Amino results for the six-month period ended 31 May 2008

Monday, August 11th, 2008
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Amino Technologies plc (‘Amino’; LSE: AMO), the Cambridge based broadband network software and systems company, announces its unaudited consolidated results for the six-month period ended 31 May 2008.

Financial performance

Turnover and unit shipments increased by 7.1% over H1 2008 to £14.53m and 256,000 respectively. MPEG-2 products continued to represent the core (85%) of shipments although early volume shipments were made of the new MPEG-4 HD (high definition) product range into the hospitality and EMEA telco markets. Whilst licensing revenue from the Group’s Asian channel strategy was in line with our expectations at £0.65m, delays to the Indian market’s roll out of IPTV services have required the Board to make a provision of £0.37m against licence and support fees due from its Indian channel partner.

Profits in the first half were significantly boosted by the 8.5 percentage points improvement in gross margin achieved on the established MPEG-2 SD product range, primarily achieved through the continued effective management of our component and manufacturing costs. Combined with higher revenues, the improvement in gross margins led to a 32.6% improvement in gross profit generated in H1 2008 as compared to H1 2007. Looking ahead, we expect that gross margins will revert to more typical levels, in the mid 30s, as the new MPEG-4 HD product range contributes a higher proportion of the Group’s sales.

Operating costs increased by £0.33m to £5.81m over H1 2007. Within operating costs, investment in development increased by £0.14m to £1.79m, of which approximately 50% was incurred on Amino’s next generation MPEG-4 HD product range.

The significant increase in gross profit combined with the limited increase in operating costs led to a £1.25m turn round in operating profit to £0.61m (H1 2007: loss of £0.64m).

The Group has a strong balance sheet with total assets less liabilities of £29.70m (H1 2007: £26.36m) representing 51.3 pence per share.

Working capital, including net cash of £19.00m (H1 2007: £14.52m), remains very healthy, especially as compared to that of many of Amino’s competitors and partners.

Since the period end, Amino has invested £1.38m in the acquisition of AssetHouse and £1.14m in the purchase of its own shares by its Employee Benefits Trust.

Market position

Market research reports forecast that much of the growth in IPTV over the next three years will be in the emerging markets of Eastern Europe and APAC deploying open standard solutions and Western Europe and North America tier 1 telcos deploying Microsoft based solutions. To date, Amino has built its business worldwide on open standard solutions and has established channel partners and customers in Eastern Europe and APAC. Whilst in Western Europe and North America tier 3 telco and hospitality, education and enterprise markets customers will continue to be important to Amino’s growth, the Board believes that the combination of AssetHouse and Amino’s next generation set-top box products will also enable it to win its fair share of the tier 1 telco market.

Strategy

I believe that the arrival of Andrew Burke as our new CEO marks a significant event for the Group. He has outlined a three tiered strategy which will see Amino (1) driving scale in its key markets, (2) expanding its product line and (3) extending its offering across the value chain.

We intend to achieve the first ambition by focusing on profitable business in core Tier 3 and 2 telco markets in Europe and North America in the short term. Longer term, we aim to develop key accounts among the top tier telcos. We believe that our established channels to market in the high growth markets of China, APAC and India will stand us in particularly good stead as we work to achieve this ambition across the emerging markets.

Our second aim is to continue to expand our product line, further developing a full range of products which will include Standard Definition (SD), High Definition (HD), Personal Video Recorder (PVR), hybrids and home gateways. In doing so, our aim is to maintain our market position, brand values and key relationships during the transition from SD to HD (MPEG 2 to MPEG 4) take up.

Lastly, we plan to extend our offering across the IPTV value chain. The AssetHouse acquisition provides a good example of how we aim to do this, giving us, for the first time, greater ability to access the Tier 1 operator market and significantly broadening our product offering beyond the STB arena where we have made our name.

AssetHouse is an enterprise software solution that helps operators and media brands to develop a more profitable, scalable content business by enabling them to turn their content assets into profitable products quickly, easily and at lower cost. The business was founded in 2000 and counts BT Vision, the UK’s highest profile IPTV service, among its customers.

The combination with AssetHouse enables us to offer our customers a more integrated merchandising solution. As the STB starts to deliver key consumption data back to the server, so we are able to offer significantly more value to our customers. Data such as navigation activity, content watched and quality of delivery will all be delivered back to the merchandising application to determine the effectiveness of the customer’s packaging and promotion activity. Therefore, whilst Amino’s STBs and AssetHouse merchandising systems are extremely valuable solo, their integration takes the IPTV solution to the next level.

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