Final Results for Year Ended 31 July 2010

RNS Number : 4621T

IndigoVision Group PLC

29 September 2010

 

IndigoVision Group PLC

 

Final results for year ended 31 July 2010

 

 

Financial Highlights

 

·;	Revenues up 6% to £28.0m (2009: £26.4m)
·;	Operating profit down 6% to £3.1m (2009: £3.3m)
·;	Net cash balances up 25% to £4.4m (2009: £3.5m)
·;	Dividend up 50% to 7.5 pence per share (2009: 5.0 pence)

 

Operating Highlights

 

·;	Research and product development spend increased 32% to £3.0m
·;	Launched 11000 range of HD pan-tilt-zoom and fixed cameras
·;	Launched next generation of resilient NVR storage, with RAID and Compact versions
·;	Integration with more 3rd party manufacturers - 18 now supported covering 26 systems
·;	Strong performance in police, prisons, rail, government, airports and banks
·;	New President for North American business appointed

 

Oliver Vellacott, Chief Executive said:

"As anticipated, the year under review proved to be particularly challenging given the economic backdrop. Whilst the Company saw a mixed performance across the regions in which it operates, operating margins held up well and cash generation remained positive. The increase in spend on research and product development, up by nearly a third against the previous year, was largely absorbed by reductions in other operating costs.

We have had an encouraging start to the current year, with sales comfortably ahead of last year, although performance across the regions remains mixed. We are therefore cautiously optimistic in relation to the current year. Reflecting that, the board is recommending an increased dividend to shareholders."

 

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 300 authorised system integrators and installers in 67 countries to provide local system design, installation and service to end users.

 

 

Shareholder calendar

 

7 October 2010	Directors' report and consolidated financial statements circulated
4 November 2010	Annual General Meeting
18 November 2010	Dividend paid
10 March 2011	2011 Interim results announced
29 September 2011	2011 Full year results announced

 

Enquiries to:

 

IndigoVision Group plc	Oliver Vellacott CEO	++44 (0) 131 475 7200
	Marcus Kneen CFO
Brewin Dolphin	Sandy Fraser (NOMAD)	++44 (0) 131 529 0276

 

Chairman's Statement

In last year's statement, we commented that expecting an easy year in the twelve months to 31 July 2010 would be unrealistic. So it proved to be. Although sales growth continued, albeit at a much lower rate than we have been used to, operating profits were down on the previous year. However, operating margins proved to be robust, and cash generation positive, reflecting continued management focus on the key financial metrics of IndigoVision's business.

Operationally, much has been achieved during the period. Management structures have been improved and are bedding in well; the product range has been further developed; substantial additional spend was committed to engineering and product development, as planned; and the quality of the sales force was improved. These advances should serve your company well in the current financial year.

Results

In the year to 31 July 2010, overall sales grew 6% to a record £28.0m (2009: £26.4m). Europe Middle East and Africa grew 8% to £12.2m(2009: £11.3m), sales to Asia Pacific grew 24% to £4.6m(2009: £3.7m), and the Americas fell 4% to £10.8m(2009: £11.2m)despite a strong performance from a small base in Latin America. Royalty and support services revenue grew to £0.4m(2009: £0.2m).

 

Gross margin for the year was 60%, down from 64% the previous year, reflecting teething problems with certain new products, an increase in stock provisioning and a change in the sales mix. The overall contribution from gross margin was marginally down at £16.8m(2009: £16.9m).

 

Operating costs were up less than 1% at £13.7m(2009: £13.6m). The one third increase in spend on research and product development to £3.0m (2009: £2.3m) was absorbed by a 4% reduction in selling and distribution costs to £7.0m  (2009: £7.2m) and a 9% reduction in administrative costs to £3.8m (2009: £4.1m).

 

Operating profits were £3.1m, some 6% lower than the previous year, but operating margins remained healthy at just under 11% (2009: 12%). Group net cash balances at the start of the year were £3.6m. During the year these increased to £4.4m and the Group had no borrowings.

 

Customer focus

In providing a complete solution IndigoVision gives customers a single point of accountability for maximum confidence that their project will roll-out smoothly with optimum performance and stability. The strength of IndigoVision's technology comes from developing the entire solution, from compression hardware through embedded storage to enterprise management software, under one roof. This allows pioneering propositions such as our guarantee never to drop a frame and a unique architecture with no single point of failure. IndigoVision can also provide training, accreditation, purchasing and support, as a one stop shop for partners.

 

Open system for customer choice

Our management software integrates with market-leading manufacturers of Access Control, License Plate/Automatic Numberplate Recognition, Electronic Point of Sale, Perimeter Detection and other systems, giving partners flexibility and choice. Users will be able to upgrade to our ONVIF-compliant management software on release of Control Center 4.2, giving them an assured migration path to an open system and complete freedom to choose any camera manufacturer.

 

From niche player to camera manufacturer

Using cutting edge compression technology IndigoVision has built a reputation as a leading player in the niche market for 'hybrid' video management, connecting analogue cameras into IP management systems. It was inevitable that, with the emergence of professional IP cameras, this niche would eventually transition to pure IP systems. In order to maintain our proposition as an end-to-end solution, it was imperative we utilised the strength of our compression technology, moving it into the camera.

The learning curve in camera technology was steep but rewarding, and we are now rapidly becoming a mainstream camera manufacturer, the result of a considered and planned strategy. Our PTZ (pan-tilt-zoom) dome cameras have been very well received, and nothing else in the market matches our HD version. Our fixed and dome cameras did experience some teething problems, however, new models that we will be launching during the coming year should put us back in front of the market in this area.

 

Whilst the majority of revenues still arise from the niche 'hybrid' market, for several years we have been investing in product development for the mainstream digital market and are confident of completing a successful transition to this much larger market over the coming years.

 

Ready for HD

The market is also starting to move from Standard Definition to High Definition. Obviously, identifying faces and reading license plates is significantly enhanced through HD but where IndigoVision has excelled is in making the technology suitable for mainstream deployment. Our compression is part of this - HD only makes sense if it fits on your network and you still get 30 days recording from your storage. But we also remain the only manufacturer capable of guaranteeing not to drop a frame. This is because we encode the video in custom hardware and therefore can predictably deliver the requisite processing power whatever the CCTV content. Our latency is also the lowest in the industry, essential for smooth operator control of PTZ domes. So it's not just about delivering 'more pixels', it's about delivering every frame, at low bandwidth and without delays. Our first generation HD (the 10000 range) was deployed along the US-Canadian border and we believe it remains the largest HD system in the world with over 1,000 cameras. Our second generation HD (the 11000 range) launched in the last few months and is being extremely well received.

 

It's because we control the end-to-end solution that we've been able to deliver an HD solution for mainstream deployment: cost effective, network-friendly, storage-efficient and instant guaranteed-smooth video.

 

Resilient distributed architecture

The IndigoVision architecture pushes the power and intelligence to the edge of the network, meaning we don't route video through expensive servers, each of which constitutes a single-point-of-failure. Our cameras and transmitters communicate peer-to-peer direct with operator workstations and recorders and, in not needing a central server of any kind, we deliver an inherently resilient and 'fault-tolerant' system. The IndigoVision architecture is extremely simple yet powerful: no servers, no bottlenecks, cost effective and reliable. In terms of competitive advantage, it's as strong as our compression.

 

Developing people

We now have four regional leaders, reporting to the CEO, each managing sales, support and marketing in their region: North America, EMEA, APAC and Latin America. The purpose of this is to prepare us for the next stage of growth by locating management of all customer-related functions as close as possible to the market so we can be as responsive as possible and adapt to local business cultures. APAC and Latin America have grown strongly over the last 12 months, a trend we expect to continue. Within EMEA, continental Europe was restructured 12 months ago and over the last 6 months has started to grow once more. We have just appointed a new leader for our North American business, who joins us from a US competitor, and we anticipate growth will resume within the current year.

In May we appointed a new head of Product Management and separated it from Engineering in order to bring more market focus to our product roadmap. At the same time we appointed an Engineering Manager reporting to the Chief Executive, thus ensuring closer ownership of technology leadership at the highest management level.

 

Dividend

Last year, IndigoVision paid a dividend of 5.0p per share. This year, reflecting the strong balance sheet and a more encouraging start to the current year, the directors are recommending an increased dividend of 7.5p per share. At this level the dividend would be covered 3.6 times.

 

The payment of the dividend is subject to the approval of the shareholders at the Annual General Meeting. If approved, the dividend will be paid on 18 November 2010 to shareholders on the register on 29 October 2010.

 

Outlook

We have had an encouraging start to the current year, with sales for the first 8 weeks comfortably ahead of the corresponding period last year. However, performance remains mixed across the regions and the business climate remains uncertain.

 

In the developed world, where our activities are predominantly focussed, the practical effects of reducing both public spending and government borrowing will continue to have an impact. Conversely, growth continues apace in some developing economies.

 

More positively, the market in which we operate continues to grow, with IP replacing analogue technology at an increasing rate. We also expect benefits to start to flow from the greater investment we have made in research and product development, producing products that enable access to a larger market.

 

Overall, therefore, we continue to view the long term future for IndigoVision positively. For the current year, we have a cautious sense of optimism in IndigoVision's business, underscored by the encouraging start to the new financial year's trading.

 

 

Hamish Grossart

Chairman

28 September 2010

 

 

Consolidated income statement

For the year ended 31 July 2010

£'000	2010	2009
Revenue	28,008	26,364
Cost of sales	(11,229)	(9,455)
Gross profit	16,779	16,909
Research and development expenses	(2,991)	(2,263)
Selling and distribution expenses	(6,962)	(7,234)
Administrative expenses	(3,772)	(4,152)
Operating profit	3,054	3,260
Financial income	11	4
Financial expenses	-	(1)
Net financing income	11	3
Profit before tax	3,065	3,263
Income tax expense	(1,095)	(778)
Profit for the year attributable to equity holders of the parent	1,970	2,485
Basic earnings per share (pence)	26.8	34.1
Diluted earnings per share (pence)	25.6	32.4

 

 

Revenue and profit for the year and comparative year relate wholly to continuing activities.

 

Statement of comprehensive income

For the year ended 31 July 2010

£'000	2010	2009
Profit for the year attributable to the equity holders of the parent	1,970	2,485
Foreign exchange translation differences on foreign operations	(40)	33
Total other comprehensive (loss)/income	(40)	33
Total comprehensive income for the year	1,930	2,518

 

Consolidated balance sheet

As at 31 July 2010

£'000	2010	2009
Non-current assets
Property, plant and equipment	491	345
Intangible assets	22	38
Deferred tax	4,850	5,939
Total non-current assets	5,363	6,322
Current assets
Inventories	3,990	2,909
Trade and other receivables	8,046	6,142
Cash and cash equivalents	4,431	3,551
Total current assets	16,467	12,602
Total assets	21,830	18,924
Current liabilities
Trade and other payables	4,080	3,035
Provisions	240	180
Total current liabilities	4,320	3,215
Non-current liabilities
Provisions	25	25
Total non-current liabilities	25	25
Total liabilities	4,345	3,240
Net assets	17,485	15,684
Equity
Called up share capital	74	73
Share premium account	1,482	1,367
Other reserve	5,146	5,146
Translation reserve	(23)	17
Profit and loss account	10,806	9,081
Total equity attributable to equity holders of the parent	17,485	15,684

 

These financial statements were approved by the Board of Directors on 28 September 2010 and were signed on its behalf by:

 

Oliver Vellacott	Marcus Kneen
Director	Director

 

 

Consolidated statement of cash flows 

For the year ended 31 July 2010

	Group
£'000	2010	2009
Cash flows from operating activities
Profit/(loss) for the year	1,970	2,485
Adjusted for:
Depreciation and amortisation	277	285
Financial income	(11)	(4)
Financial expenses	-	1
Share based payment expense	197	264
Foreign exchange loss	(122)	(150)
Income tax	1,095	778
Increase in inventories	(1,081)	(439)
Increase in trade and other receivables	(1,904)	(1,459)
Increase in trade and other payables	1,045	275
Increase in provisions	60	25
Cash generated from/(absorbed by) operations	1,526	2,061
Income taxes paid	(5)	(1)
Net cash inflow/(outflow) from operating activities	1,521	2,060
Cash flows from investing activities
Interest received	11	4
Acquisition of property, plant and equipment	(404)	(191)
Acquisition of intangibles	(12)	-
Dividends received	-	-
Net cash (outflow)/inflow from investing activities	(405)	(187)
Cash flows from financing activities
Proceeds from the issue of share capital	116	127
Interest paid	-	(1)
Repurchase of own shares	(74)	-
Dividends paid	(368)	-
Net cash (outflow)/inflow from financing activities	(326)	126
Net increase in cash and cash equivalents	790	1,999
Cash and cash equivalents at 1 August	3,551	1,371
Effect of exchange rate fluctuations on cash held	90	181
Cash and cash equivalents at 31 July	4,431	3,551

 

Notes to the consolidated financial statements 

1. Principal Activity

The principal activity of the Group 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 class Security 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 2010.

 

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 2010 or 2009 but is derived from those accounts. The statutory accounts of IndigoVision Group plc for 2009 have been delivered to the Registrar of Companies and those for 2010 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 498 (2) or (3) under Companies Act 2006.

 

 4. Income Tax

Recognised in the income statement

			2010	2009
			£000	£000
Current tax expense
Overseas tax			5	3
			5	3
Deferred tax expense
Origination and reversal of temporary differences			1,000	775
Adjustments relating to prior year trading losses			90	-
			1,090	775
Total income tax charge in income statement			1,095	778

 

5. Profit per share

		2010		2009
		£000		£000
Profit for the year attributable to equity shareholders (basic and diluted)		1,970		2,485
		Pence		Pence
Basic earnings per share		26.8		34.1
Diluted earnings per share		25.6		32.4

 

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:

 

			2010	2009
			No of shares	No of shares
Issued ordinary shares at start of year			7,321,676	7,157,176
Effect of weighted average of shares issued during the year from exercise of employee share options			38,645	127,904
Effect of purchase of own shares			(110)	-
Weighted average number of ordinary shares for the year - for basic earnings per share			7,360,211	7,285,080
Effect of share options in issue			344,500	389,300
Weighted average number of ordinary shares for the year - for diluted earnings per share			7,704,711	7,674,380

 

Basic earnings per share

The calculation of basic earnings per share for the year ending 31 July 2010 was based on the profit attributable to equity shareholders of £1,970,000 (2009: £2,485,000) and a weighted average number of ordinary shares during the year ending 31 July 2010 of 7,360,211 (2009: 7,285,080), calculated as shown above.

 

Diluted earnings per share

The calculation of diluted earnings per share for the year ending 31 July 2010 was based on the profit attributable to equity shareholders of £1,970,000 (2009: £2,485,000) and a weighted average number of ordinary shares during the year ending 31 July 2010 of 7,704,711 (2009: 7,674,380), 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.

 

6. Reconciliation of movement in capital and reserves

 

 

Group	Share capital £000	Share premium £000	Other reserve £000	Translation reserve £000	Retained earnings £000	Total equity £000
Balance at 1 August 2008	72	1,241	5,146	(16)	6,721	13,164
Profit for the year	-	-	-	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
Balance at 1 August 2009	73	1,367	5,146	17	9,081	15,684
Profit for the year	-	-	-	(40)	1,970	1,930
Share options exercised by employees	1	115	-	-	-	116
Equity-settled transactions, including deferred tax effect	-	-	-	-	197	197
Purchase of own shares					(74)	(74)
Dividends paid to equity holders	-	-	-	-	(368)	(368)
Balance at 31 July 2010	74	1,482	5,146	(23)	10,806	17,485

 

Secretary and advisors

 

 

Secretary and Registered Office	The Company Secretary
	Charles Darwin House
	The Edinburgh Technopole
	Edinburgh
	EH26 0PY
Nominated Advisor and Stock Brokers	Brewin Dolphin Ltd
	48 St Vincent Street
	Glasgow
	G2 5TS
Auditors	KPMG Audit plc
	Saltire Court
	20 Castle Terrace
	Edinburgh
	EH1 2EG
Solicitors	Shepherd & Wedderburn LLP
	1 Exchange Crescent
	Conference Square
	Edinburgh
	EH3 8UL
Bankers	Royal Bank of Scotland plc
	36 St Andrews Square
	Edinburgh
	EH2 2YB
Registrars	Computershare Investor Services plc
	The Pavilions
	Bridgwater Road
	Bristol
	BS13 8AE

 

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