TIDMDTE
RNS Number : 3945T
Datong PLC
06 December 2011
Press Release 6 December 2011
DATONG PLC
("DATONG" or "the Group")
Final Results
DATONG PLC (DTE.L), a leading provider of covert intelligence
gathering solutions, today announces its final results for the 12
month period to 30 September 2011.
Highlights
-- Revenue of GBP11.75 million (2010: GBP14.06 million)
-- Operating profit before exceptional items of GBP0.05 million
(2010: GBP0.80 million)
-- Earnings per share of 1.03p (2010: adjusted earnings per
share of 6.38p)
-- Net cash of GBP1.27 million (2010: GBP2.58 million) and
no debt on the balance sheet
-- Growth in Own Products revenues of 26% on the back of
a strong US performance
-- Significant orders received for new products
-- New joint venture formed focusing on developing and commercialising
interoperable capability across a number of industry players
-- Agreement formed introducing software analytical capability
to the product portfolio
Commenting on the results, Brian Smith, Chief Executive Officer,
said:
"Good progress continues to be made in DATONG's Own Products
business with strong customer interest in new products and
significant sales being made. However, Third Party product sales
volatility has had a short term adverse impact. The current world
economic climate and its affect on our customers' budgetary
policies is impacting DATONG with the timing of orders not
following usual trends.
"Nevertheless, DATONG is well positioned in the intelligence
gathering sector with a good sales pipeline and consequently the
Board remains confident that the Group's strategy will continue to
drive the business forward."
Enquiries:
DATONG PLC Tel: +44 (0) 113 239
5350
Brian Smith, Chief Executive Officer
Stephen Ayres, Finance Director
Nominated adviser and broker
Canaccord Genuity Tel: +44 (0) 207 050
6500
Simon Bridges / Kit Stephenson
Media enquiries
Abchurch Communications Tel: +44 (0) 207 398
7729
Sarah Hollins / Mark Dixon / Oliver
Hibberd
mark.dixon@abchurch-group.com
CHAIRMAN'S STATEMENT
The effective combating of terrorist and criminal activity
remains a key priority for policy makers in the Group's major
target markets with proactive intelligence gathering seen as a key
activity. The reliable provision of usable intelligence for our
customers underpins the Group's continuing strategy and growth
plans. During the period DATONG has made progress in diversifying
its customer base and with the broadening and integration of its
technology portfolio. However, in the current economic climate,
DATONG's business is proving to be volatile with a high degree of
dependency on budgetary policy within the Group's markets. This
volatility is reflected in the mixed financial result for the
period. Overall, following a particularly strong year in 2010,
revenues have decreased to GBP11.75 million (2010: GBP14.06
million) and operating profit before exceptional items to GBP0.05
million (2010: GBP0.80 million). The earnings per share was 1.03
pence (2010: adjusted 6.38 pence).
Revenues in the Own Products reportable segment have increased
26% to GBP9.41 million (2010: GBP7.47 million; 2009: GBP6.22
million), reflecting a continuing strong performance in the
Americas and growing demand in certain Rest of World ("ROW")
countries. This performance has been underpinned by an expansion in
our sales activity, particularly in the US, and the benefits of
sustained investment in the Group's product portfolio. Over the
past two years, DATONG has launched a new generation of products
and solutions addressing the evolving needs and demands of the
Group's customers. These products and solutions are being very well
received with significant orders being taken during the final
quarter of the year.
Third Party product revenues in the period decreased to GBP2.34
million (2010: GBP6.59 million; 2009: GBP1.60 million). This
performance reflects the inherent volatility of revenues from this
segment of the business. 2010 represented a strong year following a
number of major projects, the volume and scale of which was not
repeated in 2011. Protracted sales cycles in certain ROW
territories and the change of certain territory rights have also
had an adverse impact during the year. Although an element of
volatility is likely to persist, the Board expects to see growth
from this segment in future periods.
Dividend
The Board considers it prudent to preserve the existing strength
of the Group's balance sheet and, consequently at this time, does
not recommend the payment of a dividend (2010: GBPnil). It remains
the Board's intention to adopt a progressive dividend policy when
the Group's financial performance allows.
Board changes
Dean Blood stood down from his role as Chief Executive Officer
in July 2011. Dean had been with the Group for nearly three years,
initially as Chief Operating Officer and subsequently serving two
years as Chief Executive Officer during a period of considerable
change and difficult trading conditions. The Group is now actively
seeking a new Chief Executive Officer. As an interim measure, Brian
Smith, a Non-executive Director and the previous Chief Executive
Officer of DATONG, has taken over as interim Chief Executive
Officer.
Following his initial appointment in January 2010 as Head of
Group Sales, John Kirtland was appointed to the Board on 17 January
2011. The depth of international experience and knowledge that John
has brought to DATONG is proving invaluable in developing the sales
structure and markets of the Group.
Outlook
DATONG is well positioned in the intelligence gathering sector,
a sector expected to be more robust than others within the budgets
of international military and security agencies. However, the
current world economic situation and resultant budgetary policies
makes forecasting the timing of orders a more challenging
exercise.
The Board is confident of growth for the 2012 financial year
however it expects slower progress in the first half as a number of
larger sales opportunities in progress are not expected to be
deliverable until the second half. During the first quarter of the
year DATONG is prudently restructuring its cost base with a view to
reducing costs by GBP0.50 million on an annualised basis but
without impacting our capability and capacity or our ability to
meet the existing and medium term delivery and quality needs of our
customers.
The Board is encouraged by the strategic progress made by the
Group in the period in terms of customer interest in new products
and solutions and the continuing success being achieved in customer
diversification, and remains confident that the Group's strategy
will continue to drive the business forward.
Paul Lever
Chairman
6 December 2011
BUSINESS REVIEW
Strategy
Government funding for defence, security and law enforcement is
being adversely impacted in this continuing period of economic
pressure. However, in the face of persistent and increasingly
sophisticated terrorist and criminal activity, strategic spending
reviews across a number of DATONG's key geographic markets are
delivering a common message. The priority focus is on the use of
special military, intelligence and law enforcement units and the
gathering of intelligence in order to proactively prevent incidents
and any breach of borders or security.
Over 35 years, DATONG has established a leading brand as a
provider of advanced location based intelligence gathering
solutions to military, security and law enforcement agencies on an
international scale. Our focus is on fulfilling our customers'
high-end specialist tracking, location and surveillance
requirements. The core strategy of the Group is to deliver
profitable organic growth through continued investment in
leading-edge product, software and service solutions, whilst
developing and extending its routes to market and customer base.
Furthermore, strategic alliances and/or acquisitions will be
considered to provide such enhanced routes to market or access to
complementary technology or service offerings.
As set out in more detail below, during the year the Group has
made strong progress against these strategic intents and
consequently in the short term DATONG will build upon these solid
business foundations and focus upon delivering an improved
financial return on the investments made.
Investments in associates
In August 2011, in line with demand from major customers, and
with three other industry partners, DATONG established a new
corporate entity, Medusa Consortium Limited, to commercialise and
market for sale a covert tracking system that was interoperable
across the partners. DATONG has a 25% interest in the voting share
capital of the new company. The venture is in its early stages of
set up and the Board expects it to be earnings neutral for DATONG
in the 2012 financial period.
Market developments
An analysis of the revenue for the period by reportable segment
and geographic market is set out below.
Unaudited
12 months 12 months Year on year
ended ended change
30 September 30 September
2011 2010
GBP'000 GBP'000 %
---------------------- ------------- ------------- -------------
Revenue
Own Products 9,407 7,473 26%
Third Party products 2,338 6,591 -65%
------------- ------------- -------------
11,745 14,064 -16%
------------- ------------- -------------
Revenue
UK 2,738 3,896 -30%
Europe 2,648 4,356 -39%
Americas 4,557 3,358 36%
Rest of World 1,802 2,454 -27%
------------- ------------- -------------
11,745 14,064 -16%
------------- ------------- -------------
DATONG has achieved strong growth in its Own Products segment
reflected in a 26% increase in segment revenues for the period.
A strong performance from the Americas underpins the segment
with a 36% increase in revenues, continuing the growth achieved in
2010. DATONG has expanded its sales activity in the region during
the period and is starting to gain traction with a number of new
important customer groups. This, together with strong customer
interest and the sales achieved in the territory from the Group's
recently launched products, gives the Board confidence of continued
future growth from this critical territory. Budgetary policy in the
territory however continues to impact the timing of orders within
any particular financial year.
Following a very strong close to the 2011 financial year, order
intake in the first two months of the current year has been
comparatively low as our customers have been operating under a
continuing resolution where operating budgets have been uncertain
and capital spending has been minimal. Budget appropriations
however started to be finalised for a number of key customers at
the end of November 2011.
Demand for Own Products in the UK and Europe has been solid.
Although a relatively smaller market for Own Products, a number of
important customer order wins have been achieved in the Rest of
World territory during the period. Historically the Group has seen
greater demand for Third Party products in ROW where there is a
high density of mobile phones. The use of advanced location
technology is not as prevalent as in DATONG's traditional markets.
However, customer relationships built largely on the back of Third
Party product demand are now starting to provide a route to market
for Own Products.
Year on year revenues from Third Party products tend to be more
volatile than those for Own Products reflecting the nature of the
solution, low volume and high price. Following a particularly
strong period in 2010, revenues from Third Party products have
declined in all geographic markets. Whilst DATONG has been
successful in expanding its sales activities into certain Eastern
European countries, the short term requirements of a number of UK
and European customers were fulfilled by a small number of large
projects during 2010 and consequently these customers have not
placed orders this year. Meanwhile protracted sales cycles and
budgetary delays experienced in the ROW are reflected in reduced
revenues for that territory.
Research and Development
Research and development (R&D) is a fundamental and central
part of DATONG's organic growth strategy. Consequently, and despite
the financial pressures experienced in the period, the Group has
continued to invest heavily in this area in response to both
customers' funded and non-funded needs. The main development
drivers have been around miniaturisation, longevity of mission
life, ease of use and increased interoperability and
integration.
With the high level of development done over the last two years
and with a number of new product launches expected during the next
12 months, the Group has enhanced its product portfolio with the
launch of a number of new beacon types and a new next generation
range of fixed site and portable receivers.
Supporting its hardware developments, DATONG has also introduced
an integrated mapping software suite to the market covering a
breadth of applications including operations centres, web based and
mobile phone based platforms, all providing the visualisation and
analysis of geolocation data to end users.
Customer interest is strong, particularly from the traditional
geographic markets, and sales from these new products represented
circa 30% of Own Product revenues in the year and with strong
customer interest the Board expects this to rise significantly
during the current year.
To further enhance its software based analysis capability, in
July 2011 DATONG formed an exclusive agreement with a software
house that has specifically focused on data analysis over recent
years. The introduction of this capability to the DATONG portfolio
enables our customers to analyse their location based intelligence
more effectively. Although no sales of this enhanced capability
have been recognised in the period, customer interest is strong and
the Board expects to see sales in the current period.
Current development activity is focussed on the development of
additional features and capability aimed at increasing possible
market applications of the technology and to support DATONG's
strategy of broadening its customer base.
Third Party products
In April 2011, DATONG extended its territory rights with the
Group's cellular Third Party product partner. The revised agreement
introduced some territorial revisions permitting both parties to
strengthen their market positions and offering.
Territories that are key to supporting the development of the
product will now be managed by the partner directly. This means
that DATONG is no longer selling the cellular Third Party product
in certain historic territories (including the UK) (the "Lost
Territories") but will be developing a number of new significant
international markets including the US. In the period, the Lost
Territories contributed GBP0.22 million to the Group's revenue.
This agreement builds upon a successful relationship which, over
the last five years, has generated significant sales and successful
international market entry for DATONG. Building upon the routes to
market DATONG has developed, it is anticipated that these new
territories will bring a fresh appetite and new demands for these
systems, with DATONG well positioned to support such customer
developments.
Patent infringement litigation
As more fully described in note 9 of these financial statements,
DATONG has been subject to a patent infringement claim since 2006.
Having taken appropriate legal advice, the Board has remained
confident in DATONG's case throughout the period and, as such, has
continued with the defence. A court of appeal hearing took place on
22 and 23 November 2011 but the substantive judgement has not yet
been handed down. There has been no other material change in the
position from that disclosed in the Annual Report and Accounts for
the 18 months to 30 September 2010. A provision for GBP0.30 million
is being carried in respect of the expected share of costs and
damages to be borne by the Group for the sums that may ultimately
become payable.
FINANCIAL REVIEW
Basis of financial information
We are reporting on the results for the 12 months ended 30
September 2011. As more fully described in the Annual Report and
Accounts 2010, the Group changed its financial year end to 30
September during the previous financial period and therefore the
audited statutory comparative financial statements represent the
results for the 18 months ended 30 September 2010. For transparency
and clarity of the year on year performance and development of
DATONG, we are also providing unaudited results for the 12 month
period to 30 September 2010.
Summary financial information
Unaudited Audited
----------------------------------- ----------------- ----------------- -----------------
12 months 12 months 18 months
to 30 September to 30 September to 30 September
2011 2010 2010
----------------------------------- ----------------- ----------------- -----------------
GBP'000 GBP'000 GBP'000
----------------------------------- ----------------- ----------------- -----------------
Revenue 11,745 14,064 16,874
----------------------------------- ----------------- ----------------- -----------------
Adjusted operating profit/(loss)* 48 802 (513)
----------------------------------- ----------------- ----------------- -----------------
Adjusted profit/(loss) before
tax* 48 819 (495)
----------------------------------- ----------------- ----------------- -----------------
Adjusted EPS (pence)* 1.03 6.38 (0.51)
----------------------------------- ----------------- ----------------- -----------------
(Decrease)/increase in cash (1,311) 880 345
----------------------------------- ----------------- ----------------- -----------------
Net cash at period end 1,268 2,575 2,575
----------------------------------- ----------------- ----------------- -----------------
* Adjusted to exclude the exceptional costs incurred in 2010 as
detailed in note 7.
Revenue and profit from operations
The Group revenue for the period fell to GBP11.75 million (2010:
GBP14.06 million) reflecting the continued growth in the Own
Products reportable segment offset by a reduction in Third Party
products. Profit from operations before exceptional items fell to
GBP0.05 million (2010: GBP0.80 million).
By the nature of its operations, the Group is exposed to
fluctuations in the US dollar exchange rate, which is largely
managed by way of forward exchange contracts. The average rate in
the period was $1.60 (2010: $1.54) resulting in an adverse
translational impact compared to a constant currency position of
GBP0.16 million in revenues and GBP0.10 million in profit.
A modest improvement in the Own Products margin was offset by an
increase in overhead costs arising from employment termination
costs recognised in the period of GBP0.30 million (2010: GBPnil).
The improved margins reflect a number of business improvement
initiatives designed to improve quality and efficiency throughout
the organisation. Tangible benefits are already being seen and they
are expected to lead to continued margin improvement in the current
period.
Gross R&D expenditure in the year was GBP1.74 million (2010:
GBP1.96 million) representing 18% of Own Product revenues and the
net costs written off against profits were GBP1.54 million (2010:
GBP1.62 million).
The Group revenue for the 18 months ended 30 September 2010 was
GBP16.87 million and the loss from operations before exceptional
items was GBP0.51 million.
Taxation
The tax credit for the period of GBP0.10 million (18 months to
30 September 2010: GBP0.42 million) incorporates a debit adjustment
of GBP0.06 million (2010: credit of GBP0.08 million) in respect of
prior years and includes the continuing benefit of UK tax
incentives associated with the Group's research and development
activities.
Earnings per share and dividends
Earnings per share for the period were 1.03 pence per share
(2010 adjusted: 6.58 pence). The 2010 adjusted earnings per share
was calculated using the unaudited profit for the period before
exceptional items divided by the weighted average number of shares
in issue. The loss per share for the 18 months ended 30 September
2010 was 2.95 pence.
The Board is not recommending the payment of a dividend (2010:
GBPnil).
Cash flow and net cash
The net cash outflow from operating activities but after the
purchase of tangible and intangible assets during the period was
GBP1.67 million (2010: inflow of GBP0.88 million) and was adversely
affected by the build up of working capital, which is expected to
reverse during the first half of 2012 and which reflects the timing
of certain deliveries to customers and from suppliers around the
year end. Net trade receivables and trade payables at the year end
were GBP2.68 million (2010: GBP1.20 million).
Cash of GBP375,000 was received in the period from the sale of
old premises no longer used by the Group and previously classified
in the balance sheet as assets held for sale.
Cash and cash equivalents at 30 September 2011 were GBP1.27
million (2010: GBP2.58 million). The Group had no debt.
For the 18 months ended 30 September 2010 the net cash inflow
from operating activities but after the purchase of tangible and
intangible assets was GBP0.35 million.
PRINCIPAL RISKS
The Board monitors potential business risks and endeavours to
manage those risks through appropriate means including employee
involvement, robust financial and business controls and polices and
contracts of insurance.
As an international provider of advanced electronic systems into
government bodies, DATONG is subject to many of the same risks
faced by similar such organisations. Specific risks to DATONG
include:
Customer base
DATONG's customer base largely compromises government bodies and
as such DATONG faces risks and opportunities associated with
changes in political and economic policies and changes to
international trade relationships and restrictions. DATONG's
strategy involves further expansion of its product and service
portfolio, customer base and geographic markets that will further
diversify this risk.
Technological changes
The electronics market in which DATONG operates is characterised
by technological change, changes in customer requirements and
changes in industry standards resulting in the frequent
introduction of new products.
DATONG has created and maintains appropriate personnel policies
necessary to attract, develop and retain appropriately qualified
personnel and ensures sufficient resources are allocated to the
research and development activities to meet the technical
demands.
Third Party product supply
Third Party sales represent products bought in from third
parties and distributed by DATONG. They represented 20% (2010: 47%)
of the Group revenues in the period. Distribution rights have been
protected by formal agreements and strong relationships have been
built with our partners.
Foreign currency risk
DATONG is exposed to movements in foreign exchange rates,
particularly the US dollar, which is managed by way of forward
exchange contracts. The exchange rates used during the period to
translate dollar based transactions and year end dollar based
assets are shown in the table below:
US Dollar Average* rate Average* rate Period end Period end
during the 12 during the 12 rate at 30 rate at 30
months to 30 September months to 30 September September
2011 September 2010 2011 2010
----------- ------------------------ ---------------- ------------ ------------
GBP1 1.60 1.54 1.56 1.57
----------- ------------------------ ---------------- ------------ ------------
*Average represents the average rate weighted by sales
distribution.
KEY PERFORMANCE INDICATORS
The key performance indicators used to measure the performance
of the Group are as follows:
Unaudited Audited
------------------------------- ----------- ----------- -----------
12 months 12 months 18 months
ended 30 ended 30 ended 30
September September September
2011 2010 2010
------------------------------- ----------- ----------- -----------
Orders received (GBP'000) 10,742 13,757 18,667
------------------------------- ----------- ----------- -----------
Revenue (GBP'000) 11,745 14,064 16,874
------------------------------- ----------- ----------- -----------
Revenue per employee
(GBP'000) 129 165 199
------------------------------- ----------- ----------- -----------
Profit/(loss) from operations
before exceptional items
(GBP'000) 48 802 (513)
------------------------------- ----------- ----------- -----------
Operating margin (%)* 0.41 5.70 (3.04)
------------------------------- ----------- ----------- -----------
Return on capital employed
(%)** 0.56 10.94 (7.00)
------------------------------- ----------- ----------- -----------
*Operating margin is the profit from operations before
exceptional items expressed as a percentage of revenues.
** Return on capital employed is the profit from operations
before exceptional items expressed as a percentage of capital
employed. Capital employed is net assets less net cash.
CURRENT TRADING AND PROSPECTS
Order intake in the weeks since the period end has been below
expectations reflecting the continuing sales volatility experienced
over recent periods. The sales order pipeline however remains
strong although a number of the larger opportunities are expected
to have delivery timescales in the second half year.
The Board believes that the first half year of the current
period will be below last year. However, from the current sales
pipeline and with the positive strategic progress made on product
development and customer diversification to build upon, the Board
expects to achieve profit growth for the full year.
Over 2012 whilst we will continue to maintain focus and
capability on our customers and driving revenue growth we will also
prudently restructure the cost base during the first quarter with a
view to reducing costs by GBP0.50 million on an annualised basis,
thereby improving operating margins.
Brian Smith
Chief Executive
Stephen Ayres
Finance Director
6 December 2011
Consolidated Income Statement for the year ended 30 September
2011
12 months Unaudited Audited
12 months 18 months
ended ended ended
30 September 30 September 30 September
2011 2010 2010
Continuing operations Note GBP'000 GBP'000 GBP'000
---------------------------------- ----- ------------- ------------- -------------
Revenue 2 11,745 14,064 16,874
Cost of sales (6,563) (8,312) (10,310)
---------------------------------- ----- ------------- ------------- -------------
Gross profit 5,182 5,752 6,564
Overhead costs (5,126) (4,950) (7,077)
Share of post-tax result of (8) - -
associate
Exceptional impairment charge 7 - (337) (337)
Profit/(loss) from operations 2 48 465 (850)
Investment income 1 20 22
Finance costs (1) (3) (4)
---------------------------------- ----- ------------- ------------- -------------
Profit/(loss) before taxation 48 482 (832)
Taxation 3 95 64 424
---------------------------------- ----- ------------- ------------- -------------
Profit/(loss) for the period
attributable to equity holders
of the Company 143 546 (408)
---------------------------------- ----- ------------- ------------- -------------
Profit/(loss) per ordinary share
(pence)
Basic 4 1.03 3.95 (2.95)
Diluted 4 1.03 3.95 (2.95)
---------------------------------- ----- ------------- ------------- -------------
Consolidated Statement of Comprehensive Income for the year
ended 30 September 2011
12 months Unaudited Audited
12 months 18 months
ended Ended ended
30 September 30 September 30 September
2011 2010 2010
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------- ------------- -------------
Profit/(loss) for the period 143 546 (408)
Other comprehensive income
Currency translation differences (18) 2 9
---------------------------------------- ------------- ------------- -------------
Total comprehensive income for the
period attributable to equity holders
of the Company 125 548 (399)
---------------------------------------- ------------- ------------- -------------
Consolidated Statement of Financial Position at 30 September
2011
2011 2010
------------------ ------------------
Note GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ----- -------- -------- -------- --------
Assets
Non-current assets
Intangible assets 3,070 2,866
Property, plant and equipment 1,148 1,406
Investments in associates (8) -
Deferred tax assets 4 334
--------------------------------------- ----- -------- -------- -------- --------
4,214 4,606
Current assets
Inventories 5 2,028 1,965
Trade and other receivables 6 4,112 2,893
Derivative financial instruments - 22
Tax receivables 161 10
Cash and cash equivalents 1,268 2,575
--------------------------------------- ----- -------- -------- -------- --------
7,569 7,465
Assets held for sale 7 - 375
--------------------------------------- ----- -------- -------- -------- --------
Total assets 11,783 12,446
--------------------------------------- ----- -------- -------- -------- --------
Liabilities
Current liabilities
Trade and other payables 8 (1,563) (2,154)
Obligations under finance leases - (16)
--------------------------------------- ----- -------- -------- -------- --------
(1,563) (2,170)
Non-current liabilities
Deferred tax liabilities (48) (68)
Provisions 9 (300) (300)
--------------------------------------- ----- -------- -------- -------- --------
(348) (368)
--------------------------------------- ----- -------- -------- -------- --------
Total liabilities (1,911) (2,538)
--------------------------------------- ----- -------- -------- -------- --------
Net assets 9,872 9,908
--------------------------------------- ----- -------- -------- -------- --------
Equity
Share capital 69 69
Share premium 4,468 4,468
Currency translation reserve (17) 1
Retained earnings 5,352 5,370
--------------------------------------- ----- -------- -------- -------- --------
Equity attributable to equity holders
of the Company 9,872 9,908
--------------------------------------- ----- -------- -------- -------- --------
Consolidated Statement of Changes in Equity for the year ended
30 September 2011
Currency
Share Share translation Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- ------------ --------- --------
At 1 April 2009 69 4,468 (8) 5,676 10,205
Loss for the period - - - (408) (408)
Cost of share-based incentives - - - 102 102
Currency translation differences - - 9 - 9
---------------------------------- -------- -------- ------------ --------- --------
At 30 September 2010 69 4,468 1 5,370 9,908
Profit for the year - - - 143 143
Cost of share-based incentives - - - (161) (161)
Currency translation differences - - (18) - (18)
---------------------------------- -------- -------- ------------ --------- --------
At 30 September 2011 69 4,468 (17) 5,352 9,872
---------------------------------- -------- -------- ------------ --------- --------
Consolidated Statement of Cash Flows for the year ended 30
September 2011
12 months Unaudited Audited
12 months 18 months
ended Ended ended
30 September 30 September 30 September
2011 2010 2010
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ------------- -------------
Cash flows from operating activities
Profit/(loss) from operations 48 465 (850)
Adjustments for:
Depreciation and amortisation 1,576 1,685 2,516
Impairment of assets held for
sale - 324 324
Share of post-tax result of associate 8 - -
Profit on disposal of property,
plant and equipment - (1) (1)
Cost of share-based incentives (161) 42 102
Fair value loss/(gain) on derivative
financial instruments 22 (20) (28)
(Increase)/decrease in inventories (45) 243 3
Increase in trade and other receivables (1,224) (1,750) (181)
(Decrease)/increase in trade and
other payables (627) 1,135 275
Tax received 254 650 703
----------------------------------------- ------------- ------------- -------------
Net cash (used in)/generated from
operating activities (149) 2,773 2,863
----------------------------------------- ------------- ------------- -------------
Cash flows from investing activities
Interest received 1 20 22
Sales of property, plant and equipment 375 1 1
Purchases of property, plant and
equipment (203) (354) (425)
Purchase of intangible assets (1,318) (1,543) (2,091)
----------------------------------------- ------------- ------------- -------------
Net cash used in investing activities (1,145) (1,876) (2,493)
----------------------------------------- ------------- ------------- -------------
Cash flows from financing activities
Interest paid (1) (3) (4)
Capital element of finance leases
repaid (16) (14) (21)
Net cash used in financing activities (17) (17) (25)
----------------------------------------- ------------- ------------- -------------
Net (decrease)/increase in cash
and cash equivalents (1,311) 880 345
Cash and cash equivalents at the
start of the period 2,575 1,704 2,236
Effect of foreign currency translation 4 (9) (6)
----------------------------------------- ------------- ------------- -------------
Cash and cash equivalents at the
end of the period 1,268 2,575 2,575
----------------------------------------- ------------- ------------- -------------
Notes
1. Basis of preparation
This financial information has been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union ("IFRS"). The accounting policies used in its
preparation are the same as those applied and set out in the
Company's financial statements for the 18 months to 30 September
2010. The financial information represents consolidated financial
information for the Company and its subsidiary undertakings and is
derived from the Group's consolidated financial statements for the
year ended 30 September 2011. It does not constitute the Company's
statutory accounts. Statutory accounts for the 18 months to 30
September 2010 have been delivered to the registrar of companies,
and those for the year ended 30 September 2011 will be delivered in
due course. The Group's auditors, Saffery Champness, gave an
unqualified report on the 2010 financial statements.
2. Segment information
Information reported to the chief operating decision maker for
the purposes of resource allocation and assessment of segment
performance focuses on types of goods delivered. The Group's
reportable segments under IFRS 8 Operating Segments are Own
products and Third Party products. Own products represents products
developed, manufactured and distributed by the Group. Third Party
products represents products bought in from a third party and
distributed by the Group.
Segment revenues and results
The segment results for the year are as follows:
12 months ended Unaudited Audited
30 September 12 months 18 months ended
2011 ended 30 September
30 September 2010
2010
------------------ -------------------
Revenue Result Revenue Result Revenue Result
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------------- -------- --------- --------
Segment revenue
and results
Own products 9,407 4,205 7,473 3,214 10,053 3,770
Third Party products 2,338 832 6,591 2,352 6,821 2,513
---------------------- -------- -------- -------------- -------- --------- --------
11,745 5,037 14,064 5,566 16,874 6,283
-------- -------------- ---------
Unallocated costs (4,981) (5,101) (7,133)
Share of post-tax (8) - -
result of associate
---------------------- -------- -------- -------------- -------- --------- --------
Profit/(loss)
from operations 48 465 (850)
Investment income 1 20 22
Finance costs (1) (3) (4)
---------------------- -------- -------- -------------- -------- --------- --------
Profit/(loss)
before taxation 48 482 (832)
Taxation 95 64 424
---------------------- -------- -------- -------------- -------- --------- --------
Profit/(loss)
for the period 143 546 (408)
---------------------- -------- -------- -------------- -------- --------- --------
Segment revenue represents revenue generated from external
customers. Inter segment sales were not significant.
The products from both reportable segments are offered for sale
in the same market sectors and consequently the reportable segments
are managed together as one business operating from the same
locations. Accordingly only directly attributable items have been
allocated across the segments.
An analysis of the Group's revenue by its major products and
services is represented by the above analysis by reportable
segment.
Other segment information
The segments' assets and liabilities at 30 September 2011 for
the period then ended are as follows:
2011 2010
---------------------- ----------------------
Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- ------------ -------- ------------
Segment assets and liabilities
Own products 9,087 794 6,245 1,211
Third Party products 1,014 798 1,741 1,091
-------------------------------- -------- ------------ -------- ------------
10,101 1,592 7,986 2,302
Unallocated 1,682 319 4,460 236
-------------------------------- -------- ------------ -------- ------------
11,783 1,911 12,446 2,538
-------------------------------- -------- ------------ -------- ------------
Segment assets principally relate to property, plant and
equipment, intangible assets, inventories and trade and other
receivables. Unallocated assets principally relate to unallocated
property, plant and equipment, tax receivables, assets held for
sale and cash and cash equivalents.
Segment liabilities principally relate to provisions and trade
and other payables. Unallocated liabilities principally relate to
tax payables and borrowings.
Geographical information
The Group's two reportable segments operate in four main
geographical areas, even though they are managed on a worldwide
basis. The revenue from external customers across those geographic
areas was:
Unaudited Audited
12 months 12 months 18 months
ended 30 ended 30 ended 30
September September September
2011 2010 2010
Geographical segments
United Kingdom 2,738 3,896 4,713
Europe 2,648 4,356 4,792
Americas 4,557 3,358 4,894
Rest of World 1,802 2,454 2,475
----------------------- ----------- ----------- -----------
11,745 14,064 16,874
----------------------- ----------- ----------- -----------
Revenue is reported by the geographical location of
customers.
3. Taxation
12 months 18 months
ended ended
30 September 30 September
2011 2010
GBP'000 GBP'000
--------------------------- ------------- -------------
UK tax:
- current year (151) -
- prior year - (74)
--------------------------- ------------- -------------
Total UK tax (151) (74)
--------------------------- ------------- -------------
Deferred tax:
- current year (2) (347)
- prior year 58 (3)
--------------------------- ------------- -------------
Total deferred tax 56 (350)
--------------------------- ------------- -------------
Tax credit for the period (95) (424)
--------------------------- ------------- -------------
The tax credit included in the share of the post-tax result of
associate is GBP2,000 (2010: GBPnil).
The current tax credit differs from the theoretical amount that
would arise using the profit/(loss) before taxation and the
standard rate of UK corporation tax as follows:
12 months 18 months
Ended ended
30 September 30 September
2011 2010
GBP'000 GBP'000
--------------------------------------------------- ------------- -------------
Profit/(loss) before taxation 48 (832)
--------------------------------------------------- ------------- -------------
Tax at UK corporation tax rate of 26% (2010: 28%) 13 (233)
Effects of:
- permanent timing differences (176) (201)
- adjustment in respect of prior years 58 (77)
- unrecognised deferred tax assets 8 87
- share of tax on result of associate 2 -
Tax credit for the period (95) (424)
--------------------------------------------------- ------------- -------------
4. Earnings per ordinary share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period.
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares in issue to assume
conversion of all potential dilutive shares arising from
outstanding share options. For this adjustment, a calculation is
made to determine the number of shares that could have been
acquired at fair value (determined as the average annual market
share price during the period) based on the monetary value of the
subscription rights attached to outstanding share options. The
number of shares calculated as above is compared with the number of
shares that would have been issued assuming the exercise of share
options. The difference is added to the denominator as additional
shares for no consideration. There is no adjustment made to the
numerator.
12 months 18 months
ended ended
30 September 30 September
2011 2010
----------------------------------------------------- ------------- -------------
Profit/(loss) for the period attributable to
equity holders of the Company (GBP'000) 143 (408)
----------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares in
issue for basic and diluted earnings per share 13,834,375 13,834,375
----------------------------------------------------- ------------- -------------
Basic and diluted earnings/(loss) per share (pence) 1.03p (2.95)p
----------------------------------------------------- ------------- -------------
At 30 September 2011 options over 737,010 (2010: 1,145,695)
additional shares had been granted that could potentially dilute
basic earnings per share in the future, but were not included in
the calculation of dilutive shares because, based on the conditions
during the period, the effect would not have been dilutive.
5. Inventories
2011 2010
GBP'000 GBP'000
-------------------------- -------- --------
Raw materials 851 732
Work in progress 355 500
Finished goods and goods
for resale 822 733
-------------------------- -------- --------
2,028 1,965
-------------------------- -------- --------
6. Trade and other receivables
2011 2010
GBP'000 GBP'000
-------------------------------- -------- --------
Trade receivables 3,685 2,717
Less: provision for impairment
of trade receivables - (43)
-------------------------------- -------- --------
3,685 2,674
Other receivables 258 34
Prepayments and accrued
income 169 185
-------------------------------- -------- --------
4,112 2,893
-------------------------------- -------- --------
Movements on the provision for impairment of trade receivables
are as follows:
2011 2010
GBP'000 GBP'000
---------------------- -------- --------
At start of year 43 49
Receivables written
off during the year (43) (6)
At end of year - 43
---------------------- -------- --------
7. Assets held for sale
2011 2010
GBP'000 GBP'000
------------------------------- --------- --------
Non-current assets classified
as held for sale:
Property, plant and equipment - 375
------------------------------- --------- --------
Assets held for sale represent a vacant freehold property no
longer used by the Group. During 2010 the Board re-assessed the
value of the property to GBP375,000 and accordingly the Group
recognised an exceptional impairment loss of GBP337,000 in that
period. The property was sold for GBP375,000 during the year ended
30 September 2011.
8. Trade and other payables
2011 2010
GBP'000 GBP'000
------------------------------ -------- --------
Trade payables 1,010 1,476
Other taxes and social
security 108 136
Other creditors 163 16
Accruals and deferred income 282 526
------------------------------ -------- --------
1,563 2,154
------------------------------ -------- --------
9. Contingent liabilities
Since 2006 the Company has been a party to court proceedings in
which MMI Research Limited ("MMI") alleged that a Third Party
product for which the Company acts as a reseller infringes the UK
element of a patent that MMI jointly owns. The proceedings were
brought against the Company's supplier and the Company (the
"Defendants") by virtue of its reselling activities.
In March 2009, the High Court passed judgement in favour of MMI.
An injunction was subsequently granted prohibiting the Defendants
from selling infringing products into the UK and MMI are now
seeking damages for past infringements in the UK and a payment of
their costs. A number of open issues surrounding the case make it
difficult to determine the damages which may become payable to MMI
as a result of the court's decision. The amount of damages and
costs payable by the Defendants will be quantified at further court
proceedings and, when assessed, the liability to pay them will be
between the Defendants on a joint and several basis and is thus a
contingent liability of the Company. As between the Defendants the
Company's supplier is meeting the legal costs of the
proceedings.
The Company has made five potentially infringing sales at a
total value of approximately GBP0.4m. It is expected that MMI will
be seeking circa GBP1.4 million in relation to its legal costs (of
which the Company's supplier has already paid GBP0.4 million on
account).
During 2009 the Company made a provision of GBP0.3 million in
respect of the expected share of costs and damages to be borne by
the Company for the sums that may ultimately become payable to MMI.
The assumptions made in establishing this provision relate to the
number of infringing acts, an estimate of the damages per
infringement, the legal costs claimed by MMI and the continued
solvency of the co-defendants. Given the open issues surrounding
the case and the inherent difficulties in estimating liabilities it
cannot be guaranteed that additional costs will not be incurred
beyond the amounts provided.
Notwithstanding the judgement and the progression of proceedings
in respect of damages and costs, having taken appropriate legal
advice, the Defendants continue to have confidence in their case
and, as such, continue with their defence. A court of appeal
hearing took place on 22 and 23 November 2011 but the substantive
judgement has not yet been handed down.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FSFFWIFFSEIE
Datong Electronics (LSE:DTE)
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Datong Electronics (LSE:DTE)
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