RNS Number:9712H
Quadnetics Group PLC
31 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 of
advanced CCTV and networked video systems, reports its interim results for the
half-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 is
already producing some interesting new opportunities for the Group outside of
our 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 and
operators to evaluate the full impact and benefits of new digital technology on
their operations. However our forward order books and pipelines indicate a
higher level of UK activity across our businesses in the second half.
"Sales from Synectics' digital systems and software are now growing
significantly. Following our multi-million dollar initial digital recording
system at a Canadian casino, we are now seeing further major opportunities
emerging in North America."
For further information, please contact:
Quadnetics Group plc Tel: +44 (0) 1527 850080
Russ Singleton, Chief Executive
Email: r.singleton@quadnetics.com www.quadnetics.com
Brewin Dolphin Securities Tel: +44 (0) 113 241 0130
Neil Baldwin
Media enquiries:
Abchurch Communications Ltd Tel: +44 (0) 20 7398 7700
Peter Curtain / Ariane Comstive
Email: ariane.comstive@abchurch-group.com
Chairman's Statement
Overview
Our key objectives in the current year are the continuing integration of the two
successful acquisitions (Look CCTV and Coex) completed last year and most
importantly the international launch of our own unique products developed by
Synectic Systems. We believe this product set provides a compelling solution to
the complex problems of control, management and data storage which derive from
large scale networked digital CCTV systems. Previously diverse protocols and
standards are converging to the extent that successful products have the
potential to become dominant global winners. Our first multi-million dollar
installation in North America is now very close to completion, within budget,
and is exceeding expectations in terms of performance and functionality. A
similar scale system in the UK is to be completed in the second half year. A
proportion of the profits arising on these projects will fall into the second
half's results. We are now addressing the worldwide marketing of Synectics
products with particular attention being paid to the burgeoning demand from
North America. If we are successful, as we fully expect to be, we believe
shareholder value will be very considerably enhanced.
Results
In the half year to 30 November 2004 the Group produced a profit before tax and
goodwill amortisation of #1,180,000 (2003: #648,000).
After providing for goodwill amortisation of #198,000 (2003: #32,000) and
taxation of #286,000 (2003: #162,000) the profit on ordinary activities after
taxation 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 amortisation
and exceptional items) were 7.7p (2003: 6.5p).
The Group ended the period with net funds of #3.6 million (31 May 2004: #4.3
million; 30 November 2003: #1.4 million).
Dividend
An interim dividend of 1p per ordinary share will be payable on 4 March 2005 to
shareholders on the register at 11 February 2005.
Operational Review
These interim results cover the first complete reporting period with a full
contribution from all the four Group subsidiaries: Synectic Systems, Quadrant
Video Systems, Look CCTV and Coex. Historically, the Group results have been
skewed 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 expansion
projects. This led to some reduction in activity levels for Quadrant Video
Systems during the period, although that business still contributed significant
profitability at good margins. Quadrant Video Systems' order book and bid
pipeline indicate substantial improvement for the second half.
Since its acquisition in February 2004, Look CCTV has performed very creditably
and maintained its strong market leadership position in on-bus CCTV systems. The
business has been successfully integrated into Quadnetics Group, with the
introduction of more advanced financial and operational control systems, and
attainment of its ISO9000 quality accreditation. We have invested in additional
sales personnel for wider geographical and customer access, and the business
will 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, and
although margins have declined slightly with some planned increases in the cost
base, they continue to be excellent. We expect further progress.
Coex was also acquired in February last year, and addresses the worldwide market
for CCTV for oil and gas, marine and hazardous environments, in which it has
earned an excellent reputation. We believe this is fundamentally a growth
market, driven by increased specialised security requirements and the advent of
digital networked systems that will allow cost reductions through remote
monitoring of processes in difficult locations. These trends will be important
in providing the opportunity for new Synectics products to be introduced to the
market. Coex is being re-organised under a new Managing Director, and is now
gathering momentum as it addresses larger and more complex projects. Development
of the first generation of Synectics in-house products for this market is
nearing completion. Results in the first half were just below breakeven, and are
expected to move ahead from the second half onwards.
The major achievement of this year so far has been the introduction of
Synectics' integrated digital CCTV systems to the North American market, through
successfully winning and installing what we believe is the largest such system
in the world so far. This casino project is expected to lead to follow-on orders
for other casinos in the near future and has raised the international profile of
the company considerably. Synectics' sales are on course to grow this financial
year by more than 100% compared to 2003/04, with operating profits well ahead of
expectations, the majority of which will fall in the second half. We believe
Synectics now has the opportunity to establish a significant market position
throughout North America, not only in the casino sector, but also in the wider
large-scale security field.
Outlook
Whilst the traditional public space CCTV market in the UK remains relatively
subdued, some large projects are now coming on stream, and we confidently expect
a healthier second half and beyond. More significantly, the proportion of the
Group's profits derived from proprietary digital systems and control products is
increasing rapidly, with the opportunities for continuing growth very
encouraging. We have been actively exploring options that may lead to a
significant acceleration of Synectics' growth in the United States market, and
we hope to make an announcement on this in the near future.
Peter Rae
Chairman
31 January 2005
Consolidated Profit & Loss Account
For 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 18,079
Cost of sales (8,700) (4,606) (11,570)
Gross profit 4,043 2,444 6,509
Net 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 2,286
goodwill amortisation
Exceptional items - - (240)
Goodwill amortisation (198) (32) (174)
Net interest receivable 82 12 42
Profit on ordinary activities before taxation 982 616 1,914
Profit before tax, exceptional items and 1,180 648 2,328
goodwill amortisation
Exceptional items - - (240)
Goodwill amortisation (198) (32) (174)
Tax charge on ordinary activities 2 (286) (162) (494)
Profit on ordinary activities after taxation 696 454 1,420
Dividends 3 (116) - (346)
Profit for the period - transferred to reserves 580 454 1,074
Basic earnings per ordinary share 4 6.0p 6.1p 16.4p
Diluted earnings per ordinary share 4 6.0p 5.7p 16.3p
Underlying earnings per ordinary share 4 7.7p 6.5p 21.2p
Consolidated Balance Sheet
30 November 2004
Unaudited Unaudited Audited
30 Nov 30 Nov 31 May
2004 2003 2004
#'000 #'000 #'000
Fixed assets
Intangible assets 7,523 1,201 7,721
Tangible assets 933 526 956
8,456 1,727 8,677
Current assets
Stocks 2,407 1,488 2,710
Debtors 8,220 4,636 7,945
Cash 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 Statement
For 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
Net cash inflow/(outflow) from operating 234 (1,845) 4
activities
Returns on investments and servicing of finance 58 12 42
Taxation (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)
financing
Management of liquid resources - amounts withdrawn 2,500 - (2,500)
from/(placed on) bank deposit
Financing (31) (23) 8,192
Increase/(decrease) in cash 1,786 (1,934) (1,165)
Reconciliation of net cash flow to movements in net funds
For 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 #'000
Increase/(decrease) in cash in the year 1,786 (1,934) (1,165)
(Decrease)/increase in bank deposits (2,500) - 2,500
Decrease in debt and lease financing 55 23 35
Change in net funds resulting from cash flows (659) (1,911) 1,370
Acquisitions - - (410)
Movement in net funds in the year (659) (1,911) 960
Opening net funds 4,286 3,326 3,326
Closing net funds 3,627 1,415 4,286
Notes
1. All turnover derives from the Group's continuing activities comprising
Quadnetics Group plc, Quadrant Video Systems plc, Synectic Systems Limited, Look
CCTV Limited and Coex Limited.
2. The tax charge for the period is based on the estimated rate of
corporation 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 paid
on 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 the
following 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 16.4
Exceptional item - - 240 - - 2.8
Goodwill 198 32 174 1.7 0.4 2.0
amortisation
Underlying 894 486 1,834 7.7 6.5 21.2
Diluted 696 454 1,420 6.0 5.7 16.3
'000 '000 '000
Weighted average number of ordinary shares - basic 11,527 7,478 8,633
calculation
Dilutive potential ordinary shares arising from share 38 455 61
options
Weighted average number of ordinary shares - diluted 11,565 7,933 8,694
calculation
5. Net outflows on acquisitions and disposals of #446,000 in the half year
ended 30 November 2004 arise from payment of deferred consideration for Coex
Limited and Look CCTV Limited.
6. The interim accounts and the comparative figures are prepared on the
basis of the accounting policies set out in the financial statements of the
Group for the year ended 31 May 2004.
7. The half year results have not been audited by the Group's auditors and
do not constitute statutory accounts. The comparative figures for the year ended
31 May 2004 have been abridged from the statutory accounts for the year ended on
that date. The Auditors' opinion on those accounts was unqualified and did not
contain 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 the
Registrar of Companies.
8. Copies of this statement will be sent to shareholders and will be
available on the Group's website (www.quadnetics.com) and from Quadnetics Group
plc, North Court House, Morton Bagot, Studley, Warwickshire B80 7EL.
- Ends -
This information is provided by RNS
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