Half Yearly Report

RNS Number : 0745T

Petards Group PLC

22 September 2010

 



 

PETARDS GROUP PLC

INTERIM RESULTS ANNOUNCEMENT

Petards Group plc ('Petards'), the AIM quoted developer of advanced security and surveillance systems, reports its interim results for the six months to 30 June 2010.

Financial Highlights

·      Revenues of £5.3m (2009: £6.6m)

·      Gross margins increased to 41.1% (2009: 36.5%)

·      Profit before tax of £115,000 (2009: £242,000)

·      Basic and diluted earnings per share of 0.02p (2009: 0.04p)

·      Net cash outflow from operating activities of £0.9m (2009: £0.6m inflow) - due to early receipt of over £1m in H2 '09 for which related cash outflows occurred in early 2010

·      Net debt of £1.9m (2009: £1.8m)

Operational Highlights

·      Overseas revenues up to £1.4m (2009: £0.8m) due to increased eyeTrain sales

·      Revenues for emergency services and defence products lower than in 2009

·      Delivery of on-board CCTV on East Coast Trains accounts for c. 20% of revenues

·      New win customer with Spanish train builder, Vossloh

·      Pipeline of opportunities for rail business is strong

Commenting on the current outlook, Tim Wightman, Chairman, said:

"We expect results for the second half to be slightly weaker than in the first half. Although revenue should be higher, margins are expected to be lower. However, we do anticipate a significant order intake in the balance of the year which will provide a good base from which to build for 2011."

Contacts:

Petards Group plc	www.petards.com
Andy Wonnacott, Finance Director	[phone]
WH Ireland Limited	www.wh-ireland.co.uk
Mike Coe / Marc Davies	[phone]
Walbrook PR Limited	www.walbrookpr.com
Paul McManus	Tel: [phone]
	Mob: [phone]
	[e-mail]

Chairman's Statement

Overview of the Results

In the first half of 2010 the Group performed broadly in line with our expectations although on lower than expected revenues.

Profit before tax for the six months ended 30 June 2010 was £115,000 (2009: £242,000) despite revenues of £5.3m being almost 20% lower than the same period last year (2009: £6.6m).  An improvement in margins aided the first half result and helped offset the impact of lower revenues.  The profit after tax was £115,000 (2009: £251,000) resulting in basic and diluted earnings per share of 0.02p (2009: 0.04p). 

Government spending restrictions resulted in revenues for both our defence and emergency services (ProVida) products being lower, with defence product revenues from electronic countermeasures and ruggedised electronics control systems for armoured vehicles being particularly affected.  However, revenues from eyeTrain products were up significantly reflecting the commencement of delivery of some of the large orders we secured in 2009.

Margins in the period were 41.1% as compared with 36.5% for the first half of last year.  These reflected better than expected final margins on some projects started in 2009 and completed during the period and also the fact that some of the reduction in revenues related to products with lower than average margins.  We expect margins for the full year will be slightly below those achieved in 2009.

Cash Flow and Balance Sheet

As I reported in April, we achieved an exceptional operating cash inflow during the second half of 2009 which was aided by early receipt of over £1m for which the related cash outflows took place in the early part of 2010.  Net cash flows for the first half of 2010 were therefore reduced by this same amount resulting in a net cash outflow from operating activities for the six months ended 30 June 2010 of £0.9m (2009: £0.6m inflow). 

The Group's net debt at 30 June 2010 was £1.9m (30 June 2009: £1.8m).  Net debt has increased during the six months principally due to two main factors: the first being due to the exceptional cash performance in 2009 referred to above.  Secondly, contract work-in-progress relating to eyeTrain products had also temporarily increased as a consequence of significant orders received during 2009 and stocking levels of emergency services products that had been held in anticipation of projects that have been delayed were also higher. This stock is standard product and is being utilised on other projects and is expected to be utilised during the second half year.

The Group's total equity position continued to improve and at 30 June 2010 it showed a deficit of £0.25m compared with a deficit of £1.14m as at 30 June 2009 and £0.29m at 31 December 2009.

Operating Review

The Company's operational performance has improved markedly over recent years.  However, the present economic climate and the uncertainty pending the outcome of the UK government's public spending review this Autumn has meant that the rate at which those improvements are now being made has slowed markedly over the course of the past few months.  The impact of these factors is by no means universal, although all the industry sectors in which we operate are being affected to some degree or other.  Programmes involving new platforms in particular are being affected although we believe this is likely to present opportunities for refurbishment/life extension projects for existing equipment.  Examples of this are the well publicised deferral of UK new train programmes such as Intercity Express and Thameslink, the loss of which we would hope to offset from our strong position in supplying to the train refurbishment market.

A pleasing feature of the first half year was the increased contribution of overseas revenues.  These accounted for £1.4m of total revenues, up from £0.8m in the same period in 2009.  Revenues from eyeTrain accounted for this increase and more than offset the lower level of ProVida product sales achieved compared with 2009.  However, while for the full year overseas revenues from eyeTrain products will exceed the levels achieved in 2009, we expect our overall overseas revenues will be lower due to weaker demand for ProVida products and delays in the placement of expected orders from overseas customers.

As mentioned above, overall revenues for our emergency services and defence products in the six months were lower than in 2009.  While revenues from products for the defence industry were expected to be lower, the lower demand for emergency services products both at home and overseas was both unexpected and disappointing.  Orders for these products tend to have a sales cycle measured in weeks rather than months and there is no sign of any significant upturn in the short term and so we remain cautious on revenues for the balance of the year.

Deliveries of on-board CCTV systems under our contract with East Coast Trains continued and accounted for nearly 20% of revenues during the period.  Deliveries will continue throughout 2010 and the contract is expected to be substantially complete by the year end.  During the period we secured orders to supply equipment to another refurbishment programme being undertaken by Northern Rail in conjunction with the train owners, Angel Trains and Porterbrook Leasing.

We were also pleased to add Vossloh, a Spanish train builder to our list of European customers when they selected our on-board CCTV and Automatic Passenger Counting Systems for use on their new train-tram series.  The first eyeTrain systems were supplied during the first half year for use on Mallorca's tram and train network between Manacor and Artácan.

Our pipeline of opportunities for future rail business in the UK and overseas is strong although as previously reported, the majority of current overseas opportunities are for new build trains through train builders and the sales cycle for these runs into many months or in some cases years and so the benefits of the business development activities we have been undertaking will not be immediately apparent.

Research and Development

During the period the Group invested £0.3m (2009: £0.2m) in product development of which £0.2m (2009: £0.2m) was capitalised.  Net of amortisation, capitalised development expenditure increased by £0.1m (2009: £0.2m).

Products whose development phase was completed during the period included our ProVida 4000 in-car speed detection and video evidence system, ProVida 4000 radar system and the new ProVida DVR.  We anticipate taking our first orders for these new products by the end of the year and are optimistic that these, along with other products currently under development, will help generate additional sales.

In addition, we have continued to develop the capabilities of our eyeTrain system and have also been undertaking the engineering work to create the interfaces to enable it to be integrated onto an increasing number of train variants.

Strategy

The Board's overall objective remains to achieve attractive and sustainable rates of growth and returns in the more sophisticated or high-end of the security, surveillance and ruggedized electronics market.  Our strategy to achieve this objective is:

·      to focus upon our core products which are used in the rail transport, emergency services and defence industries;

·      to continue to invest in developing our technologies through our product roadmap;

·      to increase sales both organically and, when appropriate, by acquisition;

·      to increase sales outside of the UK; and

·      to improve operating margins through cost management.

Our progress during the period has not been helped by the current market conditions.  However, as reported above we have moved forward with our product development and overall sales outside of the UK and margins were up on the same period last year.

Outlook

The concern that I expressed in my report to you in April is proving to be well founded and the uncertainty over available programme budgets faced by our customers in the emergency services and defence industries in particular is resulting in delays in the placement of orders and in some cases programme cancellations.  Some significant orders which we were expecting to secure in the second and third quarters have been delayed and are now unlikely to contribute significantly to the 2010 results.

However, we expect that despite the likely significant nature of government expenditure cuts to be implemented in October, once those decisions have been taken this should enable customers to plan ahead with some certainty and release orders for those programmes that will be proceeding.

We expect results for the second half to be slightly weaker than in the first half. Although revenue should be higher, margins are expected to be lower. However, we do anticipate a significant order intake in the balance of the year which will provide a good base from which to build for 2011.

Tim Wightman

21 September 2010

Condensed Consolidated Income Statement

for the six months ended 30 June 2010

				Note		Unaudited 6  months ended 30 June 2010	Unaudited 6 months ended 30 June 2009	Audited Year ended 31 December 2009
						£000	£000	£000
Revenue						5,311	6,589	15,946
Cost of sales						(3,130)	(4,182)	(9,908)
Gross profit						2,181	2,407	6,038
Administrative expenses						(2,077)	(2,099)	(4,770)
Operating profit						104	308	1,268
Financial income						42	10	14
Financial expenses						(31)	(76)	(262)
Profit before income tax						115	242	1,020
Income tax				3		-	9	88
Profit for the period attributable to equity    holders of the company						115	251	1,108
Earnings per share
Basic and diluted				4		0.02p	0.04p	0.17p

The above results are derived from continuing operations.

Condensed Consolidated Statement of Comprehensive Income

for the six month period ended 30 June 2010

	Unaudited 6 months ended 30 June 2010	Unaudited 6 months ended 30 June 2009	Audited Year ended 31 December 2009
	£000	£000	£000
Profit for period	115	251	1,108
Other comprehensive income
Currency translation on foreign currency net investments	(83)	149	127
Total comprehensive income for the period	32	400	1,235

Condensed Consolidated Statement of Changes in Equity

for the six month period ended 30 June 2010

	Share capital	Share premium	Retained earnings	Currency translation differences	Total equity
	£000	£000	£000	£000	£000
Balance at 1 January 2009 (audited)	6,367	23,255	(30,866)	(317)	(1,561)
Profit for the period	-	-	251	-	251
Other comprehensive income	-	-	-	149	149
Total comprehensive income for the period	-	-	251	149	400
Equity-settled share based payments	-	-	18	-	18
Balance at 30 June 2009 (unaudited)	6,367	23,255	(30,597)	(168)	(1,143)
Balance at 1 January 2009 (audited)	6,367	23,255	(30,866)	(317)	(1,561)
Profit for the year	-	-	1,108	-	1,108
Other comprehensive income	-	-	-	127	127
Total comprehensive income for the year	-	-	1,108	127	1,235
Equity-settled share based payments	-	-	34	-	34
Balance at 31 December 2009 (audited)	6,367	23,255	(29,724)	(190)	(292)
Balance at 1 January 2010 (audited)	6,367	23,255	(29,724)	(190)	(292)
Profit for the period	-	-	115	-	115
Other comprehensive income	-	-	-	(83)	(83)
Total comprehensive income for the period	-	-	115	(83)	32
Equity-settled share based payments	-	-	9	-	9
Balance at 30 June 2010 (unaudited)	6,367	23,255	(29,600)	(273)	(251)

Condensed Consolidated Balance Sheet

at 30 June 2010           

		Unaudited 30 June 2010	Unaudited 30 June 2009	Audited 31 December 2009
ASSETS		£000	£000	£000
Non-current assets
Property, plant and equipment		237	316	267
Goodwill		401	401	401
Development costs		720	536	621
Deferred tax assets		356	310	356
		1,714	1,563	1,645
Current assets
Inventories		1,706	856	941
Trade and other receivables		1,859	1,828	3,450
Cash and cash equivalents		21	267	701
		3,586	2,951	5,092
Total assets		5,300	4,514	6,737
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital		6,367	6,367	6,367
Share premium		23,255	23,255	23,255
Currency translation reserve		(273)	(168)	(190)
Retained earnings deficit		(29,600)	(30,597)	(29,724)
Total equity		(251)	(1,143)	(292)
Non-current liabilities
Interest-bearing loans and borrowings		799	700	1,050
Deferred tax liabilities		66	-	66
		865	700	1,116
Current liabilities
Bank overdraft		669	-	-
Other interest-bearing loans and borrowings		450	1,375	400
Trade and other payables		3,567	3,582	5,513
		4,686	4,957	5,913
Total liabilities		5,551	5,657	7,029
Total equity and liabilities		5,300	4,514	6,737

Condensed Consolidated Statement of Cash Flows

for the six month period ended 30 June 2010

		Unaudited 6 months ended 30 June 2010	Unaudited 6 months ended 30 June 2009	Audited Year ended 31 December 2009
		£000	£000	£000
Cash flows from operating activities
Profit for the period		115	251	1,108
Adjustments for:
Depreciation		61	74	180
Amortisation of intangible assets		120	23	206
Financial income		(42)	(10)	(14)
Financial expense		31	76	262
Equity settled share-based payment expenses		9	18	34
Income tax credit		-	(9)	(88)
		294	423	1,688
Change in trade and other receivables		1,591	823	(822)
Change in inventories		(765)	517	432
Change in trade and other payables		(2,044)	(1,134)	800
Cash (outflow)/inflow from operations		(924)	629	2,098
Interest received		42	10	14
Interest paid		(31)	(93)	(287)
Income tax received		9	90	205
Net cash (outflow)/inflow from operating activities		(904)	636	2,030
Cash flows from investing activities
Capitalised development expenditure		(219)	(214)	(482)
Acquisition of property, plant and equipment		(31)	(53)	(110)
Net cash outflow from investing activities		(250)	(267)	(592)
Cash flows from financing activities
Decrease in committed overdraft facility		-	(356)	(356)
Repayment of bank borrowings		(201)	-	(625)
Net cash outflow from financing activities		(201)	(356)	(981)
Net (decrease)/increase in cash and cash equivalents		(1,355)	13	457
Cash and cash equivalents at start of period		701	268	268
Effect of exchange rate fluctuations on cash held		6	(14)	(24)
Cash and cash equivalents at end of period		(648)	267	701
Cash and cash equivalents comprise:
Cash and cash equivalents		21	267	701
Bank overdraft		(669)	-	-
		(648)	267	701

Notes

(forming part of the financial statements)

1              General

The interim financial information set out in this statement for the six months ended 30 June 2010 and the comparative figures for the six months ended 30 June 2009 are unaudited. This financial information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.

The comparative figures for the financial year ended 31 December 2009 are not the company's statutory financial statements for that financial year. Those accounts have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Copies of this interim statement will be sent to shareholders and will be available on the Company's website (www.petards.com) and from the Company's registered office at 390 Princesway, Team Valley, Gateshead, Tyne and Wear, NE11 0TU.

2              Basis of preparation

This interim statement, which is neither audited nor reviewed, has been prepared in accordance with the measurement and recognition criteria of Adopted IFRSs.  They do not include all the information required for the full annual financial statements, and should be read in conjunction with the financial statements of the Group as at and for the year ended 31 December 2009. It does not comply with IAS 34 'Interim Financial Reporting' as is permissible under the rules of the AIM Market ("AIM").

The accounting policies applied in preparing these interim financial statements, other than those noted below, are the same as those applied in the preparation of the annual financial statements for the year ended 31 December 2009, as described in those financial statements.  The Board approved these interim financial statements on 21 September 2010.

From 1 January 2010 the following standards, amendments and interpretations endorsed by the EU became effective and were adopted by the Group:

·      Revised IFRS 3 Business Combinations;

·      Amendments to IAS 27 Consolidated and Separate Financial Statements

·      Embedded Derivatives (Amendments to IFRIC 9 and IAS 39);

·      Eligible Hedged Items (Amendments to IAS 39 Financial Instruments: Recognition and Measurement).

The adoption of the above has not had a significant impact on the Group's interim financial statements.

3             Taxation

No provision for taxation has been made in the profit and loss account for the six months to 30 June 2010 based on the estimated tax provision required for the year ending 31 December 2010.  No provision was required in the six months to 30 June 2009.  An adjustment in respect of prior years of £9,000 arose in the six months to 30 June 2009   in respect of research and development tax credits.

4             Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to the shareholders by the weighted average number of shares in issue. The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options.

The calculation of earnings per share is based on the profit for the period and on the weighted average number of ordinary shares outstanding in the period. 

	Unaudited 6  months ended 30 June 2010	Unaudited 6 months ended 30 June 2009	Audited Year ended 31 December 2009
Earnings
Profit for the period (£000)	115	251	1,108
Number of shares
Weighted average number of ordinary shares ('000)	636,707	636,706	636,706

Diluted earnings per share is identical to the basic earnings per share.  None of the share options are dilutive as the exercise prices are higher than the average market price of the shares.

 

END

 

 

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