15th Sep 2005 07:04
Quadnetics Group PLC15 September 2005 Press Release 15 September 2005 Quadnetics Group plc Preliminary Results for the year ended 31 May 2005 Quadnetics Group plc, a leader in the design, integration and control ofadvanced CCTV and networked video systems, reports its Preliminary Results forthe year ended 31 May 2005. Highlights - Sales £26.8 million (2003/04: £18.1m)- Profit before tax £2.3 million (2003/04: £1.9m)- Underlying profit before tax £2.7 million (2003/04: £2.3m)- Underlying earnings per share 20.0p (2003/04: 21.2 p)- Proposed final dividend 3p per share, making 4p for the year Commenting on the results, Russ Singleton, Chief Executive, said: "Synecticshas continued to make considerable progress, especially in the North Americanmarket where it has won a number of digital security systems contracts againstworldwide competition from major companies. "In the UK there has been evidence of renewed commitment to CCTV security fromthe public sector as well as wider opportunities for on-vehicle transport CCTVgoing forward. In the current year we expect a return to growth from these areasof the business, and overall good progress in the Group's financial results." For further information, please contact:Quadnetics Group plc Tel: +44 (0) 1527 850 080Russ SingletonEmail: [email protected] Brewin Dolphin SecuritiesNeil Baldwin Tel: +44 (0) 113 241 0130 Media enquiries: Abchurch Tel: +44 (0) 20 7398 7700Ariane ComstiveEmail: [email protected] Chairman's Statement During the year Quadnetics Group: • More than doubled sales of its Synectics proprietary securitysystems and software • Established a presence in the large and rapidly growing NorthAmerican digital security systems market • Re-organised and expanded the capabilities of its UK transportCCTV business. Results In the year to 31 May 2005, Quadnetics Group produced sales of £26.8 million(2003/4: £18.1 million) on which it earned a profit before tax, and amortisationof goodwill of £2.7 million (2003/04: £2.3 million, before exceptional costs of£0.2 million). Profit before tax was £2.3 million (2003/04: £1.9 million).Whilst these increases are pleasing, the comparison is somewhat flattered byinclusion of the first full year of contribution from Look CCTV, acquired inFebruary 2004. Underlying earnings per share were 20.0p (2003/04: 21.2p). The Board isrecommending payment of a final dividend of 3p per share, bringing the totaldividend for the year to 4p per share (2003/04: 3p). The most noteworthy achievement in the financial year was Synectics' success inwinning a number of significant digital CCTV control system contracts in boththe UK and North America. These were won against worldwide competition frommajor companies on the basis of being the best technical systems solutionavailable. Synectics' sales for the year more than doubled to £7.7 million (2003/4: £3.6million) , on which it earned very healthy operating margins. Further growth inthe North American market will be aided by the acquisition in May 2005 of thetrade and net assets of AlphaPoint LLC which, as Synectic Systems Inc., has nowbecome the company's North American sales and service base. The potential of Synectics to achieve a significant global presence in themarket for digital CCTV systems and control software is becoming increasinglyclear, and success in this goal is the Group's key priority. As set out in our interim statement, demand for public space CCTV securitysystems in the UK was below the level of recent years, in part because of thelonger sales cycles associated with revised government funding processes.Activity levels at Quadrant Video Systems, our UK security integrationsubsidiary, picked up in the second half as predicted but not sufficiently tomake up for the earlier shortfalls. While still earning strong margins, QuadrantVideo's results for 2004/5 overall were below those of the previous year. Thereis now evidence of renewed commitment to CCTV security from the public sectorand we expect a return to growth in the current year. Look CCTV strengthened its leading position in the bus CCTV market during theyear, and made a strong contribution to Group earnings. The company moved tolarger premises and is being re-organised to form the core of the Group's wideron-vehicle transport CCTV activities, which the Board sees as an important areafor future market growth and a key opportunity for Quadnetics as a whole. Coex, the Group's specialist manufacturer of CCTV systems for the marine, andoil and gas markets, performed satisfactorily, although with a result belowbreak-even as investment was made in people and systems. The Board isparticularly pleased with progress towards our objective of enablingstep-function growth at Coex through both widening the range of equipment andsoftware, including those from Synectics, it supplies in a given project, andincreasing the size and scope of projects it participates in. We expect to beable to report on significant tangible progress in this area in the currentyear. Board Last month the Company announced that Peter Rae was stepping down from the roleof Chairman due to increased business commitments elsewhere, but would continueas a non-executive director for up to a year. Peter had been Chairman since1998, and I would like to record our sincere thanks for his numerous andimportant contributions in leading the Board over that time. Outlook During the past few years, the Group has made real progress towards positioningitself as a serious player in its chosen sectors of the growing worldwideelectronic security market. We see this as a very attractive market for both theshort and long term. Our core activity, digital CCTV security control systems, is currently competingin a young, technology-led, relatively fragmented business, with all theattendant challenges and opportunities that implies. That said, we are fullyanticipating that the current year will produce good progress in the Group'sfinancial results. David Coghlan15 September 2005 Consolidated Profit & Loss AccountFor the year ended 31 May 2005 Before goodwill Unaudited amortisation £'000 Goodwill 2005 2004 Amortisation Total Total Notes £'000 £'000 £'000 Turnover 1 26,761 - 26,761 18,079Cost of sales (18,107) - (18,107) (11,570)Gross profit 8,654 - 8,654 6,509Net operating expenses (6,132) (396) (6,528) (4,637)Operating profit 2,522 (396) 2,126 1,872Net interest receivable 139 - 139 42Profit on ordinary activities before 2,661 (396) 2,265 1,914taxationTax charge on ordinary activities: Tax charge on results for the year 4 (350) (494) Exceptional tax credit 4 302 - (48) (494)Profit on ordinary activities after 2,217 1,420taxationDividends 5 (467) (346)Retained profit for the year - transferred 1,750 1,074to reserves Basic earnings per ordinary share 6 19.2p 16.4pDiluted earnings per ordinary share 6 19.1p 16.3pUnderlying earnings per ordinary share 6 20.0p 21.2p All activities are continuing. In 2004 net operating expenses included exceptional costs of £240,000 andamortisation of goodwill amounting to £174,000. Consolidated Balance Sheet31 May 2005 Unaudited 2004 Notes 2005 £'000 £'000Fixed assetsIntangible assets 7 9,183 7,721Tangible assets 1,280 956 10,463 8,677Current assetsStocks 3,040 2,710Debtors 9,896 7,945Cash at bank and in hand 3,562 4,711 16,498 15,366 Creditors: amounts falling due within one year (7,878) (7,767) Net current assets 8,620 7,599 Total assets less current liabilities 19,083 16,276 Creditors: amounts falling due after more than one year (3) (375) Provisions for liabilities and charges 8 (1,102) (83) Net assets 17,978 15,818 Capital and reserves Called up share capital 2,341 2,305 Share premium account 12,622 12,248 Other reserves 715 715 Profit and loss account 2,300 550 Equity shareholders' funds 17,978 15,818 Consolidated Cash Flow StatementFor the year ended 31 May 2005 Unaudited Notes 2005 2004 £'000 £'000 Net cash inflow from operating activities 1,939 4Returns on investments and servicing of finance 107 42Taxation (1,398) (13)Net capital expenditure and financial investment (497) (331)Acquisitions 9 (867) (6,409)Equity dividends paid (462) (150)Cash outflow before use of liquid resources and financing (1,178) (6,857)Management of liquid resources 10 2,500 (2,500)Financing 29 8,192Increase/(decrease) in cash 1,351 (1,165) Reconciliation of Net Cash Flow to Movements in Net FundsFor the year ended 31 May 2005 Unaudited Notes 2005 2004 £'000 £'000 Increase/(decrease) in cash in the year 1,351 (1,165)(Decrease)/increase in bank deposits 10 (2,500) 2,500Decrease in debt and lease financing 63 35Change in net funds resulting from cash flows (1,086) 1,370Acquisitions - (410)Movement in net funds in the year (1,086) 960Opening net funds 4,286 3,326Closing net funds 3,200 4,286 Reconciliation of Movements in Shareholders' Funds For the year ended 31 May 2005 Unaudited Notes 2005 2004 £'000 £'000 Total recognised gains in the year 2,217 1,420Dividends 5 (467) (346) 1,750 1,074Issue of shares 410 9,287Net movement in shareholders' funds 2,160 10,361Opening shareholders' funds 15,818 5,457Closing shareholders' funds 17,978 15,818 Notes 1. Continuing operations comprise Quadnetics Group plc, Quadrant Video Systems plc, Synectic Systems Limited, Coex Limited and Look CCTV Limited. 2. On 27 May 2005, Synectic Systems, Inc, a newly created subsidiary incorporated in Delaware, acquired the trade and assets of AlphaPoint LLC, a specialist provider of digital surveillance technology in North America, for a total consideration of up to $3.3 million, made up of $0.7 million in cash at completion, $0.2 million in Ordinary Shares, plus a further $0.4 million in Ordinary Shares and $2 million in cash dependent on the profits of the business over the next four years. No material transactions arose on this business between 27 May and 31 May 2005, and accordingly no profit or loss or cashflows have been reflected in the results for the year. 3. Exceptional administrative expenses in the year ended 31 May 2004 relate to bad debts incurred with subsidiaries of the Mayflower Corporation plc which went into receivership in March 2004. 4. The 2005 tax charge on ordinary activities comprises a corporation tax charge of £594,000 offset by an exceptional tax credit of £302,000 in respect of previous years and a deferred tax credit of £244,000. The exceptional tax credit arises as a result of tax relief on share options exercised. 5. The Directors recommend the payment of a final dividend of 3p per share (2004: 3p per share), totalling £351,000 on 7 December 2005 to shareholders registered on 11 November 2005. The full year dividend charge of 4p per share (2004: 3p per share) amounts to £467,000 (2004: £346,000). 6. The calculation of basic earnings per ordinary share is based on the profit after taxation for the year of £2,217,000 (2004: £1,420,000)) and on 11,546,335 shares, being the weighted average number of shares in issue and ranking for dividend during the year (2004: 8,633,489). The calculation of diluted earnings per share is based on the profit after taxation for the year of £2,217,000 (2004: £1,420,000) and on 11,590,130 shares, being the weighted average number of shares that would be in issue after conversion of all the dilutive potential ordinary shares into ordinary shares (2004: 8,694,400). The calculation of underlying earnings per ordinary share is based on the profit after taxation for the year, but before deducting exceptional items and amortisation of goodwill, of £2,311,000 (2004: £1,834,000) and on 11,546,335 shares, being the weighted average number of shares in issue and ranking for dividend during the year (2004: 8,633,489). 7. Intangible assets comprise goodwill and include additions in the year of £1.9 million arising from the acquisition of the trade and assets of AlphaPoint LLC by Synectic Systems, Inc. 8. Provisions for liabilities and charges include £1,097,000 deferred contingent consideration for the trade and assets of AlphaPoint LLC. 9. Cash outflows on acquisitions during the year reflect the following: (1) Initial outflows on the acquisition of the trade and assets of AlphaPoint LLC as set out in note 2 above, amounting to £421,000; and (2) Deferred consideration of £446,000 arising from the acquisitions of Look CCTV and Coex in 2004. 10. Cash inflows of £2.5 million shown as management of liquid resources represents a term investment in a bank deposit account which matured on 4 June 2004. 11. The preliminary results for the year have not been audited by the Group's auditors and do not constitute statutory accounts. The comparative figures for 2004 have been abridged from the statutory accounts for the year ended 31 May 2004. The auditors' opinion on these accounts was unqualified and did not contain any statements under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 31 May 2004 have been filed with the Registrar of Companies. 12. Copies of this preliminary statement are available from Quadnetics Group plc, North Court House, Morton Bagot, Studley, Warwickshire B80 7EL or on the Company website at www.quadnetics.com. - Ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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