Trading and Strategic Update

RNS Number : 0421P

Elektron Technology PLC

05 February 2019

 

Elektron Technology plc (AIM: EKT, "Elektron" or the "Group")

Trading and Strategic update

Elektron Technology plc, the global technology group, is pleased to provide updates on trading for the financial year ended 31 January 2019 (FY19) and a strategic update for the Group.

Group Trading

The Board expects performance for the full year to be line with the upgraded market forecasts notified in the trading update on 1 November 2018.

Group revenue from continuing operations (on a like for like basis) for the full year is expected to be approximately £33.7m (unaudited) a 13% increase compared with £29.8m for FY18, building on the strong, double-digit growth of 11% in FY18 compared with  the prior year. Revenue in the second half of the year of £17.8m was substantially stronger than the first half (£15.9m) as a result of the conversion of Bulgin's strong H1 order book to sales revenue. 

Revenue

From continuing operations £m	Unaudited
	FY 2019	FY 2018	% change
Bulgin	30.1	27.3	+10%
Elektron Eye Technology	2.6	2.0	+30%
Checkit	1.0	0.5	+100%
Total Sales	33.7	29.8	+13%

Orders

Orders received in the year* £m	Unaudited
	FY 2019	FY 2018	% change
Bulgin	32.1	29.3	+10%
Elektron Eye Technology**	2.2	2.8	-21%
Total Orders	34.3	32.1	+7%

*Checkit is excluded from the above table owing to its recurring revenue, subscription based model. Contracted recurring revenue (comprising already installed systems and those scheduled to be installed) as at 31 January 2019 was £1.2m per annum (2018: £0.75m), an increase of 60%.

**Orders in the year were lower than the previous year solely due to EET's largest distributor transitioning from providing annual order cover to quarterly cover. 

Cash

Group net cash was approximately £10.1m at 31 January 2019 (31 January 2018: £5.2m) despite investment of more than £0.3m in working capital to mitigate potential Brexit related supply chain issues. The cash was driven by a very strong trading performance as noted above and the receipt of £1.2m cash proceeds from the disposal of Queensgate.

Bulgin

Bulgin ended the period with both sales and orders significantly ahead of the prior year driven by  the continued successful implementation of Bulgin's high margin product growth strategy, aided by operational gearing and in-house capacity improvements.

During the second half of the year, the Board received an unsolicited indicative offer for the Bulgin business at a substantial premium to the Group's current market capitalisation. The Board engaged with the potential overseas buyer, incurring in the region of £200k of due diligence related costs. Following this extensive due diligence which confirmed the business's trading performance and prospects, the offeror decided not to proceed for its own strategic reasons.

The Board remains committed to maintaining the success of Bulgin's growth strategy, which has enabled it to achieve record levels of sales and margin during this period. The order book has continued strongly into the new financial year and Q1 sales are expected to set a new record.

Elektron Eye Technology (EET)

EET has grown strongly and is now profitable following the successful implementation of a distribution led strategy. 

Following a strategic review of this business, the Board has now concluded that due to the growth opportunities presented by both Checkit and Bulgin, EET is not core to the Group's future plans. As a result, the Board will now seek to sell the business.

Checkit

Checkit revenue doubled over the period following the successful acquisition of customers in the year and the launch of new features and functionality. With a strong balance sheet, and further simplification of the Group freeing up management bandwidth, the Board is pursuing an ambitious organic and inorganic Checkit growth strategy and is continually evaluating potential acquisition targets to achieve this aim. 

A detailed update on the developments at Checkit will be issued at the time of the full year results announcement.

Brexit and US-China Trade Tariffs

The Board is monitoring the Brexit situation carefully. Management has put in place contingency plans to mitigate the impact of a "no-deal" scenario, including increasing component stocks and working even more closely with our distribution channel partners to seek to ensure that our end customers are not impacted.  This intensive focus on our internal supply chain has identified further opportunities for operational efficiency improvements which will be outlined in due course.

With Bulgin manufacturing predominantly in Tunisia, Bulgin is well placed to capitalise on the current 25% tariff for Chinese electronic component goods imported to the United States, Bulgin's largest market.

Outlook

Whilst the Board is clearly aware of the current macro-economic uncertainty, and hence expresses some caution going forward, it expects the strong momentum seen during the year to continue across the Group's businesses and, to trade at record levels for the period of current visibility through its first quarter.

John Wilson, Chief Executive Officer of Elektron, said:

 "The underlying performance of the Group during the last financial year has been outstanding and it is expected that profits, notwithstanding incurring £200k of aborted transaction costs, will remain in line with the most recent, upgraded, market forecasts for the year." 

For further enquiries:

Elektron Technology plc                                                                                                  [phone] 

www.elektron-technology.com                                                                                          

John Wilson (Chief Executive Officer)                                                                              

Andrew Weatherstone (Chief Financial Officer & Company Secretary)                    

Yellowstone Advisory (Investor Relations)

Alex Schlich                                                                                                                                   [phone]

N+1 Singer (Nominated Adviser & Broker)                                                                     

Shaun Dobson / Jen Boorer (Corporate Finance)                                                             [phone] 

Rachel Hayes (Corporate Broking)                                                                                      

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Notes to Editors:

Elektron conceives, designs and markets innovative products and services for business that connect, monitor and control. We have a multi skilled team of engineers, software and product line specialists based in Cambridge focused on the opportunities created by global growth in the following areas:

- Demand for ubiquitous power and data: Bulgin

- Real-time operations management using Internet of Things (IoT) technology: Checkit

 

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