RNS Number:1348J
Datong PLC
04 December 2007
Press Release 4 December 2007
This announcement replaces the RNS announcement number 0773J released at 07.00
on 4 December 2007.
For the six months to 30 September 2007 the profit from operations for own
products has been corrected to #1,168,000 and the profit from third party
products corrected to #339,000. For the year ended 31 March 2007 the profit
from operations for own products has been corrected to #5,720,000 and the profit
for third party products corrected to #155,000.
DATONG PLC
("Datong" or "the Group")
Interim Results
DATONG PLC (DTE.L), the designer and manufacturer of advanced high performance
intelligence gathering equipment, today announces its Interim Results for the
six months ended 30 September 2007.
Highlights
- Revenue up 5% to #3.52m (2006: #3.35m) despite continued weakness in US
dollar (up 9% on constant exchange rates)
- Profit before tax of #24,000 (2006: #261,000)
- Successful expansion of customer base in Europe
- Continued investment in R&D; two new products launched
- Expansion in sales team; focused on developing new markets
- Solid pipeline of opportunities identified with clear interest in new products
- Strong balance sheet incorporating net funds of #2.1m (2006: #1.2m)
Commenting on the results, Brian Smith, Chief Executive Officer, said:
"We are very pleased with our progress during the period. The success of our
continued investment in product development and establishing routes to market is
evident in some important contract wins achieved in the period and in a strong
pipeline of current opportunities. Despite continuing pressure from the
weakening US dollar we have kept our organic growth on track and look forward to
the second half year with confidence."
- Ends -
Enquiries:
DATONG PLC
Brian Smith, Chief Executive Officer Tel: +44 (0) 113 274 4822
Brian.Smith@datong.co.uk
Stephen Ayres, Finance Director Tel: +44 (0) 113 274 4822
stephen.ayres@datong.co.uk www.datong.co.uk
Landsbanki
Shaun Dobson Tel: +44 (0) 7426 9000
shaun.dobson@landsbanki.co.uk
Simon Robinson Tel: +44 (0) 7426 7705
simon.robinson@landsbanki.co.uk
Media enquiries:
Abchurch Communications
Charlie Jack/Emma Johnson Tel: +44 (0) 207 398 7700
emma.johnson@abchurch-group.com www.abchurch-group.com
Chairman's Statement
It gives me great pleasure to report that at the half year stage we are in line
for delivering our fifth consecutive year of double digit organic sales growth
despite the headwind of a weakening US dollar.
In the period strong progress has been made in our organic growth strategy with
continued investment in our product portfolio and routes to our traditional
markets, whilst also successfully increasing our presence and success in broader
geographic markets and a broader customer base.
Business review
Datong enjoys a leading position in a market sector that is being stimulated by
the ever rising need to combat the risk of terrorism and the spread of organised
crime. Awareness of and attitudes towards the benefits of technology are
improving and, as a result, Datong continues to benefit through the development
of advanced technologies that meet our customers' evolving requirements.
Our technologies launched in the last financial year are being actively marketed
and are generating strong interest including repeat interest from initial
customers. Meanwhile, we have continued to strengthen our portfolio with the
launch of two new products in the period. The first is an open architecture
mapping software product, a first for the industry and one that provides the
customer with significant benefits compared to alternatives. The second, a
versatile hand held receiver significantly improves the usability and
functionality of traditional tracking systems. With these and three further
products expected to be launched in the second half of the year, we continue to
maintain a very strong, comprehensive and leading edge product portfolio.
Demand for our Third Party products in the period, primarily targeted towards
the UK and European markets, has been exceptionally strong and with some
important contract wins we have expanded our customer base in Europe. We expect
to continue to build on this success in the second half of the year.
Trading in the UK has been steady in the period; whilst in the US delays in
approving military budgets has affected the timing, though not the size of
expected orders. However we are now starting to see the release of orders,
evidenced by the recent winning of an $800,000 US contract and we have a strong
pipeline of identified opportunities.
We continue to make steady progress in developing positions in other global
markets. An International Sales Manager has recently been appointed to lead the
development of these markets and we are now starting to see some exciting
opportunities. This appointment coincides with newly released products more in
line with the user requirements in the rest of world markets.
Over the last 18 months the capacity of the Group has been constrained to a
degree by building space. To manage its continuing growth the Group has secured
new leased premises which more than doubles its available space and offers
opportunities for future expansion. A one off capital cost for refurbishment
and conversion of around #800,000 is expected to be incurred in this financial
year. The Group's current freehold premises are being marketed for sale and a
completion is expected next financial year.
Financial and operating performance
Group revenue for the period was up 5% to #3.52m (2006: #3.35m) whilst profit
before tax was #24,000 (2006: #261,000). Basic and diluted earnings per share
were 0.43p (2006: 2.26p) and 0.4p (2006: 2.2p) respectively.
The shift in sales mix towards our Third Party products compared to last year
together with a weaker US dollar resulted in a lower margin for the period.
The average US dollar exchange rate in the period was $2.03 (2006: $1.87). The
translation impact of this weaker US dollar is summarised in the table below.
2007 result at 2007 2007 result at 2006
Impact
exchange rate exchange rate
#'000 #'000
#'000
Revenue 3518 3644
(126)
Profit before tax 24 127
(103)
Net research and development costs for the period were #0.5m (2006: #0.5m).
Gross costs for the period were #0.6m (2006: #0.7m) reflecting our continuing
focus on developing technologies that meet the needs of our markets.
Net funds decreased in the period by #0.5m to #2.1m (2006: decrease of #1.4m to
#1.2m) with an underlying cash inflow from operating activities of #0.3m (2006:
outflow of #0.5m). At the period end trade and other receivables included #1m
in relation to long term contract work in progress which was fully received in
October 2007.
Seasonality
There are a number of seasonal pressures that are reflected in the financial
results. Sales have always been heavily weighted towards the second half of the
year, primarily due to the procurement practises of our customers. Over the
last three years revenues in the first half of the year have been typically at
32% of those achieved in the full year. This trend is expected to continue in
the current year.
Strategic review
In line with the strategic review previously announced the name of the Company
was changed to Datong plc with effect from 11 October 2007.
The Board continues to actively review strategic options for acquisitive growth
that would enable the Group to access new markets and technologies.
Dividend
The Company paid its maiden dividend of 1p per share in September 2007. The
Company does not intend payment of an interim dividend but subject to financial
performance expects to pay an increasing annual dividend going forward.
Current trading and outlook
With a strong pipeline of identified opportunities for the second half of the
year and with progress since 30 September 2007 being in line with expectations
the Board looks forward with confidence to the second half of the year.
Paul Lever
Chairman
Condensed Consolidated Income Statement
for the six months ended 30 September 2007
Six months to Six months to
Year ended
30 September 30 September
31 March
2007 2006
2007
Unaudited Unaudited
Audited
& restated
& restated
Note #'000 #'000
#'000
Continuing operations
Revenue 2 3,518 3,353
9,525
Cost of sales (1,898) (1,500)
(3,612)
Gross profit 1,620 1,853
5,913
Overhead costs (1,650) (1,625)
(4,164)
(Loss)/profit from operations 2 (30) 228
1,749
Investment income 60 40
73
Finance costs (6) (7)
(14)
Profit before taxation 24 261
1,808
Taxation 3 35 52
(429)
Profit for the period attributable to 59 313
1,379
equity holders of the company
Earnings per share
Basic 4 0.43 p 2.26 p
9.97 p
Diluted 4 0.40 p 2.20 p
9.70 p
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 September 2007
Six months to Six months to
Year ended
30 September 30 September
31 March
2007 2006
2007
Unaudited Unaudited
Audited
& restated
& restated
Note #'000 #'000
#'000
Shareholders' equity at the start of the 9,838 8,389
8,389
period
Profit for the period 59 313
1,379
Cost of share-based incentives 33 -
70
Currency translation differences (5) 1
-
Dividends paid 5 (138) -
-
Net (reduction)/addition to shareholders' (51) 314
1,449
equity during the period
Shareholders' equity at the end of the 9,787 8,703
9,838
period
Condensed Consolidated Balance Sheet
as at 30 September 2007
30 September 30 September
31 March
2007 2006
2007
Unaudited Unaudited
Audited
& restated
& restated
Note #'000 #'000
#'000
Assets
Non-current assets
Intangible assets 1,782 1,594
1,598
Property, plant and equipment 1,080 1,610
1,677
Deferred tax assets 14 78
2
2,876 3,282
3,277
Current assets
Inventories 1,603 1,200
1,358
Trade and other receivables 4,318 4,202
4,997
Tax receivable - 193
90
Derivative financial instruments - -
2
Cash and cash equivalents 2,212 1,361
2,735
8,133 6,956
9,182
Assets held for sale 6 699 -
-
Total assets 11,708 10,238
12,459
Liabilities
Current liabilities
Trade and other payables (1,554) (1,338)
(2,221)
Tax payable (209) -
(235)
Derivative financial instruments - (4)
-
Short-term borrowings and overdrafts (22) (22)
(21)
Obligations under finance leases - (5)
-
(1,785) (1,369)
(2,477)
Non-current liabilities
Borrowings (136) (156)
(144)
Obligations under finance leases - (10)
-
(136) (166)
(144)
Total liabilities (1,921) (1,535)
(2,621)
Net assets 9,787 8,703
9,838
Equity
Share capital 69 69
69
Share premium account 4,468 4,468
4,468
Share-based incentives reserve 103 -
70
Currency translation reserve (5) 1
-
Retained earnings 5,152 4,165
5,231
Equity attributable to equity holders of the 9,787 8,703
9,838
company
Condensed Consolidated Cash Flow Statement
for the six months ended 30 September 2007
Six months to Six months to Year
ended
30 September 30 September 31
March
2007 2006
2007
Unaudited Unaudited
Audited
& restated &
restated
#'000 #'000
#'000
Operating activities
(Loss)/profit from operations (30) 228
1,749
Adjustments for:
Effect of currency translation - -
(3)
Depreciation and amortisation 459 501
1,236
Loss on disposal of tangible assets - -
1
Cost of share-based incentives 33 -
70
(Increase)/decrease in inventories (245) 5
(153)
Decrease/(Increase) in receivables 615 (1,363)
(2,185)
(Decrease)/Increase in payables (596) 141
1,058
Tax received/(paid) 84 (48)
(119)
Net cash from operating activities 320 (536)
1,654
Investing activities
Interest received 60 40
73
Purchases of property, plant and (267) (369)
(612)
equipment
Cost of internally generated (480) (536)
(1,101)
intangible assets
Net cash used in investing activities (687) (865)
(1,640)
Financing activities
Interest paid (6) (7)
(14)
Borrowings repaid (7) (8)
(21)
Capital element of finance leases - (3)
(17)
repaid
Dividends paid (138) -
-
Net cash used in financing activities (151) (18)
(52)
Net decrease in cash and cash (518) (1,419)
(38)
equivalents
Cash and cash equivalents at the 2,735 2,789
2,789
start of the period
Effect of currency translation (5) (9)
(16)
Cash and cash equivalents at the end 2,212 1,361
2,735
of the period
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 September 2007
Accounting policies
Basis of Preparation
These condensed financial statements are unaudited and do not constitute
statutory financial statements within the meaning of Section 240 of the
Companies Act 1985.
The condensed financial statements have been prepared in accordance with IAS 34
Interim Financial Reporting. The financial information contained in the
condensed financial statements has been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union
("IFRS").
The accounting policies used in the preparation of the condensed financial
statements are the same as those applied in the preparation of the financial
statements for the year ended 31 March 2007 with the exception of the policies
now adopted under IFRS in relation to the capitalisation of certain development
costs and the valuation of derivative financial instruments. Details of these
accounting policies are set out below.
These are the Group's first financial statements prepared in accordance with
IFRS and the comparative financial information for the six months ended 30
September 2006 and the year ended 31 March 2007 has been restated from that
presented in previous financial statements prepared in accordance with UK GAAP.
Notes 8 to 11 set out reconciliations of equity and profit for these comparative
periods explaining how the transition from UK GAAP to IFRS has affected the
Group's financial position and financial performance. There have been no changes
to the Group's cash flows as a result of the transition.
Intangible assets - development costs
Under UK GAAP all expenditure on research and development was written off
against profits in the year in which it was incurred.
Under IFRS development costs meeting the criteria set out in IAS 38 Intangible
Assets are capitalised as intangible assets and amortised over their useful
economic lives of between 3 and 5 years. Intangible assets are reviewed
annually for impairment or more frequently if there are indications that they
might be impaired. Other development costs and all research costs are written
off against profits in the year in which they are incurred.
Derivative financial instruments
A large proportion of the Group's revenue is denominated in US dollars whereas
the largest portion of its costs are incurred in GB Sterling. To help manage
the risk associated with currency volatility the Group takes on forward currency
contracts relating to its net exposure.
Under UK GAAP monetary assets and liabilities denominated in foreign currencies
were translated at the rate of exchange ruling at the balance sheet date after
taking into account any forward cover in place. The gains or losses on
translation were included in the profit for the period.
Under IFRS monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the balance sheet date. Forward
currency contracts are recorded at their fair value at the balance sheet date.
All gains and losses on translation are included in the profit for the period.
IFRS transitional arrangements
In preparing the IFRS balance sheet at 1 April 2006, the date of transition, the
Group has taken advantage of the optional exemption provided by IFRS 1
First-time adoption of International Financial Reporting Standards from full
retrospective application of IFRS accounting policies in relation to cumulative
translation differences arising on consolidation of subsidiaries. IAS 21
requires such differences to be held in a separate reserve, rather than included
in the profit and loss reserve as was the case under UK GAAP. This reserve has
been deemed to be #nil on 1 April 2006.
Segmental Information
The Group determines its reportable segments based on the structure of the
internal financial information used by the Board for decision-making purposes.
Primary reportable segment
The primary segment reporting format is by business segment which comprises two
segments; Own Products and Third Party Products. Own products represent
products developed, manufactured and distributed by the Group. Third Party
Products represent products bought in from a third party and distributed by the
Group.
The products from both business segments are offered to the same markets and
consequently the business segments are managed together as one business
operating from the same locations. Accordingly only directly attributable costs
have been allocated across the segments.
Six months to Six months to
Year ended
30 September 30 September
31 March
2007 2006
2007
Unaudited Unaudited
Audited
& restated
& restated
#'000 #'000
#'000
Business segment analysis
Revenue
Own products 2,405 3,353
9,104
Third party products 1,113 -
421
3,518 3,353
9,525
(Loss)/profit from operations
Own products 1,168 1,839
5,720
Third party products 339 -
155
1,507 1,839
5,875
Unallocated costs (1,537) (1,611)
(4,126)
(30) 228
1,749
Secondary reportable segment
The secondary segment reporting format is by geographical destination. The
Groups operations are based in four main geographical areas as set out below.
Six months to Six months to
Year ended
30 September 30 September
31 March
2007 2006
2007
Unaudited Unaudited
Audited
& restated
& restated
#'000 #'000
#'000
Geographical destination analysis
Revenue
United Kingdom 702 622
2,763
Europe 1,231 330
738
USA 1,486 2,401
5,987
Rest of World 99 -
37
3,518 3,353
9,525
Taxation
The current tax credit for the period has been calculated at the estimated
effective rate for the full year expressed as a percentage of the expected
results for the year and then applied to the interim results.
Six months to Six months to
Year ended
30 September 30 September
31 March
2007 2006
2007
Unaudited Unaudited
Audited
& restated
& restated
#'000 #'000
#'000
Current tax
UK (36) (41)
386
Foreign 13 40
19
(23) (1)
405
Deferred tax (12) (51)
24
(35) (52)
429
Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to equity holders of the company by the weighted average number of
ordinary shares in issue during the period.
Diluted earnings per share takes into account the potential dilutive effect of
outstanding share options.
Six months to Six months to
Year ended
30 September 30 September
31 March
2007 2006
2007
Unaudited Unaudited
Audited
& restated
& restated
#'000 #'000
#'000
Profit for the period attributable to equity
holders of the company 59 313
1,379
Number of ordinary shares
For calculating basic earnings per share 13,834,375 13,834,375
13,834,375
Maximum dilution potential from outstanding 889,100 374,600
377,400
share options
For calculating diluted earnings per share 14,723,475 14,208,975
14,211,775
Dividend
Six months to Six months to
Year ended
30 September 30 September
31 March
2007 2006
2007
Unaudited Unaudited
Audited
& restated
& restated
#'000 #'000
#'000
Dividends paid
Final 2007 - 1.0p per share, paid 138 -
-
September 2007
No interim dividend is proposed for the period (2006:#nil)
6 Assets held for Sale
Assets classified as held for sale are measured at the lower of book value and
fair value less disposal costs. Assets held for sale are not depreciated.
During the period, the Group entered into a lease of new pemises and began to
actively market for sale its freehold premises. Assets held for sale at 30
September 2007 represent these premises.
7 Contingent liabilities
MMI Research Limited ("MMI") has raised a court action in respect of an alleged
patent infringement by the Company and one of its suppliers. MMI alleges that a
product for which the Company acts as a reseller infringes the UK element of a
patent that MMI jointly owns. MMI has issued and served court proceedings
against the Company and the manufacturer of the product.
The Company is contesting the action vigorously and the Directors, having taken
legal advice, believe that the Company has a strong defence. A counterclaim to
revoke the patent has been made by the Company and its supplier. In the event
that MMI were to succeed the Company's potential liability is difficult to
quantify; however there is a possibility that this outcome could have an adverse
effect on the Company's profitability. No financial provision for damages has
been made, which reflects the Directors' views on the strength of the Company's
case. The case which was initially expected to be heard in December 2007 has
been postponed and is now not expected to be heard before July 2008.
8 Reconciliation of Condensed Consolidated Income Statement for the six months
to 30 September 2006 from UK GAAP
UK GAAP Intangible Derivative
Restated
IFRS format assets - financial
IFRS
Unaudited development instruments
Unaudited
costs IAS38 IAS21
#'000 #'000 #'000
#'000
Continuing Operations
Revenue 3,382 - (29)
3,353
Cost of sales (1,500) - -
(1,500)
Gross Profit 1,882 (29)
1,853
Overhead costs (1,795) 170 -
(1,625)
Profit from operations 87 170 (29)
228
Investment income 40 - -
40
Finance costs (7) - -
(7)
Profit before taxation 120 170 (29)
261
Taxation 52 - -
52
Profit for the period attributable to 172 170 (29)
313
equity holders of the company
9 Reconciliation of Condensed Consolidated Balance Sheet at 30 September 2006
from UK GAAP
UK GAAP Intangible Derivative
Restated
IFRS format assets - financial
IFRS
Unaudited development instruments
Unaudited
costs IAS38 IAS21
#'000 #'000 #'000
#'000
Assets
Non-current assets
Intangible assets - 1,594 -
1,594
Property, plant and equipment 1,610 - -
1,610
Deferred tax assets 78 - -
78
1,688 1,594 -
3,282
Current assets
Inventories 1,200 - -
1,200
Trade and other receivables 4,202 - -
4,202
Tax Receivable 193 - -
193
Cash and cash equivalents 1,361 - -
1,361
6,956 - -
6,956
Total Assets 8,644 1,594 -
10,238
Liabilities
Current liabilities
Trade and other payables (1,330) - (8)
(1,338)
Derivative financial instruments - - (4)
(4)
Short-term borrowings and overdrafts (22) - -
(22)
Obligations under finance leases (5) - -
(5)
(1,357) - (12)
(1,369)
Non-current liabilities
Borrowings (156) - -
(156)
Obligations under finance leases (10) - -
(10)
(166) - -
(166)
Total liabilities (1,523) - (12)
(1,535)
Net assets 7,121 1,594 (12)
8,703
Equity
Share capital 69 - -
69
Share premium account 4,468 - -
4,468
Currency translation reserve 1 - -
1
Retained earnings 2,583 1,594 (12)
4,165
Equity attributable to equity holders of 7,121 1,594 (12)
8,703
the company
10 Reconciliation of Condensed Consolidated Income Statement for the year to 31
March 2007 from UK GAAP
UK GAAP Intangible Derivative
Restated
IFRS format assets - financial
IFRS
Audited development instruments
costs IAS38 IAS21
#'000 #'000 #'000
#'000
Continuing Operations
Revenue 9,551 - (26)
9,525
Cost of sales (3,612) - -
(3,612)
Gross Profit 5,939 (26)
5,913
Overhead costs (4,338) 174 -
(4,164)
Profit from operations 1,601 174 (26)
1,749
Investment income 73 - -
73
Finance costs (14) - -
(14)
Profit before taxation 1,660 174 (26)
1,808
Taxation (429) - -
(429)
Profit for the period attributable to 1,231 174 (26)
1,379
equity holders of the company
11 Reconciliation of Condensed Consolidated Balance Sheet at 31 March 2007 from
UK GAAP
UK GAAP Intangible Derivative
Restated
IFRS format assets - financial
IFRS
Audited development instruments
costs IAS38 IAS21
#'000 #'000 #'000
#'000
Assets
Non-current assets
Intangible assets - 1,598 -
1,598
Property, plant and equipment 1,677 - -
1,677
Deferred tax assets 2 - -
2
1,679 1,598 -
3,277
Current assets
Inventories 1,358 - -
1,358
Trade and other receivables 4,997 - -
4,997
Tax Receivable 90 - -
90
Derivative financial instruments - - 2
2
Cash and cash equivalents 2,735 - -
2,735
9,180 - 2
9,182
Total Assets 10,859 1,598 2
12,459
Liabilities
Current liabilities
Trade and other payables (2,210) - (11)
(2,221)
Tax payable (235) - -
(235)
Short-term borrowings and overdrafts (21) - -
(21)
(2,466) - (11)
(2,477)
Non-current liabilities
Borrowings (144) - -
(144)
Total liabilities (2,610) - (11)
(2,621)
Net assets 8,249 1,598 (9)
9,838
Equity
Share capital 69 - -
69
Share premium account 4,468 - -
4,468
Share-based incentives reserve 70 - -
70
Retained earnings 3,642 1,598 (9)
5,231
Equity attributable to equity holders of 8,249 1,598 (9)
9,838
the company
This information is provided by RNS
The company news service from the London Stock Exchange
END
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