Grabbing a few big gulps can sometimes fill you up quickly, but it can also lead to a little indigestion. This proved to be the case for D&M Holdings, which filed results for the first half of its fiscal year, ending September 30, 2003, and its financial forecast for the fiscal year ending March 31, 2004 with the Tokyo Stock Exchange.
D&M Holdings has been acquiring “premium” audio, video, and home networking brands over the last couple of years, and is the parent company to Denon, Marantz Japan, McIntosh Laboratory, and Digital Networks North America, which consists of the ReplayTV, Rio, and Escient brands.
For the first half ended September 30, 2003, D&M Holdings reported consolidated revenue of $358 million USD (Â¥:39.9 billion), EBITDA (earnings before interest, taxes, depreciation, and amortization) of $10.1 million (Â¥1.1 billion), an operating loss of $845,000 (Â¥92 million), a net loss of $2.3 million (Â¥247 milion) and fully diluted loss per share of around 2Â¢ (Â¥2.74). These numbers are in contrast to consolidated revenue of $369 million (Â¥40.2 billion), EBITDA of $18.3 million (Â¥2.0 billion) and operating profit of $10.1 million (Â¥1.1 billion) for the six-month period ending September 30, 2002. D&M notes that results for the prior year’s six-month period are pro forma for comparison purposes due to the acquisition of Marantz in May 2002.
Revenue for the last six months fell short of the company’s May projections by $34.9 million (Â¥3.8 billion), which D&M says is a result of “soft consumer demand in the premium A/V industry.” The company says the shortfall in revenue was largely attributable to Denon and Marantz.
Despite this decline in revenue during the first half of its fiscal year, D&M reports that its “core A/V business” posted an increase in operating profit of around $1.1 million (Â¥125 million) compared to a year ago as a result of “post-merger integration efforts.” For the first half ending September 30, 2003, revenue for the core A/V business was $321 million (Â¥34.9 billion) and operating profit was around $13 million (Â¥1.4 billion). The company adds that the Digital Networks North America group reported an operating loss in the first half due to start-up costs from re-launching ReplayTV, Rio, and Escient as new businesses.
But D&M is still optimistic: for the fiscal year ending March 31, 2004, the company says it will stick to its forecast announced on November 7, 2003 of consolidated revenue of $841 million (Â¥91.6 billion), EBITDA of $50.5 million (Â¥5.5 billion), operating profit of $30.3 million (Â¥3.3 billion), and net income of $15 million (Â¥1.65 billion). Full year revenue forecast is still $62.5 million (Â¥6.8 billion) lower than the May 2003 projection, “reflecting the current market conditions in the premium A/V industry segment.”
The company has taken several recent steps to improve its bottom line, including integrating McIntosh into its development and purchasing platforms and making preparations to establish a global professional sales organization to enhance the Denon and Marantz professional/semi-professional business. D&M says it has also reached an agreement to establish a core production base in Guandong, China to yield cost savings and has taken steps to expand procurement activities in Hong Kong and China, while spinning off its Shirakawa plant in Japan into a subsidiary called D&M Manufacturing.