Final Results

Asfare Group plc 25 May 2006 Press Release 25 May 2006 Asfare Group plc ('Asfare' or 'Asfare Group') Final Results for the Year Ended 31 March 2006 Asfare Group plc, a leading supplier of products and services to the emergency and homeland security markets, reports its full year results for the year ended 31st March 2006. Financial Highlights • Turnover has increased by 25% to £4.905 million (2005: £3.925 million) • Profit Before Tax has risen to £358,000 (2005: £109,000) • Basic Earnings Per Share of 7.0p (2005: 2.8p) • Earnings Per Share adjusted for goodwill amortisation 10.6p (2005: 6.3p) • Cash generated from operations £774,000 (2005: £487,000) • Proposed dividend of 2 pence per share • Net asset value increased to 80 pence per share (2005: 71 pence) Significant Business Achievements • Won a £435,000 order for the replacement of ladders for the London Fire Brigade • Developed the business strategy to incorporate a focus on homeland security products, resulting in the acquisition of Todd Research Limited in November 2005 • Established a focussed European sales operation in the Netherlands • Strengthened the senior executive team Commenting on the final results to March 2006, Chairman Tim Wightman said: 'The last financial year has been one of solid progress for the Asfare Group. The second half of the year saw a strong trading performance and demonstrated the ability of Asfare to generate healthy profits and strong cash flow. Our increasing focus on the European market through the establishment of a European sales subsidiary will provide wider access to current and potential customers. The acquisition of Todd Research, represents a key element in our broader strategy and provides us with a good growth opportunity in the homeland security sector. The Group is currently in the advanced stages of negotiations to acquire a business in the fire equipment market. It is intended to fund this through further debt finance. I have been encouraged by our recent progress and the Group enters the new financial year with a strong order book. I look forward to continued positive development and growth of the business through both organic and acquisitive activity.' For further information, please contact: Asfare Group plc www.asfare.com 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 Abchurch Communications Charles Jack Tel: +44 (0) 20 7398 7700 charlie.jack@abchurch-group.com www.abchurch-group.com --------------------------------- ------------------------- Chairman's Statement 2006 The financial year ended 31st March 2006 was a year of two halves for Asfare Group with a challenging beginning and a positive end. The first six months started poorly as the impact of the review by the Office of the Deputy Prime Minister (ODPM) on the procurement practices of the fire service continued to restrict purchasing. During this time the Group remained focussed on supporting its existing customers, maintaining market share and generating a positive cash flow. In September the Group received a significant order for £435,000 to deliver ladders to Assetco for the London Fire Brigade. In view of the Group's dependency on the UK fire industry, the Board decided during the first half to broaden the strategy and to strengthen the senior executive team with managers who have experience outside the fire equipment industry. The second half of the year was stronger as the business began to deliver the London Fire Brigade order. In November the Group announced the acquisition of Todd Research Limited, a market leader in the provision of x-ray scanning equipment in the security market. The Group strengthened its international presence with the establishment of AS Security Equipment BV based in the Netherlands to focus on supplying the European fire equipment market. Trading in the final quarter was particularly strong across the business buoyed by new product launches and market initiatives. Financial Results Profit & Loss Account The results for the year ended 31st March 2006 represent twelve months trading by AS Fire and Rescue Equipment Limited ('AS Fire') and the Asfare Group plc, and trading for the period from 11th November 2005 for Todd Research Limited ('Todd'). Turnover for the twelve months to 31st March 2006 amounted to £4,905,000, a growth of 25% from the £3,925,000 achieved in the previous twelve months. AS Fire turnover rose by 4% in the year to £4,092,000 and Todd recorded £813,000 in sales. Gross margins were strong in the year at 57.8% (2005: 52.9%). The AS Fire gross margin was improved by the mix of sales and higher margin products particularly in the second half of the year. The Todd gross margin was strong as more of the new product range was sold. Operating profit before goodwill amortisation and curtailment gain for the twelve month period was £574,000, an increase of £236,000 compared with the prior year. The Operating Profit (after goodwill) in the twelve month period was £456,000 (2005: £190,000). The profit before tax for the period was £358,000 (2005: £109,000). Profit after tax was £313,000 (2005: £119,000). Fully diluted earnings per weighted average share for the twelve months were 7.0 pence (2005: 2.8 pence). Fully diluted earnings per weighted average share adjusted for goodwill amortisation were 10.6 pence (2004: 6.3 pence). Taxation Tax losses of £514,000 have been utilised during the year (2005: £292,000), which along with a charge carried over from last year of £4,000, has resulted in a tax cost of £4,000 in the results for the year ended 31 March 2006. A further £41,000 of deferred tax charge has been accrued for in the profit and loss relating to the pension fund deficit acquired with Todd. Carried forward tax losses amount to £149,000 (2005: £644,000) 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 2006, shareholders' funds increased to £3,966,000 (2005: £2,962,000) equivalent to 80 pence per share. Goodwill of £1,007,000 arose on the acquisition of Todd. An element of the goodwill arose due to the pension deficit in Todd, as a result of closing the scheme to future accruals the Group has reduced this liability and has taken the decision to accelerate the amortisation of the goodwill by £95,000. The carrying value of the remaining goodwill in the balance sheet has been reviewed and in the Board's opinion there has been no diminution in the value. The Directors believe the benefits of the acquisitions will continue for a period not less than 20 years, and accordingly the goodwill is being amortised over a 20 year period. The normalised amount of goodwill amortisation charged against profits during the year was £164,000 (2005: £148,000). The Group took the opportunity to revalue the freehold property at Todd by £605,000 to its current market value of £1,250,000. Todd Acquisition Financing The Group acquired Todd on the 11th November 2005 for an initial cash consideration of £1,650,000 plus the cash balance of £262,000; the costs for completing the transaction were £284,000 (including £28,000 of financing costs). In order to finance the acquisition the Group raised £1,250,000 of loan finance and raised a further £694,000 through a share placing of 771,112 shares at 90 pence per share. There is a potential further £2,080,000 of contingent consideration. This has not been included in goodwill as the Board considers that the outcome of this can not be reliably measured at this time. Cash Balances and Loan Finance The Group again demonstrated a strong Net Cash Inflow from Operating Activities of £774,000 (2005: £487,000). This represented a cash conversion rate of 135% when compared to Operating Profit before Goodwill Amortisation and the Curtailment Gain. The Group had loans outstanding of £1,830,000 on the 31st March 2006 after loan repayments of £280,000 during the year. The Group's cash position has improved by £326,000 to £501,000 and at the year end the Group had headroom against facilities of £851,000. Share Capital and Dividends Following the share placing of 771,112 ordinary shares on the 11th November 2005 the total number of shares issued is 4,971,112 at a nominal value of 25 pence per share. The called up share capital of the Company is £1,242,778. The directors are proposing a final dividend of 2.0 pence per share reflecting the good performance of the business in the second half of the financial year to 31st March 2006. The dividend is subject to shareholder approval at the AGM on the 18th July 2006 and will be paid on the 25th July 2006. The associated Record date will be the 16th June 2006 and the ex-dividend date shall be the 14th June 2006. Strategy & Business Update During the year the directors carried out a strategic review and concluded that the Group would be stronger if the Group was positioned so that it could benefit from opportunities within the broader Homeland Security market rather than being dependent on the fire and rescue sector. The aim of the new strategy is to provide high quality Homeland Security related equipment and services to agencies, rescue services and end-users internationally. By creating a Group of specialist suppliers we can utilise our management skills, expert market knowledge and excellent product reputation to forge strong and lasting relationships with customers. In order to service the customers in the most effective manner the business is focussing on two areas: 'Detection & Protection' and 'Fire, Search & Rescue'. Whilst there will be continued shared knowledge, access to resources and management across the Group the product development and marketing strategies will be centred on the divisions. Fire, Search & Rescue - AS Fire AS Fire is currently focussed on the fire markets, with much of its business in the UK, this market has now been through the purchasing restrictions imposed during the ODPM procurement review. In the year to the 31st March 2006 the business saw the development of a number of new products including the AS Lite roller shutter designed for fire appliances, which is lighter for ease of use, very robust and is offered at a competitive price. The business saw a strengthening in the financial positions of its OEM customers and an increase in the numbers of new vehicles planned for production. AS Fire strengthened its position in Europe with the establishment of a sales focussed company AS Security BV in Holland. During the financial year to March 2007 the business aims to continue to develop its product lines and offer them for wider use. Detection & Protection - Todd Since November our Chief Executive Tony O'Neill has worked successfully to integrate Todd into the overall business and in March we announced the appointment of Chris Awcock as the Managing Director for Todd. Chris was previously Managing Director of Call Performance Limited and prior to that a Sales and Marketing Director within the Pitney-Bowes Group. Todd supplies x-ray scanning equipment that is mainly used in mail rooms. Its customers include government departments, embassies, police, broadcasters, pharmaceutical companies and banks. During the year Todd released its first new product range for 5 years. The new products provide enhanced powder detection capability and a remote operation facility as well as updated aesthetics. Customer response to the new range has been very positive and the market interest is high. During the financial year to March 2007 Todd will build on its early success with the new product range. The addition of Chris Awcock brings a heavy weight, professional sales approach into an untapped market. People & Management The Board is grateful for the strong support, enthusiasm and flexibility shown by the staff of AS Fire and Todd during what has been a year of change for many of them. The Board looks forward to continuing to build and develop the business with them in the future. The Group has seen a number of key personnel changes in the year including the appointment of Tony O'Neill as Chief Executive in August 2005 and Tim O'Connor as Group Finance Director in September 2005. On the 1st April 2006 David Chisnall became the Non-Executive Deputy Chairman. Future Prospects The Board has been encouraged by a strong second half in the financial year to 31st March 2006. We expect there to be good opportunities for both AS Fire and Todd in the Homeland Security market during the new financial year with the Group entering the new financial year with a strong order book. The Board believes the current organisation can continue to grow organically and that there are also a number of acquisition opportunities which would strengthen its position in its chosen markets. The Group is currently in the advanced stages of negotiations to acquire a business in the fire equipment market. It is intended to fund this through further debt finance. CONSOLIDATED PROFIT AND LOSS Year Year Ended Ended 31 March 31 March Note 2006 2005 ------ --------- --------- £000 £000 Turnover Continuing Operations 1 4,092 3,925 Acquisitions 813 - Group Turnover 4,905 3,925 Cost of sales (2,069) (1,847) --------- --------- Gross profit 2,836 2,078 Administrative expenses (2,380) (1,888) Operating profit before goodwill amortisation & curtailment gain 574 338 Curtailment gain 5 141 - Goodwill amortisation 4 (259) (148) Operating Profit Continuing operations 346 190 Acquisitions 110 - --------- --------- Group operating profit 456 190 Interest receivable 8 3 Interest payable and similar charges (106) (84) --------- --------- Profit on ordinary activities before taxation 2 358 109 Tax on ordinary activities (45) 10 --------- --------- Profit for the financial year 313 119 ========= ========= Earnings per share 3 Basic earnings per share 7.0p 2.8p ========= ========= Diluted earnings per share Diluted basic earnings per share 3 7.0p 2.8p ========= ========= CONSOLIDATED BALANCE SHEET At 31 March Note 2006 2005 ------- ------ ------ £000 £000 FIXED ASSETS Intangible assets 4 3,510 2,762 Tangible assets 1,280 131 ------- ------ 4,790 2,893 CURRENT ASSETS Stock and work in progress 6 697 506 Debtors 7 1,269 914 Cash at bank and in hand 501 175 ------- ------ 2,467 1,595 CREDITORS: amounts falling due within one year 8 (1,786) (889) ------- ------ NET CURRENT ASSETS 681 706 ------- ------ TOTAL ASSETS LESS CURRENT LIABILITIES 5,471 3,599 CREDITORS: amounts falling due after more than one year 9 (1,443) (637) ------- ------ NET ASSETS EXCLUDING PENSION LIABILITY 4,028 2,962 ------- ------ Pension Liability (62) - ------- ------ NET ASSETS 3,966 2,962 ======= ====== CAPITAL AND RESERVES Called up share capital 1,243 1,050 Share premium account 10 2,346 1,872 Profit and loss account 10 377 40 ------- ------ EQUITY SHAREHOLDERS' FUNDS 11 3,966 2,962 ======= ====== CONSOLIDATED CASH FLOW STATEMENT Year Year Ended Ended 31 March 31March Note 2006 2005 ----- ------- ------- £000 £000 Net cash inflow from operating activities 12 774 487 ------- ------- Returns on investment and servicing of finance Interest received 8 3 Interest paid (92) (74) New loans issue costs (18) - ------- ------- (102) (71) ------- ------- Taxation Corporation tax paid (4) (2) Capital expenditure and financial investment Purchase of tangible fixed assets (73) (30) Sale of tangible fixed assets 7 ------- ------- (73) (23) ------- ------- Acquisitions and disposals Purchase of subsidiary undertakings (2,168) - Net cash acquired with subsidiaries 262 - ------- ------- (1,906) - ------- ------- Equity dividends paid - (42) ------- ------- Net cash (outflow)/inflow before financing (1,311) 349 ------- ------- Financing Placing Costs (27) Share Issue 694 - New long term loan 1,250 - Long-term loan repayments (280) (240) ------- ------- Net cash inflow/(outflow) from financing 1,637 (240) ------- ------- Increase in cash for the year 326 109 ======= ======= 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 2006. 1 Analysis of turnover By Division Period Year Ended Ended 31 March 31 March 2006 2005 £000 £000 AS Fire & Rescue Equipment (1) 4,092 3,925 Todd Research (from 11/11/05) (2) 813 - --------- --------- Total 4,905 3,925 ========= ========= There were two classes of business for the year: 1) Manufacture of ladders, gantries and ancillary equipment, sold under several brand names to emergency and rescue services. 2) Manufacture of x-ray scanning equipment for post and baggage aimed at the mail room market. By Geographical Market Year Year Ended Ended 31 March 31 March 2006 2005 £000 % £000 % UK 4,159 85% 3,288 84% Rest of World 746 15% 637 16% -------- ------- ------- ------ 4,905 100% 3,925 100% ======== ======= ======= ====== 2. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION Profit on ordinary activities before taxation is stated after charging Year Year Ended Ended 31 March 31 March 2006 2005 -------- ------- £000 £000 Research and Development current year 21 21 Operating leases : land and buildings 133 138 Operating leases : plant and machinery 3 3 Amortisation of goodwill 259 148 Depreciation of tangible fixed assets 72 49 Profit on disposal of tangible fixed assets - 1 Auditor remuneration - Audit fees 30 18 Auditor remuneration - Further assurance service - 34 Auditor remuneration - Tax compliance 4 2 ======== ======= 3. EARNINGS PER SHARE Year Year Ended Ended 31 March 31 March 2006 2005 -------- -------- £000 £000 Profit after taxation 313 119 Adjustments : Goodwill amortisation* 164 148 -------- -------- Adjusted profit 477 267 -------- -------- Number Number Basic weighted average number of shares 4,496,582 4,200,000 Dilutive effect of ordinary shares: Share - 22,057 options Warrants - - --------- --------- 4,496,582 4,222,057 --------- -------- Year Year Ended Ended 31 March 31 March 2006 2005 -------- -------- Basic earnings per share 7.0p 2.8p Loss per share on goodwill amortisation 3.6p 3.5p -------- -------- Adjusted earnings per share 10.6p 6.3p ======== ======== Diluted basic earnings per share 7.0p 2.8p Diluted loss per share on goodwill amortisation 3.6p 3.5p -------- -------- Diluted adjusted earnings per share 10.6p 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 2006 of 89.7p. The share warrants and share options are anti-dilutive in the year as their exercise price exceeds the fair value of the shares. *The goodwill amortisation is normalised, it does not include the accelerated amortisation of goodwill of £95,000 which arose from a movement on the pension deficit resulting from the closure of the defined benefit scheme acquired in November 2005. 4. INTANGIBLE FIXED ASSETS GROUP Note Goodwill ------ £000 Cost At 31 March 2005 2,946 ------- Acquired Goodwill Todd Research Limited 11th November 2006 5 1,007 ------- Cost At 31 March 2006 3,953 ------- Provision for amortisation At 31 March 2005 184 Accelerated amortisation* 95 Charge for the year 164 ------- At 31 March 2006 443 ------- Net book value At 31 March 2005 2,762 ======= At 31 March 2006 3,510 ======= The Directors believe the benefits to be derived from having acquired Speed 5019 Limited in 2004 and Todd Research Limited in 2005 will continue for a period of not less than 20 years and accordingly the Directors are amortising goodwill over this period. *The accelerated amortisation of goodwill adjusts the goodwill that arose through the acquisition of the defined benefit pension scheme fund deficit, this deficit was subsequently reduced by the closure of the scheme to the accrual of new benefits. 5. ACQUISITION of todd research limited On the 11th November 2005 the Asfare Group plc acquired ordinary shares with a nominal value of £13,500 in Todd Research Limited, being 100% of its nominal share capital. The total consideration of £2,168,000 (including £256,000 of costs) was satisfied in cash and financed via the placing of 771,112 ordinary shares for £694,000, cash resources of £224,000 and the raising of £1,250,000 in debt. Goodwill arising on the acquisition of Todd Research Limited has been capitalised. The purchase of Todd Research Limited has been accounted for by the acquisition method of accounting. The assets and liabilities of Todd Research Limited acquired were as follows: Book Revaluation Accounting Other Fair Value Values Policy adjustments £000 £000 £000 £000 £000 Fixed Assets Tangible 596 605 (33) (20) 1,148 Current Assets Stock 480 (68) (135) 277 Debtors 129 129 Bank & Cash 262 262 Total Assets 1,467 537 (33) (155) 1,816 Creditors Trade Creditors 355 30 385 Other Creditors 35 35 Accruals 8 8 Provisions Pension 181 181 Taxation 46 46 ------- --------- -------- ----- ------ ------- Total Liabilities 535 90 - 30 655 ------- --------- -------- ----- ------ ------- Net assets excluding pension liability 1,023 537 (33) (185) 1,342 Pension Liability 181 181 ------- --------- -------- ----- ------ ------- Net Assets 842 537 (33) (185) 1,161 ------- --------- -------- ----- ------ ------- Purchased goodwill capitalised 1,007 ------- ------- 2,168 Satisfied by: Share placing 694 Loan Financing 1,250 Cash 224 ------- Initial Consideration 2,168 Contingent Consideration 2,080 ------- Total Potential Consideration 4,248 ======= Included in the above table are accounting policy related adjustments on fixed assets of £33,000, these have been made to bring the Todd Research depreciation policy in line with the policy of the Group. The fixed assets have been reduced by £20,000 in relation to the disposal of assets and £135,000 of stock has been written down. Fair value adjustments were made to the freehold property which was increased by £605,000 to the current market value, the stock was re-valued and reduced by £68,000 and the pension deficit of £181,000 (net of the associated deferred tax asset of £78,000) has been recognised. During the period post acquisition the Group closed the defined benefit scheme to the accrual of future benefits, this resulted in a curtailment gain of £141,000 which was credited to the profit & loss account. There is a potential further £2,080,000 of contingent consideration, this has not been included in goodwill as the Board considers that the outcome of this can not be reliably measured at this time. 6. STOCKS AND WORK IN PROGRESS 2006 2005 GROUP £000 £000 Work in progress 152 2 Raw materials and finished goods 545 504 ------- ------- 697 506 ======= ====== 7. DEBTORS 2006 2005 £000 £000 Trade debtors 1,099 836 Other debtors 2 3 Prepayments and accrued income 168 75 ------ ------ 1,269 914 ====== ====== 8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2006 2005 £000 £000 Bank loans 387 231 Trade creditors 912 388 Social security and other taxes 209 156 Other creditors - 2 Accruals 275 112 Corporation tax 3 - ------- ------ 1,786 889 ======= ====== 9. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 2006 2005 £000 £000 Bank loan 1,443 637 ------ ------ 1,443 637 ====== ====== The amounts are repayable as follows:- Amounts falling due: in one year or on demand 398 240 after one year and within two 398 240 after two years and within five 638 420 In more than five 437 - ------ ------ 1,871 900 Less: Issue costs (41) (32) ------ ------ 1,830 868 Included in creditors falling due within one year (387) (231) ------ ------ 1,443 637 ====== ====== 10. SHARE PREMIUM AND RESERVES Share Profit and Premium Loss Account Account GROUP £000 £000 At 31 March 2005 1,872 40 Actuarial net gain 24 Share premium arising on placing 474 313 Retained profit ------- ------- At 31 March 2006 2,346 377 ======= ======= 11. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS Group £000 Equity shareholders' funds at 31 March 2005 2,962 Called up share capital 193 Share premium account 474 Actuarial net gain 24 Profit for the financial year 313 -------- Equity shareholders' funds at 31 March 2006 3,966 ======== 12. NET CASHFLOW FROM OPERATING ACTIVITIES Year Year Ended Ended 31 March 31 March 2006 2005 -------- -------- £000 £000 Operating profit 411 190 Depreciation 72 49 Goodwill amortisation 164 148 Profit on sale of tangible fixed assets - (1) Decrease in stock 86 129 Increase in debtors (226) (84) Increase in creditors 267 56 -------- -------- Net cash inflow from operating activities 774 487 ======== ======== This information is provided by RNS The company news service from the London Stock Exchange

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