Final Results
July 22 2002 - 7:28AM
UK Regulatory
RNS Number:9231Y
Network Technology PLC
22 July 2002
Network Technology Plc: Results for the year ended 31 March 2002
Salient Points
• Turnover down from £5.2m to £3.3m
• Average annual staff numbers down from 109 to 76
• Pre-tax loss after heavy stock write-downs and restructuring costs
increased from £1.4m to £4.1m
• There is no dividend while group remains in recovery phase and for the
last 23 months none of the board has drawn a salary
• All the remaining and consolidated group companies are now in a position
to grow and sales of security devices are consistently increasing
Commenting on prospects Klaus Bollmann, chairman and chief executive, says: "The
board remains confident that the market and product choices we have made are the
right ones. The new products are necessary to move the company away from its
exposure to the Japanese market and its print server products. The new products
will enable the company to grow out of its current difficulties and we will
continue to bring new technologies to market which, in the board's view, will
secure the company's future and the biggest rewards for our shareholders."
CHAIRMAN'S STATEMENT
I am pleased to report that the company is still on track for recovery. However,
the second half of the year was very difficult and this is reflected in the full
year results. Turnover for the year ended 31 March 2002 was £3.3m, compared with
£5.2m for the previous year. Major stock write-downs, together with interest,
final restructuring charges, R & D charges and CVA costs resulted in a full year
pre-tax loss up from last year's £l.4m to £4.1m. The stock losses in the US
stemmed mainly from the slowdown in our plotter business, which meant that
existing products could not be sold and then had to be treated as obsolete as
they were superceded by newer products.
Dividends
Whilst the Group is still in its recovery phase the directors are unable to
recommend the payment of a dividend. Shareholders may like to note that the
board has received no remuneration for 23 months out of the past 2 years and
that management's interests are totally aligned with shareholders' interests in
seeing the company restored to profitability as quickly as possible.
Review
The first six months of the year were profitable throughout on operations,
including September, owing to the momentum of forward orders that were available
until January 2002. In the second half of the year group companies experienced
varied fortunes.
H Bollmann Manufacturers, which had achieved operational profitability from
April through to August, suffered a small operational loss in September, which
increased month by month until December. Since then operational losses have
decreased month by month and the company almost broke even in May 2002. HBM has
a number of contract design projects and new designs for products sold through
the Ringdale brand, and is now engaged in enhancing existing product lines. As
all European and some US product is manufactured by HBM, we expect it to return
to profitability as Ringdale's sales increase.
Ringdale's plotter sales slowed after the tragic events of 11th September and
did not pick up again until June 2002. Ringdale's Biometrics Access Control
Systems, by contrast, saw steadily increasing sales since December 2001 as a
likely result of the increased need for security. Ringdale UK and Ringdale Inc
were profitable throughout most of the year. Ringdale Inc suffered a sharp drop
in profitability in September, however, both companies have remained profitable
in the first quarter of the current year. Ringdale's access control products are
now contributing to the bottom line. Ringdale GmbH has likewise been profitable
through most of the period, as well as the first quarter of the current year,
but it incurred a small loss in February 2002. Overall, Ringdale's state-of-the-
art access control devices and FollowMe printing products look to have a
promising future.
The business of contract manufacturing in the USA was seriously impacted as a
result of 11th September. All companies in the sector experienced this and
Nextus Inc was plunged into a loss situation from which it only managed to
recover in April 2002. Nextus has been able to attract new customers and
revenues from this new business will start to show from the middle of 2002.
The company now has forward orders up to September 2002 giving the company the
best outlook for predictable business since 1999.
JRL Systems Inc will be discontinued. A further charge for the write-off of any
slow moving inventory has already been made.
N&R Circuits was affected by the downturns at HBM and Nextus, its main
customers, as well as the aftermath of 11th September. Having been operationally
profitable from April through to September, it made a small loss in October,
which increased month by month until December 2001. Since then losses have
decreased month by month until breakeven was achieved in April, followed by a
dip in May. These signs of recovery and growth are mainly due to N&R'S
consistent stream of work from within the group and an increase in contract
manufacturing business. We believe the increase in the contract manufacturing
business is due to the dropping out of competitors that do not have a
predictable stream of business. As HBM and Nextus gain speed, N&R will also
prosper.
The US business overall contributed to 35% of group turnover. Our current view
is that the US markets are likely to recover first, probably in the latter part
of 2002, whilst the European and Asian Markets may not recover before 2003 or
2004.
The consolidation in the group has continued and the current employee count is
58. The average number of employees during the period was 76 against a turnover
of £3.3m compared to an average 109 employees with a turnover of £5.2m in the
previous period. As a result of the restructuring and consolidation process, the
revamped group companies are now focused on their core activities and are in a
position to grow.
Finance
The analysis of sales shows new product lines continuing to increase their share
with 55% of sales, compared with 51% at the half-year mark. Sales to OEM
customers remained at £lm.
The gross margin on goods sold reduced to 49% from 55% in the previous period.
The main reason was that the OEM print server prices came further under pressure
from competition in Japan and Germany and the new products were not selling in
sufficient volume yet to compensate or improve the gross margin.
A tax credit for R&D expenditure was received during the period, which was
offset against PAYE liabilities.
Three of the group companies (H Bollmann Manufacturers, N&R Circuits and
Ringdale UK) are still in a CVA. Due to the slowness of sales in those entities
for the reasons explained above, the companies were not able to repay the CVA
creditors as planned. The supervisor has tentatively spoken to the creditors of
those entities and expects the CVA to be extended at the end of October.
In order to reduce lending and excessive costs from factoring, the company sold
the group-owned Burgess Hill property and re-leased it. An overdraft facility
was agreed with Barclays Bank, which is still in place and up for review in
August 2002. For the US operations a loan repayment plan has been agreed with
Wells Fargo Bank.
Prospects
The board remains confident that the market and product choices we have made are
the right ones. The new products are necessary to move the company away from its
exposure to the Japanese market and its print server products. The new products
will allow the company to grow out of its current difficulties and we will
continue to bring new technologies to market which, in the Board's view, will
secure the company's future and the biggest rewards or our shareholders.
- see Tables of Results -
Date: 22 July 2002
Enquiries to: Klaus Bollmann
Chairman & Chief Executive
Network Technology Plc
T: 001 5l2 869 1018
Leo Cavendish
Cavendish Associates
T: 01273 841468
NETWORK TECHNOLOGY PLC
YEAR ENDED 31 MARCH 2002
PROFIT AND LOSS ACCOUNT
Unaudited Audited
2002 2001
£'000 £'000
Turnover 3,251 5,154
Cost of sales (1,651) (2,323)
Gross profit 1,600 2,831
Other operating expenses (5,699) (4,096)
Other operating income 7
Group operating loss (4,093) (1,265)
Interest receivable and similar income 0 4
Interest payable and similar charges (20) (95)
Loss on ordinary activities before taxation (4,113) (1,356)
Tax on loss on ordinary activities (68) 303
Loss on ordinary activities after taxation (4,180) (1,053)
Loss per ordinary share (pence) -11.46 -2.91
NETWORK TECHNOLOGY PLC
YEAR ENDED 31 MARCH 2002
BALANCE SHEET
Unaudited Audited
2002 2001
£'000 £'000 £'000 £'000
Fixed Assets
Tangible Assets 1,129 2,180
Intangible Assets 26 39
1,155 2,219
Current Assets
Stocks 2,722 4,736
Debtors 557 1,184
Cash at Bank and In Hand (131) 81
3,148 6,001
Creditors
Amounts falling due within one year (3,597) (3,351)
Net Current Assets (449) 2,650
Total Assets less Current Liabilities 706 4,869
Creditors
Amounts falling due after more than one year 0 (11)
Net Assets 706 4,858
Capital and Reserves
Called up share capital 3,646 3,618
Share premium account 8,029 8,028
Capital redemption reserve 12 12
Profit and loss account (10,981) (6,800)
706 4,858
NETWORK TECHNOLOGY PLC
YEAR ENDED 31 MARCH 2002
CASH FLOW STATEMENT
Unaudited Audited
2002 2001
£'000 £'000 £'000 £'000
Net Cash (outf1ow)/inflow from
operating activities (368) 359
Returns on investments and servicing
of finance
Interest received 0 3
Interest paid (18) (93)
Interest element of hire purchase payment (2) (2)
Net cash outflow from returns on
investments and servicing of finance (20) (92)
Taxation
235 0
Capital expenditure and financial
investment
Payments to acquire tangible fixed
assets (94) (95)
Payments to acquire intangible assets 0 (39)
Receipts from sales of fixed assets 275 335
Net cash inflow from capital expenditure
and financial investment 181 201
Cash inflow before financing 28 468
Financing
Debt factoring (237) 133
Proceeds from issue of shares 23 0
Repayment of debt (12) (586)
Capital element of hire purchase (14) (14)
Net cash outflow from financing (240) (467)
(Decrease/Increase in cash (212) 1
CASH FLOW STATEMENT CONTINUED
RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES
Unaudited Audited
2002 2001
£'000 £'000
Operating loss (4,093) (1,265)
Depreciation and amortisation 883 921
Loss on fixed asset disposal 1 0
Decrease in stocks 2,014 94
Decrease in debtors 320 566
Increase in creditors 507 43
Net cash (outflow)/inflow from operating
activities (368) 359
ANALYSIS OF NET FUNDS AND RECONCILIATION OF NET CASH OUTFLOW
TO MOVEMENT IN NET FUNDS
Cash
At 1.4.01 Flow At 31.3.02
Cash at Bank and in Hand 81 (212) (131)
US Subsidiary Loan (156) 12 (144)
(75) (200) (275)
Debt factoring (237) 237 0
HP contracts due after one year (11) 11 0
HP contracts due within one year (16) 3 (13)
(264) 251 (13)
Total (339) 51 (288)
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