Final Results
Acal PLC
4 June 2001
Embargoed until 07.00 a.m. Monday 4th June 2001
Press Release
Acal House, Guildford Road, Lightwater, Surrey GU18 5SA, England
Telephone: 01276 474406 Fax: 01276 474835
Audited Preliminary Results for the Year Ended 31st March 2001
The key points are:-
* Sales increased from £245million to £325million up 33%
* Operating profit before interest and goodwill amortisation
increased from £15.3million to £25.1million up 64%
* Profit before tax, goodwill amortisation and exceptional items
increased from £14.4m to £22.6m up 57%
* Earnings per share before goodwill amortisation and exceptionals
increased from 40.3p to 56.8p up 41%
* Headline earnings per share at 47.3p up 43%
* Dividend for the year at 16.5p per share up 20%
Commenting on the results and outlook, John Curry, the Chairman of Acal plc
said: -
'I'm pleased to report we have had a great year. Rapid organic growth has
taken us to a new and much higher level of profit. All divisions have
performed well, and the organic increase in sales of 31% validates our
strategy of value added distribution driven by technology. We have achieved
average organic growth during the last five years of 19%, and are confident of
our ability to manage the business successfully through the trading cycles.'
Contact: 1 John Curry Chairman
Tel: 01276 474406
2 Jim Virdee Finance Director
Tel: 01276 474406
3 Fergus Wylie / Serra Balls Cubitt Consulting
Tel: 020 7367 5100
Notes to Editors:
1 The Acal Group is a leading European, value-added distributor providing
specialist design-in, sales and marketing services for international suppliers
in the fields of Electronic Components, Information Technology Products, IT
Parts Services and Industrial Controls. Its value-added philosophy and
geographic coverage enables Acal to provide specialist knowledge and support to
customers on a pan-European basis.
2 Design-in is the process by which Acal's sales engineers work with
customers and suppliers to procure components which meet the specific technical
and performance needs of the customers.
3 Acal has operating companies in the UK, Netherlands, Belgium, Germany,
France, Italy, Scandinavia and the USA.
CHAIRMAN'S STATEMENT
Results
I am pleased to report we have had a great year. Rapid organic growth has
taken us to a new and much higher level of profit.
Sales have increased from £245.4m to £325.3m, up 33%. Organic growth was 31%,
currency translation had a 2% negative impact, and the balance of 4% was
because this year included a full year of the Sedgemoor acquisition. This
produced growth in operating profit before interest and goodwill amortisation
of 64%, up from £15.3m to £25.1m.
Group profit before taxation, increased 60% to £20.1m from £12.6m. With
taxation of 35% versus 29% this has translated into earnings per share before
goodwill amortisation and exceptional items of 56.8p versus 40.3p, up 41%.
Headline earnings per share after goodwill write-off is 47.3p, a 43% increase.
Your Board proposes a final dividend of 11.0p per share (9.2p), making a total
for the year of 16.5p per share (13.8p), an increase of 20%.
Summary Review
Pride of place in this year's success has been the very rapid growth,
particularly in the first nine months of the year, in our IT Products
division, with network and data communications equipment, including fibre
channel products, leading the way. We have also seen growth in electronic
components both in continental Europe and the UK.
I reported last year that our investment in the IT Parts Services division was
bearing fruit but the full benefit was twelve months away. I am glad to
report that success in turning this business around has been more rapid than
predicted. Thus in summary, all divisions have performed well this year.
Long-Term Growth
In the 1997 Annual Report we highlighted how the first ten years of the Group
had been characterised by the establishment and development of our strategy,
and that we were entering a phase when we could expand profitably. We have
successfully demonstrated this in the ensuing years.
This year's success underlines the continued growth of the core business and
validates our strategy of value added distribution, both with electronic
components and Information Technology products and parts services. We have
achieved average organic growth of sales over the last five years of 19%, with
a range of growth rates of between 6% and 31% in the period. Looking ahead
the challenge is to maintain this trend of growth through the economic cycles,
and achieve success in the future as we have done in the past.
/cont....
Although industry as a whole does not appear to have achieved the long-term
growth we have shown, this does not seem to be reflected in our stock market
rating relative to the All Share Index. We will endeavour, in the future, to
communicate better to potential investors the underlying strength of the
business, the value added we provide to our customers and how we ride on the
back of technology-driven growth, without the risk of most technology
investments.
This industry provides many opportunities. We aim to achieve strong organic
growth above the market average in the medium term, and to look for
acquisitions which fit our clearly defined strategy.
Appreciation
During the year the rapid growth has put enormous strain on our staff and
management. As usual, they have risen to the challenge. It is interesting to
note that while organic growth was 31%, the comparable increase in employee
numbers was 7%. As a Board we are fortunate to have teams throughout the
world who live up to our expectations.
Prospects
We have had an excellent twelve months, although as I reported at the half
year, there were signs that growth was moderating. This trend has continued
since December. To date, we have not experienced any of the serious setbacks
of which we have read so much in the press in the part of our business
relating to the network and communications industry. We remain confident of
our ability, as always, to manage the phase of the economic cycle being
signalled by the slower order pattern in the last few months, and the excess
stock levels of some of our customers. We are also well placed to take
advantage of new opportunities and the renewed strength in demand which is
generally predicted for next year.
John Curry
4th June 2001
OPERATIONS REVIEW
Overall, the year was an excellent one for the Group. The expectations
indicated twelve months ago and reiterated at the half year materialised in no
short measure. This was as a result of the buoyant economic conditions which
our industry has enjoyed during this period, coupled with the continuation of
the strategies that we have been developing over the past years, which
differentiate Acal from the majority of our competitors.
Acal's success is predominantly dependent upon the two similarly sized
branches of its business, both of which have performed to, or in excess of
expectations.
Electronic Components
Fuelled by the growth of the communications market as a whole, and the
telecommunications sector in particular, Acal's component business achieved
sales of £153m, up 30% over the previous year. Organic growth provided 22%
of this increase, allowing for the fact that Sedgemoor was only included in
last year's accounts from 1st June 1999.
It is pertinent to note that the telecommunications market which Acal serves
is specifically the infrastructure market - not the subscriber (handset)
market which tends towards commodity, low margin components.
This well illustrates one of the major Acal differentials: namely the supply
of largely specialised products which, although affected during the year by
extended lead-times, was in contrast to the suppliers and distributors of
commodity products who saw supply delinquencies and, in some cases,
allocations.
The Acal strategy of utilizing in-house technical skills and expertise with
compatible products being focussed to target markets proved particularly
successful and working as a true partner with many customers goes a long way
towards building desirable and strong customer loyalty.
In such a good all-round year it is difficult to pick out specific successes
but the performances of the Acal companies in Germany, Scandinavia, Belgium
and Italy must be mentioned and in the UK Radiatron deserves inclusion for
exceeding all expectations. These successes have in the main been as a result
of the growth of applications within some of the major telecommunications
customers and comprise a range of products from our frequency, R.F.,
semiconductor and electromechanical (connector) groups.
Information Technology Products and Services
Growth in all sectors of Acal's IT markets was achieved this year. Sales
totalled £149m, up 39%.
IT Products Division
The Document Management businesses under the Headway banner continued to make
progress after a somewhat disappointing previous year. The key achievements
being growth and improved margins, particularly in the UK and Germany,
Europe's largest markets.
The Networking business in the Netherlands, predominantly devoted to Cisco,
continued several years of growth in a very demanding market which is destined
to see continued rapid change. This puts many pressures on resources and
people and the Acal Netherlands team can be congratulated on an excellent
performance, not only in sales terms but also in the growth of added-value
services to support the market and at the same time establishing a branch
office in Belgium.
/contd...
The relatively new Acal Fibre Channel Solutions group has seen significant
growth largely as forecasted with the continuing enlargement of the SAN
(Storage Area Network) market and now supplies and supports this market
Europe-wide with dedicated personnel in Germany, Netherlands, Belgium and the
UK. In addition, we have at the time of writing a total of 40 accredited
resellers in the UK, 210 across continental Europe and as far afield as
Lithuania, Poland, Russia, South Africa, India, Singapore, Taiwan and Korea.
IT Parts Services Division
EAF has prospered as predicted twelve months ago. It has successfully
established a number of major OEM relationships which are providing a stable
platform for growth, both in the PC and printer industry. This has been
achieved in the UK, Germany and the Netherlands. The task this year is to
develop the organisation in France to the same level and extend our reach into
new territories within Europe.
Industrial Controls
This predominantly Air Conditioning & Refrigeration components business showed
a more modest 12% growth during the year with sales of £23m. This was roughly
in line with expectations and provided a satisfactory result overall.
IT Systems Strategy
We have historically worked with decentralised systems to provide the
necessary IT capability, and each company has made its own independent
decisions. Over the past few years this has led to high levels of capital
expenditure across the group, while at the same time some of our systems are
being stretched because of the rapid growth.
We have therefore conducted a review of our own IT systems strategy. Our
objective in this area continues to be to use information technology to become
more effective and efficient, and to enhance the service which we provide to
our suppliers and customers. The review has suggested that by greater sharing
of skills and systems across the group, we can afford to invest in more
sophisticated systems to meet our objective. As a result we have embarked on
a project which will result in common systems across group companies. This is
an important investment which is taking place this year while there is slower
growth, so that we are fully operational when demand accelerates again, as it
always does.
Tony Laughton
4th June 2001
FINANCIAL REVIEW
In comparing the Group's underlying performance for the year to 31 March 2001
with the previous year, we need to take account of the effect of exchange
rates and of the acquisition of Sedgemoor. The year to 31 March 2001 saw
sterling on average approximately 3% stronger against continental European
currencies than in the previous year, and thus the effect of exchange rates on
the translation of the Group's results has been relatively minor. The
Sedgemoor group of companies, which were acquired during the year ended 31
March 2000, were consolidated with effect from 1 June 1999. Hence their
results for the 10-month period to 31 March 2000 were included in the Group's
results for the year to that date, whereas a full twelve months' results are
included this year.
The table below shows a comparison of the Group's underlying performance, with
last year isolating these effects: -
£M Year ended Underlying Effect of Effect of Year
31 March 2000 Increase Acquisition Exchange ended
Rates 31
March
2001
Sales 245.4 +75.7 +9.3 -5.1 325.3
% change +31% +4% -2% +33%
EBITA* 15.6 +7.2 +0.4 -0.3 22.9
% change +46% +3% -2% +47%
(*EBITA being Earnings before interest, taxation, exceptional items, the
Group's share of results of associated undertakings, and amortisation of
goodwill)
Overall gross margins at 23.3% (2000: 24.5%) reflected the change in product
mix arising primarily from the faster growth rates in the Group's IT Products
and specialist semi-conductor businesses.
The table below compares the sales and EBITA achieved by the Group's divisions
during the year to 31 March 2001 with the prior year: -
2001 2000
Sales EBITA Sales EBITA
£M £M % £M £M %
of of
Sales Sales
Electronic 153.1 13.0 8.5 117.9 9.1 7.7
Components
IT Products 111.3 6.2 5.6 69.1 2.8 4.1
IT Parts 38.0 2.5 6.4 38.0 2.5 6.4
Services
Industrial 22.9 1.2 5.3 20.4 1.2 5.8
Controls
325.3 22.9 7.0 245.4 15.6 6.3
Net operating expenses before exceptional items and goodwill amortisation
increased during the year from £44.6m to £53.0m. Of this increase of £8.4m,
an amount of £2.5m is attributable to the acquisition of Sedgemoor and there
was a benefit of £0.6m from exchange rate movements, so that the underlying
increase was £6.5m, representing 15% as compared with the underlying sales
growth of 31%.
Westech, our electronic components associate in the Far East, delivered a
strong performance during the year, helped by exceptionally buoyant trading
conditions, and this is reflected in the Group's share of the profit of
associated undertakings increasing from £0.4m to £2.2m.
Net interest cost of £2.5m (2000: £1.6m) for the year was covered 10 times
(2000: 10 times) by profit before interest, tax and goodwill amortisation.
The Group's effective tax rate for the year ended 31 March 2001 (based on
profit before tax and amortisation of goodwill) was 34.7% as compared with
29.1% in the previous year. The higher rate this year has arisen partly
because of the relatively greater proportion of profits generated in higher
tax-rate jurisdictions in continental Europe. Moreover, as we explained at
the time, last year's tax charge included certain one-off benefits of the
reversal of timing differences and relief for tax losses brought forward.
We continue to have a strong balance sheet and finished the year with net debt
of £18.3m as compared with £23.9m at the end of the previous year. Although
credit for this achievement goes to the Group's operating companies which have
worked hard at managing cash, it must also be acknowledged that the position
at the end of the year reflected some one-off benefits in the timing of
cashflows. Shareholders' funds increased from £54.1m at 31 March 2000 to £
63.6m at 31 March 2001, predominantly as a result of the retained profits for
the year.
The first half of the year saw an increase in working capital employed beyond
that resulting from the growth of the business. This was primarily because
buoyant trading conditions led, in some cases, to lengthening lead times from
suppliers and hence the need for extra buffer stocks to maintain customer
service levels. The Group's operating companies have been placing particular
emphasis on managing their working capital and the second half of the year has
seen some progress towards achieving targets we have set ourselves in
accordance with our model. We will continue to work hard in this area.
The ordinary dividends for the year to 31 March 2001 will absorb £4.3m (2000:
£3.6m) and are covered 3.4 times (2000: 2.9 times) by attributable profit
before deducting the amortisation of goodwill.
Jim Virdee
4th June 2001
ACAL plc
Audited Preliminary Results for
the Year ended 31st March 2001
Year ended 31st March
2001 2000
£'000 £'000
Turnover 325,329 245,360
Operating Profit 22,900 15,558
Excluding exceptional items and goodwill
amortisation
Exceptional items - (726)
Goodwill amortisation (2,471) (2,076)
Group Operating Profit (excluding 20,429 12,756
associated undertakings)
Group Share of Operating Profits of 2,196 434
Associated Undertakings
Total Operating Profit (including
associated undertakings)
Excluding exceptional items and goodwill 25,098 15,994
amortisation
Exceptional items - (726)
Goodwill amortisation (2,473) (2,078)
22,625 13,190
Net profit on disposal of investments and - 1,014
tangible fixed assets
Net interest payable - group (2,358) (1,592)
Net interest payable - associated (172) (32)
undertakings
Profit before Taxation: 22,568 14,370
Excluding exceptional items and goodwill - 288
amortisation (2,473) (2,078)
Exceptional items
Goodwill amortisation
Profit on Ordinary Activities before 20,095 12,580
Taxation
Tax on Profit on Ordinary Activities:
United Kingdom (3,441) (2,384)
Overseas (3,782) (1,756)
Associated undertakings (619) (129)
(7,842) (4,269)
Profit on Ordinary Activities after 12,253 8,311
Taxation
Minority Interests - equity - (79)
Profit Attributable to Ordinary 12,253 8,232
Shareholders
Dividends on Ordinary Shares (4,294) (3,558)
Retained Profit for the Year 7,959 4,674
Earnings per Share 47.3p 33.1p
Diluted Earnings per Share 46.7p 33.0p
Earnings per Share Excluding Goodwill 56.8p 40.3p
Amortisation and Exceptional Items
ACAL plc
Audited Balance Sheet
as at 31st March 2001
At 31st March
2001 2000
£'000 £'000
FIXED ASSETS
Intangible assets 44,915 47,388
Tangible assets 10,165 9,342
Investments 3,995 2,957
59,075 59,687
CURRENT ASSETS
Stocks 36,223 26,284
Debtors 67,659 52,021
Cash at bank and in hand 12,651 8,461
116,533 86,766
CREDITORS:
Amounts falling due within one year (91,997) (64,503)
NET CURRENT ASSETS 24,536 22,263
TOTAL ASSETS LESS
CURRENT LIABILITIES 83,611 81,950
CREDITORS:
Amounts falling due after more than one (15,669) (22,926)
year
PROVISIONS FOR LIABILITIES
AND CHARGES (4,353) (4,942)
NET ASSETS 63,589 54,082
CAPITAL AND RESERVES
Called up share capital 1,301 1,289
Share premium account 36,554 35,586
Revaluation reserve 301 290
Profit and loss account and other 25,433 16,917
reserves
EQUITY SHAREHOLDERS FUNDS 63,589 54,082
ACAL plc
Audited Summary Cash flow Statement for
the Year ended 31st March 2001
Year ended 31 March
2001 2000
£'000 £'000
OPERATING ACTIVITIES
Operating profit 20,429 12,756
Depreciation and other non cash items 5,305 4,619
Increase in working capital (4,851) (3,417)
NET CASH INFLOW FROM OPERATING ACTIVITIES 20,883 13,958
Dividends from associated undertaking 300 -
Net interest paid (2,358) (1,592)
Tax paid (6,850) (6,061)
Net expenditure on tangible fixed assets (3,730) (4,194)
and investments
Net cash flow from acquisitions and 222 (31,885)
disposals
Equity dividends paid (3,794) (3,253)
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 4,673 (33,027)
(Decrease)/increase in debt and finance (7,318) 22,019
leases
Issue of share capital 980 138
NET DECREASE IN CASH (1,665) (10,870)
Reconciliation of net cash flow to movement in net debt/cash
NET DECREASE IN CASH (1,665) (10,870)
Cash outflow/(inflow) from 7,318 (22,019)
decrease/(increase) in debt and lease - (89)
financing (73) 67
Lease financing acquired with subsidiary
Translation differences
MOVEMENT IN NET DEBT 5,580 (32,911)
Net (debt)/cash at beginning of the period (23,938) 8,973
Net (debt) at end of the period (18,358) (23,938)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year ended 31 March
2001 2000
£'000 £'000
Profit attributable to shareholders 12,253 8,232
Net gain/(loss) on currency translation 568 (1,372)
Total recognised gains and losses for the 12,821 6,860
financial period
NOTES:-
1 The preliminary results were approved by the Board on 4th June 2001.The
financial information set out above does not constitute the company's statutory
accounts for the year ended 31st March 2001 or 2000, but is derived from those
accounts. Statutory accounts for 2000 have been delivered to the Registrar of
Companies whereas those for 2001 will be delivered following the company's
Annual General Meeting. The auditors have reported on those accounts; their
reports were unqualified and did not contain a statement under section 237 (2)
or (3) of the Companies Act 1985.
2 The final dividend is payable on 25th July 2001 to shareholders on the
register on 15th June 2001.
3 Earnings per share for the year to 31st March 2001 have been calculated on
the profit attributable to ordinary shareholders of £12,253,000 using the
weighted average number of ordinary shares in issue during the period.
4 The Annual Report and Accounts will be mailed to shareholders on or before
20th June 2001. Copies will also be available from: -
Acal plc
2 Chancellor Court
Occam Road
Surrey Research Park
Guildford
GU2 7AH
The results will not be advertised in any newspaper
Ends