For immediate release 7 am 8th October 2009.

ELEKTRON PLC

Interim results for the period ended 31 July 2009

Elektron PLC ("Elektron"), the AIM quoted engineered products manufacturer announces results for the half-year ended 31 July 2009.

Key Points

• Revenue 27% lower at £14.2 million in difficult markets
  

• Gross profit margin increased to 36.4% (July 2008: 34%), driven by continued focus on costs and higher margin sales.
  

• Sustained profitability at the operating level
  

• Loss held to £0.4 million after tax (July 2008: £0.2 million profit) following exceptional charges relating to cost cutting
  

• Signs of improvement in all markets but confidence still fragile
  

• Emphasis on building sales in growing economies of China and Brazil
  

• Technical selling resource strengthened in US
  

• Continuing to evaluate potential acquisition opportunities that would add scale and value

For further information please contact:

 Chairman's Statement

Elektron designs and manufactures engineered products for industrial users and the distribution market. It operates worldwide and employs over 900 people in five countries.

In the first six months of the current year we have continued to see some of the most challenging conditions that the Group has faced for many years. Nevertheless, our prompt reactions in cutting costs and focussing on higher margin business, have ensured that we made operating profits before exceptional charges.

The gross margin increased to 36.4% from 34.0%. At the operating level, profits were £0.2 million (2008: £0.8 million). Exceptional costs of £0.6m related mainly to costs associated with moving manufacturing offshore (£0.4 million) and redundancy costs in the Hard Metals Division (£0.2 million). Basic and diluted loss per share on continuing businesses after exceptional costs was 0.45p (2008: 0.2p earnings per share).

We are seeing signs of improvements in our markets but we remain cautious. Nevertheless, we believe that the steps we have taken and are continuing to take position Elektron to obtain advantage from these improvements as they become more tangible and significant.

All directors and staff are focussed on ensuring that Elektron is a profitable business with strong growth based on a strategy that concentrates on five key business drivers:

Acquire

Since 2003 we have built up the Group's tangible net assets per share from 1.29p to 8.44p as a result of a careful programme of acquisitions. We intend to continue this policy and several targets are under consideration.

Expand Geographically

Elektron Components Division ("ECD"), our largest business unit, is a relatively international business whilst the other two divisions are currently UK-centric. It is a key requirement that divisions should seek to rapidly expand their businesses overseas to take advantage of the large available international markets for the Group's product portfolio.

Innovate

Innovation continues to be given significant priority throughout the Group since it is through new products that the highest margins will be earned.

Offshore

As a manufacturer, Elektron needs to ensure that manufacturing costs are kept to a minimum in order to meet international competition. An important part of our strategy is to manufacture in lower cost countries such as China and Tunisia. The Group is currently examining a third location for manufacturing.

Unlock Talent

The board is committed to attracting and retaining talent and as detailed in the recent Annual Report has introduced a Management Development Programme. Nominees to the programme interact with main board members and participate in Group strategy setting encouraging a constant flow of new ideas.

DIVISIONAL REPORTS

Elektron Components Sales: £8.8 million; Operating Profit £0.9 million

The division designs and manufactures a range of connectors and switches under the Arcolectric and Bulgin brand names.

The current financial year commenced with a high level of uncertainty in our markets resulting in a significant fall in sales, although these were in line with our expectations based on our analysis of prospects at the end of last year. However our early actions to cut costs meant that the first half of 2009/10 yielded higher than anticipated operating results. 

Throughout this period we have continued our strategy of investment in China, where we have augmented our sales force, engineering resources and senior management team to reflect the growth opportunities and significance China now represents to our business. Order intake in China is now running 24% ahead of the same period last year as a direct result of this focus, and the team continues to work on a number of exciting prospects. We are recruiting additional sales resources elsewhere in Asia, to further increase market penetration.

We are continuing to reconfigure the global sales teams, as the economic landscape changes in our key markets. In the US we are implementing a strategy, which will grow our direct selling, and field applications resources. Our new distributors and representatives in Central and South America (particularly Brazil) are making good inroads into their markets with projected significant double-digit growth in sales for 2009/10. 

Our primary large end user targeting strategy is proving successful, with several tangible opportunities uncovered, and initial orders already received. We anticipate that our global focus on developing partnerships with large OEMs will present us with a number of strategic high value wins in the coming months.

Our new range of ATEX approved connectors designed for the intrinsic safety marketplace, where margins are highly attractive, were launched in September. This first venture into the explosive atmosphere market sector is now at the roll-out and scale-up stage. 

The continuing initiative to evolve our switch portfolio from commodity products will result in the launch of several significantly higher margin products in the second half and beyond. Further products that expand our wireless portfolio are also being launched which are enabling us to target new applications previously inaccessible to us, for example in the Oil and Gas sector.

Hard Metal Sales: £2.8 million; Operating loss £0.2 million

The division manufactures components using Tungsten Carbide technology and router cutters under the premium Titman brand name.

Following a full review of the businesses, we have successfully re-branded Howle Carbides into a leaner, more efficient business that is now known as Total Carbide. The global downturn in Oil and Gas production has affected our business but we have been quick to assess and make appropriate savings. Titman has adapted to the circumstances in a similar manner, and is performing as expected with profits running ahead of last year. 

Over the next six months we expect to see a gradual improvement in the underlying markets in which we operate. Construction, oil exploration and automotive manufacture are all showing signs of recovery. A graduate training programme has been initiated and new university collaborations will bring much needed innovation to the division. We have developed a new range of alloys for Total Carbide with better corrosion properties allowing penetration into new markets.  

Elektron Instruments Sales: £2.6 million; Operating loss £0.3 million

The division designs and supplies a range of instrumentation products with a focus on temperature, pressure and nano-measurement under the Digitron, Queensgate and Sifam brand names. Sifam branded products are being transferred to ECD and will be reported as part of that division in the full year results.

Sifam activity to date this year has included an accelerated plan to move control knob manufacturing to our facility in China, capitalizing on the established expertise. Sifam also plans to outsource meter manufacturing to India. Both projects are scheduled to complete in early 2010, although the majority of meter project costs of approximately £0.5 million will be incurred in the second half of the current financial year. We are also developing a number of new opportunities for custom mouldings within the markets we serve.

The global downturn in semiconductor usage has affected Queensgate (the nano-measurement specialist), but contracts with key accounts have bolstered sales in this period.  

Digitron has undergone a full business review and a strategic plan is in place to further accelerate development of existing and new systems. The Digitron Kyros™ wireless monitoring system was delivered ahead of schedule, and has secured its first sale in Dubai. There are plans to fast track this to new geographical locations including USA, Brazil and Australasia. We have also established a base in the Middle East, and continue to develop new distributors in key geographic locations.

By the fourth quarter we expect to have launched seven new ranges of instruments for pressure and temperature measurement replacing our current ageing range of products.  

OUTLOOK

There are some signs of improvement in all our markets but nevertheless we take a cautious view of the economy and remain confident of meeting market expectations for the full year.

Keith Daley

Chairman 

Group Statement of Recognised Income and Expense

Unaudited Interim Results to 31 July 2009

Notes to the Unaudited Interim Results to 31 July 2009

1.  Accounting Policies

The interim financial information has been prepared on the basis of International Financial Reporting Standards (IFRS). Full details of accounting policies are included in the Annual Report for the year ending 31 January 2009.  

Fixed annual charges are apportioned to the interim period on the basis of time elapsed. Other expenses are accrued in accordance with the same principles used in the preparation of the annual accounts.

The Group has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK Groups, in the preparation of these interim financial statements.

2.  Other information

The financial information in this statement does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information in respect of the year ended 31 January 2009 has been extracted from the statutory accounts, which have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.

Copies of the interim results are available to download from the Group's website www.elektronplc.com. Hard copies are available free of charge from the Company's registered office at Melville Court, Spilsby Road, Romford, Essex RM3 8SB.