APC Technology Regulatory News (APC)

26 Feb 2007 07:04

Advanced Power Components PLC26 February 2007 Date: 26 February 2007 On behalf of: Advanced Power Components plc ("APC" or "the Company") Embargoed until: 0700hrs Advanced Power Components plc Preliminary Results for the year ended 31 August 2006 Advanced Power Components plc, a specialist distributor and manufacturers'representative of electronics components, is pleased to announce its preliminaryresults for the year ended 31 August 2006. Financial Highlights: • Return to profitability with a pre-tax profit of £185,000 (2005: loss of £488,000) • Underlying performance demonstrated by improvement in profit before interest, tax, amortisation and exceptional items of £658,000 to £303,000 (2005: loss of £355,000) • Turnover increased by 45% to £6.4 million (2005: £4.4 million) Operational Highlights: • Hero Electronics acquired in May 2006 introducing a wider range of complementary electronic components • Sales team significantly strengthened with specialist, experienced product managers • Customer base expanded • Rodney Muir appointed as Finance Director in April 2006 Post period end events: • Amanda Parker promoted to the Board in September 2006 after joining the Company as Sales & Marketing Manager in April 2006 • Seymour Pierce appointed as NOMAD and broker with effect from today Commenting on the results, Mark Robinson, Chief Executive of APC, said: "This year has seen the Company return to profitability, driven primarily byorganic growth and prudent cost management, plus three months contribution fromthe new Hero division. Existing market conditions for our products and servicesare good and, as a result, new order intake for the first five months of ourcurrent financial year has exceeded our expectations. Whilst these orders aretypically scheduled over a number of months, this does give the Board confidencein the ability of the Company to maintain a strong rate of organic growth during2007." Enquiries: Advanced Power Components plc 01634 290588Mark Robinson, Chief Executivewww.apc-plc.co.uk Seymour Pierce 020 7107 8000David Newton Redleaf Communications 020 7822 0200Samantha Robbins / Duncan McCormick CHAIRMAN'S STATEMENT I am pleased to report the results of Advanced Power Components plc for the fullyear ended 31 August 2006. The year was one of further significant progress towards the Company returningto profitability by maintaining the determined impetus of a programme undertakenover the past three years to profitably increase revenues and reduce operatingcosts. In consequence it is particularly pleasing to report a profit before tax of£185,000 on a turnover of £6,449,000, compared with a loss before tax of£488,000 on a turnover of £4,445,000 in the previous year. The growth in turnover was achieved, as planned, both organically and throughthree months' revenue from Hero Electronics Limited, which was acquired in May2006. The prompt and successful integration of Hero into the company resulted in therealisation of both planned cost savings and the opportunity to market a widerrange of complementary electronic components into the growing customer base thatis being targeted for the future. A number of organisational changes took place during the year, commencing withthe departure of the Chief Operating Officer, Ian McAteer, in February 2006.Mark Robinson, the Chief Executive Officer, subsequently took over the ChiefOperating Officer's responsibilities. Additionally Rodney Muir was appointed asFinance Director on 21 April 2006 and Amanda Parker appointed Sales andMarketing Director on 1 September 2006 after joining the Company in April. Bothbring significant experience to the Board. During the period under review, and as part of the overall growth strategy, thedirectors considered and implemented a plan to accelerate the profitabledevelopment of the Company through the recruitment and direction of specialistand experienced sales personnel. The success of this programme has furtherenhanced the Company's position as one of the UK's foremost specialistdistributors and has attracted a number of potentially significant newcustomers. Furthermore we continue to be approached by a number of leading nichemanufacturers offering distribution rights to their products. This selectivebroadening of both customer base and product lines will underpin thecomplementary plans of profitable organic and acquisitive growth. The present position of the Company and the existing good market conditions forour products and services indicates positive opportunities for continuing thesuccessful development of the business into 2007 and the years to come. Your directors are also aware of the support given by our shareholders duringthe difficult years of returning the Company to profitability, for which I thankthem. As I stated in the Interim Report in May last year, it is the intention ofthe Company to resume the payments of dividends to shareholders as early aspracticable and we have recently held Extraordinary General Meetings that haveapproved the resolutions to enable dividends to be considered for future years. In conclusion I would like to extend the grateful thanks of the directors to allour employees for their contribution and support during the past year inensuring our return to profitability. R. F. Thorne, O. B. E. Chairman OPERATIONAL AND FINANCIAL REVIEW Financial results Group turnover for the financial year was £6,449,000, compared with £4,445,000in 2005, resulting in a net profit before tax of £185,000 compared with a lossof £488,000 last year. Basic earnings per share were 0.6p in 2006, compared with a loss per share of1.9p last year. At the time of the Company's interim announcement in May, we reported that theGroup had returned to profitability, with a pre-tax profit of £33,000 in thefirst half-year. Since then the underlying performance of the Group hascontinued to improve, recording a second-half pre-tax profit of £152,000,boosted by the acquisition of Hero Electronics Limited on 9 May 2006. At the operating level, using profit before tax, interest, amortisation andsignificant non-recurring costs (this year consisting of compensation for lossof office and related national insurance totalling £82,000) as the most relevantindicator of underlying performance, the comparison shows a profit in 2006 of£303,000, which represents an improvement of £658,000 over the equivalent lossof £355,000 in 2005. The Group's total overheads increased from £1,797,000 in 2005 to £1,936,000 thisyear, but this included Hero's overheads in the post acquisition period.Excluding acquisitions, the year's overheads from continuing operations fellslightly, from £1,797,000 in 2005 to £1,774,000 this year, as a result of thecontinued emphasis on cost-saving measures and tight budgetary control. Changes to the Board and corporate advisers During the year under review, and subsequently, a number of changes have beenmade to strengthen the Board. Following the departure of the Chief OperatingOfficer, Ian McAteer, the finance function was reinstated as a separate Boardrole and Rodney Muir was appointed Finance Director in April 2006. At the sametime Amanda Parker joined the Company as Sales and Marketing Manager and hasbeen appointed Sales and Marketing Director in September 2006. Theseappointments bring both experience and increased cohesion to the Board. In addition, the recent appointment of Seymour Pierce as the Company's NOMAD andBroker has completed the creation of a new, more focused team of advisers,capable of developing and supporting the Group through the next phase of itsgrowth. Operations During the year the Group continued to reap the benefits of the previous year'sinvestment in the Great Plains management information system. The integration ofHero Electronics Limited into the Group's systems, following its acquisition inMay 2006, was well under way at the financial year-end and has since beencompleted. Funding and cash flow The Group's overall cash flow showed an outflow of £328,000 in the year,compared with an inflow of £169,000 in 2005. However this included payments ofconsideration of £1,346,000 in respect of the acquisition of Hero, partiallyoffset by £1,000,000 cash brought in from Hero with that acquisition. Cash flowfrom operations showed a positive flow of £22,000 compared with £151,000 lastyear, the reduction a consequence of the investments made to fuel the Company'sgrowth. The Group ended the year with positive cash balances of £549,000. During the year a term loan facility was established with Barclays Bank plc, toassist with the funding of the Group's growth. This facility amounted to£400,000, none of which had been drawn down at 31 August 2006. It has since beenreplaced by a flexible debt finance facility with a cap of £1.5 million, securedagainst trade debtors, which was used to finance the buy-back of 6,577,756shares referred to later in this report. Capital expenditure Capital expenditure was £68,000 in 2006, compared with £42,000 in the previousyear, mainly consisting of improvements to the Group's Information Technologyinfrastructure. Treasury Details of the Group's financial instruments, as required by the financialreporting standard FRS 13, are set out in note 28 to the financial statements. Taxation The corporation tax charge of £20,000 represents the tax payable on the taxableprofits of Hero Electronics Limited, prior to the transfer of that company'sbusiness and assets to Advanced Power Components plc on 31 August 2006. There is no corporation tax charge in respect of the profit arising in AdvancedPower Components plc for the year under review, owing to the availability of taxlosses. Share options In previous years we have reported on the formation of the new 2003 EmployeeShare Option Scheme, which was approved by the Board in June 2003. This scheme,based on the Government's Enterprise Management Incentive ("EMI"), provides foroptions to be exercisable at a fixed price if certain performance conditions aremet. The conditions are linked to the Group's growth in earnings per share atthe pre-tax level. Further options were granted under this scheme in the yearunder review. Changes to capital structure Since the financial year-end the Board has taken steps to restructure theCompany's capital base. On 25 October 2006 the High Court approved thecancellation of the Company's share premium account, following approval of thismeasure by shareholders at an Extraordinary General Meeting on 4 October 2006.As a result the balance of £2,412,000 on that account will be utilised toeliminate the deficit on profit and loss account and create a positive balance,thus facilitating the resumption of dividend payments in due course. In addition, on 22 December 2006 the Company purchased 6,577,756 shares fromThird Advance Realisation Fund at a price of 16.5p per share, following theapproval of this measure by shareholders at an Extraordinary General Meeting on21 December 2006. These shares have since been cancelled. It is the Board's intention to take full advantage of the beneficial nature ofthis share buy-back, by effectively re-issuing these shares, in whole or inpart, by a new placement at the appropriate time, in order to provide funds tosupport its stated policy of organic and acquisitive growth. Therefore, at theforthcoming Annual General Meeting, shareholders will be asked to approve, as aspecial resolution, an increase in the amount of shares for which the Companycan disapply pre-emption rights, in order to maintain sufficient headroom tofacilitate flexibility in future funding requirements. Current Trading As mentioned in the Chairman's Statement, existing market conditions for ourproducts and services are good and, as a result, new order intake for the firstfive months of our current financial year has exceeded our expectations. Whilstthese orders are typically scheduled over a number of months, this does give theBoard confidence in the ability of the Company to maintain a strong rate oforganic growth in the current financial year ending 31 August 2007. Outlook Since the disposal of the Group's Telecommunications Products business in 2003,a strategy has been employed by the Board of Directors to establish the Group asone of the UK's leading specialist electronic component distributors. This strategy is now generating positive results. Investments made in financialmanagement and operating systems combined with the recruitment of increasinglyexperienced personnel plus the completion of a number of strategic acquisitionshave generated the profitable expansion demonstrated over the last three years.This has resulted in the long awaited return to profitability. Moving forward, we anticipate that this expansion will continue, fuelled by ageneral increase in demand for specialist knowledge and products, and by theBoard continuing its policy of achieving growth both organically and byacquisition. Combining these expanding revenues with prudent cost management, webelieve, will allow us to continue to produce consistently improving results. M. R. Robinson R. F. Muir Chief Executive Officer Finance Director CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 August 2006 2006 2006 2005 2005 £000 £000 £000 £000 TurnoverContinuing operations 5,541 4,445Acquisitions 908 - ______ ______ 6,449 4,445Cost of sales (4,346) (3,156) ______ ______Gross profitContinuing operations 1,803 1,289Acquisitions 300 - ______ ______ 2,103 1,289Administrative expenses (1,936) (1,797) ______ ______ Operating profit/(loss) 167 (508) Interest receivable 18 20 ______ ______Profit/(loss) on ordinary activities before taxation 185 (488) Tax (charge)/credit on profit/loss on ordinary (20) 1activities ______ ______ Profit/(loss) for the financial year 165 (487) ===== ===== Basic earnings/(loss) per share 0.6p (1.9p) Diluted earnings/(loss) per share 0.6p (1.9p) ===== ===== The Group has no recognised gains and losses other than those included in theprofit and loss account. There is no difference between the profit/(loss) as stated in the profit andloss account and the historical cost result for the year. CONSOLIDATED BALANCE SHEET at 31 August 2006 2006 2005 £000 £000 Fixed assetsIntangible assets 808 326Tangible assets 253 198 ______ ______ 1,061 524 ______ ______Current assetsStock 911 448Debtors 1,488 922Cash at bank and in hand 549 877 ______ ______ 2,948 2,247 Creditors: Amounts falling due within one year (1,663) (879) ______ ______Net current assets 1,285 1,368 ______ ______Total assets less current liabilities 2,346 1,892 Creditors : Amounts falling due in more than one year (235) -Provisions for liabilities and charges - - ______ ______Net assets 2,111 1,892 ===== ===== Capital and reserves Called up share capital 534 522Share premium account 2,412 2,370Profit and loss account (835) (1,000) ______ ______Total equity shareholders' funds 2,111 1,892 ===== ===== CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 August 2006 2006 2005 £000 £000 Net cash inflow from operating activities 22 151 ______ ______Returns on investment and servicing of finance :Interest received 18 20 ______ ______Net cash inflow from returns on investment and servicing of finance 18 20 Taxation (7) 40 Capital expenditure and financial investment :Payments to acquire tangible fixed assets (68) (42) ______ ______Net cash outflow from capital expenditure and financial investment (68) (42) Acquisitions and disposalsPurchase of subsidiary undertakings (1,346) -Cash acquired with subsidiary undertakings 1,000 - ______ ______Net cash outflow from acquisitions and disposals (346) - ______ ______Net cash (outflow)/inflow before management of liquid resources and financing (381) 169Sale of short term investments 54 -Net cash outflow from financing (1) - ______ ______(Decrease)/increase in net cash (328) 169 ===== ===== Reconciliation of operating profit/(loss) to net cash inflow from operatingactivities 2006 2005 £000 £000 Continuing operationsOperating profit/(loss) 167 (508)Goodwill amortisation 54 41Depreciation 57 55(Increase)/decrease in stocks (231) 104Decrease in debtors 6 474Decrease in creditors (31) (15) ______ ______Net cash inflow from operating activities 22 151 ===== ===== NOTES, FORMING PART OF THE FINANCIAL STATEMENTS 1. Turnover and segmental information The turnover, loss before taxation and net assets are attributable to the oneprincipal activity of the Group, the supply and distribution of electroniccomponents, which is all based in the UK. An analysis of turnover bygeographical destination is given below: 2006 2005 £000 £000 UK 5,484 3,712North America 188 111Far East, Europe and other 777 622 ______ ______ 6,449 4,445 ===== ===== 2. Taxation 2006 2005 £000 £000(a) Analysis of charge in period Current tax:UK Corporation tax at 19% on profits for the current 22 -yearAdjustments in respect of prior years (2) (1) ______ ______Total current tax 20 (1) Deferred tax - - ______ ______Tax charge on profit on ordinary activities 20 (1) ===== ===== The corporation tax rate for the current and previous years is 19 per cent, therate ruling throughout the respective periods. As referred to in the Operational and Financial Review, the result for AdvancedPower Components plc for the current year has created a profit for tax purposeswhich can be offset against tax losses arising in past years. (b) Factors affecting tax charge in period The tax charge for the period is lower than the standard rate of corporation taxin the UK. The rate of corporation tax for this purpose has been taken as thesmall companies rate (19%) for 2006. The differences are explained below: 2006 2005 £000 £000 Profit/(loss) on ordinary activities before tax 185 (488) ______ ______Standard rate of corporation tax 19% 30%Profit/(loss) on ordinary activities multiplied by the 35 (146)standard rate of corporation tax Effects of:Permanent differences 16 31Adjustments relating to prior year corporation tax (2) (1)Current tax losses (utilised)/not utilised (30) 112Accelerated capital allowances 1 3 ______ ______Current tax charge/(credit) for the period 20 (1) ===== ===== The Company has unutilised tax losses of approximately £1,520,000 at 31 August2006. There are at present no other factors which will influence the Group'staxation in future years. 3. Earnings per share The calculation of basic earnings/loss per share is based on the profit/lossafter taxation for the period and the weighted average number of shares in issueduring the period. None of the share options give rise to a dilution in the earnings/loss pershare, as their performance conditions have not yet been fulfilled. The profit/loss for the year and the weighted average number of shares used inthe calculations are set out below: 2,006 2005 £000 £000Basic and diluted loss per shareProfit/(loss) attributable to ordinary shareholders 165 (487)Weighted average number of shares 26,176,979 26,114,513Earnings/(loss) per share 0.6p (1.9p) ========= ========= 4. Reconciliation of movements in shareholders' funds Group Group Company Company 2006 2005 2006 2005 £000 £000 £000 £000 Opening shareholders' funds 1,892 2,379 1,895 2,382Issue of new shares during the year 54 - 54 -Profit/(loss) for the financial year 165 (487) 48 (487) ______ ______ ______ ______Closing shareholders' funds 2,111 1,892 1,997 1,895 ====== ====== ====== ====== The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 August 2005 or 31 August 2006, but isderived from those accounts. Statutory accounts for 2005 have been delivered tothe Registrar of Companies, and those for 2006 will be delivered following theCompany's Annual General Meeting. The auditors have reported on the statutoryAccounts for both 2005 and 2006; their reports were unqualified and did notcontain statements under section 237 (2) or (3) of the Companies Act 1985. 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