11th Dec 2006 07:01
Appian Technology PLC11 December 2006 Appian Technology plc ("Appian" or "the Group") Preliminary Results for the Period to 30 September 2006 Appian Technology plc, the AIM-traded provider of Automatic Number PlateRecognition systems (ANPR) and traffic management products and solutions,announces its preliminary results which cover trading for the year ended30 September 2006. HIGHLIGHTS •Turnover up 77.5% to £5.15 million (2005: £2.90 million) •Gross profit up to 52.4% at £2.70 million (2005: 49.1% and £1.43 million) •Profit after tax of £106,000 (2005: loss of £941,000) •Market for traffic management and terror related surveillance technology is growing •Substantially increased order intake in the UK particularly amongst government bodies and police forces •Further progress in international markets with sales to police and security customers in Canada, USA, Mexico and a number of Middle Eastern countries •Acquisition of Genesis UK Limited (Genesis) in July 2006 for an initial £1.40 million giving enhanced product range and client base and fundraising of £2.33million •Broadened core middle management team to cater for increased business •Listed on AIM in January 2006 raising £2.08 million before expenses •Well positioned to take advantage of continued growth in UK and international ANPR related markets •New COBRA camera recently introduced and other ANPR based products in development CHAIRMAN'S STATEMENT Introduction It gives me great pleasure to report on Appian and the progress the Group hasmade over the last year. The year has been very positive for the Group, which isdemonstrated in the financial results which show our inaugural profit. Overview Appian operates in the rapidly expanding security and traffic management marketssupplying a range of products based on its leading Talon ANPR engine and itsrecently acquired Shark ANPR products and back office systems. Customers aremainly police forces, national and local governments as well as corporationsboth in the UK and internationally. Our initial focus was on the UK market wherewe now have a wide presence. We continue to broaden our penetration intointernational markets which show good growth potential. Appian has an excellentresearch and development team who are committed to keeping our products at theforefront in their markets and applications. Results The year ended 30 September 2006 was another year of significant progress forAppian and one which saw the Group make an inaugural profit after tax. Orderintake increased significantly, rewarding the investment we have made in recentyears in sales, marketing and product development. Turnover increased to £5.15 million (2005: £2.90 million), and gross profitmargin increased to 52.4% (2005: 49.1%). Profit after tax for the year was £106,000 (2005: loss £941,000) which isequivalent to £0.001 per share (2005: loss £0.016 per share). Other operating expenses increased to £2.65 million (2005: £2.40 million). Theincrease in operating expenses of £0.25 million included the operating expensesof Genesis of £0.16 million for the period since its acquisition on 20 July. Theincrease in operating expenses in Appian of £0.09 million related principally tocosts associated with improving operational management, research and developmentand sales and marketing. Market In my report last year I stated that, as a Group specialising in securityproducts, we have a market opportunity that is large and at an early stage inits lifecycle. This remains valid and is reinforced by the substantial increasein order intake during the last year and the continuing pipeline of potentialbusiness. The UK market has shown growth during the past year, where our business isprimarily focused on providing fixed and mobile ANPR systems to a range ofpolice forces and commercial customers. The acquisition of Genesis in July 2006has expanded our customer base and introduced the Group to new marketsparticularly in petrol forecourt surveillance. The Directors believe the outlookfor these markets is positive. Appian has also made very good progress in the international market during thelast year and the prospects for the Group remain positive. The Group hasincreased its exposure to world markets, making sales to police and securitycustomers in Canada, USA and Mexico, as well as a number of Middle Easterncountries. Prospects for sales growth in the international market remain verygood and the Group is currently tendering for a number of internationalcontracts. Genesis was successful in its tender with joint venture partners toprovide a road user charging scheme for Malta, which will be an excellentreference site and provide us with avenues into other countries. Spending on sales and marketing in international markets has been increased todeliver sales increases going forward. The Group also intends to increase itsfocus on the traffic and transport markets in forthcoming years. As a result of the above activity, we are positive about future market growth. Products and Research & Development Research & Development was focused during the year on continuing improvementsand internationalising our core ANPR engine, improving its ease of use and userinterface, bespoke developments for specific customers and continuing specialistcamera development, particularly our new Cobra Camera. We are also investing innew ANPR based products which are expected to increase our sales and margins,which we will be introducing in the current year. The acquisition of Genesis in July 2006 broadened the Group's product rangeespecially with a new, easy to use hand held ANPR device and back office systemswhich can make valuable use of the data captured by ANPR cameras. Management Development of the management team continues as the Group grows. We haveexperienced considerable growth during the past two years and we expect this toincrease in years to come. With this in mind, the focus of management teamdevelopment is now to ensure that core senior and middle management is effectivein: •ensuring that our sales and marketing efforts are effectively manned •delivering the sales growth •supporting our maintenance customers •managing research and development and •ensuring financial management and systems effectively deal with the increased workload Increasing our senior and core middle management team and sales resources hasresulted in a necessary increase in costs. The acquisition and integration ofGenesis also increased our staffing and added additional valuable managementresource to the Group. We have recently strengthened our management team in research and development,operations and maintenance and customer service. AIM and Placing In order to increase our market awareness and raise our profile internationally,Appian was admitted to trading on AIM in January 2006. At that time we raised£1.68 million net of expenses in additional equity in order to fund theexpansion of our business and take advantage of the business opportunity inANPR. Acquisition of Genesis and Placing In July 2006 Appian acquired ANPR developer and supplier Genesis (UK) Ltd for aninitial consideration of £1.40million. The acquisition was paid for by £699,000 in cash beforeacquisition expenses and the remainder by issue of ordinary shares in Appian.Deferred consideration of up to £1.55 million based on the profits before tax ofGenesis for the years ending 31 December 2006 and 2007 may be payable. At thediscretion of the Company, up to 50 per cent of the deferred consideration is tobe satisfied by the issue of new ordinary shares at the prevailing market pricesubject to a minimum price of £0.0925 per new ordinary share, with the balanceto be satisfied in cash. At the time of the acquisition the Group raised £2.33 million by way of placing. This acquisition expanded our market penetration in the UK and internationallyand significantly strengthened the Group's strategic customer base in the UKpolice market. It also increased Appian's product range and service offeringwith back office and hand held systems in the policing, security; counterterrorism, traffic management and commercial markets. Outlook The outlook going forward is very positive. There is considerable growthpotential in our markets in the UK and Internationally. We have an excellentproduct range which we are expanding with complimentary and margin enhancingproducts. Business in hand to date is ahead of last year and the Group has agrowing pipeline. We are looking forward to a further increase in sales in theyear to September 2007, which gives the management and Board at Appian theconfidence to look forward very positively to the future. Pat RyanExecutive Chairman and CEO CONSOLIDATED PROFIT AND LOSS ACCOUNTSAs at 30 September 2006 Notes 2006 2006 2005 2005 £ £ £ £ Turnover Continuing 4,561,674 2,902,294operationsAcquisitions 588,461 - 5,150,135 2,902,294Cost of sales (2,453,602) (1,477,056) Gross profit 2,696,533 1,425,238------------------- ------ --------- --------- --------- ---------Other operating (2,648,739) (2,399,271)expenses Depreciation (20,537) (22,926)------------------- ------ --------- --------- --------- ---------Amortisation ofgoodwill and (5,574) (2,138)intangible assets------------------- ------ --------- --------- --------- --------- Operating expenses (2,674,850) (2,424,335) Operating profit/(loss) Continuing (71,412) (999,097)operationsAcquisitions 93,095 - 21,683 (999,097)Interest receivable 54,446 1,126 Interest payable (58,351) (25,415) Profit/(loss) onordinary activities 17,778 (1,023,386)before taxation Taxation 2 88,654 82,052 Profit/(loss) for 106,432 (941,334)the financial year Basic and diluted profit/(loss) per ordinary 1p share 3 0.001 (0.016) There were no recognised gains or losses in the financial year other than thosedealt with in the profit and loss account. Accordingly, no statement of totalrecognised gains and losses is prepared. CONSOLIDATED BALANCE SHEETAs at 30 September 2006 Notes 2006 2005 £ £ Fixed assetsIntangible assets 2,247,024 -Tangible assets 60,622 42,606 2,307,646 42,606 Current assetsStock 837,953 477,837Debtors 4 2,630,486 1,203,948Cash at bank and in hand 2,768,412 3,710 6,236,851 1,685,495 Creditors - Amounts falling due within oneyear 5 (3,270,934) (2,105,529) Net current assets /(liabilities) 2,965,917 (420,034) Total assets less current liabilities 5,273,563 (377,428) Creditors - Amounts falling due after morethan one year (847,816) (117,436) Net assets /(liabilities) 4,425,747 (494,864) Capital and reservesCalled up share capital 6 1,506,550 656,475Share premium account 7 10,290,347 6,949,675Merger reserve 7 623,432 -Profit and loss account 7 (7,994,582) (8,101,014) Shareholders' funds/(deficit) 8 4,425,747 (494,864) CONSOLIDATED CASH FLOW STATEMENTYear ended 30 September 2006 Notes 2006 2005 £ £ Net cash outflow from operating activities 9 (1,369,382) (850,566) Return on investments and servicing of finance 10 (3,905) (24,289) Taxation 88,654 82,052 Capital expenditure and financed investments 11 (152,457) (30,312) Acquisitions and disposals 12 (622,215) - Cash outflow before financing (2,059,305) (823,115) Financing 13 4,078,104 460,009 Increase/(decrease) in cash in the year 14 2,018,799 (363,106) NOTES TO THE PRELIMINARY ANNOUNCEMENT Year ended 30 September 2006 1 Basis of preparation The financial statements have been prepared in accordance with accountingstandards generally accepted in the United Kingdom and under UK GAAP (UK statutecomprising the Companies Act, 1985). Historical cost convention The financial statements are prepared on the going concern basis, under thehistorical cost convention and in accordance with the Companies Act 1985 andapplicable standards. The principal accounting policies of the Group are set out in the Group's 2006annual report and financial statements. The policies have remained unchanged from the previous year except that: In preparing the financial statements for the current year, the Group hasadopted the presentation requirements of FRS 25 'Financial Instruments:Disclosure and Presentation'. FRS 25 requires financial instruments to bepresented with regard to their substance. Therefore shares, which previouslywere always presented as part of shareholders' funds regardless of the substanceof the instrument, may now be presented as a liability when in substance thatshare is equivalent to a liability. As a result of this change in recognitioncriteria, there is no longer a requirement to disclose the apportionment ofshareholders' funds between equity and non-equity. The preference shares inissue have been classed as equity. There has been no financial impact of thechange in accounting policy. 2 Taxation 2006 £ 2005 £ (a) Analysis of credit in period: Taxation credit 88,654 82,052 The tax credit arises on research and development. (b) Factors affecting tax credit for period 2006 2005 £ £ Profit/(loss) on ordinary activities before tax 17,778 (1,023,386) Profit/(loss) on ordinary activities multiplied bystandard rate of corporation tax in the UK of 30%(2005: 30%) 5,333 (307,016) Expenses not deductible for tax purposes 36,765 79,596 Capital allowances for period in excess of depreciation (3,101) 4,820 Utilisation of group tax losses (39,995) - Tax losses carried forward 988 222,600 Research and development tax credit for the prior year 88,654 82,052 Total current taxation (a) 88,654 82,052 The group has carried forward tax losses of £3,600,000 (2005:£3,550,000). Thegroup has not recognised any deferred tax asset in respect of these losses oraccelerated capital allowances due to there being insufficient certaintyregarding their recovery. 3 Profit/(loss) per ordinary 1p share 2006 2005 Profit/(loss) after taxation - £ 106,432 (941,334)Weighted average of ordinary shares in issue duringthe year 105,978,955 58,599,240 Profit/(loss) per ordinary 1p share - £ 0.001 (0.016) Loss per share has been calculated on the "net basis". Diluted earnings per share takes account solely of the potential future exerciseof share options and warrants granted and is based on a weighted number ofshares in issue of 109,906,422 (2005: 60,647,494). Diluted earnings per sharehas the same value as earnings per share when rounded to three decimal places. 4 Debtors 2006 2005 £ £ GroupTrade debtors 2,148,671 582,018Called up share capital not paid 37,500 37,500Prepayments and accrued income 413,642 576,606Other debtors 30,673 7,824 2,630,486 1,203,948 5 Creditors Amounts falling due within one year: 2006 2005 £ £ GroupBank overdraft 1,067,230 333,243Trade creditors 1,224,015 897,951Social security and other taxes 278,431 259,438Other creditors 9,928 79,217Deferred consideration 38,192 38,192Accruals and deferred income 630,102 460,734Amounts due under finance leases 23,036 36,754 3,270,934 2,105,529 6 Called up share 2006 2006 2005 2005capital Number £ Number £ Authorised:Ordinary shares of £0.01each 250,000,000 2,500,000 250,000,000 2,500,000Redeemable preferenceshares of £1 each 50,000 50,000 50,000 50,000 250,050,000 2,550,000 250,050,000 2,550,000 Called up share capital:Ordinary shares of £0.01each 145,654,995 1,456,550 60,647,494 606,475Redeemable preferenceshares of £1 each 50,000 50,000 50,000 50,000 145,704,995 1,506,550 60,697,494 656,475 Called up and fullypaid:Ordinary shares of £0.01each 145,654,995 1,456,550 60,647,494 606,475Redeemable preferenceshares of £1 each 12,500 12,500 12,500 12,500 145,667,495 1,469,050 60,659,994 618,975 Preference share capital The redeemable preference shares rank pari passu for participation in theprofits and assets of the Company and entitle the holders to receive notice ofand to attend and vote at any general meeting of the Company. The Company may at any time give not less than 24 hours previous notice inwriting to the holders of the redeemable preference shares of its intention toredeem all or any part of these shares which have been issued and are fully paidup on in so far as they are paid up. The redeemable preference shares can only be redeemed out of distributableprofits or from the proceeds of a fresh issue of shares made for the purposes ofthe redemption. Appian Technology plc issued 50,000 redeemable preference shares in July 2000 onincorporation of the Company. Ordinary share capital On 11 November 2005 the Company raised £441,000 net of expenses, through theplacing of 9,200,000 ordinary shares of £0.01 each for a cash price of £0.05each to institutional and other investors. The proceeds were for additionalworking capital. On 4 January 2006 the Company was admitted to AIM and on admission issued41,580,000 ordinary shares of £0.01 each for a cash price of £0.05, raising£1,680,000 net of expenses. The proceeds were raised to increase the company'ssales in the UK and internationally in markets that are expanding in response torising security and traffic congestion issues worldwide, and to provideadditional working capital. On 20 July 2006 the Company acquired the entire issued share capital of Genesis(UK) Limited, a company incorporated in the United Kingdom. The acquisition wassatisfied in part by the issue of 7,556,757 ordinary shares of £0.01 at a deemedprice of £0.0925. In addition the Company issued a further 26,670,744 ordinaryshares of £0.01 each at a price of £0.0875 per share thereby raising £2,180,000before expenses to fund the cash element of the acquisition amounting to£756,000 and to provide additional working capital for the enlarged Group. 7 Share Merger Profit and Share Profit andReserves premium reserve loss premium loss account 2006 account account account 2006 2006 2005 2005 £ £ £ £ £ Group Balanceat beginning 6,949,675 - (8,101,014) 6,652,682 (7,159,680)of yearRetainedprofit/(loss) - - 106,432 - (941,334)for the yearArising fromissue ofshares in 4,098,183 623,432 - 307,755 -the yearExpensesof equity (757,511) - - (10,762) -share issues Balance at end of year 10,290,347 623,432 (7,994,582) 6,949,675 (8,101,014) The merger reserve arose on the acquisition of Genesis (UK) Limited. The mergerreserve resulted from the issue of 7,556,757 shares in the consideration of thepurchase of Genesis and the premium that arose on the shares. These shares wereissued at £0.0925. 8 Reconciliation of movements in shareholders' funds 2006 2005 £ £ GroupShareholders' (deficit)/ funds at beginning of year (494,864) 98,184Profit/(loss) for the financial year 106,432 (941,334)Share capital issued 850,075 51,293Net share premium from issued shares 3,964,104 296,993 Shareholders' funds/(deficit) at end of year 4,425,747 (494,864) 9 Reconciliation of operating profit/ (loss) to netcash outflow from operating activities 2006 2005 £ £ Operating profit/(loss) 21,683 (999,097)Depreciation 20,537 22,926Amortisation of intangible assets 5,574 2,138Increase in debtors (1,116,952) (323,417)Increase in stocks (59,793) (84,599)(Decrease)/increase in creditors (240,431) 531,483 Net cash outflow from operating activities (1,369,382) (850,566) 10 Returns on investment and servicing of finance 2006 2005 £ £ Interest received 54,446 1,126Interest paid (55,533) (21,884)Finance lease interest (2,818) (3,531) Net cash outflow from returns on investment and servicingof finance (3,905) (24,289) 11 Capital expenditure and financial investment 2006 2005 £ £ Receipts from disposal of tangible fixed assets 417 -Payments to acquire tangible fixed assets (22,036) (30,312)Payments to acquire intangible fixed assets (130,838) - Cash outflow from capital expenditure and financialinvestments (152,457) (30,312) 12 Acquisitions and disposals 2006 2005 £ £ Purchase of subsidiary (755,905) -Bank balances acquired on purchase of subsidiary 161,856 -Bank overdrafts acquired on purchase of subsidiary (28,166) - Net cash outflow from acquisitions and disposals (622,215) - 13 Financing 2006 2005 £ £ Proceeds from share issue 4,872,690 359,048Share issue costs (757,511) (10,762)Receipts from issue of convertible loan notes - 87,457Finance lease receipts - 59,343Capital element of finance lease repayments (37,075) (35,077) Net cash inflow from financing 4,078,104 460,009 14 Reconciliation of net cashflow to movement in netfunds/(debt) 2006 2005 £ £ Increase/(decrease) in cash in the year 2,018,799 (363,106)Inception of finance leases (8,893) (59,343)Cash outflow from lease financing 37,075 35,077 Movement in net funds/(debt) in year 2,046,981 (387,372)Net (debt)/funds at beginning of year (387,101) 271 Net funds/(debt) at end of year 1,659,880 (387,101) 15 Acquisition On 20 July 2006 the Group acquired the entire issued share capital of Genesisfor the sum of £2.15 million paid in £699,000 in shares and £755,905 in cash and£694,000 payable in deferred cash and shares. The results of Genesis have beenconsolidated from the date of acquisition. Genesis (UK) LimitedNet assets acquired Tangible fixed assets 8,041Intangible fixed assets 61,559Stocks 300,323Cash at bank and in hand 161,856Debtors 309,586Creditors (724,495)Bank overdrafts (28,166) Net assets acquired at fair value 88,704Goodwill 2,060,201 Consideration 2,148,905 Satisfied byShares allocated 699,000Cash 699,000Acquisition costs 56,905Deferred consideration 694,000 2,148,905 The fair values attributed to the above are equal to the book values at the dateof acquisition. The Group has 12 months to review the fair values of the assetsacquired. The deferred consideration is calculated on the following basis: - for the year ending 31 December 2006: 6.2 times profits before tax (PBT) forthat year (subject to a maximum PBT based upon management accounts of £290k )less £1,323k - for the year ending 31 December 2007: additional 6.7 times PBT for that year(subject to a maximum PBT based upon management accounts of £440k ) less £1,323kand any deferred consideration paid in respect of the year ended 31 December2006. The results of Genesis (UK) Limited after tax prior to acquisition were asfollows: Period from 1 Jan 2006 Year end 31 Dec 2005 to 20 July 2006 £ £Turnover 1,167,973 1,127,154Operating profit 57,999 53,853Tax - -profit after tax 19,970 34,837 The subsidiary undertakings acquired during the period absorbed £406,619 fromthe group's net operating cash flows, paid £1,062 in respect of net returns oninvestments and servicing of finance and paid £12,851 to capital expenditure. 16 Publication of non statutory accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act 1985. The consolidated balance sheet at 30 September 2006 and the consolidated profitand loss account, consolidated cash flow statement, and associated notes for theyear then ended have been extracted from the Group's 2006 statutory financialstatements upon which the auditors opinion is unqualified and does not includeany statement under Section 237 of the Companies Act 1985. Those financial statements have not yet been delivered to the registrar ofcompanies. FOR ENQUIRIES Pat Ryan Appian Technology plc Tel: 01628 554750Hugo de Salis St Brides Media and Finance Limited Tel: 020 7242 4477 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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