Densitron reports losses after poor year

The news on Wednesday that Densitron Technologies, the leading designer and manufacturer of information display systems, made a profit of only £100,000 from continuing operations, down from £600,000 last year, must have shareholders in despair.

Revenues from operating business fell from £22.6 million to £20 million and the group posed a total loss of £719,000 for the year, compared with a profit of £244,000 in 2012.

The maker of modern TFTs, OLEDs, Liquid Crystal Displays (LCD), Alphanumeric LCDs, Graphic LCDs and Touch Screens was founded 40 years ago, and operates in 35 countries, so how can things have got so dire?

Chairman Jan G Holmstrom said the company has now settled a one-off claim against it, believed to be £600,000, on a property in Newcastle leased by a former subsidiary, Densitron Ferrograph Limited, an out-of-court settlement that was the primary item pushing the company into the red.

Yen adds further misery

Otherwise, the UK and Japan were the main areas that caused the disappointing operating result. Management said that they expected more from the UK - "and at the time of putting the operating forecasts together were confident that the numbers could be achieved".

In a statement bound to attract criticism they blamed a combination of delays in bringing internal developments to market, revenues taking longer to achieve, new projects taking longer to get to mass production and new markets in which the business has opened offices taking longer to deliver revenues.

Secondly, and this time outside of the management's control, the Japanese yen's 22% weakening against the dollar resulted in a substantial increase in the cost of purchases in its Japanese subsidiary, and as the subsidiary sells into the local market in Japanese yen so the gross margin on sales was diminished.

Gross margins decreased to 27.3%, reflecting the increasing competition for standard products, the management went on, adding that "the pipeline of new business remains fairly strong and we are receiving good orders from our existing and new customers".

During the year the company launched wirelessly-networked Epaper displays (Densipaper), which allow users to display and instantly update information or imagery from their computers.

The company is now embarking on a review of how the business is structured and further reviewing costs. It is hoping to have land at Blackheath re-designated by the local Council to make future development possible, and it is also now free to market the Newcastle property.

Payment of the planned dividend has been abandoned, but the company's investors are accustomed to bad news and the shares lost just 2.5%, to 5p.