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Trading update and acquisition of tape autoloader design rights In light of the tragic events in New York and Washington on September 11th, the Board would like to update investors on Plasmon's progress in the current financial year. Prior to September 11th, overall performance was broadly in line with the Board's expectations with good growth in European sales partially offsetting more difficult trading conditions in the US. European sales increased by some 16 per cent., with particularly good growth in the core 5.25 inch library business following the introduction of the new G-Series range of products. The improved European performance also reflected the success of increased marketing efforts over the last few years. US sales, in contrast, were somewhat disappointing even allowing for more challenging economic conditions. Although 5.25 inch library sales were ahead of expectations, sales of the new LTO tape library products were slower than planned and were therefore insufficient to offset the ending of Magstar MP tape library sales to IBM. The Board believes that the US business should be making more rapid progress and in August Dr. Christopher Harris was appointed President of Plasmon Inc with responsibility for operations and engineering at both US facilities. The Company has further strengthened the US management team with the recruitment of a Senior VP of Sales & Marketing who has extensive experience in tape libraries. Despite the slow start, the Directors remain enthusiastic about the tape business. In late September the Company acquired design and manufacturing rights to the tape autoloaders it currently purchases on an OEM basis from Exabyte for a maximum consideration of $1.4m. In addition to LTO, the acquisition provides Super DLT and Sony AIT versions of the products and will enable the Company to offer a full range of Plasmon manufactured tape products. Production of the new autoloaders will be transferred to the Company's existing facility in Colorado Springs. September is always an important month for the group and the Company's outlook indicated that it would be a record month, enabling it to reach first half profitability targets. Unfortunately, a significant part of the forecast business was for financial institutions in the US, of which £2-3m was deferred due to the events of September 11th. None of these opportunities have been lost and it is expected that the deliveries will take place during the second half. The Company's results in September were also impacted by the bankruptcy of Toolex International NV, a long time customer of the consultancy business, which has left the Group with a bad debt of £624,000. The Directors expect to meet with the purchasers of the business in the coming weeks to explore the possibility of recovering this loss and future consultancy income through a new trading relationship. The development of UDO drives and media has proceeded to plan and Asahi Pentax delivered prototype drives on schedule in July. Although the development is still at a relatively early stage, the Board remains confident that finished products can be delivered within the timescale set out at the time of the UDO fundraising. The first half of Plasmon's financial year traditionally produces only a minor part of the year's profits. As a result of the events in September, the Directors now expect to report only a small profit in this period (before Goodwill amortisation and UDO development costs), compared with £2.5m in the first half of 2000/01. Despite the uncertain economic and political background, the Board looks forward to the second half of the current financial year with some confidence:
It is too early to be precise about the likely results for the second half, but the Directors believe that the Company will report a significant profit (before Goodwill amortisation and UDO development costs) in the period although not fully recovering the first half shortfall. |
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