RNS No 0107u
ACORN GROUP PLC
10th October 1997
ACORN GROUP PLC
UNAUDITED INTERIM RESULTS
FOR THE PERIOD 1 JANUARY 1997 TO 30 JUNE 1997
Chairman's Statement
Introduction
The transformation of our core business from educational PC
supplier to technology developer and licenser continued apace.
Development and licensing activities, which started only at the
beginning of 1996, accounted for 40% of total revenues in the
first half of 1997.
Financial Results
Revenues from development and licensing rose from #1.3m in the
first half of 1996 to #5.8m in the same period this year, while
revenues from products fell from #15.2m to #8.4m. The
favourable change in revenue mix reduced the operating loss
before exceptional items from #1.6m in 1996 to #1.0m in 1997.
The operating loss after exceptional items reduced from #3.1m
in 1996 to #1.0m in 1997.
During the first half of the year, the New Zealand subsidiary
was closed. The closure costs of #0.4m relate primarily to
stock write downs and redundancy payments. Trading in New
Zealand continues through a local distributor.
The Group's loss before tax reduced from #4.0m in 1996 to #1.1m
in 1997.
The Group had a cash outflow before financing for the period of
#2.8m (1996:#5.3m) due primarily to operating losses and a
reduction in creditors.
No dividend is payable.
Business Review
The next wave of Internet access devices is expected to be TV-
based. Our strategy for competing in this emerging market is to
ensure that Acorn's TVCentric technologies are compliant with
Java, the dominant emerging standard for content authoring.
Our set-top box technology has featured in the development of a
prototype videophone for NTT Japan and in partnerships with
Oracle and Silicon Graphics to deliver video-on-demand
solutions.
In the network computing arena, we announced the availability
of the first Asian character set display as well as the signing
of Samsung Electronics in Korea as a software licensee. British
Telecom was a partner in the launch of a UK consumer trial
featuring the Acorn NC, and the recent launch of coNCord, a
very fast NC incorporating the Digital StrongARM processor,
confirms Acorn as a leader in NC technology.
Interest in our technology remains strong in the Far East and
we have established our third agency in the region. Lumax
Technology in Taiwan joins MP Technology in Japan and Conhan in
Korea.
Xemplar (50% associate) continues to make satisfactory progress
and is also establishing itself as a leader in the development
of Network Computers for schools.
ARM (43% associate) revenues grew from #6.0m (restated) in the
first half of 1996 to #11.7m in the first half of 1997. Newly
announced licensees were Lucent Technologies Inc., Philips
Electronics NV and Sony Corporation. The company continued to
invest in new product development including the porting of
Windows CE to the ARM architecture.
Board Changes
On 30 April 1997, Malcolm Bird resigned as a Director.
On 26 September 1997, Stan Boland was appointed Finance
Director. He joins us from ICL where his most recent
appointment was Finance Director of ICL Financial Services.
Prospects
We continue to focus primarily on the technologies and markets
for internet appliances and digital interactive TV. To succeed
in these emerging markets it is essential that we remain at the
forefront of technology and that we develop the right strategic
partnerships. To achieve this, we have accelerated our rate of
investment in operating system, browser and Java developments
and also in our sales and marketing activities. The short term
consequence of these actions is that we do not expect any
improvement in the Group's loss before tax in the second half
of 1997 over the first half. The full year results should, as
forecast in my statement last year, show a significant
improvement over 1996.
Acorn's key strength is its ability to deliver leading edge
technology solutions which give customers a time-to-market
advantage. We remain confident of our long term prospects in
our chosen markets.
Gordon Owen
Chairman
Consolidated profit and loss Six Six Year to
account months months 31 Dec
to 30 to 30 1996
June 1997 June (Audited)
(unaudited) 1996
(restated
and
unaudited)
Notes #'000s #'000s #'000s
Turnover 14,166 16,534 30,026
Operating Loss
Operating loss before (997) (1,594) (2,473)
exceptional items
Provisions in respect of stock, 1 - (2,853) (3,645)
bad debts and warranty
Settlement from Australian - 1,326 1,326
dispute
Operating loss from continuing (997) (3,121) (4,792)
operations
Share of profit in associated 2 505 (606) 875
undertakings
Net interest payable (246) (243) (505)
Loss incurred on closure of 3 (400) - (1,874)
subsidiary
Loss on ordinary activities (1,138) (3,970) (6,296)
before tax
Tax - - -
Retained loss for the period (1,138) (3,970) (6,296)
Loss per share 4 (1.3)p (4.4)p (7.0)p
Consolidated Balance At 30 At 30 June At 31 Dec
Sheet June 1997 1996 1996
(Unaudited) (Restated (Audited)
and
unaudited)
Notes #000's #000's #000's
Fixed Assets
Intangible assets 368 428 243
Tangible assets 1,476 1,997 1,692
Investments 5 6,156 4,538 5,567
8,000 6,963 7,502
Current assets
Stocks 1,526 4,348 2,119
Debtors 6,010 8,875 7,161
Cash at bank and in 1,566 - 4,337
hand
9,102 13,223 13,617
Current Liabilities
Bank overdraft - (4,660) -
Other amounts falling (6,763) (10,776) (9,684)
due within one year
(6,763) (15,436) (9.684)
Net current 2,339 (2,213) 3,933
assets/(liabilities)
Total assets less 10,339 4,750 11,435
current liabilities
Amounts falling due (8,143) (634) (8,084)
after more than one
year
Net assets 2,196 4,116 3,351
Capital and reserves
Called up share capital 9,006 9,006 9,006
Share premium account 11,775 11,775 11,775
Other reserves (22) 19 (5)
Profit and loss account (18,563) (16,684) (17,425)
Total capital employed 2,196 4,116 3,351
Consolidated cash flow Six Six Year to
statements months to months to 31 Dec
30 June 30 June 1996
1997 1996 (Audited)
(Unaudited) (Unaudited)
Notes #'000s #'000s #'000s
Operating loss (997) (3,121) (4,792)
Depreciation 632 245 1,491
Loss on disposal of fixed 11 - 229
assets
Decrease in stocks 6 593 720 2,949
Decrease in debtors 1,065 2,159 3,873
Decrease in creditors (2,921) (4,976) (5,904)
Foreign exchange gains (17) 97 73
Loss on closure of (400) - -
subsidiary
Net cash outflow from (2,034) (4,876) (2,081)
operating activities
Returns on investment and
servicing of finance
Interest received 17 - 21
Interest paid (206) (240) (526)
Interest element of finance - (3) -
leases
Net cash outflow from (189) (243) (505)
returns on investments and
servicing of finance
Capital Expenditure
Purchase of intangible fixed (226) - (60)
assets
Purchase of tangible fixed (325) (188) (1,168)
assets
Sale of tangible fixed 3 - 4
assets
Net cash outflow from (548) (188) (1,224)
capital expenditure
Net cash outflow before (2,771) (5,307) (3,810)
financing
Financing activities
Issue of ordinary shares - 10 10
Capital element of finance - - (18)
leases
New unsecured loan - - 7,518
Net cash inflow from - 10 7,510
financing activities
(Decrease)/increase in cash (2,771) (5,297) 3,700
in the period
Change in cash
Cash at start of period 4,337 637 637
Movement (2,771) (5,297) 3,700
Cash/(overdraft) at end of 1,566 (4,660) 4,337
period
Notes
1 During the six months to 30 June 1996, the provisions
comprised #2,183,000 in respect of Lightspan stock and
#670,000 in respect of two specific bad debts.
2 Interest in Advanced RISC Xemplar Education
associated Machines Holdings Ltd
undertakings: Ltd
% holding:
as at 30 June 1997 42.6% 50%
as at 30 June 1996 42.8% 50%
Share of
profit/(loss):
to 30 June 1997 853 (348)
to 30 June 1996 103 (709)
In 1996, Advanced RISC Machines Holdings Limited changed
its accounting policy in respect of the recognition of
licensing revenue. The effect of this change was to reduce
Acorn's share of profit before tax in the six months to 30
June 1996 by #648,000.
3 During the six months to 30 June 1997, the Group closed its
New Zealand subsidiary. As a result, closure costs of
#400,000 were charged to the profit and loss account. Acorn
products continue to be sold to the New Zealand market
through a local distributor.
4 The calculation of the loss per ordinary share is based on
the loss on ordinary activities after taxation and the
weighted average number of shares in issue during the
period.
5 Investments are stated at cost plus the Group's share of
the post-acquisition retained profit or loss. As a result
of a revised 1996 taxation charge, the value of the
investment in Advanced RISC Machines Holdings Limited has
been increased by #366,000 and the consortium relief
taxation debtor has been reduced by the same value.
6 During the six months to 30 June 1996, the Group entered
into a material non-cash transaction of #2,500,000
representing a 50% investment in Xemplar Education Limited.
The main consideration was #2,400,000 of finished goods
stock.
7 The figures for the year ended 31 December 1996 are
abridged from the accounts of Acorn Group plc and do not
comprise full statutory accounts within the meaning of
Section 240 of the Companies Act 1985. Full accounts for
that year which received an unqualified audit report have
been filed with the Registrar of Companies.
Auditors' review report
We have reviewed the interim financial information for the six
months ended 30 June 1997 set out above which is the
responsibility of, and has been approved by, the directors. Our
responsibility is to report on the results of our review.
Our review was carried out having regard to the Bulletin Review
of Interim Financial Information, issued by the Auditing
Practices Board. This review consisted principally of applying
analytical procedures to the underlying financial data,
assessing whether accounting policies had been consistently
applied, and making enquires of group management responsible
for financial and accounting matters. This review excluded
audit procedures such as tests of controls and verification of
assets and liabilities, and was therefore substantially less in
scope than an audit performed in accordance with Auditing
Standards. Accordingly, we do not express an audit opinion on
the interim financial information.
On the basis of our review:
In our opinion the interim financial information has been
prepared using accounting policies consistent with those
adopted by Acorn Group plc in its financial statements for
the year ended 31 December 1996; and
we are not aware of any material modifications that should
be made to the interim financial information as presented.
Arthur Andersen
Chartered Accountants
and Registered Auditors
Betjeman House
104 Hills Road
Cambridge
CB2 1LH
Enquiries:
David Lee, Managing Director, 01223 725000
Stan Boland, Finance Director, 01223 725000
END
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