Elektron PLC 13 October 2005 Embargoed for release: 7.00 a.m. 13 October 2005 ELEKTRON PLC Interim results for the period ended 31 July 2005 Elektron PLC ("Elektron"), the AIM quoted components manufacturer announces results for the half-year ended 31 July 2005. Key Points: • Record interim operating profits on continuing operations of £1,022,000 (2004: £972,000) • Gross margins up to 38% (2004: 34.8%) •Earnings per share before goodwill release of 0.94p (2004: 0.86p) • Net funds increased to £1,143,000 from £250,000 at 31 January 2005 • Net assets increased to £6,211,000 from £5,242,000 at 31 January 2005 • Progress expected to continue in second half • Prospect of enhanced final dividend For further information please contact: Adrian Girling Roland Cornish Executive Chairman Chairman Elektron PLC Beaumont Cornish Limited Tel: 020 8477 9300 Tel: 020 7628 3396 Chairman's Statement I am pleased to report that the results for the six months to 31 July 2005 have again exceeded the Board's expectations. The Group operating profits before goodwill of £1,022,000 were a record for Elektron and are a 5% increase over last year's first half results which contained the one-off benefit of the backlog of orders following the acquisition of Arcolectric in December 2003. This backlog of around £800,000 contributed operating profits of £250,000. Gross margins improved to 38.0% (2004: 34.8%) which gives some headroom to consider further investment in product development for future organic growth. The gross margin will continue to be underpinned by the transfer of hand assembly offshore. The Group has been concentrating on its two key operating businesses, Bulgin and Arcolectric whilst also recruiting engineers and developing products via a newly formed division, Elektron System Components. The first product from this new division, a waterproof 'Bluetooth' wireless connector, will be launched this month. This represents a milestone in your company's transition from electromechanical switches and connectors to switching and connectivity. At a time when we relentlessly seek ways to reduce the cost of manufacturing our products we are excited at the prospect of achieving organic growth by developing a broader range of new products for sale through our existing well established sales channels. With the recent recovery of the US dollar, the upward revaluation of the Chinese Yuan, and expected Chinese wage inflation, we are well positioned to balance automated manufacturing in the UK with hand assembly in China and Tunisia to enable us to compete effectively in a global market. These trends favour our business model. Injection moulding has started in China and will start in Tunisia in the second half. Cashflow and balance sheet At 31 July 2005, net funds increased by £893,000 to £1,143,000 from £250,000 at 31 January 2005. Cash generated from operations was £848,000, from share issues £200,000 and from the repayment of loan notes on a prior subsidiary disposal £50,000. Net capital expenditure of £169,000 compares with depreciation charges of £453,000. Finance lease obligations have been reduced to £809,000 by repayments of £293,000 during the period. The Group's net assets have increased by 18.5% in the last six months to £6,211,000. The strong balance sheet will allow the Board to consider selectively further acquisitions. Earnings per share and dividends Earnings per share were 0.94p (2004: 0.86p before negative goodwill write backs) The Board has considered carefully the payment of an interim dividend against a background of having the authority to purchase its own shares and its desire to consider acquisition opportunities. It has concluded that, until such time as the final dividend reaches an appropriate level, it would be preferable to pay only an annual dividend and utilise surplus cash for on-market share purchases if acquisition opportunities are not available. Outlook With order books 5% up on this time last year and new products coming on-stream in the second half, I am expecting continued improvement in the full year results. Adrian Girling Executive Chairman Group Profit and Loss Account Unaudited Interim Results to 31 July 2005 Half year to Half year to Year to 31 July 31 July 31 January 2005 2004 2005 £'000 £'000 £'000 Turnover - continuing operations 11,112 12,707 22,683 - discontinued operations - 333 333 ----------------------------------- 11,112 13,040 23,016 ----------------------------------- ----------------------------------- Operating profit/(loss) - continuing operations 1,022 972 1,653 - negative goodwill release - 931 1,080 ----------------------------------- 1,022 1,903 2,733 - discontinued operations - (68) (63) ----------------------------------- Operating profit 1,022 1,835 2,670 ----------------------------------- Profit on disposal of discontinued operations - 33 33 ----------------------------------- Profit on ordinary activities before interest 1,022 1,868 2,703 Net interest payable (12) (17) (101) ----------------------------------- Profit on ordinary activities before taxation 1,010 1,851 2,602 Taxation on profit on ordinary activities (287) (577) (574) ----------------------------------- Profit on ordinary activities after taxation 723 1,274 2,028 Dividends (12) - (229) ----------------------------------- Transfer to reserves 711 1,274 1,799 ----------------------------------- Earnings per share - basic 0.94p 1.67 2.67p - before goodwill 0.94p 0.86 1.50p Group Balance Sheet Unaudited Interim Results at 31 July 2005 31 July 31 July 31 January 2005 2004 2005 £'000 £'000 £'000 Fixed assets Negative goodwill - (278) - Tangible assets 2,256 2,879 2,528 Investment in own shares 20 20 20 ------------------------------- 2,276 2,621 2,548 ------------------------------- Current assets Stocks 3,263 2,618 3,000 Debtors 4,719 5,386 3,946 Cash at bank and in hand 2,624 1,491 1,581 ------------------------------- 10,606 9,495 8,527 Creditors: amounts falling due within one year (5,813) (4,959) (4,592) ------------------------------- Net current assets 4,793 4,536 3,935 ------------------------------- Total assets less current liabilities 7,069 7,157 6,483 Creditors: amounts falling due after more than one year (202) (1,395) (512) Provisions for liabilities and charges (656) (1,039) (729) ------------------------------- Net assets 6,211 4,723 5,242 ------------------------------- Capital and reserves Called - up share capital 4,021 3,821 3,821 Share premium 244 244 244 Other reserves 20 - 20 Profit and loss account 1,926 658 1,157 ------------------------------- Shareholder's funds 6,211 4,723 5,242 ------------------------------- Group Cash Flow Statement Unaudited Interim Results to 31 July 2005 31 July 31 July 31 January 2005 2004 2005 £'000 £'000 £'000 Cash flow from operating activities 848 736 1,849 ------------------------------- Returns on investments and servicing of finance Interest received 36 22 62 Interest paid (15) (3) (53) Interest element of hire purchase and finance lease payments (33) (36) (110) ------------------------------- (12) (17) (101) ------------------------------- Taxation UK Corporation tax paid - - (17) Overseas tax paid (24) (19) (41) ------------------------------- (24) (19) (58) ------------------------------- Capital expenditure and financial investment Payments to acquire tangible fixed assets (180) (227) (558) Proceeds of sale of tangible fixed assets 11 - 11 ------------------------------- (169) (227) (547) ------------------------------- Acquisitions and disposals Sale of subsidiaries 50 671 671 Cash disposed of on sale of subsidiary - (13) (13) ------------------------------- 50 658 658 ------------------------------- Net cash flow before financing 693 1,131 1,801 ------------------------------- Financing Issue of shares 200 100 100 Debt due beyond a year: Capital element of hire purchase and finance lease payments (293) (574) (848) ------------------------------- Net cash (outflow)/inflow from financing (93) (474) (748) ------------------------------- Increase in net cash 600 657 1,053 ------------------------------- Notes to the cashflow statement: 31 July 31 July 31 January 2005 2004 2005 £'000 £'000 £'000 1. Reconciliation of operating profit to net cash inflow from operating activities Operating profit 1,022 1,835 2,670 Release of negative goodwill - (931) (1,080) Depreciation charges 453 494 847 Loss/(profit) on disposal of fixed assets (7) 3 9 Increase in stocks (263) (27) (436) Increase in debtors (764) (1,636) (496) Increase in creditors 418 707 130 Exchange adjustments 62 8 4 Increase/(decrease) in provisions (73) 283 201 ------------------------------- Cashflow from operating activities 848 736 1,849 ------------------------------- 2. Analysis of net funds/(debt) 1 February 31 July 2005 Cashflow 2005 £'000 £'000 £'000 Cash at bank and in hand 1,581 1,043 2,624 Bank overdrafts (229) (443) (672) ------------------------------- 1,352 600 1,952 Finance leases and hire purchase contracts (1,102) 293 (809) ------------------------------- Net funds 250 893 1,143 ------------------------------- 3. Reconciliation of net cashflow to movement in 31 July 31 July 31 January net funds 2005 2004 2005 £'000 £'000 £'000 Increase in cash 600 657 1,053 Cash outflow from decrease in net debt and lease financing 293 574 848 ------------------------------- Change in net funds resulting from cashflows 893 1,231 1,901 Opening net funds/(debt) 250 (1,651) (1,651) ------------------------------- Closing net funds/(debt) 1,143 (420) 250 ------------------------------- Notes: 1. The financial information in this statement does not constitute statutory accounts. The financial information in respect of the year ended 31 January 2005 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 any statement under Section 237 of the Companies Act 1985. 2. The interim financial information has been prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 31 January 2005. 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. This information is provided by RNS The company news service from the London Stock Exchange