RNS Number:9490E
Disperse Technologies Group PLC
08 November 2004
Disperse Technologies Group plc
Preliminary Announcement
for the year ended 31 August 2004
Highlights:
2004 2003
------ ------
#'000 #'000
Turnover 2,811 1,029
Profit/(Loss) pre Exceptional & R&D Costs 292 (231)
Operating Loss (923) (1,575)
Loss per Share (2.62)p (5.43)p
* Successful equity fund raisings in excess of #5 million
* Acquisition of Elizabeth French Plc
* Move from OFEX to AIM
* Reorganisation of business into three main activity areas
* Strengthening of management team
CHAIRMAN'S REPORT
I am pleased to report on the results for the enlarged Group for the year ended
31 August 2004, which show an increase in turnover from #1.03m to #2.81m and a
significant reduction in operating losses before exceptional and non-recurring
reorganisation costs , down from #1.41m to #0.53m . These results include our
continuing investment in R&D of #0.82m (2003: #1.18m).
The results for Elizabeth French are incorporated from the date of acquisition
(29 July 2004). With a turnover of #1.77m since acquisition, Elizabeth French
has produced results that are very much in line with expectations. However, due
to the short time period reported and the seasonality of its activities, this
should not be taken as an indicator of Elizabeth French's likely contribution to
annual revenue.
We have taken significant action to reduce the Group's cost base where
appropriate. Excluding the newly acquired Elizabeth French operations, the
operating costs (excluding R&D expenditure) of the historical Disperse business
in the second half amounted to #0.28m, a reduction of 42% (Six months to 29
February 2004: #0.49m). We have since taken further steps to reduce the cost
base of the historical Disperse operations (excluding Elizabeth French), so that
we estimate that in the current year it should amount to around #1.4m, including
approximately #0.4m of central costs. These savings from the Group's cost base
should ensure that the effect of improvement in our trading performance is
maximised.
During the year, we successfully raised over #5.14m in equity funding and have
further expanded our shareholder base. #3.28m of these funds were used as the
initial cash element in the acquisition of Elizabeth French, including
acquisition costs. As part of this process, the Company has moved its share
listing from OFEX to AIM.
There have been a number of changes in the management structure of the Group.
Tony Williams has been appointed Group Finance Director. David Gerrard retains
his role as Managing Director of Elizabeth French and Guy Hawking heads up the
Disperse Cosmetics and Personal Care division, including responsibility for the
USA. Derek Wheeler retains his role as overall Technical Director, but takes
specific responsibility for Disperse pharmaceutical work. We are in the process
of appointing a Marketing Director with extensive experience of brand building
and trade marketing within the cosmetic and personal care arena and we hope to
make an announcement shortly.
Looking forward the Group is now organised into three main activity areas -
design, importation and distribution of branded cosmetics (Elizabeth French);
provision of proprietary technology and design and supply of cosmetic and
personal care products to major third party brands, such as Estee Lauder and
Bath and Body Works (Disperse - Cosmetics and Personal Care); and the
development and refining of the technology so that it can be used as a drug
delivery mechanism for oral, topical and parenteral applications (Disperse -
Healthcare). It is our intention to integrate the Elizabeth French and Disperse
- Cosmetic and Personal Care operations and to expand Disperse pharmaceutical
activities into the more general healthcare area by the acquisition of suitable
brands or companies.
In respect of Elizabeth French, sales of "VIVO" since the launch in June of this
year have exceeded #0.8m, with a strong forward order book and rapidly expanding
number of retail outlets both in the UK and overseas. We have strengthened the
management team by the appointment of Tony Williams, who will be based at
Elizabeth French, and are sharpening the marketing focus by the introduction of
the proposed new Marketing Director. We are already taking steps to improve
gross margin and working capital management. The further development of existing
brands has already commenced and new products are being designed for inclusion
within the "Lizzie" and "Katie and Friends" ranges. We have agreed, in
principle, to license a new heavily promoted brand name aimed at the younger
market. A new national accounts manager with a depth of experience in trade
marketing and account development will join us in November. Certain price
increases scheduled for early 2005 have already been identified and should help
improve gross margins.
The focus in the Disperse - Cosmetic and Personal Care division is on providing
support and designing new products for major customers in the cosmetics and
personal care arena. On the technical front, our Paramus laboratory has
developed sun care products that offer both UV protection and can be used as
beachwear/daywear moisturisers as well as a range of anti-wrinkle and skin
smoothing concepts. During 2004, we received our first design and supply order
for two new products for a prestige UK brand for delivery early 2005. We are
currently negotiating with other companies both in the UK and the USA to develop
this particular aspect of our business as an alternative to our traditional
royalty remuneration. We also believe that new products using our technology
will be launched in the coming 12 months by both Estee Lauder and Bath and Body
Works.
In our Disperse - Healthcare division, there is considerable technological
overlap between our work in cosmetics and personal care and topical drug
delivery and thus our work in this area is carried on in-house in Guildford,
where substantial progress has been made on our anti-acne compounds and range of
sanitisers ("Biocleanse"). For oral and parenteral drug delivery, we work in
partnership with Monash University, one of the world's leading drug delivery
academic institutions, where further research work is being undertaken,
following positive initial results in bio-availability studies against bench
mark drugs. We continue to seek partners in this area to jointly develop drug
delivery opportunities.
In conclusion, I believe that we have successfully started the process of
integrating, developing and taking forward the new enlarged Group. Over the
coming months, where the opportunity arises to capitalise on the investment
already made, we shall be looking at acquiring further brands or companies both
in the Cosmetic and Personal Care and Healthcare markets.
Colston Herbert
5 November 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 August 2004
Notes 2004 2003
#'000 #'000
TURNOVER 3 2,811 1,029
Cost of sales 3 (1,179) (72)
________ ________
Gross profit 1,632 957
Administration expenses 3 (1,340) (1,188)
________ ________
Profit before exceptional and research &
development 292 (231)
costs
Exceptional and non-recurring reorganisation costs 4 (394) (167)
Research & development costs 3 (821) (1,177)
________ ________
OPERATING LOSS (923) (1,575)
Interest Receivable 23 31
________ ________
(900) (1,544)
Interest payable and exchange loss on foreign (59) (18)
currency
________ ________
(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION (959) (1,562)
Taxation credit 197 360
________ ________
(LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION (762) (1,202)
RETAINED
Balance on Profit & Loss Account b/fwd (2,036) (834)
________ ________
Balance on Profit & Loss Account c/fwd (2,798) (2,036)
======== ========
EARNINGS PER SHARE
Basic and fully diluted 2 (2.62)p (5.43)p
======= =======
The operating loss for the year arises from the group's continuing operations.
CONSOLIDATED BALANCE SHEET
for the year ended 31 August 2004
Notes 2004 2003
#'000 #'000
FIXED ASSETS
Intangible assets - goodwill 5 6,926 -
Investments 118 118
Tangible assets 1,666 400
________ ________
8,710 518
________ ________
CURRENT ASSETS
Stock & Materials 3,734 5
Debtors due within one year 3,526 351
Debtors due after more than one year 6 812 892
Cash at bank and in hand 3,646 261
________ ________
11,718 1,509
CREDITORS:
Amounts falling due within one year (3,346) (317)
Bank Overdrafts & short term loans (4,120) (121)
________ ________
NET CURRENT ASSETS 4,252 1,071
________ ________
TOTAL ASSETS LESS CURRENT LIABILITIES 12,962 1,589
CREDITORS: Amounts falling due after more than one
year 7 (5,492) -
________ ________
7,470 1,589
===== =====
CAPITAL AND RESERVES
Called up share capital 609 222
Share premium 9,809 3,553
Profit and loss account (2,798) (2,036)
Merger reserve (150) (150)
________ ________
EQUITY SHAREHOLDERS' FUNDS 8 7,470 1,589
===== =====
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 August 2004
Notes 2004 2003
#'000 #'000
Cash flow from operating activities (1,728) (1,051)
Returns on investments and servicing of finance (24) 31
Taxation 112 -
Capital expenditure and financial investment (71) (168)
Net cost of acquisition 5 (9,284) -
________ ________
CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES AND
FINANCING (10,995) (1,188)
Non Equity Financing 7 4,719 -
Equity Financing 8 6,643 125
________ ________
INCREASE/(DECREASE) IN CASH IN THE YEAR 367 (1,063)
========== ==========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
FUNDS/(DEBT)
Increase/(decrease) in cash in the year 367 (1,063)
Borrowings acquired with subsidiary (981)
________ ________
MOVEMENT IN NET FUNDS IN THE YEAR (614) (1,063)
NET FUNDS AT 1 SEPTEMBER 2003 140 1,203
________ ________
NET FUNDS AT 31 AUGUST 2004 (474) 140
========== ==========
NOTES TO THE PRELIMINARY ANNOUNCEMENT
for the year ended 31 August 2004
1. PREPARATION OF THE PRELIMINARY ANNOUNCEMENT
The preliminary announcement is for the year ended 31 August 2004 and includes
the results of Disperse Technologies Group plc and its subsidiary undertakings
Elizabeth French plc, Disperse Limited, Emulsion Systems Limited and Disperse
Technologies Inc. The preliminary announcement was approved by the Board on 5
November 2004. The results of Elizabeth French plc have been included since that
company's acquisition on 29 July 2004. The results of Disperse Limited have been
incorporated in accordance with the principles of merger accounting as if the
group had always owned it.
2 EARNINGS PER ORDINARY SHARE
Earnings per share has been calculated using the weighted average number of
shares in issue during the relevant financial year. The weighted average
number of shares in issue for the year ended 31 August 2004 was 29,124,216
(2003: 22,122,600). The loss for the year after taxation was #762,000 (2002:
Loss #1,202,000).
The effect of the share options in issue at the year-end is anti-dilutive
and there is therefore no adjustment to the earnings per share for the year
ended 31 August 2004 or 2003.
3. TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
The group's turnover and profit before taxation were all derived from its
principal activities. The profit and loss account disclosure of other operating
costs has been expanded to reflect the nature of the business of the company.
Disperse Elizabeth 2004 2003
French # '000 # '000
United Kingdom 222 1,473 1,695 109
Europe - 298 298 -
United States 818 - 818 920
________ ________ ________ ________
1,040 1,771 2,811 1,029
Cost of Sales (1,179) (72)
________ ________
Gross Profit 1,632 957
Administration costs (1,340) (1,188)
________ ________
Profit before exceptional and 292 (231)
research & development costs
Exceptional and non-recurring (394) (167)
reorganisation costs
Research & development costs (821) (1,177)
________ ________
Operating Profit/(Loss) (923) (1,575)
======== ========
4 EXCEPTIONAL AND NON-RECURRING REORGANISATION COSTS
2004 2003
# '000 # '000
Diminution of assets 36 106
Other restructuring and non-recurring costs 358 61
________ ________
394 167
======== ========
5 GOODWILL
2004 2003
#'000 #'000
Fixed Assets 1,391 -
Stock 3,023 -
Debtors 1,421 -
Creditors (1,737) (5)
Borrowings over 12 months (759) -
Bank Overdrafts and discount financing (981) 3
________ ________
Net Assets Acquired 2,358 (2)
________ ________
Shares allocated to vendors 1,500 -
Deferred loan 4,500 -
Cash 3,000 8
Expenses 284 -
Cash outflow in respect of acquisition 9,284 8
________ ________
Goodwill on acquisition 6,926 10
Goodwill written off - (10)
________ ________
6,926 -
In the light of the revised International Accounting Standard (IAS)coming into
force in 2005, no amortisation of goodwill has be made.
6 DEBTORS OVER 12 MONTHS 2004 2003
#'000 #'000
Deferred tax asset 749 816
Other debtors 63 76
________ ________
812 892
======== ========
7 CREDITORS OVER 12 MONTHS 2004 2003
#'000 #'000
6% Unsecured Convertible Loan Stock 219 -
2006-2007 issued at 80p per #1
Deferred consideration for acquisition 4,500 -
of Elizabeth French
Non Equity financing in Year 4,719 -
Amortisation 6% Unsecured Convertible 8 -
Loan Stock 2006-2007
Deferred tax liability 149 -
Bank loans and HP 616 -
________ ________
5,492 -
======== ========
8 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS'FUNDS
Shares 2004 2004 2003
------------- #'000 #'000
As at 1st September 22,453,703 3,775 3,650
Equity finance net of costs:
September 2003 placing at 25p 4,295,388 1,004 -
July 2004 placing & offer at 18p 26,081,839 4,139 -
Issued as part of acquisition at 18p 8,333,333 1,500 -
________ _______
Equity financing in Year 6,643 125
_________ ________ _______
As at 31 August 60,864,263 10,418 3,775
==========
Profit and Loss Account (2,798) (2,036)
Merger Reserve (150) (150)
________ ________
Total Shareholder's Funds 7,470 1,589
======= ======
Copies of this statement are available from the Company at its offices at 40
Alan Turing Road, Guildford, Surrey GU2 7YJ or by downloading from the Company's
web site @ www.disperseplc.com
8 November 2004
This information is provided by RNS
The company news service from the London Stock Exchange
END
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