TIDMAPC
RNS Number : 1231C
APC Technology Group PLC
11 April 2017
11 April 2017
APC Technology Group PLC
("APC", the "Company" or the "Group")
Unaudited Interim Results for the six months ended 28 February
2017
APC Technology Group PLC (AIM: APC), the provider of design-in,
specification and distribution services for specialist electronic
components, products and systems, announces its interim results for
the six months ended 28 February 2017.
Financial Highlights
- Operating profit before exceptional items of GBP0.4m,
representing a significant improvement from the GBP0.1m operating
loss in the comparative period
- Total profit for the period of GBP0.1m (H1 2016: GBP1.9m
loss); first reported profit since the year ended 31 August
2014
- Revenue of GBP8.3m, compared to GBP9.5m in the comparative
period; the main difference due to GBP1.6m of residual revenue from
the multi-year Morrison's contract included in prior period
- Gross margin of 34.4% in the period represents a strong margin
for the lower fixed cost, design-in distribution business
- Administrative expenses reduced by GBP1.2m from same period last year
- Cash from earnings of GBP0.3m, before net investment in working capital improvement
- Working capital (excluding net debt) improved by GBP0.5m and
net debt reduced by GBP0.3m compared to 31 August 2016, reflecting
a strengthened balance sheet position
Operational Highlights
- Green Compliance Water Division Limited sold in October 2016
for a total consideration of GBP1.8m (GBP0.8m cash and GBP1.0m in
repayment of debt). The transaction included the disposal of
GBP0.7m of future liabilities under operating leases
- Group re-centred on the proven business model of specialist
electronic components, products and systems design-in
distribution
- GBP8.25m first half bookings for the refocused business with
March 2017 Group bookings of GBP2.1m underpinning confidence in the
new business model and a profitable outlook for the full year
- Significant follow-on orders received from long standing
customer relationships and significant new orders gained through
new preferred supplier agreements signed with major blue chip
customers
- Tony Lochery appointed Non-Executive Chairman and joined the
Board as a Director on 24 February 2017
Commenting on the results, Richard Hodgson, Chief Executive,
said:
"I am satisfied that all the effort that has been spent in the
past 18 months in restructuring the Group has resulted in a return
to profitability and as the turnaround reaches its conclusion that
we can focus fully on developing our core businesses. We are now
very well positioned as a design-in, specification and distribution
business in the markets we serve, for a return to profitable
growth.
I am also pleased to welcome Tony Lochery to the Board. His
executive experience will provide invaluable guidance to all
aspects of the business as we move forward."
Enquiries
APC Technology Group PLC +44 (0) 330 313 3220
Richard Hodgson, Chief Executive www.apcplc.com
Michael Thompson, Finance Director
Stockdale Securities Limited (Nominated Adviser and Broker) +44 (0)20 7601 6100
Mark Brown / Antonio Bossi / Edward Thomas
Board review
The Board is pleased to report the interim financial results for
the six months ended 28 February 2017.
The actions taken over the past 18 months to address cost,
efficiency, and strategic focus are reflected in the financial
performance, with a small profit being reported for the first time
since the year ended 31 August 2014.
Since the beginning of the current financial year, the Board has
continued to implement a strategic realignment of the business as a
design-in distributor of specialist electronic components, products
and systems.
The most significant action in this regard was the sale of Green
Compliance Water Division Limited, which completed on 13 October
2016. This sale provided cash to support working capital and
strengthen the core business, which is profitable and cash
generative.
The design-in distribution business is organised around
technology portfolios, each with a sales leader, supported by a
shared service framework of marketing, sales, logistics and
administration. Our technology portfolios are now aligned
around:
High Reliability - high-reliability electronic components,
semiconductors, and power solutions, selling primarily into the
aerospace and defence industries;
RF and Microwave - capacitors and resistors, filters,
semiconductors, amplifiers, and switches, selling primarily into
the industrial, defence, and medical industries;
Embedded Processing, Sensors and Connectivity - single board
computers, touch-screen componentry, GPS, environmental monitoring
and sensors selling into the general industrial market;
Lighting Technologies - high-end architecturally specified LED
lighting and industrial optoelectronic devices for embedded
applications, selling into the facility management, office, retail,
municipal, healthcare, and industrial manufacturing markets;
and
New Technologies and Product Lines - new product lines that have
proven markets and existing revenue streams that are being
developed as potential future growth drivers, including: infection
prevention, time and frequency synchronisation, Internet of Things,
obsolete component location and testing, and energy performance
measurement.
Corporate costs are continuing to be challenged and adjusted to
increase profitability and lower the monthly breakeven point to
ensure the business can be cash generative through all business
cycles. In particular, further office consolidation and
streamlining of our back-office functions of finance and human
resources has occurred with greater expense control also
implemented across the business.
The Board is confident that the core business can grow
organically. Our suppliers are very supportive and many have seen
strong growth in their non-UK markets. With a renewed attention to
the basics of the design-in distribution business, we expect this
same success will be reflected in the UK market over the coming
years.
Summary of Financial Performance
Overall revenue for the period was GBP8.3m (2016 H1: GBP9.5m),
representing a decrease of 12.6% over the corresponding period in
2016. This drop is primarily attributable to the residual revenue
generated in 2016 H1 from the end of the multi-year Morrison's
contract, which contributed GBP1.6m in that period.
Excluding this fall in Lighting Technology sales, the other core
design-in distribution businesses rose to GBP5.9m in the period, an
increase of 20.3%, over the same period last year as they
capitalised on a particularly strong order book for
high-reliability components coming into the period.
This change in revenue mix for the business meant that overall
gross profit margin for the period was 34.4%. This slight decrease
from 35.8% for the year ended 31 August 2016 still represents a
strong margin for the lower fixed cost, design-in distribution
business.
Operating profit before exceptional and non-recurring expenses,
share based payments, interest, and tax was GBP0.4m (2016 H1 loss:
GBP0.1m). The most significant contributor to the improvement is
the reduction in administrative expenses of GBP1.2 million compared
to the prior period. This is a result of headcount reductions,
consolidation of offices, and improved cost control.
Exceptional and non-recurring expenses incurred in the period of
GBP0.2m (2016 H1: GBP0.8m) are represented by reorganisation costs
for personnel reduction (GBP0.3m), which were incurred to achieve
cost savings and align staff requirements with business focus,
foreign exchange losses (GBP0.1m), and onerous lease provisions
(GBP0.1m), offset by release of liabilities from dormant and
dissolved subsidiaries (GBP0.3m).
Taking into account exceptional and non-recurring expenses,
share based payments, interest, and tax, the Company produced a
GBP0.1m profit on the bottom-line for the period, compared to a
loss of GBP1.8m in 2016 H1. This marks a significant turnaround in
the business, especially in light of the decrease in revenue and
gross profit.
Balance Sheet and Cash Flow
Working capital (excluding net debt) improved GBP0.5m through
the period, from a deficit of GBP1.6m at 31 August 2016 (excluding
assets held for sale) to a deficit of GBP1.1m at 28 February 2017.
Trade and other receivables decreased by GBP1.0m during the period
due to both improved working capital management and lower sales
towards the end of the period. Inventory reduced by GBP0.2m due to
improved stock management. Trade and other payables reduced by
GBP1.6m as cash from improved management of receivables and
inventory, together with the net proceeds from the sale of Green
Compliance Water Division Limited, was directed to reducing trade
and other liabilities to reduce overall balance sheet risk.
Net debt at the end of the period was GBP2.9m, including GBP0.2m
of cash, GBP2.5m drawn on the invoice finance facilities and
GBP0.6m of unsecured loan notes from shareholders (due July 2018).
This is down from net debt of GBP3.2m at 31 August 2016, a
reduction of GBP0.3m in the period.
Cash for the period declined by GBP0.2m to GBP0.2m. Earnings
produced a positive cash flow from operations of GBP0.3m (excluding
working capital). The sale of Green Compliance Water Division
Limited generated GBP0.6m of cash. Cash generated in the period was
used to improve net working capital (GBP0.5m) and to service debt
(GBP0.6m).
Outlook
The Company has made significant progress in producing its first
profit since the year ended 31 August 2014.
The Board acknowledges that there is much more work to do, not
only to continue to improve efficiency but also to grow revenue.
Having achieved profitability, positive cash flow, and reduced
balance sheet risk, the focus now is on leveraging supplier and
manufacturer relationships within our existing technologies. Our
immediate aim is to increase the order book and cash generative
sales. We feel confident that this will occur in the coming
periods.
The Board would like to thank the Group's customers, suppliers,
employees, and shareholders for their hard work and support through
the past two years.
The Board
11 April 2017
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
for the 6 months ended 28 February 2017
================================================================================================
6 months 6 months Year
ended ended ended
28 February 29 February 31 August
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Restated
Note *
Revenue 3 8,304 9,472 17,961
Cost of sales (5,445) (5,941) (11,523)
----------------- ----------------- -----------------
Gross profit 2,859 3,531 6,438
Administration expenses (2,475) (3,649) (6,116)
Operating profit / (loss)
before exceptional and
other items 384 (118) 322
Exceptional and non-recurring
expenses 4 (154) (764) (3,026)
Share based payments (26) (46) (51)
Operating profit / (loss) 204 (928) (2,755)
Finance costs (net) (162) (116) (331)
----------------- ----------------- -----------------
Profit / (loss) before
taxation 42 (1,044) (3,086)
Taxation expense 26 32 -
----------------- ----------------- -----------------
Profit / (loss) for the
period from continuing
operations 68 (1,012) (3,086)
Loss for the period from
discontinued operations - (782) (9,789)
----------------- ----------------- -----------------
Profit / (loss) for the
period 68 (1,794) (12,875)
----------------- ----------------- -----------------
Other comprehensive income
Currency translation movement (119)
arising on consolidation - -
----------------- ----------------- -----------------
Other comprehensive income - (119) -
for the period
Total comprehensive income
for the period 68 (1,913) (12,875)
----------------- ----------------- -----------------
* See Note 6
Basic earnings per share 5 0.1p (2.0p) (12.4p)
Diluted earnings per share 5 0.1p (2.0p) (12.4p)
Earnings per share on
operating profit - before
exceptional and non-recurring
expenses and share based
payments 5 0.3p (0.2p) 0.3p
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
for the 6 months ended 28 February 2017
=================================================================================================
28 February 29 February 31 August
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBP000 GBP000 GBP000
Non-current assets
Intangible assets 7,378 16,008 7,378
Property, plant and equipment 99 180 132
Financial asset - 1,540 -
7,477 17,728 7,510
Current assets
Inventories 897 1,925 1,080
Trade and other receivables 2,775 5,789 3,751
Current tax asset - 38 -
Cash and cash equivalents 244 981 444
3,916 8,733 5,275
Assets held for sale 6 - - 3,036
3,916 8,733 8,311
Total assets 11,393 26,461 15,821
Current liabilities
Trade and other payables (4,777) (9,009) (6,416)
Borrowings (2,552) (2,951) (3,027)
(7,329) (11,960) (9,443)
Liabilities directly
associated with the assets
held for sale 6 - - (2,395)
(7,329) (11,960) (11,838)
Total assets less current
liabilities 4,064 14,501 3,983
Non-current liabilities
Financial liabilities (555) (648) (578)
Deferred tax liability - (828) -
Net assets 3,509 13,025 3,405
================ =================== =================
Equity attributable to
equity holders of the
company
Called up share capital 2,556 2,258 2,556
Share premium account 12,895 12,076 12,895
Share option valuation
reserve 574 543 548
Merger reserve 4,635 4,635 4,635
Translation reserve - (129) (10)
Retained earnings (17,151) (6,138) (17,219)
Equity attributable to
equity holders of the
parent 3,509 13,245 3,405
Non-controlling interests - (220) -
Total equity 3,509 13,025 3,405
================ =================== =================
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 6 months ended 28 February 2017
========================================================================================================================================================================================================
Attributable to the equity Non-controlling
holders of the parent Interests
-------------------------------------------------------------------------- ------------------------ --------- --------- -------------- ----------------
Share
Share option
Share premium valuation Merger Translation Retained Retained
Capital account reserve Reserve reserve earnings Total Earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
For the 6 months
ended 28 February
2017
At 1 September
2016 2,556 12,895 548 4,635 (10) (17,219) 3,405 - 3,405
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
Profit for the
period - - - - - 68 68 - 68
Other -
comprehensive
income - - - - - - - -
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
Total
comprehensive
income - - - - - 68 68 - 68
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
Transactions
with equity
holders
of the parent
Share option
charge - - 26 - - - 26 - 26
Disposal of
foreign
subsidiary - - - - 10 - 10 - 10
- - 26 - 10 - 36 - 36
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
At 28 February
2017 (unaudited) 2,556 12,895 574 4,635 - (17,151) 3,509 - 3,509
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
For the 6 months
ended 29 February
2016
At 1 September
2015 1,831 11,302 497 4,635 (10) (4,344) 13,911 (220) 13,691
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
Loss for the
period - - - - - (1,794) (1,794) - (1,794)
Other
comprehensive
income - - - - (119) - (119) - (119)
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
Total
comprehensive
income - - - - (119) (1,794) (1,913) - (1,913)
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
Transactions
with equity
holders
of the parent
Issue of new
shares 427 852 - - - - 1,279 - 1,279
Costs associated
with share issue - (78) - - - - (78) - (78)
Share option
charge - - 46 - - - 46 - 46
427 774 46 - - - 1,247 - 1,247
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
At 29 February
2016 (unaudited) 2,258 12,076 543 4,635 (129) (6,138) 13,245 (220) 13,025
------------------ -------------- ------------ -------- ------------------------ ---------------- -------------- ---------------- ------------------
Attributable to the equity holders Non-controlling
of the parent Interests
--------------------------------------------------------------------------------------------------------------------------- ----- --------- -------------- ----------------
Share
Share option
Share premium valuation Merger Translation Retained Retained
Capital account reserve Reserve reserve earnings Total Earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
For the year
ended 31 August
2016
At 1 September
2015 (audited) 1,831 11,302 497 4,635 (10) (4,344) 13,911 (220) 13,691
================== ============== ================ ============ ==================== ================ ============== ==================== ==================
Loss for the
year - - - - - (12,875) (12,875) - (12,875)
Other -
comprehensive
income - - - - - - - -
------------------ -------------- ---------------- ------------ -------------------- ---------------- -------------- -------------------- ------------------
Total
comprehensive
income - - - - - (12,875) (12,875) - (12,875)
------------------ -------------- ---------------- ------------ -------------------- ---------------- -------------- -------------------- ------------------
Transactions
with equity
holders
of the parent
Issue of new
shares 725 1,756 - - - - 2,481 - 2,481
Disposal of
non-controlling
interest - - - - - - - 220 220
Costs associated
with share issue - (163) - - - - (163) - (163)
Share option
charge - - 51 - - - 51 - 51
725 1,593 51 - - - 2,369 220 2,589
------------------ -------------- ---------------- ------------ -------------------- ---------------- -------------- -------------------- ------------------
At 31 August
2016 (audited) 2,556 12,895 548 4,635 (10) (17,219) 3,405 - 3,405
================== ============== ================ ============ ==================== ================ ============== ==================== ==================
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the 6 months ended 28 February 2017
======================================================================================================
6 months 6 months Year
ended ended ended
28 February 29 February 31 August
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBP000 GBP000 GBP000
Reconciliation of cash
flows from operating
activities
Profit / (loss) before
taxation including discontinued
operations for the period 42 (1,826) (12,875)
Share of results of associates - (16) -
Gain on disposal of property,
plant and equipment (6) - -
Impairment loss on assets
held for sale - - 6,704
Loss on investment in
associates - - 1,095
Loss on discontinued
subsidiary interests - - 1,120
Finance costs (net) 162 115 400
Taxation receipts 26 23 29
Depreciation of property,
plant and equipment 45 47 95
Amortisation of intangibles - 345 -
Decrease in inventories 183 708 846
Decrease / (increase)
in trade and other receivables 982 (549) (1,025)
Decrease in trade and
other payables (1,635) (611) (685)
Share-based payments
charge 26 46 51
Net cash used in operating
activities (175) (1,718) (4,245)
------------------- ------------------ ------------------
Cash flows from investing
activities
Acquisition of property,
plant and equipment (12) - (23)
Sale of property, plant,
and equipment 6 - -
Sale of subsidiary company 6 641 - -
Sale of investment in
associates - - 319
Net cash from investing
activities 635 - 296
------------------- ------------------ ------------------
Cash flows from financing
activities
Finance costs (net) (162) (115) (400)
Proceeds of share issue - 1,201 2,318
Finance leases (19) (12) (22)
Short-term borrowings (479) 386 1,340
Repayment of loan notes - - (60)
Net cash from financing
activities (660) 1,460 3,176
------------------- ------------------ ------------------
Decrease in net cash (200) (258) (773)
------------------- ------------------ ------------------
Cash and cash equivalents
as at 1 September 444 1,239 1,239
Decrease in net cash (200) (258) (773)
Cash in assets held for
sale - - (22)
------------------- ------------------ ------------------
Cash and cash equivalents
as at end of period 244 981 444
=================== ================== ==================
NOTES TO THE INTERIM REPORT
for the 6 months ended 28 February 2017
1. General information
APC Technology Group PLC is a public limited company ("the
Company") incorporated in the United Kingdom under the Companies
Act 2006 (registration number 01635609).
The Company is domiciled in the United Kingdom and its
registered address is 6 Stirling Park, Laker Road, Rochester, Kent,
ME1 3QR. The Company's Ordinary Shares are traded on the
Alternative Investment Market ("AIM") of the London Stock Exchange.
The principal activity of the Company and its subsidiary
undertakings (together "the Group") is the design, specification,
and distribution of specialist electronic components and
systems.
2. Basis of preparation
This unaudited consolidated interim financial information has
been prepared in accordance with IFRS as adopted by the European
Union. The principal accounting policies used in preparing the
interim results are those it expects to apply in its financial
statements for the year ended 31 August 2017 and are unchanged from
those disclosed in the Company's Annual Report for the year ended
31 August 2016.
The financial information does not contain all of the
information that is required to be disclosed in a full set of IFRS
financial statements. The financial information for the six months
ended 28 February 2017 and 29 February 2016 is unreviewed and
unaudited and does not constitute the Company's statutory financial
statements for those periods. The comparative financial information
for the full year ended 31 August 2016 has, however, been derived
from the audited statutory financial statements for that period. A
copy of those statutory financial statements has been delivered to
the Registrar of Companies. The auditor's report on those accounts
was unqualified, did not include references to any matters to which
the auditor drew attention by way of emphasis without qualifying
its report and did not contain a statement under section 498(2)-(3)
of the Companies Act 2006.
The financial information in the Interim Report is presented in
Sterling and all values are rounded to the nearest thousand pounds
(GBP000) except where otherwise indicated.
3. Segmental information
Operating Segments
IFRS 8 "Operating Segments", requires consideration of the chief
operating decision maker ('CODM') within the Company. In line with
the Company's internal reporting framework and management
structure, the key strategic and operating decisions are made by
the CEO, who reviews internal monthly management reports, budget
and forecast information as part of this process. Accordingly, the
CEO is deemed to be the CODM.
The Company operates within a single reportable segment, being
the the provision of design-in distribution services for specialist
electronic components, products and systems.
6 months 6 months Year
ended ended ended
28 February 29 February 31 August
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Restated
*
Revenue by geographic
location
UK 7,587 8,952 16,996
North America 212 179 235
Europe and Asia 505 341 730
------------ -------------- ---------------
8,304 9,472 17,961
------------ -------------- ---------------
* See Note 6
4. Exceptional and non-recurring expenses
6 months 6 months Year
ended ended ended
28 February 29 February 31 August
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Corporate re-organisation
- compromise agreements
and redundancy costs 329 373 1,543
Foreign exchange loss 64 154 293
Corporate re-organisation
- dilapidations and onerous
lease provisions 52 - 254
Costs associated with
aborted contract 47 149 736
Corporate re-organisation
- professional fees 18 89 200
Corporate re-organisation
- release of dormant
and dissolved subsidiary
liabilities (356) - -
Costs incurred in the
preparation for acquisitions - 13 -
154 778 3,026
----------------- ------------------ ------------------
5. Earnings per share
The calculation of basic earnings per share is based on the
profit after taxation attributable to equity holders of the parent
company for the period and the weighted average number of shares in
issue during the period.
Diluted earnings per share is calculated by adjusting the
weighted average number of shares outstanding by the dilutive
effect of Ordinary Shares that the Company may potentially issue
relating to its share option scheme.
Earnings per share on operating profit, before exceptional
costs, amortisation, share based payments, and discontinued
operations, are considered to be the most realistic measure of
earnings and the calculation is based on the weighted average
number of shares.
The result for the year and the weighted average number of
shares used in the calculations are set out below:
6 months 6 months Year
ended ended ended
28 February 29 February 31 August
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Continuing earnings: profit
(loss) attributable to
equity holders of the parent 68 (1,425) (3,086)
Discontinuing earnings:
loss attributable to equity
holders of the parent - (369) (9,789)
---------------- ------------------ -----------------
From profit (loss) for
the year 68 (1,794) (12,875)
---------------- ------------------ -----------------
Earnings: operating profit/(loss)
before exceptional and
non-recurring expenses
and share based payments 384 (173) 322
---------------- ------------------ -----------------
Weighted average number
of shares (000's) 127,805 91,822 103,678
Dilutive/free shares (000's) - - 28
Diluted number of shares
(000's) 127,805 91,822 103,706
6. Sale of subsidiary company
On 13 October 2016, the Company sold Green Compliance Water
Division Limited, its water hygiene and treatment business, to
Integrated Water Services Limited ("IWS"), a subsidiary of South
Staffordshire PLC. The business was sold for total consideration of
GBP800,000 and assumption of related invoice finance borrowings of
GBP999,000.
As Green Compliance Water Division was sold subsequent to the 31
August 2016 balance sheet date but before results were reported, it
was classified as an asset held for sale as at 31 August 2016.
Assets and liabilities were separately disclosed on the balance
sheet date and valued at net realisable value. The results of
operations and loss on disposal were included in discontinued
operations for the year ended 31 August 2016.
The results of operations of Green Compliance Water Division
Limited for the comparative period ended 29 February 2016, a loss
of GBP0.4m, has been reclassified to discontinued operations
consistent with the presentation for the year ended 31 August
2016.
7. Copies of Interim report
The interim report is available to view and download from the
Company's website at www.apcplc.com. If shareholders would like a
hard copy of the interim report, they should contact the Company
Secretary.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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