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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Quadnetics Grp | LSE:QDG | London | Ordinary Share | GB0007156838 | ORD 20P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 290.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
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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