Final Results
Petards Group PLC
28 June 2007
PETARDS GROUP PLC:
PRELIMINARY RESULTS ANNOUNCEMENT
Petards Group plc ('Petards'), the AIM quoted developer of advanced surveillance
systems, announces preliminary results for the year ended 31 December 2006.
In his statement to shareholders, Tim Wightman, non-executive Chairman, said:
'During 2006 Petards' financial recovery continued and the year ended on a
strong note with operating profits and cash flows showing improvements over the
prior year.
Following a strong performance in the second half year, Petards made an
operating profit before exceptional items of £0.6m (2005: £0.02m) on turnover of
£23.2m (2005: £21.8m) for the year ended 31 December 2006. Operating profit
after exceptional items was £0.1m.'
Highlights
• Turnover up 6% to £23.2m (2005: £21.8m)
• Gross profit of £8.4m up 19% (2005: £7.0m)
• Operating profit before exceptional items of £576,000 (2005: £23,000)
• Operating profit after exceptional items of £94,000 (2005: £23,000)
• Loss before tax reduced to £293,000 (2005: £482,000 loss)
• Operating cash inflow £1.0m (2005: £0.7m outflow)
• Further progress in US market; turnover up 48% to £2.0m.
• Benefits of sales synergies between group companies now being
realised; £3m order received in January 2007 from BAE Systems for
software and hardware.
• Acquired EIMC, specialist supplier of camera technologies, in March
2006
Commenting on outlook, Tim Wightman, non-executive Chairman, said:
'Global demand for advanced security and surveillance systems such as those
offered by Petards continues to grow and we see strong opportunities within the
US in particular. Order intake in the early part of 2007 has been encouraging
although in some sectors there have been delays in the placement of orders.
We remain confident that the order intake for 2007 will show significant growth
over 2006 although the timing of the receipt of those orders will largely
determine the pace at which our recovery in profitability proceeds. While six
months remain until the end of the 2007 financial year, the Board currently
expects that delays are likely to result in the company reporting profits for
the current year that fall short of market expectations.'
Contacts:
Petards Group plc Parkgreen Communications
Tim Wightman, Chairman Paul McManus
Andy Wonnacott, Finance Director Tel: 020 7479 7933
Tel: 01932 788 288 Mob: 07980 541 893
CHAIRMAN'S STATEMENT
Introduction
During 2006 Petards' financial recovery continued and the year ended on a strong
note with operating profits and cash flows both showing improvements over the
prior year. In the interim statement last September I commented upon the
completion of structural changes required to implement our longer term strategy
and the exploitation of synergies between different parts of the group. I am
pleased to say that we have seen the associated benefits starting to be
realised.
Results
Following a strong performance in the second half year, Petards made an
operating profit before exceptional items of £0.6m (2005: £0.02m) on turnover of
£23.2m (2005: £21.8m) for the year ended 31 December 2006. Operating profit
after exceptional items was £0.1m. Our focus on improving margins continued to
show progress and gross margins were up from 32% to 36%. The loss before tax
was reduced to £0.3m (2005: £0.5m).
The group generated an operating cash inflow of £1.0m (2005: £0.7m outflow), an
improvement of £1.7m over the prior period.
Business Review
The strategy followed by the Board has been to put in place a structure that
would enable the group to exploit the synergies that exist between its various
businesses being a combination of operational, technological and market factors.
It is pleasing to see that the benefits of this have now started to come
through. The most significant of these to date has been our success in
capitalising upon Petards Joyce-Loebl's routes to market into the defence
industry to enable us to sell solutions from elsewhere in the group. A good
example of this was when we were able to capitalise upon our reputation and
heritage in our traditional defence market to enable our non-defence business to
secure a contract earlier this year worth in excess of £3m to provide BAE
Systems with software and hardware as part of a UK Government project.
Our fledging US business also made progress during the year growing turnover to
£2.0m (2005: £1.3m) despite the weakening dollar. We consider the US to provide
a significant opportunity over the medium term and during 2006 we invested and
continue to invest in growing its sales and technical resources as well as
promoting the Petards brand. Its first major order of UVMS(TM) network video
recording systems for a casino for the Choctaw Nation in late 2005 was followed
by further orders in 2006 totalling more than $3m. We also secured our first
order for UVMS(TM) in the US rail sector when the State of Minnesota selected it
for use on its metro transit system.
The acquisition of EIMC in March 2006 added to our camera technology
capabilities both for infrared and daylight applications. The business
performed well in the 10 months that it was part of the group contributing
operating profits and operating cash inflows of £0.2m.
We maintained our strong position in the transport sector winning contracts for
eyeTrain(TM) on-board CCTV, including a supply and installation contract for
Arriva Trains Wales worth £2.0m as well as smaller orders such as those from
Porterbrook for South West Trains and the Tyne & Wear Metro operated by Nexus.
We are seeing many exciting opportunities within this market. However, rail is
a complex industry to sell into, particularly in the UK due to its fragmented
ownership, and we have seen slippage in the placement of orders on a number of
opportunities which we believe we are well positioned to secure. We have been
developing complementary products to enhance our offering such as forward facing
cameras on trains, driver monitors and passenger load counting systems.
Our traditional defence business has seen mixed results over the year as the
demands of operations in Iraq and Afghanistan have drawn resources away from
other programmes resulting in delays in order placement. However, operations in
those regions gave rise to a number of orders totalling over £4m for our
countermeasure sensors and dispensers that provide defensive systems for
aircraft protection.
People
The group has undergone immense change over the past two years and the benefits
of these changes are now being seen. The delivery of change within the business
is dependant upon the hard work and commitment of our people and I would like to
record my thanks to them for their efforts.
Outlook
Global demand for advanced security and surveillance systems such as those
offered by Petards continues to grow and we see strong opportunities within the
US in particular. The Board is conscious that certain market opportunities
require greater resources than are available to the group. It is therefore
constantly appraising the potential to partner or combine with other businesses
to create synergies and critical mass. Order intake in the early part of 2007
has been encouraging although as I mentioned before, in some sectors there have
been delays in the placement of orders.
We remain confident that the order intake for 2007 will show significant growth
over 2006 although the timing of the receipt of those orders will largely
determine the pace at which our recovery in profitability proceeds. While six
months remain until the end of the 2007 financial year, the Board currently
expects that delays are likely to result in the company reporting profits for
the current year that fall short of market expectations.
Tim Wightman
27 June 2007
PETARDS GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2006
Before Exceptional
exceptional items (note 3) Total
items
Year ended Year ended Year ended Year ended
Note 31 December 2006 31 December 2006 31 December 2006 31 December 2005
(as restated)
(note 29)
(note 8)
£'000 £'000 £'000 £'000
Turnover
Continuing operations 21,336 - 21,336 21,839
Acquisitions 7 1,899 - 1,899 -
23,235 - 23,235 21,839
Cost of sales (14,839) - (14,839) (14,793)
Gross profit 8,396 - 8,396 7,046
Administrative expenses
Goodwill amortisation and (60) - (60) (31)
impairment
Other administrative (7,760) (482) (8,242) (6,992)
expenses
Total administrative (7,820) (482) (8,302) (7,023)
expenses
Operating profit / (loss)
Continuing operations 357 (467) (110) (258)
Acquisitions 7 219 (15) 204 281
Operating profit/(loss) 576 (482) 94 23
Interest payable and (387) (505)
similar charges
Loss on ordinary activities (293) (482)
before taxation
Tax on loss on ordinary (12) 115
activities
Loss for the financial year (305) (367)
Loss per share - continuing
operations
Basic and diluted 4 (0.05p) (0.06p)
There is no difference between the loss above and the loss as presented on a
historical cost basis.
PETARDS GROUP PLC
CONSOLIDATED BALANCE SHEET
As at 31 December 2006
31 December 2006 31 December 2005
£'000 £'000
Fixed assets
Intangible assets 1,061 783
Tangible assets 836 887
1,897 1,670
Current assets
Stocks 2,345 2,799
Debtors 4,734 4,662
Cash at bank and in hand 502 550
7,581 8,011
Creditors: amounts falling due within one year (8,027) (7,547)
Net current (liabilities) / assets (446) 464
Total assets less current liabilities 1,451 2,134
Creditors: amounts falling due after more than one
year (3,224) (3,964)
Provisions for liabilities (121) -
Net liabilities (1,894) (1,830)
Capital and reserves
Called up share capital 6,367 6,224
Share premium account 23,255 23,198
Profit and loss account deficit (31,516) (31,252)
Shareholders' deficit (1,894) (1,830)
PETARDS GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2006
Year ended Year ended
31 December 2006 31 December 2005
Note £'000 £'000 £'000 £'000
Net cash inflow/(outflow) from operating 5
activities 992 (674)
Returns on investments and servicing of
finance
Bank interest paid (625) (179)
Finance lease interest paid (8) (6)
Net cash outflow from returns on
investments and servicing of finance (633) (185)
Taxation 70 -
Capital expenditure
Purchase of tangible fixed assets (364) (246)
Sale of tangible fixed assets 6 47
Net cash outflow from capital expenditure (358) (199)
Acquisitions and disposals
Purchase of subsidiary undertaking (71) -
Net overdrafts and cash acquired with (109) -
subsidiary
Purchase of business (8) (562)
Net cash outflow from acquisitions and (188) (562)
disposals
Net cash outflow before financing (117) (1,620)
Financing
Issue of shares - 5,108
(Decrease)/increase in bank loans (546) 3,266
Finance lease capital repayments (59) (79)
Net cash (outflow) / inflow from financing (605) 8,295
(Decrease) / increase in cash in the year 6 (722) 6,675
PETARDS GROUP PLC
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 December 2006
31 December 2006 31 December
2005
(as restated)
(note 8)
£'000 £'000
Loss for the financial year (305) (367)
Currency translation difference on foreign currency net (3) -
investments
Total recognised losses relating to the year (308) (367)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31 December 2006
Group Year ended Year ended
31 December 2006 31 December 2005
(as restated)
(note 8)
£'000 £'000
Loss for the financial year (305) (367)
Credit in relation to share based payments 44 33
Other recognised gains and losses (3) -
New shares issued 200 5,570
Expenses of share issue - (462)
Opening equity shareholders' deficit (1,830) (6,604)
Closing equity shareholders' deficit (1,894) (1,830)
PETARDS GROUP PLC
NOTES TO THE PRELIMINARY RESULTS ANNOUNCEMENT
For the year ended 31 December 2006
1. Basis of preparation
The financial information contained in this document contains abridged
preliminary financial information for the year ended 31 December 2006 together
with comparatives. Comparatives have been restated where appropriate as detailed
in note 8.
It has been prepared on the basis of the policies applied in the consolidated
statutory accounts for the year ended 31 December 2006. These policies remain
unchanged from those applied in the consolidated statutory accounts for the year
ended 31 December 2005 except that FRS 20 'Share-based payment' has been adopted
for the first time in 2006. The comparatives have been restated accordingly
(note 8).
These financial statements do not constitute financial statements within the
meaning of Section 240 of the Companies Act 1985. Statutory accounts for 2005
have been delivered to the registrar of companies, and those for 2006 will be
delivered following the company's annual general meeting. The auditors have
reported on those accounts; their reports were unqualified and did not contain
statements under section 237(2) or (3) of the Companies Act 1985.
2. Dividend
The Board of Directors does not recommend a dividend for the year ended 31
December 2006.
3. Exceptional items
During 2006 the group incurred costs in connection with the reorganisation of
its production, finance and administrative functions. The total cost of
£482,000 includes a £57,000 provision for the estimated disposal costs for a
short leasehold property that was vacated as part of that reorganisation.
4. Loss per share
The calculation of the basic loss per share on continuing operations is based on
the loss for the year of £305,000 (2005: loss £367,000) divided by the weighted
average number of ordinary 1p shares in issue of 634,084,114 (2005:
579,691,942). Due to the group's loss for the year the diluted loss per share
is the same as the basic loss per share. The loss per share is wholly
attributable to continuing operations.
5. Net cash inflow / (outflow) from operating activities
2006 2005
£'000 £'000
Operating profit 94 23
Goodwill amortisation 60 31
Depreciation of tangible fixed assets 467 420
Profit on sale of tangible fixed assets (4) (6)
Share based payment expenses 44 33
Cash flows relating to fundamental reorganisation - (341)
Decrease in stocks and work in progress 871 770
Decrease in debtors 168 356
Decrease in creditors and provisions (708) (1,960)
Net cash inflow/(outflow) from operating activities 992 (674)
6. Analysis of net cash
Acquisitions
(excluding cash
At 1 January Other non and At 31 December
2006 cash overdrafts)
Cash flow changes 2006
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 550 (48) - - 502
Overdrafts - (674) - - (674)
550 (722) - - (172)
Debt due within 1 year (550) (165) - (60) (775)
Debt due after 1 year (3,935) 775 (64) - (3,224)
Finance leases (84) 59 - (16) (41)
Total (4,019) (53) (64) (76) (4,212)
7. Acquisition
On 8 March 2006 the group acquired the entire share capital of European
Innovation Manufacturing Centre Limited ('EIMC'). An initial payment of
£225,000 comprising of £25,000 in cash and £200,000 by way of the issue of
14,285,714 new ordinary shares at 1.4p was made on acquisition, and £46,000 of
costs were incurred associated with the acquisition. Further payments may be
made based upon the operating profits of EIMC for the period ending 31 December
2007 as follows. For profits of between £440,000 and £530,000 an amount of up
to £45,000 is payable; for profits between £530,000 and £660,000 a further
amount of up to £130,000 is payable. The additional consideration payable for
any excess of operating profits above £660,000 will be paid at a multiple of 1.5
times. The maximum total additional consideration payable is £1.5m. The
directors currently estimate that no additional consideration will be payable
and therefore no provision for deferred consideration has been made.
In the event that any further payments should become payable they would be
satisfied by either the issue of loan notes or new ordinary shares at the
prevailing market price. The vendors of EIMC may elect whether to opt for loan
notes or new ordinary shares for the first £175,000 of any additional
consideration in respect of 2007. The group has the option as to whether the
balance of any further payments is satisfied by way of loan notes or new
ordinary shares.
The acquisition has been accounted for using the acquisition method of
accounting. The book values of this acquisition were:
Book and
fair value
£'000
Net assets acquired:
Tangible fixed assets 55
Stock 417
Debtors 252
Cash at bank and in hand 3
Creditors due within 1 year (560)
Bank loan and finance leases (76)
Bank overdraft (112)
Net liabilities (21)
Goodwill arising on acquisition 292
271
Satisfied by:
Cash consideration 25
Costs associated with acquisition 46
71
Shares issued 200
Deferred consideration -
271
The directors have considered the value above and believe that book and fair
values are not materially different.
8. Prior year adjustment (FRS 20 'Share-based payment')
The comparative figures for 2005 have been restated for the requirements of FRS
20 'Share-based payment' which has been adopted for the first time in this
report. Under FRS 20, the fair value of options granted is recognised as an
employee expense with a corresponding increase in equity. The fair value is
measured at grant date and spread over the period during which the employees
become unconditionally entitled to the options. The fair value of the options
granted has been measured using an option pricing model taking into account the
terms and conditions upon which the options were granted. The amount recognised
as an expense is adjusted to reflect the actual number of share options that
vest, except where variations are due only to share prices not achieving the
threshold for vesting. This has resulted in a prior year adjustment in 2005.
The charge in respect of the share based payments is matched by an equal and
opposite adjustment to profit and loss reserves, thereby having no net impact on
the group's closing reserves. The full movement on reserves is shown in the
Reconciliation of movements in shareholders' funds. The effect on the 2005
results is set out below:
Group profit and loss account 2005
£'000
Loss on ordinary activities after taxation as originally reported (334)
Charge in respect of share based payments
- continuing operations (33)
_______
Loss on ordinary activities after taxation as restated (367)
The above has no effect on the 2005 group balance sheet. The total recognised
gains and losses in 2005 are increased by £33,000.
9. Report and accounts
Copies of the Report and Accounts will be sent to shareholders in due course.
10. Announcement
Copies of this announcement will be available from the Nominated Adviser:
Collins Stewart, 9th Floor, Wood Street, London, EC2V 7QR for 14 days from the
date of this announcement.
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