RNS Number:6055B
Densitron Technologies PLC
25 September 2002
Embargoed 25 September 2002, 0700 hrs
Densitron Technologies Plc ("Densitron" or the "Company")
Interim Report for six months ended 30 June 2002
* Loss before tax of #3,503k (2001 profit #525k) on turnover of #12,026k
(#15,068k).
* Non Cash, non recurring operating exceptional items of #2,221k (see note
3).
* Cash, non-recurring operational exceptional item: - Restructuring of
computer business #98k; this reorganisation is expected to result in
annualised savings of #335k.
* Post retirement benefits have been granted to a small number of employees
who have been with the company since before flotation. These commitments
are unfunded and have not been the subject of an Actuarial valuation. The
Directors estimate the liability created by these commitments is
#430,000; this cost has been treated as an operational exceptional item.
* In line with last year the board do not recommend the payment of an
interim dividend.
Financial Highlights
#Millions #Millions
6 Months to 30/6/02 6 Months to 30/6/01
Turnover 12.0 15.1
Operating (Loss) / Profit (3.3) 0.7
(Loss) / Profit before taxation (3.5) 0.5
EPS pre exceptional items (4.6)p (0.11)p
EPS post exceptional items (13.2)p (0.11)p
Gearing 16% 1%
Order book as at 30th June 15.5 14.9
Interim dividend - -
Chairman's Statement
My report to you for the six months ended 30th June 2002 falls into three key
areas. Firstly, Densitron's trading performance and the factors behind this.
Secondly, the departure of our Chief Executive and thirdly, prospects for the
future.
The last 15 months has seen a serious recession in manufacturing in general and
particularly in technology and communications industries. Managing the Group has
been a challenging task, largely due to unpredictability of the markets. For
example, the level of orders we have received has fluctuated considerably with a
two-month decline in orders being typically followed by an upturn only to return
to a decline again.
Our strategy during this period has been a proactive one, combining the
introduction of new products into new markets with an aggressive sales and new
product campaign. We were confident that economic conditions would improve and
we have sought to position the Group to enable it to capitalise on any economic
upturn. Although our efforts are now beginning to have effect, the recovery has
been slower than expected and consequently we have experienced losses. As a
result we have reluctantly cut overheads particularly in our production staff
designing and building finished products such as the Cassius.
Our faith in the Cassius project is a matter of record and opportunities for it
in the professional industries market remain strong and viable and should
provide an adequate return on the design and development expenditure. Sales to
the retail market have been disappointing despite the fact that the Cassius has
been very well received by those who have purchased it. Our abilities in complex
retail selling have been found wanting. In consequence we have undertaken a
review, resulting in an impairment charge, of the value of our stocks and the
capital investments made in this project.
The continuing growth of VBest and its impact on our own growth plus the
acquisition of Ferrograph has opened up opportunities that mean we will not
realistically have management time to devote to some of our entrepreneurial
companies. As a result it is the intention of the Company to dispose of a
majority holding in its internet related businesses, primarily Densitron
Internet Technologies Limited. This will allow the Group to focus more closely
on its core technology areas whilst enabling Densitron Internet Technologies
Limited to continue its own development independently. We have also curtailed
activities in some other smaller initiatives.
In light of the review of retail Cassius and the proposed disposal of internet
related businesses we have reviewed the carrying value of our assets and have
taken an impairment charge of #2,221k in accordance with the provisions of FRS
11. It should be stressed that this is a non-cash charge.
The results you see for the half-year reflect a decline in our overall business
which caused trading losses, plus a prudent valuation of our continuing assets.
You will find in the third section that our major asset bases have not been
impaired.
Another significant event affecting the Group more recently has been the
departure of Ross Stuart, our Chief Executive. Ross joined us from Invensys
where he had a successful career managing varying parts of that large
organisation. When we recruited Ross it was to enable me to step down from the
Chief Executive role I had held for 15 years. We had made a conscious effort to
bring to Densitron large company experience and management procedures, but in
practice, this did not translate into the Densitron environment. Recognising
this fact it was mutually agreed that it was better for both parties to go their
separate ways.
We now come to the point where we can evaluate the present and anticipate the
future. Densitron has made significant changes since 1999 that have strengthened
the Group's position in challenging market conditions. The sale of Densitron
Microwave funding the underlying growth in our displays business, together with
the new investments in VBest and acquisition of Ferrograph, has transformed
Densitron into a potentially highly effective global competitor. In fact it is
possible to look at Ferrograph as capable of replacing Densitron Microwave
Limited within the next two years. It has the potential to be of similar size
and profitability within that time and of course we made a major profit in 1999
on the sale of Densitron Microwave Ltd. We expect Ferrograph to make a positive
contribution to the group this year and to grow further next year as its range
of products and services are marketed by the Densitron sales force.
VBest is having an excellent year, its unaudited management accounts for the
first half to 30th June 2002 show sales of #9.4 million and pre tax profits of
#1.5 million. The VBest Board is still confident about the flotation of VBest at
the end of 2003 or the beginning of 2004. Group sales of VBest products now
account for a significant percentage of Group turnover and are to a
predominantly new customer base.
Hitech continues to be a consistent profit earner and offers further potential
for growth, since the tragically early death of Edward Chi. The management has
the capacity to deliver new growth and is vital to the Group's performance.
Trading in the USA and Europe continues to present difficulties. The USA still
remains depressed but is breaking even whilst Europe has shown a definite spurt
of growth so that overall our external orders are rising. Despite the difficult
trading conditions overall gross margins have improved from 38.5% to 41.7%.
There is no doubt general market conditions remain bad and economists are
uncertain of the future. We believe that our experience and expertise in
entering new markets and expanding our product base will yield results in the
medium term. The underlying trend is very positive, as exemplified by the
strength of our order book. We do not believe that further retrenchment measures
are either desirable or necessary.
In conclusion the board believe that Densitron is not just a relatively small UK
company with a wide range of overseas holdings. A better picture of Densitron is
gained when it is understood that we have significant manufacturing capacity in
Asia coupled with an experienced direct sales force in Europe and the USA.
Access to the Asian marketplace, particularly China, is facilitated through
VBest and Hitech.
I would like to end by thanking the board and staff of Densitron for their
commitment and hard work over the last few months.
C HARDCASTLE, OBE
Chairman
For further information please contact,
Cliff Hardcastle 01959 542 000
Chairman, Densitron Technologies Plc
Rob Smith 01959 542 000
Finance Director, Densitron Technologies Plc
Takki Sulaiman/Ben Simons 020 7735 9415 / 07778 419 218
Hansard Communications
Group Profit and Loss Account
FOR THE 6 MONTHS ENDED 30TH JUNE 2002
6 months to 6 months to Year to
30th June 30th June 31st December
2002 2001 2001
Unaudited Unaudited Audited
#000 #000 #000
GROSS TURNOVER 17,120 23,296 43,531
Less:Intra Group turnover (5,094) (8,228) (15,098)
TURNOVER 12,026 15,068 28,433
Cost of Sales (7,010) (9,270) (17,359)
GROSS PROFIT 5,016 5,798 11,074
Distribution Costs (51) (55) (78)
Administrative Expenses (5,863) (5,313) (11,271)
Exceptional items (2,749) - -
Other Operating Income 70 65 655
GROUP OPERATING (LOSS)/PROFIT (3,577) 495 380
Share of associates operating profits 324 225 584
TOTAL OPERATING (LOSS)/PROFIT (3,253) 720 964
Group net Interest payable (267) (269) (549)
Share of associates interest receivable 17 74 136
Total net interest payable (250) (195) (413)
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (3,503) 525 551
Taxation (330) (199) (501)
(LOSS)/PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION (3,833) 326 50
Minority Interests - equity (415) (467) (817)
(LOSS) FOR THE FINANCIAL PERIOD (4,248) (141) (767)
Dividends Payable - - (161)
Basic and diluted (loss) per Share (13.2)p (0.48)p (2.50)p
Dividends per Share - - 1.00p
All activities arise from continuing operations.
Summarised Consolidated Balance Sheet
AS AT 30 JUNE 2002
30th June 30th June 31st December
2002 2001 2001
Unaudited Unaudited Audited
#000 #000 #000
FIXED ASSETS
Intangible Assets 1,832 2,829 2,961
Tangible Assets 2,999 3,213 3,296
Investments 13,988 14,071 14,024
18,819 20,113 20,281
CURRENT ASSETS
Stocks 4,635 6,777 5,334
Debtors - due in less than one year 5,626 7,331 5,358
Debtors - due in more than one year 274 293 267
Current asset investments - 218 -
Cash at bank and in hand 3,928 4,317 4,870
14,463 18,936 15,829
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (12,129) (11,457) (10,423)
NET CURRENT ASSETS 2,334 7,479 5,406
TOTAL ASSETS LESS CURRENT LIABILITES 21,153 27,592 25,687
CREDITORS: AMOUNTS FALLING DUE AFTER MORE
THAN ONE YEAR (949) (736) (598)
NET ASSETS 20,204 26,856 25,089
CAPITAL AND RESERVES (EQUITY SHAREHOLDERS' FUNDS) 16,750 22,796 21,318
EQUITY MINORITY INTERESTS 3,454 4,060 3,771
20,204 26,856 25,089
Summarised Consolidated Cashflow Statement
FOR THE 6 MONTHS ENDED 30TH JUNE 2002
6 months to 6 months to Year to
30th June 30th June 31st December
2002 2001 2001
Unaudited Unaudited Audited
#000 #000 #000
Net cash (outflow)/inflow from operating activities (1,213) 172 2,694
Returns on investment and servicing of finance (1,021) (374) (1,108)
Taxation paid (88) (545) (1,035)
(2,322) (747) 551
Capital expenditure and financial investment (427) (750) (1,197)
Acquisitions and disposals (125) (12,238) (12,345)
Equity dividends paid (148) (305) (364)
Management of liquid resources - - 177
Financing (205) 18,603 18,234
(Decrease)/Increase in cash (3,227) 4,563 5,056
Notes to Interim Report for the six months ended 30 June 2002
1. Interim Report
This interim report was approved by the Board on 24th September 2002. It has
been prepared using accounting policies that are consistent with those adopted
in the statutory accounts for the year ended 31st December 2001, with the
exception of deferred tax which has been accounted for under FRS19.
The results for the year ended 31st December 2001 are taken from the full
accounts on which the Group's auditors made an unqualified report which did not
contain statements under s.237 (2) or (3) of the Companies Act 1985, and which
have been delivered to the Registrar of Companies.
2. Earnings per share
6 months to 6 months to Year to
30th June 30th June 31st December
2002 2001 2001
Unaudited Unaudited Audited
#000 #000 #000
These have been calculated on earnings of: (4,248) (141) (767)
The weighted average number of shares used was:
Basic and diluted 32,170,038 29,275,496 30,734,663
3. Exceptional Items
6 months to 6 months to Year to
30th June 30th June 31st December
2002 2001 2001
Unaudited Unaudited Audited
#000 #000 #000
Write down of design and development 375 - -
Write off goodwill 352
Write down of stock 700 - -
Write off of and provisions against investments 277 - -
Disposal of investments 517 - -
Restructuring cost of computer business 98
Provision for post retirement benefits 430
2,749 - -
4. Pension
The company has granted post employment benefits to a small number of employees
who have been with the company since before flotation. At present it is not
intended to grant any further post retirement benefits. These commitments are
unfunded and have not been the subject of an Actuarial valuation. The Directors
estimate of the liability created by these commitments is #430,000.
5. Post Balance Sheet Events
As stated in the Chairman's statement subsequent to the Balance Sheet date the
Chief Executive Officer departed the Company. Contractual obligations under his
contract will be met in the second half.
6. Copies of Interim Report
Copies of the interim report for the six-month period ended 30th June 2002 are
being sent to shareholders and will be available from Densitron Technologies
plc, Unit 4, Airport Trading Estate, Biggin Hill Kent TN16 3BW for at least one
month from the date of publication.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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