Appian Technology PLC

News

Appian Swings into Profitability for FY 2006

11 December 2006

Appian Technology plc, the AIM-traded provider of Automatic Number Plate Recognition systems (ANPR) and traffic management products and solutions, announces its preliminary results which cover trading for the year ended 30 September 2006.

Highlights 

• Turnover up 77.5% to £5.15 million (2005: £2.90 million)
• Gross profit up to 52.4% at £2.70 million (2005: 49.1% and £1.43 million)
• Profit after tax of £106,000 (2005: loss of £941,000)
• Market for traffic management and terror related surveillance technology is growing
• Substantially increased order intake in the UK particularly amongst government bodies and police forces
• Further progress in international markets with sales to police and security customers in Canada, USA, Mexico and a number of Middle Eastern countries
• Acquisition of Genesis UK Limited (Genesis) in July 2006 for an initial £1.40 million giving enhanced product range and client base and fundraising of £2.33million
• Broadened core middle management team to cater for increased business
• Listed on AIM in January 2006 raising £2.08 million before expenses
• Well positioned to take advantage of continued growth in UK and international ANPR related markets
• New COBRA camera recently introduced and other ANPR based products in development

Chairman's Statment

Introduction

It gives me great pleasure to report on Appian and the progress the Group has made over the last year. The year has been very positive for the Group, which is demonstrated in the financial results which show our inaugural profit.

Overview

Appian operates in the rapidly expanding security and traffic management markets supplying a range of products based on its leading Talon ANPR engine and its recently acquired Shark ANPR products and back office systems. Customers are mainly police forces, national and local governments as well as corporations both in the UK and internationally. Our initial focus was on the UK market where we now have a wide presence. We continue to broaden our penetration into international markets which show good growth potential. Appian has an excellent research and development team who are committed to keeping our products at the forefront in their markets and applications.

Results

The year ended 30 September 2006 was another year of significant progress for Appian and one which saw the Group make an inaugural profit after tax. Order intake increased significantly, rewarding the investment we have made in recent years in sales, marketing and product development. Turnover increased to £5.15 million (2005: £2.90 million), and gross profit margin increased to 52.4% (2005: 49.1%). Profit after tax for the year was £106,000 (2005: loss £941,000) which is equivalent to £0.001 per share (2005: loss £0.016 per share). Other operating expenses increased to £2.65 million (2005: £2.40 million).

The increase in operating expenses of £0.25 million included the operating expenses of Genesis of £0.16 million for the period since its acquisition on 20 July. The increase in operating expenses in Appian of £0.09 million related principally to costs associated with improving operational management, research and development and sales and marketing.

Market

In my report last year I stated that, as a Group specialising in security products, we have a market opportunity that is large and at an early stage in its lifecycle. This remains valid and is reinforced by the substantial increase in order intake during the last year and the continuing pipeline of potential business.

The UK market has shown growth during the past year, where our business is primarily focused on providing fixed and mobile ANPR systems to a range of police forces and commercial customers. The acquisition of Genesis in July 2006 has expanded our customer base and introduced the Group to new markets particularly in petrol forecourt surveillance. The Directors believe the outlook for these markets is positive. Appian has also made very good progress in the international market during the last year and the prospects for the Group remain positive.

The Group has increased its exposure to world markets, making sales to police and security customers in Canada, USA and Mexico, as well as a number of Middle Eastern countries. Prospects for sales growth in the international market remain very good and the Group is currently tendering for a number of international contracts.

Genesis was successful in its tender with joint venture partners to provide a road user charging scheme for Malta, which will be an excellent reference site and provide us with avenues into other countries. Spending on sales and marketing in international markets has been increased to deliver sales increases going forward. The Group also intends to increase its focus on the traffic and transport markets in forthcoming years. As a result of the above activity, we are positive about future market growth.

Products and Research & Development

Research & Development was focused during the year on continuing improvements and internationalising our core ANPR engine, improving its ease of use and user interface, bespoke developments for specific customers and continuing specialist camera development, particularly our new Cobra Camera. We are also investing in new ANPR based products which are expected to increase our sales and margins, which we will be introducing in the current year. The acquisition of Genesis in July 2006 broadened the Group's product range especially with a new, easy to use hand held ANPR device and back office systems which can make valuable use of the data captured by ANPR cameras.

Management

Development of the management team continues as the Group grows. We have experienced considerable growth during the past two years and we expect this to increase in years to come. With this in mind, the focus of management team development is now to ensure that core senior and middle management is effective in:

• Ensuring that our sales and marketing efforts are effectively manned
• Delivering the sales growth
• Supporting our maintenance customers
• Managing research and development and
• Ensuring financial management and systems effectively deal with the increased workload

Increasing our senior and core middle management team and sales resources has resulted in a necessary increase in costs.

The acquisition and integration of Genesis also increased our staffing and added additional valuable management resource to the Group. We have recently strengthened our management team in research and development, operations and maintenance and customer service.

AIM and Placing

In order to increase our market awareness and raise our profile internationally, Appian was admitted to trading on AIM in January 2006. At that time we raised £1.68 million net of expenses in additional equity in order to fund the expansion of our business and take advantage of the business opportunity in ANPR.

Acquisition of Genesis and Placing

In July 2006 Appian acquired ANPR developer and supplier Genesis (UK) Ltd for an initial consideration of £1.40million. The acquisition was paid for by £699,000 in cash before acquisition expenses and the remainder by issue of ordinary shares in Appian. Deferred consideration of up to £1.55 million based on the profits before tax of Genesis for the years ending 31 December 2006 and 2007 may be payable. At the discretion of the Company, up to 50 per cent of the deferred consideration is to be satisfied by the issue of new ordinary shares at the prevailing market price subject to a minimum price of £0.0925 per new ordinary share, with the balance to be satisfied in cash.

At the time of the acquisition the Group raised £2.33 million by way of placing. This acquisition expanded our market penetration in the UK and internationally and significantly strengthened the Group's strategic customer base in the UK police market. It also increased Appian's product range and service offering with back office and hand held systems in the policing, security; counter terrorism, traffic management and commercial markets.

Outlook

The outlook going forward is very positive. There is considerable growth potential in our markets in the UK and Internationally. We have an excellent product range which we are expanding with complimentary and margin enhancing products. Business in hand to date is ahead of last year and the Group has a growing pipeline. We are looking forward to a further increase in sales in the year to September 2007, which gives the management and Board at Appian the confidence to look forward very positively to the future.

Pat Ryan

Executive Chairman and CEO