Interim Results
Petards Group PLC
07 December 2005
7 December 2005
PETARDS GROUP PLC:
INTERIM RESULTS
Petards Group plc ('Petards'), the AIM quoted developer of advanced surveillance
systems, announces interim results for the six months ended 30 June 2004, a
period in which the company made a small operating profit.
Financial Highlights
• Revenue up 23% to £13.0m (2004: £10.3m)
• Gross profit up 9% to £4.3m (2004: £3.9m)
• Operating profit of £272,000 (2004: £1,340,000 loss)
• Loss before tax of £68,000 (2004: £1,156,000 loss)
• Loss per share of 0.01 pence (2004: 1.77 pence loss)
• Significantly improved balance sheet and debt position
• No dividend
Other highlights
• Turnover increase relates to defence orders won in 2004 including
countermeasure systems for the MoD and the design and build of control
systems of the Challenger 2 tank
• £1.64m acquisition of PI Vision, a leader in scaleable networked digital
video recording systems
• £5.6m worth of orders for on-board CCTV systems for trains - majority of
sales will fall in 2006
• First sales of COFDM version of the Swift rapid deployment camera
• First significant orders received for the new Provida product range
Commenting on outlook, Tim Wightman, Chairman, said:
'The markets in which the Group operates provide significant opportunities. The
recent terrorist events in London have further highlighted to government
agencies at home and abroad the critical role that advanced security and
surveillance systems can play in tackling such threats. The Group has made good
progress over recent months. However, it is taking longer than we expected to
overcome the effect of its past difficulties within some of our markets.
'I reported in May that the performance of the Group in the second half would
depend upon our ability to convert opportunities into orders and then deliver
them before the year end. In the event, while we have been successful in
securing a number of orders and establishing our strong position in the markets
we serve, many are not deliverable before the year end. We therefore expect the
outcome for the year to be a considerable improvement over prior years, but to
fall short of market expectations. The Board is confident, however, that with
the current strong order book, the momentum of improvement in profitability will
be maintained in 2006.
'The Board continues to seek to enhance shareholder value. The Directors, with
our advisors, are undertaking a strategic review of all of the options available
to enable the Group to maximise its many strengths.'
Contacts:
Petards Group plc Binns & Co PR Ltd
David Hayes, Chief Executive Paul McManus
Andy Wonnacott, Finance Director Tel: 020 7786 9600
Tel: 01932 788 288 Mob: 07980 541 893
CHAIRMAN'S STATEMENT
Results
I am pleased to report that following the actions taken by the Board, the Group
made a small operating profit for the six months ended 30 June 2005.
The trading performance in the first half year showed a significant improvement
over the prior year. Turnover for the six months to 30 June 2005 increased 23%
to £13.0m (2004: £10.6m). The majority of this increase related to the defence
orders won in 2004, including countermeasure dispensing systems for the UK MOD,
and the design and build of control systems for the Challenger 2 tank.
Gross profit grew by 9% to £4.3m (2004: £3.9m). Margins were diluted by the
increased turnover from the defence contracts referred to above, and the overall
gross margin achieved for the period was 33% (2004: 36%).
The benefit of the action taken at the end of last year to consolidate the
Group's operations on to two sites has been seen in the first half. In
addition, in the first quarter of 2005, management implemented a number of
operational improvements at its Gateshead site, which resulted in a reduction in
the headcount. The associated redundancy costs of £76,000 have been borne within
administrative expenses. Total administrative expenses, before exceptional
items, were £4.0m, 19% lower than last year (2004: £5.0m).
The operating profit for the period was £272,000, compared with an operating
loss of £1,340,000 incurred in 2004. After net finance charges of £340,000
(2004: £88,000 credit) the loss before tax for the period was £68,000 (2004:
£1,156,000 loss). The loss per share was 0.01 pence (2004: 1.77 pence loss).
Operations
The Group has continued to make progress against its objectives. Since the last
year end the Group has strengthened its position within its public land
transportation market, winning a number of significant orders totalling £5.6m.
These are with Alstom for West Coast Main Line operated by Virgin Trains, First
Group for ScotRail and Wabtec for London Eastern Railways. These contracts will
utilise the new technology that has been developed to increase the functionality
of the Group's existing product range for on-board CCTV systems for use on
trains. While there are some deliveries in 2005, the majority of the sales from
these contracts will fall in 2006.
Following the purchase of the business of PI Vision Limited and PI Vision Inc
(together 'PI Vision') on 8 August, the Group has started to realise the benefit
of the synergies from this acquisition. Further details of the business
acquired and consideration payable are set out below under post balance sheet
events. The UK operations of PI Vision have been relocated to our Sunbury site
and the Group now has a US base from which it can begin to exploit the
significant opportunities that the North American market offers. The
acquisition will enable us to cross-sell our Advantage suite of software into
new markets and into the many valuable reference sites that PI Vision
established. Order intake since acquisition has been encouraging and includes a
$1.4m order to supply hardware and UVMSTM software to a new casino in the US.
During the first half the Group made it's first sales of the COFDM version of
its Swift rapid deployment camera that was launched in the final quarter of
2004. In addition, the first significant orders have been received for some of
the new Provida product that we have introduced. We are continuing to develop
the market leading Provida range and will be commencing sales of the Provida
500, which utilises our PolicePilot technology for speed detection, in early
2006.
We have successfully completed an order for our new traffic management product
for use in vehicle surveillance, journey-time analysis and fully automated bus
lane enforcement and are now seeking other opportunities with customers to
exploit this software. We have also increased the level of software maintenance
contracts albeit at a slower rate than we had originally anticipated.
Balance sheet
The Group's balance sheet was significantly strengthened following the raising
of additional net equity of £5.1m, approved by shareholders at an Extraordinary
General Meeting held on 24 January 2005. At that time the Group also entered
into a new £5m five-year term loan and a £1m working capital facility with its
bankers, Bank of Scotland. Consequently, while Group continues to have net
liabilities, the profile of the Group's balance sheet and debt has significantly
improved. Net current assets at 30 June 2005 were £1.2m compared with net
current liabilities of £7.9m at 31 December 2004. Borrowings at 30 June 2005
were £3.1m (Dec 2004: £7.4m) net of cash balances held of £2.0m (Dec 2004:
£0.2m).
Cash flow
The operating cash outflow for the period was £432,000 (2004: £3,338,000
outflow), which included an outflow of £341,000 for the balance of costs
relating to the fundamental reorganisation undertaken in 2004.
The net inflow from financing activities was £9.0m, which included the net
proceeds from the equity fund raising and the replacement of overdraft
borrowings with a term loan.
Post balance sheet events
As reported above, on 8 August 2005 the Group acquired the business and certain
assets of PI Vision Limited and PI Vision Inc for a maximum total consideration
of £1.64 million. We have paid an initial cash consideration of £470,000. A
further cash amount of up to £170,000 will be paid, conditional upon securing
certain orders in 2005. In 2006 an amount is payable equal to the sum by which
PI Vision's Gross Profit exceeds £1.6 million in the twelve months following its
acquisition, and depending upon the amount payable in 2006, a further
conditional sum may be payable in 2007. The payments to be made in 2006 and
2007 cannot exceed £1 million in aggregate and are payable, at the vendors'
option, either all in cash or cash and up to 50% in new Petards shares at the
prevailing market price.
PI Vision's Universal Video Management System ('UVMSTM') was introduced in 2004,
and is a leading software in scaleable networked digital video recording
systems. It features advanced IP and analogue camera recording, distributed
architecture, camera mapping and image replay functions which form the backbone
to new or existing CCTV systems. UVMSTM will integrate closely with Petards'
Advantage.Net command and control software for complex CCTV installations and
provide extended functionality. It also provides the opportunity for Petards to
access the rapidly growing network video recording market. We believe that the
UVMSTM product has the potential to become a leading industry platform. The
acquisition confirms the Board's stated intention of reinforcing our
technologies in core areas.
Dividends
The Board is not recommending the payment of a dividend.
Outlook
The markets in which the Group operates provide significant opportunities. The
recent terrorist events in London have further highlighted to government
agencies at home and abroad the critical role that advanced security and
surveillance systems can play in tackling such threats. The Group has made good
progress over recent months. However, it is taking longer than we expected to
overcome the effect of its past difficulties within some of our markets.
I reported in May that the performance of the Group in the second half would
depend upon our ability to convert opportunities into orders and then deliver
them before the year end. In the event, while we have been successful in
securing a number of orders and establishing our strong position in the markets
we serve, many are not deliverable before the year end. We therefore expect the
outcome for the year to be a considerable improvement over prior years, but to
fall short of market expectations. The Board is confident, however, that with
the current strong order book, the momentum of improvement in profitability will
be maintained in 2006.
The Board continues to seek to enhance shareholder value. The Directors, with
our advisors, are undertaking a strategic review of all of the options available
to enable the Group to maximise its many strengths.
Tim Wightman
6 December 2005
Group Summary Profit and Loss Account
Restated
(see note 6)
Unaudited Unaudited Audited
6 months ended 30 6 months ended 30 Year ended 31
June 2005 June 2004 December 2004
Note £'000 £'000 £'000
Turnover
Continuing operations 13,003 10,593 22,162
Discontinued operations - 443 443
13,003 11,036 22,605
Cost of sales 2 (8,723) (7,111) (16,153)
Gross profit 4,280 3,925 6,452
Administrative expenses (3,996) (4,962) (9,350)
Exceptional items - (289) (402)
Goodwill amortisation (12) (14) (25)
Total administrative expenses 2 (4,008) (5,265) (9,777)
Operating profit / (loss)
Continuing operations 2 272 (1,287) (3,272)
Discontinued operations 2 - (53) (53)
Total operating profit / (loss) 272 (1,340) (3,325)
Profit on disposal of discontinued - 702 702
operations
Costs of fundamental reorganisation - (606) (724)
Profit / (loss) on ordinary activities 272 (1,244) (3,347)
before interest
Net interest payable and similar charges (340) (206) (517)
Other interest receivable and similar - 294 294
income
Loss on ordinary activities before (68) (1,156) (3,570)
taxation
Taxation on loss on ordinary activities - - -
Loss for the period (68) (1,156) (3,570)
Loss per share - basic and diluted (pence) 4 (0.01) (1.77) (5.46)
Group Balance Sheet
Restated
(see note 6)
Unaudited Unaudited Audited
as at as at as at
30 June 2005 30 June 2004 31 December 2004
£'000 £'000 £'000
Fixed assets
Intangible assets 353 375 365
Tangible assets 961 795 969
1,314 1,170 1,334
Current assets
Stocks 2,372 4,483 3,539
Trade debtors 3,788 4,441 3,649
Other debtors 712 43 928
Cash at bank 2,019 1 249
8,891 8,968 8,365
Creditors: amounts falling due within one year
Bank overdraft and loans (1,000) (8,306) (7,593)
Other creditors (6,673) (5,888) (8,685)
Net current assets / (liabilities) 1,218 (5,226) (7,913)
Total assets less current liabilities 2,532 (4,056) (6,579)
Creditors: amounts falling due after more than one year (4,096) (66) (25)
Net liabilities (1,564) (4,122) (6,604)
Capital and reserves
Called up share capital 6,224 654 654
Share premium account 23,198 23,660 23,660
Profit and loss deficit (30,986) (28,436) (30,918)
Equity shareholders' deficit (1,564) (4,122) (6,604)
Group Cash Flow
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended 31
30 June 2005 30 June 2004 December 2004
£'000 £'000 £'000
Net cash outflow from operating activities (432) (3,338) (1,819)
Net cash (outflow)/inflow from returns on (212) 88 (223)
investments and servicing of finance
Taxation - - -
Net cash outflow from capital expenditure (184) (102) (444)
Net cash inflow from disposals - 658 835
Net cash outflow before financing (828) (2,694) (1,651)
Net cash inflow / (outflow) from financing:
Issue of equity shares net of expenses 5,108 - -
Net receipts from loans 3,820 - -
Net increase / (decrease) in finance leases 44 (42) (114)
Increase / (decrease) in cash in the period 8,144 (2,736) (1,765)
Notes
1. Non Statutory Accounts
The interim results which are unaudited, have been prepared in accordance with
applicable United Kingdom Accounting Standards using accounting policies
consistent with those set out in the accounts for the year ended 31 December
2004.
These statements do not constitute financial statements within the meaning of
section 240 of the Companies Act 1985. These statements have not been audited.
No financial statements will be filed for the six months ended 30 June 2005.
The financial information for the year ended 31 December 2004 has been extracted
from the revised statutory accounts for that period, which are being filed with
the Registrar of Companies. The auditors' report on those accounts was
unqualified and did not contain any statement under section 237(2) or (3) of the
Companies Act 1985.
2. Group Summary Profit and Loss Account
All operations are continuing as at 30 June 2005. At 30 June 2004 and 31
December 2004 the analysis of continuing and discontinued activities was as
follows:
Unaudited Audited
6 months ended 30 June 2004 Year ended 31 Dec 2004
Cont'ing Discont'd Cont'ing Discont'd
£'000 £'000 £'000
Turnover 10,593 443 22,162 443
Cost of sales (6,793) (318) (15,835) (318)
_______ ______ ______ _______
Gross profit 3,800 125 6,327 125
Total administrative expenses (5,087) (178) (9,599) (178)
_______ ______ ______ _______
Operating loss (1,287) (53) (3,272) (53)
3. Taxation
No provision for taxation has been made in the profit and loss account for the
six months to 30 June 2005. No provision was required in the six months to 30
June 2004.
4. Loss per share
The calculation of the basic loss per share is based on the loss for the period
on ordinary activities after taxation of £68,000 (2004: loss £1,156,000) divided
by the weighted average number of ordinary 1p shares of 540,299,162 (2004:
65,420,479).
5. Recognised gains and losses
There were no recognised gains or losses in the period other than the loss for
the six months to 30 June 2005. Other recognised gains and losses in prior
periods related to currency translation on foreign current net investments
amounting to a gain of £48,000 in the six months to 30 June 2004, and a loss of
£21,000 in the year to 31 December 2004.
6. Prior period adjustment
The prior period adjustment relates to fundamental errors arising as a result of
a breakdown in accounting controls at one of the company's subsidiary
undertakings, Petards Joyce-Loebl Limited. Those errors concerned the
accounting for costs incurred on long-term contracts, and the recording of work
in progress and advance payments from customers over a number of years.
The June 2004 comparative figures have also been restated to reflect a
reclassification of a non-operating exceptional item for that period, which
related to the costs of the fundamental reorganisation of the business.
The prior period adjustment and reclassification of the non operating
exceptional item have the following impact on the profit and loss account for
the 6 months ended 30 June 2004:
As previously
reported Prior period As restated
adjustment
£'000 £'000 £'000
Turnover 10,985 51 11,036
Cost of sales (6,848) (263) (7,111)
Gross profit 4,137 (212) 3,925
Exceptional items (895) 606 (289)
Other administrative expenses (4,976) - (4,976)
Operating loss (1,734) 394 (1,340)
Profit on disposal of discontinued operations 702 - 702
Costs of fundamental reorganisation - (606) (606)
Net interest receivable 88 - 88
Loss before taxation (944) (212) (1,156)
The prior period adjustment impacts the following 2004 balance sheet captions:
As Prior
previously period
reported adjustment As restated
£'000 £'000 £'000
Stocks 6,780 (2,297) 4,483
Debtors 4,796 (312) 4,484
Creditors due within one year (11,366) (2,828) (14,194)
Net current assets / (liabilities) 210 (5,437) (5,227)
7. Further copies
Copies of the interim statement will be sent to shareholders. Further copies
will be available from the Company's registered office at Petards House, 8
Windmill Business Village, Brooklands Close, Sunbury on Thames, Middlesex TW16
7DY for the next 14 days.
Audit Committee Report
The Audit Committee consists of the Non-Executive Deputy Chairman, Mr Ian
Taylor; the Non-Executive Chairman, Mr Tim Wightman; and the Non-Executive
Director, Mr Tim Sulivan. It reviews the Group's financial controls, accounting
policies and financial reporting.
The Audit Committee has reviewed the unaudited interim financial statements and
is satisfied that they have been prepared using accounting policies consistent
with those adopted by Petards Group plc in its financial statements for the year
ended 31 December 2004. The Committee in the course of its review has not
become aware of any material modifications that should be made to the interim
financial statements as presented.
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