Interim Results
04 June 2003 - 5:00PM
UK Regulatory
RNS Number:8871L
Stanelco PLC
04 June 2003
STANELCO PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 APRIL 2003
CHIEF EXECUTIVE'S STATEMENT
I have previously reported to you that this Company, like many others, has been
going through the most dramatic changes in market conditions in its history.
International telecommunications and engineering markets remain depressed,
although they are now showing some signs of recovery. Our financial results
during this period reflect this market. However, we have made significant
progress with our Radio Frequency (RF) capsule making technology and waste
packaging systems.
Overall, the Company is robust and the development of new applications and
routes to market based upon our core technology remains a key and exciting focus
for the business.
Results
Turnover has reduced by 58.7 per cent to #889,000 compared to the comparative
period last year of #2,151,000. This has resulted in a pre-tax loss of (#96,000)
in contrast to the underlying pre-tax profit of #274,000 (#501,000 with an
exceptional item) reported at last year's interim results. The current period
trading has resulted in a basic loss per share of (0.006p) compared to a
reported basic earnings per share of 0.052p for the corresponding period last
year.
Reductions made to our cost base in anticipation of the market downturn have
significantly mitigated the impact of this downturn on the performance of the
Company.
Period end net cash decreased by #214,000 from the previous financial year-end.
Trading remained cash generative during the period, bringing in a net #139,000.
The overall reduction in cash is due to the continued investment in research and
development. During the period #357,000 of costs were capitalised. The
substantial proportion of these costs arises from the development of ingestible
capsules through InGel Technologies Ltd (InGel). This investment has been funded
through the capital injections that resulted from the sale of shares in both
InGel and Stanelco plc to R.P. Scherer Corporation for #1,130,000.
The Company has benefited from its applications for tax relief relating to its
Research and Development programme.
Dividend
The Directors' current intention is to propose to maintain the final dividend at
the current level of 0.01p per share, pending a review of trading conditions at
the financial year-end.
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
technology for sealing ingestible soft pharmaceutical capsules, which will make
production much faster and more economical whilst enabling use of encapsulation
materials other than gelatine. Cardinal Health is ranked 19 on the current
Fortune 500 list
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 Company retains ownership of this patent, which
is currently licensed to InGel for its applications. The United States
Patent Office has informed us that it has no objections to the grant of this
patent in the United States - a major market for the applications.
* InGel has made further patentable new inventions in the course of its
development work.
* Work with the pilot scale machine capable of producing large batch sizes
for stability and clinical trials has reached an advanced stage. 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 also committed a full-time team of
people in support of InGel, working as part of a team with our own staff and
others. R.P. Scherer has also exercised its option to license the technology
for health and nutritional applications, in addition to pharmaceuticals.
* We have installed the first development machine in premises designed for
pharmaceutical capsule manufacture.
Our best estimates are that we expect InGel to start generating revenues within
the next 12 months. Although further development work is required to prove this
technology on a commercial scale - we believe that it offers the prospect of
revolutionising the manufacture of water soluble and ingestible soft capsules.
Optical fibre
I am pleased to report, although cautiously, that the Company is now seeing the
first signs of some recovery in this market. Since the end of the period we have
seen orders for RF furnaces and consumables increasing for the first time in
nearly two years. The manufacturers of optical fibre for telecommunications are
consolidating, and those that wish to continue for the long term are
contemplating relocation to lower cost manufacturing regions and using
technology to give a lower unit cost of production. Some territories are
considering the manufacture of their entire domestic requirements to avoid
importing fibre. All of these trends create opportunities for the Company to
supply its latest technology.
We have supplied our first Modified Chemical Vapour Deposition (MCVD) system to
Japan for making the specialist quartz pre-form from which optical fibre is
drawn. The MCVD technology is used to dope the quartz with rare earth metals in
order to modify its optical properties. We expect to supply a second system to
Japan during the second half year.
Waste packaging
Stanelco's RF sealing technology enables customers to seal hazardous materials
in industrial grade plastic bags. Unlike heat sealing and other RF methods, we
can seal through liquids, dusts and particulates without burning the plastic to
produce a high integrity seal. We continue to anticipate sales from our new
waste packaging equipment in excess of #1m during the current year and have
received enquiries in excess of #4m.
We have also developed, fabricated and sold the first large scale version of
this equipment for sealing drums within industrial grade plastic bags - we have
in excess of #500k of enquiries for this version of the equipment.
During the second half year we expect to make our first overseas sales and to
begin benefiting from maintenance and service income as warranties expire.
InGel Industrial
Independently of InGel, Stanelco has developed an RF 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. These 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) appears 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 full commercial potential of this technology. We are actively undertaking
trials with a number of major detergent manufacturers.
R&D Work
During the first half of the current financial year we invested the equivalent
of more than 40 per cent. 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.
Prospects
At the date of this report, the order book stands at #529,000.
We expect to see significant new orders from our existing businesses. The
optical fibre business showa signs of improving, having had a difficult first
half year and the waste packaging business is growing. Historically, the
underlying trend has been to have a relatively slow first half year followed by
a strong second half year. We anticipate a return to this trend with improved
performance in the second half of the year.
Ian Balchin
Chief Executive
3 June 2003
CONSOLIDATED SUMMARISED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 APRIL 2003
Unaudited Unaudited Audited
Six months Six months Year
ended Ended Ended
30 April 2003 30 April 2002 31 October 2002
#'000 #'000 #'000
TURNOVER 889 2,151 3,570
--------------- -------------- --------------
Operating results before exceptional items (111) 253 411
Exceptional item - 227 155
--------------- -------------- --------------
OPERATING (LOSS)/PROFIT (111) 480 566
Net interest receivable 15 21 48
-------------- -------------- --------------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES (96) 501 614
BEFORE TAXATION
Taxation 55 (155) (177)
-------------- -------------- --------------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES (41) 346 437
AFTER TAXATION
Minority interest - 7 -
-------------- -------------- --------------
(LOSS)/PROFIT FOR THE PERIOD (41) 353 437
Dividends - - (69)
-------------- -------------- --------------
RETAINED (LOSS)/PROFIT FOR THE PERIOD (41) 353 368
======== ======== ========
EARNINGS PER SHARE
Basic (loss) / earnings per share (pence) (0.006) 0.052 0.064
======== ======== ========
Fully diluted (loss)/earnings per share (pence) (0.006) 0.051 0.063
======== ======== ========
DIVIDENDS PER SHARE (pence) - - 0.01
======== ======== ========
NOTES TO THE CONSOLIDATED SUMMARISED PROFIT AND LOSS ACCOUNT
For the six months ended 30 April 2003
1. Earnings per share
The basic (loss)/earnings per share is based on an attributable (loss)/
profit after tax of (#41,000) (2002: #353,000) and on the basic (2002:
weighted average) ordinary shares in issue during the period of 686,829,750
(2002: 682,845,377). The fully diluted earnings per share are based on an
attributable (loss)/profit after tax of (#41,000) (2002: #353,000) and on
the diluted share holding of 687,556,312 (2002: 688,993,320).
2. Research and development expenditure of #357,000 (2002: #295,000) has
been incurred in the period. Of this expenditure #357,000 (2002: #295,000)
has been capitalised as an intangible asset to be amortised against future
revenues. Expenditure of this type is only capitalised where the Board is of
the opinion that future revenues will exceed the costs incurred over the
expected product life in accordance with Statement of Standard Accounting
Practice Number 13.
The Company received #1,130,000 in December 2001 from the issue of new
shares to R.P.Scherer Corporation, which is being utilised to fund the R&D
expenditure within InGel Technologies.
3. The figures for the year ended 31 October 2002 are an abridged statement
of the full Group Accounts for that year which have been delivered to the
Registrar of Companies and on which the Auditors made an unqualified report
and which did not contain a statement under Section 237 of the Companies Act
1985.
The principal accounting policies of the Group have remained unchanged from
those set out in the Group's 2002 Annual Report and Financial Statements.
The financial information set out in this Interim Report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985.
The interim financial information in this report has been neither audited,
or reviewed by the Company's auditors.
4. Copies of this statement are being sent to all shareholders and will be
available to the public at the Company's registered office.
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE SIX MONTHS ENDED 30 APRIL 2003
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 April 2003 30 April 2002 31 October 2002
#'000 #'000 #'000
(Loss)/profit for the financial period (41) 353 437
Dividends - - (69)
------------ ------------ ------------
(41) 353 368
Issue of 20,604,900 ordinary 0.1p shares in Stanelco Plc - 567 567
Issue of 500 ordinary 1p shares in InGel Technologies - 535 535
Limited
------------ ----------- ------------
Net addition to shareholders' funds (41) 1,455 1,470
Opening shareholders' funds 2,651 1,181 1,181
------------ ------------ ------------
Closing shareholders' funds 2,610 2,636 2,651
======== ======== ========
The issue of shares in Stanelco Plc and InGel Technologies Limited were made at
a premium to R.P. Scherer Corporation.
CONSOLIDATED BALANCE SHEET
AT 30 APRIL 2003
Unaudited Audited
At 30 April 2003 At 31 October 2002
#'000 #'000 #'000 #'000
FIXED ASSETS
Intangible assets 1,163 831
Tangible assets 273 307
------------ ------------
1,436 1,138
CURRENT ASSETS
Stocks 654 637
Debtors 351 775
Cash at bank and in hand 937 1,151
------------ ------------
1,942 2,563
CREDITORS: amounts falling due (593) (812)
within one year ------------ ------------
NET CURRENT ASSETS 1,349 1,751
------------ ------------
TOTAL ASSETS LESS CURRENT LIABILITIES 2,785 2,889
PROVISIONS FOR LIABILITIES AND CHARGES (147) (210)
------------ ------------
2,638 2,679
========= ========
CAPITAL AND RESERVES
Called up share capital 687 687
Share premium account 1,081 1,081
Profit and loss account 842 883
------------ ------------
SHAREHOLDERS' FUNDS 2,610 2,651
Minority interest 28 28
------------ ------------
2,638 2,679
======== ========
The Interim Accounts were approved by the Board on 3 June 2003
Signed on behalf of the Board of Directors
Ian H Balchin (Chief Executive)
Barrie C Hozier (Finance Director)
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 APRIL 2002
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2003 2002 2002
#'000 #'000 #'000
NET CASH INFLOW FROM OPERATING ACTIVITIES (note 1) 139 52 444
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 15 24 49
Interest paid - - (1)
Dividend paid (2) - (64)
Finance lease interest paid - (1) -
------------------- ------------------ ------------------
NET CASH INFLOW/ (OUTFLOW) FROM RETURNS ON 13 23 (16)
INVESTMENTS AND SERVICING OF FINANCE ------------------- ------------------ ------------------
TAXATION
Corporation tax (paid)/refunded (2) 6 (252)
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Investment in intangible fixed assets (357) (295) (844)
Purchase of tangible fixed assets (13) (87) (86)
Sale of tangible fixed assets 6 1 1
----------------- ------------------ ------------------
NET CASH OUTFLOW FROM CAPITAL (364) (381) (929)
EXPENDITURE AND FINANCIAL INVESTMENT ---------------- ------------------ ------------------
FINANCING
Issue of ordinary share capital - 1,130 1,130
Capital element of finance lease rentals - (2) (3)
------------------ ----------------- ------------------
NET CASH INFLOW FROM FINANCING - 1,128 1,127
------------------ ----------------- ------------------
(DECREASE)/INCREASE IN CASH (note 2) (214) 828 374
========== ========== ===========
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 APRIL 2002
1. RECONCILIATION OF OPERATING PROFIT TO THE NET CASH INFLOW
FROM OPERATING ACTIVITIES
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2003 2002 2002
#'000 #'000 #'000
Operating profit for the period (111) 480 566
Amortisation of intangible fixed assets 25 - 13
Depreciation of tangible fixed assets 43 44 99
(Profit)/loss on disposal of tangible fixed assets (2) (1) 1
(Increase)/decrease in stocks (17) 377 179
Decrease/(increase) in debtors 424 (404) 23
(Decrease) in creditors due within one year (215) (439) (427)
(Decrease) in provision for liabilities and charges (8) (5) (10)
--------------- -------------- ---------------
Net cash inflow from operating activities 139 52 444
========== ========== =========
2. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2003 2002 2002
#'000 #'000 #'000
(Decrease)/increase in cash in the period (214) 828 374
Cash outflow from financing - 2 3
-------------- --------------- ----------------
Change in net debt resulting from cash flows (214) 830 377
Net funds at beginning of period 1,151 774 774
------------- --------------- ----------------
Net funds at end of period 937 1,604 1,151
======== ========= ==========
3. ANALYSIS OF CHANGES IN NET FUNDS
At At
1 November 30 April
2002 Cash flow 2003
Unaudited #'000 #'000 #'000
Cash in hand and at bank 1,151 (214) 937
========== ========== =========
At At
1 November Cash flow 30 April
2001 #'000 2002
Unaudited #'000 #'000
Cash in hand and at bank 777 828 1,605
Finance leases (3) 2 (1)
--------------- -------------- --------------
774 830 1,604
========== ========== =========
At At
1 November 31 October
2001 Cash flow 2002
Audited #'000 #'000 #'000
Cash in hand and at bank 777 374 1,151
Finance leases (3) 3 -
------------- --------------- --------------
774 377 1,151
======== ========= =========
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