20th Sep 2005 07:01
Asfare Group plc20 September 2005 Press Release 20 September 2005 Asfare Group plc Final Results for the Year Ended 31 March 2005 Asfare Group plc, a leading specialist supplier of high quality products andservices supplying the Emergency Services market, reports its full year resultsfor the year ended 31st March 2005. Financial Year 2005 • Turnover £3.925 million (Proforma 2004: £4.389 million)• Profit Before Tax £109,000 (Proforma 2004: Loss £401,000)• Earnings Per Share 2.8p (Proforma 2004: Loss 13.5p)• Cash generated £487,000 (Proforma 2004: £530,000)• Net borrowings reduced to £693,000 (Proforma 2004: £1.033 million) Current Year 2006 Update • First half expected small operating loss• New orders worth in excess of £750,000 received in September 2005 for delivery in the second half, including initial £435,000 order for AssetCo for the fire service in London• Increased order book and second half significant improvement in market conditions• Strengthened Executive team• Advanced stages of an acquisition in the Homeland Security market Commenting on the Preliminary Results, Tony O'Neill Chief Executive, said: "Asfare traded profitably during the last year and generated cash despitedifficult market conditions. These conditions have continued throughout thefirst half of the current year. However, the Board is now encouraged by asignificant improvement in the order book following the orders received inSeptember and is optimistic about the Group's prospects in the second half ofthe year." For further information, please contact: Enquiries: Asfare Group plcTony O'Neill, Chief Executive Tel: +44 (0) 2380 861 966Tim O'Connor, Finance Director Seymour PierceMark Percy / John Depasquale Tel: +44 (0) 20 7107 8000 Media enquiries:Abchurch CommunicationsAriane Comstive / Sara Dean Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com - Ends - Chairman's statement The past year was a challenging period for the Group as the demand for itsproducts was disrupted by the process of change surrounding the Government'sintroduction of a National Procurement Strategy for the Fire and Rescue Service. Uncertainty in the industry resulted from directives from the Office of theDeputy Prime-Minister ("ODPM") to the fire authorities that, until such time asthe national strategy was published, they should only enter into new contractsfor operational vehicles and equipment where the need was for urgent operationalreasons. Fire appliance manufacturers were particularly affected because oftheir long manufacturing lead-times. The disruption affected the commercial momentum of the Group in several ways,continuing into the current financial year. I am pleased these difficulties arenow over and we expect to have a strong second half to the current financialyear. Financial Results Profit & Loss Account The year ended 31 March 2005 results represent a full year trading for AS Fireand Rescue Equipment Ltd ("AS Fire") and Asfare Group plc. The results for theprior period ended 31st March 2004 derive from the operations of AS Fire whichthe Company acquired on 12th December 2003, together with the results of theCompany itself for a trading period of 3 months and 20 days. In the accounts for last year we provided proforma unaudited results for thetwelve months ended 31st March 2004 and in order to give a better understandingof the underlying trading we have used these proforma figures for the prior yearcomparatives in both the accounts and the information shown below. Turnover for the twelve months to 31st March 2005 amounted to £3,925,000, a fallof 11% from the £4,389,000 achieved in the previous twelve months. As a resultof this reduced level of activity margins were under pressure and it isencouraging to note that whilst they have diminished slightly to 52.9% (2004:54.2%), this was as a result of the mix of revenue during the year rather than areduction in the efficiency of production. Operating profit before goodwill amortisation and exceptional costs for thetwelve month period was £338,000, a reduction of £443,000 compared with theprior year. The figures for 2005 are after incurring parent company overheadsfor twelve months of £238,000 (2004: £152,000). The Operating profit after goodwill and exceptional costs in the twelve monthperiod was £190,000 (2004: £360,000 loss). The profit before tax for the periodwas £109,000 (2004: £401,000 loss). Profit after tax was £119,000 (2004:£566,000 loss). Fully diluted earnings per share for the twelve months were 2.8pence (2004: 13.5p loss per share). Taxation Tax losses of £1,000,000 arose in the Company in the prior period largely due toexceptional costs together with the cost of raising share capital which wascharged to the share premium account. Tax losses of £292,000 have been utilisedduring the year (2004:£338,000), which along with an over provision from lastyear, has resulted in a tax credit of £10,000 in the results for the year ended31 March 2005. Carried forward tax losses amount to £644,000 (2004:£936,000) and will beavailable to offset against future profits, thereby reducing the tax charge andfuture tax payments. The tax losses are currently estimated and need to beagreed with the Inland Revenue. Balance Sheet At 31st March 2005, shareholders' funds amounted to £2,962,000 (2004:£2,885,000). Goodwill of £2,946,000 arose on the acquisition of AS Fire on 12December 2003. In the light of the current year's trading performance thecarrying value of this goodwill has been reviewed and in the Board's opinionthere has been no diminution in the value of this goodwill. The Directorsbelieve the benefits of this acquisition will continue for a period not lessthan 20 years, and accordingly the goodwill is being amortised over a 20 yearperiod. The amount charged against profits during the year was £148,000 (2004:£36,000). Cash Balances and Loan Finance The Group was strongly cash positive during the year and as a result netborrowings fell to £693,000 (2004: £1,033,000). Net Cash Inflow from OperatingActivities of £487,000 (2004: £530,000) was achieved in the year and thisrepresented a cash conversion rate of 144% when compared to Operating Profitbefore Goodwill Amortisation. As a result the Group has reduced its term loan to£900,000, following repayments of £240,000 during the year. The Group's cashposition has also improved by £109,000 and at the year end had headroom againstfacilities of £459,000. The Group's low requirement for capital expenditure coupled with the tax lossesavailable, means the Group should again be cash generative for the year ended 31March 2006. Dividends The Company paid an interim dividend of 1.0p but due to the lower than expectedprofit performance of the Group in the second half of the year and theconsequential lack of available reserves the directors are not proposing to paya final dividend. National Procurement Strategy for the Fire and Rescue Service in England In September 2004 the ODPM launched a draft strategy document for consultationwhich, inter alia, outlined its future expectations of the procurement functionof the Fire and Rescue Service in England. The main thrust of the proposal is tosignificantly reduce the overhead cost of procurement within the fire brigades,by the formation of a centralised body "Firebuy." Firebuy will be responsiblefor the national specification, testing and procurement of key operationalequipment including ladders, shutters and gantries. AS Fire has been actively involved in the development of the final strategy,being one of only a handful of companies that hosted a visit from the ODPM.Allied to this, the major equipment suppliers to the fire brigades have formed atrade body - "FIRESA" to represent their interests and we are proud that DavidChisnall, Deputy Chairman, has been elected the first Chairman. We are broadly in agreement with the proposals in the strategy document. Inparticular we welcome two major initiatives which will generate greater clarityand efficiency for all suppliers; 1. A single national specification for key operational equipment. Currently we produce a significant number of permutations for each of our products in order to service the needs of each individual fire brigade. In future there will be a single specification with a limited number of additional options that each brigade can choose from; and 2. All new products will be tested and assessed by a single body rather than each individual brigade. This will enable us to reduce the number of demonstration ladders that we have to produce for testing and should also reduce the lead time in these new products reaching the market place. It will also enable us to work far more closely with the industry in developing new products and services. Further the new strategy will give us the opportunity to develop new productsand to provide maintenance services previously undertaken by the fire brigadesthemselves. The formation of Firebuy has recently been approved by the Deputy PrimeMinister, and we are confident that these benefits will now start to come tofruition in the coming months. Current Trading During September the Company has seen a significant improvement in generalmarket conditions, although the first five months of the current financial yearsaw a continuation of the downward revenue trend of the previous financial year,resulting in a likely small operating loss for the first half of 2006. The completion of the ODPM review has enabled orders to be placed on the fireappliance manufacturers which, has in turn, provided AS Fire with bettervisibility on the potential future pipeline for its products. At the same timeAS Fire has won an initial contract to supply by 31 March 2006 over 220 laddersto AssetCo, (the provider of asset management services to London Fire Brigade),with a contract value of over £435,000. During September AS Fire has also woncontracts with a value in excess of £300,000 from other customers. In additionthe Company has won a four year contract to supply all of the replacementladders for the Western Australian Fire Authority, further strengthening ASFire's presence in the Australasian market. Consequently against the background of a significantly improved order book theboard expects the Company to achieve a strong second half performance. Future Strategy The potential for our traditional business remains strong. The need for ourproducts within the UK has not diminished, nor have we lost any key orders toany other suppliers during the past twelve months. Our overseas sales remainstable, reinforced by the contract win in Western Australia. The hiatus caused by the Government's intervention demonstrates the validity ofthe Group's initial strategy to build on its strong UK market share by expandingorganically and by acquisition into related market sectors in the UK and abroad.However, our acquisition discussions within the UK fire and rescue sector werehampered by a lack of forward visibility for buyer and vendor alike while theeffect of the Government's new procurement strategy remained unclear. Following a decision to reduce our dependency on the UK fire and rescue sectorwe have widened our objective to become a leading specialist supplier of highquality products and services in the Homeland Security market worldwide. Wecontinue to believe that Asfare can become a vehicle for the consolidation andgrowth of such related businesses. In pursuit of this strategy Asfare is in an advanced stage of negotiation topurchase a UK manufacturer of Homeland Security equipment which is a leader inits sector. Funding for this transaction is anticipated to be a mix of debt andequity. The board believes that this wider market will generate significantorganic growth and acquisition opportunities, as well as having synergisticbenefits for the group. Board Changes On 23 August we appointed Tony O'Neill as Chief Executive to succeed DavidChisnall who became Deputy Chairman. David became Chairman of FIRESA, the fireand rescue industry equipment suppliers' trade association, earlier this year.He will continue to make available to the Company his industry expertise andwealth of relationships but will reduce his commitment to the business to threedays a week. Tony O'Neill has considerable experience in leading and developinggrowth businesses and for the last seven years has been UK Managing Director ofRentokil Initial's Security Division, which has a turnover in excess of £100million. Adrian Jones, Group Finance Director, resigned on 31 August 2005 to take upanother appointment and was succeeded by Tim O'Connor on 1 September 2005. Hewas CFO of Tandberg Television ASA (a Norwegian listed company) between 2002 and2005 during which time he was instrumental in the successful turnaround of thebusiness to a current market capitalisation of approximately £500 million. Hewas also responsible for enlarging Tandberg's UK institutional shareholder baseand was involved in substantial acquisition activity for Tandberg. These two widely-experienced executives will bring valuable skills to the Groupas it grows organically and by acquisition and they will be able to benefit fromDavid Chisnall's deep knowledge of our core industry. Staff The Board is grateful for the strong support, enthusiasm and flexibility shownby the staff of AS Fire during what has been a challenging year. Future prospects We expect the turnover to grow strongly in the second half of the currentfinancial year now that the procurement policies of the UK fire and rescueauthorities are clearer and as a result of the brigades returning to the marketwith significant vehicle orders. The Board is therefore optimistic about thefuture prospects for AS Fire. The directors believe that the strengthening ofthe management team combined with the extension of the acquisition strategy intothe wider field of Homeland Security will result in both strong organic andacquisitive growth over the next few years for the Group. Tim WightmanChairman19 September 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT Proforma (Unaudited) Period Year Year from Ended Ended Incorporation 31 March 31 March to 31 March Note 2005 2004 2004 £000 £000 £000 Turnover 1 3,925 4,389 1,334Cost of sales (1,847) (2,012) (629) Gross profit 2,078 2,377 705 Administrative expenses (1,888) (2,737) (1,620) Operating profit before goodwill amortisation and 338 781 136exceptional costsGoodwill amortisation 5 (148) (77) (36)Exceptional costs 2 - (1,064) (1,015) Operating profit/(loss) 190 (360) (915) Interest receivable 3 5 1Interest payable (84) (46) (22) Profit/(loss) on ordinary activities before taxation 109 (401) (936) Tax on ordinary activities 3 10 (165) (1) Profit/(loss) on ordinary activities after taxation 119 (566) (937) Dividends (42) - - Retained profit/(loss) for the financial year 77 (566) (937) Earnings/(loss) per share 4Basic earnings/(loss) per share 2.8p (13.5p) (22.3p)Loss per share on goodwill and exceptional items 3.5p 24.8p 22.9pafter taxationAdjusted earnings per share 6.3p 11.3p 0.6p Diluted earnings per shareDiluted basic earnings/(loss) per share 2.8p - -Diluted loss per share on goodwill 3.5p - -Diluted adjusted earnings per share 6.3p - - All operations are classed as continuing. The Company has no recognised gains or losses other than the results for theyear as set out above. CONSOLIDATED BALANCE SHEET At 31 March Note 2005 2004 £000 £000FIXED ASSETSIntangible assets 5 2,762 2,910Tangible assets 131 156 2,893 3,066 CURRENT ASSETSStock and work in progress 506 635Debtors 6 914 830Cash at bank and in hand 175 67 1,595 1,532 CREDITORS: amounts falling 7 (889) (845)due within one year NET CURRENT ASSETS 706 687 TOTAL ASSETS LESS CURRENT 3,599 3,753LIABILITIES CREDITORS: amounts fallingdue after more thanone year 8 (637) (868) NET ASSETS 2,962 2,885 CAPITAL AND RESERVESCalled up share capital 1,050 1,050Share premium account 9 1,872 1,872Profit and loss account 9 40 (37) EQUITY SHAREHOLDERS' FUNDS 10 2,962 2,885 CONSOLIDATED CASH FLOW STATEMENT Proforma (Unaudited) Period Year Year from Ended Ended Incorporation 31March 31 March to 31March Note 2005 2004 2004 £000 £000 £000 Net cash inflow from 11 487 530 133operating activities Returns on investment andservicing of financeInterest received 3 5 1Interest paid (74) (47) (22)New loans issue costs - (44) (44) (71) (86) (65) TaxationCorporation tax paid (2) (319) (76) Capital expenditure andfinancial investmentPurchase of tangible (30) (113) (4)fixed assetsSale of tangible fixed 7 3 -assets (23) (110) (4) Acquisitions anddisposalsPurchase of subsidiary - (3,873) (3,873)undertakingsNet cash acquired with - - 439subsidiaries - (3,873) (3,434) Equity dividends paid (42) - - Net cash inflow/(outflow) 349 (3,858) (3,446)before financing FinancingShare Issue - 3,300 3,300Issue Costs - (378) (378)New long term loan - 1,200 1,200Repayment of old - (664) (550)long-term loanRepayment of new (240) (60) (60)long-term loanNet cash (outflow)/inflow (240) 3,398 3,512from financing Increase/(decrease) in 109 (460) 66cash for the year NOTES TO ACCOUNTS BASIS OF PREPARATION The accounts have been prepared in accordance with applicable accountingstandards and under the historical cost accounting rules. The accounts cover theyear ended 31 March 2005. In order to enable useful comparison of the Group's performance proformainformation has been included in this Annual Report for the year ended 31 March2004. The proforma results for the year ended 31 March 2004 represent the actualconsolidated results of the Group from the date of incorporation of the Companyplus the results of Speed 5019 Limited and its subsidiaries from 1 April 2003until its acquisition by the Company on 12 December 2003. 1 ANALYSIS OF TURNOVER Proforma (Unaudited) PeriodBy Geographical Market Year Year from Ended Ended Incorporation 31 31 March to 31 March March 2005 2004 2004 £000 % £000 % £000 % UK 3,288 84% 3,742 85% 1,127 84%Rest of World 637 16% 647 15% 207 16% 3,925 100% 4,389 100% 1,334 100% 2 EXCEPTIONAL COSTS Proforma (Unaudited) Period Year Year from Ended Ended Incorporation 31 31 March to 31 March March 2005 2004 2004 £000 £000 £000 UITF 17 charge for shares - (900) (900)issued at a discountEmployers National - (115) (115)Insurance on discountedsharesCost of relocating - (49) -factory and offices andAIM listing - (1,064) (1,015) The UITF 17 charge in the year ended 31 March 2004 relates to 1,499,998 ordinary25p shares allotted at 40p per share on 2 December 2003 to David Chisnall(498,750 shares), Tim Wightman* (498,749 shares) and Adrian Bradshaw** (502,499shares). Notes: * Tim Wightman is interested in 125,000 of the Ordinary Shares set out againsthis name by reason of his wife's beneficial ownership of those shares. ** Adrian Bradshaw is interested in one half of the Ordinary Shares set outagainst his name, all of which are held by Bradmount acting as nominee forAdrian Bradshaw and Peter Mountford in equal shares. 3 TAX ON (LOSS) / PROFIT ON ORDINARY ACTIVITIES ProformaProfit/(loss) on ordinary (Unaudited) activities before taxation Periodis stated after charging Year Year from Ended Ended Incorporation 31 31 March to 31 March March 2005 2004 2004 £000 £000 £000Research and Development 21 27 10current yearOperating leases : land 138 120 31and buildingsOperating leases : plant 3 3 1and machineryAmortisation of goodwill 148 77 36Amortisation of loan 9 3 3costsDepreciation of tangible 49 56 14fixed assetsProfit on disposal of 1 3 -tangible fixed assetsAuditor remuneration - 18 26 5Audit feesAuditor remuneration - 34 10 -Further assurance serviceAuditor remuneration - 2 7 7Tax complianceExceptional items - 1,064 1,015 4 (LOSS) / EARNINGS PER SHARE Proforma (Unaudited) Period Year Year from Ended Ended Incorporation 31 March 31 March to 31 March 2005 2004 2004 £000 £000 £000Profit/(loss) after taxation 119 (566) (937)Adjustments :Goodwill amortisation 148 77 36Exceptional items - 1,064 1,015Taxation on exceptional items - (101) (90)Adjusted profit 267 474 24 Number Number NumberBasic weighted average number of 4,200,000 4,200,000 4,200,000sharesDilutive effect Share options 22,057 - -of ordinary Warrants - - -shares: 4,222,057 4,200,000 4,200,000 Basic earnings/(loss) per share 2.8p (13.5p) (22.3p)Loss per share on goodwill and 3.5p 24.8p 22.9pexceptional items after taxationAdjusted earnings per share 6.3p 11.3p 0.6p Diluted basic earnings/(loss) per 2.8p - -shareDiluted loss per share on goodwill 3.5p - -and exceptional items after taxDiluted adjusted earnings per share 6.3p - - The dilutive effect of share options has been calculated in accordance withaccounting standards. For this purpose the fair value of the shares has beentaken as the average market price of the Group's shares for the year ended 31March 2005 of 106.6p. The share warrants are anti-dilutive as their exerciseprice exceeds the fair value of the shares. 5 INTANGIBLE FIXED ASSETS GROUP Goodwill £000CostAt 31 March 2004 and 2005 2,946 Provision for amortisationAt 31 March 2004 36Charge for the year 148At 31 March 2005 184 Net book valueAt 31 March 2004 2,910At 31 March 2005 2,762 The Directors believe the benefits to be derived from having acquired Speed 5019Limited will continue for a period of not less than 20 years and accordingly theDirectors are amortising goodwill over this period. 6 DEBTORS GROUP COMPANY 2005 2004 2005 2004 £000 £000 £000 £000Trade debtors 836 768 - -Amount owed by subsidiary - - 3,888 4,424undertakingsOther debtors 3 1 10 13Prepayments and accrued income 75 61 5 6 914 830 3,903 4,443 7 CREDITORS: AMOUNT FALLING DUE WITHIN ONE YEAR GROUP COMPANY 2005 2004 2005 2004 £000 £000 £000 £000Overdraft - 1 - 1Bank loans 231 231 231 231Trade creditors 388 317 62 52Amount due to subsidiary undertakings - - - 608Social security and other taxes 156 159 - -Other creditors 2 19 - -Accruals 112 103 41 50Corporation tax - 15 - - 889 845 334 942 The overdraft and bank loan are secured by a fixed charge over all of theCompany's assets. 8 CREDITORS: AMOUNT FALLING DUE AFTER MORE THAN ONE YEAR GROUP COMPANY 2005 2004 2005 2004 £000 £000 £000 £000 Bank loan 637 868 637 868 The amounts are repayable as follows:- Amounts falling due:in one year or on demand 240 240 240 240after one year and within two 240 240 240 240after two years and within five 420 660 420 660 900 1,140 900 1,140Less: Issue costs (32) (41) (32) (41) 868 1,099 868 1,099Included in creditors falling due (231) (231) (231) (231)within one year 637 868 637 868 The overdraft and bank loan are secured by a fixed charge over all of theCompany's assets. 9 SHARE PREMIUM ACCOUNT AND RESERVES Profit Share and Premium Loss Account AccountGROUP £000 £000 At 31 March 2004 1,872 (37)Retained profit - 77At 31 March 2005 1,872 40 COMPANY At 31 March 2004 1,872 (289)Retained profit - 299At 31 March 2005 1,872 10 10 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group Company £000 £000 Equity shareholders' funds at 31 2,885 2,633March 2004Profit for the financial year 77 299Equity shareholders' funds at 31 2,962 2,932March 2005 11 NET CASHFLOW FROM OPERATING ACTIVITIES Proforma (Unaudited) Period Year Year from Ended Ended Incorporation 31 31 March to 31 March March 2005 2004 2004 £000 £000 £000 Operating profit/(loss) 190 (360) (915)Depreciation 49 57 14Goodwill amortisation 148 77 36Non cash adjustment to exceptional - 900 900costsProfit on sale of tangible fixed (1) (3) -assetsDecrease in stock 129 20 79Increase in debtors (84) (185) (237)Increase in creditors 56 24 256Net cash inflow from operating 487 530 133activities - Ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Assetco