TIDMDGB
RNS Number : 7403F
Digital Barriers plc
29 May 2013
29 May 2013
Digital Barriers plc
(Digital Barriers' or the 'Company')
Preliminary Results for the year ended 31 March 2013
Digital Barriers (LSE AIM: DGB), the specialist provider of
advanced surveillance technologies to the international homeland
security and defence markets, announces audited results for the
year ended 31 March 2013.
The Board is pleased to report that it has continued to generate
significant momentum and traction during the period, the highlights
of which are:
Key Highlights
-- Group revenues increased 55% (22% pro forma(1) ) on 2012 to
GBP23.3 million (2012: GBP15.0 million);
-- Products Division revenues increased 34% pro forma on 2012 to
GBP16.6 million (2012: GBP12.4 million pro forma);
-- International revenues doubled from GBP3.3 million in 2012 to
GBP6.7 million, representing 29% (2012: 22%) of the Group revenues
as sales were made into more than twenty countries;
-- Loss before tax of GBP10.8 million and adjusted loss before tax of GBP7.6 million;
-- Class-leading RDC ground sensor launched during the second
half of the period, winning a high-profile competitive tender and
securing the Group's largest sale to date;
-- Notable sales successes in the period saw ThruVision double
its prior year unit sales and the Group secure its first TVI sale
to a multinational telecoms company, SingTel; and
-- Acquisition of OmniPerception face recognition technology.
Commenting on the results Dr Tom Black, Executive Chairman of
Digital Barriers said:
"The combination of strong sales momentum and the quality of
relationships we have built with key partners and customers around
the world, combined with our increasing portfolio of world-class
products and the strength of our engineering team, gives me
confidence in our ability to grow revenue significantly and drive
towards profitability. Our now proven business model and strategy
gives the board confidence in the growth prospects of the
Group."
*Adjusted loss before tax is calculated after adding back
amortisation of intangibles initially acquired on acquisition,
acquisition costs, reorganisation costs, impairment of acquired
intangibles and deducting adjustments to deferred
consideration.
(1) Assuming all prior period acquisitions occurred on 1 April
2011 and excluding all current year acquisitions
For further information, please contact:
Digital Barriers plc Tel: 020 7940 4740
Tom Black, Executive Chairman
Colin Evans, Managing Director
Zak Doffman, Development Director
Investec Investment Banking Tel: 020 7597 5970
Andrew Pinder
Dominic Emery
Patrick Robb
FTI Consulting Tel: 020 7831 3113
Edward Bridges
Matt Dixon
About Digital Barriers
Digital Barriers provides advanced surveillance technologies to
the international homeland security and defence markets.
Specialising in 'edge-intelligent' solutions that can be deployed
across remote, hostile or complex operating environments, we work
with governments, multinational corporations and system integrators
in the defence, law enforcement, critical infrastructure,
transportation and natural resources sectors.
www.digitalbarriers.com
Chairman's statement
Introduction and highlights
This last year has been a defining one for the Group in three
respects. First, our strategy to focus on our most compelling and
differentiated technologies has delivered pro forma growth within
our Products Division of 34%, including a number of high-profile
contract wins; this is double last year's 17% pro forma growth rate
for the Division. Second, this period has seen international
revenues more than doubling to GBP6.7 million (2012: GBP3.3
million), with sales into more than twenty countries across our
target markets; 29% of the Group's revenues now come from outside
the UK (2012: 22%). Finally, this period has seen our first
significant sales of fully integrated solutions, combining multiple
acquired technologies and further underpinning the potential of our
business model; this includes the successful launch of our
class-leading RDC ground sensor solution.
Three years on from its IPO, Digital Barriers continues to
generate significant momentum and traction, taking our portfolio of
products built on genuinely world-class IP to defence and security
customers around the world. Our focus has now tightened onto three
core product families - TVI, RDC and ThruVision - each one
supplemented by additional technologies and capabilities from
across the Group as we increase the pace of new product development
to meet market demand. With the launch of RDC during the period,
these three product families recorded 67% pro forma growth over
2012, and continue to generate significant market traction across
all of our regions. These core areas now account for almost all of
the Group's new technical development and planned product releases,
as well as the majority of our sales pipeline. Towards the end of
the period we added what we fully expect to be a fourth core
product family, with the acquisition of class-leading facial
recognition technology, OmniPerception.
Our Products Division grew more quickly than the overall Group,
which grew at 22% pro forma (2012: 24%), including our UK Services
Division that held flat despite the difficult economic conditions
across the UK government market and related security sectors within
which it operates.
The major highlights for the period are as follows:
-- TVI's international market penetration: Our TVI wireless
video surveillance technology has continued to secure flagship
customer sales around the world, selling into more than twenty
different countries in the period. This included the selection of
TVI by a major United States federal agency as its next generation
video surveillance technology, leading to a development contract
for the Group that will see a high-definition version of the
technology reach the market in the second half of 2013.
-- New commercial markets for the Group: The period has seen us
develop our first propositions for the broader commercial sector,
with TVI selected by SingTel as the delivery platform for its new
Video Surveillance as a Service (VSaaS) offering. TVI has
significant potential in the telecoms sector and we expect this to
form a more substantial part of our focus moving forwards, with a
range of products built on our IP that are designed specifically
for such customers, and including OEM and annuity license revenue
models. We are also in discussions with similar partners for
solutions based on our RDC and OmniPerception technologies.
-- Class-leading RDC product successfully launched: Our RDC
ground sensor has been designed to deliver class-leading
performance for a traditionally defence sector technology at a more
effective price point than incumbent products. RDC is oriented
towards the wider homeland security and critical infrastructure
sectors, whilst delivering a level of performance that has seen us
win competitive contracts in the defence sector against
market-leading competitors. We have fully integrated RDC with our
TVI platform to provide a solution that can be applied to border,
critical infrastructure and force protection, and which has secured
the Group's largest sale during the period. We are now seeing
increasing demand for the technology in Asia and the UK, with
initial trials in the Middle East and North America.
-- Excellent progress with ThruVision acquisition: The first
year with the unique ThruVision technology under our ownership saw
it deliver more than double its previous best annual unit sales.
This technology is a safe, completely passive sensing system that
is designed to see threat objects, such as guns and explosives, or
smuggled contraband, concealed under multiple layers of clothing at
standoff distances, indoors and outdoors. The technology generated
significant press coverage when it was revealed as being behind a
high-profile gun detection system under development for one of the
main police departments in the United States. We also saw an
important competitive sale to an Asian government customs agency, a
major integrated sale including multiple ThruVision products for
security operations in the Middle East, and a sale into a US
customer for standoff detection of person-borne explosive
devices.
-- Entry to high-growth biometrics market: At the beginning of
2013 we acquired the OmniPerception facial and object recognition
technology. We see biometric surveillance as a fourth core
technology area for the Group, and believe that OmniPerception's
near infrared facial recognition for consensual identity
authentication and standoff facial recognition is highly
differentiated. We are already seeing interest from multiple
customer agencies around the world. Work is underway to enhance the
OmniPerception product range by applying skills and capabilities
from across the wider Group.
-- International sales model validated: We have further
strengthened the sales teams in each of our regional centres
serving Asia Pacific, North America and the Middle East, and
provided each location with the full technology demonstration
facilities needed to manage customer and partner relationships.
During the period we also saw initial sales traction in Brazil,
leveraging the high-profile event credentials we gained in London
during the period. We are now looking at replicating our model into
other key countries that spend heavily on security and defence
technologies.
-- Continued interest in US despite budget uncertainties: The
Group continues to see strong interest in the United States for its
products, but has seen some delays to sales closures caused by
federal budget uncertainty and sequestration. Despite these delays,
the sales pipeline in the United States remains solid and the
Group's technology has been selected by a number of major
government agencies, including the GBP400,000 development contract
awarded by a major federal agency to enhance the Group's TVI
platform, incorporating multi-agency requirements.
Results
Revenue in the year was GBP23.3 million. The Group's loss before
tax was GBP10.8 million. We recorded an adjusted loss before tax of
GBP7.6 million, after adding back amortisation of intangibles
initially acquired on acquisition of GBP2.0 million, impairment of
intangibles of GBP1.3 million, acquisition costs of GBP0.4 million,
reorganisation costs of GBP0.8 million and deducting adjustments to
deferred consideration of GBP1.4 million.
Consideration for acquisitions made in the year totalled GBP3.3
million, all of which was paid in cash. A further GBP0.8 million of
cash was paid in the year as deferred consideration against current
and prior year acquisitions. The cash balance at the end of the
year was somewhat lower than expected at GBP5.5 million. This was
largely due to strong trading in March, and an increasing number of
material contract wins, which have resulted in a greater balance of
cash being wound into on-going trading.
People
With the addition of Visimetrics and its OmniPerception
subsidiary, and continued investment in sales resources across our
regions, the Digital Barriers team has increased to 212 people at
the year-end based across our London headquarters, our regional
centres and satellite locations, and our subsidiary technology
teams across the UK. We now have people from 13 nationalities
working within the Group and I am immensely proud of the integrated
culture we have built across so many locations over such a short a
period of time.
Our recruitment focus during the period has been on sales
resources within our regions, engaging directly with key customers
and partners. We continue to invest heavily in sales and marketing
to ensure that we can position our core technologies into the right
organisations around the world.
Bernie Waldron joined the Board in July, replacing Rupert Keeley
who resigned at the last Annual General Meeting. Bernie brings
significant international sales experience, primarily from his time
with IBM, and I am delighted to welcome him.
Outlook
With our proven technologies delivering strong revenue growth,
increasing penetration of flagship customers and partners around
the world and identified sales prospects substantially ahead of
this time last year, I believe that Digital Barriers continues to
have compelling growth prospects.
In the coming period we will focus on three key areas:
-- Continued strong revenue growth across our core product
families: Selling into flagship customers and partners in the UK,
Asia Pacific, North America and the Middle East, and opening up
sales channels into new markets such as Brazil is the primary focus
of the Group. We expect the market traction we are seeing for our
core technologies to underpin future revenue growth, and sales
prospects for these products now accounts for the majority of our
pipeline.
-- Positioning our technology into the commercial sector:
Opening up new markets for our IP, including telecoms and broader
commercial sectors, provides the Group with a significant
opportunity to leverage its IP across large multinational partners
where we can reach a much wider customer base for our products than
we could do directly. We believe this can be a significant addition
to the Group, adding to its traditional security and defence
customer base. This also brings the potential for annuity and
licensed revenue models, in addition to hardware and software
product sales.
-- Continued development of integrated solutions: We will
continue to bring technology and expertise from across the Group to
enhance and further differentiate our core product families. Much
of our ongoing technical development will include the integration
of multiple acquired technologies into solutions designed to
address market needs. We will also focus on continual innovation of
the world-class IP that underpins each of our core product
families, ensuring that each one retains its market-leading
position.
I believe that continued success in our UK home market, backed
up by strong growth in Asia Pacific, strong customer interest and
initial sales traction in the Middle East and the selection of our
core technologies by US customers, fully validates our strategy to
sell integrated world-class surveillance technologies to the
international defence and security sectors.
The combination of this strong sales momentum and the quality of
relationships we have built with key partners and customers around
the world, combined with our increasing portfolio of world-class
products and the strength of our engineering team, gives me
confidence in our ability to grow revenue significantly and drive
towards profitability. Our now proven business model and strategy
gives the board confidence in the growth prospects of the
Group.
Business review
Introduction
The last year has seen Digital Barriers transition from its
highly acquisitive phase to a defining period in which the
company's international growth strategy has been validated. This
was achieved by the strong sales traction of the company's three
established core product families - TVI, RDC and ThruVision - into
more than twenty countries outside the UK, including the US, the
Middle East and Asia Pacific.
At the Group level, revenues grew 22% to GBP22.9 million on a
pro forma basis. Growth in our Products Division was stronger at
34% (2012: 17%) and, within this, revenues from our core product
families, from which we expect most of our future growth, increased
by 67% on a pro forma basis. Our UK Services Division, with final
integration completed during the period, moved into healthy
profitability despite revenues remaining flat on the prior period.
Group Gross Profit margin strengthened to 42.8% (2012: 40.4%) with
our Products Division materially stronger than UK Services (47.9%
and 29.0% respectively). Continued investment in international
sales and marketing, and in the non-recurring costs of bringing RDC
to market and turning ThruVision around, resulted in adjusted loss
widening to GBP7.6 million (2012: GBP6.0 million).
Strategy
Our strategy is to provide advanced surveillance technologies to
governments, multinational corporations and system integrators in
the international defence, law enforcement, critical
infrastructure, transportation and natural resources sectors. We
specialise in delivering intelligent surveillance information from
remote, hostile and complex operating environments and in applying
intelligence as close as possible to the scene under surveillance.
We have acquired eleven technology businesses, which have been
integrated into a set of complementary product families. We have
also established a regional presence in Asia Pacific, North America
and the Middle East to engage directly with key customers and
partners.
Market review
Our assessment of the growth potential offered by the government
defence and security market remains unchanged. Global spending
remains strong and there are no signs that the anticipated
long-term sustained growth in spending is abating. Indeed,
continued regional instability in the Middle East and North Africa
in particular, together with continuing acts of terrorism in the US
and elsewhere, reinforce the need for governments to spend on a
range of security and rapid reaction defence tasks.
Digital Barriers has retained its focus on regions and countries
where economic conditions are favourable and propensity to buy
British security technology is high. In both the Middle East and
much of Asia, significant funds are available for security spending
now and in the long term. In addition, in newer potential markets
for the company, such as Brazil, spending on core security projects
is driven by these factors as well as specific events and local
trends.
While the public spending climate in the UK remains challenging,
the situation in the US deteriorated through the period. This has
resulted in the start of a budget sequestration process to cap the
spending of federal government agencies at materially lower levels.
Despite this, US federal budgets for defence and security
technology remain the largest in the world, with an on-going trend
towards greater usage of more commercially available technology of
the type that we offer.
Our strategy to date has been to focus on the international
government market. However, the broader commercial security market
continues to grow strongly and is less influenced by government
budgets. We have been very encouraged by the initial traction we
have established here, particularly in the telecoms sector, and
have plans to broaden our TVI product family to exploit the
potential this new market has to offer.
Technology
Overview
We have made substantial progress with our technology strategy
in the last year. During the period we tightened our focus onto
those core product families that offer us the greatest strategic
opportunity for growth, namely TVI, RDC and ThruVision. Each of
these technologies is highly disruptive; occupies a clearly
differentiated position in the marketplace; is scalable
internationally; and is built on class-leading intellectual
property (IP).
Beyond those technologies already under ownership, we identified
biometrics as an additional attractive segment of our overall
security market - in particular, we recognised that facial
recognition technology offered the greatest potential synergy with
our other core products. On this basis, we acquired Visimetrics in
January 2013 to gain access to its world-class facial recognition
product, OmniPerception.
With an enhanced focus on these core technologies, we have
invested significantly in extending our product range. We are doing
so to ensure that our products are attractive to a broader set of
customers and that they remain ahead of the competition. We have
supported this investment in product family development with sales
and marketing campaigns tightly focused on the unique selling
points of these products.
We have also concentrated on further differentiating our market
position by combining our technologies. The most compelling example
is that of our RDC unattended ground sensors and TriStar, our
military specification surveillance "hub" powered by TVI
technology. This has driven major success in the UK and has also
created new opportunities in the Middle East, Brazil and parts of
Asia.
In the broader commercial security market, we have identified
that the burgeoning "Machine to Machine" (M2M) sector in mobile
telecommunications offers a significant opportunity for the Group
and its TVI products. We have developed a TVI product specifically
for this sector, which has already been sold to SingTel as the
delivery platform for its new Video Surveillance as a Service
(VSaaS) offering. We are exploring further opportunities in the M2M
and broader telecoms sector.
We also identified products within our portfolio that are
capable of steady, on-going profitable growth ("mature products")
and those that are not ("non-strategic products"). We are working
on this latter small group to transfer the underlying intellectual
property into the core product families.
TVI
TVI is our world-class wireless transmission technology for live
video streaming. We have continued to generate significant interest
in TVI and have made sales across all our target regions. In the
UK, United States and Middle East for example, we have sold TVI
into major law enforcement agencies (LEAs) and specialist parts of
the military.
We have developed a number of new capabilities in the past year.
For example, with a GBP400,000 development contract from a major US
government agency, we have been able to develop this live video
streaming and distribution technology still further to meet the
specific needs of the law enforcement sector. This will result in a
high-definition version of TVI being available to the market later
in 2013. This year has also seen the launch of our software based
encoders for both Android and iOS platforms.
RDC
RDC is our Remote Detection and Classification ground sensor. We
have generated real customer excitement, especially in the border
control and force protection sectors, through deployments of this
technology in several parts of the world. RDC itself is a
class-leading product but when used as part of a surveillance
system with TVI video products, it provides a genuinely disruptive
capability to the defence and security market.
We launched the RDC product into the market in the autumn of
2012, and immediately beat more established ground sensor products
to win our largest contract to date, valued at GBP3.6m, for the
provision of an integrated unattended ground sensor solution for a
major UK customer. This win has added further impetus to
discussions with governments in all regions, giving us confidence
that in the coming year we will see significant growth.
ThruVision
ThruVision provides a passive standoff scanning capability for
concealed object detection, for example to identify weapons, drugs
or explosives hidden under clothing. This is a truly differentiated
product on the international market, with unique capabilities,
portability and standoff range.
Post the acquisition of ThruVision in early 2012, we relaunched
its main product with new features and at a new price point. This
led to a number of key contract awards: GBP300,000 to an existing
US customer for the detection of person-borne improvised explosive
devices (IEDs); GBP400,000 to a major Asia government customs
agency for passenger screening; and orders totalling GBP1,125,000
to a specialist partner working in the Middle East and Africa for
the protection of high-profile government locations. We sold more
than twice as many systems in the period than ThruVision had sold
in the year prior to its acquisition.
With referenceable sales now achieved in all our regions around
the world, and covering the border security, counter-IED,
high-profile building protection and loss prevention markets, we
enter the new period with a strong pipeline to build from.
OmniPerception
OmniPerception, acquired by Digital Barriers alongside its
parent company Visimetrics in January 2013, provides a highly
differentiated capability in the field of compliant and
non-compliant standoff face recognition and identify management. We
are at a relatively early stage in bringing these products to the
level of commercial maturity we require, but have already attracted
significant interest in this technology from customers in each of
our priority markets. Notably, we received an order for more than
GBP300,000 for OmniPerception to work alongside ThruVision systems
for a Middle East deployment.
International development
Export sales are a critical part of our growth strategy and we
have continued to invest in strengthening and broadening our
international sales force in Asia-Pacific, the US and the Middle
East, from hubs in Singapore, Washington DC and Dubai,
respectively. Fully integrated sales force management means that,
despite running a highly distributed sales force, identified sales
prospects are substantially stronger than this time last year.
Our strategy of focusing on flagship customers - typically key
government agencies - in each region continues to be successful in
supporting market entry. On the back of our work for London 2012,
and with substantial support from the UK Government's defence
export teams, we have also commenced a targeted market entry into
Brazil - which offers significant potential - and we are refining
our entry strategy for other potentially sizeable markets.
Asia Pacific
Of all our export regions, we have been operating in Asia
Pacific for the longest and our early focus on direct sales in
Singapore, Hong Kong and the Republic of Korea has generated
significant success in the period. Substantive trialling of RDC,
first in Korea, and more recently Australia, has been successful
and we have added local sales resource to both countries to build
momentum for the coming year.
We have also had major success with ThruVision in the region.
The GBP400,000 purchase of ThruVision equipment by a flagship
customs agency in Asia Pacific was the significant highlight, but
we are also actively pursuing other opportunities with customs and
border security agencies in the region, where contraband and drug
smuggling are major issues.
Asia Pacific has also been the first region in which we have
successfully exploited a mixed revenue model in the M2M market. The
contract with SingTel for the provision of video surveillance as a
solution, while important in its own right, provides a model for
other opportunities in this sector both in Asia and other
regions.
It has been a highly successful year in this region and we are
confident that we will continue this growth across an even broader
customer base next year.
United States
We achieved steady penetration of the US market in the period.
As our most mature technology, TVI was trialled very successfully
by a number of flagship government customers and this led to a
strategically important sale to a key agency to develop the next
generation TVI platform with support for high-definition video.
This gives us confidence that TVI is competitively well positioned
across the defence, homeland security and law enforcement areas of
the US government.
The US has been pivotal in the development of our ThruVision
capabilities. The joint development and testing with a major police
department of a next generation system for detecting concealed
weapons at even greater standoff ranges has been a major technical
success and resulted in wide press coverage. We expect to continue
developing this exciting capability.
The US government budget sequestration caused a number of
programmes of interest to us to be delayed materially, but we
remain well positioned for when new budgetary priorities are
established. Given the US remains the biggest single market in
which we operate, we have expanded our sales presence in our
Washington DC office.
Middle East
Our priorities in the Middle East remain the United Arab
Emirates (UAE), Qatar and the Kingdom of Saudi Arabia (KSA). We
have built a permanent presence in the region with the addition of
locally based specialist sales and technical staff in our Dubai
office.
The initial traction gained with law enforcement customers has
been built on in the past year. We have made strategically
significant initial TVI sales to flagship law enforcement customers
in three countries and have seen strong interest in RDC with a
number of trials on-going. In addition to the major partner sale of
ThruVision into the region, we have also generated significant
interest directly with flagship customers in the region around
airport, customs and VIP security.
We are confident that the foundations we have laid in building
relationships and carrying out trials with flagship customers in
the Middle East leave us well placed to make significant progress
in the region in the coming year.
Emerging Markets
In the past year we have carefully identified those new regions
that we believe offer the most long term potential for growth and
where the Digital Barriers technology portfolio would be most
relevant. The highest priority of these regions is Brazil, where we
have launched our market entry strategy in close co-ordination with
the Foreign Office and UKTI.
Early indications show that there is a large appetite for our
products among flagship government customers in Brazil and funded
programmes available. We have gained considerable early traction
with TVI and RDC. Indeed, we have already made our first sale of
TVI in Brazil to a flagship government customer in support of the
major sporting events to be held over the next few years in the
country. We see considerable potential for growth in this market
across our core technologies.
Operational review
Products Division
Our Products Division performed very strongly, with reported
revenues growing by 96% to GBP17.0 million (2012: GBP8.7 million)
and pro forma revenues growing by 34% to GBP16.6 million (2012:
GBP12.4 million). This performance was driven by solid export
progress and by some major successes in the UK. Within this, our
core product families - TVI, RDC and ThruVision - grew 67% to
GBP8.4 million on a pro forma basis.
At the divisional operating profit level, losses widened to
GBP1.5 million (2012: GBP0.9 million). This was due principally to
continued investment in getting RDC to market, turning ThruVision
around and investing more heavily in demonstration stock for our
international sales force, being offset by much more profitable
performance of our mature products.
Export
With our substantial investment in international sales and
marketing, export product revenues more than doubled to GBP6.7
million (2012: GBP3.3 million). This was lead by Asia Pacific but
included sales into 37 countries. We expect to see continued strong
growth of export sales moving forward.
UK
Against a backdrop of on-going budget pressure, UK product
revenues grew by 92% to GBP10.3 million (2012: GBP5.4 million).
This growth was characterised by steady, underlying growth of
run-rate revenues streams that were in place in businesses prior to
our acquisition, supplemented by a number of very substantial
contracts wins.
We were delighted with our major UK contract wins during the
period, including the use of our technology for high-profile event
security in London. This has given us immediate credibility in
Brazil and Qatar, where we are already involved in customer trials
and demonstrations.
We expect continued strong progress in the UK market for our
Products Division.
Services Division
Our Services Division operates exclusively in the UK market and
installs high-grade security systems, including Digital Barriers
products, into some of the most highly secure sites in the country.
Against a backdrop of on-going budget pressure, the Division
delivered headline revenues of GBP6.3 million, in line with the
prior year. Whilst maintaining our market position, we have also
concentrated on driving efficiencies, resulting in divisional
operating profit of GBP0.7 million (2012: GBP0.1 million).
The Division successfully completed a major contract for the
London 2012 Olympics. This both built the brand and helped secure
further new client wins in the period. Despite continuing budget
pressure, we believe the Division can deliver modest, profitable
growth moving forward.
Overheads
Continued heavy investment in international sales and marketing
was primarily responsible for our increased spending on overheads
of GBP6.9 million (2012: GBP5.3 million). This increase included
expanding regional sales teams in Middle East and Asia Pacific,
expanding our pre-sales team, exhibiting at a number of key
regional defence and security events and greater travel costs. We
expect these investments to continue, although increasing at a
level materially below our revenue growth.
Performance indicators
We monitor a number of metrics, both financial and
non-financial, on a monthly basis. The most important of these are
as follows:
-- Revenue: GBP23.3 million for the year under review (2012: GBP15.0 million);
-- Pro forma organic revenue growth: 22% for the year under
review, growing from GBP18.7 million to GBP22.9 million (2012:
24%);
-- International revenues: 29% (2012: 22%);
-- Gross margin: 42.8% for the year under review (2012: 40.4%);
-- Sales & Marketing costs: GBP3.8 million for the year (2012: GBP2.5 million);
-- Corporate overheads: GBP3.0 million for the year (2012: GBP2.8 million);
-- Number of employees: 212 at 31 March 2013 (2012: 183); and
-- Cash: GBP5.5 million at 31 March 2013 (2012: GBP15.3 million);
The Board is satisfied with the status of the above performance
indicators given the current stage of the Group's development.
Financial review
For the year ended 31 March 2013, Digital Barriers delivered
revenue of GBP23.3 million (2012: GBP15.0 million) generating an
adjusted loss before tax of GBP7.6 million (2012 loss: GBP6.0
million) and adjusted loss per share of 16.45 pence (2012 loss:
12.83 pence). On an unadjusted basis, the loss before tax was
GBP10.8 million (2012 loss: GBP4.1 million) and loss per share was
21.78 pence (2012 loss: 8.11 pence).
Revenue and margins
Of the GBP23.3 million of revenue in year, GBP22.9 million was
delivered from existing product and service revenue streams, and
GBP0.4 million was contributed by acquisitions in the period.
The increase in revenue over the prior period was GBP8.3 million
(55%). On a pro forma basis (assuming all prior year acquisitions
occurred on 1 April 2011 and excluding all current year
acquisitions) revenue in the year was GBP22.9 million, an increase
of GBP4.2 million (22%) on the prior year.
The only significant acquisition in the year was that of
Visimetrics (UK) Limited, which took place on 4 January 2013.
Results by division are discussed below, with pro forma revenues
split out for clarity:
Reported Pro forma Reported Pro forma
2013 2013 2012 2012
Revenue GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- --------- -------- ---------
Services 6,289 6,289 6,324 6,324
------------------ -------- --------- -------- ---------
Products:
Core technologies
(i) 8,421 8,421 3,248 5,039
Mature (ii) 4,705 4,288 3,441 3,662
Non-strategic
(iii) 3,857 3,857 1,983 3,655
------------------ -------- --------- -------- ---------
16,983 16,566 8,672 12,356
------------------ -------- --------- -------- ---------
23,272 22,855 14,996 18,680
------------------ -------- --------- -------- ---------
(i) Core technologies: greatest strategic opportunity for growth
(ii) Mature technologies: established in the market and capable
of steady on-going profitable growth
(iii) Non-strategic technologies: underlying intellectual
property being transferred into Core product families
Revenue from the services division remained flat on the prior
year at GBP6.3 million, reflecting a year of client account
consolidation whilst driving efficiencies, resulting in a GBP0.6
million (414%) increase in segmental operating profit to GBP0.7
million.
All of the increase in Group revenue is from the products
division. With a much lower level of acquisition activity than in
previous years, revenue growth has been primarily organic and most
significantly from our Core technologies, which alone have
delivered pro forma revenue of GBP8.4 million, an increase of
GBP3.4 million (67%) on the prior year. By contrast, our Mature
products grew by GBP0.6 million (17%)
to GBP4.3 million, and our non-strategic products grew by GBP0.2
million (6%) to GBP3.9 million, all on a pro forma basis.
Services Products Total
2013 2013 2013
GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- --------
Revenue 6,289 16,983 23,272
Segment profit/(loss) 735 (1,455) (720)
Corporate overheads (6,886)
--------------------------- -------- -------- --------
Adjusted Group operating
loss (7,606)
--------------------------- -------- -------- --------
Interest (31)
--------------------------- -------- -------- --------
Adjusted Group loss before
tax (7,637)
--------------------------- -------- -------- --------
Revenue in the year was split 73%: 27% (2012: 58%: 42%) between
products and services respectively. The continued trend towards
products reflects the on-going strategic focus of the Group and has
continued to drive the improvement in gross margin, increasing from
40.4% to 42.8%.
The services gross margin increased to 29.0% in the year (2012:
20.8%), reflecting the efficiency gains made and a higher
proportion of more profitable installation and maintenance work
compared to the prior year. The products gross margin was 47.9%
(2012: 54.7%). The decrease was driven by the significant progress
made with ThruVision which currently trades at a lower gross margin
than our other core products, lower margin third party product
included within some of our solution sales, and some modest
discounting across all of our products to drive international
market traction.
Adjusted loss
An adjusted loss before tax figure is presented as the Directors
believe that this is a more relevant measure of the Group's
underlying performance. For the year this was GBP7.6 million (2012:
GBP6.0 million) and is detailed in the table below:
2013 2012
GBP'000 GBP'000
-------------------------------------- -------- --------
Loss before tax (10,756) (4,102)
Add back:
Amortisation of intangibles initially
recognised on acquisition 2,029 2,024
Acquisition costs 369 754
Adjustments to deferred consideration
(i) (1,384) (5,004)
Gain on bargain purchase - (152)
Reorganisation costs (ii) 769 510
Impairment of intangibles (iii) 1,336 -
Adjusted loss before tax (7,637) (5,970)
-------------------------------------- -------- --------
(i) Relates to the reassessment of the likely deferred
consideration payable for Zimiti and the release of deferred
consideration payable against the LMW and E-Tech acquisitions,
partly offset by the unwind of discount against deferred
consideration.
(ii) Relates to the rationalisation of the organisational and
geographical design, information systems and support functions
within both the services and products divisions. As the expenditure
relates to transforming the divisions for the future these costs
are not directly related to current operations.
(iii) Relates to the investments in Keeneo, Waterfall and
Codestuff, the performance of which has been below the level used
to determine the intangible assets initially recognised on
acquisition.
The adjusted loss in the year has been driven by three key
trends:
-- continued and increasing investment in sales and marketing
required to drive international expansion;
-- on-going investment in core technologies, specifically
bringing RDC to market and turning around ThruVision; and
-- higher depreciation charges as a result of increased
investment in demonstration stock to drive the international sales
pipeline and one-off write downs on fixed assets within acquired
businesses.
Taking into account the significant depreciation charge in the
year of GBP0.8 million (2012: GBP0.2 million), the Group's
underlying adjusted loss before tax and depreciation was GBP6.8
million (2012: GBP5.8 million).
Other corporate overheads have only increased modestly during
the year, and the Group continues to reduce unnecessary
administration costs and overhead where appropriate, as reflected
in the level of exceptional reorganisation costs.
Central overheads are broken down as follows:
2013 2012
GBP'000 GBP'000
----------------------------------- -------- --------
Sales and marketing 3,824 2,498
----------------------------------- -------- --------
Other corporate overheads:
Board and Plc operating costs 1,628 1,484
Operations, finance and facilities 1,098 1,177
LTIP charge 336 159
----------------------------------- -------- --------
3,062 2,820
----------------------------------- -------- --------
Total 6,886 5,318
----------------------------------- -------- --------
Taxation
As a result of losses acquired through acquisitions and central
overheads we do not expect to pay the full rate of UK corporation
tax for a number of years. The tax credit for the period of GBP0.8
million (2012: GBP0.6 million) principally relates to R&D tax
credits.
At 31 March 2013, the Group had unutilised tax losses carried
forward of approximately GBP26.4 million (2012: GBP19.6 million).
Given the varying degrees of uncertainty as to the timescale of
utilisation of these losses, the Group has not recognised GBP5.6
million (2012: GBP3.5 million) of potential deferred tax assets
associated with GBP23.7 million (2012: GBP14.8 million) of these
losses.
At 31 March 2013, the Group's net deferred tax liability stood
at GBP0.4 million (2012: GBP0.4 million), relating to acquired
intangible assets of GBP1.8 million (2012: GBP1.6 million), offset
by GBP1.4 million (2012: GBP1.2 million) relating to tax
losses.
Loss per share
The reported Loss per share is 21.78 pence (2012 loss: 8.11
pence). The adjusted Loss per share is 16.45 pence (2012 loss:
12.83 pence).
Cash and treasury
The Group ended the year with a cash balance of GBP5.5 million
(2012: GBP15.3 million).
During the course of the year GBP3.3 million was paid to acquire
new businesses, with an additional GBP0.4 million in associated
costs, and a further GBP0.8 million was paid in deferred
consideration in respect of current and prior period acquisitions.
GBP13.8 million funded the Group's operating loss and working
capital requirements, and the remaining cash outflow during the
year of GBP1.5 million was invested in fixed assets including
demonstration stock. In January 2013 a further GBP10.0 million in
cash was raised through the issue of new Ordinary Shares, net of
placing costs of GBP0.4 million.
Aside from funding the Group's operating loss during the year,
the cash outflow represents the significant investment made in
demonstration stock to drive interest and growth in the sale of the
Group's products, and the material amount of sales made at the end
of the financial year. The latter is reflected in the high level of
receivables as at 31 March 2013, which are expected to unwind into
an improved cash position in the early months of the next financial
year.
The maximum deferred consideration payable in the future in
respect of acquisitions made to date is GBP8.6 million, of which up
to GBP5.4 million may be satisfied through the issue of new
Ordinary Shares. As at 31 March 2013, GBP0.9 million has been
provided for within the accounts. The Directors are of the opinion
that any deferred consideration payments falling due will be
largely self-financing, and so view the majority of the GBP5.5
million of cash held at the end of the year as being available to
the Group to fund future losses and working capital.
Financing costs included a charge of GBP0.1 million in respect
of the discounting of the deferred consideration for Zimiti
Limited, Stryker Communications Limited, LMW, E-Tech and
Visimetrics (UK) Limited.
Dividends
The Board is not recommending the payment of a dividend (2012:
GBPnil).
Consolidated income statement
for the year ended 31 March 2013
Year ended Year ended
31 March 2013 31 March 2012
GBP'000 GBP'000
---------------------------------------- -------------- --------------
Revenue 23,272 14,996
Cost of sales (13,322) (8,939)
---------------------------------------- -------------- --------------
Gross profit 9,950 6,057
Administration costs (20,823) (15,782)
Other income 1,484 5,828
Other costs (1,336) -
---------------------------------------- -------------- --------------
Operating loss (10,725) (3,897)
Finance revenue 69 160
Finance costs (100) (365)
---------------------------------------- -------------- --------------
Loss before tax (10,756) (4,102)
Income Tax 840 561
---------------------------------------- -------------- --------------
Loss after tax attributable to owners
of the parent (9,916) (3,541)
---------------------------------------- -------------- --------------
Adjusted loss:
Loss before tax (10,756) (4,102)
Amortisation of intangibles initially
recognised on acquisition 2,029 2,024
Acquisition costs 369 754
Adjustments to deferred consideration (1,384) (5,004)
Gain on bargain purchase - (152)
Reorganisation costs 769 510
Impairment of intangibles 1,336 -
---------------------------------------- -------------- --------------
Adjusted loss before tax for the period (7,637) (5,970)
---------------------------------------- -------------- --------------
(Loss) per share - basic (21.78p) (8.11p)
(Loss) per share - diluted (21.78p) (8.11p)
(Loss) per share - adjusted (16.45p) (12.83p)
(Loss) per share - adjusted diluted (16.45p) (12.83p)
---------------------------------------- -------------- --------------
The results for the year and the prior period are derived from
continuing activities.
Consolidated statement of comprehensive income
for the year ended 31 March 2013
Year ended Year ended
31 March 2013 31 March 2012
GBP'000 GBP'000
====================================== ============== ==============
Loss for the period (9,916) (3,541)
Exchange differences on retranslation
of foreign operations 25 (246)
-------------------------------------- -------------- --------------
Total comprehensive loss attributable
to owners of the parent (9,891) (3,787)
-------------------------------------- -------------- --------------
Consolidated balance sheet
at 31 March 2013
31 March 2013 31 March 2012
Note GBP'000 GBP'000
------------------------------- ---- ------------- -------------
Assets
Non-current assets
Property, plant and equipment 1,370 892
Goodwill 24,647 21,716
Other intangible assets 5,828 8,150
------------------------------- ---- ------------- -------------
31,845 30,758
Current assets
Inventories 1,779 1,788
Trade and other receivables 4 13,239 6,760
Current tax recoverable 972 655
Cash and cash equivalents 5,544 15,289
------------------------------- ---- ------------- -------------
21,534 24,492
------------------------------- ---- ------------- -------------
Total assets 53,379 55,250
------------------------------- ---- ------------- -------------
Equity and liabilities
Attributable to equity holders
of the Parent
Equity share capital 510 437
Share premium 57,989 48,012
Capital redemption reserve 4,735 4,735
Merger reserve 455 348
Translation reserve (221) (246)
Other reserves (307) (307)
Retained earnings (17,268) (7,687)
------------------------------- ---- ------------- -------------
Total equity 45,893 45,292
Non-current liabilities
Deferred tax liabilities 363 414
Financial liabilities 6 202 1,000
------------------------------- ---- ------------- -------------
565 1,414
Current liabilities
Trade and other payables 5 6,038 6,794
Financial liabilities 6 883 1,750
------------------------------- ---- ------------- -------------
6,921 8,544
------------------------------- ---- ------------- -------------
Total liabilities 7,486 9,958
------------------------------- ---- ------------- -------------
Total equity and liabilities 53,379 55,250
------------------------------- ---- ------------- -------------
Consolidated statement of changes in equity
for the year ended 31 March 2013
Share Capital Profit
Share premium redemption Merger Translation Other and loss Total
capital account reserve reserve reserve reserves reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- -------- ----------- -------- ----------- --------- --------- --------
At 31 March 2011 436 48,012 4,735 - - (307) (4,305) 48,571
------------------------------ -------- -------- ----------- -------- ----------- --------- --------- --------
Issue of shares on acquisition
of Keeneo 1 - - 348 - - - 349
Share-based payment
credit - - - - - - 159 159
Loss for the year - - - - - - (3,541) (3,541)
Other comprehensive
loss - - - - (246) - - (246)
------------------------------ -------- -------- ----------- -------- ----------- --------- --------- --------
Total comprehensive
loss for the year - - - - (246) - (3,541) (3,787)
------------------------------ -------- -------- ----------- -------- ----------- --------- --------- --------
At 31 March 2012 437 48,012 4,735 348 (246) (307) (7,687) 45,292
------------------------------ -------- -------- ----------- -------- ----------- --------- --------- --------
Issue of shares against
Keeneo deferred consideration 1 - - 106 - - - 107
Share issue costs - (351) - - - - - (351)
Share placement 72 10,328 - - - - - 10,400
Share-based payment
credit - - - - - - 336 336
Loss for the year - - - - - - (9,916) (9,916)
Other comprehensive
loss - - - - 25 - - 25
------------------------------ -------- -------- ----------- -------- ----------- --------- --------- --------
Total comprehensive
loss for the year - - - - 25 - (9,916) (9,891)
------------------------------ -------- -------- ----------- -------- ----------- --------- --------- --------
At 31 March 2013 510 57,989 4,735 454 (221) (307) (17,267) 45,893
------------------------------ -------- -------- ----------- -------- ----------- --------- --------- --------
Consolidated statement of cash flows
for the year ended 31 March 2013
Year ended Year ended
31 March 2013 31 March 2012
GBP'000 GBP'000
------------------------------------------------- -------------- --------------
Operating activities
Loss before tax (10,756) (4,102)
Non-cash adjustment to reconcile loss
before tax to net cash flows
Depreciation of property, plant and
equipment 771 193
Amortisation of intangible assets 2,102 2,056
Impairment of intangible assets 1,336 -
Share-based payment transaction expense 336 159
Gain on bargain purchase - (152)
Release of deferred consideration (678) (4,021)
Reassessment of deferred consideration (805) (1,693)
Disposal of fixed assets 226 5
Finance income (69) (160)
Finance costs 100 365
Working capital adjustments:
Increase in trade and other receivables (6,096) (2,896)
Increase in inventories 351 (372)
(Decrease)/Increase in trade and other
payables (1,163) 526
------------------------------------------------- -------------- --------------
Cash utilised in operations (14,345) (10,092)
Income tax received / (paid) 275 (34)
------------------------------------------------- -------------- --------------
Net cash flow from operating activities (14,070) (10,126)
------------------------------------------------- -------------- --------------
Investing activities
Purchase of property, plant and equipment (1,453) (443)
Expenditure on intangible assets (97) (563)
Acquisition of subsidiaries (3,349) (5,249)
Payment of deferred consideration (822) (2,034)
Acquisition of cash and cash equivalents
of subsidiaries (41) 31
Cash and cash equivalents arising on
pooling of interest transaction - -
Interest received 69 160
------------------------------------------------- -------------- --------------
Net cash flow utilised in investing activities (5,693) (8,098)
------------------------------------------------- -------------- --------------
Financing activities
Proceeds from issue of shares 10,400 -
Share issue costs (351) -
Interest paid - (8)
------------------------------------------------- -------------- --------------
Net cash flow from financing activities 10,049 (8)
------------------------------------------------- -------------- --------------
Net (decrease)/increase in cash and cash
equivalents (9,714) (18,232)
Cash and cash equivalents at beginning
of period 15,289 33,524
Effect of foreign exchange rate changes
on cash and cash equivalents (31) (3)
------------------------------------------------- -------------- --------------
Cash and cash equivalents at 31 March 5,544 15,289
------------------------------------------------- -------------- --------------
Notes to the financial information
1. Accounting policies
Basis of preparation
The preliminary results of the year 31 March 2013 have been
extracted from audited accounts which have not yet been delivered
to the Registrar of Companies. The Financial Statements set out in
this announcement do not constitute statutory accounts for the year
ended 31 March 2013. The report of the auditors on the statutory
accounts for the year ended 31 March 2013 was unqualified and did
not contain a statement under Section 498 of the Companies Act
2006. The Financial Statements for the year ended 31 March 2013
included in this announcement were authorised for issue in
accordance with a resolution of the Board of Directors on 28 May
2013.
Subsidiary undertakings are those entities controlled directly
or indirectly by the Company. Control arises when the Group has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. Subsidiaries are
consolidated from the date of their acquisition, being the date on
which the Group obtains control, and continue to be consolidated
until the date that such control ceases. Subsidiaries are
consolidated using the Group's accounting policies. Business
combinations are accounted for using the acquisition method of
accounting except for the acquisition of Digital Barriers Services
Limited by Digital Barriers plc which has been accounted for using
the pooling method. All inter-company balances and transactions,
including unrealised profits arising from them, are eliminated on
consolidation.
The Company is a limited liability company incorporated and
domiciled in England & Wales and whose shares are quoted on
AIM, a market operated by The London Stock Exchange.
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union as they apply to the
financial statements of the Group for the year ended 31 March 2013
and applied in accordance with the Companies Act 2006.
2. Adjusted loss before tax
An adjusted loss before tax measure has been presented as the
Directors believe that this is a more relevant measure of the
Group's underlying performance. Adjusted loss is not defined under
IFRS and has been shown as the Directors consider this to be
helpful for a better understanding of the performance of the
Group's underlying business. It may not be comparable with
similarly titled measurements reported by other companies and is
not intended to be a substitute for, or superior to, IFRS measures
of profit. The net adjustments to loss before tax are summarised
below:
2013 2012
GBP'000 GBP'000
------------------------------------------------- -------- --------
Amortisation of intangibles initially recognised
on acquisition 2,029 2,024
Acquisition costs 369 754
Adjustments to deferred consideration (i) (ii) (1,384) (5,004)
Gain on bargain purchase (iii) - (152)
Impairment of intangible assets (iv) 1,336 -
Reorganisation costs (v) 769 510
------------------------------------------------- -------- --------
Total adjustments 3,119 (1,868)
------------------------------------------------- -------- --------
(i) Adjustments to deferred consideration in the current year
comprise releases of GBP678,000 and reassessments of GBP805,000
partly offset by the unwind of discount on deferred consideration
balances of GBP99,000. In relation to the LMW acquisition deferred
consideration of GBP60,000 was paid in the year and the remaining
balance of GBP30,000 was released. An interim time-constrained
financial target was not met in relation to the Zimiti acquisition,
resulting in the release of GBP617,000 of deferred consideration;
the remaining balance held in respect of Zimiti has been reassessed
and reduced by GBP805,000 to GBP253,000. In relation to the E-Tech
acquisition deferred consideration of GBP12,000 was paid in the
year with a further GBP188,000 paid after year end in April 2013;
the remaining balance of GBP31,000 was released. The releases and
reassessments of deferred consideration totalling GBP1,484,000 have
been separately disclosed within Other Income in the Consolidated
Income Statement.
(ii) Adjustments to deferred consideration in the prior year
comprise releases of GBP3,986,000 and reassessments of GBP1,693,000
partly offset by the unwind of discount on deferred consideration
balances of GBP357,000 and legal and other fees associated with
settling certain of the earn-outs of GBP318,000. GBP669,000 was
paid in cash in full settlement of the Waterfall earn-out
considerations and so the balance of the deferred consideration
held has been released to the Other Income line within the
Consolidated Income Statement. After the payment of GBP200,000 for
excess working capital, no further deferred consideration was paid
in relation to the Essential Viewing earn-out considerations and so
the full balance of the deferred consideration has been released to
the Other Income line within the Consolidated Income Statement.
GBP315,000 was paid in cash in the year and a further GBP107,000
was issued in shares after year end in full settlement of the
Keeneo earn-out considerations, and the balance of the deferred
consideration held has been released to the Other Income line
within the Consolidated Income Statement. The undiscounted deferred
consideration in respect of Zimiti has been reassessed as at 31
March 2012 to be GBP1,720,000.
(iii) The gain on bargain purchase relates to the acquisition of
ThruVision, and has been recognised in the Other income line within
the income statement.
(iv) The performance of the Keeneo, Waterfall and Codestuff
entities within the products operating segment have been below the
level used to determine the intangible assets initially recognised
on acquisition. The carrying value of the intangible assets has
been re-evaluated using a value in use model, with discount rates
of between 10.8% and 11.7%. As a result the intangible assets of
each entity have been impaired by GBP577,000, GBP630,000 and
GBP129,000 respectively. The total impairment of GBP1,336,000 has
been separately disclosed within Other Costs in the Consolidated
Income Statement.
(v) Reorganisation costs relate to the rationalisation of the
organisational and geographical design, information systems and
support functions within both the services and products divisions.
As the expenditure relates to transforming the divisions for the
future these costs are not directly related to current
operations.
3. Loss per share
Unadjusted loss per share
Weighted Weighted
average average
number number
Loss after of Loss per Loss after of Loss per
taxation shares share taxation shares share
2013 2013 2013 2012 2012 2012
GBP'000 No. Pence GBP'000 No. Pence
----------------------- ---------- ---------- -------- ---------- ---------- --------
Basic loss per share (9,916) 45,530,712 (21.78) (3,541) 43,660,670 (8.11)
----------------------- ---------- ---------- -------- ---------- ---------- --------
Diluted loss per share (9,916) 45,530,712 (21.78) (3,541) 43,660,670 (8.11)
----------------------- ---------- ---------- -------- ---------- ---------- --------
Adjusted loss per share
Weighted Weighted
average average
number number
Loss after of Loss per Loss after of Loss per
taxation shares share taxation shares share
2013 2013 2013 2012 2012 2012
GBP'000 No. Pence GBP'000 No. Pence
-------------------------------------- ---------- ---------- -------- ---------- ---------- --------
Loss attributable to ordinary
shareholders (9,916) 45,530,712 (21.78) (3,541) 43,660,670 (8.11)
Add back:
Amortisation of acquired intangible
assets, net of tax 1,658 - 3.64 1,833 - 4.20
IPO, Placing costs and acquisition
costs 369 - 0.81 754 - 1.72
Adjustments to deferred consideration (1,384) - (3.04) (5,004) - (11.46)
Gain on bargain purchase - - - (152) - (0.35)
Reorganisation costs 769 - 1.69 510 - 1.17
Impairment of acquired intangibles 1,015 - 2.23 - - -
-------------------------------------- ---------- ---------- -------- ---------- ---------- --------
Basic adjusted loss per share (7,489) 45,530,712 (16.45) (5,600) 43,660,670 (12.83)
-------------------------------------- ---------- ---------- -------- ---------- ---------- --------
Diluted adjusted loss per
share (7,489) 45,530,712 (16.45) (5,600) 43,660,670 (12.83)
-------------------------------------- ---------- ---------- -------- ---------- ---------- --------
The Directors consider that adjusted loss per share better
reflects the underlying performance of the Group.
The inclusion of potential Ordinary Shares arising from LTIPs
and Incentive Shares would be anti-dilutive. Basic and diluted loss
per share has therefore been calculated using the same weighted
number of shares. If the Incentive Shares had become convertible on
31 March 2013 and based on the share price of GBP1.850 (2012:
GBP1.815) on that day, 1,540,401 (2012: 1,542,545) ordinary shares
would have been issued in respect of the Incentive Share
conversion. Full details as to the basis of calculation is given in
the Admission Document available on the Company's website. The
Incentive Shares will immediately vest on change of control of the
Company.
The weighted average number of shares excludes any shares held
by employee share ownership plan (ESOP) trusts, which are treated
as cancelled.
4. Trade and other receivables
Gross Provision Gross Provision
carrying for Net carrying carrying for Net carrying
amounts impairment amounts amounts impairment amounts
2013 2013 2013 2012 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- ----------- ------------ --------- ----------- ------------
Trade receivables 9,499 (34) 9,465 6,074 (118) 5,956
Prepayments and accrued
income 2,103 - 2,103 643 - 643
Amounts recoverable
on contracts 1,621 - 1,621 - - -
Other receivables 50 - 50 161 - 161
------------------------ --------- ----------- ------------ --------- ----------- ------------
13,273 (34) 13,239 6,878 (118) 6,760
------------------------ --------- ----------- ------------ --------- ----------- ------------
5. Trade and other payables
2013 2012
GBP'000 GBP'000
-------------------------------- -------- --------
Current
Trade payables 3,892 2,807
Accruals 887 2,753
Payments received on account 190 275
Social security and other taxes 861 835
Other payables 208 124
-------------------------------- -------- --------
6,038 6,794
-------------------------------- -------- --------
6. Financial liabilities
2013 2012
GBP'000 GBP'000
----------------------- -------- --------
Current
Incentive Shares 218 218
Deferred consideration 665 1,532
----------------------- -------- --------
883 1,750
----------------------- -------- --------
Non-current
----------------------- -------- --------
Deferred consideration 202 1,000
----------------------- -------- --------
7. Business combinations
Business combinations in the year ended 31 March 2013
The Group has made two acquisitions during the year, each of
which the Board believes has a product set and technology
capabilities that are complementary to those already offered by the
Group and which will expand the solutions the Group can bring to
its customers. These acquisitions were all made into the Group's
products division.
e-Tech
On 23 April 2012, the Group acquired the complete product set
and intellectual property, along with certain customer contracts,
of Enterprise Technologies (UK) Limited ('E-Tech'). E-Tech's
exceptionally skilled staff have backgrounds in technical
surveillance, military and commercial communications technologies
across the defence and security sectors. These employees have now
joined the Group under the terms of the acquisition. Together with
their very highly regarded, and complementary to the Group,
technology capabilities, they are expected to expand the range of
solutions the Group can offer to its customers. E-Tech is part of
the Group's products division.
Visimetrics
On 4 January 2013, the Group acquired 100% of the voting equity
interests in Visimetrics (UK) Limited ('Visi') including its
subsidiary OmniPerception Limited ('Omni'). Founded in 1996, Visi
develops and manufactures high-performance digital video recording,
storage and management systems for video surveillance systems. Its
customers include law enforcement, criminal justice, defence and
other public sector organisations. Its subsidiary Omni, with whom
Visi merged in April 2012, is an industry leader in the design and
development of facial recognition video systems and advanced image
processing systems.
Purchase consideration
The purchase consideration for each acquisition was as
follows:
e-Tech Visi Total
GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- --------
Cash consideration 149 3,200 3,349
Discounted fair value of deferred consideration 227 421 648
-------------------------------------------------- -------- -------- --------
Total consideration 376 3,621 3,997
-------------------------------------------------- -------- -------- --------
Pre-tax cost of debt 5.9% 6.0%
Undiscounted fair value of deferred consideration 231 457
-------------------------------------------------- -------- -------- --------
In accordance with IFRS 3R the Directors have assessed the
undiscounted fair value of deferred consideration payable for each
acquisition as stated above, based on a probability weighted
average of expected cash flows. The discounted fair values of
deferred consideration payable have been calculated from the
undiscounted amounts using the pre-tax cost of debt as stated
above.
The e-Tech initial cash consideration paid on completion was
GBP149,000. Based on sales of E-Tech products by Digital Barriers
between completion and 31 March 2013, further deferred
consideration of GBP200,000 is payable in cash.
The Visi maximum consideration is GBP8.0 million payable in cash
and new Ordinary Shares at the Group's discretion. Initial cash
consideration of GBP3.3 million was paid less debt and working
capital adjustments of GBP0.1 million. Deferred consideration of up
to GBP4.7 million is payable over the period from completion to 31
December 2014, subject to revenue and profit targets. Up to GBP3.5
million of the deferred consideration may be satisfied through the
issue of new Ordinary Shares, with the balance satisfied in cash.
Up to GBP2.35 million of the deferred consideration is based on
revenue and profit targets for the year ended 31 December 2013 and
a further GBP2.35 million on the year ended 31 December 2014.
Total acquisition costs of GBP369,000 (2012: GBP754,000) were
incurred and recorded within the administration costs line in the
income statement.
As at 31 March 2013, the maximum deferred consideration payable
in the future is GBP8.6 million (2012: GBP9.7 million), up to
GBP5.4 million (2012: GBP4.3 million) of which may be satisfied
through the issue of new Ordinary Shares, and the remainder
satisfied in cash. The movement from the prior year is due to the
completion of the full earn-out periods for the Keeneo, Stryker and
LMW acquisitions and the partial completion of the earn-out for the
Zimiti acquisition, partly offset by the acquisitions of E-Tech and
Visimetrics in the current year.
8. Issued share capital
On 5 August 2011 the Company issued 195,460 GBP0.01 Ordinary
Shares on the acquisition of Keeneo.
On 3 May 2012 the Company issued 59,216 GBP0.01 Ordinary Shares
as deferred consideration in relation to the acquisition of
Keeneo.
On 2 January 2013 the Company issued 7,172,414 GBP0.01 Ordinary
Shares for total cash consideration of GBP10,400,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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