Interim Results

Stanelco PLC 19 June 2002 STANELCO PLC - INTERIM ANNOUNCEMENT * Stanelco, the Rf (radio frequency) applications group, announces that, on balance, progress was made in the six months ended 30 April 2002. * On turnover 31.6% down at Â£2,151,000, underlying pre-tax profit was 50.5% lower at Â£274,000, whilst reported pre-tax profit was 9.4% down at Â£501,000. * Demand for the core activity - the manufacture of furnaces and supply of related consumables for the manufacture of optical fibre - was substantially reduced due to the state of the telecommunications market, as predicted in the preliminary announcement of 4 February. However, Stanelco's optical fibre activity has remained profitable and cash generative and the Group has significantly increased its share of the available market and signed key supply agreements. * In December 2001, Stanelco entered into agreements with R P Scherer (the world leader in softgel capsule technology) to commercialise Stanelco's technology for heat sealing soft gel pharmaceutical capsules, with a resultant very significant increase in the rate of progress subsequently. * Reflecting the agreements with R P Scherer, period end net cash increased to Â£1,604,000 from Â£637,000. * Following 12 months of intensive development and testing in conjunction with potential customers, Stanelco has developed a new product for welding high-end waste containers made of plastic, generating a significant contract and extensive enquiries. * Stanelco's first sale of equipment based upon the plastic proof welding method was made in the period to a well known domestic kettle manufacturer. * It is the Directors' current intention to propose at the AGM a dividend per share of 0.02p - double that paid last year. * Ian Balchin, Chief Executive, stated 'We expect to see improvements in the turnover and underlying profitability during the second half of the year and to be able to generate significant growth in turnover and profit as our new applications are commercialised.' Enquiries: Stanelco PLC 01489-570991 Ian Balchin (Chief Executive) Bankside Consultants Limited Charles Ponsonby 020-7444 4166 CHIEF EXECUTIVE'S STATEMENT Our aim is simple, to create a valuable technology business based upon Radio Frequency ('Rf') applications. On balance, progress was made in the period. Demand for the activity which currently generates substantially all the Group's turnover - the manufacture of furnaces and supply of related consumables for the manufacture of optical fibre - was substantially reduced due to the state of the telecommunications market, as predicted in the Company's preliminary announcement of 4 February 2002, and as a result profits suffered. However, significant progress has been made, both during the period and subsequently, in the development of three businesses also based on Rf technology - pharmaceutical capsules, high-end waste packaging and plastic welding. Results On turnover 31.6% down at Â£2,151,000 (2001: Â£3,145,000), underlying pre-tax profit was 50.5% lower at Â£274,000 (2001: Â£553,000), following the capitalisation of research and development costs totalling Â£295,000 (2001: nil) permitted by progress in the development of the Group's new businesses. Including an exceptional credit of Â£227,000 referred to below, the reported pre- tax profit was Â£501,000 (2001: Â£553,000). Basic earnings per share were 0.029p (2001: 0.058p) on an underlying basis and 0.052p (2001: 0.058p) on a reported basis. Period end net cash increased to Â£1,604,000 (2001: Â£637,000) following the receipt during the period of Â£1,113,000 in respect of the issue of ordinary shares in the Company and its subsidiary, InGel Technologies Limited. Net interest received in the period also increased, to Â£21,000 (2001: Â£13,000). A review of the investment the Company made, in February 2000, in the internet venture known as 'LogistiGO' has resulted in an agreement for the repayment of approximately Â£250,000. Following receipt of this sum, the Company will no longer have any interest in LogistiGO. Dividend The Directors' current intention is to propose a final dividend of 0.02p per share, double last year's dividend. Optical Fibre The Group's optical fibre activity has remained profitable and cash generative through a period of significantly reduced demand, which affected equally furnaces and consumables. We significantly increased our share of the available market (where we are already the largest independent operator globally) and have signed key supply agreements. We continue to develop new and improved Rf furnace equipment to enable our customers to both improve the quality of fibre they manufacture and lower its unit cost. We are expecting to introduce new Rf applications to this market over the next few months which, if successful, should expand the available market significantly for us. We are also in the process of recruiting additional sales staff. We are not, however, anticipating a recovery in the global telecommunications market during the second half of the year. We have taken action to reduce both manufacturing and overhead costs. In particular, nine redundancies made in the period, of which seven were made in March, at a total cost of Â£31,000, are expected to generate annualised savings of some Â£210,000. InGel Technologies As reported previously, during December 2001 we entered into agreements with R.P. Scherer Corporation (a subsidiary of Cardinal Health Inc.) concerning our technology for heat sealing soft pharmaceutical gel capsules, which will make production much faster and more economical whilst enabling use of substances other than gelatine, which has raised concerns following the BSE scare and has other disadvantages. Since that time, there has been a very significant increase in the rate of progress towards commercialising the Company's capsule making technology. I am pleased to report that: * the first patents have now been granted covering the formation of ingestible capsules using Rf technology; * we have established proof of concept in the R&D stage and will now construct a pilot scale machine capable of producing large batch sizes for stability and clinical trials; * R.P. Scherer Corporation (which in December 2001 acquired 3% of the Company, and 5% of InGel with a deferred payment to acquire an additional 5% of InGel) has committed a full-time team of people in support of InGel, working as part of the team with our own staff; additionally, it has nominated both Tom Stuart, its Regional President, Americas, and Dr. Richard Yarwood, its Regional President, Europe, to the InGel Board; * we have agreed the relocation of InGel to premises designed for pharmaceutical operations; * our best estimates are that we expect InGel to start generating revenues within the next 18 months; and * other applications capable of early revenue generation are currently being investigated Waste Packaging I am pleased to report that, following 12 months of intensive development and testing in conjunction with potential customers, we have developed a new product for welding high-end waste containers made of plastic. The equipment has recently been demonstrated successfully at six exhibitions in the UK and at the date of this report we have enquiries for circa Â£4 million of equipment in the UK. We anticipate that the equipment has significant potential in overseas markets, to which end we are currently looking for suitable overseas partners. Plastic Welding We have developed a very reliable Rf method of rapidly joining together thermoplastics to form a high integrity, hermetic, burst-proof weld. Our first sale of equipment based upon this method has been made in the period to a well- known domestic kettle manufacturer. We are currently investigating the potential of this market and expect to develop further applications for this technology. Start-ups and Acquisitions We are actively considering a range of start-up businesses based upon new and improved applications of Rf technology. Prospects At the date of this report, the order book stands at Â£628,000 and in addition we have concluded a contract to supply Â£800,000 of waste packaging products. We expect to see improvements in the turnover and underlying profitability during the second half of the year and to be able to generate significant growth in turnover and profits as our new applications are commercialised. Ian Balchin Chief Executive 19 June 2002 UNAUDITED INTERIM CONSOLIDATED ACCOUNTS SUMMARISED PROFIT AND LOSS ACCOUNT for the six months ended 30 April 2002 Six months Six months ended ended Year ended 30 April 2002 30 April 2001 31 October 2001 Â£'000 Â£'000 Â£'000 Turnover 2,151 3,145 6,013 ______ ________ _______ Operating results before exceptional items 253 775 1,688 Exceptional item 227 (235) (664) ______ ______ ______ Operating profit 480 540 1,024 Net interest receivable 21 13 31 ______ ______ _______ Profit on ordinary activities before taxation 501 553 1,055 Tax on profit on ordinary activities (155) (166) (299) Profit on ordinary activities after taxation 346 387 756 Minority interest 7 - - ______ ______ ______ Profit for the period 353 387 756 Dividends - - (69) ______ ______ ______ Retained profit for the period 353 387 687 ______ ______ ______ Earnings per share Basic earnings per share (pence) 0.052 0.058 0.113 ______ ______ ______ Fully diluted earnings per share (pence) 0.051 0.058 0.113 ______ ______ ______ Underlying earnings per share Basic earnings per share (pence) 0.029 0.058 0.113 ______ _____ ______ Fully diluted earnings per share (pence) 0.029 0.058 0.113 ______ ______ ______ Dividend per share ( pence) - - 0.01 ______ ______ ______ NOTES 1. Earnings per share The basic earnings per share is based on an attributable profit after tax of Â£353,000 (2001: Â£387,000) and on the weighted average ordinary shares in issue during the period of 682,845,377 (2001: 666,224,850). The fully diluted earnings per share are based on an attributable profit after tax of Â£353,000 (2001: Â£387,000) and on the diluted share holding of 688,993,320 ( 2001: 666,224,850). The underlying basic earnings per share is based on an attributable profit after tax of Â£198,000 (2001: Â£387,000) and on the weighted average ordinary shares in issue during the period of 682,845,377 (2001: 666,224,850). The underlying fully diluted earnings per share are based on an attributable profit after tax of Â£198,000 (2001: Â£387,000) and on the diluted share holding of 688,993,320 ( 2001: 666,224,850). 2. Exceptional item The exceptional item comprises a gross amount of Â£250,000, less expenses of Â£23,000. 3. Research and development expenditure of Â£295,000 (2001: Â£235,000) has been incurred in the period. Of this expenditure Â£295,000 (2001: nil) has been capitalised as an intangible asset to be amortised against future revenues. Expenditure of this type is only capitalised where the Board is certain that future revenues will exceed the costs incurred over the expected product life in accordance with Statement of Standard Accounting Practice No 13. 4. The figures for the year ended 31 October 2001 are an abridged statement of the full Group Accounts for that year which have been delivered to the Registrar of Companies and on which the Auditors made an unqualified report and which did not contain a statement under Section 237 of the Companies Act 1985. The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2001 Annual Report and Financial Statements. The financial information set out in this Interim Report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The interim financial information in this report has been neither audited nor reviewed by the Company's auditors. 5. Copies of this statement are being sent to all shareholders and will be available to the public at the Company's registered office. UNAUDITED INTERIM CONSOLIDATED ACCOUNTS RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS for the six months ended 30 April 2002 Six months Six months Year ended ended Ended 30 April 2002 30 April 2001 31 October 2001 Â£'000 Â£'000 Â£'000 Profit for the financial period 353 387 756 Dividends - - (69) ______ ______ ______ 353 387 687 Issue of 20,604,900 ordinary 0.1p shares in Stanelco Plc 567 - - Issue of 500 ordinary 1p shares in Ingel Technologies Limited 535 - - ______ ______ ______ Net addition to shareholders' funds 1,455 387 687 Opening shareholders' funds 1,181 494 494 ______ ______ _______ Closing shareholders' funds 2,636 881 1,181 ______ ______ ______ The issue of shares in Stanelco Plc and Ingel Technologies Limited was at a premium to R.P.Scherer Corporation. UNAUDITED INTERIM CONSOLIDATED ACCOUNTS CONSOLIDATED BALANCE SHEET at 30 April 2002 At 30 April 2002 At 31 October 2001 Â£'000 Â£'000 Â£'000 Â£'000 Fixed assets Tangible assets 365 322 Intangible assets 295 - ______ 660 ______ 322 Current assets Stocks 439 816 Debtors 1,202 798 Cash at bank and in hand 1,605 777 ______ ______ 3,246 2,391 Creditors: amounts falling due within one year 1,141 (1,482) ______ ______ Net current assets 2,105 909 ______ ______ Total assets less current liabilities 2,765 1,231 Provisions for liabilities and charges (108) (50) ______ ______ 2,657 1,181 ______ ______ Capital and reserves Called up share capital 687 666 Share premium account 1081 - Profit and loss account 868 515 ______ ______ Shareholders' funds 2,636 1,181 Minority interest 21 - ______ ______ 2,657 1,181 ______ ______ The Interim Accounts were approved by the Board on 19 June 2002. Signed on behalf of the Board of Directors Ian H Balchin (Chief Executive) Barrie C Hozier (Finance Director) UNAUDITED INTERIM CONSOLIDATED ACCOUNTS CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 April 2002 Six months Six months ended ended Year ended 30 April 2002 30 April 2001 31 October 2001 Note Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities 1 52 147 444 Returns on investment and servicing of finance Interest received 24 14 32 Finance lease interest paid (1) (1) (1) ______ ______ ______ Net cash inflow from returns on investments and servicing of finance 23 13 31 ______ ______ ______ Taxation Corporation tax refunded/(paid) 6 - (68) Capital expenditure and financial investment Purchase of tangible fixed assets (87) (65) (177) Sale of tangible fixed assets 1 1 3 Purchase of intangible fixed assets (295) - - ______ ______ ______ Net cash outflow from capital expenditure and financial investment (381) (64) (174) ______ ______ ______ Financing Issue of ordinary share capital 1,130 - - Capital element of finance lease rentals (2) (5) (7) ______ ______ ______ Net cash inflow/(outflow) from financing 1,128 (5) (7) ______ ______ ______ Increase in cash 2 828 91 226 ______ ______ ______ UNAUDITED INTERIM CONSOLIDATED ACCOUNTS NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 April 2002 RECONCILIATION OF OPERATING PROFIT TO THE NET CASH INFLOW FROM OPERATING ACTIVITIES Six months Six months Year ended ended ended 31 October 30 April 2002 30 April 2001 2001 Â£'000 Â£'000 Â£'000 Operating profit for the period 480 540 1,024 Depreciation of tangible fixed assets 44 41 91 (Profit)/loss on disposal of tangible fixed assets (1) 2 3 Decrease/(increase) in stocks 377 77 (374) (Increase) in debtors (404) (449) (345) (Decrease)/increase in creditors due within one year (439) (64) 44 (Decrease)/increase in provision for liabilities and charges (5) - 1 ______ ______ ______ Net cash inflow from operating activities 52 147 444 ______ ______ ______ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Six months Six months Year ended ended ended 31 October 30 April 2002 30 April 2001 2001 Â£'000 Â£'000 Â£'000 Increase in cash in the period 828 91 226 Cash outflow from financing 2 5 7 ______ ______ ______ Change in net debt resulting from cash flows 830 96 233 Net funds at beginning of period 774 541 541 ______ ______ ______ Net funds at end of period 1,604 637 774 ______ ______ ______ ANALYSIS OF CHANGES IN NET FUNDS At 1 November 2001 Cash Flow At 30 April 2002 Â£'000 Â£'000 Â£'000 Cash in hand and at bank 777 828 1,605 Finance leases (3) 2 (1) ______ ______ ______ 774 830 1,604 ______ ______ ______ At 1 November 2000 Cash Flow At 30 April 2001 Â£'000 Â£'000 Â£'000 Cash in hand and at bank 551 91 642 Finance leases (10) 5 (5) ______ ______ ______ 541 96 637 ______ ______ _______ At 1 At November 2000 Cash Flow 31 October 2001 Â£'000 Â£'000 Â£'000 Cash in hand and at bank 551 226 777 Finance leases (10) 7 (3) ______ ______ ______ 541 233 774 ______ ______ ______ This information is provided by RNS The company news service from the London Stock Exchange

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