Information  X 
Enter a valid email address

Datong PLC (DTE)

  Print          Annual reports

Tuesday 29 May, 2012

Datong PLC

Interim Results

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 £3.84 million (2011: £6.33 million)

· 

Operating loss of £0.14 million  (2011: profit of £0.76 million)

· 

Basic and diluted earnings per ordinary share of 1.18p (2011: 5.03p)

· 

Net cash of £2.14 million (2011: £1.57 million)

· 

Confirmed order book at period end of £2.36 million (2011: £1.07 million)

· 

Sales pipeline supports more heavily weighted second half

· 

Order intake in April and May totalled £3.10 million (2011: £1.23 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 £0.5 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

[email protected]

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 £3.84 million (2011: £6.33 million) and the operating loss was £0.14 million (2011: profit of £0.76 million).  The sales pipeline for the second half however remains strong and the committed order book at the period end was £2.36 million (2011: £1.07 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 £0.5 million on an annualised basis.  We have a strong balance sheet with a net cash position at the period end of £2.14 million (2011: £1.57 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 £0.9 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 £0.80 million (2011: £0.93 million) and the net costs written off against profit were £0.92 million (2011: £0.60 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 £0.3 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 £3.84 million (2011: £6.33 million) and the confirmed order book at the period end was £2.36 million (2011: £1.07 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 £0.44 million (2011: profit of £0.76 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 £0.11 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 £0.30 million (2011: £nil) 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 £0.31 million (2011: debit of £0.07 million) incorporates a credit of £0.04 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 £0.88 million (2011: decreased by £1.00 million) and at the period end stood at £2.14 million (2011: £1.57 million).

 

The Board is not recommending the payment of an interim dividend (2011: £nil).

 

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 £3.1 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 March

 to 31 March

 to 30 September



2012

 2011

2011



Unaudited

Unaudited

Audited

Continuing operations

Note

£'000

 £'000

 £'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


£'000

£'000

£'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

 £'000

 £'000

£'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


£'000

£'000

£'000

 £'000

 £'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 March

to 31 March

to 30 September


2012

 2011

2011


Unaudited

Unaudited

Audited


£'000

 £'000

£'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 March

to 31 March

to 30 September


2012

2011

2011


Unaudited

 Unaudited

 Audited


£'000

£'000

 £'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


£'000

£'000

£'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 March

to 31 March

to 30 September


2012

2011

2011


Unaudited

Unaudited

 Audited


£'000

£'000

 £'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 March

 to 31 March

 to 30 September


2012

2011

2011


Unaudited

Unaudited

Audited


£'000

£'000

£'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 £0.3m 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
 
 
IR DVLFLLEFBBBV

a d v e r t i s e m e n t