunisia, is still under discussion as a result of findings during the due diligence process. Due diligence is currently continuing on another opportunity. We have written off £41,000 as exceptional costs in respect of these potential transactions. Earnings per share, share buy back and dividends The underlying earnings per share before exceptional costs were 1.08p compared with 0.97p in 2005. Basic and diluted earnings per share were 0.60p (2005: 0.93p). During the period 764,500 shares were bought on-market at a cost of £132,000. The Board has considered the payment of an interim dividend, but in the light of current projects has decided to retain cash. Providing progress continues to be made the Directors intend to review the rate of the dividend at the year-end. Employees I should like to thank all of our staff for their continued hard work, particularly those at Bulgin who have worked diligently and professionally in the light of the announcement that the factory would close and operations be transferred to Tunisia. Outlook Orders received to date are currently up 8% on this time last year and with new products coming on stream we are well placed to continue progress. Adrian Girling Executive Chairman Group Income Statement Unaudited Interim Results to 31 July 2006 Half year to Half year to Year to 31 July 31 July 31 January 2006 2005 2006 As restated As restated £'000 £'000 £'000 Revenue from continuing operations 12,954 11,112 22,467 Cost of sales (8,077) (6,899) (14,041) --------- --------- --------- Gross profit 4,877 4,213 8,426 Net operating expenses (including exceptional items) (4,221) (3,205) (6,666) --------- --------- --------- ----------------------------- --------- --------- --------- Operating profit before exceptional items 1,173 1,057 1,791 Exceptional items (517) (49) (31) ----------------------------- --------- --------- --------- Operating profit from continuing operations 656 1,008 1,760 Finance costs (13) (12) (16) --------- --------- --------- Profit on ordinary activities before taxation 643 996 1,744 Taxation on profit on ordinary activities (174) (283) (477) --------- --------- --------- Profit attributable to shareholders 469 713 1,267 --------- --------- --------- --------- --------- --------- Earnings per share - basic 0.60p 0.93p 1.63p - diluted 0.60p 0.93p 1.63p --------- --------- --------- Group Balance Sheet Unaudited Interim Results at 31 July 2006 31 July 31 July 31 January 2006 2005 2006 £'000 £'000 £'000 Assets As As restated restated Non-current assets Property, plant and equipment 2,096 2,256 2,165 Deferred tax 285 72 89 -------- --------- --------- 2,381 2,328 2,254 -------- --------- --------- Current assets Inventories 3,282 3,263 3,266 Trade receivables 4,575 4,062 3,979 Other current assets 613 594 606 Cash and cash equivalents 2,421 2,624 1,714 -------- --------- --------- 10,891 10,543 9,565 -------- --------- --------- Total assets 13,272 12,871 11,819 -------- --------- --------- Equity and liabilities Equity attributable to equity holders of the parent Called - up share capital 3,916 4,021 3,954 Share premium 244 244 244 Capital redemption reserve 105 - 67 Other reserves 59 50 46 Retained earnings 2,568 1,905 2,255 Own shares - (20) - -------- --------- --------- Total equity 6,892 6,200 6,566 -------- --------- --------- Non-current liabilities Long-term borrowings 160 202 - Long-term provisions 269 347 357 -------- --------- --------- Total non-current liabilities 429 549 357 -------- --------- --------- Current liabilities Trade and other payables 3,350 3,648 2,869 Short-term borrowings 1,087 671 758 Current portion of long-term borrowings 288 608 513 Current tax payable 644 886 678 Short-term provisions 582 309 78 -------- --------- --------- Total current liabilities 5,951 6,122 4,896 -------- --------- --------- Total liabilities 6,380 6,671 5,253 -------- --------- --------- Total equity and liabilities 13,272 12,871 11,819 -------- --------- --------- Group Cash Flow Statement Unaudited Interim Results to 31 July 2006 31 July 31 July 31 January 2006 2005 2006 £'000 £'000 £'000 As restated As restated Cash flows from operating activities Profit before taxation 643 996 1,744 Adjustments for: Depreciation 481 453 902 Interest expense 13 12 16 -------- -------- -------- Operating profit before working capital changes 1,137 1,461 2,662 Increase in trade and other receivables (626) (764) (748) Increase in inventories (15) (263) (236) Increase in trade payables 477 418 243 Other non-cash movements 429 (4) (285) -------- -------- -------- Cash generated from operations 1,402 848 1,636 Interest paid (36) (48) (81) Taxation paid (394) (24) (814) -------- -------- -------- Net cash from operating activities 972 776 741 -------- -------- -------- Cash flows from investing activities Sale of subsidiaries - 50 150 Purchase of property, plant and equipment (419) (180) (546) Proceeds of sale of property, plant and equipment - 11 28 Interest received 23 36 66 -------- -------- -------- Net cash used in investing activities (396) (83) (302) -------- -------- -------- Cash flows from financing activities Issue of shares - 200 200 Purchase of own shares (132) - (205) Proceeds from long term borrowings 214 - - Movement in short term borrowings 329 443 529 Payment of hire purchase and finance liabilities (280) (293) (589) Dividends paid - - (241) -------- -------- -------- Net cash used in financing activities 131 350 (306) -------- -------- -------- Net increase in cash and cash equivalents 707 1,043 133 Cash and cash equivalents at the beginning of period 1,714 1,581 1,581 -------- -------- -------- Cash and cash equivalents at the end of period 2,421 2,624 1,714 -------- -------- -------- Group statement of changes in equity Unaudited Interim Results to 31 July 2006 Share Share Capital Other Retained Total Capital Premium Redemption reserves earnings Reserve £'000 £'000 £'000 £'000 £'000 £'000 At 31 January 2006 3,954 244 67 2 2,286 6,553 Changes in accounting policy - - - 44 (31) 13 Restated balance 3,954 244 67 46 2,255 6,566 Share purchase (38) - 38 - (132) (132) Exchange differences - - - - (24) (24) Retained profit for the period - - - 13 469 482 ------- -------- --------- -------- -------- -------- At 31 July 2006 3,916 244 105 59 2,568 6,892 ------- -------- --------- -------- -------- -------- Notes to the Unaudited Interim Results to 31 July 2006 1. Accounting Policies The interim financial information has been prepared on the basis of International Financial Reporting Standards (IFRS). This interim statement is the first consolidated financial report prepared in accordance with IFRS. Full details of accounting policies will be included in the Annual Report for the year ending 31 January 2007. These are not expected to be materially different from those set out in the Group's statutory accounts for the year ended 31 January 2006 with the exception of the policy in relation to share-based payments. The Group will implement the requirements of Financial Reporting Standard 20 (IFRS 2) 'Share-based payment' in the 2007 Annual Report, and this standard has accordingly been adopted in the interim accounts with the comparative figures being restated. This change in accounting policy has resulted in a pre-tax charge of £13,000 for the six months ended 31 July 2006, £14,000 for the six months ended 31 July 2005 and £27,000 for the year ended 31 January 2006. In accordance with FRS 20 (IFRS 2) 'Share-based payment', the Group reflects the economic cost of awarding shares and share options to employees by recording an expense in the income statement equal to the fair value of the benefit awarded, fair value being estimated by an independent third party using a proprietary binomial probability valuation model. The expense is recognised in the income statement over the vesting period of the award. Fixed annual charges are apportioned to the interim period on the basis of time elapsed. Other expenses are accrued in accordance with the same principles used in the preparation of the annual accounts. 2. Other information The financial information in this statement does not constitute statutory accounts. The financial information in respect of the year ended 31 January 2006 has been extracted from the statutory accounts, as adjusted for IFRS, which have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under Section 237 of the Companies Act 1985. Copies of the interim results will be sent to shareholders and are available free of charge from the Company's registered office at Alfreds Way, Barking, Essex IG11 0AZ. This information is provided by RNS The company news service from the London Stock Exchange

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