Water Intel. Regulatory News (WATR)

21 Dec 2005 12:00

Qonnectis plc21 December 2005 FOR IMMEDIATE RELEASE 21 December 2005 Qonnectis plc PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2005 Qonnectis plc ("Qonnectis" or "the Company"; stock code: QTI), has announced itsaudited results for the year ended 30 June 2005. These are Qonnectis' maidenpreliminary results since moving to AIM from OFEX in February 2005. Highlights: • Turnover more than doubled to £60,007. • Qonnectis registered its first gross profit of £27,497 • An encouraging increase in repeat business from its existing client base, including blue-chip customers such as Scottish Water and Cambridge Water. • In the year, Qonnectis collected 3.2 million remote meter readings throughout the UK and overseas, compared to 621,000 in 2004. • The award of a patent covering Qonnectis' remote communications technology • Appointed an approved supplier of energy monitoring equipment by the Carbon Trust • Post year-end, a number of significant new customer wins, including Qonnectis' first OEM agreement Commenting on the results, Chairman, Richard Taylor, said: "Over the past year Qonnectis has successfully made the transition from aninnovative market entrant to a fast-growing commercial organisation with anexpanding customer base of blue-chip international clients.""Our strategic focus remains on delivering customer-focused utility managementsolutions and support, whilst relentlessly driving down production costs toenable Qonnectis to achieve breakeven." Notes to Editors About QonnectisQonnectis provides remote data collection technology and analytical services tothe energy, water and environmental industries. Its technology providescommunications and data collection to any remote devices, such as energy metersor temperature sensors, via the Internet. Qonnectis' services enable utilitiesand end users to monitor their networks in real time, 24 hours a day. For moreinformation visit www.qonnectis.com For further information, please contact: Qonnectis plcMichael Tapia, Chief Executive 020 8893 4766 Bankside ConsultantsSue Scott/Michael Padley 020 7367 8888 CHAIRMAN'S STATEMENT Results I am very pleased to report that the Company has recorded its first gross profitin its five-year history of £27,497 (a gross margin of 45%) on turnover of£60,007, which has more than doubled in comparison to last year. The most significant event during the financial year was the company'ssuccessful graduation from Ofex to AIM on 26th February 2005 and the associatedfund-raising of £1.2 million, net of expenses. This represented the latest stagein Qonnectis' development from a management and business angel funded start-upfive years ago to a rapidly-growing commercial organisation with an expandinginternational customer base, traded within the technology sector of AIM. The reported loss for the financial year was £1,048,503 and includes flotationcosts of £300,000. Nevertheless this represents an improvement versus marketexpectations at the time of the graduation to AIM. As at 30th June 2005, theCompany had cash balances of £710,336. Operations We are committed to growing revenues by fostering our existing relationshipswith major customers and large UK and international water/energy users, as wellas building on our distribution partnerships. Amongst the Company's many achievements over the past year, I would highlight: • The winning of repeat business from Scottish Water, Cambridge Water and a number of National Health Service Trusts • A patent award covering Qonnectis' Internet-based data communication system • The launch of a range of environmental products and services • The approval by The Carbon Trust of the use of Qonnectis' advanced metering products in energy applications which qualify for 100% capital allowances • Facilitating £180,000 of cost savings for an NHS hospital by identifying a massive water leak Additionally we have secured a number of important contracts since the financialyear end, namely: • Our first OEM agreement with Compteurs Farnier, a major French manufacturer of water meters • The installation of the myMeter system at the World Trade Square commercial complex in Hong Kong • The selection by Aquavitae, on behalf of its customer, of Qonnectis' technology to monitor Associated British Ports' sites • The award of a contract for an initial 12 sites by Water Utilities Corporation of Botswana Also, we recently appointed Fee Ching Rees as Financial Controller; previouslyQonnectis outsourced its accountancy functions. Strategy and Outlook Our strategic focus remains on expanding our client base by deliveringcustomer-focused utility management solutions, whilst relentlessly driving downproduction costs to enable Qonnectis to achieve breakeven as soon as possible.We particularly are looking to increase the number of resellers that we workwith to enable any business consuming more than £10,000 of utility services ayear to benefit from the cost and efficiency savings that Qonnectis provides. We are confident about the future and what we can achieve with our range ofinnovative products, loyal customers and distribution partners, and ourdedicated staff. I should like to thank them all. Richard M Taylor 21 December 2005ChairmanQonnectis plc CHIEF EXECUTIVE'S REVIEW The year to June 2005 was very much one of transition for Qonnectis, symbolisedby the move to AIM in February. Over that twelve-month period, the Company hasmatured from an innovative market entrant with leading technology in the waterand energy sector, to a fast-growing commercial organisation with an expandingcustomer base of international blue chip clients. We have made significant progress in converting initial customer trials intofirm orders. Additionally, the proceeds of the placing are being directedtowards sales and marketing initiatives to increase market penetration andrevenues rapidly. Our focus now is on improving profitability, providing ourcustomers with tailored solutions to their water and energy management problems,and attracting and retaining the quality of commercial and technical staffrequired to achieve our growth targets. Qonnectis' main objective is to save customers money and improve their operatingefficiency. To do this, we provide our customers with "utility intelligence" -the data needed to make resource management decisions, be it a utility companylooking to more closely monitor its network or a business energy user looking toreduce their utility bills or carbon emissions. The first step is to analyse consumption patterns and this is one of Qonnectis'principal strengths. We provide very high resolution measurements (our installedbased of devices varies from meters being read once a month to once everyfifteen minutes). The automated charting and analysis of this high quality dataallows our customers to identify problems or areas of improvement. Our automatedalerts service means that our customers receive emails or text messages as soonas problems occur - such as water leaks or over-consumption of energy. Forexample, the NHS this year saved approximately £180,000 at one hospital alonedue to our water leakage monitoring solution. Our systems are extremely easy to use - we manage the product installations andthe remote data collection service - customers simply log on to their QonnectismyMeter.info web site and access their data, charts and alarms. Of our iStaqremote meter reading devices, 95% of shipments are now using SMS text messagingto send their data to our data centre once a day, extremely cost-effectively. Customers and MarketplaceQonnectis' technology has a wide range of applications. For example, we aremonitoring water consumption at bus garages and railway stations in Scotland,energy and water consumption in hospitals in Wales, generator performance andenergy consumption for a multiple retailer in the UK, small businesses inIreland, facilities management companies in France, air conditioning systems inHong Kong and water networks in Southern Africa. In the year Qonnectis,collected 3.2 million remote meter readings from our iStaq devices throughoutthe UK and overseas, compared to 621,000 in the previous year. We expect shortlyto reach 1 million meter readings per month. With our emphasis on customers' cost-savings, it is clear that recent hikes inenergy and water prices, coupled with other uncertainties in the utilitiessector, such as the security of gas supply and climate change regulations, arevery favourable for the business. Industrial gas costs in the UK have risen onaverage by 47% and electricity costs by 34% in 2005 whilst water bills arerising by an average of 18% from April 2005. In addition, for larger businesses,carbon emissions control requirements provide a further incentive to properlymeasure and manage their energy and water consumption. Businesses are having toreact to these pressures as a financial imperative. The Government is providingcapital grants such that businesses effectively can obtain discounts onQonnectis' advanced metering products through 100% capital allowances, as theCompany is a Carbon Trust-approved supplier on the Energy Technology and WaterTechnology Lists. Increasing energy and utility costs are becoming global issues and the initialpriority for business and governments alike should be the conservation of finiteresources via demand side management, a precursor of which is accuratemeasurement of consumption. Alternative energies and renewables will play theirpart, and have a high profile, but your Board feels that the only way to achieverapid, demonstrable results is in improved and accessible energy and watermonitoring and management. Our new environmental monitoring solutions similarlywill benefit from increased business requirements, increased regulation andreporting, and the general uncertainty concerning environmental and climatechange. New productsQonnectis' iStaq-LG advanced meter reading communications devices for water andenergy are now in established manufacture with our sub-contractors. In November2005 we began shipping the next, updated version of our software in thesedevices (the iStaq-LG Q330 Series), providing improved intelligence on-site andwith the ability to remotely configure the devices so that they can be adapted,for example, to changes in customer energy consumption. Earlier in the year, weannounced the launch of the new iStaq-AL for environmental monitoring which canrecord changes in pressure in water and gas pipes, assess water quality andmeasure water levels and rainfall for flood alerts. Recently we have upgradedour data collection server software solution to incorporate all the additionalfunctionality and facilities introduced with these products. Marketing StrategyGoing forward, we have clear objectives for the business, with sustainedprofitability being the primary driver: • Repeat business from satisfied customers: Recent months have seen a significant increase in repeat orders from our existing customer base, such as Scottish Water and the NHS. Providing consistently high service quality and support is essential for us to continue gaining repeat orders from these customers as they roll out our technology. • New customers: Over recent months we have announced significant new customer wins, such as Aquavitae, Harrimans, Botswana Water Corporation, and Compteurs Farnier. More recently, we have gained new business from a variety of companies, including Enersol Corporation, a provider of energy- saving devices to industry. We are adding additional sales resource to allow us to capitalise on the significant new prospects and customer enquiries generated by our marketing and trade press campaigns. • New channels and partners: We recently announced an agreement with Compteurs Farnier, a significant meter manufacturer, for the sale of Qonnectis products and services in France, Canada and the USA under the Farnier brand. We are actively progressing similar agreements with manufacturers, consultants, utilities, national installation companies, international distributors, and other operators in the energy and water sectors. Increasing our channels to market and to sales is a core tenet of our sales strategy. • Sales generation: The proceeds of the AIM flotation have enabled us to expand our marketing activity, including trade exhibitions and the media, as well as upgrading our corporate communications and trade web site. This is bringing in a very high level of customer enquiries which we are progressing. Within our sector, the sales cycle can be between 3 months to 2 years, so managing this process is key to achieving volume growth. • Margins: Our successful move to a new, established outsourced contract manufacturer, which took place earlier in the year, has improved margins, and we expect significant further margin improvements going forward. I am pleased to say we have a very strong and dedicated team and I would like tothank them for their great efforts and support in our year of transition. Werecently made some positive changes within our team, including our financialresource, and are expanding our sales team with expert and driven people. Looking forward, we can see great opportunities for Qonnectis, coupled with thechallenges of managing our cost base effectively whilst we seek to achievesignificant revenue growth and shareholder value. We remain highly optimisticregarding the future prospects for the business. Michael Tapia 21 December 2005Chief ExecutiveQonnectis plc CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 30 JUNE 2005 Note 2005 2004 (£) (£) TURNOVER 2 60,007 25,128 Cost of sales (32,510) (34,590) --------- --------- GROSS PROFIT / (LOSS) 27,497 (9,462) Administrative expenses (1,097,720) (580,894) Other operating income - R&D taxcredit 24,815 -- Other - 79 --------- --------- OPERATING LOSS (1,045,408) (590,277) Net finance costs (3,095) (5,926) --------- --------- LOSS ON ORDINARY ACTIVITIES BEFORETAXATION (1,048,503) (596,203)Tax credit on loss on ordinary activities - - --------- --------- LOSS ON ORDINARY ACTIVITIES AFTERTAXATION (1,048,503) (596,203) --------- --------- LOSS FOR THE FINANCIAL YEAR (1,048,503) (596,203) ========= ========= Loss per share - basic 3 (0.93p) (0.69p) ========= ========= There are no recognised gains or losses in either financial year other than theloss for each year, and therefore, no statement of total recognised gains andlosses has been prepared. All transactions are derived from continuing operations. CONSOLIDATED BALANCE SHEETAS AT 30 JUNE 2005 2005 2004 (£) (£) FIXED ASSETSGoodwill 3,733,709 3,943,566Tangible assets 3,514 2,656 --------- --------- 3,737,223 3,946,222 CURRENT ASSETSStock 9,601 -Debtors 58,855 42,181Cash at bank and in hand 710,336 15,370 --------- --------- 778,792 57,551 CREDITORS: amounts falling due within one year (270,819) (274,074) --------- --------- NET CURRENT ASSETS/(LIABILITIES) 507,973 (216,523) --------- --------- TOTAL ASSETS LESS CURRENT LIABILITIES 4,245,196 3,729,699 CREDITORS: amounts falling due after more than oneyear (78,000) (114,000) --------- --------- NET ASSETS 4,167,196 3,615,699 ========= ========= CAPITAL AND RESERVESCalled up share capital 9,658,588 8,977,636Share premium account 1,675,050 756,002Profit and loss account (7,166,442) (6,117,939) --------- --------- EQUITY SHAREHOLDERS' FUNDS 4,167,196 3,615,699 ========= ========= CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 30 JUNE 2005 Note 2005 2004 (£) (£) Net cash outflow from operating activities 4 (854,739) (556,978) ---------- -------- Returns on investments and servicing of finance Interest received 10,687 862Interest paid (13,782) (6,788) ---------- -------- Net cash outflow from returns on investments andservicing of finance (3,095) (5,926) ---------- -------- Capital expenditurePayments to acquire tangible assets (2,693) (2,615) ---------- -------- Net cash outflow from capital expenditure (2,693) (2,615) ---------- -------- Net cash outflow before management of liquidresources (860,527) (565,519)and financing ---------- -------- FinancingIssue of ordinary share capital 1,600,003 217,683Issue of B ordinary share capital - 303,500Repayment of long-term bank loan (36,000) (27,000) ---------- -------- Net cash inflow from financing 1,564,003 494,183 ---------- -------- Increase/(Decrease) in cash in the year 703,476 (71,336) ========== ======== Notes to the financial statements 1. Basis of preparation of the financial statementsThe early stage of development of the Group's business is such that there can beconsiderable unpredictable variation in the amount of revenue and timing andamounts of cash flows. The directors have projected cash flow information forthe period to 31 December 2006. The directors are working towards bringing theGroup to a level of profitable trading. In doing so, they are assessing, on aregular basis, cost levels, sales activities and research and developmentexpenditure. There is inherent uncertainty as to the realisation of the forecasts. Thedirectors consider that in preparing the financial statements they have takeninto account the uncertainty and all information that could reasonably beexpected to be available. On this basis, the directors have formed a judgementat the time of approving the financial statements that they consider itappropriate to prepare these financial statements on the going concern basis.The financial statements do not include any adjustments that would result shouldthe going concern basis of accounting no longer be appropriate. 2. TurnoverThe turnover of the Group by source and destination relates to both the United Kingdom and overseas, and the directors consider that the Group's continuing activities consist of one inter-related class of business for the provision of products and associated services. 2005 2004 (£) (£) UK 42,865 9,230Overseas 17,142 15,898 -------- -------- 60,007 25,128 ======== ======== 3. Loss per Share 2005 2004 (£) (£)BasicNet loss for the year: (1,048,503) (596,203)Weighted average number of ordinary sharesoutstanding 112,946,184 87,028,089 Loss per share: (0.93p) (0.69p) ======== ======== 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 2005 2004 (£) (£) Operating loss (1,045,408) (590,277)Depreciation and amortisation of tangible assets 1,835 7,257Amortisation of goodwill 209,857 157,393(Increase)/decrease in stock (9,601) -(Increase) / decrease in debtors (16,674) (1,344)Increase / (decrease) in creditors 5,252 (130,007) --------- -------- Net cash outflow from operating activities (854,739) (556,978) ========= ======== 5. Reconciliation of net cash flow to movement in net funds/(debt) 2005 2004 (£) (£) Increase/(Decrease) in cash in the year 703,476 (71,336) Cash outflow from decrease in debt 36,000 27,000 -------- -------- Movement in net debt in the year 739,476 (44,336) Net debt at 1 July 2004 (143,140) (98,804) -------- -------- Net funds/(debt) at 30 June 2005 596,336 (143,140) ======== ======== 6. Analysis of net funds/(debt) At Cash At 1 July flows 30 June 2004 (£) 2005 (£) (£) Cash 15,370 694,966 710,336Overdraft (8,510) 8,510 - --------- -------- -------- 6,860 703,476 710,336 Loan falling due within one year (36,000) - (36,000)Loan falling due after one year (114,000) 36,000 (78,000) --------- -------- -------- (143,140) 739,476 596,336 ========= ======== ======== 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 2004 or 2005. The statutory accounts for 2004 have beendelivered to the Registrar of Companies. The summarised balance sheet at 30 June 2005 and the summarised profit and lossaccount, summarised cash flow statement and associated notes for the year thenended have been extracted from the Group's 2005 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 accounts for the year ended 30 June 2005 are expected to be posted toshareholders in due course and will be delivered to the Registrar of Companiesin accordance with the statutory timetable. The annual general meeting will beheld on 22 February 2006. Copies will also be available from Qonnectis plc'sregistered office: Ash House, 8 Second Cross Road, Twickenham, Middlesex TW2 5RF. ENDS This information is provided by RNS The company news service from the London Stock Exchange