RNS Number:3413N
Deltron Electronics PLC
09 June 2005
For immediate release 9th June 2005
DELTRON ELECTRONICS PLC
INTERIM RESULTS
Deltron Electronics plc (LSE: DET), the specialist electronic component
solutions provider, is pleased to announce its financial results for the six
months ending 31 March 2005.
Business highlights
* Quiller Holdings Ltd acquired on 1 November 2004 for a net
consideration of #2.3M (inclusive of costs).
Financial highlights
* Sales increased to #33.3M (2004: #31.8M) +5%
* Profit before goodwill, exceptional items and tax: #1.4M (2004: #0.8M) +91%
* Profit before tax after goodwill and exceptional items: #0.5M (2004: #0.3M) +65%
* Gross margins up at 33.5% (2004: 32.5%)
* Basic EPS of 0.7p (2004: 0.2p) +250%
* Net debt at #8.8M after the acquisition of Quiller Holdings Ltd (2004: #6.0M)
* Gearing remains low at 46% (2004: 31%)
* Interim dividend increased to 0.614p (2004: 0.585p) +5%
* First China office opened - March 2005
Commenting on the results, Paul Gourmand, Chairman, said:
"Deltron has performed particularly well as a group with a 5% increase in sales
resulting in a 91% increase in profit before goodwill, exceptional items and tax
despite the challenging market conditions. The Board remains confident that the
profit before tax, goodwill, amortisation and exceptional items for the full
financial year should show a marked improvement on the previous 12 months,
albeit lower than the market expectations. We expect the industry consolidation
currently underway to continue and we will play a major role in this as we seek
to find further compatible businesses across Europe."
For more information please contact:
Deltron Electronics plc
Christopher Sawyer, Chief Executive Officer 01638 561156
Buchanan Communications
Tim Anderson or Mary-Jane Johnson 020 7466 5000
Chairman's Statement
Introduction
Deltron has performed particularly well as a Group despite the challenging
market conditions experienced throughout the first six months of the current
financial year. The Company's sales, profit, cash generation and other key
indicators all reflect the improved performance of your business.
In November 2004 we completed the acquisition of Quiller Holdings Limited, a UK
distributor of electromechanical components for a net consideration of #2.3m. It
is now fully integrated into our existing UK business enabling Deltron to
benefit from an expanded customer base and increased UK market share with a
minimal increase in overheads.
Business development has continued since 31 March 2005 with the opening of a
small office in China to improve our ability to source product from the Asian
market. It enables our Asian supply chain sources to work seamlessly alongside
our customers, thereby improving our delivery of designed-in solutions. One of
Deltron's key strengths lies in the design-in approach, which keeps the staff
close to our customers.
New legislation
Deltron are aware of new legislation that is due to come into force on 1 July
2006 from the The European Union Directive on the Restriction of Use of Certain
Hazardous Substances. We are well advanced with discussions with suppliers and
customers alike and are pleased to say that many of our suppliers are already,
in advance of this date, producing compliant products.
Financial Results
In the six months to 31 March 2005 turnover increased 5% to #33.3m with Quiller
contributing #1.4m in the period. Gross margin increased to #11.1m compared with
#10.4m in the first six months last year, while operating expenses excluding
exceptionals and goodwill amortisation only increased from #9.2m to #9.4m.
Profit before exceptionals, goodwill and tax increased 91% to #1.45m compared to
#0.8m last time and profit after tax of #0.3m compared to #0.1m. Adjusted
earnings per share increased 86% to 2.6p from 1.4p and basic earnings were 0.7p
compared to 0.2p in 2004.
The balance sheet continues to be strong with positive cashflow from operating
activities pre-exceptional items of #2.2m compared to #1.4m (Ref: Note 5) and
gearing below 50%. Interest cover before goodwill and exceptional items doubled
to 5.7 times from 2.8 times. Cash and unutilised facilities total approximately
#8m, which gives us the flexibility to respond to acquisition opportunities as
they arise.
The dividend has been increased 5% from the level last year to 0.614p. The
dividend will be paid on 19 August to shareholders on the register at 22 July
2005.
Current Trading and Prospects
Despite the strength of Deltron's first half performance the market has become
demanding as advised in our trading update issued in April 2005. Recent AFDEC
figures for the first quarter of 2005 show that billings in the UK have declined
by approximately 10% year on year, after adjusting for an early Easter. As a
result we do not expect growth in the UK this year, if we exclude the benefit of
the Quiller acquisition, a market that accounts for 30% of Group turnover.
Germany has also shown some recent signs of market weakness although for the six
months under review, Continental Europe met our expectations. The book to bill
ratio at 31 March 2005 was a useful 1.05.
In recent press reports, forecasters and our peer group are expressing negative
views on the short term economic and market conditions. The recent market
slowdown may be a temporary de-stocking situation, it is too early to say for
sure. Therefore, we believe we are right to be cautious as we move the business
forward.
Our strategy of acquisitions continues, we constantly are seeking to find
compatible businesses and product types that will accelerate profit and growth
by enhancing our service offering.
We are currently looking to strengthen our Board through recruitment of an
additional Non-executive director who can provide additional support to us
during this period of consolidation within the electronic component
distribution sector.
Deltron's management are well placed and highly experienced to add value to the
Company as demonstrated in the first half of the year and, despite the current
economic climate, our staff are extremely motivated and positive that we will
continue to grow the business.
To sum up, the Board remains confident that the Group's profit before tax,
goodwill, amortisation and exceptional items over the full financial year should
show a marked improvement on the previous 12 months, albeit less than current
market expectations. Deltron continues to win market share by staying close to
its customers and extending its product range. It is a formula which, as
demonstrated above, delivers the best possible performance even in difficult
economic climates.
P R Gourmand
Chairman
9 June 2005
GROUP PROFIT AND LOSS ACCOUNT (unaudited)
For 6 Months ended 31 March
2005 2005 2005 2004 2004 2004 Year
Before Goodwill Total Before Goodwill Total ended
goodwill and goodwill and 30
and operating and operating Sep.2004
operating exceptional operating exceptional
exceptional items exceptional items
items (note 2) items (note 2)
Note #000 #000 #000 #000 #000 #000 #000
Turnover
Existing Operations 31,854 - 31,854 31,806 - 31,806 65,709
Acquisitions 1,422 - 1,422 - - - -
33,276 - 33,276 31,806 - 31,806 65,709
Cost of Sales (22,128) - (22,128) (21,453) - (21,453) (44,290)
Gross profit 11,148 - 11,148 10,353 - 10,353 21,419
Operating expenses (9,393) (922) (10,315) (9,172) (438) (9,610) (19,565)
Operating profit being
profit / (loss) on
ordinary activities
before interest
Existing Operations 1,617 (438) 1,179 1,181 (438) 743 1,854
Acquisitions 138 (484) (346) - - - -
1,755 (922) 833 1,181 (438) 743 1,854
Interest payable (330) - (330) (441) - (441) (748)
Interest receivable 24 - 24 17 - 17 30
Profit /(loss) on
ordinary activities
before tax 1,449 (922) 527 757 (438) 319 1,136
Taxation 3 (364) 116 (248) (241) - (241) (554)
Profit /(loss) on
ordinary activities
after tax 1,085 (806) 279 516 (438) 78 582
Dividends (254) - (254) (240) - (240) (773)
Profit /(loss) retained
for the financial
period 831 (806) 25 276 (438) (162) (191)
Earnings per share - 4
(basic and diluted) 0.7p 0.2p 1.5p
Adjusted earnings per 4
share - basic and
diluted 2.6p 1.4p 3.7p
Dividends per share 0.614p 0.585p 1.872p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (unaudited)
For 6 Months ended 31 March
2005 2004 Year ended
30 Sep
2004
#000 #000 #000
Profit for the period 279 78 582
Exchange differences (11) 305 213
Total Gains and Losses recognised during period 267 383 795
MOVEMENT IN SHAREHOLDERS' FUNDS (unaudited)
For 6 Months ended 31 March
2005 2004 Year
ended
30
Sep 2004
Note #000 #000 #000
Opening shareholders' funds 18,982 12,547 12,547
Retained profit/(loss) for the period 25 (162) (191)
Share capital issued 6 273 6,434 6,413
Exchange differences (11) 305 213
Increase in shareholders' funds for the period 287 6,577 6,435
Closing shareholders' funds 19,269 19,124 18,982
GROUP BALANCE SHEET (unaudited)
As at 31 March
As at
2005 2004 30 Sep.
Total Total 2004
#000 #000 #000
Fixed Assets:
Tangible assets 2,662 2,743 2,734
Intangible assets 15,978 14,413 13,922
18,640 17,156 16,656
Current Assets:
Stocks 8,118 7,880 8,815
Debtors 13,984 13,963 13,607
Cash at bank and in hand 1,810 5,994 4,633
23,912 27,837 27,055
Creditors:
Amounts falling due within one year (16,116) (18,498) (17,073)
Net Current Assets 7,796 9,339 9,982
Total assets less current liabilities 26,436 26,495 26,638
Creditors - amounts falling due after more than one year (6,924) (7,037) (7,287)
Provision for liabilities and charges (243) (334) (369)
19,269 19,124 18,982
Capital and Reserves:
Called up share capital 2,070 2,052 2,053
Share premium 21,036 21,058 21,036
Other reserve 256 - -
Reserves (4,093) (3,986) (4,107)
Equity shareholders' funds 19,269 19,124 18,982
GROUP CASH FLOW STATEMENT (unaudited)
For 6 Months ended 31 March
2005 2004 Year
Total Total ended 30
Sep. 2004
Note #000 #000 #000
Cash flow from operating activities 5 1,849 1,448 3,388
Returns on investment and servicing of finance (343) (424) (793)
Taxation (123) 722 507
Capital expenditure (net of proceeds) (238) (133) (394)
Acquisitions (net of cash acquired) 7 (2,123) - (1,805)
Equity dividend paid (532) (344) (584)
Cash flow before financing (1,510) 1,269 319
Financing (837) 3,771 3,689
Change in Cash (2,347) 5,040 4,008
NOTE TO THE GROUP CASH FLOW STATEMENT (unaudited)
Reconciliation of cash flow to movement in net debt:
Opening net debt (7,290) (14,070) (14,070)
Change in Cash (2,347) 5,040 4,008
Cash flow from change in debt 837 2,663 2,724
Change in net debt (1,510) 7,703 6,732
Inception of finance leases (22) (33) (41)
Amortisation of issue costs (62) (26) (129)
Exchange differences 37 398 218
Movement in net debt (1,557) 8,042 6,780
Closing net debt (8,847) (6,028) (7,290)
INDEPENDENT REVIEW REPORT TO DELTRON ELECTRONICS PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 March 2005, which comprises the profit and loss account,
the statement of total recognised gains and losses, the balance sheet, the cash
flow statement, the reconciliation of cash flow to movement in net debt, and the
related notes 1 to 8 together with the movement in shareholders' funds. We have
read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2005.
Deloitte & Touche LLP
Chartered Accountants
Cambridge
9 June 2005
Notes to the interim accounts
1. Basis of preparation
The financial information for the year ended 30 September 2004 is derived from
the statutory accounts filed with the Registrar of Companies. The auditors'
report on the statutory accounts was unqualified and did not contain a statement
under Section 237 of the Companies Act 1985. The interim accounts do not
comprise statutory accounts within the meaning of Section 240 of the Companies
Act 1985 but have been reviewed by the Auditors whose report is on page 8. The
interim accounts have been prepared using accounting policies consistent with
those used for the statutory accounts for the year ended 30 September 2004.
2. Goodwill and operating exceptional items
Included within administration costs is a charge of #460,000 (2004: #438,000) in
respect of the amortisation of goodwill for the period.
The operating exceptional item of #462,000 was for the closure and relocation of
the Quiller Electronics operation in Bournemouth, when this was merged with the
existing UK distribution business in Scunthorpe. This was relieved by a tax
credit of #116,000.
3. Taxation
The taxation charge is based on the estimated effective rate for the year ending
30 September 2005.
4. Earnings per share
Earnings per share are calculated in accordance with Financial Reporting
Standard 14 (FRS 14). The calculation of earnings per share, for the half-year
is based on the profit attributable to equity shareholders of #279,000 (2004:
#78,000) and 41,348,611 (2004: 37,467,603) shares, being the daily average of
the number of shares in issue during the period.
The diluted earnings per share is based on weighted average of 41,470,663 (2004:
37,544,438) shares after allowing for the exercise of share options. The number
of qualifying options is insufficient to dilute the earning per share.
An adjusted earnings per share value is presented after adding back the
amortisation of goodwill and the operating exceptional item, net of tax, of
#806,000 (2004: after adding back the amortisation of goodwill of #438,000).
This has been presented in order to provide comparability with other companies.
5. Net cash flow from operating activities
2005 2004 Year ended 30
Sept 2004
#000 #000 #000
Operating profit 833 743 1,854
Amortisation of issue costs 62 26 129
Amortisation of goodwill 460 438 876
Depreciation 350 449 789
(Profit)/loss on disposal (1) (17) (21)
of fixed assets
Changes in
Stocks 1,082 (66) (880)
Debtors 611 (629) (1,079)
Creditors (1,548) 504 1,720
Net cash flow from
operating activities. 1,849 1,448 3,388
The net cash flow from operating activities for the six months ended 31 March
includes an exceptional cash outflow of #393,000 incurred in relation to the
restructuring of Quiller Holdings Ltd.
2005 2004 Year ended 30
Sept 2004
#000 #000 #000
Net cash flow pre
exceptional cash outflows 2,249 1,448 3,388
Exceptional cash outflows (393) - -
Net cash flow from
operating activities. 1,849 1,448 3,388
6. Share Capital
In November 2004 the company issued #273,000 (net of expenses) of new equity as
part consideration for the acquisition of Quiller Holdings Ltd ("Quiller"). The
value attributed to this transaction in excess of the nominal share capital has
been taken to Other Reserves as required by S131 of the Companies Act.
7. Acquisition
On 1 November 2004 the Group acquired 100% of the share capital of Quiller, the
holding company of Quiller Electronics Ltd, a specialist distributor of
electromechanical components to the manufacturing industry, for a net
consideration of approximately #2.3m (inclusive of costs and net of cash
acquired).
The consideration for the acquisition was satisfied by approximately #2.7M in
cash on completion and approximately #276,000 through the allotment, credited as
fully paid, of 340,740 new ordinary shares in Deltron ("the New Deltron Shares")
at an issue price of 81 pence per share.
In the year ended 31 December 2003, Quiller, which was founded in 1991, recorded
group turnover of approximately #4.2M and profit before interest and tax of
approximately #246,000 with strong 32% gross margins. Since its formation,
Quiller has extended its product range to represent a comprehensive selection of
international component manufacturers, a number of which have exclusivity in the
UK. Quiller brings with it a number of new UK franchises including additional
products for the aviation and security markets. Introduction of these products
into the Deltron European distribution network is likely over the medium term.
8. Company information
Copies of this statement are being sent to all shareholders and are also
available from the Company Secretary, Deltron Electronics plc, Cheveley House,
Fordham Road, Newmarket, Suffolk CB8 7XN.
This information is provided by RNS
The company news service from the London Stock Exchange
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