RNS Number:5476P
DRS Data & Research Services PLC
09 September 2003
DRS Data & Research Services plc
Interim Report 2003
Chairman's Statement
Results
I am pleased to report that the results for the first half of 2003 are better
than for the same period last year and continue the trend of year on year
increased profitability. Strong sales and good market growth have produced
turnover up 15%. Despite having made provisions for non-recurring costs,
significant investment in new products and services has been possible while
maintaining net profit margins at above 11% of sales.
An exciting first half of the year has seen high profile projects in both
education and elections combined with strong sales growth in the UK and
internationally. Our reputation for being experts in time critical, accurate
data capture projects was enhanced by media coverage during the period. Our
e-marker product was demonstrated to the press while being used to mark national
exams early in the year and the BBC filmed DRS in action during the local
elections in May. Hardware equipment and bureau services achieved record
sales.
Legal proceedings initiated by DRS, in the High Court in London, relating to
patents in the field of e-marking continue. A trial date of 17th November 2003
has been set and our counsel and expert witnesses are fully prepared.
However, the costs are significant and the Board has provided for the projected
costs, including the trial, in the half year accounts. The Board remains
confident in the successful outcome of the proceedings.
Financial Summary
Turnover for the first half of 2003 was #7,759k compared with a figure of
#6,749k for the first half of 2002. This represents an increase in turnover of
15%. Profit before tax for the 28 weeks ending 11th July 2003 was #892k compared
with #761k for the comparable period in 2002. Profit before tax expressed as a
percentage of sales is 11.5% (11.3% in 2002). Basic earnings per share for the
first half of 2003 were 1.88p, compared with 1.57p for the first half of 2002.
Available funds are still strong and at the half year were #5,922k (#5,206k in
2002). Working capital increased during the period as a result of the phasing
of contract payments and an increase in manufacturing inventory ahead of the GLA
contract.
Dividend
Based upon the continued growth of the business and the strong half year results
the Board is pleased to recommend an interim dividend payment of 0.5p per share
(2002: nil), payable on 7th November 2003 to those shareholders on the register
of the Company on 26th September 2003. The Board expects to recommend a final
dividend which will reflect a total dividend commensurate with profits for the
year.
Trading Highlights
As in 2002, the first six months featured local government election work.
Authorities in Durham and Shrewsbury chose DRS to count ballot papers
electronically during the May local elections. These projects were part of a
series of election pilots organised by the Office of the Deputy Prime Minister.
At Durham the three authorities combined to create a single count venue for
an all postal ballot election. Shrewsbury & Atcham were part of a
multi-channel election with DRS counting the postal ballots. Both electronic
counts were completed very successfully and results were announced in record
times.
All areas of our education market have produced good growth. Sales and rentals
of OMR scanners to schools continue to increase and substantial orders have been
secured from Local Education Authorities. We print a wide range of forms each
year for use in education both directly by schools in conjunction with our
scanners, and by testing and assessment bodies. This side of our business has
benefited from the increased sales of scanners and from increased levels of
testing and assessment. A major project using our e-marker product was
completed early in the year when our technology was used to assist the marking
of GCSE exams. The project received national press coverage and was heralded
as "a revolution" in the process of exam marking.
We are now into our eighth year of working with the University of Durham, and
have recently secured a five year contract worth #2.5m to continue that work.
The international market for our Photoscribe scanners remains buoyant. A
project to process university applications in the Guangdong province of China
required a number of scanners to be shipped there at short notice. Fortunately
travel restrictions imposed due to the SARS virus were lifted just in time for
our engineers to commission the machines and the project was completed on time.
Guangdong is just one of a number of provinces in China that may have a
requirement for our technology and services.
Our People
The very experienced DRS team have demonstrated, yet again, an extremely high
level of achievement. Our record half year turnover and profit is a direct
consequence of their expert work. We have also recruited experienced people
into several areas of the business who are already making a positive
contribution to the company. Recruitment will continue in the second half of
the year to enhance our ability to capitalise on our market potential.
Prior to the AGM we were pleased to announce two new appointments to the Board.
Gary Brighton, who was a senior manager within the company, has been appointed
Operations Director and Ann Limb, who is Chief Executive of the University for
Industry, has joined us as a non-executive Director.
Prospects
Early in the year we were nominated as the preferred supplier to the Greater
London Authority for the London Mayor and Assembly elections to take place in
June 2004. We are delighted that a contract has now been signed with an
expected value of #3.5 million. Work has already started on this large and
complex project and a dedicated production unit has been established in Milton
Keynes to handle the manufacturing and commissioning of approximately 300
Photoscribe scanners and associated equipment.
Aspects of exam marking which are not subject to the patent case continue to be
developed. However, following their acquisition by Pearson, Edexcel informed
us that the work undertaken by DRS will in future be carried out internally.
The loss of revenue from Edexcel over the next twelve months will be more than
offset by work on the GLA election.
Major trials of technology and processes planned with other examination bodies
for later in the year will continue, allowing us to offer full scale
implementation in national exams during the summer of 2004.
Development work is also continuing in other areas. The latest of the
Photoscribe series of combined image and OMR scanners has been successfully
completed and we hope to use it for the 2004 elections. The Votapad e-voting
terminal has also completed its first phase of development and is ready for a
live election trial. Also, use of the Anoto pen technology is being explored
in some new applications. These major projects, and others, are incurring costs
in the year but are part of our strategic plans for sustainable growth of
turnover and profit.
In summary, the first six months have produced excellent results despite
significant expenditure on our legal action and project costs associated with
future company growth. The high level of R&D expenditure will continue in the
second half of the year. Despite the loss of revenue from Edexcel, the Board
believes that the prospects for the second half year will be satisfactory.
There are exciting new business opportunities ahead, particularly in the market
of assessment and testing. DRS is facing some interesting challenges and I am
confident that we are ready to meet them.
DRS Data & Research Services plc
UNAUDITED RESULTS
Profit and Loss Account
For the 28 weeks ended 11July 2003
28 weeks ended 28 weeks 12 months
11 July 2003 ended ended
#'000 12 July 2002 31 December 2002
#'000 #'000
TURNOVER 7,759 6,749 12,782
OPERATING PROFIT 790 733 1,727
Net interest received 102 28 49
PROFIT BEFORE TAX 892 761 1,776
Taxation charge (257) (236) (524)
PROFIT AFTER TAX 635 525 1,252
Dividends (173) - (422)
RETAINED PROFIT FOR THE
PERIOD 462 525 830
EARNINGS PER SHARE
- basic 1.88p 1.57p 3.74p
- fully diluted 1.87p 1.55p 3.68p
DRS Data & Research Services plc
UNAUDITED RESULTS
Balance Sheet at 11 July 2003
11 July 12 July 31 December
2003 2002 2002
#'000 #'000 #'000
FIXED ASSETS
Tangible 5,136 4,913 5,313
Investment in own shares 105 164 147
5,241 5,077 5,460
CURRENT ASSETS
Stocks 1,337 864 1,055
Debtors due within one year 3,463 2,947 2,015
Investments 4,017 315 3,780
Cash at bank 1,905 4,891 2,141
10,722 9,017 8,991
CREDITORS: amounts due within
one year (5,676) (4,034) (4,604)
NET CURRENT ASSETS 5,046 4,983 4,387
TOTAL ASSETS LESS CURRENT
LIABILITIES 10,287 10,060 9,847
CREDITORS: amounts due after more than
one year (1,000) (1,600) (1,000)
Provisions for liabilities and (106) (46) (128)
charges
NET ASSETS 9,181 8,414 8,719
CAPITAL AND RESERVES
Called up share capital 1,731 1,731 1,731
Share premium account 5,377 5,377 5,377
Capital redemption reserve 115 115 115
Profit and loss account 1,958 1,191 1,496
SHAREHOLDERS' FUNDS 9,181 8,414 8,719
DRS Data & Research Services plc
UNAUDITED RESULTS
Cash Flow Statement
for the 28 weeks ended 11 July 2003
28 weeks 28 weeks 12 months
ended ended ended
11 July 12 July 31 December
2003 2002 2002
#'000 #'000 #'000
Cash inflow from operating activities 603 1,706 4,125
Net cash inflow from returns on investment
and servicing of finance 102 18 49
Taxation paid - - (170)
Capital expenditure (280) (333) (1,098)
Equity dividends paid (424) (167) (167)
Cash inflow before use of liquid resources 1 1,224 2,739
Net cash outflow from management of liquid
resources (69) (1,123) (1,522)
Net cash outflow from financing - (100) (900)
(Decrease)/increase in cash in the period (68) 1 317
DRS Data & Research Services plc
NOTES
1. The unaudited interim results have been prepared on the basis of the
accounting policies set out in the company's statutory accounts. The accounts
for the 12 months ended 31 December 2002 shown are abridged and have been
extracted from the full accounts for that year, on which the auditors made an
unqualified report under Section 235 of the Companies Act 1985, and which have
been filed with the Registrar of Companies.
2. Earnings per share have been calculated by dividing profit after tax for
the period by the weighted average number of ordinary shares in issue. For
basic earnings per share the weighted average number of ordinary shares was
33,688,467 (33,440,553 for the 28 weeks ended 12 July 2002 and 33,440,543 for
the 12 months ended 31 December 2002).
For diluted earnings per share the weighted average number of ordinary shares
was 33,998,369 (33,862,973 for the 28 weeks ended 12 July 2002 and 33,991,794
for the 12 months ended 31 December 2002). The weighted average number of
ordinary shares takes into account shares held in the Restricted Share Scheme
and outstanding options. The calculations are in accordance with the
requirements of Financial Reporting Standard 14.
3. Investment in own shares
This represents the cost of shares purchased under the Restricted Share Scheme.
At 11 July 2003 680,529 (12 July 2002: 1,181,057, 31 December 2002:
1,181,057) shares with a market value of #289,225 (12 July 2002: #266,515, 31
December 2002: #354,317) were held. Of these shares, 510,000 (12 July 2002:
605,000, 31 December 2002: 865,000) had been conditionally gifted to employees.
4. Reconciliation of net cash flow to movement in net funds. Net funds
represents cash at bank and current asset investments less bank loans.
28 weeks 28 weeks 12 months
ended ended ended
11 July 2003 12 July 2002 31 December
2002
#'000 #'000 #'000
Increase/(decrease) in cash in
period (68) 1 317
Cash outflow from financing - 100 900
Cash outflow from management of liquid
resources 69 1,123 1,522
Movement in net funds in period 1 1,224 2,739
Opening net funds 4,921 2,182 2,182
Closing net funds 4,922 3,406 4,921
This information is provided by RNS
The company news service from the London Stock Exchange
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