Water Intel. Regulatory News (WATR)

24 Nov 2006 07:01

Qonnectis plc24 November 2006 24 November 2006 Qonnectis plc PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2006 Qonnectis plc ("Qonnectis" or "the Company"; stock code: QTI), the energy andwater conservation IT services provider, announces its audited results for theyear ended 30 June 2006. Highlights: • Successful transition from development to commercialisation • Turnover up 82% in line with expectations; growth continued into current year • Loss significantly reduced • Over 50 companies, including national and international ones, now using our products • New products added to range • Focus now on commercialisation • Sales team expanded; appointment of Chief Technology Officer Commenting on the results, Chairman, Richard Taylor, said: "For the second year in succession turnover in comparison to the prior year hasalmost doubled. The last financial year has been one in which we have focused onfurther commercialising our technology, and we have made significant progresstowards achieving this. "Our overarching objective is to achieve sustainable profitability. We are nowin a position to build upon the relationships that we have with major companiesand we are confident that we can continue to increase market penetration and toexpand the client base further. We are confident that this financial year willbe one of significant progress towards our aim of achieving profitability". Notes to Editors 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 including Scottish Water, Cambridge Water, Aquavitae,Generale des Eaux and Lyonnaise des Eaux as well as large commercial anddomestic users of energy or water. Qonnectis' main iStaq family of products work by sending meter readings toQonnectis' secure data centre via SMS text messaging over the GSM network. Thedata is then aggregated and published online via utility-branded "myMeter"websites operated by Qonnectis. The data can also be sent directly to utilities'billing systems. Customers can access real-time information via a web browserusing the "myMeter" service. For more information, please visitwww.qonnectis.com. For further information, please contact: Qonnectis plc 020 8893 4766Michael Tapia, Chief ExecutiveRichard Taylor, Chairman Bankside Consultants 020 7367 8888Sue Scott/Michael Padley CHAIRMAN'S STATEMENT Results I am very pleased to report that for the second year in succession turnover incomparison to the prior year has almost doubled (+82%) to £109,425, in line withmarket expectations, and this growth has continued into the current financialyear. The last financial year has been one in which we have looked tocommercialise our technology, and we have made significant progress in achievingthis. We now have over 50 companies, including national and internationalutilities, using our products and our patented technology has proven itself inthe marketplace. The reported loss for the year to 30 June was £806,946, an improvement on theprevious year, in which losses exceeded £1 million. The significant milestones during the year were: •A roll-out plan with Scottish Water which started in the last quarter of the financial year. As part of this agreement the company has trained Scottish Water field personnel to carry out site installation under its 'Smart Metering' initiative. •The launch of the iStaq-AMR product. This is targeted at the growing market segment for automated meter reading and provides readings for the billing of large domestic users. •Installation through Bedfordshire County Council to remotely read water consumption at its caravan park customers. •Establishment of a resale partner to the pub industry together with further reseller recruitment initiatives •Sales to a major UK emergency service provider of a multi-utility meter reading solution encompassing water, gas and electricity. •The award, with an initial £52,000 order in October, of a project with one of the UK's leading utilities to develop an innovative bespoke product using Qonnectis intellectual property. Fund Raising In July, shortly after the financial year-end the company raised £558,163 (netof expenses) to enable it to further expand its operations and to take advantageof the opportunities available in a number of market segments. The future The recent fundraising has allowed us to build upon our success to date and weare continuing to expand the client base and to develop relationships with majorutilities and end users. Qonnectis intends to build on the existing 50 nationaland international utilities, end user businesses and public sector organisationsutilising its systems and, although the company would like to report greaterpenetration at this stage of its development, these users do represent a widecross section of organisations in sectors within which we expect to be able todevelop significant future business. The outlook for the company continues to bepositive and we are confident that we now have in place a structure that willallow us to take advantage of the opportunities we have developed. Richard M TaylorChairman22 November 2006 CHIEF EXECUTIVE'S REVIEW When I wrote to you this time last year, I said that the previous year had verymuch been one of transition - of moving from a company with unique technology toa commercially successful business. The subsequent year to June 2006 hascontinued this process and we have gone from a year of transition to one ofprogression - of customers rolling out product; of sales increasing; of thebusiness maturing in terms of its product and its structure. I would like totake this opportunity to cover the progress we have made in all areas of thebusiness, and how we aim to continue and accelerate that progress. Customers and the Market We have once again seen year-on-year sales almost double and our objective is toaccelerate this rate of growth in order to achieve profitability. The key tothis is large customers buying product on a regular basis. In 2006 we saw the first customer roll-outs with regular monthly shipments ofQonnectis product to customers. This was led by Scottish Water, not just as acustomer of Qonnectis, but also in the water industry, by rolling out its 'SmartMetering' programme to its business customers. This programme involves marketingremote meter reading and web services, supplied by Qonnectis, under the ScottishWater brand. We have trained their installation staff and are providing regular, monthlyshipments of product and services. Our IT systems have also been integrated withtheirs so that a customer logging into the 'Smart Metering' page on the ScottishWater web site connects to the system provided by Qonnectis. Qonnectis takescare of the data collection and web services - allowing Scottish Water to focuson marketing and providing these high value-added water and energy efficiencyservices to their key account business and public sector customers. We are also involved with a number of other utility companies, such asAquavitae, for the provision of similar services and foresee this as a majorarea of opportunity for the business. We have therefore increased our sales andmarketing resource into the direct utility sales segment and will continue to doso as we look to expand this segment of the market. With regard to our end user segment, which we define as commercial andgovernmental users of energy and water, we have in the past year added a numberof organisations to our portfolio and continue to have a significant prospectlist. Our clients range from local and county councils, hospitals and emergencyservices, transport and ports, breweries and pubs, and commercial entities ofmany types. Our fundamental offer to these organisations is to provideup-to-date information allowing them to reduce their energy and water bills plusmanage their carbon emissions and other performance measurements. You will haveread much in the press about climate change and energy prices. To us, theargument is very simple - it is much more cost-effective for business and thepublic sector, and indeed individual homes, to invest in technologies whichallow energy consumption to be managed and reduced by 10%-15%, which is atypical Qonnectis customer saving, than for the country to argue about nuclearpower stations, wind farms, solar energy, and so on. In our opinion energyefficiency does not have the prominence it should have, and we shall be pressingto move it up the national agenda. Elsewhere in this annual report you will gain a view of the types of customersand applications we are now successfully supplying. New products Again, we have focused on progression of our product range. The development workhas been concluded and we are now marketing a range of products targeted atvarious segments of the market. Having invested heavily in prior years todevelop a complete end-to-end, meter-to-desktop solution for the utilityindustry, we have continued evolving the solution through improvements oradditions in terms of communications hardware and data collection software. Themain hardware addition in the period was the iStaq-AMR, which is focused onlarge domestic utility customers, thus complementing our business solutions.Additional variants for environmental monitoring have also been developed. InOctober, we announced a partnership with a major utility to develop a newproduct in conjunction with themselves, which we expect to launch in 2007. With the emphasis now on the commercial side of the business we haverestructured our Engineering and Production department to be more in tune withthe volume roll-out and support of product in the field. During the year Alan Wall joined us as Chief Technology Officer to lead thisproject, and he has already made a significant positive impact in terms of themanufacturing processes and project management. Alan was previously in similarpositions with BCN Data Systems and Cellnet Data Systems in the USA, one of thelargest providers of remote meter reading products in that market. Focus on sales Our overarching objective is to achieve sustainable profitability, and the Julyfund raising was aimed at assisting us in getting closer to that objective. Therate of sales growth we achieved last year, and that achieved at the end of thefirst four months of the new financial year, continues this progress and weexpect this rate of growth to increase in the coming months. We are matchingthis growth in sales with tight cost control and our low overhead structuremeans that a handful of customers rolling out in a similar way to Scottish Waterwill allow us to achieve profitability. Outlook We have successfully made the transition from development company to one thatcan commercialise its technology and we are now in a position to build upon therelationships that we have with major companies. We are also confident that wecan continue to increase market penetration and to expand the client basefurther. Sales are continuing to increase and the cost base is tightly controlled.Overall, the outlook is positive and we are confident that this financial yearwill be one of significant progress towards our aim of achieving profitability. Michael TapiaChief Executive22 November 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 30 JUNE 2006 Note 2006 2005 (£) (£) TURNOVER 2 109,425 60,007Cost of sales (77,553) (32,510) --------- -------- GROSS PROFIT / (LOSS) 31,872 27,497 Administrative expenses (920,742) (1,097,720)Other operating income- R&D tax credit 75,952 24,815 --------- -------- OPERATING LOSS (812,918) (1,045,408) Net finance costs 5,972 (3,095) --------- --------- LOSS ON ORDINARY ACTIVITIES (806,946) (1,048,503)BEFORE TAXATION Tax credit on loss on ordinary activities - - --------- -------- LOSS ON ORDINARY ACTIVITIES (806,946) (1,048,503) --------- -----------AFTER TAXATION LOSS FOR THE FINANCIAL YEAR (806,946) (1,048,503) --------- ----------- Loss per share - basic 3 (0.51p) (0.93p) 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 2006 2006 2005 (£) (£)FIXED ASSETSGoodwill 3,523,852 3,733,709Tangible assets 5,916 3,514 ------ ------ 3,529,768 3,737,223CURRENT ASSETSStock 19,209 9,601Debtors 99,331 58,855Cash at bank and in hand 10,410 710,336 ------ ------- 128,950 778,792 CREDITORS: amounts falling (256,468) (270,819) --------- ---------due within one year NET CURRENT (LIABILITIES)/ASSETS (127,518) 507,973 ---------- ------- TOTAL ASSETS LESS 3,402,250 4,245,196CURRENT LIABILITIES CREDITORS: amounts falling (42,000) (78,000) due after more than one year -------- -------- NET ASSETS 3,360,250 4,167,196 ---------- --------- CAPITAL AND RESERVESCalled up share capital 9,658,588 9,658,588Share premium account 1,675,050 1,675,050Profit and loss account (7,973,388) (7,166,442) ----------- ----------- EQUITY SHAREHOLDERS' FUNDS 3,360,250 4,167,196 CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 30 JUNE 2006 Note 2006 2005 (£) (£) Net cash outflow from operating activities 4 (664,961) (854,739) --------- ---------Returns on investmentsand servicing of finance Interest received 12,445 10,687Interest paid (6,473) (13,782) ------- -------- Net cash inflow/(outflow) from returns 5,972 (3,095)on investments and servicing of finance ------- -------- Capital expenditurePayments to acquire tangible assets (4,937) (2,693) ------- -------Net cash outflow from capital expenditure (4,937) (2,693) ------- -------Net cash outflow before management of (663,926) (860,527)liquid resources and financing --------- --------- FinancingIssue of ordinary share capital - 1,600,003Repayment of long-term bank loan (36,000) (36,000) -------- --------Net cash (outflow)/inflow from financing (36,000) 1,564,003 --------- ---------(Decrease)/increase in cash in the year (699,926) 703,476 Notes to the financial statements 1. Basis of preparation of the financial statements The 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 30 June 2010. The directors are working towards bringing the Groupto a level of profitable trading. In doing so, they are assessing, on a regularbasis, cost levels, sales activities and research and development expenditure. 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. 2006 2005 (£) (£) UK 93,120 42,865Overseas 16,305 17,142 ------- ------ 109,425 60,007 3. Loss per Share 2006 2005 (£) (£)BasicNet loss for the year: (806,946) (1,048,503)Weighted average number of ordinary shares 157,408,023 112,946,184outstanding Loss per share: (0.51p) (0.93p) 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 2006 2005 (£) (£) Operating loss (812,918) (1,045,408)Depreciation and amortisation of tangible 2,535 1,835assetsAmortisation of goodwill 209,857 209,857Increase in stock (9,608) (9,601)Increase in debtors (40,476) (16,674)(Decrease)/increase in creditors (14,351) 5,252 -------- -----Net cash outflow from operating activities (664,961) (854,739) 5. Reconciliation of net cash flow to movement in net funds/(debt) 2006 2005 (£) (£) (Decrease)/increase in cash in the year (699,926) 703,476Cash outflow from decrease in debt 36,000 36,000 ------ ------Movement in net debt in the year (663,926) 739,476Net funds at 1 July 2005 596,336 (143,140) --------- ---------Net (debt)/funds at 30 June 2006 (67,590) 596,336 6. Analysis of net funds/(debt) At Cash At 1 July Flows 30 June 2005 2006 (£) (£) (£) Cash 710,336 (699,926) 10,410 ------- --------- ------ 710,336 (699,926) 10,410Loan falling due within one year (36,000) - (36,000)Loan falling due after one year (78,000) 36,000 (42,000) -------- ------- --------- 596,336 (663,926) (67,590) 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 2005 or 2006. The statutory accounts for 2005 have beendelivered to the Registrar of Companies. The summarised balance sheet at 30 June 2006 and the summarised profit and lossaccount, summarised cash flow statement and associated notes for the year thenended have been extracted from the Group's 2006 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 2006 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 25th January 2007 at 170 Windmill Road West, Sunbury-on-Thames,Middlesex TW16 7HB. Copies will also be available from Qonnectis plc'sregistered office: 85 Elsenham Street, London SW18 5NX. ENDS This information is provided by RNS The company news service from the London Stock Exchange