Interim Results
Quadrant Group PLC
15 February 2001
Quadrant Group plc
Interim Results for the half year to 30 November 2000
Half Year Statement
In the half year to 30 November 2000 Quadrant Group produced an operating
profit of £159,000 (1999: loss £328,000) and a profit before tax (after
interest and exceptional items) of £291,000 (1999: £793,000). The improved
operating result reflects primarily the expected breakthrough to
profitability of Quadrant Systems, the disposal of the loss-making
audio-visual business and growth in Quadrant Video Systems' electronic
security activities. Because these improvements did not materialise in the
main until August, the overall picture was of an operating loss in the first
quarter, followed by reasonable profitability in the second quarter.
Turnover from continuing operations for the six months grew by 50% compared
with the corresponding period last year, confirming the trend indicated in
the Group's last Annual Report. Net borrowings at 30 November 2000 were £0.9
million, increased from £0.5 million at 31 May 2000, following an investment
of £0.5 million in a 50% share of Quest Flight Training.
The CCTV security activities of Quadrant Video Systems continued to make
progress. Turnover for the six months increased by 24% but against a
relatively poor comparative period. Operating margins suffered in the first
quarter from the impact of low new sales volumes, but recovered well in the
second quarter. The high level of the order book at 30 November gives
confidence for a strong second half.
Synectic Systems' electronics control products serve the same underlying
market, and experienced a similar pattern of market delays in the first
quarter followed by a strong autumn period. Overall turnover was up by 49%
compared with the first half last year. Significant further investment was
made in research and development and in establishing a presence in major
export markets, leading to an operating result just below break-even. There
is good momentum into the second half with both existing and new products.
As previously reported, Quadrant's flight simulation business was successful
in winning a £60 million, 30-year contract from the Ministry of Defence for
exclusive provision of flight crew simulator training for the RAF's E-3D
AWACS aircraft. The contract was awarded in late July to Quest Flight
Training, a 50/50 joint venture between Quadrant and Evans & Sutherland
Computer Corporation. As a result Quest has ordered a £3 million update for
the existing E-3D simulator from Quadrant Systems, to be completed by early
2002.
The E-3D contract, together with other major contract wins, led to turnover
at Quadrant Systems increasing to £3.3 million in the first half, an increase
of more than 100% over last year. Although Quadrant Systems operated
profitably over the first half, margins were affected by a necessary build up
of costs prior to award of the E-3D contract, and by inefficiencies
associated with the high growth rate. Margin improvement is a key management
focus for the second half.
Axiom Group's design and print activities produced another solid result, with
turnover up by 8.5% to £1.1 million and an operating margin of 9%. The second
half is seasonally weaker and will also be affected by anticipated lower
volumes from a major customer.
Quadrant Group's stated goals for this year are to deliver strong organic
growth and sustainable operating and bottom line profits. Current order books
and levels of activity suggest that these objectives will be achieved.
15 February 2001
Consolidated Profit and Loss Account
For the half year ended 30 November 2000
Notes Unaudited Unaudited Audited
Half year to Half year to Year to
30 Nov 2000 30 Nov 1999 31 May 2000
£'000 £'000 £'000
Turnover
Continuing operations 1 8,096 5,401 13,192
Discontinued operations 1 - 2,825 6,096
8,096 8,226 19,288
Less: share of joint venture's 2 (67) - -
turnover
Group turnover 8,029 8,226 19,288
Cost of sales (5,659) (5,301) (12,493)
Gross profit 2,370 2,925 6,795
Net operating expenses (2,253) (3,253) (7,180)
Operating profit/(loss)
Continuing operations 117 (250) (159)
Discontinued operations - (78) (226)
117 (328) (385)
Share of operating profit in 2, 3 42 - -
joint venture and associate
Total Group operating 159 (328) (385)
profit/(loss)
Exceptional items
- Continuing operations
Profit on disposal of fixed - 1,235 1,235
assets
- Discontinued operations
Additional consideration from 4 168 - -
sale of business
Provisions and asset impairment - - (450)
on disposal of business
168 1,235 785
Profit before interest 327 907 400
Net interest payable 5 (36) (114) (146)
Profit before taxation 291 793 254
Tax charge 6 (6) - -
Profit on ordinary activities 285 793 254
after taxation
Minority interests - - -
Profit for the period - 285 793 254
transferred to reserves
Basic earnings per ordinary 7 4.4p 12.6p 4.1p
share
Diluted earnings per ordinary 7 4.4p 12.6p 4.1p
share
Consolidated Balance Sheet
30 November 2000
Unaudited Unaudited Audited
30 Nov 2000 30 Nov 1999 31 May 2000
£'000 £'000 £'000
Notes
Fixed assets
Intangible assets 44 47 46
Tangible assets 1,619 2,176 2,044
Investments:
Investment in - share of gross 2 1,702 - -
joint venture assets
- share of gross (1,203) - -
liabilities
499 - -
Investment in associate 3 241 - -
Total investments 740 - -
2,403 2,223 2,090
Current assets
Stocks 1,279 1,182 936
Debtors 4,485 4,090 4,837
Cash at bank and in hand - 7 109
5,764 5,279 5,882
Creditors: amounts falling due within one (4,602) (3,840) (4,650)
year
Net current assets 1,162 1,439 1,232
Total assets less current liabilities 3,565 3,662 3,322
Creditors: amounts falling due after more (93) (65) (92)
than one year
Provisions for liabilities and charges (77) (148) (120)
Net assets 3,395 3,449 3,110
Capital and reserves
Called up share capital 1,288 1,254 1,288
Share premium account 6,934 6,798 6,934
Other reserves 4,387 4,387 4,387
Profit and loss account (9,214) (8,990) (9,499)
Equity shareholders' funds 3,395 3,449 3,110
Consolidated Cash Flow Statement
For the half year ended 30 November 2000
Unaudited Unaudited Audited
Half year to Half year to Year to
30 Nov 2000 30 Nov 1999 31 May 2000
Notes £'000 £'000 £'000
Net cash inflow/(outflow) from operating 551 (271) (51)
activities
Returns on investments and servicing of
finance
Interest received 1 3 9
Interest paid (40) (153) (192)
(39) (150) (183)
Net capital expenditure and financial
investment
Purchase of fixed assets (373) (467) (863)
Sale of fixed assets 45 4,336 4,430
(328) 3,869 3,567
Acquisitions and disposals
Investment in joint venture 2, 8 (475) - -
Net investment in associate 3, 8 (100) - -
(575) - -
Cash inflow/(outflow) before financing (391) 3,448 3,333
Financing
Shares issued - - 170
New loans - 1,020 1,020
Repayment of loans - (3,252) (3,376)
Payment of principal under finance leases (53) (18) (31)
(53) (2,250) (2,217)
Increase/(decrease) in cash (444) 1,198 1,116
Reconciliation of net cash flow to movement in net debt
For the half year ended 30 November 2000
Unaudited Unaudited Audited
Half year to Half year to Year to
30 Nov 2000 30 Nov 1999 31 May 2000
£'000 £'000 £'000
(Increase)/decrease in cash in the period 444 (1,198) (1,116)
Decrease in debt and lease financing (53) (2,250) (2,387)
Change in net debt arising from cash flows 391 (3,448) (3,503)
New finance leases 62 - 49
Movement in net debt in the period 453 (3,448) (3,454)
Opening net debt 481 3,935 3,935
Closing net debt 934 487 481
Reconciliation of operating profit to operating cash flows
For the half year ended 30 November 2000
Unaudited Unaudited Audited
Half year to Half year to Year to
30 Nov 2000 30 Nov 1999 31 May 2000
£'000 £'000 £'000
Operating profit/(loss) 117 (328) (385)
Depreciation and amortisation 191 375 712
(Profit)/loss on sale of fixed assets (4) 25 (7)
Increase in stocks (679) (201) (5)
(Increase)/decrease in debtors 445 (125) (872)
Increase/(decrease) in creditors 481 (17) 506
Net cash inflow/(outflow) from operating 551 (271) (51)
activities
Reconciliation of movements in shareholders' funds
For the half year ended 30 November 2000
Unaudited Unaudited Audited
Half year to Half year to Year to
30 Nov 2000 30 Nov 1999 31 May
2000
£'000 £'000 £'000
Total recognised gains - profit for the period 285 793 254
Share issue proceeds - - 170
Goodwill previously written off to reserves - - 30
Net movement on shareholders' funds 285 793 454
Opening shareholders' funds 3,110 2,656 2,656
Closing shareholders' funds 3,395 3,449 3,110
Notes
1. Continuing operations comprise the businesses of Quadrant Systems, Quadrant
Video Systems ('QVS'), Axiom Design & Print, Synectic Systems and C3 Design &
Print. Turnover from continuing operations also includes 50% of the turnover
of Quest Flight Training Limited ('Quest', see note 2). Discontinued
operations comprise the former audio-visual equipment, systems and services
business ('The AV Business') of QVS (see note 3).
2. On 20 July 2000 Quest was awarded a contract by the UK Ministry of Defence
for the provision of aircrew simulator training for the RAF's Boeing E-3D
AWACS aircraft. Quest was specifically set up for this programme as a 50%
owned joint venture company between Quadrant Group plc and Evans & Sutherland
Computer Corporation. The activities of Quest have been reported as a joint
venture under the gross equity method of accounting.
3. The AV Business was transferred into a previously dormant subsidiary of QVS,
Quadrant Visual Solutions Limited ('VSL'), with effect from 1 June 2000, and
QVS subsequently completed the sale of 80.65% of the share capital of VSL to
the management of VSL. The activities of VSL have been reported as an
associated company under the equity method of accounting from 1 June 2000.
The amount shown as investment in associate includes secured loan notes of
£200,000 issued by VSL to QVS and repayable in instalments by 2007.
4. The exceptional item for the half year ended 30 November 2000 of £168,000
represents additional consideration payable for Yewlands Engineering Co.
Limited which was sold in 1997, under a sale agreement which provided that
additional consideration would be payable upon utilisation of tax losses
within the company.
5. Net interest payable includes the appropriate share of interest payable and
receivable by joint ventures and associates.
6. The tax charge represents the Group's share of joint venture tax charges. No
tax charges arise in either Quadrant Group plc, its subsidiaries or associate
company.
7. The calculation of earnings per share is based on the profit after taxation
for the period of £285,000 (half year to 30 November 1999: £793,000; year to
31 May 2000: £254,000) and on 6,439,956 shares (half year to 30 November
1999: 6,269,956; year to 31 May 2000: 6,271,349), being the weighted average
number of shares in issue and ranking for dividend during the period.
8. There were no dilutive potential ordinary shares in either the half year
ended 30 November 2000 nor the year ended 31 May 2000.
Net cash outflows from acquisitions and disposals in the half year ended 30
November 2000 arose from the investment of £475,000 in 50% of the issued
share capital of Quest; subscription for £200,000 of loan notes in VSL less
the proceeds of £100,000 arising from the disposal of 80.65% of the issued
share capital of VSL.
9. The half year figures have not been audited nor reviewed by the Group's
auditors and do not constitute statutory accounts. The comparative figures
for 31 May 2000 have been abridged from the statutory accounts for the year
ended 31 May 2000. The Auditors' opinion on these accounts was unqualified
and did not contain any statements under section 237(2) or (3) of the
Companies Act 1985. The statutory accounts for the year ended 31 May 2000
have been filed with the Registrar of Companies.
10. Copies of this statement are being sent to shareholders and will be
available from the Company's registered office at North Court House, Morton
Bagot, Studley, Warwickshire B80 7EL.
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