APC Technology Regulatory News (APC)

7 Dec 2005 07:01

Advanced Power Components PLC07 December 2005 ADVANCED POWER COMPONENTS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 AUGUST 2005 Advanced Power Components plc ("the Company" or "APC") is a specialistmanufacturers' representative and distributor of electronics components,addressing separately the high reliability and commercial market sectors. APC's "Hi-Rel" activity distributes a variety of specialist electroniccomponents into applications where component reliability is of paramountimportance. Hi-Rel's franchised product lines include power semiconductors,power supplies, memory, batteries, optoelectronics and high voltage components. In addition, Hi-Rel provides a procurement support and obsolescence managementservice for customers involved in long term defence and aerospace programmes. APC's commercial activity "SBM" represents and distributes for manufacturers ofrelatively specialist electronic components addressing a commercial andindustrial customer base. Products sold include displays, power semiconductors,communications semiconductors, touch memory devices, communications magnetic andconnector products. APC's commercial activity "Go!" provides a kitting and materials managementservice to companies wanting to outsource non-core activities, offering servicesranging from material procurement to full production management. Enquiries: Mark Robinson, Chief Executive Officer Tel: 01634-290588 CHAIRMAN'S STATEMENT I have pleasure in presenting the full year report of Advanced Power Componentsplc for the year ended 31st August 2005The year was another encouraging period for the Group and further progress wasmade towards the commitment of again attaining profitability. Measuresimplemented to improve efficiencies and reduce operating costs together resultedin a loss before tax of £488,000 on revenues of £4,445,000, which comparesfavourably with the loss of £726,000 in the previous year.Whilst the year started well, trading was disappointing in the second quarterbut recovered to finish strongly, particularly in the last four months of thefinancial year. The pre-tax loss of £251,000 in the first six months narrowed toa loss of £117,000 in the second six months, prior to the stock provisionsmentioned below, as the effects of the programme to increase efficiencies andexpand revenues generated positive financial improvements.As anticipated in the interim report, operational losses were supplemented by aprudent provision to comply promptly with the European Directive on the"Restriction of the use of Hazardous Substances" - RoHS. This one-off provisionrelated to the write-down of components that contained lead and other substancesbanned under EC Directive 2002/95/EC and totalled £101,500. This sum was addedto the slow moving stock write down of £18,500, resulting in an overallprovision of £120,000. This decision was taken following a detailed evaluationof our material stocks to ensure they comply with the new legislation, in commonwith the electronics industry as a whole. In consequence we now consider thatthe Group is well advanced in its preparations to meet the effective date of 1July 2006 for the new legislation to become law.During the year we continued to develop new trading relationships withadditional potential suppliers in North America. This has been particularlyadvantageous to our Hi-Rel activity, which continued to improve the quality ofits product portfolio. As a consequence we are generating greater interest withour target customers, which in turn is resulting in additional orders andsubsequent sales.SBM has also seen its revenues grow, in spite of the difficult tradingconditions that it experienced throughout the majority of the year. Additionaltrading relationships were successfully established, particularly with suppliersof display products from South East Asia, which will provide opportunities forprofitable growth in 2005/6.The Go! Technology results were adversely affected by the difficult marketconditions prevailing throughout the year, and by the time taken to successfullyimplement the new processes and mode of operation required to sustain long termgrowth. However, sales are now growing and a significant new order book is nowbeing developed. This suggests a much better future in the current year.In summary the actions taken by the directors and managers over the past twoyears continue to generate positive progress towards the long awaited return toprofitability.I would therefore like to express the appreciation of the Board of Directors ofyour Company for the efforts made by our employees towards achieving theimprovements I have mentioned in this report and to our shareholders for theirsupport and patience that we trust will soon be rewarded. R. F. Thorne, O. B. E.Chairman 7 December 2005 OPERATIONAL AND FINANCIAL REVIEW Financial resultsGroup turnover for the financial year was £4,445,000, compared with £5,079,000in 2004, resulting in a net loss before tax of £488,000 compared with £726,000last year. The basic loss per share was 1.9p in 2005, compared with a loss of 2.8p lastyear. As we stated at the time of the Company's interim announcement in May, the yearstarted strongly but suffered with the difficult trading conditions thatpersisted in the second three months of the financial year. However, the reducedoverhead base, which was a result of actions taken to improve overallefficiencies at the end of the previous year, meant that positive progresscontinued to be made even through this difficult period. Consequently, asconfidence returned to the market the 10.9 per cent improvement in revenuesachieved in the second half of the year, compared to the first half, resulted inthe pre-tax loss of £251,000 in the first six months narrowing to a loss of£117,000 in the second six months, prior to the stock provisions mentionedbelow. In addition to the normal trading losses as detailed above, the final result wasnegatively impacted by a prudent provision to comply promptly with the EuropeanDirective on the "Restriction of the use of Hazardous Substances" - RoHS. Thisone-off provision related to the write-down of components that contained leadand other substances banned under EC Directive 2002/95/EC and totalled £101,500.This sum was added to the slow moving stock write down of £18,500, resulting inan overall provision of £120,000. We now consider that the Company is welladvanced in its preparations to meet the effective date of 1 July 2006 for thenew legislation to become law. The Group's overheads decreased from £2,189,000 in 2004 to £1,797,000 this year,as a result of the management reorganisation referred to below, together withother cost-saving measures implemented towards the end of the previous year andduring the year under review. Management reorganisation As reported in last year's review, a number of changes were implemented at Boardlevel at the start of the year under review. With effect from 10 September 2004, Mark Robinson moved to the position of ChiefExecutive Officer and Ian McAteer was appointed Chief Operating Officer, takingon the additional responsibility of Finance. Timothy Ford stepped down as a NonExecutive Director and Hugh Edmonds resigned as Finance Director, but remainsCompany Secretary. The number of Directors on the main Board was thereforereduced from six to four, a level considered to be more appropriate to theGroup's requirements. The year under review has seen the benefits of theresulting cost savings from these measures. Operations During the year the Group continued to invest significant resources indeveloping new processes designed to take full advantage of the capabilities ofMicrosoft's Great Plains management information system, which went live on 1 May2004. The benefits are having a positive impact on the business, especially inour APC-Go! Activities, where the process improvements afforded by the systemare resulting in significant enhancements in our capacity to efficiently expandthe business. As planned, the Great Plains system is facilitating this growthwithout the need for extra administrative resource. Funding and cash flowThe Group's cash flow improved significantly in the year, with a cash inflow of£169,000 compared with an outflow of £1,373,000 in 2004, as a result of the costreductions referred to above, together with tight control of working capital andreduced capital expenditure. The Group ended the year-end with positive cashbalances of £877,000.Capital expenditureCapital expenditure was reduced from £146,000 in 2004 to £42,000 this year. Theprevious year's expenditure had been attributable to the operations improvementsreferred to above, which had mainly been completed by the start of the yearunder review. Treasury Details of our financial instruments, as required by the financial reportingstandard FRS 13, are set out in note 26 to the financial statements. Taxation There is no corporation tax charge for the year under review, since the resultfor the year is again expected to generate a loss for tax purposes. 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. The first options under the new scheme were granted to APCemployees in July 2003 and during the 2004 financial year further options weregranted to employees and directors, all at an exercise price of 2p. During the year under review the options issued under the 2003 Employee ShareOption Scheme to date were cancelled. New options were granted, with similarperformance conditions linked to the growth in the Company's earnings per sharein the two financial years commencing on 1 September 2004, but with an exerciseprice of 9p, the market price ruling on 6 October 2004, the date of grant. As wecommented last year, the Board believes that these options are structured in amanner more appropriate to the current needs of the business and the bestinterests of our shareholders and employees. Research and development During the year the Group continued to participate in research and developmentas lead partner and co-ordinator of a project funded by the European Commissionas part of the Co-operative Research FP6 programme. This project will continueuntil October 2006. Outlook During the last year we have made significant progress in a number of areas,both to reduce our operating costs and to improve our effectiveness in themarkets that we serve. As part of the completion of the integration of the businesses we acquired in2003, we have consolidated central functions such as administration, warehousingand finance and introduced new efficiencies both by the use of technology and bythe redirection of our employees. The growth in revenues, and the improvedprofitability achieved throughout the year, which is continuing into the currentyear, is a direct consequence of the actions taken, which have provided us witha firm platform for future profitable expansion. As we move forward we are optimistic that our continued progress in growingrevenues in each of our activities, combined with prudent cost management, willallow us to achieve consistently improving results. M. R. Robinson W. I. McAteerChief Executive Officer Chief Operating Officer CONSOLIDATED PROFIT AND LOSS ACCOUNT 2005 2004for the year ended 31 August 2005 £000 £000 Turnover 4,445 5,079 Cost of sales (3,156) (3,656) ________ ________Gross profit 1,289 1,423 Distribution costs (752) (743)Administrative expenses (1,045) (1,446) ________ ________Operating loss (508) (766) Interest receivable 20 40 ________ ________Loss on ordinary activities before taxation (488) (726) Tax on loss on ordinary activities 1 5 ________ ________Loss for the financial year (487) (721) ======== ======== Basic loss per share (1.9p) (2.8p) Diluted loss per share (1.9p) (2.8p) The Group has no recognised gains and losses other than those included in theprofit and loss account. There is no difference between the loss as stated in the profit and loss accountand the historical cost loss for the year. CONSOLIDATED BALANCE SHEET 2005 2004at 31 August 2005 £000 £000 Fixed assets Intangible assets 326 367Tangible assets 198 211 ________ ________ 524 578 -------- --------Current assets Stock 448 552Debtors 922 1,435Cash at bank and in hand 877 708 ________ ________ 2,247 2,695 -------- --------Creditors: Amounts falling due within one year (879) (894) ________ ________Net current assets 1,368 1,801 -------- --------Total assets less current liabilities 1,892 2,379 Creditors : Amounts falling due in more than one year - -Provisions for liabilities and charges - - ________ ________Net assets 1,892 2,379 ======== ======== Capital and reserves Called up share capital 522 522Share premium account 2,370 2,370Profit and loss account (1,000) (513) ________ ________Total equity shareholders' funds 1,892 2,379 ======== ======== CONSOLIDATED CASH FLOW STATEMENT 2005 2004for the year ended 31 August 2005 £000 £000 Net cash inflow/(outflow) from operating activities 151 (1,398) -------- --------Returns on investment and servicing of finance : Interest received 20 40Net cash inflow from returns on investment ________ ________and servicing of finance 20 40 Taxation 40 144 Capital expenditure and financial investment :Payments to acquire tangible fixed assets (42) (146)Sale of tangible fixed assets - 6Net cash outflow from capital expenditure ________ ________and financial investment (42) (140) Acquisitions and disposalsPurchase of subsidiary undertakings - (19) ________ ________Net cash outflow from acquisitions and disposals - (19) Net cash inflow/(outflow) before management of ________ ________liquid resources and financing 169 (1,373) Net cash flow from financing - - ________ ________Increase/(decrease) in net cash 169 (1,373) ======== ======== Reconciliation of operating loss 2005 2004to net cash inflow/(outflow) from operating activities £000 £000 Operating loss (508) (766)Adjustment for exchange loss - 49Goodwill amortisation 41 60Depreciation 55 93Loss on disposal of fixed assets - 6Decrease/(increase) in stocks 104 (50)Decrease/(increase) in debtors 474 (381)Decrease in creditors (15) (409) ________ ________Net cash inflow/(outflow) from operating activities 151 (1,398) ======== ======== NOTES TO THE ACCOUNTS 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 by geographical destination is given below: 2005 2004 £000 £000 UK 3,712 4,812North America 111 57Far East, Europe and other 622 210 ________ ________ 4,445 5,079 ======== ======== 2. Taxation 2005 2004 £000 £000(a) Analysis of credit in period Current tax:UK Corporation tax at 30% on losses for the current year - -Adjustments in respect of prior years (1) (5) ________ ________Total current tax (1) (5) Deferred tax - - ________ ________Tax credit on loss on ordinary activities (1) (5) ======== ======== The corporation tax rate for the current and previous years is 30 per cent, therate ruling throughout the respective periods. As referred to in the Operationaland Financial Review, the result for the current year has created a loss for taxpurposes, which can be carried forward to offset against taxable profits arisingin future years. (b) Factors affecting tax credit in periodThe tax credit for the period is lower than the standard rate of corporation taxin the UK (30%).The differences are explained below: 2005 2004 £000 £000 Loss on ordinary activities before tax (488) (726) Loss on ordinary activities multiplied by the standardrate of corporation tax (146) (218) Effects of:Permanent differences 31 33Adjustments relating to prior year corporation tax (1) (5)Current tax losses not utilised 112 180Accelerated capital allowances 3 5 ________ ________Current tax credit for the period (1) (5) ======== ======== There are at present no other factors which will influence the Group's taxationin future years. 3. Loss per share The calculation of basic loss per share is based on the loss after taxation forthe period and the weighted average number of shares in issue during the period. None of the share options give rise to a dilution in the loss per share due tothe losses made in the year. The loss for the year and the weighted average number of shares used in thecalculations are set out below: Weighted Average Per share Loss Number amountBasic and diluted loss per share £000 of share penceLoss attributable to ordinary shareholders 2005 (487) 26,114,513 (1.9p) 2004 (721) 26,114,513 (2.8p) 4. Reconciliation of movements in shareholders' funds Group Group Company Company 2005 2004 2005 2004 £000 £000 £000 £000Opening shareholders' funds 2,379 3,100 2,382 3,102Loss for the financial year (487) (721) (487) (720) ________ ________ ________ ________Closing shareholders' funds 1,892 2,379 1,895 2,382 ======== ======== ======== ======== The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 August 2004 or 31 August 2005, but isderived from those accounts. Statutory accounts for 2004 have been delivered tothe Registrar of Companies, and those for 2005 will be delivered following theCompany's Annual General Meeting. The auditors have reported on the statutoryAccounts for both 2004 and 2005; their reports were unqualified and did notcontain statements under section 237 (2) or (3) of the Companies Act 1985. A copy of this announcement will be available from the nominated adviser: Smith& Williamson Corporate Finance Limited, 25 Moorgate, London, EC2R 6AY for onemonth from the date of this announcement This information is provided by RNS The company news service from the London Stock Exchange