A year ago, Colin Evans, MD of Digital Barriers, told us that breakeven was in sight (within 12 to 18 months) for the specialist provider of advanced surveillance technologies – see Digital Barriers: profitability is in sight. Well, they’re not quite there yet. In the six months to end September 2013, the adjusted loss before tax was £6.8m compared to £5.0m in the comparative 2012 period. On an unadjusted basis, pre-tax losses were £7.2m (2012: £7.1m) due to “strategic investment in sales & marketing”. As a result, the net cash outflow from operating activities was £3.9m leading to a reduction in the cash balance from £5.5m (end March 2013) to £1.1m. At the beginning of this month, the company took action to address its working capital requirements when it raised £18.0m through a share placing (see Digital Barriers raises funds through share placing).
Group revenues continue to head in the right direction: up 12% to £9.0m. The star of the show remains the international products business – revenues up 36%. Exports now account for 33% of Group revenues (2012: 27%). But it is clear that, in the short-term at least, securing sales is requiring significant investment. Knowing how hard can be to work with the UK Government, just imagine trying to work with the Governments of 30 countries! Not only that, Digital Barriers is also on the steep bit of the mountain climb: selling a relatively new product set to new customers. The tipping point will come as those international customers that that have so far committed to small initial sales start to return to Digital Barriers for the extended product set. And it is starting to happen. At the same time, in the UK, Digital Barriers’ business is suffering due to the tough nature of the UK Government market (see UK public sector SITS market trends & forecasts 2013)- this is reflected in the 30% decline in services revenue (to £1.7m) (services is UK only).
Speaking to Evans this morning, he remains confident that the funds raised will be enough to see the company through to break-even (in the next 12-18 months). There’s no doubt that reaching that point has been tougher than originally envisaged, but he, and the rest of the management team, have great faith in the product set and the company’s “compelling technology”. That confidence has been cemented over the last few months with sales of the TVI video surveillance product and RDC ground sensor technology really taking off (revenues up 255% to £3.9m) alongside significant traction in Asia and North America.