Dedicated Micros Further Freefall - 2013

By: John Honovich, Published on May 06, 2013

Dedicated Micros most recent 2012 financials continue the tough trend the company showed in 2011 and for the past few years. Now, the former DVR leader has discontinued multiple operations and recorded a significant loss to Norbain. Inside this note, we break down the revenue decline, margins impact, discontinued operations, cash position and their future.

Revenue Decline

Revenue dropped 18% from 40.1 million GBP to 32.8 (in USD, that's the rough equivalent of going from $62 million to $50 million). At its peak in the mid 200s, DM's revenue was ~$135 million USD, meaning an overall revenue drop of 60%+.

Margins Impact

Gross margins fell from ~56% in 2011 to ~50% in 2012. However, net margin improved from a loss of ~15% in 2011 to ~12% in 2012 as it appears overhead costs were cut.

Discontinued Operations

DM reported ceased chip production at Chipwrights, closed the manufacturing facility at Denard and closed their Aviation offering. They reported a one time loss of 5.7 million GBP for such exceptional items and discontinued activities.

Norbain Impact

DM reported 1 million GBP loss due to Norbain going into administration.

Cash Position

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As for June 30, 2012, net cash balances totalled 0.2 million GBP overdrawn, down 1 million GBP year over year. However, in April 2013, DM reported a renegotiation of their financing facilities including an overdraft facility of 1 million GBP.

Things Looking Better?

DM reports 'trading performance' was 'significantly improved' in the second half of 2012. At some point, perhaps things bottom out.

From their financial report, however, the strategy discussed has stayed its course. DM's Director's Report led with Closed IPTV and other ongoing initiatives. We are skeptical of the mass appeal of Closed IPTV given its proprietary nature.

That said, at some point, maybe things will bottom out. However, while DM's competitive strength was obvious in the past decade (DVRs), it is just not clear what DM's competitive strength is now nor will be.

The Report

You can access the report for $1.60 USD at UK's Companies House WebCheck database, searching for company number '03297192'.

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