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Quadnetics Group plc

Interim Announcement for the half year ended 30 November 2002
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 2002.


Highlights

Turnover for continuing operations increased 70% to £9.6m (2001: £5.7m)

Profit before tax of £621,000 (2001: £17,000)

Order book remains strong at over £7m (30th November 2002)

Earnings per share increased to 7.1p (2001: 0.3p), or 8.4p on an adjusted basis

Further to installation of Europe’s most advanced CCTV surveillance operation in partnership with NCP (National Car Parks) and Manchester City Council, a similar system has been installed in the West End, London.

Further organic growth and increased margins expected

Commenting on the results, Russ Singleton, Chief Executive said: “We are delighted to announce these excellent interim results. Quadnetics will continue to exploit its position as a leading provider of advanced CCTV and networked video systems in the UK and overseas. Our order book is strong and we are seeing further contract wins from both the public and private sectors.
“The Group is well positioned to achieve strong organic growth in the future.”

For further information, please contact:

Quadnetics Group plc

Russ Singleton ((07976) 329 323(01527) 850 080

Email: r.singleton@quadnetics.com

http://www.quadnetics.com

Brewin Dolphin Securities

Neil Baldwin (0113) 241 0126

Media enquiries:

Bankside Consultants Limited Tel: +44 (0) 20 7444 4140

Peter Curtain / Ariane Vacher

Email: peter.curtain@bankside.com

Photographs are available from Bankside on request

Chairman’s Statement

Results

The Board of Quadnetics is pleased to announce that in the half year period to 30 November 2002, the Group produced a profit before tax of £621,000 (2001: £17,000). Turnover from continuing activities increased 70% to £9,590,000 (2001: £5,681,000). It is anticipated that no corporation tax will be due for the period.

The only debt the Group has is to fund work in progress for its predominantly blue chip customers. This figure amounted to £1.5 million as at 30 November 2002.

Earnings per share for the period were 7.1 pence (2001:0.3p) after taking the minority interest into account. The Board would like to draw the attention of shareholders to Note 3 of this statement, which summarises the position regarding the executive managers’ minority interest in the two operating subsidiary companies. If this interest had been acquired by the Group for the issue of the agreed maximum number of Quadnetics’ shares (987,800), thereby taking the total number of shares in issue to 7,427,756, the corresponding earnings per share would have been 8.4 pence.

Dividend

The Board is committed to commence payment of a dividend as soon as possible and a circular has been posted to shareholders requesting authorisation for the necessary capital reconstruction. Subject to shareholder and court approval, the Group anticipates paying a dividend during our next financial year.

Operational Review

These excellent interim results reflect the vigorous hard work and commitment from everyone involved. The Group’s forward order book remained above £7 million at 30 November 2002.

Net operating profit margin in the half year increased to 6.7% and Quadnetics is confident that through determined cost control and economies of scale this will continue to improve. Most completed installations lead to a long term service and maintenance contract commencing in the subsequent year and typically lasting at least five years. This aspect of our business is rapidly developing an important and predictable income stream, which enhances overall margin.

The CCTV and surveillance industry is experiencing unprecedented growth for two main reasons. Firstly, security is becoming a higher priority for every town centre, utility provider and transport system together with the majority of large businesses both private and public. Secondly, the dramatic advance of technology has meant that the digital era has ushered in a giant leap in the capability and usefulness, and hence value, of truly networked CCTV.

Quadrant Video Systems plc is the market leader in the “top end” UK town centre CCTV market. The recently installed infrastructure has been facilitated largely by government “Challenge Funding” for town centre surveillance. This funding is coming to the end of its current cycle but, instead of activity tailing off, the Group is finding that the presence of the new networks is inducing further business from both the public and private sectors.

Synectic Systems Ltd has achieved a dominant position in the UK market for its proprietary control systems, encoders and software and is expanding its market share in the UK and overseas. Synectics’ advanced technical capabilities have been demonstrated in a major contract with NCP (National Car Parks) in Manchester and as a contractor to the high profile West End CCTV project in London. The Group is beginning to formulate a low risk strategy with major overseas partners such as IBM and Barco to capitalise on this leading technology.

The Future

The Group has exceeded its targets at the interim stage and is well positioned to achieve strong organic growth in the future, by exploiting its position in the CCTV systems market in the UK and overseas.


Peter Rae

Chairman

23 January 2003

Consolidated Profit & Loss Account For the half year ended 30 November 2002 is available from Bankside on request.


30 November 2002

Consolidated Balance Sheet is available from Bankside on request.


Consolidated Cash Flow Statement For the half year ended 30 November 2002 is available from Bankside on request.

Notes

Continuing operations comprise the businesses of Quadrant Video Systems plc (“QVS”) and Synectic Systems Limited (“Synectics”).
Discontinued operations comprise Axiom Design & Print Limited, Quadrant Systems Limited, the Group’s joint venture company, Quest Flight Training Limited and the Group’s associated company, Quadrant Visual Solutions Limited, all of which were sold in the year ended 31 May 2002 to leave the Group focussed on its CCTV security activities.

Exceptional items in the year ended 31 May 2002 represent the net cost of restructuring arising from the disposals referred to in note 1 and the disposal of 21% of the Group’s interest in QVS and Synectics to SJC 120 Limited, a company owned by four managers in those two businesses (“the Managers”).

The calculation of basic earnings per ordinary share is based on the profit after taxation and minority interests for the period of £457,000 (half year to 30 November 2001: profit of £17,000; year to 31 May 2002: loss of £744,000) and on 6,439,956 shares being the actual number of shares in issue and ranking for dividend during the period from 1 June 2001 to 30 November 2002.
There were no dilutive potential ordinary shares in the eighteen months ended 30 November 2002.
Under the terms of a put and call option agreement with the Managers, the Group can reacquire the 21% minority interest in QVS and Synectics in exchange for a number of shares in Quadnetics Group plc, dependent on the market value of SJC 120 Limited, but capped at 987,800 shares. If this option had been exercised at 1 June 2002 and the full 987,800 shares had been issued the basic earnings per ordinary share for the half year ended 30 November 2002 would increase to 8.4p.

£600,000 of deferred consideration from the disposal of Quadrant Systems Limited and Quest Flight Training Limited was received in the half year ended 30 November 2002.

The half year results have not been audited by the Group’s auditors and do not constitute statutory accounts. The comparative figures for 31 May 2002 have been abridged from the statutory accounts for the year ended 31 May 2002. 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 2002 have been filed with the Registrar of Companies.

Copies of this statement will be sent to shareholders and will be available on the Group’s website
http://www.quadnetics.com and from

Quadnetics Group plc,

North Court House,

Morton Bagot,

Studley,

Warwickshire

B80 7EL.


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