Amino Technologies plc interim results for the six months ended 31 May 2013

Financial Overview 

• Revenue of £20.1m (H1 2012: £20.1m)
• H1 operating profit increased to £2.6m (H1 2012: £0.2m)
• Operating profit before exceptional items up 735% to £1.7m (H1 2012: £0.2m)
• Total operating profit figure includes previously announced duties rebate of £1.7m and restructuring cost of £0.7m
• EBITDA before exceptional items up 83% to £3.3m (H1 2012:  £1.8m)
• Gross profit up 30% to £9.3m (H1 2012: £7.1m) and gross margin improvement of 10.8 percentage points to 46.2% (H1 2012: 35.4%)
• Basic earnings per share excluding exceptional items increased to 3.23p (H1 2012: 0.34p)
• Increase of 32% in net cash balance to £18.2m (H1 2012: £13.9m) driven by continued margin focus, tight cost control and strong working capital management
• Interim dividend of 1p per share - with commitment to the progressive full year dividend policy announced at the end of 2011.  

Business highlights

• Focused "win back" campaigns secure North American market growth
• Lower specification product secures important contract wins in emerging markets
• Positioned strongly and gaining traction in "pure OTT" market
• Live home media centre progressing to plan with general availability towards the end of the year
• Shortened lead times via lean supply chain help secure customer wins
• Research and development teamwork benefits from single site focus
• Margin enhancement as all customers migrate to current product range

Commenting on the results Keith Todd CBE, Non-Executive Chairman said:

"This solid set of results underlines the progress Amino is making against its goal of profitable growth and improvements in shareholder returns. During the period, we have enhanced our competitiveness in our markets through a clear and compelling proposition - quality robust products, operational performance and rapid delivery to meet demanding customer expectations. Our ability to flex our portfolio is demonstrated by new contract wins from target customers in both emerging and established markets.

"In line with our previously announced progressive dividend policy, the Board is pleased to announce that an interim dividend of 1p per share in respect of 2013 will be payable in September 2013. The Company is well placed to continue its growth strategy and the Board remains confident that results for the full year will be in line with current market expectations."

Chairman's statement

Amino has delivered a solid set of half year results as the Company continues to build on the firm foundations established over the last 18 months. Improvements in profitability, gross margins and cash position clearly indicate how the business is consistently executing against its goals. The sharp focus on quality solutions, supported by solid operational performance and a clear-sighted understanding of regional market requirements, is creating a good platform for further profitable growth.

Demand for the Company's offering remains strong. Amino's IPTV portfolio is closely aligned with operator strategies to deliver a mix of pay-TV and new services delivered "over the top" ("OTT") via the open Internet.

The continued focus on software and hardware quality and shortened delivery timescales - supported by expert customer support - has created a powerful proposition in all target markets. Industry-leading low return rates on Amino products have also become a key competitive edge as operators concentrate on reducing deployment and operational costs.

In North America, the benefit of focused customer campaigns has continued. Several "win backs" in highly competitive pitches underline the strength of the Amino brand. During the half year, contracts were secured with customers including HickoryTech and companies who are seeing the benefit of increased investment in fibre networks via the government-backed broadband stimulus programme.

As detailed at the year end, Amino has developed a lower-functionality and specified device for emerging and established markets where cost is the principal purchasing driver. This is proving to be a successful strategy in specific regions with contract and tender wins in Eastern Europe and Latin America.

The growth in the pure OTT market - whereby operators deliver services directly over the open Internet - is also proving attractive, with the Company securing contracts with Russian language TV service KartinaTV and Mexican fibre network operator Maxcom. The previously announced contract with a leading European telecoms operator has experienced some delays in its deployment and, at this time, there is some uncertainty around the timings for product roll-out.  The Company continues to monitor this situation closely and, irrespective of the outcome, the delay does not impact current full year expectations.

As noted at the year end, demand remains muted in Russia. In the Netherlands, the Company has seen demand return to normal levels as the market continues to mature following strong growth during the same period last year.

Amino continues to develop its portfolio to meet future customer demands. Globally, there are a number of key market developments that play to the Company's strengths. The rollout of fibre optic networks in many regions positions operators to deploy more advanced entertainment services using Internet Protocol ("IP") technology, where Amino has over a decade's expertise. In turn, regulatory change allows operators to utilise OTT as a means of extending the reach of their services across networks, further increasing their addressable market. The move towards the "connected" home - whereby IP seamlessly connects security, heating, personal safety and entertainment - is also an encouraging trend.

The Company continues to develop its offering to meet challenges. The high-specification Intel-powered Live home media centre is progressing to plan with general availability towards the end of the year.

The Amino team has also been strengthened with the appointment of two new senior managers covering product management and engineering functions. In addition, the recruitment of regionally-focused sales specialists underlines the Company's commitment to build a strong organisation to continue its good momentum.

Financial progress

A good sales performance delivered underlying revenue for the period at £20.1m, in line with the prior year (H1 2012: £20.1m).

Profitability was strong with gross profit increasing 30% to £9.3m (H1 2012: £7.1m) with operating profit, excluding £1.7m in duties rebate, advancing ahead of the previous year to £1.0m (H1 2012: £0.2m).

The continued focus on margin enhancement delivered headline gross margin improvement up 10.8 percentage points to 46.2% (H1 2012: 35.4%). Factors in this encouraging trend include the migration of all customers on to the Company's current product range, with older devices now removed from the portfolio.

Operational improvement and cost optimisation remain a key focus. Shortening product delivery times via a lean supply chain is becoming a key differentiator in winning business and enhancing margins.

Operating costs have increased by 12.8% to £6.0m (H1 2012: £5.4m) to reflect investment for growth including new senior appointments, regionally-focused sales specialists, R&D resources and incentivisation of staff.

As announced in December 2012, it was decided to close the Company's Swedish office and focus all research and development in Cambridge. The process was completed to plan and the benefits are now starting to feed through in terms of team working. This has resulted in an exceptional cost of £0.7m.

EBITDA before exceptional items showed an 83% uplift year on year to £3.3m (H1 2012: £1.8m) as a result of the gross margin improvement, partially offset by higher costs.

During the period, the Company received two rebates totalling £1.7m in respect of duties paid on previously recognised international product sales. These receipts followed claims and negotiations with the tax authorities which were successfully argued and refunds were received during March and April 2013. There remains a slightly smaller final retrospective claim in respect of other duties paid by the Company but at this time there can be no certainty over timing or likelihood of such a rebate.

The Company's focus on profitable underlying revenue, investment in the cost base and strong working capital management delivered further improvements in the Company's net cash balance, which closed the period at £18.2m (H1 2012: £13.9m).  Although the receipt of duties rebates contributed £1.7m to the net cash balance, this was offset by the payment during the period of the year-end dividend of £1.6m (2011: £1.0m) and settlement of the reorganisation exceptional item which largely reflected the closure of the Swedish office.

The Board remains committed to its progressive dividend policy. The Board announced a 3p per share dividend for 2012, with an expectation that this dividend would grow by no less than 15 per cent per annum for each of the next two years. In addition, the Board is pleased to announce that an interim dividend of 1p per share in respect of H1 2013 will be payable on 20 September 2013. The record date for the interim dividend is 6 September 2013 and the corresponding ex-dividend date is 4 September 2013.

Outlook

Amino has made solid progress in the first half of the current financial year.  The next six months will see continued focus placed on winning profitable business whilst further developing the product portfolio and adding to the net cash position.  The Company has successfully established a leading position within the IPTV industry and the Board is confident that this knowledge and track record will enable Amino to innovate within the wider IP marketplace.  The Company is well placed to continue its growth strategy and the Board remains confident that results for the full year will be in line with current market expectations.

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