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6 October 2009

Millbrook Scientific Instruments plc

Final Results

Millbrook Scientific Instruments plc, the designer and manufacturer of innovative scientific instruments that measure nanoscale mechanical properties of thin films and coatings, announces its Final Results for the year ended 31 March 2009.

OVERVIEW

• The Group is now solely focused on the production, distribution and development of the NanoTest instrument. The MiniSIMS division was closed down after the year end after one of the Group's subsidiary companies, Millbrook Instruments Limited, was placed into administration on 22 September 2009.

• Total Group sales (including discontinued operations) for FY2009 £2.9m (FY2008 - £2.6m):

        -  Second half FY2009 Group sales £1.6m (FY2008 - £1.6m);

• EBITDA for FY2009 £94k (FY2008 - £(26)k).

• Net funds at the end of the year £451k (FY2008 - £73k); loan under Small Firms Loan Guarantee Scheme £7k (FY2008 - £19k).

• Priorities for FY2010:

        -   ensure rapid progress of product developments at Micro Materials Limited

        -   seek to reduce central costs further, in light of the reduction in size of the Group

For further information:
Millbrook Scientific Instruments plc Stephen Blank, Chairman Paul Grasske, Chief Executive Officer	Tel: +44 (0)1978 261615 www.millbrook-instruments.com
Zeus Capital Limited Alex Clarkson /Tom Rowley	Tel: +44 (0)161 831 1512 www.zeuscapital.co.uk

  

CHAIRMAN'S STATEMENT & REVIEW

REVIEW

Despite the Group achieving robust results for FY2009, regrettably this review starts negatively due to the closure of the MiniSIMS division post year end which was effected by the placing of Millbrook Instruments Limited ('MIL') into administration on 22 September 2009. This has significantly detracted from a set of results which saw the Group increase sales once more and achieve a profit at the EBITDA line.  

MiniSIMS division

On 8 April 2009, we issued a largely positive trading update. However, the lumpy nature of the Group's sales, particularly those of MIL, and the high level of fixed costs in the Group means that close attention has to be paid to liquidity risk on a continual basis. Detailed cash flow forecasts are prepared monthly and closely monitored by the Board. At our May meeting we noted that two potential orders for MIL had not been confirmed. At that point it was still entirely possible that the budget for FY2009 could be achieved. However the cash flow forecast also demonstrated that, if the orders did not materialise shortly, the Board would have to take action to cut costs by the end of August at the latest due to the length of time required to action a reduction in the Group's fixed costs.

Within two weeks it became clear that neither order would be forthcoming in the short term. The Board therefore resolved immediately to implement a cost cutting exercise and to undertake a strategic review of the MIL business, as set out in the release of 5 June 2009.

The staff at Blackburn responded magnificently, most of them agreeing to go onto short time working until the orders came through. With regret we also agreed that Dr John Eccles, one of the founders of the MiniSIMS business, would leave the business.

In conjunction with Zeus Capital, our financial adviser, the Board examined strategic options for MIL, including a disposal of the MiniSIMS business. Despite receiving an expression of interest in acquiring the MiniSIMS business from one of the parties that were contacted during the strategic review, the terms proposed by the potential acquirer were unacceptable to the Board and a disposal could not be agreed. By mid September the order position of MIL remained extremely weak and, although one of the original two orders did materialise, the Board, in consultation with its professional advisers, resolved that the Group could provide no further support to MIL so the order could not be fulfilled. As a consequence, the directors of MIL resolved that the company would be placed into administration on 22 September 2009, the appointees being Kerry Bailey and Jonathan Newell of PKF.

The Board was unanimous in its view that the best way to protect future value for the Group's shareholders was to close the MIL subsidiary. This action was taken with extreme regret in particular for the staff. Improvements had been made to the reliability of the MiniSIMS instrument and the software had been significantly upgraded during the financial year, however MIL was proving to be a cash drain in FY2010 and was creating a significant strain on the working capital position of the Group as a whole. The suddenness with which orders dried up came as a complete surprise and it was only due to excellent financial management on the part of the CEO Paul Grasske that the viability of the entire group was not compromised.  

NanoTest division

I am pleased to report that the NanoTest division is performing in line with management expectations. In the first half of the 2010 financial year the Board did note some delays in decision making at customers, even though most of them are research or university establishments, however these delays seem to have eased with prospects now starting to convert to orders on a regular basis.

Improvements and enhancements to the instrument are under way with the benefit of grant funding and it is hoped that several of these will be the subject of new patents.  In particular, improvements are in progress that will enable the company to compete successfully in markets previously dominated by our US competitors. Alongside this, demand for the NanoTest's world-leading high temperature test capability is growing rapidly and current R&D projects aim to maintain our competitive edge. The project to develop an environmental enclosure to extend the measurement range to include temperatures above which the diamond indenters oxidise in air has been successfully completed. Initial take up has been extremely encouraging with several units already sold and installed.

The Board will continue to seek to grow and develop the NanoTest business. 

  

RESULTS (FY2008 in brackets)

Group sales including discontinued operations were £2.91 million (£2.63 million), 10.6% up on the previous year.  

The major controllable cost is employee benefits expense. This increased from £940,426 in 2008 to £966,345 this year. 

Profit for the year at the EBITDA level was £93,664 (loss of £25,881). This improvement was predominantly due to increased sales.

The financial effects of the administration of MIL are set out in Note 4. These consist mainly of a complete write off of Deferred R&D expenditure and Goodwill. There is no cash effect of these adjustments. The Company is the major creditor and sole shareholder of MIL but at this point it seems highly unlikely that there will be any material return to creditors and there will be none to shareholders.

BOARD 

Since the 2008 AGM the Board has comprised five directors - three executives: Paul Grasske, John Eccles and Peter Vohralik and two non-executives: Malcolm Fortnam and myself. On 17 Feb 2009 Peter Vohralik left the Board and on 22 July 2009 Dr John Eccles also left.

The contribution of both of the directors who have left, one of whom was a founder of MIL, has been immense. They tried to the utmost of their ability to move that business forward but they have left in order to help us preserve the Group as a going concern and ultimately return value to the shareholders.

OUTLOOK

Going forward, the Group will now be focused solely on the NanoTest business and will not be constrained by the cash outflows which it had previously been experiencing at the MiniSIMS division. This should mean that the financial position of the Group will be significantly stabilised. The Board will continue actively to seek ways in which to build the NanoTest business both through technical enhancement and sales growth. 

In light of the reduction in size of the Group, the Board is also seeking ways in which to reduce costs further and is currently conducting a review of all overheads and particularly central costs which are currently, in the Board's opinion, too high for a company of Millbrook's reduced size. The Board will report the results of the review when it has been completed. 

Finally I would like to thank all of the Group's employees for their continued loyalty and support in what for many of them has been another difficult year.

S M Blank

Chairman

5 October 2009

  

GROUP INCOME STATEMENT

for the year ended 31 March 2009

		2009	2008
	Notes	Total	Total
		£	£
CONTINUING OPERATIONS
Revenue	2	2,906,080	2,484,055
Other income		15,326	14,491
Changes in inventories of finished goods and work in progress		43,103	(64,893)
Work performed by the entity and capitalised		159,141	233,601
Raw materials and consumables used		(1,309,388)	(880,252)
Employee benefits expense		(966,345)	(940,426)
Depreciation and amortisation expense		(1,296,678)	(239,666)
Other expenses		(595,112)	(675,523)
Operating loss		(1,043,873)	(68,613)
Finance costs		(2,507)	(14,518)
Loss before tax		(1,046,380)	(83,131)
Taxation		16,540	79,560
Loss for the period from continuing operations		(1,029,840)	(3,571)
DISCONTINUED OPERATIONS
Profit/(loss) for the period from discontinued operations	5	71,732	(183,856)
Loss for the period		(958,108)	(187,427)
Loss per share	3
Basic		(1.301p)	(0.290p)
Diluted		(1.129p)	(0.260p)

  

GROUP INCOME STATEMENT continued

for the year ended 31 March 2009

Earnings Before Interest, Tax and Depreciation and Amortisation ('EBITDA')

			2009	2008
			Total	Total
			£	£
EBITDA (continuing operations)			93,664	(25,881)
Exceptional items			-	(36,667)
Depreciation/loss on disposal			(62,640)	(32,544)
Work performed by entity and capitalised			159,141	233,601
Amortisation			(1,234,038)	(207,122)
Finance costs			(2,507)	(14,518)
Taxation			16,540	79,560
Loss for the period from continuing operations			(1,029,840)	(3,571)
Discontinued operations			71,732	(183,856)
Loss for the period			(958,108)	(187,427)

  

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2009

	Share  Capital £	Share  Premium £	Retained Earnings £	Total £
At 31 March 2008	2,882,871	963,449	(2,078,446)	1,767,874
Retained loss for the period	-	-	(958,108)	(958,108)
Proceeds from share issue	-	-	-	-
Share-based payments	-	-	1,311	1,311
31 March 2009	2,882,871	963,449	(3,035,243)	811,077

	Share  Capital £	Share  Premium £	Retained Earnings £	Total £
At 31 March 2007	2,682,871	777,861	(1,926,057)	1,534,675
Retained loss for the period	-	-	(187,427)	(187,427)
Proceeds from share issue	200,000	185,588	-	385,588
Share-based payments	-	-	35,038	35,038
31 March 2008	2,882,871	963,449	(2,078,446)	1,767,874

  

BALANCE SHEETS

at 31 March 2009

		Group	Group	Company	Company
		2009	2008	2009	2008
		£	£	£	£
ASSETS
NON CURRENT ASSETS
Property, plant and equipment		124,340	155,474	-	-
Goodwill		181,564	836,308	-	-
Other intangible assets		110,040	609,086	-	-
Investments		-	-	420,233	1,507,233
		415,944	1,600,868	420,233	1,507,233
CURRENT ASSETS
Inventories		199,121	231,784	-	-
Trade and other receivables		593,440	819,695	618,390	1,563,936
Cash and cash equivalents		457,801	214,495	76,939	44,295
		1,250,362	1,265,974	695,329	1,608,231
TOTAL ASSETS		1,666,306	2,866,842	1,115,562	3,115,464
LIABILITIES
CURRENT LIABILITIES
Financial liabilities		(7,000)	(134,019)	-	-
Trade and other payables		(551,081)	(660,844)	(35,458)	(43,777)
Other creditors and deferred income		(262,785)	(215,236)	-	(87,745)
		(820,866)	(1,010,099)	(35,458)	(131,522)
NON CURRENT LIABILITIES
Financial liabilities		-	(7,000)	-	-
Provision for deferred grant income		(34,363)	(81,869)	-	-
TOTAL LIABILITIES		(855,229)	(1,098,968)	(35,458)	(131,522)
NET ASSETS		811,077	1,767,874	1,080,104	2,983,942
EQUITY
Called up share capital		2,882,871	2,882,871	2,882,871	2,882,871
Share premium account		963,449	963,449	963,449	963,449
Retained losses		(3,035,243)	(2,078,446)	(2,766,216)	(862,378)
TOTAL EQUITY		811,077	1,767,874	1,080,104	2,983,942

  

GROUP STATEMENT OF CASH FLOWS

for the year ended 31 March 2009

	Notes	2009		2008
		£		£
CASH FLOWS FROM OPERATING ACTIVITIES	6	569,286		351,453
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire intangible fixed assets		(236,318)		(277,559)
Payments to acquire tangible fixed assets		(39,134)		(90,081)
Less grants received		83,491		86,974
		(191,961)		(280,666)
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of ordinary share capital		-		400,000
Share issue costs		-		(14,415)
Finance arrangement fees		-		(36,667)
Loan repayments		(12,000)		(19,195)
		(12,000)		329,723
NET INCREASE IN CASH AND CASH EQUIVALENTS		365,325		400,510

  

1.	BASIS OF CONSOLIDATION
	The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.  All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
2.	REVENUE AND GEOGRAPHICAL ANALYSIS
	Revenue represents the amounts derived from the provisions of goods and services that fall into the Group's ordinary activities, stated net of value added tax.  The Group operates in one principal area of activity, that of the manufacture and supply of scientific instruments. It generates turnover on a worldwide basis. Turnover from continuing activities is analysed as follows:

	2009	2008
	£	£
Europe (including UK)	2,309,371	747,142
North America	250,486	1,093,646
Asia	274,158	643,267
Other	72,065	-
Total	2,906,080	2,484,055

3.	LOSS PER ORDINARY SHARE

	2009	2008
	£	£
Basic weighted average number of shares in the period	73,657,416	64,586,378
Diluted weighted average number of shares in the period	84,877,402	72,091,782
Loss attributable to members of the parent undertaking	(958,108)	(187,427)
Basic loss per share	(1.301p)	(0.290p)
Diluted loss per share	(1.129p)	(0.260p)

  

4.	EXEPTIONAL ITEMS
	On 22 September 2009 one of the Group's subsidiary companies - Millbrook Instruments Limited - entered administration. This resulted in the following adjustments being included in the income statement:

		£
Adjustment of carrying value of fixed assets to realisable value		(10,056)
Write off of deferred development expenditure		(448,745)
Write down of stock		(117,219)
Release of deferred grant income		95,313
Impairment of goodwill		(654,744)

The stock adjustment is included under the heading 'Changes in inventories of finished goods and work in progress' in the income statement whilst the other adjustments are included in the heading 'Depreciation and amortisation expenses'. The results of Millbrook Instruments Limited which have been included in the consolidated income statement were as follows:

		£
Revenue		1,147,117
Expenses		(1,666,055)
Release of loan due to Parent Company		870,369
Finance (costs)		(1,010)
Profit before taxation		350,421
Research and development tax credits received		943
Profit after taxation		351,364

The net cash flows attributable to Millbrook Instruments Limited are as follows:

		£
Operating cash flow		250,762
Investing cash flows		(135,179)
Financing cash flows		(12,000)
Net cash inflow		103,583

In 2008 finance arrangement fees of £36,667 were included under 'Other expenses'.

  

5.		DISCONTINUED OPERATIONS - AQUILA INSTRUMENTS LTD
		The Board agreed to sell Aquila Instruments Ltd in March 2008 and accordingly Aquila Instruments Ltd was treated as a discontinued operation in the financial statements for the year ended 31 March 2008. These financial statements included a provision of £46,732 to cover the warranty and other liabilities of the instruments sold by Aquila Instruments Ltd. In the event, Aquila has continued to trade successfully and the Directors have been able to release £46,732 of this provision to the income statement. In addition, £25,000 has been recovered on a loan to Aquila Instruments Ltd that had previously been written off. The sale was completed on the 18 June 2008. Income/(loss) for the period from discontinued operations:

	2009	2008
	£	£
Recovery of loan previously written off	25,000	-
Release of provision	46,732	-
Post tax profit/(loss) of discontinued operations	-	(96,111)
Post tax loss on disposal of discontinued operations	-	(87,745)
	71,732	(183,856)

 

The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:

	2009	2008
	£	£
Revenue	-	147,654
Expenses	-	(243,349)
Finance (costs)	-	(416)
Loss before taxation	-	(96,111)
Research and development tax credits received	-	-
Loss after taxation	-	(96,111)

The net cash flows attributable to discontinued operations are as follows:

	2009	2008
	£	£
Operating cash flow	25,000	(143,183)
Investing cash flows	-	-
Financing cash flows	-	(7,195)
Net cash inflow/(outflow)	25,000	(150,378)

  

6.	NOTES TO THE STATEMENT OF CASH FLOWS
	Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from operating activities

	2009	2008
	£	£
Loss for the period	(958,108)	(187,427)
Finance arrangement fees	-	36,667
Share-based payments	1,311	35,038
Depreciation	52,584	38,530
Amortisation of intangibles/grant release	130,549	213,478
Impairment of intangibles	1,103,489	-
Decrease in inventories	32,663	98,587
(Increase)/Decrease in receivables	226,255	(152,707)
Increase/(Decrease) in payables	(62,214)	213,679
Loss on disposal of intangible assets	-	3,350
Disposal of subsidiary	32,701	-
Impairment of fixed assets	10,056	-
Transfer of asset for resale from fixed assets	-	52,258
Net cash inflow from operating activities	569,286	351,453

Reconciliation of net cash flow to movement in net funds

	2009	2008
	£	£
Increase in net cash in the period	365,325	400,510
Movement in bank loan	12,000	19,195
Movements in net funds	377,325	419,705
Net funds/(net debt) at 1 April 2008	73,476	(346,229)
Net funds at 31 March 2009	450,801	73,476

Analysis of net funds

	At 1 April 2008	Cash Flow	Non-Cash Movements	At 31 March 2009
	£	£	£	£
Cash at bank and in hand	214,495	243,306	-	457,801
Overdraft	(122,019)	122,019	-	-
Bank loans due within one year	(12,000)	12,000	(7,000)	(7,000)
Bank loans due beyond one year	(7,000)	-	7,000	-
	73,476	377,325	-	450,801

7.

BASIS OF PRESENTATION

The financial information contained herein does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The balance sheet at 31 March 2009 and the income statement, cash flow statement and associated notes for the year then ended have been extracted from the Group's statutory financial statements for the year ended 31 March 2009 upon which the auditors' opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985.

  NOTICE OF ANNUAL GENERAL MEETING

NOTICE is hereby given that the Annual General Meeting of the Company for the year ended 31 March 2009 will be held at the offices of Millbrook Scientific Instruments plc, Willow House, Yale Business Village, Ellice Way, Wrexham LL13 7YL, on 30 October 2009 at 11am for the purpose of considering and, if thought fit, passing the following resolutions which will be proposed as ordinary resolutions:

Ordinary Business

 

NOTES:

 

By Order of the Board

P M Grasske

Company Secretary

5 October 2009

ENDFR FSLFIISUSESS