Preliminary Results

Elektron PLC 27 June 2003 Embargoed for release: 7.00 a.m. 27 June 2003 ELEKTRON PLC Preliminary results for the year ended 31st of January 2003 Elektron PLC ('Elektron'), the AIM and ShareMark quoted components and microwave electronics company announces results for the year ended 31st January 2003. Key Points: •Turnover on continuing operations experienced a 12% decline to £11.1 million (2002: £12.6 million) •Operating losses on continuing operations, before exceptional items and goodwill amortisation, of £118,000 (2002: £328,000) •Exceptional expenses totalling £697,000 (2002: £1,501,000) •Solid performance at Bulgin Components (which remains the core business) with operating profits of £489,000 (2002: £271,000 loss) on stable turnover. • Operating losses on discontinued operations, before exceptional items and goodwill amortisation, of £636,000 plus £1,440,000 of closure costs •Continuing subsidiaries operating profitably in the current year For further information please contact: Adrian Girling Roland Cornish Executive Chairman Chairman Elektron PLC Beaumont Cornish Limited Tel: 0208 477 9300 Tel: 0207 628 3396 Chairman's Statement The unfavourable market conditions in the last two years together with consequent business closures has seriously affected the Group's financial performance and stability. Loss making operations have been closed or sold, major cost cutting plans have been implemented and a new Board structure is in place operating from a lower overhead base. Whilst the trading subsidiaries are profitable at the operational level, the Group is still managing the cashflow problems created by two years of significant losses. The Group is funded principally by invoice discounting facilities which fluctuate with the level of sales. The Group is considering ways to raise long term finance to improve financial stability and allow the existing businesses to develop organically in market places which, whilst remaining uncertain, appear to have stopped declining. Discontinued operations During the year under review three of the Group's six operating companies were discontinued. Bulgin Power Source (BPS) designed and manufactured power supplies and power management products for applications in information technology, security and access, automation, process control and communications. It entered voluntary liquidation on 2 December 2002 following a decline in its incoming orders, manufacturing problems and mounting losses. Consequently, sub-contract manufacturing for its fellow subsidiary Powertron also ceased. The losses that BPS was incurring were jeopardising the stability of the Group to such an extent that the Board had little alternative but to appoint liquidators in order to protect other businesses within the Group. Negotiations for the assignment of the leasehold premises are ongoing. Powertron Limited, which designed and sold power supplies principally for the rail industry, was sold on 7 January 2003. Following the closure of BPS, Powertron had to find new sub-contractors to manufacture its products. The costs of setting up the new arrangements were prohibitive and the Board was not prepared to make further investment in the power supply market where further cash consumption could have jeopardised other parts of the Group. The business and certain assets of Powertron were sold to a management buy-out team for £100,000 in cash on 7 January 2003. Retained book debts totalling £444,000 have now almost entirely been collected and retained liabilities of £259,000 have been settled in the majority. The management buy-out team agreed to deal with any customer warranty claims arising pre-completion at a cost payable by Powertron Limited of £25,000. Amplifier for Industry LLC, (AFI) which distributed radio frequency products from its base in Long Island, New York, ceased operations on 5 December 2002 following a decline in the markets it served. Loss on disposal/closure of operations totalled £1,440,000. Included within this was £922,000 in respect of Powertron, £383,000 in respect of Bulgin Power Source and £135,000 in respect of AFI. Continuing Operations Bulgin Components designs and manufactures connectors, switches and other electromechanical components for industrial markets. Products are sold through distribution channels worldwide and directly to Original Equipment Manufacturers. Turnover was up very slightly on the previous year to £8,349,000 (2002: £8,292,000) but the cost savings arising from the restructuring actions taken in 2001 together with improvements in the product mix saw gross margins increase from 34.4% to 40.2% which, taken with the sales increase, added £509,000 of profits. Overheads decreased from £3,123,000 to £2,871,000 so at the operating level, before exceptional items and after parent cost allocations, profits of £489,000 were earned against a loss last year of £271,000. Milmega Limited, which manufactures microwave amplifiers, suffered a 43% reduction in its sales to £1,995,000 (2002: £3,510,000) following the collapse of the telecoms market. Its gross margin consequently suffered dropping from 42.0% to 33.7% the result of which was a gross profit of £673,000 against £1,478,000 the previous year. Overheads declined from £834,000 to £789,000 with further restructuring since the year-end. In the year under review operating losses, after parent cost allocations, of £116,000 were incurred compared with an operating profit of £644,000 the previous year. BP Purchasing (Electronics) Limited, sources electronic and electromechanical components on behalf of client companies. Turnover fell by 2% to £730,000 from £748,000 with margins remaining stable at 28%. Overheads fell to £295,000 from £346,000 resulting in operating losses, after parent cost allocations, of £91,000 compared to £139,000 in the previous period. Board structure The Board structure and its overhead cost has reduced by £410,000 on an annualised basis. There are now two executive directors being Adrian Girling, a Chartered Engineer with 20 years experience in general management who was appointed Executive Chairman in January 2003 and Christopher Leigh who continues as Finance Director. There is one non-executive director, Ronald Bulgin. The head office unit has been closed with staff working there made redundant. Negotiations for the assignment of the lease are on-going. Head office functions are now effected from the premises of Bulgin Components. Group Results In the year to 31 January 2003 the Group experienced a 12% fall in total turnover on continuing operations to £11.1 million (2002: £12.6 million). Operating losses on continuing businesses, before exceptional items and goodwill amortisation were £118,000 (2002: £328,000). Details of continuing subsidiary performance are provided above. Exceptional items totalling £697,000 consist of £313,000 at Elektron, £154,000 at Bulgin Power Source Plc, £136,000 at Powertron and £94,000 at Bulgin Components. The Elektron costs relate principally to compensation for alteration and termination of employment contracts and provision for ongoing leasehold obligations. Bulgin Power Source costs relate to obligations and provisions arising through guarantees given by Elektron. Powertron costs relate to re-organisation and redundancy costs arising through factory integration at the start of the year. Bulgin Components costs relate to pension provisions arising from the actuarial calculation of the deficit on the final salary scheme at the commencement of scheme wind up. Loss per share and dividends Loss per share before goodwill amortisation was 5.45p (2002: 3.87p) and the loss per share after goodwill amortisation was 6.18p (2002: 4.49p). The Board is not proposing that a dividend be paid in respect of the year. Future strategy and outlook The Group and its shareholders have sustained a significant loss in value following the collapse of the markets served by Elektron. Despite significant restructuring the drop in sales was so rapid that losses could not be stemmed in some areas. Losses and write-offs before taxation for the last two years have totalled £6.0 million and the Group has had to adopt defensive measures to protect itself and provide some base for moving forwards. This has included the sale and leaseback of freehold properties, raising finance through invoice discounting, redundancy programmes, business closure and fire sales. It would appear that we are now through the worst with operating subsidiaries and Group trading profitably to date in the current financial year. Our aim is to continue to manage the surviving businesses profitably and to grow through new product introductions and development of new markets. Adrian Girling Executive Chairman Group Profit and Loss Account Year ended 31 January 2003 (As restated) Unaudited Audited 2003 2002 £'000 £'000 Turnover - continuing 11,074 12,550 operations - discontinued 3,563 4,361 operations --------- --------- 14,637 16,911 Cost of sales (9,550) (11,115) --------- --------- Gross profit 5,087 5,796 Net operating expenses - normal (6,222) (6,828) - exceptional (697) (1,501) --------- --------- Operating loss - continuing (696) (2,000) operations --------- --------- - discontinued (1,136) (533) operations --------- --------- Operating loss (1,832) (2,533) - Loss on closure of discontinued (1,440) - operations Profit on disposal of freehold property 61 122 --------- --------- Loss on ordinary activities before interest (3,211) (2,411) Net interest payable (155) (241) --------- --------- Loss on ordinary activities before taxation (3,366) (2,652) Taxation on loss on ordinary activities 114 525 --------- --------- Loss on ordinary activities after taxation (3,252) (2,127) Minority interests 34 35 Dividends - - --------- --------- Transfer from reserves (3,218) (2,092) ========= ========= Note - analysis of operating loss Operating loss on continuing operations - operating loss (118) (328) - exceptional items (407) (1,501) - goodwill (171) (171) amortisation --------- --------- (696) (2,000) --------- --------- Operating loss on discontinued operations - operating loss (636) (417) - exceptional items (290) - - goodwill (210) (116) amortisation --------- --------- (1,136) (533) --------- --------- Statement of Total Recognised Gains and Losses Year ended 31 January 2003 Unaudited Audited 2003 2002 £'000 £'000 Loss attributable to shareholders (3,218) (2,092) Unrealised surplus on revaluation of properties - - --------- --------- Total recognised gains and losses for the financial year (3,218) (2,092) ========= ========= Note of Historical Cost Profits and Losses Year ended 31 January 2003 Unaudited Audited 2003 2002 £'000 £'000 Reported loss on ordinary activities before taxation (3,366) (2,652) Realisation of property revaluations of previous 985 (84) years Difference between a historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount - 5 --------- --------- Historical cost loss on ordinary activities before taxation (2,381) (2,731) Taxation on loss on ordinary activities 114 525 Minority interests 34 35 Dividends - - --------- --------- Historical cost loss for the year after taxation and dividends (2,233) (2,171) ========= ========= Notes 1. No final dividend is being proposed. 2. Loss per share The calculation of the basic loss per share is based on the losses attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of the diluted loss per share is based on the basic loss per share, adjusted to allow for the issue of shares on the assumed conversion of dilutive options. The adjusted loss per share has been provided in order that the effects of goodwill amortisation on reported losses can be fully appreciated. The calculation of losses is based on the Group loss after taxation and is set out below: Unaudited Audited 2003 2002 Per-share Per-share amount amount Losses Losses £'000 Pence £'000 Pence Loss after taxation (3,218) (6.18) (2,092) (4.49) Amortisation of goodwill 381 0.73 287 0.62 -------- -------- -------- -------- Adjusted loss after (2,837) (5.45) (1,805) (3.87) taxation ======== ======== ======== ======== The weighted average number of shares used in the calculations is set out below: Unaudited Audited 2003 2002 Basic Diluted Basic Diluted Weighted average number of shares in issue - Ordinary shares 52,034,443 52,034,443 46,575,083 46,575,083 - share options - - - 50,547 -------- -------- -------- -------- 52,034,443 52,034,443 46,575,083 46,625,630 ======== ======== ======== ======== Loss per share - standard (6.18) (6.18) (4.49p) (4.48p) - adjusted earnings (5.45) (5.45) (3.87p) (3.87p) per share Group Balance Sheet Year ended 31 January 2003 Unaudited Audited 2003 2002 £'000 £'000 Fixed assets Intangible assets 413 1,624 Tangible assets 1,809 4,433 --------- --------- 2,222 6,057 --------- --------- Current assets Stocks 1,318 2,335 Debtors 2,445 3,951 Cash at bank and in hand 129 1,535 --------- --------- 3,892 7,821 Creditors: amounts falling due within one year (4,086) (7,854) --------- --------- Net current (liabilities)/assets (194) (33) --------- --------- Total assets less current liabilities 2,028 6,024 Creditors: amounts falling due after more than one (619) (1,792) year Provisions for liabilities and charges (449) (19) --------- --------- Net assets 960 4,213 ========= ========= Capital and reserves Called - up share capital 2,602 2,602 Share premium 270 270 Revaluation reserve - 985 Profit and loss account (1,912) 320 --------- --------- Shareholder's funds - Equity 960 4,177 Minority interests - 36 --------- --------- Capital employed 960 4,213 ========= ========= Notes: 1. Audited financial statements will be sent to shareholders towards the middle of July 2003. Copies of this announcement are available free of charge from the Company's registered office at Alfreds Way, Barking, Essex IG11 0AZ for a period of one month from the date hereof and copies of the audited financial statements will be so available for at least 14 days from that date. 2. The Company's financial statements for 2003, from which the figures contained in this statement have been extracted, have not yet been reported on by the Company's auditors or filed with the Registrar of Companies. The financial statements for 2002, from which the figures contained in this preliminary statement have been extracted, have been filed and contain an unqualified audit report with no reference to section 237 of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange

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