RNS No 8435k
NETWORK TECHNOLOGY PLC
25th November 1997
Network Technology PLC : Preliminary Results for year ended 30 September
1997
Network Technology, the network connectivity specialist which designs
and manufactures printservers, routers, hubs, plotters and network
management software, has enjoyed its fifth year of continued growth and
became fully listed on the London Stock Exchange in August this year
when it simultaneously raised UKpds 4.5m, net of expenses, to fund
further expansion. Commenting on prospects chairman Graham Woodhead
says: "We believe that our future is very exciting."
Salient Points :
* Organic growth and the strategic acquisitions of JRL Systems Inc and
Nextus Inc increased turnover by over 16% from last year's pro forma
UKpds 14.5m to UKpds 16.8m
* With little contribution from the acquisitions, but aided by cost
reductions, pre-tax profits advanced over 17% to UKpds 4.17m, compared
with last year's pro forma UKpds 3.55m, and gross margins improved from
47% to 55%
* Profit increase would have been significantly higher but for the
impact of the strong sterling exchange rate, which reduced profits by
UKpds 600,000 at the pre-tax level, and a three-month delay to the
launch of new Fast Ethernet products caused by customers wanting clearer
view of correct inventory levels for this new technology
* Board proposes a final dividend of 0.75p making a total dividend of
1.25p, covered 6.87 times
* Strong balance sheet with net cash of around UKpds 3.3m
* H. Bollmann Manufacturers remains the group's flagship and has made
an excellent start to the current year with new orders so far totalling
UKpds 4.0m
* The reorganisation of JRL resulted in smaller than projected profits
but, aided by its new strategy, the company has made an excellent start
to the current year
* N&R Circuits is developing into a most efficient, high technology,
printed circuit board maker
* Distribution brand Ringdale made a positive contribution to pre-tax
profits and Ringdale operations in Germany and the USA are expected to
contribute to future results
* AB Semicon, the group's manufacturer of semiconductor devices, has
achieved its first sales to Japanese OEM customers and is expected to
contribute significant profits during the next few years
Statement by Graham Woodhead, Chairman of Network Technology
"Reinforcing its reputation as a proven, consistent growth company,
Network Technology has had its fifth year of continued growth and became
fully listed on the London Stock Exchange in August this year, while
simultaneously raising UKpds 4.5 million, net of expenses, to fund
further expansion.
A combination of organic growth and the strategic acquisitions of JRL
Systems Inc and Nextus Inc saw turnover for the year ended 30 September
1997 increase from last year's pro forma UKpds 14.5 million to UKpds
16.8 million. However, the acquisitions contributed little to pre-tax
profits which, helped by cost reductions, advanced over 17% to UKpds
4.17 million.
This increase would have been significantly higher but for the impact
of the strong sterling exchange rate, which reduced our profits by UKpds
600,000 at the pre-tax level, and the launch of our new Fast Ethernet
products being delayed by three months. This delay was due to the
reluctance of our major OEM (Original Equipment Manufacturers) customers
to sign new contracts before having a clearer view of the correct
inventory levels for this new technology. I am pleased to report that
our new US manufacturing facilities will reduce our exposure to
continued sterling strength while significant reductions in the cost of
our technology will allow your Company to retain its market share, as
well as establishing the lead in new technology during 1998.
New products such as ISDN routers, Fast Ethernet hubs and Fast Ethernet
printservers accounted for 8% of profits, compared with 2% last year.
And our gross margins further improved from 47% to 55%.
In the autumn we strengthened the Board by appointing Paul Cottrell as
Finance Director in September and the Hon. Nicholas Soames as a Non-Executive Di
rector in October. The newly enlarged Board has decided to
propose a final dividend of 0.75p per Ordinary Share making a total of
1.25p for the year.
H. Bollmann Manufacturers Ltd remains the flagship of the Group. HBM's
competitive advantage is its ability to provide every aspect of
technological hardware, software, firmware and integrated circuits. It
has also continued to develop PeripheralVision Network Management and
Internet Printing System software which are market leaders, sold as
value adders with printers, HUBs and other network devices. Since brand
recognition is a key factor for software sales, we are keen to acquire
an established software brand name which will allow us to sell our
software products through distribution channels. Until we achieve this
we are unlikely to reap the full potential of this software technology.
That apart, HBM has made an excellent start to the current year with new
orders so far totalling UKpds 4.0 million, approximately double the
order level at the equivalent time last year.
HBM Inc in the USA traded profitably at the end of last year and will
reap further benefits from its ability to serve OEM customers located
on the East Coast of the United States. HBM Inc is also expected to
benefit from increasing international business for its printserver
products through Kyocera dealers.
The reorganisation of JRL Systems Inc resulted in smaller profits than
initially projected for the financial year. Many of the reorganisation
benefits only came to fruition in October 1997 and therefore did not
benefit last year's results. However, aided by its new strategy
initiated by Klaus Bollmann, our Chief Executive, and implemented by
Larry Hall and his team, JRL has made a splendid start to the current
year.
N&R Circuits UK Ltd is developing into a most efficient, high
technology, printed circuit board plant, producing quality products for
the Group's prototype needs and volume manufacturing requirements.
Management has achieved a remarkable turnround from its nadir when we
bought it in 1994.
Ringdale UK Ltd has grown at a consistent pace and made a positive
contribution to pre-tax profits. The Company recently took control of
Ringdale GmbH in Germany and this should show favourably in the Group
results over the next two years. We also formed a Ringdale franchise
in the United States. Operating out of Group premises, this venture is
proving successful and will also add to our results in future.
AB Semicon, the Group's manufacturer of semiconductor devices, has
achieved its first sales to Japanese OEM customers. During the next few
years profits from this company will be significant. Our manufacturing
capability has been strengthened by the acquisition of Nextus Inc in
Georgetown, Texas which has also been a contract manufacturer for JRL
Systems. Nextus has blue chip customers which include Selex and General
Motors in the USA and its inter-company business currently totals 25%
of its turnover; however, Nextus has only been a member of the Group
since mid-September and has therefore only made a small contribution to
profits.
In short, our strategy is on course. With the addition of JRL and
Nextus we have added printer controller and ISDN router technology as
well as US manufacturing to our expertise and product range.
Furthermore, the purchase of a revolutionary storage system patent,
coupled with the acquisition of Bits Per Second Ltd since the year end,
will give us competitive advantage in the fast growing area of archiving
and data warehousing, and further completes our ability to sell
technology into every stage of the computer purchasing cycle.
With regard to the future, we remain committed to producing the leading
edge technology and cost efficient products demanded by world markets;
to expanding our product range; and to exploring possible acquisitions
to enhance our technology, our software offering and our networking
distribution channel. We have made an excellent start to the current
year and we believe that our future is very exciting."
Enquiries to:
Klaus Bollmann Network Technology Tel: 01444 870408
Paul Cottrell Network Technology Tel: 01444 870408
Duncan Barkes Network Technology Tel: 01444 870408
Leo Cavendish Bankside Consultants Tel: 0171 220 7477
See Tables of Results attached
Consolidated Profit and Loss Account
Pro forma 11.5.95
Year to Year to to
30.9.1997 30.9.96 30.9.96
(restated) (restated)
UKpds'000 UKpds'000 UKpds'000
TURNOVER
Existing Operations 14,637 14,504 16,764
Acquisitions 2,204 - -
-------------------- ------
Continuing Operations 16,841 14,504 16,764
Cost of Sales (7,654) (7,713) (9,060)
-------------------- ------
GROSS PROFIT 9,187 6,791 7,704
Administrative Expenses (5,017) (3,233) (3,886)
Other Operating Income 6 6 8
-------------------- ------
OPERATING PROFIT 4,176 3,564 3,826
Other Interest
Receivable and Similar Income 44 26 27
Interest Payable
and Similar Charges (50) (37) (48)
-------------------- ------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 4,170 3,553 3,805
Tax on Profit
on Ordinary Activities (1,406) (1,069) (1,194)
-------------------- ------
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 2,764 2,484 2,611
Non equity dividends - (278) (278)
Equity dividends (429) (237) (237)
--------------------- ------
RETAINED PROFIT FOR THE PERIOD 2,335 1,969 2,096
====================== ======
Earnings per Ordinary Share 8.59p 8.34p 9.88p
NB1 The pro forma statement is unaudited.
NB2 KPMG were appointed the Group's auditors, in place of BDO Stoy Hayward,
in September 1997.
Group Balance Sheet
Group Group
30.9.97 30.9.96
(restated)
Ukpds '000 '000 '000 '000
FIXED ASSETS
Intangible Assets 1,249 370
Tangible Assets 3,138 2,042
Investments 230 -
---------------------------
4,617 2,412
CURRENT ASSETS
Stocks 3,899 1,924
Debtors 5,093 2,768
Cash at Bank
and in Hand 3,312 1,899
------ ------
12,304 6,591
CREDITORS
Amounts falling due
within one year (4,473) (4,046)
------ ------
NET CURRENT ASSETS 7,831 2,545
---------------------------
TOTAL ASSETS LESS
CURRENT LIABILITIES 12,448 4,957
CREDITORS
Amounts falling due
after more than one year (220) (215)
Deferred Taxation (359) -
---------------------------
NET ASSETS 11,869 4,742
===========================
CAPITAL AND RESERVES
Share Capital 3,575 3,109
Share Premium Account 9,615 3,885
Capital Redemption Reserve 12 12
Profit and Loss Account 4,448 2,084
Goodwill (5,781) (4,348)
---------------------------
EQUITY SHAREHOLDERS' FUNDS 11,869 4,742
===========================
Group Cash Flow Statement
Year 11.5.95
to to
30.9.97 30.9.96
Ukpds '000 '000 '000 '000
Net cash inflow from
operating activities 2,430 2,741
Returns on investments
and servicing of finance
Interest received 44 27
Interest paid (32) (41)
Interest element of hire
purchase payment (18) (7)
Dividends (316) (348)
------ ------
Net cash outflow from
returns on investments
and servicing of finance (322) (369)
Taxation
Corporation tax paid (1,145) (630)
Capital Expenditure &
Financial Investment
Cost of establishment of
overseas office (9) (204)
Payments to acquire
tangible fixed assets (1,250) (1,746)
Payments to acquire
intangible fixed assets (1,083) (193)
Receipts from sales
of fixed assets 17 452
Other Investments (230) (2,555) - (1,691)
------ ------
Acquisitions
Payments to acquire
subsidiary undertakings (1,108) (2,613)
------ ------
Cash inflow/(outflow) (2,700) (2,562)
before use of liquid
resources & financing
Financing
Issue of share capital 5,500 8,623
Redemption of share capital - (3,232)
Expenses set against
share premium account (1,214) (698)
Increase/(decrease) in debt (41) (364)
------ ------
Net cash inflow from financing 4,245 4,329
------ ------
Increase in cash in the period 1,545 1,767
====== ======
NB The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 September 1996 or 1997 but is
derived from those accounts. Statutory accounts for 1996 have been delivered
to the registrar of companies, whereas those for 1997 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 a
statement under section 237(2) or (3) of the Companies Act 1985.
END
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