REG - Holders Technology - Final Results
24/03/2023 07:00
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RNS Number : 0843U Holders Technology PLC 24 March 2023
Holders Technology plc
("the Group")
Specialised PCB Materials, Lighting Component Solutions and Wireless Lighting
Control Solutions
Final results for the year ended 30 November 2022
Holders Technology plc (AIM: HDT) announces its audited results for the year
ended 30 November 2022.
The Group supplies specialty laminates and materials for printed circuit board
manufacture ("PCB") and operates as a Lighting and Wireless Control Solutions
("LCS") provider. The Group principally operates from the UK and from
Germany, with PCB divisions and LCS divisions in both countries. In
addition, LCS operates joint ventures in the UK, Austria, New Zealand and
Australia.
Following the disposal of the PCB consumables business in 2021, further
investments were made in the LCS business during 2022. This initially
impacted first half profitability, but second half revenues and profitability
improved, and the second half achieved a result close to breakeven. Growth
from the continuing business was 7.6% overall.
An interim dividend of 0.50p per share was paid on 5 October 2022. The
directors will recommend payment of a final dividend of 0.50p per share, a
total of 1.00p for the year (2021 total: 3.00p).
The results are summarised below.
2022 2021
£'000 £'000
· Revenue PCB 2,667 7,920
LCS 5,652 4,466
Group 8,319 12,386
· Gross Margins PCB 35.4% 27.8%
LCS 34.5% 37.3%
Group 34.8% 31.2%
· Operating Profit/ (Loss) PCB 184 554
LCS (253) 32
Central costs (169) (117)
(238) 469
· Net Profit on Disposal of Assets* - 325
Finance Costs (13) (10)
Income from Joint Ventures (8) 3
· Profit/ (Loss) before Tax Group (259) 787
Tax - (92)
Profit/ (Loss) after Tax (259) 695
· Basic and diluted EPS/ (LPS) (6.13p) 16.45p
Dividend paid and proposed 1.00p 3.00p
Cash 2,270 3,192
* Profit on asset disposal £471,000 less related goodwill impairment
£146,000. Note
that this presentation differs from that shown on the Income Statement.
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) 596/2014 which has been incorporated into UK law by the
European Union (Withdrawal) Act 2018.
For further information, contact:
Holders Technology plc 01896 758781
Rudi Weinreich, Executive Chairman
Victoria Blaisdell, Group Managing Director
Paul Geraghty, Group Finance Director
Website www.holderstechnology.com (http://www.holderstechnology.com)
SP Angel Corporate Finance LLP - Nominated Adviser & Broker 020 3470 0470
Matthew Johnson / Harry Davies-Ball
Chairman's statement
This report covers the first full year of trading since the sale of our PCB
consumables business in October 2021. Whilst the first half results for 2022
were behind expectation, I am pleased to report that second half results show
a meaningful improvement.
In the year to 30 November 2022, Group revenue from the continuing business
grew by 7.6% to £8,319,000 (2021: £7,732,000). On a continuing basis PCB
revenue reduced by 18.3%; LCS revenue grew by 26.6%.
The full year Group result before tax was a loss of £259,000 (2021: profit
£787,000), however the 2022 second half result was much closer to breakeven
(H1 pre-tax loss £226,000, H2 pre-tax loss £33,000).
Our aim in 2022 has been to refocus our continuing PCB business onto
technically specialised products, and to further invest in the LCS
businesses. During the year further investments have been made in staff,
technology, and product development, to enable the LCS divisions to realise
the expansion which we believe to be possible. These costs have initially
contributed to an LCS margin reduction, but revenues improved in the second
half.
The margins in the PCB divisions improved due to the absence of lower margin
consumables revenue. Group margins also improved to 34.8% (2021: 31.2%).
The global economic and geo-political outlook remains uncertain, and sales
have been below expectation as we start the new financial year. The Group
continues to have a strong balance sheet and cash position, and this coupled
with the opportunities ahead, leaves us well positioned to meet the challenges
of the years ahead.
R W Weinreich
Executive Chairman
23 March 2023
Operating and Business Review
Corporate strategy
The Board seeks to enhance shareholder value over the medium to long term.
Our strategy to achieve this is to focus resources on business activities
which can generate profitable and sustainable growth.
In doing so, we ensure that risk is carefully managed, and that high standards
of corporate governance and transparency are maintained. Where a suitable
investment opportunity is identified, we invest within the bounds of
internally generated cash flow and bank facilities where appropriate.
Business strategy
The Group has operated for many years as a distributor of specialised
materials to the PCB industry in the UK and continental Europe. The European
PCB industry has strengths in the defence, aerospace, automotive and medical
sectors. The Group acts as an exclusive supplier of technically
sophisticated products to this sector, providing technical support and local
warehousing of stock. The Group views the PCB business as a steady revenue
stream, but not one which will provide significant growth to the Group.
However, the Group does expect future strong growth from the LCS divisions.
The Group's LCS products range from the sale of lighting components to
supporting customers with the design and assembly of complete light engines.
LCS divisions also offer a complete ecosystem of wireless control solutions,
project services and data analytic solutions. The Group's lighting
components strategy is to provide a competitive premium product range and
value-added services to lighting manufacturers in our markets. The Group's
wireless lighting controls strategy is to focus on the specification of the
wireless technology, as well as all project and data analytic services to
lighting specifiers, consultants and building engineering companies.
Market Overview
PCB revenues and results in 2022 were lower mainly due to customers reducing
stock levels over the year. PCB revenue from the continuing business
decreased by 18.3% from £3.3m to £2.7m and operating profitability decreased
from £554,000 to £184,000. 2021 profitability had been enhanced by
exceptional market conditions and as a result we regard the PCB return as
satisfactory.
LCS divisions in 2022 achieved a 26.6% improvement in revenue: however, the
additional costs from our investment in staff, technology and product
development adversely impacted results, particularly in the first half of the
year. The operating result for LCS divisions was a loss of £253,000 (2021:
profit £32,000).
Business Review
2022 was an exciting year in terms of our development and growth of the LCS
divisions. Highlights included the following:
· Successful implementation of large commercial, industrial, retail and
hospitality projects with wireless lighting controls hardware provided by the
Group, as well as a full range of project services.
· Implementation of new wireless emergency lighting technology into
large scale projects, for the first time.
· Launch of Generation 2 of our Holders Analytics platform. Using the
wireless lighting control infrastructure, we are able to supply customers with
energy, lighting, occupancy and environmental data.
· Development of Holders own brand products for use on our projects.
· Broadening of our range of wireless lighting control products and
supplier relationships, to ensure the largest portfolio of products available
in our markets.
· Further investment in knowledgeable and experienced sales and
technical staff, across the Group.
Conclusion
In 2023, we expect our PCB business to have continuing demand for the products
we offer. For the LCS business, we plan to focus on converting the business
opportunity available to us in our markets and investing in our own product
development to enhance our product portfolio as well as technology to support
the growth of the business.
Victoria Blaisdell
Group Managing Director
23 March 2023
Financial Review
Key performance indicators
The Board believes that the following key performance indicators are most
significant in assessing the Group's performance and financial position:
· Revenue
The turnover level is an important indication of the strength of the Group's
product range and coverage.
· Profitability
Profitability is largely a function of the gross margins achieved and
management's success in containing administrative expenses in relation to
turnover.
· Liquidity
The Group operates in a cyclical industry and the directors have consistently
adopted a conservative approach to financing the Group's activities. The key
measure is net liquid funds, as described below.
· Efficiency
Production efficiency is important in a competitive PCB market.
Revenue
Group revenue from continuing operations increased from £7.7m to £8.3m.
Overall PCB revenue from the continuing business decreased by 18.3%, whilst
Lighting and Controls revenue increased by 26.6%.
Profitability
The operating result was a loss of £238,000 compared to an operating profit
of £469,000 in 2021. (Note that the 2021 presentation differs from that
shown on the Income Statement.) The gross profit margin was 34.8% compared
to 31.2% in 2021. Administration costs decreased from £3.0m to £2.9m,
however they increased as a proportion of revenue from 24.2% in 2021 to 35.4%
in 2022.
Post tax result
The result for the financial year after tax, attributable to equity
shareholders was a loss of £259,000 (2021: profit of £695,000). The basic
and fully diluted loss per share was 6.13p (2021: 16.45p earnings per share).
Principal risks and uncertainties
The directors believe that the following are the principal risks and
uncertainties faced by the Group:
· Competition
Both the PCB and Lighting and Controls sectors are highly competitive, and the
Group faces competition from a wide range of companies. The Group
continually seeks the most cost-effective sources for its products in order to
remain competitive.
· Customers
The Group is exposed to the risk of bad debts. Within the major European
markets, the Group uses credit analysis data to monitor customer risk levels
and maintain appropriate credit limits. Credit insurance is used for UK and
European customers whenever it is economically available.
· Suppliers
As with any distribution business, the Group is dependent on maintaining
supply. The Group has diversified its product range and sources in order not
to be overly dependent on any single supplier.
· Key Management
In order to ensure retention of key management, the Group offers competitive
remuneration, a stimulating working environment and clear two-way
communication.
· Business Interruption
In order to minimise the impact of business interruption, the Group offers
dual capacity in UK and Germany, and holds appropriate business interruption
insurance.
· Financial Control
Internal controls and multiple authorisation levels, with monthly review of
results and cash, are used to combat fraud and potential misstatement of
results.
· Inflation
Inflation risk is an inherent feature of the business. Prices are continuously
monitored and managed with suppliers and customers to ensure that margins are
maintained. When an opportunity arises, the Group will purchase inventory at
an advantageous price.
Cash flow, liquidity and financing
The Group's cash position decreased during the year, from £3,192,000 to
£2,270,000. The decrease principally arose from the operating loss plus
increases in working capital, capital expenditure, and dividends paid to
shareholders.
The Group does not currently require or maintain an overdraft facility. A
trade financing facility is used for occasional letters of credit.
At 30 November 2022 the Group had net liquid funds (trade and other
receivables plus cash minus current liabilities excluding lease liabilities)
of £2.4m (2021: £3.1m). Net assets per ordinary share at 30 November 2022
were £0.99 (2021: £1.07).
Derivatives and other financial instruments
Operations are financed from retained profits. The Group's financial
instruments, other than forward currency contracts, comprise cash and items,
such as trade receivables and payables that arise directly from its
operations. The main purpose of these instruments is to provide finance for
operations if necessary. It is, and has been throughout the period under
review, the Group's policy that no trading in financial instruments shall be
undertaken.
Currency risk and exposure
The Group enters into forward currency contracts that are used to manage the
currency risks arising from purchases from foreign suppliers where the
products are sold in local currencies.
The overseas sales operations during the year were predominantly in the
European Union. The Group has currency exposures primarily in US dollars and
Euros. Although daily transactional exposures are regularly covered by
forward contracts, the Group has an underlying exposure, particularly to the
Euro. Currency contracts at the year-end are detailed in note 21.
Net assets
Net assets at the 2022 year-end were £4,172,000 (2021: £4,528,000).
Conclusion
The Group enters 2022 with a strong balance sheet and increased capacity for
investment as new opportunities are identified.
Paul Geraghty
Group Finance Director
23 March 2023
Group income statement for the year ended 30 November 2022
Note 2022 2021
£'000 £'000
Revenue 8,319 12,386
Cost of sales (5,425) (8,516)
Gross profit 2,894 3,870
Distribution costs (197) (408)
Administrative expenses (2,943) (3,001)
Impairment of goodwill - (146)
Other operating (expenses)/ income 8 8
Operating profit/ (loss) (238) 323
Profit on disposal of assets - 471
Income from joint ventures (8) 3
Finance expense (13) (10)
Profit/ (loss) before taxation (259) 787
Tax expense 2 - (92)
Profit/ (loss) after taxation attributable to equity shareholders (259) 695
Basic and diluted earnings/ (loss) per share 4 (6.13p) 16.45p
Group statement of comprehensive income for the year ended 30 November 2022
2022 2021
£'000 £'000
Profit for the year (259) 695
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations 29 (134)
Total comprehensive income/ (loss) for the year (230) 561
Statement of changes in equity for the year ended 30 November 2022
Group Share capital Share premium account Capital redemption reserve Translation reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 December 2020 422 1,590 1 248 1,738 3,999
Dividends - - - - (32) (32)
Transactions with owners - - - - (32) (32)
Profit for the year - - - - 695 695
Exchange differences on translating foreign operations
- - - (134) - (134)
Total comprehensive (loss)/ income for the year
- - - (134) 695 561
Balance at 30 November 2021 422 1,590 1 114 2,401 4,528
Dividends - - - - (126) (126)
Transactions with owners - - - - (126) (126)
Loss for the year - - - - (259) (259)
Exchange differences on translating foreign operations
- - - 29 - 29
Total comprehensive income/ (loss) for the year
- - - 29 (259) (230)
Balance at 30 November 2022 422 1,590 1 143 2,016 4,172
Group balance sheet at 30 November 2022
2022 2021
£'000 £'000
Assets
Non-current assets
Intangible fixed assets 190 220
Property, plant and equipment 226 82
Leased assets 63 97
Investments in joint ventures 103 111
Deferred tax assets 12 12
594 512
Current assets
Inventories 1,362 1,180
Trade and other receivables 1,636 1,593
Cash and cash equivalents 2,270 3,192
5,268 5,965
Liabilities
Current liabilities
Trade and other payables (1,456) (1,661)
Lease liabilities (51) (58)
(1,507) (1,719)
Net current assets 3,761 4,246
Non-current liabilities
Retirement benefit liability (165) (186)
Lease liabilities (9) (35)
Deferred tax liabilities (9) (9)
(183) (230)
4,172 4,528
Shareholders' equity
Share capital 422 422
Share premium account 1,590 1,590
Capital redemption reserve 1 1
Retained earnings 2,016 2,401
Cumulative translation adjustment reserve 143 114
4,172 4,528
Statement of cash flows for the year ended 30 November 2022
2022 2021
£'000 £'000
Cash flows from operating activities
Profit/ (loss) before tax from continuing operations
(259) 787
Depreciation 141 168
Loss/ (Gain) on disposal of property, plant and equipment
3 (471)
Impairment of goodwill - 146
Decrease in inventories (173) 1,093
(Increase)/ decrease in trade and other receivables
(409) (527)
Increase/ (decrease) in trade and other payables
Interest expense 169 702
13 10
Cash generated from operations (515) 1,908
Interest paid 8 (3)
Tax paid - (92)
Income from investments (21) (10)
Net cash (used in)/ generated from operations (528) 1,803
Cash flows from investing activities
Purchase of property, plant and equipment (212) (65)
Investment in Joint Venture - (80)
Interest received 42 -
Proceeds from sale of property, plant and equipment 2 553
Net cash (used in)/generated from investing activities (168) 408
Cash flows from financing activities
Repayment of leases (57) (37)
Equity dividends paid (126) (32)
Net cash used in financing activities (183) (69)
Net change in cash and cash equivalents (879) 2,142
Cash and cash equivalents at start of period 3,192 1,113
Effect of foreign exchange rates (43) (63)
Cash and cash equivalents at end of period 2,270 3,192
Notes
1. Basis of preparation
The Group and parent company financial statements have been prepared in
accordance with UK-adopted International Accounting Standards (IAS), in
conformance with the requirements of the Companies Act 2006. All accounting
standards and interpretations issued by the International Accounting Standards
Board effective at the time of preparing these financial statements have been
applied.
2. Taxation
2022 2021
£'000 £'000
Analysis of the charge in the period
Current tax - Current period - 92
Deferred tax charge - -
Total tax - 92
Tax reconciliation
The tax for the period is lower (2021: lower) than the standard rate of
corporation tax in the UK, effectively 19.0% (2021: 19.0%) for the company's
financial year. The differences are explained below:
2022 2021
£'000 £'000
Profit/ (loss) before taxation (259) 787
Profit/ (loss) before taxation multiplied by the rate of corporation tax in
the UK of 19.0% (2021: 19.0%)
(48) 150
Effects of:
Adjustment from prior years - -
Taxation losses 48 (58)
Taxation - 92
3. Dividends
The directors have proposed a final dividend of 0.50p per share payable on 6
June 2023 to shareholders on the register at close of business on 19 May
2023. The total dividend for the year, including the interim dividend of
0.50p (2021: 0.50p) per share paid on 4 October 2022, amounts to £42,000
(2021: £126,000), which is equivalent to 1.00p (2021: 3.00p) per share.
4. The basic and diluted earnings per share are based on the loss for
the financial year of £259,000 (2021: profit of £787,000) and on ordinary
shares of 4,224,164 (2021: 4,224,164 shares), the weighted average number of
shares in issue during the year. There were no share options in issue during
either year.
5. This statement, which has been approved by the Board on 23 March
2023, is not the Company's statutory accounts. The statutory accounts for
each of the two years to 30 November 2021 and 30 November 2022 received audit
reports which were unqualified and did not contain statements under section
498(2) and section 498(3) of the Companies Act 2006. The 2021 accounts have
been filed with the registrar of Companies, but the 2022 statutory accounts
are not yet filed.
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