TIDMQDG
RNS Number : 3206C
Quadnetics Group PLC
04 March 2011
For Immediate Release 4 March 2011
Quadnetics Group plc
Preliminary Results for the 18 months ended 30 November 2010
Quadnetics Group plc, a leader in advanced surveillance
technology and security networks, reports its preliminary results
for the 18 months ended 30 November 2010.
Financial highlights
-- Underlying profit* before tax up 77% to GBP2.6 million
(2009: GBP1.5 million)
-- Underlying EPS* up 92% to 12.5p (2009: 6.5p)
-- Recommended final dividend 4.5p per share making 7.0p
for the 12 month period to 30 November 2010 (2009:
7.0p)
-- Profit before tax for the 18 month period ended 30
November 2010: GBP1.2 million (12 months ended 31
May 2009: GBP0.5 million)
-- Basic earnings per share for the 18 month period ended
30 November 2010: 5.5p (12 months ended 31 May 2009:
1.7p)
-- Net cash at 30 November 2010: GBP3.3 million (2009:
GBP3.4 million)
-- Order book up 24% to GBP27.3 million (2009: GBP22.1
million)
Operational highlights
-- Operational restructuring completed and benefits starting
to flow
-- 3 major new Synectics product launches
-- Significant contract wins in banking, prisons and
oil & gas sectors
-- Acquisition of defence joint venture partner brings
new surveillance product and technology team
Figures quoted are unaudited figures for the 12 month periods to
30 November 2010 and 30 November 2009 unless otherwise stated.
* Underlying profit represents profit before tax, exceptional
costs and share-based payments charge. Underlying earnings per
ordinary share is based on profit after tax but before exceptional
costs and share-based payments charge.
John Shepherd, Chief Executive, commented:
"It is pleasing to see the results of integrating and refocusing
the business starting to bear fruit. The significant profit
improvement compared to the prior year has been delivered in spite
of a 5% reduction in sales. This is in line with our stated aims of
striving to increase both absolute profit and return on sales. As
we continue to focus on selling higher margin integrated systems in
our chosen niche markets, we expect this profit trend to continue.
The significantly reduced overhead cost means that we will be able
to take advantage of improving global market conditions to deliver
higher profit margins.
"In our July statement I promised that we would increase our
pace of innovation and this has resulted in the launch of three new
market leading product families. The establishment of the Synectics
Group Technology Centre at our Sheffield facility will enable us to
develop more common-core hardware and software products which we
can exploit in many different market opportunities. The higher
order book gives confidence for further improved performance in
2011."
For further information, please contact:
Quadnetics Group plc Tel: +44 (0) 1527 850080
John Shepherd, Chief Executive
Email: john.shepherd@quadnetics.com www.quadnetics.com
Arbuthnot Securities Limited Tel: +44 (0) 20 7012 2000
Tom Griffiths
Media enquiries:
Buchanan Communications Limited Tel: +44 (0) 20 7466 5000
Tim Anderson/Isabel Podda Email: isabelp@buchanan.uk.com
Chairman's Statement
Introduction
As previously announced, Quadnetics has changed its year end
from 31 May to 30 November, and the latest financial year therefore
covers the 18 months ended 30 November 2010. The accompanying
financial statements provide audited figures for the full 18 month
period, as well as unaudited figures for the 12 months ended 30
November 2010. Comparable unaudited figures are provided for the 12
months ended 30 November 2009. Unless otherwise stated, this
narrative report refers to figures for the 12 months to 30 November
2010, comparing them with those for the same period in 2009.
Quadnetics demonstrated solid progress on most fronts during
2009/10. Results improved markedly and, as importantly, there are
clear signs that the Group is benefitting from the major
organisation changes implemented across the period.
Results
In the 12 months to 30 November 2010, Quadnetics recorded
underlying profit (that is, profit before tax, exceptional costs
and share-based payment costs) up 77% to GBP2.6 million (2009:
GBP1.5 million), on revenue of GBP61.3 million (2009: GBP64.7
million). Underlying operating margin was 4.2% (2009: 2.0%). This
major improvement in operating margin reflects primarily the
initial benefits from implementation of the Group restructuring
initiated last year, and a significant turnaround within the
defence activities of the Synectics Mobile Systems division.
Further details on operating performance are set out in the
divisional business review below.
Group profit before tax was GBP1.4 million (2009: loss GBP(0.2)
million), after charging final exceptional costs of
GBP1.1 million (2009: GBP1.6 million) arising from the
restructuring, and share-based payment costs of GBP0.2 million
(2009: GBP0.1 million). Underlying earnings per share increased by
92% to 12.5p (2009: 6.5p).
Quadnetics' balance sheet remains ungeared, with net cash at 30
November 2010 of GBP3.3 million
(2009: GBP3.4 million). Free cash flow, that is cash generated
from operations less capital expenditure, was
GBP2.1 million (2009: GBP1.0 million outflow), before cash
payments in respect of exceptional restructuring charges of GBP1.5
million (2009: GBP1.1 million).
For the 18 month period ended 30 November 2010 profit before tax
was GBP1.2 million (12 months ended 31 May 2009: GBP0.5 million)
and basic earnings per share were 5.5p (12 months ended 31 May
2009: 1.7p).
Dividend
The Board is recommending a final dividend of 4.5p (2009: 4.5p)
payable on 9 May 2011 to shareholders on the register on 18 March
2011. If approved by shareholders, this would bring the total
dividend for the final 12 months of the period to 7.0p (2009:
7.0p).
Business Review
Quadnetics' business is to provide integrated electronic
security systems and services to specialist high-end markets. Our
systems are based on core proprietary technology, in particular
integration software. This technology is developed for our specific
target customer sectors, and provides fundamental differentiation
from mainstream suppliers in the wider electronic security
market.
Our business is organised in four divisions.
Integration & Managed Services
Quadnetics' IMS division is one of the leading UK providers of
design, integration, turnkey supply, monitoring and management of
large-scale electronic security systems. Its main markets are in
critical infrastructure, public space and multi-site systems. Its
capabilities include a nationwide network of service engineers, UK
government security-cleared personnel and facilities, and an
in-house 24-hour monitoring centre and help desk. The IMS division
supplies proprietary products and technology from other Quadnetics
divisions as well as from third parties.
Revenue GBP32.0 million (2009: GBP38.0 million)
Gross Margin 24.0% (2009: 24.2%)
Operating Profit** GBP1.3 million (2009: GBP2.3 million)
Operating Margin 4.2% (2009: 5.9%)
In the 12 months to 30 November 2010, revenue declined by 16% to
GBP32 million. This was primarily due to the continuing planned
transition of the managed services activities towards
fee-for-service and away from the direct sale of third party
systems and components and, to a lesser extent, to the exit of the
division from activities outside the UK.
The IMS division suffered considerable disruption during the
period from the Group restructuring, involving the consolidation of
operational and overhead functions between sites, and consequent
significant staff redundancies. The benefits of the restructuring
should become more apparent during 2011.
Important contract wins in the period included the first phase
of security upgrades for a major new UK bank customer, using
Synectics' Simplicity hybrid digital video recorder, as well as
orders for an increasing number of UK prisons and Young Offenders'
Institutions under the Home Office framework agreement won by
Quadrant Security Group last financial year.
The IMS division has made a number of new senior management
appointments, and we believe is now better positioned to bid for
and win larger-scale contracts. It continues to work more closely
with other Quadnetics divisions to exploit operating and marketing
synergies from increased focus on our core target markets. The IMS
division remains an important outlet for Synectics' products and
systems.
The current financial year has begun positively for this
division, in line with plan. However, the full benefit of the
significant changes implemented last year will take time to come
through, and we do not expect IMS to report meaningful margin
improvement or growth overall until the 2011/12 financial year.
Synectics Network Systems
The SNS Division provides specialist video-based electronic
surveillance systems and technology globally to end customers with
large scale high security requirements, particularly for critical
infrastructure protection. It is co-located in our Sheffield
facility with the Synectics Technology Centre, which provides
R&D, products and systems expertise to each of the other
divisions.
Revenue GBP12.7 million (2009: GBP10.7 million)
Gross Margin 45.5% (2009: 47.5%)
Operating Profit** GBP1.9 million (2009: GBP1.5 million)
Operating Margin 15.3% (2009: 14.4%)
Synectics Network Systems' revenue for the year rose by 18% to
GBP12.7 million, on which the division increased its operating
margin to just over 15%. The primary source of growth was the North
American gaming market, which had been significantly affected by
the recession but recovered well during 2010.
The re-organisation of Quadnetics' activities in the Middle East
under this division, and increased resource dedicated to the
region, held back the division's profits in the period. This is an
important market for Quadnetics, and the increased investment is
expected to bear fruit in the current financial year.
The Group's research and development capabilities, many of them
from within Synectics Networks, were consolidated during the year
into a separate organisation unit, allowing SNS to concentrate on
efficient delivery of systems and products, and on servicing
customer needs.
Synectics continues to win projects and deliver systems for
protecting important high security assets around the world,
including the London Borough of Lambeth, Durban City (World Cup),
the Stratosphere Las Vegas Casino,
the Atlantis Hotel Dubai and a major UK bank. Further growth is
expected in the current financial year.
Synectics Mobile Systems
Synectics Mobile Systems provides specialist ruggedised
surveillance systems and products for transport and defence
customers.
Revenue GBP11.9 million (2009: GBP12.1 million)
Gross Margin 35.0% (2009: 27.6%)
Operating Profit** GBP1.2 million (2009: GBP0.1 million)
Operating Margin 10.1% (2009: 1.1%)
Revenue in the 12 month period was slightly down at GBP11.9
million (2009: GBP12.1 million) but operating profit was
substantially ahead at GBP1.2 million (2009: GBP0.1 million). Both
the lower sales and increased profit were principally due to
restructuring of the defence business, which was profitable in the
period after two loss-making years.
The UK bus market remained somewhat subdued, as operators
delayed orders for replacement new vehicles. We believe this trend
is unlikely to continue, since additional running costs for
extending the life of older vehicles soon become uneconomic.
Similarly, light rail projects in the UK have been subject to
extended sales cycles. Synectics Mobile Systems won its first
contract for a bus/rail surveillance system in Germany, which is
likely to become a large market for mobile CCTV.
Synectics' defence operations moved into new security-approved
premises, with its core manufacturing activities consolidated
within the Group's main manufacturing site at Brigg. Shortly after
the year end, Synectics acquired Persides, its joint venture
partner in developing the Chili radio frequency surveillance suite
of products just launched, for a total consideration of GBP230,000
in cash. Persides brings with it a small and highly capable
technical team who should contribute significantly to the growth of
this specialist area within the Group.
While the degree of progress which the mobile systems division
makes in 2011 will in part be a function of the timing of recovery
in the UK new bus market, we nevertheless expect the division to
deliver continued improvement in performance for the year.
Synectics Industrial Systems
Synectics Industrial Systems designs, manufactures and supplies
surveillance systems for extreme or hazardous environments.
Applications include offshore and onshore oil & gas facilities,
ships and industrial process control.
Revenue GBP6.3 million (2009: GBP6.5 million)
Gross Margin 33.3% (2009: 32.2%)
Operating Profit** GBP0.7 million (2009: GBP0.8 million)
Operating Margin 11.9% (2009: 12.1%)
SIS achieved results just slightly down from the record revenues
and profits of the previous period. The division continued to make
progress on its objective to increase the proportion of Synectics'
proprietary technology in its systems sales.
Of particular importance, SIS completed the successful
development and launch of its new explosion-protected camera head,
which has already won a major order for the Jasmine North Sea oil
platform.
Oil & gas and process control markets continue to be strong.
We anticipate an excellent year for this division in 2011, in
particular as work comes on stream for phase 1 of the Gorgon
natural gas project in Australia.
Research and Development
Group expenditure on technology development during the 12-month
period totalled GBP1.4 million
(2009: GBP1.6 million). Of this, GBP0.7 million was capitalised,
and the remaining GBP0.7 million expensed to the profit and loss
account.
The creation during the year of the Synectics Technology Centre
as a separate development unit for the Group as a whole has allowed
a more organised and scalable approach to development priorities.
Clear benefits to schedule and cost adherence are already being
achieved.
Three major new Synectics products were launched during the
period:
- COEX 3000, a new, market-leading explosion-rated camera head
for use in hazardous environments, such as oil rigs;
- Simplicity, a high-reliability, top-of-the-range hybrid
digital video recorder which will become a central component in
Synectics' surveillance systems for multi-site applications;
and
- Chili, a suite of man-portable radio frequency surveillance
systems for mobile defence applications.
People
During the year Russ Singleton, founder of Synectics and Chief
Executive of Quadnetics from 2002 to 2008, left the Board to focus
his entrepreneurial flair on a new venture. Quadnetics owes him a
debt of gratitude for the critical role he played in building the
Company. We miss his unique talents and insight, and wish him every
success for the future.
Throughout the recent period of restructuring, Quadnetics'
employees have shown time and again their commitment to meeting
customer expectations, solving problems and simply getting things
done. I would like to record the Board's sincere thanks to all of
them.
Strategy and Financial Objectives
In our last interim report, I set out on behalf of the Board a
summary of the Group's strategy and medium term operating
profitability objectives. I propose now to repeat that summary in a
slightly updated version.
Quadnetics' strategy is to invest to grow our technology base
and market share in three security and surveillance end markets
with complex or highly critical needs: critical infrastructure,
mobile surveillance and oil & gas/marine. The specialist
requirements of these market niches will enable us increasingly to
exploit and expand the differentiation of our systems solutions
from competitor product offerings developed for higher volume
applications.
These three markets are regional or global in scope and are
specifically addressed by our three Synectics divisions: Synectics
Network Systems, Synectics Mobile Systems and Synectics Industrial
Systems respectively. We believe that each of these divisions has
good revenue growth opportunities and is capable of reaching and
sustaining operating profit margins in the mid-to-high teens per
cent (before R&D and Group central costs).
The Integration and Managed Services division is complementary
to the three Synectics divisions though different in its scope and
business characteristics. Its core skills are in security systems
integration, project management and engineering services. It is
people-intensive and operates in a UK national, or sometimes even
local, competitive arena. Its primary target market is
medium-to-large scale critical infrastructure security projects in
the UK and, as such, we believe it can increasingly benefit from,
and contribute to, the success of the Synectics divisions'
solutions in that market. Given the high bought-in content of sales
in this division, we believe a sustainable target operating profit
margin is in the range of 6-8% (before Group central costs).
Each of our divisions has, and will continue to have, profitable
sales outside the Group's core target markets. Currently these
sales amount in total to around 15-20% of Group revenues, the
majority in the Integration and Managed Services division. Our
expectation is that the proportion of such ancillary sales within
the Group will reduce over time as growth efforts and investment
are directed towards the higher margin target market niches.
Progress towards the Group's objectives should flow in part from
continuing the closer integration and focus of our overall
business, including management and administration, technology
development and co-operation between divisions. A lot of good work
has been done in the past 18 months in creating the current
divisions and moving them collectively much more to a "single
company" culture. In addition to providing a more efficient and
scalable organisation, this platform will also allow the Group to
manage bolt-on acquisitions effectively, as and when we find the
right opportunities in line with our strategy.
We believe that Quadnetics can and will progress towards
delivering consolidated underlying operating profit margins (after
all R&D and central costs) in the range of 8-10%, within a
reasonable time frame and given normal economic conditions. Of
course, any action to improve the operating profit margin will only
be taken if it is also consistent with Group's overriding financial
objectives, the most important of which is sustainable growth in
earnings per share.
Outlook
As the Group continues to emerge from the recent organisational
changes, progress against our objectives in the current year is
broadly on track.
The Group's order book at 30 November 2010 was GBP27.3 million,
up from GBP22.1 million a year earlier. The delivery timetable for
these orders suggests a more even spread of work across this year,
in contrast to last year when profits were heavily skewed to the
first half. On the basis of the improved year end order book, and
an encouraging pipeline of potential new business, the Board
expects Quadnetics to make further good progress in the current
financial year.
David Coghlan
Chairman
4 March 2011
**before research & development and Group central costs
Consolidated Income Statement
For the 18 months ended 30 November 2010
18 months 12 months 12 months 12 months
ended ended ended ended
30 Nov 31 May 30 Nov 30 Nov
Notes 2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
Unaudited proforma
information (note
2)
---------------------- ------ ---------- ---------- ----------------------
Revenue 3 91,124 70,655 61,280 64,652
Cost of sales (62,276) (50,881) (41,545) (44,944)
---------------------- ------ ---------- ---------- ---------- ----------
Gross profit 28,848 19,774 19,735 19,708
Operating expenses (27,703) (19,578) (18,402) (20,102)
Profit from
operations
---------- ---------- ---------- ----------
Excluding exceptional
reorganisation costs
and share-based
payments 3 2,714 1,553 2,552 1,308
Exceptional
reorganisation
costs 4 (1,320) (1,350) (1,050) (1,620)
Share-based payments
charge 5 (249) (7) (169) (82)
---------- ---------- ---------- ----------
Total profit from
operations 1,145 196 1,333 (394)
Finance income 6 441 552 295 332
Finance costs 7 (415) (287) (272) (189)
Share of results of
joint venture - 10 4 6
---------------------- ------ ---------- ---------- ---------- ----------
Profit before tax
---------- ---------- ---------- ----------
Excluding exceptional
reorganisation costs
and share-based
payments 2,740 1,828 2,579 1,457
Exceptional
reorganisation
costs 4 (1,320) (1,350) (1,050) (1,620)
Share-based payments
charge 5 (249) (7) (169) (82)
---------- ---------- ---------- ----------
Total profit before
tax 1,171 471 1,360 (245)
Income tax expense 8 (311) (212) (366) 2
---------------------- ------ ---------- ---------- ---------- ----------
Profit for the period
attributable to
equity holders of
the parent 860 259 994 (243)
---------------------- ------ ---------- ---------- ---------- ----------
Basic and diluted
earnings per
Ordinary share 9 5.5p 1.7p 6.4p (1.6)p
---------------------- ------ ---------- ---------- ---------- ----------
Consolidated Statement of Comprehensive Income
For the 18 months ended 30 November 2010
18 months 12 months
ended ended
30 November 31 May
2010 2009
GBP'000 GBP'000
---------------------------------------- ------------- ----------
Profit for the period 860 259
Exchange differences on translation
of foreign operations 13 117
Actuarial gains/(losses) 104 (293)
Effect of not recognising the pension
scheme surplus (104) 293
---------------------------------------- ------------- ----------
Total comprehensive income for the
period attributable to equity holders
of the parent 873 376
---------------------------------------- ------------- ----------
Consolidated Statement of Financial Position 30 November
2010
30 November 31 May
2010 2009
Notes GBP'000 GBP'000
--------------------------------------- ------ ------------ ---------
Non-current assets
Property, plant and equipment 1,503 1,809
Intangible assets 17,292 17,903
Deferred tax asset 176 414
Investment in joint venture - 55
18,971 20,181
--------------------------------------- ------ ------------ ---------
Current assets
Inventories 5,897 5,343
Trade and other receivables 22,511 22,503
Cash and cash equivalents 3,349 8,111
--------------------------------------- ------ ------------ ---------
31,757 35,957
Total assets 50,728 56,138
--------------------------------------- ------ ------------ ---------
Current liabilities
Trade and other payables (18,256) (21,767)
Tax liabilities (535) (553)
Current provisions 11 (112) (1,585)
--------------------------------------- ------ ------------ ---------
(18,903) (23,905)
--------------------------------------- ------ ------------ ---------
Non-current liabilities
Non-current provisions 11 (25) (75)
--------------------------------------- ------ ------------ ---------
(25) (75)
--------------------------------------- ------ ------------ ---------
Total liabilities (18,928) (23,980)
--------------------------------------- ------ ------------ ---------
Net assets 31,800 32,158
--------------------------------------- ------ ------------ ---------
Equity attributable to equity holders
of parent company
Called up share capital 3,514 3,382
Share premium account 15,719 14,851
Merger reserve 9,565 9,565
Other reserves (3,486) (2,486)
Currency translation reserve 117 104
Retained earnings 6,371 6,742
--------------------------------------- ------ ------------ ---------
Total equity 31,800 32,158
--------------------------------------- ------ ------------ ---------
Consolidated Statement of Changes in Equity For the 18 months
ended 30 November 2010
Called
up Share Currency
share premium Merger Other translation Retained
capital account reserve reserves reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 June
2008 3,382 14,851 9,565 (2,486) (13) 7,563 32,862
Profit after
tax for the
year - - - - - 259 259
Dividends
paid - - - - - (1,087) (1,087)
Credit in
relation to
share-based
payments - - - - - 7 7
Currency
translation
adjustment - - - - 117 - 117
------- ------- ------- -------- ----------- -------- -------
At 31 May
2009 3,382 14,851 9,565 (2,486) 104 6,742 32,158
Issue of
shares 132 868 - (1,000) - - -
Profit after
tax for the
period - - - - - 860 860
Dividends
paid - - - - - (1,480) (1,480)
Credit in
relation to
share-based
payments - - - - - 249 249
Currency
translation
adjustment - - - - 13 - 13
At 30
November
2010 3,514 15,719 9,565 (3,486) 117 6,371 31,800
------- ------- ------- -------- ----------- -------- -------
Consolidated Cash Flow Statement
For the 18 months ended 30 November 2010
18 months 12 months 12 months 12 months
ended ended ended ended
30 Nov 31 May 30 Nov 30 Nov
2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
Unaudited proforma
information (note
2)
------------------------------ ---------- ---------- ----------------------
Cash flows from operating
activities
Profit for the period 860 259 994 (243)
Income tax expense 311 212 366 (2)
Finance income (441) (552) (295) (332)
Finance costs 415 287 272 189
Depreciation and amortisation
charge 1,846 1,140 1,215 1,267
Loss on disposal of
non-current assets 2 51 5 61
Share-based payments charge 249 7 169 82
------------------------------ ---------- ---------- ---------- ----------
Operating cash flows before
movement in working capital 3,242 1,404 2,726 1,022
Increase in inventories (535) (1,067) (473) (131)
Decrease/(increase) in
receivables 55 7,617 (1,791) 2,710
(Decrease)/increase in
payables and provisions (4,407) (5,974) 1,185 (4,941)
------------------------------ ---------- ---------- ---------- ----------
Cash generated from
operations (1,645) 1,980 1,647 (1,340)
Interest received 52 281 33 189
Tax (paid)/received (38) 56 722 (560)
------------------------------ ---------- ---------- ---------- ----------
Net cash from operating
activities (1,631) 2,317 2,402 (1,711)
------------------------------ ---------- ---------- ---------- ----------
Cash flows from investing
activities
Purchase of property, plant
and equipment (493) (460) (244) (442)
Sale of property, plant and
equipment 29 46 26 36
Capitalised development costs (891) (174) (699) (199)
Purchased software (210) (68) (75) (154)
Deferred consideration on
acquisition made in 2005 (79) (382) - (78)
Investment in joint venture - (45) - (7)
------------------------------ ---------- ---------- ---------- ----------
Net cash used in investing
activities (1,644) (1,083) (992) (844)
------------------------------ ---------- ---------- ---------- ----------
Cash flows from financing
activities
Interest paid (21) (11) (10) (22)
Dividends paid (1,480) (1,087) (1,480) (1,087)
------------------------------ ---------- ---------- ---------- ----------
Net cash used in financing
activities (1,501) (1,098) (1,490) (1,109)
------------------------------ ---------- ---------- ---------- ----------
Effect of exchange rate
changes on cash and cash
equivalents 14 35 21 (17)
Net (decrease)/increase in
cash and cash equivalents (4,762) 171 (59) (3,681)
Cash and cash equivalents at
the beginning of the period 8,111 7,940 3,408 7,089
------------------------------ ---------- ---------- ---------- ----------
Cash and cash equivalents at
the end of the period 3,349 8,111 3,349 3,408
------------------------------ ---------- ---------- ---------- ----------
Notes to the Consolidated Financial Statements
For the 18 months ended 30 November 2010
1 Basis of preparation
The information contained within this Preliminary Announcement
has been extracted from the financial statements which have been
prepared in accordance with IFRS as adopted by the European Union
('adopted IFRS'), and with those parts of the Companies Act 2006
applicable to companies reporting under adopted IFRS. They have
been prepared using the historical cost convention except where the
measurement of balances at fair value is required.
2 Proforma information
Following the change in the Company's year-end date to November
the results in this statement cover the extended accounting period
for the 18 months to 30 November 2010 compared with the last
reported results for the 12 months ended 31 May 2009.
Therefore in order to provide meaningful comparability of data,
unaudited proforma results for the 12 months to 30 November 2010,
with comparatives showing results for the 12 months to 30 November
2009, are presented on both the Income Statement, the Cash Flow
Statement and the segmental analysis in note 3 below.
3 Segmental analysis
Revenue and underlying profit from operations (operating profit
before exceptional costs and share-based payments charge), derives
from the Group's four operating segments as follows:
unaudited unaudited
proforma proforma
18 months 12 months 12 months 12 months
ended ended ended ended
30 Nov 31 May 30 Nov 30 Nov
2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Integration & Managed
Services 49,439 43,325 32,039 37,950
Network Systems 17,625 11,655 12,719 10,743
Mobile Systems 17,080 12,241 11,890 12,076
Industrial Systems 9,639 6,305 6,286 6,519
Intra-group sales (2,659) (2,871) (1,654) (2,636)
91,124 70,655 61,280 64,652
---------- ---------- ---------- ----------
Underlying profit from
operations
Integration & Managed
Services 2,125 2,251 1,333 2,255
Network Systems 2,220 2,067 1,949 1,543
Mobile Systems 1,319 (81) 1,198 135
Industrial Systems 1,252 473 747 792
Research & Development Costs (1,341) (1,340) (656) (1,430)
Central Costs (2,861) (1,817) (2,019) (1,987)
2,714 1,553 2,552 1,308
---------- ---------- ---------- ----------
4 Exceptional reorganisation costs
18 months 12 months
ended ended
30 November 31 May
2010 2009
GBP'000 GBP'000
Redundancy and related costs 649 895
Reorganisation and transformation costs 671 455
------------- ----------
1,320 1,350
------------- ----------
The above costs relate to the reorganisation of operations in
Watford, Guildford and Tewkesbury in the UK and certain operations
in the Middle East. This has included the cost of integrating these
operations into other Group sites. The nature of the costs incurred
principally relate to redundancy and related costs, property,
systems and certain one off contract costs.
5 Share based payment charge
A new Group Executive Shared Ownership Plan (the 'ExSOP') was
introduced in July 2009 and awards were made under this scheme in
July and September 2009 and the previous Long Term Incentive Plan
has been discontinued. Accordingly a share-based payment charge of
GBP249,000 arises in respect of the ExSOP during the 18-month
period.
6 Finance income
18 months 12 months
ended ended
30 November 31 May
2010 2009
GBP'000 GBP'000
Bank interest receivable 14 157
Expected return on pension scheme assets 394 276
Interest receivable from HMRC on tax repayments 33 119
------------- ----------
441 552
------------- ----------
7 Finance costs
18 months 12 months
ended ended
30 November 31 May
2010 2009
GBP'000 GBP'000
Interest payable on bank overdrafts 8 5
Other interest payable 13 6
Interest on pension scheme liabilities 394 276
415 287
------------- ----------
8 Taxation
18 months 12 months
ended ended
30 November 31 May
2010 2009
Tax charge GBP'000 GBP'000
Current taxation:
UK tax 267 250
Overseas tax 418 19
Adjustments in respect of prior periods (617) (154)
------------- ----------
Total current tax 68 115
------------- ----------
Deferred taxation:
Origination and reversal of temporary differences (67) 204
Adjustments in respect of prior periods 310 (107)
------------- ----------
Total deferred tax 243 97
------------- ----------
311 212
------------- ----------
Reconciliation of tax charge for the period
The corporation tax assessed for the period differs from the
standard rate of corporation tax in the UK of 28% (12 months ended
31 May 2009: 28%). The differences are explained below:
18 months 12 months
ended ended
30 November 31 May
2010 2009
GBP'000 GBP'000
Profit on ordinary activities before tax 1,171 471
------------- ----------
Tax on profit on ordinary activities before
tax at standard rate
of 28% (12 months ended 31 May 2009: 28%) 328 132
Effects of:
Expenses not deductible for tax purposes
and temporary differences 180 155
Other temporary differences (23) (54)
US profits taxed at higher rate 103 7
Tax losses not recognised 24 -
Release of deferred tax asset - 233
Rate change on deferred tax balance 6 -
Adjustment in respect of prior periods (307) (261)
Total tax charge for the period 311 212
------------- ----------
The Group has tax losses available to be carried forward for
offset against the future taxable profits of certain Group
companies amounting to approximately GBP1.4 million (31 May 2009:
GBP1.5 million). A deferred tax asset in respect of these losses,
amounting to GBP0.2 million (31 May 2009: GBP0.2 million), has been
recognised at the period end as the Group believes that there will
be future taxable profits against which the losses will be
relieved.
In addition to the above, the Group has capital losses of
approximately GBP19 million (31 May 2009: GBP19 million) available
for offset against future taxable gains. No deferred tax asset in
respect of these losses, which would amount to GBP5 million, has
been recognised in these financial statements as there is
insufficient certainty that the asset will be recovered against
future capital gains.
9 Earnings per Ordinary share
18 months 12 months
ended ended
30 November 31 May
2010 2009
Pence Pence
per per
share share
Basic and diluted earnings per Ordinary
share 5.5 1.7
------------- ----------
Underlying basic earnings per Ordinary share 13.3 8.2
------------- ----------
Underlying diluted earnings per Ordinary
share 13.2 8.2
------------- ----------
Basic and diluted earnings per Ordinary share
The calculation of basic earnings per Ordinary share is based on
the profit after taxation for the period of GBP860,000 (12 months
to 31 May 2009: GBP259,000) and on 15,528,934 shares, being the
weighted average number of shares in issue and ranking for dividend
during the period (12 months to 31 May 2009: 15,528,934).
The calculation of diluted earnings per Ordinary share is based
on the profit after taxation for the period of GBP860,000 (12
months to 31 May 2009: GBP259,000) and on 15,612,180 shares, being
the weighted average number of shares that would be in issue after
conversion of all the dilutive potential Ordinary shares into
Ordinary shares (12 months to 31 May 2009: 15,528,934).
Weighted
average Earnings
Profit number per
after of Ordinary
tax Ordinary share
GBP'000 shares p per share
18 months ended 30 November 2010
Basic earnings per Ordinary share 860 15,528,934 5.5
Dilutive potential Ordinary shares
arising from share options - 83,246 -
--------- ----------- -------------
Diluted earnings per Ordinary share 860 15,612,180 5.5
--------- ----------- -------------
12 months ended 31 May 2009
Basic earnings per Ordinary share 259 15,528,934 1.7
Dilutive potential Ordinary shares
arising from share options - - -
--------- ----------- -------------
Diluted earnings per Ordinary share 259 15,528,934 1.7
--------- ----------- -------------
Underlying basic and diluted earnings per Ordinary share
The calculation of underlying basic earnings per Ordinary share,
which the Directors consider gives a useful additional indication
of the underlying performance of the Group, is based on the profit
after taxation for the period, but before deducting exceptional
reorganisation costs and share-based payments charge (net of tax)
of GBP2,059,000 (12 months to 31 May 2009: GBP1,272,000) and on
15,528,934 shares, being the weighted average number of shares in
issue and ranking for dividend during the period (12 months to 31
May 2009: 15,528,934).
Weighted
average Earnings
Profit number per
after of Ordinary
tax Ordinary share
GBP'000 shares p per share
18 months ended 30 November 2010
Basic earnings per Ordinary share 860 15,528,934 5.5
Exceptional reorganisation costs 1,320 - 8.5
Impact of exceptional reorganisation
costs on tax charge for the period (370) - (2.3)
Share-based payments charge 249 - 1.6
Impact of share-based payments
charge on tax charge for the period - - -
--------- ----------- -------------
Underlying basic earnings per Ordinary
share 2,059 15,528,934 13.3
--------- ----------- -------------
12 months ended 31 May 2009
Basic earnings per Ordinary share 259 15,528,934 1.7
Exceptional reorganisation costs 1,350 - 8.7
Impact of exceptional reorganisation
costs on tax charge for the year (342) - (2.2)
Share-based payments charge 7 - -
Impact of share-based payments
charge on tax charge for the year (2) - -
--------- ----------- -------------
Underlying basic earnings per Ordinary
share 1,272 15,528,934 8.2
--------- ----------- -------------
The calculation of underlying diluted earnings per Ordinary
share is based on the profit after taxation for the period, but
before deducting exceptional reorganisation costs and share-based
payments charge (net of tax) of GBP2,059,000 (12 months to 31 May
2009: GBP1,272,000) and on 15,612,180 shares being the weighted
average number of shares that would be in issue after conversion of
all the dilutive potential Ordinary shares into Ordinary shares (12
months to 31 May 2009: 15,528,934).
Weighted
average Earnings
number per
Profit after of Ordinary
tax Ordinary share
GBP'000 shares p per share
18 months ended 30 November 2010
Underlying earnings per Ordinary
share 2,059 15,528,934 13.3
Dilutive potential Ordinary shares
arising from share options - 83,246 (0.1)
------------- ----------- -------------
Underlying diluted earnings per
Ordinary share 2,059 15,612,180 13.2
------------- ----------- -------------
12 months ended 31 May 2009
Underlying earnings per Ordinary
share 1,272 15,528,934 8.2
Dilutive potential Ordinary shares
arising from share options - - -
------------- ----------- -------------
Underlying diluted earnings per
Ordinary share 1,272 15,528,934 8.2
------------- ----------- -------------
10 Dividends
The Directors recommend the payment of a final dividend of 4.5p
per share totalling GBP791,000, and subject to approval, this is
expected to be paid on 9 May 2011 to shareholders on the register
at 18 March 2011. This will give a total dividend for the 18 month
period of 9.5p (12 months to 31 May 2009: 7.0p).
11 Provisions
Deferred
consideration Restructuring Property Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2008 913 - 158 1,071
Utilised in year (382) - (31) (413)
Charge to income
statement - 776 2 778
Currency translation
adjustment 224 - - 224
--------------- -------------- --------- ---------
At 31 May 2009 755 776 129 1,660
Utilised in period (79) (2,001) (103) (2,183)
Charge to income
statement - 1,320 16 1,336
Deferred consideration
adjustment (663) - - (663)
Currency translation
adjustment (13) - - (13)
--------------- -------------- --------- ---------
At 30 November 2010 - 95 42 137
--------------- -------------- --------- ---------
In May 2005, the Group acquired the trade and net assets of
AlphaPoint LLC, a specialist provider of digital surveillance
technology in North America, for a total consideration of up to
$3.3 million, made up of $1.3 million in cash and Ordinary shares
of the Company, plus a further amount in cash, capped at $2
million, which was dependent on the future profits of the business.
Following the conclusion of the earn-out period surplus provisions
for deferred consideration of GBP0.7 million have been credited
back to goodwill.
12 Full financial statements
The auditors have issued an unqualified opinion on the full
financial statements which will be distributed to shareholders and
delivered to the Registrar of Companies in due course. The
financial information for 2009 does not comprise statutory
financial statements. Statutory financial statements for 2009, on
which the auditors gave an unqualified opinion, have been delivered
to the Registrar of Companies. Further copies of these preliminary
results will be available at the Company's registered office:
Quadnetics Group plc, Haydon House, 5 Alcester Road, Studley,
Warwickshire, B80 7AN or on the Company website at
www.quadnetics.com.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EANDDESKFEFF
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