TIDMDGB
RNS Number : 8478T
Digital Barriers plc
01 April 2016
1 April 2016
Digital Barriers plc
("Digital Barriers")
Divestment of Services Division and Trading Update
The Board of Directors (the "Board") of Digital Barriers (AIM:
DGB) (the "Group"), the specialist provider of visually intelligent
solutions to the global surveillance, security and safety markets,
today announces the proposed disposal of its non-core Services
Division and an update on trading for the continuing businesses for
the financial year ended 31 March 2016.
Divestment of Services division
As indicated in the interim results announcement on 11 December
2015, the Board believes that the Services division is no longer
strategic to the Group's future. As a consequence, the Board has
now signed an agreement for the proposed disposal of the business
to its existing management team for a nominal consideration. The
transaction is expected to complete within six weeks. The division
will be treated as a discontinued business in the Group's financial
results for the year ended 31 March 2016.
The disposal of the Services division, the performance of which
has lagged significantly behind the Solutions division for both
growth and gross margins, significantly tightens the Group's
strategic focus on developing and selling high-tech, higher margin
solutions into the global surveillance, security and safety
markets.
The Group is selling the limited ongoing customer contracts,
records and relationships within its Services division, as well as
certain assets including vehicle leases and limited stock and
moveable assets. The approximate book value of the assets expected
to be transferred is GBP0.2 million. The Group is also transferring
the division's employees, by way of a TUPE process. In combination
the Board expects annualised savings from its cost base of
approximately GBP1.0 million from this disposal. The purchaser is
Esotec Limited, a private limited company owned by Andrew Durham,
one of the current employees of the division. In the financial year
ended 31 March 2015, the last period for which audited financials
are available, the division recorded revenues of GBP7.5 million and
segment adjusted profits of GBP0.1 million, these results reflected
a non-repeating project for the protection of a major UK sporting
event which was valued at around GBP3.1 million. For the period
just ended, the Board expects the division to record materially
reduced revenues of around GBP4.0 million and a segment adjusted
loss of approximately GBP1.0 million. The non-cash goodwill write
down on disposal will be approximately GBP3.5 million. Despite the
nominal consideration being paid on disposal, the Board believes
that the transaction represents good value for the Group's
shareholders given the reduction in cost base, whilst enabling the
Group to focus entirely on its strategic Solutions division which
delivers materially better growth and margin potential.
Trading performance of the Services Division in the period
The performance of the Services division was anticipated to be
significantly weighted towards the second half of the financial
year after a disappointing first half and as the result of
continued budgetary pressures across its UK Government customer
base. Although the division has delivered sequential growth in
revenue in the second half of approximately 50%, it has not
recovered as much as the Board originally expected and sales for
the year ended 31 March 2016 are expected to be circa GBP4.0m
(2015: GBP7.5m).
Continuing Group Trading and Outlook
The Group's continuing business comprises the Solutions division
and Brimtek, the US surveillance technology company acquired by the
Group on 2 March 2016.
The Solutions division has traded strongly throughout the
period, delivering year-on-year organic revenue growth of around
50% and revenue in the second half of the financial year
approximately 70% higher than in the first half. Driven by this
strong momentum, revenue for the Solutions division, including
Brimtek, is anticipated to be in line with the Board's
expectations, with adjusted losses for the division expected to
reduce by around 50% year-on year.
The integration of Brimtek is well underway and the business is
trading modestly ahead of original expectations for the first month
under ownership. This includes the $5.9 million contract with a
government agency, as announced on 15 March 2016, which will be
delivered in the first half of the new financial year.
International performance this year has been particularly
strong, with non-UK revenue expected to grow more than 100%
year-on-year to now represent approximately 80% of the Group's
overall Solutions revenue (excluding Brimtek). Growth has been
especially strong in Asia Pacific and the United States, with
multiple significant contracts secured in both regions. The Middle
East has made good progress in the period, establishing a much
improved pipeline which includes the framework contract secured
with Etihad Etisalat (Mobily) as announced on 29 February 2016.
Within Europe, whilst the UK remains a challenging market, the
Group's increased focus on the wider Continental Europe region is
yielding some positive early momentum.
The Group continues to secure material contracts with new and
existing customers and can announce that contracts with major
government agencies in Asia Pacific, valued at more than GBP2
million in combination, were secured and delivered late in the
period. These wins build on notable successes for each of the
Group's solution areas, with the period representing the most
successful ever for the Group's class-leading EdgeVis, ThruVision
and SafeZone technologies.
Looking ahead, the continued momentum within the Solutions
division and the addition of Brimtek to the Group gives the Board
renewed confidence in delivering a profit in the financial year
ending 31 March 2017. This confidence is further underscored by the
proposed disposal of the non-core Services division, which will
improve overall gross margins for the Group going forward.
Zak Doffman, Chief Executive Officer of Digital Barriers
commented:
"Our strategy since inception has been to establish a
high-momentum technology business capable of delivering continued
growth by selling proprietary, IP-rich solutions to flagship
customers around the world. This has been an important year for us
in delivering against our strategy and the strong growth and
continued momentum of our Solutions division has seen us reach an
inflexion point - both in terms of our growth and in our relevance
to customers.
Our Services division helped us to establish our technology
credentials across major government agencies in our early years,
but it is no longer strategic to the future of the Group. The
proposed and advanced divestment of this division, combined with
the acquisition of Brimtek, means that we enter the new financial
year in better shape than ever before, with our sights set firmly
on delivering the growth needed to deliver profitability in the
year now underway."
For further information, please contact:
Digital Barriers plc Tel: 0203 553 5888
Zak Doffman, Chief
Executive Officer
Sharon Cooper, Chief
Financial Officer
Investec Investment Tel: 020 7597 5970
Banking
Andrew Pinder/ Dominic
Emery
FTI Consulting Tel: 020 3727 1000
Edward Bridges/ Matt
Dixon/ Harry Staight
About Digital Barriers
Digital Barriers provides visually intelligent solutions to the
global surveillance, security and safety markets. We deliver
zero-latency streaming and analysis of secure video and related
intelligence over wireless networks, including cellular, satellite,
IP mesh and cloud, utilising significantly less bandwidth than
standard technologies. Our rapidly-installed fixed and mobile
solutions for covert, remote and wide-area deployments, as well as
vehicle and body-worn applications, have been sold into more than
fifty countries, and have been proven in some of the world's most
demanding operational environments. We also provide advanced video
content analysis and body scanning to identify safety concerns and
threats in real-time.
www.digitalbarriers.com
This information is provided by RNS
The company news service from the London Stock Exchange
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