Final Results
Acal PLC
10 June 2002
FOR RELEASE 10 JUNE 2002 7:00 AM
ACAL plc
(Leading pan-European, value added distributor providing specialist design-in,
sales and
marketing services for international suppliers)
Audited Preliminary Results for the Year Ended 31 March 2002
2002 2001 Change
Turnover £297.0m £325.3m -9%
EBITA (pre associated companies) £17.6m £22.9m -23%
Profit before tax (pre goodwill amortisation) £16.6m £22.6m -26%
Earnings per share (pre goodwill amortisation) 42.4p 56.8p -25%
Dividends per share 18.3p 16.5p +11%
• Results in line with expectations
• Profit growth in three out of four divisions, despite global slowdown
• UK Electronic Components performed better than industry average
• Gross margins sustained across all product groups
• Since the year end:-
- Acquisition of ATM, now part of IT Parts Services
- Flotation of Westech, our associate, on Singapore Stock
Exchange
For further information:-
John Curry Chairman Tel: 01483 544500
Jim Virdee Finance Director Tel: 01483 544500
Brian Coleman-Smith Binns & Co Public Relations Ltd Tel: 020 7786 9600
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, IT 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
This financial year has been a very tough experience, after organic growth of in
excess of 30% and record profits in 2000/2001. However, I am pleased to report
the group has performed broadly in line with our expectations.
Sales have decreased to £297.0m from £325.3m, down 9%. This has produced an
operating profit excluding associated companies of £17.6m compared to £22.9m
last year, a fall of 23%. Nevertheless, even at this level the profit on sales
is close to 6% and the return on average shareholder funds is well over 20%, I
believe a very creditable performance in the circumstances.
During the year gross margins have been sustained in all divisions, any
deterioration in the overall average has been due to change of mix of business.
Without affecting future opportunities, overheads have been reduced from a peak
half-yearly rate in the second half of last year of £27.9m to a rate below
£25.0m for the second half of this year.
The outcome for the year is a profit before tax and goodwill of £16.6m (£22.6m),
a 26% fall. With taxation at 33.5% this has translated into earnings per share
before goodwill amortisation of 42.4p (56.8p), down 25%.
Your Board proposes a final dividend of 12.2p per share (11.0p) making a total
for the year of 18.3p per share, an increase of 11%, confirming our confidence
in the sustainable growth achievable based on the strategy of the business.
Summary Review
This year has proved very difficult for the electronic components industry, with
sales for the year down 25% - a better performance than indicated by industry
statistics. Quarterly Book to Bill ratios have returned to close to 1.0 from
the lows of six months ago, but as yet there are no signs of growth. However,
the inventory pipeline is now at a low level and any pick-up in end user demand,
whether it comes in the latter part of Calendar 2002 or in 2003, will have an
immediate impact on our order books.
Nevertheless the group has continued to invest in the provision of added value
distribution to its customers by design-in of components for new products and
other services including inventory management and logistics support for its
customers.
IT Products has seen growth in all sectors in the second half of this year
versus the first half. Having had a very difficult first nine months, Book to
Bill ratios are above 1.0 and the quarterly order rate, year-on-year is
beginning to show signs of growth.
IT Parts Services has continued to prosper throughout the year, although at a
slower rate than the first half, with underlying growth year-on-year over 24%.
Strategy and Management
Difficult times test the strategy and management of a business and it is my view
that both have passed the test. As set out in the Financial Review, we have
shown growth in earnings before interest, taxation and goodwill amortisation in
three of our four divisions, demonstrating the strength of our strategy of
diversification but focussed on added value distribution of technology. We have
exceeded our minimum "return on capital" goals, even with sales falling. In
spite of the 9% fall, we have also achieved approximately 15% average organic
growth over the last six years.
I am pleased to report the worst of this difficult economic cycle has passed
without the catastrophic results reported by some other companies. Of course we
have had redundancies and we have had inventory write-offs slightly larger than
the usual annual level, but all those have been taken as normal operating costs
and not treated as exceptional items. We have reduced stock levels successfully
from £36.2m at the beginning of this year and a peak of £41.2m at 31 May 2001 to
£30.3m at the end of the year, without a level of write-off that needs to be
highlighted.
Your Board is grateful to all the staff for bringing us through this difficult
period strengthened and growing our market share.
Since the Year End
Two events in the first two months of the new year have reflected our confidence
going forward. We acquired ATM Parts Company Ltd on 24 April 2002. This is a
distributor of spare parts for automated teller machines or cash dispensers, and
fits well with IT Parts Services. The initial consideration was £8.0m in cash
and there are possible further performance related payments of not more than
£4.0m in aggregate. During their year ended 31 August 2001 ATM achieved sales
of £9.1m and profit before tax of £1.3m.
In May 2002, our associate company in Singapore, Westech Electronics (Pte) Ltd
was floated on the Singapore Stock Exchange raising S$5.7m (approximately
£2.2m), so as to reduce its debt and give it flexibility to take advantage of
the opportunities available in the Asian market. At the close of trading on 31
May 2002 Acal's interest of 36.7% was valued at S$21.9m (approximately £8.4m).
Board Change
Alan Brooker will be retiring from the Board at the AGM after six valuable
years' service. He joined us as a director in 1996 when the group was less than
half its present size. He has provided wisdom, guidance and increased the
professionalism of our corporate governance, and we sincerely thank him for his
contribution. I expect to be able to announce the appointment of another
non-executive director before the AGM in July.
Prospects
We are seeing our target growth rates in IT Parts Services sustained, and growth
resume in IT Products, and we feel confident that growth in Electronic
Components will return in due course - it is purely a question of when.
There are signs around the world, as well as in our own business, that the worst
is over. This is unlikely to be reflected in the results for the first six
months of 2002/03. Nevertheless, based on economic forecasts we should see
signs of improvement before the financial year-end and we are confident that we
have the right people and resources to seize the opportunities.
John Curry
10 June 2002
OPERATIONS REVIEW
During a year in which there was a slowdown in most technology market sectors,
three of our four business activities grew profits, one of them IT Parts
Services, significantly. It was only in Electronic Components that we
experienced a decline.
Electronic Components
The telecommunication and networking markets were the big drivers in 2000 and
early 2001 and these two have without doubt been the biggest sufferers over the
past year. However, the order decline has now slowed and there is a degree of
stability which was sorely absent for most of last year.
There are nonetheless considerable variances in the sales pattern of the UK and
Continental Europe, viz:-
2002 2001
UK £m 66.4 81.5
Continental Europe £m 48.8 71.6
115.2 153.1
Our UK business is therefore down 19% compared to the UK average of 27% reported
in industry statistics and Continental Europe 32% against an industry decline
greater than in the UK.
As a result, total sales for the year at £115m were down only 25% from the prior
year. This is a result of the focus of the broad but synergistic product base,
the markets and customers that are addressed, and the design-in demand creation
ethos.
IT Products
The three groups of IT Products, namely Headway Document Imaging & Management,
Networking and Fibre Channel for the SAN (Storage Area Networking) market, grew
2% in total to £113m with growth coming only in the second half of the year.
Within Headway, the maintenance of the dominant position in the UK, growth in
Germany and overall margin improvement are key features versus the prior year.
In spite of this we are still not making adequate returns in Germany, France and
Scandinavia, but all three are still building from a start-up phase. It is
expected that this year will move these businesses into profitable growth.
The Networking activities, which are predominantly related to Cisco, and Fibre
Channel both produced growth with major steps having taken place in each
activity. In September 2001 Cisco appointed Acal Netherlands as one of its
seven CDP's (Cisco Distribution Partners) in Europe, down from seventy-five
distributors prior to this event. Within Fibre Channel, the investment in sales
effort in Continental Europe, the extension of franchises, authorized resellers
and partners continues with over half the business now outside the UK.
IT Parts Services
EAF, our IT Parts Services business, has exhibited major growth - up 24%
year-on-year to £47m and as predicted has proved to be counter cyclical in this
period of downturn. We are profitable and successful in all the countries in
which we operate, although there is still a need to continue the development of
the management and organisational structures further to take advantage of
additional opportunities to grow the business. The relationships with major
OEM's across Europe have and are leading to the establishment of a number of
valuable support models to meet growing customer needs.
Industrial Controls
At the end of September, a part of the non air conditioning and refrigeration
business was sold so that, with just one exception, this business unit is now
focused on this market exclusively. For this division, like-for-like sales and
profit both grew.
Acal IT Systems Strategy
As indicated in the Report a year ago, we are making a major investment in a new
ERP (Enterprise Resource Planning) system and a managed wide area network which
will progressively be implemented across Europe. In February and March the
first three UK businesses successfully changed over to the new system. Thanks
and appreciation for this go to our ERP team and the users in the three
companies for their very important contribution to these first implementations.
Tony Laughton
10 June 2002
FINANCIAL REVIEW
During the year ended 31 March 2002, the average sterling exchange rates against
continental European currencies were very close to those in the prior year.
Hence the changes in the Group's performance between the two years have not been
affected to any material extent by exchange rate movements.
The table below shows a comparison of the Group's overall performance with the
previous year.
Year ended Underlying Year ended
£ million 31 March 2001 change 31 March 2002
Sales 325.3 -28.3 297.0
% change -9%
EBITA* 22.9 -5.3 17.6
% change -23%
(*EBITA being earnings before interest, taxation, the Group's share of results
of associated undertakings and amortisation of goodwill)
The performance of Acal's divisions during each of the years ended 31 March 2002
and 2001 was as follows:-
2002 2001
Sales EBITA Sales EBITA
As % As % As % As %
£m of Group £m of Sales £m of Group £m of Sales
Electronic Components 115.2 39 6.4 5.5 153.1 47 13.0 8.5
IT Products 113.1 38 6.5 5.8 111.3 34 6.2 5.6
IT Parts Services 47.3 16 3.1 6.6 38.0 12 2.5 6.4
Industrial Controls 21.4 7 1.6 7.3 22.9 7 1.2 5.3
297.0 100 17.6 5.9 325.3 100 22.9 7.0
With the resumption of growth in Acal's IT divisions in the second half of the
year and the relatively more severe effect of the global economic slowdown in
Electronic Components, as can be seen from the table above, a higher proportion
of the Group's sales in the year ended
31 March 2002 have arisen in the IT divisions as compared with the previous
year.
The Group's divisions have sustained their gross margins through the difficult
trading conditions experienced over the last year, but the greater weighting of
the IT divisions in the sales "mix" means that the overall Group average gross
margin was 22.7% as compared to 23.3% in the previous year.
The Group was successful in controlling its overheads and net operating expenses
(excluding goodwill amortisation) for the year to 31 March 2002 at £49.9m were
6% lower than the £53.0m in the previous year. In taking cost saving measures,
the Group always endeavours to ensure that its "design-in" efforts and long-term
growth strategy are not adversely affected. The analysis below demonstrates the
effectiveness of the measures adopted.
Year ended 31 March
2002 2001
Net Operating Expenses £m £m
First Half 25.4 25.1
Second Half 24.5 27.9
Full Year 49.9 53.0
Our associated companies, the major one being Westech, a distributor of
electronic components in the Far East, were also affected by the poor global
trading environment, and our share of their operating profit was significantly
lower at £1.1m (2001: £2.2m).
Net interest cost of £2.1m (2001: £2.5m) was covered 9 times by profit before
interest, taxation and goodwill amortisation.
The Group's effective tax rate for the year ended 31 March 2002 (based on profit
before tax and amortisation of goodwill) was 33.5% (2001: 34.7%), the marginal
change coming from a reduction in some overseas nominal tax rates which affect
the Group.
In the current poor trading environment even greater emphasis than normal is
being placed on managing the Group's balance sheet. The Group's operating
companies are working hard at controlling their working capital and in
particular we were successful in bringing the level of stock down to £30.3m at
31 March 2002 from £35.4m at the half year. This level is much more in line
with our working capital model than it was at the end of the half-year on 30
September 2001.
Return on capital employed (which is calculated using profit before interest,
goodwill amortisation and tax, and net tangible assets adding back net debt) was
49% as compared to 68% in the previous year, a good performance for a period of
economic downturn.
Capital expenditure during the year was higher at £6.9 m (2001: £3.9m)
primarily reflecting an investment of approximately £3.3m in the Group's new ERP
system, the first implementations of which were successfully carried out in
February/March 2002. Further implementations will take place over the next
year.
We finished the year with net debt of £12.9m as compared with £18.4m at the end
of the previous year. Shareholders' funds increased from £63.6m at 31 March
2001 to £67.2m at 31 March 2002, principally as a result of the retained profits
of the period. The Group's balance sheet continues to be strong. Since 31
March 2002 we have paid £8m in cash as the initial consideration upon the
acquisition of the whole of the share capital of ATM Parts Company Ltd.
The ordinary dividends declared and recommended for the year to 31 March 2002
will absorb £4.8m (2001: £4.3m) and are covered 2.3 times (2001: 3.4 times) by
attributable profit before deducting the amortisation of goodwill.
Jim Virdee
10 June 2002
ACAL plc
Audited Consolidated Profit and Loss Account
for the Year ended 31 March 2002
2002 2001
£'000 £'000
Turnover 297,013 325,329
Operating Profit
Excluding goodwill amortisation 17,552 22,900
Goodwill amortisation (2,614) (2,471)
Group Operating Profit (excluding associated
undertakings) 14,938 20,429
Group Share of Operating Profits of Associated
Undertakings 1,119 2,196
Total Operating Profit (including associated
undertakings)
Excluding goodwill amortisation 18,673 25,098
Goodwill amortisation (2,616) (2,473)
16,057 22,625
Net interest payable - group (1,905) (2,358)
Net interest payable - associated undertakings (161) (172)
Profit before Taxation:
Excluding goodwill amortisation 16,607 22,568
Goodwill amortisation (2,616) (2,473)
Profit on Ordinary Activities before Taxation 13,991 20,095
Tax on Profit on Ordinary Activities:
United Kingdom (3,217) (3,441)
Overseas (2,118) (3,782)
Associated undertakings (230) (619)
(5,565) (7,842)
Profit on Ordinary Activities after Taxation
Excluding goodwill amortisation 11,042 14,726
Goodwill amortisation (2,616) (2,473)
Profit Attributable to Ordinary Shareholders 8,426 12,253
Dividends on Ordinary Shares (4,769) (4,294)
Retained Profit for the Year 3,657 7,959
Earnings per Share 32.4p 47.3p
Diluted Earnings per Share 32.2p 46.7p
Earnings per Share Excluding Goodwill Amortisation and
Exceptional Items 42.4p 56.8p
The results for the year and prior year relate wholly to continuing operations.
ACAL plc
Audited Consolidated Balance Sheet
as at 31 March 2002
2002 2001
£'000 £'000
FIXED ASSETS
Intangible assets 42,383 44,915
Tangible assets 12,506 10,165
Investments 4,556 3,995
59,445 59,075
CURRENT ASSETS
Stocks 30,323 36,223
Debtors 53,470 67,659
Cash at bank and in hand 10,639 12,651
94,432 116,533
CREDITORS:
Amounts falling due within one year (67,359) (91,997)
NET CURRENT ASSETS 27,073 24,536
TOTAL ASSETS LESS
CURRENT LIABILITIES 86,518 83,611
CREDITORS:
Amounts falling due after more than one year (15,369) (15,669)
PROVISIONS FOR LIABILITIES
AND CHARGES (3,915) (4,353)
NET ASSETS 67,234 63,589
CAPITAL AND RESERVES
Called up share capital 1,304 1,301
Share premium account 36,786 36,554
Revaluation reserve 296 301
Profit and loss account and other reserves 28,848 25,433
EQUITY SHAREHOLDERS' FUNDS 67,234 63,589
ACAL plc
Audited Summary Cash flow Statement for
the Year ended 31 March 2002
2002 2001
£'000 £'000
OPERATING ACTIVITIES
Operating profit 14,938 20,429
Depreciation and other non cash items 5,482 5,305
Decrease/(increase) in working capital 2,562 (4,851)
NET CASH INFLOW FROM OPERATING ACTIVITIES 22,982 20,883
Dividends from associated undertaking - 300
Net interest paid (1,905) (2,358)
Tax paid (6,353) (6,850)
Net expenditure on tangible fixed assets and investments (5,204) (3,730)
Net cash flow from acquisitions and disposals 195 222
Equity dividends paid (4,450) (3,794)
NET CASH INFLOW BEFORE FINANCING 5,265 4,673
(Decrease) in debt and finance leases (302) (7,318)
Issue of share capital 235 980
NET INCREASE/(DECREASE) IN CASH 5,198 (1,665)
Reconciliation of net cash flow to movements in net debt
NET INCREASE/(DECREASE) IN CASH 5,198 (1,665)
Cash outflow from decrease in debt and lease financing 302 7,318
New finance leases (84) -
Translation differences 64 (73)
MOVEMENT IN NET DEBT 5,480 5,580
Net (debt) at beginning of the period (18,358) (23,938)
Net (debt) at end of the period (12,878) (18,358)
Consolidated Statement of
Total Recognised Gains and Losses
2002 2001
£'000 £'000
Profit attributable to shareholders 8,426 12,253
Net (loss)/gain on currency translation (353) 568
Dilution of investment in associated undertakings (44) -
Total recognised gains and losses for the financial period 8,029 12,821
Notes:-
1 The preliminary results were approved by the Board on 10
June 2002.The financial information set out above does not constitute the
company's statutory accounts for the year ended 31 March 2002 or 2001, but is
derived from those accounts. Statutory accounts for 2001 have been delivered to
the Registrar of Companies whereas those for 2002 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 These preliminary results have been prepared in accordance
with the accounting policies normally adopted by the company. During the year,
Financial Reporting Standard No. 18 on Accounting Policies and No. 19 on
Deferred Tax have been implemented. These had no material effect on the results
for the period or the comparative period.
3 The final dividend is payable on 25 July 2002 to
shareholders on the register on 21 June 2002.
4 Earnings per share for the year to 31 March 2002 have been
calculated on the profit attributable to ordinary shareholders of £8,426,000
using the weighted average number of ordinary shares in issue during the period.
5 The Annual Report and Accounts will be mailed to
shareholders on or before 20 June 2002. 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
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