RNS Number:8405S
Formscan PLC
04 December 2003
For Immediate Release 4 December 2003
Formscan plc
Final Results For The Year Ended 31 July 2003
Chairman's Statement
The year to July 31, 2003 saw our company continue with its focus upon improving
our core business and expanding sales levels. Despite a modest increase in
revenues, we were unable to achieve our goal of a near break-even result. In
particular, we were frustrated by last minute delays in receiving and shipping
two sizeable orders in USA. We did, however, book deposits against both of
these orders in July.
We completed our prestige order for 48 camera systems in Japan, and have since
received orders for two more units for delivery to another customer there. We
anticipate more business from this relationship. This business has been
profitable for us, but having a large hardware component, represented turnover
with a lower gross margin than our normal sales.
The SARS effect on China meant that our work in that area was essentially on
hold, although we are now picking up the threads, and expect to resume our joint
efforts with our partner there.
I am also pleased to report that our ongoing development efforts have resulted
in important improvements in two core products. Both our Sentinel and Continuity
products have been upgraded to take advantage of the latest .NET technology, and
some new features have been added, to take account of customer feedback. We
received a large tax refund in USA. This refund is related to the United States
Congress passing an economic stimulus bill with business and individual tax
incentives, which included, among other things, special post-September 11th tax
benefits and an enhanced carry-back of Net Operating Losses beyond the normal 2
years.
A special effort to grow the annuity income part of our business, which is
derived from service contracts and other support income, has resulted in a 26%
increase for the year.
In July we made a modest reduction in headcount, reducing staff where the
effects were least likely to detract from sales and other revenue earning
opportunities.
The cash flow effect of our operational loss was largely offset by the tax
credits received.
The headline operating result of the Company for the full year shows a loss of
#406,000 on turnover of approximately #4.7 million. The losses attributable to
shareholders were reduced to #128,000 compared with a loss of #312,000 for the
previous year. Losses per share were 1.08p, compared with 2.75p in 2002. Net
assets at the year-end were #992,000 (2002: 1,167,000), of which cash balances
were approximately #459,000 (2002: #426,000). The board does not propose to pay
a dividend this year.
Continuity
Our forms processing and scanning solutions sales held up well, and we received
more orders for our police and local government applications.
In November last year we accepted the challenge of investing in a version of
Continuity for inclusion in a package of software to be launched by the largest
provider of pension fund software in UK. This was a conscious decision to take
this risk, where the returns are expected to supply good income over a three or
more year period. The short-term cost of this was that our sales support efforts
with normal Continuity business were reduced in favour of the better long-term
chances. This partially resulted in slippage of business for the year. Initial
pilot trials of the new software are progressing, and we are now completing
details of an agreement to supply these licences to our partner, who has now
announced that their product launch is anticipated in December this year. This
is expected to produce immediate income from a backlog of demand created by our
partner's pre-sales efforts.
Workflow-enabled business processing is now becoming a standard concept, and we
are well placed to further deploy Continuity for other similar vertical market
applications.
We are also currently bidding on two sizeable Continuity deals, following the
stated goal of getting this side of our business to follow more closely the
proven Integrity model, which can be described as a delivery of solutions rather
than a simple product sale.
Integrity
The Sentinel document tracking software has now been successfully installed
after a complete update, and we see good short-term prospects for similar sales.
During the year, we executed our plan to combine the best of the two
technologies, which were part of the old Formscan and Inspectron vision product
offerings. At the same time we have moved the hardware technology forward,
achieving speed and accuracy gains, whilst reducing the manufacturing cost.
As a result of three tradeshows attended during the past few months, we now have
an active pipeline in Europe, particularly Germany, and expect to see orders
within the first half of this year.
Current Trading
Our first quarter activities are running behind plan, again, mostly due to one
delayed, but not lost, significant purchase order. Our pipeline of outstanding
proposals continues to grow and our efforts to get in front of customers are
increasing.
Technical development in a company such as ours should never stop, and we intend
to continue our efforts to keep ahead by positioning our solutions towards
vertical markets, where one application can be sold repeatedly. Having brought
both the core Integrity and Continuity offerings to the latest levels, the
immediate focus is upon sales support and deployment.
Future Prospects
Target orders of #100,000 or more take longer to achieve, and have a "lumpy"
effect on monthly business. However, with our expectations of such larger orders
growing, we expect to see quarterly sales above last year's levels, without the
necessity to increase overheads
With much of our business rebuilding in place, we are now determined to exploit
the exciting opportunities, which continue to arise. In particular, we are
taking steps to expand our business efforts in the USA. To enable this, without
detracting from our European momentum, we have appointed a new Divisional
manager, well experienced in the Industry, who will take line responsibility for
our U.K. Document Solutions business. This should help free up our management
team to devote more time to the US business, and build upon the base acquired
with Inspectron almost two years ago.
Our management team is well aware of the implications of the absolute need to
return to profit. With a modest improvement of confidence generally in our
market, and the ability to secure a number of long awaited larger orders, we
have every reason to believe that this goal continues to be realistic in the
short term.
Allan Harle
Chairman
Consolidated Profit And Loss Account (1)
For The Year Ended 31 July 2003
Total Total
2003 2002
# # # #
Turnover
Continuing operations 4,698,714 3,642,036
Acquisitions - 589,384
4,698,714 4,231,420
Cost of sales
Continuing operations 3,923,985 2,590,341
Acquisitions - 655,735
3,923,985 3,246,076
Gross profit
Continuing operations 774,729 1,051,695
Acquisitions - (66,351)
774,729 985,344
Distribution costs
Continuing operations 208,332 161,269
Acquisitions - 43,821
208,332 205,090
Administrative expenses:
Continuing operations:
Exceptional Items (93,571)
Other Administrative expenses 972,795 1,057,560
Acquisitions - 88,945
972,795 1,052,934
Operating loss
Continuing operations (406,398) (73,563)
Acquisitions - (199,117)
Loss on ordinary activities before
interest (406,398) (272,680)
Interest receivable 3,223 5,714
Interest payable (50,058) (41,953)
Profit/(loss) on ordinary activities
before taxation (453,233) (308,919)
Tax on profit on ordinary activities 325,352 (3,326)
Profit/(loss) on ordinary activities
after taxation (127,881) (312,245)
Dividends - -
Retained (loss)/profit for the year (127,881) (312,245)
Consolidated Profit And Loss Account
For The Year Ended 31 July 2003
Total Total
2003 2002
# # # #
Basic earnings per share(2) (1.08)p (2.75)p
Diluted earnings per share (2) (1.08)p (2.75)p
Dividends per share - -
Consolidated Balance Sheet As At 31 July 2003
2003 2002
# # # #
Fixed Assets
Tangible assets 580,106 636,961
Intangible assets 472,406 552,402
Own shares 17,719 26,074
1,070,231 1,215,437
Current Assets
Stocks 396,894 542,867
Debtors 1,373,125 746,573
Cash at bank and in hand 458,936 426,421
2,228,955 1,715,861
Creditors - amounts falling due within
one year (2,113,872) (1,300,141)
Net current Assets 115,083 415,720
Total Assets Less Current Liabilities 1,185,314 1,631,157
Creditors - amounts falling due after
more than one year (193,151) (463,837)
992,163 1,167,320
Capital and Reserves
Equity interests
Called up share capital 118,909 118,909
Share premium 1,247,665 1,247,665
Merger reserve 712,147 712,147
Revaluation reserve 477,488 477,488
Capital redemption reserve 5,289 5,289
Profit and loss account (1,569,335) (1,394,178)
Total shareholders' funds 992,163 1,167,320
Consolidated Cash Flow Statement
For The Year Ended 31 July 2003
2003 2002
# # # #
Cashflow from operating activities (304,216) 279,576
Returns on investments and servicing (38,156) (28,266)
of finance
Taxation 255,706 31,509
Capital expenditure and financial
investment (14,000) (14,831)
Cash (outflow)/inflow before use of
liquid resources and financing (100,666) 267,988
Acquisitions and Disposals - (14,474)
Management of liquid resources - -
Financing (80,485) (51,743)
(Decrease)/increase in cash in the (181,151) 201,771
period
Reconciliation of net cash flow to
movement in net funds
(Decrease)/Increase in cash in the
period (181,151) 201,771
Cash outflow from decrease in lease
financing 80,485 51,743
Changes in net funds resulting from
Cash flows (100,666) 253,514
New finance leases (3,191) (42,781)
New Loan Finance (11,496) (430,669)
Translation difference 4,439 (36,168)
Movement in net funds for the period (110,914) (256,104)
Net funds at 1.8,02 (215,397) 40,707
Net funds at 31.7.03 (326,311) (215,397)
Statement Of Total Recognised Gains And Losses
For The Year Ended 31 July 2003
2003 2002
# #
Loss attributable to shareholders (127,881) (312,245)
Foreign exchange translation gain/(loss) (47,276) (195,298)
(175,157) (507,543)
Reconciliation of Movement In Shareholders' Funds
2003 2002
# #
Loss attributable to shareholders (127,881) (312,245)
Foreign exchange translation (47,276) (195,298)
Total recognised gains and losses (175,157) (507,543)
Dividends - -
(175,157) (507,543)
New share capital issued - 6,500
Premium on share capital issued - 143,000
Net (reduction)/addition to shareholders' funds (175,157) (358,043)
Shareholders' funds at 1 August 2002 1,167,320 1,525,363
992,163 1,163,320
Represented by:
Equity interests 992,163 1,167,320
Notes:
1. Financial Information
The financial information set out above does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985.
Such information has been extracted from the Group's accounts for the
relevant financial years 2002 and 2003. The accounts were prepared using
the historic cost convention and on a going concern basis. The auditors
noted a fundamental uncertainty regarding this assumption for 2003 but
accounts for both years were audited and reported upon without
qualification. The accounts for the year ended 31 July 2002 have been
delivered to the Registrar of Companies and the accounts for the year ended
31 July 2003 will be so delivered in due course.
2. Earnings per share
Basic earnings per share have been calculated on the loss attributable to
shareholders for the year of #127,881 (2002: loss of #312,245) and
11,890,904 shares (2002: 11,354,877), being the weighted average number of
shares in issue during the year.
Diluted earnings per share have been calculated using the same weighted
average shares of 11,890,904.
The two calculations are the same this year since outstanding share options
(103,730 shares) currently have an exercise price above the current share
price and are therefore, in accordance with FRS 14, not included in the
diluted shares calculation.
3. Availability of documents
Copies of this announcement are available from the company at Apex House,
West End, Frome, Somerset BA11 3AS. The Company's annual report and
accounts for the year ended 31 July 2003 will be posted to shareholders
shortly.
This information is provided by RNS
The company news service from the London Stock Exchange
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