22 May 2008 07:00
Date: 22 May 2008
On behalf of: Advanced Power Components plc ("APC" or "the Company")
Embargoed until: 0700hrs
Advanced Power Components plc
Interim results for the six months ended 29 February 2008
Advanced Power Components plc, a specialist distributor and manufacturers' representative of electronic components, is pleased to announce its interim results for the six months ended 29 February 2008.
Highlights:
Pre-tax profit increased to £270,000 (H1 2007: £250,000) and revenue increased to £4.7 million (H1 2007: £4.3 million) despite the difficult trading conditions that have clearly impacted the electronic components distribution market in the UK
Operating margins have been maintained and investment in sales, marketing and operating systems to support future growth has continued
Cost reduction programme anticipated to yield savings in operating costs of 7.5% in second half of the year
Post period end:
£1.6 million acquisition of Novacom completed on 14 April
Commenting on the results, Mark Robinson, Chief Executive of APC, said:
"This has been a solid first six months of the year for APC and demonstrates our ability to deliver a consistent and strong performance, despite the prevailing trading conditions that are affecting the market. With our reduced cost base , a strong order book and the synergies to be exploited from the acquisition of Novacom we are confident that this growth will continue into the second half of the year and expect our full year profit before tax will be in the range of £675,000 - £725,000, in line with current market expectations. We also continue to review opportunities to acquire complementary businesses in order to capture a greater share of the electronics distribution market."
Enquiries:
Advanced Power Components plc 01634 290588
Mark Robinson, Chief Executive
www.apc-plc.co.uk
Seymour Pierce 020 7107 8000
David Newton / Matthew Thomas
Redleaf Communications 020 7822 0200
Anna Dunkin / Henry Columbine
CHAIRMAN'S STATEMENT
I have pleasure in presenting the interim report of Advanced Power Components plc for the six months ended 29 February 2008.
The revenue for the first half year of £4.7 million and net profit before tax of £270,000, compare favourably with revenue of £4.3 million and £250,000 profit before tax for the six months to 28 February 2007.
The Company has for the first time prepared its financial statements in accordance with International Financial reporting Standards (IFRS), as a result of which the comparative figures for the six months to 28 February 2007 and the full year to 31 August 2007 have been restated.
The well-publicised difficult global trading conditions have clearly impacted the electronic components distribution market in the UK. However the Company has succeeded in growing sales while maintaining operating margins and continuing its investment levels in sales, marketing and operating systems to support our future growth. The resulting strength of the business in the face of the current climate is considered a further testimony of the Company's strategy to concentrate on its 'Design In' approach, following projects from initial design through to production, and providing customers and suppliers with an effective support capability.
The Board is encouraged by the strong rate of new order input achieved since the beginning of 2008 indicating that growth will continue into the second half of the year. However, in response to the nervousness surrounding the UK economy, the Company has completed a cost reduction programme that is anticipated to yield savings in operating costs of 7.5% during the six months to 31 August 2008. In another prudent step, the Board has secured significantly improved credit facilities and is considering options to minimise bank borrowing whilst continuing the strategy of driving both organic and acquisitive growth.
I am also pleased to report that the acquisition of Novacom Microwave Limited ("Novacom") was completed on 14 April. Novacom operates within a highly specialised sector of the electronics market, complementary to that of APC, focusing on defence and communications applications. Novacom has built an excellent reputation in this market sector, operating a similar 'Design In' business model to APC, and has a highly qualified sales team - a number of individuals having held senior engineering positions within leading RF and microwave organisations over the last 25 years. The market and product synergies created by this acquisition will undoubtedly generate significant additional opportunities within the enlarged customer base available to both businesses.
In summary, your Directors are encouraged by the performance of the Company in a difficult business environment and the progress it continues to make. Accordingly the Board continues to remain optimistic about the future profitable growth of the Company but would not recommend an interim dividend at this time.
R. F. Thorne, O. B. E.
Chairman
22 May 2008
CONSOLIDATED INCOME STATEMENT
for the half year ended 29 February 2008
| Half year ended 29 February 2008
| Half year ended 28 February 2007 restated | Year ended 31 August 2007 restated | ||
| Note | £000 | £000 | £000 | |
| Revenue | 4 | 4,700 | 4,276 | 9,741 |
| Cost of sales | (3,014) | (2,723) | (6,277) | |
| Gross profit | 1,686 | 1,553 | 3,464 | |
| Administration expenses | (1,378) | (1,289) | (2,787) | |
| Operating profit | 308 | 264 | 677 | |
| Finance costs | (38) | (14) | (72) | |
| Profit before taxation | 270 | 250 | 605 | |
| Income tax credit | - | - | 15 | |
| Profit for the period | 270 | 250 | 620 | |
| The results all relate to continuing operations. | ||||
| The Group has no recognised gains or losses other than those included in the profit and loss account. | ||||
| Earnings per share | 1.3p | 1.0p | 2.8p | |
| Diluted earnings per share | 1.3p | 1.0p | 2.6p | |
| Earnings per share is based on the weighted average number of shares in issue in the respective periods, as follows: | 20,157,361 | 24,206,971 | 22,155,137 |
During the period the Company issued 75,000 shares, following the exercise of share options.
As a result there were 20,211,757 shares in issue at 29 February 2008.
CONSOLIDATED BALANCE SHEET
at 29 February 2008
| 29 February 2008 | 28 February 2007 restated | 31 August 2007 restated | ||
| Note | £000 | £000 | £000 | |
| Non-current assets | ||||
| Intangible assets - goodwill | 808 | 808 | 808 | |
| Property, plant and equipment | 260 | 229 | 249 | |
| 1,068 | 1,037 | 1,057 | ||
| Current assets | ||||
| Inventories | 1,028 | 1,041 | 1,094 | |
| Trade and other receivables | 2,166 | 2,190 | 2,432 | |
|
Cash and cash equivalents | 6 | 324 | 504 | 682 |
| 3,518 | 3,735 | 4,208 | ||
| Current liabilities | ||||
| Trade and other payables | (2,607) | (3,481) | (3,583) | |
| (2,607) | (3,481) | (3,583) | ||
| Net current assets | 911 | 254 | 625 | |
| Non-current liabilities | - | - | - | |
| Net assets | 1,979 | 1,291 | 1,682 | |
| Capital and reserves | ||||
| Called up share capital | 404 | 403 | 403 | |
| Share premium account | 5 | - | - | |
| Share option valuation reserve | 84 | 42 | 63 | |
| Profit and loss account | 1,486 | 846 | 1,216 | |
| Total shareholders' equity | 5 | 1,979 | 1,291 | 1,682 |
CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 29 February 2008
| Half year ended 29 February 2008
| Half year ended 28 February 2007 restated | Year ended 31 August 2007 restated | ||
| £000 | £000 | £000 | ||
| Cash inflow/(outflow) from operating activities | 306 | (337) | (110) | |
| Finance costs | (38) | (14) | (72) | |
| Taxation | - | - | 16 | |
| Net cash from/(used in) operating activities | 268 | (351) | (166) | |
| Purchase of property, plant and equipment | (57) | (17) | (80) | |
| Sale of property, plant and equipment | - | - | 8 | |
| Net cash used in investing activities | (57) | (17) | (72) | |
| Issue of shares | 6 | - | - | |
| Re-purchase of shares | - | (1,085) | (1,085) | |
| Bank short-term loan facility | - | 1,408 | 1,459 | |
| Repayment of bank borrowings | (574) | - | - | |
| Repayment of finance lease | (1) | - | (3) | |
| Net cash (used in)/from financing activities | (569) | 323 | 371 | |
| (Decrease)/increase in net cash | (358) | (45) | 133 | |
| Reconciliation of operating profit to cash inflow/(outflow) from operating activities | ||||
| Operating profit | 308 | 264 | 677 | |
| Depreciation of property, plant and equipment | 46 | 41 | 79 | |
| Profit on disposal of property, plant and equipment | - | (1) | (3) | |
| Share option valuation charge | 21 | 15 | 36 | |
| Decrease/(increase) in inventories | 66 | (130) | (183) | |
| Decrease/(increase) in trade and other receivables | 266 | (702) | (944) | |
| (Decrease)/increase in trade and other payables | (401) | 176 | 463 | |
| Decrease in long-term creditors | - | - | (235) | |
| Cash inflow/(outflow) from operating activities | 306 | (337) | (110) | |
NOTES TO THE INTERIM REPORT
1. Basis of preparation
International Financial Reporting Standards ("IFRS") will apply for the first time in the Group's Annual Report for the year ended 31 August 2008. Consequently the Group's interim results for the six months to 29 February 2008 are presented under IFRS, together with restated information for the six months ended 28 February 2007 and the year ended 31 August 2007. Further information on the Group's adoption of IFRS is given in note 3 of this interim report.
The transition balance sheet, as at 1 September 2006, has not been presented, on the basis that there are no adjustments to the balance sheet at that date previously prepared and published under UK Generally Accepted Accounting Principles ("UK GAAP").
The financial information for the six months ended 29 February 2008 and the comparative figures for the six months ended 28 February 2007 have not been reviewed or audited by the Group's auditors and have been prepared on the basis of the accounting policies adopted by the Group under IFRS, as explained in note 2.
The unaudited comparative figures for the 12 months to 31 August 2007 have been prepared under IFRS. They do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The unqualified audited accounts for the 12 months ended 31 August 2007, previously prepared under UK GAAP, have been filed with the Registrar of Companies and did not contain statements under sections 237(2) or 237(3) of the Companies Act 1985.
The reconciliation between the figures for the comparative periods, as previously reported under UK GAAP and as reported in this interim report under IFRS, is set out in note 3.
2. Accounting policies
The consolidated income statement, consolidated balance sheet and consolidated cash flow statement have been prepared in accordance with accounting policies consistent with those set out in the statutory accounts for the year ended 31 August 2007, except for the following area where a change has been required by the adoption of IFRS:
Goodwill is no longer amortised over a pre-determined period. Instead it is stated at cost and is reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.
3. Explanation of transition to IFRS
Consolidated income statement
| Half year ended 28 February 2007 | Year ended 31 August 2007 | |||||
| As previously reported | Adjustments | As reported under IFRS | As previously reported | Adjustments | As reported under IFRS | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Revenue | 4,276 | - | 4,276 | 9,741 | - | 9,741 |
| Cost of sales | (2,723) | - | (2,723) | (6,277) | - | (6,277) |
| Gross profit | 1,553 | - | 1,553 | 3,464 | - | 3,464 |
| Administration expenses | (1,331) | 42 | (1,289) | (2,882) | 95 | (2,787) |
| Operating profit | 222 | 42 | 264 | 582 | 95 | 677 |
| Finance costs | (14) | - | (14) | (72) | - | (72) |
| Profit before taxation | 208 | 42 | 250 | 510 | 95 | 605 |
| Income tax credit | - | - | - | 15 | - | 15 |
| Profit for the period | 208 | 42 | 250 | 525 | 95 | 620 |
Consolidated Balance Sheet
| Half year ended 28 February 2007 | Year ended 31 August 2007 | |||||
| As previously reported | Adjustments | As reported under IFRS | As previously reported | Adjustments | As reported under IFRS | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Non-current assets
| ||||||
| Intangible assets - goodwill | 766 | 42 | 808 | 713 | 95 | 808 |
| Property, plant and equipment | 229 | - | 229 | 249 | - | 249 |
| 995 | 42 | 1,037 | 962 | 95 | 1,057 | |
| Current assets
| ||||||
| Inventories | 1,041 | - | 1,041 | 1,094 | - | 1,094 |
| Trade and other receivables | 2,190 | - | 2,190 | 2,432 | - | 2,432 |
| Cash and cash equivalents | 504 | - | 504 | 682 | - | 682 |
|
| 3,735 | - | 3,735 | 4,208 | - | 4,208 |
| Current liabilities | ||||||
|
Trade and other payables | (3,481) | - | (3,481) | (3,583) | - | (3,583) |
|
| (3,481) | - | (3,481) | (3,583) | - | (3,583) |
|
|
|
|
|
|
| |
| Net current assets | 254 | - | 254 | 625 | - | 625 |
|
Non-current liabilities | - | - | - | - | - | - |
|
Net assets | 1,249 | 42 | 1,291 | 1,587 | 95 | 1,682 |
3. Explanation of transition to IFRS (continued)
| Half year ended 28 February 2007 | Year ended 31 August 2007 | |||||
| As previously reported | Adjustments | As reported under IFRS | As previously reported | Adjustments | As reported under IFRS | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Capital and reserves | ||||||
| Called up share capital | 403 | - | 403 | 403 | - | 403 |
| Share premium account | - | - | - | - | - | - |
| Share option valuation reserve | 42 | - | 42 | 63 | - | 63 |
| Profit and loss account | 804 | 42 | 846 | 1,121 | 95 | 1,216 |
|
Total shareholders' equity | 1,249 | 42 | 1,291 | 1,587 | 95 | 1,682 |
The adoption by the Group of IFRS, as set out in note 1, has resulted in the following adjustments:
For the six months to 28 February 2007, the amortisation of goodwill previously charged under UK GAAP, amounting to £42,000, has been reversed in accordance with IFRS 3.
For the year to 31 August 2007, the amortisation of goodwill previously charged under UK GAAP, amounting to £95,000, has been reversed.
As a result of these adjustments, the carrying value of the Group's goodwill has reverted to its value at 31 August 2006, £808,000. The directors have made an assessment of the need to impair goodwill in accordance with the requirements of IAS 38 and have concluded that this is an appropriate value and no impairment is required.
4. Segmental information
The majority of the Group's activity arises in the United Kingdom from the supply and distribution of electronic components, in consequence of which the Group has one business and one geographical segment.
5. Reconciliation of movements in shareholders equity
| Half year ended 29 February 2008
| Half year ended 28 February 2007 restated | Year ended 31 August 2007 restated | ||
| £000 | £000 | £000 | ||
| Opening shareholders' equity | 1,682 | 2,111 | 2,111 | |
| Share option valuation reserve | 21 | 15 | 36 | |
| Issue of new shares during the year | 6 | - | - | |
| Cancellation of share premium account | - | (2,412) | (2,412) | |
| Corresponding increase in retained earnings | - | 2,412 | 2,412 | |
| Purchase of ordinary shares | - | (1,085) | (1,085) | |
| Profit for the period | 270 | 250 | 620 | |
| Closing shareholders' equity | 1,979 | 1,291 | 1,682 | |
6. Analysis of net funds
| At 29 February 2008 | Cash flow | At 31 August 2007 | ||
| £000 | £000 | £000 | ||
| Cash, comprising current accounts and overnight deposits | 324 | (358) | 682 | |
| Bank short-term loan facility | (885) | 574 | (1,459) | |
| Finance lease | (11) | 1 | (12) | |
| (572) | 217 | (789) | ||
7. Events subsequent to the reporting date
On 14 April 2008 the Company acquired the entire issued share capital of Novacom Microwave Limited, a distributor and manufacturers' representative for RF and microwave frequency electronic components. The maximum total cash consideration is approximately £1.6 million, comprising approximately £400,000 for the actual value of the net assets on completion, £700,000 for goodwill, and a contingent consideration of up to £500,000 based on the pre-tax performance of Novacom during the 12 months following completion.
8. Distribution of interim report
A copy of this interim report will be distributed to all shareholders. Additional copies are available on application to the Company's registered office:
Advanced Power Components plc, 47 Riverside, Medway City Estate, Rochester, Kent, ME2 4DP.
The report may also be viewed on the Company's website:
www.apc-plc.co.uk