RNS Number:6888R
IndigoVision Group PLC
05 November 2003
Embargoed 7.30am
5th November 2003
IndigoVision Group plc ("IndigoVision")
Preliminary Results for the year to
31 July 2003
Financial Highlights
* Overheads reduced by 61% from #12.5m to #4.9m
* Total revenues reduced 20% from #2.3m to #1.8m
* Product revenues increased 23% from #1.3m to #1.6m
* Exceptional charges of #0.3m (2002-#1.4m)
* Loss before taxation reduced 65% from #10.3m to #3.6m
* Return of #11.7m surplus cash to shareholders
* Net cash balances of #6.2m at year end
Operating Highlights
* Refocus of group as IP Video product manufacturer
* Exit from licensing completed
* Substantial organisational restructuring
* Launch of 8000 product range, using MPEG4
* First to deploy MPEG4 IP Video in the UK
* Won first UK city centre to adopt IP Video
* Major new installations operating effectively include:
* Monmouthshire city centre CCTV
* Cambridge University
* Farnborough Airport
* UK motorways
Chief Executive, Oliver Vellacott, commented:
"We continue to reduce costs and move towards breakeven. As we are now a product
manufacturer we are in a stronger position to achieve this."
Enquiries to:
Oliver Vellacott CEO IndigoVision Group plc
Telephone: +44 (0)131 475 7200
IndigoVision Group plc ("IndigoVision")
Preliminary Results for the year to
31 July 2003
Chairman's Statement
The year to 31 July 2003 was one of change for IndigoVision. The company
underwent a transition from being a licensor of video technology to third party
product manufacturers to manufacturing its own IP Video products for the
security market. Licensing was failing to deliver sufficient royalties to
sustain IndigoVision's growth and, accordingly, following the result of a
business review conducted in the first half, the board concluded the optimum way
to drive adoption of IP Video was to sell proprietary products through the
system integrators who specify and install end-user projects. We are now
starting to see an increasing flow of projects adopting IndigoVision's IP Video
products in preference to analogue CCTV.
The first half of the year was turbulent, as a result of a comprehensive
business review, the consequent exit from licensing and exclusion of related
revenues, and a sustained period of restructuring. This was followed by a more
stable second half as the focus on system integrators, streamlined structure and
product focus each started to take effect. Restructuring has resulted in a 61%
reduction in overheads , to #4.9m (2002-#12.5m), with a reduction in headcount
from 124 to 57. Revenues declined from #2.3m to #1.8m as a result of the removal
of license-related revenues but encouragingly, product revenues increased 23% to
#1.6m.
IndigoVision has continued to honour existing contractual commitments to
licensees. However, we have declined to license our new generation of MPEG4/
ASIC-based technology to any third party, preferring to leverage the significant
R&D investment we have made in this to maximise competitive advantage with
IndigoVision products. We also supply some products to third parties who wish to
rebrand them, under OEM supply agreements, enabling former licensees to move to
the next generation of MPEG4-based products while maintaining compatibility with
their existing IndigoVision products.
Results
Turnover for the year to 31 July 2003 reduced by 20% to #1.79m (2002-#2.25m). As
a result of the change in business model from licensing to product manufacture,
margin changed to 37% (2002-51%) with the removal of higher margin license
revenue. Operating costs were reduced by 61% to #4.9m (2002-#12.5m), mainly
through a reduction in headcount from 124 to 57. Exceptional charges of #0.3m
were incurred in restructuring and capital reduction (2002-#1.4m)
The geographical split of revenues was Europe, Middle East and Asia: 54%, N.
America: 33% and Asia: 13%.
Our net cash position at 31 July 2003 was #6.2m.
Product developments
During the year we extended the 6000 product suite to include the VideoBridge
Rack, which is suited to retrofitting large-scale analogue systems with IP. This
converts analogue video signals from existing cameras into a digital format.
These video signals can then be transferred over standard Ethernet IP networks,
saving customers the substantial cost of installing a separate non-scalable CCTV
infrastructure. These signals can then be converted back into analogue format
for output to a standard monitor or CCTV matrix if required.
Throughout the year we have been developing the new MPEG4 product suite, the
8000 range. This has included development of a unique chip to deliver a
guaranteed 30 frames per second of DVD-quality MPEG4-encoded video, which will
power our entire 8000 range. The whole IP Video market, including our
competition, is moving towards MPEG4 as the standard for all video encoding and
recording.
We have also revamped Control Center for the 8000, providing the functionality
of sophisticated analogue management systems, plus such features as remote
viewing from anywhere, multiple viewing of the same camera, motion search, user
authentication, audit trail and secure camera access at a fraction of the price
of analogue systems.
During the year we launched a new IP camera; this combines a full-function,
high-quality CCTV colour camera with an IP Video Transmitter in one unit and can
be connected directly to a standard IP Ethernet network.
The Network Video Recorder ("NVR") has been upgraded to support the MPEG4 8000
range. This IP networked server software allows the recording of up to 100
simultaneous streams (or cameras) of video on a single PC hardware platform. In
contrast to existing analogue storage systems, NVR is more flexible and allows
for DVD quality recording. Recordings can also be managed and stored on
industrial sized tape or disc storage systems. Unlike the most advanced DVR
(Digital Video Recorder) solutions currently available, NVRs can be placed
anywhere on a worldwide corporate network at a fraction of the cost of a DVR,
and can also be viewed simultaneously from workstations anywhere on the network.
Since NVR streams are encoded at the IP Camera or Transmitter/Receiver unit, the
NVR is extremely efficient for storage, making it an ideal solution for
companies with large storage requirements, such as town centres, airports,
railways, and military installations.
Applications
Despite a difficult period of change for the company, our system integrator
partners have deployed during this year a number of significant projects, which
demonstrate the value of our IP Video solutions.
In Monmouth, we were the first to deploy MPEG4 IP video in the UK. This is also,
we believe, the first town centre CCTV system in the UK to use IP Video. The end
user reported cost savings significantly in excess of 50% compared with
analogue. Jesus College, Cambridge was the first university to adopt
IndigoVision's IP Video solution in preference to analogue, using existing IP
infrastructure, avoiding having to recable their historic buildings with
analogue coaxial cable. TAG Airport at Farnborough also installed an IP Video
system instead of analogue for the similar reason of being able to share a new
IP infrastructure in common with other airport services. Our second UK MPEG4
deployment was for a 120-camera motorway management system, our IP Video
solution being selected here for its strengths in video quality and remote
transmission. One of our US integrator partners installed a 300-camera system
for AIG Insurance. Finally, another of our integrator partners has secured a 140
unit major leisure project.
Return of Capital
As a result of the business review conducted during the first half, the Board
concluded the group had cash significantly in excess of its requirement to bring
the group to profitability with its revised business model as a product
manufacturer. Accordingly, a recommendation was made to shareholders to return
to them #11.7m in total, amounting to a capital reduction of 17p per share. This
was approved by the shareholders on 25 March 2003 and effected on 20 May 2003.
Move to AIM
As previously indicated, the Board has been reviewing the costs of maintaining a
full listing including the requirement for quarterly reporting. Given the
Company's market capitalisation, the Board has concluded that a quotation on the
Alternative Investment Market ("AIM") is more appropriate to the scale and stage
of development of IndigoVision and that such a move would reduce costs. We are
today making application for the admission to trading on AIM. We anticipate that
dealings will cease on the Official List with effect from the close of business
on 12 December 2003 and commence on AIM on 15 December 2003.
Current trading and outlook
The first quarter (to 31 October) of our reporting year is seasonally affected
by the August vacation period and has historically been weak. Notwithstanding
this Q1 revenues were 20% higher than the corresponding period last year at
#356k.
We expect revenues to grow in the current year. Since year-end we have made a
further reduction in headcount from 57 to 48, lowering our overhead to reduce
the breakeven point of sales, and we are targeting overheads of less than #4m
for the current year. Considerable work is also being undertaken to improve
margins.
The board remains confident that IndigoVision is well placed with strong
technology to benefit from an increasing market shift from analogue to IP Video
products, and expects the group to move closer to breakeven during the current
financial year.
Consolidated profit and loss account (audited)
for the year ended 31 July 2003
2003 2002
Notes #000 #000
Turnover 3 1,794 2,251
Cost of sales (1,129) (1,098)
Gross profit 665 1,153
Research and development expenditure (2,057) (3,555)
Other administrative expenses 4 (2,841) (8,956)
Operating loss (4,233) (11,358)
Bank interest receivable and similar income 598 1,088
Interest payable and similar charges (7) (10)
Loss on ordinary activities before taxation (3,642) (10,280)
Retained loss for the year (3,642) (10,280)
Loss per ordinary share 5
Basic and diluted loss per share (6.44p) (15.01p)
Loss per share before exceptional items (5.86p) (12.96p)
Consolidated statement of total recognised gains and losses (audited)
for the year ended 31 July 2003
2003 2002
#000 #000
Loss for the financial year (3,642) (10,280)
(Loss) gain on foreign currency (3) 82
Total recognised gains and losses relating to the year (3,645) (10,198)
Consolidated balance sheet (audited)
at 31 July 2003
2003 2002
Notes #000 #000 #000 #000
Fixed assets
Tangible assets 127 276
Current assets
Stocks 406 791
Debtors 467 916
Cash at bank and in hand 6,283 23,588
7,156 25,295
Creditors: amounts falling due within one (871) (1,870)
year
Net current assets 6,285 23,425
Total assets less current liabilities 6,412 23,701
Creditors: amounts falling due after more (37) (65)
than one year
Provisions for liabilities and charges (28) (1,194)
Net assets 6,347 22,442
Capital and reserves
Called up share capital 7 69 6,849
Share premium account 8 23,971 28,849
Other reserve 8,563 8,563
Profit and loss account 8 (26,256) (21,819)
Shareholders' funds - equity 6,347 22,442
Consolidated cash flow statement (audited)
for the year ended 31 July 2003
2003 2002
Notes #000 #000 #000 #000
Cash flow statement
Cash outflow from operating activities 9 (6,199) (9,693)
Returns on investments and servicing of finance
Interest received 598 1,088
Interest paid (7) (10)
591 1,078
Capital expenditure
Purchase of tangible fixed assets (2) (190)
Disposal of tangible fixed assets 3 -
1 (190)
Cash outflow before financing (5,607) (8,805)
Financing
Repayment of loans (37) (48)
Reduction in share capital (11,658) -
(11,695) (48)
Decrease in cash in the year (17,302) (8,853)
Reconciliation of net cash flow 10
to movement in net funds
Decrease in cash in the year (17,302) (8,853)
Cash flow from movement in debt 37 48
Translation adjustment (3) 82
Movement in net funds in the year (17,268) (8,723)
Net funds at the start of the year 23,486 32,209
Net funds at the end of the year 6,218 23,486
Notes
1. Basis of consolidation
The consolidated financial statements include the financial statements of
the company and its subsidiary undertakings made up to 31 July 2003.
2. Financial statements
The financial information set out in this announcement does not constitute
the Group's Statutory Accounts for the years ended 31 July 2002 or 2003 but
is derived from those accounts. Statutory Accounts of IndigoVision Group plc
for 2002 have been delivered to the Registrar of Companies and those for
2003 will be delivered to the Registrar of Companies following the company's
annual general meeting. The auditors have reported on those accounts; their
reports were unqualified and did not contain a statement under section 237
(2) or (3) of the Companies Act 1985.
3. Turnover by destination
2003 2002
#000 % #000 %
EMEA 974 54% 756 34%
USA 586 33% 1,040 46%
Asia 234 13% 455 20%
______ ______ ______ ______
1,794 100% 2,251 100%
===== ===== ===== =====
4. Exceptional Items
Included within other administrative expenses are exceptional operating
items of #321,000 which relate to restructuring (#177,000) and capital
reduction costs (#144,000) incurred during the year. Exceptional costs of
#1,400,000 relating to restructuring were incurred in 2002 and included
within administrative expenses #1,112,000 and research and development
expenditure #288,000.
5. Loss per share.
Loss per share is calculated as follows:
Year to Year to
31 July 2003 31 July 2002
#000 #000
Loss for the financial year (3,642) (10,280)
Exceptional items 321 1,400
_______ _______
Loss before exceptional items (3,321) (8,880)
====== ======
Basic and diluted loss per share (6.44p) (15.01p)
====== =======
Loss per share before exceptional items (5.86p) (12.96)p
====== =======
The additional calculation of loss per share is given in order to provide a
more meaningful comparison of underlying performance.
All calculations of earnings per share are based on the weighted average
number of ordinary shares in issue during the year of 56,585,857 (68,493,520
-2002)
6. Dividend
The company intends to reinvest any future earnings to finance the growth of
the business and does not anticipate paying any dividends in the foreseeable
future.
7. Called up share capital
2003 2002
note #000 #000
Authorised
14,922 10,000
Equity: Ordinary shares of 1p each
_____ _____
(2002-10p each)
14,922 10,000
Allotted, called up and fully paid
69 6,849
Equity: Ordinary shares of 1p each
_____ _____
(2002-10p each)
69 6,849
8. Share premium and reserves
Share Premium Other reserve Profit and loss
Account account
#000
#000 #000
At beginning of year 28,849 8,563 (21,819)
Retained loss for year - - (3,642)
Cancellation of share options - - (792)
Currency exchange movements - - (3)
Reduction in share capital (4,878) - -
_______ _______ ________
At end of year 23,971 8,563 (26,256)
====== ====== =======
The charge for cancellation of share options granted at less than market
value is in respect of a credit to the profit and loss account effected in
prior years in accordance with UITF Abstract 17.
9. Reconciliation of operating loss to operating cash flows
2003 2002
#000 #000
Operating loss (4,233) (11,358)
Depreciation 148 142
Decrease/(Increase) in stocks 385 (425)
Decrease in debtors 449 275
(Decrease)/Increasein creditors (990) 142
Share option charges (792) 396
Payment of restructuring costs (1,124)
Provision for restructuring costs 1,124
Movement in warranty provisions (42) 11
_______ _______
Net cash outflow from operating activities (6,199) (9,693)
====== ======
10. Analysis of net funds
At beginning Cash flows Other non cash At end of year
of year #000 changes
#000 #000
#000
Cash in hand and at bank 23,588 (17,305) - 6,283
Debt due after one year (65) - 28 (37)
Debt due within one year (37) 37 (28) (28)
______ ______ _______ ______
Total 23,486 (17,268) - 6,218
===== ===== ====== =====
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