Interim Results

Elektron PLC 25 October 2007 For immediate release 7 am 25 October 2007. ELEKTRON PLC Interim results for the period ended 31 July 2007 Elektron PLC ('Elektron'), the fast expanding AIM quoted Engineered Components manufacturer announces results for the half-year ended 31 July 2007. Key Points: • Turnover from continuing operations up 21% to £15.6 million (2006: £13.0 million) • Operating profits before exceptional items up 8% to £1.3 million (2006: £1.2 million) • Profit before taxation from continuing activities up 72% to £1.1 million (2006: £0.64 million) • Earnings per share on continuing operations up 128% to 1.37p (2006: 0.60p) • Net gearing reduced to 13% from 63% at 31 January 2007 • Transfer of Arcolectric production to China anticipated to produce future annualised cost savings of circa £1.0 million from 1 February 2009. • Expected annualised sales of circa £40 million in 2008 following acquisition of Sifam For further information please contact: Adrian Girling Roland Cornish Executive Chairman Chairman Elektron PLC Beaumont Cornish Limited Tel: 01708 336309 Tel: 020 7628 3396 Chairman's Statement Summary We had a good first half. The transfer of the Bulgin manufacturing processes to Tunisia is now complete and has produced excellent financial results whilst Arcolectric has continued to suffer as a result of the weakness of the US Dollar and higher metal prices. The division has produced a return of 11.2% on sales of £11.3m. We have announced to our Arcolectric employees that we will be moving the major parts of the West Molesey manufacturing operation to China by 23 December 2008, the lease break date. This will result in us reducing our UK Arcolectric space requirement from 81,000 square feet to 36,000 sq feet and UK employee numbers by circa 100 staff. The revenue cost of the move, which will involve taking a lease on a new factory in Shenzhen, is expected to be in the region of £1.4 million with a further £0.6 million of capital costs and is anticipated to result in cost savings of circa £1.0 million per annum from 1 February 2009. The continuing Howle businesses produced a return of 3.4% on sales of £4.3 million. This is well below our target for the future and is largely due to operating with inefficient ageing plant, which is in the process of being replaced. Howle Carbides in particular should have good prospects once new investment has taken place. We mentioned in our 2007 Annual Report that we saw this year as a period of consolidation involving management and organisational changes. Following the acquisition of Sifam Instruments in September 2007 we have commenced an internal re-organisation to create three divisions within the Group each with a dedicated managing director. The operations of the Bulgin and Arcolectric brands will be transferred into a new division named Elektron Components, which will have annual sales of about £24 million. Howle Holdings, which was acquired in October last year, has seen its two loss making businesses and freeholds sold, leaving the two profitable businesses for us to expand. Howle Carbides and Titman Tip Tools will form the Hard Metal Components division, which will have annual sales of about £8 million. Sifam Instruments Limited, which was acquired in September 2007, is presently being managed by me until such time as we have recruited a managing director. Sifam designs, manufactures and sells nano-positioning systems, electrical and electronic measuring instruments and moulded control knobs and will form the Instrumentation division with annual sales of about £8 million. By making the necessary investment in engineering resources for new product development, we see good opportunities for organic growth in the medium term. Financial results Group sales have increased by 21% to £15,630,000. Group operating profits of £1,267,000, before exceptional items, were 8% ahead of those in the first half of last year. Gross margins were 37% compared with 38% the previous year, the reduction being due to the addition of the lower margin Howle businesses. We expect to bring Howle margins to a satisfactory level in due course as mentioned above. We incurred exceptional costs of £85,000 in the period relating to aborted acquisition costs and redundancy costs in Titman Tip Tools. Group profits before taxation from continuing businesses have increased by 72% to £1,108,000. The taxation credit has arisen from a review of the underlying tax position relating to the fair value exercise carried out on the acquisition of Howle Holdings. This has resulted in a one-off tax credit of £328,000. The underlying tax charge for the period is £252,000 representing a rate of 23%. At 31 July 2007, net borrowings had decreased to £1,189,000 from £5,038,000, the reduction principally arising from the sale and leaseback of the Howle freehold properties. Gearing at the period end reduced to 13% from 63% at 31 January 2007. Acquisitions We continue to investigate acquisition opportunities with a view to accelerating Elektron's growth. Earnings per share and dividends The earnings per share from continuing businesses, before exceptional costs, were 1.45p compared with 1.08p in 2006. Basic and diluted earnings per share on continuing businesses after exceptional costs were 1.37p (2006: 0.60p). 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 consider an increase in the dividend at year-end. Employees I should like to thank all of our staff for their enthusiasm and hard work, particularly those at Arcolectric who have continued to work diligently and professionally in the light of the announcement that the factory would be moving the majority of its operations to China. Outlook Having established a track record of steadily improving pre-exceptional operating results based mainly on cost reductions we are now looking to accelerate our investment in new product development. We are excited that Elektron now owns a selection of leading brand names, namely Arcolectric, Bulgin, Digitron, Howle Carbides, Sifam, Teco, Titman and Queensgate, all well known and respected in the markets they serve, through which new products will be promoted to achieve organic growth. Orders received to date, for continuing businesses, are currently up 41% on this time last year and we are well placed to continue progress. Adrian Girling Executive Chairman Group Income Statement Unaudited Interim Results to 31 July 2007 Unaudited Unaudited Audited Half year to Half year to Year to 31 July 31 July 31 January 2007 2006 2007 £'000 £'000 £'000 Revenue from continuing operations 15,630 12,954 26,010 Cost of sales (9,824) (8,077) (16,662) --------- --------- --------- Gross profit 5,806 4,877 9,348 Net operating expenses (including exceptional items) (4,624) (4,221) (8,753) --------- --------- --------- -------------------------------------------------------------------------------- Operating profit before exceptional items 1,267 1,173 1,874 Exceptional items (85) (517) (1,279) -------------------------------------------------------------------------------- Operating profit from continuing 1,182 656 595 operations Finance income 31 23 49 Finance costs (105) (36) (131) --------- --------- --------- Profit before taxation from continuing operations 1,108 643 513 Taxation on continuing operations 76 (174) (21) --------- --------- --------- Profit after taxation from continuing operations 1,184 469 492 Loss after taxation from discontinued operations (9) - (85) --------- --------- --------- Profit attributable to shareholders 1,175 469 407 --------- --------- --------- Earnings per share - basic 1.35p 0.60p 0.50p - diluted 1.35p 0.60p 0.50p --------- --------- --------- Earnings per share continuing operations - basic 1.37p 0.60p 0.61p - diluted 1.37p 0.60p 0.61p --------- --------- --------- Group Balance Sheet Unaudited Interim Results at 31 July 2007 Unaudited Unaudited Audited 31 July 31 July 31 January 2007 2006 2007 £'000 £'000 £'000 Assets Non-current assets Property, plant and equipment 3,136 2,096 3,683 Deferred tax 62 285 - ---------- --------- --------- Total non-current assets 3,198 2,381 3,683 ---------- --------- --------- Current assets Inventories 5,335 3,282 4,974 Trade and other receivables 7,744 5,188 10,506 Cash and cash equivalents 1,746 2,421 858 ---------- --------- --------- 14,825 10,891 16,338 Assets held for sale 1,160 - 1,253 ---------- --------- --------- Total current assets 15,985 10,891 17,591 ---------- --------- --------- Total assets 19,183 13,272 21,274 ---------- --------- --------- Equity and liabilities Equity attributable to equity holders of the parent Called - up share capital 4.336 3,916 4,336 Share premium 244 244 244 Merger reserve 1,047 - 1,047 Capital redemption reserve 106 105 106 Other reserves 57 59 54 Retained earnings 3,389 2,568 2,214 ---------- --------- --------- Total equity 9,179 6,892 8,001 ---------- --------- --------- Non-current liabilities Long-term borrowings 333 160 286 Long-term provisions 251 269 251 Deferred income tax liabilities - - 63 ---------- --------- --------- Total non-current liabilities 584 429 600 ---------- --------- --------- Current liabilities Trade and other payables 5,026 3,350 4,609 Short-term borrowings 2,260 1,087 5,385 Current portion of long-term borrowings 342 288 225 Current tax payable 566 644 895 Short-term provisions 146 582 500 ---------- --------- --------- Total current liabilities 8,340 5,951 11,614 Liabilities directly associated with assets held for sale 1,080 - 1,059 ---------- --------- --------- Total current liabilities 9,420 5,951 12,673 ---------- --------- --------- Total liabilities 10,004 6,380 13,273 ---------- --------- --------- Total equity and liabilities 19,183 13,272 21,274 ---------- --------- --------- Group Cash Flow Statement Unaudited Interim Results to 31 July 2007 Unaudited Unaudited Audited 31 July 31 July 31 January 2007 2006 2007 £'000 £'000 £'000 Cash flows from operating activities Profit before taxation (continuing activities) 1,108 643 513 Loss before taxation (discontinued activities) (16) - (104) -------- -------- -------- Profit before taxation 1,092 643 409 Adjustments for: Depreciation charge 616 481 1,019 Interest receivable (31) (23) (49) Interest expense 147 36 184 (Profit)/loss on disposal of fixed assets (32) - 57 Goodwill impairment - - (5) -------- -------- -------- Operating profit before working capital changes 1,792 1,137 1,615 (Increase)/decrease in inventories (376) (15) 113 Decrease/(increase) in trade and other receivables 3,344 (626) (14) Increase in trade and other payables 110 477 17 Decrease in provisions (364) - - Other non-cash movements 5 429 364 -------- -------- -------- Cash generated from operations 4,511 1,402 2,095 Interest paid (147) (36) (184) Taxation paid (85) (394) (457) ------------------------------------------------------------------------------ Net cash inflow from continuing operations 4,343 972 1,553 Net cash outflow from discontinued operations (64) - (99) ------------------------------------------------------------------------------ Net cash inflow from operating activities (total) 4,279 972 1,454 -------- -------- -------- Cash flows from investing activities Sale of subsidiary operations 80 - 100 Acquisition of subsidiaries - - (1,655) Purchase of property, plant and equipment (459) (419) (610) Proceeds of sale of property, plant and equipment 33 - 4 Interest received 31 23 49 -------- -------- -------- Net cash used in investing activities (315) (396) (2,112) -------- -------- -------- Cash flows from financing activities Purchase of own shares - (132) (132) Movement in long term borrowings (146) 214 (2,224) Movement in short term borrowings (3,067) 329 2,906 New capital leases 146 - 164 Payment of hire purchase and finance liabilities (9) (280) (638) Dividends paid - - (274) -------- -------- -------- Net cash used in financing activities (3,076) 131 (198) -------- -------- -------- Net increase/(decrease) in cash and cash equivalents 888 707 (856) Cash and cash equivalents at the beginning of period 858 1,714 1,714 -------- -------- -------- Cash and cash equivalents at the end of period 1,746 2,421 858 -------- -------- -------- Group statement of changes in equity Unaudited Interim Results to 31 July 2007 Share Share Merger Capital Other Translation Retained Total Capital Premium Reserve Redemption Reserves Earnings £000 £000 £000 Reserve £000 Reserve £000 £000 £000 £000 At 1 February 2007 4,336 244 1,047 106 73 (19) 2,214 8,001 Transfer from income and expense - - - - - - 1,175 1,175 account Employee share scheme - - - - 14 - - 14 transfer Exchange differences - - - - - (11) - (11) At 31 July 2007 4,336 244 1,047 106 87 (30) 3,389 9,179 Notes to the Unaudited Interim Results to 31 July 2007 1. Accounting Policies The interim financial information has been prepared on the basis of International Financial Reporting Standards (IFRS). Full details of accounting policies will be included in the Annual Report for the year ending 31 January 2008. These are not expected to be materially different from those set out in the Group's statutory accounts for the year ended 31 January 2007. 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. The Group has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK Groups, in the preparation of these interim financial statements. 2. Other information The financial information in this statement does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The financial information in respect of the year ended 31 January 2007 has been extracted from the statutory accounts, which have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain a statement under Section 237 of the Companies Act 1985. Copies of the interim results will be sent to shareholders and are available to download from the Group's website www.elektronplc.com. Hard copies are available free of charge from the Company's registered office at Melville Court, Spilsby Road, Romford, Essex RM3 8SB. This information is provided by RNS The company news service from the London Stock Exchange GNZM

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