Preliminary Results

 

TIDMQDG 
 
RNS Number : 7324Y 
Quadnetics Group PLC 
09 September 2009 
 

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| For immediate release                |                       9 September 2009 | 
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Quadnetics Group plc 
 
 
Preliminary Results for the year ended 31 May 2009 
 
 
Quadnetics Group plc, a leader in the development, design, integration and 
management of advanced surveillance technology and security networks, reports 
its preliminary results for the year ended 31 May 2009. 
 
 
Highlights 
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|                                     · | Revenue GBP70.7 million (2008: GBP79.2 million)                    |   | 
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|                                     · | Underlying profit* before tax GBP1.8 million (2008: GBP3.7         |   | 
|                                       | million), after charging GBP1.6 million of costs related to new    |   | 
|                                       | products (2008: GBP0.1 million)                                    |   | 
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|                                     · | Profit before tax GBP0.5 million (2008: GBP4.4 million)            |   | 
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|                                     · | Underlying EPS** 8.2p (2008: 18.9p)                                |   | 
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|                                     · | Basic EPS 1.7p (2008: 21.6p)                                       |   | 
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|                                     · | Recurring revenue GBP16.3 million (2008: GBP14.1 million)          |   | 
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|                                     · | Proposed final dividend 4.5p per share making 7.0p for the full    |   | 
|                                       | year (2008: 7.0p)                                                  |   | 
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|                                     · | Significant initial sales of new Synectics products                |   | 
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|                                     · | Net cash at 31 May 2009 GBP8.1 million (2008: GBP7.9 million)      |   | 
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|                                     · | Group restructuring well under way                                 |   | 
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* Underlying profit represents profit before tax, exceptional items, goodwill 
reduction and share-based payments charge/(credit). **Underlying earnings per 
Ordinary share is based on profit after tax but before exceptional items, 
goodwill reduction and share-based payments charge/(credit). 
 
 
Commenting on the results, John Shepherd, Chief Executive, said: 
 
 
"Trading for the year as a whole was difficult in comparison to the previous 
year especially in the first half. It is especially pleasing to have delivered 
the stronger second half performance as predicted in February without cutting 
back on our investment in new product development - the lifeblood of future 
growth. 
 
 
"Since joining the Group in November I have begun a programme of transition 
which is aimed at responding to and capitalising on the current global economic 
turmoil through focusing the business on defendable higher margin market niches. 
The first phase of the transition process, which includes significant investment 
in senior management talent, structural reorganisation, site consolidation and 
regional expansion, is now well underway. It will take a further six to twelve 
months before we begin to see the fruits of this investment. The global security 
and surveillance market is still growing and the supply base is fragmented - a 
situation which presents many exciting opportunities for the Group." 
 
 
For further information, please contact: 
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| Quadnetics Group plc                           |   Tel: [phone] | 
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| John Shepherd, Chief Executive                 |                            | 
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| Email: [e-mail]            |         www.quadnetics.com | 
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| Brewin Dolphin Investment Banking              |  Tel: [phone] | 
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| Neil Baldwin                                   |                            | 
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Media enquiries: 
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| Buchanan Communications Limited                |  Tel: [phone] | 
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| Tim Anderson, Isabel Podda, Ben Romney,        |                     Email: | 
| Katharine Sutton                               |    [e-mail] | 
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  Chairman's Statement 
 
 
 
 
Introduction 
 
 
I am pleased to report that, after a weak first half, Quadnetics produced a 
significantly stronger underlying operating performance in the second half of 
2008/9 as anticipated in the Company's interim statement. Nevertheless, results 
continued to be patchy across the various security and surveillance markets 
Quadnetics serves, with some areas seemingly more affected than others by the 
downturn of the past year or so. In particular, the gaming market in North 
America was subject to a sharp decline as projects for systems upgrades suffered 
lengthy delays, whereas Synectics Networks' products and systems in all other 
regions produced good revenue and profits growth. 
 
 
2008/9 was also a year of investment for Quadnetics, both in a new Group 
technology platform, and in establishing a more integrated operating structure. 
Firstly, we brought to market our suite of new H.264 digital surveillance 
products. The net cost of development of these products charged to the income 
statement in 2008/9 was GBP1.6 million (2008: GBP88,000). Secondly, we began 
during the year a substantial reorganisation of the Group's operating and 
management structure to consolidate and further integrate our activities and so 
enable greater focus on specific core customer groups, and greater efficiencies 
of operating scale. We expect the benefits of these actions to become apparent 
in the second half of the 2009/10 financial year. 
 
 
Results 
 
 
In the year to 31 May 2009, Quadnetics recorded underlying profit (that is, 
profit before tax, exceptional costs, goodwill reduction and share-based payment 
costs) of GBP1.8 million (2008: GBP3.7 million) on revenue of GBP70.7 million 
(2008: GBP79.2 million). The primary reasons for the decreases in both revenue 
and operating margin are set out in the business review below. Profit before tax 
was GBP0.5 million (2008: GBP4.4 million), after charging GBP1.35 million of 
exceptional costs related to the restructuring referred to above. 
 
 
Sales in the nature of recurring revenue, primarily maintenance and managed 
services, are a key measure targeted by the Group. These grew by just over 15% 
to GBP16.3 million. 
 
 
Underlying earnings per share were 8.2p (2008: 18.9p). 
 
 
The Group's balance sheet remained ungeared, with net cash at 31 May 2009 of 
GBP8.1 million (2008: GBP7.9 million). Free cash flow, that is cash inflow from 
operations (excluding exceptional payments) less capital expenditure, was GBP1.9 
million (2008: GBP2.5 million). 
 
 
Dividend 
 
 
The Board is proposing a final dividend of 4.5p (2008: 4.5p) payable on 4 
December 2009 to shareholders on the register on 6 November 2009. If approved by 
shareholders, this would bring the total dividend for the full year to 7.0p 
(2008: 7.0p). The proposal of an unchanged dividend reflects both our strong 
balance sheet and, more importantly, the Board's confidence in the prospects of 
the Group. 
 
 
Business Review 
 
 
Quadrant Security 
The Group's security services division, providing integrated security systems, 
security management support and mobile surveillance services 
 
 
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| Revenue                 | GBP52 million           |                         | 
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| Operating Profit        | GBP3.6 million          |                         | 
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Quadrant Security Group ("QSG") achieved a small overall increase in operating 
profit to GBP3.6 million (2008: GBP3.5 million), on revenue that declined by 10%