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Kenetics Group Ltd (KEN)

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Tuesday 31 March, 2009

Kenetics Group Ltd

Final Results

RNS Number : 7516P
Kenetics Group Limited
31 March 2009
 



Embargoed Until: 0700, 31 March 2009



Kenetics Group Limited

('Kenetics', the 'Group' or the 'Company')


Preliminary Results for the year ended 31 December 2008


Kenetics Group Limited (AIM:KEN), the Radio Frequency Identification ('RFID') group focussed on security and RFID systems and products, announces its Preliminary Results for the year ended 31 December 2008.


Highlights


  • Consolidated revenue fell to £556,397 (2007:£699,768)


  • Operating expenses reduced 3% to £1.15 million (2007:£1.18 million)


  • Pre-tax loss for the year of £590,741 (2007:£433,084)


  • Board satisfied that the Group has sufficient cash reserves for foreseeable future


  • Major agreements signed with Singapore Land Transport Authority for Contactless Smart Card Readers, On board Bus Equipment and wireless local area network


  • Appointment of distribution partner in Japan


Commenting on the results, Ken Wong, Chairman of Kenetics said: 


'The agreements we have signed with the Singapore LTA are transformational for Kenetics enhancing our capabilities and growth in the Automated Fare Collection Systems market.' He added: 'The global markets remain volatile and challenging, however your board feels that the significant transitional steps taken during 2008 will stand us in good stead to realise the significant opportunity our technology afford us and drive the business forward during the coming year.'


For more information, please contact:



Ken Wong, Chairman and CEO

Kenetics Group Limited 


Graeme Thom / David Newton 

Zimmerman Adams International Ltd

Tel: +65 6749 0083

(Nominated Advisor)

Website:www.kenetics-group.com

Tel: +44 207 060 1760



Peter Ward / Ian Callaway

SVS Securities (PLC)

Jeremy Carey / Andrew Dunn

Tavistock Communications Ltd

(Broker)

Tel: +44 207 920 3150

Tel: +44 207 638 5600



Chairman's Statement


In my last annual statement I reported that the Group had embarked upon a reorganisation programme with the objective of overcoming structural deficiencies and preparing the business for sustainable growth and profitability.  


During 2008, the Group maintained good progress with the restructuring and the development of a new generation of products, recruiting a team of highly skilled technical staff and expanding the sales and distribution networks.


These efforts have resulted in our securing contracts with the Singapore Land Transport Authority ('LTA'), which are transformational for the Group, and which we anticipate will be reflected in our results in 2009 and beyond.


Financial results


Consolidated revenue for the period fell to £556,397 (2007: £699,768) reflecting both the downturn in the global economy and the Group's focus during the first eight months of the year on securing the relationship with LTA.  


Operating expenses were £1.15 million (2007: £1.18 million) down 3% on the previous year with a substantial part being the continued investment in research and product development as well as sales and marketing.


The pre tax loss for the year was £590,741 (2007: £433,084).  

 

Finances


In July 2008, the Group announced that it had raised S$1 million (£372,000) by the issue of a convertible loan, due on 30 June 2009. Interest was not due and payable save in the event that the Company fails to repay the loan on the due date. The lender has subsequently agreed to extend the loan for a further twelve months with interest being payable at 6% per annum from 30 June 2009. 


Post the period end, in March 2009 the Group received a S$500,000 (£232,340) bridging loan from United Overseas Bank to provide additional working capital in respect of our contracts with the LTA, 80% of which was underwritten by the Government of Singapore. The loan is repayable over two years and carries a fixed interest rate of 5% per annum. We are pleased to receive two such endorsements of our strategy in the support provided both by the bank and the Government of Singapore. This shows confidence in our model and our capabilities as a technology leader in our field.  


These loans coupled with the beginning of payments from the LTA contracts means that the Board is satisfied that the Group has sufficient cash reserves for the foreseeable future. The Group will be seeking additional funds in the form of equity financing in the later part of the year to build on its business and allow the Company to exploit the potential provided by the LTA contracts.


Dividend policy


Because of its continuing commitment to invest in growing further the business and establishing Kenetics at the forefront of RFID technology and services, the Company does not have distributable reserves at this time. Consequently the Board is not recommending a dividend.


Product Development


Kenetics remains committed to its strategy of replacing existing product lines by developing new generation products ('GEN2') and growing our core team of leading technical staff to help us achieve this.  


We are also reducing our reliance on Original Design Manufacturers ('ODM') and systems business where traditionally returns on sales revenue have fluctuated, to better balance the income stream between ODM project work and Industrial product sales.


One of these new products, the Ultra High Frequency (UHF) USB RFID Reader has received wide interest in USA, Europe and Japan. This reader is believed to be the smallest currently commercially available in the market, being the size of an ordinary thumbdrive. Initial shipments have been made and it is expected that volume sales will pick up during 2009.  


Sales and Marketing


During the year we have taken major steps to improve our brand presence in our markets. During the first half of the 2008, we began exhibiting at industry trade shows in Hanover, Germany, Tokyo, Japan and Dallas, USA. Several of our products were displayed and we received very useful feedback from potential customers and partners alike, highlighting that Kenetics would benefit from a higher profile at such trade shows.  


A major step forward has been the appointment of a distribution partner in Japan. Several of Kenetics' RFID products were tested by TELEC, Japan and subsequently qualified for sale in Japan. In passing these stringent tests, Japanese customers are reassured of Kenetics product quality and advanced technology. Sales enquiries have been received from major Japanese companies and we are expecting to turn some of these enquiries into sales orders in the near future.


We are aware that these transitional processes will take time, and whilst they are very much ongoing, we are pleased to report that they are progressing well and in line with our expectations.


Research and Development


Besides continuing to enhance its new UHF technology platform and developing new generation RFID products, Kenetics began investing into the development of advanced Automated Fare Collection (AFC) technologies in early 2008. Strategically, Kenetics has identified a growing market towards automation in the public mass transport sectors, particularly in automated fare collection for rail and bus systems. To cater for global requirements, we have developed a short-range reader that is capable of reading most of the world's fare cards including the Oyster card used by London Transport.  


Singapore Land Transport Authority 


With our Interim results in September 2008, we announced that we had secured a contract with the LTA for the supply of a Contactless Smart Card ('CSC') Readers capable of reading both the current public transport fare cards and new CSCs. We also announced that the contract allows the LTA the option to purchase additional card readers, reportedly requiring a number of 22,000 card readers on buses and at train stations with the implementation of the new CSC.


The relationship with the LTA developed further post the period end as we announced in January 2009 an additional agreement to supply on-board bus equipment ('OBE') with a wireless local area network ('WLAN'). The agreement includes the design, manufacture, supply, delivery, installation, testing and commissioning of the new OBE and WLAN. The contract is expected to complete within 15 months of the contract award and is subject to extensive trials on existing buses. If successful, the Board anticipates that the contract will enhance Kenetics' capabilities and growth in the Automated Fare Collection Systems market.


Advisers


In March 2009, Kenetics appointed SVS Securities Ltd as broker to the Company. We welcome their enthusiasm and contribution and look forward to working with them over the coming months. SVS will work alongside Zimmerman Adams International, which remains the Company's nominated adviser.


Directors and Employees


Kenetics was pleased to appoint Mr Terry Fuller to our Board as non-executive director in March 2008. Mr Fuller has contributed considerable experience to the Group and his assistance during the year has proven invaluable.


We thank our dedicated staff across the Group, whose hard work and enthusiasm has helped us progress this year.


Outlook


The global markets remain volatile and challenging, however your Board feels that the significant transitional steps taken during 2008 will stand us in good stead to realise the significant opportunity our technology affords us and drive the business forward during the coming year.



Ken Wong

Chairman

Kenetics Group Ltd

30 March 2009



KENETICS GROUP LIMITED

(Incorporated in Jersey)


CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2008




Note

2008


2007



£


£

Continuing operations





Revenue


556,397 


699,768 

Other operating income


512 


49,604 

Changes in inventories of finished goods





and work-in-progress


(3,515)


80,075 

Raw materials and consumables used


(292,738)


(408,045)

Employee benefits expenses


(463,182)


(491,594)

Depreciation of plant and equipment


(90,938)


(59,578)

Other operating expenses


(283,418)


(301,405)

Finance costs


(13,859)


(1,909)

Loss before tax


(590,741)


(433,084)

Income tax 

5

(315)


6,217 

Loss for the year


(591,056)


(426,867)











Attributable to:





Equity holders of the company


(580,254)


(426,867)

Minority interests


(10,802)




(591,056)


(426,867)






Loss per share (pence)





- Basic and diluted

4

(2.24)


(1.62)





CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2008






2008


2007




£


£







Non-Current Assets






Plant and equipments



120,749 


143,437 

Available for sale financial asset




22,332 

Total non-current assets



120,749 


165,769 







Current Assets






Inventories



332,314 


236,610 

Trade receivables



68,253 


139,226 

Other receivables



71,421 


31,774 

Cash and cash equivalents



168,952 


172,865 

Total current assets



640,940 


580,475 

Total assets



761,689 


746,244 







Equity






Share capital



263,495 


263,495 

Share premium



280,204 


280,204 

Share option reserve



3,415 


27,411 

Equity component 

of convertible loan




16,260 



Merger reserve



369,579 


369,579 

Foreign currency translation reserve




21,343 



(26,514)

Accumulated losses



(1,186,196)


(632,423)

Total equity



(231,900)


281,752 







Non-Current Liabilities






Obligations under finance leases




457 

Amount owing to a director



272,007 


Total non-current liabilities



272,007 


457 







Current liabilities






Trade payables



49,989 


146,521 

Other payables



115,205 


138,225 

Amount owing to directors



20,489 


51,447 

Obligations under finance leases



632 


5,535 

Convertible loan



362,938 


-  

Bank overdraft - secured



172,329 


122,307 

Total current liabilities



721,582 


464,035 

Total liabilities



993,589 


464,492 

Total equity and liabilities



761,689 


746,244 




CONSOLIDATED CASH FLOW STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2008




2008


2007



£


£

Cash Flow From Operating Activities





Loss before taxation


(590,741)


(433,084)

Adjustments for:





Depreciation


90,938 


59,578 

Impairment loss


30,884 


122,159 

Plant and equipment written off



266 

Provision for inventory obsolescence


39,774 


9,654 

Share option


2,485 


930 

Interest income


(1,358)


(1,579)

Interest expense


15,217 


3,488 

Operating loss before working capital changes


(412,801)


(238,588)

Increase in contract work-in-progress


(23,969)


(29,424)

Decrease in trade and other receivables


94,220 


2,632 

Increase in inventories


(19,752)


(84,376)

(Decrease)/increase in trade and other payables


(362,997)


105,937 

Cash used in operations


(725,299)


(243,819)

Interest paid


(7,766)


(3,488)

Income tax (paid)/refunded


(315)


6,378 

Net cash flows used in operating activities


(733,380)


(240,929)






Cash Flows from Investing Activities





Purchase of plant and equipment


(12,851)


(56,392)

Capital contribution from minority interests


10,802 


Interest received


1,358 


1,579 

Net cash flows used in investing activities


(691)


(54,813)






Cash Flows from Financing Activities





Loan from/(to) director


221,346 


(8,579)

Proceeds from convertible loan


371,747 


Difference of fixed deposit balance due to accumulation of interest



(2,250)



(1,603)

Loan from hire purchase creditor


(7,654)


(5,269)

Net cash flows generated from/(used in) financing activities



583,189 



(15,451)






Net decrease in cash and cash equivalents


(150,882)


(311,193)

Effect of exchange rate changes


60,077 


(19,062)

Cash and cash equivalents at beginning of year


(39,838)


290,417 

Cash and cash equivalents at end of year


(130,643)


(39,838)





NOTES TO THE FINANCIAL INFORMATION




1. Financial information


The preliminary results were approved by the Board of Directors on 30 March 2009. The financial information set out above does not comprise the Company's statutory financial statements for the years ended 31 December 2008 and 2007, but is derived from those financial statements. The auditors have reported on the statutory financial statements for the years ended 31 December 2008 and 2007; their report was unqualified.


2. Exchange rates


The financial statements of the Group are presented in Pound Sterling ('£') which is the Company's functional currency. The functional currencies of Kenetics Innovations Pte Ltd and Kenetics Innovations (Beijing) Co Ltd are Singapore Dollars ('S$') and Renminbi ('RMB') respectively. The following exchange rates have been used in preparing the financial statements as at 31 December 2008:



S$1 = £

RMB1 = £    

31 December 2008 

0.47920

0.10140

Average rates 

0.38437

0.07863


3. Basis of preparation


These preliminary results have been prepared in accordance with the accounting policies adopted by the Company which are consistent with those adopted in annual report and accounts for the period ended 31 December 2007.


These preliminary results have also been prepared in accordance with International Financial Reporting Standards.


4. Loss per share


Basic loss per share has been calculated by dividing the net loss attributable to equity holders of the Company of £591,056 (2007: £426,867) by the weighted average number of ordinary shares outstanding during the financial year of 26,349,466 (2007: 26,349,466).


The number of ordinary shares used for the calculation of basic loss per share in 2008 and 2007 where merger accounting is applied, is based on the contributed capital of Kenetics Innovations Pte Ltd, adjusted to equivalent shares of the Company whose shares are outstanding after the combination.


5. Income tax


The income tax credit attributable to the loss of £315 (2007: Over-provision of £6,217) is made up of under-provision of tax provision in prior year.





This information is provided by RNS
The company news service from the London Stock Exchange
 
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