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Preliminary Announcement of Financial Results Year Ended 31 March 2009
Friday 12th June, 2009
PRELIMINARY ANNOUNCEMENT OF FINANCIAL RESULTS
YEAR ENDED 31 MARCH 2009
HIGHLIGHTS
- Won three major new contracts with global semiconductor companies to integrate our NFC IP into their system devices
- Secured our first major contract in China with a leading smartcard vendor
- Signed joint marketing agreement with NXP to enable us to access new markets
- Secured a significant order for completed Jewel® tickets
- Invested in the development of "Silverstone", our next generation NFC IP, and the EmeraldTM platform aimed at future tag applications
- Elected to the Board of the NFC Forum alongside global leaders including Nokia, Sony, Samsung, Visa, Mastercard and Microsoft
David Wollen, Chief Executive Officer said:
"We are pleased to have made significant strategic advances although we are clearly disappointed at the delays affecting the financial results. Licensing our NFC IP to some of the largest global semiconductor companies and signing our first major RFID development contract in China has put the company in a strong position from which to move forward and continue successfully investing in these markets."
Enquiries:
Innovision Research & Technology plc Tel: 01285 888 200
David Wollen, Chief Executive Officer
Brian McKenzie, Finance Director
KBC Peel Hunt Ltd (Nomad and Broker) Tel: 020 7418 8900
Jonathan Marren
David Anderson
STATEMENT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE
We are pleased to finish a difficult year having made significant strategic advances in deploying our NFC IP and in entering the Chinese market. A series of major contract wins has put the company in a strong position from which to move forward. In Near Field Communications (NFC) we have licensed our technology to some of the largest global semiconductor companies who are already the leaders in the wireless market and we are working in partnership with them to incorporate our NFC IP into their chips targeted at the mobile handset market. In China we won our first major RFID development contract which will produce two chips for sale in early 2010 within China itself.
The semiconductor industry has been greatly affected by the current general economic conditions and most of the major semiconductor companies who are our customers and prospects have been affected by mergers, acquisitions, reorganisations and redundancies. As reported in the Interim Statement, significant changes within one major customer's own business led to an unexpected shortfall in development programmes and a delay in licence revenue. That shortfall continued through the full year as the customer's problems worsened and management changes ensued. We now believe the customer will continue to play a leading role in the industry and we have just concluded a joint marketing and licence deal to capture the opportunities that exist to now take our combined offerings to market.
With the contracts now in place, we are entering an implementation phase with a number of major programmes and we have continued to strengthen the engineering team with a number of key recruits including the appointment of Dr Stephen Morris as Chief Technical Officer in November 2008.
Near Field Communications
The NFC market is getting increasing coverage with positive statements from the payment processors, mobile network operators and handset manufacturers. We are particularly pleased to report that there appears to be a growing consensus amongst the interested parties on how the business models for mobile payments using NFC will work. This will give a major impetus to the NFC market.
Within NFC we have, since the turn of the year, secured three major contracts with global semiconductor companies to incorporate our NFC IP into their system devices targeted at the mobile handset market. The initial stages of these contracts involve delivering engineering services however once we reach production we estimate that each of these deals could generate multi-million pound royalty revenue streams over several years. Securing our NFC IP into a significant proportion of the NFC handsets shipped from 2011 onwards will provide a solid foundation for sales of our tags and peripheral devices to service the applications that will be developed using the NFC functionality. We are making progress within the tag business, supplying into relatively small scale trials for applications such as healthcare, transport ticketing, social networking and entertainment.
China
We have invested in marketing and sales activities within China over the past eighteen months and have already secured our first significant contract with a major smartcard vendor for an analogue design to be sold into the domestic Chinese market. Other prospects are in the pipeline and there is clearly a huge potential to work with local companies to propagate our designs into the local market.
We have also been successful on the supply side in China, setting up efficient and cost effective subcontracted manufacturing for chips and complete tags. This is an important step to securing a position in the tag market over the coming years.
Results for the year
The majority of revenue in the year related to the completion of pre-existing contracted development services. The contracts won recently have had little or no impact on the development engineering revenue as the initial elements are recognised on a percentage completion basis. Clearly we are disappointed to report that overall revenue was, therefore, significantly lower than the previous year at £1.2m (2008: £3.4m).
We maintained our direct investment in our NFC IP, the development of future generations, and new tag products at £1.6m (2008: £1.6m). This investment in dedicated system-on-chip (SoC) IP has been a key element in securing contracts against strong competition and we will continue to enhance the background IP whilst moving into the implementation phase on the current generation with key customers.
Administrative expenses at £3.7m (2008: £3.5m excluding exceptional bad debt provision) have been controlled with the additional spend directed at the patent portfolio and additional sales focus on key markets in China and Japan. Staff costs were slightly lower than the previous year but during the delay in winning new business, we clearly needed to retain our core team in order to secure and deliver that business. We have recruited new engineers since the year end to service the new business and, due to this, staff costs are set to increase going forward.
The loss before tax at £2.9m (2008: £2.1m) is a reflection of the lower revenue caused by the curtailment of the development programme by an existing major customer and the new business coming too late in the year to make any significant impact to the results.
At 31 March 2009, we had cash deposits of £3.6m (2008: £5.6m) and additional current assets of £1.5m (2008: £1.6m). Net cash outflow was £2.0m (2008: £2.5m excluding £6.2m net proceeds from the share placing in July 2007). The improvement in cash flow represents the conversion of receivables to cash particularly in the second half of the year partially offset by funding the additional cash investment in research and development.
Operations Review
We continued to enhance our Integrated Circuit (IC) design capability based in Cirencester with emphasis on near-field data communications and RFID. We are proud to have built a design centre that stands up to the intense scrutiny of major semiconductor players with access to massive resources. We have continued to invest in Electronic Design Automation (EDA) tools which allow our IP to be taken to state of the art processes.
We have played a strong role in the NFC standards body (see www.nfc-forum.org) over the year and have been recognised as one of the key global companies in this market with our election to the Board of the NFC Forum, alongside such companies as Nokia, Sony, Samsung, Visa, Mastercard and Microsoft. This will allow us to stay fully abreast of and directly influence critical developments in the NFC market moving forward. We see this as a major endorsement of the Company and its leading position in NFC IP.
We are members of and have contributed to the European Telecommunications Standards Institute (ETSI) (see www.etsi.org) in order to influence related standards within the telecoms arena. In the transport market we are members of ITSO which provides a specification for secure 'end to end' inter-operable ticketing transactions, utilising relevant ISO and emerging CEN standards. As well as being a direct market for our Jewel® product, transport ticketing represents one of the core use cases for NFC.
Within the product supply area we have undertaken cost reduction programmes in three key areas. We have worked to reduce the intrinsic cost of the chip; to reduce the number of steps in the production process; and put in place alternative supply partners to ensure competitive subcontract pricing. We have had some success selling complete tags and by becoming more closely integrated with our supply chain we make the supply of complete tags and tickets in production volumes more readily deliverable.
Board of Directors
The Board are delighted to welcome Dr Stephen Morris to as the Company's new Chief Technical Officer. Steve joined Innovision in August 2008 and was appointed to the Board in November. He brings with him a wealth of wide ranging experiences from a variety of senior roles in UK and US based companies and is a visiting Professor at the University of Westminster. Steve has already made significant contributions to our current projects and is leading the major expansion of our engineering function.
In last year's report we announced that Marc Borrett, co-founding Director, intended to leave the Company for personal reasons to pursue other interests and in August Marc left. He has made a major contribution to the development of the Company over the years and we wish him well for the future.
Current trading and outlook
We remain focussed on the NFC market where we believe we have unrivalled IP for SoC solutions as evidenced by the recent contract wins with the major suppliers in this market. We have a roadmap in place to maintain this position. NFC market expectations are becoming more solid however the general outlook for the semiconductor industry and the broader handset market is tempering our expectations. We expect mass market consumer handsets with fully integrated NFC to start shipping in late 2010 and for volumes to grow through 2011 to 2015. Our influence on the market has been further enhanced with our election to the Board of the NFC Forum which gives us direct knowledge of upcoming changes and an opportunity to discuss these with the important organisations in the value chain such as handset manufacturers and payment processors.
The business model for the company in NFC remains to propagate its IP with major semiconductor vendors for use in "combo" and other chips designed for the mobile handset and consumer device market. "Combo" chips are a major growth area in handsets and combine multiple wireless functions such as a combination of Bluetooth, WiFi, FM and GPS on a single chip. We are implementing this model in partnership with three leading vendors and expect to progress these to fully integrated designs during 2010.
We are working towards securing a number of additional contracts for our NFC IP with major semiconductor vendors under a similar business model and also through our recent joint marketing agreement with NXP, which represents an opportunity to access markets we are not in a position to service directly but would still provide a significant licence and royalty stream. Once the "combo" chips are designed into the devices, the company will both earn a licence fee and royalties based on the shipments of the "combo" chips, and sell tags for use with these devices.
We believe the potential for the tag market may ultimately be greater than the royalty stream from the devices themselves. Each device will create a market for multiple tags in applications such as smart posters, business cards, quick texting, staff location, music downloads, easy pairing of devices, loyalty/top-up cards, anti-counterfeiting and website redirection. The list is likely to extend rapidly as new applications are conceived and brought online so we have invested in the development of the EmeraldTM platform designed to allow us to create optimised tag ICs for individual applications cost effectively. This leaves us well placed to respond quickly to new use cases and attack this market with a series of niche products. Further developments in this area may include creating tags with additional features such as temperature or pressure sensors, or extra memory capacity.
As a complement to NFC, we continue to build on our expertise within the broader RFID market. In particular we have focussed sales and marketing effort on the market in China which is an exciting potential opportunity for us and, having secured our first significant design win, we expect to show further results with customer engagements during the next year. During the year we were also pleased to have reported a significant order for complete Jewel® tickets including antenna, paper, and custom printing alongside the IC into mass transport systems. The market for limited use contactless ticketing is continuing to develop and we are maximising the opportunity to obtain a return from this area by moving up the value chain. Our priority however remains to secure existing NFC business.
Despite the prevailing uncertain climate, there is no doubt we have made major progress in being selected as the best technical solution to provide NFC IP to some major semiconductor companies. The focus for the next year is the successful implementation of the recent contracts, continued investment until they deliver royalties and securing new programmes with new customers in both NFC and China.
| Malcolm Baggott Chairman 11 June 2009 | David Wollen Chief Executive Officer 11 June 2009 |
| INCOME STATEMENT | 2009 £'000 | 2008 £'000 |
| Revenue | 1,192 | 3,400 |
| Cost of sales | (600) | (1,623) |
| Gross profit | 592 | 1,777 |
| Administrative expenses | (3,731) | (4,150) |
| OPERATING LOSS | (3,139) | (2,373) |
| Investment Income | 216 | 298 |
| LOSS BEFORE TAXATION | (2,923) | (2,075) |
| Income Tax | 334 | 119 |
| LOSS FOR THE YEAR ATTRIBUTABLE TO THE EQUITY | (2,589) | (1,956) |
| SHAREHOLDERS OF THE COMPANY | ||
| LOSS PER SHARE | Pence per share | Pence per share |
| Basic and diluted | (4.20) | (3.41) |
The operating loss for the year arises from the Company’s continuing operations.
| BALANCE SHEET | 2009 £’000 | 2008 £’000 |
| Non-Current Assets | ||
| Property, plant & equipment | 217 | 206 |
| Intangible assets | 646 | 202 |
| Other receivables | 2 | 238 |
865 | 646 | |
| Current Assets | ||
| Inventories | 80 | 6 |
| Trade and other receivables | 1,125 | 2,115 |
| Current tax asset | 310 | 135 |
| Cash and cash equivalents | 3,585 | 5,588 |
5,100 | 7,844 | |
| TOTAL ASSETS | 5,965 | 8,490 |
| Current Liabilities | ||
| Trade and other payables | 607 | 617 |
| Provisions | 99 | 35 |
706 | 652 | |
| Non-Current Liabilities | ||
| Provisions | - | 19 |
- | 19 | |
| TOTAL LIABILITIES | 706 | 671 |
| NET ASSETS | 5,259 | 7,819 |
| Equity | ||
| Share Capital | 615 | 615 |
| Share Premium Account | 21,735 | 21,735 |
| Retained Earnings | (17,091) | (14,531) |
| TOTAL EQUITY ATTRIBUTABLE TO EQUITY | 5,259 | 7,819 |
| SHAREHOLDERS OF THE COMPANY |
| STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY | 2009 £’000 | 2008 £’000 |
| At beginning of year | 7,819 | 3,481 |
| Loss for the year | (2,589) | (1,956) |
| Total recognised income and expense for the year | (2,589) | (1,956) |
| Issue of share capital | - | 6,502 |
| Share issue costs | - | (275) |
| Employee share option scheme | 29 | 67 |
| At end of year | 5,259 | 7,819 |
There are no gains or losses recognised directly in equity.
| CASH FLOW STATEMENT | 2009 £’000 | 2008 £’000 |
| Operating activities | ||
| Cash used in operations | (895) | (2,038) |
| Tax credit received | 160 | 120 |
| Net cash used in operating activities | (735) | (1,918) |
| Investing activities | ||
| Interest received | 209 | 282 |
| Purchases of property, plant & equipment | (143) | (61) |
| Investment in intangible assets | (1,334) | (778) |
| Net cash used in investing activities | (1,268) | (557) |
| Financing activities | ||
| Proceeds on issue of shares | - | 6,502 |
| Share capital issue costs | - | (275) |
| Net cash from financing activities | - | 6,227 |
| Net (decrease) / increase in cash & cash equivalents | (2,003) | 3,752 |
| Cash & cash equivalents at the beginning of the year | 5,588 | 1,836 |
| Cash & cash equivalents at the end of the year | 3,585 | 5,588 |
Notes
1. The figures for the year ended 31 March 2009 and 2008 do not constitute statutory accounts within the meaning of S.240 of the Companies Act 1985. The figures for the year ended 31 March 2009 have been extracted from the statutory accounts for that year which have yet to be delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report. The figures for the year ended 31 March 2008 have been extracted from the statutory accounts for that year, which have been delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report. No statement has been made by the auditor under Section 237(2) or (3) of the Companies Act 1985 in respect of either of these sets of accounts. This announcement was approved by the board of directors on 11 June 2009.
2. The financial statements have been Prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together "IFRS") as endorsed by the European Union. The information in this preliminary announcement has been extracted from the audited financial statements for the year ended 31 March 2009 and as such, does not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards ("IFRS").
The financial statements have been prepared on a going concern basis. The Directors believe that the going concern basis is appropriate, despite the current economic outlook, for the following reasons.
The Company’s forecasts and financial projections, taking account of reasonably possible changes in trading performance, show that the Company will be able to operate within the level of its current cash balances of £3.5m at 31 March 2009 for at least the next twelve months from the date of approval of these financial statements. The Board reviews the forecasts and projections on an at least quarterly basis and would take steps to raise further finance or put facilities in place should these forecasts show a potential future shortfall.
The Company has a robust policy towards treasury risk and cash flow management. Cash flows are monitored on a day to day basis within the Company’s finance function, with emphasis on good working capital management. Recent contract wins mean that the Company is adequately placed to manage its business risks successfully despite the current uncertain economic outlook and challenging macro economic conditions.
These financial statements are presented in sterling as that is the currency of the primary economic environment in which the Company operates.
3. Loss per share
Basic loss per share is calculated by dividing the loss for the year attributable to ordinary shareholders for by the weighted average number of shares in issue during the year. For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. Dilutive potential ordinary shares arise from employee share options. At 31 March 2009 no share options (2008: nil) had an exercise price less than the current share price and consequently the shares related to share options are excluded from the diluted earnings per share calculation and there is no dilution in the earnings per share as a result of outstanding options.
2009 £’000 | 2008 £’000 | |
| Loss for the year | 2,589 | 1,956 |
Number of shares | Number of shares | |
| Weighted average number of shares – basic and diluted | 61,556,121 | 57,298,652 |
4. Notes to the Cash Flow Statement
2009 £’000 | 2008 £’000 | |
| Loss before tax | (2,923) | (2,075) |
| Adjustments for: | ||
| Depreciation of property, plant & equipment | 130 | 164 |
| Loss on disposal of property, plant & equipment | 2 | - |
| Amortisation of intangible assets | 890 | 596 |
| Share based payments | 29 | 68 |
| Increase / (Decrease) in provisions | 45 | (35) |
| Investment income | (216) | (298) |
| Operating cash flows before movements in working capital | (2,043) | (1,580) |
| (Increase) / decrease in inventories | (74) | 9 |
| Decrease / (increase) in receivables | 1,232 | (325) |
| Decrease in payables | (10) | (142) |
| Cash used in operations | (895) | (2,038) |
5. Copies of the 2009 Annual Report and Accounts will be available to shareholders in July from the company’s website or may be obtained by contacting the Company Secretary at registered office. The annual general meeting is to be held at the registered office on 2 September 2009.
About Innovision Research & Technology plc
Innovision Research & Technology plc, is leading the next generation of NFC/RFID solutions. As the leading fabless developer of Short-Range Data Communication semiconductor and system solutions, with particular focus on NFC/RFID (Radio Frequency Identification) and ultra low-cost Integrated Circuit (IC) and RF electronic design, IRT is pushing cost performance to enable clients to get maximum utility for minimum cost.
The company develops innovative semiconductor technologies, ICs, RF systems (HF/UHF) and complete end product applications for mass volume commercialisation and then licenses customers for its incorporation into their own products.
At the heart of the emerging Near Field Communication (NFC) market, Innovision R&T designs and develops NFC/RFID IC solutions for the global mobile handset and consumer device sectors.
Products include Topaz, mandated by the NFC Forum as the NFC number one tag type format, Jewel for mass transit ticketing applications, and io, the world's smallest standards compatible Near-Field RFID reader.
Headquartered in the UK, Innovision R&T was listed in 2001 on the Alternative Investment Market (AIM) of the London Stock Exchange (ticker symbol:INN).