Datrontech Group PLC
19 April 2000
DATRONTECH GROUP PLC
Preliminary Statement for the period to 2 January 2000
Datrontech Group, the European PC component and value added
networking products and services distributor, reports its
preliminary results for the period to 2 January 2000.
Key Points
( Sales from continuing operations of £200.7m (1999:
£223.3m)
( Loss before tax of £8.199m (1999: Profit £2.045m),
reflects exceptional items of £7.9m
( Second half pre-tax profits stood at £0.401m.
( Basic Loss per share of 19.3p (1999: Earnings 2.2p)
( Exceptional costs of £7.9m includes £3.6m write-off of
goodwill following disposal of RDT and closure of the
Eastern European companies, and a tangible loss of £2.669m
on closure of the Eastern European companies.
( Net debt significantly reduced to £12.5m from £18.1m.
( Working capital performance continues to improve with
significant efficiency gains contributing positively to
generation of net cash inflow from operations of £10.2m.
Ray Way, Chairman of Datrontech Group said that... 'The
closure of the Eastern European companies, which was
reported at the interim stage, is now complete. 1999 was a
difficult year for the Group and the immediate task is to
achieve a much better level of profitability. We are
fortunate to have a group of committed management and
enthusiastic employees who are dedicated to restoring the
fortunes of the Group.'
Enquiries
Ray Way, Chairman 01256 360360
David Holloway, Finance Director
Datrontech Group
Suzanne Dunne
Buchanan Communications 020 7466 5000
CHAIRMAN'S STATEMENT
RESULT
Although the loss before tax and exceptional items of
£299,000 was disappointing, the achievement of a second
half profit before tax of £401,000 was encouraging. The
loss of £7,900,000 from exceptional items includes write-
offs of goodwill of £3.6m arising from the disposal of RDT
and the closure of the Eastern European companies. The
tangible loss on the closure of Eastern European companies
of £2,669,000 is in line with the forecast that I gave in
the Interim Statement.
Net debt at the year-end at £12,497,000 represented a
significant reduction from the debt at the beginning of the
year (£18,125,000). We continue to enjoy the support of
our bankers in following through our strategy.
There will be no dividend payable for the year.
TRADING
The current Group comprises five UK companies based in
Basingstoke, ICP based in the Netherlands, C-Connect based
in Switzerland and a small company, PC Direct, based in
Poland. The UK companies' activities complement each other
and offer a wide range of products and services to support
re-sellers and assemblers. Our strategy is to use the UK
expertise to assist ICP in particular to broaden their
range of services to replicate the breadth that has been
achieved in the UK.
Datrontech UK is a distributor of components to the SME
market via assemblers and re-sellers. New management
appointed during the year is changing its emphasis from low
margin components towards higher added value products
including networking. A significant part of the
exceptional costs relate to the re-organisation of Summit,
our storage company, which during the year was relocated
from Colchester to Basingstoke. Summit now concentrates on
specialist storage products and the general storage
components are sold through Datrontech UK.
Portable Add-ons is one of the UK's leading suppliers of
products for mobile computing. It specialises in the
supply and support of communication technologies for laptop
computers. Many new products are planned to be launched
during the current year. Mobile computing is a fast
growing sector of the IT industry and the prospects for the
company are good.
Data Connectivity is a true value added networking
distributor with extensive field based staff and support
personnel. Many significant projects were won and
implemented during the year. In the current year we will
see increased focus on voice and data convergence.
Datrontech Retail specialises in producing and supplying
products for major retail chains. It particularly focuses
on supplying new technology products packaged and presented
in a form suitable for the retail markets. It performed
well in 1999.
ICP is a distributor of components with sales operations in
Holland, Belgium and Denmark. It also builds PCs to order.
During 1999 it started to broaden its activities and this
drive will be accelerated in the current year as Data
Connectivity and Portable Add-ons extend their portfolio to
the Benelux countries. ICP's investment in Van Berkel
(Laser) was sold for a profit in February 2000. During
2000 we intend to establish clear ties between ICP and C-
Connect in Switzerland.
The closure of the Eastern European companies, which was
reported at the interim stage, is now complete.
In common with many competitors, trading in January and
February was disappointing but activity levels in March
picked up markedly. It is too early to predict with
certainty whether this encouraging improvement will be
maintained but the better focused Group that we now have
should assist in achieving the improvements in the
performance that we are all aiming for.
MANAGEMENT AND THE BOARD
Now that the restructure and divestment policy of the Group
is largely complete Mark Mulford has stepped down as CEO to
concentrate full time on investigating the possibility of
developing an Application Service Provider (ASP) for
business to business (B2B) applications in mobile computing
and remote access. If successful this would capitalise and
strengthen the specialities of the Datrontech Group
companies in the high growth arena of mobile computing and
communications.
I am pleased to say that Ray Peck has joined us as the new
CEO of the Group with effect from 19 April 2000. Ray has
significant experience outside the IT industry in managing
and developing distribution companies and achieving
significant improvements in them. I am very confident that
he is the right man to lead the Group to help restore its
fortunes. The Executive Directors are now Ray Peck, Allan
Mack, Ian Boyle and David Holloway, who joined us as Group
Financial Director in September 1999.
During the year three new General Managers, James Morgan,
Steve Muttram and Mark Davison were recruited to head
Datrontech UK, Portable Add-ons and Summit respectively.
1999 was a difficult year for the Group. Downsizing and
restructuring a group always causes significant strains for
employees particularly when seen against a backdrop of
disappointing trading. We are fortunate to have a group of
committed management and enthusiastic employees who are
dedicated to restoring the fortunes of the Group.
CONCLUSION
The immediate task is to achieve a much better level of
profitability. Most of the large scale restructuring is
now complete but Ray Peck will be reviewing the Group's
operations with the Board and senior management to
determine the most effective strategy for developing the
undoubted potential of the companies that remain and to
achieve a co-ordinated strategy for maximising the
opportunities that owning similar companies in the UK, the
Netherlands and Switzerland offers us.
FINANCE DIRECTOR'S REPORT
RESULTS
The Chairman's report refers to the result for the year,
namely a loss before tax of £8.2m, having been heavily
impacted by exceptional restructuring costs of £7.9m.
These costs are part of the process of concentrating the
Group's activities on its core elements, with a view to
restoring the profitability of the business. The half-year
statement referred to proposed closure costs associated
with the Group's withdrawal from Eastern Europe (with the
exception of PC Direct), which have been secured at a cost
of £2.7m plus £1.0m of goodwill written off.
Costs of £3.2m have been incurred in restructuring and
refinancing the UK operations, of which £1.7m was included
at the half-year.
The Group disposed of RD Trading resulting in a loss on
disposal of £1.2m, including a write-back of goodwill of
£2.6m, and also sold its 49% interest in DMC Holdings Ltd,
resulting in a gain on disposal of £0.2m.
The Group's operating profit on ordinary activities before
taxation and interest was £1.2m, £3m below last year's
comparative of £4.2m. Last year's result included the
additional benefit of £1m from profit on disposal and share
of associate's profit, whilst discontinued businesses also
contributed an additional c£1.7m before becoming loss
making. Encouragingly, £1m of this year's operating profit
relates to the second half-year, representing early
indicative signs of the benefits of restructuring.
BALANCE SHEET
The exceptional costs have similarly impacted on the
Group's net assets, which have decreased from £3.7m to a
negative £0.8m as at 2 January 2000. The goodwill
adjustments in respect of RD Trading and Eastern Europe
were transfers between reserves and had no overall effect
on equity shareholders' funds.
The balance sheet also includes outstanding deferred
consideration of £2.7m in respect of previous acquisitions.
Last year's comparative amount was £8.9m. The remaining
deferred consideration will be satisfied during 2000, and
thereafter the Group's cash flow will be unhindered by this
burden, which since 1995 has amounted to £24.3m in total.
Goodwill written off against reserves has reduced in the
year from £27.7m to £22.1m as a result of the disposals and
closures referred to above.
Working capital performance continues to improve, with
significant efficiency gains contributing positively to the
generation of a net cash inflow from operations of £10.2m
in the year.
Cash
At the year-end, the Group had net borrowings of £12.5m,
compared with £18.1m at the end of 1998, a reduction of
£5.6m after meeting deferred consideration commitments of
£3.4m. The movements for the year in summary were as
follows:
£m
Opening net debt (18.1)
Cash flow from 10.2
operations
Net interest paid (1.5)
Taxation (0.7)
1998 Final dividend (0.4)
Capital expenditure (1.1)
Acquisitions (3.4)
Disposals 2.7
Debt disposed of with
subsidiary 0.5
Translational (0.7)
differences
Net movement in the 5.6
year
Closing net debt (12.5)
Cash inflow from disposals was £2.7m, consisting of £1.5m
from the disposal of RD Trading and £1.2m from the disposal
of the Group's 49% share of DMC Holdings.
In January 1999, the Group acquired a 45% interest in Van
Berkel, a Dutch PC assembler. In February 2000, the Group
disposed of this interest at a profit of £0.3m.
Funding and Treasury Policies
At the end of the period, the Group had total overdraft
facilities of £21m from National Westminster Bank, ING
Bank, UBS and AmerBank, and a term loan of £5.1m from
National Westminster Bank. All borrowings are on variable
interest rates. Local currency borrowings are used to
mitigate exposures on overseas earnings and net assets,
which are translated at the year-end rate.
The current level of facilities is adequate for the future
needs of the Group, and cash flow receives close management
attention in order to ensure that resources are efficiently
deployed.
Summary
The Group has experienced rapid expansion in recent years,
both organic and via acquisition, which has contributed to
the problems encountered during the last two years. 1999
has been a year of management extricating the Group from
some of these fundamental issues, by way of managing the
implicit risks to more acceptable levels, so enabling the
business to concentrate on its core areas of expertise.
This has been achieved whilst maintaining a strong cash
flow and reducing the debt burden. The significance of
this achievement should not be underestimated as the Group
is now well placed to exploit the potential offered by its
core markets in a more controlled and efficient manner.
Consolidated Profit and
Loss Account
For the Period Ended 2 January 2000
Period Period
ended ended
2 4
Before January January
Exceptio Exceptio 2000 1999
nal nal
Items Items Total
£'000 £'000 £'000 £'000
Turnover
Continuing operations 200,727 - 200,727 223,291
Discontinued operations 7,558 - 7,558 41,764
208,285 - 208,285 265,055
Cost of sales (187,114) (2,073) (189,187) (235,008)
Gross profit (loss) 21,171 (2,073) 19,098 30,047
Operating expenses (20,085) (3,788) (23,873) (26,882)
Operating profit (loss)
Continuing operations 1,273 (3,192) (1,919) 4,575
Discontinued operations (187) (2,669) (2,856) (1,410)
1,086 (5,861) (4,775) 3,165
Share of associate's 156 - 156 432
operating profit
(Loss) profit on disposal - (1,232) (1,232) 604
of subsidiary undertaking
Profit on disposal of - 158 158 -
associated undertaking
Loss on discontinued - (965) (965) -
operations
Profit (loss) on ordinary 1,242 (7,900) (6,658) 4,201
activities before tax
interest
Interest receivable 1,137 - 1,137 343
Interest payable (2,678) - (2,678) (2,499)
(Loss) profit on ordinary (299) (7,900) (8,199) 2,045
activities before taxation
Tax on (loss) profit on 90 115 205 (1,175)
ordinary activities
(Loss) profit on ordinary (209) (7,785) (7,994) 870
activities after taxation
Dividends paid and proposed - - - (888)
Retained (loss) profit (209) (7,785) (7,994) (18)
(Loss) earnings per share
Basic (0.5p) (18.8p) (19.3p) 2.2p
Diluted (0.5p) (18.3p) (18.7p) 1.8p
Consolidated Statement of Period Period
Total Recognised ended ended
Gains and Losses 2 4
January January
2000 1999
£'000 £'000
(Loss) profit for the (7,994) 870
financial year
(Loss) gain on foreign (830) 139
currency translation
(8,824) 1,009
Consolidated Profit and
Loss Account
For the Period Ended 2 H1
January 2000
Period
Before Except Ended
Except Items 4 July
ional ional 1999
Items Items Total
£'000 £'000 £'000
Turnover
Continuing operations 111,075 111,075
Discontinued operations 1,704 1,704
112,779 112,779
Cost of sales (100,259) (1,049) (101,308)
Gross profit 12,520 (1,049) 11,471
Operating expenses (12,484) (605) (13,089)
Operating profit
Continuing operations (123) (1,654) (1,777)
Discontinued operations 159 159
36 (1,654) (1,618)
Share of associate's 156 156
operating profit
(Loss) Profit on disposal (1,232) (1,232)
of subsidiary undertaking
Profit on disposal of 158 158
associated undertaking
Loss on discontinued
operations
Profit on ordinary 192 (2,728) (2,536)
activities before tax and
interest
Interest receivable 572 572
Interest payable (1,464) (1,464)
Profit on ordinary (700) (2,728) (3,428)
activities before taxation
Tax on profit on ordinary 133 520 653
activities
Profit on ordinary (567) (2,208) (2,775)
activities after taxation
Dividends paid and
proposed
Retained (loss) profit (567) (2,208) (2,775)
Consolidated Statement of Period
Total Recognised ended
Gains and Losses
4 July
1999
£'000
Profit for the financial (2,775)
year
Gain (loss) on foreign (603)
currency translation
(3,378)
Consolidated Profit and
Loss Account
For the Period Ended 2 H2
January 2000
Period
Ended
2 January
1999
Before Except
Except Items
ional ional
Items Items Total
£'000 £'000 £'000
Turnover
Continuing operations 89,652 89,652
Discontinued operations 5,854 5,854
95,506 95,506
Cost of sales (86,855) (1,024) (87,879)
Gross profit 8,651 (1,024) 7,627
Operating expenses (7,601) (3,183 (10,784)
Operating profit
Continuing operations 1,396 (1,538) (142)
Discontinued operations (346) (2,669) (3,015)
1,050 (4,207) (3,157)
Share of associate's
operating profit
(Loss) Profit on disposal
of subsidiary undertaking
Profit on disposal of
associated undertaking
Loss on discontinued (965) (965)
operations
Profit on ordinary 1,050 (5,172) (4,122)
activities before tax and
interest
Interest receivable 565 565
Interest payable (1,214) (1,214)
Profit on ordinary 401 (5,172) (4,771)
activities before taxation
Tax on profit on ordinary (43) (405) (448)
activities
Profit on ordinary 358 (5,577) (5,219)
activities after taxation
Dividends paid and
proposed
Retained (loss) profit 358 (5,577) (5,219)
Consolidated Statement of Period
Total Recognised ended
Gains and Losses
2 January
2000
£'000
Profit for the financial (5,219)
year
Gain (loss) on foreign (227)
currency translation
(5,446)
Consolidated Profit and Loss Account
For the Period Ended 2 Full
January 2000 Year
Period Period
ended ended
2 4
January January
2000 1999
Before
Except Except
ional ional
Items Items Total
£'000 £'000 £'000 £'000
Turnover
Continuing operations 200,727 200,727 223,291
Discontinued operations 7,558 7,558 41,764
208,285 208,285 265,055
Cost of sales (187,114) (2,073) (189,187) (235,008)
Gross profit 21,171 (2,073) 19,098 30,047
Operating expenses (20,085) (3,788) (23,873) (26,882)
Operating profit
Continuing operations 1,273 (3,192) (1,919) 4,575
Discontinued operations (187) (2,669) (2,856) (1,410)
1,086 (5,861) (4,775) 3,165
Share of associate's 156 156 432
operating profit
(Loss) Profit on disposal (1,232) (1,232) 604
of subsidiary undertaking
Profit on disposal of 158 158
associated undertaking
Loss on discontinued (965) (965)
operations
Profit on ordinary 1,242 (7,900) (6,658) 4,201
activities before tax and
interest
Interest receivable 1,137 1,137 343
Interest payable (2,678) (2,678) (2,499)
Profit on ordinary (299) (7,900) (8,199) 2,045
activities before taxation
Tax on profit on ordinary 90 115 205 (1,175)
activities
Profit on ordinary (209) (7,785) (7,994) 870
activities after taxation
Dividends paid and (888)
proposed
Retained (loss) profit (209) (7,785) (7,994) (18)
Consolidated Statement of Period Period
Total Recognised ended ended
Gains and Losses
2 4
January January
2000 1999
£'000 £'000
Profit for the financial (7,994) 870
year
Gain (loss) on foreign (830) 139
currency translation
(8,824) 1,009
Balance Sheets
As at 2 January 2000
Group Company
2 4 2 4
January January January January
2000 1999 2000 1999
£'000 £'000 £'000 £'000
Fixed assets
Tangible fixed assets 3,355 5,119 - -
Investments 1 893 28,346 34,489
3,356 6,012 28,346 34,489
Current assets
Stock 9,354 16,999 - -
Debtors 30,481 37,541 4,933 16,994
Cash at bank and in 2,534 2,910 - -
hand
42,369 57,450 4,933 16,994
Creditors:
Amounts falling due (42,701) (51,135) (6,540) (11,211)
within one year
Net current (333) 6,315 (1,609) 5,783
(liabilities) assets
Total assets less 3,023 12,327 26,739 40,272
current liabilities
Creditors:
Amounts falling due (3,840) (7,621) (3,840) (7,094)
after more than one
year
Provision for - (1,004) - (1,004)
liabilities and
charges
Net assets (817) 3,702 22,899 32,174
Capital and reserves
Called-up share 2,131 2,065 2,131 2,065
capital
Share premium 18,373 17,689 18,373 17,689
Other reserves (21,321) (16,052) 2,395 12,420
Equity shareholders' (817) 3,702 22,899 32,174
funds
Consolidated Cash Flow
Statement
For the Period Ended 2 January
2000 Period Period
ended ended
2 January 4 January
2000 1999
£'000 £'000
Net cash inflow from operating 10,246 2,828
activities
Returns on investment and (1,494) (1,815)
servicing of finance
Taxation (726) (3,031)
Capital expenditure (1,154) (2,105)
Acquisitions and disposals (695) (3,999)
Equity dividends paid (413) (2,112)
Cash inflow (outflow) before
use of liquid resources and 5,764 (10,234)
financing
Financing (1,316) 6,207
Increase (decrease) in cash in 4,448 (4,027)
the year
Reconciliation of net cash flow
to movement in net debt
Increase (decrease) in cash in 4,448 (4,027)
the year
Cash outflow (inflow) from
decrease (increase) in debt
and lease financing 1,316 (6,198)
Change in net debt resulting 5,764 (10,225)
from cash flows
Mortgage disposed of with 525 -
subsidiary undertaking
Translation difference (661) 86
Movement in net debt in the 5,628 (10,139)
year
Net debt at beginning of year (18,125) (7,986)
Net debt at end of year (12,497) (18,125)
Notes
1) Basis of Preparation
The profit and loss account, balance sheet and cash flow have
been prepared on a basis consistent with that adopted in the
statutory accounts for the period ended 4 January 1999.
2) Earnings per Share
Basic earnings per share have been calculated by reference to
the loss for the financial year of £7,994,000 (1998
Profit:£870,000) and to the weighted average number of 5p
ordinary shares in issue during the year of 41,464,214 (4
January 1999: 40,342,845). The fully diluted earnings per
share is based on 42,633,026 and 49,708,838 shares
respectively.
3) Financial Information
The financial information set out above does not constitute
the Group's statutory accounts within the meaning of section
240 of the Companies Act 1985. The condensed information for
the period ended 4 January 1999 represents extracts from the
latest statutory accounts which have been delivered to the
Registrar of Companies: the report of the auditors was
unqualified and did not contain a statement under section 237
(2) or (3) of the Companies Act 1985.
4) 1999 Report and Accounts
The auditors have not reported on accounts for the year ended
2 January 2000, nor have any such accounts been delivered to
the Registrar of Companies. The 1999 Report and Accounts
will be posted to shareholders shortly. Additional copies
will be available from the Company's registered office:
Datrontech House, Lutyens Close, Chineham, Basingstoke,
Hants, RG24 8AH.