Quadnetics Group PLC
AIM : QDG

Quadnetics Group PLC

September 15, 2005 03:41 ET

Quadnetics Group plc: Preliminary Results for the Year Ended 31 May 2005

LONDON, UNITED KINGDOM--(CCNMatthews - Sept. 15, 2005) - Quadnetics Group plc (AIM:QDG), a leader in the design, integration and control of advanced CCTV and networked video systems, reports its Preliminary Results for the year ended 31 May 2005.



Highlights

- Sales Pounds Sterling 26.8 million
(2003/04: Pounds Sterling 18.1m)

- Profit before tax Pounds Sterling 2.3 million
(2003/04: Pounds Sterling 1.9m)

- Underlying profit before tax Pounds Sterling 2.7 million
(2003/04: Pounds Sterling 2.3m)

- Underlying earnings per share 20.0p (2003/04: 21.2 p)

- Proposed final dividend 3p per share, making 4p for the year


Commenting on the results, Russ Singleton, Chief Executive, said: "Synectics has continued to make considerable progress, especially in the North American market where it has won a number of digital security systems contracts against worldwide competition from major companies.

In the UK there has been evidence of renewed commitment to CCTV security from the public sector as well as wider opportunities for on-vehicle transport CCTV going forward. In the current year we expect a return to growth from these areas of the business, and overall good progress in the Group's financial results."



For further information, please contact:

Quadnetics Group plc Tel: +44 (0) 1527 850 080
Russ Singleton
Email: r.singleton@quadnetics.com

Brewin Dolphin Securities
Neil Baldwin Tel: +44 (0) 113 241 0130

Media enquiries:

Abchurch Tel: +44 (0) 20 7398 7700
Peter Curtain / Ariane Comstive
Email: ariane.comstive@abchurch-group.com


Chairman's Statement

During the year Quadnetics Group:

- More than doubled sales of its Synectics proprietary security systems and software

- Established a presence in the large and rapidly growing North American digital security systems market

- Re-organised and expanded the capabilities of its UK transport CCTV business.

Results

In the year to 31 May 2005, Quadnetics Group produced sales of Pounds Sterling 26.8 million (2003/4: Pounds Sterling 18.1 million) on which it earned a profit before tax, and amortisation of goodwill of Pounds Sterling 2.7 million (2003/04: Pounds Sterling 2.3 million, before exceptional costs of Pounds Sterling 0.2 million). Profit before tax was Pounds Sterling 2.3 million (2003/04: Pounds Sterling 1.9 million). Whilst these increases are pleasing, the comparison is somewhat flattered by inclusion of the first full year of contribution from Look CCTV, acquired in February 2004.

Underlying earnings per share were 20.0p (2003/04: 21.2p). The Board is recommending payment of a final dividend of 3p per share, bringing the total dividend for the year to 4p per share (2003/04: 3p).

The most noteworthy achievement in the financial year was Synectics' success in winning a number of significant digital CCTV control system contracts in both the UK and North America. These were won against worldwide competition from major companies on the basis of being the best technical systems solution available.

Synectics' sales for the year more than doubled to Pounds Sterling 7.7 million (2003/4: Pounds Sterling 3.6 million) , on which it earned very healthy operating margins. Further growth in the North American market will be aided by the acquisition in May 2005 of the trade and net assets of AlphaPoint LLC which, as Synectic Systems Inc., has now become the company's North American sales and service base.

The potential of Synectics to achieve a significant global presence in the market for digital CCTV systems and control software is becoming increasingly clear, and success in this goal is the Group's key priority.

As set out in our interim statement, demand for public space CCTV security systems in the UK was below the level of recent years, in part because of the longer sales cycles associated with revised government funding processes. Activity levels at Quadrant Video Systems, our UK security integration subsidiary, picked up in the second half as predicted but not sufficiently to make up for the earlier shortfalls. While still earning strong margins, Quadrant Video's results for 2004/5 overall were below those of the previous year. There is now evidence of renewed commitment to CCTV security from the public sector and we expect a return to growth in the current year.

Look CCTV strengthened its leading position in the bus CCTV market during the year, and made a strong contribution to Group earnings. The company moved to larger premises and is being re-organised to form the core of the Group's wider on-vehicle transport CCTV activities, which the Board sees as an important area for future market growth and a key opportunity for Quadnetics as a whole.

Coex, the Group's specialist manufacturer of CCTV systems for the marine, and oil and gas markets, performed satisfactorily, although with a result below break-even as investment was made in people and systems. The Board is particularly pleased with progress towards our objective of enabling step-function growth at Coex through both widening the range of equipment and software, including those from Synectics, it supplies in a given project, and increasing the size and scope of projects it participates in. We expect to be able to report on significant tangible progress in this area in the current year.

Board

Last month the Company announced that Peter Rae was stepping down from the role of Chairman due to increased business commitments elsewhere, but would continue as a non-executive director for up to a year. Peter had been Chairman since 1998, and I would like to record our sincere thanks for his numerous and important contributions in leading the Board over that time.

Outlook

During the past few years, the Group has made real progress towards positioning itself as a serious player in its chosen sectors of the growing worldwide electronic security market. We see this as a very attractive market for both the short and long term.

Our core activity, digital CCTV security control systems, is currently competing in a young, technology-led, relatively fragmented business, with all the attendant challenges and opportunities that implies. That said, we are fully anticipating that the current year will produce good progress in the Group's financial results.

David Coghlan

15 September 2005



Consolidated Profit & Loss Account
For the year ended 31 May 2005

Before Unaudited
goodwill Goodwill 2005 2004
amortisation amortisation Total Total
Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling
Notes '000 '000 '000 '000

Turnover 1 26,761 - 26,761 18,079
Cost of sales (18,107) - (18,107) (11,570)
------------------------------------------
Gross profit 8,654 - 8,654 6,509
Net operating expenses (6,132) (396) (6,528) (4,637)
------------------------------------------
Operating profit 2,522 (396) 2,126 1,872
Net interest receivable 139 - 139 42
------------------------------------------
Profit on ordinary
activities before
taxation 2,661 (396) 2,265 1,914
-------------------------
Tax charge on ordinary
activities:
-----------------
Tax charge on results
for the year 4 (350) (494)
Exceptional tax credit 4 302 -
-----------------
(48) (494)
-----------------
Profit on ordinary
activities after taxation 2,217 1,420
Dividends 5 (467) (346)
-----------------
Retained profit for the
year - transferred to
reserves 1,750 1,074
-----------------
-----------------

Basic earnings per
ordinary share 6 19.2p 16.4p
-----------------
-----------------
Diluted earnings per
ordinary share 6 19.1p 16.3p
-----------------
-----------------
Underlying earnings per
ordinary share 6 20.0p 21.2p
-----------------
-----------------

All activities are continuing.

In 2004 net operating expenses included exceptional costs of Pounds
Sterling 240,000 and amortisation of goodwill amounting to Pounds
Sterling 174,000.



Consolidated Balance Sheet
31 May 2005

Unaudited
2005 2004
Pounds Pounds
Sterling Sterling
Notes '000 '000

Fixed assets
Intangible assets 7 9,183 7,721
Tangible assets 1,280 956
--------------------
10,463 8,677
--------------------

Current assets
Stocks 3,040 2,710
Debtors 9,896 7,945
Cash at bank and in hand 3,562 4,711
--------------------
16,498 15,366

Creditors: amounts falling due within one year (7,878) (7,767)

--------------------
Net current assets 8,620 7,599
--------------------

Total assets less current liabilities 19,083 16,276

Creditors: amounts falling due after more
than one year (3) (375)

Provisions for liabilities and charges 8 (1,102) (83)

--------------------
Net assets 17,978 15,818
--------------------
--------------------

Capital and reserves

Called up share capital 2,341 2,305

Share premium account 12,622 12,248

Other reserves 715 715

Profit and loss account 2,300 550

--------------------
Equity shareholders' funds 17,978 15,818
--------------------
--------------------



Consolidated Cash Flow Statement
For the year ended 31 May 2005

Unaudited
2005 2004
Pounds Pounds
Sterling Sterling
Notes '000 '000

Net cash inflow from operating activities 1,939 4
Returns on investments and servicing
of finance 107 42
Taxation (1,398) (13)
Net capital expenditure and financial
investment (497) (331)
Acquisitions 9 (867) (6,409)
Equity dividends paid (462) (150)
--------------------
Cash outflow before use of liquid resources
and financing (1,178) (6,857)
Management of liquid resources 10 2,500 (2,500)
Financing 29 8,192
--------------------
Increase/(decrease) in cash 1,351 (1,165)
--------------------
--------------------



Reconciliation of Net Cash Flow to Movements in Net Funds
For the year ended 31 May 2005

Unaudited
2005 2004
Pounds Pounds
Sterling Sterling
Notes '000 '000

Increase/(decrease) in cash in the year 1,351 (1,165)
(Decrease)/increase in bank deposits 10 (2,500) 2,500
Decrease in debt and lease financing 63 35
--------------------
Change in net funds resulting from cash flows (1,086) 1,370
Acquisitions - (410)
--------------------
Movement in net funds in the year (1,086) 960
Opening net funds 4,286 3,326
--------------------
Closing net funds 3,200 4,286
--------------------
--------------------



Reconciliation of Movements in Shareholders' Funds
For the year ended 31 May 2005

Unaudited
2005 2004
Pounds Pounds
Sterling Sterling
Notes '000 '000

Total recognised gains in the year 2,217 1,420
Dividends 5 (467) (346)
--------------------
1,750 1,074
Issue of shares 410 9,287
--------------------
Net movement in shareholders' funds 2,160 10,361
Opening shareholders' funds 15,818 5,457
--------------------
Closing shareholders' funds 17,978 15,818
--------------------
--------------------


Notes

1. Continuing operations comprise Quadnetics Group plc, Quadrant Video Systems plc, Synectic Systems Limited, Coex Limited and Look CCTV Limited.

2. On 27 May 2005, Synectic Systems, Inc, a newly created subsidiary incorporated in Delaware, acquired the trade and assets of AlphaPoint LLC, a specialist provider of digital surveillance technology in North America, for a total consideration of up to $3.3 million, made up of $0.7 million in cash at completion, $0.2 million in Ordinary Shares, plus a further $0.4 million in Ordinary Shares and $2 million in cash dependent on the profits of the business over the next four years. No material transactions arose on this business between 27 May and 31 May 2005, and accordingly no profit or loss or cashflows have been reflected in the results for the year.

3. Exceptional administrative expenses in the year ended 31 May 2004 relate to bad debts incurred with subsidiaries of the Mayflower Corporation plc which went into receivership in March 2004.

4. The 2005 tax charge on ordinary activities comprises a corporation tax charge of Pounds Sterling 594,000 offset by an exceptional tax credit of Pounds Sterling 302,000 in respect of previous years and a deferred tax credit of Pounds Sterling 244,000. The exceptional tax credit arises as a result of tax relief on share options exercised.

5. The Directors recommend the payment of a final dividend of 3p per share (2004: 3p per share), totalling Pounds Sterling 351,000 on 7 December 2005 to shareholders registered on 11 November 2005. The full year dividend charge of 4p per share (2004: 3p per share) amounts to Pounds Sterling 467,000 (2004: Pounds Sterling 346,000).

6. The calculation of basic earnings per ordinary share is based on the profit after taxation for the year of Pounds Sterling 2,217,000 (2004: Pounds Sterling 1,420,000)) and on 11,546,335 shares, being the weighted average number of shares in issue and ranking for dividend during the year (2004: 8,633,489).

The calculation of diluted earnings per share is based on the profit after taxation for the year of Pounds Sterling 2,217,000 (2004: Pounds Sterling 1,420,000) and on 11,590,130 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 (2004: 8,694,400).

The calculation of underlying earnings per ordinary share is based on the profit after taxation for the year, but before deducting exceptional items and amortisation of goodwill, of Pounds Sterling 2,311,000 (2004: Pounds Sterling 1,834,000) and on 11,546,335 shares, being the weighted average number of shares in issue and ranking for dividend during the year (2004: 8,633,489).

7. Intangible assets comprise goodwill and include additions in the year of Pounds Sterling 1.9 million arising from the acquisition of the trade and assets of AlphaPoint LLC by Synectic Systems, Inc.

8. Provisions for liabilities and charges include Pounds Sterling 1,097,000 deferred contingent consideration for the trade and assets of AlphaPoint LLC.

9. Cash outflows on acquisitions during the year reflect the following:

(1) Initial outflows on the acquisition of the trade and assets of AlphaPoint LLC as set out in note 2 above, amounting to Pounds Sterling 421,000; and

(2) Deferred consideration of Pounds Sterling 446,000 arising from the acquisitions of Look CCTV and Coex in 2004.

10. Cash inflows of Pounds Sterling 2.5 million shown as management of liquid resources represents a term investment in a bank deposit account which matured on 4 June 2004.

11. The preliminary results for the year have not been audited by the Group's auditors and do not constitute statutory accounts. The comparative figures for 2004 have been abridged from the statutory accounts for the year ended 31 May 2004. 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 2004 have been filed with the Registrar of Companies.

12. Copies of this preliminary statement are available from Quadnetics Group plc, North Court House, Morton Bagot, Studley, Warwickshire B80 7EL or on the Company website at www.quadnetics.com.

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