7 Feb 2011 07:00
7 February 2011
AMINO TECHNOLOGIES PLC
FINAL RESULTS
FOR THE YEAR ENDED 30 NOVEMBER 2010
Amino Technologies plc ("Amino"; stock code: AMO), the Cambridge-based leader in digital entertainment solutions for IPTV, hybrid/Over the Top ("OTT") TV and in-home multimedia distribution, announces its audited final results for the year ended 30 November 2010.
Overview:
The financial results for the year were:
- Revenues up 74% to £44.0m (2009: £25.3m)
- Gross profit up 52% to £12.6m (2009: £8.3m)
- Gross margins 4.3 percentage points down to 28.6% (2009: 32.9%) largely due to adverse foreign exchange markets and larger customer orders
- EBITDA before exceptional items of £3.3m (2009: loss of £5.0m)
- Operating profit before exceptional items of £1.8m (2009: loss of £6.4m) with operating loss after exceptional items of £0.9m (2009: loss of £8.8m)
o H2 2010 operating profit after exceptional items of £0.1m (H1 2010: operating loss of £1.0m)
- Year-end cash lower at £3.6m (2009: £9.0m) due to the cost of stock built to fulfil major tier 1 order which commenced delivery in December 2010
- Net assets of £21.8m (2009: £21.9m)
Operational highlights:
- Strong performance in core IPTV market with recovery in key markets and launch of new product portfolio gaining immediate traction
- Investment in securing leadership in the emerging OTT TV market paying off with the launch, in December 2010, by a tier 1 Western European network operator of entertainment services based on the Company's hybrid/OTT technology
- Further OTT product developed and launched, after the year-end, targeting adjacent pay-TV market with initial technical trials underway with major operators
- Strengthened management team through appointment of experienced COO and FD
Commenting on the results, Keith Todd, Non-Executive Chairman stated: "Amino has made encouraging progress this year, delivering continued momentum in sales, revenues and market traction for newly- launched products. The combination of record sales revenues and unit sales in our core IPTV business - and the return to profitability in the second half of 2010 - represents an important turnaround in performance from the previous year.
"This success has been achieved despite a period of heavy investment in the hybrid/OTT space. We took a conscious decision, as a Board, to make this investment and believe it is an important step towards delivering long-term shareholder value. Making this investment has secured a significant tier 1 customer, opened up a number of new tier 1 opportunities and, as a result, we have maintained our industry leading position in this potentially transformational industry segment.
"Amino moves in to 2011 with a good order backlog. The Company is confident that, with its new product portfolio addressing core and new markets plus a clear focus on margin management, it can continue to build on the solid platform it has created during 2010."
For further information please contact:
Amino Technologies +44 (0)1954 234100
Keith Todd, Non-Executive Chairman www.aminocom.com
Andrew Burke, Chief Executive Officer
FD +44 (0)20 7831 3113
James Melville-Ross / Matt Dixon / Nicola Biles
finnCap Limited +44 (0) 207 600 1658
Marc Young/Charlotte Stranner - Corporate Finance
Brian Patient/Tom Jenkins - Corporate Broking
Chairman's Statement
Amino has made good progress this year with the strategic initiatives put in place at the end of last year benefitting the entire business. Across a number of key metrics in its core IPTV market - revenues, sales orders and unit sales - the Company has had a record year. The launch of new IPTV products, a streamlining of core technology and traction in the emerging hybrid/OTT market represents a solid platform on which to build.
The sales momentum identified at the end of 2009 has continued throughout the year and into 2011 with a strong order book. The return to profitability in the second half of the year is a further indication of the Company's progress during the year.
Amino can be best analysed as offering both a profitable IPTV portfolio addressing the needs of tier 2 and 3 network operators and an emerging OTT product suite focusing on the more significant tier 1 market opportunity.
In 2010, the Company sought to maximise shareholder value by re-investing the profits from the IPTV business to further develop Amino's market leadership in OTT and its ability to rapidly bring new products to market.
In core IPTV, revenues at £44m increased 74% year on year (2009: £25.3m) as the Company benefited from higher volume orders, particularly from tier 2 operators. Unit shipments are up 81%, with over 80% comprising MPEG-4 high definition (HD) devices. However, as Amino scales successfully to target this type of higher volume customer, margins erode as the volume and value of such orders increases. When combined with foreign exchange rate movements, margins have reduced to 28.6% (2009: 32.9%)
The new OTT proposition has been in accelerated start-up mode and has achieved a great deal in a short time. This has required significant investment in order to maximise the future market potential and take advantage of an emerging opportunity ahead of the competition. Operating costs, after exceptional costs, were therefore higher than planned at £13.5m (2009: £17.1m).
The Company is now starting to see the benefits of this investment with encouraging traction in the hybrid/OTT market, where it is working closely with Intel on the development of the MeeGo Linux platform for OTT. The first customer - a tier 1 Western European network operator - deployed a multimedia entertainment offering based on this technology shortly after the financial year-end. The Company will recognise these unit sales in financial year 2010/11. The stock build to fulfil this order has impacted the cash balance, which at the year-end, was £3.6m (2009: £9.0m).
Furthermore, fulfilling this first contractual order resulted in an exceptional loss of £1.7m. However, these costs underwrite the experience and expertise in delivering this type of product and help drive the Company's leading position in this exciting and sizable market opportunity.
To underline the progress and speed with which the Company is able to innovate, after the year-end a new product was launched that adds a new layer of OTT content to existing pay-TV devices. Initial market reaction has been strong with a number of technical trials with tier 1 operators underway.
Following the appointment of Donald McGarva to Chief Operating Officer, the focus on improvements in supply chain management and operational execution to reduce costs and manage margins is progressing well and is expected to show results in the second half of 2011.
Outlook:
Amino moves into 2011 with an order book of 157k units representing £13.9m in revenues. The market for IPTV set-top boxes is forecast by industry analysts to remain stable in the coming year and the Company will strive to exploit its market-leading position in the hybrid/OTT market, where demand is expected to grow strongly next year, albeit from a small base.
The Company is confident that, with its new product portfolio addressing core and new markets plus a clear focus on margin management, it can continue to build on the solid platform it has created during 2010.
Chief Executive's Statement
Delivering against strategy:
During 2010, Amino has made significant strides in executing to its stated strategy. First, the Company has worked hard to drive scale, selling more of its products to a broader range of customers. This has been evidenced by strong growth in its core IPTV market. At the same time, the Company has taken the financial contribution derived from this profitable core and reinvested to gain market traction for new hybrid/OTT technology.
Continued growth in the deployment of IPTV set-top boxes by tier 2 operators in Western and Eastern Europe has been particularly encouraging. The availability of the new portfolio of products has been well-received by the market, as operators support the move to high definition entertainment services by their customers. This move has continued in the North American market, where Amino has recovered well.
The development and launch of a new IPTV portfolio based on the latest STi7105 MPEG4 HD decoder offers improved performance at reduced cost and has been well received by the market.
The delivery of a hybrid/OTT product for the tier 1 operator market during the year was followed, after the year-end, by the launch of a new "companion" OTT device - the Freedom Jump - for the pay-TV market. The rapid pace in product development - and strong working partnership with Intel® - has enabled the Company to target a number of opportunities, with a major tier 1 Western European operator launching services based on this technology after the year-end.
Operations:
The improved Company performance has been underpinned by a number of important operational initiatives during the year.
The restructuring initiated in 2009 was completed early in the year with re-focused sales, marketing and customer support teams and more streamlined senior management. In engineering, the transition to a single core IPTV technology from multiple permutations has improved efficiency, cost-effectiveness and the ability to provide improved levels of customer support.
Revitalising the Amino brand was a major objective for the year. The launch ahead of the Company's presence at the IBC show in September was successfully and cost-effectively executed. Product launches have also been well-received by customers and the broader market - with two major industry awards secured for the Amino Freedom hybrid/OTT product.
Security of component supply has been a key objective during 2010. Availability improved and pricing stabilised as the year progressed, however, to meet order deadlines a limited amount of spot buying was necessary. Improvements to the supply chain have been made and the Company remains sharply focused on cost reduction and improved efficiency.
This process is being driven by Donald McGarva, previously a non-executive director of the Company, who joined as Chief Operating Officer in September and now oversees operations, logistics, engineering and research and development functions. He brings a wealth of experience in global logistics and supply chain management to the executive team.
In December 2010 Julia Hornby joined the Company as Finance Director, and today joins the Amino Board. With a background in high growth media companies, Julia will strengthen both the Board and executive team.
Market traction:
Amino's core IPTV market continues to show a positive outlook. Industry analysts forecast a stable market in the coming year with traditional markets in Eastern and Central Europe and North America holding up well against a background of challenging economic conditions.
The Company's new product range is closely aligned with evolving consumer demand towards high definition (HD) TV-based entertainment and has been very well received by the market.
Continued strong sales by the Company's Central European IPTV customers have been boosted by Vodafone Iceland who became one of the first operators to deploy the new IPTV product range. There were good sales volumes in Eastern Europe, particularly in the Russian market.
The North American market has shown rates of improvement with revenues up 35% on 2009. The combination of new products and a clear customer and technical support focus has proved successful in securing contracts in a number of competitive pitches. These include Canby Telecom, Lennox Municipal Utilities, City of Salisbury, Mahaska Communications and CDE Lightband.
Latin America is emerging as a new IPTV growth market as regulatory changes enable network operators to deploy a wider range of communications and entertainment services. Securing a contract with Costa Rican tier 2 operator ICE is an important landmark contract in the region.
The market for hybrid/OTT products is also developing. The technology behind the Amino Freedom product is now powering the deployment shortly after the year-end by a Western European operator of a range of entertainment services.
While Amino has historically focused on IPTV, there are growing opportunities in adjacent and larger markets including pay-TV - particularly with the development of a complementary OTT device, the Freedom Jump. This new product enhances existing set-top boxes by working alongside them to offer access to the wealth of additional content available on the open Internet such as applications, movie-on-demand services, catch-up TV, music services and social networking. Initial market feedback to the product, which was launched at the CES show in January 2011, has been positive and the Company is now engaged in a number of technical trials.
Market Prospects:
Amino moves into 2011 better positioned than at the start of the year. The advanced next generation IPTV product range, growing hybrid/OTT product portfolio, strengthened management and clear brand is a step change for the Company.
Economic conditions are improving but fragile and the Company remains vigilant to sensitivities within emerging markets and the supply and pricing of key components. However, with a backlog of orders for 157k units going into 2011, Amino has a strong platform on which to build in the year ahead.
Chief Financial Officer's report:
Results for the year:
The Group has delivered record sales revenues and unit sales during the year. Device shipments increased by 81% to 619k units (2009: 341k) with MPEG-4 devices now accounting for over 80% of sales. Order intake in the second half of the year was 307k units (H2 2009: 280k) with 157k units as backlog into 2011.
Revenue increased 74% to £44m driven by strong sales of IPTV products.
Within gross profit, realised foreign exchange losses totalled £0.8m during the year, an adverse swing of £1.2m compared to last year where a favourable variance of £0.4m was experienced. Adjusting for this impact, gross margin would have been 30.5%, some 0.7% lower than last year. This remaining variance was largely due to increased business from tier 2 operators at lower margin. Including the foreign exchange impact, overall gross margin has declined by 4.3% to 28.6%.
It is expected that margins will continue to come under pressure as Amino scales its business to meet the requirements of the tier 1 and tier 2 markets. However, the Group is focused on operational improvement and supply chain management to help to mitigate the effect going forward.
Gross profit increased by £4.3m to £12.6m reflecting the improved volumes and absorbing the adverse foreign exchange swing of £1.2m noted above.
Operating costs excluding restructuring, a loss on the Company's first OTT contract and impairment costs totalled £11.6m - £2.7m better than 2009 (2009: £14.3m) - largely due to the benefits of the restructuring implemented in 2009.
·; Research and development costs expensed excluding restructuring costs reduced by £0.3m to £5.2m (2009: £5.5m). During the year, £2.4m (2009: £1.6m) research and development costs were capitalised which included £1.2m relating to the hybrid/OTT product
·; Sales, general and administrative expenses excluding exceptional costs decreased by £2.4m to £6.4m (2009: £8.8m)
·; At the year-end, headcount was 126 (2009: 138). The average number of employees during the year was 125 (2009: 154).
During the year, exceptional items totalling £2.7m (2009: £2.4m) were incurred which largely comprised £1.7m relating to an onerous contract provision for the loss to be incurred on the Company's first OTT contract, resulting largely from the requirement to spot buy and meet contractual obligations. Revenues are expected to be recognised during the first half of 2011. In addition, foreign exchange losses totalling £0.9m were incurred (2009: profit £0.5m).
The increase in pre-exceptional gross profit of £5.5m combined with lower pre-exceptional operating costs of £2.7m resulted in the Group generating an operating profit before exceptional items of £1.8m (2009: loss of £6.4m). After exceptional items, the result for the year was an operating loss of £0.9m (2009: loss of £8.8m).
Corporation tax receivable of £0.5m (2009: £0.01m) includes research and development tax credits receivable of £0.5m.
While the Group returned to profit in the second half of 2010, loss after tax for the year is £0.3m (2009: loss of £8.7m) and basic loss per share is 0.61p (2009: loss per share of 15.97p).
Balance sheet:
Total equity was £21.8m at the year-end (2009: £21.9m) which is equivalent to 38p per share (2009: 38p) of which £3.6m (2009: £9.0m) or 6p per share (2009: 16p per share) is represented by net cash balances.
Net current assets are £13.5m (2009: £15.0m), the principal components of which are net cash balances of £3.6m (2009: £9.0m), trade receivables of £10.7m (2009: £8.3m), stock of £12.0m (2009: £3.7m) and trade and other payables of £14.6m (2009: £7.7m).
·; 40% of trade receivables at 30 November are insured. Trade receivables over 60 days at 30 November but not provided for amounted to £1.2m (2009: £1.8m) of which, as at 1 February 2011, all but £0.2m had been collected, demonstrating the Group's strong debt collection during the year.
·; The increase in stock levels at the year-end was largely due to the build of £7m of inventory required to fulfil an order for hybrid/OTT technology for a tier 1 Western European operator, which launched services shortly after the financial year-end. The Company will recognise these units as sales in the first half of 2011.
·; The increase in trade and other payables is largely due to the growth in the business and high IPTV volumes built and shipped towards the end of the year.
Net cash balances at £3.6m (2009: £9.0m) were impacted by the stock build requirements for the tier 1 Western European contract. At the balance sheet date, the Group had forward foreign exchange contracts of £11.2m at average conversion rates of $1.58 and €1.19. £2.6m (2009: £2.0m) of net current assets is denominated in US dollars and £2.4m (2009: £2.2m) in Euro.
At 30 November 2010, the Group has approximately £36.3m of tax losses available to carry forward to set against future taxable profits, of which losses of £2.5m are recognised by the deferred tax asset of £0.7m and £35m of tax losses remain unrecognised. At the current taxation rates, the unrecognised deferred tax asset is £9.5m.
Equity:
The issued share capital of the Group is 57.9m (2009: 57.9m) ordinary shares, of which 5.7% were held by the Employee Benefits Trust. The number of subsisting options at the year-end, granted primarily to current and former employees, was 6.4m (2009: 6.0m) at an average exercise price of 51p per share.
Ends
Consolidated income statement
For the year ended 30 November 2010
Year to 30 November 2010 £ | Year to 30 November 2009 £ | ||
Revenue | 43,975,603 | 25,290,903 | |
Cost of sales | (31,377,280) | (16,976,265) | |
__________ | __________ | ||
Gross profit | 12,598,323 | 8,314,638 | |
Selling, general and administrative expenses | (8,220,290) | (11,243,179) | |
Research and development expenses | (5,201,972) | (5,917,883) | |
Unrealised foreign exchange (losses)/gains on forward contracts | (71,504) | 59,017 | |
__________ | __________ | ||
Operating loss | (895,443) | (8,787,407) | |
Analysed as: | |||
Operating profit/(loss) before restructuring, realised foreign exchange gains/losses, impairment and onerous contracts | 1,776,849 | (6,403,129) | |
Restructuring costs | (101,667) | (1,160,573) | |
Impairment costs | - | (1,694,508) | |
Loss on first OTT contract | (1,675,993) | - | |
Realised and unrealised foreign exchange (losses)/gains | (894,632) | 470,803 | |
__________ | __________ | ||
Operating loss | (895,443) | (8,787,407) | |
Finance income | 13,182 | 56,849 | |
__________ | __________ | ||
Net finance income | 13,182 | 56,849 | |
__________ | __________ | ||
Loss before corporation tax | (882,261) | (8,730,558) | |
Corporation tax credit | 536,392 | 11,939 | |
__________ | __________ | ||
Loss for the year attributable to equity holders | (345,869) | (8,718,619) | |
__________ | __________ | ||
All amounts relate to continuing activities | |||
Basic (loss)/earnings per 1p ordinary share | (0.61p) | (15.97p) | |
Diluted (loss)/earnings per 1p ordinary share | (0.61p) | (15.97p) |
Consolidated balance sheet as at 30 November 2010
| As at 30 November 2010 £ | As at 30 November2009 £ | |||
Assets | |||||
Non-current assets | |||||
Property, plant and equipment | 1,094,020 | 1,192,639 | |||
Intangible assets | 6,442,979 | 4,952,320 | |||
Deferred income tax assets | 671,149 | 671,149 | |||
Trade and other receivables | 172,964 | 172,696 | |||
_________ | _________ | ||||
8,381,112 | 6,988,804 | ||||
_________ | _________ | ||||
Current assets | |||||
Inventories | 11,962,412 | 3,691,257 | |||
Trade and other receivables | 12,528,263 | 10,245,842 | |||
Derivative financial instruments | - | 48,155 | |||
Cash and cash equivalents | 3,587,687 | 9,047,378 | |||
_________ | _________ | ||||
28,078,362 | 23,032,632 | ||||
_________ | _________ | ||||
Total assets | 36,459,474 | 30,021,436 | |||
_________ | _________ | ||||
Capital and reserves attributable to equity holders of the business | |||||
Called-up share capital | 578,930 | 578,930 | |||
Share premium | 126,376 | 126,376 | |||
Capital redemption reserve | 6,200 | 6,200 | |||
Foreign exchange reserves | 580,101 | 494,103 | |||
Other reserves | 16,388,755 | 16,388,755 | |||
Retained earnings | 4,163,382 | 4,348,000 | |||
_________ | _________ | ||||
Total equity | 21,843,744 | 21,942,364 | |||
_________ | _________ | ||||
Liabilities | |||||
Current liabilities | |||||
Borrowings | - | 12,502 | |||
Trade and other payables | 14,592,381 | 7,694,407 | |||
Derivative financial instruments | 23,349 | - | |||
Provisions | - | 372,163 | |||
_________ | _________ | ||||
Total liabilities | 14,615,730 | 8,079,072 | |||
_________ | _________ | ||||
Total equity and liabilities | 36,459,474 | 30,021,436 | |||
_________ | _________ |
Consolidated statement of cash flows for the year ended 30 November 2010
|
| Year to November 2010 | Year to November 2009 | |
£ | £ | |||
Cash flows from operating activities | ||||
Cash (used in)/generated from operations | (3,567,180) | (200,300) | ||
Corporation tax received/(paid) | 944,743 | 32,416 | ||
_________ | _________ | |||
Net cash (used in)/generated from operating activities |
(2,622,437) |
(167,884) | ||
_________ | _________ | |||
Cash flows from investing activities |
|
| ||
Acquisition of subsidiary - net of cash acquired | - | (2,761,361) | ||
Purchases of intangible fixed assets | (2,518,914) | (1,845,681) | ||
Purchases of property, plant and equipment | (358,024) | (595,625) | ||
Interest received | 11,192 | 56,139 | ||
_________ | _________ | |||
Net cash used in investing activities | (2,865,746) | (5,146,528) | ||
_________ | _________ | |||
Cash flows from financing activities |
|
| ||
Proceeds from exercise of employee share options | 4,000 | 1,919 | ||
_________ | _________ | |||
Net cash generated from/(used) in financing activities |
4,000 |
1,919 | ||
_________ | _________ | |||
Net decrease in cash and cash equivalents | (5,484,183) | (5,312,493) | ||
Cash and cash equivalents at beginning of year | 9,047,378 | 14,443,582 | ||
Effects of exchange rate fluctuations on cash held | 24,492 | (83,711) | ||
_________ | _________ | |||
Cash and cash equivalents at end of year | 3,587,687 | 9,047,378 | ||
_________ | _________ |
1 Basis of preparation
The preliminary announcement for the year ended 30 November 2010 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 in this preliminary announcement does not constitute the Group's statutory accounts for the year ended 30 November 2010 or the year ended 30 November 2009 but is derived from those accounts.
2 Loss per share
Year to 30 November 2010 | Year to 30 November 2009 | ||
Loss attributable to ordinary shareholders | (345,869) | (8,718,619) | |
_________ | _________ | ||
Weighted average number of shares (Basic) | 56,420,652 | 54,588,041 | |
_________ | _________ | ||
Weighted average number of shares (Diluted) |
56,420,652 |
54,588,041 | |
_________ | _________ | ||
Loss per share basic | (0.61p) | (15.97p) | |
________ | _________ | ||
Loss per share diluted | (0.61p) | (15.97p) | |
_________ | _________ | ||
The calculation of basic earnings per share is based on (loss)/profit after taxation and the weighted average of ordinary shares of 1p each in issue during the period.
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 two categories 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 and deferred ordinary shares in respect of the acquisition of SJ Consulting Limited, applicable for the year ended 30 November 2009 only. There is no dilutive effect in respect of the years ended 30 November 2009 and 30 November 2010 as the Group was loss making.
3 Trade and other receivables
As at 30 November 2010 £ | As at 30 November 2009 £ | |||
Current assets: | ||||
Trade receivables | 10,765,549 | 8,353,234 | ||
Less: provision for impairment of receivables | (73,503) | (73,215) | ||
_________ | _________ | |||
Trade receivables (net) | 10,692,046 | 8,280,019 | ||
Other receivables | 101,385 | 90,981 | ||
Corporation tax receivable | 542,819 | 951,170 | ||
Prepayments | 1,192,013 | 923,672 | ||
_________ | _________ | |||
12,528,263 | 10,245,842 | |||
_________ | _________ | |||
Non current assets: | ||||
Other receivables | 172,964 | 172,696 | ||
_________ | _________ | |||
4 Trade and other payables
As at 30 November 2010 £ | As at 30 November 2009 £ | |||
Trade payables | 9,529,014 | 5,001,020 | ||
Social security and other taxes | 375,498 | 225,129 | ||
Other payables | 10,233 | 267,082 | ||
Accruals | 4,229,287 | 2,094,829 | ||
Deferred income | 448,349 | 106,347 | ||
_________ | _________ | |||
14,592,381 | 7,694,407 | |||
_________ | _________ |
5 Cash generated from operations
Year to 30 November 2010 £ | Year to 30 November 2009 £ | ||
Loss before corporation tax | (882,261) | (8,730,558) | |
Adjustments for: | |||
Amortisation charge | 1,028,255 | 939,836 | |
Depreciation charge | 457,508 | 485,344 | |
Impairment charge | - | 1,867,959 | |
Loss on disposal of property, plant and equipment | 3,382 | - | |
Loss on disposal of software intangibles | - | 9,052 | |
Share-based payment charge | 157,251 | 100,818 | |
Loss/(gain) on derivative financial instruments | 71,504 | (59,017) | |
Finance income - net (see note 7) | (11,192) | (56,849) | |
Exchange differences | 44,757 | (38,471) | |
(Increase)/decrease in inventories | (8,271,155) | 2,172,923 | |
(Increase)/decrease in trade and other receivables | (2,691,040) | 4,578,968 | |
(Decrease)/increase in provisions | (372,163) | 372,163 | |
Increase/(decrease) in trade and other payables | 6,897,974 | (1,842,468) | |
_________ | _________ | ||
Cash (used in)/generated from operations | (3,567,180) | (200,300) | |
_________ | _________ | ||