Final Results

RNS Number : 4158P

TG21 Plc

25 March 2009

 

25 March 2009

TG21 plc ('TG21', 'the company' or 'the group')

Preliminary results for the year ended 31 December 2008

TG21 today announces its preliminary results for the year ended 31 December 2008. Over the last few years the company has moved successfully to reposition itself from being a distributor of in-car entertainment and security systems to become a vehicle installation service provider with its 75% subsidiary, 21^st Century, supplying public transport CCTV and other monitoring systems. 21^st Century has developed 'EcoManager' which is aimed at saving fuel and improving safety for bus operators by monitoring driver behaviour. 

Financial Highlights

• Record sales from Public Transport Monitoring Systems up 54% to £7.7m (2007: £5.0m)

• Net debt reduced to nil at the year end (2007: £0.6m)

• Gross profit increased from 55% to 60%

• Operating profit from continuing operations* at £0.6m is ahead of expectations for the year (2007: £1.4m) 

• Excellent final quarter results for 2008 continue into first quarter of 2009

Operational Highlights

• First sales of innovative EcoManager system to public transport operator achieved in the year
  
  
• Pipeline orders for a further 2,000 EcoManager systems in the current year
  
  
• Healthy pipeline of products include live on-bus CCTV currently being trialled by Transport for London
  
  
• Option agreement signed to dispose of freehold premises for £2.7m

*Before exceptional impairment loss (£0.7m), restructuring costs (£0.2m) and provision against loan to associate company (£0.4m).

Commenting on the results, Peter Ward, Chairman of TG21, said:

'2008 was a year of transformation for TG21plc, having disposed of our legacy distribution businesses at the end of 2007. During the year we successfully launched innovative new products to the public transport sector and whilst we had anticipated that the 2008 result, before exceptional items, would be closer to breakeven, we are delighted to report better than expected results. In the final part of the year we achieved record sales within our Public Transport Monitoring Systems division, which benefited from the first revenue generated by our new EcoManager system.   

The group has historically been highly geared but, for the first time in over 10 years, we have achieved a net credit position with the bank and coupled with results in the first quarter of the year currently exceeding our expectations we are looking forward to 2009 with a position of strength and optimism.'

A copy of this preliminary results announcement is available on the company's website: www.tg21plc.com

For Further Information:

TG21 plc	Wilson Jennings, Finance Director	020 8710 4000
Hogarth Partnership Limited	Barnaby Fry	020 7357 9477
	Vicky Watkins
Daniel Stewart & Co plc (Nomad)	Graham Webster	020 7776 6550

Notes to editors

Launched in 1993, the company began as Toad plc and was focused on the distribution of in-car entertainment systems and vehicle security products.  Under the stewardship of Chairman Peter Ward, former Chairman and CEO of Rolls Royce Motors and Cunard Line, who joined the board at the end of 2001, TG21's strategy has been to reposition itself away from its legacy businesses into markets with better growth potential while leveraging its core strengths - nationwide field force of vehicle electrical engineers, call centre and distribution facilities. 

In line with this strategy, in 2005 the company took a controlling stake in 21^st Century Crime Prevention Services Ltd ('21^st Century'), the preferred supplier of on-board CCTV systems for Arriva UK Bus. 21^st Century has pioneered the use of WiFi with on board CCTV systems and was the first company to successfully launch automatic video downloads and a bus CCTV monitoring system (Heartbeat^TM). In addition to Arriva UK Bus, clients of 21^st Century include Go-Ahead, Arriva Scandinavia and Leicester City Council.

Headquartered in Mitcham, the group also has an office in Blackburn and employs around 100 staff.

Trading results

I am pleased to report that group operating profit from continuing activities at £0.6m (before exceptional impairment loss, reorganisation costs and provision against the loan due from the associate) is ahead of market expectations. As a result of tight working capital management and proceeds from disposals made in the prior year, as at 31 December 2008 we had cash funds in excess of our bank borrowings so that for the first time in over 10 years we are able to report zero net debt at the year end (2007: £0.6m).

The acquisition of our investment in 21st Century CPS Ltd ('21st Century') in 2004/05, which now operates under our Public Transport Monitoring Systems ('PTMS') division marked the start of the implementation of our plan to reposition the group into markets with growth potential. A clear watershed in this strategy was the disposal of a number of our legacy businesses at the end of 2007.

These disposals meant that 2008 was always likely to be a challenging year as they would inevitably result in a reduction in total group sales and profitability in the short term.  However, we saw the longer term benefits of reducing our borrowings and generating cash to invest in growth opportunities. Indeed, the disposal of our legacy car audio and security distribution businesses proved very timely as this market sector was severely exposed to the recessionary conditions which have impacted from the second half of 2008.  

I am delighted to report that our Public Transport Monitoring Systems business enjoyed a good year - particularly in the second half. As a result of the successful launch of 21st Century's EcoManager system aimed at reducing fuel costs and improving safety by monitoring bus driver behaviour, our PTMS division achieved its highest sales month in November 2008 at over £1m. We are also very encouraged by trading to date in the current year. 

In light of the success achieved by 21st Century we believe that our resources would be better focused on this subsidiary and so we have decided not to take up our option to acquire Cyberlyne Communications Limited ('CCL'). As stated in the December 2008 trading update, CCL was unable to repay the loan from TG21 of £430,000 which became due on 31 December 2008. We are continuing our discussions with the management of CCL to try to negotiate staged repayment terms for this loan but, to be prudent, we have made a full provision for this amount in our consolidated income statement for the year.  

In our interim results announcement I pointed to the continued decline in our mature audio insurance replacement business and our exit from the mobile 'phone installation contract with Unipart at the end of last year. Both have impacted on non PTMS work carried out by our Vehicle Installation Services division.  Our interim results also noted that the anticipated growth in black-box installations for the motor insurance market has been disappointing. In response to this we have acted quickly and decisively to scale back the infrastructure supporting our non PTMS related activities, resulting in an exceptional restructuring charge of £0.2m in the year.

Financial review

Group - continuing operations	2008 £m	2007 £m
Revenue	12.2	15.5
Gross profit	7.4	8.4
Gross profit percentage	60%	55%
Net operating expenses	(6.8)	(7.0)
Total operating profit from continuing operations before impairment loss and restructuring costs	0.6	1.4
Impairment loss	(0.7)	-
Restructuring costs	(0.2)	-
Operating loss from continuing operations	(0.3)	1.4
Provision for CCL loan	(0.4)	-
Finance costs	(0.1)	(0.3)
(Loss)/profit before taxation	(0.8)	1.1
Taxation	0.3	(0.1)
Loss for the period from discontinued operations	-	(0.4)
(Loss)/profit from continuing and discontinued operations	(0.5)	0.6
Minority interest	(0.3)	(0.1)
Net (loss)/profit attributable to members of the parent company	(0.8)	0.5
Earnings per share	Pence	Pence
- Continuing operations	(0.96)p	1.05p
- Continuing and discontinued operations	(0.94)p	0.62p
	£m	£m
Net debt	-	0.6

Analysis of revenue from continuing operations	2008 £m	2007 £m
Public transport monitoring systems	7.7	5.0
Vehicle installation services	2.8	8.6
Distribution	1.7	1.9
Total	12.2	15.5

Operational review

Public transport monitoring systems

Principal activities in this division are the supply of CCTV, black-box and other monitoring systems for use on public transport vehicles.

Sales in this division were up 54% (£2.7m) from £5.0m to £7.7m.

During the year, 21st Century supplied over 1,000 on-bus CCTV systems to Arriva UK Bus. Following a successful trial, its new EcoManager product has also contributed significantly to the increase in revenue for the PTMS division in the latter part of the year with over 600 systems sold to Arriva UK Bus. The EcoManager system, which incorporates a passenger counting facility, is aimed at reducing fuel costs, improving safety and enhancing revenues for bus operators by monitoring driving styles against fuel consumption.

We have pipeline orders for 2,000 of these systems in the current year.  

The remaining increase in sales achieved in 2008 is attributable to CCTV business awarded to us by Go-Ahead group, Arriva Europe and several small bus operators. We hope to build further on these successes and we are hoping to commence trials of the EcoManager system with Arriva in mainland Europe in the current year.

In addition to EcoManager and passenger counting we have a number of exciting pipeline products under development.  In October 2008, in conjunction with Transport for London we launched a trial of an on-bus CCTV system giving a live picture feed back to a central control centre monitored by TfL and the Metropolitan Police.

Vehicle installation services 

The principal activities within this division are:

(i)        installation of public transport monitoring systems for 21st Century;

(ii)       replacement and installation of in-car entertainment and navigation systems for 
           insurance company customers; 

(iii)      installation services for the embryonic black-box motor insurance market.

The original core activity of this division was the provision of replacement units for stolen in-car entertainment systems to the insurance market. We have flagged the decline in this market for a number of years which has resulted from improvements in vehicle security and the fact that in newer vehicles, in-car entertainment systems are now integrated into the dash board.  Until the end of 2007 the division also generated significant income from the installation of hands-free mobile 'phone kits.  The main activity of this division now, however, is in support of the activities of 21st Century and so its contribution to the group is largely measured by the results of the PTMS division.

Third party sales - insurance and hands-free kit installations - are down by nearly 70% (£5.8m) compared to 2007. At the end of 2007 our mobile 'phone hands-free installation contract with Unipart ended. This contract had contributed £4.2m to sales in 2007. The remainder of the reduction in turnover in this division is attributable to the maturing audio insurance replacement business. We had hoped that this division would receive a boost from sales of black-box related motor insurance products; however, while sales have been steady, the growth in this sector has been disappointing. During the year we reduced headcount within the division and, while we remain alert to other vehicle installation opportunities, our focus will continue to be installations of public transport monitoring systems.

Distribution

The principal activity of this division is the distribution of motorcycle alarms and accessories through our Datatool business.  While Datatool's sales at £1.7m (2007: £1.9m) were slightly down on last year, the Thatcham approved 'Datatool S4' bike alarm is now the UK's number one selling brand and the division continues to make a positive contribution to group results.

Net operating expenses

Net operating expenses for continuing activities as reported above were £6.8m compared to £7.0m in 2007. However the net operating expenses reported in 2007 under discontinued activities included £1.8m of 'shared' overheads which could not be attributed directly to either continuing or discontinued operations.  These overheads were split between the activities pro-rata to sales and included depreciation, warehouse costs and the support departments such as IT, Finance, Administration and Personnel along with the costs associated with being a public company.  Total overheads for continuing activities in 2007, including an add back of the shared overheads previously allocated to discontinued operations were £8.8m. In 2008, we achieved net savings in overheads directly attributable to continuing activities of £1m and a further £1m reduction was achieved in operating expenses previously shared with discontinued operations. Consequently net operating expenses for continuing operations, after adjustment for last year's shared overheads, were reduced by £2m to £6.8m in the year.

Land and buildings - impairment loss

In October 2008, we announced an option agreement to dispose of the group's freehold premises in Mitcham, Surrey for £2.7m. The carrying value of these premises in our balance sheet as at 31 December 2007, which was based upon a revaluation carried out in December 2004, was £3.5m.  After the normal depreciation charge for the year ended 31 December 2008 this carrying value would have reduced to £3.4m. 

However, subsequent to the disposal of a number of our distribution businesses at the end of 2007 our operations in Mitcham have contracted, so that the Mitcham property is currently under-utilised. In the opinion of the directors therefore, as at 31 December 2008, the value in use of this property had reduced. Consequently, the consolidated income statement for 2008 includes a provision of £0.7m for the write down in the carrying value of the freehold property to its estimated recoverable amount of £2.7m. There is also a credit of £0.3m in the consolidated income statement in respect of a reversal of the deferred tax provision required on the revaluation surplus.  In arriving at this recoverable amount we have assumed that the sale of the property under the option agreement will proceed but this is dependent on the purchaser obtaining planning permission for the redevelopment of the site. We understand that their planning application is progressing but is still at an early stage.

Outlook

We are looking forward to building on the considerable success achieved by our Public Transport Monitoring Systems division in the year. The final quarter of 2008 was particularly encouraging with record sales achieved within PTMS and I am particularly pleased to report that the momentum from this has continued into the first quarter of 2009.

Peter Ward

Chairman

25 March 2009

Consolidated income statement for the year ended  31 December 2008	Notes	2008 £'000	2007 £'000
Continuing operations
Revenue	2	12,217	15,455
Cost of sales		(4,864)	(7,020)
Gross profit		7,353	8,435
Other operating income		103	108
Administrative expenses - property impairment		(720)	-
Administrative expenses - restructuring costs		(144)	(46)
Administrative expenses - other		(6,898)	(7,137)
Administrative expenses - total		(7,762)	(7,183)
Operating (loss)/profit		(306)	1,360
Provision for associate loan		(430)	-
Finance costs		(70)	(271)
(Loss)/profit before taxation		(806)	1,089
Taxation	3	320	(100)
(Loss)/profit for the period from continuing operations		(486)	989
Discontinued operations
Profit/(loss) for the period from discontinued operations		22	(353)
(Loss)/profit for the period		(464)	636
Attributable to:
Equity holders of the parent		(764)	503
Minority interest		300	133
		(464)	636
Earnings per share
From continuing operations
Basic and diluted	4	(0.96)p	1.05p
From continuing and discontinued operations
Basic and diluted	4	(0.94)p	0.62p

Consolidated statement of recognised income and expense for the year ended 31 December 2008		2008 £'000	2007 £'000
(Loss)/profit for the year and total recognised income and expense for the year		(464)	636
		(464)	636
Group		(764)	503
Minority interest		300	133
		(464)	636

Consolidated balance sheet  as at 31 December 2008	Notes	2008 £'000	2007 £'000
Assets
Non-current assets
Goodwill		4,850	4,850
Other intangible assets		388	511
Property, plant and equipment	5	2,922	3,837
Deferred tax asset		212	226
		8,372	9,424
Current assets
Inventories		1,501	1,291
Trade and other receivables		2,727	4,566
Cash and cash equivalents		2,172	2,965
		6,400	8,822
Total assets		14,772	18,246
Liabilities
Current liabilities
Trade and other payables		(2,748)	(3,682)
Current tax liabilities		-	(70)
Bank loans and overdrafts		(1,970)	(2,444)
Provisions		(72)	(72)
		(4,790)	(6,268)
Net current assets		1,610	2,554
Non-current liabilities
Bank loans		-	(1,150)
Provisions		(275)	(337)
Deferred tax liabilities		(362)	(626)
		(637)	(2,113)
Total liabilities		(5,427)	(8,381)
Net assets		9,345	9,865
		2008 £'000	2007 £'000
Shareholders' equity
Share capital		8,169	8,169
Share premium account		3,387	3,387
Special reserve		1,206	1,206
Other reserve		43	43
Retained earnings		(3,778)	(3,091)
Equity attributable to equity holders of the parent		9,027	9,714
Minority interests		318	151
Total equity		9,345	9,865

Consolidated cash flow statement for the year ended 31 December 2008	Notes	2008 £'000	2007 £'000
Net cash generated from operating activities	6	693	1,373

Cash flow from investing activities
Disposal of discontinued operations		395	1,547
Purchases of property, plant and equipment		(48)	(78)
Purchases of intangible fixed assets		(76)	(158)
Net cash generated from investing activities		271	1,311

Cash flow from financing activities
Repayment of borrowings		(1,150)	(1,350)
(Decrease)/increase in bank overdrafts		(474)	912
Dividend paid to minority interest		(133)	(26)
Net cash used in financing activities		(1,757)	(464)

Net (decrease)/increase in cash and cash equivalents

(793)

2,220

Cash and cash equivalents at beginning of year

2,965

745

Cash and cash equivalents at end of year

2,172

2,965

Other than the disposal proceeds disclosed above there was no cash flow from investing activities relating to the discontinued operations. Cash flows from operating and financing activities attributable to the discontinued operations cannot be meaningfully distinguished from those relating to continuing operations. 

Notes to the preliminary results announcement for the year ended 31 December 2008

1.  Basis of preparation 

This preliminary results announcement for the year ended 31 December 2008 is unaudited. 

While the financial information included in this preliminary results announcement has been computed in accordance with EU endorsed International Financial Reporting Standards (IFRSs) on a basis consistent with that adopted in the previous year, this announcement does not in itself contain sufficient information to comply with IFRSs.  

The financial information contained in this preliminary announcement does not constitute statutory accounts for the year ended 31 December 2008.  The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that period which have been delivered to the Registrar and included an audit report which was unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985.  The financial information for the year ended 31 December 2008 is derived from the statutory accounts for the period which include an audit report which is unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985 and will be delivered to the Registrar of Companies following the company's Annual General Meeting.

2. Segmental reporting

The analysis by business area is based upon the group's reporting structure.

2008 Continuing operations	Public transport monitoring systems	Vehicle installation services	Distribution	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Total revenue	7,733	7,046	1,697	-	16,476
Inter-segment sales	-	(4,259)	-	-	(4,259)
External revenue	7,733	2,787	1,697	-	12,217
Operating profit/(loss) before impairment loss, restructuring costs and provision for associate loan	1,636	(1,123)	45	-	558
Impairment of freehold property	-	-	-	(720)	(720)
Restructuring costs	(18)	(121)	(5)	-	(144)
Provision for associate loan	(430)	-	-	-	(430)
Operating profit/(loss)	1,188	(1,244)	40	(720)	(736)

2008 - Discontinued operations	Distribution
	£'000
Revenue	-
Operating profit arising from write back of provisions	122
Provision against deferred disposal proceeds	(100)
Operating profit	22

2. Segmental reporting (continued)

2007 Continuing operations	Public transport monitoring systems	Vehicle installation services	Distribution	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Total revenue	4,961	11,409	1,873	-	18,243
Inter-segment sales	(4)	(2,784)	-	-	(2,788)
External revenue	4,957	8,625	1,873	-	15,455
Operating profit before restructuring costs	545	782	79	-	1,406
Restructuring costs	-	(46)	-	-	(46)
Operating profit	545	736	79	-	1,360

2007 - Discontinued operations	Distribution
	£'000
Revenue	11,096
Operating loss before disposal costs and proceeds	(364)
Reorganisation and redundancy costs	(262)
Write down of inventories following disposals of businesses	(200)
Onerous lease provision	(409)
Operating loss before proceeds from disposals of businesses	(1,235)
Profit on sale of business	957
Operating loss after proceeds from disposals of businesses	(278)

3.    Taxation

Analysis of charge in year:

	2008 £'000	2007 £'000
Current tax
UK corporation tax on the profit for the year	-	20
UK corporation tax on profit of prior year	-	50
UK corporation tax overprovision in prior years	(70)	-
Total current tax (credit)/charge	(70)	70
Deferred tax (credit)/charge	(250)	30
Total tax (credit)/charge for the year	(320)	100

There was no tax payable on discontinued operations.

4. Earnings per ordinary share

Basic earnings per share ('EPS') is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.

For diluted earnings, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.  

	2008		2007
	Earnings £'000	Per share amount Pence	Earnings £'000	Per share amount Pence
From continuing and discontinued operations
Basic EPS
Earnings attributable to ordinary shareholders	(764)	(0.94)	503	0.62
Diluted EPS
Earnings	(764)	(0.94)	503	0.62
From continuing operations
Basic EPS
Earnings attributable to ordinary shareholders	(764)	(0.94)	503	0.62
Adjustment to exclude (profit)/loss from discontinued operations	(22)	(0.02)	353	0.43
Earnings from continuing operations	(786)	(0.96)	856	1.05
Diluted EPS
Earnings from continuing operations (as above)	(786)	(0.96)	856	1.05

Details of the weighted average number of ordinary shares used as the denominator in calculating the basic and diluted earnings per ordinary share is given below:

	2008 '000	2007 '000
Weighted average number of shares	81,689	81,689

5. Property, plant and equipment

2008 movements	Freehold land and buildings £'000	Plant and equipment   £'000	Total     £'000
Cost:
At 1 January 2008	3,786	2,556	6,342
Additions	-	48	48
At 31 December 2008	3,786	2,604	6,390
Depreciation:
At 1 January 2008	292	2,213	2,505
Charge for the year	74	169	243
Impairment	720	-	720
At 31 December 2008	1,086	2,382	3,468
Net book amounts:
At 31 December 2008	2,700	222	2,922
At 31 December 2007	3,494	343	3,837

6.    Reconciliation of (loss)/profit to net cash inflow from operating activities

	2008 £'000	2007 £'000
(Loss)/profit for the year	(464)	636
Adjustments for:
Finance costs	70	346
Income tax (credits)/expense	(320)	100
Gain on disposal of discontinued operations	-	(957)
Impairment of freehold property	720	-
Depreciation of property, plant and equipment	243	289
Amortisation of intangible fixed assets	199	148
Share based payment expense	77	106
(Decrease)/increase in provisions	(62)	409
Operating cash flows before movement in working capital	463	1,077
(Increase)/decrease in inventories	(210)	573
Decrease in receivables	1,444	686
Decrease in payables	(934)	(620)
Cash inflow from operations	763	1,716
Interest paid	(70)	(343)
Net cash inflow from operating activities	693	1,373

 

END

 

 

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