IND.L Regulatory News (IND)

13 Sep 2007 07:01

IndigoVision Group PLC13 September 2007 13 September 2007 IndigoVision Group plc ("IndigoVision") Preliminary Results for the year to 31 July 2007 Highlights Financial Highlights • Total revenues increased by 77% to £13.4m• Product revenues increased by 92% to £13.3m• Gross margins improved to 66%• Operating profit increased by 81% to £0.65m• Profit before taxation doubled from £0.32m to £0.67m• Strong start to current year Operating Highlights • Product revenue growth in all markets - Americas up 164% to £3.6m - EMEA up 66% to £7.3m - APAC up 107% to £2.4m • Licensing £0.1m compared with £0.6m last year • Management structure and team extended, direct sales force expanded and strengthened • Product range broadened - Next generation H.264 compression launched (9000 range) - IP Camera range expanded - New entry level products introduced • Major installations and project wins in all geographies including: - 1300 cameras in Vancouver rail networks, Canada - 1100 cameras at two casinos in Tucson, Arizona, USA - 600 cameras at Doha International Airport in Qatar - 340 cameras for Macau police service, China - 200 cameras at Berlin suburban rail network, Germany Oliver Vellacott, Chief Executive, said: "I am pleased to report continued strong growth across all territories and inmultiple sectors of the market, especially rail and casinos. During the year, aspart of our planning for future growth, we made significant investments inmanagement, with a number of critical senior appointments, and in the salesforce and distribution infrastructure. The task ahead is to transform that investment into sustainably higher levels ofprofitability and build on IndigoVision's excellent positioning as an enterpriseIP video provider. We have had a strong start to the current year with salesand order intake well ahead of last year. The board is therefore confident thatthis year will see further growth and rapid progress towards these goals". Notes to Editors About IndigoVision IndigoVision is a leading manufacturer of complete end-to-end IP video and alarmmanagement solutions. IndigoVision is widely chosen for applications inairports, city centers, ports, mines, road and rail systems, education, banking,casinos, prisons, government and the military. These enterprise-class systemsimprove organizations' operational efficiency, enhance public safety and enabletimely emergency response. IndigoVision is headquartered in Edinburgh UK, withlocal sales and support offices across the world. IndigoVision partners withover 200 authorised system integrators and installers in 40 countries to providelocal system design, installation and service to end users. Enquiries to: IndigoVision plc Oliver Vellacott CEO ++44 (0) 131 475 7200 Marcus Kneen CFO Brewin Dolphin Securities Ltd Alan Stewart ++44 (0) 141 221 7733 Nominated Advisor Kenneth Fleming IndigoVision Group Plc Preliminary Results for the year to 31 July 2007 Chairman's Statement The year to 31 July 2007 was one of substantial growth for IndigoVision, both inproduct revenues and profits which approximately doubled, and in the management,sales and distribution infrastructure necessary to support future growth.Excellent progress was made in all key markets, the product range was broadened,and the rapid pace of development of the acceptance of IP video as thetechnology of choice for end users continued. Results Turnover for the year to 31 July 2007 increased by 77% to £13.4m (20063/4£7.6m),with product revenues almost doubling for the third successive year, increasing92% to £13.3m. As expected, licensing income reduced from £0.6m to £0.1m.Growth continued to be strong in all markets, with revenues from the Americas up164% to £3.6m, from Europe, Middle East and Africa up 66% to £7.3m and from AsiaPacific up 38% to £2.5m. In Asia Pacific, excluding licensing income, productrevenues grew 107% to £2.4m. Gross margin improved slightly to 65.6%, a good outcome given the reduction inlicensing revenues. These gross margins enable IndigoVision to provide themarket leading products, sales support and infrastructure, research anddevelopment, and customer service which our customers rightly expect. Theoverall contribution from gross margin grew by 86% to £8.8m. As indicated previously, the year to 31 July 2007 saw a substantial increase incosts. A planned investment in developing the scale and quality of the salesforce resulted in selling and distribution costs increasing by 130% to £4.32m; abroadening and strengthening of the management team and support infrastructureresulted in administrative costs increasing by 80% to £2.32m; and increasedexpenditure on product development resulted in research and development costsrising 24% to £1.49m. Overall, operating costs grew 86% to £8.13m, on aheadcount which including retained agents grew to 99 from 66 at last year end.Three regional hubs (Singapore, USA, UK) are now operational to locate stocking,service and support closer to our partners. As a result of these increasedresources, IndigoVision is better placed to service its global customer base,and to continue to take advantage of the rapid growth rates evident in itschosen markets. Operating profits grew 81% to £0.65m, and profit before taxation by 108% to£0.67m. The profit and loss account also benefited from a credit of £2.0m inrespect of deferred tax, being a partial recognition of the substantial taxlosses available to IndigoVision for offset against future profits. The boardconsidered it appropriate not to recognise the full amount until a moresustained record of profitability becomes evident. During the year there was a net cash outflow from operating activities of £1.1m,reflecting a net increased investment of approximately £2.1m in stock, debtorsand creditors, concomitant with increased levels of trade. This was offset bysome £1.0m of net cash flow from trading profits after adjusting for non-cashitems. At the year end, despite the increased investment in working capital,IndigoVision had cash of £0.2m and our bank overdraft facilities were unused. The Business IndigoVision is a leading originator of complete IP video and alarm managementsolutions. Its products are widely chosen for applications in airports, citycenters, ports, mines, road and rail systems, education, banking, casinos,prisons, government and the military. IndigoVision's enterprise-class systemsimprove organisations' operational efficiency, enhance public safety and enabletimely emergency response. IndigoVision has local sales, support anddistribution presence across the world, and partners with over 200 authorisedsystem integrators and installers in 40 countries to provide local systemdesign, installation and service to end users. IndigoVision's products have beenemployed in thousands of installations globally, including two Olympic Games,the 2006 Soccer World Cup, 7 major rail networks, 2 of the world's top 5 banks,28 airports and 5 casinos. In July 2007 IndigoVision was awarded its largest ever US contract, supplying anintegrated 1100 camera IP Video solution for two casinos in Tucson, Arizona.IndigoVision also recently won a prestigious contract for TransLink inVancouver, Canada to upgrade the 880 camera CCTV system on SkyTrain, the world'slargest automated light rapid transit system - reflecting IndigoVision'scontinued success with infrastructure projects in the transport sector. Key to the future success of IndigoVision are continual product improvement anddevelopment and delivering the very best customer service. IndigoVision'shardware and software are designed and developed in-house. During 2007 weincreased our commitment to research and development, and launched a completelynew range of products based on the higher compression H.264 standard, as well asbroadening other existing parts of the product range including IP cameras andnew entry level solutions. We also invested heavily in customer service staffand systems with a view to meeting and exceeding the standards of responsivenessand professionalism expected by our customers and partners, on whom our futuregrowth depends. The development of IP video technology has opened up a completely new area ofCCTV applications. These are enterprise wide solutions employing greater than1000 cameras, 200 monitors, 50 operators, 100 recorders with one petabyte ofstorage, which are continuously displaying and recording high-quality videoacross IP networks spanning entire plants, organisations and even countries.IndigoVision is fortunate to have a lead in the real world deployment of suchsystems and is very well placed to take advantage of the substantial marketgrowth that is developing for such systems. Sales and Distribution The total number of staff and retained agents employed in customer facing areas,namely sales, marketing, sales support, customer service and distributionincreased 49% from 37 at last year end to 55 at 31 July 2007. This step changein the scale of IndigoVision's market infrastructure was necessary both toenable last year's doubling of product revenues and to support the futuredevelopment of IndigoVision's business in markets that are expected to growrapidly in the foreseeable future. Management and Staff The board has deliberately strengthened the management team during the year, atsignificant cost, in order to give IndigoVision a much broader team capable ofoverseeing the further development of the group's business. A group salesdirector, group human resources director, chief marketing officer and head oftechnical support were recruited from outwith IndigoVision, all experienced andhighly qualified individuals. Internal candidates were appointed to the new postof operations director and to regional sales management positions each of whomis well experienced in IndigoVision's operations and products. The group nowhas a full service management team committed to the growth of IndigoVision'sbusiness. In a year which has seen a doubling of the scale of IndigoVision and a greatdeal of internal change, the management and staff throughout the group havecontinued to be highly dedicated, committed and professional and I would like tothank them on behalf of the group's shareholders and customers. Current Trading and Outlook The year to 31 July 2007 saw an approximate doubling of product revenues for thethird successive year, and despite a number of larger volume contracts, this wasachieved without sacrificing margins. In order to maximise on the opportunityavailable from rapidly developing markets, the board deliberately chose tore-invest the fruits of that growth in increased overheads to support expansion. The group's management is focussed on continuing the growth of IndigoVision'sbusiness and in turning the substantial investment made in infrastructure intosustainably higher levels of profitability. The current year has started well. Both sales and order intake in the last sixweeks are well ahead of the corresponding period last year and the pipeline ofpotential new business remains high. Whilst precise rates of growth in rapidlydeveloping markets are inherently difficult to predict, this strong start givesthe board confidence that the current year will show a good increase in sales.We are not, at this stage, seeing any marked effect on customers from thecurrent turmoil in financial markets, and we are firmly of the view that shouldthis ultimately flow through to capital spending, it is likely to affect therate of market growth, rather than growth itself. The investment in increased resource undertaken last year, coupled with thepositioning and quality of IndigoVision products, places the company in anexcellent competitive position as its markets continue to expand. We currentlyexpect the overall cost base to grow less rapidly this year than last, althoughgrowth will still be substantial, both as a result of the full year effect ofdecisions made last year, and of further overhead spending to support increasedsales. We again expect increased investment in working capital, particularly inhigher debtors (consistent with an expectation of higher sales) and in higherstocks of the faster selling finished goods (reflecting both higher expectedsales and targeted larger production batch sizes aimed at achieving improvedmanufacturing efficiency). In addition we expect to increase research anddevelopment expenditure to ensure that IndigoVision's market leading position ismaintained. IndigoVision is enviably positioned with excellent products and well developedinfrastructure in a nascent but rapidly growing market. Goals for the currentyear are maintaining competitive advantage; bedding in last year's rapidincreases in management and selling overhead; growing sales and the installedbase of product; and importantly, delivering sustainably higher levels ofoperating margins and cash flow from trading necessary to finance expected ratesof growth. There is every reason to believe that the current year will see goodprogress towards these goals. Hamish Grossart Chairman 12 September 2007 Consolidated profit and loss account for the year ended 31 July 2007 Note 2007 2006 £000 £000 (Restated - note 1) Group Turnover 1,2 13,385 7,574Cost of sales (4,610) (2,853) Gross profit 8,775 4,721Research and development expenditure (1,490) (1,197)Selling and distribution costs (4,315) (1,879)Other administrative costs (2,320) (1,286) Group operating profit 650 359Interest receivable and similar income 6 21 44Interest payable and similar charges 7 - (80) Profit on ordinary activities before 2-5 671 323taxationTax on profit on ordinary activities 8 2,066 87 Profit for the financial year 2,737 410 Profit per ordinary shareBasic profit per share 9 39.1p 5.9pDiluted profit per share 9 35.0p 5.2p Turnover and profit on ordinary activities before taxation for the current andprevious year relate wholly to continuing activities. Consolidated balance sheet at 31 July 2007 Note 2007 2007 2006 2006 £000 £000 £000 £000Fixed assets Tangible assets 10 385 240 Current assetsStocks 12 1,533 398Debtors due after less than one year 13 4,211 2,105Debtors due after more than one year - Deferred 14taxation 2,000 -Total debtors 6,211 2,105Cash at bank and in hand 179 1,454 7,923 3,957Creditors: amounts falling due within one year 15 (2,463) (1,431) Net current assets 5,460 2,526 Total assets less current liabilities 5,845 2,766Provisions for liabilities and charges 17 (150) (90) Net assets 5,695 2,676 Capital and reservesCalled up share capital 18 71 69Share premium account 20 24,045 23,974Other reserve 20 8,562 8,562Profit and loss account 20 (26,983) (29,929) Shareholders' funds 5,695 2,676 Consolidated cash flow statement for the year ended 31 July 2007 Note 2007 2006 £000 £000 Cash flow statement Cash (outflow)/inflow from operating 23 (1,094) 334activitiesReturns on investments and servicing of 24 21 44financeTaxation - 87Capital expenditure 24 (275) (144) Cash (outflow)/ inflow before financing (1,348) 321 Financing 24 73 1 (Decrease)/increase in cash in the year (1,275) 322 Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash in the year 25 (1,275) 322 Cash outflow from debt repayment - - Change in net debt resulting from cash (1,275) 322flows Movement in net funds in the year (1,275) 322 Net funds at the start of the year 1,454 1,132 Net funds at the end of the year 25 179 1,454 Consolidated statement of total recognised gains and losses for the year ended 31 July 2007 Group 2007 2006 £000 £000 (Restated - note 1) Profit for the financial year 2,737 410 Exchange differences on the retranslation of net investments (1) - Total recognised gains and losses relating to the financial year 2,736 410 Prior year adjustment (as explained in note 1) (116) Total recognised gains since the last annual report 2,620 Reconciliations of movements in shareholders' funds for the year ended 31 July 2007 Group Company 2007 2006 2007 2006 £000 £000 £000 £000 Restated Restated Profit / (loss) for the financial year 2,737 410 (40) (19)Share based payments 209 116 209 116Increase in share capital 73 1 73 1 Net increase in shareholders' funds 3,019 527 242 98Opening shareholders' funds 2,676 2,149 1,349 1,251 (Company: originally £1,233,000 restated forprior year adjustment of £116,000) Closing shareholders' funds 5,695 2,676 1,591 1,349 Notes to the accounts: 1 Principal Activity The principal activity of the Group and its subsidiaries continues to be thedesign, development, manufacture and sale of software and hardware products.These products provide CCTV and alarm integrators with a complete enterprisevideo and alarm management system that allows full motion real time video to betransmitted worldwide, in real-time, with digital quality and security, usinglocal or wide area networks, wireless links or the Internet. 2 Accounting policies Basis of preparation The preliminary financial information has been prepared on the basis of theaccounting policies set out in the most recent set of financial statements forthe year ended 31 July 2006. These policies are detailed on pages 14 and 15 ofThe IndigoVision Group plc annual report for 2006. FRS 20 "Share based payments" has been adopted in the year. As a result of theadoption of FRS 20, a share based charge of £209,000 (2006:£116,000) has beenmade to the Group profit for the financial year. There is a correspondingcredit to the profit and loss reserves, and accordingly there is no effect onnet assets at the end of any of the periods. 3 Annual accounts The financial information set out in this announcement does not constitute theGroup's Statutory Accounts for the year ended 31 July 2007 or 2006 but isderived from those accounts. Statutory Accounts of IndigoVision Group plc for2006 have been delivered to the Registrar of Companies and those for 2007 willbe delivered to the Registrar of Companies following the Company's annualgeneral meeting. The auditors have reported on those accounts; their reportswere unqualified and did not contain a statement under section 237(2) or (3) ofthe Companies Act 1985. 4 Segmental information Turnover by destination 2007 2006 £000 £000 Europe, Middle East & Africa 7,257 4,381Asia 2,515 1,823Americas 3,613 1,370 13,385 7,574 5 Profit per share The weighted average number of ordinary shares used in the calculation of 2007 2006basic and diluted earnings per share for each period were calculated asfollows: Issued ordinary shares at start of year 6,928 6,924 Effects of shares issued during the period from exercise of employee share 64 4options Weighted average number of ordinary shares at end of year - for basic earnings per share 6,992 6,928Effect of share options in issue 819 878 Weighted average number of ordinary shares at end of year - for diluted earnings per share 7,811 7,806 Basic earnings per share The calculation of basic earnings per share for the year ended 31 July 2007 wasbased on a profit attributable to ordinary shareholders of £2,737,000 (2006:£410,000) and a weighted average number of ordinary shares outstanding duringthe year ended 31 July 2007 of 6,992,309 (2006: 6,927,976), calculated as shownabove. Diluted earnings per share The calculation of diluted earnings per share for the year ended 31 July 2007was based on a profit attributable to ordinary shareholders of £2,737,000 (2006:£410,000)) and a weighted average number of ordinary shares outstanding duringthe year ended 31 July 2007 of 7,811,609 (2006: 7,806,176), calculated asshown above. Adjusted earnings per share Adjusted earnings per share has been calculated excluding the deferred taxcredit. Based on a profit of £737,000 the basic earnings per share is 10.5p andthe diluted earnings per share is 9.4p. 6 Called up share capital 2007 2006 £000 £000Group and CompanyAuthorisedEquity: Ordinary shares of 1p each 14,922 14,922 Allotted, called up and fully paidEquity: 7,082,176 Ordinary shares of 1p each(2006: 6,927,976) 71 69 71 69 During the year 154,200 ordinary shares of 1p each were issued. 47,000 at 35pper share, 41,000 at 36p per share, 3,200 at 130p per share, 43,000 at 56.5p pershare and 20,000 at 63.5p per share pursuant to the exercise of options. 7 Share premium and reserves Share Profit premium Other and loss account reserve accountGroup £000 £000 £000 At beginning of year 23,974 8,562 (29,929)Retained profit for the year - - 2,737Premium on share capital 71 - -Share based payments - - 209 At end of year 24,045 8,562 (26,983) 8 Reconciliation of operating profit to operating cash flows 2007 2006 £000 £000 (Restated - note 1) Operating profit 650 359Depreciation 130 61(Increase) in stocks (1,135) (45)(Increase) in debtors (2,040) (675)Increase in creditors 1,033 581Foreign exchange (loss) / profit (1) (78)Movement in warranty provisions 60 15Charge in respect of share based payment 209 116 Net cash (outflow)/ inflow from operatingactivities (1,094) 334 9 Analysis of net funds At beginning Cash flow At end of of year year £000 £000 £000 Cash in hand, at bank 1,454 (1,275) 179 Total 1,454 (1,275) 179 Secretary and advisors Secretary and Registered Office The Company Secretary Charles Darwin Building The Edinburgh Technopole Bush Loan Edinburgh EH26 0PJ Nominated Advisor and Stock Brokers Brewin Dolphin Securities Ltd 48 St Vincent Street Glasgow G2 5TS Auditors KPMG Audit Plc Saltire Court 20 Castle Terrace Edinburgh EH1 2EG Solicitors Shepherd & Wedderburn Saltire Court 20 Castle Terrace Edinburgh EH1 2ET Bankers Royal Bank of Scotland 36 St.Andrews Square Edinburgh EH2 2YB Registrars Computershare Services PLC 7th Floor, Jupiter House Triton Court 14 Finsbury Square London EC2A 1BR This information is provided by RNS The company news service from the London Stock Exchange