7th Feb 2007 07:02
Quadnetics Group PLC07 February 2007 Press Release 7 February 2007 Quadnetics Group plc Interim Results for the six months ended 30 November 2006 Quadnetics Group plc, a leader in the development, design, integration andcontrol of advanced CCTV and networked video systems, is pleased to reportinterim results for the six months ended 30 November 2006. Highlights • Turnover up 74% to £30.9 million (2005: £17.8 million) with full six months contribution from businesses acquired in the previous year • Overall gross margins increased from 29.0% to 31.9 • Underlying profit* before tax up 91% to £1.8 million (2005: £0.9 million) • Underlying earnings* per share up 21% to 8.7p • Interim dividend of 2p (2005: 1.5p) • $7.1m of orders or letters of intent received by Synectics for digital surveillance solutions in North American casinos with Synectics specified in upgrades valued at a further $3m *before goodwill amortisation, exceptional items and share based paymentscharges Commenting on the results, Russ Singleton, Chief Executive, said: "Quadnetics has performed well over the last six months as we continue todevelop innovative security solutions for specific customer sectors throughoutthe world. Our order books, pipelines and prospects support our growth plans andwe are looking forward to strengthening our position in key market segments overthe next few years." For further information, please contact: Quadnetics Group plc (www.quadnetics.com) Tel: +44 (0) 1527 850080Russ Singleton, Chief Executive Email: russ.singleton@ quadnetics.com Brewin Dolphin Securities Tel: +44 (0) 113 241 0130Neil Baldwin Buchanan Communications Tel: +44 (0) 20 7466 5000 Tim Anderson/Isabel Podda/Simon Potter Email: [email protected] Chairman's Statement Overview In the first half of our current financial year Quadnetics Group delivered ahealthy performance in almost all areas. Quadrant Security Group maintained itsleadership position in markets such as prisons and secure hospitals, while theSynectics digital technology offering is generating substantial sales in therapidly expanding casino market segment. The businesses acquired last year havecontinued to contribute strongly within the restructured Quadneticsorganisation. Good progress has been achieved in financial results, flowing fromthe Group's strategy of concentrating our efforts on specific sectors of theelectronic security market where we have relevant scale and a strong competitiveposition. Results In the half year to 30 November 2006, Quadnetics Group recorded consolidatedturnover of £30.9 million (2005: £17.8 million) and a profit before tax,exceptional costs, goodwill amortisation and share-based payments charges of£1.8 million (2005: £0.9 million). The half year benefited from inclusion of afull six month period of contribution from the acquired Protec businesses,compared with only one month in the first half last year. No exceptional costswere incurred in the period, but there was a charge of £0.24 million (2005restated: £0.15 million) from application for the first time of the newshare-based payment accounting standard. Previously, equivalent items ofshare-based compensation were noted in the financial statements but not chargedto the profit and loss account. Profit before tax was £1.1 million (2005 restated: loss £0.1 million).Underlying earnings per share increased by 21% to 8.7p (2005: 7.2p). Net cash balances at 30 November 2006 were £6.3 million (30 November 2005: £7.9million; 31 May 2006: £8.9 million). The cash outflow in the first halfreflected an increase in working capital as business activity levels have risenin most areas, particularly towards the end of the period. Dividend An interim dividend of 2p per share (2005: 1.5p) will be paid on 16 March 2007to shareholders on the register as at 16 February 2007. Operational Review The most pleasing element of the Group's operating performance in the first halfwas the increase in gross margins, particularly in the security services area.This in part reflects achievement of planned operational benefits in integratingthe acquired Protec businesses with Quadnetics' existing activities. We arecontinuing to deliver customer and margin advantages from pushing theseintegration benefits further. Quadrant Security, our security services business, achieved turnover of justunder £23 million (2005: £12.3 million) and an underlying operating profit(being operating profit before exceptional costs, goodwill amortisation andshare based payments charges) of £1.7 million (2005: £0.9 million). This strongperformance was underlined by Quadrant Security's continued leadership positionin security systems for UK prisons and secure hospitals, where a number of largenew orders were won and delivered. The division benefited from the expectedresurgence of activity in the local government town centre CCTV sector, atraditional area of strength for Quadrant. Encouraging results are also beingachieved in the specialist onshore petrochemical and major corporate sectors. The increased scale of our security services activities has enabled Quadrant toextend the scope and density of its national service network, and hence grow thehigher margin recurring revenue portion of the business. This trend is expectedto continue. Synectics, the Group's security technology business, grew turnover in the halfyear to £9.3 million (2005: £6.2 million), on which it made an underlyingoperating profit of £0.7 million (2005: £0.4 million). This result was achieveddespite delays in receiving formal orders for two large casino contracts thatwere expected to contribute in the first half. These orders have now beenreceived and will be produced and delivered in the second half. In fact since 1December 2006 Synectic Systems, Inc. has received orders or letters of intentfor casino surveillance products and software totalling $7.1 million, and inaddition the Synectics digital surveillance solution has been specified for twocasino upgrades expected to be worth a further $3.0 million. These ordersconfirm Synectics' strong position in this growing market segment, where weexpect results for the year as a whole will be fully in line with our originalplan. Notable achievements by Synectics during the first half included successfuldelivery of its software solution for the UK National Air Traffic Servicesemergency radio-based air traffic system, as well as the next phase of itsspecialist hazardous area video security system for AGIP's oil platforms on theCaspian Sea. Follow-on orders are expected for both these projects. Synecticsalso received and successfully supplied an urgent follow-on order from theMinistry of Defence for a classified surveillance system for use by the UKdefence forces. One of Synectics' primary strategic objectives is to expand as rapidly aspossible the range of worldwide video surveillance applications using itsproprietary Synergy software control system. Good progress has been made indeveloping Synergy for mobile, marine and other transport infrastructureapplications, and we are successfully increasing sales of this product throughour systems integration businesses. At the beginning of the current financial year, Synectics established adedicated research and development facility that will broaden the Company'sdigital surveillance product range within the market sectors we serve, and allowit to scale more easily. The first new products from this effort are expected tobe released by early autumn this year. Related development costs of £0.1 millionwere capitalised in the first half. Outlook The market for electronic surveillance systems continues to grow. In addition,the shift in underlying video capture, transmission, storage and networktechnology from analogue to digital is creating opportunities for new productsand services. Within this very positive environment, Quadnetics will maintainits focus on providing integrated, workable open platform solutions in a sub-setof specialised market sectors that we know well, and where we can deliver acompetitive advantage. The Group's order books remain healthy and further large orders, in particularfrom the casino sector, are expected in the coming months. Overall, the activitylevel and momentum of our businesses are strong, and the Board continues toexpect good results for the full year and further progress beyond. David Coghlan Chairman 7 February 2007 Consolidated Profit & Loss AccountFor the half year ended 30 November 2006 Restated Unaudited Unaudited Restated Half year to Half year to Year to 30 Nov 30 Nov 31 May 2006 2005 2006 Total Total Total Notes £'000 £'000 £'000 Turnover 2 30,935 17,790 49,642Cost of sales (21,064) (12,623) (34,495) ------- ------- -------Gross profit 9,871 5,167 15,147Net operatingexpenses (8,949) (5,285) (13,687) ------- ------- ------- ------- ------- -------Operating profitbefore goodwillamortisation,exceptionalitems and sharebased paymentscharges 1,622 871 3,467Goodwillamortisation (456) (283) (740)Exceptionalitems - (555) (965)Share basedpayments charge (244) (151) (302) ------- ------- -------Operatingprofit/(loss) 922 (118) 1,460Exceptional itemin respect of asubsidiarydisposed of in aprevious year - - (300)Net interestreceivable 141 52 147 ------- ------- ------- ------- ------- -------Profit beforetax, goodwillamortisation,exceptionalitems and sharebased paymentscharges 1,763 923 3,614Goodwillamortisation (456) (283) (740)Exceptionalitems - (555) (1,265)Share basedpayments charge (244) (151) (302) ------- ------- -------Profit/(loss) onordinaryactivitiesbefore taxation 1,063 (66) 1,307 Tax(charge)/crediton ordinaryactivities 3 (350) 8 (87) ------- ------- -------Profit/(loss)for thefinancial period 713 (58) 1,220 ------- ------- -------Earnings/(loss) per ordinaryshare: - Basic (and Diluted) 5 4.6p (0.5)p 8.9p ------- ------- ------- - Underlying (and Diluted Underlying) 5 8.7p 7.2p 24.2p ------- ------- ------- Consolidated Balance Sheet30 November 2006 Unaudited Restated Restated 30 Nov Unaudited 31 May 2006 30 Nov 2006 2005 £'000 £'000 £'000Fixed assetsIntangible assets 16,497 17,788 16,925Tangible assets 2,098 2,264 2,049 -------- --------- -------- 18,595 20,052 18,974 -------- --------- --------Current assetsStocks 5,442 3,463 4,281Debtors 20,054 17,556 19,995Cash at bank and in hand 6,309 7,899 8,940 -------- --------- -------- 31,805 28,918 33,216 Creditors: amounts falling due within oneyear (20,084) (20,430) (22,015) -------- --------- --------Net current assets 11,721 8,488 11,201 -------- --------- -------- Total assets less current liabilities 30,316 28,540 30,175 Creditors: amounts falling due after more than - - -one year Provisions for liabilities and charges (1,667) (1,414) (1,763) -------- --------- --------Net assets 28,649 27,126 28,412 -------- --------- -------- Capital and reserves Called up share capital 3,366 3,244 3,263 Share premium account 14,621 13,366 13,634 Merger reserve 9,565 9,416 9,565 Other reserves (2,391) (1,164) (1,307) Profit and loss account 3,488 2,264 3,257 -------- --------- --------Equity shareholders' funds 28,649 27,126 28,412 -------- --------- -------- Consolidated Cash Flow StatementFor the half year ended 30 November 2006 Restated Unaudited Unaudited Restated Half year to Half year to Year to 30 Nov 30 Nov 31 May 2006 2005 2006 £'000 £'000 £'000Net cash (outflow)/inflow from operatingactivities (2,075) 462 3,246Returns on investments and servicing offinance 94 82 132Taxation (175) 176 (299)Net capital expenditure and financialinvestment (461) (156) (238)Acquisitions and disposals - 3,782 3,220Equity dividends paid - - (573) -------- -------- --------Cash (outflow)/inflow before use ofliquid resources and financing (2,617) 4,346 (5,488)Management of liquid resources - amounts(placed on)/withdrawn from bank deposit - (1,396) -Financing (14) (9) (110) -------- -------- --------(Decrease)/increase in cash (2,631) 2,941 5,378 -------- -------- -------- Reconciliation of net cash flow to movements in net fundsFor the half year ended 30 November 2006 Restated Unaudited Unaudited Restated Half year to Half year to Year to 30 Nov 30 Nov 31 May 2006 2005 2006 £'000 £'000 £'000 (Decrease)/increase in cash in the period (2,631) 2,941 5,378Increase in bank deposits - 1,396 -Decrease in debt and lease financing 20 359 395 -------- -------- --------Change in net funds resulting from cashflows (2,611) 4,696 5,773Acquisitions - (53) (53) -------- -------- --------Movement in net funds in the period (2,611) 4,643 5,720Opening net funds 8,920 3,200 3,200 -------- -------- --------Closing net funds 6,309 7,843 8,920 -------- -------- -------- Statement of Total Recognised Gains and LossesFor the half year ended 30 November 2006 Restated Unaudited Unaudited Restated Half year to Half year to Year to 30 Nov 30 Nov 31 May 2006 2005 2006 £'000 £'000 £'000Total gains recognised since the lastannual report: Profit/(loss) for the financial period 713 (58) 1,220 Other recognised gains and losses relating to the year - currency translation adjustment 17 1 (9) --------- -------- ------- 730 (57) 1,211 --------- -------- ------- Reconciliation of Movements in Shareholders' FundsFor the half year ended 30 November 2006 Restated Unaudited Unaudited Restated Half year to Half year to Year to 30 Nov 30 Nov 31 May 2006 2005 2006 £'000 £'000 £'000Profit/(loss) for the financial period 713 (58) 1,220Dividends (524) (351) (573) --------- -------- ------- 189 (409) 647Other recognised gains and losses relating to the year - currencytranslation adjustment 17 1 (9) Share based payment reserve 25 22 45 Issue of shares 6 9,183 9,477 Share buy-back - - (77) --------- -------- -------Net movement in shareholders' funds 237 8,797 10,083 --------- -------- ------- Opening shareholders' funds as originallystated in year ended 31 May 2006 and 31 May 2005 accounts 28,578 17,978 17,978 Prior year adjustment in respect of FRS 20 (166) - - Prior year adjustment in respect ofdividends - 351 351 --------- -------- ------- Restated opening shareholders' funds 28,412 18,329 18,329 --------- -------- -------Closing shareholders' funds 28,649 27,126 28,412 --------- -------- ------- Notes 1. These 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 2006, with the exception of FRS20 (Share BasedPayments) which has been applied for the first time. Prior year figures havebeen restated accordingly. The half year results have not been audited by theGroup's auditors and do not constitute statutory accounts. The comparativefigures for the year ended 31 May 2006 have been abridged from the statutoryaccounts for the year ended on that date, subject only to the adjustments notedabove in respect of FRS20. The Auditors' opinion on those accounts wasunqualified and did not contain any statements under section 237(2) or (3) ofthe Companies Act 1985. The statutory accounts for the year ended 31 May 2006have been filed with the Registrar of Companies. 2. Turnover and underlying operating profit (operating profit beforegoodwill amortisation, exceptional items and share based payments charges)derives from the Group's two business segments as follows: Restated Unaudited Unaudited Restated Half year to Half year to Year to 30 Nov 30 Nov 31 May 2006 2005 2006 Total Total Total £'000 £'000 £'000TurnoverServices 22,946 12,267 36,241Products and software 9,301 6,161 14,595Intra-group sales (1,312) (638) (1,194) ------- -------- ------- 30,935 17,790 49,642 ------- -------- -------Underlying operating profitServices 1,655 943 3,198Products and software 653 407 1,466Central costs (686) (479) (1,197) ------- -------- ------- 1,622 871 3,467 ------- -------- ------- 3. 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 2007. 4. An interim dividend of 2p per share, totalling approximately £300,000will be paid on 16 March 2007 to shareholders on the register at 16 February2007. 5. Basic, diluted and underlying earnings per share have been calculatedon the following earnings and numbers of shares: Earnings Earnings per share Restated Restated Restated Restated 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 2006 2005 2006 2006 2005 2006 £'000 £'000 £'000 p p p Basic Earnings 713 (58) 1,220 4.6 (0.5) 8.9Share basedpaymentscharge 244 151 302 1.6 1.2 2.2Exceptionalitems - 555 1,265 - 4.5 9.1Impact ofexceptionalitems andshare basedpayments ontax charge forthe period (73) (45) (189) (0.5) (0.3) (1.4)Goodwillamortisation 456 283 740 3.0 2.3 5.4 ------- ------- ------- ------- ------- ------UnderlyingEarnings 1,340 886 3,338 8.7 7.2 24.2 ------- ------- ------- ------- ------- ------Basic Earnings- diluted 713 (58) 1,220 4.6 (0.5) 8.9 ------- ------- ------- ------- ------- ------UnderlyingEarnings -diluted 1,340 886 3,338 8.7 7.2 24.2 ------- ------- ------- ------- ------- ------ '000 '000 '000Weightedaverage numberof ordinaryshares - basiccalculation 15,479 12,318 13,782Dilutivepotentialordinaryshares arisingfrom shareoptions 6 7 7 ------- ------- ------Weightedaverage numberof ordinaryshares -dilutedcalculation 15,485 12,325 13,789 ------- ------- ------ 6. Copies of this statement will be sent to shareholders and will beavailable on the Group's website (www.quadnetics.com) and from Quadnetics Groupplc, Haydon House, 5 Alcester Road, Studley, Warwickshire B80 7AN. - Ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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