Final Results
Buckland Group PLC
07 July 2005
Buckland Group plc
Final Results
Chairman's statement for the year ended 31 December 2004
I present the financial results for Buckland Group plc for the year ended 31
December 2004. The group results show a loss before tax of £488,376 ( 2003:
loss £ 464,840 ) on sales of £2,957,083 (2003: £4,453,297). The loss per share
was 0.26p compared with a loss of 0.30p in 2003. No dividend is proposed.
Review of Euro Asia Connectors & Derlite
At the time of the interim report last September, I expressed cautious optimism
that the return to profits shown in the management accounts last August would be
maintained. Unfortunately this has not proved to be the case with the group
falling back into losses in recent months. Whilst our strategy had been to
transfer operating assets and personnel from Euro Asia Connectors (EAC) to
Derlite as the former relinquished low margin sales and the latter grew, it has
not proved possible to expand Derlite at a fast enough rate to bridge the gap.
Consequently the decision has been taken for EAC to withdraw entirely from the
connector business, with the majority of the workforce being made redundant this
month. A charge of £60,000 has been taken to the 2004 profit and loss account,
reflecting the anticipated write-down in the value of EAC's fixed assets and
stocks as a result of this withdrawal. The General Manager and the Finance
Director in Thailand have also both left the group.
EAC is currently completing all its outstanding orders and a decision on the
future of the company will be taken within the next few weeks, once these orders
have been completed.
Derlite achieved further growth in sales in 2004 and the prospects for the
second half of 2005 are encouraging with the first production orders due for
delivery to various important new customers in the third quarter.
Acquisition of the Kigass business
On 18th February 2005 the Group acquired the business and certain assets of
Kigass Electronics Ltd. Kigass, which now trades under the name DK Gas ('DK'),
designs and manufactures spark ignition electrodes and spark generators for use
in domestic gas cookers and boilers, with annual sales of some £2.7m. The
company is based in Redditch, West Midlands and employs a staff of 80.
DK's activities are highly complementary with those of Derlite, with 95% of DK's
sales currently in the UK compared with over 90% of Derlite's sales in the rest
of the EU and in USA/Mexico. The combination of Derlite and DK Gas gives the
Group a significant presence as a supplier of ignition components to the
domestic gas cooker markets in the UK and Mexico/North America, with good
potential to strengthen its position both in these markets and in the rest of
Europe.
It is planned to commence the integration of the two companies' manufacturing
operations in the third quarter of this year.
Balance sheet
Following the significant loss in 2004, shareholders' funds at the year end
stood at approximately £50,000. The acquisition of the Kigass business in
February 2005 was funded by the issue of 214,000,000 new shares at 0.5p each,
thereby increasing shareholders funds' by approximately £1.0m.
Outlook
Short term the Group faces some significant challenges in rationalising the Thai
operations to concentrate on Derlite and DK Gas. This is putting some strain on
the Group's short term liquidity position as referred to in more detail in the
Report of the Directors.
I am confident, once we have resolved these problems, that we should be able to
achieve a satisfactory return on shareholders' funds.
Patrick Rogers
Chairman
6 July 2005
Report of the directors for the year ended 31 December 2004
The directors present their report together with the audited financial
statements for the year ended 31 December 2004.
Results and dividends
The profit and loss account is set out on page 9 and shows the result of the
group for the year ended 31 December 2004.
The directors do not recommend the payment of a dividend.
Principal activities, trading review and future developments
The Group has two principal activities; the manufacture of connectors used in
consumer electronics products and the manufacture of components used in gas
ignition systems for gas cookers, gas ovens and gas boilers. The Group is in the
process of withdrawing from the manufacture of connectors.
A review of the group's activities during the period together with an indication
of future developments is given in the Chairman's statement on pages 2 and 3.
Research and development
Research and development in the gas ignition businesses is concentrated on the
development of new products capable of maintaining and increasing sales.
Key events during 2004
During 2004 Euro Asia Connectors continued to be loss-making. Since the year
end the decision has been taken to cease all production of connectors and to
make redundant the majority of its workforce. The future scope of operations of
the company is currently under review and a decision will be taken on the future
of the company within the next weeks.
Derlite achieved further growth in sales, derived from both new product lines
and from new customers.
Post balance sheet events
On 18th February 2005 the Group acquired the business and certain of the assets
of Kigass Electronics Ltd for a total cash consideration of £ 1.07m, funded by
the issue of 214 million new ordinary shares at 0.5p each to institutional and
other investors.
Directors
The directors of the company during the year and their interests in the ordinary
share capital of the company were:
31 December 31 December
2004 2003
Patrick CRC Rogers (note 1) 4,360,000 15,908,332
Leon K Sharples (note 1) 4,360,000 15,908,332
Leon K Sharples 11,548,332 -
Phillip E Palmer (note 2) 8,866,666 8,866,666
Notes:
(1) Joint shareholdings, held by Wharton Holdings Corporation as trustees.
(2) Held by C I Law Trustees Limited on behalf of a discretionary trust the
beneficiaries of which include the family of Mr Palmer.
Details of directors' interests in options to acquire ordinary shares are shown
in note 21.
Substantial shareholdings
At 28th June 2005 , those shareholders which have notified the company of
disclosable interests of 3 per cent or more in the ordinary share capital of the
company are as set out below;
Ordinary shares
Holder of 0.5p each Percentage
Prof Richard Price 20,250,000 5.0%
Creditor payment policy and practice
It is the company's policy that payments to suppliers are made in accordance
with those terms and conditions agreed between the company and its suppliers,
provided that all trading terms and conditions have been complied with. Trade
creditors at the year end amount to 110 days of average supplies for the year
(2003: 69 days).
Going Concern
The Directors have reviewed the profit and loss and cash flow projections for
the Group for the year ending 30 June 2006 and expected cash trends for July
2006. Based on current forecasts and assumptions, the Directors anticipate that
there may be a short term funding requirement, in excess of banking and loan
facilities already in place, during the period August/September 2005. The
Directors are currently examining the options for covering this anticipated
shortfall by a combination of additional bank borrowings, shareholders' loans
and/or additional equity funding and are of the opinion that adequate additional
facilities will be forthcoming to cover this requirement.
Auditors
The directors' consider the independence and objectivity of the external auditor
and the level of fees payable for both audit and non-audit work. Details of the
non-audit related fees are shown in note 6 to the financial statements.
A resolution concerning re-appointment of Grant Thornton UK LLP will be proposed
at the forthcoming Annual General Meeting, in accordance with section 385 of the
Companies Act 1985.
On behalf of the Board
Patrick Rogers
Director
Statement of directors' responsibilities
Company law in the United Kingdom requires the directors to prepare financial
statements for each financial period which give a true and fair view of the
state of affairs of the company and the group and of the profit or loss of the
group for that period. In preparing those financial statements, the directors
are required to:
• select suitable accounting policies and then apply them consistently
• make judgements and estimates that are reasonable and prudent
• state whether applicable accounting standards have been followed subject to
any material departures disclosed and explained in the financial statements
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group will continue in business.
The directors are responsible for keeping proper accounting records, for
safeguarding the assets of the group and for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for ensuring that the directors' report and
chairman's statement are prepared in accordance with United Kingdom company law.
They are also responsible for ensuring that the annual report includes
information required by the AIM rules.
Report of the independent auditors to the members of Buckland Group Plc
We have audited the financial statements of Buckland Group plc for the year
ended 31 December 2004 which comprise the consolidated profit and loss account,
the consolidated statement of total recognised gains and losses, the
consolidated reconciliation of movements in shareholders' funds, the balance
sheets, the consolidated cash flow statement with two cash flow reconciliations
and notes 1 to 26. These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the company's members, as a body, in accordance
with Section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the annual report and the
financial statements in accordance with United Kingdom law and accounting
standards are set out in the statement of directors' responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and United Kingdom auditing
standards.
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you if, in our opinion, the directors' report is not
consistent with the financial statements, if the company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and transactions with the group is not disclosed.
We read other information contained in the annual report, and consider whether
it is consistent with the audited financial statements. This other information
comprises only the directors' report and the chairman's statement. We consider
the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements. Our responsibilities
do not extend to any other information.
Basis of opinion
We conducted our audit in accordance with United Kingdom auditing standards
issued by the Auditing Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the financial statements
and of whether the accounting policies are appropriate to the group's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Report of the independent auditors to the members of Buckland Group Plc
(continued)
Going concern
In forming our opinion we have considered the adequacy of the disclosures made
in the financial statements concerning the possible outcome of negotiations for
additional finance. The financial statements have been prepared on the going
concern basis, the validity of which depends upon current funding being
maintained and additional future funding being made available. The financial
statements do not include any adjustments that would result from a failure to
obtain such funding. The directors are currently negotiating for funding to
cover the deficit through a combination of bank borrowings, shareholder loans
and/or the net proceeds of a placing which the Directors believe will be
concluded successfully. Details of the circumstances relating to this
fundamental uncertainty are described in Note 2. Our opinion is not qualified
in this respect.
Opinion
In our opinion the financial statements give a true and fair view of the state
of affairs of the company and group at 31 December 2004 and of the loss of the
group for the year then ended and have been properly prepared in accordance with
the Companies Act 1985.
GRANT THORNTON UK LLP
Registered Auditors
Chartered Accountants
Gatwick
Consolidated profit and loss account for the year ended 31 December 2004
Note Year ended Year ended
31 December 2004 31 December 2003
£ £
Turnover 3 2,957,083 4,453,297
Cost of sales (2,458,683) (3,956,500)
Gross profit 498,400 496,797
Administrative expenses (1,029,754) (1,282,109)
Other operating income 3 70,418 369,711
Operating loss 6 (460,936) (415,601)
Interest receivable 7 97 104
Interest payable and 8 (27,537) (49,343)
similar charges
Loss on ordinary activities (488,376) (464,840)
before taxation
Tax on loss on ordinary 9 - (2,137)
activities
Loss transferred to 11,22 (488,376) (466,977)
reserves
Loss per ordinary share:
Basic 10 (0.26p) (0.30)p
The loss arises from operations continuing as at 31 March 2005.
The accompanying notes form an integral part of these financial statements.
Consolidated statement of total recognised gains and losses and
consolidated reconciliation of movements in shareholders' funds
for the year ended 31 December 2004
Year ended Year ended
31 December 2004 31 December 2003
£ £
Consolidated statement of total recognised gains and losses
Loss for the year (488,376) (466,977)
Exchange translation loss on foreign currency (53,887) (110,944)
net investments in subsidiary undertakings
Total recognised gains and losses for the year (542,263) (577,921)
Consolidated reconciliation of movements in shareholders' funds
Total recognised gains and losses (542,263) (577,921)
New ordinary share capital subscribed for and allotted in the period, - 283,000
including share premium (net of expenses)
Net reduction in equity shareholders' funds (542,263) (294,921)
Opening equity shareholders' funds 592,065 886,986
Closing equity shareholders' funds 49,802 592,065
The accompanying notes form an integral part of these financial statements.
Consolidated balance sheet at 31 December 2004
Note At At
31 December 2004 31 December 2003
£ £ £ £
Fixed assets
Intangible assets 12 318,313 336,188
Tangible assets 13 173,382 318,009
491,695 654,197
Current assets
Stocks 15 423,088 471,646
Debtors 16 331,243 581,870
Cash at bank and in hand 24b 37,298 84,542
791,629 1,138,058
Creditors: amounts falling due 17 (1,206,754) (1,150,943)
within one year
Net current liabilities (415,125) (12,885)
Total assets less current liabilities 76,570 641,312
Creditors: amounts falling due 18 (26,768) (49,247)
after more than one year
49,802 592,065
Capital and reserves
Called up share capital 21 2,417,752 2,417,752
Share premium account 22 735,775 735,775
Profit and loss account 22 (3,103,725) (2,561,462)
Equity shareholders' funds 49,802 592,065
The financial statements were approved by the Board on 6 July 2005.
Patrick C R C Rogers
Director
The accompanying notes form an integral part of these financial statements.
Company balance sheet at 31 December 2004
Note At At
31 December 2004 31 December 2003
£ £ £ £
Fixed assets
Investments 14 162 162
Current assets
Stock 7,115 -
Debtors 16 494,973 523,205
Cash at bank and in hand 4,493 1,000
506,581 524,205
Creditors: amounts falling due 17 (465,897) (330,784)
within one year
Net current assets 40,684 193,421
Total assets less current liabilities 40,846 193,583
Capital and reserves
Called up share capital 21 2,417,752 2,417,752
Share premium account 22 735,775 735,775
Profit and loss account 22 (3,112,681) (2,959,944)
Equity shareholders' funds 40,846 193,583
The financial statements were approved by the Board on 6 July 2005.
Patrick C R C Rogers
Director
The accompanying notes form an integral part of these financial statements.
Consolidated cash flow statement for the year ended 31 December 2004
Note Year ended Year ended
31 December 31 December 2003
2004
£ £
Net cash inflow/(outflow) from operating activities (see below) 47,226 (56,700)
Returns on investments and servicing of finance 24a (27,440) (49,239)
Taxation(2,066)- 24a (62,927) (126,945)
Acquisitions and disposals
Cash outflow before management of liquid resources and financing (45,207) (232,884)
Financing 24a 8,166 164,953
Decrease in cash (37,041) (67,931)
Reconciliation of net cash flow to movement in net debt 24b
Decrease in cash in the period (37,041) (67,931)
Cash outflow from decrease in debt (8,166) 28,047
Change in net debt resulting from cash flows (45,207) 39,884
Loan notes repaid - 90,000
Finance leases acquired - (29,403)
Exchange movement (6,653) (490)
Movement in net debt in the period (51,860) 20,223
Opening net debt (237,242) (257,465)
Closing net debt 24b (289,102) (237,242)
Reconciliation of operating loss to net
cash inflow/(outflow) from operating activities
Operating loss (460,936) (415,601)
Depreciation and impairment 191,095 192,631
Amortisation of goodwill 17,875 100,470
(Profit)/loss on sale of fixed assets (560) 1,553
Decrease in stocks 48,558 63,280
Decrease in debtors 250,627 106,215
Increase/(decrease) in creditors 30,782 (98,713)
Other non cash operating adjustment (30,215) (6,535)
Net cash inflow/(outflow) from operating activities 47,226 (56,700)
The accompanying notes form an integral part of these financial statements.
Notes forming part of the financial statements for the year ended 31 December
2004
1 Accounting policies
The financial statements have been prepared under the historical cost convention
and are in accordance with applicable United Kingdom accounting standards. The
principal accounting policies of the Group are set out below. In accordance
with Financial Reporting Standard ('FRS') 18 the Group has reviewed its
accounting policies and estimation techniques and consider that these policies
are the most appropriate. The Group's accounting policies remain unchanged from
the previous year.
Turnover
Turnover represents supplies of components used in colour televisions, PC
monitors, VCRs, DVDs, satellite decoders and gas ignition decoders to third
parties, excluding Value Added Tax or local sales tax where appropriate.
Turnover is recognised upon delivery and its treatment is in line with FRS 5.
Basis of consolidation
The group has used the acquisition method of accounting to consolidate the
results of subsidiary undertakings. The results of subsidiary undertakings are
included in the group results from the date of acquisition. The consolidated
financial statements incorporate the financial statements of Buckland Group PLC
and all of its subsidiary undertakings made up to 31 December 2004.
Goodwill
Goodwill arising on an acquisition of a subsidiary undertaking is the difference
between the fair value of the consideration paid and the fair value of the
assets and liabilities acquired. It is amortised through the profit and loss
account over the directors' estimate of its useful economic life from the date
of acquisition. Any permanent diminutions in value are written off.
Valuation of investments
Investments held as fixed assets are stated at cost less any amounts written off
in respect of permanent diminution in value.
Depreciation
Depreciation is provided to write off the cost less estimated residual value, on
a straight line basis, of all fixed assets, except freehold land, evenly over
their expected useful economic lives. Asset lives are as follows:
Leasehold improvements - 5 years
Machines and equipment - between 3 and 5 years
Fixtures and fittings - between 3 and 10 years
Motor vehicles - 4 years
Financial Instruments
The group does not use derivative financial instruments. Financial assets are
recognised in the balance sheet at the lower of cost and net realisable value.
Income and expenditure arising on financial instruments is recognised on the
accruals basis, and credited or charged to the profit and loss account in the
financial period to which it relates.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
1 Accounting policies (continued)
Foreign currency
Foreign currency transactions of individual companies are translated at the
rates ruling when they occurred. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the balance sheet dates. Any
differences are taken to the profit and loss account.
The profit and loss accounts of foreign subsidiary undertakings are translated
into sterling at the average rate of exchange for the period. Assets and
liabilities of foreign subsidiary undertakings are translated into sterling at
the rates of exchange ruling at the balance sheet date. Differences on exchange
arising from the translation of the opening net investment in subsidiaries are
taken directly to reserves. All other exchange differences are dealt with
through the profit and loss account.
Product research and development
Product research and development costs are charged to profit and loss account in
the period in which the expenditure is incurred.
Stocks
Stocks are valued at the lower of cost and net realisable value. Cost is
calculated as follows:
Raw materials - purchase cost on a first in, first out basis.
Work in progress and finished goods - cost of raw materials and labour together
with attributable overheads
Net realisable value is based on estimated selling price less additional costs
to completion and disposal.
Deferred taxation
Deferred tax has been provided in accordance with FRS 19.
Deferred tax is recognised on all timing differences where the transactions or
events that give the group an obligation to pay more tax in the future, or a
right to pay less tax in the future, have occurred by the balance sheet date.
Deferred tax assets are recognised when it is more likely than not that they
will be recovered. Deferred tax is measured using rates of tax that have been
enacted or substantially enacted by the balance sheet date.
Leased assets
Assets acquired under hire purchase contracts and finance leases are capitalised
in the balance sheet. The corresponding leasing commitments are shown as amounts
payable to the lessor. Depreciation on the relevant assets is charged to the
profit and loss account.
Lease payments are analysed between capital and interest components. The
interest element of the payment is charged to the profit and loss account over
the period of the lease and is calculated so that it represents a constant
proportion of the balances of capital repayments outstanding. The capital
element reduces the amounts payable to the lessor.
Rentals paid under operating leases are charged to the profit and loss account
on a straight line basis over the lease period.
Retirement benefits
Defined contributions pension scheme. The pension costs charged against
operating profits are the contributions payable to a foreign scheme in respect
of the accounting period.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
2 Going Concern
The Directors have reviewed the profit and loss and cash flow projections for
the Group to 30 June 2006. Based on current forecasts and assumptions, the
Directors anticipate that there may be a short term funding requirement, in
excess of banking and loan facilities already in place, during the period August
/September 2005. The Directors are currently examining the options for covering
this anticipated shortfall by a combination of additional bank borrowings,
shareholders' loans and/or additional equity funding and are of the opinion
that adequate additional facilities will be forthcoming to cover this
requirement.
In the event that the decision is taken to close all of Euro Asia Connectors Co
Ltd's operations in Bangkok, it is not anticipated that this would have any
adverse impact on the operation of Derlite Co Ltd. There are no cross
guarantees in force whereby any of the liabilities of EAC could fall upon other
group companies.
3 Turnover, profit, net assets and other operating income
Turnover is related to the manufacture of components used in colour televisions,
PC Monitors, VCRs, DVDs and satellite decoders: and to the manufacture of
components used in gas ignition systems for gas cooking and gas heating
appliances.
An analysis by geographical market follows:
Year ended 31 Year ended
December 31 December
2004 2003
Turnover by origin £ £
Europe - 318,973
Asia 2,957,083 4,134,324
2,957,083 4,453,297
Year ended Year ended
31 December 31 December
2004 2003
Turnover by destination £ £
Europe 2,375,450 3,313,239
Asia 269,086 810,438
Rest of the World 312,547 329,620
2,957,083 4,453,297
An analysis by segment follows:
Year ended 31 Year ended
December 31 December
2004 2003
Turnover by segment £ £
Electronic Components 1,534,425 3,161,677
Gas Ignition Equipment 1,422,658 1,291,620
2,957,083 4,453,297
Loss before tax and net assets relating to each major geographical market are
not disclosed as, in the opinion of the directors, their disclosure would be
seriously prejudicial to the interests of the group.
Other operating income in 2003 included a one-off accounts payable write off
amounting to £205,000 and exchange differences of £149,000.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
4 Employees
Year ended Year ended
31 December 2004 31 December 2003
Staff costs excluding directors consist of: £ £
Wages and salaries 712,618 984,414
Pension costs 661 744
Social security costs 22,065 25,053
735,344 1,010,211
The average monthly number of employees of the group, excluding directors,
during the year was as follows:
Number Number
2004 2003
Manufacturing 344 388
Sales 2 3
Administration 9 12
Research and development 3 3
358 406
5 Directors' emoluments
Year ended Year ended
31 December 31 December
2004 2003
£ £
Fees 134,600 114,333
No director receives contributions to a pension scheme.
6 Operating loss
Year ended Year ended
31 December 31 December
2004 2003
This has been arrived at after charging / (crediting) : £ £
Depreciation - own assets 140,361 183,501
- leased assets 8,407 9,130
Impairment provision 42,327 -
Amortisation of goodwill 17,875 100,470
Operating lease rentals - plant and machinery 8,047 -
- other 77,099 109,896
Auditors' remuneration - audit services 50,056 50,679
- non-audit services: taxation 8,510 3,948
Research and development expenditure 20,543 24,180
Profit/loss on disposal of fixed assets (560) 1,553
Net (profit) on foreign exchange (36,280) (119,217)
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
7 Interest receivable
Year ended Year ended
31 December 31 December
2004 2003
£ £
Interest on bank balances 97 104
8 Interest payable and similar charges
Year ended 31 Year ended
December 31 December
2004 2003
£ £
Interest on bank loans and overdrafts 2,723 6,461
Finance charges payable under finance leases and hire purchase 1,747 2,028
contracts
Other loans 23,067 40,854
27,537 49,343
9 Taxation
Year ended Year ended
31 December 31 December
2004 2003
£ £
Current tax:
UK corporation tax on loss for the period - -
Foreign corporation tax on profits for the year - 2,137
- 2,137
The tax assessed for the period is higher than the standard rate of
corporation tax in the UK (30%). The differences are explained
below:
Loss on ordinary activities before tax (488,376) (464,840)
Loss on ordinary activities multiplied by standard rate of (146,513) (139,452)
corporation tax in the UK of 30%
Effects of:
Expenses not deductible for tax purposes 134,586 (30,889)
Capital allowances for the period in (excess of)/less than (199) 813
depreciation
Utilisation of tax losses 3,483 -
Current year tax losses 107,899 241,119
Foreign tax exemption (115,081) (64,733)
Inter company adjustments 15,825 (4,721)
Current tax charge for the period - 2,137
Current year tax losses relate to £104,540 of UK losses and £255,123 of losses
in Thailand.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
10 Earnings per share
The calculations of basic earnings per share are based on the loss for the year
attributable to ordinary shareholders of £488,376 (2003: loss £466,977) and a
weighted average number of shares in issue during the year of 190,779,408 (2003:
153,135,572).
Note 21 shows that share options exist at 20% of issued share capital. These
share options have an anti- dilutive effect on the earnings per share since the
exercise prices are in excess of the market price.
11 Loss for the financial period
The parent company has taken advantage of section 230 of the Companies Act 1985
and has not included its own profit and loss account in these financial
statements. The parent company's loss after tax for the year was £152,737
(2003: loss £193,583).
12 Intangible assets
Goodwill on:
Group Acquisition Acquisition Total
of 10% of Purchased
of 100% of Euro Asia Goodwill
Derlite Limited Connectors Co.
Limited
£ £ £
Cost
At 1 January 2004 and 31 December 2004 357,491 97,472 454,963
Amortisation
At 1 January 2004 21,303 97,472 118,775
Provision for the period 17,875 - 17,875
At 31 December 2004 39,178 97,472 136,650
Net book value
At 31 December 2004 318,313 - 318,313
At 31 December 2003 336,188 - 336,188
The goodwill relating to Derlite Limited is being amortised over its useful
economic life of 20 years and for Euro Asia Connectors Co. Limited has been
written off due to declining returns on the connector business.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
13 Tangible assets
Plant,
machinery and
motor vehicles Fixtures,
fillings and
Leasehold equipment
Group Improvements Total
£ £ £ £
Cost
At 1 January 2004 69,817 1,994,848 103,064 2,167,729
Additions during the year 13,459 44,099 6,049 63,607
Disposals - (324) (5,580) (5,904)
Exchange differences (4,417) (120,631) (6,202) (131,250)
At 31 December 2004 78,859 1,917,992 97,331 2,094,182
Depreciation
At 1 January 2004 51,545 1,732,632 65,543 1,849,720
Provided for in the year 17,646 120,092 11,030 148,768
Disposals - (204) (5,580) (5,784)
Impairment provision 11,213 16,280 14,834 42,327
Exchange differences (3,572) (106,387) (4,272) (114,231)
At 31 December 2004 76,832 1,762,413 81,555 1,920,800
Net book value
At 31 December 2004 2,027 155,579 15,776 173,382
At 31 December 2003 18,272 262,216 37,521 318,009
The net book value of tangible fixed assets included within plant, machinery and
motor vehicles, includes an amount of £17,916 (2003: £27,859) in respect of
assets held under finance leases and hire purchase contracts. Depreciation
charged in the year on assets held under finance lease was £8,407 (2003:
£9,130).
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
14 Fixed asset investments
Subsidiary
undertakings
Company £
Cost
At 1 January 2004 1,022,896
Additions -
At 31 December 2004 1,022,896
Provisions at 1 January 2004 1,022,734
Provided during the year -
Provisions at 31 December 2004 1,022,734
Net book value at 31 December 2004 162
Net book value at 31 December 2003 162
As at 31 December 2004 the Group held 100% of the share capital of the following
companies.
Nature of business Date of acquisition/ set up
Subsidiary undertaking Country of
incorporation
Sparkle Investment B V Holland Dormant 6 March 1998
Euro Asia Connectors Co Thailand Manufacturing 6 March 1998
Limited
Euro Asia Connectors Co Hong Kong Trading 19 March 1999
(Hong Kong) Limited
Euro Asia Strip Tinning Thailand Manufacturing 24 April 2000
Limited
Ravago Plastics Ltd
United Kingdom Trading 5 June 2002
Holdsafe Limited United Kingdom Dormant 22 October 2002
Derlite Co. Limited Thailand Manufacturing 21 February 2003
(Thailand)
Hong Kong Trading 29 October 2003
Buckland Group (Hong
Kong) Limited
All companies within the group have co-terminous year ends.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
15 Stocks
Group 31 December 2004 31 December 2003
£ £
Raw materials 272,873 202,262
Work in progress 96,829 125,430
Finished goods 53,386 143,954
423,088 471,646
There is no material difference between the replacement cost of stocks and the
amounts stated above.
16 Debtors
Group Company
31 December 31 December 31 December 31 December
2004 2003 2004 2003
£ £ £ £
Trade debtors 179,251 391,976 - -
Amounts owed by group undertakings - - 474,052 481,475
Other debtors 110,387 145,779 8,269 39,430
Prepayments and accrued income 41,605 44,115 12,652 2,300
331,243 581,870 494,973 523,205
At 31 December 2004 £13,953 (2003: £21,647) of the trade debtors have been
factored with recourse.
At 31 December 2004 and 31 December 2003 Euro Asia Connectors Co Ltd had a cash
deposit of Thai Baht 1.66 million (£22,220, 2003: £23,641) with the Metropolitan
Electrical Authority for a guaranteed contract to supply electricity.
17 Creditors: amounts falling due within one year
31 December 31 December 31 December 31 December
2004 2003 2004 2003
£ £ £ £
Bank loans and other borrowings 282,880 256,022 216,303 195,717
Bank overdrafts 409 363 - 363
Trade creditors 740,329 719,116 208,958 100,415
Amounts owed to group undertakings - - 72 1,254
Corporation tax - 2,066 - -
Obligations under finance leases and hire 16,343 16,152 - -
purchase contracts
Accruals 166,793 157,224 40,564 33,035
1,206,754 1,150,943 465,897 330,784
Amounts due under finance leases and hire purchase contracts are secured on the
assets to which they relate.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
18 Creditors: amounts falling due after more than one year
Group
31 December 31 December
2004 2003
£ £
Bank loans and other borrowings 18,038 32,743
Obligations under finance leases and hire purchase 8,730 16,504
contracts
26,768 49,247
Further details of the terms of the loans are shown in note 19.
Amounts due under finance leases and hire purchase contracts are secured on the
assets to which they relate.
19 Financial Instruments
The company's treasury policy is to avoid transactions of a speculative nature.
The main risks arising from the group's financial instruments are interest rate
risk and foreign currency risk. The directors review and agree policies for
managing each of these risks and they are summarised below.
Short term debtors and creditors
Short term debtors and creditors have been excluded from all the following
disclosures, other than the currency risk disclosures.
Interest rate risk
The group finances its operations through bank borrowings. The group exposure
to interest rate fluctuations on its borrowings is managed by the use of both
fixed and floating facilities. It is the Group's policy that approximately 2/3
of its borrowings should be at a fixed rate. At the year end 100% per cent of
the borrowings were at fixed rates, excluding a shareholder loan which is
incurring no further interest.
Loans amounting to £216,303 (2003: £195,717) are unsecured, repayable on demand,
due to a shareholder, Groupe Industriel, and include interest at 10% per annum.
Of the amount due £133,337 (2003: £133,337) is related to capital and £82,966 to
interest (2003: £62,511).
Loans amounting to £50,663 (2003: £71,402) are due to Eurovideo, secured by a
charge over the group's shareholdings in EACHK. The loan bears interest of 7%
per annum and is repayable by equal quarterly instalments.
A loan of £20,000 (2003: £Nil) is due to Dr Leon Sharples. The loan is interest
free, unsecured and repayable on demand after 31 December 2006.
Bank loans
Other borrowings amounting to £13,953 (2003: £21,646) relate to factored book
debts. The borrowings bear interest of 9.5% per annum (2003: 9.5%).
Bank overdrafts
Other overdrafts amounting to £409 (2003: £363) are secured by a fixed and
floating charge over the Company's assets. The overdraft bears interest of 4%
over base rate.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
19 Financial instruments (continued)
Liquidity risk
The group seeks to manage financial risk, to ensure sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably manage the liquidity through the use of overdraft. It is the Group's
policy to factor its trade debtors wherever practicable.
Maturity of financial liabilities
The group financial liabilities analysis at 31 December 2004 was as follows:
Group 2004 2003
£ £
Borrowings are repayable as follows:
Within one year
Bank loans 13,953 21,647
Other loans 268,927 234,376
Finance leases 16,343 16,152
Between one and two years
Other loans 18,038 32,743
Finance leases 6,783 7,217
Between two and five years
Other loans - -
Finance leases 1,947 9,288
325,991 321,423
Borrowing facilities
At 31 December 2004 the group had un-drawn committed borrowing facilities
£52,971 (2003: £120,763).
Currency risk
The group does not hedge its exposure of foreign investments held in foreign
currencies. The Group considers that the prevailing financial conditions in
Thailand preclude the need to hedge against the Baht.
The group is exposed to translation and transaction foreign exchange risk. In
relation to translation risk the proportion of assets held in the foreign
currency is matched to an appropriate level of borrowings in the same currency.
The group has overseas subsidiaries operating in Thailand and Hong Kong whose
revenues and expenses are denominated in US dollars and local currencies. The
directors protect the group's sterling balance sheet from movements in the US
dollar/local currency exchange rates, by financing its net investments in its
subsidiaries, with the exception of Thailand, by means of local currency
borrowings.
The majority of the group's sales are to Europe and Asia. These sales are
invoiced primarily in US dollars and Euros.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
19 Financial instruments (continued)
The table below shows, in sterling, the extent to which group companies have
monetary assets and liabilities in currencies other than their local currency.
Foreign exchange differences on retranslation of these assets are taken to the
profit and loss account of the group companies and the group.
Functional currency of operation Net foreign currency monetary (liabilities)
Euro GBP US dollars
At 31 December 2004
Euro - (16,225) (50,371)
GBP (216,303) - -
(216,303) (16,225) (50,371)
At 31 December 2003
Euro - 5,100 (70,649)
GBP (195,717) - -
(195,717) 5,100 (70,649)
Fair Values
The fair value of short term deposits, long term borrowings, loans, overdraft
and other financial assets approximates to the carrying amount because of the
short maturity of these instruments.
20 Deferred tax
Group Company
Unprovided deferred tax 31 December 31 December 31 December 31 December
2004 2003 2004 2003
£ £ £ £
Accelerated capital allowances (598) (797) (598) (797)
Losses (909,113) (910,724) (747,772) (727,501)
Unrecognised deferred tax asset (909,711) (911,521) (748,370) (728,298)
No provision for the deferred tax asset has been made in the group or company
due to the uncertainty of the group or company being able to generate sufficient
future taxable profits from which the future reversal of the timing differences
can be deducted.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
21 Called up share capital
2004 2004 2003 2003
Number £ Number £
Authorised
New Ordinary shares 0.5p each 500,000,000 2,500,000 267,229,000 1,336,145
Deferred shares 9.5p each 15,409,000 1,463,855 15,409,000 1,463,855
515,409,000 3,963,855 282,638,000 2,800,000
Allotted, called up and fully paid
New Ordinary shares 0.5p each 190,779,408 953,897 190,779,408 953,897
Deferred shares 9.5p each 15,409,000 1,463,855 15,409,000 1,463,855
206,188,408 2,417,752 206,188,408 2,417,752
The deferred shares, which are not listed, have no voting right, no rights to
dividends and are not entitled to any payment on winding up.
An aggregate of 24,774,998 of the 0.5p new ordinary shares were held by Wharton
Holdings Corporation and C I Law Trustees Limited on behalf of discretionary
trusts, the beneficiaries of which include the families of Mr Rogers and Dr
Sharples, and Mr Palmer.
Options
The company has entered into the following option arrangements under which the
holders are entitled to subscribe for a percentage of the company's ordinary
share capital from time to time.
Options outstanding
Holder at 31 December 2004 Percentage
Wharton Holdings Corporation 2,075,405 at 15p 13.38
501,750 at 10p
20,633,700 at 0.75p
8,697,000 at 0.50p
C I Law Trustees Limited 1,026,845 at 15p 6.62
248,250 at 10p
10,208,902 at 0.75p
4,303,000 at 0.50p
The options held by Wharton Holdings Corporation are held on behalf of
discretionary trusts, the beneficiaries of which include the families of Mr
Rogers and Dr Sharples. Those held by C I Law Trustees Limited are held on
behalf of a discretionary trust, beneficiaries of which include the family of Mr
Palmer.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
21 Called up share capital (continued)
The following is a summary of the principal terms of the options.
(a) The price at which the option holders are entitled to subscribe for
ordinary shares is 15p in respect of the rights which accrued to the option
holders on 19 September 1997 and on 6 March 1998. The exercise price in respect
of rights which accrued to option holders in December 1999 is 10p per share and
in respect of rights which accrued on 6 March and 17 April 2003 is 0.75p per
share. For rights which accrued on 15 May 2003 and on 30 October 2004 the option
price is 0.50p per share.
(b) In respect of any ordinary shares for which the holder is entitled to
subscribe as a result of a rights issue, placing, open offer or similar the
exercise price shall be the price at which such ordinary shares are issued.
(c) In respect of any ordinary shares for which the holder is entitled to
subscribe as a result of any capitalisation of reserves or profits, or a capital
reduction or otherwise or on the making of an exempt distribution by virtue of
Chapter II Part VI of the Income and Corporation Taxes Act 1998, the exercise
price may be varied.
(d) In respect of any ordinary shares for which the option holder is
entitled to subscribe as a result of the exercise by any other person, firm or
corporation of any rights granted to subscribe for ordinary shares (whether by
way of option, warrant or otherwise), the exercise price per ordinary share
shall be equal to the average market price of the ordinary shares on each of the
five business days preceding the date of the exercise of the said rights, as
derived from the Stock Exchange Daily Official List.
(e) The options may be exercised in whole or in part on any one or more
occasions at any time between 1 October 1998 and 30 September
2009.
(f) The ordinary shares allotted to the option holder shall rank pari
passu in all respects with the ordinary shares of the company then in issue and
shall carry the right to receive all dividends and other distributions declared,
made or paid by the company in respect of the ordinary shares on and after the
date of the exercise of any of the options.
(g) On 18th February 2005 the Company issued 214 million new ordinary shares
at 0.5p each.
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
22 Reserves
Group Share Profit
premium account and loss account
£ £
At 1 January 2004 735,775 (2,561,462)
Loss for the year - (488,376)
Exchange differences - (53,887)
At 31 December 2004 735,775 (3,103,725)
Company
At 1 January 2004 735,775 (2,959,944)
Loss for the year - (152,737)
At 31 December 2004 735,775 (3,112,681)
23 Commitments under operating leases
As at 31 December 2004, the group had annual commitments under non-cancellable
operating leases as set out below.
31 December 2004 31 December 2003
Operating leases which expire: £ £
Within one year 108,360 -
In two to five years - 82,030
108,360 82,030
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
24 Note to the cash flow statement
(a) Gross cash flows 31 December 31 December
2004 2003
£ £
Returns on investments and servicing of finance
Interest received 97 104
Interest paid (27,537) (49,343)
(27,440) (49,239)
Capital expenditure
Payments to acquire tangible fixed assets (63,607) (162,111)
Receipts from sale of tangible fixed assets 680 35,166
(62,927) (126,945)
Financing
Issue of ordinary share capital - 200,000
Expenses paid in connection with share - (7,000)
issue
Increase in/(repayment of) bank loans and 14,058 (10,913)
other borrowings
Repayment of finance leases (5,892) (17,134)
8,166 164,953
(b) Analysis of changes in net
debt
Exchange At
At movement 31 December
1 January Cash 2004
2004 Flow
£ £ £ £
Cash in hand and at bank 84,542 (36,995) (10,249) 37,298
Bank overdrafts (363) (46) - (409)
84,179 (37,041) (10,249) 36,889
Bank loans and
other borrowings (288,765) (14,058) 1,905 (300,918)
Finance leases (32,656) 5,892 1,691 (25,073)
Net (debt) (237,242) (45,207) (6,653) (289,102)
Notes forming part of the financial statements for the year ended 31 December
2004 (continued)
25 Contingent liabilities
There is a dispute with the vendors of Holdsafe Ltd concerning a number of
items, including matters relating to warranties given on the sale of Holdsafe to
the Group. The directors consider that it is most unlikely that any material
loss will fall on the Group. The maximum exposure is considered to be circa
£70,000.
Euro Asia Connectors Co Ltd is in receipt of a claim for Baht 32.3m (£450,000
approx) from a former customer in respect of the supply of allegedly defective
products. The Directors consider it unlikely that the claim will succeed in
this amount, if at all, and are of the opinion that it is most unlikely that any
loss will fall on the rest of the Group.
26 Post balance sheet events
On 18th February 2005 the Group acquired the business and certain of the assets
of Kigass Electronics Ltd for a total cash consideration of £1.07m, funded by
the issue of 214 million new ordinary shares at 0.5p each to institutional and
other investors.
Since the year end the decision has been taken to cease all production of
connectors at EAC and to make redundant the majority of its workforce. The
future scope of operations of the company is currently under review. In the
event that the decision is taken to close all of Euro Asia Connectors Co Ltd's
operations in Bangkok, it is not anticipated that this would have any adverse
impact on the operation of Derlite Co Ltd. There are no cross guarantees in
force whereby any of the liabilities of EAC could fall upon other group
companies.
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the above company will
be held at the offices of Seymour Pierce, Bucklersbury House, 3 Queen Victoria
Street, London EC4N 8EC on Monday 1st August 2005 at 11am when the following
ordinary and special business will be transacted:
Ordinary Resolutions:
1. To receive and consider the report of the directors and the statement of
accounts for the year ended
31 December 2004 with the auditor's report thereon.
2. To re-elect Dr L.Sharples who retires by rotation and being eligible offers
himself for re-election.
3. To re-elect the auditors for the ensuing year.
4. To fix the remuneration of the auditors.
5. To transact any other business which may be properly transacted at an annual
general meeting.
The following special business will also be transacted at the meeting:
6. To increase the authorised share capital of the company beyond the existing
authorised share capital of £2,500,000 divided into 500,000,000 ordinary
shares of 0.5p each by the creation of 500,000,000 ordinary shares of 0.5p
ranking pari passu inter se with the existing ordinary shares of the company.
Special Resolution:
THAT the board be and it is hereby empowered pursuant to section 95 of the
Companies Act 1985 to allot equity securities (within the meaning of section 94
of the said Act) for such consideration as the directors shall at their
discretion think fit including without limitation for cash as if sub-section (1)
of section 89 of the said Act did not apply to any such allotment.
THAT the directors be and are hereby generally and unconditionally authorised,
pursuant to section 80 of the Companies Act 1985 to allot equity securities
(within the meaning of that section) up to the aggregate nominal value of the
authorised but unissued share capital of the company. The authority hereby
conferred shall expire, unless previously renewed, on 8th August 2009 save that
the Directors may, notwithstanding such expiry, allot relevant securities under
this authority in pursuant of an offer or agreement to do so made by the company
before the expiry of this authority.
DATED 6th July 2005
By Order of the Board
Leon Sharples
Secretary
Notes
A member entitled to attend and vote at the meeting is entitled to appoint a
proxy to attend and vote in his stead. A proxy need not be a member of the
company. Forms of proxy should be returned, by no later than 48 hours before the
meeting to Northern Registrars Limited, Northern House, Woodsome Park, Fenay
Bridge, Huddersfield HD8 0LA
A copy of this document is available free of charge from the offices of the
Company for up to and including 8 August 2005
This information is provided by RNS
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