Notes to the financial statements - Plasmon

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Chief Executive’s Review Nigel Street Chief Executive Plasmon Plc Annual Report 2003 Chief Executive’s Review 6 2002/3 has been another challenging year for Plasmon with difficult economic conditions and the continuing decline in our business with IBM depressing overall revenues from £61.6m to £60.1m. In contrast to the disappointing trading performance, our UDO development programme made excellent progress in 2002/3 and we completed successfully the transfer of our library business from Minneapolis to Colorado Springs.
In the first half of 2002/3, the Group returned to modest growth with revenues 3% ahead at £30.1m. As we experienced last year, our European operations performed better than our business in the US where economic conditions remained difficult. In the final quarter of 2002/3 our US business was further impacted by events in the Middle East, and coupled with a 10% movement in the average £:$ exchange rate our overall second half revenues declined 7% from the previous year. Since the cessation of hostilities we are seeing increasing signs of activity in the US, but we remain cautious about the timing of any upturn in business. In contrast, our European business grew 17% in 2002/3 and we expect to make further progress in the coming year. In light of the difficult trading conditions our US reorganisation has proved both timely and extremely necessary. The reorganisation was finally completed in September 2002 when the last library engineers left our Minneapolis engineering operation. These engineers were retained for six months longer than the manufacturing group to complete the new Enterprise DVD library range that we developed specifically for our major medical imaging customers such as Siemens Medical. From a peak of some 314 US employees in 2001, the US reorganisation programme reduced the headcount to 225 by April 2003. In addition, we reduced our European headcount by some 20 employees as part of our overall cost control programme. In 2002/3 our overall product mix remained broadly constant and, in line with the sales shortfall, our gross margins declined slightly to 36.3% from 36.7% the previous year. Following our reorganisation, Plasmon Plc Annual Report 2003 operating expenses before UDO development expenditure, goodwill amortisation and exceptional costs fell by £2.0m to £16.4m. At the adjusted pre-tax level we achieved a profit of £4.7m compared to the £3.7m we achieved the previous year. At the pre-tax level we significantly reduced our full year loss to £3.4m from £6.3m, after goodwill amortisation of £1.1m and the final £0.5m of US reorganisation costs. UDO development expenditure increased by 24% to £6.5m in 2002/3 as we entered the final development phase of the drive and media. The increased expenditure was slightly ahead of our original expectations and reflected additional costs in reworking ASIC parts and the consequent increase in quick-turn prototype costs to keep the project on schedule. In addition to fully expensed development costs of £6.5m, we invested a further £3.9m in capital equipment in 2002/3 as the UDO media production facility in Melbourn neared completion. Despite maintaining significant levels of investment in 2002/3, our year-end gearing remained comfortable at 34% compared to 24% the previous year. In March 2003 we secured new £7m banking facilities with Venture Finance Plc, the UK structured finance subsidiary of ABN Amro. These new financing arrangements have increased our immediate liquidity by some £3.4m and will provide sufficient funding to complete UDO development and enter volume production. Chief Executive’s Review 7 Turnover £ million 70 60 50 40 30 20 10 0 49.9 70.3 69.1 61.6 60.1 1999 2000 2001 2002 2003 (Loss)/profit before tax £ million 4 2 0 -2 -4 -6 -8 -10 0.3 4.1 4.2 6.3 3.4 1999 2000 2001 2002 2003
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Page 3 and 4: Plasmon Overview Plasmon manufactur
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Page 11 and 12: from Nichia, our Japanese supplier.
Page 13 and 14: performance benefits of the technol
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Notes to the financial statements - Plasmon

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