RNS Number:9107A
Newport Networks Group PLC
04 April 2006
Embargoed, for release at 7a.m. on Tuesday, 4 April 2006
Newport Networks Group PLC
("The Company")
Preliminary Results for the Year to 31 December 2005
Financial Summary
* Revenues increase to #1,010,000 from #336,000
* Orders received in the year from 15 end customers
* Successful fundraising in January 2006 raised #14.6m net of costs.
Operational Summary
* Distribution agreement signed in March 2006 with major Tier-1 Network
Equipment Vendor
* Reseller agreement with Marconi taken over by Ericsson
* Six channel partnerships with major Network Equipment Vendors
* Eight country specific partnerships with Systems Integrators
* Appointment of Alan Nunn, currently Chief Voice Architect at BT, as Chief
Technical Officer with effect from 24 April 2006
Commenting on the outlook, Sir Terry Matthews, Chairman, said, "The Company
continues to address a large number of sales prospects around the world, with a
clear focus on the major opportunities. We are expecting significant revenue
growth during 2006."
For further information, please visit www.newport-networks.com or contact:
John Everard, Chief Executive Simon Hudson
John Ackroyd, Finance Director Lulu Bridges
Newport Networks Group PLC Tavistock Communications
Tel: 020 7920 3150 on 4 April 2006, Tel: 020 7920 3150
01291 435700 thereafter
Newport Networks Group PLC ("Newport" or "the Company").
Preliminary Results for the year ended 31 December 2005
Chairman's Report.
Newport continues to make progress across all areas of operations to address the
growing market for carrier-class session border controllers (SBCs). SBCs are
critical components of Next Generation Networks (NGNs) for Voice over IP (VoIP)
and any new multi-media services. It is important to understand that the
telecommunications industry worldwide is overhauling the Public Switched
Telephone Network (PSTN) to encompass a broadband IP infrastructure. This
represents the most dramatic infrastructure change in the history of the
industry. However, during the last year the industry experienced delays in the
implementation of NGN projects and this clearly impacted our revenues. The
current level of interest and activity provides us with confidence that the
market demand for carrier class SBCs is gathering momentum, leading to
significant revenue growth expectations for the Company for 2006.
During 2005, Newport received orders to the value of #1.6m from 15 end customers
distributed over eight countries. Product shipments amounted to #1.3m leading to
recognised revenues in the period of #1.0m (2004: #0.3m).
The placing of shares with institutional investors announced on 23 December
2005, followed by shareholder approval at the Extraordinary General Meeting on
23 January 2006, secured additional funding for the Company amounting to #14.6m
net of expenses. The Company now has a strengthened balance sheet and the
ability to fund working capital requirements going forward.
Financial performance
The loss before interest, tax, depreciation and amortisation for the year
increased to #13.4m from #7.8m in 2004, primarily as a result of the
establishment of a global service, sales and support organisation to meet
anticipated customer demand.
Gross profit increased to #0.4m (2004: #0.2m) but the gross margin for the year
at 43% (2004: 55%) was at the lower end of our expectations reflecting discounts
for initial sales. As volume orders, shipments and revenues are achieved in
2006, we expect to achieve a significantly higher gross margin.
We maintained our investment in R&D with expenditure of #4.7m (2004: #4.7m).
With continued eligibility for R&D Tax Credits the Company expects to receive a
tax repayment in excess of #1.0m during 2006. Investment in capital expenditure
in the year amounted to #2.4m (2004: #0.4m) with a significant proportion
relating to the capitalisation at cost of our own equipment used within the
Engineering Department.
At 31 March 2006, our cash resources were #12.9m and we had no borrowings.
Channel partnerships
The key route to market for the Newport 1460 Session Border Controller (Newport
1460) is through channel partnerships with Network Equipment Vendors (NEVs) and
country specific Distributors/Systems Integrators. In April 2005 Newport had one
such channel partnership with Marconi. In April 2006 I am pleased to report that
Newport now has six channel partnerships with major NEVs and eight country
specific partnerships with Systems Integrators. The NEVs with whom we have
signed channel partnerships include Ericsson who has taken over the agreement
between Newport and Marconi.
In my letter to shareholders dated 23 December 2005 regarding the share placing,
I stated that we were negotiating with a Tier-1 NEV to supply a Tier-1 operator
with the session border controller components of its next generation network. We
subsequently announced on 13 March 2006 that we had signed a distribution
agreement with this major NEV. Negotiations are continuing with the NEV and
Tier-1 operator and we are confident that we will receive the initial order in
the first half of 2006. We also expect to be able to announce the name of the
NEV and Tier-1 operator at that time. Since signing the distribution agreement
in March, the NEV has also introduced our products to four other globally
recognised service providers.
Marketplace
The carrier VoIP market continues to grow rapidly driven primarily from new
broadband voice projects and services. The analyst firm Infonetics has recently
estimated the market for SBCs to grow from $100m in 2005 to $510m in 2009. Your
directors believe that Newport is well placed to capitalise on this growth
supplying core network equipment.
Demand for carrier class SBCs continues to accelerate with many Tier-1 service
providers issuing RFPs (Requests for Proposals) for interconnect services
between their home country and associated subsidiaries in other geographies. I
am pleased to report that large PSTN replacement projects are underway with a
number of pilot networks expected to be in place in the second half of 2006. The
Company is seeing significantly higher levels of activity in the European and
Asian markets where infrastructure rebuild is occurring at a faster pace than
North America.
IP Multi-media Subsystems (IMSs) are attracting significant attention from both
fixed and mobile operators looking for lab or early market trials in 2006.
Border security is an important aspect of the IMS network architecture and most
IMS trials will include a SBC. The Newport product line is ideal for this
application.
Certifications and Awards
Following independent laboratory testing, the Newport 1460 received formal
certification in 2005 confirming compliance with NEBS*, ETSI* and BTNR*
specifications. The Company's operations were also certified to comply with ISO
9001:2000 requirements. During early 2006, the Company received both the Frost &
Sullivan Next Generation Carrier Infrastructure Entrepreneurial Company of the
Year Award and the Internet Telephony Magazine's Product of the Year Award for
2005.
Personnel
I am pleased to report that Alan Nunn will be joining the Group on 24 April 2006
as Chief Technical Officer. Alan is joining Newport from BT where he has worked
for 19 years, latterly as the BT Chief Voice Architect playing a significant
role in the development of the 21CN Network.
Current trading and prospects
I am encouraged by the Company's engagement and level of activity with the major
NEV channel partners and corresponding end customers. Our original seeding of
end-customer interest to partners to enhance the relationship is yielding
positive results, with the partners now bringing their SBC customer requirements
to Newport. This is key to securing substantial revenue growth through Newport
leveraging the channel partner's resources, worldwide presence and customer
relationships.
The Company continues to address a large number of sales opportunities around
the world with a clear focus on the major opportunities. We are expecting
significant revenue growth during 2006.
Sir Terence H Matthews
Chairman.
* Network Equipment Building System, European Telecommunications Standards
Institute and British Telecom Network Requirement
-------------------------------------------------------------------------------
Group Profit and Loss Account
for the year ended 31 December 2005
2005 2004
#000 #000
Turnover 1,010 336
Cost of sales (580) (152)
----------- -----------
Gross profit 430 184
Administrative expenses (14,427) (8,139)
----------- -----------
Operating loss (13,997) (7,955)
Interest receivable 531 642
Interest payable - (68)
----------- -----------
Loss on ordinary activities before taxation (13,466) (7,381)
Tax on loss on ordinary activities 1,138 1,684
----------- -----------
Loss for the financial year (12,328) (5,697)
=========== ===========
Earnings per share
- Basic and diluted (19.5p) (12.8p)
Group statement of total recognised gains and losses
for the year ended 31 December 2005
2005 2004
#000 #000
(Loss) for the financial year (12,328) (5,697)
Exchange differences on foreign net investments 88 -
----------- -----------
Total recognised gains and losses relating to
the year (12,240) (5,697)
=========== ===========
There was no material difference between the result for each financial year
presented above and the result restated on an historical cost basis.
Group Balance Sheet
as at 31 December 2005
2005 2004
#000 #000
Fixed assets
Tangible assets 2,193 361
=========== ===========
Current assets
Stock 3,210 798
Debtors 2,920 1,757
Cash at bank and in hand 2,599 18,939
----------- -----------
8,729 21,494
Creditors: amounts falling due within one year (2,292) (1,219)
----------- -----------
Net current assets 6,437 20,275
----------- -----------
Total assets less current liabilities 8,630 20,636
=========== ===========
Capital and reserves
Called up share capital 3,162 3,154
Share premium account 26,886 26,816
Merger reserve 8,088 8,088
Other reserve 199 76
Profit and loss account (29,705) (17,498)
----------- -----------
Total shareholders' funds - equity interests 8,630 20,636
=========== ===========
Group Cashflow Statement
for the year ended 31 December 2005
2005 2004
#000 #000
Net cash outflow from operations (15,601) (8,443)
Returns on investments and servicing of finance
Interest received 531 642
Interest paid - (68)
Taxation
UK corporation tax repaid 1,030 412
Capital expenditure
Purchase of tangible fixed assets (2,378) (365)
----------- -----------
Net cash outflow before financing (16,418) (7,822)
Financing
Issue of ordinary share capital 78 27,059
Directors loans received - 1,400
Costs of admission to AIM - (1,696)
Other loans repaid - (100)
----------- -----------
78 26,663
----------- -----------
(Decrease) / Increase in cash (16,340) 18,841
=========== ===========
Notes to the group cashflow statement
Reconciliation of operating loss to net cash outflow from operating activities
2005 2004
#000 #000
Operating loss (13,997) (7,955)
Depreciation of tangible fixed assets 550 109
Loss on disposal of fixed asset - 1
(Increase) in stock (2,412) (798)
(Increase) in debtors (1,055) (590)
Increase in creditors 1,073 686
Share based payment 156 104
Other non cash items 84 -
----------- -----------
Net cash outflow from operating activities (15,601) (8,443)
=========== ===========
Reconciliation of net cash flow to movement in net debt
2005 2004
#000 #000
(Decrease) / Increase in cash (16,340) 18,841
Net cash inflow from movements in loan - (1,300)
----------- -----------
Changes in net funds resulting from cash flows (16,340) 17,541
Loans converted in net funds - 3,675
----------- -----------
Movement in net funds (16,340) 21,216
At 1 January 18,939 (2,277)
=========== ===========
At 31 December 2,599 18,939
=========== ===========
Notes to the financial statements
1. The financial information contained in this preliminary announcement does
not constitute statutory accounts as defined in Section 240 of the
companies Act 1985. Copies of the directors' report and the audited
financial statements for the year ending 31 December 2005 will be posted to
the shareholders in due course and may be obtained thereafter from the
Company's registered office at 6 St Andrew Street, London, EC3A 3LX.
2. Interest receivable
2005 2004
#000 #000
Bank interest 531 642
=========== ===========
3. Interest payable and similar charges
2005 2004
#000 #000
Bank loans and overdrafts - 5
Other loans - 63
----------- -----------
- 68
=========== ===========
4. Taxation
a) Tax on loss on ordinary activities
The tax (credit)/charge is made up as follows:
2005 2004
#000 #000
UK Corporation tax (1,115) (1,008)
Adjustments in respect of previous periods (23) (676)
----------- -----------
Total current tax (1,138) (1,684)
=========== ===========
b) Factors affecting the current tax (credit)/charge
The tax assessed on the loss on ordinary activities for the year is
higher than the standard rate of corporation tax in the UK. The
differences are explained below:
2005 2004
#000 #000
Loss on ordinary activities before tax (13,466) (7,381)
----------- -----------
Loss on ordinary activities multiplied
by standard rate of corporation tax in the UK
of 30% (2004 - 30%) (4,040) (2,214)
Effect of:
Disallowed expenses and non taxable income 13 3
Capital allowances in excess of depreciation (449) (49)
Other timing differences 43 (32)
Adjustments in respect of previous periods (22) (677)
Tax losses carried forward 3,040 1,033
Research and development tax credit (1,115) (1,008)
Losses surrendered for research and development
tax credit 1,392 1,260
----------- -----------
Total current tax (1,138) (1,684)
=========== ===========
c) Factors that may affect future tax charges
The future tax charge will depend on the continued availability of
research & development tax credits and whether any deferred tax can be
recognised for tax losses. There is an unrecognised deferred tax asset of
#6,210,000 (2004: #3,750,000) which is made up as follows:
2005 2004
#000 #000
Accelerated capital allowances (505) (55)
Other Short term timing differences 49 5
Tax losses carried forward 6,666 3,800
----------- -----------
6,210 3,750
=========== ===========
5. Earnings per ordinary share
The basic 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.
The comparative earnings per share (EPS) of (12.8p) is based on the loss
for the year of #5,697,000 and the weighted average number of ordinary
shares in issue of 44,368,656.
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.
6. Debtors
2005 2004
#000 #000
Trade debtors 1,310 392
VAT recoverable 59 13
Other debtors 11 108
R&D tax credit receivable 1,115 1,007
Prepayments and accrued income 425 237
----------- -----------
2,920 1,757
=========== ===========
7. Creditors: amounts falling due within one year
2005 2004
#000 #000
Trade creditors 809 618
Other taxes and social security costs 267 146
Other creditors 48 1
Accruals 868 451
Deferred revenue 300 3
----------- -----------
2,292 1,219
=========== ===========
Other creditors includes pension contributions payable of #48,000 (2004 -
#1,000)
8. Post balance sheet event
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.
This information is provided by RNS
The company news service from the London Stock Exchange
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