COE Group plc - Results for the six months ended 31 December 2007
25 Mar 2008
COE, the AIM-quoted developer and supplier of advanced video surveillance systems, announces unaudited results for the 6 months ended 31 December 2007 (H1 FY08).
Financial Highlights
• Gross profit on new orders £949k (H1
FY07: £785k, 20.9% increase).
• Gross profit up 3.3% to £1,089k (H1 FY07:
£1,054k) on lower turnover of
£2,075k (H1 FY07: £2,477k),
due to management focus on contract
profitability.
• Overheads higher at £1,662k (H1 FY07:
£1,306k, 27.3% increase) and
operating loss higher at £573k (H1
FY07: £252k) due to previously announced
sales force and management team
expansion.
• Net cash at 31 Dec 2007: £495k (31 Dec
2006: net debt £150k).
• Further growth in new order in the current
period (H2 FY08): Order
intake in first three months of the
current half (H2 FY08) is the highest
the company has experienced in 4
years.
Operational Highlights
• Integrated IP systems increasingly in demand -
sales quotes for new
systems formed 31% of quotes in the 90
days to 31 December 2007.
• First competitive wins for new software products:
o
X-Net Video Management and Recording System to Martignano
Tunnel,
Italy.
o COE
Genesys Command and Control System, to Kaohsiung Metro, Taiwan.
• Number of major competitive wins increased including:
o
Autoroute Blanche (France).
o Road
traffic system for number plate recognition (UK).
o
further growth at Strasbourg, a leading all-IP Urban
surveillance
system in France.
• Management team completed with hiring of a
new Global Sales Director and
Engineering Manager.
About COE:
COE Ltd develops and supplies integrated IP video surveillance (CCTV) systems for some of the most complex high profile sites worldwide. COE products and systems allow users to achieve faultless and cost-effective video surveillance in safety critical operations and rugged environments year after year, by delivering very high quality video, high reliability and extensive third party integration. COE provides both IP and hybrid IP/analogue solutions so that customers have the option of leveraging existing installations.
The Company has over 10,000 installations worldwide across three main sectors - traffic & transport, heavy industrial and urban surveillance. References include the London Congestion Charge network, underground and high-speed rail systems worldwide, including the UK, Singapore, France, Spain, Germany, Hong Kong and Delhi; airports across Germany, Hong Kong and SE Asia, and road systems worldwide. City-centre systems include over 35 UK towns and cities, while industrial complexes include the South Parrs gas field in the Middle East.
COE works closely with selected systems integrators, helping them to deliver the most competitive overall solutions for end-users. The Company provides support through the entire lifecycle including design, supply, on-site test, commissioning and long-term maintenance.
Please visit www.coe.co.uk
CHAIRMAN'S STATEMENT
Having taken up the reins midway through COE's strategic development, I am pleased to announce that the Company continues to execute and achieve its growth plan laid out in March 2007. The results of the sales force expansion are now starting to show tangible benefits through an increased number of firm orders being won. Order intake in the current half (H2 FY08) is the highest the company has experienced in 4 years. This growth is being seen in several geographies and is both in project-based business and in routine orders.
The strengthening and restructuring of the management team is now complete following the recruitment of the Global Sales Director and the Engineering Manager. The Company has launched its integrated IP Product portfolio which builds on COE's 7-year track record in IP systems.
First wins and shipments of several important new products were achieved including both of the new Command and Control Systems. COE's Video Management System won a competitive bid to supply a tunnel traffic management customer in Italy, while COE Genesys was chosen by Singapore Technologies Electronics for the Kaohsiung Metro in Taiwan. Command and Control Systems are a key element of integrated IP surveillance systems, which form the fastest growing demand segment amongst COE's customers.
Looking further ahead, leading indicators are showing positive
signs:
1. Firm quotes submitted
during the period continued the steep growth
experienced
in previous quarters due to improvement in the product
portfolio,
sales force expansion and increased management skills and
capacity.
2. Significant volumes
of firm quotes were submitted for all the products
launched
during the period including the Company's new H-Box (a
miniaturised
video encoder which compresses video into lower bandwidth
than its
predecessors to allow a reduction in network costs) and its
VMS (a
control room management and recording system).
FINANCIAL REPORT
Gross profits for the half year rose by 3.3% to £1,089k (2007: £1,054k) on lower turnover of £2,075k (2007: £2,477k) due to management's higher focus on contract profitability. The Company announced during March 2007 that the operational benefits of the expanded sales force were not expected until 2008 and these are now starting to be seen in current trading (H2 FY08).
The loss for the half year of £573k (H1 FY07: £252k) results largely from investment in skills, resources and new products to accelerate growth which increased overheads in the period to £1,662k (H1 FY07: £1,306k, 27.3%). The benefits of this investment are anticipated by the Directors to be realised in future periods.
The trend in gross margin improvements was maintained (H1 FY08: 52%, H2 FY07: 44%, H1 FY07: 42%).
These interim financial statements have been prepared using International Financial Reporting Standards (IFRS) and the comparative figures re-stated accordingly. The main difference under IFRS is the treatment of research and development expenditure. Under UK GAAP this was expensed as incurred. IFRS requires the expenditure which meets certain criteria to be capitalised and amortised over the period of its economic benefit.
BALANCE SHEET AND FINANCING
Although the Group is consuming cash as it invests in expansion the net cash position at 31 December 2007 was £495k (31 December 2006: net debt £150K).
As predicted during 2007, after the 80% reduction in stocks over previous years, period end stocks rose slightly to £233k (30 June 2007: £167k). The Group's new sourcing arrangements are now established and have allowed continued use of stocks held by sub-contractors to reduce the Company's lead-times and improve its working capital.
The loan notes which had been on the balance sheet since 2003 together with the ring-fenced monies on deposit expired on 31st December 2007. These loan notes have therefore been repaid and this completes the restructuring of the Group's balance sheet and, subject to HM Revenue & Customs approval, allows Venture Capital Trusts to gain income tax relief against purchases of new shares in the Group from 1 January 2008.
BOARD AND STAFF CHANGES
A Global Sales Director was hired in September 2007. He brings extensive experience from the IT industry including a lengthy period of growth with Compaq Computer from start-up to billion dollar turnover. An Engineering Manager also joined during the period from Pace Micro Technology, bringing over 15 years' project management experience including over 10 years managing embedded and PC software development and maintenance.
POST BALANCE SHEET EVENTS
On 11 January 2008, the board announced that Stephen Allott was stepping down as chairman and resigning from the Board. Stephen has helped COE formally and informally for over 3 years and we wish him well. Following Stephen's resignation, I took over as non-executive Chairman.
CONCLUSION AND OUTLOOK
The Company has sharpened its focus on the transport and traffic segment of the global video surveillance markets. This is the fastest growing segment of the global video surveillance markets and the Company's references, reputation and products are well received. The Company has continued to build its IP products towards the integrated systems now demanded by customers and is experiencing success with these new products as well as with its established IP and fibre products.
The growth plan announced in March 2007, which involved significant increases in the Company's management capability and sales resources, is being executed and new business wins in the current period (H2 FY08) have resulted in growth as these new resources start to deliver.
The Board is focussed on continuing to deliver the benefits of this investment during the current period to establish the Company at a materially higher level, and form a platform for further growth.
Dr Alison Fielding
Chairman
25 March 2008
COE Group Plc
Andrew Wallace, Chief
Executive
Officer
0113 230 8862
Ian Jefferson, Finance
Director
0113 230 8826
KBC Peel Hunt
Ltd
0207 418 8900
Oliver Scott
Nicholas Marren
The full text of this announcement is available on RNS.
