Bank Irel13.375 Regulatory News (BOI)

8 Mar 2005 07:00

Biotrace International PLC08 March 2005 FOR IMMEDIATE RELEASE:07.00am - 8th March 2005 BIOTRACE INTERNATIONAL PLC ANNOUNCES PRELIMINARY RESULTS for the year ended 31 December 2004 Biotrace International Plc ('Biotrace', the "Company" or the "Group"), a leadingmanufacturer of industrial microbiology products, today announces itspreliminary results for the year ended 31 December 2004. Highlights • Sales up 34% to £26.6 million (2003: £19.9 million) • Profit before amortisation, exceptional items and tax £3.0 million (2003: £3.8 million) • Profit before tax £2.2 million (2003: £3.3 million), reflecting changes in business mix and other factors now addressed • Profit before tax of £1.4 million in second half, up 75% on first half • Earnings per share 3.56p (2003: 7.37p, 5.39p per share on same tax charge) • Operating cash flow up 22% at £3.5 million (2003: £2.9 million) • Strong performances from International BioProducts ("IBP") and Tecra Pty Ltd ("Tecra"), acquired in September 2003 and June 2004 respectively. • Total dividend for the year increased by 22% to 1.40p (2003 : 1.15p) Commenting on the results, Terry Clements, Non-Executive Chairman of Biotrace,said: "The Group made solid progress in 2004 by continuing to implement its corporategrowth plans. In June last year, the Company acquired Tecra, an Australian basedbusiness, which expanded the Group's product offering and strengtheneddistribution in Asia Pacific. The transition to direct selling in North Americacoupled with other operational issues reported at the interim stage had anadverse effect on profits in the first half. The business however respondedwell in the second half with operating profits doubling from their first halflevel. In common with others operating in North America, the US dollar weaknesscontinues to adversely affect sales and profits. Top line growth in 2005 will be generated from a full year of contribution fromTecra but, also through continued organic growth. The enhanced product rangecoupled with our expanded direct sales organisation will help fuel this growth.The Company is now much stronger with greater visibility of its revenues which,together with the organisational changes made in the latter part of 2004, shouldcontinue to enhance financial performance. We have made a positive start to 2005 and the Company is well placed to continueto consolidate leadership in the industrial microbiology market. WhilstManagement's focus will be on improving profitability, it will also continue toseek out synergistic acquisitions that will add value to our customers and toour earnings in the longer term." For further information:Biotrace International Tel: +44 (0) 1656 641 400Ian Johnson, Chief Executive Officer Peter Morgan, Finance DirectorBuchanan Communications Tel: +44 (0) 20 7466 5000Tim Anderson / Mary Jane Johnson / James Strong BIOTRACE INTERNATIONAL PLC ANNOUNCES PRELIMINARY RESULTS for the year ended 31 December 2004 OVERVIEW: Group sales £26.6 million (2003: 19.9 million) Industrial £24.9 million (2003: £16.3 million)Life Science £ 1.0 million (2003: £0.8 million)Defence £ 0.7 million (2003: £2.8 million) The Company has identified the industrial diagnostics market, and in particularthe microbiology market, as having the most potential for profitable growth andis focussing its resources into establishing a significant presence. Theindustrial microbiology market was estimated in 2003 to be worth $3.2 billionand is forecast to grow to $4.9 billion by the end of 2008. The market is nowconsolidating, following the same trend observed in the clinical diagnosticsfield and this is providing opportunities for Biotrace to implement its strategyof broadening its product range and developing direct customer access forindustrial diagnostic products. Over the past few years, leading brands such as Cogent, Fred Baker Scientific,International BioProducts and, most recently, Tecra have added critical mass interms of distribution and product breadth. Biotrace is now in the top tier ofglobal companies addressing the industrial microbiology market, however with oneimportant difference, 94% of Group turnover is derived from this market, whereasmost of the top tier competition derives the majority of its revenues from theclinical diagnostics and life science markets. The Group's focus shouldtranslate into sustainable competitive advantage as it continues to expand itsdirect sales organisation and enhances its product portfolio. The business model is centred on maintaining a high level (> 80%) of recurringrevenues from reagents and other consumables from an equally high level of ownbrands via a direct sales organisation in major markets. This provides theGroup with good visibility of earnings, control over distribution and highmargins, all of which should translate over the long term into sustainablegrowth in sales and profits. The Industrial business is focussed on delivering innovative products andservices that reduce the time to result or provide automation or convenience forenvironmental monitoring, quality control and quality assurance testing. Itserves customers within the food, beverage, pharmaceutical, personal careproducts, water quality and industrial processing sectors. Companies around theworld rely on Biotrace to ensure product quality, optimise process performanceand safeguard human health. The Group's Life Science business, Ruskinn Life Sciences, manufacturesinnovative products for medical microbiology and life science research and hasan active R&D programme developing products for a wide range of applications.It addresses very different customer groups generally through third partydistribution and therefore exists as an independent business unit within theGroup. The Defence business unit develops and manufactures biological weapon detectionequipment and consumables, leveraging the Group's rapid detection technology.These systems are supplied to the UK MoD and several other governments anddefence organisations either directly or through larger defence partners.Biotrace is a strategic supplier to the UK MoD and manufactures defence-specificreagents through a joint venture company, Lucigen. Over the past 14 years theGroup's Defence business has grown by co-development of systems with the Defencescience and technology laboratories at Porton Down. However, since 2001 thebusiness has tended to be lumpy as it benefited from discrete contracts arisingfrom world events such as the increased threat from bio-terrorism and the Gulfconflict in 2003. Whilst Group sales moved ahead strongly in 2004, boosted by a full yearcontribution of IBP and a half year of Tecra, this was offset by a decline inDefence sales and a reduction in North American hygiene sales. The financialperformance of the business was also affected by a number of isolated issueswhich adversely affected margins and reduced profits compared with the previousyear. The issues were largely confined to the first half and second halfoperating profits were double that of the first half. As in previous years,growth was led by a significant increase in consumable sales, while theinstalled base of instruments continued to expand. Sales increased 34% to £26.6 million (2003: £19.9 million) whilst profit beforetax decreased to £2.2 million (2003: £3.3 million). Pre tax profit beforeexceptional items was £2.4 million (2003: £3.5 million). Earnings per sharedecreased to 3.56p (2003: 7.37p or 5.39p on same tax charge), with earningsbefore exceptional items also decreasing from 7.78p in 2003 to 3.84p. OPERATIONAL REVIEW: Group sales £26.6 million (2003: 19.9 million) Europe, Middle East & Africa £11.8 million (2003: £12.4 million)Americas £12.8 million (2003: £6.5 million)Asia Pacific £ 2.0 million (2003: £1.0 million) Following the acquisition of Tecra, the Group was able to establish a regionalstructure with operational centres in Europe, North America and Asia Pacific.This enables the Company to access global markets in a more efficient way andprovides a greater level of customer service. Each centre has manufacturing anda sales and support organisation. European sales decreased by 5% to £11.8 million (2003: £12.4 million), largelyas a result of the reduction in the level of UK defence sales. However, thiswas substantially offset by growth from industrial and life science products.Sales in the Americas almost doubled to £12.8 million, benefiting from a fullyear of contribution from IBP, which performed in line with expectations.Asia-Pacific sales doubled to £2.0 million as a result of strong organic growthand the second half contribution from Tecra sales in the region. Sales of the Group's own brands in 2004 increased to 82% of turnover (2003:80%), as a result of the second half contribution of Tecra. Direct sales, fromthe Group's sales subsidiaries, accounted for 87% of turnover (2003: 79%), withthe balance from the Group's network of international distributors. Reagentsand other consumables remained steady at 89% of Group sales. Industrial Sales £24.9 million (2003: £16.3 million) The Company's product offering to the industrial market expanded considerablyduring 2004, largely as a result of the acquisition of IBP in late 2003 andTecra in June 2004. Customers are now able to purchase a wider range ofproducts, including rapid hygiene tests, pathogen tests, pre-prepared culturemedia and sampling products, from an expanded direct sales organisation. Overall, Industrial sales grew 53% to £24.9 million in 2004 (2003: £16.3million) and generated over 90% of the Group's operating profits. The food andbeverage sectors, which now account for 81% of industrial turnover, benefitedfrom a contribution of £1.5 million from Tecra from the date of acquisition, anda full year of IBP at £9.4 million. Excluding these acquisitions, growth in thissector was adversely affected by a reduction in hygiene sales resulting from thechangeover from distributor sales to direct sales in North America. Althoughdelayed and hampered by manufacturing issues, sales of the new hygieneinstrument reached record levels, leading to growth of hygiene sales of 12% yearon year outside North America. Two new Air-traceTM air samplers were launchedin mid 2004 specifically for the pharmaceutical sector and a number of orderswere secured in the second half of the year, including an order for 24 systemsfrom a major Scandinavian company. In the fourth quarter a new automated linefor the production of pre prepared plated culture media was commissioned toincrease the capacity for the production of own brand media products. Life Science Sales £1.0 million (2003: £0.8 million) Ruskinn Life Sciences, which makes medical microbiology and research products,contributed sales of £1.0 million in 2004, significantly up on last year (2003:£0.8 million) as a result of the release of capital equipment budgets, whichwere frozen for most of 2003. Margins however, were adversely affected bysupply and manufacturing issues, reducing the contribution to the Group.Management is currently addressing these issues to maintain the momentum insales and return margins to a higher level. The Group is investing in the development of a new product aimed at the in vitrofertilisation market (IVF), with the anticipated launch of the product in mid2006. The IVF market is already large and growing and with increasingregulation demanding the correct environment for this procedure, Ruskinn expectsto develop a significant business in this field. Defence Sales £0.7 million (2003: £2.8 million) As anticipated, defence sales reduced significantly in 2004 to £0.7 million(2003: £2.8 million), accounting for less than 3% of Group turnover. The buildup for the Gulf conflict in 2003 resulted in one off reagent sales of £1.3million, which was not repeated in 2004. Moreover, the previous high level ofmonitoring in the Gulf region has dramatically reduced post conflict. Whilstsignificant concern still remains world wide with regard to the use ofbiological weapons, the current visibility would suggest a continuing low levelof business in the absence of any further conflicts or the development ofregular civil defence monitoring. Biotrace and Lucigen retain the ability tomeet any significant up turn in orders should the need arise. Product Development Expenditure on R&D during the year was similar to 2003 at £1.2 million. TheCompany launched a new replacement instrument for hygiene testing in the firstquarter of 2004 and completed the development of the Air-traceTM air sampler,which was launched late in the second quarter of the year. Other projects of asmaller nature continued throughout the year with Tecra adding to the R&Dexpense during the second half. Corporate Development IBP, acquired in September 2003 has been integrated into the Group and theintegration of Tecra, acquired in June 2004, is well underway. Management arecontinuing to seek ways in which to add value through new product development,acquisition of further new products and technologies and by expanding the directsales infrastructure. FINANCIAL REVIEW: Sales: Sales for the year were £26.6 million (2003: £19.9 million), a growth of 34%over 2003 and a compound annual growth rate since 2000 of 37%. The improvement in sales resulted from the full year effect of the acquisitionof IBP in September 2003, combined with six months contribution from Tecra,acquired in June 2004 and organic growth. Sales for the 2nd half were up 26% onthe corresponding period in 2003 and up 14% on the 1st half of 2004. During theyear, the US dollar declined by 7% relative to sterling following a decline of11% in 2003. The average rate used to translate the results of our USoperations declined by 12%, costing the Group £1.5 million in turnover on a likefor like basis. Gross Margins: Overall gross margins for the year were 51% (2003: 58%) improving in the 2ndhalf as anticipated, to 53% benefiting from the inclusion of Tecra and improvedoperating margins. Gross margin percentages are anticipated to continue at thislevel throughout 2005. Expenses: Selling and administrative costs, including goodwill amortisation, were £10.0million (2003: £7.1 million) before exceptional items, increasing as anticipatedover 2003 with the inclusion of a full year of costs of IBP, together with theselling and administration costs of Tecra included from June onwards.Amortisation during the period amounted to £0.6 million (2003: £0.3 million).Excluding the additional costs and amortisation noted above, underlyingoverheads remained at 2003 levels. Result for the Year: The profit before taxation was £2.2 million compared with £3.3 million in 2003.Exceptional costs of £0.2 million (2003: £0.2 million) were incurred in relationto the restructuring of the business on a geographical basis after theacquisition of Tecra. The associated costs were incurred mainly in the UK andare combined with the cost of relocating the Lucigen business to Bridgend, SouthWales and the change to direct distribution in North America. Taxation: The tax charge for the year of £0.8 million (2003: £0.5 million), represents anequivalent consolidated tax charge of 38%. As predicted the tax charge hasincreased following the recognition in full in 2003 of the US tax lossesavailable to the Group and increasing the deferred tax asset. Consequently theGroup does not yet pay federal taxes on profits in the US but the tax chargeincurred is set against the deferred tax asset on the balance sheet. The chargerepresents a high percentage relative to profit before tax due to the add backof goodwill amortisation, the majority of which is not allowed for tax purposes,and higher tax rates outside the UK. Earnings per share Earnings per share for 2004 was 3.56p (2003: 7.37p) reduced from the prior yeardue to lower earnings, a normalised tax charge and a greater number of shares inissue. To aid comparison with the current period, restating 2003's earningswith a 38% tax charge would have reduced earnings by £0.7 million and givenearnings per share of 5.39p. Dividend: The profitability of the Group coupled with the continuing strong cash flow, hasenabled the Board to recommend a final dividend of 1.15p per share, whichcombined with the interim dividend of 0.25p paid in October, gives a totaldividend of 1.40p per share for the year amounting to £0.5 million. Thisrepresents an increase of 22% over 2003. Cash flow: Cash flow from operating activities was robust, increasing by 22% over 2003 to£3.5 million (2003: £2.9 million) and has grown at a compound annual growth rateof 28% since 2000. The net cash inflow from operating activities was offset byinvestment in Tecra of £5.5 million, combined with net capital expenditure of£0.7 million, corporation tax payments of £0.9 million and dividend payments of£0.5 million. Balance Sheet: Equity shareholders' funds have increased by 9% to £16.5 million arising fromthe retained profits for the period of £0.8 million, combined with a foreigncurrency exchange gain of £0.3 million and the issue of £0.3 million worth ofnew shares. 575,000 ordinary shares were issued in the year, to satisfy the exercise ofoptions and warrants in the period. Capital investment totalled £0.7 million for the year (2003: £0.8 million).Intangible assets increased to £13.1 million from the valuation of patents, knowhow and trademarks arising on the acquisition of Tecra and an increase of £0.3million in the amount payable on the acquisition of Fred Baker ScientificLimited. Since the year end the amount of deferred consideration related tothis acquisition has been agreed with the payment of £0.9 million in loan notes,which are redeemable within an eighteen month period from July 2005. Stocks increased in the period by £1.0 million to £3.9 million, arisingprincipally from the acquisition of Tecra combined with some increasedstockholding of instruments at the year end. Debtors decreased marginally yearon year despite the addition of Tecra debtor balances of £0.5 million. Cash and indebtedness: Cash balances at the year end amounted to £0.8 million, with borrowings of £4.1million giving a net debt position of £3.3m, representing gearing of 20%. Bythe year end, the depreciation of the US dollar had reduced the balance of theloan liability in the Group's balance sheet by £0.3 million, with £4.1 millionoutstanding at 31 December 2004. OUTLOOK: The restructuring of the Group has resulted in greater efficiency andproductivity and this was reflected in part in our second half performance.Trading at this early stage in 2005 is encouraging as the level of profitabilityachieved in the second half of 2004 is still in evidence. The Company is nowmuch stronger in an increasingly competitive environment with greater directsales, more own brands and a high level of repeat consumable business. Growth over the long term will continue to be driven by the Industrial division,through a combination of organic growth and strategic acquisitions as theindustrial microbiology market continues to consolidate. The Life Sciencedivision will be more visible in its contribution to growth of the Group whenthe IVF products are launched and sales commence from 2006 onwards. The Defencedivision will, as in the past, continue to perform better in some years thanothers but it provides us with high quality and profitable business whencontracts are won. Biotrace remains strongly cash generative and is well positioned to takeadvantage of the opportunities for profitable growth that will add value forshareholders. GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 December 2004 Note 2004 2004 2003 2003 £'000 £'000 £'000 £'000 TURNOVER 1Continuing operations 25136 17047 Acquisitions 3 1503 2854 26639 19901Cost of sales (13108) (8339) GROSS PROFIT 13531 11562Selling and administrative expenses - ordinary (10005) (7119) - exceptional 2 (157) (185) (10162) (7304)Development costs (1155) (1131) (11317) (8435) OPERATING PROFITContinuing operations 2031 2870 Acquisitions 183 257 2214 3127Share of operating profit in associate 19 55Share of operating profit in joint venture 57 51TOTAL OPERATING PROFIT & SHARE OF JOINT VENTURE AND 2290 3223ASSOCIATE Interest receivable and similar income - Group 82 161 - Joint Venture 1 1Interest payable and similar charges - Group (114) (33) - Joint Venture (50) (50) PROFIT ON ORDINARY ACTIVITIES BEFORE EXCEPTIONAL ITEMS &TAXATION 2366 3497Exceptional costs (157) (185)PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2209 3312 Tax on profit on ordinary activities 4 (843) (526) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 1366 2786 Equity minority interests 9 (54) PROFIT FOR THE FINANCIAL YEAR 1375 2732 Dividend 5 (547) (440) RETAINED PROFIT FOR THE FINANCIAL YEAR 828 2292 EARNINGS PER SHARE - basic 3.56p 7.37p - diluted 3.53p 7.24p - before exceptional items 3.84p 7.78p - before amortisation & exceptional items 6 5.27p 8.60p GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 31 December 2004 2004 2003 £'000 £'000 Profit for the financial year 1375 2732Difference in net investment in foreign enterprises arisingfrom changes in foreign currency exchange rates 284 (212) TOTAL RECOGNISED GAINS AND LOSSES 1659 2520 GROUP BALANCE SHEET At 31 December 2004 Note 2004 2003 £'000 £'000FIXED ASSETSIntangible assets 3 13110 8183Tangible assets 2737 2577Investments in joint venture - share of gross assets 764 754 - share of gross liabilities (610) (606)Investment in associate - 727 16001 11635 CURRENT ASSETSDeferred tax asset 4 460 875Other debtors due in more than one year 100 205Debtors due in less than one year 5047 5071Debtors 5607 6151Stocks 3905 2919Cash at bank and in hand 758 4221 10270 13291 CREDITORS - Amounts fallingdue within one year (6192) (5267)NET CURRENT ASSETS 4078 8024 TOTAL ASSETS LESS CURRENT LIABILITIES 20079 19659 CREDITORS - Amounts fallingdue after more than one year (3027) (4081) PROVISIONS FOR LIABILITIES AND CHARGES (99) - TOTAL NET ASSETS 16953 15578 CAPITAL AND RESERVESCalled up share capital 3887 3829Share premium account 9921 9707Revaluation reserve 29 29Merger reserve 390 390Profit and loss account 7 2243 1131 EQUITY SHAREHOLDERS' FUNDS 8 16470 15086 Equity minority interest share in net assets 483 492 16953 15578 GROUP CASH FLOW STATEMENT for the year ended 31 December 2004 Note 2004 2003 £'000 £'000 NET CASH FLOW FROM OPERATING ACTIVITIES 9 3519 2883 RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest received 83 164Interest paid (151) (79)Interest paid in respect of hire purchase agreements (1) (4) (69) 81 TAXATIONAmounts paid in respect of tax (866) (696) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPayments to acquire tangible fixed assets (726) (847)Payments to acquire intangible fixed assets (4) -Receipts from sale of tangible fixed assets 57 30 (673) (817) ACQUISITIONS AND DISPOSALSPurchase of subsidiary undertakings (5672) (4796)Net overdraft acquired with subsidiary - (14)Cash acquired with business 204 151 (5468) (4659) EQUITY DIVIDENDS PAID (539) (349) NET CASH OUTFLOW BEFORE FINANCING (4096) (3557) FINANCING Issue of ordinary share capital 272 164Increase in debt:New secured loan repayablewithin 1 year (352) 845after more than 1 year 714 3180Repayment of capital element of hire purchase and finance leaseagreements (18) (22) 616 4167 NET CASH (OUTFLOW)/INFLOW 10 (3480) 610 Notes 1. TURNOVER An analysis of turnover by geographical area is as follows: 2004 2003 £'000 £'000 Europe, Middle East & Africa 11851 12378Americas 12782 6545Asia Pacific 2006 978 26639 19901 An analysis of turnover by sector is as follows: 2004 2003 £'000 £'000 Industrial 24949 16256Life Science 1018 805Defence 672 2840 26639 19901 2. EXCEPTIONAL ITEMS Included in selling and administrative expenses are exceptional items of £0.2million (2003: £0.2 million) of costs associated with the restructuring of partof the Group's activities. These expenses arose through the restructuring of thebusiness on a geographical basis after the acquisition of Tecra. Theseassociated costs were incurred mainly in the UK and are combined with costsrelating to the relocation of the Lucigen business to Bridgend, South Wales andthe change to direct distribution in North America. 3. INTANGIBLE ASSETS During the year the Group made the following investments: On 11 June 2004 the Company, through an Australian subsidiary company BiotraceAustralia Holdings Pty Limited, acquired the remaining share capital of Tecrafor £5.5m. Previously through Biotrace International BioProducts Inc, Biotraceheld 21% of the ordinary shares of Tecra as an associate. The provisional fairvalue of the assets acquired with the company were: Book value Adjustments Fair value £'000 £'000 £'000Fixed assets - tangible 467 - 467 - patents 1506 2855 4361 - other intangible - 1471 1471Stocks 770 - 770Debtors 782 64 846Creditors (946) - (946) 2579 4390 6969 Satisfied by the following consideration:Cash 5218Shares already owned at fair value (see note below) 1400Acquisition costs 317Net cash acquired 34 6969 A fair value adjustment of £770,000 has been made to increase the value of theshares in Tecra held by IBP prior to Biotrace's acquisition of the US companywhich has decreased the amount of goodwill arising on the acquisition of IBP in2003. A fair value adjustment was made to recognise the value of the patents andother intangible assets acquired in Tecra. Tecra's contribution to the operating profits since acquisition is set outbelow: 11 June - 31 December 2004 £'000Turnover 1503Cost of sales (402) Gross profit 1101Selling and administrative expenses (918) Operating profit 183 4. TAXATION The Group tax charge amounted to £0.8 million. This includes £0.4 millioncurrent tax and £0.4 million deferred tax. The deferred tax charge relates tothe reduction in the deferred tax asset arising from the utilisation of US taxlosses. The 2003 group tax charge consisted of UK and overseas tax chargetotalling £0.9 million offset by a deferred tax credit of £0.4 million relatingto the full recognition of US tax losses. 5. DIVIDEND 2004 2003 pence per share pence per share Dividend - interim paid 0.25 - - final proposed 1.15 1.15 The dividend proposed in respect of the year ending 31 December 2004 will bepayable on 16 May 2005 to shareholders on the register on 15 April 2005. 6. EARNINGS PER SHARE Earnings per share is based on the profit after taxation of £1.4 million (2003:£2.7 million) and the weighted average number of shares in issue during the yearof 38,633,574 (2003: 37,072,508). Diluted earnings per share is based on theprofit after taxation of £1.4 million (2003: £2.7 million) and 38,899,921 (2003:37,734,250) ordinary shares. The Group has calculated an earnings per share before exceptional items in orderto inform shareholders of the underlying position of the Group's results. Theearnings before exceptional items is calculated in the following way: 2004 2003 £'000 £'000Profit after tax and minority interests 1375 2732Add: Exceptional administrative expenses 157 185Less: Tax on exceptional items (cost only) (47) (32) 1485 2885 In addition earnings per share before exceptional items andamortisation has been calculated as follows:- 2004 2003 £'000 £'000Profit before exceptional items 1485 2885Add: Amortisation of intangibles 603 345Less: Tax on amortisation (50) (42) 2038 3188 7. Profit and loss account 2004 2003 £'000 £'000 Accumulated profits/(losses) brought forward 1131 (949)Profit for the year 1375 2732Exchange difference on translation 284 (212)Dividend interim paid, final proposed (547) (440)Accumulated profits carried forward 2243 1131 8. Reconciliation of movements in shareholders' funds 2004 2003 £'000 £'000Profit for the year 1375 2732Dividend paid and final proposed (547) (440)Profit for the financial year 828 2292Shares issued 272 2203Exchange difference on translation 284 (212) Net increase to equity shareholders' funds 1384 4283Opening equity shareholders' funds 15086 10803Closing equity shareholders' funds 16470 15086 9. Reconciliation of operating profit to net cash flow from operating activities 2004 2003 £'000 £'000Operating profit 2214 3127Depreciation and amortisation charges 1569 1037Increase in stocks (249) (276)Decrease/(increase) in debtors 325 (1112)Decrease in creditors (259) (73)Share in joint venture results 57 51Currency adjustment on intercompany balances (138) 129 3519 2883 10. Reconciliation of net cashflow to movement in net funds 2004 2003 £'000 £'000Net cashflow (3480) 610Cash inflow from increase in debt (362) (4025)Cash outflow from decrease in finance lease 17 21financingChange in net funds from cash flows (3825) (3394)Loans acquired with subsidiary (238) -Finance leases acquired with subsidiary - (37)Effect of exchange rate changes and non cash movements 272 292Movement in net funds in period (3791) (3139) 465 3604 Net funds brought forwardNet (debt)/funds carried forward (3326) 465 11. Analysis of net funds B'fwd Acquisitions Cash Other Exchange C'fwd £'000 £'000 movements non cash movements £'000 movements £'000 £'000 £'000 Cash at bank and in hand 4221 - (3480) - 17 758Overdrafts - - - - - -Net cash 4221 - (3480) - 17 758 Bank loans:Due within 1 year (782) (238) 352 (730) 255 (1143)Due after more than 1 year (2933) - (714) 730 - (2917)Finance lease and hire purchase (41) - 17 - - (24)agreementsNet funds/(debt) 465 (238) (3825) - 272 (3326) 12. Basis of preparation The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 December 2003 or 2004. The financialinformation for 2003 is derived from the statutory accounts for 2003 which havebeen delivered to the registrar of companies. The auditors have reported on the2003 accounts; their report was unqualified and did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The statutory accountsfor 2004 will be finalised on the basis of the financial information presentedby the directors in this preliminary announcement and will be delivered to theregistrar of companies following the company's annual general meeting. This Preliminary Statement was approved by the Board of Directors on 7March 2005. This information is provided by RNS The company news service from the London Stock Exchange