TIDMDGB
RNS Number : 8915Q
Digital Barriers plc
23 June 2015
23 June 2015
Digital Barriers plc
("Digital Barriers" or the "Group")
Preliminary Results for the year ended 31 March 2015
The Board of Digital Barriers plc (AIM: DGB), the specialist
provider of advanced surveillance technologies to the security and
defence sectors, announces audited results for the year ended 31
March 2015.
Key Highlights
-- Performance for the year in line with February 2015 guidance
-- Group revenues of GBP19.4 million (2014: GBP19.0 million) and
adjusted losses of (GBP10.5 million) (2014: GBP12.0 million)
-- International revenues increased 42% and are now 37% of total revenues (2014: 26%)
-- Transition from selling discrete products to fully integrated solutions
-- First TVI and ISP solution sales into critical
infrastructure, transportation, construction, defence, security and
law enforcement
-- Most successful year yet for the Group's ThruVision product and UK Services business
-- Zak Doffman appointed Chief Executive Officer with Tom Black
continuing as Chairman of the Board and more experienced regional
sales leadership brought into the Group
-- GBP7.1 million (net of placing costs) raised through new share issue in January 2015
Commenting on the results Zak Doffman, CEO of Digital Barriers,
said:
"This has been a pivotal year for Digital Barriers. We have
firmly established our portfolio of world-class technical
solutions, significantly strengthened our regional leadership and
broadened our addressable market. The strength of our international
sales growth, spearheaded by Asia Pacific, gives a clear indication
of the compelling opportunity for us to sell our technology to
flagship customers around the world.
Now our focus is on delivering stronger progress in the US and
Middle East, continued success in Asia Pacific, and a renewed
impetus in the UK and Europe where we are securing new strategic
government and commercial accounts. We also have the potential to
accelerate our growth through key industry partnerships, OEM
channels to market and our Cloud Video Platform, benefiting from
the intensifying global appetite for wireless network video and
advanced surveillance technologies."
For further information,
please contact:
Digital Barriers plc Tel: 0203 553 5888
Zak Doffman, Chief Executive
Officer
Sharon Cooper, Chief Financial
Officer
Investec Investment Banking Tel: 020 7597 5970
Andrew Pinder / Dominic
Emery
FTI Consulting Tel: 020 3727 1000
Edward Bridges / Rob Mindell
/ Harry Staight
About Digital Barriers
Digital Barriers provides advanced surveillance technologies to
the international homeland security and defence markets,
specialising in 'edge-intelligent' solutions that are designed for
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. Our surveillance
technologies have been successfully proven on some of the most
demanding operational and environmental deployments around the
world.
www.digitalbarriers.com
Chairman's Statement
The Group's results were broadly flat on the prior year, but we
made significant strategic progress on a number of fronts during
the period. Although revenues were only modestly ahead of last year
at GBP19.4 million (2014: GBP19.0 million), that masks a very
strong year for our international revenues which were 42% ahead of
the prior year and now account for around 37% of our total revenues
and 59% of our product revenues. International growth would have
been even stronger except for two material contracts which were
delayed but are expected to close this current year.
Asia Pacific performed particularly well during the period,
doubling its revenues from the prior year with key contract wins in
Singapore, Japan, Malaysia and Indonesia for our core TVI and ISP
solutions. We also secured a notable follow-on order for our
ThruVision product in Hong Kong towards the end of the period,
completing the best ever year of sales for this technology. The US
and Middle East regions were more challenging, although we did
deliver a $1.5 million TVI video surveillance hardware contract
into a major US Federal agency. Longer than anticipated sales
cycles, including funding delays for a large wireless video
programme in the US, had an effect on key contracts expected late
in the period and these are now expected to contribute positively
this year.
In reviewing our international performance during the year, we
decided to improve the quality of sales leadership in both the US
and Middle East regions, bringing much stronger access to senior
customers across a wide range of government and commercial
organisations.
Our strong trading performance in Asia Pacific has continued
since the period-end, and includes our first ISP solution sale into
a new and very significant Ministry of Defence customer in the
region for integrated maritime border protection. This was secured
with strong UK government support and constitutes the first part of
one of the delayed contracts referenced above. In the US we have
seen a positive impact from the new leadership now in place, with
strong sales momentum since the period-end. We now have material
contract discussions ongoing with several federal agencies for
procurements during the current financial year, including the
second of the delayed contracts referenced above and new
requirements for our technology. We have also seen initial
purchases from commercial organisations looking to adopt our
technology. In the Middle East our new leadership is also proving
effective, with ongoing engagement with government agencies and
commercial organisations expected to contribute positively this
year. The same is true in West Africa, with continuing sales
opportunities in government and oil and gas, and in India, where we
have received government accreditation for our ISP critical
infrastructure and border protection solution.
Unfortunately strong international growth during the period was
undermined by disappointing performance in our UK products
division. This was due to continued pressure on public sector
budgets which meant we were unsuccessful in replacing prior year
revenues from a large programme we completed for the Ministry of
Defence. We addressed this performance midway through the year,
bringing in new more experienced leadership for our UK and Europe
region and combining our UK products and services divisions under a
single management team. With new leadership in place, the UK
division improved its performance in the second half of the year,
securing very notable strategic product sales with new accounts in
a variety of sectors, including construction, energy and
transportation. The year also saw significant growth in UK
services, including the delivery of a large project into a major UK
sporting event.
We expect the UK to be particularly second-half weighted this
current year, given delays in government contract awards after the
general election period, but we will offset this where possible
with strategic account management and a continued focus on securing
new opportunities in the commercial sector for integrated solutions
and services sales.
In addition to international revenue growth, I would highlight
four other significant areas of strategic progress for the Group
during the period.
First, we made material progress during the year in
transitioning our products division from the development and
marketing of discrete hardware and software products to the design,
development and delivery of integrated solutions, built around our
world-class intellectual property. Our solutions provide customers
with fully functioning capabilities that we deploy with local
integration partners, helping to secure longer-term relationships
between customer organisations and our technologies. We are
standardising our offerings with repeat sales of these solutions,
adding greater value for our customers and securing larger contract
values. For example, until recently we marketed 'black box' TVI
video encoding units for law enforcement vehicles, with the
customer or their technology partners adding required cameras and
accessories. Now we market a fully integrated vehicle surveillance
solution that combines our TVI technology with cameras, peripherals
and a body worn accessory for when personnel exit the vehicle. The
response from both government and commercial customers to this
transition to solutions has been resoundingly positive and is
driving our forward sales pipeline.
Second we are now developing new channels to market for the
Group's class-leading TVI technology. TVI can stream live real-time
video, at almost zero latency, across limited or constrained
bandwidths such as cellular and satellite networks. It offers
compelling performance improvements and bandwidth cost savings over
competing technologies and has already been sold to customers in
more than thirty countries, including some of the most prominent
defence and security organisations in the world. Now we have
started to work with manufacturers of cameras and video management
systems to widen the market for TVI. Streaming live real-time video
across wireless networks is extremely challenging but it offers
materially reduced infrastructural and deployment costs as well as
new levels of operational flexibility. TVI addresses the
fundamental constraints of wireless video and we believe we can
work with industry partners to drive significant growth for the
technology over the coming years. Our partnership with Milestone,
announced since the period-end, is illustrative of this, and we
have other partnerships in discussion which we expect to announce
during the course of this year.
Third, as prefaced during our 2014 Interim Statement, we have
launched our Cloud Video Platform (CVP) for this current year. CVP
provides an extremely flexible and scalable channel for our TVI and
video analytics capabilities. Embracing new video tools is usually
time consuming and expensive for customers, prolonging procurement
timescales and delaying implementation. CVP places our existing
class-leading video transformation tools and high-performance
analytics directly into cloud-accessible services, making them
quick to adopt and removing barriers to entry. CVP has been in
trial with key customers during our first quarter, and has now
fully launched to provide our intellectual property to a wider
client-base, with subscription and per-use billing rather than our
traditional perpetual licensing model. This will, over time,
provide us with increasing recurring revenues with modest incomes
projected this year but rising through next year.
Finally, we made significant changes to our management
arrangements during the year, most notably Zak Doffman's
appointment as Chief Executive Officer, with me continuing to Chair
the Board in a non-executive capacity. This change to a more
traditional management structure has always been our intention and
has allowed Zak to build a much stronger and more experienced
leadership team than we have had previously. This includes new
high-calibre sales leadership in three of our four regions, as well
as Colin Evans being appointed Chief Operating Officer with
responsibility for technology, engineering and the development of
new partner channels as detailed above. Sharon Cooper, our Chief
Financial Officer, has broadened her role to manage our integrated
back-office functions, which have reduced in cost in the last year
through efficiencies. With all outstanding integration activities
now complete, the focus of our unified leadership team and
organisation is entirely on growth. We continue to rely on the
expertise and commitment of our staff and we have placed a greater
emphasis on our people agenda. At this stage, our headcount of 150
gives us the right balance between investment and achieving
critical mass in our key markets.
We remain extremely proud of the strong support we continue to
receive from our shareholders, and during the year we raised a
further GBP7.1 million to fund ongoing expenses, to strengthen our
balance sheet and to provide working capital for growth. These
funds remained on the balance sheet at the year-end, with the cash
position at GBP8.7 million.
Although the Group operates in markets with sales cycles that
can be protracted and unpredictable, we have now sold into our key
regions for a number of years and have a better understanding of
the purchasing behaviours of key government and commercial
organisations. We have also enhanced our channels to market and
improved our regional sales leadership. Notable well-qualified
opportunities in our sales pipeline include flagship US law
enforcement and defence agencies, where we have successfully
established the operational benefits of our core technologies and
expect material purchases to follow. In Asia Pacific we have strong
UK government support for a number of major border programmes where
we expect our Integrated Surveillance Platform to be procured. We
are seeing strong traction for our TVI and ThruVision solutions
into law enforcement and civil security, we have a strong sales
pipeline in a number of markets across the region, including
Singapore, Malaysia, Japan, Indonesia, Australia, Philippines, Hong
Kong and the Republic of Korea, and have launched one of our core
technologies into Mainland China with immediate customer interest.
In the Middle East, where anticipated spend on security and defence
technologies reflects the ongoing threat context. We operate in
UAE, Qatar and Saudi Arabia, as well as West Africa and India, and
have material opportunities for law enforcement, border security
and oil and gas protection in those geographies. In the UK and
Europe we are balancing existing government customer relationships
with new commercial accounts in critical infrastructure,
transportation and industrial services.
Looking forward, I remain confident our technologies are
uniquely positioned in the international marketplace, playing an
increasingly important role as organisations seek a more agile
alternative to conventional surveillance and security systems, as
well as opening new opportunities in the broader wireless video
domain. The combination of stronger management with repeatable
solutions, scalable cloud offerings and new industry channels to
market, provides us with the depth of capabilities and commercial
flexibility to grow revenues this year and beyond. The Board
remains comfortable with its expectations for this financial year
driven by continued strong international growth, notwithstanding
that the current timing of UK government contracting will
contribute to a second-half weighting.
Update on Strategy
We continue to pursue our strategy of providing advanced
surveillance technologies to governments, multinational
corporations and system integrators in the international defence,
law enforcement, critical infrastructure, transportation and
natural resources sectors. As our strategy continues to develop we
are seeing increasing opportunities to leverage our core
intellectual property across the wider wireless video domain. We
have broadened beyond discrete product sales into integrated
solution sales, we are working with industry technology partners
and we have launched a cloud service to secure new channels to
market. We are also pursuing opportunities for our technology in
adjacent commercial sectors. This includes specialist safety
applications, such as for construction site monitoring, and
offerings for mainstream security, such as SafeZone-edge for
Stanley Security and MiniCam for BT Redcare.
At IPO in 2010 we outlined three phases of our development, from
the initial acquisitions phase, through integration and
international expansion, to further geographical and product
expansion. In the last year we completed our transition from phase
two to phase three, making significant progress in widening our
product portfolio and transitioning from 'boxes' to solutions. This
better enables us to exploit our TVI, RDC, video analytics and
ThruVision technologies, as well as to secure a greater share of
total contract value and more closely manage customer requirements.
Our product expansion also encompasses OEM and utility-based cloud
offerings to deliver our technology through new revenue models.
These enable enterprise-wide adoption of our products, integrating
them with existing surveillance and security infrastructures.
With new regional leadership in place, we have the foundations
to drive the adoption of these expanded solution offerings. Our
assessment of the growth potential within our market remains
unchanged. The defence, homeland security, critical infrastructure,
oil and gas and transportation sectors continue to face persistent
threats, often beyond the capabilities of conventional security
systems. Beyond these markets, we are well positioned to exploit
broader security opportunities as well as adjacent offerings for
our core technologies. This is reinforced by the wider market
access provided by our strategic alliance partners across the
industry ecosystem.
Global spending in both core and adjacent markets remains strong
across our regions and broader technology imperatives such as the
growth in wireless network video is shaping our focus areas:
-- Strong strategic account management in the UK, supplementing
core defence sales with sales into broader security and commercial
sectors, providing fully integrated offerings.
-- Established presence in Asia Pacific, with doubling of
revenues last year and a pipeline of repeatable solution sales and
larger multi-year programmes albeit with longer sales cycles.
-- Significant market opportunity in the US for our solutions
and our new regional leadership will accelerate our traction with
Federal agencies as well as increasing the focus on other
government and commercial opportunities.
-- Much stronger Middle East business, with experienced
leadership and a clear focus on security opportunities across the
Gulf, India and West Africa.
-- Continued shift towards mobility in surveillance and security
operations, driving the adoption of wireless connected video
solutions.
-- Commoditisation of mainstream CCTV and a shift in focus to
add intelligence and value to existing camera estates, leveraging
the flexibility of both 'edge' and 'cloud'.
Our solutions address a wide range of surveillance and security
requirements. For smaller-scale opportunities, this facilitates
customer adoption and integration with existing systems. The strong
interest we see in our vehicle-based surveillance offering is a
prime example of this. On larger programmes, our solution focus
enables us to assemble a range of modular capabilities, providing
more rapidly deployable and affordable options than conventional
systems. Our positions on large national security procurements,
involving multi-faceted requirements, are evidence of this
resonating with customers. This traction, along with the
international security and technology context, confirms that our
original strategy, although expanding, remains valid and we will
continue to pursue it.
Business review
Introduction
During the period we focused on developing complete solutions
built on our unique and proven core products. By providing
standardised and integrated offerings to customers to solve
specific problems, we can access a greater share of total contract
value.
This shift in focus has already delivered results, with a number
of key sales in the year coming from these solution offerings. This
included the GBP0.9 million initial sale of a new construction site
solution in the UK, the GBP0.8 million initial sale of a law
enforcement vehicle surveillance solution in Indonesia, and the
GBP0.6 million initial sale of a critical infrastructure perimeter
security solution in the UK.
Performance in Asia Pacific through the year reflected both our
solutions focus and strong sales leadership, with revenues doubling
year on year. The second half of the year showed an improvement in
performance in the UK, with new leadership driving the solutions
agenda and delivering key sales into new sectors. We are
replicating this approach in the Americas and Middle East regions,
with more experienced sales leadership now in place.
Complementing this solutions focus, we launched a recurring
revenue and subscription model, with a particular focus around our
virtualised Cloud Video Platform, which we expect to become an
increasing revenue contributor in the coming year and beyond.
Services
Our UK-based Services business recorded its strongest ever year
with revenues of GBP7.5 million, representing growth of 65% over
the prior year.
Key customer contracts delivered in the period included a
material framework programme with one of our UK government
customers (GBP0.9 million) and a major contract for a flagship
sporting event in the UK (GBP3.1 million). The period also saw
closer integration between our UK Services and UK Products
businesses as we evolve towards integrated solutions. In the UK
such solutions include deployment and support, leveraging our
Services infrastructure.
In delivering strong growth and closer ties with our Products
business, our Services business is well positioned to consolidate
the growth it achieved during the period into the coming year and
beyond.
Products
We achieved a number of notable contract wins in the year,
successfully launching solution sales into core sectors and
delivering strong international sales growth:
-- First solution sale to the construction industry - GBP0.9
million sale of a monitoring solution for tower cranes to improve
operational efficiency and site safety. Such video solutions are
likely to become more standardised across the industry and extended
to other types of construction equipment.
-- Multiple site solution sale within critical national
infrastructure market - GBP0.6 million sale of a perimeter
monitoring solution to secure remote energy facilities across
multiple initial sites. We anticipate follow on orders in the
current year and interest from other organisations with similar
requirements.
-- Strategic sale of new TVI hardware products- GBP1.0 million
($1.5 million) sale of high-definition TVI devices to a US
government agency for operational surveillance requirements as part
of a new integrated requirement and broader agency adoption of
TVI.
-- First major sale of vehicle solutions to an enterprise
customer - GBP0.8 million sale of vehicle surveillance solution
kits for a law enforcement agency in Indonesia. The solution
includes a body worn option and is the initial phase of a wider
deployment.
-- ThruVision sales into key markets- sales during the year
included Turkey, Japan, Hong Kong, US and the Philippines, with the
improved performance and functionality of our updated product
driving strong customer traction.
-- Surveillance networking equipment sales in Singapore - GBP1.8
million of sales into the transportation sector for major rail
surveillance projects, we expect material follow-on sales with
continued infrastructure investment.
-- Remote site security solution sale- GBP0.3 million sale of
facility monitoring equipment to the Nigerian government for the
protection of a secure government site, although delayed by Ebola
and the election we have on-going opportunities in this
country.
Our sales pipeline continues to build, with traction focused on
our new range of integrated solutions that build on our core
intellectual property, namely:
-- Our TVI Video Distribution Platform includes vehicle
surveillance solutions, covert and tactical law enforcement and
defence solutions and specialist industrial solutions. Our
customers see these rapidly deployable, proven solutions as a
unique approach to video transmission and viewing from anywhere to
anywhere. Over time we will continue to expand this range.
-- Our Integrated Surveillance Platform combines our RDC sensors
with TVI, allowing unauthorised intrusions to be viewed securely
and remotely. Our customers see this rapidly deployable covert
solution as the ideal approach for pre-emptive instead of reactive
security. We are working with lead customers for a number of new
vertical market solutions, including a new critical national
infrastructure protection solution.
-- Our Cloud Video Platform brings our TVI and analytics
capabilities to a cloud environment. This allows CCTV, public
transportation and body worn cameras to be viewed in real-time from
anywhere by authorised users. It also includes class-leading video
analytics in the cloud that can be used to analyse video from any
system on demand, both live and archived, to increase intelligence
without the need for dedicated infrastructure and investments from
multiple agencies.
-- Our Safe Search People Screening Solution based on our
ThruVision product facilitates the screening of people without the
need for time-consuming, intrusive physical searches. Our customers
see this 'virtual pat-down' as an efficient, repeatable and
reliable procedure for looking for weapons, contraband or stolen
goods in a safe and respectful manner.
International Markets- We have continued our strategy of
targeting key markets with material defence and security budgets
across the Americas, Asia Pacific and the Middle East and Africa
regions. In FY15 we achieved international growth of 42%, with
International now representing 59% of all our product sales. With
the change of sales leadership in the Middle East and US, we are
now working with larger partners in these regions to provide
improved market access. We have also continued to strengthen our
direct customer relationships.
In Asia Pacific, we remained focused on key markets, including
the Republic of Korea, Hong Kong, Japan, Singapore, Malaysia,
Indonesia and Australia. The year saw new customers secured in
Japan, Hong Kong and the Philippines, including key reference
customers for TVI and ThruVision. Solution sales have been a key
part of driving growth in Asia Pacific, and in the current year we
expect to see these new solutions continue to be a key driver of
growth.
In the Middle East and Africa we are focused on the key GCC
states and have followed early sales successes to achieve repeat
sales and commitments from larger partners. Our partners in this
region have a particular interest in off-the-shelf solutions that
can be more easily adopted, with our construction and law
enforcement offerings being well positioned.
The US market remains challenging because of longer than
expected sales cycles, however there have been a number of landmark
sales. These include a ThruVision sale to a major metropolitan
police department and a $1.5 million sale of our TVI video
surveillance hardware into a major US Federal agency.
UK Market - The UK Government market remained challenging, with
the General Election delaying some major procurement decisions late
in the year. Although we saw an impact from a decline in our
defence sales, we have been working to open up new strategic
accounts in the critical national infrastructure, transportation
and construction markets.
We introduced new leadership into our UK and Europe region
midway through the year, which gave impetus to a diversification of
accounts and a sharper focus on solution sales. During the year we
also combined our UK Services and UK Products businesses to create
an integrated UK organisation to better leverage solution sales
into our customer base. The UK Services business continues to
perform well, reflecting the enduring strength and value of
long-standing customer relationships. We have also brought focused
sales resource into the team to expand on our existing sales into
Europe.
New Commercial Channels to Market
The mainstream, non-security market is witnessing an
unprecedented shift to digital distribution of video over IP
networks, fuelling rapid growth. Large technology firms are now
entering the market through internal product development and
acquisitions. This creates a number of opportunities for Digital
Barriers to wirelessly enable market leaders in the Camera and
Video Management System (VMS) fields, where our TVI technology has
compelling benefits over its competition for wireless video
streaming.
Our relationship with Axis, one of the world's leading network
camera manufacturers, continues to develop strongly and we
anticipate leveraging this to help drive adoption of our products
alongside their cameras and VMS. Monthly sales of our SafeZone-edge
product have increased ten-fold since launch and we are developing
other services to deliver on this platform. We also have interest
from other manufacturers to adopt our edge solutions or create open
platforms which we can leverage for wider distribution.
VMS vendors remain key to the enterprise video market due to the
high cost of switching from an incumbent supplier. We have
agreements with the largest VMS vendors, including one of the
market leaders Milestone, to integrate TVI and we expect other
market leading VMS providers to follow. As mainstream technology
companies enter the network video and CCTV markets, VMS vendors are
moving more into the mainstream and creating Visual Solutions aimed
at new types of customers. They are demonstrating strong interest
in adopting our solutions for construction site safety and
ambulance patient management systems as well as the application of
TVI and analytics into the broad commercial market.
We are also investing in technology to make it easier for third
parties to adopt TVI and our analytics without any additional
investment from us for each new partner. Given the fragmented
nature of the VMS and broader video market we view this
standardised technology approach as a way to become an industry
standard. One example of the benefits of our ability to integrate
TVI's unique capabilities into third party solutions is the
opportunities we are seeing in the body worn market to add wireless
capability to devices which already have a very large install
base.
Technology and Products
During the course of the year, we continued to focus on our four
core product families - TVI, RDC, ThruVision and analytics -
developing a set of end-to-end solutions for key vertical markets,
leveraging the unique and complementary characteristics of our
products.
Although our focus is now firmly on integrated solutions rather
than discrete product 'boxes', it is imperative that each
underlying product remains disruptive in its respective category,
occupying a clearly differentiated position and embodying
class-leading intellectual property that is both protected and
difficult to replicate. Significantly, these core product families
have been reinforced with additional capabilities to form the new
solutions propositions which are driving international sales
activity. It is the maturity of our product development that has
enabled us to deliver the new solutions into key industry verticals
over the last year. We will continue to invest in adding the
incremental capability to our products to enable us to take our
technology to wider enterprise markets.
Tactical Visual Intelligence (TVI) - TVI represents the largest
market opportunity for us. As a proven, world-class video
distribution technology, it offers large organisations the ability
to adopt video as an affordable, core enterprise tool for a range
of surveillance and security applications in the first instance,
but increasingly for more mainstream 'enterprise applications'. We
continue to make progress in adding features to make TVI suitable
for commercial applications.
Highlights include:
-- Addition of multi-camera HD support on the IP Series -
primarily developed to meet the needs of vehicle-based law
enforcement, the IP450 was launched in July. The product is quickly
gaining traction and, due to its versatility and performance, has
been selected as the basis for a number of our new solution
packages.
-- Launch of a new smart phone and desktop viewing software -
developed to support our mission-critical surveillance and ISP
propositions and introduced at a specialist user exhibition in
March. It will also provide the technical foundations to enable
greater third-party interoperability of TVI to simplify customer
adoption.
Plans for the coming year include developing new body worn video
solutions and boosting the scalability of the TVI platform with
technical and enterprise features. We increasingly see demands for
TVI deployments with ever-larger numbers of cameras and users and
we will continue to scale the platform and enhance integration with
other systems.
Remote Detection and Classification (RDC) - RDC is our unique
ground sensor for the remote detection and classification of
unauthorised people or vehicles in remote locations - particularly
where network and power infrastructure is limited. RDC has been
deployed for a wide range of remote security applications,
including the protection of defence forces, wide-area border
monitoring, oil and gas security, critical infrastructure asset
protection and the monitoring of secure sites.
Our key differentiation remains the combination of a rapidly
deployable covert form factor, reliable sensing technology, low
power wireless networking and tight coupling with TVI to enable
real-time video verification of threats. Together, these form a key
component of our Integrated Surveillance Platform, providing a
practical and cost-effective approach to the monitoring of wide
areas, remote locations or in other situations where conventional
security systems are impractical.
RDC is now tightly integrated with TVI at a hardware and
software level, the combination is being used for an
ever-increasing number of applications.
Highlights include:
-- Launch of new CNI and oil and gas proposition - developed
around existing products and the requirements of lead customers in
both sectors, this solution is also being evaluated by further
customers in the CNI and oil and gas sectors.
-- Launch of RDC-enabled homeland security solutions - the
introduction of a range of scalable remote security and wide-area
surveillance solutions that are based on the RDC sensor, including
force protection and border security.
-- Launch of UltraMesh networking firmware- we launched a next
generation wireless networking technology to enhance the
node-to-node transmission of alerts.
Plans for the coming year include the addition of intelligent
'trigger and cue' nodes that bring the RDC wireless alarm and
triggering technology to a wider range of applications, as well as
continued integration of RDC and TVI for both configuration and
operations.
ThruVision -ThruVision is our passive, standoff people screening
technology for the protection of high profile buildings and VIPs,
the detection of concealed contraband by customs organisations,
high-threat military checkpoint screening and the efficient
searching of employees to reduce theft in retail and distribution
environments.
Highlights include:
-- Launch of a new adaptive scan mechanism - developed to make
the device more practical to operate in concealed deployments and
significantly boost operations.
-- Development of new core components - developed to reduce unit
cost and weight as well as decrease unit operating costs and
operational noise.
Plans for the coming year include further improvements to the
operator software that is used to screen individuals, including
automated threat detection (ATD), as well as customer-funded
developments to improve performance in different environments.
Cloud Video Platform (CVP) - CVP places our existing market
leading video transformation tools and high performance analytics
directly into cloud accessible services - making them quick to
adopt and removing barriers to entry. Deriving value from video and
distributing the video to where it's needed is a huge challenge for
organisations. Video is typically locked within an organisation's
data stores, rarely looked at and rarely shared due to the cost and
complexity of video analytics and the impact of bandwidth
constraints on moving the video. Embracing new video tools is time
consuming and expensive, the high barrier to adoption prolonging
procurement timescales and delaying implementation.
We can deploy CVP and its analytics on a public or private cloud
or at the edge, providing flexibility to perform processing where
it is most economic. The use of readily available commercial cloud
services also gives us automatic scalability and resilience,
allowing our server capacity and costs to flex with demand.
Highlights include:
-- Launch of the platform to selected customers- our first suite
of analytics, developed to make it easier to monitor large fleets
of cameras, have entered evaluation trials with a number of
monitoring and video management service providers including major
Alarm Receive Centres (ARCs). The ARC sector is key for us as they
aggregate camera customers whilst continually seeking ways to
reduce costs and offer innovative service options to the
market.
-- Launch of our developer tools to selected customers - our
developer focused analytics products have entered trials with one
of the world's largest management consulting and technology
outsourcing firms for developing end-customer applications based
upon our cloud ready services.
-- Industry recognition of SafeZone-edge- SafeZone-edge was the
winner of Intruder Alarm or Exterior Deterrent Product of the Year
at IFSEC's Security & Fire Excellence Awards 2014. SafeZone
Edge has now been extended to support the third-party Axis video
cloud platform (AVHS), creating the SafeZone ARC product.
Plans for the coming year include continued platform development
and commercial product launch, development of new and enhanced
algorithms, and implementing subscription models for our edge
analytics products. We plan to release new CVP video tools and
analytics approximately every two months, including TVI video
transformation in the cloud - allowing organisations to distribute
existing video sources wirelessly, and also cloud access to our
facial detection and recognition tools.
Operational review
People
We made significant changes to the management team during the
year, including the appointment of Zak Doffman as Chief Executive
Officer with Tom Black becoming Non-Executive Chairman. We also
significantly strengthened our regional sales leadership and
organised our technology and delivery functions to ensure we can
support the Group through its next phases of growth.
We endeavour to provide exciting careers for highly talented
sales and engineering staff, with a common culture of innovation
and engineering excellence and collaboration across our geographies
and engineering teams. This enables a sophisticated level of
integration across our products and solutions.
In the last year we have put in place a formal mentoring
programme that has given greater emphasis to our people agenda,
providing staff with career development direction outside of the
line management structure and crossing geographic and product
boundaries.
Cost base
During the period a cost reduction programme reduced our overall
net cost base by GBP3.0 million. Operational efficiencies allowed
for further investment in international sales and engineering
whilst still maintaining the lower cost base.
Infrastructure
We have expanded our TVI engineering office in Glasgow and
invested in our Oxfordshire hub to increase ThruVision
manufacturing and broader solution delivery capacity. This year we
invested in a new, secure, Group-wide IT infrastructure to allow
more efficient working for our staff around the world, while also
better securing our core intellectual property.
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: GBP19.4 million for the year under review (2014: GBP19.0 million);
-- International revenues: 37% of total revenues (2014: 26%);
-- Gross margin: 35% for the year under review (2014: 46%);
-- Adjusted loss before tax: GBP10.5 million for the year under
review (2014: GBP12.0 million);
-- Central costs: GBP4.0 million for the year under review (2014: GBP6.5 million);
-- Number of employees: 150 at 31 March 2015 (2014: 193); and
-- Cash: GBP8.7 million at 31 March 2015 (2014: GBP14.2 million).
Financial review
For the year ended 31 March 2015, Digital Barriers delivered
revenue of GBP19.4 million (2014: GBP19.0 million) generating an
adjusted loss before tax of GBP10.5 million (2014 loss: GBP12.0
million) and adjusted loss per share of 14.12 pence (2014 loss:
21.49 pence). On an unadjusted basis, the loss before tax was
GBP18.7 million (2014 loss: GBP15.1 million) and loss per share was
25.85 pence (2014 loss: 25.87 pence).
Revenue and margins
Of the GBP19.4 million of revenue in year, GBP11.9 million
(2014: GBP14.5 million) was delivered from Product revenue streams,
with GBP7.5 million (2014: GBP4.5 million) from the Services
division.
Within the Products division international revenues grew 42%,
with sales in the Asia Pacific regions doubling year on year. This
growth was offset by a reduction in UK revenues as the region looks
to augment less predictable government spend with value-driven
sales into the commercial sector. The reduction in UK revenues led
to a fall in total Product revenues in the year of 18% (2014:
15%).
International Product revenues now account for 59% of total
Product sales, up from 34% in the prior year.
All Product sales are now strategic to the Group, with legacy
products (and associated revenues) now immaterial to the Group.
Results by division are detailed below:
Reported 2015 Reported 2014
Revenue GBP'000 GBP'000
---------------- -------------- --------------
Products:
---------------- -------------- --------------
International 7,093 5,004
---------------- -------------- --------------
UK 4,849 9,511
---------------- -------------- --------------
Products total 11,942 14,515
---------------- -------------- --------------
Services 7,460 4,527
---------------- -------------- --------------
19,402 19,042
---------------- -------------- --------------
Revenue from the Services division grew 65% year on year to
GBP7.5 million. This growth was underpinned by the delivery of a
large system into major UK sporting event in the first half of the
year.
Revenue in the year was split 62%:38% (2014: 76%:24%) between
Products and Services respectively. The strength of Services
revenue in the year, along with a significant acceleration of
ThruVision revenues (unit sales up from 8 to 33) has resulted in a
decrease in the Group's gross margin from 46% to 35%.
Product Services Total
2015 GBP'000 GBP'000 GBP'000
---------------------- --------- --------- ---------
Revenue 11,942 7,460 19,402
---------------------- --------- --------- ---------
Segment gross margin 5,155 1,670 6,825
---------------------- --------- --------- ---------
Gross margin % 43% 22% 35%
---------------------- --------- --------- ---------
2014
--------------------- ------- ------ -------
Revenue 14,515 4,527 19,042
--------------------- ------- ------ -------
Segment gross margin 7,860 863 8,723
--------------------- ------- ------ -------
Gross margin % 54% 19% 46%
--------------------- ------- ------ -------
Services gross margin increased to 22% in the year (2014: 19%),
as a result of strong project management and tighter cost control.
Products gross margin was 43% (2014: 54%). This decrease is largely
associated with sales mix, with a reduction in the proportion of
software sales in the year, alongside an increase in ThruVision
sales which attract a lower gross margin.
Overheads
Administration costs are broken down as follows:
Reported 2015 Reported 2014
Overheads GBP'000 GBP'000
----------------------------------------------------------------- -------------- --------------
Products administration costs 12,201 15,117
----------------------------------------------------------------- -------------- --------------
Services administration costs 1,132 960
----------------------------------------------------------------- -------------- --------------
Amortisation of intangibles initially recognised on acquisition 1,865 1,733
----------------------------------------------------------------- -------------- --------------
Central costs
----------------------------------------------------------------- -------------- --------------
Board, operations, finance and facilities 3,578 4,147
----------------------------------------------------------------- -------------- --------------
LTIP charge 438 524
----------------------------------------------------------------- -------------- --------------
Reorganisation costs - 1,860
----------------------------------------------------------------- -------------- --------------
4,016 6,531
----------------------------------------------------------------- -------------- --------------
Total administration costs 19,214 24,341
----------------------------------------------------------------- -------------- --------------
Administration costs within the Products division largely
consist of sales and marketing costs, together with research and
development spend. Services divisional overheads are predominantly
made up of sales and operations costs.
In total, administration costs in the year have been reduced by
21% to GBP19.2 million (2014: GBP24.3 million). This reduction is
the result of a restructuring programme undertaken in the prior
year to rationalise the cost base of the Group and concentrate
resources on strategic products. As a result of this programme
GBP1.86 million in reorganisation costs were incurred in the prior
year, with over GBP3 million of annual cost savings realised. These
savings were largely within the Products division and central
spend.
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 GBP10.5 million
(2014: GBP12.0 million) and is detailed in the table below:
2015 2014
GBP'000 GBP'000
----------------------------------------------------------------- --------- ---------
Loss before tax (18,697) (15,067)
----------------------------------------------------------------- --------- ---------
Add back:
----------------------------------------------------------------- --------- ---------
Amortisation of intangibles initially recognised on acquisition 1,865 1,733
----------------------------------------------------------------- --------- ---------
Loss on disposal of businesses(i) 103 -
----------------------------------------------------------------- --------- ---------
Adjustments to deferred consideration(ii) - (679)
----------------------------------------------------------------- --------- ---------
Reorganisation costs(iii) - 1,860
----------------------------------------------------------------- --------- ---------
Impairment of goodwill and intangibles(iv) 6,250 160
----------------------------------------------------------------- --------- ---------
Adjusted loss before tax (10,479) (11,993)
----------------------------------------------------------------- --------- ---------
(i) Relates to the disposals of two wholly owned subsidiaries,
Margaux Matrix Limited and Visimetrics (UK) Limited. Each were
disposed of for GBP1 consideration during the year. The Group did
not sell any intellectual property as part of these
transactions.
(ii) Relates to the release of deferred consideration payable
against the Zimiti and Visimetrics acquisitions plus reassessment
of the remaining Visimetrics deferred considerations balance to
zero, partly offset by the unwind of discount.
(iii) Relates to the restructuring programme to rationalise the
Group's cost base and concentrate its resources on strategic
Products. As the expenditure relates to transforming the divisions
for the future these costs are not directly related to continued
operations.
(iv) Relates to the reassessment of the carrying value of
goodwill and intangibles within the Products division. The
impairment of goodwill reflects a period of product development
which has impacted the Group's ability to leverage value from the
integrated businesses in the original timeframes expected.
The reduction in the adjusted loss year on year has been driven
by three key factors:
-- growth in international Product revenues
-- continued investment in sales and marketing required to drive international expansion
-- reduction in overheads in connection with non-strategic products
The unadjusted loss before tax for the year amounts to GBP18.7
million (2014 loss: GBP15.1 million). The increase in the loss is
principally the result of an impairment charge of GBP6.25 million
recorded during the year. This reflects the reassessment of the
carrying value of goodwill within the Products division following a
period of product development which has impacted the Group's
ability to leverage value from the integrated businesses in the
original timeframes expected. Further details on Product goodwill
can be found in note 7.
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 Income Statement tax credit for the
year of GBP0.8 million (2014: GBP0.5 million) principally relates
to R&D tax credits. At 31 March 2015, the Group had unutilised
tax losses carried forward of approximately GBP47.5 million (2014:
GBP44.0 million). Given the varying degrees of uncertainty as to
the timescale of utilisation of these losses, the Group has not
recognised GBP8.6 million (2014: GBP8.5 million) of potential
deferred tax assets associated with GBP42.9 million (2014: GBP42.3
million) of these losses.
At 31 March 2015, the Group's net deferred tax liability stood
at GBP0.1million (2014: GBP0.2 million).
Loss per share
The reported loss per share is 25.85 pence (2014 loss: 25.87
pence). The adjusted loss per share is 14.12 pence (2014 loss:
21.49 pence).
Cash and treasury
The Group ended the year with a cash balance of GBP8.7 million
(2014: GBP14.2 million).
The GBP5.5 million year on year decrease in net cash consists of
GBP7.1 million (net of placing costs) proceeds from an equity fund
raise less GBP(12.1) million (2014: GBP(8.5) million) outflow from
operating activities and GBP(0.5) million (2014: GBP(0.8) million)
investing spend. No new businesses were acquired during the
year.
The GBP(12.1) million (2014: GBP(8.5) million) outflow from
operating activities included a GBP1.9 million net working capital
outflow (2014: GBP2.3 million inflow), largely the result of higher
fourth quarter revenues than in the prior year, along with GBP0.4
million (2014: GBP1.0 million) of payments in relation to
reorganisation activities undertaken in late FY14. The balancing
GBP(9.8) million outflow from operating activities (2014: GBP(9.8)
million outflow) relates principally to the "cash" operating loss
(operating loss excluding non-cash items).
Investing spend included GBP(0.6) million of capital
expenditure, mainly demonstration stock to support sales
activities.
In April 2015 an agreement was signed with HSBC Bank plc for a
GBP5.0million secured working capital facility to provide pre and
post-shipment finance in relation to export activities across the
Group. The facility is partially guaranteed by the UK Export
Finance Guarantees Department. The interest rate for any borrowings
under this facility is 3% over the bank's sterling base rate. The
facility will be reviewed on an annual basis as part of our wider
banking facilities with HSBC Bank Plc in September each year.
Dividends
The Board is not recommending the payment of a dividend (2014:
GBPnil).
DIGITAL BARRIERS PLC
Consolidated income statement
for the year ended 31 March 2015
Year ended 31 March 2015 Year ended 31 March 2014
Note GBP'000 GBP'000
--------------------------------------------------------- ----- ------------------------- -------------------------
Revenue 2 19,402 19,042
--------------------------------------------------------- ----- ------------------------- -------------------------
Cost of sales (12,577) (10,319)
--------------------------------------------------------- ----- ------------------------- -------------------------
Gross profit 6,825 8,723
--------------------------------------------------------- ----- ------------------------- -------------------------
Administration costs (19,214) (24,341)
--------------------------------------------------------- ----- ------------------------- -------------------------
Other income - 706
--------------------------------------------------------- ----- ------------------------- -------------------------
Other costs (6,353) (160)
--------------------------------------------------------- ----- ------------------------- -------------------------
Operating loss (18,742) (15,072)
--------------------------------------------------------- ----- ------------------------- -------------------------
Finance revenue 45 32
--------------------------------------------------------- ----- ------------------------- -------------------------
Finance costs - (27)
--------------------------------------------------------- ----- ------------------------- -------------------------
Loss before tax (18,697) (15,067)
--------------------------------------------------------- ----- ------------------------- -------------------------
Income tax 785 458
--------------------------------------------------------- ----- ------------------------- -------------------------
Loss after tax attributable to owners of the parent (17,912) (14,609)
--------------------------------------------------------- ----- ------------------------- -------------------------
Adjusted loss: 3
--------------------------------------------------------- ----- ------------------------- -------------------------
Loss before tax (18,697) (15,067)
--------------------------------------------------------- ----- ------------------------- -------------------------
Amortisation of intangibles initially recognised on
acquisition 1,865 1,733
--------------------------------------------------------- ----- ------------------------- -------------------------
Loss on disposal of businesses 103 -
--------------------------------------------------------- ----- ------------------------- -------------------------
Adjustments to deferred consideration - (679)
--------------------------------------------------------- ----- ------------------------- -------------------------
Reorganisation costs - 1,860
--------------------------------------------------------- ----- ------------------------- -------------------------
Impairment of goodwill 6,250 -
--------------------------------------------------------- ----- ------------------------- -------------------------
Impairment of intangibles - 160
--------------------------------------------------------- ----- ------------------------- -------------------------
Adjusted loss before tax for the year (10,479) (11,993)
--------------------------------------------------------- ----- ------------------------- -------------------------
(Loss) per share - basic 4 (25.85p) (25.87p)
--------------------------------------------------------- ----- ------------------------- -------------------------
(Loss) per share - diluted 4 (25.85p) (25.87p)
--------------------------------------------------------- ----- ------------------------- -------------------------
(Loss) per share - adjusted 4 (14.12p) (21.49p)
--------------------------------------------------------- ----- ------------------------- -------------------------
(Loss) per share - adjusted diluted 4 (14.12p) (21.49p)
--------------------------------------------------------- ----- ------------------------- -------------------------
The results for the year and the prior year are derived from
continuing activities.
DIGITAL BARRIERS PLC
Consolidated statement of comprehensive income
for the year ended 31 March 2015
Year
Year ended
ended 31
31 March March
2015 2014
GBP'000 GBP'000
--------------------------------------- ---------- ---------
Loss for the year (17,912) (14,609)
---------------------------------------- ---------- ---------
Other comprehensive income
--------------------------------------- ---------- ---------
Other comprehensive income that
may be subsequently reclassified
to profit and loss:
--------------------------------------- ---------- ---------
Exchange differences on retranslation
of foreign operations (656) 9
---------------------------------------- ---------- ---------
Net other comprehensive income
to be reclassified to profit or
loss in subsequent years (656) 9
---------------------------------------- ---------- ---------
Total comprehensive loss attributable
to owners of the parent (18,568) (14,600)
---------------------------------------- ---------- ---------
DIGITAL BARRIERS PLC
Consolidated statement of financial position
at 31 March 2015
31
31 March March
2015 2014
Note GBP'000 GBP'000
-------------------------------- ----- --------- ---------
Assets
-------------------------------- ----- --------- ---------
Non-current assets
-------------------------------- ----- --------- ---------
Property, plant and equipment 683 1,108
-------------------------------- ----- --------- ---------
Goodwill 7 18,186 24,802
-------------------------------- ----- --------- ---------
Other intangible assets 2,092 3,857
-------------------------------- ----- --------- ---------
20,961 29,767
-------------------------------- ----- --------- ---------
Current assets
-------------------------------- ----- --------- ---------
Inventories 4,499 3,895
-------------------------------- ----- --------- ---------
Trade and other receivables 5 8,869 7,706
-------------------------------- ----- --------- ---------
Current tax recoverable 1,513 826
-------------------------------- ----- --------- ---------
Cash and cash equivalents 8,701 14,246
-------------------------------- ----- --------- ---------
23,582 26,673
-------------------------------- ----- --------- ---------
Total assets 44,543 56,440
-------------------------------- ----- --------- ---------
Equity and liabilities
-------------------------------- ----- --------- ---------
Attributable to equity holders
of the Parent
-------------------------------- ----- --------- ---------
Equity share capital 8 845 646
-------------------------------- ----- --------- ---------
Share premium 82,757 75,879
-------------------------------- ----- --------- ---------
Capital redemption reserve 4,786 4,786
-------------------------------- ----- --------- ---------
Merger reserve 454 454
-------------------------------- ----- --------- ---------
Translation reserve (868) (212)
-------------------------------- ----- --------- ---------
Other reserves (307) (307)
-------------------------------- ----- --------- ---------
Retained earnings (48,826) (31,352)
-------------------------------- ----- --------- ---------
Total equity 38,841 49,894
-------------------------------- ----- --------- ---------
Non-current liabilities
-------------------------------- ----- --------- ---------
Deferred tax liabilities 116 194
-------------------------------- ----- --------- ---------
Provisions 134 161
-------------------------------- ----- --------- ---------
250 355
-------------------------------- ----- --------- ---------
Current liabilities
-------------------------------- ----- --------- ---------
Trade and other payables 6 5,261 5,608
-------------------------------- ----- --------- ---------
Financial liabilities 163 163
-------------------------------- ----- --------- ---------
Provisions 28 420
-------------------------------- ----- --------- ---------
5,452 6,191
-------------------------------- ----- --------- ---------
Total liabilities 5,702 6,546
-------------------------------- ----- --------- ---------
Total equity and liabilities 44,543 56,440
-------------------------------- ----- --------- ---------
DIGITAL BARRIERS PLC
Consolidated statement of changes in equity
for the year ended 31 March 2015
Profit
Share Capital and
Share premium redemption Merger Translation Other 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
2013 510 57,989 4,735 454 (221) (307) (17,267) 45,893
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Loss for the
year - - - - - - (14,609) (14,609)
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Other comprehensive
loss - - - - 9 - - 9
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Total comprehensive
loss - - - - 9 - (14,609) (14,600)
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Share placement 133 18,567 - - - - - 18,700
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Share issue
costs - (677) - - - - - (677)
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Incentive share
conversion 3 - 51 - - - - 54
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Share based
payment credit - - - - - - 524 524
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
At 31 March
2014 646 75,879 4,786 454 (212) (307) (31,352) 49,894
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Loss for the
year - - - - - - (17,912) (17,912)
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Other comprehensive
loss - - - - (656) - - (656)
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Total comprehensive
loss - - - - (656) - (17,912) (18,568)
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Share placement 199 7,151 - - - - - 7,350
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Share issue
costs - (273) - - - - - (273)
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Share based
payment credit - - - - - - 438 438
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
At 31 March
2015 845 82,757 4,786 454 (868) (307) (48,826) 38,841
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
DIGITAL BARRIERS PLC
Consolidated statement of cash flows
for the year ended 31 March 2015
Year Year
ended ended
31 31
March March
2015 2014
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Operating activities
--------------------------------------------- --------- ---------
Loss before tax (18,697) (15,067)
---------------------------------------------- --------- ---------
Non-cash adjustment to reconcile
loss before tax to net cash flows
--------------------------------------------- --------- ---------
Depreciation of property, plant
and equipment 630 739
---------------------------------------------- --------- ---------
Amortisation of intangible assets 1,971 1,819
---------------------------------------------- --------- ---------
Impairment of goodwill 6,250 -
--------------------------------------------- --------- ---------
Impairment of intangible assets - 160
---------------------------------------------- --------- ---------
Share-based payment transaction
expense 438 524
---------------------------------------------- --------- ---------
Unrealised (gains) / loss on foreign
exchange (95) -
--------------------------------------------- --------- ---------
Release of deferred consideration - (494)
---------------------------------------------- --------- ---------
Reassessment of deferred consideration - (212)
---------------------------------------------- --------- ---------
Disposal of fixed assets 56 178
---------------------------------------------- --------- ---------
Finance income (45) (32)
---------------------------------------------- --------- ---------
Finance costs - 27
---------------------------------------------- --------- ---------
Working capital adjustments:
--------------------------------------------- --------- ---------
(Increase) / decrease in trade
and other receivables (1,262) 5,353
---------------------------------------------- --------- ---------
Increase in inventories (604) (2,116)
---------------------------------------------- --------- ---------
Decrease in trade and other payables (62) (919)
---------------------------------------------- --------- ---------
(Decrease) / increase in deferred
revenue (285) 704
---------------------------------------------- --------- ---------
(Decrease) / increase in provisions (419) 581
---------------------------------------------- --------- ---------
Cash utilised in operations (12,124) (8,755)
---------------------------------------------- --------- ---------
Tax received 3 220
---------------------------------------------- --------- ---------
Net cash flow from operating activities (12,121) (8,535)
---------------------------------------------- --------- ---------
Investing activities
--------------------------------------------- --------- ---------
Purchase of property, plant and
equipment (532) (624)
---------------------------------------------- --------- ---------
Expenditure on intangible assets (3) (8)
---------------------------------------------- --------- ---------
Payment of deferred consideration - (188)
---------------------------------------------- --------- ---------
Interest received 45 32
---------------------------------------------- --------- ---------
Net cash flow utilised in investing
activities (490) (788)
---------------------------------------------- --------- ---------
Financing activities
--------------------------------------------- --------- ---------
Proceeds from issue of shares 7,350 18,700
---------------------------------------------- --------- ---------
Share issue costs (273) (677)
---------------------------------------------- --------- ---------
Net cash flow from financing activities 7,077 18,023
---------------------------------------------- --------- ---------
Net (decrease)/ increase in cash
and cash equivalents (5,534) 8,700
---------------------------------------------- --------- ---------
Cash and cash equivalents at beginning
of year 14,246 5,544
---------------------------------------------- --------- ---------
Effect of foreign exchange rate
changes on cash and cash equivalents (11) 2
---------------------------------------------- --------- ---------
Cash and cash equivalents at end
of year 8,701 14,246
---------------------------------------------- --------- ---------
Notes to the financial information
1. Accounting policies
Basis of preparation
The Annual Financial Report announcement was approved by the
Board of Directors on 22 June 2015.
The financial information set out in this Annual Report results
announcement for the year ended 31 March 2015 does not constitute
the Group's statutory accounts as defined by s435 of the Companies
Act but has been extracted from the 2015 statutory accounts on
which an unqualified audit report has been made by the auditors,
and which did not contain an emphasis of matter paragraph nor a
statement under section 498(2) or (3) of CA 2006. The financial
information included in the Annual Report announcement for the
prior year ended 31 March 2014 has been extracted from the 2014
statutory accounts on which an unqualified audit report has been
made by the auditors, and which did not contain an emphasis of
matter paragraph nor a statement under section 237(2) or (3) of CA
1985.
The Group's consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU"). The accounting
policies have been consistently applied to all periods presented
and are consistent with those presented in the 2015 statutory
accounts.
The audited financial statements for the year ended 31 March
2014 have been delivered to the Registrar of Companies. The Annual
Report for the year ended 31 March 2015 will be mailed to
shareholders at the end of July 2015 and will be delivered to the
Registrar of Companies following the Annual General Meeting which
will be held in September 2015 at the Company's office at Cargo
Works, 1-2 Hatfields, London SE1 9PG.
Going concern
The Group's net loss for the year was GBP17.9 million (2014:
GBP14.6 million). As at 31 March 2015 the Group had net current
assets of GBP18.1 million (2014: GBP20.5 million) and cash reserves
of GBP8.7 million (2014: GBP14.2 million).
In April 2015 an agreement was signed with HSBC Bank plc for a
GBP5.0 million secured working capital facility to provide pre and
post-shipment finance in relation to export activities across the
Group. The facility is partially guaranteed by the UK Export
Finance Guarantees Department. The interest rate for any borrowings
under this facility is 3% over the bank's sterling base rate. The
facility will be reviewed on an annual basis as part of our wider
banking facilities with HSBC Bank Plc in September each year. There
are no indications that the facility (along with our wider banking
facilities) will not be renewed in September and as a result this
facility has been factored in to cash flow projections for the
Group. Should the facility not be renewed in September, mitigating
actions can be taken to manage our cash flows.
The Board has reviewed these cash flow forecasts for the period
up to and including 30 September 2016. These forecasts and
projections take into account reasonably possible changes in
trading performance and show that the Group will be able to operate
within the level of current funding resources. The Directors
therefore believe there is sufficient cash available to the Group
to manage through these requirements.
As with all businesses, there are particular times of the year
where the Group's working capital requirements are at their peak.
However, the Group is well placed to manage business risk
effectively and the Board reviews the Group's performance against
budgets and forecasts on a regular basis to ensure action is taken
where needed.
The Directors therefore are satisfied that the Group has
adequate resources to continue operating for the foreseeable
future. For this reason they have adopted the going concern basis
in preparing the financial statements.
2. Segmental information
The Group is organised into the 'Services' and 'Products'
Divisions for internal management, reporting and decision-making,
based on the nature of the products and services of the Group's
businesses. Managers have been appointed within Services and
Products, who report to members of the Board. These are the
reportable operating segments in accordance with IFRS 8 'Operating
Segments'.
Services Products Central Total
2015 2015 2015 2015
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ --------- --------- --------- ---------
Total segment revenue 7,460 12,272 - 19,732
------------------------------------------ --------- --------- --------- ---------
Inter-segment revenue - (330) - (330)
------------------------------------------ --------- --------- --------- ---------
Revenue 7,460 11,942 - 19,402
------------------------------------------ --------- --------- --------- ---------
Depreciation 55 575 - 630
------------------------------------------ --------- --------- --------- ---------
Segment adjusted operating profit/(loss) 538 (7,046) (4,016) (10,524)
------------------------------------------ --------- --------- --------- ---------
Amortisation of intangibles
initially recognised on acquisition (430) (1,435) - (1,865)
------------------------------------------ --------- --------- --------- ---------
Loss on disposal of businesses - (103) - (103)
------------------------------------------ --------- --------- --------- ---------
Impairment of goodwill - (6,250) - (6,250)
------------------------------------------ --------- --------- --------- ---------
Segment operating profit/(loss) 108 (14,834) (4,016) (18,742)
------------------------------------------ --------- --------- --------- ---------
Finance income 45
------------------------------------------ --------- --------- --------- ---------
Loss before tax (18,697)
------------------------------------------ --------- --------- --------- ---------
Income tax credit 785
------------------------------------------ --------- --------- --------- ---------
Loss for the year (17,912)
------------------------------------------ --------- --------- --------- ---------
Services Products Central Total
2014 2014 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------- --------- ---------
Total segment revenue 4,527 14,696 - 19,223
--------------------------------------- --------- --------- --------- ---------
Inter-segment revenue - (181) - (181)
--------------------------------------- --------- --------- --------- ---------
Revenue 4,527 14,515 - 19,042
--------------------------------------- --------- --------- --------- ---------
Depreciation 70 669 - 739
--------------------------------------- --------- --------- --------- ---------
Segment adjusted operating loss (97) (7,257) (4,671) (12,025)
--------------------------------------- --------- --------- --------- ---------
Amortisation of intangibles
initially recognised on acquisition (432) (1,301) - (1,733)
--------------------------------------- --------- --------- --------- ---------
Adjustments to deferred consideration - 706 - 706
--------------------------------------- --------- --------- --------- ---------
Impairment of intangible assets - (160) - (160)
--------------------------------------- --------- --------- --------- ---------
Reorganisation costs - - (1,860) (1,860)
--------------------------------------- --------- --------- --------- ---------
Segment operating loss (529) (8,012) (6,531) (15,072)
--------------------------------------- --------- --------- --------- ---------
Finance income 32
--------------------------------------- --------- --------- --------- ---------
Finance costs (27)
--------------------------------------- --------- --------- --------- ---------
Loss before tax (15,067)
--------------------------------------- --------- --------- --------- ---------
Income tax credit 458
--------------------------------------- --------- --------- --------- ---------
Loss for the year (14,609)
--------------------------------------- --------- --------- --------- ---------
3. 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:
2015 2014
GBP'000 GBP'000
---------------------------------------- --------- ---------
Amortisation of intangibles initially
recognised on acquisition 1,865 1,733
---------------------------------------- --------- ---------
Loss on disposal of businesses (i) 103 -
---------------------------------------- --------- ---------
Adjustments to deferred consideration
(ii) - (679)
---------------------------------------- --------- ---------
Reorganisation costs - 1,860
---------------------------------------- --------- ---------
Impairment of goodwill and intangibles
(note 7) (iii) 6,250 160
---------------------------------------- --------- ---------
Total adjustments 8,218 3,074
---------------------------------------- --------- ---------
(i) During the year ended 31 March 2015 Margaux Matrix Limited
and Visimetrics (UK) Limited, two wholly owned subsidiaries, were
each disposed of for GBP1 consideration
(ii) Adjustments to deferred consideration in the prior year comprise releases of GBP494,000 and reassessments of GBP212,000 partly offset by the unwind of discount on deferred consideration balances of GBP27,000.
(iii) A GBP6.25m non-cash impairment charge has been recorded
against the carrying value of goodwill within the Products division
and has been separately disclosed within Other Costs in the
Consolidated Income Statement. This impairment reflects a period of
product development, which has delayed the Group's ability to
leverage value from the integrated businesses in the expected
timeframes, along with delays in sales cycles as reported to the
market by the Group on 11 August 2014. Further detail is given in
note 7.
In the prior year a restructuring programme resulted in an
impairment, within the products operating segment, of certain
customer relationships and intellectual property in relation to the
LMW and Visimetrics acquired businesses. The total impairment of
GBP160,000 was separately disclosed within Other Costs in the
Consolidated Income Statement. As a result the intangible assets of
each entity have been impaired by GBP67,000 and GBP93,000
respectively, the carrying value of these assets is now nil.
4. Loss per share
Unadjusted loss per share
Weighted Weighted
Loss average Loss Loss average Loss
after number per after number per
taxation of shares share taxation of shares share
2015 2015 2015 2014 2014 2014
GBP'000 No. Pence GBP'000 No. Pence
------------------ ---------- ----------- -------- ---------- ----------- --------
Basic loss per
share (17,912) 69,305,105 (25.85) (14,609) 56,472,084 (25.87)
------------------ ---------- ----------- -------- ---------- ----------- --------
Diluted loss per
share (17,912) 69,305,105 (25.85) (14,609) 56,472,084 (25.87)
------------------ ---------- ----------- -------- ---------- ----------- --------
Adjusted loss per share
Weighted Weighted
Loss average Loss Loss average Loss
after number per after number per
taxation of shares share taxation of shares share
2015 2015 2015 2014 2014 2014
GBP'000 No. Pence GBP'000 No. Pence
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Loss attributable
to ordinary shareholders (17,912) 69,305,105 (25.85) (14,609) 56,472,084 (25.87)
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Add back:
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Amortisation of
acquired intangible
assets, net of
tax 1,771 - 2.56 1,559 - 2.76
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Disposal of businesses 103 - 0.15 - - -
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Adjustments to
deferred consideration - - - (679) - (1.20)
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Reorganisation
costs - - - 1,432 - 2.54
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Impairment of
goodwill 6,250 - 9.02 - - -
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Impairment of
acquired intangibles - - - 160 - 0.28
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Basic adjusted
loss per share (9,788) 69,305,105 (14.12) (12,137) 56,472,084 (21.49)
--------------------------- ---------- ----------- -------- ---------- ----------- --------
Diluted adjusted
loss per share (9,788) 69,305,105 (14.12) (12,137) 56,472,084 (21.49)
--------------------------- ---------- ----------- -------- ---------- ----------- --------
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 2015 and based on the share price of GBP0.385 (2014:
GBP0.875) on that day, no (2014: no) Ordinary Shares would have
been issued in respect of the Incentive Share conversion. Full
details of 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.
5. Trade and other receivables
Gross Provision Net Gross Provision Net
carrying for carrying carrying for carrying
amounts impairment amounts amounts impairment amounts
2015 2015 2015 2014 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- ------------ ---------- ---------- ------------ ----------
Trade receivables 9,112 (1,208) 7,904 6,562 (499) 6,063
--------------------- ---------- ------------ ---------- ---------- ------------ ----------
Prepayments 439 - 439 430 - 430
--------------------- ---------- ------------ ---------- ---------- ------------ ----------
Accrued income 350 - 350 119 - 119
--------------------- ---------- ------------ ---------- ---------- ------------ ----------
Amounts recoverable
on contracts - - - 692 - 692
--------------------- ---------- ------------ ---------- ---------- ------------ ----------
Other receivables 176 - 176 402 - 402
--------------------- ---------- ------------ ---------- ---------- ------------ ----------
10,077 (1,208) 8,869 8,205 (499) 7,706
--------------------- ---------- ------------ ---------- ---------- ------------ ----------
The Group has experienced credit risk which reflects its early
stage of development into international markets, as reflected in
the provision for doubtful debts. As the Group further establishes
itself and its products into new and existing geographies, so its
exposure to credit risk is expected to reduce.
6. Trade and other payables
2015 2014
GBP'000 GBP'000
--------------------------------- --------- ---------
Current
--------------------------------- --------- ---------
Trade payables 3,100 3,096
--------------------------------- --------- ---------
Accruals 1,296 1,173
--------------------------------- --------- ---------
Deferred income 419 704
--------------------------------- --------- ---------
Social security and other taxes 279 520
--------------------------------- --------- ---------
Other payables 167 115
--------------------------------- --------- ---------
5,261 5,608
--------------------------------- --------- ---------
7. Goodwill
Goodwill
GBP'000
------------------------------------ ---------
At 31 March 2013 and 31 March 2014 24,802
------------------------------------ ---------
Impairment of goodwill (6,250)
------------------------------------ ---------
Exchange movements (366)
------------------------------------ ---------
At 31 March 2015 18,186
------------------------------------ ---------
Carrying amount of goodwill allocated to operating segments
2015 2014
GBP'000 GBP'000
---------- --------- ---------
Services 3,582 3,582
---------- --------- ---------
Products 14,604 21,220
---------- --------- ---------
18,186 24,802
---------- --------- ---------
Goodwill acquired through business combinations has been
allocated for impairment testing purposes to two groups of
cash-generating Units ('CGUs'). These groups of CGUs are its two
operating segments 'Services' and 'Products' as the goodwill
relates to synergies at this level. The Group conducts annual
impairment tests on the carrying value of the CGUs in the statement
of financial position. Although required to perform annual
impairment tests, these do not have to take place at 31 March but
the test should be consistently carried out at the same time
annually. The Group carries out its annual impairment testing as at
28 February each year. Impairment testing is only re-performed if
an impairment triggering event occurs in the intervening period. As
announced on 11 August 2014, the Group's original forecasts for the
year ended 31 March 2015 were revised downwards. As a result the
Group conducted an impairment test on the carrying value of the
Product division as at 30 September 2014.
Value in use calculations were used to determine the recoverable
amount of the Product cash-generating unit at that time. The key
assumptions for the value in use calculations were the forecast
revenue growth of the CGU, cost allocations, the discount rate
applied and the long-term growth rate of the net operating cash
flows. In determining the key assumptions, management took into
consideration the nature of the markets in which it operates, the
ability of the CGU to exploit those opportunities and the current
economic climate, the resulting impact on expected growth, cost
base and pre-tax discount rates, and the pressure this placed on
impairment calculations.
The Group prepared cash flow forecasts for the cash-generating
unit based on the most recent two and a half year detailed
financial forecasts at that time. These forecasts had been
revisited in light of the announcement on 11 August 2014 and
progression of the business through its phases of development. The
cash flow forecasts were based on an internal assessment of the
strength of the CGU in the markets in which it operates, the costs
attributable to the CGU and the expected growth in revenue and
margins, reflecting the size and opportunities in its core
strategic markets. Revenue growth in years two and three was
forecast at 40% and 20% per annum respectively based on lowered
forecast, with revenue growth of 2.5% assumed from year four
onwards, being an external estimate of the UK's long-term growth
rate. A discount rate of 11.6% was applied. Based on these
assumptions the recoverable amount was determined to be GBP24.5
million and an impairment charge of GBP6.25 million arose.
A further impairment test has been performed on both the Product
and Services divisions as at 28 February 2015 consistent with
annual review cycles.
Value in use calculations are again used to determine the
recoverable amount of cash-generating units. The key assumptions
for the value in use calculations remain the forecast revenue
growth of each CGU, the discount rate applied and the long-term
growth rate of the net operating cash flows, along with the gross
margin for Products. In determining the key assumptions, management
have taken into consideration the expected growth of the markets in
which it operates, the ability of the CGU to exploit those
opportunities and the current economic climate, the resulting
impact on expected growth and pre-tax discount rates, and the
pressure this places on impairment calculations. The cost base of
the company has stabilised following the restructuring programme
undertaken by the Group in the prior year and as a result the cost
base is not considered to be a key assumption.
The Group prepares cash flow forecasts for these cash-generating
units based on the most recent three-year detailed financial
forecasts. The table below sets out the key assumptions included in
these forecasts:
Products Services
----------------------------------- -------------- --------------
2015 2014 2015 2014
----------------------------------- ------ ------ ------ ------
Revenue growth compound from
FY15 to FY18 (years one to
three)(1) 46% 40% 0% 20%
----------------------------------- ------ ------ ------ ------
Revenue growth from FY19 onwards
(year four onwards) (2) 2.5% 2.5% 2.5% 2.5%
----------------------------------- ------ ------ ------ ------
Gross margin improvement compound
from FY15 to FY18 (years one
to three) (3) 8% 0% 0% 16%
----------------------------------- ------ ------ ------ ------
Discount rate (4) 10.6% 11.6% 10.0% 10.9%
----------------------------------- ------ ------ ------ ------
(1) Forecasts are based on an internal assessment of the
strength of the CGU in the markets in which it operates with the
expected growth reflecting the opportunities in its core strategic
markets, sales pipeline and relationships being developed.
(2) Revenue growth of 2.5% is an external estimate of the UK's
long-term growth rate.
(3) Product gross margin is forecast to improve against FY15 as
the product mix evolves through the next three years to include a
greater proportion of software and standard solution sales. The
forecast gross margin is in line with gross margins achieved by the
Products segment in the recent past.
(4) Discount rate is based on the weighted cost of capital
applying to businesses in the same sector, and reflects the current
market assessments of the time value of money and of the risks
specific to the cash generating units.
As a result of these assumptions, no impairment losses have been
recognised to date for Services. No further impairment loss arises
for Products based on these base assumptions and a full three-year
detailed forecast, compared to a two and a half year detailed
forecast as at 30 September 2014.
The Directors consider that an absolute change in the key
assumptions set out below is reasonably possible.
Products Services
--------------------------------------- --------- ---------
Reduction in forecast revenue growth
compound from FY15 to FY18 (years
one to three) -5% -2%
--------------------------------------- --------- ---------
Reduction in forecast revenue growth
FY19 onwards (year four onwards) -2.5% -2.5%
--------------------------------------- --------- ---------
Reduction in gross margin improvement
compound from FY15 to FY18 (years
one to three) -3% n/a
--------------------------------------- --------- ---------
Increase in discount rate (4) 2.5% 2.5%
--------------------------------------- --------- ---------
If these assumptions were to change in isolation, they would not
result in an impairment charge of goodwill within either Services
or Products. The value in use calculations are most sensitive to
changes in assumptions around forecast revenue growth and gross
margin improvement. An absolute reduction in the forecast revenue
growth of 7% (compound over years one to three) or a 4% reduction
in gross margin improvement (compound over years one to three)
would result in the recoverable amount of Products goodwill being
equal to the carrying amount (a reduction in the headroom from
GBP14.4 million to GBPnil).
If all key assumptions were to change in combination, a further
impairment charge would be recognised for the current carrying
value of goodwill in relation to the Products segment. There would
be no impairment charge within Services.
8. Share capital
Number GBP'000
------------------------------------------- ----------- --------
Authorised, allotted, called-up and fully
paid
------------------------------------------- ----------- --------
Ordinary Shares of 1 pence each
------------------------------------------- ----------- --------
At 31 March 2013 50,959,590 510
------------------------------------------- ----------- --------
Shares issued in the year 13,665,026 136
------------------------------------------- ----------- --------
At 31 March 2014 64,624,616 646
------------------------------------------- ----------- --------
Shares issued in the year 19,864,865 199
------------------------------------------- ----------- --------
At 31 March 2015 84,489,481 845
------------------------------------------- ----------- --------
On 5 January 2015 19,864,865 Ordinary Shares were issued at 37
pence per share for a total cash consideration of GBP7,350,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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