Preliminary Results

RNS Number : 4390W

Amino Technologies PLC

28 January 2013

 



28 January 2013

AMINO TECHNOLOGIES PLC

FINAL RESULTS

FOR THE YEAR ENDED 30 NOVEMBER 2012

Amino Technologies plc ("Amino" or the "Company"; stock code: AMO), the Cambridge-based leader in digital entertainment solutions for IPTV, OTT and in-home multimedia distribution, announces audited results for the year ended 30 November 2012 which demonstrate strong growth in profitability and cash.

Overview:

Financial results

-      Gross profit up 20.8% to £17.5m (2011: £14.5m)

-      Underlying Gross margins up 9.3 percentage points to 42.0% (2011: 32.7%)

-      EBITDA of £6.2m, an increase of 42.2% (2011: £4.4m)

-      Operating profit of £2.8m (2011: loss of £0.6m)

-      Underlying revenue down 6.1% to £41.7m (underlying 2011: £44.4m; reported 2011: £51.8m) reflecting continued focus on profitability

-      Year-end net cash 21.3% higher at £17.1m (2011: £14.1m)

-      Proposed final dividend of 3p, an increase of 50% (2011: 2p) with an expectation of continued dividend growth of no less than 15 per cent per annum for each of the next two years

Operational highlights:

-      Strong focus on operational management

o  Improved execution delivered by new, refreshed management team

o  Strong working relationships maintained with supply chain partners

o  Primary technology facility located in the Cambridge area from 2013 to achieve productivity improvements

-      Strengthening the Amino product range

o  Innovative new products launched

o  More focused portfolio range proving key differentiator against competitors

o  Aminet software stack now integrated across entire product range

o  Technology roadmap to ensure faster development of market-leading solutions

-      Continued delivery to existing and new markets

o  Consistent demand for products in our key markets

o  Signed agreement to supply tier one European operator with Live media gateway platform

Commenting on the results, Keith Todd CBE, Non-Executive Chairman, stated:

"Amino has performed strongly in 2012, and we have seen significant increases in both profit and cash flow, alongside material improvements in its operational execution. This has allowed us to sharply increase shareholder returns.

Moving into 2013, we will continue to target growth which is both high margin and cash flow generative, leveraging off a simplified supply chain and more targeted product range. Whilst exercising a suitable degree of caution, we are well positioned to meet its expectations for the financial year ahead."

For further information please contact:

Amino Technologies:	[phone]
Keith Todd CBE, Non Executive Chairman	www.aminocom.com
Donald McGarva, Chief Executive Officer
Julia Hornby, Chief Financial Officer
FTI Consulting:	[phone]
Matt Dixon / Clare Thomas
finnCap Limited	[phone]
Marc Young / Charlotte Stranner - Corporate Finance
Victoria Bates / Stephen Norcross - Corporate Broking

Chairman's statement

The Company's focus on profitable growth, cash generation and operational execution has delivered a good result this year.  It is very pleasing to announce a proposed increased full year dividend of 3p for the year ended 30 November 2012.

At the start of the year, the Board made it clear that the Company's stronger, more focused product range - supported by exacting operational performance standards - would be the platform on which to build profitable growth.

The Company has delivered against this strategy, with encouraging results and significant early traction for new innovative products launched during the year. Important improvements have been made to operational performance, where lead times for product delivery have been reduced and cost reductions achieved.  This has, in turn, fed through to margin growth. Cash generation has been particularly strong and the Company enters 2013 with a significantly improved cash position despite the rise in shareholder returns.

Relationships with key partners have been enhanced and in both established and emerging markets, the Company has secured a good mix of recurring, new and returning business across its product range. It was encouraging to see the positive reception to newer products continue, post period end, at CES, the major annual consumer technology show that took place in Las Vegas earlier this month.  The clear acceptance seen from visitors at the show reconfirmed our view that the Company's strategy is closely aligned with customer requirements and market direction.

This performance is testimony to the new management team, which has provided a refreshed and rigorous impetus to the Company's financial and operational performance.   It is also important to recognise the efforts of the wider Amino staff who have worked hard this year to deliver these good results. On behalf of the Board, I would like to thank them for their commitment.

Dividend

In line with guidance at the full year results for 2011, when the Company announced its maiden dividend, the Board now intends to introduce a progressive dividend policy. The Board is pleased to recommend a full year dividend of 3p (FY 2011: full year dividend of 2p) for the year ended 30 November 2012, a 50 per cent increase year on year, with an expectation to provide both an interim and full year dividend moving forward. Furthermore, the Board expects this dividend to grow by no less than 15 per cent per annum for each of the next two years.

Subject to shareholder approval at the annual general meeting to be held on March 27, 2013, the dividend will be payable on 15th April 2013, to shareholders on the register at 2 April 2013 with a corresponding ex-dividend date of 27 March 2013.

Outlook

Amino has performed strongly in 2012, and seen significant increases in both profit and cash flow, alongside material improvements in its operational execution. This has allowed the Company to sharply increase shareholder returns. Moving into 2013, the Company will continue to target growth which is both high margin and cash flow generative, leveraging off a simplified supply chain and more targeted product range. Whilst exercising a suitable degree of caution, the Company is well positioned to meet its expectations for the financial year ahead. 

Chief Executive's statement:

At the end of my first full year as Chief Executive, I am pleased to report continued momentum in our three key areas of strategic focus. In what has been a turbulent year for the industry - with the effects of natural disasters in the prior year affecting key areas of the supply chain - it is gratifying to see that Amino has emerged as a more focused, lean and innovative business with an enhanced position in target markets.

Customers and markets:

The Company's markets are dynamic and exciting with operator and service provider requirements evolving rapidly to meet consumer demand for new kinds of entertainment experiences. What was leading edge 18 months ago - for example, in the provision of "over the top" (OTT) capability for the delivery of content over the open Internet - is now a standard feature requirement. The ability to provide multiscreen delivery of content around the home to the TV, mobile device or laptop is also shaping customers' service offerings and, in turn, product definition.

Amino's ability to innovate, particularly in OTT, has positioned the Company to capitalise on this changing landscape. Demand for products in the Company's key markets, such as North America and Western Europe, has been consistently good during the year. Repeat orders from long-term customers made a solid contribution to performance. The continued rollout of fibre-to-the-home in several addressable markets has opened up new opportunities as operators seek to capitalise on increasing bandwidth and its delivery capabilities for advanced pay TV and OTT services.

Performance in other regions has been more mixed with for example the continued consolidation in the Russian market impacting sales. However, in emerging markets such as Latin America, the Company is making good progress and continues to develop strong commercial relationships with a number of key service providers.

Encouragingly, new products launched during the year - such as the Live media gateway platform - are beginning to gain traction with a significant new contract to supply a tier one European operator announced in December 2012.

Focused "win back" campaigns have also yielded positive results - particularly in North America but also in other markets as well. The Amino "brand", with its hallmarks of software and hardware quality, innovation and reliability - and exceptionally low product return rates - is proving a key differentiator against competitors, including new market entrants. The availability of a lower specification device aligned to the demands of emerging markets has also been critical in securing significant contracts where service provision is highly cost-driven, particularly in Eastern Europe.

Products:

Amino has developed a clear and compelling portfolio, offering products that are aligned with a defined range of market price points. During the year, it was decided to focus all product development around the proven Aminet software stack which has been at the core of the Company's research and product development for over 10 years.

As well as the IPTV/OTT range, Aminet is now the key pay-TV component in the Live media gateway which was launched at IBC 2012. This cost-optimised product, which has already enjoyed early market traction with a European tier-one operator, aligns trusted Aminet pay-TV performance and the latest Intel® chipset alongside an Android-driven environment for the deployment of television-based applications and OTT services.

The Company continues to develop strong partnerships with its extensive ecosystem - particularly with Intel® - and has closely aligned its technology roadmap to ensure customers continue to benefit from market-leading products and solutions.

Operational performance:

Continuous improvement in operational performance has underpinned the Company's solid delivery against its margin improvement targets. Coupled with a focus on higher margin opportunities, the ability to consistently execute against internal lead time improvement targets and "cost down" initiatives - without compromising quality - has been a hallmark of the Company during 2012.

Strong working relationships with supply chain partners have been critical in mitigating the impact on hard disk drive (HDDs) supply caused by the natural disasters in Japan and Thailand in late 2011. The Company experienced minimal disruption and modest short-term price rises for HDDs settled down to normal industry levels with minimal impact on pricing and margin.

To further improve operational efficiency, the Company's technical research and development capabilities will now be focused in Cambridge with the Swedish office scheduled to close early in 2013.  The Company expects to achieve productivity improvements from single site working.

Our priority:

The Company remains focused on its customers, product innovation and operational performance into 2013. Innovation is central to Amino's proposition and will continue to drive product development as the Company strives to develop and grow its addressable markets.

Donald McGarva

Chief Executive Officer

Chief Financial Officer's report

Results for the year

The Company's continued focus on securing higher margin business and on delivering continual operational improvements has led to an increase in Gross profit by £3.0m to £17.5m, (2011 £14.5m)

After adjusting for the initial leading Tier 1 customer order of 50,000 units at nil margin recognised in 2011, revenue for the full year was £41.7m - or 6.1% lower than that achieved in 2011 (2011: £51.8m; Underlying 2011: £44.4m)

The underlying sales performance reflects strong sales generated during the period from customers in the Netherlands, where sales were £3.7m higher than in 2011.  This strong performance was offset by lower underlying sales to our leading Tier 1 customer in Italy, which were £4.2m lower following the phasing of deliveries concentrated in 2011. Whilst, there is limited further demand for our premium product with this customer, there are ongoing discussions around the opportunity for the supply of a lower functionality product.

As identified at the end of 2011, unsettled conditions in the Russian market have continued. The structural issues identified at the end of 2011 remain unresolved and, as a consequence, this market has remained challenging.  Sales in Russia were £2.0m lower than those achieved in 2011.

In Eastern Europe, however, the Company has seen some encouraging and positive progress, securing two contract wins during the period for the delivery of HD products in this region. These tenders were won as a result of the new lower cost, lower functionality product announced at the end of 2011, designed specifically to tackle highly competitive market dynamics in Eastern Europe and Latin America. As a result of this progress, the performance for the rest of the world was maintained and sales were in line with those achieved in 2011

Reported gross margin increased by 14 percentage points from 28.0% in 2011 to 42.0% in 2012. Adjusting for the initial Italian order of 50,000 units at nil margin recognised in the prior year, gross margin has increased by 9.3 percentage points to 42.0% (H1 2011: 32.7%).

This margin improvement is due to a combination of:

·     Increased migration to new IPTV product which provides better economies of scale, flexibility and more focused operational performance

·     Continued focus on supply chain including simplifying product design, focus on product cost reduction, eliminating or reducing manual processes which has led to a reduction in unit costs hence lifting the overall margin

·     Provision of £0.8m for legacy stock in 2011 which depressed the prior year margin by around 2%

The well-documented supply chain issues that affected the wider industry during 2011 have had minimal impact on Amino's performance and component costs have also remained under control. Customer lead times have been significantly reduced and improvements made to product packaging, further improving service levels and reducing costs.

Operating expenses before amortisation and depreciation have increased by £1.2m to £11.3m (2011: £10.1m) through compensation for loss of office, incentivisation of staff and a lower capitalisation rate of product development costs in 2012.    

Shortly after the year end, the announcement to close the Swedish office was made. This will improve operational efficiency by locating research and development resource to a single site in Cambridge. This will result in closure costs of around £0.8m. Additional headcount will be required in Cambridge therefore this closure is not expected to generate significant cost savings.

Year-end headcount was 105 (2011: 118) and the average number of employees during the year totalled 114 (2011: 120)

EBITDA at £6.2m is £1.8m higher than the prior year (2011: £4.4m). The launch of new products during 2011 has resulted in a corresponding increase in amortisation of £0.8m during the year. In addition, in 2011, an impairment charge of £2.3m was incurred relating to the goodwill on the Swedish business acquired in 2009.  The group returned to operating profit during the year, which at £2.8m is £3.4m better than the prior year (2011: loss of £0.6m).

Balance sheet

Total equity was £22.4m at the year-end (2011: £20.6m) which is equivalent to 43.1p per share (2011: 38.2p) of which £17.1m (2011: £14.1m), or 32.8p per share (2011: 26.2p per share), is represented by net cash balances.

Net current assets are £17.6m (2011: £14.6m), the principal components of which are net cash balances of £17.1m (2011: £14.1m), trade and other receivables of £7.9m (2011: £10.4m), stock of £2.1m (2011: £4.0m) and trade and other payables of £9.6m (2011: £14.0m). 

·     71% of trade receivables at 30 November 2012 are insured (2011: 71%).  Trade receivables over 60 days at 30 November 2012 but not provided for amounted to £0.1m (2011: £0.3m) demonstrating the Group's strong debtor management

·      The reduction in stock levels and trade and other payables at the year-end was largely due to year-end supply chain management.

The group's focus on profitable underlying revenue growth, tight cost control, and strong working capital management, has delivered further improvements in the Company's cash balance, which stood at £17.1m (2011: £14.1m).  This £3.0m improvement is despite total cash outflows of £1.0m in respect of dividend payments in the first half of 2012.

At the balance sheet date, the Group had forward foreign exchange contracts to convert €1.25m into GBP at average exchange rates of €1.2371 and SEK 6.0m at SEK 10.7811 (2011: €2.0m at average conversion rate of €1.1385).  £6.0m (2011: £3.1m) of net current assets is denominated in US dollars and £1.5m of assets (2011: £1.5m) in Euro.

At 30 November 2012, the Group has approximately £37m of unrecognised tax losses and other timing differences available to carry forward to set against future taxable profits.  In addition, losses of £2.8m are recognised by the deferred tax asset of £0.6m. At the current taxation rates, the unrecognised deferred tax asset is £9.0m.

Equity

The issued share capital of the Group is 57.9m (2011: 57.9m) ordinary shares, of which 5.1% were held by the Employee Benefits Trust and 4.9% held in treasury by the company following the purchase of 2.8m shares during the prior year, leaving 52.2m shares held external to the group.

Julia Hornby

Chief Financial Officer

Consolidated Income Statement

For The Year Ended 30 November 2012

	Notes	Year to 30 November 2012 £000s	Year to 30 November 2011 £000s
Revenue	2	41,700	51,815
Cost of sales		(24,160)	(37,295)
		__________	__________
Gross profit		17,540	14,520
Operating expenses		(14,709)	(15,146)
		__________	__________
Operating profit / (loss)		2,831	(626)
Analysed as:
Gross profit		17,540	14,520
Selling, general and administrative expenses		(6,603)	(6,125)
Research and development expenses		(4,746)	(4,042)
		__________	__________
EBITDA		6,191	4,353
Depreciation		(235)	(379)
Amortisation		(3,125)	(2,321)
Impairment of intangible assets		-	(2,279)
		__________	__________
Operating profit / (loss)		2,831	(626)
Finance expense		(1)	(8)
Finance income		55	15
		__________	__________
Net finance income		54	7
		__________	__________
Profit / (loss) before corporation tax		2,885	(619)
Corporation tax (charge) / credit		(43)	410
		__________	__________
Profit / (loss) for the year attributable to equity holders		2,842	(209)
		__________	__________
Basic earnings / (loss) per 1p ordinary share	3	5.45p	(0.39p)
Diluted earnings / (loss) per 1p ordinary share	3	5.40p	(0.39p)

All amounts relate to continuing activities.

Consolidated Statement of Comprehensive Income

For The Year Ended 30 November 2012

		Year  to 30 November 2012 £000s	Year  to 30 November 2011 £000s
Profit / (loss) for the year		2,842	(209)
		__________	__________
Foreign exchange difference arising on consolidation		(45)	7
		__________	__________
Other comprehensive (expense) / income		(45)	7
		__________	__________
Total comprehensive income / (expense) for the financial year attributable to equity holders		2,797	(202)
		__________	__________

Consolidated Balance sheet

As At 30 November 2012

			Notes	As at 30 November 2012 £000s	As at 30 November 2011 £000s
Assets
Non-current assets
Property, plant and equipment				579	672
Intangible assets				3,478	4,492
Deferred income tax assets				644	671
Trade and other receivables				162	168
				__________	__________
				4,863	6,003
				__________	__________
Current assets
Inventories				2,097	4,016
Trade and other receivables			4	7,936	10,404
Derivative financial instruments				5	42
Cash and cash equivalents				17,103	14,124
				__________	__________
				27,141	28,586
				__________	__________
Total assets				32,004	34,589
				_________	_________
Capital and reserves attributable to equity holders of the business
Called-up share capital				579	579
Share premium				126	126
Capital redemption reserve				6	6
Foreign exchange reserves				542	587
Other reserves				16,389	16,389
Retained earnings				4,803	2,940
				__________	__________
Total equity				22,445	20,627
				_________	_________
Liabilities
Current liabilities
Trade and other payables			5	9,559	13,962
				__________	__________
Total liabilities				9,559	13,962
				__________	__________
Total equity and liabilities				32,004	34,589
				_________	_________

Consolidated Statement of Cash Flows

For The Year Ended 30 November 2012

		Notes	Year to November 2012	Year to November 2011
			£000s	£000s
Cash flows from operating activities
Cash generated from operations		6	5,968	13,745
Corporation tax received			312	565
			__________	__________
Net cash generated from operating activities			6,280	14,310
			__________	__________
Cash flows from investing activities
Purchases of intangible assets			(2,111)	(2,648)
Purchases of property, plant and equipment			(148)	(22)
Net interest received			54	7
			_________	_________
Net cash used in investing activities			(2,205)	(2,663)
			_________	_________
Cash flows from financing activities
Proceeds from exercise of employee share options			8	85
Dividends paid			(1,043)	-
Purchase of own shares			-	(1,207)
			__________	__________
Net cash used in financing activities			(1,035)	(1,122)
			__________	_________
Net increase in cash and cash equivalents			3,040	10,525
Cash and cash equivalents at beginning of year			14,124	3,588
Effects of exchange rate fluctuations on cash held			(61)	11
			_________	_________
Cash and cash equivalents at end of year			17,103	14,124
			__________	__________

Consolidated Statement of Changes in Shareholders' Equity

For The Year Ended 30 November 2012

	Share capital £000s	Share premium £000s	Other reserves £000s	Foreign exchange reserve £000s	Capital redemption reserve £000s	Profit and loss £000s	Total £000s
Shareholders' equity at 30 November 2010	579	126	16,389	580	6	4,163	21,843
	_________	_________	____  _____	_________	_________	_________	_________
Loss for the year	-	-	-	-	-	(209)	(209)
Other comprehensive income	-	-	-	7	-	-	7
	_________	_________	_________	_________	_________	_________	_________
Total comprehensive expense for the period attributable to equity holders	-	-	-	7	-	(209)	(202)
	_________	_________	_________	_________	_________	_________	_________
Share option compensation charge	-	-	-	-	-	108	108
Exercise of employee share options	-	-	-	-	-	85	85
Purchase of own shares	-	-	-	-	-	(1,207)	(1,207)
	_________	_________	_________	_________	_________	_________	_________
Total transactions with owners	-	-	-	-	-	(1,014)	(1,014)
	_________	_________	_________	_________	_________	_________	_________
Total movement in shareholders' equity	-	-	-	7	-	(1,223)	(1,216)
	_________	_________	_________	_________	_________	_________	_________
Shareholders' equity at 30 November 2011	579	126	16,389	587	6	2,940	20,627
	_________	_________	____  _____	_________	_________	_________	_________
Profit for the year	-	-	-	-	-	2,842	2,842
Other comprehensive expense	-	-	-	(45)	-	-	(45)
	_________	_________	_________	_________	_________	_________	_________
Total comprehensive income for the period attributable to equity holders	-	-	-	(45)	-	2,842	2,797
	_________	_________	_________	_________	_________	_________	_________
Share option compensation charge	-	-	-	-	-	56	56
Exercise of employee share options	-	-	-	-	-	8	8
Dividends paid	-	-	-	-	-	(1,043)	(1,043)
	_________	_________	_________	_________	_________	_________	_________
Total transactions with owners	-	-	-	-	-	(979)	(979)
	_________	_________	_________	_________	_________	_________	_________
Total movement in shareholders' equity	-	-	-	(45)	-	1,863	1,818
	_________	_________	_________	_________	_________	_________	_________
Shareholders' equity at 30 November 2012	579	126	16,389	542	6	4,803	22,445
	_________	_________	_________	_________	_________	_________	_________

1.    Basis of preparation

The preliminary announcement for the year ended 30 November 2012 has been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information set out above, which was approved by the Board on 28 January 2013, is derived from the full Group accounts for the year ended 30 November 2012 and does not constitute the statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group accounts on which the auditors have given an unqualified report, which does not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2012, will be delivered to the Registrar of Companies in due course.

2.   Geographical external customer revenue analysis

	Year to 30 November 2012 £000s	Year to 30 November 2011 £000s
United Kingdom	526	963
Russia	1,460	3,518
Netherlands	11,510	7,789
Italy	1,405	13,023
USA	15,563	14,950
Rest of the World	11,236	11,572
	_________	_________
	41,700	51,815
	_________	_________

For this disclosure revenue is determined by the location of the customer.

3.    Profit/(Loss) per share

		Year  to 30 November 2012	Year  to 30 November 2011
Profit/(Loss) attributable to ordinary shareholders		2,841,953	(208,850)
Profit attributable to ordinary shareholders excluding exceptional items		2,841,953	2,070,401
		_________	_________
Weighted average number of shares (Basic)		52,131,082	53,955,749
		_________	_________
Weighted average number of shares (Diluted)		52,583,136	54,363,806
		_________	_________
Basic earnings / (loss) per share		5.45p	(0.39p)
		________	________
Diluted earnings / (loss) per share		5.40p	(0.39p)
		_________	_________
Basic earnings per share excluding exceptional items		5.45p	3.84p
		________	________
Diluted earnings per share excluding exceptional items		5.40p	3.81p
		________	________

The calculation of basic earnings per share is based on profit/(loss) after taxation and the weighted average of ordinary shares of 1p each in issue during the period. The Company holds 2,844,857 of its own shares in treasury and these are excluded from the weighted average above. The basic weighted average number of shares also excludes 2,913,581 shares held by the EBT.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.  The Group has only one category of dilutive potential ordinary shares; those share options where the exercise price is less than the average market price of the Company's ordinary shares during the year. There is no dilutive effect on unadjusted loss per share in respect of the year ended 30 November 2011 as the Group was loss making.

The profit attributable to ordinary shareholders excluding exceptional items disclosed for the year ended 30 November 2011 is derived by adding back the exceptional impairment of £2,279,251 disclosed on the face of the income statement.

4.   Trade and other receivables

			As at 30 November 2012 £000s	As at 30 November 2011 £000s
Current assets:
Trade receivables			7,024	8,222
Less: provision for impairment of receivables			(187)	(60)
			_________	_________
Trade receivables (net)			6,837	8,162
Other receivables			54	68
Corporation tax receivable			60	388
Prepayments			985	1,786
			_________	_________
			7,936	10,404
			_________	_________
Non current assets:
Other receivables			162	168
			_________	_________

Other receivables comprise rent deposits.

5.   Trade and other payables

			As at 30 November 2012 £000s	As at 30 November 2011 £000s
Trade payables			4,629	8,634
Social security and other taxes			205	214
Other payables			63	9
Accruals			4,468	4,871
Deferred income			194	234
			_________	_________
			9,559	13,962
			_________	_________

 

6.   Cash generated from operations

		Year  to 30 November 2012 £000s	Year  to 30 November 2011 £000s
Profit / (Loss) before corporation tax		2,885	(619)
Adjustments for:
Amortisation charge		3,125	2,321
Depreciation charge		235	379
Impairment charge		-	2,279
Loss on disposal of property, plant and equipment		5	69
Share-based payment charge		56	108
Loss / (Gain) on derivative financial instruments		37	(66)
Finance income - net		(54)	(7)
Exchange differences		16	(9)
Decrease in inventories		1,919	7,946
Decrease in trade and other receivables		2,147	1,974
(Decrease) in trade and other payables		(4,403)	(630)
		_________	_________
Cash generated from operations		5,968	13,745
		_________	_________

Ends

 

END

 

 

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