Final Results
Embargoed Release: 07:00hrs Wednesday 16 March 2005
Toad Group Plc
(`Toad' or the `Group')
Preliminary Results Announcement for the Year Ended 31st December 2004
Highlights
* Operating profit before intangibles up on last year
* Strong growth in hands-free installations
* 25% stake taken in high growth business supplying CCTV for public transport
vehicles
* Net debt down despite £1.78m spend on above investment
* Move to AIM proposed for Spring `05
Chairman's Statement
Trading Results
I am pleased to report that despite a difficult year for our mature businesses
we have recorded a slight increase in operating profit after interest payable
but before amortisation and impairment of intangibles at £1.5m (2003: £1.4m).
This has been achieved by tight control of all operations combined with
shifting the focus of the business into new growth markets. This has required
some investment, but disciplined working capital management has meant that we
have been able to fund a £1.8m cash investment (including costs) in a high
growth business and at the same time actually reduce our net debt to £3.7m
(2003: £3.9m).
Our results are summarised as follows:
2004 2003
£m £m
Turnover 34.6 33.2
Gross profit 14.2 13.3
Gross profit percentage 41% 40%
Operating expenses excluding amortisation and impairment of (12.2) (11.3)
intangibles
Operating profit before amortisation and impairment of 2.0 2.0
intangibles
Operating profit before amortisation and impairment of 1.5 1.4
intangibles but after interest payable
Sales overall increased by £1.4m to £34.6m (2003: £33.2m) mainly due to
significant growth by our Technical Services Division where sales are up by £
3.2m (160%) boosted by mobile phone hands-free installations. We are now
handling around 3,000 hands-free installations a month from virtually a
standing start at the end of 2003.
Conversely our mature businesses have seen some inevitable decline. Car audio
insurance replacement was down by £2.4m (23%) on 2003 and car security
distribution sales were down £1.3m (21%) on the prior year, but by sourcing new
products, extending our ranges, increasing market penetration and looking to
new markets, sales in our other business areas increased by £1.9m although
margins have been under pressure. This £1.9m includes £0.8m from the sale of
distribution rights for Actra in the UK public transport sector to 21st Century
Crime Prevention Services Limited ('21st Century'), a company in which the
group subsequently took a 25% stake (see below).
Increases in operating expenses in the period (excluding amortisation and
impairment of intangibles) reflect our investment in training and
infrastructure to support new growth areas. Our biggest single operational
investment this year has been to enhance our engineering and call centre
resource to support the growth in the hands-free installation business. The
benefit of this can be seen in the enhanced gross margin with the related
labour cost included in operating expenses.
Operating expenses also include product development costs written off of £
170,000 and costs of £110,000 incurred to investigate several acquisition
opportunities in the year.
Amortisation and impairment of intangibles and tax
2004 2003
£m £m
Operating profit before amortisation and impairment of intangibles 1.5 1.4
but after interest payable
Amortisation and impairment of intangibles (0.7) (0.3)
Net profit before tax 0.8 1.1
Tax - 0.2
Minority interests - (0.1)
Net profit after tax and minority interests 0.8 1.2
At the end of the year the directors undertook a detailed review of the
carrying value of the group's intangible fixed assets. After due consideration
of all the factors it was decided that the remaining balances in respect of
Metvale (the acquisition of an audio insurance replacement business dating from
January 1999) and Actra (development costs in respect of our telematics product
accumulated since 2001) should be written off. This has resulted in a one-off
impairment charge of £0.4m in the year but as a result there will be no further
amortisation charges in respect of these intangibles in future years.
Last year's results were enhanced by a tax credit resulting from an accounting
requirement to recognise a deferred tax asset in respect of previous years'
trading losses. An equivalent asset remains in the balance sheet at 31 December
2004. The net tax charge is £nil in 2004 (2003: credit of £0.2m) and the group
has £2.6m (2003: £4.0m) of tax losses available for carry forward.
Investment in associate
In December we acquired a 25% stake in 21st Century for £1.65m (before costs)
in cash together with options to acquire the remaining 75% in two tranches of
24% and 51%, for a further total cash payment of £5.05m. 21st Century is a fast
growing supplier of specialist CCTV security systems for public transport
vehicles. These systems have the support of transport authorities and operating
companies who are keen to increase passenger numbers by reducing crime on
public transport vehicles and defeat fraudulent or bogus insurance claims. As
well as supplying security solutions to numerous public transport companies,
21st Century is the preferred supplier to Arriva's UK Bus Division with whom it
has developed a bespoke system. Synergy from this acquisition comes from
leveraging our installation and customer services capabilities to accelerate
growth. We are excited by the prospects for this business and our close working
relationship will enable us to assess the progress of the company before we
exercise our options to take 100% ownership.
In view of the encouraging early progress of 21st Century the directors are
keen to exercise the company's first option to acquire a further 24% of 21st
Century at the option price of £750,000 in cash. These additional preference
shares yield a dividend entitlement of £245,000 per annum which will bring the
cumulative dividend entitlement to £500,000 per annum. The directors intend to
exercise this option only once the company has moved across to AIM (see below)
to avoid the disproportionate costs which would otherwise be associated with
the transaction if the company were to remain on the Official List.
Proposed move to AIM
The board is planning to move the company's ordinary shares from the Official
List of the United Kingdom Listing Authority (the 'Official List') to the AIM
market of the London Stock Exchange ('AIM') in the second quarter of 2005.
As an AIM company, the company will continue to be subject to the regulatory
and disciplinary controls of the London Stock Exchange. The board believes that
AIM, with its lower cost of complying with continuing obligations, is a more
appropriate market for the company given its size and shareholder base and
would allow the company to pursue acquisitions in the most cost effective
manner. Shareholders should be reassured that, so far as is known to the
directors, with the exception of shares held in a Personal Equity Plan or an
Individual Savings Account, the transfer to AIM will in no way affect their
ability to hold shares in the company and existing share certificates will
remain valid. Shareholders should note that shares held in companies trading on
AIM are treated as unquoted for purposes of certain tax reliefs, although
shareholders should seek their own financial advice on this point.
Board change
In January this year Stuart Gall our Marketing Director gave notice of his
intention to leave the company in the Spring of 2005 to pursue other interests
in the biotechnology sector. Stuart has been with the company from the very
beginning and I would like to thank him for his invaluable contribution over
the past 11 years.
Staff
I would also like to take this opportunity to thank all the staff for their
hard work over the last year. It is through their dedication and enthusiasm
that we have been able to maintain the profitability of the group in the face
of significant market pressure within a number of the businesses in which we
operate.
Strategy and current trading
While it is pleasing to be able to report an operating profit before
amortisation and impairment of intangibles in line with the prior year, we
remain determined to grow this business. Current trading is in line with market
expectations. We continue to generate cash from our mature businesses to fund
growth opportunities and we are actively looking to grow by acquisition.
Peter Ward
Chairman
Operating Review
The Toad Group of companies operate in two divisions:
Services: Insurance Services is the provision of claims handling and fulfilment
for the UK's major insurance companies. The core business is founded on the
replacement of stolen in-car audio equipment. Insurance Services represents 25%
(2003: 33%*) of group turnover.
Technical Services is the supply and installation of mobile phone hands-free
kits, security, telematics and sat-nav systems to fleet and other non-insurance
customers. Technical Services represents 15% (2003: 6%*) of group turnover.
Distribution: Supply of third party in-car entertainment systems, own-brand
security systems and interface cables to the retail or wholesale trade, vehicle
and motorcycle manufacturers. Distribution represents 60% (2003: 61%*) of our
total turnover.
*Note that 2003 comparative figures have been amended to reclassify certain
categories of income in line with classifications adopted in the current year
Services
Insurance Services turnover at £8.7m was down 21% on the previous year (2003
sales: £11.0m). The fall in sales is attributable to the maturity of the car
audio insurance replacement market. We are actively looking for other
opportunities in insurance services.
Technical Services turnover increased by 260% to £5.2m (2003 sales: £2.0m). £
3.3m (2003: £0.3m) of the total sales figure was attributable to income from
the installation of mobile phone hands-free car kits - most of which comes from
our contract with UTL who manage the installation logistics on behalf of
Vodafone. Technical Services turnover also includes £0.8m from the sale of
certain distribution rights in Actra.
Distribution
Distribution turnover increased to £20.7m (2003: £20.2m). Sales of satellite
navigation and in-car entertainment systems performed strongly to reach £12.7m
an increase of 18% on the previous year and this offset the decline in sales
within the car security market.
The extension of the product range within Datatool, our motorcycle security and
accessories business has yielded some early success - in particular, with sales
of motorcycle battery chargers which increased by over 150% in the year. Sales
of the Reevu crash helmet, for which we have the UK distribution rights, are
due to start during 2005.
Operating expenses
Group operating expenses excluding amortisation and impairment of intangibles
have increased to £12.2m up £0.9m on the prior year. More than half of this
increase is attributable to our investment in recruitment and training of
engineers and call centre staff to service the growing hands-free installation
business. These costs are however covered by the enhanced gross margin which
has arisen from the hands-free installation revenue included in sales. The
remainder of the increased operating expenses representing a rise of 3.5%
includes the costs of relocating Datatool at the beginning of the year to share
our head office facility, R&D costs for new products and services, increased
advertising and marketing spend for new products and services and professional
costs associated with several acquisition opportunities which were reviewed in
the year.
In addition, at the year end the directors undertook a review of the carrying
value of investments in the company and made a provision against these of £
7.3m. This provision does not impact on the group balance sheet or group
results for the year.
21st Century
On 18 December 2004 we completed a transaction to acquire 25% of 21st Century
with an option to acquire the remaining 75%. 21st Century supplies and installs
CCTV security systems for use on public transport vehicles and has preferred
supplier status with Arriva's UK Bus Division. 21st Century employs
sub-contract labour to carry out its installations. We are training our
engineers to carry out this work alongside existing contractors and thereby
accelerate the growth of this business. We will also be able to draw on our
sales and support infrastructure to enhance the existing service and
accommodate growth in the customer base.
21st Century has two classes of shares, being ordinary and preference shares.
The preference shares and ordinary shares rank pari-passu in all respects
except to the extent that the preference shareholders have the first
entitlement to dividends before the ordinary shareholders.
Our initial 25% investment of £1.65m in cash was made by way of preference
shares in 21st Century which yield a cumulative dividend entitlement of £
255,000 per annum. 49% of the share capital is represented by preference shares
and our initial investment included an amount in respect of options to buy the
remaining preference shares for £750,000 which will bring our dividend
entitlement to £500,000 per annum. We then have an option to acquire the
remaining 51% of the business for £4.3m.
Working capital and net debt
Net cash flow from operations was £3.0m (2003: £2.6m). Interest and finance
costs paid were £0.5m (2003: £0.5m). Net capital expenditure was £0.5m (2003: £
0.6m) and the cash paid in respect of the acquisition of the stake in 21st
Century including professional fees was £1.8m (2003: £nil). As a result net
debt at the year end was reduced to £3.7m (2003: £3.9m).
Conversion of redeemable preference shares
On 23 December 2004 the preference shareholder, Carglass Luxembourg Sarl - Zug
Branch, converted its 3,114,582 convertible redeemable preference shares in the
company into new ordinary shares of 10p each in accordance with the terms of
the preference shares. These new ordinary shares rank pari-passu with the
existing ordinary shares and represent 3.8% of the enlarged ordinary share
capital.
Revaluation of freehold property
The group's freehold property at Mitcham was revalued on 10 December 2004, on
the basis of open market valuation by independent qualified valuers. This
valuation has been incorporated into the financial statements and the resulting
revaluation adjustment has been taken to revaluation reserve. The revaluation
resulted in a revaluation surplus of £1,406,000.
People
We have continued our investment in training with particular emphasis on our
engineering workforce to support the growth in the mobile phone installation
business. The experience and facilities developed in this exercise will be
invaluable in helping us meet the growth in CCTV installations into public
transport vehicles, which our alliance with 21st Century will bring.
Nick Grimond
Managing Director
Consolidated profit and loss account
For the year ended 31 December 2004
Continuing operations Before Amortisation 2004 2003
amortisation and (restated)
and impairment
impairment of
of intangibles
intangibles
Notes £'000 £'000 £'000 £'000
Turnover 1 34,574 - 34,574 33,235
Cost of sales (20,380) - (20,380) (19,910)
________ __________ ________ ________
Gross profit 14,194 - 14,194 13,325
Other operating (12,187) (687) (12,874) (11,679)
expenses
_________ __________ ________ ________
Group operating 2,007 (687) 1,320 1,646
profit
Share of operating (3) (3) (6) -
profit in
associate-acquisition
__________ __________ ________ _________
Total operating 2,004 (690) 1,314 1,646
profit
Interest payable and (547) - (547) (586)
similar charges
__________ __________ ________ _________
Profit on ordinary 1,457 (690) 767 1,060
activities before
taxation
Taxation - - - 200
__________ __________ ________ _________
Profit on ordinary 1,457 (690) 767 1,260
activities after
taxation
Minority (1) - (1) (86)
interests-equity
__________ __________ ________ _________
Profit for the year 1,456 (690) 766 1,174
attributable to
members of the parent
company
========= ========= ======= ========
Earnings per 1.85p 0.97p 1.55p
share-basic
-diluted 1.79p 0.94p 1.48p
There are no differences between the historical cost profit and the results
shown above for both periods.
Consolidated statement of total recognised gains and losses
For the year ended 31 December 2004
2004 2003
£'000 £'000
Profit/(loss) for the financial year
- Group 772 1,174
- Associate company (6) -
_______ _______
766 1,174
Unrealised surplus on revaluation of 1,406 -
freehold property
_______ _______
Total recognised gains for the year 2,172 1,174
====== ======
- Group 2,178 1,174
- Associate company (6) -
_______ _______
Total recognised gains for the year 2,172 1,174
====== ======
Balance sheets
At 31 December 2004
Notes 2004 Group 2004 Company
£'000 2003 £'000 2003
£'000 £'000
Fixed assets
Intangible assets 634 1,321 - -
Tangible assets 4,406 2,906 - -
Investments 2 1,774 - 10,562 16,115
________ _________ ________ ________
6,814 4,227 10,562 16,115
________ _________ ________ ________
Current assets
Stocks 3,678 3,755 - -
Debtors 5,000 5,153 4,184 6,950
Cash at bank and in 809 541 - 29
hand
________ __________ _________ ________
9,487 9,449 4,184 6,979
Creditors: amounts (7,626) (6,281) (1,099) (1,049)
falling due within
one year
________ __________ _________ ________
Net current assets 1,861 3,168 3,085 5,930
________ __________ _________ ________
Total assets less 8,675 7,395 13,647 22,045
current liabilities
Creditors: amounts (975) (1,892) (975) (1,890)
falling due after
more than one year
________ __________ _________ ________
Net assets 7,700 5,503 12,672 20,155
======= ========= ======== =======
Capital and reserves
Called up share 8,169 8,144 8,169 8,144
capital
Share premium account 12,110 12,110 12,110 12,110
Share capital to be 43 43 43 43
issued
Merger reserve - - 1,001 1,001
Revaluation reserve 1,406 - - -
Profit and loss (14,028) (14,794) (8,651) (1,143)
account
________ __________ _________ ________
Total shareholders'
funds
Equity 7,700 4,724 12,672 19,376
Non-equity - 779 - 779
7,700 5,503 12,672 20,155
________ __________ _________ ________
Minority interest - - - -
________ __________ _________ ________
Capital employed 3 7,700 5,503 12,672 20,155
======= ========= ======== =======
Consolidated statement of cash flows
For the year ended 31 December 2004
Notes 2004 2003
£'000 £'000
Net cash inflow from operating 4 3,002 2,551
activities
_______ ______
Returns on investments and
servicing of finance
Interest paid (461) (493)
Interest paid on finance leases (2) (8)
_______ ______
(463) (501)
_______ ______
Taxation
UK corporation tax refunded - 155
_______ ______
Capital expenditure
Purchase of intangible fixed - (9)
assets
Purchase of tangible fixed assets (513) (668)
Sale of tangible fixed assets 5 38
________ ________
(508) (639)
________ ________
Acquisitions
Purchase of investment in (1,780) -
associate
________ ________
Cash inflow before financing 251 1,566
________ ________
Financing
Issue of shares 25 691
Repayment of long term borrowings (1,000) (1,000)
Repayment of principal under (13) (103)
finance leases
________ ________
(988) (412)
________ ________
(Decrease)/increase in cash in 6 (737) 1,154
the year
======= =======
Notes to the financial statements
at 31 December 2004
1. Segmental reporting
Turnover consists primarily of sales made in the United Kingdom. Export sales
are not material. The analysis by business area is based upon the group's
reporting structure. Sales between segments are not material.
Turnover Profit before tax
Restated Before After After
amortisation amortisation amortisation
and and and
impairment impairment impairment
of of of
intangibles intangibles intangibles
2004 2003 2004 2004 2003
£'000 £'000 £'000 £'000 £'000
Business
analysis
Services 13,897 12,986 1,147 575 679
Distribution 20,677 20,249 310 192 381
_______ _______ _______ _______ _______
34,574 33,235 1,457 767 1,060
======= ======= ======= ======= =======
Net assets
Excluding Including Including
Intangible Intangible Intangible
assets assets assets
2004 2004 2003
£'000 £'000 £'000
Business analysis
Services 3,479 3,479 1,809
Distribution 3,387 4,021 3,494
_____ _____ ______
6,866 7,500 5,303
Central 200 200 200
_____ _____ _____
Total 7,066 7,700 5,503
===== ===== =====
Central net assets comprise assets, partially offset by liabilities, that
cannot practicably be divided between the segments and comprise the deferred
corporation tax asset.
2. Fixed asset investments
Details of the group's investments are:
Interest
in
associate
£'000
Cost:
At 1 January 2004 -
Addition
-Net assets 94
-Goodwill 1,686
Share of loss in period (3)
_____
At 31 December 2004
-Net assets 91
-Goodwill 1,686
_____
1,777
_____
Accumulated amortisation of goodwill:
At January 2004 -
Charge for the period (3)
_____
At 31 December 2004 (3)
_____
Net book amount:
At 31 December 2004
-Net assets 91
-Goodwill 1,683
_____
1,774
=====
Purchase of an associate
On 18 December 2004 the company acquired a 25% interest in 21st Century Crime
Prevention Services Limited ('21st Century') by way of preference shares which
will yield an annual dividend entitlement of at least £255,000. The company has
also acquired (i) an option to buy further preference shares for £750,000 in
cash which will bring its holding in 21st Century up to 49% and its annual
dividend entitlement up to at least £500,000 and; (ii) an option to acquire the
remaining 51% of the business for £4.3m in cash. Should the company not
exercise these options by 18 December 2006, the majority shareholders in 21st
Century have the option to buy back the 25% interest currently held by the
company.
Details of the company's investments are:
Interests in
group
Undertakings
£'000
Cost: 18,931
At 1 January 2004
Additions 1,780
_____
At 31 December 2004 20,711
_____
Amounts provided:
At 1 January 2004 (2,816)
Provided in the year (7,333)
_____
At 31 December 2004 (10,149)
_____
Net book amount:
At 31 December 2004 10,562
=====
Net book amount:
At 31 December 2003 16,115
=====
At the year end the directors undertook a review of the carrying value of the
company's investments which comprise its interests in group undertakings and
increased the amount provided against these investments to £10,149,000.
3. Reconciliation of movements in shareholders' funds
2004 2003
£'000 £'000
Group
Opening shareholders' funds 5,503 3,638
Placing of shares - 691
Exercise of share options 25 -
Revaluation surplus 1,406 -
Profit for the year 766 1,174
_______ _______
Closing shareholders' funds 7,700 5,503
====== ======
2004 2003
£'000 £'000
Company
Opening shareholders' funds 20,155 17,721
Placing of shares - 691
Exercise of share options 25 -
(Loss)/profit for the year (7,508) 1,743
_______ _______
Closing shareholders' funds 12,672 20,155
====== ======
4. Reconciliation of operating profit to net cash inflow from operating
activities
2004 2003
£'000 £'000
Operating profit 1,314 1,646
Depreciation on tangible fixed assets 414 417
Amortisation and impairment of intangible fixed 690 304
assets
Decrease in stocks 77 350
Decrease/(increase) in debtors 153 (540)
Increase in creditors 354 374
_______ _______
Net cash inflow from continuing operating activities 3,002 2,551
======= =======
5. Reconciliation of net cash flow to movement in net debt
2004 2003
£'000 £'000
(Decrease)/increase in cash in the year (737) 1,154
Cash outflow from movement in debt 1,013 1,103
_______ _______
Change in net debt arising from cash flows 276 2,257
Other - amortisation of loan issue costs (85) (85)
_______ _______
Movement in net debt in the year 191 2,172
Net debt at 1 January (see note 6) (3,916) (6,088)
_______ _______
Net debt at 31 December (see note 6) (3,725) (3,916)
======= =======
6. Analysis of net debt
At Cash flow Non cash At
31 December movement 31 December
2003 2004
£'000 £'000 £'000 £'000
Cash at bank and in 541 268 - 809
hand
Bank overdrafts (1,552) (1,005) - (2,557)
_______ _______ _______ _______
(1,011) (737) - (1,748)
_______ _______ _______ _______
Finance leases (15) 13 - (2)
Short term bank loans (1,000) 1,000 (1,000) (1,000)
Other loans (1,890) - 915 (975)
_______ _______ _______ _______
(3,916) 276 (85) (3,725)
======= ======= ======= =======
The net non cash movement relates to amortised loan issue costs during the
year.
7.Restatements
The company has reviewed its presentation of certain amounts
The group receives rebates from suppliers and pays rebates to customers
representing contributions to marketing costs. Previously these contributions
were included in turnover and cost of sales respectively. Rebates received and
paid have been reclassified to other operating expenses. Rebates received in
2004 were £553,000 (2003: £541,000) and rebates paid were £223,000 (2003: £
312,000)
In previous years bought ledger discounts received were included in turnover.
These have now been reclassified as a deduction from cost of sales. Bought
ledger discounts received in 2004 were £300,000 (2003: £326,000)
In previous years intercompany sales by Integrated Technologies (International)
Limited to Toad (UK) Limited were not eliminated on consolidation. The
consolidated turnover and cost of sales figures have been reduced by
intercompany sales in 2004 of £418,000 (2003: £259,000).
The impact of the restatement of the above amounts on the results for 2003 can
be summarised as follows:
Restatement
2003
Increase/ Increase/ (Decrease)/
(decrease) in (decrease) in increase in
sales cost of sales operating
expenses
£'000 £'000 £'000
Rebates received (541) - (541)
Rebates paid - (312) 312
Bought ledger discounts (326) (326) -
Intercompany sales (259) (259) -
_______ _______ _______
(1,126) (897) (229)
====== ======= =======
8. Related party transactions
21st Century Crime Prevention Services Limited ('21st Century')
Mr Paul Frodsham, Managing Director and majority shareholder in 21st Century,
is the brother-in-law of Mr Wilson Jennings a main board director and Company
Secretary of Toad Group plc.
On 17th December 2004, the group sold the distribution rights to Actra within
the UK public transport market to 21st Century for £850,000.
On 18th December 2004, Toad Group plc acquired a 25% stake in 21st Century
along with options to acquire the remaining share capital (further details are
given in note 14) for £1,650,000.
At 31 December 2004 there was an amount of £149,000 included within other
debtors (2003: £nil) outstanding and payable by 21st Century to the group.
9. Publication of non-statutory accounts and basis of preparation
The financial information contained in this preliminary announcement does not
constitute statutory accounts for the year ended 31 December 2004. The
financial information for the year ended 31 December 2003 is derived from the
statutory accounts for that period which have been delivered to the Registrar
and included an audit report which was unqualified and did not contain a
statement under either Section 237(2) or Sections 237(3) of the Companies Act
1985. The statutory accounts for the year ended 31 December 2004 will be
finalised on the basis of the financial information presented by the directors
in the preliminary announcement and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
-END-
For Further Information:
Peter Ward Toad Group Plc 020 8710 4015
Chairman
Andrew Tan Hansard Communications 020 7245 1100
Account Executive
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