RNS No 0851m
DELTRON ELECTRONICS PLC
1st December 1997
PRELIMINARY RESULTS ANNOUNCEMENT
Pre-tax Profit up 17% to #2.7 million
Deltron Electronics plc, a specialist electromechanical
component distributor and manufacturer, announces its results
for the year ended 30 September 1997, the first full year
results following flotation.
* Profit before taxation up 17% to #2.7 million (1996 :
#2.3 million)
* Earnings per share up 4.2% to 9.9p (1996 pro forma
adjusted : 9.5p)
* Operating margins improved to 11.1% of turnover from
10.4% in 1996
* Proposed final dividend 2.0p per share, making total
payment for the year of 3.0p
* Further European acquisitions completed
Commenting on the results, Paul Gourmand, Chairman said:
"Deltons activities have little exposure to the turbulent
semi-conductor market which attracts so much attention. Our
companies are specialists and operate in industrial markets
which are relatively stable..... The current uncertainties in
the Far East, and in particular Japan, are unlikely to have an
adverse effect on our businesses.
"Our planned strategic development in Europe ... has
continued.
"During the year, the management team have had to wrestle with
the well publicised currency issue.. . However, it is an
indication of the strength of the Group that we can still make
good progress.
"The outlook is for further solid progress... Deltron is
rapidly becoming a truly pan-European company, a fact which is
expected to give us a strengthening position with our
suppliers and a well balanced business better able to
withstand downturns in individual markets.
"... I am pleased to report that the new year has started
well."
For further information contact:
Christopher Sawyer, Chief Executive, Deltron Electronics plc
Tel. No. 01638 561156
M Alex Borrelli, Director, Granville Davies
Tel. No.0171 488 1212
Michael Padley / Zena Bates, Buchanan Communications
Tel. No.0171 466 5000
CHAIRMANS STATEMENT
I am pleased to report after our first full year as a listed
company that the Groups profits before taxation have
increased to #2.7 million from #2.3 million, an increase of
17% despite turnover being marginally lower due to the effects
of currency. Earnings per share rose to 9.9p
(1996 9.5p). During this period the resources raised at the
time of flotation have been used as planned to develop the
Groups activities. Two further European acquisitions have
now been completed (one immediately after the year end).
Trading
The Groups business has been focused into two divisions,
namely Deltron Manufacturing and Deltron European
Distribution, in order to improve performance further by cross-
fertilisation of products and better utilisation of common
resources.
Deltrons activities have little exposure to the turbulent
semi-conductor market which attracts so much attention. Our
companies are specialists and operate in industrial markets
which are relatively stable.
During the year, the management team have had to wrestle with
the well publicised currency issue, which involved the
unexpected and unusual strengthening of sterling referred to
in my Interim Statement. This has been a distraction and has
reduced the reported profit for the year. However, it is an
indication of the strength of the Group that we can still make
good progress.
The current uncertainties in the Far East, and in particular
Japan, are unlikely to have an adverse effect on our business.
Strategic development
Our planned strategic development in Europe, which started
with the acquisition of Euroindustrie in France in October
1995, has continued. In April this year, the Group acquired
Conelec A/S, a distributor of electromechanical products in
Denmark. In October (after the year end) Freber AB, a leading
distributor of electromechanical products in Sweden, was
acquired. These acquisitions not only increase our presence
in Europe, they also strengthen product knowledge and
management experience in our specialist electromechanical
field.
Balance sheet
The financial condition of the Group remains healthy with
gearing at the year end of 27% and interest cover at 10.7
times. Cash flow from operating activities during the year
was a positive #3.2m. The acquisition of Freber after the
year end has increased gearing on the balance sheet to 187%
but prospective interest cover remains healthy. In the
absence of further acquisitions, the Groups strong cash flow
will result in this gearing figure being substantially reduced
by the end of the current financial year.
The Board is recommending a final dividend for the year of
2.0p per share, which will bring the total payment for the
year to 3.0p.
Trading outlook
The outlook is for further solid progress in sales and profit
in the current year. Whilst the rate of growth may vary, we
do expect the markets in which we operate to continue to grow
and our policy of carefully evaluating both those components
and markets in which we trade should provide a relatively
stable environment in which we can maintain our expansion.
We have recently invested in new products, people and
facilities and this will continue. We undertake this
investment because we believe all our business units have the
opportunity and ability to achieve further growth both with
existing and new products. Accordingly, we will be providing
the resource necessary to enable this.
We intend, when prices can be justified, to continue our
policy of acquiring other businesses engaged in activities
similar or complementary to our existing businesses in line
with our strategic objectives.
Turnover in the current year is likely to increase
substantially as a result of a full year contribution from our
Danish and Swedish subsidiaries. Whilst the proportional
benefit to pre-tax profits will be lower than the increase in
turnover to accommodate interest costs associated with their
acquisition, I am confident that the benefit to shareholders,
together with an improving outlook and Deltrons proven strong
cash flow, will deliver continued growth in earnings per
share.
Employees
Shareholders, many of whom are employees, will be aware that
the continued progress of the Group is dependent on the
dedication and support of our staff across Europe. On behalf
of the Board, I wish to express my thanks to our staff in what
has been a very demanding year.
Prospects
Deltron is rapidly becoming a truly pan-European group, a fact
which is expected to give us a strengthening position with our
suppliers and a well balanced business better able to
withstand downturns in individual markets. Plans for 1998
include continued organic growth supported by further
investment in products, facilities and people, both in the UK
and abroad.
The Groups underlying strength is such that it is well
positioned to continue its growth in the current financial
year and beyond.
In conclusion, I am pleased to report that the new year has
started well.
Paul. R. Gourmand
Chairman
OPERATIONAL REVIEW
The Deltron Group is a specialist electromechanical business
involved in the distribution of third party products in the
UK, France, Denmark and Sweden. It also carries out
manufacturing activities in London and Scunthorpe in the UK.
Deltron has strong long standing commercial relationships with
many of the worlds leading component manufacturers, including
Alps Electric, Star Micronics and C & K Switches and provides
an agency style representation. Complementary and long
standing customers are widely spread throughout industry in
all the areas where the Group operates. The Group operates
primarily as a technical selling organisation, having products
specified and designed into new applications and as a result
enjoys an order book equivalent to some three months sales at
any time.
The Groups strategy is to focus on its electromechanical
skills and operating base but within this specialism to
control its exposure to any single influence so that it is
better able to take advantage of changes. We intend to
concentrate our efforts in this sector.
Accordingly, 1996/97 has seen a further consolidation of
activities in the UK and France, with one acquisition in
Denmark and another in Sweden after the year end. Both
acquisitions are of specialist electromechanical distribution
businesses which add useful value to the Group. The result of
these acquisitions is that in the current financial year we
expect that less than 50% of Group sales will be made in the
UK.
As mentioned in the Chairmans Statement, the Groups
operations have now been grouped into two divisions. The
results of these divisions for this year and last were as
follows:
Distribution Manufacturing
1997 1996 1997 1996
#000 #000 #000 #000
Turnover * 15,699 15,155 10,761 10,801
Operating profit margin 11.4% 9.9% 10.6% 10.0%
* 1996 turnover adjusted for discontinued operations
FINANCIAL REVIEW
Despite the currency issues mentioned below and the year on
year reduction in turnover, profit before tax for the year
ended 30 September 1997 exceeded that of 1996 by some 17% as
follows:
1997 1996
#000 #000
Turnover 26,460 26,604
______ ______
Operating Profit 2,936 2,776
Interest (net) (275) (503)
______ ______
Profit before Tax 2,661 2,273
Taxation (833) (751)
______ ______
Profit after Tax 1,828 1,522
______ ______
After eliminating discontinued operations, turnover including
acquisitions increased by 2% and gross profit by 5.3%.
Operating margins during the year rose to 11.1% (10.4% in
1996).
The Group drew down the seven year fixed rate term loan of
#3.5 million mentioned in the Interim Statement. This
resulted in a higher net interest cost than would have been
normal, but has also provided additional liquidity and part of
the funding for the acquisitions mentioned above.
At the time of the Interim Statement, shareholders attention
was drawn to the effect of the very rapid strengthening of
Sterling, in particular against the Japanese Yen and
Continental currencies (especially in Deltrons case the
French Franc). Roxburgh Electronics in the UK and
Euroindustrie in France have both been affected by this which
is estimated to have cost the Group some #2.5 million in
reduced turnover and approximately #300,000 in profits this
year. Its impact is demonstrated either in reduced selling
prices and gross profit or in reduced conversion values
(reporting French profits in Sterling). However, the Board
has taken advantage of the strength of Sterling to make
further overseas acquisitions economically.
Cash flow from operating activities for the last three years
has been as follows:
1995 1996 1997
#m #m #m
1.6 2.1 3.2
Our confidence in the Groups ability to generate cash enables
us to continue with the programme of investment and
acquisition already mentioned. Plans for 1998 include further
organic growth, supported by investment in new products,
facilities and people. In the manufacturing division, this
includes a new range of filters and other new products for our
expanding pro-audio business. In the European distribution
division this will include new franchises as well as
additional sales staff. Both Conelec and Euroindustrie have
moved to larger premises in 1997 in order to accommodate year
on year growth.
The balance sheet shows the benefit of the term loan and the
cash flow mentioned above. Gearing at the year end was 27%,
with interest cover over 10.7 times. The results of a
determined programme to maintain and strengthen control of
working capital are now apparent. Group stock levels have
been reduced, despite the inclusion of Conelecs figures, by
#697,000 during the year. This shows an improvement in
stockturn for the Group as a whole to over 4.8 times (1996
4.1 times)
Dividends
Subject to shareholders approval at the Annual General
Meeting on 23 February 1998, it is proposed to make payment of
the final dividend recommended of 2.0p per share on 27
February 1998 to shareholders on the Register of Members on 23
January 1998. This brings the total dividend payment for the
year to 3.0p per share.
Group Profit and Loss Account
for the year ended 30 September
Audited Audited
1997 1996
#000 #000
Turnover:
Continuing operations 24,679 25,956
Acquisitions 1,781 -
Discontinued operations - 648
______ ______
26,460 26,604
Cost of sales (16,077) (16,519)
______ ______
Gross profit:
Continuing operations 9,759 9,864
Acquisitions 624 -
Discontinued operations - 221
______ ______
10,383 10,085
Selling and distribution costs (1,539) (1,645)
Administrative costs (5,908) (5,664)
______ ______
Operating profit:
Continuing operations 2,641 2,578
Acquisitions 295 -
Discontinued operations - 198
______ ______
2,936 2,776
Bank interest receivable 148 9
Interest payable (423) (512)
______ ______
Profit on ordinary activities
before tax 2,661 2,273
Taxation (833) (751)
______ ______
Profit on ordinary activities
after tax 1,828 1,522
Minority interest - (94)
______ ______
Profit for the financial year 1,828 1,428
Dividends: non-equity - (195)
______ ______
Profit attributable to equity
shareholders 1,828 1,233
Dividends: equity (565) (72)
______ ______
Profit retained for the financial year1,263 1,161
====== ======
Earnings per share 9.9p 11.7p
====== ======
Adjusted pro forma earnings per share N/A 9.5p
====== ======
There is no difference between profit before taxation and
profit for the financial year on a historical cost basis and
that disclosed in the accounts.
Group Balance Sheet
as at 30 September
Audited Audited
1997 1996
#000 #000
Fixed assets
Tangible assets 3,961 4,237
______ ______
Current assets
Stocks 3,331 4,028
Debtors 7,810 6,767
Cash 3,583 1,538
______ ______
14,724 12,333
Creditors: amounts falling due
within one year (6,961) (7,485)
______ ______
Net current assets 7,763 4,848
______ ______
Total assets less current liabilities11,724 9,085
Creditors: amounts falling due
after more than one year (6,456) (2,752)
Deferred income (320) (336)
______ ______
4,948 5,997
====== ======
Capital and reserves
Called up share capital 928 921
Share premium account 4,328 7,721
Capital redemption reserve - 600
Profit and loss account 2,517 1,513
Goodwill write-off reserve (2,825) (4,758)
______ ______
Equity shareholders funds 4,948 5,997
====== ======
Group Cash Flow Statement
for the year ended 30 September
Audited Audited
1997 1996
#000 #000
Cash flow from operating activities 3,245 2,070
Returns on investment and servicing of finance
Interest received 148 9
Interest paid (383) (436)
Preference dividend paid - (195)
Interest element of finance
lease rental payments (46) (40)
______ ______
(281) (662)
______ ______
Taxation (616) (589)
Capital expenditure
Purchase of tangible fixed assets (373) (725)
Sale of tangible fixed assets 52 129
______ ______
(321) (596)
______ ______
Acquisitions (1,419) (1,798)
Equity dividend paid (186) (115)
______ ______
Cash inflow/(outflow) before financing 422 (1,690)
Financing 2,162 4,590
______ ______
Increase in cash 2,584 2,900
====== ======
Reconciliation of cash flow to
movement in net debt
Net debt at 1 October (1,199) (4,008)
______ ______
Increase in cash 2,584 2,900
Cash (outflow)/inflow from increase in
debt and lease financing (2,535) 264
______ ______
Change in net debt resulting
from cash flows 49 3,164
Inception of finance leases (110) (342)
Amortisation of issue costs (15) (4)
Exchange differences (74) (9)
Movement in net debt ______ ______
(150) 2,809
______ ______
Net debt at 30 September (1,349) (1,199)
====== ======
The 1996 comparatives have been adjusted in accordance with
FRS 1 (Revised)
Notes:
1. The financial information set out in the preliminary
results for the year ended 30 September 1997 does not
constitute statutory accounts within the meaning of
section 240 of the Companies Act 1985.
The statutory accounts for the year ended 30 September
1996 have been delivered to the Registrar of Companies.
The auditors have made a report under section 235 of the
Companies Act 1985, as amended, in respect of such
accounts which was unqualified and did not contain a
statement under section 237(2) or (3) of the Act.
2. Earnings per Share
Earnings per ordinary share are calculated using the
profit after taxation of #1,828,000 (1996 profit
#1,233,000) and the weighted average number of ordinary
shares in issue during the year of 18,467,052 (1996
10,575,396).
The adjusted pro forma figure has been produced to
illustrate the effect that the new capital structure and
debt position, introduced on flotation on 30 September
1996, would have had if they had been effective from 1
October 1995 for the year ended 30 September 1996. The
calculation of earnings per share is based on the actual
profit attributable to equity shareholders adjusted for a
reduction in interest of #349,000 an increase in taxation
of #115,000 and the elimination of the minority interest
and preference share dividend and 18,405,726 shares being
the number of shares in issue immediately following
flotation.
3. Copies of the audited financial statements will be posted
to shareholders on 3 December 1997. Further copies may
be obtained from the Company Secretary at the Companys
Registered Office:-
Suffolk House
Fordham Road
Newmarket
Suffolk
CB8 7AA
4. The Annual General Meeting will be held on 23 February
1998 at the Companys Registered Office.
END
FR OCFCPODDDADB
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