Interim Results
September 08 2004 - 3:02AM
UK Regulatory
RNS Number:7231C
Newport Networks Group PLC
08 September 2004
8 September 2004
Newport Networks Group PLC - Interim Results
Chairman's Report
I am pleased to report to you on the performance of Newport Networks Group PLC
("Newport" or "the Company"). The Company has made substantial progress in all
areas since being admitted to the London Alternative Investment Market (AIM) on
12th May, 2004.
Admission to AIM
Newport was successfully admitted to AIM with trading of the shares commencing
on 12th May 2004. While the original plan was to raise #15m net of costs, the
level of interest and demand was such that the Company raised #25.3m net of
costs. The additional #10m of new equity will allow for the development of
additional product features earlier than originally planned and to ramp up the
growth of the global Marketing, Sales and Support team.
I am delighted to welcome all the new shareholders to Newport Networks Group PLC
and look forward to meeting you in the near future.
Financial Results
As Newport was incorporated on 23rd March 2004 and did not trade prior to its
acquisition of Newport Networks Limited on 21st April 2004, the results relate
to a ten-week period from 21st April 2004 to 30th June 2004. The Profit and Loss
Account, Balance Sheet, and Cash Flow Statements show separate pro-forma
comparative figures for Newport Networks Limited and its subsidiary Newport
Networks Systems Corporation to enable a more meaningful comparison to be made.
The loss before tax in the ten-week period was #1,639,000 after charging
amortisation of goodwill of #124,000 and the inclusion of a provision of #26,000
for share options granted prior to flotation at under market value.
The loss after taxation was reduced to #1,510,000 after taking credit for an R&D
Tax Credit for the ten-week period of #129,000. On 6th August 2004 Newport
Networks Limited received an R&D Tax Credit of #664,000 in respect of the year
to 31st December 2003. This amount was not included in the 2003 accounts of
Newport Networks Limited pending agreement with the Inland Revenue. The net
liabilities of Newport Networks Limited at the time of its acquisition by
Newport Networks Group PLC have now been retrospectively reduced by the related
R&D Tax Credit. In the six months to 30th June 2004 Newport Networks Limited
invested over #2m in research and development. This has been fully written off
for the period.
Cash
As at 30th June 2004, the Company had cash balances amounting to #23.3m. This
stood at #22.3m on 3rd September 2004 following payment of normal trading
expenditure and receipt of the R&D Tax Credit described above.
The Marketplace
The Newport Networks 1460 Session Controller is a large scale, carrier class
device targeted at both access and peering applications associated with the
provision of Voice over IP and Multi-media over IP services. Service Providers
around the world continue to announce their plans for such services. As an
example, BT recently announced plans for their 21st Century Network which will
involve the migration of voice traffic onto an IP-based network by 2008. Major
research analysts provide forecasts on the market for Next Generation Networks
and corresponding network products and services. A recent Yankee Group report
forecast the market for session controllers to be worth approximately $1.2
Billion in 2008.
We were pleased to exhibit the 1460 Session Controller at the US SuperComm
conference in Chicago in July 2004. Over the coming months the Company will be
participating in other events including the Voice over Networks (VON) show in
Boston in October and the SIP-Paris show in January 2005. While these events are
primarily targeted at networking industry professionals, they also provide an
opportunity for investors to better understand the market and see our products
first hand.
Newport continues to develop relationships with a growing number of Service
Providers around the world as well as with technology and channel partners. I am
pleased with the progress of the Company in this regard.
Product Launch.
On 29th July 2004, Newport announced the launch of the 1460 Session Controller
for evaluations and trials. While non-disclosure agreements inhibit providing
too much detail at this time, such evaluations are conducted as part of a
well-controlled process according to a pre-agreed plan. There are 5 systems
undergoing evaluation at this time using a mixture of Internet based remote
testing, pre-evaluations in Newport laboratories and on-site evaluation in
customer laboratories. A further 15 systems are being manufactured for similar
evaluations in the coming months. We are confident that the evaluations will
lead to a number of in-service trials and subsequent sales.
Sales and Support.
I am pleased to report that the Company is building a solid Sales and Support
organisation in line with the business objectives outlined at the time of
admission to AIM. We have successfully recruited key Marketing and Sales
executives for Europe and the Americas. Brent Hayes joined Newport in June 2004
as Vice President of Sales for the Americas. Brent has previously held
management and executive roles at Ungermann-Bass, Nortel Networks, Unisphere
Networks, Vpacket and VocalData. Craig Decker joined the Company in August 2004
as Vice President of Sales for Europe & Asia. Craig has previously held
management and executive roles at Cosine Communications, Syndesis, Ascend
Communications and Comtech Communications.
As part of the Sales and Support growth, the Company has established a
subsidiary in the USA, with offices located in Herndon-Virginia, Dallas-Texas
and Denver-Colorado. Taken together with offices in Canada at Vancouver and
Ottawa, Newport now has a platform and growing presence to address the North
American market. The Company has also concluded agreements with a number of
Sales Agencies to address the market opportunities for session controllers in
Europe, Asia-Pacific and South America.
Current Trading and Outlook.
Newport is in a pre-commercial revenue phase. However the launch of the 1460
Session Controller into evaluations and trials together with the growth of our
Sales and Support organisation lays the foundation for the Company to pursue its
objective of generating revenues before the end of 2004.
I am very pleased with the progress to date and would like to take this
opportunity to thank all our employees for their hard work and commitment and
our investors for their continued support.
Terry Matthews
Chairman
8th September 2004
For further information, please contact:
John Everard, Chief Executive Justin Griffiths
Newport Networks Group PLC Tavistock Communications
Tel: 020 7920 3150 Tel: 020 7920 3150
Consolidated profit and loss account
Proforma figures for Newport
Networks Limited and its
subsidiary
10 weeks to 6 months to 6 months to Year to
30th June 30th June 30th June 31stDecember
2004 2004 2003 2003
unaudited unaudited unaudited audited
#'000 #'000 #'000 #'000
Turnover - - 433 433
Cost of sales - - 87 87
-------------------------------------------------
Gross Profit - - 346 346
Administrative expenses -1642 -3206 -2358 -4823
Amortisation of goodwill -124 - - -
-------------------------------------------------
Operating loss -1766 -3206 -2012 -4477
Interest receivable 139 2 6 9
Interest payable -12 -67 -1 -42
-------------------------------------------------
Loss on ordinary
activities before tax -1639 -3271 -2007 -4510
Tax credit 129 1000 - -
-------------------------------------------------
Loss for the period -1510 -2271 -2007 -4510
=================================================
Basic loss per share -15.4p
Diluted loss per share -14.5p
Basic loss per share adjusted
for amortisation of goodwill -14.1p
Statement of Total Recognised Gains and Losses
For the 10 weeks to 30th June 2004 there have been no recognised gains and
losses other than as stated above.
Consolidated balance sheet
Proforma figures for
Newport Networks Limited
and its subsidiary
30th June 30th June 31st December
2004 2003 2003
unaudited unaudited audited
#'000 #'000 #'000
Fixed assets
Tangible assets 166 275 105
Goodwill 4398 - -
----------------------------------
Current assets
Debtors 1316 156 166
Cash at bank and in hand 23329 85 100
----------------------------------
Creditors: amounts falling due
within one year -781 -706 -3122
Net current assets /(liabilities) 23864 -465 -2856
Total assets less current liabilities 28428 -190 -2751
Creditors: amounts falling due
after more than one year - -100 -57
----------------------------------
28428 -290 -2808
----------------------------------
Capital and reserves
Called up share capital 3147 9 9
Share premium account 26765 9012 9012
Share option reserve 26 - -
Profit and loss account -1510 -9311 -11829
----------------------------------
Total shareholders' funds 28428 -290 -2808
----------------------------------
Consolidated cash flow statement
Pro-forma figures for
Newport Networks Limited and
its subsidiary
10 weeks to 6 months to Year ended
30th June 30th June 31st December
2004 2004 2003
Unaudited Unaudited audited
#'000 #'000 #'000
Net cash
outflow from operations -1697 -3120 -3826
Servicing of finance
Interest received 139 2 9
Interest paid -12 -67 -2
Taxation
UK corporation tax
paid/repaid -254 -254 -
Capital expenditure
Purchase of tangible
fixed assets -51 -92 -65
-------------------------------------------------
Net cash outflow before
financing -1875 -3531 -3884
Financing
Issue of ordinary share
capital 27000 - 1549
Loans received - 1400 2375
Costs of admission to AIM -1696 - -
Inter company indebtedness - 2421 -
Loans repaid -100 -100 -
-------------------------------------------------
25204 3721 3924
-------------------------------------------------
Increase in cash 23329 190 40
=================================================
Reconciliation of operating loss
to net cash outflow from operating
activities
Operating loss -1642 -3206 -4477
Depreciation of tangible
fixed assets 13 35 429
Decrease/(increase) in
debtors -124 -159 17
Increase in creditors 30 184 205
Options reserve 26 26 -
-------------------------------------------------
Net cash outflow from
operating activities -1697 -3120 -3826
-------------------------------------------------
-------------------------------------------------
Notes to the interim statement
1. Basis of preparation
Newport Networks Group PLC was incorporated on 23rd March 2004 and acquired the
entire issued share capital of Newport Networks Limited on 21st April 2004.
These interim financial statements include the consolidated results for the ten
weeks from 21st April 2004 to 30th June 2004. As there are no comparative
figures for Newport Networks Group PLC comparative figures for Newport Networks
Limited are included for information purposes. The results for the year to 31st
December 2003 have been abridged from the full statutory financial statements
for that year which received an unqualified auditors' report and have been
delivered to the Registrar of Companies.
The interim financial statements have been prepared on the basis of the
accounting policies set out in the 2003 statutory financial statements of
Newport Networks Limited. Goodwill on acquisitions is capitalised and amortised
over its useful economic life, which in the case of Newport Networks Limited,
the Board estimates to be seven years.
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 interim report was approved by the Board of directors on 6th September 2004.
2. Taxation
In August 2004 following agreement with the Inland Revenue Newport Networks
Limited received #664,000 in respect of R&D Tax Credits for the year to 31st
December 2003. This amount had not previously been included in the accounts of
Newport Networks Limited and is therefore credited in these accounts. In
addition further R&D Tax Credits of #336,000 have been included in respect of
the six months to 30th June 2004.
The net liabilities of Newport Networks Limited at the time of its acquisition
by Newport Networks Group PLC have been retrospectively reduced by the related
R&D Tax Credit.
3. Loss per share
The calculation of loss per ordinary share is based on the following:
#'000
Loss for the period used in basic loss per share 1510
Amortisation of goodwill 124
---
Loss used in adjusted loss per share 1386
----
Number of shares
Weighted average number of shares 9,815,379
Dilutive effect of share options 585,756
-------
Diluted weighted average shares in issue 10,401,135
----------
4. Share option reserve
In accordance with UITF 17 the difference between the market value of share
options at the date of grant and the exercise price is charged to the profit and
loss account over the period the shares may be exercised with a corresponding
credit to reserves. The total difference amounts to approximately #800,000 and
the Board has decided to charge this over a five year period rather than over
the full exercise period of ten years. The share options to which this relates
were granted prior to flotation and no new grants of options at undervalue are
planned.
Independent Review Report to Newport Networks Group PLC
Introduction
We have been instructed by the Group to review the financial information for the
10 week period ended 30th June 2004 which comprises the Group Profit and Loss
Account, Group Balance Sheet, Group Cash Flow Statement and the related notes
and pro-forma comparative figures for Newport Networks Limited and its
subsidiary Newport Networks Systems Corporation for 6 month periods to 30th June
2003 and 2004. We have read the other information contained in the Interim
Report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the Company in accordance with the guidance
contained in the Bulletin 1999/4 'Review of interim financial information'
issued by the Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company, for
our work, for this report, or for the conclusions we have formed.
Directors Responsibilities.
The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the Interim Report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual financial statements except
where any changes, and the reasons for them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of group management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether
the accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the period ended
30th June 2004.
Ernst & Young LLP
Bristol
This information is provided by RNS
The company news service from the London Stock Exchange
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