RNS Number:5757E
Deltron Electronics PLC
03 December 2002
For Immediate Release 3 December 2002
DELTRON ELECTRONICS plc
PRELIMINARY RESULTS
Deltron Electronics plc ("Deltron"), the specialist European electromechanical
solutions provider, announces its audited Full Year Results for the year ended
30 September, 2002.
Financial Highlights:
* Turnover maintained at #65.5m (2001: #64.9m)
* Gross margins robust at 32.5%
* Operating profit before goodwill amortisation and exceptional items at
#2.7m (2001: #4.3m) in line with expectations.
* Final dividend of 1.17p (2001 : 2p)
* Like for like sales down 15% against market decline of c.25%
* 2% organic growth in second six months compared to first half
* Order book constant at two and a half months
Business Highlights:
* Deltron personnel across Europe demonstrate commitment to the future
with investment of #0.7m in new shares
* Board restructured to ensure benefit of management experience across
Continental Europe
* Board strengthened by the appointment of Derek O'Neill as Finance
Director
* Meeting revised market expectations in tough industry conditions
Paul Gourmand, Chairman of Deltron, commented:
"Weathering a 35 - 40% market downturn over 24 months is an achievement in
itself. To do so while integrating six operations into the Group, growing market
share and improving certain areas of business performance, is quite an
achievement...The net position is a healthy group, geared to recovery, in a
strong relationship with customers and suppliers.
Deltron has never been fitter, or better prepared, to meet the needs of its
market place."
For further information, please contact:
Deltron Electronics plc Tel: 01638 561156
Christopher Sawyer, CEO
Buchanan Communications Tel: 020 7466 5000
Tim Anderson/Bobbie Swanson
Chairman's Statement
This is the first full year Deltron has traded as a pan-European group,
operational in nine Western Europe countries. 2002 has been difficult, but the
current trend is now in the right direction.
After a year of severe overhead reduction as we integrated and rationalised our
new operations- we acquired six companies in 2001 - Deltron's operational
gearing means that any increase in turnover should generate a disproportionate
increase in profit. What, therefore, are the indicators which will enable us to
exploit Deltron's current position ?
Firstly, organic growth increased 2% in the second six months compared with our
first half; a trend we expect to continue. Meanwhile, industry experts are split
on the prospects for the next couple of years. The Semiconductor Industry
Association and Nokia, are predicting global double digit market growth in 2003
and 2004 while Afdec (Association of Franchised Distributors of Electronic
Components) only expects a flat market in the UK over the next year. Our
expectations at Deltron are modest, but, nevertheless, we believe the trend is
encouraging.
In 2001, telecoms led the downturn. This year, medical devices, automotive and
instrumentation, which have undergone huge change in recent years with the
introduction of electronics into the instruments, have led the upturn. We
actively target recovery sectors which we hope will generate growth in 2003,
whether the macro climate improves or not.
Growth in 2003 will be achieved principally through the extension of franchises
across the Group. Suppliers are attracted by our pan-European reach and that has
led to Deltron winning more franchises. In 2003, cross-fertilisation of
franchises from one country to another will be a major growth driver.
Over 24 months, the electronics components market has declined by 35 to 40%.
Geographically, we have seen the sales performance from the UK reduce by 4% in
the second half. However, we have seen a 10% improvement in Germany. Turnover in
Continental Europe improved by 5% in the second six months of our financial year
compared to the first. Overall second half turnover improved by 2% compared to
the first half. Deltron has delivered a solid performance in the worst market
conditions we have ever seen.
Financial Performance
Turnover increased 1% to #65.5m, although when the contribution from acquired
companies is stripped out, there is a like-for-like decline of 15%. Given a
current market decline of circa 25%, this points to an outstanding performance
where Deltron has won substantial market share.
Margins held steady at a very healthy 32.5%. However, the impact of greater
overheads as a result of the acquisitions (now substantially reduced), has
produced an operating profit before goodwill amortisation and exceptional items
of #2.7m down from #4.3m.
Again, the first half to second half trend was very encouraging. Debt fell by
#1.6m, cash flow improved, stock turn was improved and gearing down. The order
book stayed at 2 1/2 months where it has reliably stood for several years.
People
The Board was strengthened by the appointment of Derek O'Neill as Group Finance
Director, following two and a half months as interim FD. Derek replaces Edward
Tozer who resigned in July, 2002. I would like to take this opportunity to
thank Edward for the contribution he made to the company and to welcome Derek to
the Board.
We have also introduced a change to the Board structure to ensure we benefit
from the experience of our management in Continental Europe. From 1 October
2002, in addition to Francois Feldman, a main Board director who runs our French
operation, two more representatives of our subsidiary companies will serve on
the Board on a rotational basis. Pierre Romano (Italy) and Niels K Nielsen
(Denmark) have agreed to join the Board. We expect the Board to benefit from the
local market intelligence and European perspective that these new directors will
bring.
During a difficult year our personnel tackled Deltron's reorganisation with
energy and enthusiasm and are focused on the future. Their commitment to
Deltron was further demonstrated by investing #0.7m in new shares in September
of this year. The Board would like to take this opportunity of thanking all
employees for their continued support.
Dividend
The Board recommends a final dividend of 1.17p (2001 : 2p) to be paid on 7 March
2003 to shareholders on the register on 31 January 2003. This brings the total
for the year to 1.755p (2001 : 3.17p). The recommendation reflects the reduction
of profit, mitigated by the fall in debt and the improvement in most other
indicators including cash flow.
Prospects
Weathering a 35 - 40% market downturn over 24 months is an achievement in
itself. To do so while integrating six operations into the Group, growing market
share and improving certain areas of business performance, is quite an
achievement. The acquisitions brought an immediate increase in overheads but a
vigorous process has reduced these considerably as is detailed in the Financial
Review. The net position is a healthy group, geared to recovery, with a strong
relationship with customers and suppliers.
Some of the industry forecasts for next year are, in our view, evidently
excessive. However, they are very heartening. In the meantime, we expect to
generate growth internally. Deltron has never been fitter, or better prepared,
to meet the needs of its market place.
P R Gourmand
Chairman
2 December 2002
Operational Review
Deltron management have met the challenge of managing its business during the
electronics industry's period of greatest decline.
Having said that, Deltron now operates in 9 countries, which cover most of
developed Western Europe. In addition, Deltron has identified suitable business
partners in Eastern Europe and has put in place an appropriate development plan.
This new development allows Deltron to continue to provide its dedicated
service to its customers as and when production is transferred from Western
Europe.
Despite the difficult industrial climate, our suppliers are encouraging and
supporting Deltron's individual business units to cross fertilise their
franchises resulting in over 20 new franchises/product lines which will drive
our growth. This growth will further accelerate when the industrial economic
recovery commences.
As a result of our information technology investment, it is pleasing that, for
example in the UK distribution business, electronic commercial transactions with
its customers has risen from 3% to 12% meeting customer service requirements as
well as improving operational efficiencies.
The robustness and stability of Deltron's business is well illustrated by not
being dependent on any one customer or supplier, e.g. our biggest customer and
supplier equals 3% and 12% of group turnover respectively. In addition, we
continue to enjoy gross profit margins of 32.5% with an order book of some 2.5
months of sales turnover which are well above the industry's average, as are our
stock turns at 6 times.
We are short of volume but with our improved operational gearing, a 10%
recovery in our industry should nearly double profits, not the 35 - 40% it has
declined.
The six acquisitions in Europe in 2001 have put us in a very strong position for
the future. We can already see much of our potential organic growth for the
coming year by cross-fertilising our franchises across the Group. Suppliers are
attracted by our greater geographic reach, whilst our design-in approach
continues to keep Deltron close to our customers.
We are the leading specialist pan-European emech distributor for suppliers.
Deltron has the capability of providing a European central logistic service.
This reduces the administrative burden of suppliers, particularly for American
and Japanese suppliers, by creating one point of contact for Europe. It reduces
currency considerations, delivery points, trading terms and other factors to
just one simple formula.
People
We have changed and strengthened our management to reflect the European nature
of our business, as well as the demanding economic climate. In particular, two
directors from our continental European operations have now joined the Board on
a rotational basis. There is a determination across Deltron to realise our
considerable potential. Recognising the growth prospects of the Group, 22
executives and non-executive directors from subsidiaries in six countries
invested sums ranging from #1,000 to #170,000 in a total investment of #0.7m in
September. All our employees are motivated to grow the Deltron business.
Outlook
The integration of businesses acquired in 2001 is largely complete. The
expanded Group is stronger with much greater potential. Operational gearing
means a small increase in turnover has a disproportionate improvement in profit.
We are confident of increasing our market share in a stable market and winning
more than our fair share in expanding conditions. After an unprecedented
slowdown in our sector, we have seen a stable position across our operations for
some time. Deltron has the geographic reach, the experienced people and the
infrastructure to produce the optimal performance for the Group going forward.
C J Sawyer
Group Chief Executive
2 December 2002
Financial Review
The last financial year has seen management focusing on the integration of the
six European acquisitions made in 2001 into the Deltron group, implementing
operational efficiencies and expanding the number of product franchises.
Revenue increased 1% to #65.5m from #64.9m in 2001, however on a like for like
basis removing the 2001 acquisitions from these numbers would show revenues
dropped 15%. This is considerably better than the reported market shortfall of
circa 25%. This improvement in revenue reflects an increase in market share,
which was achieved without sacrifice of margin. Margins during the year were
consistent with 2001 at 32.5% of sales. This is a robust result in these
difficult market conditions.
Operating expenses before goodwill and exceptionals were #18.6m, an increase of
#1.8m over 2001. As a proportion of sales, overheads increased from 25.9% in
2001 to 28.4% in 2002. The table below confirms that operating expenses
increased as the acquisitions were made peaking in the first half of 2002. They
have reduced in the last six months due to the reorganisation decisions made in
the year. Overheads in the second half of the year were 5.5% lower than the
first half and represented 27.5% of sales.
#m
Overheads pre-goodwill and exceptionals for the six months to:
March 2001 8.0
September 2001 8.8
March 2002 9.6
September 2002 9.0
The above table does not show the full attention paid to operating expenses
since the acquisitions. The annualised run rate for overheads at the time the
acquisitions took place would have been #20.2m and headcount would have been 405
compared to #18.6m and 347 at 30 September 2002.
Interest costs in 2002 increased because of the full year effect of the
borrowings taken on to fund the 2001 acquisitions. As shown in the table below,
debt is down #1.6m since the interims.
#m 2002 2001
Operating Net Debt #15.2 #8.6
Debt at Interim - 30 March #16.3 #6.7
Debt at year end - 30 September #14.7 #15.2
Net Interest Cost #1.3 #0.8
Profit after tax, before goodwill amortisation and exceptionals was #1.0m
against #2.2m in 2001 because of the underlying fall in revenues and the full
year effect of the acquisitions on overheads and interest.
The Group's effective tax rate for the year (based on profit before tax and
amortisation of goodwill) was 23.4% against 40.3% the previous year. If the
effect of Financial Reporting Standard 19 - deferred tax, is removed then the
tax rate is unchanged from 2001 at 30.8%.
Cash Flow
During this financial year a cash inflow from operating activities of #4.7m was
achieved compared with #3.3m in 2001 In addition, during the year the Company's
management subscribed #0.7m in a private share placing reflecting their
confidence in the future of the business. Net capital expenditure was #0.5m
against #0.4m in 2001 principally as a result of investing in the consolidation
of two UK sites into one.
Balance Sheet
The balance sheet shows net debt at 30 September 2002 of #14.7m compared with
#16.3m at 31 March 2002. Working capital in the year reduced by #2.3m. This has
been achieved through improved stock management. Stock has been reduced to #8.0m
from #10.8m in the previous year.
Working capital utilisation improved during the year as a result of improved
stock management. The key performance indicators were:
2002 2001
Stock Turn 5.9 Times 4.7 Times
Debtor Days 61 Days 71 Days
Creditor Days 61 Days 61 Days
D O Neill
Group Finance Director
2 December 2002
Group Profit and Loss Account
for the year ended 30 September
2002 2001
Before 2002 Before 2001
Goodwill Goodwill Goodwill Goodwill
and and and And
exceptional exceptional 2002 exceptional Exceptional 2001
items items Total items items Total
Note 2 Note 2
#000 #000 #000 #000 #000 #000
Sales 65,496 - 65,496 64,933 - 64,933
Cost of Sales (44,184) - (44,184) (43,835) - (43,835)
Gross Profit 21,312 - 21,312 21,098 - 21,098
Operating Expenses:
Selling and Distribution (8,384) - (8,384) (6,080) - (6,080)
Administration (10,246) (2,015) (12,261) (10,733) (1,048) (11,781)
Operating profit/(loss): 2,682 (2,015) 667 4,285 (1,048) 3,237
Interest payable & similar (1,321) - (1,321) (814) - (814)
charges
Interest receivable & similar 46 - 46 53 - 53
income
Net finance costs (1,275) - (1,275) (761) - (761)
(Loss)/profit on ordinary 1,407 (2,015) (608) 3,524 (1,048) 2,476
activities before taxation
Tax on (loss)/profit on (405) 345 (60) (1,369) 163 (1,206)
ordinary activities
(Loss)/profit on ordinary 1,002 (1,670) (668) 2,155 (885) 1,270
activities after taxation
Dividends (515) (896)
(Loss)/profit for the financial (1,183) 374
year
(Loss)/earnings per share - (2.4)p 4.7p
basic and diluted
Adjusted earnings per share - 3.5p 8.0p
basic and diluted
As a result of implementing Financial Reporting Standard 19, all comparative
figures have been restated.
All activities derive from continuing operations
Group Statement of Total Recognised Gains and Losses
for the year ended 30 September
2002 2001
#000 #000
(Loss)/profit for the financial year (668) 1,270
Exchange adjustments 125 103
Total gains and losses recognised during the year (543) 1,373
Note on prior period adjustment
Total recognized gains and losses related to the year above (543)
Prior period adjustment in respect of Financial Reporting Standard 19 (283)
Total gains and losses recognized since the last annual report (826)
As a result of implementing Financial Reporting Standard 19, all comparative
figures have been restated.
Group Balance Sheet
as at 30 September
2002 2001
#000 #000
Fixed assets
Intangible assets 15,608 16,207
Tangible assets 5,157 5,480
20,765 21,687
Current assets
Stocks 8,003 10,750
Debtors 15,328 17,340
Cash at bank and in hand 2,389 3,385
25,720 31,475
Creditors: amounts falling due within one year (17,117) (19,377)
Net current assets 8,603 12,098
Total assets less current liabilities 29,368 33,785
Creditors: amounts falling due after more than one year (13,490) (17,531)
Provision for liabilities and charges (1,118) (1,137)
Net assets 14,760 15,117
Capital and reserves
Called up share capital 1,466 1,407
Share Premium 15,134 14,492
Profit and loss account (1,840) (782)
Equity shareholders' funds 14,760 15,117
As a result of Implementing Financial Reporting Standard 19, all comparative
figures have been restated.
The financial statements were approved by the Board of Directors on 2 December
2002 and were signed on its behalf by:
C J Sawyer
Director
Group Cash Flow Statement
For the year ended 30 September
2002 2001
#000 #000
Net cash inflow from operating activities 4,739 3,346
Returns on investment and servicing of finance
Interest received 46 53
Interest paid (1,269) (626)
Interest element of finance lease rental payments (34) (53)
(1,257) (626)
Taxation (1,401) (1,353)
Capital expenditure
Purchase of tangible fixed assets (1,165) (691)
Sale of tangible fixed assets 622 294
(543) (397)
Acquisitions net of cash acquired (750) (13,937)
Equity dividend paid (731) (777)
Cash inflow / (outflow) before financing 57 (13,744)
Financing (inclusive of #0.7m (2001: #7.7m) from issue of shares) (2,787) 18,254
Change in cash (2,730) 4,510
Reconciliation of cash flow to movement in net debt
Net debt at 1 October (15,163) (8,585)
Change in cash (2,730) 4,510
Cash from change in debt and lease financing 3,488 (10,592)
Change in net debt resulting from cash flows 758 (6,082)
Inception of finance leases (236) (483)
Amortisation of issue costs (35) (17)
Exchange differences (71) 4
Movement in net debt 416 (6,578)
Net debt at 30 September (14,747) (15,163)
Notes to the Accounts
1. Financial Information
The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 September 2002 or 2001, but is derived
from those accounts. Statutory accounts for 2001 have been delivered to the
Registrar of companies and those for 2002 will be delivered following the
company's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under s237(2) or
(3) Companies Act 1985.
The Annual Report and Accounts will be posted to shareholders during December
2003. Copies of the Annual Report and Accounts and of this announcement will be
available from the Company's registered office: Suffolk House, Fordham Road,
Newmarket, CB8 7AA
2. Goodwill and exceptional items
Goodwill amortisation is #864,000 (2001; #519,000) relating to acquisitions made
in 2000 and 2001. The exceptional item of #1,151,000 includes the cost of
restructuring part of the UK manufacturing business Deltron Emcon Limited and
also the restructuring of parts of the activity of Hawnt Electronics Ltd and
Discomp SA in France, which were acquisitions made during 2001. This is relieved
by a tax credit of #345,000. In 2001 there was an exceptional item of #529,000,
which related to the restructuring of parts of the activity of Hawnt Electronics
Ltd and Discomp SA.
3. Earnings per share
Earnings per share for 2002 have been calculated in accordance with Financial
Reporting Standard 14. The calculation of the basic and diluted (loss) /
earnings per share is based on the loss attributable to equity shareholders of
#668,000 (2001: profit of #1,270,000) and 28,261,057 (2001: 26,863,004) shares
being the daily average of the number of shares in issue during the year. There
is no dilutive effect of the options and as a result both basic and diluted
earnings per share are the same.
An adjusted earnings per share value is shown after adding back the amortisation
of goodwill and the exceptional item, net of taxation of #1,670,000 (2001:
#885,000). This has been presented in order to provide additional information to
shareholders.
4. Dividends
An interim cash dividend of 0.585p per ordinary share was declared during the
year and paid on 16 August 2002. The directors recommend payment of a final
dividend of 1.17p per ordinary share, to be paid on 7 March 2003 to shareholders
on the register on 31 January 2003. This will bring the total dividend for the
year to 1.755p per ordinary share.
5. Net cash inflow from operations
2002 2001
#000 #000
Operating profit 667 3,237
Release of government grant (84) (33)
Amortisation of issue costs 14 17
Amortisation of goodwill 864 519
Depreciation 1,052 1,075
Profit on disposal of fixed assets (105) (5)
Changes in
Stocks 2,373 (41)
Debtors 2,698 1,925
Creditors (2,741) (3,348)
4,739 3,346
6. Deferred taxation
Deferred tax is provided in full on timing differences, which result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallize based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in financial statements. Deferred tax assets
are recognized to the extent that it is regarded, as more likely than not that
they will be recovered. Deferred tax assets and liabilities are not discounted.
The effect on the current year profits resulting from the implementation of FRS
19 is to create an additional credit of #19,000. The prior year comparatives
have been restated for the impact of FRS 19 in accordance with FRS 3. The effect
on the prior full year period profit and loss account was to charge an amount of
#283,000. The opening reserves have been restated accordingly by a reduction of
#283,000 and this is reflected in the Statement of Total Recognised Gains and
Losses.
7. Acquisitions
The cash outflow of #750,000 primarily relates to the payment of additional
consideration and costs in respect of the acquisitions made in 2001 of Hawnt
Electronics Ltd and Camax Electronics Srl. The consideration became due upon the
final agreement of the net assets.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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