(STOCK SYMBOL - TSXV, "HED")

Hedley Announces Results

for the Second Quarter 2003

Mississauga, Ontario (August 20, 2003) Hedley Technologies Ltd. reports the second quarter results.

In the past, Hedley’s primary business has been the development, manufacturing and marketing of low toxicity insecticides, with the preponderance of our earnings obtained from Protect-It®.  Sales volume is very much dictated by climate as it relates to growing and harvesting grain crops.  With limited resources, both financial and human, the Company has concentrated its effort on developing markets in Canada and the USA.  Therefore, the business has been quite cyclical, with the majority of demand for Protect-It® occurring in June through September for grain and a lesser need from the southern U.S. states for peanut crops in November/December.  The ten year agreement with BioLytical Laboratories Inc. to be licensee and master distributor responsible for global commercialization and sales of INSTI® HIV-1/HIV-2 Rapid Antibody Test (“INSTI®”) should provide more stability to Hedley’s business.

 

Sales for the first six months of 2003 were $431,194, up $276,433 or 179% from the same period in 2002 and are entirely from our low toxicity insecticides. The net loss for the period ended June 30, 2003 was $258,240 down $41,942 or 14% from $300,182 in the year ago period. The net loss per share was for the period was $0.021 (2.1 cents) per share down from $0.033 per share in the period ending June 30, 2002.

 

As at June 30, 2003, current assets were $989,498, up 9% or $83,449 from the period ending March 31, 2003, and up $322,159 or 48% from the year ago period. The increase in current assets was primarily derived from the $400,000 gross proceeds received from a private placement which closed on March 4, 2003, and from the increase in sales for the first half of 2003.  Cash of $209,753 is down slightly from $216,651 on March 31, 2003. Inventory of $564,245 is down $16,251 from  March 31, 2003, reflecting strong insecticide sales. $500,000 of the June 30, 2003 inventory balance is represented by INSTI® which were purchased pursuant to our arrangement to distribute the product. Receivables for the six months ended June 30, 2003 of $209, 550, up from $127,188 a year ago, were driven by the substantial increase in sales versus last year. 

 

The substantive increase in sales were driven by the previously reported long term production contract with S.C. Johnson and Son Limited for Raid® Earthblends™ Ant & Earwig Dust and higher than expected sales of Protect-It® grain insecticide in Canada. The margin in home and garden products is lower than in Protect-It® sales, resulting in a gross margin of 41.4% to June 30, 2003 versus 66.4% for the same period last year.  As sales of higher margin Protect-It® contribute a greater share of our product mix in the last half of this year, over-all gross margin will increase.  For the full year, on a comparable basis, however, we expect margins to decline somewhat this year versus last, as sales of Insecolo (Raid® Earthblends™ Ant & Earwig Dust ) and INSTI® will make up a larger portion of the overall sales mix and both of these products have lower margins than Protect-It®.  Last year’s sales were exclusively comprised of higher margin Protect-It® shipments.

 

Expenses of $436,781 to June 30, 2003 versus $404,252 from the same period last year do not accurately reflect the ongoing differential between last year’s operating expenses and those for 2003.  In the first quarter of 2002 there was a one time extraordinary expenditure of approximately $20,000 for employee bonuses.  This year, with the acquisition of INSTI®, our human resources and corresponding expenses have increased over year 2002, resulting in the increased operating expenses of $32,529 for the period.  In 2002 we received a credit from Health Canada’s Pest Management Regulatory Agency for overpayment of year 2001 registration fees, thus the variance in Selling and Marketing Expense of $16,559 for this year versus $573 for the same period last year.  The strengthening of the Canadian dollar has had a negative effect on Hedley’s Foreign Exchange expense, which rose to $23,339 for the period versus $3,895 year ago. This increased expense is due to a shareholder’s loan between Hedley and Hedley (USA) that is expressed in U.S. funds and converted to Canadian Dollars at each month-end for reporting purposes.  The increase in Transfer & Agency expenses were primarily legal fees connected with the previously reported private placement.

 

Working Capital at June 30, 2003 was $701,062 versus $726,729 on March 31, 2003 and $461,416 on June 30, 2002.  Other than normal trade payables the Company is debt-free.

 

Consolidated Financial Highlights

For the Six months ended June 30, 2003 and 2002
Canadian $

All figures unless otherwise noted are reported in accordance with Canadian Generally Accepted Accounting Principles.

Please visit the SEDAR home page for a more detailed account of our filings.

 mailto:info@hedleytech.com
 

 

 

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