RNS Number:1971J
Newport Networks Group PLC
20 September 2006
Embargoed. For release at 7a.m. on 20 September 2006
Newport Networks Group PLC ("Company")
Interim Results for the 6 Months to 30 June 2006
Summary
* Revenue in the 6 months of #758,000 (2005 : #213,000)
* Loss after tax in the 6 months #6.9m (2005 : #5.6m)
* Cash balances at 30 June 2006 #10.5m (2005 : #11.6m)
* New smaller product, the 310 Media Proxy Border Gateway, launched
* Worldwide delays in deployment of Next Generation Networks continue
* Operating costs to be reduced to preserve cash resources
Commenting on the outlook Sir Terry Matthews, Chairman, said "We expect to see
better industry and revenue growth for our sector in 2007. I am committed to the
Company and I continue to provide my full support."
For further information please visit www.newport-networks.com or contact:
John Everard, Chief Executive
John Ackroyd, Finance Director
Newport Networks Group PLC
Tel: 01291 435700
Chairman's Report for Newport Networks Group PLC ("Newport" or the "Company")
Worldwide delays in the deployment of Next Generation Networks ("NGN") continue
to have an adverse effect on revenues for Newport Networks. This is a
considerable disappointment for me. I have referred to the delays in earlier
reports and recent announcements from Tier-1 Operators merely confirm the
position.
As previously reported we have been working with Tier-1 Operators and Tier-1
Network Equipment Vendors ("NEV") to supply Session Border Controller ("SBC")
components of NGN architectures. Negotiations with a particular large service
provider continue but we cannot be certain with respect to timing or whether we
will be successful. Even if negotiations were to be successfully completed
before the end of 2006 it is now unlikely that the new business will contribute
significant revenues in the current year. This reflects the general situation
with regard to the supply of NGN equipment to Tier-1 Service Providers and in
particular with the current requirements for carrier-scale Session Border
Controllers such as the Newport 1460. The market for small SBC's is buoyant but
we do not now expect the market for carrier scale SBC's to develop until 2007.
IMS Development
We announced in July that we were accelerating the introduction of a
complementary smaller product incorporating an advanced split media and
signalling technology which forms an important part of what is known as the IMS
(IP Multimedia Subsystem) architecture. The new product, the 310 Media Proxy
Border Gateway, will support 1,000 to 35,000 media sessions in a compact chassis
giving service providers a granular option to optimise network design and push
media handling to the edge of the network. I was recently impressed with a
demonstration of our distributed architecture, in which the signalling node was
in the UK and the media handling in China.
The 310 Media Proxy Border Gateway was launched last week at Fall VON 2006 in
Boston and initial shipments are expected in the current financial year. Future
development of new features will be concentrated in our distributed networks R&D
program. This is a development area where the Company considers it has market
leadership and significant revenue opportunities.
Financial Performance
Revenues for the six months to 30 June 2006 were #758,000. The loss after tax
for the six months to 30 June 2006 was #6.9m compared to a loss of #5.6m in the
six months to 30 June 2005. An R&D Tax Credit claim for the year to 31 December
2005 has been agreed with the Inland Revenue and a repayment of #1,117,000 was
received in May 2006.
In January 2006 the Company received funds of #14.7m following the placing of
103,333,333 new Ordinary Shares at a price of 15 pence per share. At 30 June
2006 cash resources were #10.5m and at 31 August 2006 amounted to #8m.
Financial Management
On 5 July we announced a programme to reduce ongoing operating expenses by 20%.
The programme has been implemented resulting in a one-time write-off of
#250,000, which was recorded in the accounts to 30 June 2006.
In the current market environment with continuing NGN project delays, the Board
has decided to implement a further reduction in operating expenses to conserve
cash resources. This action, combined with the actions taken in July, will
reduce the cash burn to less than half of the prevailing run rate a few months
ago. Our forecasts show that the Company will have sufficient cash resources to
last through calendar year 2007, based on conservative revenue levels.
Outlook
As a result of the ongoing industry delays, revenues for the second half of 2006
are likely to be delayed and less than market estimates. We expect to see better
industry and revenue growth for our sector in 2007.
I consider that the course of action taken by the management of the Company to
implement a more robust financial plan is in the best interests of the Company
and its shareholders. I am committed to the Company and I continue to provide my
full support.
Sir Terence Matthews
Chairman.
For further information, please contact:
John Everard, Chief Executive
John Ackroyd, Finance Director
Newport Networks Group PLC
GROUP PROFIT AND LOSS ACCOUNT
6 months to 6 months to Year to
30 June 2006 30 June 2005 31 December
Unaudited Unaudited 2005
Audited
#000 #000 #000
Turnover 758 213 1,010
Cost of sales (297) (86) (580)
------------------------------------------------------------------------------
Gross Profit 461 127 430
Administrative expenses (8,131) (6,631) (14,427)
------------------------------------------------------------------------------
Operating loss (7,670) (6,504) (13,997)
Interest receivable 232 357 531
------------------------------------------------------------------------------
Loss on ordinary activities before
taxation (7,438) (6,147) (13,466)
Tax on loss on ordinary activities 553 540 1,138
------------------------------------------------------------------------------
Loss for the period (6,885) (5,607) (12,328)
==============================================================================
Earnings per share
- Basic and diluted (4.52p) (8.88p) (19.5p)
==============================================================================
GROUP STATEMENT OF TOTAL
RECOGNISED GAINS AND LOSSES
6 months to 6 months to Year to
30 June 2006 30 June 2005 31 December
Unaudited Unaudited 2005
Audited
#000 #000 #000
Loss for the period (6,885) (5,607) (12,328)
Translation difference in respect
of net investment (23) 28 88
in overseas subsidiary undertakings
------------------------------------------------------------------------------
Total recognised losses in the
period (6,908) (5,579) (12,240)
------------------------------------------------------------------------------
GROUP BALANCE SHEET
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
#000 #000 #000
Fixed assets
Tangible assets 2,595 1,338 2,193
------------------------------------------------------------------------------
Current assets
Stock 3,248 2,273 3,210
Debtors 2,558 2,120 2,920
Cash at bank and in hand 10,501 11,584 2,599
------------------------------------------------------------------------------
16,307 15,977 8,729
Creditors: amounts falling due
within one year (2,429) (2,109) (2,292)
------------------------------------------------------------------------------
Net current assets 13,878 13,868 6,437
------------------------------------------------------------------------------
Net assets 16,473 15,206 8,630
==============================================================================
Capital and reserves
Called up share capital 8,329 3,162 3,162
Share premium account 36,391 26,879 26,886
Merger reserve 8,088 8,088 8,088
Other reserve 278 122 199
Profit and loss account (36,613) (23,045) (29,705)
------------------------------------------------------------------------------
Total shareholders' funds - equity
interests 16,473 15,206 8,630
==============================================================================
GROUP CASH FLOW STATEMENT
6 months to 6 months to Year to
30 June 2006 30 June 2005 31 December
Unaudited Unaudited 2005
Audited
#000 #000 #000
Net cash outflow from operating
activities (7,164) (6,607) (15,601)
Returns on investments
and servicing of finance
Interest received 232 357 531
Taxation
UK corporation tax repaid 1,117 - 1,030
Capital Expenditure
Purchase of tangible fixed assets (955) (1,176) (2,378)
-------------------------------------------------------------------------------
Net cash outflow before financing (6,770) (7,426) (16,418)
Financing
Issue of ordinary share capital 14,672 71 78
-------------------------------------------------------------------------------
Increase / (Decrease) in cash 7,902 (7,355) (16,340)
===============================================================================
Reconciliation of operating loss
to net cash outflow from
operating activities
Operating loss (7,670) (6,504) (13,997)
Depreciation of tangible fixed
assets 553 199 550
(Increase) / Decrease in debtors (202) 177 (1,055)
Increase in creditors 137 890 1,073
(Increase) in stock (38) (1,475) (2,412)
Share based payment 79 78 152
Other non cash items (23) 28 88
-------------------------------------------------------------------------------
Net cash outflow from operating
activities (7,164) (6,607) (15,601)
===============================================================================
NOTES TO THE INTERIM STATEMENT
1. Basis of preparation
The interim financial statements have been prepared on the basis of the
accounting policies set out in the 2005 statutory financial statements of
Newport Networks Group PLC. The directors consider the group will have adequate
resources to continue in existence for the foreseeable future and therefore it
is appropriate to prepare the interim report on a going concern basis.
The interim report was approved by the Board of directors on 19 September 2006.
2. Earnings per ordinary share
The basic earnings per share (EPS) of (4.52p) is based on the loss for the
period of #6,885,000 and the weighted average number of ordinary shares in issue
of 152,310,273.
The 30 June 2005 comparative earnings per share (EPS) of (8.88p) is based on the
loss for the period of #5,607,000 and the weighted average number of ordinary
shares in issue of 63,128,938.
The 31 December 2005 comparative earnings per share (EPS) of (19.5p) is based on
the loss for the year of #12,328,000 and the weighted average number of ordinary
shares in issue of 63,188,347.
Diluted EPS has not been disclosed, due to employee share options being
anti-dilutive. In these circumstances diluted EPS is the same as the basic EPS.
3. Fixed assets
Fixed assets include #1,665,000 of the Company's session controllers which are
used within Engineering for product research and development (June 2005:
#850,000 & December 2005: #1,504,000). The cost of the equipment is depreciated
over 5 years on a straight line basis.
4. Debtors
30 June 30 June 31 December
2006 2005 2005
#000 #000 #000
Trade debtors 1,406 215 1,310
VAT recoverable 75 64 59
Other debtors 203 38 11
R&D tax credit receivable 551 1,548 1,115
Prepayments and accrued income 323 255 425
-----------------------------------------
2,558 2,120 2,920
=========================================
5. Creditors: amounts falling due within one year
30 June 30 June 31 December
2006 2005 2005
#000 #000 #000
Trade creditors 565 722 809
Other taxes and social security costs 267 214 267
Accruals 1,458 1,173 868
Deferred revenue 139 - 300
--------------------------------------
2,429 2,109 2,292
======================================
6. Group reconciliation of movements in shareholders' funds
Share Share Other Profit &
capital premium reserve loss
account
#000 #000 #000 #000
At 1 January 2006 3,162 26,886 199 (29,705)
Loss for the period - - - (6,885)
Exchange differences on foreign net
investments - - (23)
Shares issued in the period 5,167 9,505 - -
Provision for share options issued - - 79 -
------------------------------------------------------------------------------
At 30 June 2006 8,329 36,391 278 (36,613)
------------------------------------------------------------------------------
At an Extraordinary General Meeting held on 23 January 2006 the shareholders
approved the increase in the authorised share capital to #10,000,000 and the
allotment of 103,333,333 new shares at 15p per share. Dealings in the new shares
commenced on AIM on 25 January 2006 and subsequently raised #15,500,000 before
costs.
There has been no movement in the Merger Reserve during the six month period
ended 30 June 2006.
7. Publication of non-statutory accounts
The financial information contained in this interim statement does not amount to
statutory financial statements within the meaning of section 240 Companies Act
1985 and has not been reported on by the auditors or delivered to the Registrar
of Companies. The figures for the year to 31 December 2005 have been extracted
from the full statutory financial statements for that year which have been filed
with the Registrar of Companies. The auditors' report on those financial
statements was unqualified and did not contain a statement under Section 237(2)
or (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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