Checkit Regulatory News (CKT)

1 February 2013

Elektron Technology plc 

Year-end technology, trading and operations update

Elektron Technology plc (AIM: EKT, "Elektron" or the "Group"), the global technology group, provides an update on performance for the full year to 31 January 2013.

Elektron continues to make significant progress in building its new product development pipeline and in developing an organisation that is fit for the future. This multi-year transformation agenda is designed to create an innovation led technology company with a world class infrastructure and a portfolio of products with unique selling points, protected through intellectual property rights. Sales from continuing operations in the year were approximately £55m (2012: £63m); further information is provided under Trading and outlook below.

New product development ('NPD') in 2012/13

Following the foundation of its Technology Centre in Cambridge in mid 2011, Elektron has made its first significant new product launches for many years. This development is much needed, as the Group's legacy product portfolio is mature in its life cycle, naturally leading to a reduction in demand for some products. In Connectivity, for example, over 75% of the core range is now more than 30 years old and the portfolio in Instrumentation, Monitoring and Control is also in need of renewal.

New products were introduced across three separate product lines during the year:

Ø The Bulgin 6000 series twist and lock (patent pending) connectors for harsh environments

Ø The first line in a new range of Queensgate nanopositioning products with Dual Sensor Control technology (patent pending)

Ø The MPS II ophthalmic device for age related macular degeneration ("AMD") screening under the Elektron Technology brand. This is the only such instrument available worldwide in its price range.

Each of these new products has been well received in its relevant market, though sales pipelines naturally take time to build. In the case of medical products it is necessary to gain approval from government regulatory agencies prior to selling in most geographical markets. With lessons learned from these developments, the Group continues to invest in NPD with confidence.

Planned launches in 2013/14

The pace of investment increased substantially in the year just ended and further significant new product introductions are planned for 2013/14. Elektron intends to launch the following in the current year:

Ø Further extensions to the Bulgin range of connectors for harsh environments

Ø Additions to Queensgate nanopositioning products

Ø Elektron's first product involving a platform technology addressing the "Internet of Things", a system of smart sensors, wireless communications and networked computing that transforms how innovative solutions can be built and delivered.

Product line rationalisation

Elektron views the diversity of its product range as a strength. However, parts of the portfolio are of low, no or negative growth. A managed cull of underperforming brands and products has begun, to ensure that investment is focussed on areas with the most potential for profits and growth. The ASL brand, one of the smallest brands acquired with the Hartest business, was sold in January 2013 as part of this programme, as previously reported, and the Tinsley name is being discontinued.

Building an effective organisation

Elektron continues to make good progress in building an organisation designed to support its growth aspirations. Since the relocation of the Group to Cambridge, the senior management team has been strengthened with expert additions to key functions: Sales, Marketing, Product Line Management, Quality, Operations, Finance and Human Resources, in addition to the creation of a highly skilled technical team.

Two years ago, the Group used 11 different IT systems across its businesses for transaction processing and reporting. Today, approximately 80% of the Group's operations are managed through a single Enterprise Resource Planning system and the migration of the remaining activities onto this platform will complete during the coming year. This has brought considerable benefits in the speed, consistency and quality of information available, as well as improvements in efficiency and control.

Streamlining and cost reduction

The closure of the Redhill and West Molesey factories, announced a year ago, is on track for completion as scheduled during 2013/14 and the consolidation of Arcolectric production into the Group's facility in Tunisia is now virtually complete, with a corresponding reduction in Elektron's manufacturing activities in China which is no longer regarded by the Group as a low cost location. China remains an important market for Elektron products and the Group retains a significant presence there.

Building on the success of these changes, further rationalisation programmes have now been identified for implementation during 2013/14. Approximately £1.5m was invested in organisational changes during 2012/13 and the Group expects to incur a further £2.5m to complete these programmes in the coming year. In steady state, the programmes in aggregate are expected to deliver annual savings in excess of £3m, including at least £1m in 2013/14. In addition to the cost savings, the Group will benefit through a simplified operating configuration providing closer control of product quality and lead-time to customers.

Geographical focus

The Group has continued to focus on the creation and strengthening of selling channels in both its core and emerging markets. Through its branded manufactured products with a unique selling proposition sales have begun to stabilise, especially in the Asia Pacific region. The distribution network in this region has been further expanded to include key territories such as South Korea, Japan and Taiwan.

The Group is also seeing opportunities for its differentiated products in India. However, its legacy

Indian factored business, offering turnkey calibration and instrumentation equipment with little differentiation, has seen a dramatic decline due to local competition and falling demand. The Group is actively looking at the future of this business.

Trading and outlook

Elektron's products are on relatively short lead times, so the order book provides very limited visibility of future sales. The Group saw a modest upturn in performance in the third quarter of the year compared with the equivalent periods in the previous year, but this was not sustained to the year end. Sales in December and January were particularly disappointing.

Full year sales from continuing operations in the year to 31 January 2013 were approximately £55m (2012: £63m). Elektron remains highly operationally geared, so the decline in sales has a disproportionate effect on trading profits. As a result, it is expected that the Group's performance was around break-even in the second half of the year before interest and exceptional charges (2012: £1.5m).

Net borrowings at 31 January 2013 are expected to be less than £6m (2012: £4.4m), reflecting the investment in restructuring and new product development.

It will take some time for the results of the new product development programme to outweigh the effect of the economic cycle on the Group's legacy product portfolio. We therefore expect a further reduction in sales from continuing operations in the coming year. However, with a pipeline of NPD activities, continuing investment in recruiting a high calibre management team and further cost savings through streamlining Elektron faces the future with confidence.

Elektron expects to release its full year results on 11 April 2013.

Notes to Editors

Elektron Technology is a global designer and manufacturer of fast moving engineered products, the precision engineered components that enable three of the most important technology areas of the always-on, networked economy: Monitoring & Control, Connectivity and Precision Instrumentation.

The Group has a broad portfolio of products that are recognised leaders in their markets, playing a critical role in many industries from underwater construction to food preparation, semiconductor manufacture to emergency vehicle systems. They result from a commercially focused, customer-led new product development process centred on the Group's Technology Centre based in Cambridge. The Group's products are sold worldwide to 7,000 customers; 100,000 end-users, and used in all 7 continents and in space.

Elektron Technology is headquartered in Cambridge and traded on the AIM market of the London Stock Exchange.