Final Results
Asfare Group plc
20 September 2005
Press Release 20 September 2005
Asfare Group plc
Final Results for the Year Ended 31 March 2005
Asfare Group plc, a leading specialist supplier of high quality products and
services supplying the Emergency Services market, reports its full year results
for the year ended 31st March 2005.
Financial Year 2005
• Turnover £3.925 million (Proforma 2004: £4.389 million)
• Profit Before Tax £109,000 (Proforma 2004: Loss £401,000)
• Earnings Per Share 2.8p (Proforma 2004: Loss 13.5p)
• Cash generated £487,000 (Proforma 2004: £530,000)
• Net borrowings reduced to £693,000 (Proforma 2004: £1.033 million)
Current Year 2006 Update
• First half expected small operating loss
• New orders worth in excess of £750,000 received in September 2005 for
delivery in the second half, including initial £435,000 order for AssetCo for
the fire service in London
• Increased order book and second half significant improvement in market
conditions
• Strengthened Executive team
• Advanced stages of an acquisition in the Homeland Security market
Commenting on the Preliminary Results, Tony O'Neill Chief Executive, said:
'Asfare traded profitably during the last year and generated cash despite
difficult market conditions. These conditions have continued throughout the
first half of the current year. However, the Board is now encouraged by a
significant improvement in the order book following the orders received in
September and is optimistic about the Group's prospects in the second half of
the year.'
For further information, please contact:
Enquiries:
Asfare Group plc
Tony O'Neill, Chief Executive Tel: +44 (0) 2380 861 966
Tim O'Connor, Finance Director
Seymour Pierce
Mark Percy / John Depasquale Tel: +44 (0) 20 7107 8000
Media enquiries:
Abchurch Communications
Ariane Comstive / Sara Dean Tel: +44 (0) 20 7398 7700
ariane.comstive@abchurch-group.com www.abchurch-group.com
- Ends -
Chairman's statement
The past year was a challenging period for the Group as the demand for its
products was disrupted by the process of change surrounding the Government's
introduction of a National Procurement Strategy for the Fire and Rescue Service.
Uncertainty in the industry resulted from directives from the Office of the
Deputy Prime-Minister ('ODPM') to the fire authorities that, until such time as
the national strategy was published, they should only enter into new contracts
for operational vehicles and equipment where the need was for urgent operational
reasons. Fire appliance manufacturers were particularly affected because of
their long manufacturing lead-times.
The disruption affected the commercial momentum of the Group in several ways,
continuing into the current financial year. I am pleased these difficulties are
now over and we expect to have a strong second half to the current financial
year.
Financial Results
Profit & Loss Account
The year ended 31 March 2005 results represent a full year trading for AS Fire
and Rescue Equipment Ltd ('AS Fire') and Asfare Group plc. The results for the
prior period ended 31st March 2004 derive from the operations of AS Fire which
the Company acquired on 12th December 2003, together with the results of the
Company itself for a trading period of 3 months and 20 days.
In the accounts for last year we provided proforma unaudited results for the
twelve months ended 31st March 2004 and in order to give a better understanding
of the underlying trading we have used these proforma figures for the prior year
comparatives in both the accounts and the information shown below.
Turnover for the twelve months to 31st March 2005 amounted to £3,925,000, a fall
of 11% from the £4,389,000 achieved in the previous twelve months. As a result
of this reduced level of activity margins were under pressure and it is
encouraging to note that whilst they have diminished slightly to 52.9% (2004:
54.2%), this was as a result of the mix of revenue during the year rather than a
reduction in the efficiency of production.
Operating profit before goodwill amortisation and exceptional costs for the
twelve month period was £338,000, a reduction of £443,000 compared with the
prior year. The figures for 2005 are after incurring parent company overheads
for twelve months of £238,000 (2004: £152,000).
The Operating profit after goodwill and exceptional costs in the twelve month
period was £190,000 (2004: £360,000 loss). The profit before tax for the period
was £109,000 (2004: £401,000 loss). Profit after tax was £119,000 (2004:
£566,000 loss). Fully diluted earnings per share for the twelve months were 2.8
pence (2004: 13.5p loss per share).
Taxation
Tax losses of £1,000,000 arose in the Company in the prior period largely due to
exceptional costs together with the cost of raising share capital which was
charged to the share premium account. Tax losses of £292,000 have been utilised
during the year (2004:£338,000), which along with an over provision from last
year, has resulted in a tax credit of £10,000 in the results for the year ended
31 March 2005.
Carried forward tax losses amount to £644,000 (2004:£936,000) and will be
available to offset against future profits, thereby reducing the tax charge and
future tax payments. The tax losses are currently estimated and need to be
agreed with the Inland Revenue.
Balance Sheet
At 31st March 2005, shareholders' funds amounted to £2,962,000 (2004:
£2,885,000). Goodwill of £2,946,000 arose on the acquisition of AS Fire on 12
December 2003. In the light of the current year's trading performance the
carrying value of this goodwill has been reviewed and in the Board's opinion
there has been no diminution in the value of this goodwill. The Directors
believe the benefits of this acquisition will continue for a period not less
than 20 years, and accordingly the goodwill is being amortised over a 20 year
period. The amount charged against profits during the year was £148,000 (2004:
£36,000).
Cash Balances and Loan Finance
The Group was strongly cash positive during the year and as a result net
borrowings fell to £693,000 (2004: £1,033,000). Net Cash Inflow from Operating
Activities of £487,000 (2004: £530,000) was achieved in the year and this
represented a cash conversion rate of 144% when compared to Operating Profit
before Goodwill Amortisation. As a result the Group has reduced its term loan to
£900,000, following repayments of £240,000 during the year. The Group's cash
position has also improved by £109,000 and at the year end had headroom against
facilities of £459,000.
The Group's low requirement for capital expenditure coupled with the tax losses
available, means the Group should again be cash generative for the year ended 31
March 2006.
Dividends
The Company paid an interim dividend of 1.0p but due to the lower than expected
profit performance of the Group in the second half of the year and the
consequential lack of available reserves the directors are not proposing to pay
a final dividend.
National Procurement Strategy for the Fire and Rescue Service in England
In September 2004 the ODPM launched a draft strategy document for consultation
which, inter alia, outlined its future expectations of the procurement function
of the Fire and Rescue Service in England. The main thrust of the proposal is to
significantly reduce the overhead cost of procurement within the fire brigades,
by the formation of a centralised body 'Firebuy.' Firebuy will be responsible
for the national specification, testing and procurement of key operational
equipment including ladders, shutters and gantries.
AS Fire has been actively involved in the development of the final strategy,
being one of only a handful of companies that hosted a visit from the ODPM.
Allied to this, the major equipment suppliers to the fire brigades have formed a
trade body - 'FIRESA' to represent their interests and we are proud that David
Chisnall, Deputy Chairman, has been elected the first Chairman.
We are broadly in agreement with the proposals in the strategy document. In
particular we welcome two major initiatives which will generate greater clarity
and efficiency for all suppliers;
1. A single national specification for key operational equipment. Currently
we produce a significant number of permutations for each of our products in
order to service the needs of each individual fire brigade. In future there
will be a single specification with a limited number of additional options
that each brigade can choose from; and
2. All new products will be tested and assessed by a single body rather than
each individual brigade. This will enable us to reduce the number of
demonstration ladders that we have to produce for testing and should also
reduce the lead time in these new products reaching the market place. It will
also enable us to work far more closely with the industry in developing new
products and services.
Further the new strategy will give us the opportunity to develop new products
and to provide maintenance services previously undertaken by the fire brigades
themselves.
The formation of Firebuy has recently been approved by the Deputy Prime
Minister, and we are confident that these benefits will now start to come to
fruition in the coming months.
Current Trading
During September the Company has seen a significant improvement in general
market conditions, although the first five months of the current financial year
saw a continuation of the downward revenue trend of the previous financial year,
resulting in a likely small operating loss for the first half of 2006.
The completion of the ODPM review has enabled orders to be placed on the fire
appliance manufacturers which, has in turn, provided AS Fire with better
visibility on the potential future pipeline for its products. At the same time
AS Fire has won an initial contract to supply by 31 March 2006 over 220 ladders
to AssetCo, (the provider of asset management services to London Fire Brigade),
with a contract value of over £435,000. During September AS Fire has also won
contracts with a value in excess of £300,000 from other customers. In addition
the Company has won a four year contract to supply all of the replacement
ladders for the Western Australian Fire Authority, further strengthening AS
Fire's presence in the Australasian market.
Consequently against the background of a significantly improved order book the
board expects the Company to achieve a strong second half performance.
Future Strategy
The potential for our traditional business remains strong. The need for our
products within the UK has not diminished, nor have we lost any key orders to
any other suppliers during the past twelve months. Our overseas sales remain
stable, reinforced by the contract win in Western Australia.
The hiatus caused by the Government's intervention demonstrates the validity of
the Group's initial strategy to build on its strong UK market share by expanding
organically and by acquisition into related market sectors in the UK and abroad.
However, our acquisition discussions within the UK fire and rescue sector were
hampered by a lack of forward visibility for buyer and vendor alike while the
effect of the Government's new procurement strategy remained unclear.
Following a decision to reduce our dependency on the UK fire and rescue sector
we have widened our objective to become a leading specialist supplier of high
quality products and services in the Homeland Security market worldwide. We
continue to believe that Asfare can become a vehicle for the consolidation and
growth of such related businesses.
In pursuit of this strategy Asfare is in an advanced stage of negotiation to
purchase a UK manufacturer of Homeland Security equipment which is a leader in
its sector. Funding for this transaction is anticipated to be a mix of debt and
equity. The board believes that this wider market will generate significant
organic growth and acquisition opportunities, as well as having synergistic
benefits for the group.
Board Changes
On 23 August we appointed Tony O'Neill as Chief Executive to succeed David
Chisnall who became Deputy Chairman. David became Chairman of FIRESA, the fire
and rescue industry equipment suppliers' trade association, earlier this year.
He will continue to make available to the Company his industry expertise and
wealth of relationships but will reduce his commitment to the business to three
days a week. Tony O'Neill has considerable experience in leading and developing
growth businesses and for the last seven years has been UK Managing Director of
Rentokil Initial's Security Division, which has a turnover in excess of £100
million.
Adrian Jones, Group Finance Director, resigned on 31 August 2005 to take up
another appointment and was succeeded by Tim O'Connor on 1 September 2005. He
was CFO of Tandberg Television ASA (a Norwegian listed company) between 2002 and
2005 during which time he was instrumental in the successful turnaround of the
business to a current market capitalisation of approximately £500 million. He
was also responsible for enlarging Tandberg's UK institutional shareholder base
and was involved in substantial acquisition activity for Tandberg.
These two widely-experienced executives will bring valuable skills to the Group
as it grows organically and by acquisition and they will be able to benefit from
David Chisnall's deep knowledge of our core industry.
Staff
The Board is grateful for the strong support, enthusiasm and flexibility shown
by the staff of AS Fire during what has been a challenging year.
Future prospects
We expect the turnover to grow strongly in the second half of the current
financial year now that the procurement policies of the UK fire and rescue
authorities are clearer and as a result of the brigades returning to the market
with significant vehicle orders. The Board is therefore optimistic about the
future prospects for AS Fire. The directors believe that the strengthening of
the management team combined with the extension of the acquisition strategy into
the wider field of Homeland Security will result in both strong organic and
acquisitive growth over the next few years for the Group.
Tim Wightman
Chairman
19 September 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Proforma
(Unaudited) Period
Year Year from
Ended Ended Incorporation
31 March 31 March to 31 March
Note 2005 2004 2004
£000 £000 £000
Turnover 1 3,925 4,389 1,334
Cost of sales (1,847) (2,012) (629)
Gross profit 2,078 2,377 705
Administrative expenses (1,888) (2,737) (1,620)
Operating profit before goodwill amortisation and 338 781 136
exceptional costs
Goodwill amortisation 5 (148) (77) (36)
Exceptional costs 2 - (1,064) (1,015)
Operating profit/(loss) 190 (360) (915)
Interest receivable 3 5 1
Interest payable (84) (46) (22)
Profit/(loss) on ordinary activities before taxation 109 (401) (936)
Tax on ordinary activities 3 10 (165) (1)
Profit/(loss) on ordinary activities after taxation 119 (566) (937)
Dividends (42) - -
Retained profit/(loss) for the financial year 77 (566) (937)
Earnings/(loss) per share 4
Basic earnings/(loss) per share 2.8p (13.5p) (22.3p)
Loss per share on goodwill and exceptional items 3.5p 24.8p 22.9p
after taxation
Adjusted earnings per share 6.3p 11.3p 0.6p
Diluted earnings per share
Diluted basic earnings/(loss) per share 2.8p - -
Diluted loss per share on goodwill 3.5p - -
Diluted adjusted earnings per share 6.3p - -
All operations are classed as continuing.
The Company has no recognised gains or losses other than the results for the
year as set out above.
CONSOLIDATED BALANCE SHEET
At 31 March Note 2005 2004
£000 £000
FIXED ASSETS
Intangible assets 5 2,762 2,910
Tangible assets 131 156
2,893 3,066
CURRENT ASSETS
Stock and work in progress 506 635
Debtors 6 914 830
Cash at bank and in hand 175 67
1,595 1,532
CREDITORS: amounts falling 7 (889) (845)
due within one year
NET CURRENT ASSETS 706 687
TOTAL ASSETS LESS CURRENT 3,599 3,753
LIABILITIES
CREDITORS: amounts falling
due after more than
one year 8 (637) (868)
NET ASSETS 2,962 2,885
CAPITAL AND RESERVES
Called up share capital 1,050 1,050
Share premium account 9 1,872 1,872
Profit and loss account 9 40 (37)
EQUITY SHAREHOLDERS' FUNDS 10 2,962 2,885
CONSOLIDATED CASH FLOW STATEMENT
Proforma
(Unaudited) Period
Year Year from
Ended Ended Incorporation
31March 31 March to 31March
Note 2005 2004 2004
£000 £000 £000
Net cash inflow from 11 487 530 133
operating activities
Returns on investment and
servicing of finance
Interest received 3 5 1
Interest paid (74) (47) (22)
New loans issue costs - (44) (44)
(71) (86) (65)
Taxation
Corporation tax paid (2) (319) (76)
Capital expenditure and
financial investment
Purchase of tangible (30) (113) (4)
fixed assets
Sale of tangible fixed 7 3 -
assets
(23) (110) (4)
Acquisitions and
disposals
Purchase of subsidiary - (3,873) (3,873)
undertakings
Net cash acquired with - - 439
subsidiaries
- (3,873) (3,434)
Equity dividends paid (42) - -
Net cash inflow/(outflow) 349 (3,858) (3,446)
before financing
Financing
Share Issue - 3,300 3,300
Issue Costs - (378) (378)
New long term loan - 1,200 1,200
Repayment of old - (664) (550)
long-term loan
Repayment of new (240) (60) (60)
long-term loan
Net cash (outflow)/inflow (240) 3,398 3,512
from financing
Increase/(decrease) in 109 (460) 66
cash for the year
NOTES TO ACCOUNTS
BASIS OF PREPARATION
The accounts have been prepared in accordance with applicable accounting
standards and under the historical cost accounting rules. The accounts cover the
year ended 31 March 2005.
In order to enable useful comparison of the Group's performance proforma
information has been included in this Annual Report for the year ended 31 March
2004. The proforma results for the year ended 31 March 2004 represent the actual
consolidated results of the Group from the date of incorporation of the Company
plus the results of Speed 5019 Limited and its subsidiaries from 1 April 2003
until its acquisition by the Company on 12 December 2003.
1 ANALYSIS OF TURNOVER
Proforma
(Unaudited) Period
By Geographical Market Year Year from
Ended Ended Incorporation
31 31 March to 31 March
March
2005 2004 2004
£000 % £000 % £000 %
UK 3,288 84% 3,742 85% 1,127 84%
Rest of World 637 16% 647 15% 207 16%
3,925 100% 4,389 100% 1,334 100%
2 EXCEPTIONAL COSTS
Proforma
(Unaudited) Period
Year Year from
Ended Ended Incorporation
31 31 March to 31 March
March
2005 2004 2004
£000 £000 £000
UITF 17 charge for shares - (900) (900)
issued at a discount
Employers National - (115) (115)
Insurance on discounted
shares
Cost of relocating - (49) -
factory and offices and
AIM listing
- (1,064) (1,015)
The UITF 17 charge in the year ended 31 March 2004 relates to 1,499,998 ordinary
25p shares allotted at 40p per share on 2 December 2003 to David Chisnall
(498,750 shares), Tim Wightman* (498,749 shares) and Adrian Bradshaw** (502,499
shares).
Notes:
* Tim Wightman is interested in 125,000 of the Ordinary Shares set out against
his name by reason of his wife's beneficial ownership of those shares.
** Adrian Bradshaw is interested in one half of the Ordinary Shares set out
against his name, all of which are held by Bradmount acting as nominee for
Adrian Bradshaw and Peter Mountford in equal shares.
3 TAX ON (LOSS) / PROFIT ON ORDINARY ACTIVITIES
Proforma
Profit/(loss) on ordinary (Unaudited)
activities before taxation Period
is stated after charging Year Year from
Ended Ended Incorporation
31 31 March to 31 March
March
2005 2004 2004
£000 £000 £000
Research and Development 21 27 10
current year
Operating leases : land 138 120 31
and buildings
Operating leases : plant 3 3 1
and machinery
Amortisation of goodwill 148 77 36
Amortisation of loan 9 3 3
costs
Depreciation of tangible 49 56 14
fixed assets
Profit on disposal of 1 3 -
tangible fixed assets
Auditor remuneration - 18 26 5
Audit fees
Auditor remuneration - 34 10 -
Further assurance service
Auditor remuneration - 2 7 7
Tax compliance
Exceptional items - 1,064 1,015
4 (LOSS) / EARNINGS PER SHARE
Proforma
(Unaudited) Period
Year Year from
Ended Ended Incorporation
31 March 31 March to 31 March
2005 2004 2004
£000 £000 £000
Profit/(loss) after taxation 119 (566) (937)
Adjustments :
Goodwill amortisation 148 77 36
Exceptional items - 1,064 1,015
Taxation on exceptional items - (101) (90)
Adjusted profit 267 474 24
Number Number Number
Basic weighted average number of 4,200,000 4,200,000 4,200,000
shares
Dilutive effect Share options 22,057 - -
of ordinary Warrants - - -
shares:
4,222,057 4,200,000 4,200,000
Basic earnings/(loss) per share 2.8p (13.5p) (22.3p)
Loss per share on goodwill and 3.5p 24.8p 22.9p
exceptional items after taxation
Adjusted earnings per share 6.3p 11.3p 0.6p
Diluted basic earnings/(loss) per 2.8p - -
share
Diluted loss per share on goodwill 3.5p - -
and exceptional items after tax
Diluted adjusted earnings per share 6.3p - -
The dilutive effect of share options has been calculated in accordance with
accounting standards. For this purpose the fair value of the shares has been
taken as the average market price of the Group's shares for the year ended 31
March 2005 of 106.6p. The share warrants are anti-dilutive as their exercise
price exceeds the fair value of the shares.
5 INTANGIBLE FIXED ASSETS
GROUP Goodwill
£000
Cost
At 31 March 2004 and 2005 2,946
Provision for amortisation
At 31 March 2004 36
Charge for the year 148
At 31 March 2005 184
Net book value
At 31 March 2004 2,910
At 31 March 2005 2,762
The Directors believe the benefits to be derived from having acquired Speed 5019
Limited will continue for a period of not less than 20 years and accordingly the
Directors are amortising goodwill over this period.
6 DEBTORS
GROUP COMPANY
2005 2004 2005 2004
£000 £000 £000 £000
Trade debtors 836 768 - -
Amount owed by subsidiary - - 3,888 4,424
undertakings
Other debtors 3 1 10 13
Prepayments and accrued income 75 61 5 6
914 830 3,903 4,443
7 CREDITORS: AMOUNT FALLING DUE WITHIN ONE YEAR
GROUP COMPANY
2005 2004 2005 2004
£000 £000 £000 £000
Overdraft - 1 - 1
Bank loans 231 231 231 231
Trade creditors 388 317 62 52
Amount due to subsidiary undertakings - - - 608
Social security and other taxes 156 159 - -
Other creditors 2 19 - -
Accruals 112 103 41 50
Corporation tax - 15 - -
889 845 334 942
The overdraft and bank loan are secured by a fixed charge over all of the
Company's assets.
8 CREDITORS: AMOUNT FALLING DUE AFTER MORE THAN ONE YEAR
GROUP COMPANY
2005 2004 2005 2004
£000 £000 £000 £000
Bank loan 637 868 637 868
The amounts are repayable as follows:-
Amounts falling due:
in one year or on demand 240 240 240 240
after one year and within two 240 240 240 240
after two years and within five 420 660 420 660
900 1,140 900 1,140
Less: Issue costs (32) (41) (32) (41)
868 1,099 868 1,099
Included in creditors falling due (231) (231) (231) (231)
within one year
637 868 637 868
The overdraft and bank loan are secured by a fixed charge over all of the
Company's assets.
9 SHARE PREMIUM ACCOUNT AND RESERVES
Profit
Share and
Premium Loss
Account Account
GROUP £000 £000
At 31 March 2004 1,872 (37)
Retained profit - 77
At 31 March 2005 1,872 40
COMPANY
At 31 March 2004 1,872 (289)
Retained profit - 299
At 31 March 2005 1,872 10
10 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Group Company
£000 £000
Equity shareholders' funds at 31 2,885 2,633
March 2004
Profit for the financial year 77 299
Equity shareholders' funds at 31 2,962 2,932
March 2005
11 NET CASHFLOW FROM OPERATING ACTIVITIES
Proforma
(Unaudited) Period
Year Year from
Ended Ended Incorporation
31 31 March to 31 March
March
2005 2004 2004
£000 £000 £000
Operating profit/(loss) 190 (360) (915)
Depreciation 49 57 14
Goodwill amortisation 148 77 36
Non cash adjustment to exceptional - 900 900
costs
Profit on sale of tangible fixed (1) (3) -
assets
Decrease in stock 129 20 79
Increase in debtors (84) (185) (237)
Increase in creditors 56 24 256
Net cash inflow from operating 487 530 133
activities
- Ends -
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