31st Jan 2005 07:01
Quadnetics Group PLC31 January 2005 31 January 2005 Quadnetics Group plc Interim Results for the six months ended 30 November 2004 Quadnetics Group plc, a leader in the design, integration and control ofadvanced CCTV and networked video systems, reports its interim results for thehalf-year ended 30 November 2004. Highlights - Profit before tax and goodwill amortisation: £1.2 million (2003: £0.6 million) - Underlying earnings per share up 18% at 7.7p (2003: 6.5p) - Interim dividend declared of 1p per share (2003: nil) - First multi-million dollar North American digital installation close to completion and exceeding expectations. - Relatively subdued UK public space CCTV market expected to revive in the second half and beyond. - Growing proportion of profits derived from proprietary digital systems and control products Commenting on the results, Russ Singleton, Chief Executive, said: "The integration of the two acquisitions, Look and Coex, is going well and isalready producing some interesting new opportunities for the Group outside ofour traditional areas of public space surveillance. "The UK installation market has been relatively subdued in the first half,reflecting changes in the source of budgets and the time taken for end-users andoperators to evaluate the full impact and benefits of new digital technology ontheir operations. However our forward order books and pipelines indicate ahigher level of UK activity across our businesses in the second half. "Sales from Synectics' digital systems and software are now growingsignificantly. Following our multi-million dollar initial digital recordingsystem at a Canadian casino, we are now seeing further major opportunitiesemerging in North America." For further information, please contact: Quadnetics Group plc Tel: +44 (0) 1527 850080Russ Singleton, Chief ExecutiveEmail: [email protected] www.quadnetics.com Brewin Dolphin Securities Tel: +44 (0) 113 241 0130Neil Baldwin Media enquiries: Abchurch Communications Ltd Tel: +44 (0) 20 7398 7700Peter Curtain / Ariane ComstiveEmail: [email protected] Chairman's Statement Overview Our key objectives in the current year are the continuing integration of the twosuccessful acquisitions (Look CCTV and Coex) completed last year and mostimportantly the international launch of our own unique products developed bySynectic Systems. We believe this product set provides a compelling solution tothe complex problems of control, management and data storage which derive fromlarge scale networked digital CCTV systems. Previously diverse protocols andstandards are converging to the extent that successful products have thepotential to become dominant global winners. Our first multi-million dollarinstallation in North America is now very close to completion, within budget,and is exceeding expectations in terms of performance and functionality. Asimilar scale system in the UK is to be completed in the second half year. Aproportion of the profits arising on these projects will fall into the secondhalf's results. We are now addressing the worldwide marketing of Synecticsproducts with particular attention being paid to the burgeoning demand fromNorth America. If we are successful, as we fully expect to be, we believeshareholder value will be very considerably enhanced. Results In the half year to 30 November 2004 the Group produced a profit before tax andgoodwill amortisation of £1,180,000 (2003: £648,000). After providing for goodwill amortisation of £198,000 (2003: £32,000) andtaxation of £286,000 (2003: £162,000) the profit on ordinary activities aftertaxation attributable to shareholders was £696,000. Turnover for the period was£12,743,000 (2003: £7,050,000). Underlying earnings per share for the period (excluding goodwill amortisationand exceptional items) were 7.7p (2003: 6.5p). The Group ended the period with net funds of £3.6 million (31 May 2004: £4.3million; 30 November 2003: £1.4 million). Dividend An interim dividend of 1p per ordinary share will be payable on 4 March 2005 toshareholders on the register at 11 February 2005. Operational Review These interim results cover the first complete reporting period with a fullcontribution from all the four Group subsidiaries: Synectic Systems, QuadrantVideo Systems, Look CCTV and Coex. Historically, the Group results have beenskewed in favour of the second half and this pattern is expected to continue.However, elements of our business have been slower than we had hoped,particularly the timing of contract awards for Town Centre CCTV system expansionprojects. This led to some reduction in activity levels for Quadrant VideoSystems during the period, although that business still contributed significantprofitability at good margins. Quadrant Video Systems' order book and bidpipeline indicate substantial improvement for the second half. Since its acquisition in February 2004, Look CCTV has performed very creditablyand maintained its strong market leadership position in on-bus CCTV systems. Thebusiness has been successfully integrated into Quadnetics Group, with theintroduction of more advanced financial and operational control systems, andattainment of its ISO9000 quality accreditation. We have invested in additionalsales personnel for wider geographical and customer access, and the businesswill shortly be relocating to new premises to accommodate future growth.Although accurate comparative figures are not available for the preceding year,we believe that sales revenues have grown satisfactorily in the first half, andalthough margins have declined slightly with some planned increases in the costbase, they continue to be excellent. We expect further progress. Coex was also acquired in February last year, and addresses the worldwide marketfor CCTV for oil and gas, marine and hazardous environments, in which it hasearned an excellent reputation. We believe this is fundamentally a growthmarket, driven by increased specialised security requirements and the advent ofdigital networked systems that will allow cost reductions through remotemonitoring of processes in difficult locations. These trends will be importantin providing the opportunity for new Synectics products to be introduced to themarket. Coex is being re-organised under a new Managing Director, and is nowgathering momentum as it addresses larger and more complex projects. Developmentof the first generation of Synectics in-house products for this market isnearing completion. Results in the first half were just below breakeven, and areexpected to move ahead from the second half onwards. The major achievement of this year so far has been the introduction ofSynectics' integrated digital CCTV systems to the North American market, throughsuccessfully winning and installing what we believe is the largest such systemin the world so far. This casino project is expected to lead to follow-on ordersfor other casinos in the near future and has raised the international profile ofthe company considerably. Synectics' sales are on course to grow this financialyear by more than 100% compared to 2003/04, with operating profits well ahead ofexpectations, the majority of which will fall in the second half. We believeSynectics now has the opportunity to establish a significant market positionthroughout North America, not only in the casino sector, but also in the widerlarge-scale security field. Outlook Whilst the traditional public space CCTV market in the UK remains relativelysubdued, some large projects are now coming on stream, and we confidently expecta healthier second half and beyond. More significantly, the proportion of theGroup's profits derived from proprietary digital systems and control products isincreasing rapidly, with the opportunities for continuing growth veryencouraging. We have been actively exploring options that may lead to asignificant acceleration of Synectics' growth in the United States market, andwe hope to make an announcement on this in the near future. Peter RaeChairman31 January 2005 Consolidated Profit & Loss AccountFor the half year ended 30 November 2004 Unaudited Unaudited Audited Half year to Half year to Year to 30 Nov 30 Nov 31 May 2004 2003 2004 Notes £'000 £'000 £'000 Turnover 1 12,743 7,050 18,079Cost of sales (8,700) (4,606) (11,570)Gross profit 4,043 2,444 6,509Net operating expenses (including exceptional (3,143) (1,840) (4,637)items and goodwill amortisation)Operating profit 900 604 1,872 Operating profit before exceptional items and 1,098 636 2,286goodwill amortisationExceptional items - - (240)Goodwill amortisation (198) (32) (174) Net interest receivable 82 12 42Profit on ordinary activities before taxation 982 616 1,914 Profit before tax, exceptional items and 1,180 648 2,328goodwill amortisationExceptional items - - (240)Goodwill amortisation (198) (32) (174) Tax charge on ordinary activities 2 (286) (162) (494)Profit on ordinary activities after taxation 696 454 1,420Dividends 3 (116) - (346)Profit for the period - transferred to reserves 580 454 1,074 Basic earnings per ordinary share 4 6.0p 6.1p 16.4pDiluted earnings per ordinary share 4 6.0p 5.7p 16.3pUnderlying earnings per ordinary share 4 7.7p 6.5p 21.2p Consolidated Balance Sheet30 November 2004 Unaudited Unaudited Audited 30 Nov 30 Nov 31 May 2004 2003 2004 £'000 £'000 £'000Fixed assetsIntangible assets 7,523 1,201 7,721Tangible assets 933 526 956 8,456 1,727 8,677Current assetsStocks 2,407 1,488 2,710Debtors 8,220 4,636 7,945Cash at bank and in hand 3,997 1,442 4,711 14,624 7,566 15,366 Creditors: amounts falling due within one (6,569) (3,306) (7,767)year Net current assets 8,055 4,260 7,599 Total assets less current liabilities 16,511 5,987 16,276 Creditors: amounts falling due after more than (4) (24) (375)one year Provisions for liabilities and charges (84) (52) (83) Net assets 16,423 5,911 15,818 Capital and reserves Called up share capital 2,311 1,496 2,305 Share premium account 12,267 3,770 12,248 Other reserves 715 835 715 Profit and loss account 1,130 (190) 550 Equity shareholders' funds 16,423 5,911 15,818 Consolidated Cash Flow StatementFor the half year ended 30 November 2004 Unaudited Unaudited Audited Half year to Half year to Year to 30 Nov 30 Nov 31 May 2004 2003 2004 Notes £'000 £'000 £'000Net cash inflow/(outflow) from operating 234 (1,845) 4activitiesReturns on investments and servicing of finance 58 12 42Taxation (437) - (13)Net capital expenditure and financial investment (92) (78) (331)Acquisitions and disposals 5 (446) - (6,409)Equity dividends paid - - (150)Cash outflow before use of liquid resources and (683) (1,911) (6,857)financingManagement of liquid resources - amounts withdrawn 2,500 - (2,500)from/(placed on) bank depositFinancing (31) (23) 8,192Increase/(decrease) in cash 1,786 (1,934) (1,165) Reconciliation of net cash flow to movements in net fundsFor the half year ended 30 November 2004 Unaudited Unaudited Audited Half year to Half year to Year to 30 Nov 30 Nov 31 May 2004 2003 2004 £'000 £'000 £'000Increase/(decrease) in cash in the year 1,786 (1,934) (1,165)(Decrease)/increase in bank deposits (2,500) - 2,500Decrease in debt and lease financing 55 23 35Change in net funds resulting from cash flows (659) (1,911) 1,370Acquisitions - - (410) Movement in net funds in the year (659) (1,911) 960Opening net funds 4,286 3,326 3,326Closing net funds 3,627 1,415 4,286 Notes 1. All turnover derives from the Group's continuing activities comprisingQuadnetics Group plc, Quadrant Video Systems plc, Synectic Systems Limited, LookCCTV Limited and Coex Limited. 2. The tax charge for the period is based on the estimated rate ofcorporation tax that is likely to be effective for the full year to 31 May 2005. 3. An interim dividend of 1.0p per share, totalling £116,000 will be paidon 4 March 2005 to shareholders on the register at 11 February 2005. 4. Earnings per share Basic, diluted and underlying earnings per share have been calculated on thefollowing earnings and numbers of shares: Earnings Earnings per share Half year Half year Year to Half year Half year Year to to 30 Nov to 30 Nov 31 May to 30 Nov to 30 Nov 31 May 2004 2003 2004 2004 2003 2004 £'000 £'000 £'000 p p p Basic 696 454 1,420 6.0 6.1 16.4Exceptional item - - 240 - - 2.8Goodwill 198 32 174 1.7 0.4 2.0 amortisationUnderlying 894 486 1,834 7.7 6.5 21.2Diluted 696 454 1,420 6.0 5.7 16.3 '000 '000 '000 Weighted average number of ordinary shares - basic 11,527 7,478 8,633calculationDilutive potential ordinary shares arising from share 38 455 61optionsWeighted average number of ordinary shares - diluted 11,565 7,933 8,694calculation 5. Net outflows on acquisitions and disposals of £446,000 in the half yearended 30 November 2004 arise from payment of deferred consideration for CoexLimited and Look CCTV Limited. 6. The interim accounts and the comparative figures are prepared on thebasis of the accounting policies set out in the financial statements of theGroup for the year ended 31 May 2004. 7. The half year results have not been audited by the Group's auditors anddo not constitute statutory accounts. The comparative figures for the year ended31 May 2004 have been abridged from the statutory accounts for the year ended onthat date. The Auditors' opinion on those accounts was unqualified and did notcontain 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 theRegistrar of Companies. 8. Copies of this statement will be sent to shareholders and will beavailable on the Group's website (www.quadnetics.com) and from Quadnetics Groupplc, North Court House, Morton Bagot, Studley, Warwickshire B80 7EL. - Ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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