Final Results
Pentagon Protection PLC
31 January 2008
Pentagon Protection Plc ('Pentagon')
PRELIMINARY RESULTS
Pentagon Protection Plc, the global specialist in the supply and installation of
enhanced glass protection and anchoring for glazing, announces its preliminary
results for the 12 months ended 30 September 2007, a year showing a considerable
reduction in losses.
Results highlights:
• Revenue up 7.4% to £1.74million (2006: £1.62million)
• Gross profit up 180% to £819,000 (2006: £456,000). Gross profit
margin up to 47% from 28% in 2006
• Operating losses reduced by 71% to £330,000 (2006: £1.14million
excluding loss from discontinued operations)
• Administrative expenses reduced by £396,000 (33%) to £792,000
Alan Nicholl, Chairman of Pentagon, commented:
'I am very happy to report a significant reduction in losses following our major
restructuring implemented through the first half of the year. There were
improvements in all areas and in the period since the end of year we have seen
further positive progress in sales and are now in a strong position to gain
significant market share.'
Enquiries:
Pentagon Protection Plc Tel: 01494 793 333
Alan Nicholl, Chairman
Seymour Pierce Limited Tel: 020 7107 8000
Matthew Thomas
Parkgreen Communications Tel: 020 7479 7933
Paul McManus Mob: 07980 541 893
Paul.mcmanus@parkgreenmedia.com
PENTAGON PROTECTION PLC
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2007
Introduction
My report on the Interim Financial Statements in June 2007 referred to our
reorganised Board - I particularly mentioned our aim to appoint another non
executive director. I am delighted to report that this was achieved in November
2007 when we welcomed Liu Chunlin as our new Deputy Chairman. Mr Chunlin brings
with him the energy of youth coupled with extensive experience in our industry,
gained by developing an enormously successful property protection group in
Singapore and China. His particular responsibility on our Board will be to
enhance our presence in Singapore and Asia, where we have previously carried out
some major contracts, including Terminals 1, 2 and 3 of Changi Airport.
In the period since the release of the interim financial statements, we have
seen further positive progress in the sales performance of the group and we are
now in a strong position to gain significant market share, not only in our
traditional market of enhanced glass protection, but also in the area of energy
saving, where our Infra-Max(R) films are making a significant contribution to
the reduction of carbon emissions.
Financial Review
I am very pleased to report that the Board has decided to adopt International
Financial Reporting Standards (IFRS) a year before we were obliged to do so.
This decision was taken in order to make our financial results and position more
comprehensible to our stakeholders all around the world, particularly to our new
Singaporean partners (see further details below). In fact, we have found that
the new formats, disclosures and accounting treatments make the accounts easier
to understand for all concerned.
For example, the discontinued aspect of our operations within the 2006 results
(which related to the automotive division) is now shown as one line, after the
loss for the period from continuing operations, rather than being split between
all the various categories on the face of the income statement (as it was last
year). This means that the results shown are truly comparing like with like,
which makes it even more pleasing to be able to say that revenues are up by 7.4%
from £1,616,343 to £1,736,026, and the loss from operations, derived from
continuing activities, has reduced by 71%, from £1,138,450 in 2006 to £329,787
this year. When one compares the total loss for the year with that for the
previous year (i.e. including the loss from discontinued operations) the
improvement in results is even more dramatic, being an 80% reduction in the loss
from £1,617,556 to £325,543.
Looking a little more closely at the operational changes that have led to these
improved results, you will see that administrative expenses have reduced by
nearly £400,000, representing a fall of 33.3% compared to the 2006 level. This
has been achieved by very strict management of all aspects of our spending. In
particular, we initiated a major reduction in staff numbers throughout the
business, particularly at senior management and Board level.
In all this celebration, I will just take a moment out to explain that despite
the dramatic improvement in our results compared to the last few years, the
Board is a little disappointed that the loss in the second half of the year
turned out to be high as it was. There were two main reasons for this. The
main cause was a contract at Dubai Airport where stringent security measures
were initiated after the contract had already been started. This added
approximately £100,000 additional costs which were not recoverable from the
client. The other reason arose because our sales team invested significant time
and effort in some very large, profitable overseas contracts, which took longer
to come to fruition than we had originally anticipated. As a consequence of
these factors, the financial results are not as good as we had hoped for the
year ended 30th September 2007. Nonetheless, the results continue to improve and
developing the business in the Far East looks likely to accelerate the rate of
this improvement.
Returning to the areas of significant improvement, we are reporting an increase
in the gross profit, from £455,583 in 2006 to £818,719 in 2007. This represents
an improvement from a gross profit margin of 28% in 2006 to a very respectable
47% in 2007.
Finally, it is worth noting that in addition to all the improvements above, all
the other items reported in the consolidated income statement are better than
the equivalent figure in the previous period. For example, investment income at
£10,440 is up on the 2006 income of £6,468. Finance costs are reduced at
£6,196, compared with £15,545 last year and of course last year's results
included a loss arising on the disposal of the automotive division, amounting in
total to £470,029 and there is no equivalent figure at all this year.
Note 25 to the accounts sets out the differences in accounting policies under
IFRS, which have led to the restatement of the balance sheet. The largest
difference relates to the treatment of goodwill. Under IFRS, goodwill has an
indefinite life and is only written down when an impairment test suggests that
the carrying value is overstated. An amortisation charge of £130,942 relating
to goodwill, arising on the acquisition of subsidiaries, was reversed on
adoption of IFRS. In addition to this, a staff bonus accrual has been
introduced to the accounts, which amounts in total at 30 September 2007 to
£8,408. Taken over all, Total Equity (previously known as Shareholders' funds)
at 30 September 2007 is £2,912,418, a figure which is only £83,484 less than the
equivalent figure at 30 September 2006, as reported under UK GAAP.
The cash flow statement shows that we have raised very little cash this year
through share issues (only £120,500), therefore the trading loss has inevitably
led to a reduction in cash and cash equivalents held at the end of the period
(2006 - £720,762, 2007 - £257,851). Nonetheless, we are confident that we have
sufficient cash resources to fund our activities for the foreseeable future.
Operational Review
Continuing the global communication theme initiated by the use of IFRS, the
directors normally consider the Group's activities in terms of the development
of various geographical areas. This year has seen a number of exciting
developments in our 'think global' theme, as follows:
European Operations
An important and sizeable contract win in Vienna and outstanding quotations of
around £1M has helped us to maintain an important presence in Europe. The
continuing push for more energy efficient buildings by the EU ensures a fertile
and growing market place throughout this important trading area.
Singapore and China
The introduction of Mr Liu Chunlin and his company K & C Protective Technologies
Pte Ltd by our ex CEO Graham Bannerman has given us an important foothold in
this part of the world with its dynamic and rapidly expanding economy.
K & C were recently awarded first place in the prestigious E5O start up awards
organised by Accenture and The Business Times to recognise innovation and
companies making a significant contribution to the Singapore economy.
As mentioned above, Mr Chunlin has joined the Board as non executive Deputy
Chairman and we are intending to trade with Mr Chunlin's companies and contacts
during the coming year.
Middle East Operations
I have already told you, in my Statement with the Interim Report, that in May
2007, Graham Bannerman was granted a licence to make certain international sales
on our behalf. One of his key territories was Dubai, which is now producing
positive results and has started to contribute modest commissions which are
expected to grow during the next 12 months.
In addition to this, we will be reviewing all our agency agreements in the
Middle East during January 2008 and expect to make changes in any areas of under
performance.
Russian Operations
A new agent, Ronix Standart, has been appointed in Moscow. Their training has
just begun and thereafter we expect to see an expansive marketing drive starting
in Moscow and then spreading out to the other major cities in the region.
We have great hopes for this region, where there is currently no significant
competition. Ronix Standart are particularly well placed to open up this area
for the Group, since they already have an extensive client base supplying a wide
variety of security products.
USA Operations
Our suppliers, 3M and Bekaerts, have been appointed as preferred suppliers of
energy saving films for the Clinton Climate Initiative. This has provided us
with an exceptional opportunity to promote our installation services to the 40
cities that have already signed up to the initiative and the many more that will
be joining this unique and far reaching programme.
In addition, our partners in the USA continue to grow their business and have
recently acquired a Florida based company, Elite Window Films, whose founder
Lucas Rodrigues has been appointed as Vice President of Operations for Pentagon
USA.
UK Operations
Back at home, we have continued to invest in sales and marketing and have added
three young and enthusiastic salesmen to the team.
Our continued investment in quality sales training has proven to be a successful
strategy borne out by an order book of around £1M and an equally healthy quote
bank.
Without doubt, the most exciting development in our industry since the
introduction of bomb blast protection in the '70s is our range of energy saving
films, Infra-Max(R). We anticipate tremendous growth in this area during the
year ahead.
A new division has been set up to concentrate on the sale of manifestations
(graphics for glass) through the internet and also via our usual marketing
strategies. This division adds an exciting new dimension to our range of
products as we are finding innovative ways of using existing glass facades for
advertising or by adding decorative designs to make the glass more interesting
and attractive.
Conclusion
The year ended with significant contract gains in Austria, Iraq and the UK which
has given us an impressive start for the year 2007 - 2008.
Our early adoption of IFRS echoes our international aspirations, which the Board
believes will take us from strength to strength in 2008.
Alan Nicholl
Chairman
31 January 2008
PENTAGON PROTECTION PLC
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2007
The directors present their report and the financial statements of the company
and the group for the year ended 30 September 2007.
Principal activities and review of the business
Pentagon Protection Plc is the parent company of Pentagon Protection (UK)
Limited.
The principal activity of Pentagon Protection (UK) Limited is the supply and
application of solar control, safety and security films to commercial buildings.
A review of the business and future developments is included within the
chairman's statement which immediately precedes this report.
Results and dividends
The results of the group for the year are set out in the Group Income Statement
on page 10.
The directors do not recommend the payment of a dividend.
International financial reporting standards
The group has applied International Financial Reporting Standards (IFRS) for the
first time in these financial statements.
Supplier payment policy
The group's payment policy is to obtain the best possible terms for all business
and hence there is no standard policy as to the terms applied. The group seeks
to abide by the payment terms agreed with suppliers when it is satisfied that
the supplier has provided goods and services in accordance with contractual
arrangements. Trade creditors of the group at 30 September 2007 were equivalent
to 70 days purchases based on the average daily amount incurred by suppliers
during the year (2006: 83 days).
Directors
The directors who served throughout the year were as follows:
A R Nicholl (Executive Chairman)
S D Harrhy (Sales Director)
H ElZayn
G H Bannerman (resigned 1 May 2007)
L Chunlin (appointed 6 November 2007)
Substantial shareholdings
As of 24 January 2008, being the latest practical date before the date of this
report, the Company has been notified of the following shareholders (excluding
directors) with interests of more than 3 per cent in the issued share capital of
the Company.
Name of owner Number of Shares Percentage of Issued share capital
D Thomas 40,597,788 12.44%
G Bannerman 24,378,947 7.47%
J Hitchins 14,000,000 4.29%
Employee involvement
Efforts are made to consult and inform employees on matters which concern them
with emphasis on the continuous growth and development of the group. Regular
meetings are held to keep staff abreast of group changes and progress.
It is the group's policy to support the employment of disabled persons wherever
possible, both through recruitment and through retention of those who have
become disabled whilst in the employment of the group.
Auditors
Warrener Stewart, Chartered Accountants, of Harwood House, 43 Harwood Road,
London, SW6 4QP will be proposed for reappointment at the forthcoming annual
general meeting.
Directors' responsibilities
The directors are responsible for preparing the annual report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the group and parent
company financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union. In preparing these
financial statements, the directors have also elected to comply with IFRSs,
issued by the International Accounting Standards Board (IASB). The financial
statements are required by law to give a true and fair view of the state of
affairs of the company and the group and of the profit or loss of the group for
that period. In preparing those financial statements, the directors are required
to:
-select suitable accounting policies and then apply them consistently;
-make judgements and estimates that are reasonable and prudent;
-state that the financial statements comply with IFRSs as adopted by the
European Union and IFRSs issued by IASB;
-prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group will continue in business.
The directors confirm that they have complied with the above requirement in
preparing the financial statements.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and the group and to enable them to ensure that the financial statements
comply with the Companies Act 1985. They are also responsible for safeguarding
the assets of the company and the group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the group's website. Legislation in the
United Kingdom governing the preparation and dissemination of financial
statements may differ in other jurisdictions.
Statement of disclosure to auditor
(a) So far as the directors are aware, there is no relevant audit information
of which the company's auditors are unaware, and
(b) they have taken all the steps that they ought to have taken as directors
in order to make themselves aware of any relevant audit information and to
establish that the company's auditors are aware of that information.
On behalf of the board
A R Nicholl
Director
31 January 2008
PENTAGON PROTECTION PLC
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF PENTAGON PROTECTION PLC
We have audited the group and parent company financial statements (the '
financial statements') of Pentagon Protection Plc for the year ended 30
September 2007 which comprise the Group Income Statement, the Group and Parent
Company Balance Sheets, the Group and Parent Company Cash Flow Statement and the
related notes. These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the company's members, as a body, in accordance
with Section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditor's report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the
financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union are set
out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985 and Article 4 of the IAS Regulation. We also report to you whether in our
opinion the information given in the Directors' Report is consistent with the
financial statements.
In addition we report to you if, in our opinion, the company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it
is consistent with the audited financial statements. The other information
comprises only the Directors' Report and the Chairman's Statement. We consider
the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements. Our responsibilities
do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the directors in the preparation of
the financial statements and of whether the accounting policies are appropriate
to the group's and company's circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statement
Opinion
In our opinion:
• the group financial statements give a true and fair view, in accordance
with IFRSs as adopted by the European Union, of the state of the group's
and the parent company's affairs as at 30 September 2007 and of its loss
and cash flows for the year then ended;
• the parent company financial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union as applied in
accordance with the provisions of the Companies Act 1985, of the state of
the parent company's affairs as at 30 September 2007 and cash flows for the
year then ended;
• the information given in the Directors' Report is consistent with
the financial statements.
Warrener Stewart
Chartered Accountants
Registered Auditors
31 January 2008
Harwood House
43 Harwood Road
London
SW6 4QP
PENTAGON PROTECTION PLC
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2007
2007 2006
Notes £ £
Continuing Operations
Revenue 2 1,736,026 1,616,343
Cost of sales (917,307) (1,160,760)
Gross profit 818,719 455,583
Distribution costs (356,761) (406,707)
Administrative expenses (791,745) (1,187,326)
Loss from operations (329,787) (1,138,450)
Investment income 10,440 6,468
Finance costs 5 (6,196) (15,545)
Loss before tax (325,543) (1,147,527)
Tax 6 - -
Loss for the period from continuing operations (325,543) (1,147,527)
Discontinued Operations
Loss for the period from discontinued operations 3 - (470,029)
Loss for the period (325,543) (1,617,556)
Loss attributable to:
Equity holders of the parent (325,543) (1,617,556)
Total recognised income and expenses
attributable to:
Equity holders of the parent (325,543) (1,617,556)
Loss per share
From continuing operations:
Basic (0.10)p (0.56)p
Diluted (0.10)p (0.56)p
From continuing and discontinuing operations:
Basic (0.10)p (0.80)p
Diluted (0.10)p (0.80)p
BALANCE SHEETS
AS AT 30 SEPTEMBER 2007
Group Company
2007 2006 2007 2006
Notes £ £ £ £
Non-current assets
Goodwill 8 2,389,093 2,389,093 - -
Property, plant and equipment 9 6,459 23,586 - -
Investments 10 - - 2,610,510 2,610,510
2,395,552 2,412,679 2,610,510 2,610,510
Current assets
Inventories 105,984 125,190 - -
Trade and other receivables 11 496,247 691,326 1,263,289 935,066
Cash and cash equivalents 260,904 720,762 253,039 710,508
863,135 1,537,278 1,516,328 1,645,574
Current liabilities
Trade and other payables 12 (267,100) (581,371) (62,500) (102,277)
Borrowings 13 (20,362) (67,318) - -
Net current assets 575,673 888,589 1,453,828 1,543,297
Total assets less current liabilities 2,971,225 3,301,268 4,064,338 4,153,807
Non-current liabilities
Provisions 14 (58,807) (183,807) (58,808) (183,807)
2,912,418 3,117,461 4,005,530 3,970,000
Equity
Share capital 16 326,418 310,918 326,418 310,918
Share premium account 17 5,705,303 5,600,303 5,705,303 5,600,303
Shares held by ESOP (4,541) (4,541) (4,541) (4,541)
Retained earnings 17 (3,114,762) (2,789,219) (2,021,650) (1,936,680)
Total equity 2,912,418 3,117,461 4,005,530 3,970,000
The financial statements were authorised for issue by the Board of Directors on
31 January 2008 and were signed on its behalf.
A.R Nicholl
Director
CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2007
Group Company
2007 2006 2007 2006
£ £ £ £
Operating activities
Net loss of consolidated companies (329,787) (1,411,010) - -
Net loss of company - - (92,650) (326,281)
Net loss of disposal of subsidiaries - - - 99,999
Depreciation of property, plant and equipment 16,186 38,890 - -
Loss on disposal of property, plant and equipment 200 8,369 - -
Decrease in inventories 19,206 56,559 - -
Decrease in trade receivables 195,078 284,717 (328,223) (812,579)
(Decrease)/increase in trade payables (314,271) 144,747 (42,278) 17,161
Interest received 10,440 6,728 10,191 5,637
Interest paid (6,196) (15,586) (10) (24)
Net cash from operating activities (409,144) (886,586) (452,970) (1,016,087)
Investing activities
Payments to acquire property, plant and equipment (559) (12,486) - -
Receipts from sales of property, plant and equipment 1,300 1,500 - -
Payment against provision for purchase of subsidiary (124,999) (11,193) (124,999) (11,193)
undertaking
Disposal of subsidiaries - (29,702) - 1
Net cash used in investing activities (124,258) (51,881) (124,999) (11,192)
Financing activities
Interest element of finance lease rentals - (2,851) - -
Decrease in factor finance (47,511) (213,837) - -
Share issue costs - (52,500) - (52,500)
Capital element of finance lease rental - (17,954) - -
Shares issued 120,500 1,500,000 120,500 1,500,000
Net cash (used in)/from financing activities 72,989 1,212,858 120,500 1,447,500
Net increase/(decrease) in cash and cash equivalents (460,413) 274,391 (457,469) 420,221
Cash and cash equivalents at the start of the period 720,762 446,371 710,508 290,287
Cash and cash equivalents at the end of the period 260,349 720,762 253,039 710,508
Cash and cash equivalents consists of:
Cash and cash equivalents 260,904 720,762 253,039 710,508
Bank overdrafts (555) - - -
260,349 720,762 253,039 710,508
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2007
1 Accounting policies
1.1 Basis of preparation
The financial statements have been prepared in accordance with EU endorsed
International Accounitng Standards, International Financial Reporting Standards
(collectively 'IFRS') for the first time. They have also been prepared in
accordance with the Companies Act 1985 applicable to companies preparing their
accounts under IFRS. The disclosures required by IFRS 1 concerning the
transition from UK GAAP to IFRS are given in note 25.
The financial statements are presented in sterling and have been prepared on the
historical cost basis, except where IFRS requires an alternative treatment. The
principal variations from historical cost relate to financial instruments (IAS
39).
At the date of issue of these financial statements, the following Standards and
interpretations, which have not been applied, were in issue but not yet
effective:
IFRS7 Financial Instruments: Disclosures; and the related amendment to IAS1 on
capital disclosures
IFRS8 Operating Segments
IFRIC10 Interim reporting and impairments
The directors anticipate that the adoption of these Standards and
Interpretations will have no material impact on the financial statements of the
group other than the appropriate necessary changes to disclosures arising from
the applications of IFRS7 and IFRS8.
1.2 Basis of consolidation
The group financial statements consolidate the financial statements of the
company and all its subsidiary undertakings as at 30 September 2007. Control is
achieved where the company has the power to govern the financial and operating
policies of an investee entity so as to obtain benefits from its activities.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used in line with those of the
group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
1.3 Revenue
Revenue represents the total amounts receivable by the group for goods and
services supplied to third parties, net of value added tax and trade discounts.
1.4 Goodwill
Goodwill arising on the acquisition of a subsidiary represents the excess cost
of acquisition over the Group's interest in the net fair value of the indefinite
assets, liabilities and contingent liabilities of the subsidiary recognised at
the date of acquisition. Impairment provisions are only made when, in the
opinion of the directors, sustainable future earnings from such subsidiaries are
insufficient to support the carrying value of that goodwill. An impairment loss
recognised for goodwill is not reversed in a subsequent period.
Goodwill arising on acquisition before the date of transition to IFRS has been
retained at the previous UK GAAP amounts as at 30 September 2005, subject to
being tested for impairment at that date. Goodwill written off to reserves under
UK GAAP prior to 2005 has not been reinstated and is not included in determining
any subsequent profit or loss on disposal.
1.5 Property, plant and equipment
Depreciation is provided on all property, plant and equipment at rates
calculated to write off the cost less estimated residual value of each asset
over its expected useful life, as follows:
Plant and machinery 10% to 25% on written down value
Fixtures & fittings 50% on cost and 25% on written down value
Motor vehicles 25% on written down value
1.6 Research and development
Development expenditure is capitalised on clearly defined projects whose outcome
can be assessed with reasonable certainty. Amortisation is commenced in the year
in which significant revenues from the development occur and is amortised in
line with sales. All other research and development expenditure is written off
in the year in which it is incurred.
1.7 Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the
rates of exchange ruling at the balance sheet date. Transactions in foreign
currencies are translated into sterling at the rate of exchange prevailing at
the date of the transaction. Exchange differences are taken into account in
arriving at the operating result.
1.8 Leasing
Assets held under finance leases are recognised as assets of the Group as their
fair value or, if lower, at the present value of the minimum lease payment, each
determined at the inception of the lease. The corresponding liability to the
lessor is included in the balance sheet as a finance lease obligation. Lease
payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against income, unless
they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the Group's general policy on borrowing costs
(see below).
Rentals payable under opening leases are charged to income on a straight-line
basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating
lease are also spread on a straight-line basis over the lease term.
1.9 Pensions
The group operates a defined contribution scheme for its employees. The funds
of this scheme are administered by trustees and are separate from the group.
All payments are charged to the profit and loss account as and when they arise.
1.10 Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial liabilities in a
transaction that affects neither the tax profit nor the accounting profit.
1.10 Deferred taxation (continued)
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the rates that are expected to apply in the period
when the liability is settled or the asset is realised. Deferred tax is charged
or credited in the income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with
in equity.
1.11 Inventories
Inventories are included at the lower of cost and net realisable value, after
making provision for slow moving and obsolete items.
1.12 Financial instruments
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short term deposits with maturities of three months or less. Bank
overdrafts also form part of net cash and cash equivalents for the purposes of
the cash flow statement.
Borrowings
Borrowings are recognised initially at fair value net of transaction costs
incurred and such interest bearing liabilities are subsequently stated at
amortised cost using the effective interest rate method. Borrowings are
classified as current liabilities unless the group has an unconditional right to
defer settlement of the liabilities for at least 12 months after the balance
sheet date.
Trade and other receivables
Trade and other non-interest bearing receivables are initially recognised at
cost and are subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for impairment of
trade receivables is established when there is objective evidence that it is
uncertain if the amount due can be collected. Movement in the provision charged
or credited in the period is recognised in the income statement.
The group discounts some of its trade receivables. The accounting policy is to
continue to recognise the trade receivables within current assets and to record
cash advances as borrowings within current liabilties. Discounting fees are
charged in the income statement as finance costs.
Trade and other payables
Trade and other payables are not interest bearing and are initially recognised
at cost and are subsequently measured at amortised cost using the the effective
interest method.
Investments in subsidiaries
Investments in subsidiairies are included in these financial statements at the
cost of the ordinary share capital acquired. Adjustments to this value are only
made when, in the opinion of the directors, a permanent diminution in value has
taken place and where there is no prospect of an improvement in the foreseeable
future.
1.13 Share based payments
The group has applied the exemption available under IFRS 1 and elects to apply
IFRS 2 only to awards of equity instruments made after 7 November 2002 that had
not vested by 1 January 2006.
Options are measured at fair value at grant date using the Black-Scholes model.
The fair value is expensed on a straight line basis over the vesting period,
based on an estimate of the number of options that will eventually vest.
2 Business and geographical segments
Based on the risks and returns the directors consider that the primary reporting
format is by business segment. The directors consider that there is only one
business segment being the application of protective film to building's glass.
Therefore the necessary disclosures have already been provided elsewhere in the
financial statements.
The group was also previously involved in the application of protective film to
automotive glass. That operation was discontinued in the previous year and the
segmented information is presented below:
Discontinued
Building Automotive Operations Consolidated
2006 2006 2006 2006
£ £ £ £
Revenue 1,616,343 536,278 536,278 2,152,621
Segment results (1,147,527) (263,957) (263,957) (1,411,484)
The results of the consolidated discontinued operations within the business segments are disclosed in note 3.
Capital additions 12,447 39 39 12,486
Depreciation (16,609) (22,281) (22,281) (38,890)
Balance Sheet
Assets 3,949,957 - - 3,949,957
Liabilities (832,496) - - (832,496)
The secondary reporting format is by geographic segments based on location of
customers. All of the business assets are located in the United Kingdom.
External revenue by segment is as follows:
2007 2006
£ £
Continuing operations
United Kingdom 606,232 942,849
Americas - 76,429
Europe 204,283 155,553
Africa and Middle East 526,740 422,018
Far East 398,771 19,494
1,736,026 1,616,343
Discontinued operations
United Kingdom - 536,278
- 536,278
1,736,026 2,152,621
3 Discontinued operations 2007 2006
£ £
Revenue - 536,278
Cost of sales - (269,410)
266,868
Distribution expenses - (136,291)
Administrative expenses - (432,706)
Other operating income - 40,804
Investment income - 260
Finance costs - (2,892)
- (530,825)
Net loss - (263,957)
Disposal of discontinued operations:
Loss on disposal of subsidiary undertaking - Pentagon Glass Tech
(Franchising) Limited - (491,447)
Profit on disposal of subsidiary undertaking - Pentagon Glass Tech
Limited - 285,375
Loss for the period from discontinued operations - (470,029)
4 Loss for the period 2007 2006
£ £
Loss for the period is stated after charging/
(crediting):
Depreciation of property, plant and equipment 16,186 38,890
Loss/(profit) on disposal of property, plant and equipment 200 8,369
Operating lease rentals
- Plant and machinery 13,517 75,774
- Other assets 24,900 159,663
Auditors' remuneration 12,000 17,000
5 Finance costs 2007 2006
£ £
On bank loans and overdrafts 321 2,176
On factored debts 5,875 10,518
On finance leases - 2,851
6,196 15,545
6 Taxation 2007 2006
£ £
Domestic current year tax
U.K. corporation tax - current tax charge - -
Factors affecting the tax charge for the year
Loss on ordinary activities before taxation (325,543) (1,617,556)
Loss on ordinary activities before taxation (97,663) (485,267)
multiplied by standard rate of UK corporation tax of
30.00% (2006: 30.00%)
Effects of:
Non deductible expenses 1,721 22,565
Accelerated capital allowances 485 651
Carried forward losses 95,457 325,783
Losses surrendered on disposal of subsidiaries - 74,447
Other adjustments - 61,821
97,663 485,267
Current tax charge - -
The group has tax losses of approximately £1,729,000 available to carry forward
against future trading profits, subject to agreement by HMRC.
No provision has been made for a potential deferred tax asset of approximately
£519,000 arising from these losses.
7 Loss per share
The calculations of loss per share are based on the following losses and number of shares:
2007 2007 2006 2006
Basic Diluted Basic Diluted
Loss for the financial year (325,543) (325,543) (1,617,556) (1,617,556)
Weighted average number of
shares for basic and diluted
loss per share 312,271,580 312,271,580 203,233,224 203,233,224
In accordance with the provisions of IAS33, shares under option are not regarded as dilutive in calculating
earnings per share.
8 Goodwill
Group 2007 2006
£ £
Carrying Value 2,389,093 2,389,093
Goodwill arose in 2003 on the acquisition of Pentagon Protection (UK) Limited
(formerly Pentagon Filmtek Limited). The goodwill arising was previously
amortised over its estimated useful economic life of 20 years until 1 October
2005 when the policy was changed to undertake impairment reviews in accordance
with international financial reporting standards at the year end.
9 Property, plant and equipment
Group
Plant and machinery Fixtures & Motor Total
fittings vehicles
£ £ £ £
Cost or valuation
At 1 October 2006 34,262 9,131 17,509 60,902
Additions 559 - - 559
Disposals - - (11,167) (11,167)
At 30 September 2007 34,821 9,131 6,342 50,294
Depreciation
At 1 October 2006 17,837 6,569 12,910 37,316
Charge for the year 13,843 1,568 775 16,186
On disposals - - (9,667) (9,667)
At 30 September 2007 31,680 8,137 4,018 43,835
Net book value
At 30 September 2007 3,141 994 2,324 6,459
At 30 September 2006 16,425 2,562 4,599 23,586
10 Investments
Company
Shares in group
undertakings
£
Cost or valuation
At 1 October 2006 and 30 September 2007 2,610,510
Net book value
At 1 October 2006 and 30 September 2007 2,610,510
The company owns 100% of the ordinary share capital of the following subsidiary company, which is
incorporated in England:
Name: Principal activity:
Pentagon Protection (UK) Limited (formerly Supply and application of solar controls, safety
Pentagon Filmtek Limited) and security films to commercial buildings.
11 Trade and other receivables
Group Company
2007 2006 2007 2006
£ £ £ £
Trade receivables 447,604 386,284 - -
Amounts owed by group undertakings - - 1,248,096 646,555
Other receivables 48,643 301,271 15,193 288,511
Prepayments and accrued income
- 3,771 - -
496,247 691,326 1,263,289 935,066
12 Trade and other payables
Group Company
2007 2006 2007 2006
£ £ £ £
Trade payables 192,406 325,899 15,917 31,693
Other taxes and social security
costs 11,576 20,352 - -
Other payables 7,709 78,007 2,083 2,584
Accruals and deferred income 55,409 157,113 44,500 68,000
267,100 581,371 62,500 102,277
13 Borrowings
Group Company
2007 2006 2007 2006
£ £ £ £
Factoring finance 19,807 67,318 - -
Bank overdrafts 555 - - -
20,362 67,318 - -
The invoice financing facility is secured by way of a fixed and floating charge
over all of the assets, both present and future, of the company.
14 Non-current liabilities
Group Company
£ £
Balance at 1 October 2006 183,807 183,807
Payments made in the year (125,000) (125,000)
Balance at 30 September 2007 58,807 58,807
The provision above relates to deferred consideration on the acquisition of a subsidiary.
15 Pension costs
Defined contribution 2007 2006
£ £
Contributions payable by the group for the
year 7,282 8,139
16 Share capital 2007 2006
£ £
Authorised
1,000,000,000 Ordinary shares of 0.1p each 1,000,000 1,000,000
Allotted, called up and fully
paid
326,418,156 (2006: 310,918,156) Ordinary shares of 0.1p each 326,418 310,918
Share transaction history
On 6 December 2006 there was a placing of 500,000 ordinary 0.1p shares for 0.1p
each. There was a further placing of 15,000,000 ordinary 0.1p shares for 0.8p
each on 7 September 2007.
Share options
As at 30 September 2006 there were 3,592,105 share options outstanding under an
Unapproved Executive Share Option scheme. These options are exercisable at 4.75p
on or before 11 December 2014. There were also 2,579,534 options outstanding
under an Enterprise Management Initiative Scheme exercisable at 4.75p per share
on or before 9 February 2015.
Employee share option plan
On flotation 4,541,262 shares were gifted into an Employee Share Option Plan at
par. At 30 September 2006 1,941,635 of these shares remained unallocated.
17 Statement of movements on reserves
Group
Retained Share premium Totals
earnings account
£ £ £
At 1 October 2006 (2,789,219) 5,600,303 2,811,084
Shares issued - 105,000 105,000
Loss for the year (325,543) - (325,543)
At 30 September 2007 (3,114,762) 5,705,303 2,590,541
Company
Retained Share premium Totals
earnings account
£ £ £
At 1 October 2006 (1,936,680) 5,600,303 3,663,623
Shares issued - 105,000 105,000
Loss for the year (84,970) - (84,970)
At 30 September 2007 (2,021,650) 5,705,303 3,683,653
18 Statement of changes in equity
Group 2007 2006
£ £
At 1 October 2006 3,117,461 3,287,517
Loss for the financial year (325,543) (1,617,556)
Net proceeds from issue of shares 120,500 1,447,500
Total recognised income and expense for the year (205,043) (170,056)
At 30 September 2007 2,912,418 3,117,461
Company 2007 2006
£ £
At 1 October 2006 3,970,000 2,843,168
Loss for the financial year (84,970) (320,668)
Net proceeds from issue of shares 120,500 1,447,500
Total recognised income and expense for the year 35,530 1,126,832
At 30 September 2007 4,005,530 3,970,000
19 Directors' emoluments 2007 2006
£ £
Aggregate emoluments including benefits in kind 141,785 207,697
Emoluments disclosed above include the following
amounts paid to the highest paid director:
Aggregate emoluments 65,004 59,316
No director benefited from any increase in the value of share options during the year.
The number of directors for whom retirement benefits are accruing under defined benefit schemes amounted to 2
(2006: 2).
20 Employees
Number of employees
The average monthly number of employees (including
directors) during the year was: 2007 2006
Number Number
Operations 7 12
Administration 10 15
Sales 2 9
19 36
Employment costs 2007 2006
£ £
Wages and salaries 492,933 903,013
Social security costs 52,122 86,358
Other pension costs 7,282 8,139
552,337 997,510
21 Financial instruments
The group's financial instruments comprise cash, borrowings, factor finance and
hire purchase and finance liabilities as well as various items such as trade
debtors and trade creditors that arise directly from its operations. The main
purpose of these financial instruments is to raise finance for the group's
operations. Short term debtors and creditors have been excluded from the
following disclosures.
The fair value of the group's financial assets and liabilities is not materially
different from the carrying values in the balance sheet.
It is and has been throughout the period under review, the group's policy that
no trading in financial instruments shall be undertaken.
The main risks arising from the group's financial instruments are interest rate
risk and liquidity risk.
Interest rate risk
It is the group's policy to regularly review the group's exposure to interest
rate risk.
Liquidity risk
It is the group's policy to regularly review the group's exposure to liquidity
risk so that an appropriate balance between continuity of funding and short term
flexibility is achieved.
Interest rate risk profile of financial assets and financial liabilities
Financial assets
The group's exposure to interest rate risk currently applies only to the
interest received on cash deposits which is based on the Nat West base rate. The
group's sterling floating cash balances at the year end were £260,904 (2006:
£720,762).
Financial liabilities
The interest rate profile of the group's financial liabilities was as follows:
Total Floating Fixed rate
rate financial
financial liabilities
liabilities
£ £ £
At 30 September 2007: Sterling 20,362 20,362 -
At 30 September 2006: Sterling 67,318 67,318 -
All fixed rate financial liabilities relate to hire purchase and finance lease
agreements which have different levels of agreed fixed interest rates.
The floating rate financial liabilities comprise sterling denominated overdrafts
that bear interest based on the Nat West base rate and borrowing from a factor
that bears interest based on the Royal Bank of Scotland base rate.
22 Control
The company is listed on AIM and there is no individual controlling
party.
23 Related party disclosures
2007 2006
£ £
Creditor balances
R Bambra - 2,803
A Nicholl - 50,000
In the year ended 30 September 2006 the group paid rent and service charges of £18,850 to GB Management
Limited, a company in which G Bannerman has an interest. No such rent was paid in the current year.
On 1 May 2007 G Bannerman resigned as a director of the company, and on that same date entered in to a license
agreement with the company making him the sole licensee for the promotion, sales and application of laminate
(or similar) film for application to windows of buildings within specified territories, prominently: East
Asia, Australasia and Africa. Included within turnover are amounts of £5,426 in connection with this
agreement.
24 Operating lease commitments
The group leases offices and various plant and machinery under non-cancellable operating agreements. The lease
terms are between 3 and 5 years, and the majority of lease agreements are renewable at the end of the lease
period at market rate.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
2007 2006
£ £
No later than 1 year 39,850 40,461
Later than 1 year and no later than 5 years 20,011 59,861
59,861 100,322
25 Explanation of transition to IFRSs
This is the first year that the company has presented its financial statements under IFRS. The following
disclosures are required in the year of transition. The last financial statements under UK GAAP were for the
year ended 30 September 2006 and the date of transition to IFRSs was therefore 1 October 2005.
Reconciliation of the Group's equity at 1 October 2005 (date of transition to IFRSs)
Per accounts Effects of
Notes UK GAAP transition to IFRSs IFRSs
Non-current assets
Goodwill 2,389,093 - 2,389,093
Property, plant and equipment 202,038 - 202,038
2,591,131 - 2,591,131
Current assets
Inventories 201,923 - 201,923
Trade and other receivables 1,262,218 - 1,262,218
Cash and cash equivalents 471,347 - 471,347
1,935,488 - 1,935,488
Current liabilities
Trade and other payables (1,024,298) - (1,024,298)
Employee benefits 2 - (11,235) (11,235)
Net current assets 911,190 (11,235) 899,955
Total assets less current liabilities 3,502,321 (11,235) 3,491,086
Non-current liabilities
Other non-current
liabilities (8,568) - (8,568)
Provisions (195,000) - (195,000)
3,298,753 (11,235) 3,287,518
Equity
Share capital 165,918 - 165,918
Share premium account 4,297,803 - 4,297,803
Shares held by Employee Share Ownership Plan - (4,541) (4,541)
Merger reserve 192,150 - 192,150
Profit and loss account (1,357,118) (6,694) (1,363,812)
Total equity 3,298,753 (11,235) 3,287,518
Reconciliation of the Group's equity at 30 September 2006 (date of last UK GAAP financial statements)
Per accounts Effects of
Notes UK GAAP transition to IFRSs IFRSs
Non-current assets
Goodwill 1 2,258,151 130,942 2,389,093
Property, plant and equipment 23,586 23,586
2,281,737 130,942 2,412,679
Current assets
Inventories 125,190 - 125,190
Trade and other receivables 691,326 - 691,326
Cash and cash equivalents 720,762 - 720,762
1,537,278 - 1,537,278
Current liabilities
Trade and other payables (639,306) - (639,306)
Employee benefits 2 - (9,383) (9,383)
Net current assets 897,972 (9,383) 888,589
Total assets less current liabilities 3,179,709 121,559 3,301,268
Non-current liabilities
Provisions (183,807) - (183,807)
2,995,902 121,559 3,117,461
Equity
Share capital 310,918 - 310,918
Share premium account 5,600,303 - 5,600,303
Shares held by ESOP 3 - (4,541) (4,541)
Profit and loss account (2,915,319) 126,100 (2,789,219)
Total equity 2,995,902 121,559 3,117,461
Notes to the reconciliations of the Group's equity at 1 October 2005 and 30 September 2006
1 Goodwill
Under IFRS, goodwill has an indefinite life and is only written down when an impairment test suggests that the
carrying value is overstated. The amortisation charge of £130,942 relating to goodwill arising on the
acquisition of subsidiaries were reversed under IFRS.
2 Employee benefits
Accruing for holiday pay was not required under UK GAAP but is required under IFRS and charges have been made
under IFRS relating to holidays that have accrued to staff but have not yet been taken. A cumulative charge of
£11,235 was recognised at the transition date and the provision was reduced to £9,383 in 2006.
3 Shares held by Employee Share Ownership Plan
Shares held by the employee share ownership plan trust which have not been unconditionally transferred to the
relevant employees are shown as a deduction from equity. As stated in note 16 the shares were originally
gifted to the trust prior to 1 October 2005 and therefore the corresponding adjustment is to increase the
retained earnings.
Reconciliation of the Group's income statement for 2006
Per accounts Effects of
Notes UK GAAP transition to IFRSs IFRSs
Continuing Operations
Revenue 1,616,343 - 1,616,343
Cost of sales (1,160,760) - (1,160,760)
Gross profit 455,583 - 455,583
Distribution costs (406,707) - (406,707)
Administrative expenses (1,320,121) 132,795 (1,187,326)
-
Loss from operations (1,271,245) 132,795 (1,138,450)
Investment income 6,468 - 6,468
Finance costs (15,545) - (15,545)
Loss before tax (1,280,322) 132,795 (1,147,527)
Tax - - -
Loss for the period from continuing operations (1,280,322) 132,795 (1,147,527)
Discontinued Operations
Loss for the period from discontinued operations (470,029) - (470,029)
Loss for the period (1,750,351) 132,795 (1,617,556)
Reconciliation of the Company's equity at 1 October 2005 (date of transition to IFRSs)
Per accounts Effects of
Notes UK GAAP transition to IFRSs IFRSs
Non-current assets
Investments 2,710,510 - 2,710,510
2,710,510 - 2,710,510
Current assets
Trade and other receivables 133,471 - 133,471
Cash and cash equivalents 290,287 - 290,287
423,758 - 423,758
Current liabilities
Trade and other payables (96,100) - (96,100)
Net current assets 327,658 - 327,658
Total assets less current liabilities 3,038,168 - 3,038,168
Non-current liabilities
Provisions (195,000) - (195,000)
2,843,168 - 2,843,168
Equity
Share capital 165,918
- 165,918
Share premium account 4,297,803
- 4,297,803
Shares held by Employee Share Ownership Plan -
(4,541) (4,541)
Merger reserve 1,570,783
- 1,570,783
Retained earnings (3,191,336)
4,541 (3,186,795)
Total equity 2,843,168
- 2,843,168
Reconciliation of the Company's equity at 30 September 2006 (date of last UK GAAP financial statements)
Per accounts Effects of
Notes UK GAAP transition to IFRSs IFRSs
Non-current assets
Investments 2,610,510 - 2,610,510
2,610,510 - 2,610,510
Current assets
Trade and other receivables 935,066 - 935,066
Cash and cash equivalents 710,508 - 710,508
1,645,574 - 1,645,574
Current liabilities
Trade and other payables (102,277) - (102,277)
Net current assets 1,543,297 - 1,543,297
Total assets less current liabilities 4,153,807 - 4,153,807
Non-current liabilities
Provisions (183,807) - (183,807)
3,970,000 - 3,970,000
Equity
Share capital 310,918 - 310,918
Share premium account 5,600,303 - 5,600,303
Shares held by ESOP 1 - (4,541) (4,541)
Retained earnings (1,941,221) 4,541 (1,936,680)
Total equity 3,970,000 - 3,970,000
Notes to the reconciliation of the Company's equity at 1 October 2005 and 30 September 2006
1 Shares held by Employee Share Ownership Plan
Shares held by the employee share ownership plan trust which have not been unconditionally transferred to the
relevant employees are shown as a deduction from equity. As stated in note 16 the shares were originally gifted
to the trust prior to 1 October 2005 and therefore the corresponding adjustment is to increase the retained
earnings.
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