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  News – 19 October 2006  
  Amstrad Plc
Annual Report & Accounts 2005/2006
  Download the Full Annual Report & Accounts 2005/2006  
  Chairman's Statement  
  Financial Review

The Group reported a profit before tax of £20.2m (2005: £19.6m) on sales of £91.7m (2005: £101.5m). The earnings per share were 18.4p (2005: 17.2p).

The results published in this Announcement are the first full year results to be prepared by the Group on the basis of International Financial Reporting Standards, as opposed to UK Generally Accepted Accounting Practice as has previously been the case. The main impact on the Group’s accounts are the need to revalue (i.e. mark to market) foreign exchange forward contracts and certain foreign currency denominated stock purchase contracts, the capitalisation and subsequent amortisation of development expenditure and the charging to the income statement of a fair value in relation to share option grants. In these statements the comparative figures for the year to 30 June 2005 have been restated accordingly and the full impact of these changes to reporting under IFRS are outlined in the notes to the financial statements.

As shareholders will be aware, the Group has been generating significant levels of cash over the last few years. The cash is now at a level where the Board feels it appropriate to recommend to shareholders the return, by way of dividend, of £30m. It is proposed that the return of cash is by way of a special dividend of 32p per ordinary share and a normal final dividend of 4.5p (2005: 4.5p) per ordinary share with both dividends to be paid on 8 December 2006 to shareholders on the register on 6 October 2006. The Company paid an interim dividend of 2.5p (2005: 2.0p) per ordinary share on 6 April 2006.

The Group’s net assets have increased to £56.3m (2005: £46.0m). As at 30 June 2006 the Group had cash of £56.4m (2005: £40.3m). Inventories of £6.1m (2005: £8.7m) were lower than last year reflecting the successful sale of all of the Group’s e-mailer stocks.

Review of Activities

Volumes of satellite set top boxes sold to the UK and Italian markets were similar overall to a year ago. The reduction in sales value reflects both the mix of product sales with a higher proportion of standard set top box sales this year and the inevitable downward pressure on selling prices of more mature products. However, our continuing focus on cost reduction through re-engineering and component price and manufacturing cost reductions has helped mitigate the impact of price pressure on profits.

During the financial year we have been developing HDTV set top boxes and in June 2006 we made our first deliveries of this product to the Italian market.

The Hong Kong business, which designs, manufactures and sells audio products to the US and European markets, has achieved a slightly lower level of sales compared to last year, which was a good result in what is a very competitive audio products market.

During the year the Amserve business sold all of its e-mailer stocks to retailers with approximately 64,000 e-mailer units being bought and registered by consumers bringing the total registered since the initial launch of the product to 493,000 units.

The installed base of e-mailers continues to generate significant usage revenue for the Group from e-mail, internet access, sms, downloading of ringtones and advertising. In March 2006 the e-mail tariff was increased and to date this tariff change does not appear to have had a significant impact on the normal churn rate. Based on the figures for June 2006 usage revenue this equated to an annualised figure of £7.9m


The broadcasting industry is increasingly moving towards high definition television and we continue to work on developing HDTV set top boxes and HDTV PVR boxes, with deliveries of HDTV boxes having already commenced and deliveries of the HDTV PVR box scheduled for the second half of the new financial year.

In September 2005 we announced that it had been agreed with BSkyB that we would develop and supply a new PVR set top box. Development work is ongoing on this product and we now expect first deliveries to be in the second half of the current financial year rather than in the first half as we originally envisaged. The development of this leading edge product will leave us well placed for the future.

The current financial year will see a growing transition towards HDTV. Our new models will start to ship in the current financial year but the benefit of full scale production volumes will not be seen until the following year and correspondingly we expect demand to decline on the current models in the current year. As such shareholders should not expect the same level of result as that which we have just reported.

We continue to invest in the development of the next generation of smart phones for use on broadband lines and are in discussions with telecom providers on the potential for these products.

Sir Alan Sugar

28 September 2006
  Amstrad plc
Register No. 955321
Brentwood House
169 Kings Road
Essex CM14 4EF

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Tel: 0207 693 6999
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