YEOMAN GROUP PLC
Operational Review
1 Mobile navigation
TravelM8 has continued to attract significant industry interest, and has won
support from telematics groups in several major companies. Operationally the
service has continued to prove highly robust, and its versatility was
demonstrated by the richness of the colour mapping and route instruction
services launched promptly following the introduction of MMS phones by the
mobile phone operators. Economic slowdown in the mobile phone industry has
delayed the introduction of GPS enabled handsets, but through the YEOMAN
TravelM8active GPS product we have demonstrated the capability of the YEOMAN
'off-board' architecture to support future GPS handsets.
Current economic conditions across Europe however have seen these groups limit
their commitment to the marketing of these products to their customers. In the
UK, despite early enthusiasm from the motoring organisations, translation into
commercial activity continues to be delayed. Therefore revenues remain driven
primarily by own-brand marketing and have continued at a similar level to last
year. Discussions continue at a senior level and new companies continue to sign
up to conduct trials. Trial services will begin shortly with two large European
companies in Germany.
We believe that in this weak market the next stage in telematics development
will be industry consolidation. Several large technology, consumer and transport
groups are looking to provide products to their customers in partnership with
specialist telematics suppliers. The large organisations looking at this
industry have made it clear they would prefer to form a partnership with a
sizeable and sustainable telematics group with a wide range of products and
technology. The opportunity exists to drive the creation of a company that will
provide that sustainability, capability and ambition to the market. YEOMAN owns
a powerful, future-proof, technology base and using the resources from disposals
intend to play a substantial role in the industry consolidation.
2 Other Operations
In December we reported that the three constituent businesses in YEOMAN Group
had been separated to operate on a standalone basis. The need for Marine
navigation (B&G) and Laser-Scan to provide Mobile Navigation with technical
support was past and their future support would be viewed on a purely financial
basis.
2.1 Marine navigation, B&G
During the first half of the year we conducted a strategic review of B&G, in
particular to address the cost base with regard to prevailing general economic
conditions and continuing losses. In the light of our decision to concentrate on
Mobile Navigation, we determined to sell B&G and accordingly have appointed KPMG
to advise us on the disposal.
2.2 Laser-Scan
Laser-Scan was acquired in 2000 as a cornerstone of the Group's mobile
navigation strategy. The company brought with it a very strong software
development team experienced in development of geospatial software and
applications, and core technology that allowed the rapid translation of the
YEOMAN demonstrators into robust commercial scaled services.
The company's core business providing spatial database products to National
Mapping Authorities is in transition from proprietary products to open
standards. Over the last two years, the Group has therefore invested through
Laser-Scan in a new product, 'Radius', that exploits its existing technology on
an Oracle database, and this was launched in June 2002.
Tight control of costs has resulted in a stabilisation in the financial
performance of the company, from a £0.4m loss last year to a £0.3m trading
profit this year. However despite technical plaudits, sales of Radius have been
significantly slower than anticipated. We concluded that the possibility of
operating the core business at even break-even in the medium term was extremely
uncertain. Therefore the decision has been made to seek an administration order
for the company to allow a controlled disposal of the assets.
Financial review
Sales decreased in the half year to 31 March 2003 to £5.2 million against £6.5
million in the equivalent period in 2002. Marine sales were weaker at £2.9
million (2002: £4.1 million) due to tough market conditions. Laser-Scan sales
were £2.3 million compared with £2.5 million in the equivalent period (which did
however include sales in Laser-Scan Inc, its US subsidiary that was sold in
March 2002, of £0.9 million). Total turnover was therefore down 7% from £5.6
million to £5.2 million on a like for like basis.
Across Marine and Laser-Scan, operational EBITDA before research and development
costs was a profit of £0.1 million (2002 - loss of £0.2 million). A loss of £0.4
million in the marine operation (2002 - profit of £0.2 million) was offset by a
profit of £0.5 million in Laser-Scan after the writing back to profit of £0.2
million of accruals no longer required (2002 - loss of £0.4 million). Mobile
Navigation losses grew from £0.9 million for the three months from the TravelM8
launch in December 2001 to March 2002, to £1.3 million for the six months to 31
March 2003, an effective fall in the average loss per month.
Research and development costs have continued to fall as predicted and were £1.1
million for the half year compared with £1.9 million in the equivalent period
last year and £1.6 million in the second half of the last financial year. The
declared loss for the half-year was £3.2 million (2002 - £6.8 million) and was
struck after reorganisation costs in the marine operation of £0.7 million to
cover redundancy costs, stock write downs and accelerated amortisation of
intangibles offset by research and development tax credits of £0.6 million.
Net assets of £2.2 million were struck after adjustments to stocks held in the
marine division of £0.3 million, which reduced stocks held to £1.3 million, and
the accelerated write down of intangibles in the marine division of £0.1
million. Goodwill arising on the acquisition of Laser-Scan was completely
written off at 30 September 2002.
Subsequent to 31 March 2003, net cash of £2.6 million has been significantly
depleted due to continuing operating losses, reorganisation costs in the marine
division and settlement of arrears of creditors and of rent including a delayed
agreement of a rent review due in December 2000 for Laser-Scan's premises in
Cambridge.
Outlook
We maintain our long held vision that navigation and mapping should be provided
as a service to mobile devices, rather than being a specialised product
requiring up-front purchase by the end-user. In line with this we have built a
demonstrably robust and comprehensive server system that is capable of
supporting existing and future devices. The convergence of positioning and
communication in consumer devices has been slower than the industry expected,
but we believe that these devices will become more widespread in the future,
providing YEOMAN with a wider customer base to whom we can deliver increasingly
advanced services. In the meantime, we have a very strong focussed company,
which, supported by its technology and the proceeds from the B&G disposal, is
strongly placed to drive forward consolidation within the industry.
CONSOLIDATED PROFIT AND LOSS FOR THE 6 MONTHS TO 31 MARCH 2003
Unaudited Unaudited Audited
6 months 6 months 12 months
to 31/3/03 to 31/3/02 to 30/9/02
£000 £000 £000
Sales 5,195 6,542 12,915
---------- ---------- ----------
Cost of sales (3,058) (3,394) (7,976)
---------- ---------- ----------
Gross profit 2,137 3,148 4,939
---------- ---------- ----------
Distribution costs (2,715) (2,996) (4,917)
Administrative expenses
Amortisation of goodwill 0 (2,754) (5,510)
Research and development (1,104) (1,948) (3,538)
Other (1,409) (2,275) (3,396)
Reorganisation costs (note 1) (656)
---------- ---------- ----------
Total administrative (3,169) (6,977) (12,444)
expenses ---------- ---------- ----------
Operating loss (3,747) (6,825) (12,422)
Interest receivable 47 88 122
Interest payable (17) (31) (54)
Taxation 558 (4) 29
---------- ---------- ----------
Loss on ordinary activities (3,159) (6,772) (12,325)
after tax ---------- ---------- ----------
Loss per share - basic & (14.1p) (45.3p) (79.2p)
diluted
CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2003
Unaudited Unaudited Audited
6 months 6 months 12 months
to 31/3/03 to 31/3/02 to 30/9/02
£000 £000 £000
Fixed assets
Intangible 0 2,807 49
Tangible 994 1,397 1,200
--------- ---------- ----------
994 4,204 1,249
--------- ---------- ----------
Current assets
Stock 1,266 1,785 1,776
Debtors 2,461 2,281 1,975
Cash at bank and in hand 2,556 3,387 5,462
--------- ---------- ----------
6,283 7,453 9,213
Creditors: amounts due within (4,514) (5,512) (4,818)
one year
--------- ---------- ----------
Net current assets 1,769 1,941 4,395
--------- ---------- ----------
Total assets less current 2,763 6,145 5,644
liabilities
Creditors: amounts due after more 0 (65) (21)
than one year
Provisions for liabilities and (527) (342) (275)
charges
--------- ---------- ----------
Net assets 2,236 5,738 5,348
========= ========== ==========
Capital and reserves
Called up share capital 5,628 3,738 5,607
Share premium account 30,837 27,550 30,816
Merger reserve 692 692 692
Profit and loss (34,921) (26,242) (31,767)
--------- ---------- ----------
2,236 5,738 5,348
========= ========== ==========
CONSOLIDATED CASHFLOW FOR THE 6 MONTHS TO 31 MARCH 2003
Unaudited Unaudited Audited
6 months 6 months 12 months
to 31/3/03 to 31/3/02 to 30/9/02
£000 £000 £000
Cash outflow from
operations
Operating loss (3,747) (6,825) (12,422)
Loss on disposal of 114
subsidiary
Loss on disposal of fixed 37
assets
Amortisation 145 2,754 5,593
Depreciation 261 378 589
(Increase)/decrease in 510 (268) (259)
stock
(Increase)/decrease in (486) 184 298
debtors
Increase/(decrease) in (325) 776 227
creditors
Increase/(decrease) in 252 (219) (286)
provisions
Net exchange differences 5 8 34
Shares issued in lieu of 42 48 47
cash ---------- ---------- ----------
(3,343) (3,164) (6,028)
---------- ---------- ----------
Servicing of finance
Interest received 47 88 122
Interest paid (17) (31) (54)
---------- ---------- ----------
30 57 68
---------- ---------- ----------
Taxation
Corporation tax credits 561 0 41
received
Overseas tax (3) (4) (12)
---------- ---------- ----------
558 (4) 29
---------- ---------- ----------
Capital expenditure
Purchase of fixed assets (151) (229) (396)
Disposal of fixed assets 0 0 30
---------- ---------- ----------
(151) (229) (366)
---------- ---------- ----------
Acquisitions and
disposals
Net outflow from disposal of 0 0 (13)
subsidiary
---------- ---------- ----------
0 0 (13)
---------- ---------- ----------
Financing
Issue of new share 0 0 5,609
capital
Expenses of share issue 0 0 (473)
Capital element of finance 0 0 (91)
lease repayments
---------- ---------- ----------
0 0 5,045
---------- ---------- ----------
---------- ---------- ----------
Net cash inflow/(outflow) for (2,906) (3,340) (1,265)
the period
Opening cash 5,462 6,727 6,727
---------- ---------- ----------
Closing cash 2,556 3,387 5,462
========== ========== ==========