Interim Results

TG21 Plc 21 August 2006 Embargoed Release: 7.00 hrs 21 August 2006 TG21 plc Interim Results for the six month period ended 30 June 2006 TG21, the niche provider of business solutions to the automotive, public transport, cellular and insurance markets, today announces unaudited interim figures for the six months to 30 June 2006. Operational Highlights •21st Century new products to be trialed with Arriva UK Bus •In July the Company acquired an interest in a second public transport CCTV business •Legacy distribution business achieved increased sales but at low margins •Services business hit by delays in Pay As You Drive projects Financial Highlights •Group turnover up 7% to £17.4m (H1 2005: £16.2m) •Group profit before tax* of £320,000 •Basic earnings per share* of 0.37p •Cash flow from operations remains strong despite disappointing trading results *pre-amortisation of intangibles Commenting on the results, Peter Ward, Chairman of TG21, said: 'After a robust set of results for 2005, the performance of the Group in the first half of the current year has been disappointing. Our aim is to harvest the cash generated by our legacy businesses to allow us to move into growth areas leveraging our core competencies. Our investment in the public transport monitoring systems market via 21st Century and CCL underlines our commitment to this strategy. The Board remains convinced that the future growth of the Company lies in these markets. We will continue to work hard to attract new customers and develop new products which allow public transport companies to monitor and maintain their fleets. ' For Further Information: TG21 plc Wilson Jennings 020 8710 4000 Finance Director Hogarth Partnership Barnaby Fry/ 020 7357 9477 Sarah Richardson TG21 plc Chairman's statement - Interims 2006 TG21, the niche provider of business solutions to the automotive, public transport, cellular and insurance markets, today announces unaudited interim figures for the six months to 30 June 2006. For the 12 months to 31 December 2005, our public transport CCTV business contributed £1.1m to Group operating profit before amortisation. For the first six months of this year its contribution has been satisfactory and has compensated to some extent for the decline in our maturing legacy businesses. We are, however, hoping for more from this investment in the medium and long term and have significant levels of pipeline business awaiting approval. We believe this division to be a key part of the future growth of TG21 plc. We have achieved increased sales in our Distribution division compared to the same period last year and within our Services Division turnover from hands-free installations has been maintained at around last year's levels. However, the majority of Distribution sales came from very low margin satellite navigation systems. We have also seen a continued decline in insurance replacement combined with delays experienced in the revenue stream from Pay As You Drive installations impacting significantly on our bottom line. Consequently we are taking steps to achieve overhead savings and examining further exit strategies from some sectors of the legacy business. Cash flow remains strong. Net debt stands at £3.3m which is down by £0.6m when compared to 30 June last year despite the fact that in the intervening period we have spent £2.7m to increase our holding in 21st Century to 75% at a net cash cost of £2.0m and £0.7m on capital expenditure including the refurbishment of our call centre. Public transport on-board monitoring systems Principal activities in this division are the supply of CCTV, black box and other monitoring systems for use on public transport vehicles. In August 2005 we increased our stake in 21st Century to 75% and have consolidated its results as a subsidiary from that date. 21st Century is the preferred supplier of on-board CCTV to Arriva UK Bus. Sales in the first half of 2006 at £1.5m compare to £2.1m for the same period last year. However we have significant pipeline business on hold awaiting final approval. To build upon its on-board CCTV business, 21st Century is developing new products aimed at enhancing revenue and reducing running costs for bus operators and Arriva UK Bus is shortly to commence trials of these products on 56 of its buses. In July this year we announced that we have made a loan of £0.4m to Cyberlyne Communications Limited ('CCL'). At the same time we were granted options to acquire the whole of the share capital of CCL. Like 21st Century, CCL supplies on-board CCTV for use on public transport vehicles and has 6,000 installed systems to date. CCL however has a wider customer base which includes First Group, Go-Ahead and Translink and has developed its own digital recorder which lies at the heart of the CCTV system. We believe that this investment has the potential to leverage our existing position in the market. Services The principal activities within Services are the replacement of stolen in-car entertainment and navigation systems for insurance company customers and the supply and installation of mobile 'phone hands-free kits for corporate fleets. Following the acquisition of 21st Century, the division now also undertakes installations of public transport monitoring systems. Turnover in this division was £0.8m (13%) down on the same period last year at £5.3m. In the second half of last year we exited a number of peripheral activities - telematics (Actra), camera and computer insurance replacement and vehicle inspection services - which contributed to the reduced sales. However, most of the decline in the first half of this year is attributable to the maturing audio replacement business. Installations of mobile 'phone hands-free kits have held up reasonably well compared to the first half of last year. We recognise that this market does not have an indefinite shelf life and so our focus has been to find new opportunities to leverage our strengths in engineering, distribution and call centre services. Our investment in public transport on-board monitoring services via 21st Century and now CCL is a significant step forward in this regard and we anticipate that installations of public transport monitoring systems will make an increasing contribution to Group profitability as income from our legacy businesses falls away. From the start of the year we also geared up our engineering capability and invested in technology in anticipation of new income streams from our insurance customers offering Pay As You Drive ('PAYD') schemes. However delays in these projects which are beyond our control mean that we are unlikely to see a return on our investment in the current year. Distribution Principal activities within Distribution consist of the distribution of in-car entertainment systems, satnav/communications equipment, speed camera alerts, audio leads and own brand automotive and motorcycle alarms to the retail trade. Overall the sales in this division increased by £0.5m (5%) from £10.1m to £10.6m at the half year. Datatool our motorcycle alarm and accessory brand accounted for 70% of this increase in turnover which is encouraging. However the remaining increase and almost half of total Distribution sales were attributable to sales of very low margin portable satellite navigation systems which have far outsold in-car entertainment systems and speed camera alerts. While the growth in portable satellite navigation is flattering to our top line it has not been able to mask the underlying decline in higher margin aftermarket in-car entertainment systems. We have also suffered from the impact of a 9 month delay in delivery by the manufacturer of the upgraded Inforad speed camera alert, for which we have UK distribution rights. Current trading and outlook After a robust set of results for 2005, the performance of the Group in the first half of the current year has been disappointing. We have flagged for some time, however, that our in-car entertainment and security businesses are operating in very mature and declining markets. Our aim is to harvest the cash generated by these legacy businesses or divest of them altogether to allow us to move into growth areas which leverage our core competencies. Our investment in the public transport monitoring systems market via 21st Century and CCL underlines our commitment to this strategy but it is clear that we still have a lot of hard work ahead of us to achieve the vision we have for the Group. Peter Ward Chairman Consolidated profit and loss account Unaudited six months Unaudited six ended 30 June 2006 Months ended Year ended 30 June 2005 31 Dec 2005 Restated Restated (see note 1) (see note 1) Before After amortisation Amortisation amortisation of of of intangibles intangibles intangibles £'000 £'000 £'000 £'000 £'000 Turnover 17,403 - 17,403 16,214 36,316 Cost of sales (11,105) - (11,105) (9,250) (21,409) ========= ========= ========= ========== =========== Gross profit 6,298 - 6,298 6,964 14,907 Other operating expenses (5,744) (288) (6,032) (5,993) (12,664) ========= ========= ========= ========== =========== Group operating profit 554 (288) 266 971 2,243 Share of operating profit/(loss) of associate - - - 144 (137) ========= ========= ========= ========== =========== Total operating profit 554 (288) 266 1,115 2,106 Interest payable and similar charges (234) - (234) (253) (500) ========= ========= ========= ========== =========== Profit on ordinary activities before taxation 320 (288) 32 862 1,606 Taxation - - - (66) (289) ========= ========= ========= ========== =========== Profit on ordinary activities after taxation 320 (288) 32 796 1,317 Minority interests (15) - (15) (36) (132) ========= ========= ========= ========== =========== Profit attributable to members of the parent company (note 2) 305 (288) 17 760 1,185 ========= ========= ========= ========== =========== Earnings per share - basic 0.37p (0.35)P 0.02p 0.93p 1.45p Earnings per share - diluted 0.37p (0.35)P 0.02p 0.93p 1.45p ========= ========= ========= Consolidated balance sheet Unaudited Unaudited 30 June 2006 30 June 2005 31 Dec 2005 Restated Restated (see note 1) (see note 1) £'000 £'000 £'000 Fixed Assets Intangible assets 4,562 592 4,850 Tangible assets 4,679 4,424 4,645 Investments - 2,658 - =========== ========= ========== 9,241 7,674 9,495 Current Assets Stocks 3,451 3,709 3,799 Debtors 4,667 5,558 6,771 Cash at bank and in hand 1,397 2,370 1,525 =========== ========= ========== 9,515 11,637 12,095 Creditors: amounts falling due within one year (6,408) (8,784) (8,865) =========== ========= ========== Net current assets 3,107 2,853 3,230 =========== ========= ========== Total assets less current liabilities 12,348 10,527 12,725 Creditors: amounts falling due after more than one year (2,979) (1,981) (3,468) =========== ========= ========== Net Assets 9,369 8,546 9,257 Capital and reserves Called-up share capital 8,169 8,169 8,169 Share premium account 3,387 12,110 12,110 Share capital to be issued 43 43 43 Revaluation reserve 1,378 1,392 1,378 Profit and loss account (3,845) (13,204) (12,665) =========== ========= ========== Total equity shareholders' funds (note 2) 9,132 8,510 9,035 Minority interests 237 36 222 9,369 8,546 9,257 =========== ========= ========== Consolidated cash flow statement Unaudited Unaudited six six months ended months ended Year ended 30 June 2006 30 June 2005 31 Decr 2005 £'000 £'000 £'000 Net cash inflow from operating activities (note 3) 959 1,112 4,092 ========= ========= ========== Returns on investments and servicing of finance Interest payable and similar charges (223) (210) (503) Taxation UK Corporation tax paid - - (151) Capital expenditure and financial investment Purchase of tangible fixed (275) (259) (699) assets ========= ========= ========== (275) (259) (699) Acquisitions Purchase of investment in associate (805) - Purchase of investment in subsidiary - - (3,133) Cash acquired - - 319 - (805) (2,814) ========= ========= ========== Cash inflow/(outflow) before financing 461 (162) (75) Financing Net movement in long term borrowings (500) 1,000 2,500 Repayment of principal under finance leases - (2) (2) ========= ========= ========== (500) 998 2,498 ========= ========= ========== (Decrease)/increase in cash in period (note 4) (39) 836 2,423 ========= ========= ========== Notes 1. Basis of preparation. The interim statement has been prepared on the basis of the accounting policies set out in the Group's statutory accounts to 31 December 2005 with the exception of share based payments which are now accounted for under FRS 20. Applying the Black-Scholes valuation model gives a fair value charge for these share options which in accordance with FRS 20 has been added to other operating expenses in each period as follows: Unaudited six Unaudited six months ended months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Share based remuneration charge (FRS 20) 80 50 150 ============ =========== ========== The financial information contained in the interim report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The interim report has neither been audited nor reviewed by the Group's auditors. A copy of the Group's 2005 statutory accounts has been filed with the Registrar of Companies: the Auditors' opinion on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985. The interim statement for the six months ended 30 June 2006 was approved by the directors on 21 August 2006. 2. Reconciliation of movements in shareholders funds Unaudited six Unaudited six months ended Months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (Restated) (Restated) £'000 £'000 £'000 Net profit for the period 17 760 1,185 FRS20 current year adjustment (note 1) 80 - - Share premium decrease* (8,723) - - Retained profit and loss reserve increase* 8,723 - - ========== ========= ========= Net movement in shareholders' funds 97 760 1,185 ========== ========= ========= Opening shareholders' funds as previously reported 9,035 7,700 7,700 Prior year adjustments (note 1) - 50 150 ========== ========= ========= Opening shareholders' funds as restated 9,035 7,750 7,850 ========== ========= ========= Closing shareholders' funds 9,132 8,510 9,035 ========== ========= ========= *At the Annual General Meeting held on 23 May 2006 a special resolution was passed to transfer £8,723,000 standing on the credit of the company's share premium account to distributable reserves. Following the AGM an application to the High Court was made and this completed on 28 June 2006. 3. Reconciliation of operating profit to net cash flow from operating activities Unaudited six Unaudited six months ended Months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Operating profit 266 971 2,243 Depreciation of tangible fixed assets 241 223 482 FRS20 adjustment (note 1) 80 50 150 Amortisation of intangible fixed assets 288 60 312 Decrease/(increase) in working capital balances 84 (192) 905 ========== ========== ========= Net cash inflow from operating activities 959 1,112 4,092 ========== ========== ========= 4. Reconciliation of net cash flow to movement in net debt Unaudited six Unaudited six months ended Months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 (Decrease)/increase in cash in the period (39) 836 2,423 Cash outflow/(inflow) from decrease/(increase) in net debt 500 (998) (2,498) ========== ========== ========= Changes in net debt resulting from cash flows 461 (162) (75) Other (11) (43) 7 ========== ========== ========= Movement in net debt in the period 450 (205) (68) Net debt at start of period (3,793) (3,725) (3,725) ========== ========== ========= Net debt at end of period (3,343) (3,930) (3,793) ========== ========== ========= Notes to editors About TG21 TG21 plc is a niche provider of business solutions to the automotive, public transport, cellular and insurance markets. It operates via 3 core divisions: Public Transport On-board Monitoring Systems, Services and Distribution. TG21 holds a 75% stake in 21st Century, a leading provider of CCTV and black box recording systems to the UK public transport sector. This black box technology, pioneered by the aviation industry, offers features above and beyond standard CCTV. 21st Century is the preferred supplier to Arriva UK Bus. In the Services division, TG21 provides Insurance Services such as claims handling and fulfillment, related to theft of in-car entertainment systems. TG21 provides a professional call centre and engineer response. Major customers include Royal Bank of Scotland and Norwich Union. TG21 also provides Technical Services, which include mobile vehicle installation of hands-free mobile phone kits for UTL who manage the installation logistics for Vodafone. TG21's Distribution division focuses on the distribution of automotive and motorcycle products to the UK specialist aftermarket, to include security, speed-camera warning, audio, navigation and multi-media systems. TG21 employs around 250 staff with offices in Mitcham, Tamworth, Blackburn and Runcorn. This information is provided by RNS The company news service from the London Stock Exchange

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