Active Energy Regulatory News (AEG)

30 Jul 2008 14:27



30 July 2008

Cinpart plc (the "Company")

Operating Update 

The Board of Directors of Cinpart plc ("Cinpart" or "the Company") are today announcing a trading update and information on business development.

Trading Update 

Trading in the first half of 2008 has been difficult and the Company witnessed a decline in sales for the first 6 months of 2008 compared with the first 6 months of 2007. This is caused by several factors; firstly,  the increase in delivery times associated with the change from air freight to the more cost effective sea freight has meant that customers increased their inventory levels during 2007 to compensate. Therefore, Sales in 2007 are estimated to be 12 - 15% higher than normal due to this factor. Secondly, the down turn in the housing market both in United Kingdom ("UK") and in the United States ("US") has led to a decline in the number of gas appliances being manufactured and distributed to those markets.

However, despite the downturn in sales, the Company has continued to improve gross margins primarily through continued cost savings through more efficient production techniques and sourcing of components. Gross margins in the first half of 2008 are expected to be greater than achieved during the same period last year and we anticipate gross margins to increase approximately 3-4%. However, net profit margins have been affected by an increase in overhead costs in the first half of 2008 although actions are underway to reduce these in the second half of the year. Given the above circumstances the company now re-forecasts a full year profit for 2008 similar to that achieved in 2007.

New Business Development 

Looking to the future, the new Board has taken the view that the Company should not only rely on a single operation supplying a specialist product to a limited number of international customers.  It is therefore necessary for the Company to diversify through developing new business activities.

Cinpart has in the recent past established core competencies in electrical equipment manufacture in a low labour cost location being Thailand, the ability to acquire and successfully transfer manufacturing operations from the UK to the Far East. It has also developed a technical team with the skill and expertise to design, develop, and produce gas ignition systems. These skills can also be applied to any type of electrical equipment. The Company has also established a network of reliable suppliers located throughout the Far East. The plant in Thailand is now equipped with the plant and machinery required to produce circuit boards, metal stamped parts, moulded plastic parts, vacuum encapsulation as well a having a work force of over 120 assembly operators experienced in the assembly of electrical equipment.

With these points in mind the Board has expanded its vision from growth through development of the current business and the acquisition of small scale UK based manufacturing operations for transfer to Thailand. The Board considers that the Company can leverage the competencies and resources outlined and to that end has established a new wholly owned subsidiary in the UK named "Component Imports Ltd". As the name suggests, this company will seek to use the Group's sourcing contacts and expanded utilization of the manufacturing facilities in Thailand.  The sales and technical support office is located in Edinburgh and the company will seek to source any manufactured item that may be required.  The target market is small to medium sized manufacturers that do not have the scale of operation, resources and/or skills to identify suitable offshore manufacturers themselves.

After technical specification reviews and identification of appropriate supplier, Component Imports Ltd will place orders with the selected suppliers, and arrange shipment, import and delivery to the customer.  Customers may either purchase the imported product directly from Component Imports Ltd or alternately pay a percentage fee for the services outlined.

Component Imports Ltd has already signed a confidentiality agreement with representatives of the Midlands Assembly Network.  This is a UK association of complementary engineering companies that offer a wide range of mechanical, electro-mechanical and electronic sub assemblies to manufacturers across the globe. Under this umbrella arrangement Cinpart anticipates that it will obtain sourcing opportunities from the association members. It is also already been asked to secure a contract for the supply of ceramic plaques for a major manufacturer of hot water boilers.  These are to be sourced from a company in China and the first order is expected following completion of samples currently being prepared. 

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NOTES TO EDITORS

Cinpart (Ticker CINP) is listed within the electronic and electrical equipment sector of the AIM market of the London Stock Exchange. The Company manufactures ignition systems for gas appliances in Thailand and sells to manufacturers of stoves water heaters and boilers throughout the world.