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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 : 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
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