Quadnetics secures 77% profits rise despite fall in revenue

SECURITY group Quadnetics has reported a 77% rise in full year pre-tax profits despite falling revenues.

The Warwickshire business, which provides integrated electronic security systems and services to specialist high-end markets, saw its underlying pre-tax profits jump from £1.5m in 2009 to £2.6m last year. This is despite revenues declining to £61.3m compared with £64.7m a year ago.

Underlying operating margin was 4.2%, up from 2% a year ago and the group said the improvement reflected the initial benefits of a major restructuring programme and a significant turnaround within the defence activities of the Synectics Mobile Systems division.

Underlying earnings per share increased by 92% to 12.5p, while it said its balance sheet remained ungeared, with net cash at November 30, 2010 of £3.3m.

The board is recommending a final dividend of 4.5p – the same as last year – to be payable on May 9 to shareholders on the register on March 18. If approved by shareholders, this would bring the total dividend for the final 12 months of the period to 7.0p, again the same as last year.

The group’s order book was up 24% to £27.3m, which compares with £22.1m a year ago.

Aside from the restructuring, operational highlights in the period included the launch of three Synectics products, significant contract wins in banking, prisons and the oil and gas sectors plus the acquisition of a defence joint venture partner to strengthen the group’s surveillance products and technology team.

John Shepherd, Quadnetics chief executive, said: “It is pleasing to see the results of integrating and refocusing the business starting to bear fruit. The significant profit improvement compared to the prior year has been delivered in spite of a 5% reduction in sales. This is in line with our stated aims of striving to increase both absolute profit and return on sales.

“As we continue to focus on selling higher margin integrated systems in our chosen niche markets, we expect this profit trend to continue. The significantly reduced overhead cost means that we will be able to take advantage of improving global market conditions to deliver higher profit margins.”
 
In July, Mr Shepherd said the group would increase the pace of innovation and this has resulted in the launch of three new market leading products.

“The establishment of the Synectics Group Technology Centre at our Sheffield facility will enable us to develop more common-core hardware and software products which we can exploit in many different market opportunities.

“The higher order book gives confidence for further improved performance in 2011,” he added.

For latest Quadnetics share price click here