RNS Number : 1209W
Plasmon PLC
06 June 2008
PLASMON PLC
2008 PRELIMINARY RESULTS
Plasmon Plc, (LSE: PLM) ("Plasmon", the "Company" or the "Group"), a leader in data archiving solutions, today announces its results for
the year ended 31 March 2008.
Highlights:
* Group revenues fell 13% at constant exchange rates to �29.4 million (2007: �35.9 million) following further decline in legacy
products.
* Revenue declined in the first half and flattened out in the second, as newer archive solution product growth (45% year on year in
constant currencies) compensated for a continuing fall in legacy sales.
* Operating losses before rationalisation costs reduced by �1.2 million to �9.6 million (2007: �10.8 million).
* �8 million gross capital raised in May 2007 to complete and launch a new range of enterprise archive solutions.
* �10 million gross capital raised in April 2008 to fund a new sales strategy and enhancement of the archive management software
layer.
* New CEO appointed with proven data storage and turnaround track record.
* Sales re-organisation substantially completed, 18 new sales staff now recruited.
* Expecting to extend our industry partnerships in the near term.
* Expecting to reach positive cash flow during second half of current year.
Steven Murphy, Chief Executive of Plasmon, commented: *The data archiving market is growing strongly. Plasmon has always had great
technology; but we now have a business model that can sell and deliver superior archiving solutions for enterprise customer needs. This is a
turning point for the Company, and it is beginning to deliver results.*
Rod Powell, Chairman of Plasmon, commented: "Our transformation of Plasmon aims to create a profitable and fast-growing solutions
business. The Board and I are delighted with the progress Steven Murphy and his team have already made in executing the new sales strategy,
and we expect to reach the key milestone of positive cash flow in the second half."
Enquiries:
Plasmon Plc (01763 261466)
Steven Murphy (Chief Executive)
Tim Arthur (Finance Director)
Citigate Dewe Rogerson (020 7638 9571)
Martin Jackson / Ged Brumby
CHAIRMAN'S STATEMENT
For the financial year ended 31 March 2008, Group revenue fell by 13% (at constant exchange rates) to �29.4 million as the decline in
legacy systems sales outweighed the nascent growth in archive solution revenues. The decline in sales revenues was halted during the year,
with second half sales of �14.6 million (2007: �17.2 million) being only slightly below the �14.8 million (�18.7 million) achieved in the
first half. Operating losses before rationalisation costs reduced from �10.8 million to �9.6 million. Our main focus as a business during
the financial year was a series of major changes to transform Plasmon from a specialist manufacturer of optical hardware into a provider of
enterprise archiving solutions.
In April 2007, we successfully launched a broad range of Archive Appliance products with the new UDO2 media and drive technology. In May
2007, as interim Chief Executive, I introduced a major programme of outsourcing and cost reduction, which is now complete and gives us the
right operating structure after the previous three years in which our focus was investing in technology development.
Our previous Chairman, Jeffrey Hewitt, stepped down in November 2007 having brought Steven Murphy on board as Chief Executive, and I
took over as your Chairman. We are both based in the USA, which is our largest market by far. Steven, as well as being a 20 year veteran of
the storage industry, has a successful track record as an entrepreneurial CEO, leading growth and sales in solutions businesses. His
priority, supported by shareholders in the April 2008 fundraising, is solution sales execution to deliver faster growth in higher value
customer segments. This next stage of our transformation is designed to exploit three exciting opportunities:
1. Growth in the archiving market is accelerating at record levels: whatever
the economic climate, businesses continue to create new data and
increasingly require this data to be securely archived for long periods;
2. Enterprise customers are addressing escalating storage management costs,
data centre power consumption, and the environmental impact of
ever-expanding RAID disk server farms that are unsuited to long-term data
archiving; and
3. Plasmon has a purpose-built archive solution; which is cheaper and much
more energy efficient than production RAID disk, provides faster recovery
than traditional tape solutions and, with our patented UDO media
technology, greatly reduces the risk of data loss compared to traditional
magnetic media .
Since the beginning of 2008, Steven has successfully implemented Plasmon's new sales operation:
- A customer-facing channel has been created to complement our resellers.
- 18 experienced storage industry sales staff have been recruited.
- Best practice sales management processes and automation tools have been put in place.
- We are now selling packaged, repeatable go-to-market solutions which address specific
industry needs.
- Field system engineers have been trained to provide specialised support for large customer
implementations and to enhance our industry partner sales.
In addition, we have enhanced the data archiving software layer and made the production quality and installation process changes needed
to successfully address a broad archive solutions market.
After these last 12 months of major change in our strategy, leadership, organisation, product development and capital structure, the
Board believes Plasmon is now positioned strongly to deliver on its growth potential.
OUTLOOK
The overall archive storage market is forecast to grow rapidly from $9 billion in 2007 to $23 billion by 2010. Our Archive Appliance
solution sales grew 45% in constant currency terms compared to the comparable period last year, despite the disruptions of major
organisational change. We now have all of our sales "enablers" in place, and are actively focused on a series of specific market segments
where our archive solutions are either most compelling for new customers or where we have the best opportunity to "refresh" Plasmon legacy
products. Additionally, we hope to expand our market opportunities by extending our industry partnerships in the near term. The Board
believes that the new solution sales and marketing strategy should lead to significant revenue growth and anticipates a return to positive
cash flow in the second half of the current financial year to 31 March 2009.
I would like to thank my predecessor, Jeffrey Hewitt, for his service on the Board, and all of our employees and partners for helping
the Company reach this exciting point in its development.
Rod Powell
Chairman
6 June 2008
BUSINESS REVIEW
Following the successful placing of new shares on 18 May 2007, which raised �7.4 million net of expenses, Rod Powell was appointed
Interim Chief Executive and Matthew Peacock, a founding partner of Hanover, a major shareholder in the Company, joined the Board as a
non-executive Director. On 21 June 2007, Nigel Street, who had led the development of UDO optical technology, resigned from the Board. The
Group was restructured around a global sales, marketing and delivery organisation to better capture the significant sales growth potential
of our archive solutions product range. The Outsourcing and Cost Alignment programme, "OSCA", was initiated to further reduce the Group's
fixed cost base and inventories, as well as our high dependency on internal manufacturing. A recruitment exercise commenced to find a
permanent Chief Executive to lead the Group through this transition from a technology component led supplier to a customer and market led
solutions provider.
In November 2007, Steven Murphy was appointed Chief Executive and Rod Powell assumed the role of non-executive Chairman, succeeding
Jeffrey Hewitt who stepped down from the Board. Steven is a seasoned American executive with more than 20 years experience in the storage
and systems management industry and he has a proven track record in successfully repositioning companies for growth.
Growth Strategy
As announced on 7 February 2008, the $45 billion global storage market continues to grow and, within this, the archive storage revenues
will be the fastest growing major segment, with sales forecast to increase from $9 billion in 2007 to $23 billion by 2010. Business and
public sector organisations recognise that most of their rapidly growing storage of data is rarely accessed after 90 days. However, they are
faced with a need to have their data readily available to meet business recovery, legal and regulatory requirements. There is, therefore, an
increasing opportunity to move rarely-accessed data archives from expensive hard disk (RAID) servers to a lower cost, more permanent storage
infrastructure tier ideally suited to Plasmon's Archive Appliance, embedded with our proprietary ultra density optical disk media "UDO".
Plasmon's Archive Appliance* solutions offer the benefits of immediate recall of archive data, like RAID based solutions, but with high
levels of data authenticity and longevity at a significantly lower cost. Plasmon's Archive Appliance also consumes less power than RAID, at
a time when the environmental impact of increased power, air-conditioning and telecom infrastructures in data centres is a concern or not
available. By combining the performance of RAID with the easy to use and lower cost of UDO media, but with the added benefits of increased
data integrity, authenticity, and permanence of UDO's non-magnetic media, Plasmon is in the unique position to provide the best fit archive
solution for enterprise and public sector customers. Plasmon is now in the position to leverage its 20 years of leadership in providing
professional archive and optical storage technology, with our objective to become the archive solution provider of choice.
2008 Fundraising
In order to achieve the Group's long-term growth objectives, in February 2008 a �10 million fund raising was announced to fund:
* the recruitment and investment in a customer-facing sales and service channel and marketing strategy, focused on stimulating
awareness and demand within major enterprise customers in support of the current third party reseller channel;
* the strengthening of the Group's intellectual property in the archive management software layer; and
* the working capital requirements of the Group and provide customers and employees with confidence in the Group's long-term growth
prospects.
The fundraising was successfully completed with the Company receiving the net proceeds of �9.3 million in April 2008. The Group has
already filled the majority of marketing and development positions in the USA identified as being required and is now focusing on the other
global growth market requirements.
PRODUCT DEVELOPMENT AND STRATEGY
During the past year we re-organised the business to align fully all resources, development programmes and go-to-market strategies
around our 2008/2009 enterprise archive solutions strategy. With this top-to-bottom strategy alignment, we have been able to accelerate the
planned reduction in our longer term investments without impacting our competitive advantage in the market short term. Further opportunities
for reductions followed the successful launch of UDO2 products in April 2007 and the cessation of the Irish RAID business in March 2007.
UDO2 products were formally launched on 26 April 2007 and, at 60GB, doubled the capacity of the previous UDO1 product range. The new
drives read and write 50% faster than the previous products and are backwards read compatible with UDO1 to provide investment protection and
an easy upgrade path for our customers.
Total research and development expenditure, excluding rationalisation costs, fell by 24% to �5.8 million in 2007/8 (2007: �7.7 million).
The archive solutions strategy will continue to trend development expenditure from hardware toward data capture and management software as
the Archive Appliance develops its presence as a standard in the IT archive platform. Archive Appliance development and marketing efforts
are now focused on increasing its competitive advantage by expanding data retention and disposition software functionality, thereby
accelerating the speed of full deployment of the solution into a broader range of mainstream IT archive and disaster recovery applications,
adding more routes to market and improving market share.
FINANCIAL RESULTS
Turnover
Turnover fell by 13% (at constant exchange rates) to �29.4 million in the financial year ended 31 March 2008 (2007: �35.9 million) as
the decline in legacy system sales outweighed the growth in archive solution revenues. The rate of decline in sales revenues slowed during
the year with second half sales of �14.6 million (2007: �17.2 million) being only slightly below the �14.8 million (�18.7 million) achieved
in the first half. In geographical terms, the ratio of US origin revenues to European origin revenues remained at 62%:38%.
Operating loss
Operating losses before rationalisation costs decreased by �1.2 million to �9.6 million in 2007/8. The �1.9 million reduction in gross
profits that resulted from the reduced turnover was more than offset by a �3.1 million decrease in net operating expenses that resulted from
the initial benefits of the rationalisation programmes and favourable foreign exchange movements. In percentage terms, gross margins
decreased slightly from 28.0% in 2006/7 to 27.8% in the current year with material margins falling from 56.5% in the previous year to 55.3%.
Manufacturing overheads were reduced in line with the declining revenues. The reduced net operating expenses included the recording of a
�0.3 million foreign exchange gain in administrative expenses compared to a �0.3 million loss in the previous year.
Second half operating losses before rationalisation costs of �4.8 million were in line with the first half losses of �4.8 million with
costs being reduced in line with the slightly lower revenues.
Total operating losses of �12.2 million (2007: �14.6 million) in 2007/8 include �2.5 million of rationalisation costs (2007: �3.7
million). Full details of these rationalisation costs are given in later sections of this report.
Operating losses before tax and interest in North America totalled �5.8 million compared to the prior year loss of �6.6 million, largely
due to reduced overhead costs resulting from the rationalisation programmes. In Europe, operating losses before tax and interest were �6.3
million compared to a loss of �8.0 million during the previous year mainly due to a reduction in the rationalisation costs incurred in this
territory.
Taxation
The small tax credit for the year related to a deferred tax movement partially offset by tax incurred by our European subsidiaries.
Operating losses eliminate any significant tax charge at the principal operating entities.
Full details of potential deferred tax assets are given in the notes to the financial statements. As a result of these assets, the Group
will not pay significant amounts of corporation tax for the following few years.
Loss per share
The 11.24p loss per share compares with 19.11p for the previous year. The rationalisation costs account for 2.20p of the loss per share
(2007: 4.63p). The impact of the decreased losses was compounded by the increased weighted average number of shares in issue, which rose
from 80,354,084 in 2006/7 to 115,510,374 in 2007/8 as a result of the fundraisings completed during the period.
Cash flow and net debt
Net debt decreased during the year ended 31 March 2008 by �0.7 million to �10.3 million with Group gearing increasing from 39% to 44%
during the course of the year. Net assets decreased from �28.6 million at 31 March 2007 to �23.2 million at the end of the year with the
�7.4 million increase in share capital that resulted from the May 2007 fundraising partially offsetting the loss for the period of �13.0
million.
Inventories fell by a further �1.3 million before currency movements as the amount of legacy inventories held continued to be reduced
and receivables fell by �0.7 million net of currency movements, primarily due to the lower turnover. With the major UDO capital investment
completed in previous years, expenditure on property, plant and equipment remained flat at �1.5 million in the current year and mainly
related to the replacement of old computer and production equipment. This level of expenditure remains significantly below the total
depreciation and amortisation costs of �2.8 million, a trend that is expected to continue over the next few years.
RATIONALISATION PROGRAMME
In light of the continuing decline in our legacy businesses, during 2006/7 we began to implement a restructuring programme to reduce our
cost base and improve our focus on our archival storage business. This programme was expanded by project OSCA during 2007/8 to cover the
outsourcing of US library manufacturing, which is already at an advanced stage with our chosen partner now manufacturing the full range of
libraries. The final stage of this part of the programme will be completed in July 2008 when the remaining Colorado Springs based employees
relocate to a smaller facility. In February 2008, we also took the decision to exit the French mastering business which is no longer
considered core to our focus on archival storage and had begun to lose money. The rationalisation programmes have resulted in a charge for
the year of �2.5 million (2007: �3.7 million).
Once completed in July 2008, these reorganisation programmes will have reduced our total staff numbers to below 300 employees from the
average 340 for 2007/8 and 415 for 2006/7.
Explanation of terms:
In order to reflect underlying business performance, comparisons of financial measures between periods have been adjusted for exchange
rates. Changes in profit, cash flow, debt and share related measures such as loss per share are at reported exchange rates.
Safe Harbour:
The Chairman's Statement and Business Review contain certain statements, statistics and projections that are or may be forward-looking.
The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position,
strategy, projected costs, plans and objectives for the management of future operations of Plasmon Plc and its subsidiaries is not warranted
or guaranteed. These statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of similar
import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances
that will occur in the future. Although Plasmon Plc believes that the expectations reflected in such statements are reasonable, no assurance
can be given that such expectations will prove to be correct. There are a number of factors, which may be beyond the control of Plasmon Plc,
which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Other than as required by applicable law or the
applicable rules of any exchange on which our securities may be listed, Plasmon Plc has no intention or obligation to update forward-looking
statements contained herein.
Plasmon Plc
Consolidated income statement
For the year ended 31 March
2008
Before Rationalisation costs After rationalisation costs
rationalisation
costs
2008 2008 2008
�'000 �'000 �'000
Continuing operations
Revenue 29,433 - 29,433
Cost of sales (21,254) (1,705) (22,959)
Gross profit 8,179 (1,705) 6,474
Sales and marketing expenses (8,907) (38) (8,945)
Research and development (5,843) 4 (5,839)
expenses
Administrative expenses (3,069) (798) (3,867)
Operating loss from continuing (9,640) (2,537) (12,177)
operations
Interest payable and other (858) - (858)
similar charges
Interest receivable 26 - 26
Loss on continuing activities (10,472) (2,537) (13,009)
before taxation
Tax on loss on ordinary 29 - 29
activities
Loss for financial year (10,443) (2,537) (12,980)
Loss per share expressed in
pence per share:
Basic and diluted (9.04) (2.20) (11.24)
Plasmon Plc
Consolidated income statement
For the year ended 31 March
2007
Before Rationalisation costs After rationalisation costs
rationalisation
costs
2007 2007 2007
�'000 �'000 �'000
Continuing operations
Revenue 35,884 - 35,884
Cost of sales (25,838) (1,791) (27,629)
Gross profit 10,046 (1,791) 8,255
Sales and marketing expenses (8,946) (99) (9,045)
Research and development (7,684) (882) (8,566)
expenses
Administrative expenses (4,253) (946) (5,199)
Operating loss from continuing (10,837) (3,718) (14,555)
operations
Interest payable and other (685) - (685)
similar charges
Interest receivable 13 - 13
Loss on continuing activities (11,509) (3,718) (15,227)
before taxation
Tax on loss on ordinary (126) - (126)
activities
Loss for financial year (11,635) (3,718) (15,353)
Loss per share expressed in
pence per share:
Basic and diluted (14.48) (4.63) (19.11)
Plasmon Plc
Consolidated balance sheet
As at 31 March 2008
2008 2007
�'000 �'000
Assets
Non current assets
Goodwill 7,874 7,966
Intangible assets 3,320 4,152
Property, plant and equipment 18,191 19,964
29,385 32,082
Current assets
Inventories 9,889 11,343
Trade and other receivables 6,632 7,504
Current tax assets - 2
Cash and cash equivalents 810 347
17,331 19,196
Liabilities
Current liabilities
Trade and other payables (10,940) (9,580)
Current tax liabilities (37) (83)
Obligations under finance leases (250) (406)
Bank overdraft and loans (7,244) (6,579)
Provisions (1,148) (1,319)
(19,619) (17,967)
Net current (liabilities) / assets (2,288) 1,229
Non-current liabilities
Bank loans (3,451) (3,935)
Obligations under finance leases (163) (461)
Deferred tax (266) (332)
(3,880) (4,728)
Net assets 23,217 28,583
Equity
Share capital 6,038 4,037
Share premium account 75,731 70,336
Foreign exchange reserves (991) (973)
Profit and loss account (57,561) (44,817)
Total shareholders' equity 23,217 28,583
Plasmon Plc
Consolidated statement of changes in shareholders'
equity
For the year ended 31 March
2008
Attributable to equity holders of the Company
Share Foreign Profit and
Share premium exchange loss
capital account reserves account Total
�'000 �'000 �'000 �'000 �'000
At 1 April 2006 3,670 64,861 106 (29,671) 38,966
Share options - value of - - - 207 207
employee services
Currency translation - - (1,079) - (1,079)
differences
Total (expense) / income - - (1,079) 207 (872)
recognised directly in equity
Issue of shares net of fees 367 5,475 - - 5,842
Net loss for the period - - - (15,353) (15,353)
At 31 March 2007 4,037 70,336 (973) (44,817) 28,583
Share options - value of - - - 236 236
employee services
Currency translation - - (18) - (18)
differences
Total (expense)/income - - (18) 236 218
recognised directly in equity
Issue of shares net of fees 2,001 5,395 - - 7,396
Net loss for the period - - - (12,980) (12,980)
At 31 March 2008 6,038 75,731 (991) (57,561) 23,217
Plasmon Plc
Consolidated cash flow statement
For the year ended 31 March 2008
2008 2007
�'000 �'000
Continuing operations
Operating loss (12,177) (14,555)
Adjustments for:
Depreciation - property, plant and equipment 2,083 2,669
Impairment loss on property, plant and equipment 960 875
Amortisation of intangible assets 683 800
Impairment loss on intangible assets 127 217
Impairment loss on goodwill 65 -
Profit on disposal of property, plant and equipment (24) (13)
Share options - value of employee services 236 207
Changes in working capital:
Decrease in inventories 1,326 1,982
Decrease in trade and other receivables 698 882
Increase in payables 1,350 623
Cash absorbed by operations (4,673) (6,313)
Cash generated from/(absorbed by) operating activities
Interest received 26 13
Interest paid - bank loans and overdrafts (811) (606)
Interest paid - finance leases (55) (85)
Taxation paid (50) (175)
Net cash absorbed by operating activities (5,563) (7,166)
Investing activities
Proceeds from the sale of property, plant and equipment 188 39
Purchase of intangible assets - (274)
Purchase of property, plant and equipment (1,447) (1,337)
Net cash used in investing activities (1,259) (1,572)
Financing activities
Issue of ordinary shares, net 7,395 5,842
Repayment of borrowings (491) (3,192)
Repayment of obligations under finance leases (450) (948)
New bank loans issued - 4,600
Net cash raised through financing activities 6,454 6,302
Effect of foreign exchange rate changes 133 258
Net decrease in cash and cash equivalents (235) (2,178)
Cash and cash equivalents at the beginning of the period (5,739) (3,561)
Cash and cash equivalents at the end of the period (5,974) (5,739)
Analysis of net debt
Inception Foreign
At 1 April Cash of finance exchange At 31 March
2007 flow leases gain/(loss) 2008
�'000 �'000 �'000 �'000 �'000
Cash at bank and in hand 347 366 - 97 810
Overdrafts (6,086) (734) - 36 (6,784)
(5,739) (368) - 133 (5,974)
Debt due within one year (493) 32 - 1 (460)
Debt due after one year (3,935) 480 - 4 (3,451)
Finance leases due within one (406) 167 (6) (5) (250)
year
Finance leases due after one (461) 311 (12) (1) (163)
year
Net debt (11,034) 622 (18) 132 (10,298)
Notes to the Financial Information:
1. The financial information contained in this statement
does not constitute statutory accounts as defined in
Section 240 of the Companies Act 1985. The information
has been extracted from financial statements approved by
the Directors on 6 June 2008 which have received an
unqualified auditor*s report from PricewaterhouseCoopers
LLP, Chartered Accountants and Registered Auditors of
Abacus House, Castle Park, Cambridge CB3 0AN. The
financial statements will be delivered to the Registrar
of Companies after the Annual General Meeting. The 2007
financial statements were given an unqualified opinion
by the Company*s auditors.
2. The consolidated financial information of the Group has
been prepared in accordance with International Financial
Reporting Standards (*IFRS*) as endorsed by the European
Union, International Financial Reporting Interpretations
Committee (*IFRIC*) interpretations and those parts of
the Companies Act 1985 applicable to companies reporting
under IFRS. This is in accordance with the Listing Rules
of the Financial Services Authority. The consolidated
financial information has been prepared on a historical
cost basis except for certain items that have been
measured at fair value. Certain policies have only been
applied from 1 April 2005 as permitted under the
transitional arrangements for first time adoption of
IFRS. The preparation of financial information in
accordance with generally accepted accounting principles
requires management to make judgements, estimates and
assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and
expenses. The estimates and associa
3. Basic losses per share have been calculated on the basis
of loss on ordinary activities after tax and 115,510,374
Ordinary Shares (2007: 80,354,084), being the weighted
average number of Ordinary Shares deemed to have been in
issue in the period.
4. There is no dilution of losses per share in the year
ended 31 March 2008 and 31 March 2007.
5. The Directors do not propose to declare a dividend in
respect of the year ended 31 March 2008.
6. On 3 April 2008, the Company completed the placing of
100,000,000 Ordinary Shares for 10p each raising �9.3m
net of expenses.
7. The Annual Report will be mailed to shareholders and
copies will be available from the registered office *
Plasmon Plc, Whiting Way, Melbourn, Hertfordshire, SG8
6EN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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