RNS Number:9923T
Densitron Technologies PLC
4 April 2002
DENSITRON TECHNOLOGIES PLC ("DENSITRON", "THE GROUP" OR "THE COMPANY")
Preliminary Figures for the Year Ended 31 December 2001
HIGHLIGHTS
• Reduced orders and sales in difficult trading conditions
• Profits sharply down under these conditions, but:
• Net borrowing substantially reduced
• Strong growth in net asset value
• Strong growth in net asset value per share
• £2.7 million cash generated from operating activities
• Strong performance from VBest and Hitech
• Final dividend of 0.5p per share
Cliff Hardcastle, Executive Chairman, commented:
"We have radically restructured and refinanced the Group over the last two and a
half years and added very significant production capacity to go with it. We have
the financial resources to enable us to exploit this position and the people
ready to implement our plans."
For further details please contact:
Ross Stuart - Chief Executive Tel: 01959 542 000
Densitron Technologies Plc
Takki Sulaiman/Damian Hamill Tel: 020 7735 9415
Hansard Communications mail@hansardcommunications.com
www.hansardcommunications.com
CHAIRMAN'S STATEMENT
It is possible to look at 2001 in two entirely different ways. The first is, of
course, the extremely disappointing fiscal performance of the Company during
that year. But the second is a more strategic view when one can look at the
complete reconstruction, reorientation and growth of the Company since the
disposal of Densitron Microwave in 1999.
Let us first deal with the disappointing performance of the Company during 2001.
This was particularly galling because at the beginning of the year it looked as
if we were going to move into a bumper year of continuing growth. Indeed the
first quarter continued to show the growth we were looking for. Whilst the
second quarter showed a steep decline during April, there was a rebound of order
input during May and June and at that time it looked as if this particular
quarter was only likely to be anomalously low. Unfortunately orders declined
again very sharply during the third quarter. This drop in orders did not
immediately affect the shipments as most of our orders have long term call off
deliveries and therefore the shipment figures are smoother than the order input.
The fourth quarter showed a much more substantial rebound in orders than that
experienced at the end of the second quarter.
From this brief description you can understand that the falling order input
commenced well before the September 11th incident and in fact we have shown some
recovery since September in our order input.
By the end of the year the result of this was that our gross order input
(including intercompany orders) was sharply down from £55 million to £43
million. The major part of these declines were in the USA and in those parts of
Asia which were reliant upon US orders. The European order input was virtually
identical to the year 2000 at £18 million.
With regard to sales, Europe showed a slight increase in sales for the period
but the USA showed a substantial decline, and with Asia registering a smaller
decline based upon the American difficulties, sales fell from £48 million to £43
million.
From the above description it can be seen that the vast bulk of our difficulties
were caused by an extremely sharp recession in the United States which was
underpinned by a lack of anticipated growth in Europe, particularly in our
computer related business.
It is I think, however, pertinent to look at the structural changes that have
now taken place in the Group and the positive stance we are able to take into
the future as a result of these changes.
Firstly, the movements in the Balance Sheet should be noted. In 1998 prior to
the disposal of Densitron Microwave and our Rights Issue, our Balance Sheet was
worth £3.0 million. It is now worth £21.3 million which is plainly a major
change in the capabilities of the Group to finance its business. Further in 1998
our net borrowing from the bank was £3.6 million whereas it is essentially zero
at the end of 2001. Our fixed assets are worth £20.3 million as opposed to £6.9
million and our total assets less current liabilities are worth £25.7 million
versus £6.5 million. Clearly the Company is in a much stronger position that it
was three years ago prior to all the changes.
With regard to the operating side of the Company, our sales on a continuing
operations basis are 32 per cent higher than two years ago and our gross margin
is £1.6 million higher than two years ago, rising from £9.5 million to £11.1
million, almost exactly back to the levels we had before the disposal of
Densitron Microwave Ltd. The negative side is that the gross margin has dropped
from 44 per cent (an historical high) to 38.9 per cent, mostly due to market
mix, which nevertheless is still above our projected margins. The other negative
area is in the administration costs which have risen by £1.6 million last year,
from £9.7 million to £11.3 million, and as a result our operating profit and
profit before tax are not where they were expected to be for this year. A large
element of these increased costs were as a result of investments we chose to
make in growing parts of the Company. These were as follows:
Our past performance in Europe was notable by the absence of Germany as a major
market place. As a consequence we decided to invest in a completely new company
in Germany at a cost within the year of £89,000. It is pleasing to note that
Germany now has many large opportunities for us and we expect this venture to be
significantly profitable during 2002. We also invested in a start-up company to
take advantage of the new relationship with VBest. In order to create a dynamic
sales activity we formed a company DV3 which cost close to £100,000 with no
return during the year, but is enabling us to win business that in the past we
would not have even been able to bid for. We invested in sales activity for our
new Cassius computer which, regrettably, did not result in the expected improved
position. The promotional expenditure here was £140,000. The final area we
invested in was in our Internet Technologies activity where we increased
expenditure by £130,000 to provide further capacity for expansion. Added
together, these new expenditures came to over £459,000. It is essential that we
keep new products and new initiatives going forward despite the difficult
current recessionary period. We also brought in a new Chief Executive and a
Managing Director for our computer business. Finally we took a more prudent
approach to design and development by expensing £445,000 which might otherwise
have been capitalised and provided for some outstanding debt costing a further
£317,000. We are confident that these initiatives plus the growth of our new
products will repay fully in the future.
The Densitron of today is now a very different Company. It is structured as a
major low cost source of manufacturing product with two international sales
organisations supported by a strengthened Balance Sheet.
We have a very large production and sourcing capacity in Asia, principally
Taiwan/China. This manufacturing and supply capacity is many times larger than
the rest of the Company and is not yet fully exploited. Based upon this
manufacturing and supply structure there are two sales companies, one in Europe
and one in the USA. We have re-organised our Taiwanese structure so that all our
investments in that area are held by a single holding company rather than as
individual investments by the parent company. This new structure should enable
us to take full advantage of the new opportunities that are now coming our way
both operationally and from a tax point of view.
Nevertheless our current trading still remains difficult, however, to reflect
our confidence in the future the Directors are recommending a final dividend of
0.5p per share payable on the 25th May 2002 to shareholders on the register at
the 12th April 2002.
In summary therefore, over the last two to two and a half years, we have
radically restructured and refinanced the Group and added very significant
production capacity to go with it. We have the financial resources to enable us
to exploit this position and the people ready to implement our plans. The year
2001 was disappointing particularly in the United States but early action by our
new Chief Executive, Ross Stuart, has already transformed the operations in the
United States and I am confident that this will be improving through this year
and into next year. I should like to compliment Ross and all his staff on
maintaining a high degree of enthusiasm and commitment through what has been a
very, very difficult transition period. If you consider that in the last two
years we have sold a major subsidiary, recruited a new Chief Executive, raised
£20 million by Rights Issue and bought into a new manufacturing capacity, as
well as suffering the loss of one of our main partners Edward Chi, who
unfortunately died during the year, it is possible that we became a little
distracted from the day to day activities. However, I am quite certain that we
are now refocused and can expect the benefits of all this hard work to flow
towards us over the next few years. Then we can realise all our ambitions to get
the earnings per share up to an acceptable level for everybody concerned.
C HARDCASTLE, OBE
Chairman
Consolidated Profit and Loss Account
For the year ended 31 December 2001
2001 2000
£000 £000
Gross Turnover 43,531 48,177
Less: Intra Group turnover (15,098) (17,753)
TURNOVER 28,433 30,424
Cost of sales (17,359) (18,401)
GROSS PROFIT 11,074 12,023
Distribution Costs (78) (170)
Administrative Expenses (11,271) (9,646)
Other operating income 655 207
GROUP OPERATING PROFIT 380 2,414
Share of associate's operating profit/(loss) 584 (24)
TOTAL OPERATING PROFIT 964 2,390
Exceptional items
Profit on disposal of Densitron Microwave - 174
Write down of assets in Taiwan - (391)
- (217)
964 (2,173)
Group net interest payable (549) (708)
Share of associate's net interest receivable 136 -
Total net interest payable (413) (708)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 551 1,465
Tax on profit on ordinary activities
UK - Current - -
Prior year 197 114
Overseas (575) (720)
Share of associated undertakings' taxation (123) -
Charge for the period (501) (606)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 50 859
Minority Interests - equity (817) (658)
PROFIT/(LOSS) FOR THE FINANCIAL YEAR (767) 201
Dividends (161) (370)
RETAINED (LOSS) FOR THE FINANCIAL YEAR (928) (169)
Basic earnings/(loss) per share (2.50)p 1.09p
Diluted earnings/(loss) per share (2.50)p 1.09p
Statement of Total Recognised Gains and Losses
2001 2000
£000 £000
Profit/(Loss) for the financial year (767) 201
Unrealised translation losses (758) (24)
Total recognised gains/(losses) for the year (1,525) 177
All results arise from continuing activities.
Consolidated and Parent Company Balance Sheets
As at 31 December 2001
The Group The Company
2001 2000 2001 2000
£000 £000 £000 £000
FIXED ASSETS
Intangible assets 2,961 2,711 41 38
Tangible assets 3,296 3,076 727 751
Investments 14,024 1,590 11,181 4,721
20,281 7,377 11,949 5,510
CURRENT ASSETS
Stocks 5,334 7,577 - -
Debtors - due in less than one year 5,358 6,464 15,022 5,658
Debtors - due in more than one year 267 489 1,390 1,550
Current asset investments - 214 - -
Cash at bank and in hand 4,870 3,400 12 9
15,829 18,144 16,424 7,217
CREDITORS: AMOUNTS FALLING DUE WITHIN
ONE YEAR (10,423) (16,747) (1,658) (6,101)
NET CURRENT ASSETS 5,406 1,397 14,766 1,116
TOTAL ASSETS LESS CURRENT LIABILITIES 25,687 8,774 26,715 6,626
CREDITORS: AMOUNTS FALLING DUE AFTER
MORE THAN ONE YEAR (598) (964) (965) (940)
PROVISIONS FOR LIABILITIES AND CHARGES - - - -
25,089 7,810 25,750 5,686
CAPITAL AND RESERVES
Called up share capital 1,609 919 1,609 919
Share premium account 19,937 1,796 19,937 1,796
Revaluation reserve 158 162 117 117
Profit and loss account (386) 1,296 4,087 2,854
TOTAL EQUITY SHAREHOLDERS' FUNDS 21,318 4,173 25,750 5,686
MINORITY INTERESTS - Equity 3,771 3,637 - -
25,089 7,810 25,750 5,686
The accounts were approved by the Board on 3 April 2002 and signed on its behalf by:
Clifford Hardcastle, OBE
Chairman
Consolidated Cash Flow Statement
For the year ended 31 December 2001
2001 2000
£000 £000 £000 £000
NET CASH INFLOW FROM OPERATING ACTIVITIES 2,694 (220)
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 57 42
Interest paid (586) (722)
Interest element of finance lease payments (20) (28)
Dividends paid to minority (559) (198)
(1,108) (906)
TAXATION PAID
UK tax paid (83) (102)
Overseas tax paid (952) (608)
(1,035) (710)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payment for tangible fixed assets (354) (499)
Payment for intangible assets (902) (1,394)
Receipts from the sale of tangible fixed assets 59 95
Payment for fixed asset investments - (1,370)
(1,197) (3,168)
ACQUISITIONS AND DISPOSALS
Sale of shares in subsidiary undertaking - 1,478
Purchase of shares in associated undertaking (12,345) -
12,345 1,478
EQUITY DIVIDENDS PAID (364) (186)
MANAGEMENT OF LIQUID RESOURCES
Current asset investments 177 (604)
FINANCING
Options exercised - 85
Share issues: rights issues 19,991 -
Share issues: expenses (1,160) -
Capital element of finance lease payments (184) (236)
Repayments of bank loans (413) (302)
New bank loans - 327
NET CASH INFLOW/(OUTFLOW) FROM FINANCING 18,234 126
INCREASE/(DECREASE) IN CASH 5,056 (4,442)
NOTES TO THE ACCOUNTS
Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities
2001 2000
£000 £000
Group operating profit 380 2,414
Depreciation charges 511 423
Amortisation of intangible assets 765 519
Assets written out - 13
(Profit)/Loss on sale of fixed assets (2) 9
Loss on disposal of current asset investments 37 -
Decrease/(Increase) in stocks 2,087 (3,321)
Decrease/(Increase) in debtors 1,048 (1,734)
(Decrease)/Increase in creditors (1,980) 1,666
(Decrease)/Increase in advances from factors 7 13
Currency adjustments (159) (222)
2,694 (220)
Analysis of Turnover and Gross Profit by Class of Business
2001 2000
Turnover Gross profit Turnover Gross profit
£000 £000 £000 £000
Display related products 18,797 7,918 19,794 8,362
Computer products and trading 7,780 2,553 8,791 3,058
Electro-mechanical products 1,856 603 1,839 603
28,433 11,074 30,424 12,023
Analysis of Net Debt
Inception of Exchange Other non cash 31 December
1 January 2001 Cash Flow finance leases movements movements 2001
£000 £000 £000 £000 £000 £000
Cash at bank and in
hand 3,400 1,565 - (95) - 4,870
Bank overdraft (7,907) 3,491 - 57 - (4,359)
CASH (4,507) 5,056 - (38) - 511
Loans (827) 413 - 64 - (350)
Finance leases (211) 184 (326) - - (353)
BORROWINGS (1,038) 597 (326) 64 - (703)
Management of liquid
resources 214 (177) - - (37) -
NET DEBT (5,331) 5,476 (326) 26 (37) (192)
Earnings Per Share
Basic earnings/(loss) per share has been calculated on the Group profit/(loss)
attributable to the ordinary shareholders on ordinary activities after taxation
and minority interests, of £(767,000) (2000: £201,000) and the average number of
ordinary shares in issue during the year being 30,734,663 (2000: 18,379,591).
There are no share options in existence so the diluted earnings per share is the
same as the earnings per share.
This preliminary statement is not the Company's statutory accounts. The
statutory accounts for the year ended 31 December 2000 have been delivered to
the Registrar of Companies and received an audit report which was unqualified
and did not contain statements under S237(2) or (3) of the Companies Act 1985.
The statutory accounts for the year ended 31 December 2001 have been audited and
received an unqualified opinion but have not yet been filed with the Registrar
of Companies.
Copies of the Annual Report will be despatched on 12 April 2002 to all
shareholders currently on the Register.
Densitron Technologies plc, Unit 4, Airport Trading Estate, Biggin Hill,
Westerham, Kent, TN16 3BW.
Telephone: 01959 542000.
For further details please contact:
Ross Stuart - Chief Executive Tel: 01959 542 000
Densitron Technologies Plc
Takki Sulaiman/Damian Hamill Tel: 020 7735 9415
Hansard Communications mail@hansardcommunications.com
www.hansardcommunications.com
This information is provided by RNS
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