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Share Name | Share Symbol | Market | Type |
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Refac Optical Grp | AMEX:REF | AMEX | Ordinary Share |
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RNS Number:5989N Reflec PLC 16 July 2003 Reflec plc ("Reflec" or "the Group" or "the Company") Preliminary results for the year ended 28 February 2003 Chairman's Statement The Group experienced a further year of challenging trading conditions and significant change in 2002/3. Whilst the results for the year are unsatisfactory they do represent an improvement on last year and on the outcome indicated for this year at the time of the announcement of the Interim results. Turnover reduced from #3.4m to #3.2m but operating losses were reduced from #2.6m to #1.8m before exceptional costs, and from #6.9m to #2.1m after exceptional costs. The reduced level of turnover reflected the focussing of the Group on more profitable and sustainable businesses and the reduced level of loss reflected both this focus and very significant cost reductions which will impact fully in the current financial year. These initiatives are detailed in the Chief Executive's Review and will enable the Group to approach a cash neutral position in the current financial year and to grow profitably from this more secure base. No dividend is payable. The composition of your Board has also changed through the year with my appointment on 12th August 2002, the resignations of Nick Rowbottom on 13th September 2002 and Stuart Dootson on 8th November 2002, and the promotion to Finance Director of David Chiverton on 8th November 2002. Now that the actions have been taken to focus the strategy of the Group and to commence its financial turnaround, and to contribute to minimising our fixed costs, I have decided to resign. With immediate effect and for the time being, Peter Smith will again combine the roles of Chairman and Chief Executive. I would like to thank my colleagues on the Board and all the management and employees for their continued hard work and commitment and to wish the Group every success in the future. J M Gilliatt Chairman Chief Executive's Review In February 2002 your Board completed a strategic review of all the Company's activities evaluating the overall financial situation of the Group as well as each of the Reflec businesses in terms of their ability to create value for the shareholders. A new strategy was developed with a focus on exploiting the Company's IPR and brands in markets where we have the potential to be a market leader. At the same time, we identified businesses within the Group that would not create either short or longer term value. In these cases we have taken the tough but necessary decisions to close down the business or dramatically reduce our activities within it. The past year has seen your Company's turnover fall by approximately 6%, while operating losses before exceptional costs have been reduced by approximately 37 %. The past 12 months have been focused on the financial turnaround of the Group, the actions from which we are only now beginning to see the financial benefits. Today, your Company is focused on higher margin and more sustainable business. It is operating at an expense level half that of a year ago whilst maintaining the same level of turnover. Profit margins are increasing. We are focused on moving towards positive cash flow with the objective of being able to fund future profitable growth. The Company is now organised into three divisions, Reflec Media, Reflec Evolution and Reflec Reflectives and operates in two locations Winsford in the UK and Ashland, USA. The Operating Subsidiaries Reflec Media In a difficult transition year the new Reflec Media business is performing well having moved from a loss of #818k in 2001/2002, when the business was part of the Viewercom joint venture, to a #115k loss prior to group overheads in 2002/ 2003. Following the closure of the unprofitable Viewercom joint venture, we established Reflec Media as a division of Reflec Technology. The initial focus of this new team was centred on assessing the needs of the marketplace and the fit of our technology. The work was revealing and has guided us to redesign our product range in the form of our award winning Chromaflex and Chromatte curtains. Market launches were successfully implemented at the world's most important trade shows including IBC in Amsterdam, AsiaMedia in India and most recently at NAB in Las Vegas, the world's largest media trade show. A new relationship with the Manchester Metropolitan University is helping to improve our understanding of our technology and its role in the media market. A series of new products is expected to arise from this relationship. Today Chromatte and Chromaflex are being marketed in 40 countries worldwide through a growing network of resellers who are equipped by the Reflec Media team to sell value added services to customers at the local level. In March this year agreement was reached with two major US distributors to market the Chromatte systems in North America. These important partnerships are performing as planned. Finally, to further reduce expenses and improve overall coordination within the Group, the Reflec Media team will be moving to the Winsford site in mid July 2003. We are expecting this business to achieve a modest profit and positive cash flow over the coming 12 months. Reflec Reflectives This business comprises of two entities: Reflec Technology and Reflec USA. Technology is responsible for research, development, and manufacturing. The sales and marketing activities are concentrated in the US. As our licensing model develops, the need for an Asian sourcing location has decreased. In an effort to further reduce operating costs we decided to close the Hong Kong operation. At the time of announcing the last Interim results your Board informed you of its decision to seek a variety of strategic options for the Reflectives business including alliances, joint ventures or the sale of the business. At this time no specific agreement has been reached although discussions are on going with a number of potential candidates. Reflec Technology Your Company had high hopes for the launch of its new EN471compliant retroreflective tape following more than seven years of development. Unfortunately, with the entry of a number of low cost Asian manufacturers the market price for tape has fallen by up to 50% with obvious impact on profitability for a new entrant like us. The gross margin of 20 per cent compared to 45 per cent in the previous year. Your Board decided to exit the commodity end of this market and to offset this lost revenue by reducing its costs. Today, Reflec Technology is focused on its core businesses of manufacturing its proprietary reflective ink system and in partnership with a number of third parties the company's range of reflective fabrics sold under its illumiNITE brand. Reflec Technology now operates with 25 per cent of the staff compared to a year ago. ReflecUSA Reflec USA operates as sales and marketing conduit to the important North American market. The Company is the world's largest supplier of retroreflective fabrics promoting what the Directors believe to be the next generation of high visibility products for the occupational and consumer personal safety markets. The results of Reflec USA's operations were disappointing with sales of #1,012k this year compared to #1,126k in the previous year. The primary shortfall resulted from the poor retail environment, the loss of a key account and slower than anticipated adoption of our technology in the occupational markets. Profitability was unchanged at a loss of #675k versus #661k a year earlier. Measures have been implemented to better focus the business and reduce costs in order to achieve profitability in this coming year. The Company launched its range of ANSI 107 compliant products but unfortunately sales were below plan. We now only expect modest growth until the ISEA/ANSI 107 high visibility clothing committee (of which Reflec USA is an active member) address the current thinking relating to the conspicuity of the human form. A new branded fabric licensing model was developed and successfully launched through the year. A number of licensing agreements have been signed with many more in negotiation. Unfortunately, an important US military contract was lost to our major competitor as a result of price. Work is underway to win back this contract using the Company's Intellectual Property and its leadership in retroreflective fabrics. Sales of our branded Sportswear line of apparel and accessories were negatively impacted by the generally poor retail climate in the United States which continued to be affected by the tragic events of September 11th 2001 and the general economic slowdown. There are indications that consumer confidence is beginning to pick up fuelled by lower interest rates and reductions in personal taxation. On a positive note, the Company's new range of solar reflective sportswear was a winner of the Dupont/ISPO New Brands of the Year award at last summers ISPO tradeshow in Munich, Germany. Reflec Evolution Reflec Evolution is based at the Company's Winsford site. It business activities are focused on offering services to third parties to change the physical state of powders including micro grinding, compaction, drying and mixing. Due to the service requirements of this business the majority of its customers are located in the United Kingdom. Our new strategy of focusing on specific capabilities and serving higher margin target accounts has proven to be the correct one. We are concentrating on work where we have a competitive advantage and, through improved operating efficiency, we can earn higher margins. We are currently negotiating on a number of new contracts. During this financial year, Reflec Evolution turned over #1.13m down from the previous year of #1.5m but losses were more than halved to #359k compared to #809k for last year. We anticipate that the business will make a contribution and generate cash in this coming year. Reflec Asia (Kelvar) In 2000, Reflec acquired the trademark of Kelvar, the company's anticorrosion powder. The main market for Kelvar was seen as the Far East. CCI (Asia) Limited was acquired to act as sales conduit to the local market. During the year, our sales of Kelvar and ancillary products were #34,000. Unfortunately, neither the profitability of the product or the market potential justified the expenditure and risk associated with the business. Your Board decided to stem the losses and has closed down the Asia operation. Sales of Kelvar are now limited to exports to Asian applicators and coaters operating in the United Kingdom. Summary: The Company's Future The new strategy of your Company is now focused on achieving profitability and positive cash flow in the short term as well as striving for longer term growth in shareholder value. Today, we only market products and/or services where we have a real competitive advantage and where we have identified markets that are willing and able to reward us for our efforts. The improved marketing capabilities of the Group will help us to better exploit our technology and trademarks by positioning our branded products and/or services in to our target market niches around the world. At the same time, the Company will accelerate its efforts to license its proprietary technology and brands. Finally, I would like to thank John Gilliatt for his services to the Company over the past year. During this period of transition, John's financial insights to the business have been invaluable in driving the changes we have implemented. Reflec is that much stronger as a result. P R Smith Chief Executive Consolidated profit and loss account for the year ended 28 February 2003 Note Continuing Discontinued operations Operations Total 2003 2003 2003 2002 #'000 #'000 #'000 #'000 Turnover 2 3,071 134 3,205 3,405 Cost of sales 1,349 64 1,413 1,510 _____ _____ _____ _____ Gross profit 1,772 70 1,792 1,895 Distribution 31 149 180 187 costs Administrative 3,362 98 3,460 4,350 expenses - ordinary Administrative 4 266 - 266 4,276 expenses - exceptional Total 3,628 98 3,726 8,626 administrative expenses _____ _____ _____ _____ Operating 4 (1,937) (177) (2,114) (6,918) loss Interest 40 183 receivable Interest 11 81 payable and similar charges _____ _____ Loss on ordinary activities before taxation (2,085) (6,816) Tax credit on (62) - loss on ordinary activities _____ _____ Loss for the (2,023) (6,816) financial year ===== ===== Loss per share 5 0.48 pence 1.6 pence - basic and diluted ========== ========= Consolidated statement of total recognised gains and losses for the year ended 28 February 2003 Group Group 2003 2002 #'000 #'000 Loss for the financial year after taxation (2,023) (6,816) Currency translation differences on foreign currency net investment 48 27 ______ ______ Total recognised gains and losses for the year (1,975) (6,789) ====== ====== Consolidated balance sheet at 28 February 2003 Note 2003 2002 #'000 #'000 #'000 #'000 Fixed assets Intangible assets 711 1,069 Tangible assets 1,365 1,544 ______ ______ 2,076 2,613 Current assets Stocks 714 797 Debtors - due within 999 781 one year Cash at bank and in 549 2,613 hand ______ ______ 2,262 4,191 Creditors: amounts falling due within one year 849 1,242 ______ ______ Net current assets 1,413 2,949 ______ ______ Total assets less 3,489 5,562 current liabilities Creditors: amounts falling due after more than one year 24 122 ______ ______ 3,465 5,440 ====== ====== Capital and reserves Called up share 6 425 425 capital Share premium account 12,915 12,915 Profit and loss (9,875) (7,900) account ______ _______ Equity shareholders' 7 3,465 5,440 funds ===== ====== Consolidated cash flow statement for the year ended 28 February 2003 2003 2002 #'000 #'000 Net cash outflow from operating activities (2,063) (3,100) Returns on investments and servicing of finance 29 102 Taxation 62 - Capital expenditure (83) (525) Acquisitions - (123) ______ ______ Cash outflow before management of liquid resources (2,055) (3,646) and financing Management of liquid resources 2,020 3,300 Financing 16 (9) ______ ______ (Decrease) - in cash (19) (355) ===== ===== Reconciliation of operating loss to net cash outflow from operating activities 2003 2002 #'000 #'000 Operating loss (2,114) (6,918) Amortisation 386 2,718 Depreciation 135 805 Loss on disposal of fixed assets 99 58 Decrease/(increase) in stock 59 (234) (Increase)/decrease in debtors (224) 116 (Decrease)/increase in creditors (404) 355 ______ ______ Net cash outflow from operating activities (2,063) (3,100) ===== ===== Reconciliation of net cash flow to movement in net funds 2003 2002 #'000 #'000 Decrease in cash in the year (19) (355) Cash (inflow)/outflow from movement in debt and (16) 11 lease financing Cash inflow from movement in liquid resources (2,020) (3,300) ______ ______ Change in net funds resulting from cash flows (2,055) (3,644) Translation differences (25) - ______ ______ Movement in net funds in the year (2,080) (3,644) Net funds at beginning of year 2,581 6,225 ______ ______ Net funds at end of year 501 2,581 ===== ===== Notes 1 Financial Information The financial information for the year ended 28 February 2003 is extracted from the Group's financial statements to that date which received an unqualified auditors' report and will be filed with the Registrar of Companies. The financial information for the year ended 28 February 2002 is extracted from the Group's financial statements to that date which received an unqualified auditors' report and have been filed with the Registrar of Companies. The preliminary announcement has been prepared on the basis of the accounting policies set out in the statutory financial statements for the year ended 28 February 2003. 2 Turnover, losses and net assets Turnover is the total gross external sales excluding VAT. Turnover and loss before taxation are derived from net assets situated in the United Kingdom, United States of America and Hong Kong. Turnover Pre-tax profit/ Net assets/ (loss) (liabilities) 2003 2002 2003 2002 2003 2002 #'000 #'000 #'000 #'000 #'000 #'000 Analysis by class of business: Retro-reflective 1,764 1,401 (1,607) (1,628) (5,339) (3,782) products Grinding and 1,075 1,501 (359) (809) (3,204) (2,845) Kelvar Anti-corrosion coating services & sub contract 134 291 (177) (625) (1,312) (1,140) cable containment Visual Communication Technology Group 232 212 (112) (817) - 58 - - 170 (2,937) 6,390 13,149 ______ ______ ______ ______ ______ ______ 3,205 3,405 (2,085) (6,816) 3,465 5,440 ______ ______ ______ ______ ______ ______ Turnover Pre-tax profit/ Net assets/ (loss) (liabilities) 2003 2002 2003 2002 2003 2002 #'000 #'000 #'000 #'000 #'000 #'000 Analysis by geographical market: By origin United 2,059 1,988 (1,403) (2,593) (7,250) (5,908) Kingdom Asia/ 134 291 (177) (625) (1,312) (1,140) Pacific USA 1,012 1,126 (675) (661) (1,293) (661) Group - - 170 (2,937) 6,390 13,149 _______ _______ _______ _______ _______ _______ 3,205 3,405 (2,085) (6,816) 3,465 5,440 _______ _______ _______ _______ _______ _______ By destination United 1,547 1,040 Kingdom Other 703 800 European countries Asia/ 127 388 Pacific USA 798 1,177 Rest of 30 - World ______ ______ 3,205 3,405 ______ _____ In accordance with FRS 3 'Reporting Financial Performance', the results of Corrosion Control International (Asia) Limited are classified as discontinued. The segmental analysis, as detailed above, in relation to discontinued activities is as follows: Turnover Pre-tax profit/ Net assets/ (loss) (liabilities) 2003 2002 2003 2002 2003 2002 #'000 #'000 #'000 #'000 #'000 #'000 Analysis by class of business: Anti-corrosion coating services & sub contract 134 291 (177) (625) (1,312) (1,140) cable containment ______ ______ ______ ______ ______ ______ Analysis by geographical market: By origin and by destination Asia/Pacific 134 291 (177) (625) (1,312) (1,140) ______ ______ ______ ______ ______ ______ 3 Exceptional costs During the year the Board has continued the strategic review of the group, which resulted in further adjustments to the carrying values of intangible fixed assets. 2002 2003 #'000 #'000 Impairment of patent licenses - Kelvar 266 1,234 Impairment of goodwill - 1,300 Impairment of tangible fixed assets - 390 Property reorganisation expenses - 409 Reorganisation expenses - 1121 ______ ______ 266 4,454 ===== ===== 4 Operating loss 2003 2002 This is arrived at after charging/(crediting): #'000 #'000 Auditors' remuneration - audit services (company 41 25 #11,000 (2002 #10,000)) - non audit services 5 9 Depreciation - normal 135 415 - exceptional (see above) - 390 Amortisation of goodwill and patent licenses - normal 58 94 - exceptional (see above) 266 2,534 Research and development - current year's 105 134 expenditure - amortisation of capitalised expenditure 62 90 Operating leases - hire of plant and machinery 15 15 - other 146 146 Other exceptional expenses (see above) - 1,352 Exchange loss - 59 Loss/(Profit) on sale of fixed assets 99 58 ===== ===== The audit fee is dealt with on a Group basis. 5 Loss per share The basic loss per share has been calculated on the weighted average number of shares in issue during the year, namely 424,699,774 (2002 - 423,949,774) and losses of #2,022,674 (2002 - #6,816,160). There are no dilutive potential ordinary shares in issue. 6 Share capital Allotted, Allotted, called up called up and fully and fully Authorised paid Authorised paid 2003 2003 2002 2002 Group and Company #'000 #'000 #'000 #'000 424,699,774 600 425 600 425 Ordinary shares of 0.1p each === === === === 7. *Reconciliation of movements in shareholders' funds Group Company Group Company 2003 2003 2002 2002 #'000 #'000 #'000 #'000 (Loss)/profit for the (2,023) (1,684) (6,816) (4,313) financial year Other recognised gains and 48 - 27 - losses relating to the year New share capital subscribed, - - 2 2 net of issue costs Movement in other reserve - - (10) (10) ______ ______ ______ ______ Net movement to shareholders' (1,975) (1,684) (6,797) (4,321) funds Opening shareholders' funds 5,440 9,027 12,237 13,348 ______ ______ ______ ______ Closing shareholders' funds 3,465 7,343 5,440 9,027 ===== ===== ===== ===== 8. Annual General Meeting The Annual General Meeting of the Company will be held at 10.00 am on 18th September 2003 at The Quality Hotel, London Road, Northwich, Cheshire CW9 5HD. 9. The Annual Report & Accounts The annual report and accounts of the Company for the year ended 28 February 2003 will be posted to shareholders on 15th August 2003 and copies of the report and accounts will be available from the Company's registered office, Road One, Winsford Industrial Estate, Winsford, Cheshire, CW7 3QQ from 15th August 2003. This information is provided by RNS The company news service from the London Stock Exchange END FR SFLFUISDSEIW
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