Water Intel. Regulatory News (WATR)

21 Dec 2007 07:01

Qonnectis plc21 December 2007 FOR IMMEDIATE RELEASE 21 December 2007 Qonnectis plc PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2007 Qonnectis plc ("Qonnectis" or "the Company"; stock code: QTI), the energy andwater conservation IT services provider, announces its audited results for theyear to 30 June 2007. Highlights: • Turnover almost trebled in comparison to 2006 levels to £304,776 • Gross profit margins widened to 63.6% (2006: 29.1%) • Reported loss of £861,129 similar to 2006 • Development of Leakfrog domestic leakage monitoring device in partnership with Thames Water • New multi-utility monitoring contracts and business wins • Repeat business from a number of clients Commenting on the results, Chairman, Richard M. Taylor, said: "Qonnectis has made strong progress this year as a combination of new customerwins, existing customer roll-outs and the considerable potential of Leakfroghas greatly strengthened the business. "Since the year end, we have concluded an exclusive licence arrangement with Thames Water that will allow us to market Leakfrog nationally and internationally. Additionally, Government moves to encourage the introduction of smart metering for energy and compulsory water metering should be extremely beneficial to our business environment. The Company enters its new financialyear with significant momentum and the Board remains optimistic about its continued growth." Notes to Editors Editors' notes - About Qonnectis Qonnectis' patented technologies enable the analysis of remote meter data tofacilitate water leakage control, customer profiling, and energy and watermanagement efficiency. Its products are already being used by a wide range of UKand overseas utilities as well as large commercial and domestic users of energyor water. The iStaq family of products work by sending meter readings to Qonnectis' securedata centre via SMS text messaging over the GSM network. The data is thenaggregated and published online via utility-branded "myMeter" websites operatedby Qonnectis. The data can also be sent directly to utilities' billings systems.Customers can access real-time information via a web browser using the "myMeter"service. For further information, please visit www.qonnectis.com. For further information, please contact: Qonnectis plc 01932 788299Michael Tapia, Chief ExecutiveRichard M. Taylor, Chairman HB Corporate 020 7510 8600Edward Hutton/Rachel Kane Bankside Consultants 020 7367 8888Sue Scott/Michael Padley CHAIRMAN'S STATEMENT Results I am delighted to report that Qonnectis has seen strong revenue growth for thethird year in succession, with turnover almost trebling in comparison to 2006levels to £304,776. Of equal importance is the improvement in our gross profitmargins which have widened from 29.1% in the last financial year to 63.6%. The reported loss of £861,129 was a similar figure to the prior year, reflectingadditional investment in research and development. The most significant event in 2007 has been the development of our Leakfrog(R)product in partnership with Thames Water, which, for the first time in the UKwater industry, enables customer side leakage to be identified and measured.This innovative device has been adopted by Thames Water following successfulfield trials and is currently being installed as part of their Victorian MainsRenewal Programme. A £200,000 order was placed by them in October and therevenues from this will contribute to the 2008 financial results. Other highlights of the year included: * An ongoing relationship with Scottish Water, most notably a £56,000 order for 'iStaq' data loggers and web services. * New contracts with Schlumberger Oilphase and Redditch Borough Council for multi-utility monitoring. * Repeat business from a number of the NHS Trusts and local councils, the London Fire and Emergency Planning Authority and Aquavitae. * New business from Aga Rayburn, Jardine Motors, Smith Bellerby, Larsen Water Management and a number of other organisations. Fund Raising In August, shortly after the financial year end, the Company raised £250,000through a secured convertible loan facility from Security Change Ltd. If notrepaid by 31 January 2008, the loan will become immediately convertible. Thisfunding has enabled us to complete the development work on Leakfrog which ledto the £200,000 order from Thames Water. Board Changes Guy Chant joined the board as a non-executive director in May, following theresignation of Percival Albuquerque. I would like to take this opportunity tothank Percy for his contribution to Qonnectis since flotation. Guy brings to theCompany his extensive experience within the European water industry. He waspreviously Commercial Director of Thames Water Utilities and External AffairsDirector of Thames Water plc. Outlook Following the Thames Water order, 'Leakfrog(R) was launched commercially at awater industry conference in December. The Board anticipates that Leakfrog(R)will generate significant revenues from the water utility industry in thefuture. To date, Qonnectis has primarily focused on the measurement and provision ofutility-related data. Whilst we will continue to exploit our technological leadin this area, where we are seeing increasing demand, customer feedback ishighlighting opportunities for Qonnectis to address other operational issues -such as how to remediate a leak, improve metering, integrate financial systems,or improve the energy efficiency of heating and air conditioning. Hence we arein conversations with complementary businesses with a view to providingintegrated industry solutions, from data gathering to problem-solving forcustomers. Richard M. TaylorChairman21 December 2007 CHIEF EXECUTIVE'S REVIEW It is very gratifying to be able to report continued strong progress this yearas a combination of new customer wins, existing customer roll-outs and theconsiderable potential of Leakfrog(R) has greatly strengthened the business. Customers and the Market In my review last year I stated that the key to our profitability is to winrepeat orders from existing and new customers. We have seen significant repeatbusiness from existing customers - in particular Scottish Water, Aquavitae andthe NHS. Of particular note is that Qonnectis' myMeter service is now fullyintegrated into Scottish Water's own corporate web site and we continue topartner with them in marketing and selling Qonnectis products and services tobusinesses throughout Scotland as part of their "Smart Metering" service. Smart metering is now well-established as a way for energy and water utilitiesand their major commercial and public sector users to reduce both costs andtheir impact on the environment. During the year we have added several newblue-chip customers who are using the "Qonnectis Network" system, comprisingiStaq data loggers and myMeter web services, to achieve real cost savings andreal reductions in energy, CO2 and water losses. By way of illustration of thebenefits derived, we have included three customer case studies in the AnnualReport. Thames Water ("Thames") represents our most significant new customer win thisyear and I should like to explain the significance of this partnership. As partof their ongoing efforts to reduce leakages via their renewal programme of theVictorian mains system in London, Thames identified a major area of challengeand opportunity as being how to quantify and reduce the level of leakage withinhomes and private buildings. Domestic monitoring has always presented achallenge for the utility industry - there are millions of properties and hencethe associated costs are difficult to justify from an economic standpoint. Thames set us the challenge to develop a product that would meet theiraggressive technical and cost criteria, and I am very pleased to say that ourteam have been able to deliver. Working in partnership with Thames, we havedeveloped Leakfrog(R), a highly functional and cost-effective leakage monitorfor the home. Leakfrog(R) allows water companies to carry out large scaledomestic leakage monitoring for the first time and we are highly optimistic thatit will be widely adopted within the water industry. The intellectual propertyrights for Leakfrog are jointly owned by the two parties. Just prior to writingthis review we signed a licence agreement with Thames Water and Qonnectis cannow market Leakfrog to other UK and overseas water companies. New products Last year we restructured our technical resources to focus on production, costreduction and field support. We have continued to do this in 2007, whichnecessitated a small increase in our R&D investment to facilitate the ThamesWater/Leakfrog(R) opportunity. By subcontracting manufacture of this highlyinnovative product to an established facility in the Far East, we have been ableto produce Leakfrog(R) units to high quality standards and verycost-effectively. Developing new sales channels Our focus remains very much on boosting sales and product roll-outs to attainprofitability. Leakfrog(R) is set to add significantly to our overall sales,combined with the growing sales of Qonnectis Network products. Having a moreeffective sales resource, be it internal or external, is one way to achievethis, and we continue to seek additional channels to market. Recently we haveincreased our efforts to establish strong channel partnerships in our industryand identify resellers with products and services complementary to the Qonnectisoffering. Outlook The benefits of our technology and services are increasingly being recognised.Pressure on the environment, increasing energy prices and water shortages areleading to more reasons to adopt our technologies. Looking ahead, Governmentmoves to encourage the introduction of smart metering for energy such as seen inthe Energy Review earlier in the year, and compulsory water metering, should beextremely beneficial to our business environment. The underlying business has continued its strong year-on-year growth. WithLeakfrog(R), we have now added a new product with immense potential thatrepresents a breakthrough for the water industry as a whole. I should like tothank our staff for their great efforts over the past year. Qonnectis enters itsnew financial year with significant momentum and we remain optimistic about thecontinued growth of the Company. Michael TapiaChief Executive 21 December 2007CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR TO 30 JUNE 2007 Note Year to Year to 30 June 30 June 2007 2006 £ £ TURNOVER 2 304,776 109,425Cost of sales (110,985) (77,553) -------- -------GROSS PROFIT / (LOSS) 193,791 31,872 Administrative expenses (1,106,587) (920,742)Other operating income 49,313 75,952 ---------- ---------OPERATING LOSS (863,483) (812,918) ---------- ---------Interest receivable and similar income 7,354 12,445Interest payable and similar charges (5,000) (6,473) -------- ---------LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (861,129) (806,946)Tax credit on loss on ordinary activities - - -------- ---------LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (861,129) (806,946) ======== ======== Loss per share - basic 3 (0.40p) (0.51p) All of the activities of the company are classed as continuing. The company has no recognised gains or losses other than the results for theyear as set out above. CONSOLIDATED BALANCE SHEETAS AT 30 JUNE 2007 30 June 30 June 2007 2006 £ £FIXED ASSETSGoodwill 3,313,995 3,523,852Tangible assets 8,683 5,916 --------- --------- 3,322,678 3,529,768CURRENT ASSETSStock 11,906 19,209Debtors 94,785 99,331Cash at bank and in hand 44,046 10,410 ------- ------- 150,737 128,950CREDITORS: amounts falling (356,294) (256,468)due within one year -------- --------NET CURRENT LIABILITIES (205,557) (127,518) --------- --------- TOTAL ASSETS LESS CURRENT LIABILITIES 3,117,121 3,402,250 CREDITORS: amounts falling (6,000) (42,000)due after more than one year --------- ---------NET ASSETS 3,111,121 3,360,250 ========= ========= CAPITAL AND RESERVESCalled up share capital 10,270,588 9,658,588Share premium account 1,675,050 1,675,050Profit and loss account (8,834,517) (7,973,388) ----------- ----------EQUITY SHAREHOLDERS' FUNDS 3,111,121 3,360,250 =========== ========== CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR TO 30 JUNE 2006 Note 30 June 30 June 2007 2006 £ £ Net cash outflow from operating activities 4 (538,386) (664,961) -------- ---------Returns on investments and servicing offinanceInterest received 7,354 12,445Interest paid (5,000) (6,473) -------- --------Net cash in/(out)flow from returns on 2,354 5,972investments and servicing of financeTaxation - - Capital expenditurePayments to acquire fixed assets (6,332) (4,937) -------- -------Net cash outflow from capital expenditure (6,332) (4,937) --------- --------Net cash outflow before financing (542,364) (663,926) --------- --------FinancingIssue of share capital 612,000 -Repayment of other long term loan (36,000) (36,000) -------- --------Net cash inflow/(outflow) from financing 576,000 (36,000) -------- ---------Increase/(Decrease) in cash in the period 5 33,636 (699,926) ======== ========= Notes to the financial statements 1. Basis of preparation of the financial statements These financial statements have been prepared under the historical costconvention in accordance with the provisions of the Companies Act 1985 and withapplicable accounting standards. These financial statements have been prepared on the assumption that the companyis a going concern. The validity of this assumption is dependent on thecompany's ability to generate sufficient cash flow from revenues or additionalborrowing or equity financing to enable it to meet its debts as they fall duefor the foreseeable future. When assessing the foreseeable future the directorshave considered a period of twelve months from the date of approval of thefinancial statements. Should the going concern assumption not be valid then adjustments would have tobe made to reduce the balance sheet values of assets to their recoverableamounts, to provide for any further liabilities which might then arise and toreclassify fixed assets and long-term liabilities as current assets andliabilities. 2. Turnover The turnover of the group is attributable to continuing activity for a singleinter-related class of business for the provision of products and associatedservices. Analysis by geographic market: Year to Year to 30 June 30 June 2007 2006 £ £ United Kingdom 299,875 93,120Rest of world 4,901 16,305 ------- ------- 304,776 109,425 ======= ======= 3. Loss per Share Year to Year to 30 June 30 June 2007 2006 £ £BasicNet loss for the year: (861,129) (806,946)Weighted average number of ordinary shares 213,508,023 157,408,023outstanding Loss per share (0.40p) (0.51p) ======= ======= FRS 14 requires presentation of diluted loss per share when a company could becalled upon to issue shares that would decrease net profit or increase net lossper share. For this company the issue of shares would decrease the net loss pershare and, therefore, it does not meet the requirements of FRS 14. Accordinglyno diluted EPS has been presented. 4. Reconciliation of operating loss to net cash outflow As at As at 30 June 30 June 2007 2006 £ £ Operating loss (863,483) (812,918)Depreciation and amortisation of tangible 3,565 2,535assetsAmortisation of goodwill 209,857 209,857Increase in stock 7,303 (9,608)Increase in debtors 4,546 (40,476)(Decrease)/increase in creditors 99,826 (14,351) --------- ---------Net cash outflow from operating activities (538,386) (664,961) ========= ========= 5. Reconciliation of net cash flow to movement in net funds/(debt) As at As at 30 June 30 June 2007 2006 £ £Increase/(Decrease) in cash in the period 33,636 (699,926)Cash outflow from decrease in debt 36,000 36,000 ------ ---------Movement in net debt in the period 69,636 (663,926)Net(debt)/funds at beginning of year (67,590) 596,336 ------- ---------Net(debt)/funds at end of year 2,046 (67,590) 6. Analysis of net funds/(debt) As at Cashflow As at 1 July 30 June 2006 2007 £ £ £ Cash 10,410 33,636 44,046Bank overdraft - - - ------ ------ -------Cash and cash equivalents 10,410 33,636 44,046Loan falling due within one year (36,000) - (36,000)Loan falling due after one year (42,000) 36,000 (6,000) ------- ------- --------Net(debt)/funds (67,590) (69,836) 2,046 ======== ======== ======== 7. Publication of non-statutory accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985 for either 2006 or 2007 The summarised balance sheet at 30 June 2007 and the summarised profit and lossaccount, summarised cash flow statement and associated notes for the year thenended have been extracted from the Group's 2007 statutory financial statementsupon which the auditors opinion is unqualified but which does draw attention tothe uncertainty as to the realisation of the forecasts and does not include anystatement under Section 237 of the Companies Act 1985. The report and accounts for the year ended 30 June 2007 will be posted toshareholders and will be delivered to the Registrar of Companies in accordancewith the statutory timetable. The Annual General Meeting will be held at 2pm on29th January 2008 at 170 Windmill Road West, Sunbury-on-Thames, Middlesex, TW167HB. Copies of the report and accounts will also be available from Qonnectisplc's registered office: 85 Elsenham Street, London SW18 5NX. ENDS This information is provided by RNS The company news service from the London Stock Exchange