TIDMQDG
RNS Number : 4588Y
Quadnetics Group PLC
01 March 2012
Press Release 1 March 2012
Quadnetics Group plc
Preliminary Results for the year ended 30 November 2011
Quadnetics Group plc, a leader in the design, integration and
control of advanced surveillance technology, networked security
systems and strategic security solutions, reports its preliminary
results for the year ended 30 November 2011.
Financial highlights*
-- Revenue up 13% to GBP69.1 million (2010*: GBP61.3
million)
-- Profit before tax GBP2.5 million (2010*: GBP1.4 million)
-- Underlying profit** before tax up 36% to GBP3.5 million
(2010*: GBP2.6 million)
-- Underlying operating margin up to 5.1% (2010*: 4.2%)
-- Basic EPS 10.2p (2010*: 6.4p)
-- Underlying EPS** up 31% to 16.4p (2010*: 12.5p)
-- Recommended final dividend 4.5p per share making 7.0p
for the year (2010*: 7.0p)
-- Net cash at 30 November 2011: GBP1.3 million (2010:
GBP3.3 million), after payment of initial consideration
for the acquisition of Indanet AG in July 2011
-- Like-for-like (excluding Indanet) year end order book
up 19% to GBP32.5 million (2010: GBP27.3 million)
Operational highlights
-- Increased investment in new product development
-- Significant contract wins in all sectors
-- Acquisition of Indanet AG, a highly complementary
leading German provider of integrated surveillance
systems for major transport hubs
* All comparatives refer to proforma unaudited figures for the
12 months to 30 November 2010
** Underlying profit represents profit before tax,
non-underlying items (amortisation of acquired intangibles,
acquisition expenses, restructuring costs, and share based payments
charges) and interest charges on deferred and contingent
consideration. Underlying earnings per ordinary share is based on
profit after tax but before non-underlying items and interest
charges on deferred and contingent consideration
John Shepherd, Chief Executive, commented:
"We continue to make good progress against our stated targets of
growing revenues, operating profit and return on sales. I am
pleased to report that this significant improvement in performance
has been achieved whilst still being able to increase R&D
investment in new systems and products as well as completing the
acquisition of Indanet in the period. We start 2012 with increased
technical capability, geographical and market reach and most
importantly a larger order book - all factors which give us
confidence that further good progress will be achieved in 2012. Our
highly capable and committed workforce can feel justifiably proud
of delivering this result and I thank them all on behalf of the
executive team."
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
Westhouse Securities Limited Tel: +44 (0) 207 601 6100
Tom Griffiths
Buchanan Tel: +44 (0) 20 7466 5000
Tim Anderson/Isabel Podda Email: isabelp@buchanan.uk.com
Chairman's Statement
Introduction
During the last financial year Quadnetics continued to make
solid progress towards its strategic, operational and financial
objectives. Demand for Synectics' surveillance systems in our
targeted critical security and oil & gas sectors increased
significantly compared with the prior year, enabling the Group to
achieve a good overall performance. The resilience of these results
underscores the benefits of our strategy of developing proprietary
systems and services specialised for those customer sectors willing
and able to pay for high-end surveillance capabilities.
Results
For the year to 30 November 2011, Quadnetics Group recorded
consolidated revenue of GBP69.1 million (2010(1) : GBP61.3
million). On a like-for-like basis, excluding the impact of the
acquisition of Indanet AG, this represented organic growth of 7.9%
over the comparable period last year. The Group made an underlying
profit before tax(2) of GBP3.5 million (2010: GBP2.6 million)
which, adjusted for the acquisition, equated to like-for-like
growth of 30%. The underlying operating margin was 5.1% (2010:
4.2%).
Further details on operating performance are set out in the
divisional business review below.
Group profit before tax was GBP2.5 million (2010: GBP1.4
million), after charging non-underlying costs of GBP0.9 million
(2010: GBP1.2 million) (including acquisition and restructuring
costs (GBP0.7 million) and share-based payments charge (GBP0.2
million). Underlying basic earnings per share increased by 31% to
16.4p (2010: 12.5p).
Quadnetics had net cash of GBP1.3 million at 30 November 2011
(2010: GBP3.3 million). The reduction in net cash was primarily due
to the payment of initial consideration for the acquisition of
Indanet AG and to a large delayed customer payment received after
the year end. Free cash flow, that is cash generated from
operations less capital expenditure, was GBP2.7 million (2010:
GBP2.1 million), before cash payments in respect of non-underlying
items of GBP0.7 million (2010: GBP1.5 million).
Dividend
In view of the increasing growth opportunities we see for the
Group, and our cautious approach to gearing in current credit
markets, the Board has decided to recommend an unchanged final
dividend of 4.5p payable on 9 May 2012 to shareholders on the
register on 16 March 2012. If approved by shareholders, this would
bring the total dividend for the year to 7.0p (2010: 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.
(1) Quadnetics' 2009/10 financial year covered 18 months to 30
November 2010. To provide fair comparisons, however, all results
for 2009/10 quoted in this statement are unaudited proforma figures
for the 12 months ended 30 November 2010.
(2) Underlying profit before tax represents profit before tax,
non-underlying items (amortisation of acquired intangibles,
acquisition expenses, restructuring costs, and share based payments
charges) and IAS 39 interest charges on deferred and contingent
consideration.
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 GBP32.6 million (2010: GBP32.0 million)
Gross Margin 22.2% (2010: 24.0%)
Operating Profit** GBP1.5 million (2010: GBP1.3 million)
Operating Margin** 4.5% (2010: 4.2%)
In the year to 30 November 2011 revenue increased by 2% to
GBP32.6 million and underlying operating profit by 10% to GBP1.5
million. This result was achieved against a background of
continuing market weakness in the UK, in particular in the retail
sector, and was in line with expectations for the division set at
the beginning of the year. The increased operating margin was
primarily a result of reduced overheads following the restructuring
and site consolidation within Quadrant Security Group undertaken in
2010.
Important contract wins in the period included several major
prison upgrades for the Ministry of Justice, nuclear power plant
security system upgrades and maintenance, and a police authority
custody suite.
In the North West of England IMS won a landmark project, using
Synectics' proprietary hardware and software, to streamline
security operations by upgrading and integrating CCTV provision in
three town centre locations and consolidating control into one main
management base in Chester.
A pleasing feature of the year was the division's success in
winning a number of new pan-European contracts for large financial
institutions and multinational companies. This is very much in line
with the Group's objective of fostering the standardisation and
consolidation of electronic security control across multiple
regional or global sites of large organisations.
The process of positioning the IMS division to win larger-scale
contracts, and to increase the proportion of business including
in-house systems solutions from Synectics, is proceeding on plan.
Considerable further progress on these two objectives is expected
in the current financial year, as is continued progress towards the
division's medium-term operating margin target of 6-8%.
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, and products and systems expertise to each of the other
divisions.
Revenue GBP16.2 million (2010: GBP12.7 million)
Gross Margin 47.8% (2010: 45.5%)
Operating Profit** GBP3.8 million (2010: GBP1.9 million)
Operating Margin** 23.2% (2010: 15.3%)
Synectics Network Systems produced an excellent performance for
the year. Revenue rose by 28% to GBP16.2 million with a
near-doubling of operating profit to GBP3.8 million, representing
an operating margin of well over 20%. Major sources of growth
included a continuation of the strong recovery in the North
American gaming market, a significant improvement in results from
the Middle East and competitive share gains within relatively
subdued markets in the UK and Europe.
SNS benefitted from the reorganisation implemented in 2010 to
provide a clean separation between operations and R&D
activities. Both areas now have a sharper focus and increased
efficiency.
An important sales success in the year was the high-profile
upgrade of a major US city centre surveillance system, as part of
the security measures for the up-coming presidential elections.
This is the first Synectics city-wide system in the United States,
and should provide an excellent reference site as more US cities
look to install the type of public space surveillance common in the
UK, and for which Synectics is the market leader.
During 2011 SNS achieved a healthy mix of upgrades and
expansions for existing customers as well as systems for new
customers. Major activity included systems for the Northern Ireland
Prison Service, the Stormont Assembly Building, three out of five
of the largest UK retail banks, Cheshire East Council, Sheffield
City Centre, Centro and Belfast Harbour in the UK. In the USA we
added the Genting Group, and, in the Middle East, NCP car parks
UAE, the Atlantis Hotel in Dubai, Duqum Port and high security
applications for the Omani government.
As a result of both the volume increase and improved average
gross margins, SNS exceeded its medium term operating margin target
of mid-to-high teens per cent. We now believe that 20% returns for
this division are capable of being sustained for the medium
term.
The current year has begun well. We do not expect activity in
the US gaming market to continue at the exceptional levels of 2011,
but otherwise look forward to further progress in what are likely
to remain challenging market conditions.
Synectics Mobile Systems
Synectics Mobile Systems provides specialist surveillance
systems and products for integrated transport and defence
customers.
Revenue GBP13.5 million(3) (2010: GBP11.9 million)
Gross Margin 29.7% (2010: 35.0%)
Operating Profit** GBP0.3 million (2010: GBP1.2 million)
Operating Margin** 2.1% (2010: 10.1%)
Synectics Mobile Systems division had a mixed year. On the
negative side, the defence activities recorded a loss for the year
as a result of delayed orders, principally in the Middle East due
to the ongoing political upheaval, and slippage of the development
timetable for its new product suite, brought in-house from a former
partner at the beginning of the year. Action has been taken to
address these issues, and we are already seeing improved results.
We do not anticipate a continuation of this unacceptable
performance in the current year.
Conditions in the UK on-bus surveillance market improved in the
second half of last year. This improvement meant that results for
SMS' transport activities for the year as a whole were broadly flat
compared with the prior year. In addition to our ongoing multi-year
contract with Stagecoach, SMS won significant orders in the year
from National Express, First Group, Caetano, CentreBus and Bus
Eireann.
The most significant event in this division during the year was
the acquisition of Indanet AG, a leading German supplier of
electronic surveillance systems for major transport hubs. Indanet
is a software intensive business with a close cultural and
strategic fit to Synectics. Its customers include the Berlin,
Munich and Frankfurt public transport authorities, as well as
Deutsche Bahn, the German national railway. In addition to its own
growth plans in Germany and other northern and eastern European
markets, the management of Indanet see opportunities to lead the
sales of Synectics' existing specialised surveillance systems, for
applications such as prisons, city centres and critical
infrastructure, into those verticals within Indanet's home markets.
In the four-and-a-half month period post acquisition, Indanet
contributed revenue of GBP2.9 million and operating profit of
GBP0.2 million.
As set out in the announcement of the acquisition on 18 July
2011, we plan for Indanet to invest significantly in sales and
engineering resources during 2012 to support expected growth from
the second half of the current year onwards. These additional costs
will mean that Indanet will report a negative contribution in the
first half of this year.
With Indanet, the Group's medium term operating margin target
for this division remains in the mid-to-high teens per cent, though
on a higher and faster-growing revenue base.
(3) Figures for 2011 include the results of Indanet AG from the
date of acquisition in July 2011.
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 GBP7.9 million (2010: GBP6.3 million)
Gross Margin 38.1% (2010: 33.3%)
Operating Profit** GBP1.3 million (2010: GBP0.7 million)
Operating Margin** 15.8% (2010: 11.9%)
SIS had an excellent year, marked by the successful delivery of
its new range of COEX3000 hazardous area camera stations,
completion of its largest ever project for phase 1 of the Gorgon
natural gas field off Western Australia and by moving into expanded
new premises.
Revenue increased by 26% to GBP7.9 million. Costs were well
managed, leading to a 68% increase in operating profit to GBP1.3
million. The division's operating margin has moved into its medium
term target range of mid-to-high-teens per cent.
Additional orders were received for the Gorgon natural gas
project, including a complete Synectics solution comprising
COEX(TM) hazardous area and safe area Tri-Mode PTZ thermal camera
stations, SynergyPro(TM) command and control system and associated
server and storage systems. SIS also completed systems for the
Jasmine & Judy fields in the North Sea, which were the first
significant deployment of the new COEX3000 camera station.
The underlying markets served by SIS remain healthy, especially
in the Far East and the Middle East. SIS ended last year with a
firm order book of GBP6.2 million, more than double the figure a
year earlier, and we anticipate another strong performance in
2012.
Research and Development
Group expenditure on technology development during 2011 totalled
GBP1.8 million (2010: GBP1.4 million). Of this, GBP0.8 million was
capitalised, and the remaining GBP1.0 million expensed to the
profit and loss account. GBP0.6 million of previously capitalised
development was amortised during the year.
2011 was the first full year of operation of the Synectics
Technology Centre, created as a consolidated development unit for
the Group as a whole. The benefits of this organisation were borne
out by increased focus, efficiency and schedule adherence in
development projects undertaken during the year.
People
We have been pleased to welcome a substantial number of new
people to the Group over the past year, both from Indanet and from
new hires across all divisions, in particular in a number of senior
positions to help us achieve and manage the next phase of
Quadnetics' growth.
With a large amount of change being implemented over the past
two years, our employees have continued to demonstrate
extraordinary skill and commitment in delivering superior
electronic surveillance systems and services to our customers. On
behalf of the Board and shareholders, I gladly record our
thanks.
Strategy and Financial Objectives
Quadnetics' strategy and financial objectives were set out in
detail in the chairman's statement in both the interim and annual
reports last year. They have not changed since.
In summary, we aim to use proprietary technology, particularly
software, and market knowledge to create complex surveillance
systems, increasingly differentiated to serve the needs of the
specialist customer sectors we target - critical infrastructure,
transport and hazardous areas.
With the Group's current mix of business, the Board's stated
objective is for Quadnetics to achieve an overall underlying
operating profit margin of 8-10%, after all R&D and central
costs, within a reasonable time frame and given normal economic
conditions. In 2011, we increased our performance on this measure
to 5.1%, up from 4.2% in the previous year. Against a prevailing
market background that was in many parts unhelpful, and combined
with respectable organic revenue growth, the Board views that level
of progress as satisfactory.
Proposed Name Change
For many years now the Group has been developing the Synectics
brand in electronic surveillance markets around the world. The
Board believes that this brand has now achieved substantial
recognition and that both the operating businesses and the parent
company would benefit if the quoted entity carried the same
name.
We will therefore propose a resolution for consideration by
shareholders at our upcoming Annual General Meeting to authorise
the Board to change the name of Quadnetics Group plc to Synectics
plc.
Outlook
The Group's consolidated order book at 30 November 2011 stood at
GBP35.9 million, or GBP32.5 million excluding Indanet, a
like-for-like increase of 19% compared with the previous year.
Trading in the first two months of the year has been
encouraging.
On the basis of the existing strong order book and bid pipeline,
and on the assumption of no significant worsening in our markets,
the Board expects Quadnetics to deliver another good performance in
the current financial year.
David Coghlan
Chairman
1 March 2012
**before non-underlying items, research & development and
Group central costs
Consolidated Income Statement
For the 12 months ended 30 November 2011
12 months 18 months 12 months
ended ended ended
30 November 30 November 30 November
Notes 2011 2010 2010
GBP'000 GBP'000 GBP'000
Unaudited
proforma
information
(note 2)
-------------------------------------------- ------ ------------- ------------- -------------
Revenue 3 69,083 91,124 61,280
Cost of sales (47,062) (62,276) (41,545)
-------------------------------------------- ------ ------------- ------------- -------------
Gross profit 22,021 28,848 19,735
Operating expenses (19,418) (27,703) (18,402)
Profit from operations
------------- ------------- -------------
Excluding non-underlying items 3 3,541 2,714 2,552
Non-underlying items 4 (938) (1,569) (1,219)
Total profit from operations 2,603 1,145 1,333
Finance income 5 268 441 295
Finance costs 6 (409) (415) (272)
Share of results of joint venture - - 4
-------------------------------------------- ------ ------------- ------------- -------------
Profit before tax
------------- ------------- -------------
Excluding non-underlying items and
finance cost of deferred consideration 3,510 2,740 2,579
Non-underlying items 4 (938) (1,569) (1,219)
IAS 39 charge on deferred and contingent
consideration (110) - -
------------- ------------- -------------
Total profit before tax 2,462 1,171 1,360
Income tax expense 7 (874) (311) (366)
-------------------------------------------- ------ ------------- ------------- -------------
Profit for the year attributable
to equity holders of the parent 1,588 860 994
-------------------------------------------- ------ ------------- ------------- -------------
Basic earnings per Ordinary share 8 10.2p 5.5p 6.4p
-------------------------------------------- ------ ------------- ------------- -------------
Diluted earnings per Ordinary share 8 10.0p 5.5p 6.4p
-------------------------------------------- ------ ------------- ------------- -------------
Non-underlying items comprise amortisation of acquired
intangibles, acquisition expenses, restructuring costs and share
based payment charges. See note 4.
Consolidated Statement of Comprehensive Income
For the 12 months ended 30 November 2011
12 months 18 months
ended ended
30 November 30 November
2011 2010
GBP'000 GBP'000
------------------------------------------------------ ------------- -------------
Profit for the year 1,588 860
Exchange differences on translation of foreign
operations (21) 13
Actuarial gains 114 104
Effect of not recognising the pension scheme
surplus (114) (104)
------------------------------------------------------ ------------- -------------
Total comprehensive income for the year attributable
to equity holders of the parent 1,567 873
------------------------------------------------------ ------------- -------------
Consolidated Statement of Financial Position
30 November 2011
Notes 30 November 30 November
2011 2010
GBP'000 GBP'000
--------------------------------------- ------ ------------ ------------
Non-current assets
Property, plant and equipment 1,618 1,503
Intangible assets 25,189 17,292
Deferred tax asset - 176
26,807 18,971
--------------------------------------- ------ ------------ ------------
Current assets
Inventories 7,459 5,897
Trade and other receivables 26,501 22,511
Cash and cash equivalents 3,098 3,349
--------------------------------------- ------ ------------ ------------
37,058 31,757
Total assets 63,865 50,728
--------------------------------------- ------ ------------ ------------
Current liabilities
Trade and other payables (22,507) (18,256)
Tax liabilities (861) (535)
Current provisions 10 (44) (112)
--------------------------------------- ------ ------------ ------------
(23,412) (18,903)
--------------------------------------- ------ ------------ ------------
Non-current liabilities
Loans and borrowings (1,843) -
Non-current provisions 10 (6,028) (25)
Deferred tax liabilities (133) -
--------------------------------------- ------ ------------ ------------
(8,004) (25)
--------------------------------------- ------ ------------ ------------
Total liabilities (31,416) (18,928)
--------------------------------------- ------ ------------ ------------
Net assets 32,449 31,800
--------------------------------------- ------ ------------ ------------
Equity attributable to equity holders
of parent company
Called up share capital 3,514 3,514
Share premium account 15,719 15,719
Merger reserve 9,565 9,565
Other reserves (3,486) (3,486)
Currency translation reserve 96 117
Retained earnings 7,041 6,371
--------------------------------------- ------ ------------ ------------
Total equity 32,449 31,800
--------------------------------------- ------ ------------ ------------
Consolidated Statement of Changes in Equity
For the 12 months ended 30 November 2011
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 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 (note
9) - - - - - (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
Profit after tax for
the year - - - - - 1,588 1,588
Dividends paid (note
9) - - - - - (1,110) (1,110)
Credit in relation
to share based payments - - - - - 192 192
Currency translation
adjustment - - - - (21) - (21)
At 30 November 2011 3,514 15,719 9,565 (3,486) 96 7,041 32,449
--------- -------- -------- --------- ------------ --------- --------
Consolidated Cash Flow Statement
For the 12 months ended 30 November 2011
12 months 18 months 12 months
ended ended ended
30 November 30 November 30 November
2011 2010 2010
GBP'000 GBP'000 GBP'000
Unaudited
proforma
information
(note 2)
------------------------------------------- ------------- ------------- -------------
Cash flows from operating activities
Profit for the year 1,588 860 994
Income tax expense 874 311 366
Finance income (268) (441) (295)
Finance costs 409 415 272
Depreciation and amortisation charge 1,268 1,846 1,215
(Profit)/ loss on disposal of non-current
assets (10) 2 5
Share based payments charge 192 249 169
------------------------------------------- ------------- ------------- -------------
Operating cash flows before movement
in working capital 4,053 3,242 2,726
Increase in inventories (871) (535) (473)
(Increase)/decrease in receivables (3,175) 55 (1,791)
Increase/(decrease) in payables
and provisions 3,423 (4,407) 1,185
------------------------------------------- ------------- ------------- -------------
Cash generated from operations 3,430 (1,645) 1,647
Interest received 11 52 33
Tax (paid)/received (485) (38) 722
------------------------------------------- ------------- ------------- -------------
Net cash from operating activities 2,956 (1,631) 2,402
------------------------------------------- ------------- ------------- -------------
Cash flows from investing activities
Purchase of property, plant and
equipment (566) (493) (244)
Sale of property, plant and equipment 10 29 26
Acquisition of subsidiaries (note (2,556) - -
11)
Capitalised development costs (747) (891) (699)
Purchased software (69) (210) (75)
Deferred consideration on acquisition - (79) -
made in 2005
Net cash used in investing activities (3,928) (1,644) (992)
------------------------------------------- ------------- ------------- -------------
Cash flows from financing activities
New borrowings 1,843 - -
Interest paid (33) (21) (10)
Dividends paid (1,110) (1,480) (1,480)
------------------------------------------- ------------- ------------- -------------
Net cash used in financing activities 700 (1,501) (1,490)
------------------------------------------- ------------- ------------- -------------
Effect of exchange rate changes
on cash and cash equivalents 21 14 21
Net decrease in cash and cash equivalents (251) (4,762) (59)
Cash and cash equivalents at the
beginning of the year 3,349 8,111 3,408
------------------------------------------- ------------- ------------- -------------
Cash and cash equivalents at the
end of the year 3,098 3,349 3,349
------------------------------------------- ------------- ------------- -------------
Notes
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 comparative results in this statement are the reported figures
for the 18 months to 30 November 2010. Therefore in order to
provide meaningful comparability of data, unaudited proforma
results for the 12 months to 30 November 2010, are presented on the
Income Statement, the Cash Flow Statement and the segmental
analysis in note 3 below.
3 Segmental analysis
Revenue and underlying operating profit (operating profit before
non-underlying items (amortisation of acquired intangibles,
acquisition expenses, restructuring costs and share based payments
charges)), derives from the Group's four operating segments as
follows:
12 months 18 months 12 months
ended ended ended
30 Nov 30 Nov 30 Nov
2011 2010 2010
GBP'000 GBP'000 GBP'000
Unaudited
proforma
information
(note 2)
Revenue
Integration & Managed Services 32,622 49,439 32,039
Network Systems 16,230 17,625 12,719
Mobile Systems 13,461 17,080 11,890
Industrial Systems 7,943 9,639 6,286
------------- ------------- --------------
Total segmental revenue 70,256 93,783 62,934
Reconciliation to consolidated revenue:
Intra-group sales (1,173) (2,659) (1,654)
69,083 91,124 61,280
------------- ------------- --------------
Underlying operating profit
Integration & Managed Services 1,460 2,125 1,333
Network Systems 3,762 2,220 1,949
Mobile Systems 280 1,319 1,198
Industrial Systems 1,258 1,252 747
------------- ------------- --------------
Total segmental underlying operating
profit 6,760 6,916 5,227
Reconciliation to underlying operating
profit:
Research & Development costs (1,025) (1,341) (656)
Central costs (2,194) (2,861) (2,019)
3,541 2,714 2,552
------------- ------------- --------------
There has been no aggregation of the operating segments in
arriving at these reportable segments.
4 Non-underlying items
12 months 18 months
ended ended
30 November 30 November
2011 2010
GBP'000 GBP'000
Acquisition costs 352 -
Restructuring costs 346 1,320
Share based payments charge 192 249
Amortisation of intangible assets acquired 48 -
as a result of business combinations
938 1,569
------------- -------------
The acquisition expenses relate to the acquisition of Persides
Technology Limited in December 2010 and Indanet AG in July
2011.
The restructuring costs relate to reorganisation of the Mobile
division.
The 2010 non-underlying restructuring costs related to the
reorganisation of operations in Watford, Guildford and Tewkesbury
in the UK and certain operations in the Middle East. This included
the cost of integrating these operations into other Group
sites.
A new Group Executive Share Ownership Plan (the 'ExSOP') was
introduced in July 2009 and awards were made under this scheme in
July 2009, September 2009 and March 2011. Accordingly a share-based
payment charge of GBP192,000 arises in respect of the ExSOP during
the year.
5 Finance income
12 months 18 months
ended ended
30 November 30 November
2011 2010
GBP'000 GBP'000
Bank interest receivable 11 14
Expected return on pension scheme assets 257 394
Interest receivable on tax repayments - 33
268 441
------------- -------------
6 Finance costs
12 months 18 months
ended ended
30 November 30 November
2011 2010
GBP'000 GBP'000
Interest payable on bank overdrafts 28 8
Interest payable on bank loans 8 -
Other interest payable 6 13
Interest on pension scheme liabilities 257 394
IAS 39 charge on deferred and contingent 110 -
consideration
------------- -------------
409 415
------------- -------------
7 Taxation
12 months 18 months
Tax charge ended ended
30 November 30 November
2011 2010
GBP'000 GBP'000
Current taxation:
UK tax 84 267
Overseas tax 955 418
Adjustments in respect of prior periods (230) (617)
------------- -------------
Total current tax 809 68
------------- -------------
Deferred taxation:
Origination and reversal of temporary
differences 48 (67)
Adjustments in respect of prior periods 17 310
------------- -------------
Total deferred tax 65 243
------------- -------------
874 311
------------- -------------
Reconciliation of tax charge for the year
The corporation tax assessed for the year differs from the
standard rate of corporation tax in the UK of 26.67% (18 months
ended 30 November 2010: 28%). The differences are explained
below:
12 months 18 months
ended ended
30 November 30 November
2011 2010
GBP'000 GBP'000
Profit on ordinary activities before tax 2,462 1,171
------------- -------------
Tax on profit on ordinary activities before
tax at standard rate of 26.67% (18 months
ended 30 November 2010: 28%) 657 328
Effects of:
Expenses not deductible for tax purposes
and temporary differences 308 157
Overseas profits taxed at higher rate 252 103
Tax losses not recognised - 24
Tax losses utilised (126) -
Rate change on deferred tax balance (4) 6
Adjustment in respect of prior periods (213) (307)
Total tax charge for the period 874 311
------------- -------------
The Group has tax losses available to be carried forward for
offset against the future taxable profits of certain Group
companies amounting to approximately GBP1.0 million (30 November
2010: GBP1.4 million). A deferred tax asset in respect of these
losses, amounting to GBP0.1 million (30 November 2010: GBP0.2
million), has been recognised at the year 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 (30 November 2010: 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.
8 Earnings per Ordinary share
18 months
12 months ended
ended 30 November
30 November 2010
2011 Pence
Pence per
per share
share
Basic earnings per Ordinary share 10.2 5.5
------------- -------------
Diluted earnings per Ordinary share 10.0 5.5
------------- -------------
Underlying basic earnings per Ordinary
share 16.4 13.3
------------- -------------
Underlying diluted earnings per Ordinary
share 16.2 13.2
------------- -------------
Basic and diluted earnings per Ordinary share
The calculation of basic earnings per Ordinary share is based on
the profit after taxation for the year of GBP1,588,000 (18 months
to 30 November 2010: GBP860,000) and on 15,528,934 shares, being
the weighted average number of shares in issue and ranking for
dividend during the year (18 months to 30 November 2010:
15,528,934).
The calculation of diluted earnings per Ordinary share is based
on the profit after taxation for the year of GBP1,588,000 (18
months to 30 November 2010: GBP860,000) and on 15,803,076 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 (18 months to 30 November 2010: 15,612,180).
Weighted
average Earnings
Profit number per
after of Ordinary
tax Ordinary share
GBP'000 shares p per share
12 months ended 30 November 2011
Basic earnings per Ordinary share 1,588 15,528,934 10.2
Dilutive potential Ordinary shares
arising from share options - 274,142 (0.2)
--------- ----------- -------------
Diluted earnings per Ordinary share 1,588 15,803,076 10.0
--------- ----------- -------------
18 months ended 30 November 2010
Basic earnings per Ordinary share 860 15,528,934 5.5
Dilutive potential Ordinary shares - 83,246 -
arising from share options
--------- ----------- -------------
Diluted earnings per Ordinary share 860 15,612,180 5.5
--------- ----------- -------------
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 year, but before deducting non-underlying
items (net of tax) and IAS 39 charge on contingent deferred
consideration on 15,528,934 shares, being the weighted average
number of shares in issue and ranking for dividend during the year
(18 months to 30 November 2010: 15,528,934).
Weighted
average Earnings
Profit number per
after of Ordinary
tax Ordinary share
GBP'000 shares p per share
12 months ended 30 November 2011
Basic earnings per Ordinary share 1,588 15,528,934 10.2
Non-underlying items (note 4) 938 - 6.1
Impact of non-underlying items (82) - -
on tax charge for the period
IAS 39 charge on deferred and contingent
consideration 110 - 0.1
Underlying basic earnings per Ordinary
share 2,554 15,528,934 16.4
--------- ----------- -------------
18 months ended 30 November 2010
Basic earnings per Ordinary share 860 15,528,934 5.5
Non-underlying items (note 4) 1,569 - 10.1
Impact of non-underlying items
on tax charge for the period (370) - (2.3)
Underlying basic earnings per Ordinary
share 2,059 15,528,934 13.3
--------- ----------- -------------
The calculation of underlying diluted earnings per Ordinary
share is based on the profit after taxation for the year, but
before deducting underlying items (net of tax) and IAS 39 charge on
deferred and contingent consideration and on 15,803,076 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 (18 months to 30 November 2010: 15,612,180).
Weighted
average Earnings
Profit number per
after of Ordinary
tax Ordinary share
GBP'000 shares p per share
12 months ended 30 November 2011
Underlying earnings per Ordinary
share 2,554 15,528,934 16.4
Dilutive potential Ordinary shares
arising from share options - 274,142 (0.2)
--------- ----------- -------------
Underlying diluted earnings per
Ordinary share 2,554 15,803,076 16.2
--------- ----------- -------------
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
--------- ----------- -------------
9 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 2012 to shareholders on the register
at 16 March 2012. This will give a total dividend for the year of
7.0p (18 months to 30 November 2010: 9.5p).
10 Provisions
Deferred
consideration Restructuring Property Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2009 755 776 129 1,660
Utilised in year (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
Utilised in period - (58) (16) (74)
Charge to income statement - - 28 28
Acquisition made during
year (note11) 6,012 - - 6,012
IAS 39 charge on deferred
and contingent consideration 110 - - 110
Currency translation
adjustment (141) - - (141)
--------------- --------------- ---------- ---------
At 30 November 2011 5,981 37 54 6,072
--------------- --------------- ---------- ---------
11 Acquisitions
Acquisition of Indanet AG
On 15 July 2011 Quadnetics Group plc , through its subsidiary
Synectic Systems GmbH, agreed to acquire 100% of the issued share
capital of Indanet AG ("Indanet"), a leading German provider of
integrated surveillance and security management systems to the
transport industry, for a maximum total consideration of EUR10
million. Consideration of EUR2 million in cash was paid on
completion for an initial tranche of shares equivalent to 51% of
Indanet's issued share capital. Further consideration of between
EUR1 million and EUR8 million for the remaining 49% of Indanet will
be payable in three tranches between 2013 and 2015, dependent on
Indanet's profits for the period from completion to 31 May 2015.
The anticipated acquisition method has been applied in accounting
for this acquisition.
Indanet's technology and market positions are highly
complementary to those of Quadnetics' Mobile Systems and Network
Systems divisions, and the acquisition is expected to accelerate
significantly the Group's expansion into specialist transport
surveillance markets in northern, central and eastern Europe in
particular. It should also provide enhanced opportunities for the
sales of Synectics high security surveillance systems into those
regions.
Recognised amounts of identifiable assets Provisional
acquired and liabilities assumed Book value fair value
GBP'000 GBP'000
Identifiable assets
Property, plant and equipment 62 62
Trade and other receivables 729 729
Inventory 687 687
Identifiable intangible assets - 754
Identifiable liabilities
Overdraft (573) (573)
Trade and other payables (731) (731)
Deferred tax - (249)
----------- ------------
Net identifiable assets 174 679
Goodwill 7,085
------------
Total consideration 7,764
------------
Satisfied by:
Cash 1,752
Deferred consideration 785
Contingent consideration arrangement 5,227
------------
Total consideration transferred 7,764
------------
Net cash outflow arising on acquisition
Cash consideration 1,752
Add: bank overdraft 573
------------
2,326
------------
The fair values shown above are provisional and may be amended
if information not currently available comes to light.
The fair value of the financial assets includes trade
receivables with a fair value of GBP644,000.
The fair value adjustment in relation to intangible assets
recognises customer relationships (GBP231,000) and software
(GBP523,000) in accordance with IFRS 3.
The goodwill of GBP7,085,000 arising from the acquisition
consists of the assembled workforce and increased geographical
presence in Europe together with software development
opportunities.
The deferred consideration arrangement requires a further
EUR1,000,000 to be paid on 31 December 2013. The contingent
consideration arrangement of up to EUR7,000,000 is dependent on
Indanet's profits for the period from completion to 31 May 2015,
and is payable in two tranches in 2014 and 2015. A maximum of
EUR3.5 million of the contingent consideration may be paid, at
Quadnetics' option, in new Quadnetics' Ordinary shares, with the
remainder in cash.
Acquisition related costs (included in non-underlying operating
expenses) amounted to GBP333,000.
Indanet AG contributed GBP2.9 million revenue and GBP0.2 million
operating profit to the Group's profit for the period between the
date of acquisition and the balance sheet date.
Acquisition of Persides Technology Limited
On 22 December 2010 Synectic Systems Group Limited ("SSGL")
acquired the entire issued share capital of Persides Technology
Limited ("PTL") for a total consideration of GBP230,000 in cash and
the trade and assets of PTL were hived up to SSGL at fair
value.
PTL specialises in advanced battlefield electronic monitoring
systems (EMS) and ruggedized hand-held digital video systems
(VEEcam O) for use in extreme environments, and was a technology
partner to the Group's defence business, playing an important role
in the development of Synectics' latest generation radio frequency
detection system, Chili.
12 Company information
Full Financial Statements
The auditors have issued an unqualified opinion on the full
financial statements for the year ended 30 November 2011 which will
be distributed to shareholders and delivered to the Registrar of
Companies in due course. The financial information for 2011 and
2010 does not comprise statutory financial statements. Statutory
financial statements for the 18 month period ended 30 November
2010, on which the auditors gave an unqualified opinion, have been
delivered to the Registrar of Companies. Further copies of these
preliminary results, and the full financial statements when
published, 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.
Forward-looking statements
This report may contain certain statements about the future
outlook for Quadnetics Group plc. Although the directors believe
their expectations are based on reasonable assumption, any
statements about future outlook may be influenced by factors that
could cause actual outcomes and results to be materially
different.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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