Final Results

RNS Number : 7297K

Petards Group PLC

26 April 2010

 

 

 

PETARDS GROUP PLC

 

PRELIMINARY RESULTS ANNOUNCEMENT

 

Petards Group plc ('Petards'), the AIM quoted developer of advanced security and surveillance systems, announces preliminary audited results for the year ended 31 December 2009, which report a significant growth in profits and cash generation.

Financial results

·; Operating profits up 34% to £1.3m (2008: £0.9m)

·; Profit before tax up 45% to £1.0m (2008: £0.7m)

·; Gross margins up to 38% (2008: 32%)

·; Strong operating cash inflows £2.0m (2008: £0.5m)

·; Net debt significantly reduced to £0.7m as at 31 December 2009 (Dec 2008: £2.2m)

·; Basic and diluted EPS of 0.17p (2008: 0.16p)

·; Term of £1.45m bank loan now extended through to December 2012

 

Other highlights

·; Orders worth £4m from train builders for eyeTrain on new build trains

·; £3m eyeTrain order from East Coast Trains for major train refurbishment project

·; Growing penetration of new geographic markets including mainland Europe and the Middle East

·; £2.5m order for electronic countermeasures for MoD helicopters substantially completed

·; Continued investment in eyeTrain and ProVida product ranges

 

Commenting on the current outlook, Tim Wightman, Chairman, said: 

"Our pipeline of sales opportunities across our business continues to increase and we are confident that the markets in which we operate will continue to expand. 

 

The degree of uncertainty over UK Government actions that may be taken post the forthcoming election may well affect spending by our UK customers.

While your Board remains confident for the future, its expectation is for modest progress in 2010".

 

Contacts

Petards Group plc	www.petards.com
Andy Wonnacott, Finance Director	Tel: 0191 420 3000
WH Ireland Limited	www.wh-ireland.co.uk
Mike Coe, Marc Davies	Tel: 0117 945 3470
Walbrook PR Limited	Tel: 020 7933 8787
Paul McManus	Mob: 07980 541 893
	[email protected]

 

 

Chairman's statement

 

Overview

 

It is my pleasure to report on the continued progress made over the course of the past financial year in which the Group made a profit before tax of £1.0m (2008: £0.7m) and generated an operating cash inflow of £2.0m (2008: £0.5m).

 

Results

 

Operating profitability for the year was significantly ahead of the previous year at £1.3m (2008: £0.9m) albeit on lower revenues of £15.9m (2008: £18.9m).

 

The increase in operating profits arose from an improvement in gross margins over both 2008 and the first half of 2009. Gross margins for the year were 38% (2008: 32%). This more than offset the year-on-year reduction in revenues which was due to a different phasing of customer deliveries for eyeTrain products influenced by train refurbishment programme schedules.

 

Overall administrative expenses reduced by 5% to £4.8m (2008: £5.0m) reflecting the full year benefit of actions taken in 2008.

 

Net financial expenses were £0.2m (2008: £0.2m) and included a foreign exchange loss of £0.1m (2008: £0.1m foreign exchange gain).

 

Profits after tax were £1.1m (2008: £1.0m) and included a net tax credit of £0.1m (2008: £0.3m).

 

Cash and Balance Sheet

 

The strong operating cashflow achieved in the first half of the year continued and the Group generated an operating cash inflow of £2.0m for the year (2008: £0.5m). This exceptional performance was aided by the early receipt of over £1m of customer payments related to December revenues. Consequently net debt at 31 December 2009 was lower than expected at £0.7m (2008: £2.2m).

 

Our financial position was further strengthened by new banking arrangements that were put in place in December 2009. Our existing term loan was extended and now expires on 31 December 2012. Total repayments in 2010 under the revised loan facility will be £0.4m as compared with £1.45m under the previous arrangement. At the same time, our £1.75m working capital facility was renewed for a further year. Interest margins on both facilities remain the same as before. The additional working capital that is now available will help the Group realise its future plans.

 

The work to improve the Group's balance sheet continues and by 31 December 2009 the deficit on equity had reduced to £0.3m (2008: £1.6m deficit).

 

Business review

 

We were pleased with the progress that was made during the year towards our objectives of growing our overseas customer base and to invest in developing our products.

 

During 2009 our UK business was successful in growing both its revenues and orders won from customers outside of the UK for its eyeTrain and ProVida product ranges. Revenues from overseas customers increased from 12% to 18% of total revenue and the momentum is steadily growing.

 

Our current generation of eyeTrain digital CCTV systems were developed with a view to them being equally competitive for use on new build trains, metro and tram vehicles. Hyundai Rotem's £1m order was the first we received for these systems, which are to be fitted to their new Matangi Electrical Multiple Unit (EMU) cars being sold to New Zealand. When I last reported to you in September I said that I hoped to be able to report further progress in penetrating the new build market. Since then we have announced that we have secured further orders totalling approximately £2.5m for systems to be fitted to new build vehicles from Bombardier Transportation for their Electrostar EMU trains, Construcciones y Auxiliar de Ferrocarriles S.A (CAF) of Spain for their Class 4000 trains and Alstom Ferroviaria S.p.A of Italy for their Pendalino trains.

 

We have been providing digital onboard CCTV systems for the mainline rail market for many years and have a leading presence in the UK for such systems being fitted to trains undergoing refurbishment. Our continued success was demonstrated by the order from East Coast Trains for over £3m in the first half year for the supply and installation of eyeTrain systems to over 390 passenger vehicles as well as forward facing cameras on two classes of locomotives.

 

In addition to the £0.4m order for Provida systems for the Italian Carabinieri that was received in the first half of the year, orders taken included our first major sale to the Gulf State region for Automatic Number Plate Recognition ("ANPR") cameras to be fitted on a new fleet of police traffic cars. The order, worth over £0.5m, will result in each of the cars having Petards cameras fitted providing a 360° reading capability.

 

The common thread throughout our product range is our expertise in the provision of ruggedised specialist electronic systems. Our products and services for defence applications are no different. Although there have been notable exceptions in the past with large one off sales to France and Norway, these are mainly sold to UK customers. However we have started to identify opportunities with overseas suppliers of military equipment and we hope that this will translate into orders over the medium term.

 

While we expected revenues from electronic countermeasures systems to be lower in 2009, a £2.5m order from the MoD for systems that they are retrofitting to helicopters in their fleet was substantially completed during the period. Sales to non-MoD customers such as Agusta Westland were also made in the year.

 

Post design engineering services provided to the MoD by the business for both electronic warfare and communications applications continue to provide a useful ongoing revenue stream.

 

As well as continuing to develop eyeTrainand broaden our offering of similar electrical on-board sub-systems, we expect to make sales later in 2010 of new products in our ProVida range that were developed in 2009. These include a new in-car speed detection and video system and new digital recording systems.

 

Our US operation, which was restructured in 2008 following the disposal of our UK software products business, continues to support its existing UVMS customers under our license agreement with BAE Systems. We do not anticipate this will be a significant area of our business going forward.

 

The Board

 

After serving as a non-executive director for over six years, David Mills is retiring by rotation at the Annual General Meeting and will not be seeking re-election as a director. I should like to thank David for his contribution during his time with Petards and we wish him every success in the future.

 

Employees

 

Once again, our employees' hard work and commitment enabled us to make good progress towards our objectives and I would like to thank all of them for their efforts, and in particular for their achievements in a very busy final quarter of 2009.

 

Share capital

 

The Board has been considering proposals to rationalise the Company's share capital by way of a simple share consolidation and sub-division and will issue proposals shortly for consideration by shareholders at the time of the Annual General Meeting in June.

 

Outlook

 

The outcome for 2009 was ahead of our expectations, our pipeline of sales opportunities across our business continues to increase and we are confident that the markets in which we operate will continue to expand. However, the poor state of government finances around the world and low economic growth is of concern. Recent examples of programmes being delayed by the UK government are the Intercity Express rail programme and the Warrior (armoured vehicle) Capability Sustainment Programme both of which are projects in which we would hope to participate.

 

The degree of uncertainty over UK Government actions that may be taken post the forthcoming election may well affect spending by our UK customers. Overseas we are seeing a less marked effect, perhaps because we are growing from a small historic base and the markets are large. In order to be in a position to capitalise on these and other opportunities when they present themselves, we shall continue to invest in our business and product development activities over the course of 2010.

 

While your Board remains confident for the future, its expectation is for modest progress in 2010.

 

Tim Wightman Chairman 23 April 2010 Consolidated Income Statement

for year ended 31 December 2009

	Note	2009	2008
		£000	£000
Revenue	2	15,946	18,862
Cost of sales		(9,908)	(12,887)
Gross profit		6,038	5,975
Administrative expenses		(4,770)	(5,031)
Operating profit		1,268	944
Financial income		14	147
Financial expenses		(262)	(387)
Profit before tax		1,020	704
Income tax	3	88	296
Profit for the year attributable to equity shareholders of the parent		1,108	1,000
Basic and diluted earnings per share (pence)	4	0.17	0.16

 

Consolidated Statement of Comprehensive Income

for year ended 31 December 2009

 

						2009	2008
						£000	£000
Profit for the year						1,108	1,000
Other comprehensive income
Currency translation on foreign currency net investments						127	(317)
Total comprehensive income for the year						1,235	683

 

 

 

Statements of Changes in Equity

for year ended 31 December 2009

	Share capital	Share premium	Retained earnings	Currency translation differences	Total equity
	£000	£000	£000	£000	£000
Balance at 1 January 2008	6,367	23,255	(31,907)	-	(2,285)
Profit for the year	-	-	1,000	-	1,000
Other comprehensive income	-	-	-	(317)	(317)
Total comprehensive income for the year	-	-	1,000	(317)	683
Equity-settled share based payments	-	-	41	-	41
Balance at 31 December 2008	6,367	23,255	(30,866)	(317)	(1,561)
Balance at 1 January 2009	6,367	23,255	(30,866)	(317)	(1,561)
Profit for the year	-	-	1,108	-	1,108
Other comprehensive income	-	-	-	127	127
Total comprehensive income for the year	-	-	1,108	127	1,235
Equity-settled share based payments	-	-	34	-	34
Balance at 31 December 2009	6,367	23,255	(29,724)	(190)	(292)

Consolidated Balance Sheet

at 31 December 2009

				2009	2008
				£000	£000
ASSETS
Non-current assets
Property, plant and equipment				267	339
Goodwill				401	401
Development costs				621	345
Deferred tax assets				356	310
				1,645	1,395
Current assets
Inventories				941	1,373
Trade and other receivables				3,450	2,635
Cash and cash equivalents				701	268
				5,092	4,276
Total assets				6,737	5,671
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital				6,367	6,367
Share premium				23,255	23,255
Currency translation reserve				(190)	(317)
Retained earnings deficit				(29,724)	(30,866)
Total equity				(292)	(1,561)
Non-current liabilities
Interest-bearing loans and borrowings				1,050	1,756
Deferred tax liabilities				66	-
				1,116	1,756
Current liabilities
Interest-bearing loans and borrowings				400	675
Trade and other payables				5,513	4,801
				5,913	5,476
Total liabilities				7,029	7,232
Total equity and liabilities				6,737	5,671

Consolidated Statement of Cash Flows

for year ended 31 December 2009

						2009	2008
						£000	£000
Cash flows from operating activities
Profit for the year						1,108	1,000
Adjustments for:
Depreciation						180	208
Amortisation of intangible assets						206	73
Financial income						(14)	(147)
Financial expense						262	387
Loss on sale of property, plant and equipment						-	9
Equity settled share-based payment expenses						34	41
Income tax credit						(88)	(296)
						1,688	1,275
Change in trade and other receivables						(822)	746
Change in inventories						432	46
Change in trade and other payables						800	(1,389)
Change in provisions						-	(11)
						2,098	667
Interest received						14	147
Interest paid						(287)	(407)
Income tax received						205	56
Net cash generated from operating activities						2,030	463
Cash flows from investing activities
Proceeds from sale of property, plant and equipment						-	5
Disposal of business (see below)						-	2,400
Acquisition of property, plant and equipment						(110)	(99)
Capitalised development expenditure						(482)	(358)
Net cash (outflow)/inflow from investing activities						(592)	1,948
Cash flows from financing activities
(Decrease)/increase on committed overdraft facility					(356)			356
Repayment of borrowings					(625)			(1,990)
Payment of finance lease liabilities					-			(8)
Net cash outflow from financing activities					(981)			(1,642)
Net increase in cash and cash equivalents					457			769
Cash and cash equivalents at 1 January					268			(580)
Effect of exchange rate fluctuations on cash held					(24)			79
Cash and cash equivalents at 31 December					701			268

The receipt of £2,400,000 from the disposal of the UK software products business on 21 December 2007 was held in a separate bank account at 31 December 2007 and was not available for use by the Group or Company at that time. This amount was excluded from cash and cash equivalents as disclosed in the 2007 Consolidated Statement of Cash Flows on the basis that it was not available for use by either the Group or Company at that time. The £2,400,000 was recognised as a cash inflow in the 2008 Consolidated Statement of Cash Flows when it was released from escrow.

1 Basis of preparation and status of financial information

The preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU ("adopted IFRSs"), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. It does not include all the information required for full annual accounts.

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2009 or 31 December 2008. The financial information for 2008 is derived from the statutory accounts for 2008 which have been delivered to the registrar of companies, and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985 in respect of the accounts for 2008 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2009.

 

2 Segmental information

The introduction of IFRS 8 Operating segments, which is effective for accounting periods beginning on or after 1 January 2009, has required a reassessment of the reportable segments within the Group. The analysis by geographic segment is presented in accordance with IFRS 8 on the basis of those segments whose operating results are regularly reviewed by the Board of Directors (the Chief Operating Decision Maker as defined by IFRS 8) to make strategic decisions.

 

The Board of Directors consider the business from a geographic perspective, with consideration of the performance of its UK and US operations.

 

The directors consider the Group to have only one segment in terms of products and services, being the development, supply and maintenance of technologies used in advanced security, surveillance and ruggedised electronic applications. An analysis of segmental information by geographical component is set out below. This information is presented by geography of revenue by source. There are no inter segment transactions.

 

As the Board of Directors receives segment revenue and operating profit/(loss) on the same basis as for the statutory financial statements no further reconciliation is considered to be necessary.

 

	UK		USA		Total
	2009	2008	2009	2008	2009	2008
	£000	£000	£000	£000	£000	£000
Segment revenue	15,783	18,056	163	806	15,946	18,862
Segment operating profit/(loss) before amortisation and depreciation	1,660	1,214	(6)	11	1,654	1,225
Depreciation of tangible fixed assets	(173)	(173)	(7)	(35)	(180)	(208)
Amortisation of intangible fixed assets	(206)	(73)	-	-	(206)	(73)
Segment operating profit/(loss)	1,281	968	(13)	(24)	1,268	944
Financial income					14	147
Financial expenses					(262)	(387)
Statutory profit before tax					1,020	704
Segment assets	6,534	5,245	203	426	6,737	5,671
Segment liabilities	(5,851)	(5,755)	(1,178)	(1,477)	(7,029)	(7,232)
Segment net assets / (liabilities)	683	(510)	(975)	(1,051)	(292)	(1,561)

 

 

 

 

Revenue by geographical destination can be analysed as follows:

	2009		2008
	£000		£000
United Kingdom	12,993		15,909
Continental Europe	1,798		2,067
Rest of World	1,155		886
	15,946		18,862

Included in the above amounts are revenues of £3,052,000 (2008: £5,073,000) in respect of construction contracts. The balance comprises revenue from sales of goods and services.

 

3 Taxation

Recognised in the income statement

	2009		2008
	£000	£000	£000	£000
Current tax
Current year tax credit	(52)		-
Adjustments in respect of prior years	(56)		(231)
Total current tax		(108)		(231)
Deferred tax
Origination and reversal of temporary differences	148		(8)
Recognition of previously unrecognised tax losses	(184)		(57)
Adjustment in respect of prior years	56		-
Total deferred tax		20		(65)
Total tax credit in income statement		(88)		(296)

The adjustments in respect of prior years principally arise from Research and Development tax credits. Claims for these were submitted in 2008 and 2009 but related to expenditure in earlier years.

Reconciliation of effective tax rate

	2009	2008
	£000	£000
Profit for the period	1,020	704
Tax using the UK corporation tax rate of 28% (2008: 28.5%)	286	201
Non-deductible expenses	64	37
Non-taxable income	(14)	(103)
Effect of tax losses generated in year not provided for in deferred tax	-	70
Recognition of previously unrecognised tax losses	(184)	(57)
Utilisation of tax losses	(58)	(45)
Change in unrecognised temporary differences	(111)	(168)
Adjustments in respect of prior years	-	(231)
Enhanced deduction for R&D expenditure	(71)	-
Total tax credit	(88)	(296)

For the year ended 31 December 2008, the Group was subject to UK corporation tax at a base rate of 30% during the 3 months to 31 March 2008 and 28% from 1 April 2008 to 31 December 2008.

 

4 Earnings per share

The calculation of basic earnings per share for 2009 was based on the profit attributable to ordinary shareholders of £1,108,000 (2008: £1,000,000) divided by the weighted average number of ordinary shares outstanding during the year ended 31 December 2009 of 636,706,423 (2008: 636,706,423).

Diluted earnings per share is identical to the basic earnings per share. None of the share options are dilutive as the exercise prices are higher than the average market price of the shares. 

 

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