30th Sep 2009 07:00
IndigoVision Group PLC
Final results for year ended 31 July 2009
Record results ahead of expectations.
IndigoVision uses Internet based digital technology to make surveillance systems that allow businesses and governments to secure their assets and processes. The systems are very fast, highly robust and scalable. They can be used anywhere and are hard to infiltrate or disable.
Financial Highlights
Revenues up 43% to a record £26.4m
Operating profit up 59% to a record £3.26m
Adjusted basic earnings per share up 59% to 34.1p
Net cash more than doubled to £3.5m at 31 July 2009
Maiden dividend of 5.0p per share
Operating Highlights
Increased investment in engineering capability
Supporting ONVIF and PSIA open standard initiatives for IP cameras
Integration with access control, perimeter detection and vehicle licence plate recognition systems
Product range:
High-Definition (HD) IP cameras range increased
Network Video Recorder performance increased
Major installations across all geographies in 20 vertical markets including:
11 casino projects in North America
US-Canadian border crossings for Canada Border Services Agency
Banking and Retail projects in all geographies
Airport projects in USA, India, China and Portugal
Oil, gas and petrochemicals including Sakhalin pipeline and Shell Albian
City and traffic systems in all major geographies
Rail projects including Santiago Metro in Chile
Oliver Vellacott, Chief Executive, said
'These are great results achieved in a difficult economic climate. I am especially pleased to be announcing our first ever dividend to shareholders.
The financial results achieved are a direct result of the strength of our product range and its powerful supporting technology, the talented group of people which we have worldwide, and the strong market position which we have built based on the needs of customers.
The long term market potential for IndigoVision's offering continues to be attractive, the sales force is well developed, distribution and service centers are working well and finances are sound. Although the security market is moving from older analogue systems to IP, 90% of this transition has still to take place, giving IndigoVision a clear opportunity.
In the current year we will be stepping up spend on research and product development to prepare IndigoVision for the next phase of growth. We expect the short term economic background to continue to be difficult, but believe that IndigoVision can meet this challenge."
Notes to Editors
About IndigoVision
IndigoVision is a leading manufacturer of complete end-to-end IP Security Management Systems. IndigoVision is widely chosen for applications in airports, city centres, ports, mines, road and rail systems, education, banking, casinos, prisons, government and the military. These enterprise-class systems improve organisations' operational efficiency, enhance public safety and enable timely emergency response.
IndigoVision is headquartered in Edinburgh, UK, with local sales and support offices across the world. IndigoVision partners with over 270 authorised system integrators and installers in 64 countries to provide local system design, installation and service to end users.
Shareholder calendar
4 November 2009 Annual General Meeting
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Enquiries to: |
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IndigoVision Group plc |
Oliver Vellacott CEO |
+44 (0) 131 475 7200 |
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Marcus Kneen CFO |
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Brewin Dolphin |
Sandy Fraser (NOMAD) |
+44 (0) 131 529 0276 |
Chairman's statement
The year to 31 July 2009 turned out to be a remarkably successful one for IndigoVision, notwithstanding the turbulence in financial markets in the first half, and the impact on the economies in which we operate in the second half. The rate of growth fluctuated throughout the year but in the end the group has achieved record sales, profit and earnings. Good progress was also made in developing and bedding in the sales, service, and distribution infrastructure globally. The group ended the year with strong cash balances and no debt, and the board is recommending a dividend to shareholders for the first time.
Results
In the year to 31 July 2009, revenue growth was achieved in each of the three regions in which we operate, and overall sales grew 43% to a record £26.4m. Sales doubled in the Americas to £11.2m, grew by 50% in Asia Pacific to £3.9m, and increased 10% in Europe, Middle East and Africa to £11.3m. All of these rates of growth are creditable given the economic backdrop.
Gross margins were lower than last year, reflecting a change in sales mix and greater volumes, but the contribution from gross margin grew 30% to a record £16.9m. Operating costs were 24% higher at £13.6m; operating profits reached a record £3.26m, 59% higher than the previous year; and adjusted earnings per share reached a record 34.1p, up 59% on the year to 31 July 2008.
The Group started the year with net cash balances of £1.4m. By the year end these balances had increased to £3.5m, notwithstanding an increase in working capital of £1.6m to finance the greater level of sales.
Dividend
The directors believe there is now sufficient balance sheet strength to commence the payment of dividends to shareholders, who have patiently supported IndigoVision as its business has been developed.
The directors are therefore recommending a dividend of 5.0p per share, payment of which will be subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend will be paid on 27 November 2009 to shareholders on the register on 6 November 2009.
IndigoVision's business
IndigoVision innovates and manufactures Security Management Systems. We integrate popular 3rd party systems such as access control, perimeter detection and vehicle license plate recognition, giving users freedom to choose the best technology for their needs yet control it from one 'front end'. For video management IndigoVision provides an end-to-end solution - both hardware and software - giving users the maximum performance and confidence which is possible from having a single point of supply. We are also active participants in the ONVIF and PSIA open standards, meaning our users will in future have the same freedom to choose whichever camera manufacturer best suits their needs.
Growth
The security market is undergoing a fundamental technology shift from analogue to IP. More than 90% of this transition to IP has yet to occur, representing a significant opportunity for IndigoVision. In recent years market growth has been 10-20% per annum (source: IMS Research). We estimate IndigoVision has grown sales at an average of roughly twice the rate of growth in the available market in the last five years, steadily increasing our market share. IndigoVision's strategy is to continue to grow organically, funded by our strong margins and net cash generation, with the goal of continuing to outstrip the rate of growth in the IP market.
Technology
IndigoVision has a reputation for providing IP systems that scale smoothly from just a few to thousands of cameras. A recent industry survey identified reliability as the single most important factor affecting a user's confidence to move from analogue to IP. The fact that IndigoVision is end-to-end - taking the software-hardware integration headaches away from our partners - is an inherent source of confidence for our users. Our technology also employs a unique distributed architecture with no single point of failure, hugely important for mission critical systems which cannot afford to 'go down' just because a central server is temporarily unavailable over the network. Video playback is also a hot favourite with our users with our facility to assess 24 hours of video in just 3 seconds. This, coupled with our suite of video analytics, can enable a ten-fold reduction in the time and cost expended in incident investigation.
Partners
In providing an end-to-end solution we give our partners a single point of accountability so they can have confidence that their project will roll-out smoothly with optimum performance and stability. We are their single point of training, accreditation, design, purchasing and support. IndigoVision authorises partners on completion of technical training and we supply exclusively through these partners - never direct to end users or to 'box shifters'. This encourages loyalty from our partners and protects our brand.
We think end-to-end means customer satisfaction and profit: if it deploys smoothly then the end user gets a great system, our partners make money, and we make money. Yet we also recognise that users need choice and that open systems are good for the whole market. We have a strong reputation as a provider of world-class end-to-end video solutions integrated with popular 3rd party security systems. This gives partners the ease of a single point of supply coupled with freedom of choice for those that prefer to select different manufacturers.
Global reach and markets
We have people in 22 countries, serving hundreds of integrators who deploy IndigoVision systems in approximately 80 countries. Our global supply chain manufactures in the Far East and uses three stocking and service hubs (APAC, EMEA, Americas) to provide local & rapid response to our partners' needs. IndigoVision systems are now installed in 31 airports, having recently won Delhi and Shanghai. In the US alone we have 7000 cameras in 18 casinos, the majority of which have been won in the last year. We continue to build a strong position in Rail, with a number of systems with thousands of cameras in Europe and North America. The Government sector continues to be important for us with the 1000 camera US-Canada border win, which we believe to be the largest project in the world using HD cameras.
We have now provided security for four Olympics Games, three G8 Summits and one G20 Summit. We continue to expand in the Police sector with a growing number of stations using IndigoVision systems across the world. We also continue to build reference sites in Ports, with the Port of Montreal, Suez Canal, Spanish Ports and the St Lawrence Seaway. Retail is also growing, with a large North American bank part-way through a major roll out within their retail branch network. Petrochem is also growing, with the Sakhalin pipeline, Shell Albian and state oil companies in Latin America. Key Education projects include Miami University and John Hopkins University in the US. 'Safe Cities' projects are starting to emerge in scale, with IndigoVision already having completed a system for a major city in the Far East and projects in 17 cities in Latin America. Rail projects include the continuing roll out of a major North American project and the Santiago Metro in Chile. Other sectors in which we are making progress include Health, Industrial, Mining, Traffic and Luxury Residential.
Current trading and outlook
The underlying strength of IndigoVision's business model, people and products has served it well in recent years. Although financial markets seem to be recovering, the severe contraction in bank balance sheets continues to affect business confidence and investment in all major economies and we expect this will continue for some time. It remains to be seen how much this will affect business performance in the short term, but expecting an easy year would be unrealistic. The strength of IndigoVision's market position and technology should enable it to meet this challenge.
The security market is moving from older analogue systems to IP, but 90% of this transition has still to take place. This presents a clear medium and long term opportunity for IndigoVision to develop further. In the current year, we will be stepping up the spend on research and product development to prepare IndigoVision for the next stage of growth.
Sales and order intake for the first few weeks of the current year show a mixed picture, with some markets doing well and others falling short. We expect a clearer picture to emerge by the end of the first quarter, and we will update shareholders at the Annual General Meeting at the beginning of November.
Hamish Grossart
Chairman
29 September 2009
Consolidated income statement
For the year ended 31 July 2009
|
£'000 |
2009 |
2008 |
|
Revenue |
26,364 |
18,403 |
|
Cost of sales |
(9,455) |
(5,375) |
|
Gross profit |
16,909 |
13,028 |
|
Research and development expenses |
(2,263) |
(1,766) |
|
Selling and distribution expenses |
(6,993) |
(5,572) |
|
Administrative expenses |
(4,393) |
(3,637) |
|
Operating profit |
3,260 |
2,053 |
|
Financial income |
4 |
7 |
|
Financial expenses |
(1) |
(24) |
|
Net financing income/(costs) |
3 |
(17) |
|
Profit before tax |
3,263 |
2,036 |
|
Income tax (expense)/credit |
(778) |
4,502 |
|
Profit for the year attributable to equity holders of the parent |
2,485 |
6,538 |
|
Basic earnings per share (pence) |
34.1 |
91.7 |
|
Diluted earnings per share (pence) |
31.2 |
82.6 |
Revenue and profit for the year and comparative year relate wholly to continuing activities.
Consolidated statement of recognised income and expense
For the year ended 31 July 2009
|
£'000 |
2009 |
2008 |
|
Foreign exchange translation differences on foreign operations |
33 |
(5) |
|
Net gains/(losses) recognised directly in equity |
33 |
(5) |
|
Profit for the year |
2,485 |
6,538 |
|
Total recognised income and expense for the year attributable to equity holders of the parent |
2,518 |
6,533 |
Consolidated balance sheet
As at 31 July 2009
|
£'000 |
2009 |
2008 |
|
Non-current assets |
||
|
Property, plant and equipment |
345 |
413 |
|
Intangible assets |
38 |
64 |
|
Deferred tax |
5,939 |
7,103 |
|
Total non-current assets |
6,322 |
7,580 |
|
Current assets |
||
|
Inventories |
2,909 |
2,470 |
|
Trade and other receivables |
6,142 |
4,683 |
|
Cash and cash equivalents |
3,551 |
1,371 |
|
Total current assets |
12,602 |
8,524 |
|
Total assets |
18,924 |
16,104 |
|
Current liabilities |
||
|
Trade and other payables |
3,035 |
2,760 |
|
Provisions |
180 |
150 |
|
Total current liabilities |
3,215 |
2,910 |
|
Non-current liabilities |
||
|
Provisions |
25 |
30 |
|
Total non-current liabilities |
25 |
30 |
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Total liabilities |
3,240 |
2,940 |
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Net assets |
15,684 |
13,164 |
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Equity |
||
|
Called up share capital |
73 |
72 |
|
Share premium account |
1,367 |
1,241 |
|
Other reserve |
5,146 |
5,146 |
|
Translation reserve |
17 |
(16) |
|
Profit and loss account |
9,081 |
6,721 |
|
Total equity attributable to equity holders of the parent |
15,684 |
13,164 |
These financial statements were approved by the Board of Directors on 29 September 2009 and were signed on its behalf by:
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Oliver Vellacott |
Marcus Kneen |
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Director |
Director |
Consolidated statement of cash flows
For the year ended 31 July 2009
|
Group |
Company |
|||
|
£'000 |
2009 |
2008 |
2009 |
2008 |
|
Cash flows from operating activities |
||||
|
Profit/(loss) for the year |
2,485 |
6,538 |
29 |
(50) |
|
Adjusted for: |
||||
|
Depreciation and amortisation |
285 |
240 |
- |
- |
|
Financial income |
(4) |
(7) |
- |
- |
|
Financial expenses |
1 |
24 |
- |
- |
|
Share based payment expense |
264 |
289 |
- |
- |
|
Foreign exchange loss |
(150) |
- |
- |
- |
|
Income tax |
778 |
(4,502) |
- |
- |
|
Increase in inventories |
(439) |
(937) |
- |
- |
|
(Increase)/decrease in trade and other receivables |
(1,459) |
(538) |
(156) |
3 |
|
Increase in trade and other payables |
275 |
297 |
- |
- |
|
Increase in provisions |
25 |
30 |
- |
- |
|
Cash generated from/(absorbed by) operations |
2,061 |
1,434 |
(127) |
(47) |
|
Income taxes (paid)/refunded |
(1) |
66 |
- |
- |
|
Net cash inflow/(outflow) from operating activities |
2,060 |
1,500 |
(127) |
(47) |
|
Cash flows from investing activities |
||||
|
Interest received |
4 |
7 |
- |
- |
|
Acquisition of property, plant and equipment |
(191) |
(335) |
- |
- |
|
Net cash outflow from investing activities |
(187) |
(328) |
- |
- |
|
Cash flows from financing activities |
||||
|
Proceeds from the issue of share capital |
127 |
47 |
127 |
47 |
|
Interest paid |
(1) |
(24) |
- |
- |
|
Net cash inflow from financing activities |
126 |
23 |
- |
- |
|
Net increase in cash and cash equivalents |
1,999 |
1,195 |
- |
- |
|
Cash and cash equivalents at 1 August |
1,371 |
179 |
- |
- |
|
Effect of exchange rate fluctuations on cash held |
181 |
(3) |
- |
- |
|
Cash and cash equivalents at 31 July |
3,551 |
1,371 |
- |
- |
Notes to the consolidated financial statements
1. Principal Activity
The principal activity of the Group and its subsidiaries continues to be the design, development, manufacture and sale of software and hardware products. These products provide CCTV and alarm integrators with a complete enterprise video and alarm management system that allows full motion real time video to be transmitted worldwide, in real-time, with digital quality and security, using local or wide area networks, wireless links or the Internet.
2. Basis of preparation
The financial statements are presented in sterling, rounded to the nearest thousand. They are prepared on the historical cost basis.
The accounting policies used in preparing the preliminary financial statements are set out in note 1 of the IndigoVision Group plc Directors' report and consolidated financial statements 2008.
3. Annual accounts
The financial information set out in this announcement does not constitute the Group's statutory accounts for the year ended 31 July 2009 or 2008 but is derived from those accounts. The statutory accounts of IndigoVision Group plc for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered to the Registrar of Companies following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
4. Income Tax
Recognised in the income statement
|
2009 |
2008 |
|
|
£000 |
£000 |
|
|
Current tax expense |
||
|
Overseas tax |
3 |
1 |
|
3 |
1 |
|
|
Deferred tax expense |
||
|
Origination and reversal of temporary differences |
775 |
405 |
|
Reduction in tax rate |
- |
103 |
|
Adjustments relating to prior year trading losses |
- |
(5,011) |
|
775 |
(4,503) |
|
|
Total income tax credit in income statement |
778 |
(4,502) |
5. Profit per share
|
2009 |
2008 |
|
|
£000 |
£000 |
|
|
Profit for the year attributable to equity shareholders (basic and diluted) |
2,485 |
6,538 |
|
Exceptional deferred tax credit |
- |
(5,011) |
|
Adjusted profit for the year attributable to equity shareholders (basic & diluted) |
2,485 |
1,527 |
|
Pence |
Pence |
|
|
Basic earnings per share |
34.1 |
91.7 |
|
Diluted earnings per share |
31.2 |
82.6 |
|
Adjusted basic earnings per share |
34.1 |
21.4 |
|
Adjusted diluted earnings per share |
31.2 |
19.3 |
The weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share for each year were calculated as follows:
|
2009 |
2008 |
|
|
No of shares |
No of shares |
|
|
Issued ordinary shares at start of year |
7,157,176 |
7,082,176 |
|
Effect of shares issued during the year from exercise of employee share options |
127,904 |
49,318 |
|
Weighted average number of ordinary shares for the year - for basic earnings per share |
7,285,080 |
7,131,494 |
|
Effect of share options in issue |
688,500 |
783,300 |
|
Weighted average number of ordinary shares for the year - for diluted earnings per share |
7,973,580 |
7,914,794 |
Basic earnings per share
The calculation of basic earnings per share for the year ending 31 July 2009 was based on the profit attributable to equity shareholders of £2,485,000 (2008: £6,538,000) and a weighted average number of ordinary shares during the year ending 31 July 2009 of 7,285,080 (2008: 7,131,494), calculated as shown above.
Diluted earnings per share
The calculation of diluted earnings per share for the year ending 31 July 2009 was based on the profit attributable to equity shareholders of £2,485,000 (2008: £6,538,000) and a weighted average number of ordinary shares during the year ending 31 July 2009 of 7,973,580 (2008: 7,914,794), calculated as shown above.
The average market value of the Company's shares for the purposes of calculating the dilutive effect of share options was based on quoted market prices for the period that the options were outstanding.
Adjusted basic earnings per share
The calculation of adjusted basic earnings per share for the year ending 31 July 2009 was based on a profit of £2,485,000 (2008: £1,527,000), which excluded the tax credit relating to adjustments for prior years of £nil (2008: £5,011,000), and a weighted average number of ordinary shares during the year ending 31 July 2009 of 7,285,080 (2008: 7,131,494), calculated as shown above.
Adjusted diluted earnings per share
The calculation of adjusted diluted earnings per share for the year ending 31 July 2009 was based on a profit of £2,485,000 (2008: £1,527,000), which excluded the tax credit relating to adjustments for prior years of £nil (2008: £5,011,000), and a weighted average number of ordinary shares during the year ending 31 July 2009 of 7,973,580 (2008: 7,914,794), calculated as shown above.
6. Reconciliation of movement in capital and reserves
|
Share capital £000 |
Share premium £000 |
Other reserve £000 |
Translation reserve £000 |
Retained earnings £000 |
Total equity £000 |
|
|
Balance at 1 August 2007 |
71 |
24,045 |
8,562 |
(11) |
(25,474) |
7,193 |
|
Total recognised income and expense |
- |
- |
- |
(5) |
6,538 |
6,533 |
|
Court sanctioned capital reduction |
- |
(22,850) |
- |
- |
22,850 |
- |
|
Reserve transfer |
- |
- |
(3,416) |
- |
3,416 |
- |
|
Share options exercised by employees |
1 |
46 |
- |
- |
- |
47 |
|
Equity-settled transactions, including deferred tax effect |
- |
- |
- |
- |
(609) |
(609) |
|
Balance at 31 July 2008 |
72 |
1,241 |
5,146 |
(16) |
6,721 |
13,164 |
|
Balance at 1 August 2008 |
72 |
1,241 |
5,146 |
(16) |
6,721 |
13,164 |
|
Total recognised income and expense |
- |
- |
- |
33 |
2,485 |
2,518 |
|
Share options exercised by employees |
1 |
126 |
- |
- |
- |
127 |
|
Equity-settled transactions, including deferred tax effect |
- |
- |
- |
- |
(125) |
(125) |
|
Balance at 31 July 2009 |
73 |
1,367 |
5,146 |
17 |
9,081 |
15,684 |
Secretary and advisors
|
Secretary and Registered Office |
The Company Secretary |
|
|
Charles Darwin House |
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|
The Edinburgh Technopole |
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|
Edinburgh |
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|
EH26 0PY |
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Nominated Advisor and Stock Brokers |
Brewin Dolphin Ltd |
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|
48 St Vincent Street |
|
|
Glasgow |
|
|
G2 5TS |
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Auditors |
KPMG Audit plc |
|
|
Saltire Court |
|
|
20 Castle Terrace |
|
|
Edinburgh |
|
|
EH1 2EG |
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Solicitors |
Shepherd & Wedderburn LLP |
|
|
1 Exchange Crescent |
|
|
Conference Square |
|
|
Edinburgh |
|
|
EH3 8UL |
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Bankers |
Royal Bank of Scotland plc |
|
|
36 St Andrews Square |
|
|
Edinburgh |
|
|
EH2 2YB |
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Registrars |
Computershare Investor Services plc |
|
|
The Pavilions Bridgwater Road |
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|
Bristol |
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|
BS13 8AE |
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