|
FOR IMMEDIATE RELEASE
|
25 May 2010
|
ENDACE LIMITED
FULL YEAR RESULTS FOR THE YEAR
ENDED 31 MARCH 2010
Endace Limited (LSE/AIM: EDA, "Endace" or "the Company"), a world leader in network monitoring solutions, announces full year results for the year ended 31 March 2010.
Highlights
· Year of continued development of the business
· Launch of products in Cyber Security market, which holds significant opportunity for Endace
· Good progress in penetration of financial services analytics sector
· Systems sales overtook DAG card sales, demonstrating successful progression of products up the value chain
· Modest sales growth to US$31.0 million achieved in difficult trading conditions
· Costs contained, despite strong NZ dollar
· Increased investment in R&D
· After taking into account a $1.2 million provision for an overdue receivable, profit before tax was US$379,000, before share options
· The sales pipeline is the strongest we have ever seen
Endace Chairman, Ian Graham, commented:
"The year to 31 March 2010 was a one of continued development of our business, with significant progress in penetrating both the financial services analytics sector and the Cyber Security market. It has also been a challenging year for us, with our sales growing more slowly than we had hoped as our customers coped with the effects of the worldwide recession.
"While there still remains considerable uncertainty in the world economy, we continue to experience increasing interest and demand for our products and solutions to protect critical infrastructure. I look forward to Endace making further progress this year and have great confidence in our prospects."
Ends
CONTACTS:
|
Endace Limited
|
|
|
Mike Riley, CEO
|
+44 20 7067 0700
|
|
Neil Hopkins, Group Finance Director
|
+44 20 7067 0700
|
|
|
|
|
Weber Shandwick Financial
|
|
|
Nick Oborne / Stephanie Badjonat
|
+44 20 7067 0700
|
|
|
|
|
Panmure Gordon
|
|
|
Edward Farmer
|
+44 20 7459 3600
|
About Endace
For organisations that rely on their IP networks to do business, Endace provides high performance traffic analysis, latency measurement, network security and application acceleration solutions that capture, inspect and report on every single data packet. Our product portfolio includes high-speed packet capture technology, open development environments, multi-function network monitoring appliances and a comprehensive range of powerful yet intuitive management, measurement, alerting and analysis applications. We enable our customers to be confident in their service performance, traffic monitoring, information security, and regulatory compliance. Based in Auckland, New Zealand, Endace also has offices in the UK, USA and Singapore. Quoted on AIM, the stock code is LSE: EDA. For further information: http://www.endace.com
Endace, the Endace logo, DAG and NinjaProbe are trademarks or registered trademarks in New Zealand or other countries of Endace Technology Limited. All other trademarks may be the property of their respective holders.
CHAIRMAN'S STATEMENT
Introduction
The year to 31 March 2010 was a one of continued development of our business, with significant progress in penetrating both the financial services analytics sector and the Cyber Security market. It has also been a challenging year for us, with our sales growing more slowly than we had hoped as our customers coped with the effects of the worldwide recession.
We believe the Cyber Security market for the protection of critical infrastructure holds very significant opportunity for Endace. During the year we made significant progress in the development of our Cyber Security solutions, and we launched our products into this market in March 2010. Across Government, telecommunications, internet and mobile service providers, the threats associated with malicious Cyber Security attacks are becoming increasingly a matter for international concern. Recent repeated attempts to cause severe damage to critical infrastructure are leading to heightened focus on accurate detection and forensics technologies. This is a substantial new market for our products.
Our analytics products are being well received in electronic trading environments, and we were pleased to see a rapid recovery in this sector during the year.
We achieved rapid growth in sales of systems based on our cards and, as a result, sales of systems surpassed the sale of cards for the first time. This is an important milestone in our development.
Towards the end of the year three large contracts, budgeted for March 2010, were deferred into the current year as customers took longer to finalise capital expenditure commitments. While it was disappointing to experience these delays, we remain confident that these contracts will be secured in the current year, and I am pleased to report that our pipeline of opportunities is the strongest we have seen.
At the beginning of the year we reduced our cost base through staff restructuring and relocation of the Corporate marketing function from the United States to New Zealand. We have maintained a close focus on cost control but have continued to invest in business infrastructure and the creation of IP. Our current priority is to increase our sales team in the field.
Results and Finance
Revenues for the year ended 31 March 2010 were $31 million (2009: US$30.4 million) with systems sales increasing by 72.8% and representing 45.2% of total revenue. Profit before tax and a share option charge of $746,000 was US$379,000 (2009: US$5.2 million), after taking account of a $1.2m provision for a significant receivable. This provision is discussed further in the Finance Director's report.
We ended the year with cash balances of US$1.7 million.
Board
On 22 February 2010 Mark Giles was appointed to the board as an Independent Non Executive Director. Mark is currently Chairperson of First Mobile New Zealand, and has previously held senior management positions at IBM and New Zealand Board positions at Alcatel and Vodafone. Mark is resident in New Zealand and brings highly relevant telecoms industry and general management skills and experience to the Endace Board.
Outlook
While there still remains considerable uncertainty in the world economy, we continue to experience increasing interest and demand for our products and solutions to protect critical infrastructure. I look forward to Endace making further progress this year and have great confidence in our prospects.
Annual General Meeting
The Annual General Meeting of the Company will be held at the offices of the company's UK subsidiary, Endace Europe Limited, Davidson House, Forbury Square, Reading, Berkshire, RG1 3EU on Wednesday 28 July 2010 at 9.30am.
Ian Graham
Chairman
25 May 2010
CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
Despite difficult market conditions we made good progress overall towards the achievement of our long term objectives.
For the first time, systems sales exceeded DAG card sales, which is an important indicator for the company as it demonstrates successful progression of our products up the value chain. This year also saw us win our largest ever single contract, with a US based financial institution, and a good number of wins against key competitors. The typical deal size increased substantially during the year.
We maintained tight controls over costs and cash, focusing on essential capital expenditure to continue the successful development of our systems. We also undertook an important internal reorganisation and recruited a number of key individuals to strengthen the operational foundations for the growth we see ahead of us.
Strategy for Growth
While remaining consistent with our previous approach, our strategy for growth has evolved during the year. We are seeing increasing opportunity in the market for Cyber Security solutions. There is strong demand for these in the Government, Financial, and Telecommunications sectors which we already serve and they also open up new sectors for us where there is critical infrastructure which needs to be protected.
Our increasing focus on Cyber Security solutions will accelerate the evolution of our sales from DAG cards to more complete system solutions. Systems sales generate significantly increased revenue and contribution per monitored point, albeit at a lower margin than DAG cards, and the systems market opportunity is significantly larger.
We shall continue to develop and market our traditional product base and are confident that this strategy positions us well to address near term opportunities arising from current markets and to benefit from longer term strategic investment into new markets.
Markets
Customers were substantially more cautious about their investment decisions and more financially demanding of their suppliers, which affected the time to completion as they took longer to finalise capex decisions.
The Financial Services market showed renewed strength in the USA, particularly in Chicago and New York, but less so in EMEA, reflecting the USA's status as the global decision-making hub. Having won major accounts with 7Ticks, Trading Technology and RealTick, Endace established itself as the industry standard analytics platform in the high-frequency trading market place.
In the Cyber Security market, Europe and Asia showed most progress, with both India and the Baltic states generating significant business. We have a clear technology advantage in this marketplace and are competing and gaining market share from our competitors, many of whom are much larger than Endace,
The telecommunications service provider market in the USA was profitable for Endace with some carriers making extensive investments.
Product Portfolio
Significant investment was made during the year into our systems, ensuring that our capabilities continue to exceed those of our competitors. We shall continue to invest in areas of product development in order to retain our competitive advantage and exploit emerging opportunities. In particular, investments planned this year will further improve the performance and flexibility of our probes, enhance our analytics and latency measurement capabilities, building on our core DAG technology.
In February 2010 we announced our DAG 9.2X2, the world's first two-port 10 Gb PCIe Gen 2 packet capture card, which is our first product using FPGA technology from Altera. At the same time we launched our 'Next Generation Intrusion Detection System' aimed at governments, telecommunication companies and large enterprises seeking to protect critical infrastructure. The product was successfully demonstrated at the RSA Conference in San Francisco in March 2010, reinforcing the branding of the Endace range - "The power to see all".
As part of our strategic investment in the Cyber Security market we committed resource to the Open Information Security Foundation ("OISF"), a US Department of Homeland Security funded initiative to create the next generation of Open Source security IDS / IPS engine. This is intended to replace the widely installed, but aging, SNORT; Suricata (the OISF engine) will form the backbone of Endace's cyber product strategy henceforth.
Partnerships and Collaborative Agreements
During the year we continued to develop and invest in our partnership with CACE Technologies, whose Pilot product offers customers a powerful visualisation tool and is proving popular with the Financial Services market. We also signed partnership agreements with Correlix and Seanet, reinforcing our position as the packet capture platform of choice in the Financial Services market.
Other partnerships agreed during the year include Vixtel and Kapsch CarrierCom in the telecommunications market.
Our entry into the market for Cyber Security solutions is widening our base of reselling and marketing partners, particularly in North America and Western Europe, where our customers are major defence contractors.
Resource development
The focus of our resource development is on driving sales growth. We put significant effort into finding the right people in New Zealand to lead key corporate functions within the business. We recruited a Chief Product Officer, a role new to Endace, to drive improvements of processes and systems required to support delivery of Endace's products. We also hired a new Director of Marketing and we re-defined the role of the Chief Technical Officer to give him a more strategic mandate.
At a sales level, we focused the business on EMEA and USA, markets that we know can deliver early value. We also learned much about emerging markets, particularly India. We introduced a new sales organisation structure and we are now recruiting additional sales people in USA and EMEA. Marketing specialists, based in the USA, will also be added to provide strength and depth to this discipline.
During the year we established a new laboratory in the Hamilton office to enhance Quality Assurance and testing. Corporate marketing functions were relocated to New Zealand from overseas to reduce costs and improve efficiency.
Employees
I extend my thanks to everyone in Endace for their commitment and response during a year of difficult market conditions. During the year the team was bolstered by a number of new hires that brought new depth and strength to the team.
Prospects
The current sales pipeline is the strongest that Endace has had in its history and the markets we address give us good near- and longer-term growth potential. We shall maintain vigorous cost control and proceed with caution with our investment decisions but, with increased market focus and a strengthened management team, we enter the current year with confidence.
Mike Riley
Chief Executive Officer
25 May 2010
FINANCE DIRECTOR'S REPORT
Revenue
Group revenue for the year ended 31 March 2010 was US$31.0 million (2009: US$30.4 million). Revenues in the US accounted for 59.6% (2009: 61.8%) of total Group revenue, revenues in Europe, Middle East and Africa (EMEA) accounted for 34.3% (2009: 28.7%), and revenues in Asia Pacific 6.1% (2009: 9.5%). Revenue in EMEA grew by 22% with strong sales in the Government sector. In the US revenue was flat year on year, while in Asia Pacific it declined.
Revenue from systems grew by 72.8% over last year and, at 45.2% of total revenue, for the first time exceeded sales from DAG cards, which represented 31.5% of total revenue. This is clear evidence of the success of our strategy to generate an increasing proportion of our sales from systems, the market for which represents a much larger opportunity for the Group.
Across the Group, revenue from the Financial Services sector recorded substantial growth, up 241% with 61.5% derived from the sale of systems. Despite strong Government sales in EMEA, overall Group sales declined due to a drop in revenue through our US government reseller, RSignia. Sales to the Telco market were down as compared with last year, but there were still a number of significant deals in both US and EMEA.
Product margins remain strong. However, the mix of revenue, now weighted more to systems than DAG cards, has resulted in a lower overall gross margin this year of 64.0% (2009: 71.1%). This is also lower due to the impact of a number of one-off lower margin deals involving 3rd party accessories.
Recurring support income, recognised over the life of the support contract, grew by 9.0% over the previous year. The balance sheet shows deferred income of US$1.7 million (2009: US$1.8 million), being the contracted support income which is carried forward to the new financial year.
Investment and costs
At the beginning of the financial year we reduced costs through staff restructuring and relocation of some functions to New Zealand. We have maintained a close focus on cost control particularly in salaries and travel. However, operating expenditure has come under pressure from the consequences of a stronger New Zealand dollar. Total SG&A expenditure was $13.9m (2009: $12.7m) which includes a doubtful debts provision of $1.2m and higher employee share options compensation charges.
We have continued to maintain investment in product development with R&D expenditure increased to US$8.8 million (2009: US$6.6 million). Of this, US$6.3 million (2009: US$4.4 million) has been expensed during the year and US$2.5 million (2009: US$2.2 million) has been capitalised in accordance with Group policy. The capitalised R&D costs relates to products which are planned for future release and will be amortised over two to three year periods. The amortisation cost of intangible assets during the year was US$1.5 million (2009: US$0.6 million). Depreciation attributable to R&D has also increased this year to $1.3m (2009: US$1.0) reflecting investments made in capital equipment over recent years.
Cash
Cash and cash equivalents were US$1.7 million at 31 March 2010 (2009: US$1.7 million). The company achieved positive cash flows from operations of $7.0m (2009: US$3.6m), but continues to invest in new product development and the purchase of property plant and equipment, (primarily laboratory and test equipment). Total cash spend on these was $5.0m (2009: $5.4m). The Group also suffered higher income tax payments of $2.0m while in the prior year there was a small refund.
The Company recently renewed for a further 12 months its US$4 million facility in place with HSBC.
Provision against trade receivable
At the time of our interim results we disclosed a debt of $3,489,338 from RSignia, a reseller and systems integrator supplying the US Government, that was predominantly overdue. This reseller has been a significant customer of the Group for over four years and Endace management has been working closely to help it sell its inventory and establish a payment plan to us, so that our debt will be repaid in full. Due to the poor economic climate, the customer has faced a slowdown in its business and has recently failed to meet the payment plan. As a result, we have decided to make a substantial provision for the balance of the receivable due from Rsignia.
In the past financial year Rsignia met an agreed schedule of payments to Endace and as at 31 March 2010 the balance on the account had reduced to $2,755,633. Subsequently, however, the customer has failed to make a payment by the due date which fell in April 2010. This has created increased uncertainty of full repayment and we have chosen to make a provision of $1,200,000. This is based on the difference between the outstanding debt and the value of the Endace sourced inventory the customer held as at 31 March 2010.
Taxation
The Group recorded a tax benefit this year of $0.5m (2009 $2.0m tax expense). The effective tax rate varies from the standard corporate tax rate of 30% (2009: 30%) primarily due to foreign exchange differences that arise from translating the tax liability for the New Zealand Group entities from US dollars into New Zealand dollars. In the previous year there was a decline in the New Zealand dollar against the US dollar and the group suffered taxable gains. This year, the strengthening of the New Zealand dollar has provided us with the benefit of taxable losses.
Adjusted earnings per share
The adjusted earnings per share eliminates distortions from one off factors affecting the annual earnings of the Group. The adjusted earnings per share have been calculated as follows:
|
|
2010
|
2009
|
|
|
US$'000
|
US$'000
|
|
Profit for the year
|
124
|
2,749
|
|
Add back:
|
|
|
|
Provision for restructuring (net of tax)
|
39
|
135
|
|
Provision against US trade receivable
|
1,200
|
-
|
|
Tax benefit from trade receivable provision
|
(360)
|
-
|
|
Share option compensation charge
|
746
|
462
|
|
Tax charge from foreign exchange gain arising on calculation of NZ tax liability
|
-
|
1,178
|
|
Less:
|
|
|
|
Tax benefit from Foreign exchange loss arising on calculation of NZ tax liability
|
( 337)
|
-
|
|
Adjusted profit for the year
|
1,412
|
4,524
|
|
|
|
|
|
Diluted number of shares in issue
|
16,131
|
16,890
|
|
|
|
|
|
Adjusted fully diluted EPS (US cents)
|
8.8
|
26.8
|
Neil Hopkins
Finance Director
25 May 2010
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2010
|
|
|
Group
|
|
|
|
2010
|
2009
|
|
|
Notes
|
US$'000
|
US$'000
|
|
|
|
|
|
|
Revenue
|
|
31,017
|
30,384
|
|
Cost of sales
|
|
(11,177)
|
(8,784)
|
|
Gross profit
|
|
19,840
|
21,600
|
|
|
|
|
|
|
Other income
|
|
70
|
272
|
|
Selling and administrative expenses
|
3
|
(13,892)
|
(12,686)
|
|
Research and development expenses
|
3
|
(6,311)
|
(4,441)
|
|
Finance cost
|
|
(103)
|
(33)
|
|
Finance income
|
|
29
|
22
|
|
|
|
|
|
|
(Loss)/Profit before taxation
|
|
(367)
|
4,734
|
|
Income tax benefit/(expense)
|
4
|
491
|
(1,985)
|
|
Profit for the year
|
|
124
|
2,749
|
|
|
|
|
|
|
Earnings per share
|
5
|
US cents
|
US cents
|
|
- basic
|
|
0.83
|
18.36
|
|
- diluted
|
|
0.77
|
16.28
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2010
|
|
|
Group
|
|
|
|
2010
|
2009
|
|
|
|
US$'000
|
US$'000
|
|
|
|
|
|
|
Profit for the year
|
|
124
|
2,749
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
Cash flow hedges, net of tax
|
|
3
|
-
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
127
|
2,749
|
CONSOLIDATED BALANCE SHEET
As at 31 March 2010
|
|
|
Group
|
|
|
|
2010
|
2009
|
|
|
Notes
|
US$'000
|
US$'000
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
|
1,755
|
1,777
|
|
Trade and other receivables
|
6
|
10,643
|
11,790
|
|
Inventories
|
|
3,611
|
4,485
|
|
Total current assets
|
|
16,009
|
18,052
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
Property, plant and equipment
|
|
4,689
|
3,699
|
|
Intangible assets
|
7
|
11,913
|
11,196
|
|
Deferred tax asset
|
|
1,793
|
97
|
|
Total non-current assets
|
|
18,395
|
14,992
|
|
|
|
|
|
|
Total assets
|
|
34,404
|
33,044
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
Trade and other payables
|
|
5,980
|
4,625
|
|
Current income tax liabilities
|
|
778
|
1,571
|
|
Deferred income
|
|
1,397
|
1,590
|
|
Deferred tax liability
|
|
5
|
-
|
|
Total current liabilities
|
|
8,160
|
7,786
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Deferred income
|
|
343
|
243
|
|
Total non-current liabilities
|
|
343
|
243
|
|
|
|
|
|
|
Total liabilities
|
|
8,503
|
8,029
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Share capital
|
|
15,272
|
15,254
|
|
Foreign currency translation reserve
|
|
(147)
|
(147)
|
|
Cash flow hedge reserve
|
|
3
|
-
|
|
Share option reserve
|
|
1,586
|
845
|
|
Retained earnings
|
|
9,187
|
9,063
|
|
Total equity
|
|
25,901
|
25,015
|
|
|
|
|
|
|
Total equity and liabilities
|
|
34,404
|
33,044
|
|
|
|
|
|
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2010
|
|
|
2010
|
2009
|
|
|
Note
|
US$'000
|
US$'000
|
|
Cash flows from operating activities
|
|
|
|
|
Cash receipts from customers
|
|
30,814
|
27,755
|
|
Cash paid to suppliers and employees
|
|
(23,817)
|
(24,111)
|
|
Cash generated from operations
|
|
6,997
|
3,644
|
|
Interest paid
|
|
(103)
|
(33)
|
|
Income tax (payment) /refund
|
|
(1,993)
|
84
|
|
Net cash flows from operating activities
|
8
|
4,901
|
3,695
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(2,164)
|
(2,475)
|
|
Purchases of intangible assets
|
|
(319)
|
(287)
|
|
Investment in product development
|
|
(2,502)
|
(2,147)
|
|
Outflow on acquisition of Applied Watch Technologies LLC
|
|
-
|
(650)
|
|
Interest received
|
|
29
|
120
|
|
Net cash used in investing activities
|
|
(4,956)
|
(5,439)
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Proceeds from exercise of share options
|
|
13
|
123
|
|
Net cash flows from financing activities
|
|
13
|
123
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
(42)
|
(1,621)
|
|
Cash and cash equivalents at beginning of year
|
|
1,777
|
3,513
|
|
Exchange gains/(losses) on cash and cash equivalents
|
|
20
|
(115)
|
|
Cash and cash equivalents at end of year
|
|
1,755
|
1,777
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2010
|
Group
|
Share capital
|
Foreign currency translation reserve
|
Cash flow hedge reserve
|
Share Option Reserve
|
Retained earnings
|
Total equity
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Balance as at 1 April 2008
|
15,092
|
(147)
|
-
|
422
|
6,314
|
21,681
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
Retained profit for the year
|
-
|
-
|
-
|
-
|
2,749
|
2,749
|
|
Other comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total comprehensive income
|
-
|
-
|
-
|
-
|
2,749
|
2,749
|
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
Capital raised on employee options
|
123
|
-
|
-
|
-
|
-
|
123
|
|
Share options exercised
|
39
|
-
|
-
|
(39)
|
-
|
-
|
|
Share option compensation expense
|
-
|
-
|
-
|
462
|
-
|
462
|
|
Balance as at 31 March 2009
|
15,254
|
(147)
|
-
|
845
|
9,063
|
25,015
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
Retained profit for the year
|
-
|
-
|
-
|
-
|
124
|
124
|
|
Other comprehensive income
|
-
|
-
|
3
|
-
|
-
|
3
|
|
Total comprehensive income
|
-
|
-
|
3
|
-
|
124
|
127
|
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
Capital raised on employee options
|
13
|
-
|
-
|
-
|
-
|
13
|
|
Share options exercised
|
5
|
-
|
-
|
(5)
|
-
|
-
|
|
Share option compensation expense
|
-
|
-
|
-
|
746
|
-
|
746
|
|
Balance as at 31 March 2010
|
15,272
|
(147)
|
3
|
1,586
|
9,187
|
25,901
|
Notes
1. Basis of reporting
The consolidated financial statements contained herein are prepared in accordance with the New Zealand equivalent of the International Financial Reporting Standards ('NZ IFRS'). The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at 31 March 2010 and the results of all subsidiaries of the Group for the year ended 31 March 2010. Endace Limited (the 'Parent') and its subsidiaries together are referred to in these financial statements as the Group and are designated as profit oriented entities for financial reporting purposes.
The consolidated financial information contained herein is an abridged version of the Group's audited accounts, which have received an unqualified report from the Group's auditors and will be included in the statutory Annual Report and Accounts for the year ended 31 March 2010. The Annual Report and Accounts will be dispatched to the shareholders and filed with the New Zealand Registrar of Companies in June 2010.
2. Segment reporting
The chief operating decision-maker has been identified as the team comprising the Chief Executive Officer and the Chief Financial Officer. This team reviews the Group's internal reporting in order to assess performance and allocate resources. The team has determined the operating segments based on these reports.
The Group's revenue is attributable to the principal activities being sales, marketing and distribution of the products developed by the Group. The team considers the business from a geographical perspective based on the location of customers.
a) Description of segments
The Group is organised into three main business segments.
North America
Comprises sales, support and distribution operations in Chantilly, Virginia, USA; servicing customers throughout the Americas.
Europe, Middle East, Africa
Comprises sales, support and distribution operations in Reading, UK; servicing customers throughout Europe, Middle East and Africa.
Asia Pacific
Comprises sales, support and distribution operations in New Zealand and Singapore; servicing customers throughout the Asia Pacific region.
Group marketing, product development and engineering operations are also based in New Zealand as is the corporate head office.
Unallocated
These items are unable to be allocated to a specific segment within the group.
b) Reporting measures
The CEO and CFO team assesses the performance of the segments based on a measure of profit before tax.
c) Segment results
|
31 March 2010
|
North America
|
Europe, Middle East, Africa
|
Asia Pacific
|
Unallocated
|
Consolidated
|
|
|
2010
|
2010
|
2010
|
2010
|
2010
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Revenue
|
|
|
|
|
|
|
Segment sales
|
20,972
|
11,985
|
21,385
|
-
|
54,342
|
|
Inter-segment sales
|
(2,491)
|
(1,351)
|
(19,483)
|
-
|
(23,325)
|
|
Total revenue
|
18,481
|
10,634
|
1,902
|
-
|
31,017
|
|
|
|
|
|
|
|
|
Results
|
|
|
|
|
|
|
Operating (loss)/profit
|
(461)
|
425
|
(181)
|
(76)
|
(293)
|
|
Finance income - net
|
-
|
-
|
-
|
(74)
|
(74)
|
|
|
|
|
|
|
|
|
(Loss)/profit before taxation
|
(461)
|
425
|
(181)
|
(150)
|
(367)
|
|
|
|
|
|
|
|
|
31 March 2009
|
North America
|
Europe, Middle East, Africa
|
Asia Pacific
|
Unallocated
|
Consolidated
|
|
|
2009
|
2009
|
2009
|
2009
|
2009
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Revenue
|
|
|
|
|
|
|
Segment sales
|
18,767
|
8,713
|
25,424
|
-
|
52,904
|
|
Inter-segment sales
|
-
|
-
|
(22,520)
|
-
|
(22,520)
|
|
Total revenue
|
18,767
|
8,713
|
2,904
|
-
|
30,384
|
|
|
|
|
|
|
|
|
Results
|
|
|
|
|
|
|
Operating profit
|
1,037
|
343
|
3,365
|
-
|
4,745
|
|
Finance income - net
|
-
|
-
|
-
|
(11)
|
(11)
|
|
|
|
|
|
|
|
|
Profit/(loss) before taxation
|
1,037
|
343
|
3,365
|
(11)
|
4,734
|
|
|
|
|
|
|
|
3. Expenses
|
|
|
Group
|
|
|
|
2010
|
2009
|
|
|
Notes
|
US$'000
|
US$'000
|
|
(Loss)/profit before taxation is stated after charging / (crediting):
|
|
|
|
|
Wages and salaries expense
|
|
8,721
|
8,088
|
|
Depreciation of property, plant and equipment
|
|
1,570
|
1,060
|
|
Amortisation of intangible assets
|
7
|
2,104
|
1,117
|
|
Loss on disposal of property plant and equipment
|
|
-
|
9
|
|
Bad debt expense
|
|
(6)
|
145
|
|
Doubtful Debts Provision
|
6
|
1,334
|
|
|
Operating lease rentals
|
|
813
|
629
|
|
Directors fees
|
|
219
|
189
|
|
Net share option compensation charge
|
|
746
|
462
|
|
Unrealised foreign exchange (gains)/ losses
|
|
(23)
|
114
|
|
Realised foreign exchange (gains)
|
|
(41)
|
(13)
|
|
Group audit fees
|
|
114
|
76
|
4. Income tax expense
|
|
|
Group
|
|
|
|
2010
|
2009
|
|
|
|
US$'000
|
US$'000
|
|
Current Tax
|
|
|
|
|
New Zealand Income tax
|
|
(2,425)
|
1,960
|
|
New Zealand: Adjustment to tax in respect of prior year
|
|
406
|
(678)
|
|
Losses recognised in deferred tax
|
|
2,425
|
-
|
|
Foreign corporation taxes
|
|
675
|
287
|
|
Foreign corporation taxes: Adjustment to tax in respect of the prior year
|
|
120
|
52
|
|
Total current tax
|
|
1,201
|
1,621
|
|
|
|
|
|
|
Deferred tax
|
|
|
|
|
Origination and reversal of timing differences
|
|
(1,692)
|
364
|
|
Represented by:
|
|
|
|
|
New Zealand deferred tax
|
|
1,437
|
348
|
|
New Zealand deferred tax in respect of prior year
|
|
(216)
|
-
|
|
Losses recognised in deferred tax
|
|
(2,425)
|
-
|
|
Foreign deferred tax
|
|
(434)
|
16
|
|
Foreign deferred tax in respect of prior year
|
|
(54)
|
-
|
|
Total deferred tax (benefit)/expense
|
|
(1,692)
|
364
|
|
|
|
|
|
|
Income tax (benefit)/expense
|
|
(491)
|
1,985
|
5. Earnings per share
|
|
As at 31 March 2010
|
As at 31 March 2009
|
|
|
Earnings
|
Number of shares
|
Per share amount
|
Earnings
|
Number of shares
|
Per share amount
|
|
|
US$'000
|
'000
|
US cents
|
US$'000
|
'000
|
US cents
|
|
Profit attributable to shareholders
|
124
|
|
|
2,749
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
Earnings attributable to ordinary shareholders
|
124
|
14,983
|
0.83
|
2,749
|
14,976
|
18.36
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
Options (1)
|
-
|
1,148
|
-
|
-
|
1,914
|
-
|
|
Diluted EPS adjusted earnings
|
124
|
16,131
|
0.77
|
2,749
|
16,890
|
16.28
|
(1) Includes the option entitlements held by non-executive Directors John Scott and Mark Rowan
6. Trade and other receivables
|
|
|
Group
|
|
|
|
2010
|
2009
|
|
|
|
US$'000
|
US$'000
|
|
Trade receivables
|
|
11,586
|
11,132
|
|
Less: provision for impairment of trade receivables
|
|
(1,356)
|
(22)
|
|
|
|
10,230
|
11,110
|
|
Other receivables
|
|
180
|
184
|
|
Prepayments
|
|
232
|
496
|
|
Receivables from related parties
|
|
1
|
-
|
|
|
|
10,643
|
11,790
|
As at 31 March 2010, trade receivables of $2,906,793 (2009: $22,500) were impaired and provided for. The amount of the provision was $1,355,550 (2009: $22,500). The individually impaired receivables relate to customers which are in unexpectedly difficult economic situations. The ageing of these receivables is as follows:
|
|
Group
|
|
|
2010
|
2009
|
|
|
US$'000
|
US$'000
|
|
Up to 3 months
|
55
|
13
|
|
3 to 6 months
|
-
|
-
|
|
6 to 12 months
|
2,416
|
-
|
|
Over 12 months
|
436
|
9
|
|
|
2,907
|
22
|
At the time of our interim results we disclosed a debt of $3,489,338 from a reseller and systems integrator supplying the US Government, which was predominantly overdue. This reseller has been a significant customer of the Group for over four years and Endace management has been working closely with it to help build business, to sell through inventory and establish a payment plan, so that the debt will be repaid in full. Due to the poor economic climate, the customer has faced a slowdown in its business and has failed to meet its payment plan. As a result we have decided to make a substantial provision for the balance of the receivable from the customer.
Throughout the past financial year the customer met the schedule of payments to Endace and as at 31 March 2010 the balance on the account had reduced to $2,755,633. In April 2010 the customer failed to meet the payment plan. As a result, this event has created increased risk and uncertainly of full repayment and a provision of $1,200,000 has been made. This provision is based on the difference between the outstanding debt and the value of the Endace sourced inventory the customer is holding as at 31 March 2010.
The customer is still committed to full repayment of the debt and is continuing to work closely with Endace to achieve this.
7. Intangible assets
|
|
Goodwill
|
Software
|
Development costs
|
Intellectual property
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Cost
|
|
|
|
|
|
|
At 1 April 2008
|
7,057
|
1,173
|
1,842
|
1,211
|
11,283
|
|
Additions
|
-
|
287
|
2,147
|
-
|
2,434
|
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
|
At 31 March 2009
|
7,057
|
1,460
|
3,989
|
1,211
|
13,717
|
|
Additions
|
-
|
119
|
2,502
|
200
|
2,821
|
|
Disposals
|
-
|
(96)
|
-
|
-
|
(96)
|
|
At 31 March 2010
|
7,057
|
1,483
|
6,491
|
1,411
|
16,442
|
|
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
|
|
At 1 April 2008
|
40
|
632
|
255
|
477
|
1,404
|
|
Charge for the year
|
-
|
284
|
574
|
259
|
1,117
|
|
Disposals
|
-
|
-
|
-
|
|
-
|
|
At 31 March 2009
|
40
|
916
|
829
|
736
|
2,521
|
|
Charge for the year
|
-
|
293
|
1,521
|
290
|
2,104
|
|
Disposals
|
-
|
(96)
|
-
|
-
|
(96)
|
|
At 31 March 2010
|
40
|
1,113
|
2,350
|
1,026
|
4,529
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
At 31 March 2010
|
7,017
|
370
|
4,141
|
385
|
11,913
|
|
At 31 March 2009
|
7,017
|
544
|
3,160
|
475
|
11,196
|
8. Cash flows from operating activities
|
|
|
Group
|
|
|
|
2010
|
2009
|
|
|
|
US$'000
|
US$'000
|
|
|
|
|
|
|
Profit for the year
|
|
124
|
2,749
|
|
Less
|
|
|
|
|
Depreciation and amortisation
|
|
3,674
|
2,177
|
|
Share option compensation charge
|
|
746
|
462
|
|
Loss on disposal of property, plant and
equipment
|
|
-
|
9
|
|
Interest income
|
|
(29)
|
(120)
|
|
|
|
|
|
|
Foreign exchange (gain)/loss
|
|
(17)
|
115
|
|
Movement in deferred tax asset
|
|
(1,696)
|
364
|
|
Deferred consideration for Applied Watch Technologies acquisition
|
|
-
|
650
|
|
Non-cash movement in working capital
|
|
(396)
|
96
|
|
Changes in working capital (excluding the effects of acquisition):
|
|
|
|
|
Inventories
|
|
874
|
(1,672)
|
|
Trade and other receivables
|
|
1,147
|
(2,881)
|
|
Trade and other payables
|
|
474
|
1,746
|
|
Total net cash flows from operating activities
|
|
4,901
|
3,695
|
9. Contingent liabilities and contingent assets
The Parent and Group had no contingent liabilities or contingent assets as at 31 March 2010 (March 2009: Nil).