RNS Number:8328Q
Quadnetics Group PLC
07 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 and
control of advanced CCTV and networked video systems, is pleased to report
interim 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 payments
charges
Commenting on the results, Russ Singleton, Chief Executive, said:
"Quadnetics has performed well over the last six months as we continue to
develop innovative security solutions for specific customer sectors throughout
the world. Our order books, pipelines and prospects support our growth plans and
we are looking forward to strengthening our position in key market segments over
the next few years."
For further information, please contact:
Quadnetics Group plc
(www.quadnetics.com) Tel: +44 (0) 1527 850080
Russ Singleton, Chief Executive Email: russ.singleton@ quadnetics.com
Brewin Dolphin Securities Tel: +44 (0) 113 241 0130
Neil Baldwin
Buchanan Communications Tel: +44 (0) 20 7466 5000
Tim Anderson/Isabel Podda/Simon Potter Email: isabelp@buchanan.uk.com
Chairman's Statement
Overview
In the first half of our current financial year Quadnetics Group delivered a
healthy performance in almost all areas. Quadrant Security Group maintained its
leadership position in markets such as prisons and secure hospitals, while the
Synectics digital technology offering is generating substantial sales in the
rapidly expanding casino market segment. The businesses acquired last year have
continued to contribute strongly within the restructured Quadnetics
organisation. Good progress has been achieved in financial results, flowing from
the Group's strategy of concentrating our efforts on specific sectors of the
electronic security market where we have relevant scale and a strong competitive
position.
Results
In the half year to 30 November 2006, Quadnetics Group recorded consolidated
turnover 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 a
full six month period of contribution from the acquired Protec businesses,
compared with only one month in the first half last year. No exceptional costs
were incurred in the period, but there was a charge of #0.24 million (2005
restated: #0.15 million) from application for the first time of the new
share-based payment accounting standard. Previously, equivalent items of
share-based compensation were noted in the financial statements but not charged
to 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: #7.9
million; 31 May 2006: #8.9 million). The cash outflow in the first half
reflected an increase in working capital as business activity levels have risen
in 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 2007
to shareholders on the register as at 16 February 2007.
Operational Review
The most pleasing element of the Group's operating performance in the first half
was the increase in gross margins, particularly in the security services area.
This in part reflects achievement of planned operational benefits in integrating
the acquired Protec businesses with Quadnetics' existing activities. We are
continuing to deliver customer and margin advantages from pushing these
integration benefits further.
Quadrant Security, our security services business, achieved turnover of just
under #23 million (2005: #12.3 million) and an underlying operating profit
(being operating profit before exceptional costs, goodwill amortisation and
share based payments charges) of #1.7 million (2005: #0.9 million). This strong
performance was underlined by Quadrant Security's continued leadership position
in security systems for UK prisons and secure hospitals, where a number of large
new orders were won and delivered. The division benefited from the expected
resurgence of activity in the local government town centre CCTV sector, a
traditional area of strength for Quadrant. Encouraging results are also being
achieved in the specialist onshore petrochemical and major corporate sectors.
The increased scale of our security services activities has enabled Quadrant to
extend the scope and density of its national service network, and hence grow the
higher margin recurring revenue portion of the business. This trend is expected
to continue.
Synectics, the Group's security technology business, grew turnover in the half
year to #9.3 million (2005: #6.2 million), on which it made an underlying
operating profit of #0.7 million (2005: #0.4 million). This result was achieved
despite delays in receiving formal orders for two large casino contracts that
were expected to contribute in the first half. These orders have now been
received and will be produced and delivered in the second half. In fact since 1
December 2006 Synectic Systems, Inc. has received orders or letters of intent
for casino surveillance products and software totalling $7.1 million, and in
addition the Synectics digital surveillance solution has been specified for two
casino upgrades expected to be worth a further $3.0 million. These orders
confirm Synectics' strong position in this growing market segment, where we
expect results for the year as a whole will be fully in line with our original
plan.
Notable achievements by Synectics during the first half included successful
delivery of its software solution for the UK National Air Traffic Services
emergency radio-based air traffic system, as well as the next phase of its
specialist hazardous area video security system for AGIP's oil platforms on the
Caspian Sea. Follow-on orders are expected for both these projects. Synectics
also received and successfully supplied an urgent follow-on order from the
Ministry of Defence for a classified surveillance system for use by the UK
defence forces.
One of Synectics' primary strategic objectives is to expand as rapidly as
possible the range of worldwide video surveillance applications using its
proprietary Synergy software control system. Good progress has been made in
developing Synergy for mobile, marine and other transport infrastructure
applications, and we are successfully increasing sales of this product through
our systems integration businesses.
At the beginning of the current financial year, Synectics established a
dedicated research and development facility that will broaden the Company's
digital surveillance product range within the market sectors we serve, and allow
it to scale more easily. The first new products from this effort are expected to
be released by early autumn this year. Related development costs of #0.1 million
were 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 network
technology from analogue to digital is creating opportunities for new products
and services. Within this very positive environment, Quadnetics will maintain
its focus on providing integrated, workable open platform solutions in a sub-set
of specialised market sectors that we know well, and where we can deliver a
competitive advantage.
The Group's order books remain healthy and further large orders, in particular
from the casino sector, are expected in the coming months. Overall, the activity
level and momentum of our businesses are strong, and the Board continues to
expect good results for the full year and further progress beyond.
David Coghlan
Chairman
7 February 2007
Consolidated Profit & Loss Account
For 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 49,642
Cost of sales (21,064) (12,623) (34,495)
------- ------- -------
Gross profit 9,871 5,167 15,147
Net operating
expenses (8,949) (5,285) (13,687)
------- ------- -------
------- ------- -------
Operating profit
before goodwill
amortisation,
exceptional
items and share
based payments
charges 1,622 871 3,467
Goodwill
amortisation (456) (283) (740)
Exceptional
items - (555) (965)
Share based
payments charge (244) (151) (302)
------- ------- -------
Operating
profit/(loss) 922 (118) 1,460
Exceptional item
in respect of a
subsidiary
disposed of in a
previous year - - (300)
Net interest
receivable 141 52 147
------- ------- -------
------- ------- -------
Profit before
tax, goodwill
amortisation,
exceptional
items and share
based payments
charges 1,763 923 3,614
Goodwill
amortisation (456) (283) (740)
Exceptional
items - (555) (1,265)
Share based
payments charge (244) (151) (302)
------- ------- -------
Profit/(loss) on
ordinary
activities
before taxation 1,063 (66) 1,307
Tax
(charge)/credit
on ordinary
activities 3 (350) 8 (87)
------- ------- -------
Profit/(loss)
for the
financial period 713 (58) 1,220
------- ------- -------
Earnings/(loss) per ordinary
share:
- Basic (and
Diluted) 5 4.6p (0.5)p 8.9p
------- ------- -------
- Underlying
(and Diluted
Underlying) 5 8.7p 7.2p 24.2p
------- ------- -------
Consolidated Balance Sheet
30 November 2006
Unaudited Restated Restated
30 Nov Unaudited 31 May
2006 30 Nov 2006
2005
#'000 #'000 #'000
Fixed assets
Intangible assets 16,497 17,788 16,925
Tangible assets 2,098 2,264 2,049
-------- --------- --------
18,595 20,052 18,974
-------- --------- --------
Current assets
Stocks 5,442 3,463 4,281
Debtors 20,054 17,556 19,995
Cash at bank and in hand 6,309 7,899 8,940
-------- --------- --------
31,805 28,918 33,216
Creditors: amounts falling due within one
year (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 Statement
For 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
Net cash (outflow)/inflow from operating
activities (2,075) 462 3,246
Returns on investments and servicing of
finance 94 82 132
Taxation (175) 176 (299)
Net capital expenditure and financial
investment (461) (156) (238)
Acquisitions and disposals - 3,782 3,220
Equity dividends paid - - (573)
-------- -------- --------
Cash (outflow)/inflow before use of
liquid 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 funds
For 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 5,378
Increase in bank deposits - 1,396 -
Decrease in debt and lease financing 20 359 395
-------- -------- --------
Change in net funds resulting from cash
flows (2,611) 4,696 5,773
Acquisitions - (53) (53)
-------- -------- --------
Movement in net funds in the period (2,611) 4,643 5,720
Opening net funds 8,920 3,200 3,200
-------- -------- --------
Closing net funds 6,309 7,843 8,920
-------- -------- --------
Statement of Total Recognised Gains and Losses
For 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
Total gains recognised since the last
annual 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' Funds
For 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
Profit/(loss) for the financial period 713 (58) 1,220
Dividends (524) (351) (573)
--------- -------- -------
189 (409) 647
Other recognised gains and losses
relating to the year - currency
translation 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 originally
stated 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 of
dividends - 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 the
basis of the accounting policies set out in the financial statements of the
Group for the year ended 31 May 2006, with the exception of FRS20 (Share Based
Payments) which has been applied for the first time. Prior year figures have
been restated accordingly. 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 2006 have been abridged from the statutory
accounts for the year ended on that date, subject only to the adjustments noted
above in respect of FRS20. 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 2006
have been filed with the Registrar of Companies.
2. Turnover and underlying operating profit (operating profit before
goodwill 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 #'000
Turnover
Services 22,946 12,267 36,241
Products and software 9,301 6,161 14,595
Intra-group sales (1,312) (638) (1,194)
------- -------- -------
30,935 17,790 49,642
------- -------- -------
Underlying operating profit
Services 1,655 943 3,198
Products and software 653 407 1,466
Central costs (686) (479) (1,197)
------- -------- -------
1,622 871 3,467
------- -------- -------
3. 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 2007.
4. An interim dividend of 2p per share, totalling approximately #300,000
will be paid on 16 March 2007 to shareholders on the register at 16 February
2007.
5. Basic, diluted and underlying earnings per share have been calculated
on 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) 8.9
Share based
payments
charge 244 151 302 1.6 1.2 2.2
Exceptional
items - 555 1,265 - 4.5 9.1
Impact of
exceptional
items and
share based
payments on
tax charge for
the period (73) (45) (189) (0.5) (0.3) (1.4)
Goodwill
amortisation 456 283 740 3.0 2.3 5.4
------- ------- ------- ------- ------- ------
Underlying
Earnings 1,340 886 3,338 8.7 7.2 24.2
------- ------- ------- ------- ------- ------
Basic Earnings
- diluted 713 (58) 1,220 4.6 (0.5) 8.9
------- ------- ------- ------- ------- ------
Underlying
Earnings -
diluted 1,340 886 3,338 8.7 7.2 24.2
------- ------- ------- ------- ------- ------
'000 '000 '000
Weighted
average number
of ordinary
shares - basic
calculation 15,479 12,318 13,782
Dilutive
potential
ordinary
shares arising
from share
options 6 7 7
------- ------- ------
Weighted
average number
of ordinary
shares -
diluted
calculation 15,485 12,325 13,789
------- ------- ------
6. 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, Haydon House, 5 Alcester Road, Studley, Warwickshire B80 7AN.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
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