17 April APC Technology Group PLC ( APC, the Company or the Group ) Unaudited Interim Results for the six months ended 28 February APC Technology Group PLC (AIM: APC), the provider of design-in, specification and distribution services for specialist electronic components and systems, lighting technologies and connectivity products, announces its unaudited interim results for the six months ended 28 February. Financial Highlights Operating profit before exceptional items increased 45% to 0.55m (H1 : 0.38m). Total profit for the period increased to 0.4m (H1 : 0.1m), compared with 0.2m for the whole year ended August. Revenue increased to 8.6m (H1 8.3m) up 14% from the 7.3m posted in H2. Gross margin maintained at 34.2% in the period (H1 : 34.4%), driving increased profitability through the lower fixed cost, design-in distribution business. Administrative expenses reduced by 3.5% from same period last year. Further reduction in trade and other creditors, as the Group invests in strengthening supplier relationships. Operational Highlights Acquistion of First Byte Micro Limited in January, to enhance APC Locator offering. Sale of investment in Open Energy Market Limited in January, to concentrate on core activities. Group now concentrating on the proven business model of specialist electronic components, products and systems design-in distribution. First half bookings increased to 9.0m (H1 8.25m), representing a positive book-to-bill ratio. Significant traction from the focus on growth through increased bookings from existing technologies, in particular those that sit in high growth markets; growth through the signing of new complementary product lines; and growth through targeted bolt-on acquisitions. Commenting on the results, Richard Hodgson, Chief Executive, said: These results represent a signiticant increase in profitability for the Group and highlight the success of following a focused strategy of driving high margin, design-in distribution sales through a reduced fixed cost base. This profit has then been re-invested into a strengthened balance sheet. With this foundation in place, we are fully committed to delivering increased profit and cash generation from increased revenue from our existing technologies and new complementary product lines and through targeted bolt-on acquistions. I would like to thank our staff, whose tremendous effort and unfailing team spirit has given us this great platform and opportunity. 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 unaudited interim financial results for the six months ended 28 February. The period has seen increases in turnover and profit compared with the equivalent period in, described more fully in the financial performance section below. These encouraging results reflect the recent strategic realignment of the business to leverage our experience and expertise as a design-in distributor of specialist electronic components, products and systems. In January, the Group completed the acquisition of First Byte Micro Limited ( FBM ), for a total consideration of 1.2m, details of which are set out in note 7 to the interim financial statements. FBM sources and supplies a wide range of electronic components from major blue chip manufacturers such as Altera, Seiko Instruments, Texas Instruments, and Cypress, and from others either directly under franchise or from authorised open market and worldwide sources. Approximately 80% of FBM clients provide repeat business. As such, FBM has long-lasting client relationships including several up to 20 years in duration. This acquisition provides a platform for a significant boost for APC Locator s business. Also in January, as part of the realignment, the Board made the decision to sell the Group s 15% stake in Open Energy Market Limited ( OEM ), a company specialising in energy procurement, having concluded that this activity was not core to the Group s business and with a new equity partner coming into OEM on terms that would have created a significant risk of APC not being able to achieve a successful exit from this investment. The proceeds of sale amounted to 307,000. The design-in distribution business is now organised around technology portfolios, each with specialist business teams with specific technical expertise, combined with in-depth industry and product knowledge, supported by a shared service framework of marketing, sales, logistics and administration. Our product and application focus is centered around the following businesses: High Reliability Electronics (trading as APC Hi-Rel) the technical sale of high-reliability, high temperature and high voltage electronic components, semiconductors and power solutions, selling primarily into the aerospace and defence industries; Component services and sourcing solutions (trading as APC Locator) offers a range of services relating to the location of obsolete, end of life and hard to find components, including obsolescence management, component requalification and anti-counterfeit testing. APC s historical experience in this area has been augmented by the acquisition of First Byte Micro Limited, which provides a new platform for expansion of this activity; Radio Frequency and Microwave (trading as APC RF & Microwave) distributes high performance connectors, passive and active devices and related electronic components, selling primarily into the defence, telecoms, wireless and broadband markets; Embedded Processing, Computing, Wireless and Internet of Things (IoT) (trading as APC Smartwave) sells embedded computer boards and memory, sensors and related components to IT, industrial manufacturing, defence and healthcare sectors; Time and Frequency Synchronisation (trading as APC Time) - provides time and frequency synchronisation systems to financial institutions, government bodies, broadcasters, telecoms organisations and rail companies; and Lighting Technologies (trading as APC Lighting) a bespoke provider of high-end architecturally specified LED lighting and industrial optoelectronic devices to facility management companies. In addition, EEVS Performance Management provides energy verification services in connection with energy performance contracts by facilities management companies or energy-saving measures funded by public sector organisations. Summary of Financial Performance Revenue for the period was 8.6m (H1 : 8.3m), representing an increase of 3.6% over the corresponding period in. Revenue was 14% higher than the immediately preceding 6 months. The result includes revenue of 0.25m from two months trading of FBM. Overall gross profit margin for the period was 34.2% (H1 : 34.4%), broadly similar to the result in the corresponding period last year and also the last full year. This consistent performance is underpinned by 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 0.55m (H1 : 0.38m), representing a 45% increase. This was assisted by a reduction of 3.5% in overheads compared with the corresponding period last year, as the current period saw the full effect of the headcount reductions, consolidation of offices and improved cost control that were established in 2016/7. Exceptional and non-recurring expenses reduced substantially in the period, from 154k in H1 to just 5k in this period. This reflects the business moving forward from a period of considerable change to one of increasing stability and consistency. After exceptional and non-recurring expenses, share based payments, interest and tax, the Company produced a 0.4m profit for the period, compared to 0.1m in H1 and resulting in a basic and diluted EPS of 0.3p (H1 : 0.1p). This marks a further improvement in the Group s profitability as the new strategy starts to take effect. Balance Sheet and Cash Flow Working capital (excluding net debt) moved from a defict of 0.5m at 31 August to a surplus of 0.6m at 28 February. Net debt at the end of the period was 4.0m, including 0.3m of cash, 3.1m drawn on the ABN invoice finance facility, 0.5m from the Pay4 trade payment facility and 0.7m of unsecured loan notes from shareholders. This compares with net debt of 3.1m at 31 August. These trends stem predominantly from the increased emphasis on investing in reducing trade payables days, thereby creating stronger supplier relationships. The higher invoice discounting debt reflects the increased trading of the business with the inclusion of FBM and therefore the larger overall availability on the facility. The Group continues to enjoy considerable support from ABN and its invoice discounting facility of up to 6m remains in place with no fixed termination date. Cash outflow for the period resulted in an overall decrease in net cash of 0.1m, influenced by the working capital movements outlined above, together with the cost of the FBM acquisition ( 0.5m) and the proceeds from the sale of the investment in OEM ( 0.3m). No new shares have been issued in the financial year to date. Outlook The Board has formulated a clear strategy for moving forward with profitable cash-generative growth. This strategy has three tactical strands: Increase revenue through our established and growth technologies. This growth will largely be driven by market or compliance requirements and will be achieved through reorganised and incentivised sales teams, hunting sales proactively. In this context orders worth 16m were taken in the financial year (compared with billings of 15.6m) and 9.0m in H1 (compared with 8.6m billed); both of these provide a positive book-to-bill ratio, implying a continuing growth profile; Growth by signing new proven technology partners. Three new signings took place at the end of FY and there is a robust pipeline of other target technologies; and Sales growth through bolt-on acquisitions. The targets are established companies, with turnover of 1m or more, that can provide additional revenue consistent with APC s strategic profile, together with a bank of existing customers. The acquisition of First Byte Micro Limited is the first example of this strategy in action. The Board believes that the actions of the past two years have brought the Group to a position of stability, with a clear view of the way ahead through a well-defined strategy, and we therefore face the future with confidence. Once again we would like to thank the Group s employees for their dedication and hard work, and our customers, suppliers and shareholders for their continued support. The Board of Directors 17 April
CONDENSED CONSOLIDATED STATEMENT OF INCOME for the 6 months ended 28 February Note 6 months 6 months Year ended ended ended 28 February 28 February 31 August 000 000 000 Revenue 3 8,616 8,304 15,564 Cost of sales (5,670) (5,445) (10,133) Gross profit 2,946 2,859 5,431 Administration expenses (2,389) (2,475) (4,637) Operating profit before exceptional and other items 557 384 794 Exceptional and non-recurring expenses 4 (5) (154) (252) Share based payments (26) (26) (38) Operating profit 526 204 504 Finance costs (net) (173) (162) (338) Profit before taxation 353 42 166 Taxation credit 45 26 26 Profit for the period 398 68 192 Basic earnings per share 5 0.3p 0.1p 0.1p Diluted earnings per share 5 0.3p 0.1p 0.1p There were no other items of comprehensive income. Accordingly no consolidated statement of comprehensive income has been prepared.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION for the 6 months ended 28 February 28 February 28 February 31 August 000 000 000 Non-current assets Intangible assets 7,856 7,378 7,378 Property, plant and equipment 29 99 55 Associates and financial assets - - 307 7,885 7,477 7,740 Current assets Inventories 1,089 897 832 Trade and other receivables 3,671 2,775 2,985 Cash and cash equivalents 277 244 377 5,037 3,916 4,194 Total assets 12,922 11,393 11,934 Current liabilities Trade and other payables (4,102) (4,777) (4,332) Borrowings (4,272) (2,552) (3,478) (8,374) (7,329) (7,810) Total assets less current liabilities 4,548 4,064 4,124 Non-current liabilities Financial liabilities - (555) - Net assets 4,548 3,509 4,124 Equity attributable to equity holders of the company Called up share capital 2,698 2,556 2,698 Share premium account 13,232 12,895 13,232 Share option valuation reserve 323 574 297 Merger reserve 4,635 4,635 4,635 Retained earnings (16,340) (17,151) (16,738) Total equity 4,548 3,509 4,124
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the 6 months ended 28 February Attributable to the equity holders of the parent For the 6 months ended 28 February Share Share option Share premium Valuation Merger Translation Retained Capital account Reserve Reserve reserve earnings Total 000 000 000 000 000 000 000 At 1 September 2,698 13,232 297 4,635 - (16,738) 4,124 Profit for the period - - - - - 398 398 Other comprehensive income - - - - - - - Total comprehensive income - - - - - 398 398 Transactions with equity holders of the parent Share option charge - - 26 - - - 26 - - 26 - - - 26 At 28 February (unaudited) 2,698 13,232 323 4,635 - (16,340) 4,548 For the 6 months ended 28 February At 1 September 2016 2,556 12,895 548 4,635 (10) (17,219) 3,405 Loss for the period - - - - - 68 68 Other comprehensive income - - - - - - - Total comprehensive income - - - - - 68 68 Transactions with equity holders of the parent Share option charge - - 26 - - - 26 Disposal of foreign subsidiary - - - - 10-10 - - 26 - - - 36 At 28 February (unaudited) 2,556 12,895 574 4,635 - (17,151) 3,509
For the year ended 31 August Attributable to the equity holders of the parent Share Share option Share option Share Premium valuation Merger Translation Retained Capital Account reserve Reserve reserve earnings Total 000 000 000 000 000 000 000 At 1 September 2016 (audited) 2,556 12,895 548 4,635 (10) (17,219) 3,405 Profit for the year - - - - - 192 192 Other comprehensive income - - - - - - - Total comprehensive income - - - - - 192 192 Transactions with equity holders of the parent Issue of new shares 142 337 - - - - 479 Share option charge - - (251) - - 289 38 Non-controlling interest disposed - - - - 10-10 142 337 (251) - 10 289 527 At 31 August (audited) 2,698 13,232 297 4,635 - (16,738) 4,124
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS for the 6 months ended 28 February Reconciliation of cash flows from operating activities 6 months 6 months Year ended ended ended 28 February 28 February 31 August Note 000 000 000 Profit before taxation including discontinued operations for the period 353 42 166 Gain on disposal of property, plant and equipment - (6) - Gain on investment in associates - - (307) Finance costs (net) 173 162 338 Taxation receipts 45 26 26 Depreciation of property, plant and equipment 24 45 90 (Increase)/decrease in inventories (257) 183 248 (Increase)/decrease in trade and other receivables (686) 982 766 Decrease in trade and other payables (229) (1,635) (2,084) Share-based payments charge 26 26 38 Net cash used in operating activities (551) (175) (719) Cash flows from investing activities Acquisition of property, plant and equipment - (12) (13) Sale of property, plant, and equipment - 6 - Acquisition of subsidiary company, net of cash acquired 7 (478) - - Sale of subsidiary company - 641 641 Sale of investment in associates 6 307 - - Net cash from/(used in) investing activities (171) 635 628 Cash flows from financing activities Finance costs (net) (173) (162) (338) Proceeds of share issue - - 479 Loan notes issued 100 - - Finance leases - (19) (21) Short-term borrowings 695 (479) (96) Net cash from/(used in)financing activities 622 (660) 24 Decrease in net cash (100) (200) (67) Cash and cash equivalents as at 1 September 377 444 444 Decrease in net cash (100) (200) (67) Cash and cash equivalents as at end of period 277 244 377
NOTES TO THE INTERIM REPORT for the 6 months ended 28 February 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 and are unchanged from those disclosed in the Company s Annual Report for the year ended 31 August. 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 and 28 February 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 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 ( 000) 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 28 February 31 August 000 000 000 Revenue by geographic location UK 8,397 7,587 15,216 North America 74 212 82 Europe and Asia 145 505 266 8,616 8,304 15,564
4. Exceptional and non-recurring expenses 6 months 6 months Year ended ended ended 28 February 28 February 31 August 000 000 000 Corporate re-organisation - compromise agreements and redundancy costs - 329 399 Foreign exchange loss - 64 39 Corporate re-organisation dilapidations and onerous lease provisions 5 52 57 Costs associated with aborted contract - 47 24 Corporate re-organisation professional fees - 18 68 Corporate re-organisation third party creditors - - (335) Corporate re-organisation release of dormant and dissolved subsidiary liabilities - (356) - 5 154 252 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. 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 28 February 31 August 000 000 000 Net profit after tax for the period 398 68 192 Weighted average number of shares (000 s) 134,913 127,805 130,326 Dilutive/free shares (000 s) 945-917 Diluted number of shares (000 s) 135,858 127,805 131,243 6. Sale of investment in associated company On 24 January the Group sold its investment in Open Energy Market Limited ( OEM ), a company incorporated in England and Wales, whose principal activity consists of energy procurement. The Group owned 15% of the issued share capital of OEM and the proceeds of sale amounted to 307,000. 7. Acquisition of subsidiary company On 10 January the Group completed the acquisition of First Byte Micro Limited ( FBM ) a franchised and independent distributor of electronic components. The consideration payable is 1.2 million, of which 0.7m represents cash at completion in FBM. Of the remaining 0.5m, 0.27m will be paid on completion from existing APC cash and debt facilities, with the residual 0.23m being paid in January 2019. 8. 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, APC Technology Group PLC, 6 Stirling Park, Laker Road, Rochester, Kent ME1 3QR.