26th Sep 2006 07:02
Kenetics Group Limited26 September 2006 For Immediate Release 26 September 2006 Kenetics Group Limited Interim Results Kenetics Group Limited (Kenetics or the Company), the Radio FrequencyIdentification (RFID) company focused on Security and RFID systems and products,released its interim report for the 6 months ended June 2006. Key Points •Total turnover versus the comparable period reduced by 52.5% to £207,000 (2005: £436,000) due to delay in key projects. •Loss on ordinary activities after tax and expenses was £103,000 (2005: £158,000 profit) •Kenetics was admitted to AIM on 18 August 2006 and pre-IPO financing of £827,000 was successfully raised. •The Company will continue to enlarge its sales and distribution network in Europe to explore new avenues. •The Company is developing a newer generation of products to be offered early next year. This is expected to provide a more stable and regular source of income. Commenting on the results Ken Wong, President and CEO said: "We continue to remain confident about the outlook for the Company as we havenumerous projects being developed and outstanding revenue expected for earlynext year. We are excited about the expansion into Europe and in particular the progressioninto the UK market, especially now we have been admitted to AIM." For more information, please contact: Kenetics Group Limited - 0207 466 5000 (on the day)Ken Wong, CEOHin Yuen Yeong Buchanan Communications - 0207 466 5000Tim Thompson / James Strong CHAIRMAN'S STATEMENT Dear Shareholder It is my pleasure to report our interim results for the period ended 30 June2006. Financial Summary Kenetics Group Limited (Kenetics or the Company), the Radio FrequencyIdentification (RFID) company focused on Security and RFID systems and products,announces its interim report for the 6 months ended June 2006. The financialinformation reported upon relates to the Company's trading subsidiary KeneticsInnovations Pte. Limited ('Kenetics Innovations') which was acquired by way of ashare exchange on 24 July 2006. The acquisition of Kenetics Innovations has beentreated as a merger for accounting purposes and full year accounts of theCompany to 31 December 2006 will be presented on this basis. Turnover for the period was £207,000 (SGD 607,000) (2005: £436,000; SGD1,319,000) which after expenses, resulted in a post-tax loss of £103,000 (SGD(302,931) (2005: £158,000 profit; SGD 477,146). Post Period Events Pre-IPO financing amounting to £827,000 (before expenses) was raised on 11August 2006 and the Company was admitted to AIM on 18 August 2006. Effective from the date of admission, Mr Lynton Jones was appointed asnon-executive director of the Company. Operational Review Although trading for the first half of the year has been in line with previousyears, the Group has been affected by recent slower development than expected inseveral key ODM projects, which consequently have had to be delayed. Developmentwork has started on the projects and revenue is projected to come in during thesecond half of the year with the balance of the contracted revenue continuing tocome in during the first half of 2007. Several exploratory projects have alsonot yet materialised, particularly the implementation of security projects inChina. Additionally, a major customer in Singapore has delayed the call fortender on a project that had earlier been expected to come in the middle of theyear. This is now expected to occur in 2007. The Company is taking steps to get some of the delayed projects back on track. AChina business support office has been established in Beijing to renew businesscontacts with Chinese government agencies as well as to establish a network ofdistributors to expand product sales. The new business support office is nowfully functional. In Europe, the Company will continue to enlarge its sales and distributionnetwork to explore new business avenues either generically or throughacquisitions. To lessen the timing uncertainty of ODM projects, the Company is in the processof developing a newer generation of products to offer to the market beginningearly next year. This is expected to provide a more stable and regular source ofincome for the Company. Prospects The board believes that changing the emphasis from being a systems developer toproduct developer will be more cash generative in the medium term. The companyis well placed to do this using its intellectual property and core technologies. Ken Wong Kai EnChairman 26 September 2006 INCOME STATEMENTS Restated 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 NotesContinuing operationsRevenue 207 436 919Other operating income - 19 52Changes in inventories offinished goods andwork-in-progress 31 (7) (7)Raw materials and consumables (80) (86) (262)usedStaff costs (167) (111) (269)Depreciation and amortisation (21) (18) (45)expensesOther operating expenses (73) (34) (84) Profit/(loss) before tax (103) 199 304Income tax expense 3 - (41) (56) Profit/(loss) after tax (103) 158 248 Earnings/(loss) per share 4 (0.43)p 0.67p 1.05p The Company had no recognised gains or losses other than the profit for theperiod. All of the amounts above relate to continuing activities. BALANCE SHEETS 30 June 30 June Restated 2006 2005 31 December (Unaudited) (Unaudited) 2005 £'000 £'000 (Audited) £'000 Non-current assetsPlant and equipment 136 129 137 Total non-current assets 136 129 137 Current assetsAvailable for sale assets 142 - -Excess of contract work-in-progress over 35 - -progress billingsContract work-in-progress - 11 20Stocks and work-in-progress 134 27 39Trade receivables 60 57 182Other receivables 117 59 94Bank balances 206 321 256 Total current assets 694 475 591 Total assets 830 604 728 Equity attributable to equity holdersShare capital 606 149 157Share premium 3 1 4Retained profits 138 231 248 Total Equity 747 381 409 Non-current liabilitiesObligations under finance leases 5 5 12 Total non-current liabilities 5 5 12 Current liabilitiesExcess of progress billings over contract - - 24work in progressTrade payables 18 20 96Other payables 36 76 77Amount owing to directors - 60 53Obligations under finance leases 9 13 5Provision for taxation 15 49 52 Total current liabilities 78 218 307 Total liabilities 83 223 319 Total equity and liabilities 830 604 728 STATEMENT OF CASH FLOWS Restated 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Operating activities(Loss)/profit before taxation (103) 199 303 Adjustments for:Depreciation and amortisation 20 18 45Unrealised foreign exchange loss - - 1Interest received - - (1)Interest paid - - - Operating (loss)/profit before workingcapital changes (83) 217 348(Decrease)/Increase in contractwork-in-progressExcess of progress billings overcontract work-in-progressExcess of contract work-in-progressover progress billings (39) (15) -Decrease/(Increase) in trade and other 93 107 (40)receivables(Increase) in inventories (95) (1) (11)(Decrease) in trade and other payables (115) (156) (94) Cash generated from operations (239) 152 203Income tax paid (36) - (12)Interest paid - - -Interest received 1 - 1 Net cash flows from operating (274) 152 192activities Cash flows from investing activitiesPurchase of plant and equipment (24) (25) (37)Investment in quoted shares (142) - - Net cash flows used in investing (166) (25) (37)activities STATEMENT OF CASH FLOWS (continued) Restated 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Cash flows from financing activitiesRepayment of loan from director (52) (4) (14)Trust receipts - (74) (79)Increase/(Decrease) in share application (2) (1) 1Increase in share capital 452 - -Repayment of loan (2) 17 -Dividends paid - - (77)Difference of fixed deposit balance due toaccumulation of interest (1) (1) (1) Net cash flows from/(used in) financing 395 (63) (170)activities Net (decrease)/increase in cash in handand at bank (45) 64 (15)Effect of exchange rate changes - - (1)Cash in hand and at bank at beginning of 152 168 168period Cash in hand and at bank at end of period 107 232 152Fixed deposit 88 83 88Exchange differences 11 6 16 Per balance sheet 206 321 256 STATEMENT OF CHANGES IN COMBINED SHAREHOLDERS' EQUITY 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 (Loss)/Profit for the period (103) 158 248New shares issued 452 - -Increase/(Reduction) in share (2) (2) 1applicationsDividends paid - - (77)Opening shareholders funds 409 217 217Exchange differences (9) 8 20 Closing shareholders funds 747 381 409 1. Business of Kenetics Group Limited The Company was incorporated in Jersey on 22 June 2006 and on 24 July 2006acquired the entire issued share capital of Kenetics Innovations. Kenetics Innovations is incorporated and domiciled in Singapore. Its principaloffice is at 2 Tannery Road #05-01 Cencon Building, Singapore 347720. The principal activities are that of business of electronics design and ofmanufacturing and producing all kinds of electrical and electronic goods. 2. Basis of preparation and significant accounting policies The financial statements are prepared in accordance with International FinancialReporting Standards ('IFRS') adopted in the presentation of the financialinformation in the Company's AIM admission document. The financial statements are presented in Sterling. They are prepared on thehistorical cost basis. For the purpose of these interim financial statements represents the results andfinancial position of the Company's subsidiary company, Kenetics Innovationsthat was acquired by way of an exchange of shares on 24 July 2006. Theacquisition of Kenetics Innovations has been treated as a merger for accountingpurpose and the full year accounts for the Company will be presented on thisbasis. The preparation of financial statements in conformity with IFRSs requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets, liabilities, income andexpenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making the judgementsabout carrying amounts of assets and liabilities that are not readily apparentfrom other sources. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised, if the revision affects only that period, or in the periodof the revision and future periods, if the revision affects both current andfuture periods. Judgments made by management in the application of IFRSs that have a significanteffect on the financial statements an in arriving at estimates with asignificant risk or material adjustments in the following year. 3. Taxation 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Provision for deferred taxation - - -Current taxation - 41 56 Corporate taxation credit - 41 56 4. Earnings/(loss) per share Earnings/(loss) per share has been calculated on the basis of the profits orlosses attributable to ordinary shareholders divided by 23,592,880, being thenumber of ordinary shares issued by the Company for the acquisition of KeneticsInnovations on 24 July 2006. 5. Exchange rates The reporting currency of the Company is deemed to be £ sterling. The functionalcurrency of Kenetics Innovations is Singaporean dollars. The following exchangerates have been used in preparing this financial information: £1 = S$ 31 December 2004 3.12730 June 2005 3.02431 December 2005 2.8630 June 2006 2.927 6. Post balance sheet events On 24 July 2006, the Company issued 23,592,880 new Ordinary Shares of £0.01 eachin consideration for the acquisition of the entire issued share capital ofKenetics Innovations. On 11 August 2006 the Company issued 2,756,666 new Ordinary Shares of 1p each toinvestors for a total cash consideration of £827,000. On 11 August 2006 the Company's issued share capital was admitted to AIM. 7. Nature of financial information The interim financial information set out above is not audited and does notrepresent statutory financial statements for Kenetics Group Limited or for anyof the entities comprising the Kenetics Group for the period ended 30 June 2006.Neither the Company nor Kenetics Innovations are required to prepare or filestatutory financial statements in the UK and have not done so. The firststatutory financial statements of Kenetics Group Limited will in respect of theperiod ending 31 December 2006. The Board approved the interim financial information for the period ended 30June 2006 on 25 September 2006. These interim results will be available on the Company's websitewww.kenetics-group.com. Further copies can be obtained from the registeredoffice at 44 Esplanade, St Helier, Jersey, JE4 8PM. Ends This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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