Final Results for Year Ended 31 July 2011

IndigoVision Group PLC

Final results for year ended 31 July 2011

Financial Highlights

Operating Highlights

Oliver Vellacott, Chief Executive, said:

"Difficult trading towards the end of last year resulted in a reduction in operating profits, but the group continued to grow sales in some markets. We have had a slow start to the current financial year and although sales in the first seven weeks of the current year are approximately in line with last year, order intake is down on the corresponding period last year. Over the last twelve months a great deal of work has been undertaken improving the rate of introduction of new products and we expect that these will start to show through in improved business results as the year progresses. However we remain concerned about the impact of current economic conditions."

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.

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Chairman's Statement

The year to 31 July 2011 was a mixed one for IndigoVision. After a good first six months, the revenue for the second half was disappointing and lower than the previous year. Whilst Group revenue for the year as a whole grew marginally over the previous year, sales and profits fell below our earlier expectations as lead times lengthened towards the end of our financial year and pressure on gross margins continued. Notwithstanding the overall weaker performance, good rates of growth were achieved in some regions and the rate of product introductions has been improved.

Results and Dividend

Revenue for the year to 31 July 2011 was £28.9m, 3% higher than last year (2010: £28.0m).

Sales growth was strong in Latin America, up 41% to £3.89m (2010:- £2.76m), and satisfactory in Asia Pacific, up 16% to £5.28m (2010: £4.57m), but there was no overall growth in North America, down 3% to £7.72m (2010: £8.04m), and in Europe, Middle East and Africa, down 2% to £12.03m (2010: £12.24m).

Within North America, USA sales increased by 28%. New management in North America has appointed six new sales managers within an overall unchanged headcount. However, the performance in North America was offset by a 35% fall in Canada as previous large roll-outs completed. Sales growth of 18% in Northern Europe was also offset by a 12% reduction in business in the UK, and by 9% lower sales in Southern Europe, Middle East and Africa. This reflects differing regional economies within Europe and weaker conditions in the Middle East. The fall in UK sales was largely expected as public expenditure reductions began to take effect. In our developing regions, now amounting to one third of Group sales, successes include large projects in Brazil, Colombia, China and Australia in government, safe city and airport sectors, with prospective follow on work.

Gross margin for the year was 56%, down from 60% the previous year, as a result of a change in the sales mix, lower prices and a small number of lower margin reference contracts in new territories. There was evidence of continuing product quality improvements as the cost of returns fell by a quarter from the previous year. Overheads grew 9% from £13.7m to £14.9m as we continued to develop the selling and distribution networks in the regions, and maintained investment in research and product development.

Operating profit was £1.19m, much lower than the previous year's £3.05m as a result of gross profit contribution falling £0.64m and overheads rising £1.22m. Cash balances at the year end were £5.07m (2010: £4.43m) and the group had no borrowings. These cash balances together with unutilised bank facilities of £3.5m provide IndigoVision with strong liquidity.

Diluted earnings per share were 8.2 pence, compared with 25.6 pence the previous year. Last year, there was no interim dividend, but a final dividend of 7.5 pence per share was paid. This year, an interim dividend of 4.0 pence was paid. The directors are recommending a final dividend of 3.5 pence for the year, making a total of 7.5 pence for the year, the same as last year's total. If approved by shareholders, the final dividend will be paid on 17 November 2011 to shareholders on the register on 28 October 2011.

Business Momentum

IndigoVision has always been positioned in the top quartile of the market, and we remain comfortable competing here. We are known for high end forensics, intelligent incident handling, distributed architecture and end-to-end solution. Lengthening lead times and the resultant fall off in sales at the end of the year were unexpected, but momentum is being rebuilt with an increased pace of product innovation, including many new software features. In the last year we have increased the rate of new product launches, including a new HD PTZ Camera, two management software releases, including the 'ONVIF' common standard for video, a range of improved Wide Dynamic Range fixed dome cameras and recorders with doubled capacity. These new products are being well received by our partners. Next month we will be launching a new range of 2 Megapixel HD Minidome cameras to widen significantly the scope of the market across which we compete. Hardware quality has continued to improve during the year and this trend is expected to continue. In support of sustained growth being experienced in Latin America a service support centre is being established in Brazil.

Resilient architecture

IndigoVision has a reputation for security systems with exceptional resilience, the basis of which is the unique architecture. Being distributed means there are no central server bottlenecks, no single-point-of-failure, strong system resilience and high responsiveness. Being end-to-end means the system installs easily, has a low cost of ownership and customers can look to IndigoVision as their single point of accountability. Being open means customers are not locked in with IndigoVision and are assured of the freedom to choose third party manufacturers. Add those three key aspects of our architecture together - distributed, end-to-end and open - and our customers have a foundation from which they can rely on an exceptionally resilient security system.

Outlook

The regional management structure put in place two years ago is now firmly established. The product management team who perform the critical link between the market and engineering has been strengthened and engineering has been restructured. With the benefit of hindsight we underestimated the challenge of establishing a range of cameras and early products have slowed the business down. Products launched in 2010/11 are being received more positively and should start to extend IndigoVision's reputation for quality to cameras.

However, we do not expect an easy first half to January 2012. Although sales in the first seven weeks of the current year are approximately in line with last year, order intake is down on the corresponding period last year and there is as yet no sign of lead times improving. Regionally, performance remains mixed, reflecting the economic backdrop. 

Whilst not expecting benign conditions, there are positives to be drawn from the growth rates we have been achieving in Latin America and Asia Pacific, from the changes we have made to our North American business and from the resilience of our business in North Europe. The management of the group is firmly focused on achieving the gross and operating performance appropriate to IndigoVision's business and this focus should, in due course, produce improved results. We remain confident in the longer term potential of the business, but realistic that in the short term the performance of IndigoVision is likely to be muted.

Hamish Grossart

Chairman

20 September 2011

Consolidated income statement

For the year ended 31 July 2011

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

Consolidated balance sheet

As at 31 July 2011

These financial statements were approved by the Board of Directors on 20 September 2011 and were signed on its behalf by:

Oliver Vellacott Marcus Kneen

Director Director

Consolidated statement of cash flows

For the year ended 31 July 2011

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 2011.

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 2011 or 2010 but is derived from those accounts. The statutory accounts of IndigoVision Group plc for 2010 have been delivered to the Registrar of Companies and those for 2011 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

5. Profit per share

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:

Basic earnings per share

The calculation of basic earnings per share for the year ending 31 July 2011 was based on the profit attributable to equity shareholders of £625,000 (2010: £1,970,000) and a weighted average number of ordinary shares during the year ending 31 July 2011 of 7,474,643 (2010: 7,360,211), calculated as shown above.

Diluted earnings per share

The calculation of diluted earnings per share for the year ending 31 July 2011 was based on the profit attributable to equity shareholders of £625,000 (2010: £1,970,000) and a weighted average number of ordinary shares during the year ending 31 July 2011 of 7,649,023 (2010: 7,704,711), 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

Secretary and advisors