For immediate release
12 June 2003
Scipher plc
Preliminary results
The technology development and licensing company, Scipher plc ("Scipher" or
"the Company") announces its results for the year ended 31 March 2003.
SUMMARY
Financial
* Full year revenue �20.4 million (FY 2002: �21.0 million)
* Q1-Q3 revenue increased by 31% to �14.8 million
* New business revenue �16.7 million (FY 2002: �16.5 million), now 82% of
total revenue
* Continued stringent control over the cost base: EBITDA loss reduced by 20%
* Loss before tax reduced by 17% to �10.5 million (FY 2002: �12.7 million)
* Net debt reduced by 51% to �5.8 million (FY 2002: �11.8 million)
Operations
* Acquisition of yet2.com in December 2002 strengthens Patent Licensing
* Secure Identification wins extensions to border control system and NHS
contracts
* Design-in work progressed with customers for new microdisplay-based
products
* Communications signs long-term wireless networks agreement with Royal Mail
Post year end
* Secure Identification wins �2.0m information systems contract
* Evolution Beeson Gregory appointed financial advisers and stockbroker to
the Company
Announced today
* Firm Placing and Open Offer proposed to raise approximately �7.57 million
* Scipher to transfer to AIM from the Official List
Enquiries
Scipher plc
Dr Ken Gray, Chairman Tel: 020 8848 6555
Chris Mutter, Finance Director Tel: 020 8848 6500
Michael Kendon, Investor Relations Tel: 020 8848 6444
Financial Dynamics
James Melville-Ross Tel: 020 7831 3113
Juliet Clarke Tel: 020 7831 3113
For further information about the Placing and Open Offer:
Evolution Beeson Gregory
Nick Rogers Tel: 020 7071 4389
Tim Redfern Tel: 020 7071 4312
CHAIRMAN'S STATEMENT
"Having seen revenue growth of 31% in the first three quarters of the year, it
was disappointing that this growth did not carry through into the fourth
quarter. Sales which were expected in the last quarter were delayed owing to
reluctance by customers to finalise contracts in the economic uncertainty of
the period. As a result, the Company's available cash resources came under
strain. Scipher continued to reduce its cost base and employ strong working
capital controls and, on 19 May 2003, renegotiated its banking facilities. New
business recorded revenue of �16.7 million for the year (FY2002: �16.5 million)
and represents 82% of Scipher's total revenue (FY2002: 78%).
The impact on cash of the shortfall in sales has been reduced by the ongoing
actions taken to reduce costs throughout the year and in particular during the
second half of the year. This control over indirect costs underlies the
improvement in operating results. EBITDA loss reduced by 20% to �5.1 million in
the year (FY2002: �6.4 million loss).
On 1 July 2002, Scipher completed the sale and leaseback of its headquarters
building for a gross cash consideration of �16.9 million. The proceeds from the
sale and leaseback delivered �6.5 million net cash back into the business after
repaying bank loans and the mortgage on the building.
We have today announced that the Company proposes to raise up to �7.57 million
(before expenses) by way of a Firm Placing and Open Offer. The proceeds will
provide additional working capital to allow the company to realise further
value from the technology business it has created. In conjunction with this
proposed fundraising, the Company has also announced its intention to transfer
Scipher's listing from the Official List of the UK Listing Authority to the
Alternative Investment Market of the London Stock Exchange ("AIM"). This is
expected to reduce the costs of maintaining a stock market quotation and of
effecting corporate transactions in the future. The fundraising is conditional
on the approval of shareholders, which is to be sought at an extraordinary
general meeting ("EGM").
For further information regarding the fundraising, the transfer to AIM and the
EGM, shareholders should refer to the announcement made today. In addition, a
document setting out the proposals and a notice of EGM has been posted to the
Company's shareholders today.
Operational highlights
The acquisition in December 2002 of the US-based intellectual property ("IP")
licensing business, yet2.com (since renamed QED Inc.) has further strengthened
Scipher's Patent Licensing business in the US and Japan. It operates the
world's largest online marketplace for the exchange of IP. The acquisition has
enhanced our capabilities in all aspects of IP management and licensing.
In May 2002, PicVue Electronics ("PicVue"), Scipher's partner for the
exploitation of our silicon chip-based microdisplay technology, confirmed its
plans for high volume microdisplay manufacturing in Taiwan using Scipher's
technology and the production process developed by MicroVue. Although this is
likely to become operational later than expected, progress towards financing
this operation has been encouraging.
Board changes
The Board has been reorganised with the appointments of Phillip Stern and
Benjamin duPont as Executive Directors, and Daniel Chapchal as a Non-executive
Director. I welcome them to the Board. After six years as a Non-executive
Director, Neil Pearce has indicated his intention to retire from the Board at
the Company's 2003 AGM. In addition, Executive Directors Dr John White and
David Hulston resigned from the Board on 1 November 2002 and 22 May 2003
respectively.
Outlook and strategy
Scipher's strategy continues to be based on the exploitation of IP and the
drive for positive cash flow and profitability. We intend to achieve this in
two ways:
First, to drive revenue from our "New business" activities (defined as those
activities that have been established since Scipher was formed in 1996), which
now comprise over 80% of Scipher's revenues. These businesses have been
identified by the Board as being central to the Group's future success and have
achieved a compound average growth rate ("CAGR") of 36% revenue growth from the
year ended 31 March 2000 to the year ended 31 March 2003. Maintaining this
revenue growth is fundamental to Scipher achieving positive cash generation.
Second, to focus attention on the Patent Licensing, Displays and Secure
Identification businesses which have achieved a CAGR of 42% in new business
revenue from the year ended 31 March 2000 to the year ended 31 March 2003. The
Board sees these particular businesses as being central to Scipher's future
progress. In addition, the performance of 3D Sound, Communications and
Technology Generation underlines the Company's ability to create and manage
successful businesses.
Meanwhile the Board recognises that the present challenging market conditions
for new technology spend are likely to continue for some time, along with
lengthened sales cycles. Consequently, it will continue its policy of stringent
cost management.
Looking ahead the Directors see good prospects for renewed growth with
particular benefit being derived from the Patent Licensing, Secure
Identification and Displays operations."
Dr Kenneth W Gray CBE FREng
Chairman and Chief Executive
12 June 2003
Consolidated profit and loss account
For the year ended 31 March 2003
12 months 12 months
to 31 March to 31 March
2003 2002
unaudited audited
Note �'000 �'000
Turnover: Group and share of joint ventures
Continuing operations 19,831 21,004
Acquisitions 554 -
Total turnover 3 20,385 21,004
Less: share of turnover of joint ventures
Continuing operations (124) (220)
Group turnover 20,261 20,784
Cost of sales (11,103) (8,562)
Gross profit 9,158 12,222
Administrative expenses (21,508) (23,256)
Operating loss before goodwill amortisation (6,537) (7,712)
and non-recurring items
Goodwill amortisation (946) (557)
Non-recurring items (4,867) (2,765)
Continuing operations (11,780) (11,034)
Acquisitions (570) -
Group operating loss (12,350) (11,034)
Share of operating loss in joint ventures (328) (390)
Share of operating loss in associated (396) (546)
undertakings
Total operating loss (13,074) (11,970)
Profit on disposal of fixed assets 10 3,598 -
Net interest payable
Group (668) (637)
Associated undertakings and joint ventures (22) (12)
Amounts written off investments (192) -
Other finance charges (142) (50)
Loss on ordinary activities before taxation (10,500) (12,669)
Taxation (15) (37)
Loss on ordinary activities after taxation (10,515) (12,706)
Minority interest 825 1,040
Loss for the year 6 (9,690) (11,666)
Loss per share 4
Basic and diluted (10.4p) (13.2p)
Adjusted (7.8p) (9.5p)
Consolidated statement of Group total recognised gains and losses
For the year ended 31 March 2003
12 months 12 months
to 31 March to 31 March
2003 2002
�'000 unaudited audited
Loss for the year (9,690) (11,666)
Currency translation differences on foreign 13 -
currency net investments
Total recognised gains and losses for the (9,677) (11,666)
year and since last Annual Report
Consolidated balance sheet
As at 31 March 2003
As at 31 As at 31
March March
2003 2002
unaudited audited
Note �'000 �'000
Fixed Assets
Intangible assets 8,902 7,119
Tangible assets 4,762 16,835
Investments 84 294
Interest in joint ventures - 126
Investments - own shares 4 4
13,752 24,378
Current assets
Stocks 1,436 2,247
Debtors - amounts falling due within one 10,330 11,866
year
Debtors - amounts falling due after more 2,227 569
than one year
Cash at bank and in hand 275 746
14,268 15,428
Creditors: amounts falling due within one (17,313) (16,079)
year
Net current liabilities (3,045) (651)
Total assets less current liabilities 10,707 23,727
Creditors: amounts falling due after more (407) (6,648)
than one year
Provisions for losses in associated (206) (609)
undertakings and joint ventures
Provisions for liabilities and charges (486) (167)
Net assets 9,608 16,303
Capital and reserves
Called-up share capital 1,007 910
Share premium account 43,334 39,928
Shares to be issued 2,791 3,050
Capital redemption reserve 149 149
Profit and loss account (38,494) (28,817)
Shareholders' funds 6 8,787 15,220
Minority interests (equity) 821 1,083
Capital employed 9,608 16,303
Consolidated cash flow statement
For the year ended 31 March 2003
12 months 12 months
to 31 March to 31 March
2003 2002
unaudited audited
Note �'000 �'000
Net cash outflow from operating activities 7 (8,883) (10,315)
Returns on investments and servicing of
finance
Interest received 183 36
Interest paid (916) (685)
Interest element of finance lease rentals (58) (49)
Taxation (15) (37)
Capital expenditure and financial investment
Net proceeds from sales of tangible fixed 10 13,290 14
assets
Purchase of tangible fixed assets (373) (1,695)
Acquisitions and disposals
Purchase of subsidiary undertakings 9 (295) (90)
Net cash/(overdrafts) acquired with 9 2,849 (110)
acquisitions
Proceeds from sales in joint ventures 3 -
Investment in joint ventures (188) (313)
Investment in associated undertakings (118) (569)
2,251 (1,082)
Net cash inflow/(outflow) before use of 5,479 (13,813)
liquid resources and financing
Management of liquid resources
Short-term deposits - 225
Financing
Issue of shares 21 47
Contributions from minority interests 539 1,147
Increase in borrowings - 1,270
Capital element of financial lease payments (239) (398)
Decrease in debt (6,790) (571)
Cash (outflow)/ inflow from financing (6,469) 1,495
Decrease in cash in the period (990) (12,093)
Reconciliation of net cash flow to movement
in net debt
Decrease in cash in the period (990) (12,093)
Decrease in short-term deposits - ( 225)
Cash outflow from decrease in debt 6,790 571
Movement in finance leases 239 (872)
Exchange differences (28) -
Movement in net funds in the period 6,011 (12,619)
Net (debt)/funds at 1 April 8 (11,847) 772
Net debt at 31 March 8 (5,836) (11,847)
Notes to the financial information - (unaudited)
For the year ended 31 March 2003
1. Basis of preparation and going concern
The financial statements have been prepared on the basis of accounting policies
consistent with those adopted for the year ended 31 March 2002.
This preliminary announcement has been prepared on the going concern basis.
Through the firm Placing and Open Offer, and stringent working capital
management, the Directors' are of the opinion that the Group will continue in
operational existence for the foreseeable future.
2. Presentation of the financial information
The figures and financial information for the year ended 31 March 2002 do not
constitute the financial statements for that year. Those financial statements
have been delivered to the Registrar and include the auditors' report which was
unqualified and did not contain a statement under either section 237(2) of the
Companies Act 1985 (accounting records or returns inadequate or accounts not
agreeing with records and returns), or section 273(3) (failure to obtain
necessary information and explanations).
The figures and financial information for the year ended 31 March 2003 do not
constitute the statutory financial statements for that year. Those financial
statements have not yet been delivered to the Registrar, nor has the auditor
made a report for the purposes of section 249A(2).
3. Segmental analysis
The following table details the source of Scipher's revenues
12 months 6 months 6 months to 12 months
to
to 31 March to 31 to 30 Sept. to 31
March March
�'000 2003 2003 2002 2002
New business 16,678 8,973 7,705 16,458
Mature business 1,947 936 1,011 2,540
R&D 1,760 537 1,223 2,006
Total 20,385 10,446 9,939 21,004
New business represents turnover from activities that have been established
since Scipher became independent from EMI Group in 1996, and was able to
exploit the large IP portfolio originating from its activities as a corporate
research centre. Mature business denotes sales from a range of products based
on technologies that were first developed more than 12 years ago. R&D
represents income from customers for early-stage research and development.
4. Loss per share
The calculation of loss per share has been based upon the loss for the year of
�9.7 million (2002: �11.7 million) divided by the weighted average number of
ordinary shares in issue during the year of 93,516,000 (2002: 88,095,400).
An adjusted basic loss per share is also provided below in order to eliminate
the effects of the amortisation of goodwill, the non-recurring operational
items, the gain made in the year on the disposal of fixed assets, and the
amounts written off investments.
12 months 12 months
to 31 March to 31 March
2003 2002
unaudited audited
�'000 �'000
Loss for the year (9,690) (11,666)
Adjustments:
Goodwill amortisation 946 557
Non-recurring items 4,867 2,765
Profit on disposal of fixed assets (3,598) -
Amounts written off investments 192 -
Adjusted loss for the year (7,283) (8,344)
Weighted average number of shares 93,516 88,095
(`000)
Loss per share (10.4p) (13.2p)
Adjustments:
Goodwill amortisation 1.0p 0.6p
Non-recurring items 5.2p 3.1p
Profit on disposal of fixed assets (3.8p) -
Amounts written off investments 0.2p -
Adjusted loss per share (7.8p) (9.5p)
The exercise of outstanding share options would not dilute loss per share.
5. EBITDA
The following table details the movements between EBITDA (earnings before
interest, tax, depreciation, amortisation and non-recurring items) and
operating loss.
�'000 Full year 2003 1st Full year 2002 1st
half half
2nd half 2nd half
EBITDA (5,145) (3,706) (1,439) (6,416) (1,365) (5,051)
Depreciation (1,390) (731) (659) (1,296) (636) (660)
Amortisation (948) (515) (433) (557) (474) (83)
Non-recurring (4,867) (2,342) (2,525) (2,765) (1,218) (1,547)
items
Operating loss (12,350) (7,294) (5,056) (11,034) (3,693) (7,341)
The non-recurring operating items of �4.9 million relates to �4.0 million for
headcount reductions and �0.9 million of other costs.
6. Reconciliation of movements in shareholders' funds
As at 31 March As at 31 March
2003 2002
unaudited audited
�'000 �'000
Loss for the year (9,690) (11,666)
Currency translation differences 13 -
Issue of share capital 97 40
Share premium (net of issue expenses) 3,406 3,780
Movement in shares to be issued as (259) 3,050
deferred consideration
Net reduction in shareholders' funds (6,433) (4,796)
Opening shareholders' funds 15,220 20,016
Closing shareholders' funds 8,787 15,220
7. Reconciliation of operating loss to operating cash flows
12 months 12 months
to 31 March to 31 March
2003 2002
unaudited audited
�'000 �'000
Net cash outflow from operating activities
Operating loss (12,350) (11,034)
Amortisation of intangible fixed assets 948 557
Depreciation of tangible fixed assets 1,390 1,296
Loss/(profit) on disposal of fixed assets 119 (2)
Profit on disposal of associated undertakings - (59)
Decrease/(increase) in stocks 527 (129)
Decrease/(increase) in debtors 852 (2,703)
(Decrease)/increase in creditors (1,565) 1,520
Increase in provisions 1,196 239
(8,883) (10,315)
8. Analysis of net debt
At 1 Non-cash Exchange At 31
April March
2002 Cash flow changes differences 2003
�'000 �'000 �'000 �'000 �'000
Cash at bank and in hand 746 (443) - (28) 275
Secured overdrafts (4,931) (547) - - (5,478)
Debt:
Secured loans due within (556) 680 (124) - -
one year
Secured loans due after (6,234) 6,110 124 - -
one year
Finance leases:
Due within one year (458) 239 (357) - (576)
Due after one year (414) - 357 - (57)
Total (11,847) 6,039 - (28) (5,836)
9. Acquisitions in the year
In December 2002 the Company acquired Yet2.com, Inc. ("Yet2.com"), a company
incorporated in the United States, for a total consideration of �4.4 million
satisfied through the issue of new ordinary shares of the Company. Deferred
consideration may be payable up to a maximum of �2.1 million contingent upon
the level of cumulative sales in the 15-month period since the acquisition. The
Director's have estimated that the potential deferred consideration is �0.5
million, and this has been reflected in the balance sheet as "shares to be
issued". Total goodwill of �2.7 million in respect of this acquisition will be
amortised over 12 years from the date of acquisition.
The following table sets out the book value (ie the assets that would appear in
Yet2.com's accounts at the date of acquisition) and the adjustments required to
reach the fair value of the assets.
Book Provisional
value fair value
�'000 �'000
Fixed assets 370 370
Debtors 428 428
Creditors (1,934) (1,934)
Cash 2,849 2,849
Net assets acquired 1,713 1,713
Goodwill 2,684
Consideration 4,397
Consideration satisfied by:
Shares issued 3,330
Deferred consideration 520
Costs of acquisition 547
4,397
The book value of the assets and liabilities has been taken from the management
accounts of Yet2.com at 16 December 2002 (the date of acquisition) at actual
exchange rates on that date. There are currently no fair value adjustments.
These are held as provisional amounts which will be finalised in the 2004
financial statements.
10. Profit on disposal of fixed assets
The Group sold its headquarters building on a sale and leaseback arrangement
giving a profit on disposal of �3.6 million. The cash proceeds in the period
were �13.3 million excluding a retention of �1.8 million held by the lessors,
due for release after five years. The net sale consideration is �14.8 million
after a provision for dilapidations of �0.3 million.
Headquarters Other Total
building
�'000 �'000 �'000
Net sale consideration 14,805 10 14,815
Net carrying value of (11,213) (4) (11,217)
assets
Profit on disposal 3,592 6 3,598
Registered Office
Scipher plc
Dawley Road
Hayes
Middlesex
UB3 1HH
Tel: +44 (0)20 8848 6555
Fax: +44 (0)20 8848 6677
www.scipher.com
Registered in England and Wales
No. 3248274
1
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