3rd Oct 2005 07:01
DAT Group PLC03 October 2005 Embargoed. For release at 0701h, 3 October 2005 DAT Group plc ("DAT", "the Company" or "the Group") Interim Results for the six months to 30 June 2005 Highlights: • Turnover up 80% to £1.8 million (2004: £1.0 million) • Loss of £1.0 million (2004: £1.3 million) • Appointment of new CEO • Completed acquisition of Synchronica Software GmbH • Commissioned major internal review • New structure in place to capitalise on a tighter, more focused suite of products • Cash balance at 30 June 2005 £2.6 million (at 31 December 2004: £5.5 million) Commenting on the announcement John Gunn, Chairman of DAT said: "The last ninemonths has been a period of considerable change for DAT Group. During thisperiod we completed a significant acquisition, determined that the Group's salesprocesses and product portfolio were insufficiently focused and commissioned amajor internal review to establish the best way to profitably exploit ourvaluable technology and expertise. The Board has now completed its review ofDAT's products, processes and organisation. A new structure has been put inplace under the leadership of our new CEO. The Group will now seek to capitaliseon a much tighter, more focused, suite of products which management believeshave undoubted competitive advantages." Carsten Brinkschulte DAT CEO added: "The team at DAT Group, from top to bottom,is excited by the opportunity we have to become significant suppliers of devicemanagement solutions to international customers. The analysis and review we haveundertaken this summer has, I believe, led to the creation of a much strongerand more focused organisation. We face the future with confidence". For more information please visit www.datgroup.com or contact: Carsten Brinkschulte Nicole Meissner, CMO DAT Group plc DAT Group plcChief Executive Officer Office: +49 30 616 75 650Mobile: +49 172 88 72 758 Mobile: +49 173 606 91 60 Simon Hudson / Clemmie Carr Tavistock CommunicationsTel: +44 20 7920 3150 Chairman's Statement IntroductionThe last nine months has been a period of considerable change for DAT Group.During this period we completed a significant acquisition, determined that theGroup's sales processes and product portfolio were insufficiently focused andcommissioned a major internal review to establish the best way to profitablyexploit our valuable technology and expertise. We also accepted the resignationof our former Chief Executive Officer. The Board has now completed its review of DAT's products, processes andorganisation. A new structure has been put in place under the leadership of ournew CEO. The Group will now seek to capitalise on a much tighter, more focused,suite of products which management believes have undoubted competitiveadvantages. The rationale and strategy behind our refocused business model isset out in more detail in the CEO's Review accompanying these results. TheDirectors believe that the steps we have taken to address our problems willresult in a much stronger Group, capable of delivering the financial resultsexpected by our shareholders. Results Turnover for the six months to 30 June 2005 was £1.8 million (2004: £1.0million). This was disappointing, given our strong sales pipeline and was areflection of the issues outlined above. As a result of the sales shortfall, butcontinued investment, there was a loss for the period of £1.0 million (2004:loss of £1.3 million). Loss per share was 5.1p (2004: loss of 9.6p). Cashbalances at 30 June 2005 were £2.6 million (31 December 2004: £5.5 million). Given the current stage of the Group's development and its cash investmentneeds, the Directors are not declaring a dividend in respect of the period underreview. Business Activities The Group's addressable markets continue to grow. As mobile device operatorsseek to generate returns on their very substantial investments in data enablednetworks, the facilities offered on (and thus complexity of) handsets increases.This complexity extends to the configuration, provisioning, management andsynchronisation of these devices as consumers - both retail and business -require more and more services to be delivered to handheld devices. DAT isuniquely positioned to supply a complete portfolio of solutions covering theseareas to operators, mobile manufacturers, wholesalers and enterprises. Our ability to supply such solutions was significantly enhanced by theacquisition of Synchronica Software GmbH ("Synchronica") in April this year.Synchronica brought live, installed products and expertise in mobile devicemanagement and data synchronisation based on increasingly popular and widespreadindustry standard protocols (OMA DS and OMA DM) - whereas DAT's previous focushad been on Microsoft's proprietary mobile operating systems. The combination ofthe two businesses has resulted in a much stronger product and service offeringfor our target markets. The strategic and business review undertaken by the Board has produced a muchshorter portfolio of products around which the business is now organised. Thereview process included a long, hard and objective look at the totality of ourbusiness offering and has resulted in the decision to put on hold thedevelopment of a number of products. These include the previously high-profileTabella products, which we determined would need massive consumer marketingspend to succeed. We do not have such resources. However, the synchronisationand push e-mail markets Tabella sought to address will instead be tackled by theSynchronica SyncML Gateway, targeted at operators and enterprises. As of today,with very limited marketing and sales effort, more than 80 corporate customersare already using this solution to synchronise appointments, contacts, notes ande-mails. Board and Management In July, on the resignation of the previous Chief Executive Officer - DavidHayes - we appointed the Chief Financial Officer, Allan Jonnes, as interim CEOand, at the same time, strengthened the Board with the appointment of two newexecutive Directors. The new appointments were Terry Page, who was previouslyDirector, Commercial Delivery, and Carsten Brinkschulte, who was the CEO ofSynchronica and the Group's Chief Technical Officer. In tandem with the review of our business activities, the Board has beenconsidering candidates (both internal and external) for the post of ChiefExecutive Officer. We have now appointed Carsten Brinkschulte as the new CEO aswe believe that his intimate knowledge of our technology and markets, combinedwith his proven entrepreneurial ability, will make him an outstanding leader ofthe Group through the next phase of our development. The Board congratulates himon his appointment. Outlook The Directors have, I consider, successfully addressed the issues identifiedearlier in the year which were hampering the Group's development. The transitionfrom an entrepreneurial, opportunistic business to a global products-basedoperation is not an easy one. In the short term, we do not expect thistransition to materially affect our view on the likely outcome for 2005; salesare expected to be in the lower half of the range we presented in July. We havesought, however, in managing this transition, to maintain our cultural valueswhile imposing a more focused structure on our product range and organisation.The Board believes that we have now put in place the foundations to restorevalue to shareholders. Finally, I would like to personally thank all employees of the Group, in London,Berlin and the U.S., and my fellow Directors, for their hard work over the pastthree months while we conducted the review process. We could not haveaccomplished it without their wholehearted support. J. Gunn30 September 2005 Review of Operations by the Chief Executive Officer, Carsten Brinkschulte This is my first review for shareholders as CEO of DAT Group plc. I am delightedto have taken up this position and believe that the Group's potentiallyworld-beating technology can be exploited profitably for shareholders with thenew structure and product range we have put in place. The Review The Company announced in July that it would undertake a complete analysis andreview of DAT's products, structure and markets. The analysis phase of thisprocess took approximately six weeks, as we studied in detail the strengths andweaknesses of the Company, products and technologies applied. This analysis wasfollowed by a thorough review of our service offering, which led to theselection of a core product range to which DAT could bring significantcompetitive advantages. Following the selection of the products to focus on going forward, we needed todetermine our strategy to exploit them. This part of the process led naturallyto a definition of how the Company would organise and structure itself aroundthe focused suite of products we would pursue. A formal business plan wasproduced at the beginning of September and the results of the analysis andreview were presented to staff. I believe the conclusions and outcome of thereview have been very well received by the people who will implement it and makeit successful. Analysis The issues which we identified in the course of the review were principallytwo-fold and stemmed, in large measure, from DAT's cultural heritage as anentrepreneurial, service based business. There existed no clear or coherentproduct and sales strategy. As a result, the Company had been leading aday-to-day existence, unable to staff all of its products adequately, withengineering resources stretched between customer projects and standard productsand - most obviously - too many products addressing too many different markets. Products At the end of the first half of our financial year DAT Group plc, includingSynchronica, had a total product line-up of thirteen distinct products targetedat five separate markets in the mobile device business space. Three of theseproducts - Tabella Express, Tabella Professional and Retail Assistant - wereaimed at the end-user/consumer and retail markets where the Group had little orno experience. We determined to focus our financial and human resources on four core productswhich cover mobile manufacturers, operators and corporates within the globalmobile device marketplace. The products we have focused on all have largepotential markets with either strong, growing demand and/or low competition.This, together with the chosen products' technological advantages and proventrack record, gives us a realistic chance for securing revenues against ourcompetitors. The important and fast growing corporate and enterprise market for mobile deviceservices and management which was supposed to be addressed by Tabella Businesswill now instead be addressed by the Synchronica SyncML Gateway and EnterpriseAssistant. Both products can also be applied to the market of mobile operatorswhich offers a potential for large and recurring revenue streams. WithROM-Builder we are addressing the market of device manufacturers, while weaddress mobile operators and manufacturers with the Synchronica SyncML DMServer. Our new, focused product line-up, and the markets they address, is set outbelow: Synchronica SyncML DM Server The Synchronica SyncML DM Server is a device management solution for mobileoperators and device manufacturers supporting automated device diagnosis andrepair; including over-the-air device reconfiguration and firmware updates. Ithas been designed to meet the high demands of mobile operators incorporating acarrier-grade architecture capable of performing mass-rollout of new deviceconfiguration and software updates to millions of devices. The growing complexity of mobile phones has significantly increased the numberof software bugs in devices, some of which even require device recalls. Devicemanufacturers and mobile operators are now searching for mobile devicemanagement solutions to reduce customer-care costs and prevent public devicerecalls. In addition, mobile operators are searching for solutions to distributeconfiguration changes and software updates to a larger number of devices inorder to increase customer satisfaction and network utilisation. Both operatorsand manufacturers are in favour of multi-vendor solutions using open industrystandards to enforce interoperability and prevent single-vendor lock-insituations. Based on the open industry standard OMA DM backed by all major devicemanufacturers, the Synchronica SyncML DM Server works with any OMA DM compliantdevice and does not require any installation of additional client software.Thanks to its unique and proprietary server-side scripting language "Sydemas",the SyncML DM Server is highly adaptable and can be used to build an automatedhotline system capable of replacing a large percentage of standard manualprocedures. Device Manufacturers can use the SyncML DM Server to prevent costly devicerecalls avoiding bad press with mass-distribution of software updates. Mobileoperators can distribute configuration changes to their subscriber base reducingcustomer-care costs and increasing customer satisfaction. The SyncML DM Serveris sold directly to device manufacturers and operators by the DAT sales forceand indirectly through OEM partners such as Smarttrust and Extended Systems. Synchronica SyncML Gateway The Synchronica SyncML Gateway provides over-the-air synchronisation ofcorporate email, calendar, contacts, tasks and notes with mobile phones andPDAs. It is sold as shrink-wrapped software to enterprises, with an easy-to-useinstallation procedure, as well as to mobile operators which will offer theSyncML Gateway to corporate users as a hosted service. Based on the open industry standard OMA DS, supported by all major devicemanufacturers and available on more than 150 devices currently available in themarket, the SyncML Gateway works out-of-the box, without additional clientsoftware on the device. When hosted by a mobile operator, it features a "zerofootprint" architecture enabling corporate users to synchronize their mobilephones without any software installation or firewall changes. With the increasing functionality and usability of high-end mobile phones, PDAsand Smartphones, corporate users are starting to use mobile phones for much morethan simply phone calls. Most devices today are bundled with synchronisationsoftware enabling the synchronisation of calendar contacts and tasks between theuser's PC and the mobile device. However, these solutions are based on cable,infra-red or Bluetooth connections and while sufficient for synchronisation ofstatic data such as contacts, they are not suitable for synchronisation of emailor calendar information where up-to-date information is essential. Recently,industry pioneers such as Blackberry have shown significant success offeringmobile data synchronisation solutions enabling mobile access to corporate emailand calendar information. However, Blackberry and most other solutions are basedon proprietary technology and require costly dedicated devices or installationof additional client software on the device limiting their compatibility andusability. While mobile operators appreciate growing revenues from mobile messaging andsynchronisation solutions, they typically prefer solutions based on openindustry standards to increase compatibility and prevent single-vendor lock-insituations. Since the SyncML Gateway is based on the open industry standard OMADS, it is compatible with a wide range of devices on the market and does notrequire installation of additional client software on the device. Thanks to thezero-footprint architecture, mobile operators can offer mobile synchronisationservices to individual end-users without having to convince a corporate ITdepartment to install software behind a corporate firewall. The SyncML Gateway is offered directly to enterprises which can purchase thesoftware from a Web-Shop operated by DAT's Synchronica subsidiary. In addition,the software is marketed through a reseller network consisting of smaller systemintegrators offering the solution to their clients. To mobile operators, theSyncML Gateway is marketed directly with a dedicated sales team. ROM Builder The design of the operating system in a Windows Mobile powered device is crucialto its reliability and success. Incorrectly programmed settings can causesignificant downstream support burdens and reduced revenues. This is why phoneprototyping is a time consuming and complex activity before phones are launchedto market. This responsibility brings challenges to the process of customising a WindowsMobile phone. The participating organisations are often located in differentcontinents and collaborative work has to take place across time zones. Thesedifficulties are compounded by the different languages spoken by thecontributors. Today, the device settings determined by the team are stored in alarge table or spreadsheet which is updated manually with any change requests.It is also a manual process to transcribe the settings from the table to thephone. ROM Builder is a web application which can be provided as an ASP solution orhosted by a device manufacturer. It is a collaborative tool which is offered tothe manufacturers' operator customers and their channel partners to speed up theprocess of creating ROM prototypes. Users interact with ROM Builder through webinterfaces which are optimised for the contributor. ROM Builder has two main customer benefits: it reduces the time to market aWindows Mobile device manufacturer needs to customise the operating system tovarious mobile operators and their requirements. In addition, it streamlines andstandardises the communication processes with operators reducing the number oferrors which can occur during the customisation process. This unique product will be offered to all Windows Mobile Smart Phone devicemanufacturers globally. Enterprise Assistant Enterprise Assistant is a web based application designed to enable organisationsto manage their estates of mobile devices. The business value of EnterpriseAssistant is significant because of the value of data carried on the new breedof smart devices being issued on a far broader scale inside all types oforganisations. The loss of a smart device is not limited to just the expensivepiece of hardware, but the often unquantifiable value of the business data bothin financial and credibility terms. The target market for Enterprise Assistant is any organisation deploying, usingand managing devices to its employees. Today this spans the entire range oforganisations from corporates of varying sizes through to governments. Today, the driver for most organisations to implement Enterprise Assistant issimilar to insurance, giving them the ability to lock or wipe the data from alost or stolen device. Of course Enterprise Assistant also has a range of otherkey features which customers need to be able to provision, maintain and supporttheir users mobile devices in the field. Customers achieve a number of keybenefits including the ability to segment mobile device users by group andmanage them in those groups in a way that is otherwise impossible to achieve. Amajor benefit to many organisations is consolidated reporting which enables thepresentation of otherwise disparate data in a usable manner to determine usage,access and device data. Strategy In order to fully exploit our product portfolio, we have now created dedicated,ring-fenced teams for each of our products. Product managers will definefeatures, design a road map to achieve them and lead product development. Eachproduct's development team will be solely focused on delivering the product roadmap, the features specified by the product manager and software updates tocorrect problems. Each team will also have attached dedicated quality assurance,technical documentation and support staff who will be experts in theirparticular products. The products themselves will reach the marketplace throughspecialised sales teams for the first time executing a dedicated sales strategy. The Group's products are almost always mission-critical for our customers. Whileproducts offered to the enterprise market are shrink-wrapped, sales to mobilemanufacturers as well as operators will require customisation and oftenadditional features and will be delivered with professional services in thecontext of a project. The professional services group takes a snapshot of thecurrent product state and implements changes or additional features required bythe customer independently and without affecting the product teams. Ifapplicable to a wider audience, the additional features will be streamed backinto the core, accelerating the product roadmap. With regards to our existing clients using results of custom development work,we are fully committed to support these projects and can offer to implementfurther enhancements on request. Structure The executive structure of the Group has been changed to reflect our new vision,strategy and priorities. Under my leadership there is now a team of experiencedindividuals who, I believe, will enable us to deliver our vision. As ChiefTechnical Officer, Tim Carmichael is responsible for all technical mattersincluding forward thinking, product development and quality assurance. TerryPage is Chief Operating Officer responsible for professional services, supportand internal IT resources. A central plank of our new strategy is to establish clear sales processes,supported by effective marketing and product management. Nicole Meissner is ourChief Marketing Officer and will focus on product management, overall marketing,public relations and external communications with our investors and investmentaudiences. As Chief Sales Officer, Bruce Eley will design and run a salesstrategy and management process across all the Group's markets. Finally, Allan Jonnes, our Chief Financial Officer, will provide financialplanning and control as well as human resources and managing of contracts withcustomers. The Future The team at DAT Group, from top to bottom, is excited by the opportunity we haveto become significant suppliers of device management solutions to internationalcustomers. The analysis and review we have undertaken this summer has, Ibelieve, led to the creation of a much stronger and more focused organisation.We face the future with confidence. C. Brinkschulte30 September 2005 Consolidated Profit and Loss Account Note 6 Months to 6 Months to Year to 30 Jun '05 30 Jun '04 31 Dec '04 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Turnover: Continuing 1,784 1,028 2,424operations ======= ======= =======Operating loss: Continuingoperations (1,034) (1,261) (2,271)Interest receivable lessinterest 82 (109) (105)payable ------- ------- -------Loss on ordinary activitiesbefore (952) (1,370) (2,376)taxTax on loss on ordinary 1 (4) 120 406activities ------- ------- -------Loss on ordinary activitiesafter (956) (1,250) (1,970)tax ======= ======= =======Basic and diluted loss perordinary share 2 (5.1p) (9.6p) (14.7p) ======= ======= ======= The results of acquisitions in the period are not considered to be material andhave not been separately disclosed in accordance with FRS3. Consolidated Cash Flow Statement Note 6 Months to 6 Months to Year to 30 Jun '05 30 Jun '04 31 Dec '04 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net cash flow from operatingactivities 3 (2,115) (928) (1,726)Returns on investment andservicing 82 (108) (119)of financeTaxation (paid) and received (6) 304 410Capital expenditure andfinancial (156) (78) (41)investmentAcquisitions and disposals 4 (763) - - ------- ------- -------Net cash flow before financing (2,958) (810) (1,476)Financing 13 1,317 6,970 ------- ------- -------(Decrease) / increase in cash (2,945) 507 5,494 ======= ======= ======= Consolidated Balance Sheet Note As at As at As at 30 Jun '05 31 Dec '04 30 Jun '04 (unaudited) (audited) (unaudited) £'000 £'000 £'000 Intangible assets and goodwill 970 - -Tangible assets 215 108 122 -------- -------- -------- Total Fixed Assets 1,185 108 122 -------- -------- -------- Stocks 108 29 21Debtors due after one year 11 11 11Debtors due within one year 1,348 652 655Cash at bank and in hand 2,568 5,512 108 -------- -------- -------- Total Current Assets 4,035 6,204 795Creditors: Amounts falling duewithin one year (877) (1,203) (1,503) -------- -------- -------- Net current assets /(liabilities) 3,158 5,001 (708) -------- -------- -------- Total assets less currentliabilities 4,343 5,109 (586) Creditors: Amounts falling dueafter more than one year - (16) (37) -------- -------- -------- Net assets / (liabilities) 4,343 5,093 (623) ======== ======== ======== Capital and reserves 5 4,343 5,093 (623) ======== ======== ======== Notes to the Interim Financial Information 1. Tax 6 Months to 6 Months to Year to 30 Jun '05 30 Jun '04 31 Dec '04 (unaudited) (unaudited) (audited) £'000 £'000 £'000 United Kingdom tax credit - 120 410Overseas tax payable (4) - (4) -------- -------- -------- Current taxation (4) 120 406 ======== ======== ======== 2. Loss Per Share 6 Months to 6 Months to Year to 30 Jun '05 30 Jun '04 31 Dec '04 (unaudited) (unaudited) (audited) £'000 £'000 £'000 These have been calculated on lossesof: (956) (1,250) (1,970) ======== ======== ======== The weighted average number of sharesused was: 18,665,000 13,035,000 13,376,000 ======== ======== ======== Basic and diluted loss per ordinaryshare (5.1p) (9.6p) (14.7p) ======== ======== ======== 3. Reconciliation of Operating Loss to Net Cash Outflow from Operating Activities. 6 Months to 6 Months to Year to 30 Jun '05 30 Jun '04 31 Dec '04 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Operating loss (1,034) (1,261) (2,271)Amortisation of goodwill 25 - -Depreciation of tangible assets 55 37 83(Profit) / loss on sale of tangiblefixed assets - - (1)Change in stocks (80) 35 27Change in debtors (808) 198 264Change in creditors (273) 63 172 -------- -------- --------Net cash flow from operatingactivities (2,115) (928) (1,726) ======== ======== ======== 4. Acquisition of Subsidiary On 31 March 2005, DAT Group PLC acquired the entire issued share capital ofSynchronica Software GmbH, a Berlin based software company. The totalconsideration for the acquisition of Synchronica was €1,350k (£933k) includingan allotment to the vendors of options in respect of Ordinary shares in DAT witha market value of €250k. Payment of €800k in cash was made on completion (31March 2005) and the balance of €300k was paid into escrow accounts on the samedate. Acquisition expenses amounted to £106k. A provisional fair value of £44k has been calculated for the assets, including£103k in cash, acquired via the transaction. Goodwill of £995k, afteradjustments for associated transaction costs, is to be provisionally amortisedover a period of 10 years. Analysis of Acquisition Cash Flow £'000Total consideration (€1,350k) 933Less share options (€250k) (173) --------Cash consideration 760Acquisition expenses 106Less cash acquired (103) --------Net cash flow for acquisition 763 ======== 5. Reconciliation of Movement in Shareholder's Funds Capital and Reserves £'000At 31 December 2004 5,093Retained loss for the period (956)New Ordinary shares allotted 33Capital to be issued 173 --------At 30 June 2005 4,343 ======== 6. Interim ReportThis interim report was approved by the Board on 30 September 2005. It is notthe company's statutory accounts. It has been prepared using accounting policiesthat are consistent with those adopted in the statutory accounts for the yearended 31 December 2004. The figures for the year to 31 December 2004 were derived from the statutoryaccounts for that year. The statutory accounts for the year ended 31 December2004 have been delivered to the Registrar of Companies and received an auditreport which was unqualified and did not contain statements under s237(2) or (3)of the Companies Act 1985. Independent Review Report to DAT Group PLC Introduction We have been instructed by the company to review the financial information setout on pages 10 to 14. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. Directors' Responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review Work Performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied, unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom Auditing Standards and thereforeprovides a lower level of assurance than an audit. Accordingly we do not expressan audit opinion on the financial information. We have not carried out anyreview procedures on the financial information for the six months ended 30 June2004. Review Conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. RSM Robson Rhodes LLPChartered Accountants London, England30 September 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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