Notes to the financial statements - Plasmon

Plasmon Plc
Annual Report 2003
Pre-tax profit before goodwill amortisation,
UDO development costs and exceptional
costs increased 29% to £4.7m and the
retained loss for the full year reduced 41%
to £3.4m. Having incurred a loss of £2.4m
in the first half, the retained loss in the
second half fell to £1.0m as post
reorganisation cost savings were realised.
Despite the poor trading conditions our
channel sales in the US increased by 4%
in dollar terms. As expected, sales to IBM
decreased a further 35% in 2002/3
resulting in an overall US revenue decline
of 3% in local currency terms, translating
into a fall of 10% after unfavourable foreign
exchange movements. Our US business
represented 66% of Group sales in 2002/3
and the level of activity in the US market
therefore remains a critical driver of our
overall business performance.
Having achieved 6% revenue growth last
year, our European channel sales grew a
further 15% in 2002/3 as we continue to
increase market share in our core 5.25"
library business. In August we secured
Siemens as a major new DVD library
customer and we expect this relationship
to drive further growth in the coming year.
European economic conditions were
more favourable than the US last year
and we also benefited from a stronger
European regional presence than many
of our US competitors.
Our UDO development programme
continues to make excellent progress and
we successfully demonstrated working
UDO drives at the Comdex trade show in
Las Vegas in November. The overall cost of
the UDO development programme
remains broadly in line with our plans and
we are on schedule to begin initial
shipments in September this year.
Chairman’s Statement
3
We are receiving an excellent response from
potential OEM customers and expect UDO
technology to establish a leading position in
professional optical storage solutions.
Recent changes in financial compliance
regulations are also driving the market
requirements for secure data archival
solutions like UDO and we look forward to
commencing deliveries of this exciting new
product in the coming financial year.
In June 2002 we raised a further £1.7m net
of expenses, by way of a 5% Placing, to
support the purchase of capital equipment
for UDO at a time when equipment leasing
was proving difficult to secure. In February
2003 we further improved our available
financial resources with a £7m structured
finance facility that provides us with ample
liquidity to complete our UDO
development and launch plans. Our
financial position remains comfortable with
gearing of 34% at year end.
Although trading in the past year was
difficult, we start the new financial year
well positioned to complete the UDO
development and capitalise on its
significant potential. Our UDO launch
plans are well advanced and we believe
the timing is excellent to deliver a
performance leading data archival solution
at a time of growing compliance
regulation. After a period of significant
contraction the IT market is also forecast
to return to modest growth, which we
expect to drive increased revenue and
profitability in our core business in the
coming year.
On behalf of the Board, I would like to thank
all our employees for their dedication and
hard work over the past year.
J. Barrie Morgans
Chairman