Last checked at 19 May 2009 07:00
Embargoed Release: 07:00hrs, Tuesday 19 May 2009
CINPART PLC
('Cinpart', the 'Company' or the 'Group')
Final results for the year ended 31 December 2008
Cinpart, the AIM-quoted electrical components manufacturer and supplier, is pleased to announce its final results for the year ended 31 December 2008 (the "period").
Highlights:
Total revenues of £2,028,918 (2007: £2,816,496);
Loss for the year £346,546 (2007: Profit of £113,896); loss after adjusting for exchange gains was £191,723;
Continued to benefit from operational improvements implemented in 2007;
Core business remains stable with existing customers being retained.
Post-period Highlights:
Fundraising amounting to £729,000 completed in March 2009 at a premium to then share price
Establishment of a 65 per cent. owned subsidiary Active Energy Limited ('Active Energy'), which holds the rights, intangible assets and intellectual property of the established VoltageMaster brand; a range of voltage optimisation equipment
Active Energy is in discussions with a number of Blue Chip companies and local authorities to install the VoltageMaster product
Current cash balances in excess of £500,000
Kevin Baker, Cinpart's chief executive officer, commented:
"We are delighted to have secured a new stream of business to our Group by way of our recently created subsidiary Active Energy Limited. We believe that voltage optimisation is a simple but highly effective method for owners of commercial and industrial buildings to create energy efficiencies, reduce economic costs and, as importantly, minimise carbon emissions in line with governmental targets across the globe. We are confident in Cinpart's future; the electrical components business is well prepared for increased demand as international economies recover and we expect that our extensive sales and marketing channels and expertise will enable the Active Energy subsidiary to grow sales rapidly."
Enquiries:
| Cinpart Christopher Foster, Non-executive Director Kevin Baker, Chief Executive | Tel: 020 7491 9533 Tel: 020 7629 8940 |
| John East & Partners Limited, a subsidiary of Merchant Securities Plc (Nomad) | |
| John East/Simon Clements | Tel: 020 7628 2200 |
| Rivington Street Corporate Finance Limited (Broker) | |
| Monisha Varadan | Tel: 020 7562 3389 |
| Hansard Group (Public Relations) | |
| Vikki Krause Chris Roberts | Tel: 020 7245 1100 |
About Cinpart:
Cinpart plc (AIM:CINP) is a designer, manufacturer and supplier of electrical components. The Group, owns a manufacturing facility in Thailand and operates through its wholly owned subsidiaries Gasignition Limited ("Gasignition"); a supplier of electrical components to small- and medium-sized European gas appliance manufacturers, Derlite Co Limited ("Derlite"); an international manufacturer of electrical and non-electrical components, and Active Energy Limited ("Active Energy"), the 65 per cent. owned manufacturer and supplier of the VoltageMaster, a device that can reduce electricity consumption in commercial buildings by up to 20 per cent.
CHAIRMAN'S STATEMENT
Financial Review
The year ended 31 December 2008 was a period of mixed results for Cinpart's existing businesses Derlite and Gasignition. Total revenues decreased to £2,028,918 (2007: £2,816,496), resulting in a loss for year of £346,546 (2007: £113,896 profit). Despite the loss for the period, losses attributable to equity holders were only £191,723, due to an exchange rate gain arising on the translation of the results of our foreign operations of £154,823.
The decline in revenue over the year was primarily attributable to the unprecedented global economic downturn, which caused a dramatic slowdown in the housing industry. The downturn has had a profound effect on the sales of 'white goods', the predominant market to which our subsidiaries supply their gas ignition products. In spite of this, the Group significantly improved gross margins over the period from 33.5 percent to 39.0 percent.
During the period, the Group was able to retain its core customer base. To mitigate the fall in demand for electrical components, the Group implemented further cost efficiencies including the reduction of headcount by a third and the renegotiation of salary/wage rates for the remainder of the staff. Cinpart has adapted to the current difficult sales climate and remains well positioned to respond to an improved sales environment. The Group has maintained strong sales channels and is established in numerous key international markets. Once the global economy moves into recovery, we expect that both Derlite and Gasignition will continue to provide a secure recurring revenue stream.
Since its recapitalisation under the guidance of Christopher Foster, non-executive director, Cinpart has focused on maximising profitability through strict cost management. Re-establishing the Group on a solid footing meant an unusually high amount of non-recurring central costs were incurred in 2008. However, having already incurred these costs, Cinpart looks forward to a return to profitability on the back of a global economic recovery and the potential of its new investment in Active Energy.
Operating Review
The Group's main activity during the period was the manufacture and sale of gas ignition components necessary for gas powered appliances such as ovens, boilers, heaters and laundry driers through Cinpart's two main subsidiaries; Gasignition and Derlite. Cinpart is an established supplier to major 'white good' and appliance manufacturers such as Electrolux and Glen Dimplex. Cinpart's major markets for gas ignition components are currently the UK, US and Mexico, with peripheral sales generated in Europe, Thailand and Australia.
Gasignition, located in England, acts as a distributor for Derlite's Thai manufactured gas ignition systems. Derlite also sells directly to major clients, offering a low cost and flexible manufacturing facility which can be expanded for increased production. During the period, the Group transferred its Gasignition sales office to Thailand from England, creating further cost efficiencies. Unfortunately, the reduced labour cost has been offset by falling demand. In addition, the UK-based operations increased its sales focus by directly representing Derlite's manufacturing capabilities.
In 2008, Derlite received international quality standard ISO9001:2000 accreditation. This accreditation provides Derlite with the opportunity to access numerous new potential customers that demand this standard of its supplier as a prerequisite to buying products.
Post-Period Events
I am delighted to report that on 5 March 2009 Cinpart completed a £729,000 fundraising at 2p per share, a premium to the 1.87p closing share price on the business day prior to the announcement of the placing. The funds will support the current operations and has allowed the establishment of Active Energy.
Active Energy is a direct result of the Group's strategy to identify opportunities that can capitalise on and complement Cinpart's key strengths. To counter the economic decline of 2008, Cinpart actively pursued acquisitional targets to strengthen the Group.
Following the year end, Cinpart announced it had established Active Energy and held a 65 percent interest. Active Energy owns the rights, intangible assets and intellectual property of VoltageMaster, a range of voltage optimisation equipment, having acquired these from SDC Industries Limited. ('SDC Industries') a recognised designer, manufacturer and supplier of power quality equipment. Active Energy has been created to manufacture, distribute and sell the VoltageMaster; SDC Industries holds a 25 percent equity interest in the subsidiary with PLUS-listed Alpha Prospects plc holding the remaining 10 percent.
The VoltageMaster utilises an established, easily installed technology that can be adapted to complement existing infrastructures. It is a sophisticated device that optimises the voltage used in a building by regulating the incoming supply of electricity to produce a constant 220 volts of output to the whole building. Electricity companies are required under an EU directive to provide a larger voltage supply at source to account for dilution of the electricity supply line, however electrical appliances, while they can operate at a range of voltages, produce optimal performance at 220 volts.
The VoltageMaster offers three key advantages:
Reduction in voltage used (by up to 20 percent), resulting in a reduction to electricity bills (average saving of 16 percent)
Reduction in energy requirements, resulting in reduced carbon emissions
Appliance life extended (by as much as 60 percent) as a result of an optimal voltage (and elimination of higher incoming voltage stresses)
The Board believes that this new business venture has the potential to propel the Group from a small manufacturer and distributor of niche market products, into a medium-sized operation selling a higher value product into a new energy-saving, green early stage market.
A further incentive for owners of commercial, industrial and intensive energy requirement premises to install the VoltageMaster is international government commitments to reduce carbon emissions. For instance, the UK government has committed itself to reducing carbon emissions from the levels recorded in 1990 through staggered targets; by 2012, 20 percent; by 2020, 30 percent (Kyoto Protocol); and 60 percent by 2050 (Climate Change Bill), in order to reduce global warming.
The VoltageMaster has already been installed by SDC Industries in a range of buildings including prisons, manufacturing facilities, council buildings, retail outlets, educational institutions, leisure facilities and hotels.
Active Energy has estimated that there are over 400,000 buildings in the UK that would benefit from the VoltageMaster voltage optimisation and, given the embryonic stage of the industry, the Board believe there is tremendous growth potential. A key initial target for Active Energy is the UK government's 18,000 buildings, which ministers have pledged to slash the carbon footprint of by 30 percent over the next 12 years. The Board hopes that by holding excellent credentials including being British owned, developed and produced it will assist Active Energy in meeting its growth targets. Hotels and supermarket chains are also clear candidates with their high power consumption and long operating hours.
Active Energy's initial focus is on the UK market, however the voltage optimisation technology is also appropriate to international markets. The Board anticipates that through the utilisation of Derlite and Gasignition's international channels, and of Derlite's cost effective manufacturing capability, the VoltageMaster could swiftly be rolled out worldwide. The VoltageMaster has a life expectancy of approximately 25 years, and whilst remaining a low maintenance device, periodic inspections and configurations will provide Active Energy with a recurring after sales revenue stream.
Adviser and Board Changes
As Cinpart is now heading in a new direction with a strong focus on Active Energy, it is appropriate that I pass executive responsibilities to my fellow directors Kevin Baker and Christopher Foster. I am stepping down with immediate effect from the role of executive chairman, while retaining the position of non-executive chairman. Christopher Foster, who has been instrumental in the restructuring of Cinpart's business as well as driving forward Active Energy's operations, has been appointed as an executive director of the Group (previously he held a non-executive position).
We will look to strengthen our board as the Company grows. In particular, we will seek to appoint a suitably qualified independent non-executive director in line with best practice under corporate governance guidelines.
I am also pleased to welcome our new advisers John East & Partners Limited (Nominated Adviser) and Rivington Street Corporate Finance Limited (Broker).
Outlook
The Board looks to the future with cautious optimism; both Gasignition and Derlite are well positioned to rebuild healthy sales when market conditions improve. The Board expects that Active Energy will make a substantial contribution to the Group's future revenues; and the Company's fundraising has ensured we have a healthy cash balance from which to grow the business.
Going forward, the Board initially intends to develop national sales of VoltageMaster's power optimising transformers from its existing UK presence. The Group has already identified, and is in talks with numerous local government authorities and blue chip companies and the Board intends to convert these potential opportunities into VoltageMaster sales.
I am proud to have been able to steer the Group through its recovery in 2007 and the establishment of the new venture, Active Energy. I believe there is an exciting future ahead and I look forward to seeing the Group grow.
I also wish to take the opportunity, on behalf of the Board of Directors, to thank the management and staff of the Group. Their continued support and dedication throughout the year has ensured the successful progression of the business.
Philip E. Palmer
Chairman
18 May 2009
Consolidated Income Statement
For the year ended 31 December 2008
| Notes | 2008 | 2007 | |
| £ | £ | ||
| Revenue | 2,028,918 | 2,816,496 | |
| Cost of sales | (1,236,639) | (1,872,232) | |
| Gross profit | 792,279 | 944,264 | |
| Other income | 22,292 | 93,678 | |
| Administrative expense | (1,132,349) | (828,314) | |
| Operating (loss) / profit | (317,778) | 209,628 | |
| Finance expense | (18,597) | (72,059) | |
| Finance income | 1,438 | 2,676 | |
| (Loss) / Profit before tax | 2 | (334,937) | 140,245 |
| Tax | 3 | (3,304) | - |
| (Loss) / Profit from continuing operations | (338,241) | 140,245 | |
| Loss from discontinued operations net of tax | (8,305) | (26,349) | |
| (Loss) / Profit for the year attributable to equity holders of the parent | (346,546) | 113,896 | |
| 2008 | 2007 (restated) | ||
| (Loss) / Earnings per share for (loss) / profit attributable to the equity holders of the parent during the year | |||
| Basic (pence) | 4 | (1.09) | 0.57 |
| Diluted (pence) | 4 | (1.09) | 0.52 |
| Continuing operations | |||
| Basic (pence) | 4 | (1.06) | 0.70 |
| Diluted (pence) | 4 | (1.06) | 0.64 |
| Discontinued operations | |||
| Basic (pence) | 4 | (0.03) | (0.13) |
| Diluted (pence) | 4 | (0.03) | (0.13) |
Statement of Recognised Income and Expense
For the year ended 31 December 2008
| 2008 | 2007 | |
| £ | £ | |
| Exchange gain on retranslation of foreign operations | 154,823 | 8,625 |
| Net expense recognised directly in equity | 154,823 | 8,625 |
| (Loss) / Profit for the financial year | (346,546) | 113,896 |
| Total recognised income and expense for the year | (191,723) | 122,521 |
| Attributable to: | ||
| Equity holders of the parent | (191,723) | 122,521 |
Consolidated Balance Sheet
As at 31 December 2008
| Notes | 2008 | 2007 | |
| £ | £ | ||
| Assets | |||
| Non-current assets | |||
| Goodwill | 105,028 | 105,028 | |
| Property, plant and equipment | 202,479 | 178,280 | |
| 307,507 | 283,308 | ||
| Current assets | |||
| Inventories | 404,169 | 281,961 | |
| Trade and other receivable | 547,692 | 787,796 | |
| Cash and cash equivalents | 6 | 22,059 | 98,717 |
| 973,920 | 1,168,474 | ||
| Total assets | 1,281,427 | 1,451,782 | |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 436,898 | 475,124 | |
| Financial liabilities - interest bearing loans and borrowings | 109,096 | 118,483 | |
| Corporate tax | 3,304 | - | |
| 549,298 | 593,607 | ||
| Net current assets | 424,622 | 574,867 | |
| Non-current liabilities | |||
| Financial liabilities - interest bearing loans and borrowings | 25,135 | 13,498 | |
| Total liabilities | 574,433 | 607,105 | |
| Net assets | 706,994 | 844,677 | |
| Equity | |||
| Called up share capital | 3,766,748 | 3,759,763 | |
| Share premium | 2,233,163 | 2,186,108 | |
| Merger reserve | 128,571 | 128,571 | |
| Retained earnings | (5,549,235) | (5,202,689) | |
| Foreign exchange reserve | 127,747 | (27,076) | |
| Total equity | 706,994 | 844,677 | |
Consolidated Cash Flow Statement
For the year ended 31 December 2008
| Notes | 2008 | 2007 | |
| £ | £ | ||
| Cash flows from operating activities | |||
| Cash used in operations | (86,498) | (135,040) | |
| Cash flow from investing activities | |||
| Acquisition of subsidiary, cash acquired | - | 10,886 | |
| Purchase of property, plant and equipment | (29,468) | (87,591) | |
| Sale of property, plant and equipment | 46,374 | 25,385 | |
| Interest received | 1,438 | 2,676 | |
| Net cash generated by / (used in) investing activities | 18,344 | (48,644) | |
| Cash flows from financing activities | |||
| Repayment of loans | (14,184) | (13,000) | |
| Repayment of finance leases | (19,543) | (11,774) | |
| Repayment of bank loans and other borrowing | (10,397) | (424,065) | |
| Proceeds on issue of shares | 54,040 | 815,513 | |
| Interest paid | (18,420) | (62,167) | |
| Net cash (used in) / generated from financing activities | (8,504) | 304,507 | |
| Net (decrease) / increase in cash and cash equivalents | (76,658) | 120,823 | |
| Cash and cash equivalents at beginning of year | 6 | 98,717 | (22,106) |
| Cash and cash equivalents at end of year | 6 | 22,059 | 98,717 |
NOTES TO THE FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
1. Basis of Preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by European Union ("adopted IFRSs"), and are in accordance with IFRS as issued by the IASB.
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2007 and 2008, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's Annual General Meeting. The auditors reported on these accounts; their reports were unqualified, include references to matters to which the auditors have drawn attention by way of emphasis without qualifying their reports and did not contain statements under the Companies Act 1985, s. 237(2) or (3).
Going Concern
In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The Group has made an operating loss from continuing operations for the year ended 31 December 2008.
Subsequent to the year end, the Company raised new funds of £692,923 net of expenses via a share placing to fund the working capital requirements of the existing business and to invest in a new business venture, Active Energy Limited.
Management has prepared detailed cash flow forecasts for the existing business and the new venture for the following two financial years which indicate that risks exist in respect of the future performance of the existing business as demand for gas ignition components reduces in line with the decline in the new housing market. Furthermore there is uncertainty over the achievability of the forecast revenues of the new business. It is therefore acknowledged that this could result in the need for additional funding. The Directors believe there are a number of options available to them to meet any additional funding requirements, which include establishing a new invoice discounting facility in respect of the trade receivables of Active Energy, or a further placing of shares, although the availability of such financing is currently uncertain.
Having reviewed the cash flow forecasts and key assumptions, together with assessing the possible options for additional funding, the Directors have a reasonable expectation that the Group will be able to meet its liabilities as they fall due for the foreseeable future. It is on this basis that the Directors consider it appropriate to prepare the Group's financial statements on a going concern basis.
However for the reasons described above, the Directors recognise that there are material uncertainties that may cast doubt on the Group's ability to continue as a going concern, and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. These material uncertainties comprise:
the achievability of forecasts and key assumptions within the forecasts; and
the ability to obtain additional funding from alternative sources should it be required.
2. (Loss)/Profit from operations
The loss (2007 - profit) from operations is stated after charging/(crediting):
| 2008 £ | 2007 £ | |
| Operating leases - property | 46,918 | 52,160 |
| Depreciation of property, plant and equipment | 57,032 | 28,581 |
| Loss on disposal of property, plant and equipment | - | 3,736 |
| Auditors remuneration | ||
| - audit fee | 40,000 | 57,500 |
| - subsidiary audit | 4,650 | 3,430 |
| - non-audit services: taxation | 34,350 | 7,500 |
| Foreign Exchange differences | (21,734) | (741) |
| Share based payments | - | 60,746 |
| Research and development expenditure | 22,234 | 13,741 |
3. Tax
Analysis of tax charge
| 2008 £ | 2007 £ | |
| Current tax | 3,304 | - |
| 3,304 | - | |
Factors affecting the tax charge
The tax assess for the year ended 31 December 2008 is higher (2007 - lower) than the standard rate of corporation tax in the UK. The difference is explained below.
| Factors affecting the tax charge | 2008 £ | 2007 £ |
| (Loss)/Profit before tax | (343,242) | 113,896 |
| (Loss)/Profit multiplied by the standard rate of corporation tax | ||
| in the UK of 28 percent. | (96,108) | 34,169 |
| Effects of: | ||
| Expenses not deductible for tax purposes | 12,080 | 10,657 |
| Non taxable income | (20,217) | (153,359) |
| Current year tax losses | 114,213 | 51,366 |
| Utilisation of tax losses | (124) | (11,293) |
| Losses no longer available | - | (7,360) |
| Excess of capital allowances over depreciation on qualifying assets | (453) | - |
| Other timing differences | (6,306) | 59,272 |
| Difference in tax rates | 219 | - |
| Adjustment to deferred tax in respect of prior years | - | 16,548 |
| Total tax | 3,304 | - |
4. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.
Reconciliations are set out below.
| Earnings £ | 2008 Weighted average number of shares | Per-share amount (pence) | |
| Basic EPS | |||
| Earnings attributable to ordinary shareholders | (346,546) | 31,920,728 | (1.09) |
| Effect of dilutive securities | |||
| Options | - | 3,501,182 | - |
| Adjusted earnings | (346,546) | 35,421,910 | (1.09) |
| Continuing operations | |||
| Basic EPS | |||
| Earnings attributable to ordinary shareholders | (338,241) | 31,920,728 | (1.06) |
| Effect of dilutive securities | |||
| Options | - | 3,501,182 | - |
| Adjusted earnings | (338,241) | 35,421,910 | (1.06) |
| Discontinued operations | |||
| Basic EPS | |||
| Earnings attributable to Ordinary Shareholders | (8,305) | 31,920,728 | (0.03) |
| Effect of dilutive securities | |||
| Options | - | 3,501,182 | - |
| Adjusted earnings | (8,305) | 35,421,910 | (0.03) |
Adjusted EPS shows a lower loss per share than the basic loss per share and therefore has not been disclosed.
| Earnings £ | 2008 Weighted average number of shares | Per-share amount | |
| Basic EPS | 113,896 | 20,147,697 | 0.57 |
| Earnings attributable to ordinary shareholders | |||
| Effect of dilutive securities | |||
| Options | - | 1,859,696 | - |
| Diluted EPS | |||
| Adjusted earnings | 113,896 | 22,007,393 | 0.52 |
| Continuing operations | |||
| Basic EPS | |||
| Earnings attributable to ordinary shareholders | 140,245 | 20,147,697 | 0.70 |
| Effect of dilutive securities | |||
| Options | - | 1,859,696 | - |
| Diluted EPS | |||
| Adjusted earnings | 140,245 | 22,007,393 | 0.64 |
| Discontinued operations | |||
| Basic EPS | |||
| Earnings attributable to Ordinary Shareholders | (26,349) | 20,147,697 | (0.13) |
| Effect of dilutive securities | |||
| Options | - | 1,859,696 | - |
| Diluted EPS | |||
| Adjusted earnings | (26,349) | 22,007,393 | (0.13) |
A detailed review of the option agreements supporting the weighted average 3,849,262 option shares that were reported as being in place in the 2007 financial statements has determined that the quantity stated should be restated as 1,859,696. This change arises due to reconsideration of the expiry dates of options issued in the period 19 September 1997 through 18 February 2005.
On 5 March 2009 the Company issued 36,469,613 new ordinary shares, had these been issued on 1 January 2008 the basic loss attributable to ordinary shareholders would have been £0.05 per ordinary share.
5. Post Balance Sheet Events
On 5 March 2009 the Company entered into agreements to establish the new business Active Energy Limited and on the same day the Company placed 36,469,613 new ordinary shares of 1p each in the capital of the Company at 2p per share.
On the same date the Company sold a 25 per cent. minority interests in Active Energy Limited to Stephen Coomes the owner of SDC Industries and 10 per cent. to Alpha Prospects Plc. Active Energy Limited in turn entered into agreements with SDC Industries Limited to acquire the intellectual property rights for the VoltageMaster ranger of power optimisers.
The Company has the right, but not the obligation, to acquire all but not part of the minority interest held by Stephen Coomes and/or Alpha in Active Energy. This right continues for a period of five years. The option is exercisable during the 30 days following the announcement of Cinpart's results for the year to 31 December 2009 and each successive financial year until 31 December 2014.
On 30 April 2009 one of the Group's subsidiaries Derlite Company Limited made 42 employees redundant. The redundancy compensation liability incurred was £57,784. An average 8 percent. reduction in wage rates was negotiated with the remaining hourly rate work force. The combined savings in wages is expected to be approximately £82,000 over a twelve month period.
6. Cash and cash equivalents
The amount disclosed on the cash flow statement in respect of cash and cash equivalents are in respect of these balance sheet amounts:
| Group | ||
| 2008 £ | 2007 £ | |
| Cash | 22,059 | 98,717 |
| 22,059 | 98,717 | |
7. Dividends
No dividends will be distributed for the year ended 31 December 2008 (2007 £Nil).
8. Copies of Report and Accounts
Copies of the Report and Accounts will be posted to shareholders shortly and will be available from the Company's registered office, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU and the Company's website http://www.cinpart.com.