RNS No 5896c
DELTRON ELECTRONICS PLC
4th December 1998
DELTRON ELECTRONICS plc
PRELIMINARY RESULTS ANNOUNCEMENT
Deltron Electronics, the Pan-European specialist distributor
and manufacturer of electromechanical components, announces
its Preliminary Results for the year ended 30th September 1998.
On a geographical basis, the UK now accounts for less than half
of sales with the balance spread mainly across mainland Europe
which means that the introduction of the Euro in 1999 is both
relevant and welcome. Accordingly, we have decided to present
our results in both ECU (Euro) and Sterling for the first time.
Key Points
Sterling Euro
* Turnover #36.0m +36% +44%
* Operating profit #3.7m +26% +33%
* Profit before taxation #3.2m +19% +26%
* Earnings per share 11.6p +17% +24%
* Dividends per share 3.54p +18% +25%
* Cash flow from operating
activities #4.7m +46% +54%
* Continued focus on specialist electromechanical and passive
niche markets
* Two significant acquisitions were made during the year -
Freber Elektronik Leasing AB, a leading distributor of
electro-mechanical solutions in Sweden and EUROiNDustrie EMC,
a manufacturer of filters based in France. Both companies are
trading in line with expectations.
Paul Gourmand, Chairman said..."Whilst last year's demanding
climate in the UK is expected to continue in the immediate future,
we consider that the combination of a Group which has spread its
risks through a number of countries, markets and industries, but
remains focused on its specialist core activities is a strong one.
The coming year will once again pose great challenges which we look
forward to with enthusiasm."
For further information contact:
Christopher Sawyer 0171 466 5000 (today)
Chief Executive, Deltron Electronics plc 01638 561156 (thereafter)
Tim Anderson/Andy Yeo 0171 466 5000
Buchanan Communications
CHAIRMAN'S STATEMENT
The strategy for development of the Deltron Group has been
maintained successfully during the last 12 months. We have
continued to focus our efforts on specialist electromechanical
and passive niche markets as well as developing our pan-European
presence in these areas. The benefits of the strategy are
apparent in the increased financial performance of the Group,
where we are delighted to report a further year of real progress
with significant double digit increases in pre-tax profits,
earnings per share and dividends.
The financial highlights of the Group for the year ended 30
September 1998 are as follows:
Sterling Euro
Turnover #36.0m +36% +44%
Operating profit up #3.7m +26% +33%
Profit before taxation up #3.2m +19% +26%
Earnings per share up 11.6p +17% +24%
Dividends per share up 3.54p +18% +25%
Cash flow from operating
activities #4.7m +46% +54%
During the year we completed 2 significant acquisitions in Europe,
one in Sweden and one in France. On a geographical basis, the UK
now accounts for less than half of sales with the balance spread
mainly across mainland Europe which means that the introduction of
the Euro in 1999 is both relevant and welcome. Accordingly, we
have decided to present our results in both ECU (Euro) and Sterling
for the first time. This also clarifies the extent of our success
with organic growth.
Trading
Shareholders will be aware that trading in the Electronic Components
industry has, in general, been tough during the past 12 months,
and indeed remains so. We acknowledge these problems in general,
but in detail the Deltron Group has significant strengths which
provides a useful resilience.
The Deltron Group of companies operates exclusively in the
specialist electromechanical and passive markets which do not suffer
the volatile swings in pricing and demand experienced in the
semi-conductor field. In addition, the management culture of the
Group is to operate in an entrepreneurial style within strict
corporate disciplines. As a result, whilst we are not immune to
the overall economic cycle, and fluctuations in currency, this
combination of specialist markets, professional managers and a
pan-European presence makes our development plans and profits
less vulnerable.
It is our expansion in mainland Europe that has been central to
maintaining 33% compound growth over the last seven years. During
the last three years our business in France has increased from
FF33.5 million to FF68.1 million as we have capitalised on the
opportunity we anticipated. Growth prospects across mainland
Europe remain better than in the UK.
It is intended to maintain our strategy for further European
development. Suppliers and customers are both attracted to and
supportive of this strategy, given the success achieved by the
Group in countries where we already operate.
Over the next few years we expect to see further consolidation
amongst suppliers and customers throughout the electronics
industry across Europe. We will embrace those challenges and
intend to be at the forefront of that process. This includes
maintaining our investment to support the cost effectiveness of
our operations. We will continue to make acquisitions to
complement our development strategy albeit only at prices that
we consider can be justified.
Balance Sheet
The financial position of the Group remains healthy. This is a
result of careful attention to detail throughout the finance
management function. Net debt at the year end was #4.1m
(#1.3m in 1997) with net interest cover remaining at a very
comfortable 6.9 times.
Cash flow during the year from operating activities was #4.7m
(#3.2m in 1997). This has provided essential support to our
acquisition programme.
The Board is recommending a final dividend for the year of
2.36p per share which will bring the total for the year to
3.54p. This represents an increase of 18% over 1997 and is
covered 3.3 times by earnings.
Employees
We continue to develop through the commitment of our people.
We believe that the expansion of the Group opens up new career
paths for staff at all levels. The Board and shareholders owe a
great debt of gratitude to all employees for their commitment,
enthusiasm and dedication. I am pleased to say that some 75% of
all employees are eligible for share options and future options
will be granted to employees following publication of the
Group's results.
Prospects
Whilst last year's demanding climate in the UK is expected to
continue in the immediate future, we consider that the combination
of a Group which has spread its risks through a number of
countries, markets and industries, but remains focused on its
specialist core activities is a strong one.
Tough trading conditions are not new to the Group. We developed
Deltron during the last UK recession, traded through the economic
downturn in mainland Europe, are now enjoying the recovery there,
and once again find the UK on the edge of recession. Throughout
past difficult periods we have achieved strong growth. We therefore
remain confident of the future while recognising that we will
only continue to succeed by making the best of the available
opportunities and being wary of the expected pitfalls. The coming
year will once again pose great challenges which we look forward
to with enthusiasm.
OPERATIONAL REVIEW
Deltron aims to provide total electromechanical solutions
to customers across Europe.
During the next few years Deltron's strategy is to be
represented in all the major countries of Europe - but retaining
the existing specialist electromechanical product portfolio.
The benefits of this strategy are:-
* familiarity with the market place, leading to greater
confidence when making acquisitions.
* greater attraction for suppliers seeking pan-European
representation.
* increasing ability to satisfy International customers on a
European basis.
During the year this strategy has been developed with two
significant acquisitions and in a number of other ways. As
already mentioned, these were:-
* Freber Elektronik Leasing AB, a leading distributor of
electro mechanical solutions in Sweden. This company maintains
the product line up already established across the rest of the
Group, and also provides access to the important Scandinavian
technology markets, in particular, telecommunications.
* EUROiNDustrie EMC in France, a manufacturer of filters. This
extends the Group's EMC capabilities and enables it to cover
an important additional sector of power ratings from its own
resources. The result of this is that the Group can now cater
for a very wide range of customer requirements. This enables
the Group to promote EMC solutions with greater vigour through
its distribution companies and other agents.
Both acquisitions are trading in line with expectations.
During the year, detailed discussions have been held as a matter
of routine with all major suppliers and customers. Many of these
have indicated the attraction of dealing with the Deltron Group
throughout Europe, through Deltron's own subsidiary companies.
This leads us to believe that the strategy on which we have
embarked will develop increasing synergies in the course of the
next few years.
In line with this strategy, we have developed product management
groups with one International co-ordinator responsible for each.
This means that for example the developments of our connector
business, supervised by our Danish management, focuses on world
wide developments available within this field. This enables them
to apply opportunities to each of our subsidiary companies. This
is a long term development of significant potential benefit for
the future.
We have supported this managerial development with the appointment
of certain key managers during the year and we intend this process
to continue. The training of members of our existing staff
continues to keep them fully informed of changes in products that
are constantly taking place in our industries. This absorbs
significant resource but produces valuable returns in due course.
Deltron has enjoyed significant growth rates at 33% compound and
consequently continually reviews the effectiveness of its
management and utilisation of resources. Currently the changing
market climate demands an even greater focus on how we go to market
and utilisation of this resource.
We are supporting the capabilities of group management by
significant further investment in our information technology
capabilities. The objective is to have common computer systems
operating throughout the Group with significantly improved access
to group-wide data. This has the additional advantage that it
provides greater certainty of security against the Year 2000 date
reference issue.
During the year, the Distribution Division did particularly well
with turnover growing by 55% to #24.3m. Turnover in the
Manufacturing Division, which has seen the impact of some of the
slow down in the UK, was harder to increase but still rose by a
creditable 6%. Comparing the results of these two divisions, it is
notable that the UK has been a demanding market during the past
financial year.
The Group turnover in mainland Europe, as planned, has risen from
38% in 1997 to 54% in 1998.
It is encouraging that the Group's strategy of investing in
Europe at a time when this was regarded as unfashionable has
paid off for our shareholders.
FINANCIAL REVIEW
Turnover
Group turnover for the year ended 30 September 1998 is #36.0m.
This represents a growth of 36.0% over the previous year. #5.6m
of turnover for the year is attributable to acquisitions made in
the period.
The geographical division of turnover by destination continues
to become more focused on mainland Europe. Turnover to customers
based outside the UK is now 57% (1997 43%) with Mainland Europe
providing the majority of this revenue.
Gross Margins
These remained steady during the year at 39.2% for continuing
operations. However, those businesses acquired during the year
were operating at lower levels of margin. Operating costs grew
slightly during the year reflecting the investment in the
additional service requirements of our customers across the
Group. Those related to acquisitions have already been reduced
to control unnecessary duplication of overheads.
Profits
Operating profits have increased 26.2% from #2.9m to #3.7m.
The corresponding increase in EPS is 17.2% from 9.9p to 11.6p.
Overheads have increased from #7.4m to #9.9m which reflects
acquisitions made in the year. However, our costs, expressed as
a percentage of turnover, has improved from 28.1% in 1997 to
27.5% this year.
Interest
Net interest expense rose to #0.5m from #0.3m which reflects
primarily the impact of the acquisitions made in the year.
However, cover remains high at 6.9 times. The company continues
to look for ways to optimise its interest costs, taking advantage
of its cash inflows in a variety of European currencies.
Taxation
The tax charge for the year was 30.8% of profit before tax
compared with 31.3% in the previous year. This is mostly a result
of acquisitions on the continent, which have changed the mix of
corporate tax rates.
Dividend
The directors recommend payment of a final dividend of 2.36
pence per ordinary share, to be paid on 26 February 1999 to
shareholders on the register on 22 January 1999. This represents
an 18% increase against last year.
Balance Sheet
The consolidated net assets at the year end have decreased by
#2.6 million compared with 1997. This reduction was primarily
due to writing off goodwill on acquisitions made in the year
which amounted to #4.5 million.
The company has continued to write off goodwill in accordance
with current accounting standards. It is proposed that with effect
from the new financial year, goodwill on new acquisitions will
be capitalised and depreciated through the profit and loss
account. The company is considering the options available to it
with respect to the best treatment of the goodwill write-off
reserve.
At the end of the financial year 1998 the total goodwill
written off against shareholders' funds since 1991 was
#11.5 million.
Cash Flow
Operating Cash Flow during the year increased 46.6% to
#4.7 million.
Net debt was #4.1 million at the year end. This represents a
movement of #2.8 million in the year and is explained as
follows:-
# million
Opening Net Debt (1.3)
Operating cashflow 4.7
Capital Expenditure (0.6)
Finance costs paid (0.6)
Tax (1.1)
Dividends (0.6)
Acquisitions (and debt acquired) (4.6)
Closing Net Debt (4.1)
Gearing
Gearing at the end of the year was 176%, which compares with
27% at the end of last year. The significant cause for this was
the acquisitions made in the year, which resulted both in the
outflow of cash and also the goodwill write off against
Shareholders' funds already mentioned.
Exchange Rates
Whilst the strength of Sterling has allowed us to pursue
continental acquisitions at favourable prices the continued
appreciation of Sterling during the year has had a significant
impact on our profits as reported.
The average Sterling exchange rates used to translate the major
currencies were as follows:
Average for
Financial Year at Sterling
30 Sept 1998 30 Sept 1997 Appreciation
French Franc 9.91 9.58 +3.4%
Swedish Kroner 13.10 12.25 +6.9%
Danish Kroner 11.26 10.86 +3.7%
US Dollar 1.66 1.62 +2.5%
Japanese Yen 221.6 195.02 +13.6%
German Mark 2.95 2.85 +3.5%
Treasury
The Group has a central treasury function whose objective is to
manage and structure cash balances and debt, taking advantage of
a range of European interest rates where prudent to do so. Material
foreign exchange cash flows are normally hedged through the use
of forward contracts or currency options. The Group does not
speculate in foreign currency.
Economic & Monetary Union
Although the UK, Sweden and Denmark will not be members of the
initial phase of Monetary Union affective from 1 January 1999, we
expect all of our operations to be effected by the implementation
of the Euro.
It is too early to forecast the potential cost of the introduction
of the Euro in the UK.
The advent of the Euro means that we have taken the opportunity to
present additional financial data in Euro's for the first time.
We currently have investments in four European countries, which
we intend to extend. We purchase significant volumes of products
in Japanese Yen, US Dollar and German Mark, in addition from
local currencies, and we supply major customers in a variety of
currencies. Accordingly the opportunity to reduce fluctuations
in currency levels, and introduce greater certainty is welcome.
Naturally, the Euro issue has two sides. The reverse is that
pricing will become more transparent. However, we continue to
take the view that the Group is well placed to take advantage of
opportunities as they arrive, and by taking a positive stance
to this issue with suppliers and customers we intend to make it
work for us.
Year 2000 Compliance
Deltron Electronics plc and its subsidiary companies have taken
the necessary steps, including the purchase of new computer
hardware and software where appropriate, and a review of all
systems, to ensure that the Group will conform to Year 2000
requirements. This includes making enquiries of key suppliers
and key customers and subject to our business partners'
capabilities, the Group is confident that it will be fully Year
2000 compliant. This matter remains the subject of ongoing work
and constant review.
The cost of addressing the Year 2000 problem is a part of the
continuing programme to develop enhanced IT systems and
performance for the Deltron Group which is expected to be
some #250,000 in the current year. The resources required
to achieve compliance are principally expected to be found
from normal operating budgets. All related costs are written
off as incurred.
Group Profit and Loss Account in Sterling
for the year ended 30 September
1998 1997
#000 #000
Turnover:
Continuing operations 30,408 26,460
Acquisitions 5,574 -
______ ______
35,982 26,460
Cost of sales (22,387) (16,077)
Gross profit:
Continuing operations 11,923 10,383
Acquisitions 1,672 -
______ ______
13,595 10,383
Selling and distribution costs (4,067) (2,874)
Administrative costs (5,822) (4,573)
Operating profit:
Continuing operations 3,082 2,936
Acquisitions 624 -
______ ______
3,706 2,936
Bank interest (net) (534) (275)
______ ______
Profit on ordinary activities
before tax 3,172 2,661
Taxation (976) (833)
______ ______
Profit for the financial year 2,196 1,828
Dividends (675) (565)
______ ______
Profit retained for the
financial year 1,521 1,263
Earnings per share 11.6p 9.9p
====== ======
There is no difference between profit before taxation and profit
for the financial year on a historical cost basis.
Group Statement of Total Recognised Gains and Losses
in Sterling for the year ended 30 September
1998 1997
#000 #000
Profit for the period 1,521 1,263
Exchange adjustments (95) (259)
_____ _____
Total recognised gains and
losses for the period 1,426 1,004
===== =====
Group Profit and Loss Account in Euro
For the year ended 30 September
1998 1997
Euro '000 Euro '000
Turnover:
Continuing operations 45,510 37,522
Acquisitions 8,343 -
______ ______
53,853 37,522
Cost of sales (33,505) (22,797)
Gross profit:
Continuing operations 17,845 14,725
Acquisitions 2,503 -
______ _______
20,348 14,725
Selling and distribution costs (6,087) (4,076)
Administrative costs (8,715) (6,485)
Operating profit:
Continuing operations 4,612 4,164
Acquisitions 934 -
______ ______
5,546 4,164
Bank interest (net) (799) (391)
______ ______
Profit on ordinary activities
before tax 4,747 3,773
Taxation (1,460) (1,181)
______ ______
Profit for the financial year 3,287 2,592
Dividends (1,010) (801)
______ ______
Profit retained for the
financial year 2,277 1,791
______ ______
Group Statement of Total Recognised Gains and Losses in Euro
for the year ended 30 September
1998 1997
Euro '000 Euro '000
Profit for the period 2,277 1,791
Exchange adjustments (155) (424)
______ ______
Total recognised gains and
losses for the period 2,122 1,367
====== ======
Group Balance Sheet in Sterling
As at 30 September
1998 1997
#000 #000
Fixed assets
Tangible assets 5,051 3,961
______ ______
Current assets
Stocks 4,845 3,331
Debtors 7,523 7,810
Cash 833 3,583
______ ______
13,201 14,724
Creditors: amounts falling due
within one year (10,366) (6,961)
______ ______
Net current assets 2,835 7,763
______ ______
Total assets less current
liabilities 7,886 11,724
Creditors: amounts falling due
after more than one year (5,230) (6,456)
Deferred income (306) (320)
______ ______
2,350 4,948
====== ======
Capital and reserves
Called up share capital 954 928
Share premium account 4,829 4,328
Profit and loss account 3,943 2,517
Goodwill write-off reserve (7,376) (2,825)
______ ______
Equity shareholders' funds 2,350 4,948
====== ======
Group Balance Sheet in Euro
As at 30 September
1998 1997
Euro '000 Euro '000
Fixed assets
Tangible assets 7,290 5,764
______ ______
Current assets
Stocks 6,992 4,847
Debtors 10,857 11,364
Cash 1,202 5,214
______ ______
19,051 21,425
Creditors: amounts falling due
within one year (14,960) (10,129)
______ ______
Net current assets 4,091 11,296
______ ______
Total assets less current
liabilities 11,381 17,060
Creditors: amounts falling due
after more than one year (7,547) (9,395)
Deferred income (442) (466)
______ ______
3,392 7,199
====== ======
Capital and reserves
Called up share capital 1,377 1,350
Share premium account 6,969 6,298
Profit and loss account 5,691 3,662
Goodwill write-off reserve (10,645) (4,111)
______ ______
Equity shareholders' funds 3,392 7,199
====== ======
Group Cash Flow Statement in Sterling
For the year ended 30 September
1998 1997
#000 #000
Cash flow from operating activities 4,759 3,245
Returns on investment and
servicing of finance
Interest received 44 148
Interest paid (556) (383)
Interest element of finance
lease rental payments (27) (46)
______ ______
(539) (281)
______ ______
Taxation (1,119) (616)
Capital expenditure
Purchase of tangible fixed assets (602) (373)
Sale of tangible fixed assets 58 52
______ ______
(544) (321)
______ ______
Acquisitions (4,167) (1,419)
Equity dividend paid (604) (186)
______ ______
Cash (outflow)/inflow before
financing (2,214) 422
Financing (537) 2,162
______ ______
(Decrease)/Increase in cash (2,751) 2,584
====== ======
Reconciliation of cash flow to
movement in net debt
Net debt at 1 October (1,349) (1,199)
______ ______
(Decrease)/increase in cash (2,751) 2,584
Cash inflow/(outflow) from
increase in debt and lease
financing 563 (2,535)
______ ______
Change in net debt resulting
from cash flows (2,188) 49
Acquired with subsidiary (409) -
Inception of finance leases (228) (110)
Amortisation of issue costs (15) (15)
Exchange differences 48 (74)
______ ______
Movement in net debt (2,792) (150)
______ ______
Net debt at 30 September (4,141) (1,349)
====== ======
Group Cash Flow Statement in Euro
For the year ended 30 September
1998 1997
Euro '000 Euro '000
Cash flow from operating
activities 7,123 4,602
Returns on investment and
servicing of finance
Interest received 66 210
Interest paid (833) (543)
Interest element of finance
lease rental payments (40) (65)
______ ______
(807) (398)
______ ______
Taxation (1,675) (874)
Capital expenditure
Purchase of tangible fixed assets (901) (529)
Sale of tangible fixed assets 87 74
______ ______
(814) (455)
______ ______
Acquisitions (6,237) (2,012)
Dividend paid (904) (264)
______ ______
Cash (outflow)/inflow before
financing (3,314) 599
Financing (804) 3,066
______ ______
(Decrease)/increase in cash (4,118) 3,665
====== ======
Reconciliation of cash flow to
movement in net debt
Net debt at 1 October (1,963) (1,745)
______ ______
(Decrease)/increase in cash (4,118) 3,665
Cash inflow/(outflow) from
increase in debt
and lease financing 843 (3,595)
______ ______
Change in net debt resulting
from cash flows (3,275) 70
Inception of finance leases (341) (156)
Acquired with subsidiary (612) -
Amortisation of issue costs (23) (21)
Exchange differences 238 (111)
______ ______
Movement in net debt (4,013) (218)
______ ______
Net debt at 30 September (5,976) (1,963)
====== ======
Notes:
The financial information set out in the preliminary results
for the year ended 30 September 1998 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 1997
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.
Earnings per share
The calculation of earnings per share is based on profit
attributable to equity shareholders of #2,196,000
(1997 #1,828,000) and 19,013,717 shares (1997 18,467,052)
being the daily average of the number of shares in issue
during the year.
Copies of the audited financial statements will be posted
to shareholders shortly. Further copies may be obtained from
the Company Secretary at the Company's Registered Office:
Suffolk House
Fordham Road
Newmarket
Suffolk CB8 7AA
The Annual General Meeting will be held on 22 February 1999
at 11 a.m. at the Company's Registered Office.
END
FR FCNCDBDDBQBK
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