RNS Number:0615T
Applied Optical Technologies PLC
10 December 2003
10th December 2003
Applied optical Technologies plc
("Applied Optical Technologies" or "the Group")
Interim results for the six months ended 30th September 2003
Applied Optical Technologies plc, the supplier of anti-counterfeiting
technologies and services, and premium packaging for brand enhancement and
protection, announces interim results for the six months ended 30th September
2003.
Highlights
2003 2002
unaudited unaudited
Group turnover #12.7m #14.0m
Adjusted operating profit/(loss) #20,000 #(272,000)
Adjusted loss per share (1.3)p (1.2)p
* Improved operating performance against last year
* Record results from the American operations and higher contribution from
3DCD offset the impact of difficult conditions faced by the European
business
* Cash inflow from operating activities improved to #730,000 (2002: cash
outflow of #413,000)
* Balance sheet remains strong with cash at bank and in hand of #2.5
million (2002: #2.5 million) and net funds of #2.3 million (2002: 1.9
million)
* Conditions have improved for all of the Group's operations and this
should significantly improve profitability in the second half of the year
David Mahony, Chairman, said:
"The improved half year performance and the encouraging order intake give us
confidence that the result for the current year will be in line with
expectations. The measures taken to develop and widen both our own businesses
and that of 3DCD should lead to increased profitability in the longer term, as
will a successful conclusion to the current discussions on the strategic options
open to the Group."
- Ends -
For further information, please contact:
Applied Optical Technologies plc 0191 419 3344
Mark Turnage, Chief Executive (mturnage@aotgroup.com)
Mike Angus, Finance Director (mangus@aotgroup.co.uk)
Weber Shandwick Square Mile 020 7067 0700
Nick Oborne
Sally Lewis
10th December 2003
Applied Optical Technologies plc
("Applied Optical Technologies" or "the Group")
Interim results for the six months ended 30th September 2003
Chairman's Statement
We are pleased to report that trading in the first half of the year improved
against last year. We were not immune to the difficult conditions faced by our
American ID technologies and European banknote and high security businesses,
which affected the early months of this year, but their impact was offset by
record results from our Maryland operation and a higher contribution from 3DCD.
Market conditions are more encouraging throughout all our operations and this
should significantly improve profitability, particularly in our European
operations, in the second half of the current year.
Results
Group turnover for the six months was #12.7 million (2002: #14.0 million) and
the operating profit, adjusted for the impact of goodwill and exceptional costs,
was #20,000 (2002: loss of #272,000).
Cash inflow from operating activities improved to #730,000 (2002: cash outflow
of #413,000).
The Group's balance sheet remains strong, with cash at bank and in hand of #2.5
million (2002: #2.5 million) and net funds of #2.3 million (2002: #1.9 million).
American Operations
Overall our American operations continued to perform well with operating profit
up by 30% compared to the first half of last year. On a dollar basis, turnover
increased by 4% from the previous year, although movement in the sterling-dollar
exchange rate masked this growth at a consolidated level.
The brand protection business in America increased during the period and the
recently announced extension of the NBA contract reaffirmed our leading position
in protecting licensed merchandise in America. As anticipated, turnover derived
from the temporary license plates with AAMVA returned to normal levels following
customers' difficulties with budgets which led to a downturn in sales in the
prior year.
These increases offset the reduction in Advantage ID Technologies business,
which suffered from slippage due to the delay in the receipt of orders from some
key customers. The second Advantage line is now fully operational and this
enables us actively to seek additional contracts for the Lancaster facility.
European Operations
Turnover for the European operations was down by 19%, largely due to lower
product enhancement sales and the delay in anticipated banknote and high
security documents orders. This reduced volume led to a fall in gross margin
from 27% to 19% but tight control of overheads limited the impact on operating
profit.
The benefits arising from the restructured European sales force are beginning to
become apparent. Following the recently announced contract for tax stamps and
orders received for banknote products, we now have an order book substantially
ahead of that previously achieved. This order book will give our European
operations the opportunity to improve performance in the second half of the
current year.
Joint Ventures
During the six months to 30th September 2003 3DCD contributed #518,000 (2002:
#188,000) to Group results. This improved contribution reflects increased
activity at Microsoft but does not reflect any benefit from the new customers
that the joint venture has recently secured; it is expected that this will have
a positive impact on future results.
Balance Sheet Restructuring
The restructuring of the balance sheet approved at the Company's Annual General
Meeting gained High Court approval on 31st October 2003. The deficit on Company
reserves at 31st March 2003 was eliminated by a transfer of #17.2 million from
the share premium account.
Strategic Review
We announced at the time of our Annual Results that we were undertaking a review
of the options open to the Board to ensure a return to profitability and a
recovery in the valuation placed by the market on the Group. Outside consultants
were appointed to help with this evaluation and the Board, having reviewed the
results of their work, has instituted measures to validate a number of options.
We hope to be able to make a further announcement on this early in the new
calendar year.
Conclusion
The improved half year performance and the encouraging order intake give us
confidence that the result for the current year will be in line with
expectations. The measures taken to develop and widen both our own businesses
and that of 3DCD should lead to increased profitability in the longer term, as
will a successful conclusion to the current discussions on the strategic options
open to the Group.
DA Mahony
Chairman
10th December 2003
APPLIED OPTICAL TECHNOLOGIES plc
Consolidated Profit and Loss Account
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
#'000 #'000 #'000
Turnover: Group and share of joint
ventures 13,834 14,805 28,594
Less, share of joint ventures' turnover (1,156) (756) (1,434)
----------- --------- --------
Group turnover 12,678 14,049 27,160
Cost of sales (8,507) (9,028) (17,660)
----------- --------- --------
Gross profit 4,171 5,021 9,500
Goodwill amortisation (629) (1,057) (1,675)
Goodwill impairment - (15,991) (15,991)
Exceptional items - (226) (1,275)
Other operating expenses (4,669) (5,363) (10,114)
Net operating expenses (5,298) (22,637) (29,055)
----------- --------- --------
Group operating loss (1,127) (17,616) (19,555)
Share of operating profit of joint
ventures 518 70 207
----------- --------- --------
Operating loss (609) (17,546) (19,348)
Interest receivable and similar income (22) 43 93
Amounts written off investments (37) (5) (5)
Interest payable and similar charges (21) (60) (114)
----------- --------- --------
Loss on ordinary activities before
taxation (689) (17,568) (19,374)
Taxation (609) (332) (112)
----------- --------- --------
Loss for the financial period (1,298) (17,900) (19,486)
=========== ========= ========
Basic loss per share (2.6)p (35.5)p (38.7)p
Diluted loss per share (2.6)p (35.5)p (38.7)p
Adjusted loss per share (1.3)p (1.2)p (1.1)p
Adjusted diluted loss per share (1.3)p (1.2)p (1.1)p
APPLIED OPTICAL TECHNOLOGIES plc
Consolidated Balance Sheet
Unaudited Unaudited
30-Sep-03 30-Sep-02 31-Mar-03
#'000 #'000 #'000
Fixed assets
Intangible assets 7,851 9,035 8,869
Tangible assets 11,853 12,779 12,413
Investments
Investments in joint ventures
Share of gross assets 1,029 793 692
Share of gross liabilities (359) (335) (299)
----------- --------- ---------
670 458 393
----------- --------- ---------
Investments in own shares 1,608 1,736 1,674
Other investments 28 28 28
----------- --------- ---------
22,010 24,036 23,377
----------- --------- ---------
Current assets
Stocks 2,302 2,793 2,554
Debtors
- amounts falling due within one year 5,473 5,444 5,964
- amounts falling due after more than one
year 1,694 5,295 2,218
----------- --------- ---------
7,167 10,739 8,182
----------- --------- ---------
Cash 2,526 2,527 2,747
----------- --------- ---------
11,995 16,059 13,483
----------- --------- ---------
Creditors : amounts falling due within one
year (5,447) (6,148) (6,002)
----------- --------- ---------
Net current assets 6,548 9,911 7,481
----------- --------- ---------
Total assets less current liabilities 28,558 33,947 30,858
Creditors : amounts falling due after more
than one year (93) (331) (117)
Provisions for liabilities and charges - (1,121) -
----------- --------- ---------
Net assets 28,465 32,495 30,741
=========== ========= =========
Capital and Reserves
Called up equity share capital 2,669 2,669 2,669
Share premium account 70,402 70,402 70,402
Profit and loss account (44,606) (40,576) (42,330)
----------- --------- ---------
Equity shareholders' funds 28,465 32,495 30,741
=========== ========= =========
APPLIED OPTICAL TECHNOLOGIES plc
Consolidated Cash Flow Statement
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
#'000 #'000 #'000
Cash inflow /(outflow) from
operating activities 730 (413) 670
Dividend received from joint venture 221 656 972
Returns on investments and servicing
of finance (11) 38 73
Taxation (44) (52) (114)
Capital expenditure and financial
investment (799) (1,459) (2,374)
----------- --------- --------
Cash inflow /(outflow) before management
of liquid resources and financing 97 (1,230) (773)
Management of liquid resources - - -
Financing
Issue of shares 29 - -
Decrease in net debt (219) (256) (491)
----------- --------- --------
Net cash outflow from financing (190) (256) (491)
----------- --------- --------
----------- --------- --------
Decrease in cash in the period (93) (1,486) (1,264)
=========== ========= ========
Reconciliation of net cash flow to movement in net
funds
Decrease in cash in the period (93) (1,486) (1,264)
Cash outflow from decrease in debt
and lease financing 219 256 491
----------- --------- --------
Change in net funds resulting from
cash flows 126 (1,230) (773)
Foreign exchange movements (134) (236) (291)
----------- --------- --------
Movement in net funds in period (8) (1,466) (1,064)
Net funds at 1st April 2003 2,267 3,331 3,331
----------- --------- --------
Net funds at 30th September 2003 2,259 1,865 2,267
=========== ========= ========
APPLIED OPTICAL TECHNOLOGIES plc
Statement of Total Recognised Gains and Losses
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
#'000 #'000 #'000
Loss for the financial period
attributable to shareholders (1,298) (17,900) (19,486)
Translation of net foreign currency
investments (978) (3,804) (3,910)
----------- --------- --------
Total gains and losses relating to
the period (2,276) (21,704) (23,396)
=========== ========= ========
Reconciliation of Movements in Shareholders' Funds
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
#'000 #'000 #'000
Loss for the financial period
attributable to shareholders (1,298) (17,900) (19,486)
Translation of net foreign currency
investments (978) (3,804) (3,910)
Adjustment in respect of savings
related share scheme - - (62)
----------- --------- --------
Movement for the period (2,276) (21,704) (23,458)
Opening shareholders' funds 30,741 54,199 54,199
----------- --------- --------
Closing shareholders' funds 28,465 32,495 30,741
=========== ========= ========
Notes to the Interim Statement
1. Basis of preparation
The financial information set out in this document does not constitute full
financial statements within the meaning of the Companies Act 1985. The financial
information for the six months ended 30th September 2003 has been prepared on
the basis of the current accounting policies of the Group and is unaudited.
These policies have not changed since 31st March 2003.
The comparative figures for the financial year ended 31st March 2003 are not the
Company's statutory accounts for that financial year. Those accounts have been
reported on by the Company's auditors and delivered to the Registrar of
Companies. The report of the auditors was unqualified and did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985.
2. Segment Information
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
a) Turnover by market sector #'000 #'000 #'000
Banknote and high security 3,605 2,105 4,377
Brand protection 4,747 5,518 10,566
Brand protection via Joint Venture 1,156 756 1,434
ID Technologies 3,045 4,621 8,906
Product Enhancement 702 1,213 2,063
Metallising 262 327 779
Other 317 265 469
----------- --------- --------
13,834 14,805 28,594
----------- --------- --------
b) Turnover by geographical origin
American operations 7,853 8,071 16,622
American operations via Joint Venture 1,156 756 1,434
European operations 5,514 6,828 12,109
Intersegment sales (689) (850) (1,571)
----------- --------- --------
13,834 14,805 28,594
=========== ========= ========
c) Operating profit/(loss) by geographical origin
American operations 854 (16,202) (15,448)
European operations (1,463) (1,344) (3,900)
----------- --------- --------
Operating loss (609) (17,546) (19,348)
Exclude goodwill amortisation 629 1,057 1,675
Exclude goodwill impairment - 15,991 15,991
Exclude exceptional items - 226 1,275
----------- --------- --------
Adjusted operating profit/(loss) 20 (272) (407)
=========== ========= ========
Adjusted operating profit/(loss) arises from :
American operations 940 724 1,842
European operations (1,438) (1,066) (2,456)
Joint Ventures 518 70 207
----------- --------- --------
20 (272) (407)
=========== ========= ========
3. Net Operating Expenses
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
#'000 #'000 #'000
Distribution Costs
Selling and marketing costs 1,710 2,205 3,993
---------- --------- --------
Administrative Expenses
Technical support 304 316 669
Research and development costs 551 555 1,031
Administrative costs 2,104 2,287 4,421
Exceptional costs - 226 1,275
Goodwill amortisation 629 1,057 1,675
Goodwill impairment - 15,991 15,991
---------- --------- --------
3,588 20,432 25,062
---------- --------- --------
---------- --------- --------
Net Operating Expenses 5,298 22,637 29,055
========== ========= ========
Exceptional items included within net
operating expenses
Reorganisation costs - 226 672
Impairment of amount due from joint
venture partner - - 681
Tangible fixed asset impairment - - 50
Profit on disposal of fixed assets - - (128)
---------- --------- --------
- 226 1,275
========== ========= ========
4. Share of Operating Profit of Joint Ventures
The share of operating profit of joint ventures represents the Group's share of
the results of 3DCD for the six months ended 30th September 2003.
5. Interest
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
#'000 #'000 #'000
Interest receivable and similar income
Bank interest receivable 6 43 36
Other interest receivable - 38 82
Foreign exchange losses (28) (38) (25)
---------- ----------- ---------
(22) 43 93
---------- ----------- ---------
Interest payable and similar charges
On finance leases and hire purchase agreements 3 8 31
On short term bank loans and overdrafts 12 35 13
Exchange losses on foreign currency borrowings 6 17 70
---------- ----------- ---------
21 60 114
---------- ----------- ---------
6. Taxation
No taxation is payable in the current period by any of the Group's UK based
companies due to losses brought forward from prior years. The tax charge for
the period relates to the utilisation of the Group's deferred tax asset in
respect of profits arising in the American operations.
7. Loss per Share
The calculations of loss per share are based upon the following losses and
numbers of shares.
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
Earnings #'000 #'000 #'000
Loss for the financial
period (Basic and Diluted EPS) (1,298) (17,900) (19,486)
========== =========== =========
Adjusted earnings
Loss for the financial period (1,298) (17,900) (19,486)
Add back goodwill amortisation 629 1,057 1,675
Exclude amounts written off investments 37 5 5
Exclude goodwill impairment - 15,991 15,991
Exclude exceptional items - 226 1,275
---------- ----------- ---------
Adjusted loss (632) (621) (540)
========== =========== =========
Weighted average number of No. of No. of No. of
shares shares shares shares
For Basic and Diluted
earnings per share 50,449,014 50,402,334 50,402,334
========== =========== =========
8. Notes to the Cash Flow Statement
Reconciliation of Group Operating Loss to Operating Cash Flows
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
#'000 #'000 #'000
Operating loss (1,127) (17,616) (19,555)
Depreciation 1,125 1,108 2,252
Profit on sale of fixed assets - - (126)
Amortisation 629 1,057 1,675
Impairment charges - 15,991 16,722
Movement in stocks 177 (108) 134
Movement in debtors (69) 506 1,034
Movement in creditors (5) (1,297) (1,412)
Movements in provisions for
liabilities and charges - (54) (54)
--------- -------- ---------
Net cash inflow/(outflow)
from operating activities 730 (413) 670
========= ======== =========
Analysis of Net Funds
At 30th
At 1st April Exchange September
2003 Cashflows adjustments 2003
#'000 #'000 #'000 #'000
Cash at bank and in hand 2,747 (93) (128) 2,526
Finance leases (80) 16 - (64)
Bank loans (400) 203 (6) (203)
--------- ----------- -------- ---------
2,267 126 (134) 2,259
========= =========== ======== =========
Reconciliation of Group Operating Loss to Operating Cash Flows
Unaudited Unaudited
6 months 6 months Year
ended ended ended
30-Sep-03 30-Sep-02 31-Mar-03
#'000 #'000 #'000
Analysis of cash flows for headings
netted in the cash flow statement
Returns on investments and servicing of finance
Interest received 6 82 119
Interest paid (17) (44) (46)
---------- --------- ---------
Net cash (outflow)/inflow from
returns on investments and servicing of finance (11) 38 73
========== ========= =========
Taxation
Overseas tax paid (44) (52) (114)
---------- --------- ---------
Net cash outflow from taxation (44) (52) (114)
========== ========= =========
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,020) (1,469) (2,403)
Sale of tangible fixed assets 221 10 29
---------- --------- ---------
Net cash outflow from capital expenditure and
financial investment (799) (1,459) (2,374)
========== ========= =========
Financing
Issue of ordinary share capital 29 - -
---------- --------- ---------
Loan repayments (203) (181) (381)
Capital element of finance lease rental payments (16) (75) (110)
---------- --------- ---------
Decrease in debt (219) (256) (491)
---------- --------- ---------
---------- --------- ---------
Net cash outflow from financing (190) (256) (491)
========== ========= =========
A copy of this announcement has been sent to all shareholders. Further copies are
available to members of the public from the Company's registered office, 40 Phoenix
Road, Crowther, District 3, Washington, Tyne & Wear, NE38 0AD.
This information is provided by RNS
The company news service from the London Stock Exchange
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