The Group reported a pre-tax profit of £7.1m (2002: £nil)
on sales of £29.5m (2002: £23.3m). The earnings per share
were 6.0p (2002: 0.5p).
The interim dividend is to be increased to 1.5p (2002: 0.8p) per ordinary
share to be paid on 6 April 2004 to shareholders on the register as
at 27 February 2004.
The Group balance sheet remains strong with net assets of £27.9m
(2003: £23.4m) of which £22.6m (2002: £18.9m) was
The Amstrad business made a profit before tax of £6.1m (2002:
£5.5m) on sales of £23.0m (2002: £19.1m). Sales
of digital decoders (“set top boxes”) were particularly
strong with volumes significantly higher than the same period last
The Hong Kong business continues to perform well with direct shipments
of audio products in the first half, mainly to the US market, significantly
ahead of the same period last year.
The Amserve business moved into profit in the period with a pre-tax
profit of £1.0m (2002: £5.5m loss) on sales of £6.5m
As shareholders will recall, the e-m@iler business model is based
on subsidising the sales price of the units with the subsidy to be
recouped through a revenue stream derived from usage of the e-m@iler.
We are currently manufacturing and selling an updated version of the
“e-m@iler plus” which has some new features that increase
the e-mail revenue potential. In view of the increased revenue generated
and in keeping with accounting practice generally adopted in this
industry where hardware sales are subsidised, we now consider it appropriate
to take account of future revenue streams when assessing the net realisable
value of stock.
A total of 298k e-m@iler units have now been bought and registered
since the launch of the e-m@iler. As part of our strategy of increasing
the installed base the retail price of the “e-m@iler plus”
was significantly reduced after Christmas in most retail outlets from
around £49 to around £29. Lower manufacturing costs together
with additional revenue potential have made this price reduction possible
and we believe this new price will provide a significant impetus to
In December 2003 the average revenue generated from the installed
base was £21k per day (approximate annualised rate of £7.6m
per annum). The majority of revenue continues to be derived from e-mail
and surf usage; we are particularly encouraged by the contribution
from other services such as the downloading of ring tones, games and
SMS text messaging. Our new updated version of the “e-m@iler
plus” is the first telephone in the UK to have a dedicated DQ
button (directory enquiry button) which allows the user, at one touch,
to be connected to one directory enquiry service of our choice and
enables us to rent this feature to directory operators. We have recently
entered a 12 month agreement with 11 88 66 Ltd, a wholly-owned subsidiary
of Telegate AG, Europe’s largest independent directory service
provider, who pay us for the use of this facility.
Advertising revenue is growing as the installed base is becoming more
attractive for advertisers and our total audience reach is now believed
to be over 1 million people. We have attracted leading names such
as AOL, BT, Halifax, BSkyB and Onetel all of whom advertise regularly
on the e-m@iler.
In the second half of this financial year we expect to receive final
technical approval from BSkyB and commence shipment of Sky+ set top
box units. This will take the Company into a new and potentially high
growth area of technology, personal video recorder (“ PVR”),
through the incorporation of a hard disc drive in a set top box. I
personally believe this generation of product is one of the best innovations
to have been introduced in recent years in the consumer electronics
industry and I feel that this generation of product will become a
standard piece of equipment in homes in the same way as the VCR has.
We have recently been advised of new volumes for supply in our next
financial year for both standard set top boxes and PVRs. This demonstrates
our competitive edge in a very demanding price orientated marketplace.
We are able to achieve this by having a very compact and focused team
of developers, manufacturing and logistics staff. We are currently
developing new units and are confident that we will be supplying other
geographic markets with set top boxes in the next financial year.
In the Amserve business we will continue to focus on both increasing
the installed base and increasing the revenue generated per phone
by adding new revenue earning services. In the second half of the
financial year there will be a pilot introduction of a new third generation
product which takes us into a new exciting level of technology. It
will provide us with additional revenue earning functionality. We
expect a full roll out for the Christmas season of 2004 thus impacting
revenues for our next financial year.
Sir Alan Sugar
19 February 2004