Half Yearly Report

RNS Number : 5327S

Kenetics Group Limited

13 September 2010

 



For release: 0700, 13 September 2010

 

KENETICS GROUP LIMITED

INTERIM FINANCIAL INFORMATION

FOR THE SIX MONTHS ENDED 30 JUNE 2010

Kenetics Group Limited

("Kenetics" or "the Company" or "the Group")

Interim Results

Kenetics Group Limited (AIM: KEN) the Radio Frequency Identification (RFID) company focused on Security and RFID systems and products, announces its interim results for the six month period ended 30 June 2010.

Key Points

·   Consolidated turnover fell 17% to £472,000 (H1 2009: £570,000).

·   Consolidated loss on ordinary activities after tax and expenses was up 6.4% £217,000 (H1 2009: £204,000).

·    Increase in materials cost due to the manufacturing of the production units of On-Board Bus Equipment ("OBE") in fulfillment of the Singapore Land Transport Authority ("LTA") contracts, which was offset by reduction in employee benefits expenses and other operating expenses.

·    In-house testing of the OBE systems for the LTA contracts has been completed.

·    Delivery of the production systems will begin in September 2010 for deployment in October 2010.

Commenting on the results, Ken Wong, Chairman and CEO said: "We feel confident that the LTA trials will be successfully completed by the end of the year and the Company will continue to seize the opportunities not only in Singapore but also in the region to grow the business"

For further information, please contact:

Ken Wong, Chairman and CEO

Kenetics Group Limited

Tel: [phone]

Website:www.kenetics-group.com

Dominique Doussot

ZAI Corporate Finance Ltd

(Nominated Advisor)

Tel: [phone]

Alex Mattey / Ian Callaway

SVS Securities (PLC)

(Broker)

Tel: [phone]

	Jeremy Carey / Andrew Dunn
	Tavistock Communications Ltd
	Tel: [phone]

CHAIRMAN'S STATEMENT

The first half year performance has been affected by the delay in the start of the deployment and trials for the OBE systems for the LTA contracts. This delay was mainly due to operational issues which arose during the testing of the OBE systems and the integration of the systems with the fare collection software developed for the Singapore public transport operations, which include both the bus and rail systems.

The testing of the OBE system has now been completed and the certification of the system is expected to be completed by end September 2010 before the actual installation begins.

I am pleased to announce that the deployment and trials will start on 1 October 2010 with 10 buses and all 170 buses to be commissioned by end Nov 2010. The trial period will be shortened to two months, from Oct 2010 to Dec 2010, as many issues were resolved during the in-house testing phases. It is expected by LTA that the two month trial period will be sufficient to detect and resolve any further issues that may arise. Delivery of the first 40 systems is scheduled for the 17 September 2010 and the balance of 130 system by the end of October 2010.

The Contactless Smart Card (CSC) Reader developed for the LTA rail (subway) systems has been successfully completed. The readers have been deployed in eleven stations and are currently undergoing a three month trial. I am pleased to mention that the reader has now been adopted for the bus systems as well. It will be deployed together with the OBE system trials in October 2010. 880 readers are manufactured and awaiting loading of the fare collection software by LTA. 631 reader units had been programmed as at 30 Aug 2010.

In my statement with the full year results for 2009, the directors stated that the Group would be seeking additional funds in the form of equity financing in two phases during 2010. On 21 June 2010, we announced that we had raised £300,000 (gross) by way of a Placing of 7,500,000 new shares at 4.0p per share, to provide continued working capital to fulfill the LTA contracts. The second phase will focus in raising £2 million to provide the necessary financial resources to bid for the subsequent commercial roll-out contracts for both the rail and bus systems.

Despite the delay in the deployment of the OBE systems for the bus trials, the Company is leveraging on the completion of the development and testing of the OBE hardware and systems. Working with its partners, Kenetics has been involved in marketing the OBE systems to other countries, particularly in South East Asia. A trial system with two buses is expected to begin in Vietnam by the end of 2010. The Board feels confident that the LTA trials will be successfully completed by the end of the year and the Company will continue to seize the opportunities not only in Singapore but also in the region to grow the business

Ken Wong, Chairman and CEO

Kenetics Group Limited

10 September 2010

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

CONDENSED CONSOLIDATED INCOME STATEMENT

		6 months	6 months	12 months
		Ended	Ended	Ended
		30 June	30 June	31 December
		2010	2009	2009
		(Unaudited)	(Unaudited)	(Audited)
		£'000	£'000	£'000
Continuing operations
Revenue		472	570	1,422
Other operating income		-	36	80
Changes in inventories of finished
goods and work-in-progress		12	(21)	(47)
Raw materials and consumables used		(227)	(163)	(430)
Employee benefits expenses		(278)	(329)	(723)
Depreciation of plant and equipment		(21)	(25)	(51)
Other operating expenses		(131)	(202)	(378)
Loss arising on derivative financial instrument		-	(52)	(20)
Finance costs		(43)	(17)	(58)
Loss before income tax		(216)	(203)	(205)
Income tax expense		(1)	(1)	17
Loss for the period		(217)	(204)	(188)
Loss attributable to:
Owners of the Company		(217)	(204)	(188)
Minority interests		-	-	-
		(217)	(204)	(188)
Loss per share (pence) - Basic and diluted		(0.81)	(0.77)	(0.68)

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

		6 months	6 months	12 months
		Ended	Ended	Ended
		30 June	30 June	31 December
		2010	2009	2009
		(Unaudited)	(Unaudited)	(Audited)
		£'000	£'000	£'000
Loss for the period		(217)	(204)	(188)
Other comprehensive income:
Foreign currency translation		4	(4)	(1)
Total comprehensive expense for the period		(213)	(208)	(189)
Total comprehensive
expense attributable to:
Owners of the Company		(213)	(208)	(189)
Minority interests		-	-	-
		(213)	(208)	(189)

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	30 June	30 June	31 December
	2010	2009	2009
	(Unaudited)	(Unaudited)	(Audited)
	£'000	£'000	£'000
Non-current assets
Plant and equipment	308	100	208
Available for sale financial asset	-	-	-
Total non-current assets	308	100	208
Current assets
Contract work-in-progress	355	-	526
Inventories	642	449	504
Trade receivables	26	90	204
Other receivables	174	186	208
Cash and cash equivalents	146	183	137
Total current assets	1,343	908	1,579
Total assets	1,651	1,008	1,787
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital	408	264	333
Share premium	628	280	403
Share option reserve	-	5	4
Merger reserve	370	370	370
Foreign currency translation reserve	24	17	20
Accumulated losses	(1,591)	(1,374)	(1,374)
Total equity	(161)	(438)	(244)
Non-current liabilities
Amount owing to director	-	318	-
Bank loan	-	81	29
Total non-current liabilities	-	399	29

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

	30 June	30 June	31 December
	2010	2009	2009
	(Unaudited)	(Unaudited)	(Audited)
	£'000	£'000	£'000
Current liabilities
Excess of progress billings over
contract work-in-progress	-	-	8
Trade payables	169	55	265
Other payables	212	137	165
Amount owing to directors	599	190	792
Convertible loan	491	416	463
Derivative financial instrument	20	52	20
Bank loan	220	103	202
Bank overdraft - secured	101	94	87
Total current liabilities	1,812	1,047	2,002
Total liabilities	1,812	1,446	2,031
Total equity and liabilities	1,651	1,008	1,787

KENETICS GROUP LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR 6 MONTHS ENDED 30 JUNE 2010

	Attributable to owners of the Company
Group	Share capital		Share premium		Share option reserve		Equity component of convertible loan		Merger reserve		Foreign currency translation  reserve		Accumulated losses		Total		Non- controlling   interest		Total equity
	£'000		£'000		£'000		£'000		£'000		£'000		£'000		£'000		£'000		£'000
Balance as at 01/01/09	264		280		3		16		370		21		(1,186)		(232)		-		(232)
Share option granted	-		-		2		-		-		-		-		2		-		2
Equity component of convertible loan	-		-		-		(16)		-		-		16		-		-		-
Total comprehensive expense for the period	-		-		-		-		-		(4)		(204)		(208)		-		(208)
Balance as at 30/06/09	264		280		5		-		370		17		(1,374)		(438)		-		(438)
Share options granted	-		-		(1)		-		-		-		-		(1)		-		(1)
Equity component of convertible loan	-		-		-		-		-		-		(16)		(16)		-		(16)
Issue of ordinary shares	69		123		-		-		-		-		-		192		-		192
Total comprehensive income for the period	-		-		-		-		-		3		16		19		-		19
Balance as at 31/12/09	333		403		4		-		370		20		(1,374)		(244)		-		(244)
Share options granted	-		-		(4)		-		-		-		-		(4)		-		(4)
Issue of ordinary shares	75		225		-		-		-		-		-		300		-		300
Total comprehensive expense for the period	-		-		-		-		-		4		(217)		(213)		-		(213)
Balance as at 30/06/10	408		628		-		-		370		24		(1,591)		(161)		-		(161)

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

	6 months	6 months	12 months
	Ended	Ended	Ended
	30 June	30 June	31 December
	2010	2009	2009
	(Unaudited)	(Unaudited)	(Audited)
	£'000	£'000	£'000
Cash flows from operating activities
Loss before income tax	(216)	(203)	(205)
Adjustments for:
Depreciation	21	25	51
Interest expense	43	18	58
Interest income	-	(1)	-
Provision for diminution of investment in
subsidiary	(4)	-	-
Share options expenses	-	2	1
Loss arising on derivative financial instrument	-	52	20
Unrealised exchange loss	18	41	61
Cash outflow before working capital changes	(138)	(66)	(14)
(Increase)/decrease in contract work-in-progress	194	(161)	(495)
(Increase)/decrease in trade and other receivables	241	(156)	(283)
Decrease/(increase) in inventories	(106)	1	(217)
Increase/(decrease) in trade and other payables	(103)	64	271
Cash generated from/(used in) operations	88	(318)	(738)
Interest paid	(8)	(3)	(13)
Income tax paid	(1)	(1)	17
Net cash flows generated from/(used in) operations	79	(322)	(734)

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (continued)

	6 months	6 months	12 months
	Ended	Ended	Ended
	30 June	30 June	31 December
	2010	2009	2009
	(Unaudited)	(Unaudited)	(Audited)
	£'000	£'000	£'000
Cash flows from investing activities
Purchase of plant and equipment	(109)	(20)	(147)
Interest received	-	1	1
Net cash flows (used in)/ generated from investing activities	(109)	(19)	(146)
Cash flows from financing activities
Receipt of loan from director	45	258	513
Issue of ordinary shares	-	-	193
Repayment of hire purchase loan	-	(1)	(1)
Proceeds from bank loan	33	208	313
Repayment of bank loan	(59)	(25)	(81)
Difference of fixed deposit balance due to accumulation of interest	(1)	-	(1)
Net cash flows generated from financing activities	18	440	936
Net increase/(decrease) in cash in hand and at bank	(12)	99	56
Effect of exchange rate changes	(2)	9	6
Cash in hand and at bank at beginning of period	(69)	(131)	(131)
Cash in hand and at bank at end of period	(83)	(23)	(69)
Fixed deposit	128	112	119
Bank overdraft	101	94	87
Cash and cash equivalents per balance sheet	146	183	137

 

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

1.      Business of Kenetics Group Limited

The Company was incorporated in Jersey on 22 June 2006. The condensed consolidated financial information of the Company for the six months ended 30 June 2010 comprise the Company and its subsidiaries, Kenetics Innovations Pte Ltd and Kenetics Innovations (Beijing) Co., Ltd.

The registered office of the Company is located at Walker House, PO Box 498, 28-34 Hill Street, St Helier, Jersey JE4 5TF.

The Group is in the business of electronics design and manufacturing and producing of electrical and electronic goods.

2.      Basis of preparation of interim condensed consolidated financial information

These interim consolidated financial statements are for the six months ended 30 June 2010 and have been prepared in accordance with International Accounting Standard 34 "Interim Financial Statements". The accounting policies applied are consistent with International Financial Reporting Standards (IFRS) adopted for use by the European Union. The accounting policies and methods of computation used in the interim consolidated financial statements are consistent with those used in the Annual Report for 2009 and are expected to be applied for the year ended 31 December 2010.

The interim results for the six months ended 30 June 2010 are not necessarily indicative of the results to be expected for the full year 2010

3.      Share Capital

On 16 June 2010, 7.5 million new ordinary shares for a total consideration of £300,000 were issued to provide for additional working capital for the LTA projects. The share premium for the issue amounts to £225,000.

For details of the above, please refer to the announcement made by the Company on 21 June 2010.

4.      Loss per share

         Basic loss per share has been calculated on the basis of the losses attributable to ordinary shareholders divided by 26,915,219 (30/06/09: 26,349,466, 31/12/09: 27,480,973), being the weighted average number of ordinary shares issued by the Company.

In accordance with IAS 33 and as the Group has reported a loss for the period, the potential ordinary shares are not dilutive.

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

5.      Exchange rates

         The reporting currency of the Company is deemed to be Sterling Pounds. The functional currencies of Kenetics Innovations Pte Ltd and Kenetics Innovations (Beijing) Co Ltd are in Singapore dollars and Chinese Renminbi respectively. The following exchange rates have been used in preparing this financial information:

	S$1 = £	RMB1 = £
30 June 2010	0.47441	0.09773
Average rates	0.47145	0.09675

6.      Income tax

There was no income tax expense for the 6 months ended 30 June 2010, as the Group has been loss making during this period. The income tax expense for the 6 months ended 30 June 2010 amounted to £662 was an under-provision of tax in prior year.

7.      Segment reporting

The Group has adopted IFRS 8 which is required for all annual reports and interim financial statements starting 1 January 2009 or later.

For management purposes, the Group is currently organised around differences in regulatory environment and geographical areas; and has three reportable segments as follows:

I.          The Singapore segment designs, manufactures and produce all kinds of electrical and electronic goods.

II.          The China segment imports and exports goods and services, and to act as an agent.

III.         The UK segment provides management services to entities in the group.

Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.

Group financing (including finance costs) is managed on a group basis and is not allocated to operating segments. Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

KENETICS GROUP LIMITED

FOR 6 MONTHS ENDED 30 JUNE 2010

Segment reporting (cont'd)
Operating Segments	UK					Singapore				China						Elimination						Consolidated Total
	6 Months Ended 30 June 2010	6 Months Ended 30 June 2009	12 Months Ended 31 December 2009			6 Months Ended 30 June 2010	6 Months Ended 30 June 2009	12 Months Ended 31 December 2009		6 Months Ended 30 June 2010	6 Months Ended 30 June 2009	12 Months Ended 31 December 2009				6 Months Ended 30 June 2010	6 Months Ended 30 June 2009	12 Months Ended 31 December 2009				6 Months Ended 30 June 2010	6 Months Ended 30 June 2009	12 Months Ended 31 December 2009
	£'000	£'000	£'000			£'000	£'000	£'000		£'000	£'000	£'000				£'000	£'000	£'000				£'000	£'000	£'000
Total external revenue	-	-	-			472	570	1,422		-	-	-				-	-	-				472	570	1,422
Inter-segment Revenue	-	-	198			-	-	-		-	-	-				-	-	(198)				-	-	-
Finance Income	-	-	-			-	1	1		-	-	-				-	-	-				-	1	1
Depreciation	-	-	-			20	26	49		1	1	2				-	(2)	-				21	25	51
Unallocated finance costs	-	-	-			-	-	-		-	-	-				-	-	-				43	17	58
Reportable segment profit /(loss) before tax	(166)	(112)	(80)			(47)	11	(115)		(7)	(26)	(41)				4	(76)	31				(216)	(203)	(205)
Income tax expense	(1)	(1)	(1)			-	-	18		-	-	-				-	-	-				(1)	(1)	17
Reportable segment profit /(loss) after tax	(167)	(113)	(81)			(47)	11	(97)		(7)	(26)	(41)				4	(76)	31				(217)	(204)	(188)

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

7.      Segment reporting (cont'd)

Geographical information
	Sales to external customers
	6 months	6 months		12 months
	Ended	Ended		Ended
	30 June	30 June		31 December
	2010	2009		2009
	£'000	£'000		£'000
Asia Pacific	387	489		1,262
Europe	80	78		154
Others	5	3		6
	472	570		1,422

8.      Nature of financial information

The interim financial information set out above is neither audited nor reviewed and does not represent the statutory financial statements for Kenetics Group Limited or for any of the entities comprising the Kenetics Group for the period ended 30 June 2010. The figures for the year ended 31 December 2009 were extracted from the consolidated financial statements which have been presented to the shareholders. The auditors' report on those financial statements was unqualified.

The Board approved the interim financial information for the period ended 30 June 2010 on 10 September 2010.

These interim results are available on the Company's website www.kenetics-group.com.

9.      Subsequent event

On 1 July 2010, the Company entered into an interest-bearing redeemable convertible loan agreement with an external party, to obtain a principal loan of £300,000. The principal loan will be due for repayment on 30 June 2012 and the interest will be payable monthly at the rate of 12% per annum. The loan may be converted on written notification at any time after the expiry of the loan in whole or in part provided the always that the total number of shares shall not at any time exceed 1% of the Borrower's total shareholding.

The Company has received the loan amount of £300,000 in cash.

 

END

 

 

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