Final Results
February 24 2003 - 10:51AM
UK Regulatory
RNS Number:8962H
Stanelco PLC
24 February 2003
STANELCO PLC
("Stanelco" or "the Company" or "the Group")
PRELIMINARY RESULTS FOR YEAR ENDED 31 OCTOBER 2002
CHAIRMAN'S STATEMENT
Results
As with many companies, and especially those operating in the telecommunications
and engineering sectors, Stanelco has experienced the most dramatic changes in
market conditions in its history. We have seen both our customers and rivals
making significant reductions to their capacities and workforces. Stanelco has
also faced those conditions and our results reflect them.
Year to 31 Year to 31 October
October 2002 2001
#'000 #'000
Turnover 3,570 6,013
Trading Profit - before exceptional items 528 1,809
Exceptional items 155 (664)
Holding company costs (117) (121)
Net interest receivable 48 31
Profit on ordinary activities before taxation 614 1,055
Taxation (177) (299)
Profit after taxation 437 756
Dividends (69) (69)
Retained profit for the year 368 687
Future prospects
Because we have anticipated a continued downturn in optical fibre manufacture we
have focused on new and emerging markets. I am pleased to report that during
this year Stanelco has made significant progress towards this objective.
In our traditional Radio Frequency (RF) furnace market, we have launched a new
MCVD (Modified Chemical Vapour Deposition) furnace product which helps to make
the specialist quartz pre-forms from which optical fibre is drawn. We believe
that this unit will help our customers significantly to reduce their unit cost
of production and we have already made the first sales of this new product.
Alongside this we have taken action during the year to reduce our cost base on
this side of the business.
We have also entered a new market, welding high-end waste containers made of
plastic. Our first product was launched during the year and is set to achieve
annual sales in excess of #1m in the UK. A larger version of this machine is
currently being developed for sealing drums within industrial grade plastic
bags. We are assessing overseas markets and other applications.
In conjunction with R.P. Scherer Corporation (a subsidiary of Cardinal Health
Inc.) we continue to develop commercial-scale technology for the manufacture of
soft gelatine-free capsules primarily for pharmaceutical applications. This work
is being carried out by our jointly owned subsidiary InGel Technologies Ltd
(InGel) and is currently our most significant development project. We expect to
make further announcements about its progress during the year.
The Board is monitoring closely the situation in both the telecoms' market and
the developments within InGel. We are endeavouring to make the Company less
dependent on the telecoms' market and take it from being purely a manufacturer
of capital equipment to a company that derives a substantial portion of its
revenue from royalties based upon the value added to a variety of applications
by our RF technology.
Our success in developing new products and remaining profitable at this time is
due to our business partners, our customer relationships and our staff. The
Board is grateful to them all.
Elizabeth Filkin
Chairman
24 February 2003
CHIEF EXECUTIVE'S STATEMENT
Our aim is simple: to create a valuable technology business based upon Radio
Frequency ("RF") applications.
Trading conditions during the year have been tough for the Company. We continue
to expect difficult conditions in the telecommunications market. I am pleased to
report, though, that the significant developments we are making to enter new
markets, based upon adaptations of our RF technology, are now bearing fruit.
RESULTS
I am pleased to report that as a Company heavily dependent upon the
telecommunications market, and in particular the manufacturers of optical fibre,
we have remained profitable and cash generative through a period of
significantly reduced demand. We have seen turnover decline to approximately
#3.6m (2001: #6.0m) and after deducting holding company costs of #117k (2001:
#121k) we achieved a Group profit of #614k (2001: #1,055k). We are recommending
that the dividend payment is maintained at #69k (0.01p per share), the second
time that the Company has made a dividend payment. After taxation and dividend
charges there is a retained profit for the Group of #368k (2001: #687k).
During the year we exited from our interest in the internet venture known as
"LogistiGo", which has resulted in a payment to the Company of #250k less costs
of #45k. #85k was received during the financial year and #165k has been received
subsequently. The Company has no ongoing interest in LogistiGo.
Prospects
As an illustration of the sheer rate of change in market conditions, almost our
entire current turnover is being derived from products that we have developed
during the past 2 years. These were the products that I was hoping would provide
growth for the Company; instead they have become our insurance policy. This has
made us more determined to introduce new products where we can see a premium
return and a low risk route to market.
The main focus of the Company now is to complete the capsule developments being
made by InGel Technologies Ltd (InGel) whilst maintaining positive cash flow
from operations in furnaces for optical fibre production and high-end waste
packaging equipment.
At the date of this report, the Company's order book stands at #561k.
InGel Technologies
As reported previously, during December 2001 we entered into agreements with
R.P.Scherer Corporation (a subsidiary of Cardinal Health Inc.) concerning our RF
technology for sealing soft pharmaceutical capsules, which should make
production much faster and more economical whilst enabling the use of materials
other than gelatine.
Since that time there has been very significant progress towards commercialising
this capsule making technology. I am pleased to report:
* Patents have been granted in several territories and are pending in others
covering the formation, using RF, of capsules from soluble materials. We
believe that this invention, which covers a process, is a platform
technology with many applications and is likely to be valuable irrespective
of the success of InGel. The Group retains ownership of this patent, which
is currently licensed to InGel for its applications.
* InGel has made further patentable new inventions in the course of its
development work.
* The pilot scale machine capable of producing large batch sizes for
stability and clinical trials will be complete within the next few months.
We are currently using it as the basis to select production scale
technologies.
* R.P.Scherer Corporation (which in December 2001 acquired 3 per cent of
Stanelco plc and 5 per cent of InGel, with a deferred payment to acquire an
additional 5 per cent of InGel) has committed a full-time team of people in
support of InGel, working as part of a team with our own staff and others.
* We have installed the first R&D machine in premises designed for
pharmaceutical capsule manufacture.
* Our best estimates are that we expect InGel to start generating revenues
within the next 12 to 14 months.
Optical Fibre
We are not anticipating a recovery in the global telecommunications market in
the year ahead.
We continue to develop new and improved RF furnace equipment to enable our
customers both to improve the quality of fibre they manufacture and lower its
unit cost. We have significantly increased our share of the available market and
have signed key supply agreements.
We have introduced a new product used for making the specialist quartz pre-form
("ingot") from which optical fibre is drawn. The technology known as Modified
Chemical Vapour Deposition (MCVD) is used to dope the quartz with rare earth
metals in order to modify its optical properties. The first orders for this
technology have been received from Japan.
We have continued to keep a sharp eye on our cost base. This has unfortunately
meant that we have made 15 jobs redundant, at a cost of #59k to the Company,
producing annualised savings of some #345k. Further savings have been made to
the unit cost of production.
Since the start of the new calendar year we have seen a considerable increase in
the level of enquiries for furnace and MCVD technology. These, although a
positive sign, have yet to translate into a corresponding recovery in order
levels.
Waste Packaging
During the year we launched our first product for sealing high-end waste
containers, made of plastic, using RF. We currently anticipate annualised sales
of some #1m from this product and related services.
The equipment was successfully demonstrated at six exhibitions in the UK and at
the date of this report we have received orders for in excess of #500k and have
enquiries for a further circa #4 million of equipment in the UK. We anticipate
that the equipment has significant potential in overseas markets and we are
currently looking for suitable partners.
A larger version of this machine is currently being developed for sealing drums
within industrial grade plastic bags. We are assessing overseas markets and
other applications.
R&D Work
In 2002 we invested the equivalent of more than 23 percent of our turnover into
research and development activities. When it makes sense we seek to protect our
intellectual property through patenting and we work closely with intellectual
property specialists in this regard. We continue to anticipate significant R&D
expenditure as we develop new products for the future.
Start-ups and Acquisitions
We are actively considering a range of start-up businesses based upon new and
improved applications of RF technology.
InGel Industrial
Independently of InGel, Stanelco has developed a process for making capsules
from Polyvinyl Alcohol based plastics. These plastics are environmentally
friendly and biodegrade safely. The main applications for these capsules,
currently, are laundry detergents and agrochemicals. We have produced a range of
concept capsules to demonstrate the versatility of our RF process. The concept
capsules have been produced in a range of sizes and shapes, containing both
liquids and powders and capsules within capsules. Our process (which is also
covered by the same base patent licensed to InGel) seems to offer many potential
advantages over the heat-sealing method of forming these capsules, one notable
feature is that our capsules do not need to contain an air bubble - unlike those
currently available. As with InGel, we are uncertain at present as to the
commercial potential of this technology. We are seeking to work with commercial
partners to bring it to market.
Currently we are not considering any acquisition.
Thank you
Thank you again to the team of hard working people at Stanelco who in
partnership with our customers and suppliers continue to improve our business. I
am particularly pleased that we are introducing a new share scheme, which gives
the opportunity for all staff to become shareholders in Stanelco.
Ian Balchin
CHIEF EXECUTIVE
24 February 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
2002 2001
#'000 #'000
Turnover 3,570 6,013
Cost of sales (1,931) (3,149)
Gross profit 1,639 2,864
Distribution costs (35) (69)
Administrative expenses : Exceptional items 155 (664)
Other (1,193) (1,107)
(1,038) (1,771)
Operating profit 566 1,024
Interest receivable and similar income 49 32
Interest payable and similar charges (1) (1)
Profit on ordinary activities before taxation 614 1,055
Taxation (177) (299)
Profit on ordinary activities after taxation 437 756
Dividends (69) (69)
Retained profit for the year 368 687
Basic earnings per share - pence 0.064 0.113
Diluted earnings per share - pence 0.063 0.113
All transactions arise from continuing operations.
All recognised gains and losses are included in the profit and loss account.
CONSOLIDATED BALANCE SHEET
At 31 October 2002 At 31 October 2001
#'000 #'000 #'000 #'000
Fixed assets
Intangible assets 831 -
Tangible assets 307 322
1,138 322
Current assets
Stock 637 816
Debtors 775 798
Cash at bank and in hand 1,151 777
2,563 2,391
Creditors: amounts falling due within one (812) (1,482)
year
Net current assets 1,751 909
Total assets less current liabilities 2,889 1,231
Provisions for liabilities and charges (210) (50)
2,679 1,181
Capital and reserves
Called up share capital 687 666
Share Premium account 1,081 -
Profit and loss account 883 515
Shareholders' funds 2,651 1,181
Minority interest 28 -
2,679 1,181
CONSOLIDATED CASH FLOW STATEMENT
2002 2001
#'000 #'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 444 444
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 49 32
Interest paid (1) -
Dividends paid (64) -
Finance lease interest paid - (1)
NET CASH (OUTFLOW)/INFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF (16) 31
FINANCE
TAXATION
Corporation tax paid (252) (68)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Investment in intangible fixed assets (844) -
Sale of tangible fixed assets 1 3
Purchase of tangible fixed assets (86) (177)
NET CASH (OUTFLOW) FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (929) (174)
FINANCING
Issue of ordinary share capital 1,130 -
Capital element of finance lease rentals (3) (7)
NET CASH INFLOW / (OUTFLOW) FROM FINANCING 1,127 (7)
INCREASE IN CASH 374 226
NOTES
Earnings per share
The calculation of earnings per share is based on the profit after tax for the
year of #437,000 (2001 - profit #756,000) and 686,829,750 (2001 - 666,224,850)
ordinary shares in issue
Dividend
Subject to shareholder approval, the dividend of 0.01p per ordinary share is
payable on 1 July 2003 to shareholders on the register on 30 May 2003.
Report and Financial Statement
The information relating to the year ended 31 October 2002 is unaudited and has
been extracted from draft accounts on which the auditors expect to issue an
unqualified opinion.
The information relating to the year ended 31 October 2001 is extracted from the
audited accounts that have been filed at Companies House and on which the
auditors issued an unqualified opinion.
The above financial information does not constitute statutory accounts within
the meaning of Section 240 of the Companies Act 1985.
Enquiries:
Stanelco PLC 01489 570991
Ian Balchin (Chief Executive)
Barrie Hozier (Finance Director)
This information is provided by RNS
The company news service from the London Stock Exchange
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