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Vigilant Technology (VGT)

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Tuesday 21 March, 2006

Vigilant Technology

Final Results

Vigilant Technology
21 March 2006

21 March 2006



                          Vigilant Technology Limited



        Maiden Preliminary Results for the period ended 31 December 2005

                          Reports Record Revenues and

              First-ever full year Operating Profit and Net Profit



Vigilant Technology Limited ('Vigilant' or the 'Company'), the AIM-listed
company (ticker: VGT), which designs and manufactures sophisticated, '
intelligent' solutions for the high-end CCTV security and surveillance market,
today announces its maiden preliminary results.



Highlights

•         Revenues increased by 33% to US$8.2 million (2004: US$6.2 million)

•         Gross Margin rose to 61% (2004: 49%)

•         Operating Profit turnaround to US$0.8 million (2004: Operating loss of
          US$0.7 million)

•         Net Profit Before Tax of US$0.64 million (2004: Net loss before tax
          US$0.8 million)

•         Net Profit after tax income of US$1.34 million (2004: Net loss of
          US$0.8 million)

•         Net cash position of US$12.9 million and zero debt on balance sheet as
          at end 2005

•         Strong pipeline to be fulfilled

•         Additional sales resources added

Since period end:

•         Non-exclusive OEM agreement in US with Pelco extended in January 2006
          for a further year until the end of 2006

•         Won several significant tenders in 2006

•         Appointment of Vice President sales

•         New 3rd generation offering to be launched on 5 April 2006





Moshit Yaffe-Blushinksy, Chief Executive Officer, commenting on the results
announcement said:



'We are pleased to announce our first set of results as a public company since
listing on AIM in December last year.  We have delivered a strong set of results
for the year with organic revenue growth of 33% and a gross margin of over 60%.
This has generated our first ever full year profit.



The Company has won several significant tenders in addition to orders under
longer-standing arrangements.  The outlook is therefore for further growth this
year as we gain customers from the expansion of our direct sales force in the US
and the growth of our blue-chip customer base in the UK, Europe and the rest of
the world.  We are in an excellent position to capitalise further on the growing
global demand for 'intelligent' security and surveillance solutions, against the
backdrop of rising terrorism and security concerns. '



                                    - ends -


For further information, please contact:



Citigate Dewe Rogerson                     +44 (0)20 7638 9571
Sally Marshak/Hannah Seward



Commitment IR
Yael Nevat                                 +972 50 762 6215



Vigilant Technology Limited                +972 50 87 89 898
Moshit Yaffe-Blushinsky





Notes to Editors



  • Vigilant Technology designs and manufactures sophisticated, 'intelligent'
    solutions for the high-end CCTV (closed circuit TV) security and
    surveillance market.  This is a rapidly developing market due in large part
    to the growing threat of terrorism and other security concerns and the
    greater recognition of the role live and recorded video can play in
    preventing and detecting crime.



  • Vigilant Technology was listed on AIM on 20th December 2005, following a
    placing of 23,255,814 new ordinary shares, which raised gross proceeds of
    £10 million.  Shore Capital acts as nominated adviser and broker to the
    Company.



  • Vigilant's systems use proprietary technology, both hardware and software,
    which it developed internally. The Company's systems enable end users to
    record, compress, store, retrieve, review and analyse digital video footage
    collected from a large number of security cameras.



  • Over the six years since its foundation, Vigilant has won a 'blue-chip'
    customer list, which is growing as new products and security solutions come
    on stream.  Large-scale installations using Vigilant's products include
    local authorities, correctional facilities, airports, transport hubs, banks,
    shopping malls and casinos.  For example, Vigilant's systems are currently
    installed in the London Boroughs of Hackney, Hillingdon, Barking and
    Dagenham as well as the Bluewater shopping centre and Tel Aviv Ben Gurion
    Airport.   Other projects in the pipeline include casino projects in the US,
    a project with a leading South African systems integrator to upgrade seaport
    security systems and a project to upgrade the security for railway stations
    in Spain.



  • In addition, Vigilant has a strong research and development programme and
    is currently trialing its next generation (the 'Third Generation') of
    digital surveillance technology.



•         Vigilant is based in Israel while currently over 95 per cent of its
revenues are derived from exports.  The Company has supplied large systems in a
number of major countries, including the USA, UK, France, Spain, Italy, Greece,
South Africa and Argentina.  The Group has marketing and support offices in both
New York and London, through two wholly-owned subsidiaries, Vigilant Technology
Inc. in the US and Vigilant Technology UK Limited in the UK.


Financial Summary


                                          2005         2004
                                           US$          US$
                                        ('000)       ('000)
Revenues                                 8,169        6,157
Cost of revenues                         3,210        3,132
Gross profit                             4,959        3,025
As a % of Revenues                       60.7%        49.1%
R&D                                      2,027        1,781
As a % of Revenues                       24.8%        28.9%
S&M                                      1,556        1,235
G&A                                        586          728
Operating Profit (loss)                    790        (719)
As a % of Revenues                        9.7%       -11.7%
Financial Expenses                         148           86
Net profit (loss) before income            642        (805)
taxes
As a % of Revenues                        7.9%       -13.1%
Income Taxes                               691            0
Net Profit (loss)                        1,333        (805)





Overview of Financial Results

Revenues for the year to December 31 2005 were US$8.2 million up 33% on the
prior year (2004: US$6.2 million).  This is primarily attributable to a rise in
revenues from the UK and the Rest of the World ('ROW') in 2005, partially offset
by a decline in US revenues over the same period.  UK revenues grew by 138% in
2005 to US$1.1 million while ROW revenues rose more than seven-fold to US$3.4
million over the same period.  During 2005 10 new projects were added from the
ROW region resulting from sales in 9 countries compared to 3 countries in 2004,
with the result that the ROW's share of total revenues rose from 6% in 2004 to
41% in 2005.  In the UK 6 new projects were won during 2005, including three for
town centres (the London Borough of Bromley, St. Edmunds/Haverhill and Barking &
Dagenham) as well as the penetration of a new vertical market for police custody
facilities with a technically challenging project for Staffordshire Police.  The
rise in UK and ROW revenues during 2005 reflects the Company's stronger position
worldwide and the expansion of the Company's direct distribution and sales
channels in those markets.

As a result of changes in sales and distribution arrangements, our revenues in
the US declined by 30% in 2005 to US$3.7 million compared to 2004.  However,
because the gross margin was significantly higher we achieved the same gross
profit from the US as in 2004. (Gross margins in H2 2005 were at a record high
of 64%).  Vigilant's non-exclusive OEM agreement with Pelco in the US was
extended in January 2006 for a further year and the Company continues to
collaborate successfully with Pelco, for example on the TBTA (Triboro Bridge and
Tunnel Authority) project in New York City. The Directors believe that the
continued growth of direct US sales in 2006 will be one of the Company's main
growth drivers in terms of both revenues and profit.

Gross profit for the period was US$5.0 million, (2004: US$3.0 million). This is
attributable to the increase in direct sales over 2004.  As a result the gross
margin rose from 49% in 2004 to 61% in 2005.

Operating profit in 2005 was US$0.8 million compared to an operating loss in
2004 of US$0.7 million. The turnaround in operating profit is primarily the
result of a strong rise in gross margins offset by related increases in R&D and
sales & marketing expenditure (14% and 26% respectively).

Net profit before tax for 2005 was US$0.64 million compared to a net loss in
2004 of US$0.8 million.

Financial expenses in 2005 amounted to $148,000 in 2005 ($68,000 in 2004).
However, since all bank debt was repaid at the end of 2005, we do not expect to
incur such expenses in 2006.

The carry forward losses at the end of 2005 amounted to $5.4 million. Tax income
of US$691,000 is an allowance arising from IFRS rules.

Basic earnings per share after tax income for 2005 are 4.7 cents per share (3.1
cents loss per share in 2004) while diluted earnings per share for 2005 are 4.6
cents per share.





2005 Geographic Revenues Breakdown:


                           2005  % of Total          2004      % of Total      Y/Y growth

                            US$                       US$

                         ('000)                    ('000)
USA                       3,687       45.1%         5,300           86.1%          -30.4%
Direct                    2,003       24.5%             0            0.0%
Pelco                     1,684       20.6%         5,300           86.1%          -68.2%
UK                        1,132       13.8%           476            7.7%          137.8%
Greece                    1,005       12.3%             0            0.0%
ROW                       2,352       28.8%           381            6.2%          781.1%
Total                     8,176      100.0%         6,157          100.0%           32.8%





2005 Analysis of Revenues by Sector:


Transportation                                                            35%
Casinos                                                                   24%
Town centre, shopping centres, public safety (Homeland                    19%
Security)
Finance                                                                   12%
Other                                                                     10%





Balance Sheet and Cash Flow

The balance sheet as at 31 December 2005 showed net assets of US$16.6 million
compared to net assets of US$267,000 at the end of December 2004.  This
primarily reflects the Company's net proceeds of US$14.5 million from its share
offering and listing on AIM in December 2005. The increase in accounts
receivable reflects the increase of revenues in the latter part of the year. The
Company had zero debt on its balance sheet at the end of 2005.

The Company's net cash position increased from US$0.6 million as at the end of
December 2004 to US$12.9 million at the end of December 2005, primarily
reflecting the net proceeds of US$14.5 million from the share offering in
December 2005, offset by the repayment of the bank loan and bank credit.

Operating cash outflow was US$1.9 million, largely the result of the increase in
accounts receivable.


Business Review



Operations

During 2005 Vigilant won over 15 new projects.  These included a very large
project for the Bank of Greece to bring a digital video recording solution in
the highest resolution in full frame rate to more than 20 of its branches; this
represents the largest high-end CCTV installation in the Greek market to date.
Vigilant also won a project to provide a new digital video recording solution
for Buenos Aires airport in Argentina. Additionally the Company was selected to
provide a digital video recording solution to three seaports in South Africa.
In Israel, Vigilant won a project to provide a full CCTV digital solution, both
video recording and virtual matrix, for Israel's two largest banks.



In the last quarter of 2005 we completed installation of a custom-built digital
video recording system for two Paradise Casinos in the US.  Elsewhere in the US
Vigilant continued to progress its existing TBTA (Triboro Bridge and Tunnel
Authority) project.  This moved ahead slower than hoped in 2005 and the early
part of 2006, but we expect faster implementation for the rest of 2006.



In the UK Vigilant secured orders for three new town centre projects the London
Borough of Bromley, St. Edmunds/Haverhill and Barking & Dagenham. The Company
also successfully penetrated a new vertical market, police custody facilities,
with the installation of a technically challenging system for Staffordshire
Police. The relationship with Land Securities continued with an additional
shopping centre installation in Leeds, as well as significant additions to the
pipeline for 2006. A further project was secured with Hammersons, for the
replacement of a legacy digital recording system at the Oracle Centre in
Reading.



Product Development

Vigilant's strong R&D function ensures that the Company stays at the
cutting-edge of technical innovation in the sector.  In 2005 Vigilant broadened
its product offering, migrating its digital video recorder to a total solution
IP surveillance system.  New products launched during the year to accomplish
this included the Vigilant Virtual Matrix and Event Handling NetView; this is
designed to replace legacy analogue systems, and provides the functionality of a
fully operational control centre.  Customer benefits include better efficiency,
flexibility and profitability.



The Company introduced the Vigilant IP NetStreamTM video server together with
the NetStoreTM storage manager, providing a unique state-of-the-art solution,
which complies with today's high-performance CCTV standards in a full networking
environment.



We plan to unveil our 3rd generation offering, including an all IP functionality
and features offering advanced automation of surveillance, at IST West in Las
Vegas on 5 April 2006.



Sales and Marketing

In the US Vigilant has continued to build its direct sales force as well as
developing strategic relationships with key end-user customers and consultants.
Direct sales enabled Vigilant to achieve a significantly higher gross margin.



In the UK Vigilant continued to build upon existing relationships and
established new ones with a number of high profile national security system
installers and integrators as well as leading security-consulting firms.
Relationships were further developed with Siemens Building Technologies,
particularly in Scotland, and with Quadrant Video Systems, in securing and
concluding projects within a range of vertical markets.  We have also developed
additional consultancy relationships in the UK during the year.




Developments in 2006

We are pleased to report that we have won a number of significant tenders since
our IPO in December 2005.  These include a further two casinos in the US, a
major Australian customer and an important site in Israel.



Strategy

In 2006, Vigilant is continuing to build its 'blue-chip' customer base and
increasing its presence in the UK and US.  The Directors believe that Vigilant
will grow at a significant rate in the coming years by addressing three
different types of demand:



  • Replacement and upgrading of older analogue CCTV systems with more
    efficient digital technologies.  Vigilant is a technical leader on two
    fronts of the digital revolution:  the development of more active,
    intelligent security systems as well as the move towards an IP-based
    infrastructure to replace old analogue systems;
  • New installations in newly constructed, large developments deploying the
    latest technology; and
  • Upgrading existing customer installations through add-on software
    solutions



Vigilant will focus on the further development of its technical and marketing
infrastructure, utilising the funding from its recent IPO, in order to support
significant sales growth in 2006 and 2007.



In the US, Vigilant is continuing to focus on building its direct sales team and
developing strategic relationships with key end-user customers and advisers to
drive growth and margins.





Outlook

The Company has won several significant tenders in addition to orders under
longer-standing arrangements, although there have been some delays in deliveries
in the first two months. We have continued to broaden our range of customers and
to win business in new territories.



AS part of its planned expansion, Vigilant has appointed a Vice President in
charge of global sales, reporting to the CEO. In all its markets, Vigilant has
substantially increased its sales force. We have begun to implement a structured
brand building and marketing plan which, together with high profile exposure
within major trade exhibitions and sector specific press, has already begun to
yield benefits and we therefore expect strong growth in 2006.

Looking further ahead, the Company will continue to focus on building its
technical and marketing infrastructure to support expected significant growth in
2006 and 2007.  Vigilant has also identified a number of new potential target
markets that intend to adopt the digital and full IP solutions for CCTV due to
the increasing awareness of security and anti-terrorism.  The Board therefore
views the future prospects of the Company with confidence.




Consolidated Statements of Operations


                                                          Year                Year                Year

                                                         ended               ended               ended

                                                      December        December 31,            December
                                                                              2004
                                                      31, 2005                                31, 2003
                                                         U.S.$               U.S.$               U.S.$
                                                                    In thousands

Revenues                                                 8,169               6,157               3,319
Cost of revenues                                         3,210               3,132               1,799

Gross profit                                             4,959               3,025               1,520

Research and development costs, net                      2,027               1,781               1,334
Selling and marketing expenses, net                      1,556               1,235               1,387
General and administrative expenses                        586                 728                 580

Operating profit (loss)                                    790               (719)             (1,781)

Financial expenses, net                                    148                  86                  82
Other expenses                                               -                   -                  11

Net profit (loss) before income taxes                      642               (805)             (1,874)

Income taxes                                               691                   -                   -

Net profit (loss) for the year                           1,333               (805)             (1,874)




                                                         U.S.$               U.S.$               U.S.$

Earnings (loss) per ordinary share and
ordinary share equivalent

Basic earnings (loss) per share                          0.047             (0.031)             (0.071)

Diluted earnings (loss) per share                        0.046             (0.031)             (0.071)






Consolidated Balance Sheets
                                                                 December 31        December 31
                                                                        2005               2004
                                                                       U.S.$              U.S.$
                                                              In thousands

Assets

Current assets:

Cash and cash equivalents                                             12,854              1,172
Restricted bank deposit                                                    6                  6
Trade accounts receivable, net                                         4,105                950
Other accounts receivable                                                370                277
Deferred costs                                                             -                924
Inventories                                                            1,520                881

Total current assets                                                  18,855              4,210

Non - current assets:

Property and equipment, net                                              297                270
Deferred income tax                                                    1,133                  -
Other assets                                                              24                 34

Total non - current assets                                             1,454                304

                                                                      20,309              4,514



Liabilities and shareholders' equity

Current Liabilities

Bank loan and credit                                                       -                579
Trade accounts payable                                                 1,290                953
Other accounts payable                                                 2,257              1,116
Deferred revenues and advances                                             -              1,369

Total Current Liabilities                                              3,547              4,017

Liability for employee rights                                            154                230

upon retirement, net

Shareholders' equity                                                  16,608                267

                                                                      20,309              4,514














Consolidated Statements of Cash Flows
                                                                          Year              Year               Year

                                                                         ended             ended              ended

                                                                  December 31,      December 31,       December 31,
                                                                          2005              2004               2003
                                                                         U.S.$             U.S.$              U.S.$
                                                                                   In thousands

Cash flows used in operating activities:

Net profit (loss)                                                        1,333             (805)            (1,874)

Adjustments required to reconcile net profit (loss) to net cash
used in operating activities:

Income and expenses not involving cash flows:

Depreciation and amortization                                              113               113                146
Loss on abandonment of equipment                                             -                 -                 11
Provision for doubtful accounts                                              -                 4                 24
Changes in accrued liability for employee rights upon                     (76)                24               (23)
Retirement
Increase in deferred taxes                                               (691)                 -                  -
Recognition of compensation related to employee stock option                44                22                  -
plan

Changes in operating assets and liabilities items:

(Increase) decrease in trade accounts receivable                       (3,155)             (646)                 42
(Increase) decrease in other accounts receivable                          (77)               (3)                 90
Income tax paid                                                            (6)               (8)               (13)
Decrease (Increase) in deferred costs                                      924             (924)                 30
(Increase) decrease in inventories                                       (639)              (42)                 38
Increase (decrease) in trade accounts payable                              337               388              (206)
Increase in other accounts payable                                       1,268               247                179
(Decrease) increase in deferred revenues and advances                  (1,369)             1,369              (130)

Net cash used in operating activities                                  (1,994)             (261)            (1,686)

Cash flows used in investing activities:

Purchase of property and equipment                                       (140)             (103)               (40)
Investment in restricted bank deposit                                        -               (6)                  -

Net cash used in investing activities                                    (140)             (109)               (40)

Cash flows from financing activities:

Short-term bank loan and credit, net                                     (579)                26                 31
Interest paid, net                                                       (127)              (43)               (53)
Proceeds from issuance of share capital, net of issuance costs          14,522                 -                  -

Net cash provided by (used in) financing activities                     13,816              (17)               (22)

Increase (decrease) in cash and cash equivalents                        11,682             (387)            (1,748)
Balance of cash and cash equivalents at beginning of year                1,172             1,559              3,307

Balance of cash and cash equivalents at end of year                     12,854             1,172              1,559





                      This information is provided by RNS
            The company news service from the London Stock Exchange