RNS No 7787t
ACORN GROUP PLC
30th April 1998
Acorn Group plc
Preliminary earnings
Statement
Year end 31 December 1997
Chairman's Statement
--------------------
An important milestone in the Group's history was reached in April 1998 with
the public listing of our associate company, ARM Holdings plc, on both NASDAQ
and the London Stock Exchange. Starting in 1990 with the transfer of 12 people
from Acorn, ARM has grown into a global business now employing around 300
people and with an initial public offering value of around #264m.
In order to facilitate the public offering all four corporate shareholders,
including Acorn, agreed to sell approximately 19% of their shareholdings. The
Group's proceeds of sale, net of expenses, amounted to #14.9m before tax.
These proceeds together with a dividend from ARM of #1.5m, will be used to
repay borrowings and to finance the growth of the core business. Any Capital
Gains Tax will be payable in 1999.
During the year, we continued the transformation of our core business from UK
educational PC supplier to worldwide technology developer and licenser. Sales
outside the UK grew from 24% of turnover in 1996 to 41% in 1997, and
operating losses fell from #4.8m to #3.7m, despite an increase of #1.7m in
research and development expenditure.
Our other associate company, Xemplar Education Limited, achieved a pre-tax
profit of #0.2m in 1997, its second year of trading, following a loss of #1.4m
in 1996.
The Group's loss on ordinary activities before tax reduced from #6.3m in 1996
to #2.9m in 1997. The Group's loss per share improved from 7.0p to 3.7p. No
dividend is payable.
Board changes
-------------
On 30 April 1997, Malcolm Bird resigned as a Director.
On 26 September 1997, Stan Boland was appointed Finance Director. He joined
us from ICL, where his most recent appointments were as Finance Director of
ICL Financial Services and ICL Sorbus. Previously he was ICL's Director of
Treasury and Tax, following treasury appointments in a
number of public and private companies.
Outlook
-------
Following the public listing of ARM Holdings plc, your Board intends to build
value in the core business of the Group, and to examine the best means of
maximising the value to shareholders of the Group's substantial
remaining interests in ARM and Xemplar.
To remain competitive in our chosen markets of digital interactive TV and
information appliances, it is essential to maintain a high level of targeted
development expenditure, where possible, co-funded by customers or
partners. We expect such collaborations to play a key role in our corporate
development in 1998.
During 1998, your Board expects a further reduction in revenues compared with
1997, as the core business continues its transition from product supplier to
technology provider. The first half of 1998 in particular is
likely to see a significant reduction in revenues, and an increased loss
compared to the first half of 1997, which benefited from the NCI contract,
and higher levels of product sales. Revenue growth is expected in the
second half of 1998 as a result of increased consultancy and licensing
activities, and the launch of the new Risc PC.
Taking the year as a whole, while a better gross profit is expected as a
result of the improving mix of activities, the planned increase in development
expenditure is likely to delay any significant reduction in operating losses.
However, the development expenditure is being
invested in markets and technologies which have the potential for revenue
growth and profit in 1999 and beyond.
Your Board believes there is significant value in Acorn's core business and is
determined to unlock this potential for the benefit of shareholders.
Gordon Owen
Chairman
Acorn Group plc
30 April 1998
Chief Executive's Review
------------------------
Acorn core business
-------------------
During 1997, we made further progress in the transformation of our core
business. Consultancy and licensing accounted for 36% of turnover in 1997
compared with only 10% in 1996, and sales outside the UK grew from
24% of turnover in 1996 to 41% in 1997.
Our set-top box technology 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. We are participating in
several broadband digital interactive TV trials in the USA, Europe and Asia.
There are signs that this market is at last starting to develop and that
some trials should proceed to commercial roll-out by the end of 1998.
In the network computing sector, 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. Our joint development program with Oracle's
subsidiary Network Computer, Inc. (NCI) was successfully completed, and the
first network computer
(NC) products were shipped by RCA to US consumers in the fourth quarter of
1997 to market acclaim. Although joint development activities with NCI
are no longer continuing, we have since licensed the related technologies
directly to other consumer electronics companies in the US and Asia.
In the information appliance sector, we developed an Internet fax product on
behalf of Netfax, Inc., a US start-up company. The technology
enables the secure delivery of facsimiles over the Internet, intranets
or telephone networks by transforming the legacy fax machine into a secure
email messaging terminal. The key advantages are security and a dramatic
reduction in the longdistance charges associated with traditional facsimile
transmission.
We continued to market a range of RISC OS based, ARM- powered desktop
personal computers via three distribution channels: (i) to UK schools through
Xemplar, (ii) to a niche consumer market through the Acorn dealer network, and
(iii) to specific vertical market customers through OEMs.
Xemplar Education Limited
-------------------------
Xemplar sells information technology products, services and solutions to UK
schools.
1997 was the first full year of trading, following an initial trading period
of nine months from start-up in April 1996. 1997 proved to be a successful
year with the company moving into a profit of #0.2m, ahead
of schedule. This was achieved while continuing to invest in specific
solutions for UK schools, and innovative technologies such as the network
computer and eMate.
The company, which is the second largest information technology supplier in
the UK schools market, has developed valuable equity in the Xemplar brand and
has aligned its overall strategy with the UK Government's
drive to form a National Grid for Learning.
ARM Holdings plc
----------------
ARM designs high-performance, low-cost, power-efficient RISC microprocessors.
The company licences and sells its technology and products to leading
international electronics companies, which in turn
manufacture, market and sell microprocessors, application-specific
integrated circuits and applicationspecific standard products based on ARM's
architecture to systems companies for incorporation into a wide range of end
products.
Revenues in 1997 increased by 59% to #26.7m. All sectors of the business grew
in line with expectations, with particularly strong growth coming
from the sale of development systems and royalty income compared with 1996.
Licensing revenues accounted for 59% of sales.
Research and development expenditure increased from #3.1m in 1996 to #6.7m in
1997. Profit before tax increased by 35% from #3.7m in 1996 to #5.0m in 1997.
The company increased its geographical presence during the year with the
opening of four new offices in Maidenhead and Cambridge, UK, in Seoul,
South Korea, and in Austin, Texas, the last of these being the first design
office to be opened by the company outside the UK. The number of employees
grew from 162 at December 1996 to 274 at December 1997.
During the year, the company successfully licensed ARM7 derivatives and some
of its new ARM9 family of products as work continued on further development of
the ARM product roadmap. New partners announced in
1997 included LSI Logic, Hyundai, Sony, Lucent and Philips. Since the
year-end, further licences have been announced with Intel and IBM.
Acorn's core business in 1998
-----------------------------
At the beginning of 1998, we organised the core business into three operating
divisions, Consultancy, Software and Workstations. This will enable us to
manage their activities more effectively and to
better deliver partnerships appropriate to each.
Consultancy
-----------
The Consultancy division is engaged in product design and development
consultancy focused on the markets for digital interactive TV and information
appliances. Our offering is tailored to the requirements of individual
customers and ranges from the provision of engineering services to complete
solutions, including the licensing of software
components from Acorn's Software division or third parties.
Digital TV is a growing and potentially huge worldwide market, driven by the
significant distribution cost advantages compared with analogue TV, and also
by customer demand for more entertainment and information channels.
The market can be segmented into: (i) Broadcast, where the digital TV signal
is supplied from a satellite or terrestrial broadcast, with
interactivity provided by a telephone back channel, or interactively via a
cable network, and (ii) Broadband, where digital video content is supplied
over existing telecom networks, upgraded to carry high-speed data streams, or
alternatively over a computer network within an organisation.
Acorn is addressing both market segments. Alliances with manufacturers,
middleware providers and network operators are crucial to success.
We have and are developing technologies which are particularly suitable for
the next generation of DiTV systems. These systems typically contain general
purpose computing devices, highly graphical user interfaces and integrated
multimedia capabilities. The Digital Semiconductor SA1500/1501 chipset which
we helped to design is specifically targeted at these types of systems and
currently offers significant cost advantages compared with other hardware
solutions. Our Software division has also developed or is developing software
components such as MPEG decoding, graphics libraries, software modem, OS
kernel and browser which optimise the performance of chipsets in DiTV
solutions.
Information appliances can be defined as products which are designed to
connect to a data source, often but not always using the Internet. Acorn is
targeting three market segments: (i) Dedicated terminals, typically with a
single function aimed at a specific use such as home banking or
retailer stock ordering, (ii) Smart TV set-top devices, allowing Internet
access and display on an analogue TV, and (iii) smart phones, incorporating a
text screen and providing access to email and other text services such as
phone directory enquiries.
We also have technologies which are suitable for the targeted information
appliance markets. Designs are currently based on the Cirrus Logic 7500FE or
Digital Semiconductor SA110 processors. Acorn's RISC OS, middleware and
applications are already available on these processors, enabling new designs
to be produced quickly.
In future, we shall be adopting an approach which allows Acorn software
components to be integrated with other selected operating systems and on other
processors.
Software
--------
Historically, our software technologies have been offered only as a complete
stack associated with an Acorn/ARM hardware design. Although this strategy
has given a time to market advantage, together with optimum performance and
good reliability, it has limited the market opportunities that could be
addressed. We have now chosen to make our software portfolio available across
a broader range of hardware and software platforms.
Our software technologies include MPEG and JPEG decoders, graphics libraries,
operating systems, hardware device drivers, Internet software suites and
Javabased environments and support services. This extensive set of
multimedia network-based software technologies is of value to consumer
electronics companies and system chip integration companies who are
building new generations of digital products such as Internet appliances, Web
phones and digital interactive television solutions.
The Software division seeks to exploit Acorn's intellectual property by
licensing software components to technology partners and by working with chip
vendors and consumer electronics companies to integrate
state of the art system software into the new classes of digitally-enabled
consumer products.
Workstations
------------
The Workstations division sells Acorn desktop computing products to a niche
consumer market through Acorn's dealer network, to corporate customers for
vertical applications through OEMs and to UK schools through Xemplar.
During the second half of 1998, we shall be launching the first major new
product since the Risc PC was introduced four years ago. The success of
the desktop computer business hinges on the successful launch and take-up of
this product.
We also plan to market a range of software products.
The other major initiative to be undertaken by the division in 1998 is a joint
marketing program with Xemplar to promote the sale of NCs into the education
market, together with Xemplar's NC-based solutions. With the market
requirement for low-cost, robust and easy-to-use computing, the educational
sector represents one of the best opportunities for early adoption of NC
technology.
Acorn's NC product will include Java and also Citrix client software which
enables the NC to access Microsoft applications running on a Windows
server.
D Lee
Chief Executive
Acorn Group plc
30 April 1998
Finance Director's Review
-------------------------
Revenues from consultancy and licensing rose from #3.0m in 1996 to #9.0m in
1997, while revenues from products fell from #27.0m to #16.2m. Despite
the net reduction of #4.8m in revenues, the favourable change in mix resulted
in better margins. Gross profit improved from #6.5m, 22% of
revenues, to #6.6m, 26% of revenues.
Operating expenses fell from #11.3m in 1996 to #10.2m in 1997. The principal
changes were a reduction of #2.6m in administration expenses due
to lower stock write-downs, and an increase of #1.7m in research and
development expenditure on software and silicon technologies.
The operating loss reduced from #4.8m in 1996 to #3.7m in 1997.
The Group's share of profit in associated undertakings rose from #0.9m in 1996
to #2.1m in 1997. The share of profit in ARM Holdings plc increased from #1.6m
to #2.0m, while the share in Xemplar Education Limited improved from a loss of
#0.7m to a profit of #0.1m.
In the second half of the year, the Group's share of the net assets of ARM
Holdings plc fell from 42.8% to 38.7% due to the exercise of share options by
ARM employees. The loss of #0.4m arising from this dilution has been charged
to the profit and loss account. The Group's fully diluted shareholding as at
31 December 1997 was 34.4%.
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 #6.3m in 1996 to #2.9m in 1997.
The Group had a net cash outflow before financing of #4.7m (1996:#3.8m) due
primarily to operating losses before depreciation of #2.5m (1996:#3.3m) and
capital expenditure of #1.6m (1996:#1.2m). The sale by the Group of
approximately 19% of its shareholding in ARM Holdings plc in connection with
ARM's initial public offering in April 1998, together with the receipt of a
pre-flotation dividend, has a transforming effect on the consolidated balance
sheet. Had the transactions been completed on 31 December 1997, the
improvement to the consolidated balance sheet would have been as summarised
below:
Actual Pro-forma
31 Dec 97 31 Dec 97
#m #m
Fixed assets 8.8 14.1
Net current liabilities - (0.4) (3.8)
excluding borrowings/cash
Long-term liabilities (0.2) (0.2)
Net (borrowings)/cash (6.6) 9.8
------ ------
Net assets 1.6 19.9
====== ======
Share capital/premium 22.5 22.5
Reserves (20.9) (2.6)
------ ------
Equity shareholders' funds 1.6 19.9
====== ======
The Group retains 12,161,961 shares in ARM Holdings plc, representing 26.8%
(24.5% fully diluted) of ARM's total equity. This investment will be carried
at approximately #10m in the consolidated balance sheet. The market value of
this investment is #70m at the flotation price of #5.75 per share. This
valuation takes no account of the Capital Gains Tax liability which may arise
on any disposal.
Stan Boland
Finance Director
Acorn Group plc
30 April 1998
Consolidated Profit and Loss Account
------------------------------------
YEAR ENDED 31 DECEMBER 1997 Notes 1997 1996
#000 #000
Turnover 1 25,192 30,026
Cost of Sales (18,632) (23,551)
-------- --------
Gross Profit 6,560 6,475
Distribution costs (4,496) (4,593)
Administration expenses (2,892) (5,520)
Research and Development (2,858) (1,154)
-------- --------
Operating Loss 2 (3,686) (4,792)
Share profit in associated
undertakings
ARM Holdings plc 2,063 1,572
Xemplar Education Ltd 80 (697)
Loss incurred on dilution
of shareholding in associate (417) -
Loss incurred on closure of
overseas subsidiaries 3 (376) (1,874)
Net interest payable (547) (505)
-------- -------
Loss on ordinary activities before (2,883) (6,296)
taxation
Tax on loss on ordinary activities (479) -
-------- -------
Retained loss for the year (3,362) (6,296)
======== =======
Loss per share 4 (3.7)p (7.0)p
All operations of the Group continued throughout
both periods.
The accompanying notes are an integral part
of these financial statements.
Statement of Total Recognised Gains and Losses
----------------------------------------------
YEAR ENDED 31 DECEMBER 1997 1997 1996
#000 #000
Group
Loss for financial year (3,362) (6,296)
(Loss)/gain on foreign current
translation (53) 73
Goodwill charged to the profit and
loss account in 1996 previously written
off to consolidated reserves - 1,585
-------- --------
Total recognised gains and losses
relating to the year (3,415) (4,638)
======== ========
1997 1996
#000 #000
Company
Loss for the financial year (727) (200)
Unrealised deficit on the revaluation
of investments in subsidiaries (2,688) (4,438)
-------- --------
Total recognised gains and loss
relating to the year (3,415) (4,638)
======== ========
The accompanying notes are an integral part
of these financial statements.
Balance Sheets
--------------
AT 31 DECEMBER 1997 GROUP COMPANY
Notes 1997 1996 1997 1996
restated
#000 #000 #000 #000
Fixed assets
Intangible assets 969 243 - -
Tangible assets 1,267 1,692 - -
Investments 5 6,602 5,567 1,806 3,833
-------- -------- -------- --------
8,838 7,502 1,806 3,833
======== ======== ======== ========
Current assets
Stocks 775 2,119 - -
Debtors 3,905 7,161 - -
Cash at bank and in hand 1,325 4,337 18 84
-------- -------- -------- --------
6,005 13,617 18 84
Creditors
Amounts falling due
within one year (13,019) (9,684) - -
-------- -------- -------- --------
Net current
(liabilities)/assets (7,014) 3,933 18 84
======== ======== ======== ========
Total assets less
current liabilities 1,824 11,435 1,824 3,917
Creditors
Amounts falling due
after more than one year (204) (8,084) (204) (566)
-------- -------- -------- --------
Net assets 1,620 3,351 1,620 3,351
======== ======== ======== ========
Capital and reserves
Called-up share capital 9,204 9,006 9,204 9,006
Share premium account 13,261 11,775 13,261 11,775
Other reserves (58) (5) - -
Profit and loss account (20,787) (17,425) (20,845) (17,430)
-------- -------- -------- --------
Equity shareholders'funds 1,620 3,351 1,620 3,351
======== ======== ======== ========
These financial statements were
approved by the Board of
Directors on 30 April 1998 and
were signed on its behalf by:
D Lee Director
S Boland Director
The accompanying notes are an integral part
of these financial statements.
Consolidated Statement of Cash Flows
------------------------------------
YEAR ENDED 31 DECEMBER 1997 Notes 1997 1996
#000 #000
Net cash outflow from operating
activities 6 (2,858) (2,081)
Returns on investment and servicing
of finance
Interest received 67 21
Interest paid (249) (526)
Net cash outflow from returns ------- -------
on investment and servicing
of finance (182) (505)
------- -------
Capital expenditure
Purchase of intangible fixed assets (971) (60)
Purchase of tangible fixed assets (659) (1,168)
Sale of tangible fixed assets - 4
------- -------
Net cash outflow from capital
expenditure (1,630) (1,224)
------- -------
Net cash outflow before
financing (4,670) (3,810)
------- -------
Financing activities
Issue of ordinary shares 1,684 10
Capital element of finance leases - (18)
New unsecured loan - 7,518
Redemption of loan stock (26) -
------- -------
Net cash inflow from financing 1,658 7,510
------- -------
(Decrease)/increase in cash (3,012) 3,700
======= =======
The accompanying notes are an integral part
of these financial statements.
Notes to the Accounts
---------------------
1.Segment Information
-------------------
All the Group's turnover and loss on ordinary activities before taxation
derive from the sale of electronic hardware and software and fee income
from consultancy and licensing agreements. All the Group's turnover
originates in the United Kingdom.
Turnover by destination 1997 1996
#000 #000
UK 14,901 22,758
Europe 972 2,078
Australasia 825 3,048
USA 7,190 1,609
Other 1,304 533
------ ------
25,192 30,026
====== ======
No further segmental analysis is given, because in the opinion of the
Directors, the disclosure of such information would be prejudicial to the
interests of the Group.
2.Operating Loss
--------------
Operating loss is started after 1997 1996
charging/(crediting): #000 #000
Exceptional charges
- bad debts 1,272 1,053
- stock write downs - 2,592
Exceptional gains
- profit on redemption of loan stock (336) -
- settlement of legal dispute - (1,326)
The exceptional items shown above are included within administration
expenses on the face of the profit and loss account.
3. During the year, the Group closed its New Zealand subsidiary. As a
result, closure costs of #376,000 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
postacquisition retained profit or loss.
6. During the year to 31 December 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.
Statutory Statement
-------------------
The financial information set out above does not comprise the company's
statutory accounts. Statutory accounts for the previous financial year ended
31 December 1996 have been delivered to the Registrar of Companies. The
Auditors report on those accounts was unqualified and did not contain any
statement under section 237(2) or (3) of the companies Act 1985.
The Auditors have not reported on accounts for the period 31 December 1997,
nor have any such accounts been delivered to the Registrar of Companies.
END
FR WBUQUCBGRUBU
Advance Capital (LSE:ACN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Advance Capital (LSE:ACN)
Historical Stock Chart
From Jul 2023 to Jul 2024
