RNS Number:8562M
Advanced Technology (UK) PLC
27 June 2003
Advanced Technology (UK) Plc
("ATL" or the "Company")
Preliminary Results for the year ended 31 December 2002
Advanced Technology (UK) Plc, the provider of short range low power
communications systems and technology, today announces results for the year
ended 31 December 2002
Operational
One-Way Mobile
* The Group has increased its share of the important US market, which is
growing by over 30% per annum, despite disruption caused by the FCC enquiry.
* New product now launched for US electricity market. Gas product to be
launched later this year.
Two-Way Mobile
* First shipments of embedded licenses to South-East Asia. Awaiting
eventual volume orders.
* Unforeseen delays in Ghana. However, now back on track and close to
first major order.
* 2003 will be the defining year in the development of this embryonic
business.
Financial
* Turnover up 27% to #7.6 million (2001: #6.0 million).
* Much reduced loss of #2.7 million (before goodwill amortization and
exceptional items) (2001: #5.0 million).
* Margins temporarily reduced due to new product launches. Restoration
of normalized margins by third quarter 2003.
Funding
* The Group has raised #1.75 million (net of expenses) in two fundraisings in
November 2002 and March 2003 by way of convertible loan notes and equity.
Major contracts of a cash generative nature are still required to ensure
immediate and long-term success of the Group.
Greg Morgan, Chairman of Advanced Technology (UK) plc, said:
"Whilst we continue to have our challenges, our technology is now proven, the
market is growing substantially and we have been successfully increasing our
product exposure in the US. It is now our task to manage rapid growth of our
One-Way business and, hopefully, to commercialise our Two-Way pilot operations."
27 June 2003
ENQUIRIES:
Advanced Technology (UK) plc Tel: 01202 592000
John Howell, Chief Executive
David Collinson, Finance Director
College Hill Tel: 020 7457 2020
Matthew Smallwood
Chairman's statement
Introduction
Progress has been made in the year under review, and with recent developments
factored in, the Board is more confident of its technology, the potential for
growth in its markets and in the ability of Advanced Technology to exploit its
opportunities.
The United States continues to be our major market and despite disruption caused
by the FCC enquiry we have continued to grow our market share. In Asia and in
Africa the steps forward have been painfully slow and frustrating. However,
there is progress in both territories, and we are hopeful of making more
positive comment in the near future.
Results
Turnover for the year was #7.6 million (2001: #6.0 million), a 27% improvement
over the previous year, despite the adverse impacts of #0.3 million exceptional
product return as a consequence of the FCC investigation, and #0.3 million
adverse currency translation. The Company has reported a reduced loss before
tax of #3.9 million (2001: loss of #5.0 million) which included #0.7 million
(2001: #0.7 million) of goodwill amortisation and #0.5 million of exceptional
items relating to the FCC investigation and an aborted fundraising (2001: #0.5
million arising from transfer of the Group's Ramar business to Christchurch, and
termination of the contracts of former directors). Therefore the loss on
ordinary activities before goodwill, exceptional items and taxation was #2.7
million (2001: 3.7 million).
Gross margins reduced from 40% to 33% in the period largely due to increased
costs arising from the FCC investigation and accelerated introduction of new
products.
Funding
In November, the Group raised #0.9 million (net of expenses) to provide
additional funds for working capital and new product tooling. Whilst sufficient
in the very short-term the Group's exciting prospects required further financial
support. Therefore in March of the current year the Group raised a further
#0.85 million (net of expenses). Both fundraisings were carried out by the
issue of convertible loan notes with a 6% coupon although the second phase also
provided an equity alternative. In tandem with the November fundraising,
existing shareholders were given a warrant to subscribe for new shares at the
same price as the loan notes. These warrants are valid until December 2003.
Operations
One-Way Mobile
The Group enjoyed excellent order intake in the first quarter in the US.
However, the investigation by the FCC into whether Ramar's meter transponder
complied with its regulations, whilst making minimal initial impact, did disrupt
manufacturing and sales patterns throughout the second half. Our product had
complied with regulations when initially tested, but due to further
sophistication of the FCC's testing equipment, we found that some modification
to the product was required. This was completed by the end of the first half of
2002.
The Group's main focus has been on its One-Way Mobile business, addressing the
water market. A second-generation product, the MkII TranspondIT, has been
developed and launched in the US. This product incorporated the required
modifications subsequent to the FCC rulings. As with all new technologies,
there have been some capacity constraints and some excess costs have been
incurred, resulting in initially reduced gross margin. Market acceptance of the
MkII TranspondIT has been encouraging. Gross margins should be restored early
in the second half of 2003 as manufacturing and efficiency normalise.
As previously intimated, we have been exploring and developing products for the
other utilities. In September 2002 we launched, at the AMRA symposium, a
One-Way Mobile product to meet the needs of the US electricity market. It has
been well received with shipments made to our first customers, who are operating
pilot sites.
Our entry into the gas sector, originally planned for Spring 2003, will now be
launched later in the year. This is largely due to resource constraints
compounded by the actions of the FCC.
We continue to develop relationships with vendors in Europe.
Two-Way Fixed Network
Progress has been made in South-East Asia, and we have shipped embedded licenses
and elements of network infrastructure, in support of our customer's first
installation. Whilst this is on a small scale, we expect, although not
immediately, that volumes will increase over time. We can only supply at the
pace of the customer's development and we await instructions on future volume
deployment.
Development in Ghana has been slow. Indeed, shareholders will recall that some
six months ago we stated that we expected to receive our first order for a
Two-Way system from Ghana. Unfortunately, we then encountered unforeseen delays
which pushed the programme back many months. These delays, which were of a
commercial nature, have now been resolved and we hope to be able to progress
this project. We will make further announcements when practicable.
Board
Richard Davies, Non-Executive Chairman, stepped down during the period. At the
time, in October, we said that we sought a replacement. Greg Morgan was
appointed Non-Executive Chairman on 1 May 2003. He has had a close interest in
the Group since its formation, is a significant shareholder in his own right and
has already demonstrated his commitment to the Group through his assistance in
both recent fundraisings.
Outlook
The current year has started slowly. US orders were impacted by harsh winter
conditions in the USA which restricted installation rates. Subsequently, the
Group experienced strong order uplift with the water metering market continuing
to grow at a fast rate (2002: +33% - source: The Scott Report - Seventh
Edition).
Manufacturing has had its challenges and we experienced some component shortages
resulting from variable lead times causing delivery shortfalls. Whilst these
issues are now being overcome with production shortages being made up over the
next few months, the impact will be evident in the Group's results for the first
half of the current year.
The cash injection from the two recent fundraisings secured the Group's
immediate prospects, though the Group's longer term prospects remain
significantly dependant on delivery of a major Two-Way contract. The funding
position remains tight, and the key pressures on the Group's funding position
are shown in note 1 to the preliminary statement. Shareholders will be only too
well aware that the embryonic Two-Way operation has absorbed considerable
resources which has constrained the rest of the Group's business from growing
more rapidly. Your directors fully believe in the potential offered by the
Two-Way system the Group has developed. Nevertheless, they are increasingly
mindful that continued support of this operation cannot be maintained
indefinitely without the accompanying Two-Way revenues. 2003 will be a defining
year for the Two-Way business.
Our focus this year will be on restoring our gross margin, ensuring smooth
passage of new products to market, and managing the needs of our existing and
new customers. In that context, our new electricity product has met with an
encouraging overall customer response. Added to our established water presence,
this widens both our product and customer profile.
The market in which we are operating is now proven and fast growing. It is our
task to leverage our strengthening position, exploit our potential and therefore
maximise value for all shareholders.
Greg Morgan 27 June 2003
Chairman
Consolidated profit and loss account
for the year ended 31 December 2002
2002 2002 2002 2001
Before Exceptional Total Total
exceptional items
items
#000 #000 #000 #000
Turnover 7,923 (289) 7,634 6,007
Cost of sales (5,196) 75 (5,121) (3,578)
Gross profit 2,727 (214) 2,513 2,429
Administrative expenses - including exceptional
costs of #236,000 (2001: #502,000) before
goodwill (5,408) (236) (5,644) (6,767)
Operating loss before goodwill amortisation (2,681) (450) (3,131) (4,338)
Goodwill amortisation (740) - (740) (739)
Operating loss (3,421) (450) (3,871) (5,077)
Interest receivable 8 124
Interest payable (35) (2)
Loss on ordinary activities before taxation (3,898) (4,955)
Tax credit on ordinary activities 312 401
Retained loss for the financial year (3,586) (4,554)
Loss and diluted loss per share (14.0p) (17.8p)
Loss and diluted loss per share, excluding (12.3p) (15.9p)
exceptional items
Consolidated balance sheet
at 31 December 2002
2002 2001
#000 #000 #000 #000
Fixed assets
Intangible assets 4,222 4,970
Tangible assets 658 623
4,880 5,593
Current assets
Stocks 304 666
Debtors 1,044 1,765
Cash at bank and in hand 568 1,155
1,916 3,586
Creditors: amounts falling due within one year (1,966) (1,719)
Net current (liabilities)/assets (50) 1,867
Total assets less current liabilities 4,830 7,460
Creditors: amounts falling due after more than one
year
- convertible loan notes (933) -
Provisions for liabilities and charges (554) (459)
Net assets 3,343 7,001
Capital and reserves
Called up share capital 1,277 1,277
Share premium account 22,895 22,895
Profit and loss account (20,829) (17,171)
Equity shareholders' funds 3,343 7,001
Consolidated cash flow statement
for the year ended 31 December 2002
2002 2001
#000 #000
Net cash outflow from operating activities (1,678) (3,942)
Returns on investments and servicing of finance (17) 122
Taxation 665 -
Capital expenditure (324) (344)
Cash outflow before management of liquid
resources and financing (1,354) (4,164)
Management of liquid resources - (4,000)
Financing 923 -
Decrease in cash in the year (431) (164)
Reconciliation of net cash flow to movement in net (debt)/funds
2002 2001
#000 #000
Decrease in cash in the year (431) (164)
Cash inflow from increase in debt financing (923) -
Cash inflow from decrease in liquid resources - (4,000)
Currency translation differences (156) (1)
Amortisation of financing costs (10) -
Movement in net (debt)/funds in the year (1,520) (4,165)
Net funds at 1 January 1,155 5,320
Net (debt)/funds at 31 December (365) 1,155
Notes
1 The financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost accounting rules.
The financial statements have been prepared on a going concern basis, which the
directors believe to be appropriate for the following reasons. Cash flow
projections indicate that the Group is expected to have a positive cash balance
for the foreseeable future even without a revenue contribution from the Two-Way
fixed network activity. Included within the cash flow projections are the
proceeds from the exercise of warrants amounting to #540,000 in the period 1
July 2003 to 30 June 2004. However, the headroom is particularly tight in the
period July 2003 to November 2003 where the group is anticipating the receipt of
a research and development tax credit of #324,000. The Group remains dependent
upon the continued support of its key supplier together with a debt factoring
facility that has already been agreed with an institution. In preparing these
financial statements, the directors have given consideration to the cash flow
projections and the key assumptions within them, including the timing of future
orders, the continued support of the Group's key supplier, the timing and
likelihood of the receipt of a research and development tax credit, the adequacy
of the agreed debt factoring facility and the amount and timing of receipts from
the exercise of warrants. The directors have concluded that although there is
significant uncertainty in relation to these matters, it is appropriate to
prepare these statements on a going concern basis.
The financial statements do not include any adjustments that might be necessary
were this basis to cease to be appropriate.
2 Loss and diluted loss per share
Loss per share and diluted loss per share (as under Financial Reporting Standard
14 "Earnings Per Share" losses cannot be diluted) for the year ended 31 December
2002 have been calculated on the basis of the weighted average number of
ordinary shares in issue for the year of 25,536,033 (2001: 25,536,033) and loss
after taxation of #3,585,000 (2001: #4,554,000).
The loss and diluted loss per share excluding exceptional items has been
calculated after adjusting the loss after taxation of #3,585,000 (2001:
#4,554,000) for the exceptional item of #450,000 (2001: #502,000). The loss and
diluted loss per share excluding the exceptional item is shown to allow a
comparison of earnings per share on a recurring basis.
3 Reconciliation of operating loss to operating cash flows
2002 2001
#000 #000
Operating loss including exceptional cost of #450,000
(2001: #502,000) (3,871) (5,077)
Depreciation and amortisation charges 1,033 1,006
Profit on disposal of fixed assets - (1)
Decrease/(increase) in stocks 349 (162)
Decrease in debtors 339 856
Increase/(decrease) in creditors 339 (641)
Increase in warranty provision 133 77
Net cash outflow from operating activities (1,678) (3,942)
4 Analysis of changes in net debt
At 1 Cash flow Other Exchange At 31 December
January non-cash movement 2002
2002 charges
#000 #000 #000 #000 #000
Cash at bank and in hand 1,155 (431) - (156) 568
1,155 (431) - (156) 568
Debt due after 1 year - (923) (10) - (933)
Total 1,155 (1,354) (10) (156) (365)
5 The financial information set out above does not constitute the Company's
statutory accounts for the years ending 31 December 2001 or 2002 but is derived
from those accounts. Statutory accounts for 2001 have been delivered to the
Registrar of Companies, and those for 2002 will be delivered following the
Company's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under section
237(2) or (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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