Interim Results
Petards Group PLC
29 September 2006
PETARDS GROUP PLC:
INTERIM RESULTS
Petards Group plc ('Petards'), the AIM quoted developer of advanced surveillance
systems, announces interim results for the six months to 30 June 2006, a period
during which it continues to implement its strategy to transform itself into a
focused Group capable of making sustainable profits and cash flows.
In his statement to shareholders, Tim Wightman, Chairman, said:
'From an operational perspective we have now completed the structural changes
necessary to implement the Board's longer term strategy that was embarked upon
over 18 months ago. That strategy was to put in place a structure that enabled
the Group to exploit the synergies that exist between its various businesses.
Those synergies arise from an overlap between the businesses and are a
combination of operational, technological and market factors.'
Financial Highlights
• Turnover of £10.4m (2005: £13.0m - inc. exceptional increase in defence
sales in H1 2005)
• Gross profit of £3.6m (2005: £4.3m)
• Operating loss before exceptional expenses from reorganisation of £179,000
(2005: £257,000 profit)
• Operating loss after exceptional expenses of £598,000 (2005: £257,000
profit)
• Loss before tax of £736,000 (2005: £83,000 loss)
• Loss per share of 0.12p (2005: 0.02p loss)
• Operating cash inflow of £345,000 (2005: £432,000 outflow)
• No dividend (2005: nil)
Other highlights
• Centralisation to Gateshead site expected to result in approximately £0.6m
savings in 2007 (with £0.4m exceptional costs charged in current period)
• Further exploitation of synergies between technologies used on different
platforms
• £1.8m contract to supply and install eyeTrainTM on 133 trains for Arriva
Trains Wales
• £0.9m repeat order to supply displays to Alstom for Belgian railways
• £2m countermeasures orders from UK MoD for the Royal Navy and Army Lynx
aircraft
• £0.25m countermeasures order from Bell Helicopters for the Norwegian Air
Force
• Growing market presence in the USA for Group technologies
• EIMC, acquired in March 2006, has performed well
• Appointment of Bill Conn as Group Chief Executive
Commenting on outlook, Tim Wightman, Chairman, said:
'The Board expects that profit before exceptional items for the year will show
an improvement over 2005 and is encouraged by the promising pipeline of orders
that should secure the Group's continued recovery in 2007 and beyond.'
Contacts:
Petards Group plc Parkgreen Communications Ltd
Tim Wightman, Chairman Paul McManus
Andy Wonnacott, Finance Director Tel: 020 7493 3716
Tel: 01932 788 288 Mob: 07980 541 893
CHAIRMAN'S STATEMENT
I am pleased to present my report on the Group's activities and results for the
six months to 30 June 2006.
Introduction
During the period to the date of this report the management has continued to
implement its strategy to transform the Group from a fragmented business with a
high cost base making significant losses, to a focussed Group capable of making
sustainable profits and cash flows.
Operations
From an operational perspective we have now completed the structural changes
necessary to implement the Board's longer term strategy that was embarked upon
over 18 months ago. That strategy was to put in place a structure that enabled
the Group to exploit the synergies that exist between its various businesses.
Those synergies arise from an overlap between the businesses and are a
combination of operational, technological and market factors.
Following the appointment of Bill Conn as Group Chief Executive and in
conjunction with the acquisition of EIMC, the Group's production, purchasing,
finance and administrative functions were centralised onto our Gateshead site.
This restructuring gave rise to an exceptional cost of £419,000 in the period
but will result in anticipated cost savings of approximately £600,000 in 2007.
The benefits for customers of combining all of our production onto our largest
site will be enhanced quality and an improvement in delivery schedules.
The synergies between the technologies used on our different platforms are also
being exploited further. By bringing together our engineering resources across
our product range we are benefiting from the sharing of experience gained in
similar applications across the Group. For example, our expertise in the design
and production of ruggedised equipment for the military is being applied to our
Provida in-car digital recording systems and our UVMSTM network video recording
software is being integrated with eyeTrainTM, our on-board digital CCTV system.
Our long history and respected position as a supplier within the defence
industry is starting to result in opportunities for our surveillance
technologies within that sector. In addition within the rail industry, our
ability to supply both on-board and land based surveillance solutions is proving
attractive to customers.
We continued to win significant contracts during the period. In the transport
sector, we secured the £1.8m contract to supply and install eyeTrainTM to 133
trains for Arriva Trains Wales and a repeat order worth £0.9m to supply
passenger information displays to Alstom for the Belgian railway. While demand
for countermeasure dispensing systems peaked at the time of the early stages of
the Iraqi conflict, during the period we received £2m of orders for these
systems from the UK MOD for the Royal Navy and Army Lynx Aircraft and a further
£0.25m from Bell Helicopters for the Norwegian Air Force. Customer interest in
UVMSTM is continuing to grow and the systems installed in the first half
included one for the new Ascot racecourse. In addition, prospects for UVMSTM
within our US customer base remain strong particularly within the casino
industry. We have been steadily growing our market presence in the USA for our
other technologies and have been developing partner and customer relationships
from which we believe benefits will accrue in 2007. At 30 June 2006 the order
book stood at over £14m.
Since its acquisition in March, EIMC has performed well and demand to date for
its range of infra-red cameras for use within ANPR (Automatic Number Plate
Recognition) systems has been strong.
Results
The trading performance in the first half year showed an improvement over the
second half of 2005, but was behind that reported for the first half of 2005.
On continuing operations, turnover for the six months to 30 June 2006 was £9.4m
(2005: £13.0m) while the turnover of EIMC which we acquired in March was £1m.
The reduction in turnover from continuing operations reflected an exceptional
increase in defence sales in the first half of 2005 following the military phase
of the war in Iraq. Those sales were not repeated in 2006. In addition, as I
reported in June 2006, software sales were significantly lower as compared with
the first half of 2005. Gross margins increased to 35% (2005: 33%) despite the
lower software sales which attract better margins.
The operating loss for the period, before exceptional expenses arising on the
reorganisation, was £179,000 (2005: £257,000 profit as restated). This is after
a charge of £19,000 (2005: £15,000) relating to the implementation of FRS 20
'Share based payments' which has been implemented for the first time and for
which comparative figures for prior periods have been restated. After the
exceptional expenses of £419,000 the Group made a loss for the financial period
of £736,000 (2005: £83,000 loss as restated) and the underlying loss per share
was 0.12p (2005: loss 0.02p).
Cash flow
The operating cash inflow for the period was £345,000 (2005: £432,000 outflow)
which is stated after outflows of £0.2m in respect of exceptional reorganisation
costs.
Net interest paid in the period amounted to £433,000 which included £295,000
paid in January in respect of 2005. Net cash outflows associated with the
acquisition of EIMC amounted to £187,000 which together with capital expenditure
of £144,000 resulted in a cash outflow before financing of £419,000.
Dividends
The Board is not recommending the payment of a dividend.
Outlook
While the first half year's operating result is behind that of last year, the
Board is confident that in the second half year the Group will be profitable.
We are anticipating significant deliveries to customers during the last quarter
and expect that profit before exceptional items for the year will show an
improvement over 2005. The Board is encouraged by the promising pipeline of
orders that should secure the Group's continued recovery in 2007 and beyond.
Tim Wightman
29 September 2006
Consolidated Profit and Loss Account
Unaudited Unaudited Audited
6 months Year to
to 30 June 31 December
6 months to 30 June 2006 2005 2005
(As (As
restated) restated)
Before Exceptional After
exceptional items exceptional
items (note 4) items
£'000 £'000 £'000 £'000 £'000
Note
Turnover
Continuing operations 9,429 - 9,429 13,003 21,839
Acquisitions 993 - 993 - -
10,422 - 10,422 13,003 21,839
Cost of sales (6,820) - (6,820) (8,723) (14,793)
Gross profit 3,602 - 3,602 4,280 7,046
Exceptional administrative expenses 4 - (419) (419) - -
Goodwill amortisation (28) - (28) (12) (31)
Other administrative expenses (3,753) - (3,753) (4,011) (6,992)
Total administrative expenses (3,781) (419) (4,200) (4,023) (7,023)
Operating (loss) / profit
Continuing operations (396) (404) (800) 257 23
Acquisitions 217 (15) 202 - -
Total operating (loss) /profit (179) (419) (598) 257 23
before interest and taxation
Interest payable (138) (340) (505)
Loss on ordinary activities before (736) (83) (482)
taxation
Taxation on loss on ordinary - - 115
activities
Loss for the financial period (736) (83) (367)
Loss per share - basic and diluted 6 (0.12p) (0.02p) (0.06p)
Consolidated Balance Sheet
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 2005 31 December 2005
2006 (As restated) (As restated)
Note £'000 £'000 £'000
Fixed assets
Intangible assets 1,056 353 783
Tangible assets 889 961 887
1,945 1,314 1,670
Current assets
Stocks 2,997 2,372 2,799
Debtors 4,628 4,500 4,662
Cash at bank 26 2,019 550
7,651 8,891 8,011
Creditors: amounts falling due within one year 8 (8,292) (7,673) (7,547)
Net current (liabilities) / assets (641) 1,218 464
Total assets less current liabilities 1,304 2,532 2,134
Creditors: amounts falling due after more than one
year
Bank loan and finance leases (3,651) (4,096) (3,964)
Net liabilities (2,347) (1,564) (1,830)
Capital and reserves
Called up share capital 6,367 6,224 6,224
Share premium account 23,255 23,198 23,198
Profit and loss deficit (31,969) (30,986) (31,252)
Equity shareholders' deficit (2,347) (1,564) (1,830)
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months to 30 6 months to 30 Year to 31 December
June 2006 June 2005 2005
£'000 £'000 £'000
Net cash inflow / (outflow) from operating 345 (432) (674)
activities
Net cash outflow from returns on investments and (433) (212) (185)
servicing of finance
Taxation - - -
Net cash outflow from capital expenditure (144) (184) (199)
Net cash outflow from acquisitions (187) - (562)
Net cash outflow before financing (419) (828) (1,620)
Net cash (outflow) / inflow from financing:
Issue of equity shares net of expenses - 5,108 5,108
Net (payments) / receipts from loans (222) 3,820 3,266
Net (decrease) / increase in finance leases (29) 44 (79)
(Decrease) / increase in cash in the period (670) 8,144 6,675
Reconciliation of Consolidated Movements in Shareholders' Funds
Unaudited Unaudited Audited
6 months to 30 6 months to 30 Year to 31 December
June 2006 June 2005 2005
£'000 £'000 £'000
Loss for the period as restated (736) (83) (367)
Credit in relation to share based payments 19 15 33
(note 2)
New share issues 200 5,570 5,570
Expenses of share issues - (462) (462)
Net (decrease) / increase in shareholders' (517) 5,040 4,774
funds
Opening shareholders' deficit (1,830) (6,604) (6,604)
Closing shareholders' deficit (2,347) (1,564) (1,830)
Notes
1. Non Statutory Accounts
The unaudited financial information for the six months to 30 June 2006 has 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 2005 except for the adoption of FRS 20 ('Share based
payments').
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 2006.
The financial information for the year ended 31 December 2005 has been derived
from the statutory accounts for that period, which have been 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. Prior year adjustment (FRS 20 'Share based payments')
The comparative figures for 2004 and 2005 have been restated for the
requirements of FRS 20 'Share based payments' 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 prior year
adjustments in 2004 and 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 period profit after interest and tax for the periods is set
out below:
2005 2005
H1 Full year
£'000 £'000
Loss after interest and tax as originally reported (68) (334)
Charge in respect of share based payments
- continuing operations (15) (33)
_______ _______
Loss after interest and taxation as restated (83) (367)
3. Acquisition
On 8 March 2006 the Company acquired the entire share capital of European
Innovation Manufacturing Centre Limited ('EIMC') for a maximum total
consideration of £1.8 million. An initial £225,000 was paid comprising of
£25,000 in cash and the balance in 14,285,714 new ordinary shares at 1.4p.
Further payments up to a total aggregate maximum of £1,500,000 will be made on a
performance-related basis for the ten months ending 31 December 2006 and the
year ending 31 December 2007. These further payments will be satisfied by
either the issue of loan notes or new Petards shares at the prevailing market
price. The vendors of EIMC may elect whether to opt for loan notes or new
Petards Shares for the first £133,500 of the further payment in respect of 2006
and the first £175,000 in respect of 2007. Petards have the option as to
whether the balance of any further payments is satisfied by way of loan notes or
new Petards shares.
4. Exceptional administrative expenses
The exceptional administrative expenses incurred relate to re-organisation costs
following the centralisation of the Group's production, purchasing, finance and
administrative functions during the period. The exceptional administrative
expenses have no effect on the tax charge for the period.
5. Taxation
No provision for taxation has been made in the profit and loss account for the
six months to 30 June 2006 based on the estimated tax provision required for the
year ending 31 December 2006. No provision was required in the six months to 30
June 2005.
6. 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 £736,000 (2005: restated loss £83,000)
divided by the weighted average number of ordinary 1p shares of 631,418,341
(2005: 540,299,162).
7. 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 2006.
8. Creditors: amounts falling due within one year
Unaudited Unaudited Audited
as at 30 June 2006 as at 30 June 2005 as at 31 December
2005
£'000 £'000 £'000
Bank overdrafts, loan and finance leases 889 1,000 605
Trade creditors 3,535 2,677 3,204
Other creditors 3,868 3,996 3,738
_______ _______ _______
8,292 7,673 7,547
9. 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.
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