Solid State Regulatory News (SOLI)

5 Jul 2006 11:44

Solid State PLC05 July 2006 SOLID STATE PLC PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2006 CHAIRMAN'S STATEMENT Trading Review Solid State Supplies During the course of 2005 and in common with other distributors Solid StateSupplies suffered the loss of three component franchises, as the market inelectronic component distribution continues to consolidate. We have since takensteps to both replace these lines and broaden our product offering with theappointment of a Business Development Manager. The first phase of this processis now complete and we will sign further lines during the first half of thisfiscal year. We continue to reduce costs where appropriate without compromisingcustomer service levels. In addition, the re-branding of the group we believe will increase customerawareness of our produce range and assist us in increasing sales. I am pleasedto report that trading conditions have improved since March and our book to billratio for the first two months of the year amounted to 1.20 to 1.00 and thesigns are that market conditions will remain buoyant throughout this financialyear. Steatite and Wordsworth Technology The re-organisation of Steatite and Wordsworth was completed in January 2006 ontime and within budget. The improved efficiencies projected have already shown apositive result to the businesses. Year on year sales growth of the continuing business was 6.8% over thecorresponding period in the prior year. Costs have remained under close scrutiny and the companies have preparedthemselves for the introduction of RoHs (Restriction of Hazardous Substances)registration which comes into effect in July 2006 minimizing risks to thebusiness. The result is that a strong platform for maximizing profit and increasing salesis in place and the companies are confident in achieving their goals movingforward. Our business strategy is to continue to focus on demand creation forvalue added own brand products increasing market share and consolidating theirposition. Dividends In view of the substantial costs incurred in recent months with there-organisation of Steatite and Wordsworth Technology the Directors have decidedthat no final dividend should be declared for the year ended 31st March 2006.This means that the total dividend in respect of the year is 0.5p compared with3.5p per share last year. Summary We have recorded a good start to the new financial year at both sites and theBoard believes we are in a strong position to develop during the currentfinancial year and beyond. Peter Haining Chairman 5 July 2006 MANAGING DIRECTOR'S REVIEW The audited loss before tax of the Group was £60,000 (2005: profit of £315,000)after charging non-recurring expenses of £119,000 comprising relocation expensesof £89,000 and an ex-gratia payment to a former director of £30,000, and aftercharging goodwill amortisation of £71,000 (2005: £35,000). The difficulties experienced in the electronic component distribution businessillustrate the importance of the Group's strategy in diversifying intomanufacturing, commenced in 2002 with the acquisition of the Steatite businessand strengthened in 2005 with the acquisition of Wordsworth Technology Limited.In the year ended 31st March 2006, over 60% of the group turnover was generatedby these businesses, whereas in the previous year Solid State Supplies hadaccounted for 56% of group turnover. Following the loss of three significant franchises in 2005, the Board took thedecision that investment should be made to restore the core electronic componentdistribution business to profitability and the results to date have beenpositive. Book to bill ratio is always a key indicator of trading trends, and aratio of 1.20 to 1.00 for the first three months of the new financial year is astrong indication that the steps being taken which have included strengtheningthe sales team, the appointment of a Business Development Manager and activelyseeking new lines to broaden the overall product range are now giving positiveresults. A process of tightening stock control has been in place for many years,but the current expansion is being achieved with stock at historically lowlevels thus improving financial efficiency. The relocation of Wordsworth Technology Limited to Steatite's existing premisesat Redditch at the end of 2005 was achieved with a minimum of disruption totrade and the two businesses are now operating side by side. This has enabledsignificant savings in overheads, principally staff costs and premises expenses,in the order of £30,000 per month, and both businesses have been able to benefitfrom the close relationship with the other in terms of customer base, andtechnical expertise. For some time the impending Restriction of Hazardous Substances regulations havecast a shadow on the electronic component industry in the UK with uncertaintyover the detailed scope of the new regulations and areas to be exempted, anduntil recently a lack of urgency to react to the new regime on the part ofoverseas suppliers, particularly in the USA. Careful control of non-compliantstock levels at all sites has enabled the Group to prepare successfully for theimplementation in July 2006. Cash flow has been carefully controlled throughout the last year with the resultthat borrowing has been comfortably within available limits throughout. Invoicediscounting in place at Steatite and Wordsworth allows increases in workingcapital requirements arising from increased trading levels to be absorbedwithout stretching available resources. The purchase of Wordsworth for cashconsideration has increased borrowing levels significantly but repaymentsscheduled to medium term loans of £260,000 in the current year and £331,000 inthe following year will result in a significant overall reduction in borrowinglevels. The new year has started well with turnover in excess of £3.2m in the firstthree months and strong booking levels. Gary MarshManaging Director5 July 2006 Enquiries: Solid State plc Peter Haining 01892 667 466Chairman Gary Marsh 01892 836 836Managing Director Charles Stanley SecuritiesPhilip Davies 020 7149 6457 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 March 2006 2006 2006 2006 2005 £ £ £ £ Continuing Acquisitions Total Total Operations Turnover 8,310,071 2,141,896 10,451,967 9,480,429Cost of sales (6,025,917) (1,517,478) (7,543,395) (6,698,300) --------------- --------------- --------------- --------------- GROSS PROFIT 2,284,154 624,418 2,908,572 2,782,129Selling expenses (1,075,315) (140,207) (1,215,522) (1,181,137)and distributioncostsAdministrative (1,251,417) (424,436) (1,675,853) (1,285,865)expenses --------------- --------------- --------------- --------------- OPERATING (LOSS)/ (42,578) 59,775 17,197 315,127PROFITOther interestreceivable andsimilar income 3,639 1,943Interest payable (80,897) (1,660) --------------- --------------- (LOSS)/PROFIT ONORDINARY ACTIVITIESBEFORE TAXATION (60,061) 315,410Tax on profit on 34,893 (79,573)ordinary activities --------------- --------------- (LOSS)/PROFIT ONORDINARY ACTIVITIESAFTER TAXATION (25,168) 235,837 --------------- --------------- EARNINGS PER SHAREBasic (0.4)p 3.8pDiluted (0.4)p 3.8p All amounts relate to continuing activities. There were no recognised gains or losses other than the (loss)/profit for theyear as stated above. CONSOLIDATED BALANCE SHEETat 31 March 2006 2006 2005 £ (as restated) £ FIXED ASSETSIntangible assets 1,660,878 596,117Tangible assets 373,562 415,322 ----------------- ----------------- 2,034,440 1,011,439 CURRENT ASSETSStocks 1,081,498 1,091,215Debtors 1,863,854 1,941,024Cash at bank in hand 153,903 108,536 ----------------- ----------------- 3,099,255 3,140,775 CREDITORS: Amounts falling due within one 2,560,981 1,599,908year ----------------- ----------------- NET CURRENT ASSETS 538,274 1,540,867 ----------------- ----------------- TOTAL ASSETS LESS CURRENT LIABILITIES 2,572,714 2,552,306 CREDITORS: Amounts falling due after morethan one year 553,737 354,249 ----------------- ----------------- 2,018,977 2,198,057 ----------------- ----------------- CAPITAL AND RESERVESCalled up share capital 307,826 307,826Share premium account 756,980 756,980Capital redemption reserve 4,674 4,674Profit and loss account 949,497 1,128,577 ----------------- -----------------SHAREHOLDERS' FUNDS-EQUITY 2,018,977 2,198,057 ----------------- ----------------- CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 March 2006 2006 2005 £ £ Net cash inflow from operating activities 1,216,366 673,859 Return on investments and servicing offinance:Interest received 3,639 1,943Hire purchase interest paid - 29,522Other interest paid (80,897) (31,182) --------------- ---------------Net cash (outflow)/inflow from return oninvestments and servicing of finance (77,258) 283 TaxationCorporation tax paid (185,253) (71,575) Capital expenditure and financialinvestmentPayments to acquire tangible fixed assets (145,093) (80,616)Receipts from sales of tangible fixed 43,957 25,934assets --------------- ---------------Net cash outflow from capital expenditureand financial investment (101,136) (54,682) Acquisitions and disposalsReceipt from sale of joint venture - 500Purchase of business operation (1,833,167) -Net cash acquired with subsidiary 234,977 - --------------- ---------------Net cash (outflow)/inflow from acquisitionsand disposals (1,598,190) 500 Equity dividends paid (153,912) (217,875) --------------- ---------------Net cash (outflow)/inflow before financing (899,383) 330,510 FinancingMedium term loan received 500,000 -Repayments of medium term loan: capital (138,429) (108,572)elementHire purchase finance repaid: capital - (32,318)elementInvoice discounting finance received/(paid)(net movement) 501,566 (122,675)Purchase of own shares - (33,811) --------------- ---------------Net cash inflow/(outflow) from financing 863,137 (297,276) --------------- ---------------(Decrease)/increase in cash (36,246) 33,234 --------------- --------------- NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2006 1. The attached preliminary announcement is prepared on the same basis as setout in the previous year's annual accounts and does not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985; thestatutory accounts for the year ended 31 March 2006, upon which an unqualifiedaudit opinion has been given and which did not contain a statement under Section235, 237(2) or 237(3) of the Companies Act 1985, will be delivered to theRegistrar of Companies at a later date. A duly appointed and authorisedcommittee of the Board of Directors approved the preliminary announcement. 2. CHANGES TO ACCOUNTING POLICIES The group has adopted FRS 21 'Events after the balance sheet date'. Previously,equity dividends declared after the balance sheet date were recognised asliabilities at the year end, as required by company law and SSAP 17 'Accountingfor post balance sheet events'. In accordance with FRS 21 and recent changes tothe law, if a final equity dividend is declared after the balance sheet date butbefore the financial statements are authorised for issue, the dividend is notrecognised as a liability at the balance sheet date. The adoption of FRS 21 has resulted in an increase in shareholders funds of£123,130 at 1st April 2006 (2005 - £124,500) due to the write back of thedividend proposed at 31st March 2005. 3. OPERATING PROFIT The operating profit is stated after charging/(crediting): 2006 2005 £ £ Depreciation 150,860 177,049Loss on disposal of fixed assets 17,453 8,409Amortisation of goodwill 71,062 34,762Auditors' remuneration:Audit services 35,406 24,495Operating lease rentals:Plant and machinery 25,429 23,227Other 123,421 102,838Foreign exchange gains (67,184) (100,837)Employment termination costs 33,688 14,896Relocation expenses: Wordsworth 89,918 -Technology LimitedEx gratia payment to former director 30,000 -Research & development 10,123 - ----------------- ----------------- Included in audit fees is an amount of £15,349 (2005: £12,495) in respect of theCompany. Additional non-audit services regarding the purchase of WordsworthTechnology Limited were £24,498 (2005: £nil) and have been capitalised and addedto the goodwill figure on consolidation. The relocation expenses for Wordsworth Technology Limited of £89,918 representsthe costs, mainly staff termination costs, arising from the relocation of itsbusiness from Edenbridge in Kent to the Steatite Limited premises in Redditch inWorcestershire. 4. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATINGACTIVITIES 2006 2005 £ £Operating profit 17,197 315,127Amortisation of intangible fixed 71,062 34,762assetsDepreciation of tangible fixed 150,860 177,049assetsLoss on sale of tangible fixed 17,453 8,409assetsDecrease in stocks 222,634 165,764Decrease in debtors 800,776 85,597(Decrease) in creditors (63,616) (112,849) ---------------- ----------------Net cash in flow from operating 1,216,366 673,859activities ---------------- ---------------- 5. DIVIDENDS 2006 2005 (as restated) £ £Final dividend for the prior year of 2p 123,130 124,500per share (2005: 2p)Interim dividend paid of 0.5p per share 30,782 93,375(2005: 1.5p) ---------------- ---------------- 153,912 217,875 ---------------- ----------------No final dividend proposed for the year - 123,130(2005: 2p) ---------------- ---------------- 6. EARNINGS PER SHARE 2006 2005 £ £The earnings per share is based onthe following:Earnings (25,168) 235,837 ------------------ ------------------Weighted average number of shares 6,156,511 6,207,342Diluted number of shares 6,156,511 6,207,342 Earnings per share (0.4)p 3.8pDiluted earnings per share (0.4)p 3.8p Earnings per ordinary share has been calculated using the weighted averagenumber of shares in issue during the year. The weighted average number of equityshares in issue was 6,156,511 (2005: 6,207,342). The Diluted earnings per share is based on 6,156,511 (2005: 6,207,342) ordinaryshares which allow for the exercise of all dilutive potential ordinary shares. 7. The Annual Report will be sent to shareholders on 10 July 2006 and madeavailable to the public at the registered office of the Company at Unit 2,Eastlands Lane, Paddock Wood, Kent, TN12 6BU This information is provided by RNS The company news service from the London Stock Exchange