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Quadnetics Group PLC (SNX)

  Print      Mail a friend       Annual reports

Monday 27 September, 2004

Quadnetics Group PLC

Final Results

Quadnetics Group PLC
27 September 2004




Press Release                                                 27 September 2004



                              Quadnetics Group plc

               Preliminary Results for the year ended 31 May 2004


Quadnetics Group plc, 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 2004.


Highlights


-    Profit before tax, exceptionals and goodwill amortisation of £2.3 million 
     (2003: £1.4 million)

-    Underlying earnings per share of 21.2p (17.7p)

-    Net funds of £4.3 million (2003: £3.3 million)

-    Proposed dividend of 3p per share (2003: 2p)

-    Acquired  Look CCTV and Coex, facilitated by a successful share placing 
     that raised £8 million


-    Progress in proprietary digital control and recording technologies


-    Focus on higher-value work in the installation businesses




Commenting on the results, Russ Singleton, Chief Executive, said:  'Although
they contributed only for a few months in the year to 31 May 2004, the Look CCTV
and Coex acquisitions have strengthened our overall service offering, and we
expect them to contribute significantly in the future.  We have a strong balance
sheet and we continue to look out for suitable opportunities that would further
enhance our business.  As the level of recognition of our advanced products
continues to grow, both in the UK and overseas, we remain confident about our
prospects.'


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 ended 31 May 2004 the Group has achieved sales of £18.1 million
(2003: £20.3 million) and profit before tax of £1.9m (2003: £1.4 million) after
providing for an exceptional loss of £240,000 resulting from the unexpected
receivership of the parent company of a major customer, and after charging
£174,000 for amortisation of goodwill arising mostly from the acquisition of
Look CCTV.

At the year end the Group had no net borrowings and held net funds of £4.3
million.

The Board is recommending the payment of a dividend of 3p per share (2003: 2p
per share) on 14 December 2004 to all shareholders on the share register on 19
November 2004.

Synectic Systems Limited, our subsidiary which develops systems software and
equipment, continued to make real progress in the development of its products.
In a separate statement today we are delighted to announce that Synectics has
won a contract worth more than US$2 million to supply a digital recording and
control system to one of the largest casinos in Canada. This is Synectics' first
major contract in North America and is a powerful endorsement of our leading
technology. It follows on from our announcement on 30 June 2004 that Synectics
has been selected to supply a similar advanced digital recording solution to a
major UK police force. Revenue from this new work will only be recognised in the
current year ending 31 May 2005 and is not reflected in the financial results
announced today.

Look CCTV was acquired on 20 February 2004 and has proved to be an excellent
investment. Its dominant position in supplying on-board CCTV to the bus market
is continuing and both sales and profits are well ahead of our initial
expectations. We are particularly pleased that Look is now working with
Synectics to enhance and develop Look's products, and we are confident that this
will further strengthen its market position.

Coex Limited was acquired on 6 February 2004 and has also exceeded our
expectations. Its position in the market for hazardous environment CCTV is
strong and, helped by the financial and technical resources of the Group, we see
very good prospects.

The lower sales value within Quadrant Video Systems (£11.1 million compared to
£16.8 million in the previous year) is the expected result of our having
deliberately pursued higher value-added sales. However, despite the sales value
having fallen, the profitability of this subsidiary was in fact slightly ahead
of the previous year. Quadrant Video Systems has maintained its leading position
in the public space surveillance market and is continuing to work on improving
customer service and margin enhancement.

The CCTV market continues to migrate to digital solutions involving networks and
extensive data management. This market is large and worldwide and we are
delighted to look forward with the knowledge that our key products have been
selected by the most discerning and sophisticated buyers in North America and
the UK.

I am pleased to report that Steve Coggins, who currently heads the Europe,
Middle East and Africa operations of Silicon Graphics, Inc. has agreed to join
the board as an independent non-executive director with effect from 1 January
2005. Prior to joining Silicon Graphics, he previously held senior positions
with Fujitsu and IBM. I look forward to Steve's contribution to the next stage
in the development of the Group.



Peter Rae

 CREATEDATE /@ 'd MMMM yyyy' /* MERGEFORMAT 27 September 2004



Consolidated Profit & Loss Account
For the year ended 31 May 2004

                                                   Before
                                              exceptional
                                                items and                                 Unaudited
                                                 goodwill   Exceptional       Goodwill         2004       2003
                                             amortisation         items   amortisation        Total      Total
                                    Notes           £'000         £'000          £'000        £'000      £'000          
                  
Turnover

Continuing operations                 1            14,128             -              -       14,128     20,299

Acquisitions                          1             3,951             -              -        3,951          -

Total turnover                                     18,079             -              -       18,079     20,299

Cost of sales                                    (11,570)             -              -     (11,570)   (15,110)

Gross profit                                        6,509             -              -        6,509      5,189

Net operating expenses                2           (4,223)         (240)          (174)      (4,637)    (3,773)

Operating profit

Continuing operations                               1,447             -           (63)        1,384      1,416

Acquisitions                                          839         (240)          (111)          488          -

Total operating profit                              2,286         (240)          (174)        1,872      1,416

Net interest receivable/(payable)                      42             -              -           42        (9)

Profit before taxation                              2,328         (240)          (174)        1,914      1,407

Tax charge on ordinary activities     3                                                       (494)          -

Profit on ordinary activities after                                                          
taxation                                                                                      1,420      1,407

Minority interests                                                                                -      (232)

Profit on ordinary activities after                                                           
taxation and minority interests                                                               1,420      1,175

Dividends                             4                                                       (346)      (150)

Retained profit for the year -                                                                
transferred to reserves                                                                       1,074      1,025

Basic earnings per ordinary share     5                                                       16.4p      17.4p

Diluted earnings per ordinary share   5                                                       16.3p      17.0p

Underlying earnings per ordinary      
share                                 5                                                       21.2p      17.7p



All activities are continuing.

In 2003 there were no exceptional items and amortisation of goodwill was
£23,000.





Consolidated Balance Sheet
31 May 2004
                                                                   Notes        Unaudited            2003
                                                                                     2004           £'000
                                                                                    £'000
Fixed assets

Intangible assets                                                    6              7,721           1,233

Tangible assets                                                                       956             501

                                                                                    8,677           1,734


Current assets

Stocks                                                                              2,710           1,767

Debtors                                                                             7,945           4,375

Cash at bank and in hand                                                            4,711           3,376

                                                                                   15,366           9,518


Creditors: amounts falling due within one year                                    (7,767)         (5,722)

Net current assets                                                                  7,599           3,796


Total assets less current liabilities                                              16,276           5,530


Creditors: amounts falling due after more than one year                             (375)            (25)


Provisions for liabilities and charges                                               (83)            (48)


Net assets                                                                         15,818           5,457



Capital and reserves


Called up share capital                                              7              2,305           1,496


Share premium account                                                7             12,248           3,770


Other reserves                                                                        715             835


Profit and loss account                                                               550           (644)


Equity shareholders' funds                                                         15,818           5,457




Consolidated Cash Flow Statement
For the year ended 31 May 2004
                                                                                Unaudited
                                                                                     2004            2003
                                                                   Notes            £'000           £'000

Net cash inflow from operating activities                                               4           3,719

Returns on investments and servicing of finance                                        42            (14)

Taxation                                                                             (13)               -

Net capital expenditure and financial investment                                    (331)            (88)

Acquisitions and disposals                                           8            (6,409)             593

Equity dividends paid                                                               (150)               -

Cash (outflow)/inflow before use of liquid resources and                          
financing                                                                         (6,857)           4,210

Management of liquid resources - amounts placed on bank deposit      9            (2,500)               -

Financing                                                            7              8,192            (14)

(Decrease)/increase in cash                                                       (1,165)           4,196




Reconciliation of Net Cash Flow to Movements in Net Funds
For the year ended 31 May 2004
                                                                                Unaudited
                                                                                     2004            2003
                                                                 Notes              £'000           £'000


(Decrease)/increase in cash in the year                                           (1,165)           4,196

Increase in bank deposits                                        9                  2,500               -

Decrease in debt and lease financing                                                   35              35

Change in net funds resulting from cash flows                                       1,370           4,231

Acquisitions                                                                        (410)               -

Movement in net funds in the year                                                     960           4,231

Opening net funds/(debt)                                                            3,326           (905)

Closing net funds                                                                   4,286           3,326



Reconciliation of Movements in Shareholders' Funds
For the year ended 31 May 2004
                                                                                Unaudited
                                                                    Notes            2004            2003
                                                                                    £'000           £'000

Total recognised gains in the year                                                  1,420           1,175

Proposed dividend                                                     4             (346)           (150)

                                                                                    1,074           1,025

Issue of shares                                                       7             9,287           1,380

Net movement in shareholders' funds                                                10,361           2,405

Opening shareholders' funds                                                         5,457           3,052

Closing shareholders' funds                                                        15,818           5,457





Notes


  1. Continuing operations comprise Quadnetics Group plc, Quadrant Video 
     Systems plc, Synectic Systems Limited, Coex Limited ('Coex') and Look CCTV 
     Limited ('Look'), with Coex and Look representing acquisitions made during 
     the year, as follows:

     (1) On 6 February 2004 the Company acquired the entire issued ordinary 
     share capital of Coex, a specialist manufacturer of CCTV equipment and 
     systems for extreme or hazardous environments, for an initial consideration 
     of £1.165 million in cash.  A further £0.2 million of deferred cash 
     consideration is payable on 30 September 2004.

     (2) On 20 February 2004 the Company acquired the entire issued ordinary 
     share capital of Look, which develops and supplies CCTV systems to bus 
     manufacturers and operators, for an initial consideration of £6.3 million 
     made up of cash (£4.9 million), loan notes (£0.3 million) and new Ordinary 
     Shares (£1.1 million). A further £0.2 million of deferred cash 
     consideration is payable in October 2004.

  2. Exceptional operating expenses relate to the post-acquisition element of 
     bad debts incurred by Look with subsidiaries of the Mayflower Corporation 
     plc which went into receivership in March 2004.

  3. The 2004 tax charge on ordinary activities comprises a corporation tax 
     charge of £573,000 offset by a deferred tax credit of £79,000.

  4. The Directors recommend the payment of a final dividend of 3p per share 
     (2003: 2p per share), totalling £346,000 on 14 December 2004 to 
     shareholders registered on 19 November 2004.

  5. The calculation of basic earnings per ordinary share is based on the profit 
     after taxation and minority interests for the year of £1,420,000 (2003: 
     £1,175,000)) and on 8,633,489 shares, being the weighted average number of 
     shares in issue and ranking for dividend during the year (2003:  
     6,766,627).

     The calculation of diluted earnings per share is based on the profit after 
     taxation and minority interests for the year of £1,420,000 (2003: 
     £1,175,000) and on 8,694,400 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 (2003: 6,904,185).

     The calculation of underlying earnings per ordinary share is based on the 
     profit after taxation and minority interests for the year, but before 
     deducting exceptional items and amortisation of goodwill, of £1,834,000 
     (2003: £1,198,000) and on 8,633,489 shares, being the weighted average 
     number of shares in issue and ranking for dividend during the year 
     (2003:  6,766,627).

  6. Intangible assets represent goodwill arising on consolidation and include 
     additions in the year of £6.7 million arising from the acquisitions of 
     Coex and Look.

  7. Issued share capital and the share premium account have increased by 
     £9.3 million during the year as a result of the following events:

     (1) On 13 February 2004, 617,567 new Ordinary Shares were issued as a 
     result of share options being exercised, raising £0.5 million in cash.

     (2) Following approval by the Company's shareholders at an extraordinary 
     general meeting on 18 February 2004, the Company issued 3,031,368 new 
     Ordinary Shares at £2.65 each under a placing agreement dated 23 January 
     2004.  The proceeds of £7.7m, net of expenses, were used to finance the 
     acquisition of Look and provide further working capital for the development 
     of the Group.

     (3)  400,000 new Ordinary Shares were issued at a valuation of £1.1 million 
     as part consideration for Look on 20 February 2004.

  8. Cash outflows on acquisitions during the year reflect the initial 
     consideration for Coex and Look of £6.1 million, and acquisition expenses 
     of £0.4 million offset by bank balances acquired within the two businesses 
     of £0.1 million.

  9. Cash outflows of £2.5 million shown as management of liquid resources 
     represents a term investment in a bank deposit account which matured on 
     4 June 2004.

 10. 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 2003 have been abridged from the statutory accounts for the year ended 
     31 May 2003. 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 2003 have been 
     filed with the Registrar of Companies.

 11. 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.



                                    - Ends -


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