TIDMDTE
RNS Number : 2666E
Datong PLC
29 May 2012
Press Release 29 May 2012
DATONG PLC
("DATONG" or "the Group")
Interim Results
DATONG PLC (DTE.L), a leading provider of covert intelligence
gathering solutions, today announces its interim results for the
six-month period ended 31 March 2012.
Financial Highlights
-- Revenue of GBP3.84 million (2011: GBP6.33 million)
-- Operating loss of GBP0.14 million (2011: profit of GBP0.76
million)
-- Basic and diluted earnings per ordinary share of 1.18p (2011:
5.03p)
-- Net cash of GBP2.14 million (2011: GBP1.57 million)
-- Confirmed order book at period end of GBP2.36 million (2011:
GBP1.07 million)
-- Sales pipeline supports more heavily weighted second half
-- Order intake in April and May totalled GBP3.10 million (2011:
GBP1.23 million)
Operational Highlights
-- Mark Cook appointed to the Board as Chief Executive Officer
-- Strong demand for new products.
-- Group cost base successfully restructured leading to annualised
savings of GBP0.5 million
-- Implementation of operational improvements leading to efficiency
savings and margin improvements
-- Successful Court of Appeal result and removal of patent litigation
Commenting on the results, Mark Cook, Chief Executive Officer,
said:
"Whilst the half-year financials were below previous year's
results, they were in-line with our expectations and do not reflect
the underlying strength of DATONG's business operations. The slow
release of Government funding in the first half, most notably in
the US, is showing signs of recovery which provides the Board with
confidence of a strong second half.
"We are particularly encouraged that our new products have been
well received and quickly adopted by the market place. After
protracted litigation, I am pleased that the Courts have found in
our favour, which has removed any lingering concerns with our
customers and enabled us to continue selling and supporting the
third-party cellular technology. During the second half our focus
will be to develop our strategic direction with particular emphasis
on market diversification, strengthening our technology and
intellectual property portfolio and developing innovative service
offerings."
- Ends -
Enquiries:
DATONG PLC Tel: +44 (0) 113 239
5350
Mark Cook, Chief Executive Officer
Stephen Ayres, Finance Director
Nominated adviser and broker
Canaccord Genuity Tel: +44 (0) 207 523
8000
Simon Bridges / Kit Stephenson
Media enquiries
Abchurch Communications Tel: +44 (0) 207 398
7714
Sarah Hollins / Mark Dixon/ Oliver
Hibberd
oliver.hibberd@abchurch-group.com
Chairman's Statement
As highlighted in previous statements made by the Group, the
first half has been financially slower than the corresponding
period last year due to a number of larger sales opportunities not
being deliverable until the second half of the year. Delivered
revenue for the period was GBP3.84 million (2011: GBP6.33 million)
and the operating loss was GBP0.14 million (2011: profit of GBP0.76
million). The sales pipeline for the second half however remains
strong and the committed order book at the period end was GBP2.36
million (2011: GBP1.07 million).
The Group continues to invest in its strong product portfolio
and routes to market whilst also prudently controlling its cost
base. Operational improvements have been implemented which are
leading to efficiency savings and margin improvements. As announced
at DATONG's Annual General Meeting, the Group's cost base has been
successfully restructured in the period and is expected to reduce
costs by circa GBP0.5 million on an annualised basis. We have a
strong balance sheet with a net cash position at the period end of
GBP2.14 million (2011: GBP1.57 million).
Strategy
DATONG provides advanced covert tracking and location based
solutions to military, security and law enforcement agencies for
the gathering of intelligence to help combat terrorism and
organised crime. Whilst economic conditions continue to impact the
funding of Defence and Security budgets in many countries,
Governments in the Group's core markets have confirmed spending
priorities that support DATONG's niche market solutions and provide
the Group with significant room for growth. DATONG's strategy is to
broaden its product and service portfolio and routes to market in
its chosen international markets. Although the USA and the UK
remain the Group's core geographic focus, DATONG is also
successfully developing routes to market in many other
international markets.
The provision of solutions to reliably gather usable
intelligence has underpinned the Group's strategy and growth plans
for a number of years and DATONG continues to diversify its
customer base and strengthen its technology portfolio.
Market Developments
Although DATONG's market remains relatively robust overall,
individual markets are proving to be volatile in terms of spending
in certain countries and in particular the timing of spend in the
larger markets. This volatility is reflected in the mixed financial
result for the period. An analysis of the revenue for the period by
reportable segment and geographic market is set out in note 2.
For different reasons the placing and/or delivery of certain
large orders are expected in the second half of the financial year
which will result in a more heavily weighted second half than
previously seen.
Americas
We continue to successfully expand our activity in the Americas
and we are experiencing strong and encouraging interest from our
customers in our more recent products giving the Board confidence
of continued year on year growth from this important territory.
Although early restrictions and delays in the release of budgets to
end users adversely impacted order intake at the start of the
period, recent activity and the current sales pipeline are expected
to deliver a strong second half performance.
UK and Rest of World ("ROW")
Order intake from the UK and ROW territories has exceeded
management expectations to date. However, the delivery of a large
Own Products order (for GBP0.9 million) is not expected to take
place until the second half of the year whereas traditionally
delivery of such orders would normally take place in the first
half.
Europe
The challenging economic environment within Europe has adversely
impacted the Group in the period and in particular with respect to
Third Party products which tend to be more volatile in nature
reflecting the relative size and number of orders.
These market conditions and the corresponding performance of the
Group's geographic territories are expected to continue throughout
the second half of the year.
Product and Service Portfolio
Research and development ("R&D") is core to DATONG's organic
growth strategy and the Group continues to make significant
investment in this area in response to both customer funded and
non-funded development opportunities. Following the high number of
product launches over the previous 12-18 months, the Group's
development activity during the period has largely been focused on
the development of additional capability and characteristics aimed
at increasing the possible market applications of the Group's
technology.
Gross R&D expenditure in the period was GBP0.80 million
(2011: GBP0.93 million) and the net costs written off against
profit were GBP0.92 million (2011: GBP0.60 million) reflecting a
higher amortisation charge associated with recent product
launches.
Patent Infringement Litigation
As more fully disclosed in the Company's Annual Report and
Accounts for the year ended 30 September 2011, DATONG had been
subject to a patent infringement claim since 2006.
During the period the Court of Appeal has judged that the patent
in suit is invalid and as a result, neither damages nor legal costs
will be payable or recoverable by the Company. Consequently the
financial provision of GBP0.3 million previously carried has been
released into profit during the period.
There are no restrictions on the Company's ability to sell any
of the affected Third Party products into its chosen markets and
the judgement removes any lingering doubt that may have existed
with its customers.
Financial Performance
Group revenue for the period was GBP3.84 million (2011: GBP6.33
million) and the confirmed order book at the period end was GBP2.36
million (2011: GBP1.07 million). As noted above a number of factors
have impacted the delivered revenue in the period and the closing
order book such that the resulting shape of the business will lead
to a higher second half weighting than previously seen.
The operating loss before exceptional items for the period was
GBP0.44 million (2011: profit of GBP0.76 million). Although a
number of operational improvement initiatives implemented are
delivering margin improvements these have been offset by the
reduced volume in the period. The costs recognised in the operating
loss for the period to effect the restructuring of the cost base
are GBP0.11 million.
By the nature of its operations, the Group is exposed to
fluctuations in the US dollar exchange rate, which is principally
managed by way of forward exchange contracts. The average exchange
rate in the period was $1.59 (2011: $1.60) resulting in a
negligible translation impact in the period compared to a constant
currency position.
An exceptional credit of GBP0.30 million (2011: GBPnil) has been
recognised in the loss for the period relating to the release of
the patent litigation provision referred to above.
The tax credit for the period of GBP0.31 million (2011: debit of
GBP0.07 million) incorporates a credit of GBP0.04 million in
respect of prior periods and includes the continuing benefit of UK
tax incentives associated with the Group's R&D activities.
Basic and diluted earnings per share are 1.18p (2011:
5.03p).
Net cash increased in the period by GBP0.88 million (2011:
decreased by GBP1.00 million) and at the period end stood at
GBP2.14 million (2011: GBP1.57 million).
The Board is not recommending the payment of an interim dividend
(2011: GBPnil).
Board Changes
Mark Cook was appointed to the Board as Chief Executive Officer
on 9 January 2012. He has significant experience of successfully
developing high technology defence and security businesses in both
the UK and international markets which will prove invaluable to
DATONG in progressing its growth strategy.
Brian Smith who had been acting interim Chief Executive Officer
since 13 July 2011 reverted to his position as a Non-Executive
Director on 9 January 2012.
Outlook
Order intake during April and May has been in line with
expectations totalling GBP3.1 million. The sales pipeline remains
strong with good visibility over the potential order intake for the
rest of the year underpinning current consensus market
expectations.
Supported by confidence in the US market, the Board is confident
that the Group's continued investment in product development and
routes to market will drive the business forward and deliver
growth.
Paul Lever
Chairman
29 May 2012
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2012
Six months Six months Twelve months
to 31 to 31 to 30 September
March March
2012 2011 2011
Unaudited Unaudited Audited
Continuing operations Note GBP'000 GBP'000 GBP'000
-------------------------------------- ---- ---------- ----------- ----------------
Revenue 2 3,839 6,332 11,745
Cost of sales (2,164) (3,182) (6,563)
-------------------------------------- ---- ---------- ----------- ----------------
Gross profit 1,675 3,150 5,182
Overhead costs (2,113) (2,387) (5,126)
Share of post-tax result of associate (3) - (8)
Exceptional litigation costs 4 300 - -
(Loss)/profit from operations 2 (141) 763 48
Investment income - - 1
Finance costs (1) (1) (1)
-------------------------------------- ---- ---------- ----------- ----------------
(Loss)/profit before taxation (142) 762 48
Taxation 305 (66) 95
-------------------------------------- ---- ---------- ----------- ----------------
Profit for the period attributable
to equity holders of the Company 163 696 143
-------------------------------------- ---- ---------- ----------- ----------------
Earnings per ordinary share (pence)
Basic 3 1.18 5.03 1.03
Diluted 3 1.18 5.03 1.03
-------------------------------------- ---- ---------- ----------- ----------------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 MARCH 2012
Six months Six months Twelve months
to 31 March to 31 March to 30 September
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- ----------- ---------------
Profit for the period 163 696 143
Other comprehensive income
Currency translation differences 26 10 (18)
--------------------------------------- ----------- ----------- ---------------
Total comprehensive income for the
period attributable to equity holders
of the Company 189 706 125
--------------------------------------- ----------- ----------- ---------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2012
31 March 31 March 30 September
2012 2011 2011
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
--------------------------------- ---- --------- ---------- -------------
Assets
Non-current assets
Intangible assets 2,952 3,198 3,070
Property, plant and equipment 1,037 1,290 1,148
Investment in associates 9 - (8)
Deferred tax assets 263 12 4
--------------------------------- ---- --------- ---------- -------------
4,261 4,500 4,214
Current assets
Inventories 2,415 2,164 2,028
Trade and other receivables 2,482 3,752 4,112
Derivative financial instruments 21 37 -
Tax receivables 10 264 161
Cash and cash equivalents 2,144 1,570 1,268
--------------------------------- ---- --------- ---------- -------------
7,073 7,787 7,569
Assets held for sale - 375 -
--------------------------------- ---- --------- ---------- -------------
Total assets 11,334 12,662 11,783
--------------------------------- ---- --------- ---------- -------------
Liabilities
Current liabilities
Trade and other payables (1,236) (1,812) (1,563)
Obligations under finance leases - (8) -
--------------------------------- ---- --------- ---------- -------------
(1,236) (1,820) (1,563)
Non-current liabilities
Deferred tax liabilities (35) (66) (48)
Provisions 4 - (300) (300)
--------------------------------- ---- --------- ---------- -------------
(35) (366) (348)
--------------------------------- ---- --------- ---------- -------------
Total liabilities (1,271) (2,186) (1,911)
--------------------------------- ---- --------- ---------- -------------
Net assets 10,063 10,476 9,872
--------------------------------- ---- --------- ---------- -------------
Equity
Share capital 69 69 69
Share premium 4,468 4,468 4,468
Currency translation reserve 9 11 (17)
Retained earnings 5,517 5,928 5,352
--------------------------------- ---- --------- ---------- -------------
Equity attributable to equity
holders of the Company 10,063 10,476 9,872
--------------------------------- ---- --------- ---------- -------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 MARCH 2012
Currency
Share Share translation Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- ------- ------------ -------- --------
Unaudited
At 1 October 2011 69 4,468 (17) 5,352 9,872
Total comprehensive income
for the period - - 26 163 189
Cost of share-based incentives - - - 2 2
At 31 March 2012 69 4,468 9 5,517 10,063
------------------------------- ------- ------- ------------ -------- --------
Unaudited
At 1 October 2010 69 4,468 1 5,370 9,908
Total comprehensive income
for the period - - 10 696 706
Cost of share-based incentives - - - (138) (138)
At 31 March 2011 69 4,468 11 5,928 10,476
------------------------------- ------- ------- ------------ -------- --------
Audited
At 1 October 2010 69 4,468 1 5,370 9,908
Total comprehensive income
for the period - - (18) 143 125
Cost of share-based incentives - - - (161) (161)
At 30 September 2011 69 4,468 (17) 5,352 9,872
------------------------------- ------- ------- ------------ -------- --------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 MARCH 2012
Six months Six months Twelve months
to 31 to 31 to 30 September
March March
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------- ---------- ----------- ---------------
Cash flows from operating activities
(Loss)/profit from operations (141) 763 48
Adjustments for:
Depreciation and amortisation 694 582 1,576
Share of post-tax result of associate 3 - 8
Profit on disposal of tangible assets - - -
Cost of share-based incentives 2 (138) (161)
Fair value (gains)/losses on derivative
financial instruments (21) (15) 22
Increase in inventories (385) (203) (45)
Decrease/(increase) in trade and
other receivables 1,578 (776) (1,224)
Decrease in trade and other payables (549) (405) (627)
Tax received 184 - 254
--------------------------------------------- ---------- ----------- ---------------
Net cash generated from /(used in) operating
activities 1,365 (192) (149)
--------------------------------------------- ---------- ----------- ---------------
Cash flows from investing activities
Interest received - - 1
Sales of property, plant and equipment - - 375
Purchases of property, plant and equipment (45) (100) (203)
Purchase of intangible assets (422) (701) (1,318)
Investment in associate (20) - -
--------------------------------------------- ---------- ----------- ---------------
Net cash used in investing activities (487) (801) (1,145)
--------------------------------------------- ---------- ----------- ---------------
Cash flows from financing activities
Interest paid (1) (1) (1)
Capital element of finance leases repaid - (8) (16)
Net cash used in financing activities (1) (9) (17)
--------------------------------------------- ---------- ----------- ---------------
Net increase/(decrease) in cash and
cash equivalents 877 (1,002) (1,311)
Cash and cash equivalents at the start
of the period 1,268 2,575 2,575
Effect of foreign currency translation (1) (3) 4
--------------------------------------------- ---------- ----------- ---------------
Cash and cash equivalents at the end
of the period 2,144 1,570 1,268
--------------------------------------------- ---------- ----------- ---------------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2012
1. Accounting policies
Basis of Preparation
These financial statements are the unaudited interim
consolidated financial statements of DATONG plc, a company
incorporated in the United Kingdom, and its subsidiaries (together
referred to as the "Group") for the six month period ended 31 March
2012. They have been prepared in accordance with IAS 34 'Interim
Financial Reporting' and should be read in conjunction with the
consolidated financial statements for the 12-month period ended 30
September 2011. They were approved for issue by the Board of
Directors on 3 January 2012. The financial information contained in
these financial statements does not constitute statutory accounts
as defined in the Companies Act 2006.
The accounting policies used in the preparation of the interim
financial statements are the same as those applied in the
preparation of the financial statements for the year ended 30
September 2011.
The preparation of the interim financial statements requires the
use of certain estimates and requires management to exercise its
judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or
complexity or areas where assumptions and estimates are significant
to the interim financial statements are consistent with those
disclosed in the consolidated financial statements for the year
ended 30 September 2011.
The comparative figures for the year ended 30 September 2011
have been taken from but do not constitute the company's statutory
financial statements for that financial year. Those financial
statements have been reported on by the Company's Auditors and
delivered to the Registrar of Companies. Their report was
unqualified and did not contain a statement under section 498 of
the Companies Act 2006.
TAXATION
The charge for taxation is recognised based upon the estimated
effective rate for the full financial year, expressed as a
percentage of the expected result for the year and then applied to
the interim results. The tax effect of exceptional items and UK
Research & Development tax credits are however not included in
the estimated effective rate but are recognised in the same period
as they arise.
2. Segmental 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 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.
segment REVENUES AND RESULTS
The segment results for the period are as follows:
Six months Six months Twelve months
to 31 to 31 March to 30 September
March
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- ----------- ---------------
Segment revenue
Own products 3,423 4,995 9,407
Third Party products 416 1,337 2,338
-------------------------------------- ---------- ----------- ---------------
Total 3,839 6,332 11,745
-------------------------------------- ---------- ----------- ---------------
Segment profit
Own products 1,404 2,534 4,205
Third Party products 217 546 832
-------------------------------------- ---------- ----------- ---------------
Total 1,621 3,080 5,037
-------------------------------------- ---------- ----------- ---------------
Unallocated costs (2,059) (2,317) (4,981)
Share of post-tax result of associate (3) - (8)
Exceptional litigation costs 300 - -
Investment income - - 1
Finance costs (1) (1) (1)
-------------------------------------- ---------- ----------- ---------------
(Loss)/profit before taxation (142) 762 48
-------------------------------------- ---------- ----------- ---------------
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 the period end are as
follows:
31 March 31 March 30 September
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------- --------- --------- ------------
Segment assets
Own products 8,702 9,164 9,087
Third Party products 155 244 1,014
--------------------- --------- --------- ------------
8,857 9,408 10,101
Unallocated 2,477 3,254 1,682
--------------------- --------- --------- ------------
11,334 12,662 11,783
--------------------- --------- --------- ------------
Segment liabilities
Own products 962 1,471 794
Third Party products 34 415 798
--------------------- --------- --------- ------------
996 1,886 1,592
Unallocated 275 300 319
--------------------- --------- --------- ------------
1,271 2,186 1,911
--------------------- --------- --------- ------------
Segment assets principally relate to property, plant and
equipment, intangible assets, inventories and trade and other
receivables. Unallocated assets principally relate to plant and
equipment, tax receivables and cash and cash equivalents.
Segment liabilities principally relate to provisions and trade
and other payables. Unallocated liabilities principally relate to
tax payables.
Geographical information
The Group's two reportable segments operate in four main
geographical areas, although they are managed on a worldwide
basis.
Six months Six months Twelve months
to 31 to 31 March to 30 September
March
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ----------- ---------------
Revenue from external customers
United Kingdom 998 2,029 2,738
Europe 239 1,610 2,648
Americas 2,139 2,198 4,557
Rest of World 463 495 1,802
-------------------------------- ---------- ----------- ---------------
3,839 6,332 11,745
-------------------------------- ---------- ----------- ---------------
Revenue is reported by the geographical location of
customers.
3. Earnings per ordinary 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 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.
Six months Six months Twelve months
to 31 to 31 March to 30 September
March
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------ ----------- ------------ ----------------
Profit for the period attributable
to equity holders
of the Company 163 696 143
------------------------------------ ----------- ------------ ----------------
Weighted average number of ordinary
shares
in issue for basic and for diluted
earnings
per share 13,834,375 13,834,375 13,834,375
------------------------------------ ----------- ------------ ----------------
4. Contingent liabilities
Patent Infringement Litigation
As more fully disclosed in the Company's Annual Report and
Accounts for the year ended 30 September 2011, DATONG has been
subject to a patent infringement claim since 2006. During the
period the Court of Appeal has judged that the patent in suit is
invalid and as a result, neither damages nor legal costs will be
payable or recoverable by the Company. Consequently the financial
provision of GBP0.3m previously carried has been released into
profit during the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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