Elektron PLC 27 May 2005 Embargoed for release: 7:00 a.m. 27 May 2005 ELEKTRON PLC Preliminary results for the year ended 31st January 2005 Elektron PLC ("Elektron"), the AIM quoted components manufacturer announces its preliminary results for the year ended 31st January 2005. Key Points: Operating profits on continuing operations before goodwill release of £1,653,000 (2004: £796,000) Profit before taxation of £2,602,000 (2004: £1,605,000) Earnings per share before goodwill of 1.50p (2004: earnings 1.26p). Earnings per share after goodwill 2.67p (2004: earnings 2.42p) Net cash of £250,000 (2004: Net borrowings of £1,651,000) Proposed final dividend of 0.3p per share (2004: nil) Current year has started satisfactorily For further information please contact: Adrian Girling Roland Cornish Executive Chairman Chairman Elektron PLC Beaumont Cornish Limited Tel: 020 8979 3232 Tel: 020 7628 3396 Chairman's Statement I am pleased to be able to report continued improvement in the Group's results. Bulgin Components designs and manufactures connectors, switches and other electromechanical components for industrial markets. Turnover was up on the previous year to £8,735,000 (2004: £7,931,000) returning operating profits of £778,000 (before exceptional charges of £453,000) compared to £376,000 in the previous year. Gross margins remained stable at 41% despite the transfer of assembly to Tunisia incurring additional short term labour costs whilst recruitment and training took place. With the large majority of assembly now in Tunisia margins are expected to improve in the current year. In the first three months of the new financial year incoming orders were £2,447,000 (2004: £2,588,000) and outgoing shipments £2,380,000 (2004: £2,489,000). Arcolectric specialises in the manufacture of appliance switches, indicator lights and fuseholders for the consumer and industrial markets. Turnover was £13,948,000 returning operating profits of £1,286,000 with gross margins of 34%. As mentioned previously, sales were boosted by the backlog of orders arising prior to the acquisition of Arcolectric in December 2003. In the first three months of the new financial year incoming orders were £3,169,000 and outgoing shipments of £3,218,000 which is considered to be more representative of ongoing sales. Gearing and balance sheet At 31 January 2005, net cash inflows of £1,901,000 had turned net borrowings at the previous year-end of £1,651,000 into net cash of £250,000. Tangible net assets at the year-end had increased 14% to £5,242,000, which equates to a tangible net asset value per share of 6.9p per share compared to 6.2p per share at 31 January 2004. Earnings per share and dividends Earnings per share for the year ended 31 January 2005, before goodwill were 1.50p (year ended 31 January 2004: 1.26p). Earnings per share for the year ended 31 January 2005, after goodwill were 2.67p (year ended 31 January 2004: 2.42p). The Board is proposing a final dividend of 0.3p per share (2004: nil) payable on 5 August 2005. Future strategy The need to reduce costs continuously to offset margin pressure by making use of low cost manufacturing has become part of the culture. Our customers are under pressure to reduce their costs. To meet their price expectations we must reduce our costs too. We are well placed, with our own manufacturing facilities in Tunisia and China, to continue this process, also to serve the growing market in China. Transfer is taking place at a measured pace to make sure we maintain high levels of customer service, protecting and re-enforcing the Arcolectric and Bulgin brand reputations. During the year we explored a number of potential acquisitions. We have not been in agreement with the high value some owners place on businesses complementary to ours. Our conclusion is that whilst opportunities may arise from time to time, we cannot rely on acquisitions to grow our business. In 2004 our priority was to get Arcolectric back into shape following the acquisition from the Receiver, and to transfer most of the Bulgin assembly operations to Tunisia. With the businesses now on even keel, we are putting greater emphasis on the development of innovative new products. The Ethernet and USB versions of the Bulgin waterproof connectors have been successful beyond our expectations, with immediate sales growth through catalogue distributors both in Europe and the USA. The launch of a Firewire (1EEE 1394) version is imminent. This is the beginning of our determined effort to transition from 'Connectors to Connectivity'. Taking this beyond our traditional expertise in electromechanical products, we intend to explore the opportunities for wireless connectivity, in relation to the markets we serve. For instance, in December 2004, release of the ZigBee 1.0 specification confirmed a global standard for reliable, cost effective, low power wireless connectivity, targeted at industrial, building management, home appliance monitoring and control markets. The Board believes that there will be substantial growth in the applications that employ this technology. We do not believe in breaking new ground with high technology developments. We will develop robust solutions to customer problems based on proven technologies for the customers and markets we currently target. By providing component subsystems in selected growth markets to customers looking to reduce their fixed costs we plan to achieve strong organic growth. We have already started to incur costs towards the development of innovative electronic products. We will adopt a conservative approach to the cost and speed of development based on opportunities as they arise. There are companies who do not have the channels to market enjoyed by Bulgin and Arcolectric, who lose money, yet are valued at multiples of sales because they claim to have a unique technological business proposition. In contrast, Elektron is profitable, has established brands and experienced management. We are optimistic that experienced investors will recognise that these strengths, combined with a determined and measured approach to the development of innovative products in growth markets will underpin the value of their investment in Elektron. Outlook We anticipate that weakness in some of our markets will be offset by the cost savings in having moved the majority of assembly to Tunisia. The current year has started satisfactorily Adrian Girling Executive Chairman Group Profit and Loss Account Preliminary Results for year ended 31 January 2005 2005 2004 2004 2003 £'000 £'000 Turnover - continuing operations 22,683 10,133 - discontinued operations 333 1,850 ----------------------------- 23,016 11,983 ----------------------------- Cost of sales (14,635) (7,371) Gross profit 8,381 4,612 Net operating expenses (5,711) (2,866) --------- --------- Operating profit/(loss) - continuing operations 1,653 796 - discontinued operations (63) (185) - negative goodwill release 1,080 1,135 --------- --------- ----------------------------- Operating profit 2,670 1,746 Profit/(loss) on closure/disposal of discontinued operations 33 (47) ----------------------------- Profit on ordinary activities before interest 2,703 1,699 Net interest payable (101) (94) ----------------------------- Profit on ordinary activities before taxation 2,602 1,605 Taxation on profit on ordinary activities (574) (299) ----------------------------- Profit on ordinary activities after taxation 2,028 1,306 Dividends (229) - ----------------------------- Transfer to reserves 1,799 1,306 ----------------------------- Earnings per ordinary share - basic 2.67p 2.42p Earnings per ordinary share before goodwill release/ 1.50p 1.26p amortisation - basic Group Balance Sheet Preliminary Results for year ended 31 January 2005 31 January 31 January 2005 2004 £'000 £'000 Fixed assets Negative goodwill 0 (1,257) Tangible assets 2,528 3,149 Investment in own shares 20 20 ---------------------------- 2,548 1,912 ---------------------------- Current assets Stocks 3,000 2,605 Debtors 3,946 4,384 Cash at bank and in hand 1,581 1,123 ---------------------------- 8,527 8,112 Creditors: amounts falling due within one year (4,592) (4,659) ---------------------------- Net current assets 3,935 3,453 ---------------------------- Total assets less current liabilities 6,483 5,365 Creditors: amounts falling due after more than one year (512) (1,318) Provisions for liabilities and charges (729) (708) ---------------------------- Net assets 5,242 3,339 ---------------------------- Capital and reserves Called - up share capital 3,821 3,730 Share premium 244 235 Other reserves 20 - Profit and loss account 1,157 (626) ---------------------------- Capital employed 5,242 3,339 ---------------------------- Notes: 1. Audited financial statements will be sent to shareholders towards the end of June 2005. 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 date of publication. 2. The Company's financial statements for 2005, 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 2004, 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