Thruvision Grp Regulatory News (THRU)

1 June 2011

Digital Barriers plc

("Digital Barriers" or the "Company")

Preliminary Results for the thirteen months ended 31 March 2011

Digital Barriers plc (LSE AIM: DGB), the specialist provider of products and services to the international homeland security market, announces audited results for the thirteen months ended 31 March 2011.

The Board is pleased to report that it has made good strategic progress since IPO in March 2010, the highlights of which are:

Key Highlights

·; Revenue of £6.6 million, Loss before tax of £4.6 million, Adjusted loss before tax of £2.7 million*

·; Raising a total of £55.0 million (before expenses) through Executive Director contribution, the IPO in March 2010 and a share placing in December 2010;

·; Completing five acquisitions since IPO, on which integration is effectively complete, and with a good pipeline of potential target companies for further acquisition;

·; Acquiring world-class IP into the group which is generating significant traction from a growing number of overseas governments and commercial organisations - we already have trial deployments underway in the US, Middle East and Asia-Pacific. Our acquisition pipeline should bring additional world-class IP into the Group;

·; Establishing a London Headquarters which provides leadership, governance, strategic direction as well as sales and brand management across the Group;

·; Developing an international presence. We now have operations within each of our target regions, with offices in London, Singapore and Washington, DC. Our presence in the Middle East is expected to be in place later this year. In addition, we have experienced considerable sales success in South Korea; and

·; Developing relationships with major prime system integrators. We have entered into formal contractual arrangements with Singapore Technologies and we are working with Boeing to provide expertise in risk and vulnerability assessments. In addition we have on-going sales collaboration with several other major integrators across each of our target regions.

* Before amortisation of acquired intangibles of £0.7 million, the unwinding of the discount on deferred consideration of £0.1 million, IPO and placing costs of £0.2 million and deal costs of £0.9 million.

Commenting on the results Dr Tom Black, Executive Chairman of Digital Barriers plc said:

"With our strategy now validated, and with strong sales interest across each of our target regions, we continue to see the opportunity for Digital Barriers as very compelling over the medium to long term. We also have a good pipeline of potential acquisitions which gives us additional confidence in the future of the Group."

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About Digital Barriers plc:

Founded by the leadership team behind Detica Group plc, Digital Barriers is focused on the provision of specialist products and services to the international homeland security market, where counter-terrorism, the protection of critical computer systems and networks, and support for counter-insurgency operations overseas represent a compelling commercial opportunity. Over time, the Company aims to become a leading specialist, working directly with end-customers and through key partner organisations, providing focused, proportionate and effective solutions across the Secure Government, Border Protection, Defence, Transportation, Energy and Utilities sectors, as well as with organisations responsible for safeguarding crowded public spaces and nationally symbolic locations.

www.digitalbarriers.com

Chairman's Statement

Introduction and highlights

This has been a very good first year for Digital Barriers and we have seen significant momentum in the development of the Company. At the time of our IPO in March 2010, we stated that we aimed to provide specialist products and services to an international homeland security market now worth $178.0 billion a year and growing (Source: Visiongain: 'Global Homeland Security 2010-2020, July 2010). This aim remains unaltered. Since then, the evolving threats of international terrorism against civilian targets, highly-organised criminal networks sponsoring the trafficking of drugs and people, economic fraud and identity theft, attacks on high-profile computer systems, and specialist military operations overseas, have continued to dominate the headlines both in the UK and internationally.

Our strategy is to provide specialist solutions to the major government departments and commercial organisations responsible for combating these threats in the most significant homeland security regions, specifically the UK and Mainland Europe, the United States, the Middle East and Asia-Pacific. Our progress and momentum through the last year has validated this strategy through the strong interest we have received from major customers and partners across each of these territories.

The major highlights are as follows:

·; Revenue of £6.6 million, Loss before tax of £4.6 million, Adjusted loss before tax of £2.7 million*

·; Raising a total of £55.0 million (before expenses) through Executive Director contribution, the IPO in March 2010 and a share placing in December 2010;

·; Completing five acquisitions since IPO, on which integration is effectively complete, and with a good pipeline of potential target companies for further acquisition;

·; Acquiring world-class IP into the group which is generating significant traction from a growing number of overseas governments and commercial organisations - we already have trial deployments underway in the US, Middle East and Asia-Pacific. Our acquisition pipeline should bring additional world-class IP into the Group;

·; Establishing a London Headquarters which provides leadership, governance, strategic direction as well as sales and brand management across the Group;

·; Developing an international presence. We now have operations within each of our target regions, with regional offices in London, Singapore and Washington, DC. Our presence in the Middle East is expected to be in place later this year. In addition, we have experienced considerable sales success in South Korea; and

·; Developing relationships with major prime system integrators. We have entered into formal contractual arrangements with Singapore Technologies and we are working with Boeing to provide expertise in risk and vulnerability assessments. In addition we have on-going sales collaboration with several other major integrators across each of our target regions.

* Before amortisation of acquired intangibles of £0.7 million, the unwinding of the discount on deferred consideration of £0.1 million, IPO and placing costs of £0.2 million and deal costs of £0.9 million.

Results

The results for the period reflect the phased acquisitions by the Group during the period and ongoing corporate overheads. As such they are not representative of the current trading of the business.

Revenues in the period were £6.6 million. The Group's loss before tax was £4.6 million. We recorded an adjusted loss before tax of £2.7 million, after adding back amortisation of acquired intangibles of £0.7 million, the unwinding of the discount on deferred consideration of £0.1 million, IPO and placing costs of £0.2 million and acquisition costs of £0.9 million.

Consideration for acquisitions in the period totalled £20.2 million, with £16.5 million of this paid in cash in the period. The cash balance at the end of the period was £33.5 million.

People

Our people include world-class technologists and experienced homeland security and specialist defence practitioners who help our customers and partners both in the UK and overseas. We bring together a unique mix of skills to provide real-world solutions that make a tangible difference on the ground.

In our first year we have assembled a very experienced HQ management and sales team, and have made good progress in developing our broader regional presence. We have also established a Strategic Advisors Group comprising four senior former government officials from the UK and US. This group brings deep operational expertise and a strong network of international relationships.

Outlook

Having validated our strategy, with world-class IP in the Group, and with strong interest across each of our regions, we remain confident that the opportunity for Digital Barriers is very compelling over the medium to long term.

The Group's initial set-up phase is complete and the focus is now on international sales, with our specialist sales team taking solutions based on our world-class IP to target customers and partners in each of our regions. We will also continue to identify and secure additional target companies with compelling technology; we expect these to be broadly similar in size and profile to previous acquisitions.

We will continue to develop the Digital Barriers brand in the minds of customers and partners, and remain confident that we are continuing to make good progress in establishing the Group as a leading international homeland security specialist over the coming years.

Business Review

Introduction

We have made very good progress in establishing a platform for Digital Barriers since the IPO in March 2010. In addition to establishing our Headquarters and international sales functions, we have also put in place two operating divisions, Services and Products, into which we have integrated the five acquisitions made to date.

With this platform now established, we are confident we can drive strong organic growth by exploiting our regional sales capability, and continue adding further capability via acquisition.

Services Division

A key part of our strategy is to use the strong credentials provided by our experience with the UK Government to support our international business development initiatives. Our Services Division is focused on the UK market and, in our first year, we saw Digital Barriers establish itself with a number of key UK Government organisations in the secure government, law enforcement and transportation sectors. This has been achieved through the acquisition and subsequent development of Security Applications and Overtis Solutions (now known as Digital Barriers Integration Services), which together, despite difficult market conditions, delivered good results.

This division generally implements solutions based on third party technology although we are starting to deliver our own technology into our UK Services clients. We plan to develop our Services business primarily organically and will maintain our current focus on the very high security areas of the UK Government market.

Outside the UK Government market we have been further encouraged by the support received so far from the Government's UK Trade and Investment organisation, where staff in London and embassies in key countries have provided us with invaluable advice and introductions.

Products Division

Our Products Division operates internationally and currently comprises COE, Waterfall Solutions and Essential Viewing Systems. Collectively, these businesses have sold to customers in the UK, Asia-Pacific and the US in the period.

Waterfall Solutions and Essential Viewing Systems have traded very well post-acquisition and have both helped broaden and deepen our UK Government relationships. COE brought with it both its existing infrastructure and customer base in Singapore, upon which we have continued to build as well as a broader Asia-Pacific market position, particularly in the transportation sector. We have implemented a number of planned changes to align COE better with the Digital Barriers operating model.

Technology capability

Our Products Division now owns industry leading intellectual property focused on the advanced visual surveillance market. This covers image capture, a range of image processing and enhancement techniques (for example, thermal image processing, image stabilisation, and enhancing low light performance), and a range of video analysis techniques. In addition, we have world class secure and bandwidth-efficient wireless transmission technology.

We have been successful in generating good interest with a number of highly differentiated products and have trials underway with new government customers in the US, Middle East and Asia-Pacific. In particular:

·; Essential Viewing's wireless video transmission system, "LiteStream" - utilising a patented software algorithm originating from the University of Strathclyde, the E300 is designed to stream high quality video over very poor quality wireless communications links, such as the poor coverage areas of a mobile phone network. With a military heritage, this technology is creating significant interest from traditional military customers, police forces and, under Digital Barriers' ownership, mass transport operators worried about terrorist and serious crime risks.

·; Waterfall's dual-band imaging and processing system "Fuzer"™- with roots in advanced military image processing, this system intelligently fuses images from multiple cameras, including visual and infrared sensors, into a single, integrated and enhanced image. This unique system is capable of fusing imagery from zoom-enabled cameras. This provides excellent performance in difficult surveillance environments and is in trial with a number of mainly military customers.

International progress

In Asia-Pacific, our initial focus has been on Singapore, both as an important international customer itself, and as a regional hub. We have been encouraged by the response of the Singapore Government, the key regional partner Singapore Technologies and customers such as Port of Singapore Authority and Singapore Mass Transit System to our full range of capability. We expect to see a broadening and deepening of these relationships in the coming year. From a broader Asian perspective, we have achieved good progress in South Korea and are now actively broadening our reach to other countries in the region.

Our Essential Viewing acquisition has brought us a number of US Government opportunities. We have established a sales presence in a Washington, DC. office to take these opportunities forward and to develop our US market presence. In this large and highly competitive market, we are working with a small number of key US prime system integrators to gain traction.

In the Middle East, we have initiated relationship and brand-building activities with the support of the UK Government. With an initial focus on the United Arab Emirates, Qatar, Kuwait and the Kingdom of Saudi Arabia, we are again working closely with major prime system integrators such as Boeing, who are well established in the region and that have good market knowledge and relationships.

Sales approach

Since IPO, we have established an international sales capability utilising our regional office infrastructure. We are currently focusing primarily on direct sales to end-government customers to gain market traction and build credibility internationally. Given our consulting-led approach, we are confident that once initial sales are complete, we can go on to develop enduring relationships with these international customers.

We are also positioning ourselves as key partners with prime system integrators on very large programmes, specifically in the US and Middle East. These are at various stages of the procurement cycle but represent substantial opportunities for us over time.

Governance

Digital Barriers is committed to maintaining high standards of Corporate Governance. Whilst the Group is not bound by the provisions of section 1 of the 2008 Combined Code on Corporate Governance ('the Combined Code') the Board endeavors, so far as is practical, to comply with the Combined Code. During the period under review the Board has developed the internal controls and processes to ensure as far as possible compliance with the Combined Code.

Performance Indicators

We monitor a number of metrics, both financial and non-financial, on a monthly basis. The most important of these are as follows:

·; Revenue: £6.6 million for period under review;

·; Corporate overhead £2.7 million for period under review;

·; Number of employees: 110 at 31 March 2011; and

·; Cash: £33.5 million at 31 March 2011.

The Board is satisfied with the status of the above performance indicators given the current stage of the Group's development.

Although not particularly relevant for the period under review the Board will in future also monitor organic revenue growth, operating margin, tax rate and cash conversion.

Financial Review

Digital Barriers has delivered solid performance in its first accounting period since incorporation in February 2010, with revenue of £6.6 million generating an adjusted loss before tax of £2.7 million and adjusted loss per share of 9.21 pence. On an unadjusted basis, the loss before tax was £4.6 million and loss per share was 15.38 pence.

Revenue and margins

Digital Barriers delivered £6.6 million of revenue driven by the acquisition of five businesses at various points in the reporting period as detailed below.

These acquired businesses have been integrated into one of two divisions. Results by division are shown below. The Products Divisional loss is the result of a number of planned changes post-acquisition to align COE better with Digital Barriers' operating model.

The Group's adjusted loss before tax for the period was £2.7 million. The table below summarises the Group's revenue and operating results by these segments.

Revenues earned by the Group in the period were split 64% and 36% between Services and Products respectively.

The Corporate overheads are broken down as follows:

Taxation

As a result of losses acquired through acquisitions and corporate overheads we do not expect to pay the full rate of UK corporation tax for a number of years. The tax credit for the period of £0.3 million principally relates to the unwinding of deferred tax liabilities on acquired intangibles and R&D tax credits.

At 31 March the Group hadunutilised tax losses carried forward of approximately £11.2 million. Given the varying degrees of uncertainty as to the timescale ofutilisation of these losses, the Group has not recognised £2.2 million of potential deferred tax assets associated with £8.3 million of these losses.

At 31 March the Group's net deferred tax liability stood at £0.5 million, relating to intangibles on acquisitions made in the period of £1.3 million, offset by £0.8 million relating to tax losses.

Loss Per Share

The reported Loss per share is 15.38 pence.

The adjusted Loss per share of 9.21 pence is detailed in the table below as the Directors believe that this is a more relevant measure of the Group's underlying performance.

Cash and treasury

We ended the period with a cash balance of £33.5 million.

During the course of the period the Group raised a total of £55.0 million (before expenses). The Executive Directors contributed £5.0 million through Digital Barriers Services Ltd, £20.0 million was raised via the IPO in March 2010 and £30.0 million from a Placing in December 2010. After taking into account the maximum deferred consideration payable in respect of acquisitions made to date of £4.0 million, and assuming these are paid in full, the balance of cash would be £29.5 million. This cash balance remains available to the business to fund future acquisitions and working capital.

Financing costs included a charge of £0.1 million in respect of the discounting of the deferred consideration for Security Applications Limited, Waterfall Solutions Limited and Essential Viewing Systems Limited, which will be paid out over the next two years.

Dividends

The Board is not recommending the payment of a dividend. 

DIGITAL BARRIERS PLC

Consolidated statement of comprehensive income

for the thirteen months ended 31 March 2011

The results for the period are derived from continuing activities

DIGITAL BARRIERS PLC

Consolidated balance sheet

at 31 March 2011

DIGITAL BARRIERS PLC

Consolidated statement of changes in equity

for the thirteen months ended 31 March 2011

DIGITAL BARRIERS PLC

Consolidated statement of cash flows

for the thirteen months ended 31 March 2011

1. Accounting policies

Basis of preparation

The preliminary results of the period 8 February 2010 to 31 March 2011 have been extracted from audited accounts which have not yet been delivered to the Registrar of Companies. The Financial Statements set out in this announcement do not constitute statutory accounts for the period ended 31 March 2011. The report of the auditors on the statutory accounts for the period ended 31 March 2011 was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The Financial Statements for the period ended 31 March 2011 included in this announcement were authorised for issue in accordance with a resolution of the Board of Directors on 31 May 2011.

Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Control arises when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Subsidiaries are consolidated using the Group's accounting policies. Business combinations are accounted for using the acquisition method of accounting except for the acquisition of Digital Barriers Services Limited by Digital Barriers plc which has been accounted for using the pooling method. All inter-company balances and transactions, including unrealised profits arising from them, are eliminated on consolidation.

The Company is a limited liability company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange.

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union as they apply to the financial statements of the Group for the period ended 31 March 2011 and applied in accordance with the Companies Act 2006.

New holding company

On 8 February 2010, Digital Barriers plc was incorporated as a new holding company and parent company of the Group. On 22 February 2010 the former shareholders of Digital Barriers Services Limited ("DBSL") were issued new shares in Digital Barriers plc in a share for share exchange. Immediately following the share for share exchange the former shareholders of DBSL held the same economic interest in Digital Barriers plc as they held in DBSL immediately prior to the exchange.

The acquisition of DBSL by Digital Barriers plc falls outside the scope of IFRS 3R "Business Combinations" and has been accounted for in these financial statements using the pooling of interests method which reflects the economic substance of the transaction. In accordance with the requirements of the pooling of interests method, the assets and liabilities of Digital Barriers plc and DBSL are recognised and measured in these financial statements at their pre-combination carrying amounts.

2. Loss per share

Basic loss per share

Adjusted loss per share

The Directors consider that adjusted EPS better reflects the underlying performance of the Group.

The inclusion of potential ordinary shares arising from LTIPs and Incentive shares would be anti-dilutive. Basic and diluted loss per share has therefore been calculated using the same weighted number of shares. If the Incentive shares had become convertible on 31 March 2011 and based on the share price of £2.05 on that day, 2,679,206 ordinary shares would have been issued in respect of the Incentive Share conversion. Full details as to the basis of calculation is given in the placing document available on the Company's website. The Incentive shares will immediately vest on change of control of the Company.

The weighted average number of shares excludes any shares held by employee share ownership plan (ESOP) trusts, which are treated as cancelled.

3. Trade and other receivables

4. Trade and other payables

5. Financial liabilities

6. Business combinations

Details of the acquisitions made by the Group in the period are set out below.

6a. Digital Barriers Services Limited

On 22 February 2010, Digital Barriers plc acquired 100% of the shares of Digital Barriers Services Limited ("DBSL") to form the Digital Barriers group via a share for share exchange. Digital Barriers plc issued 4,782,500 £1 ordinary shares and 217,500 Incentive shares at £1 to acquire 100% of the share capital of DBSL. This transaction has been accounted for using the pooling of interests method.

6b. Security Applications Limited

On 23 March 2010, the Group acquired the entire issued share capital of Security Applications Ltd ("SAL"), (trading as D Ford Associates). for £2.0m in cash and up to £0.85m in deferred cash consideration.

SAL is a UK-based specialist supplier, installer and integrator of thermal imaging equipment for perimeter surveillance, law enforcement and the protection of high-profile target locations. SAL supplies customised equipment and associated installation and maintenance services on a project-by-project basis to a highly-concentrated customer base through a framework agreement with a major UK Government department. SAL is part of the Group's Services division.

At present, the most significant threat to UK security comes not from state-to-state conflict, but from international and domestic terrorism. To effectively protect potential target locations such as crowded public spaces, high-profile targets and critical national infrastructure, they must appear hostile to potential terrorist activity. The Company believes that SAL will be instrumental in helping it achieve its strategic aim of working directly with end-customers and through key partner organisations, both in the UK and abroad, to provide focused, proportionate and effective solutions which will help protect these target locations from attack.

6c. Overtis Solutions (now known as Digital Barriers Integration Services)

On 23 July 2010 the Group acquired the business and assets of the Solutions division of Overtis Group ("Overtis Solutions") for £3.2m in cash.

Overtis Solutions is a UK-based specialist provider of integrated security solutions used in the protection of high value physical, human and information assets on a global basis held by high risk government departments, public sector bodies and major corporations. Overtis is part of the Group's Services division.

Overtis Solutions is considered by the Board to be highly complementary to the activities of Security Applications Limited ("SAL"), which Digital Barriers acquired on 23 March 2010. The Board of Digital Barriers believes that the activities of Overtis Solutions combined with those of SAL will enable the Company to take a further step forward in its strategic ambition to build a specialist mid-market business that can work directly with end-customers and through key partner organisations both at home and abroad to provide focused, proportionate and effective solutions which help protect key assets from attack.

6d. COE Group plc

On 20 August 2010 the Group's recommended cash offer for the issued share capital of COE Plc ("COE") for £3.3m in cash became unconditional, and the Group took control of Coe Group plc.

COE's focus has been to specialise in bringing innovative products to the video surveillance market. This has culminated in the successful development of COE's product range which offer high levels of video quality and technological integration for surveillance activities across IP, fibre and hybrid networks. The Board believes that the acquisition of COE will provide Digital Barriers with the next step in the development and execution of its strategy to build a leading mid-market business in the homeland security space. Coe is part of the Group's Products division.

6e. Waterfall Solutions Limited

On 20 October 2010, the Group acquired the entire share capital of Waterfall Solutions Limited ("Waterfall Solutions") for a maximum consideration of £5.5 million in cash and loan notes on a cash and debt free basis. Cash consideration was an initial £3.9 million paid upon completion and another £0.5 million paid before the period end for the excess working capital acquired. The initial consideration of £3.9 million was paid in cash. Deferred consideration of up to £0.75 million is payable in cash and loan notes based on the year ended 30 September 2011, and an additional sum of up to £0.75 million is payable in cash and loan notes based on the year ended 30 September 2012, based on revenue and profit targets. A further £0.1 million is payable shortly after the year ended 30 September 2011 and is contingent on the vendors continuing to be employed by the Group at that date. This amount is treated as remuneration for services to Waterfall Solutions and will be recognised within administrative expenses over the period to 30 September 2011.

Waterfall Solutions is a UK-based provider of advanced technology solutions and related consulting services, specialising in the areas of image processing, data fusion, modelling and simulation, and fits neatly with Digital Barriers existing acquired assets. Waterfall works directly with government and commercial clients in the defence and security sectors as well as through strategies partnerships and prime systems integrators. Waterfall is part of the Group's Products division.

6f. Essential Viewing Systems Limited

On 11 March 2011, the Group acquired the entire share capital of Essential Viewing Systems Limited ("EVS") for a maximum consideration of £4.85 million in cash on a cash-free, debt-free basis. Cash consideration was an initial £3.4 million paid upon completion and another £0.2 million paid before the period end for the excess working capital acquired. A further payment of £0.2 million for the balance of excess working capital is payable after the period end. Deferred consideration of up to £1.45 million is payable in cash upon the completion of EVS' current financial year, ending on 31 December 2011 and subject to revenue and profit targets. Up to £0.35 million of this deferred consideration is payable at the end of the first half of EVS' current financial year, ending on 30 June 2011, again subject to revenue and profit targets.

EVS is a UK-based provider of surveillance products that are capable of streaming real-time video and related data over cellular and other wireless networks where bandwidth limitations can seriously compromise video quality and equipment control. EVS' products can be rapidly deployed and are especially well suited to covert surveillance, specialist areas of defence and law enforcement, public safety including transportation security, and deployment within remote or hostile environments. EVS is part of the Group's Products division.

EVS' products, its end markets and the high quality nature of its solutions complement Digital Barriers' existing technology portfolio and stated growth strategy, as does EVS' current network of partners, distributors and integrators.