APC Technology Regulatory News (APC)

21 Nov 2007 07:00

Advanced Power Components PLC21 November 2007 Date: 21 November 2007On behalf of: Advanced Power Components plc ("APC" or the "Group")Embargoed until: 0700hrs Advanced Power ComponentsPreliminary results for the year ended 31 August 2007 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 2007. Financial Highlights: • Revenues increased by 51% to £9.74 million (2006: £6.45 million) • Pre-tax profits up by 198% to £0.51 million, after exceptional costs and interest charges (2006: £0.17 million) • Basic earnings per share up to 2.4 pence (2006: 0.6 pence) • Number of shares in issue reduced by 6,577,756 Operational Highlights: • Expanded sales and marketing capabilities with recruitment of experienced personnel • Administrative functions developed to support planned organic and acquisitive growth • Board strengthened by appointment of Will David Commenting on the results, Mark Robinson, Chief Executive of APC, said: "Much work has been done over the last 12 months to further develop a platformfrom which the Group can grow both organically and via acquisition. In line withthe Group's long-term strategy the result is an organisation with the capacityfor significant expansion. "The Board remains confident that this expansion will be achieved over the nextyear as investments in personnel, improving market conditions and the search forsuitable acquisition targets all yield positive results." 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 / Anna Dunkin CHAIRMAN'S STATEMENT I am pleased to report that the year ended 31 August 2007 was the mostsuccessful since the Company was listed on AIM in 2002, having exceededexpectations in terms of revenues and pre-tax profits. Compared with the previous year, sales increased by just over 50 per cent to£9,741,000 and pre-tax profits by nearly 200 per cent to £510,000, afterexceptional costs of £73,000 and interest charges of £72,000. Both costs areassociated with the purchase and funding of 6,577,756 shares from Third AdvanceRealisation Fund that took place in December 2006, the details of which wererecorded in the previous annual report. During the year and consistent with its strategic plan, the Company continued tostrengthen and expand its sales and marketing capabilities by recruitingadditional experienced personnel. This expansion has allowed us to significantlyextend our customer base and develop sales into additional markets. Investmenthas also been made to further develop the sales support and administrativefunctions that are complementary to our planned growth, which will includepotential acquisitions in specialist areas of the market. To assist us in realising our growth strategy, the Board of Directors has beenstrengthened during the year by the appointment of Will David, who joined theCompany as a non-executive director in August. His wide experience with growingsmall and mid-cap companies will be of considerable value to the Company inmeeting its future goals. We have previously stated that the Company will resume the payment of dividendsas early as practicable, however the Board does not recommend that a dividend bepaid at this stage. The subject will be reviewed again in May 2008 when theinterim results for the current financial year are finalised. In summary, during the past year we have successfully taken advantage of goodmarket opportunities and improved internal efficiencies with the co-operation ofour valued personnel. Whilst, at the time of preparing this report, the marketconditions are not as favourable as this time last year, the Company is in astronger position to face the new challenges with confidence that we cancontinue our profitable growth for the benefit of our investors and employees. R. F. Thorne, O. B. E.Chairman 21 November 2007 OPERATIONAL AND FINANCIAL REVIEW Financial results Group turnover for the financial year was £9,741,000, compared with £6,449,000in 2006, resulting in a net profit before tax of £510,000, compared with arestated pre-tax profit of £171,000 last year. Basic earnings per share were 2.4p in 2007, compared with 0.6p last year.Diluted earnings per share, which is only applicable to the current year andtakes into account the effect of unexercised share options, were 2.2p. The Group has this year adopted the provisions of Financial Reporting Standard20 in respect of outstanding share options. As a result an amount of £36,000 hasbeen charged to the profit and loss account in the current year. In additionFRS20 requires that a retrospective charge be applied for relevant earlieraccounting periods. Accordingly the profit and loss account for the comparativeyear has been restated to include a charge of £14,000 and the profit and lossaccount brought forward at 1 September 2005 has been restated to include acharge of £13,000. At the time of the Company's interim announcement in May, we reported a pre-taxprofit of £208,000 in the first half-year. Since then the underlying performanceof the Group has continued to improve, recording a second-half pre-tax profit of£302,000, resulting from the continued investment in key staff and resources. At the operating level, using profit before tax, interest, amortisation andsignificant non-recurring costs (this year consisting of professional and legalfees totaling £73,000 relating to the purchase of 6.5m shares from Third AdvanceRealisation Fund) as the most relevant indicator of underlying performance, thecomparison shows a profit in 2007 of £749,000, which represents an improvementof £446,000 over the equivalent profit of £303,000 in 2006. The Group's total overheads increased from £1,950,000 in 2006 to £2,882,000 thisyear. This reflects a full year of overheads from Hero Electronics Limited, thesubsidiary acquired in 2006, together with the investment in additionalspecialist sales and support staff. Changes to the Board and corporate advisers As reported last year, Amanda Parker was appointed Sales and Marketing Directoron 1 September 2006, the start of the financial year. This step completed theformation of the executive team, which has been in place throughout thefinancial year and to date. In addition Seymour Pierce was appointed as theCompany's NOMAD and Broker in February 2007. The Board was further strengthened by the appointment of an additionalnon-executive Director, William David, on 1 August 2007. Will has more than 20years' experience working in corporate advisory and broking roles for small andmid cap companies. During his professional career he has worked on over 20flotations for clients across a range of sectors. His experience also includesacquisitions and disposals, public takeovers and secondary fundraisings andprovision of advice on corporate governance matters. The Group is now starting to reap the benefits of a well-balanced andexperienced Board, supported by a responsive team of professional advisers. Thisteam is well qualified to guide the Group through further acquisitions when thetime is right. Operations During the year the Group continued to reap the benefits of prior years'investment in the Great Plains management information system. The integration ofHero Electronics Limited into the Group's systems, following its acquisition inMay 2006, was completed during the year, since when the emphasis has been onadditional improvements to the Group's systems in order to further enhance theefficiency and effectiveness of its operations. Funding and cash flow The Group's overall cash flow showed an inflow of £133,000 in the year, comparedwith an outflow of £328,000 in 2006, the year that included the acquisition ofHero Electronics Limited. Cash flow from operations showed a negative flow of£110,000 compared with a positive flow of £22,000 last year, the reduction aconsequence of the investments in additional specialist staff made to fuel theCompany's growth and the increased working capital. The Group ended the year-endwith positive cash balances of £682,000. During the year the Group's term loan facility with Barclays Bank plc amountingto £400,000 was replaced by a flexible debt finance facility with a cap of £1.5million, secured against trade debtors, which was used to finance the buy-backof 6,577,756 shares referred to elsewhere in this report. Borrowing against thisfacility amounted to £1,459,000 at 31 August 2007. Capital expenditure Capital expenditure was £80,000 in 2007, compared with £68,000 last year, mainlyconsisting of further improvements to the Group's Information Technologysystems. Taxation 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 During the financial year the Board restructured the Company's capital base, asfollows: On 25 October 2006 the High Court approved the cancellation of the Company'sshare premium account. As a result the balance of £2,412,000 on that account wasutilised to eliminate the deficit on profit and loss account and create apositive balance, thus facilitating the resumption of dividend payments in duecourse. In addition, on 22 December 2006 the Company purchased 6,577,756 of its sharesfrom Third Advance Realisation Fund, following the approval of this measure byshareholders at an Extraordinary General Meeting on 21 December 2006. Theseshares were then cancelled. Current Trading As reported in the Chairman's statement, market conditions are currently lessfavourable than they were at the same time last year. This has been consistentlyreported in sector specific industry reports, which have indicated signs ofweakness in the market throughout most of 2007. However, in early trading theGroup's revenues compare favourably against the corresponding period last year,giving the Board confidence that the Company will continue to grow. Outlook Much work has been done over the last twelve months to further develop aplatform from which the Group can grow both organically and via acquisition. Theresult of this continuation of the Group's long-term strategy is an organisationthat has the capacity for significant expansion. The Board remain confident that this expansion will be achieved over the nextyear as investments in personnel, improving market conditions and the search forsuitable acquisition targets all yield positive results. M. R. Robinson R. F. MuirChief Executive Officer Finance Director CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 August 2007 2007 2007 2006 2006 Note restated restated £000 £000 £000 £000Turnover 1 Continuing operations 9,741 5,541Acquisitions - 9,741 908 6,449Cost of sales (6,277) (4,346) Gross profitContinuing operations 3,464 1,803Acquisitions - 3,464 300 2,103Administration expenses (2,882) (1,950) Operating profit 582 153Interest (payable)/receivable (72) 18 Profit on ordinary activities before taxation 510 171Tax credit/(charge) on profit on ordinary activities 2 15 (20) Profit for the financial year 525 151 Basic earnings per share 3 2.4p 0.6p Diluted earnings per share 3 2.2p 0.6p Restatement of prior periods' results The Company has adopted the provisions of Financial Reporting Standard 20 inrespect of outstanding share options. As a result the profit and loss accountfor the comparative year has been restated. The Group has no recognised gains and losses other than those included in theprofit and loss account. There is no difference between the profit as stated in the profit and lossaccount and the historical cost result for the year. CONSOLIDATED BALANCE SHEETat 31 August 2007 2007 2006 Note (restated) £000 £000Fixed assetsIntangible assets 713 808Tangible assets 249 253 962 1,061 Current assetsStock 1,094 911Debtors 2,432 1,488Cash at bank and in hand 682 549 4,208 2,948 Creditors: Amounts falling due within one year (3,583) (1,663)Net current assets 625 1,285 Total assets less current liabilities 1,587 2,346 Creditors: Amounts falling due in more than one year - (235)Provisions for liabilities - -Net assets 1,587 2,111 Capital and reservesCalled up share capital 403 534Share premium account - 2,412Share option valuation reserve 63 27Profit and loss account 1,121 (862)Total equity shareholders' funds 4 1,587 2,111 CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 August 2007 2007 2006 (restated) £000 £000 Net cash (outflow)/inflow from operating activities (110) 22Returns on investment and servicing of finance:Interest (paid)/received (72) 18Net cash (outflow)/inflow from returns on investment and servicing of finance (72) 18 Taxation 16 (7) Capital expenditure and financial investment:Payments to acquire tangible fixed assets (80) (68)Sale of tangible fixed assets 8 -Net cash outflow from capital expenditure and financial investment (72) (68) Acquisitions and disposalsPurchase of subsidiary undertakings - (1,346)Cash acquired with subsidiary undertakings - 1,000Net cash outflow from acquisitions and disposals - (346) Net cash outflow before management of liquid resources and financing (238) (381)Re-purchase of shares (1,085) -Bank flexible debt finance facility 1,459 -Sale of short term investments - 54Net cash outflow from financing (3) (1)Increase/(decrease) in net cash 133 (328) Reconciliation of operating profit to net cash (outflow)/inflow from operatingactivities 2007 2006 £000 £000 Operating profit 582 153Goodwill amortisation 95 54Depreciation 79 57Share option valuation charge 36 14Profit on disposal of fixed assets (3) -Increase in stocks (183) (231)(Increase)/decrease in debtors (944) 6Increase/(decrease) in creditors 463 (31)Decrease in long-term creditors (235) -Net cash (outflow)/inflow from operating activities (110) 22 NOTES TO THE ACCOUNTS 1. Turnover and segmental information The turnover, profit 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: 2007 2006 £000 £000 UK 8,759 5,484North America 195 188Far East, Europe and other 787 777 9,741 6,449 2. Taxation 2007 2006(a) Analysis of charge in period restated £000 £000Current tax:UK Corporation tax on profits for the current year 1 22Adjustments in respect of prior years (16) (2)Total current tax (note 2b) (15) 20Deferred tax - -Tax (credit)/charge on profit on ordinary activities (15) 20 The corporation tax rate for 2007 is 20% (2006 - 19%). As referred to in the Operational and Financial Review on pages 4 and 5, theresult for the current year has created a profit for tax purposes, which can beoffset 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 of 20% for 2007 (2006 - 19%).The differences are explained below: 2007 2006 restated £000 £000 Profit on ordinary activities before tax 510 171Standard rate of corporation tax 20% 19%Profit on ordinary activities multiplied by the standard rate of corporation tax 102 32 Effects of:Permanent differences 58 19Adjustments relating to prior year corporation tax (16) (2)Current tax losses utilised (158) (30)Accelerated capital allowances (2) 1Case III interest receivable 1 -Current tax (credit)/charge for the period (note 2a) (15) 20 The Company has unutilised tax losses of approximately £840,000 at 31 August2007. There are at present no other factors which will influence the Group's taxationin future years. 3. Earnings per share The calculation of basic earnings per share is based on the profit aftertaxation for the period and the weighted average number of shares in issueduring the period. The earnings for the year are diluted by the share options that are exercisableas a result of the performance condition for the year being attained. The profit for the year and the weighted average number of shares used in thecalculations are set out below: 2007 2006 restated Weighted Per Weighted Per average share average share Earnings number amount Earnings number amount £000 of shares pence £000 of shares penceBasic earnings per shareProfit attributable to 525 22,155,137 2.4p 151 26,176,979 0.6pordinary shareholdersEffect of dilutivesecuritiesShare options - 1,374,461 (0.2p) - - -Diluted earnings per share 525 23,529,598 2.2p 151 26,176,979 0.6p 4. Reconciliation of movements in shareholders' funds Group Group Company Company 2007 2006 2007 2006 restated restated £000 £000 £000 £000 Opening shareholders' funds 2,111 1,892 1,997 1,895Share option valuation reserve 36 14 36 14Cancellation of share premium account (2,412) - (2,412) -Corresponding increase in profit and loss account 2,412 - 2,412 -Issue of new shares during the previous year - 54 - 54Purchase and cancellation of ordinary shares (1,085) - (1,085) -Profit for the financial year 525 151 525 34Closing shareholders' funds 1,587 2,111 1,473 1,997 This information is provided by RNS The company news service from the London Stock Exchange