APC Technology Regulatory News (APC)

APC Technology Group PLC ("APC", "Group" or the "Company")

Trading Statement

APC Technology Group PLC (AIM: APC), the provider of technologies and services intended to help improve organisational sustainability and specialist distributor of electronic components, is pleased to provide an update on its current trading and anticipated results for the six months ended 28 February 2015.

Headlines

§ Group revenues for the period anticipated to be up approximately 20% on H1 2014

§ Further strengthening and diversification of customer base

§ Expansion of Minimise Group through the creation of Minimise Water Limited and Minimise Generation Limited

§ Delivery of cross-selling momentum and operational efficiencies following the acquisition of Green Compliance plc

§ Working capital position enhanced by £3.5m fundraising during the period and £6m invoice discounting facility

Financial Performance

In the six months ended 28 February 2015, the Group is expected to report sales of approximately £14.4m (2014 H1: £12.1m) and to declare an operating profit before interest, tax, amortisation and exceptional costs of approximately £250,000 (2014 H1: £791,000) when it publishes its interim results at the end of May. Exceptional costs incurred in the period include acquisition costs in respect of Green Compliance plc of £650,000, restructuring costs of £150,000 and discontinued costs relating to the acquisition of Green Compliance plc totalling £350,000. The majority of the one off costs relating to the integration of Green Compliance into the Group have now been expensed.

Revenue Growth

Revenues in Minimise Energy were approximately £4.0m during the period (2014 H1: £5.9m). Importantly, however, as a result of investments made during the period to strengthen sales and marketing activities, significant progress was made in reducing over-reliance on any one customer with sales to customers other than Wm Morrisons increasing 300% from £0.9m to £3.6m. Further recent expansion of the Minimise Energy order book indicates that sales in the second half will be significantly higher than in the first half year of the year.

Half year revenues in Green Compliance, which now trades as a part of Minimise Water, were in line with expectations at £4.1m. This business has maintained its core water hygiene and treatment contract base and has begun to develop new revenue streams through an extension of its products and services related to the management of water consumption.

Minimise Solutions, the Group's sustainability consulting business, had a successful period of growth with a new contract secured with Royal Mail Group supplementing revenues from other new and existing clients. Minimise Finance secured its initial energy efficiency projects during the period and has a number of significant proposals under review. Both Minimise Solutions and Minimise Finance are intended to be profitable in their own rights as well as serving to generate and support sales for the other parts of the Minimise Group.

Sales continue to grow overseas where Minimise Energy has operations in Miami, Florida in the USA and Waterloo, Ontario in Canada. Operations were expanded during the latter months of 2014 and, whilst these businesses are still at a relatively early stage, the value of opportunities under development is growing and progress is encouraging.

Revenues in APC's electronic component distribution business, which trades as Advanced Power Components, were flat at approximately £6.2m when compared with the corresponding period in the prior year. The order book for the second half of the current financial year is strong which is consistent with historic trading patterns in which the second half of the year is typically stronger than the first half in this part of the business.

Operational Performance

Following the acquisition of Green Compliance plc in September 2014 and the creation of Minimise Generation Limited in January 2015, APC's Minimise Group now delivers an expanded range of innovative technologies, products and services, including energy efficiency, energy generation, water management, sustainability consulting and project financing, to a significantly expanded customer base.

Since the Green Compliance acquisition a number of important integration milestones have been reached. From a sales and marketing perspective, Salesforce CRM, a customer relationship management platform, has been rolled out across the Minimise Group to improve sales pipeline visibility and opportunity management. A number of cross-selling initiatives have already been implemented using this platform, including the Minimise internal commission sharing 'ReferAll' programme which has already identified close to 100 new customer opportunities. The impact of these initiatives has been enhanced as a result of a complete rebranding exercise undertaken across the Minimise businesses. This has made the Company's wider sustainability offering easier to understand from a commercial standpoint and is expected to have a significant impact on the expansion of the customer base. Significant internal restructuring is on-going with steps being taken to rationalise head office costs, drive operational efficiencies and leverage economies of scale.

Working Capital and Funding for Growth

Between December 2014 and February 2015 £3.5m of cash was raised to fund expansion via the placing of, in aggregate, 17,193,182 new ordinary shares in the Company. Net debt at the end of the period was £1.25m including cash on hand of £2.4m, £2.9m drawn on the invoice finance facility (against a gross debtor book of £4.5m) and £750,000 of unsecured loan notes from shareholders, which are due to be redeemed in July 2015. This is a £500,000 improvement on the pro-forma balance sheet net debt position as at August 2014.

In addition to the aforementioned acquisition, restructuring and re-financing costs incurred during the period, the Group invested approximately £300,000 to create Minimise Generation, £400,000 in expanding its operations in the Americas and £1.2m in working capital to support the recent growth in Minimise Energy. These measured investments, supported by the Company's shareholders, are enabling the Group to move into the next phase of its development.

Summary

In summary, the Group continues to invest to create an organisation with the potential to deliver revenues and profits on a significantly higher scale than has been achieved in prior years. The Board is very appreciative of the Group's shareholders, whose investment and continued support has enabled the Group to create a stable working capital base to fund this exciting phase in its development, and look forward to the future with confidence.

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