Interim Results

Quadnetics Group PLC 26 January 2004 Press Release 26 January 2004 Quadnetics Group plc Interim Results for the six months ended 30 November 2003 Quadnetics Group plc, a leader in the design, integration and control of advanced CCTV and networked video systems, reports its interim results for the half year ended 30 November 2003. Highlights - Profit before tax and goodwill amortisation was £648,000 (2002: £622,000) - Improved net operating profit margin of 9.0% (2002: 6.7%) - Turnover of £7.05 million (2002: £9.59 million) - Net cash at 30 November 2003 of £1.44 million (2002: £1.39 million net borrowings) - Award winning product range now in place to address worldwide markets Commenting on the results, Russ Singleton, Chief Executive said: 'These results show that we are on track with our strategy. Whilst turnover has fallen during the period due to reduced involvement in low margin sub-contract civil works we have seen our margins improve in all areas of the business. 'We will also be announcing today a very significant step forward for Quadnetics involving an acquisition and major expansion of our equity capital and shareholder base.' For further information, please contact: Quadnetics Group plc Tel: +44 (0) 1527 850 080 Russ Singleton, Chief Executive Email: r.singleton@quadnetics.com www.quadnetics.com Brewin Dolphin Securities Tel: +44 (0) 113 241 0130 Neil Baldwin Media enquiries: Bankside Tel: +44 (0) 20 7444 4140 Peter Curtain / Ariane Vacher Email: ariane.vacher@bankside.com Chairman's Statement Results The Board of Directors of Quadnetics Group plc is pleased to announce that in the half year to 30 November 2003 the Group produced a profit before tax and goodwill amortisation of £648,000 (2002: £622,000). After providing for goodwill amortisation of £32,000 (2002: £1,000) and taxation of £162,000 (2002: £nil), the profit on ordinary activities after taxation attributable to shareholders was £454,000 (2002: £457,000). Turnover for the period was £7,050,000 (2002: £9,590,000). Earnings per share for the period were 5.7 pence on a fully diluted basis (2002: 7.1 pence). The Group ended the period with net cash of £1,442,000 (2002: net borrowings £1,388,000). Dividend The Board is not recommending the payment of an interim dividend although, subject to shareholder approval, the Group anticipates paying an increased final dividend after the end of our financial year. Operational Review These interim results are in accordance with our expectations and reflect the fulfilment of several key objectives for the Group. Firstly, turnover has reduced by 26%, significantly due to our reduced involvement with low margin sub-contract civil works such as duct and cable installation. Despite this drop, the profit before tax and goodwill amortisation is slightly ahead of the corresponding period last year. This result reflects a significant improvement in our net operating profit margin to 9.0% (2002: 6.7%). We had previously indicated our determination to improve margins. This objective has been achieved through a combination of an increased contribution from ongoing service and maintenance revenue and an increased proportion of higher value added contracts. We have continued our product development programme at Synectics Systems Limited and we now have ready a range of award winning products addressing the rapidly growing requirement for the control, recording and management of complex digital CCTV systems. Part of the costs of developing these products fell in the half year to November 2003 and yet significant sales will not occur until the second half. In accordance with our usual practice we have written off all development costs as they are incurred to the profit and loss account. The first orders for these new generation products were received in December 2003 and we expect that sales of these products will generate an important contribution from now onwards. The Future The Group is well positioned at the forefront of the rapidly growing market for digital solutions to video surveillance. The capabilities of the new generation of networked digital CCTV products and systems are vastly greater than the previous generation of analogue products, with new applications emerging continually. The CCTV systems we are now able to offer address a worldwide market which is increasingly converging with mainstream computer technology. We believe we have the right products at the right time and we are optimistic for the future of the Group. In a separate announcement being made today, we will be seeking shareholders' approval for a very significant step forward for the Group, involving an acquisition and a major expansion of our equity capital and shareholder base. Peter Rae Chairman 26 January 2004 Consolidated Profit & Loss Account For the half year ended 30 November 2003 Unaudited Unaudited Audited Half year to Half year to Year to 30 Nov 30 Nov 31 May 2003 2002 2003 Notes £'000 £'000 £'000 Turnover 1 7,050 9,590 20,299 Cost of sales (4,606) (7,209) (15,110) Gross profit 2,444 2,381 5,189 Net operating expenses (1,840) (1,742) (3,773) Operating profit 604 639 1,416 Operating profit before goodwill amortisation 636 640 1,439 Goodwill amortisation (32) (1) (23) Net interest receivable/(payable) 12 (18) (9) Profit on ordinary activities before taxation 616 621 1,407 Profit before tax and goodwill amortisation 648 622 1,430 Goodwill amortisation (32) (1) (23) Tax charge on ordinary activities 2 (162) - - Profit on ordinary activities after taxation 454 621 1,407 Minority interests - (164) (232) Profit on ordinary activities after taxation and 454 457 1,175 minority interests Dividends - - (150) Profit for the period - transferred to reserves 454 457 1,025 Basic earnings per ordinary share 3 6.1p 7.1p 17.4p Diluted earnings per ordinary share 3 5.7p 7.1p 17.0p Consolidated Balance Sheet 30 November 2003 Unaudited Unaudited Audited 30 Nov 30 Nov 31 May 2003 2002 2003 £'000 £'000 £'000 Fixed assets Intangible assets 1,201 31 1,233 Tangible assets 526 490 501 1,727 521 1,734 Current assets Stocks 1,488 1,744 1,767 Debtors 4,636 6,779 4,375 Cash at bank and in hand 1,442 - 3,376 7,566 8,523 9,518 Creditors: amounts falling due within one year (3,306) (5,055) (5,722) Net current assets 4,260 3,468 3,796 Total assets less current liabilities 5,987 3,989 5,530 Creditors: amounts falling due after more than one (24) (32) (25) year Provisions for liabilities and charges (52) (10) (48) Net assets 5,911 3,947 5,457 Capital and reserves Called up share capital 1,496 1,288 1,496 Share premium account 3,770 6,934 3,770 Other reserves 835 4,387 835 Profit and loss account (190) (9,100) (644) Equity shareholders' funds 5,911 3,509 5,457 Equity minority interest - 438 - 5,911 3,947 5,457 Consolidated Cash Flow Statement For the half year ended 30 November 2003 Unaudited Unaudited Audited Half year to Half year to Year to 30 Nov 30 Nov 31 May 2003 2002 2003 Notes £'000 £'000 £'000 Net cash inflow/(outflow) from operating (1,845) (1,133) 3,719 activities Returns on investments and servicing of finance 12 (19) (14) Net capital expenditure and financial investment (78) (6) (88) Acquisitions and disposals - 600 593 Cash inflow/(outflow) before financing (1,911) (558) 4,210 Financing (23) (10) (14) Increase/(decrease) in cash (1,934) (568) 4,196 Notes 1. All turnover derives from the Group's continuing activities comprising Quadrant Video Systems plc and Synectic Systems Limited. 2. The tax charge for the period is based on the estimated rate of corporation tax that is likely to be effective for the full year to 31 May 2004. 3. The calculation of basic earnings per ordinary share is based on the profit after taxation and minority interests for the period of £454,000 (half year to 30 November 2002: £457,000; year to 31 May 2003: £1,175,000) and on 7,477,756 shares being the actual number of shares in issue and ranking for dividend during the period from 1 June 2003 to 30 November 2003 (half year to 30 November 2002: actual number of shares - 6,439,956; year to 31 May 2003: weighted average number of shares - 6,766,627). The calculation of diluted earnings per share in the current period is based on the profit after taxation and minority interests for the year of £454,000 and on 7,932,791 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. There were no dilutive potential ordinary shares in the six months ended 30 November 2002. The calculation of diluted earnings per share in the year ended 31 May 2003 is based on the profit after taxation and minority interests for the year of £1,175,000 and on 6,904,185 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. 4. The half year results have not been audited by the Group's auditors and do not constitute statutory accounts. The comparative figures for the year ended 31 May 2003 have been abridged from the statutory accounts for the year ended on that date. The Auditors' opinion on those 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 2003 have been filed with the Registrar of Companies. 5. Copies of this statement will be sent to shareholders and will be available on the Group's website (www.quadnetics.com) and from Quadnetics Group plc, North Court House, Morton Bagot, Studley, Warwickshire B80 7EL. - Ends - This information is provided by RNS The company news service from the London Stock Exchange

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