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Kenetics Group Ltd (KEN)

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Wednesday 16 September, 2009

Kenetics Group Ltd

Half Yearly Report

RNS Number : 0938Z
Kenetics Group Limited
15 September 2009
 



Embargoed until 0700, 16 September 2009


Kenetics Group Limited


Interim Results



Kenetics Group Limited ('Kenetics' or 'the Company' or 'the Group'), the Radio Frequency Identification (RFID) company focused on Security and RFID systems and products, announces its interim report for the 6 months ended 30 June 2009.


Key Points


  • Consolidated turnover versus the corresponding period in 2008 improved by 143% to £570,000 (six months ended 30 June 2008: £235,000).

  • Consolidated loss on ordinary activities after tax and expenses was £204,000 (six months ended 30 June 2008: £289,000).

  • Cash outflow before working capital changes reduced to £66,000 from £250,000 in the corresponding period in 2008.

  • There was an increase of other operating expenses to £202,000 (six months ended 30 June 2008: £145,000), mainly due to a loss in foreign exchange of £52,000 (six months ended 30 June 2008: £21,000 gain in exchange) in the translation of Singapore Dollars to Sterling during the first half of the year. 

  • The Company is pleased to announce that it is making good progress with the two Singapore Land Transport Authority ('LTA') contracts, which were earlier reported. These contracts have contributed to the significant increase in revenue in the first half of the year. 

  • The directors believe that these contracts with LTA will enable the Company to withstand the worst effects of the current economic uncertainty on the sector.



Commenting on the results, Ken Wong, Chairman and CEO said:

'The first half year performance has been very encouraging despite the current global downturn in business activities. I am pleased to report that we are making good progress in the two LTA contracts that we gained in the second half of last year and the first quarter of this year. For the initial contract on the Contactless Smart Card (CSC) Reader, the development and testing stages have been successfully completed. Production of the Readers has started and field trials are expected to commence in the second half of the year. Similarly, the design of the On-Board Bus Equipment (OBE) under the second contract has been completed and prototypes will begin after the review of the designs. 


Notwithstanding these contracts, we have been sustaining our industrial product sales despite the weaker market conditions, resulting in about one third of the revenue coming from this business segment. The efforts made by our Japanese partner have begun to bear fruit and sales orders are coming in for the products introduced in Japan.


With regards to the Company's working capital position, as at 30 June 2009 the Company had net liabilities of £438,000, after taking into account of  £508,000 owing to the Directors. The Company currently receives, and will continue to receive, adequate financing through loans made by Directors but recognizes that further third party funding will be required in the short to medium term to finance the increased level of business activities. The Company is talking to its advisers with regards to securing such future funding and further announcements will be made in due course.

 

Despite the global markets continuing to look uncertain, the Company is leveraging on the good progress made in the LTA contracts and expects to introduce the new products for field trials on buses and rail systems in the second half of the year. The Board feels confident that further progressive improvements will be made and the Company will continue to seize the opportunities to grow the business'



For more information, please contact:

Ken Wong, Chairman and CEO

Kenetics Group Limited 

Tel: +65 6749 0083

Website:www.kenetics-group.com 



David Newton 

ZAI Corporate Finance Ltd

(Nominated Advisor)

Tel: +44 207 060 1760


Peter Ward / Ian Callaway

SVS Securities (PLC)

(Broker)

Tel: +44 207 638 5600



Jeremy Carey / Andrew Dunn


Tavistock Communications Ltd


Tel: +44 207 920 3150





Kenetics Group Limited - Interim financial information

Six months ended 30 June 2009



CONDENSED CONSOLIDATED INCOME STATEMENT









6 months 

6 months 

12 months 



Ended 

Ended 

Ended 



30 June 

30 June 

31 December 



2009 

2008 

2008 



(Unaudited)

(Unaudited)

(Audited)



£'000 

£'000 

£'000 






Continuing operations





Revenue


570 

235 

556 

Other operating income


36 

Changes in inventories of finished





goods and work-in-progress


(21)

(13)

(4)


Raw materials and consumables used



(163)

   

(83)


(293)

Employee benefits expenses


(329)

(245)

(463)

Depreciation of plant and equipment


(25)

(35)

(91)

Other operating expenses


(202)

(145)

(283)

Loss arising on derivative financial instrument



(52)



Finance costs


(17)

(3)

(14)

Loss before income tax


(203)

(289)

(591)

Income tax expense


(1)

Loss for the period


(204)

(289)

(591)






Loss attributable to:





Owners of the Company


(204)

(282)

(580)

Minority interests


(7)

(11)



(204)

(289)

(591)











Loss per share (pence) - Basic 

and diluted



(0.77)


(1.07)


(2.24)




Kenetics Group Limited - Interim financial information

Six months ended 30 June 2009



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME




6 months 

6 months 

12 months 



Ended 

Ended 

Ended 



30 June 

30 June 

31 December 



2009 

2008 

2008 



(Unaudited)

(Unaudited)

(Audited)



£'000 

£'000 

£'000 











Loss for the period


(204)

(289)

(591)






Other comprehensive income:










Foreign currency translation 


(4)

(6)

48 






Total comprehensive expense

for the period



(208)


(295)


(543)


























Total comprehensive 





expense attributable to:





Owners of the Company


(208)

(288)

(532)

Minority interests


-

(7)

(11)



(208)

(295)

(543)








Kenetics Group Limited - Interim financial information

Six months ended 30 June 2009



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION







 

30 June 

30 June 

31 December 


2009 

2008 

2008 


(Unaudited)

(Unaudited)

(Audited)


£'000 

£'000 

£'000 

Non-current assets




Plant and equipment

100 

124 

121 

Available for sale financial asset

24 

Total non-current assets

100 

148 

121 





Current assets




Inventories

449 

248 

332 

Trade receivables

90 

55 

68 

Other receivables

186 

41 

72 

Cash and cash equivalents 

183 

107 

169 

Total current assets 

908 

451 

641 

Total assets

1,008 

599 

762 





EQUITY AND LIABILITIES




Equity attributable to owners of the Company




Share capital

264 

264 

264 

Share premium

280 

280 

280 

Share option reserve

28 

Equity component of convertible loan

16 

Merger reserve

370 

370 

370 

Foreign currency translation reserve

17 

(33)

21 

Accumulated losses

(1,374)

(914)

(1,186)

Total equity

(438)

(5)

(232)





Non-current liabilities




Amount owing to director

318 

272 

Bank loan    

81 

Total non-current liabilities

399 

272 

 

 

 

 




Kenetics Group Limited - Interim financial information

Six months ended 30 June 2009



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)







 

30 June 

30 June 

31 December 


2009 

2008 

2008 


(Unaudited)

(Unaudited)

 (Audited)


£'000 

£'000 

£'000 

Current liabilities




Trade payables

55 

76 

50 

Other payables

137 

132 

115 

Amount owing to directors

190 

223 

21 

Obligations under finance leases

Convertible loan

416 

363 

Derivative financial instrument

52 

Bank loan

103 

Bank overdraft - secured

94 

169 

172 

Total current liabilities

1,047 

604 

722 

Total liabilities

1,446 

604 

994 

Total equity and liabilities

1,008 

599 

762 















KENETICS GROUP LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR 6 MONTHS ENDED 30 JUNE 2009



Attributable to owners of the Company









Group





Share

capital





Share

premium





Share 

Option

reserve 


Equity 

Component  of  convertible

loan 





Merger

reserve



Foreign 

Currency 

Translation 

 Reserve 





Accumulated  

Losses 






Total 





Minority 

Interest 





Total 

Equity 


£'000


£'000


£'000 


£'000 


£'000


£'000 


£'000 


£'000 


£'000 


£'000 

Balance as at 1/1/08


264


  280


27 



370


  (27)


(632)


  282 



  282 

Share option granted


  -


  -


  1 


  - 


  -


  - 


  - 


  1 


  - 


  1 

Acquisition of additional interest in subsidiary




-




-










-




  - 




 - 




  - 







  7 

Total comprehensive expense for the period




-



 

-



 





 


-


  

   

  (6)




(282)


   

  

(288)




(7)


 

 

(295)

Balance as at 30/06/08


264


 280


28 



370


  (33)


(914)


  (5)



  (5)

Share options granted


  -


  -


  1 


  - 


  -


  - 


  - 


  1 



  1 

Share options lapsed


  -


  -


  (26)


  - 


  -


  - 


  26 


  - 



  - 

Equity component of convertible loan

   

  -


   

  -


   

  - 


   

  16 


   

  -


   

  - 


   

  - 


   

  16 




  

  16 

Acquisition of additional interest in subsidiary




-




-










-
















Total comprehensive income/(expense) for the period




-




-










-


  


54 



   

  (298)




(244)




(4)




(248)

Balance as at 31/12/08



264



280



  3 



16 



  370



21 



  (1,186)



(232)





(232)

Share options granted


-


-


  2 



-






 2 

Equity component of convertible loan



  -



  -



  - 



  (16)



  -



  - 



  16 



  - 





  - 

Total comprehensive expense for the period


   

   

  -


   

   

  -


   

   

  -   


   

   

  - 


   

   

  -


   

   

  (4)


   

   

  (204)



   

  (208)







 (208)

Balance as at 30/06/09


264



280







370



17 



(1,374)



(438)





(438)






Kenetics Group Limited - Interim financial information

Six months ended 30 June 2009



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW 







6 months 

6 months 

12 months 


Ended 

Ended 

Ended 


30 June 

30 June 

31 December 


2009 

2008 

2008 


(Unaudited)

(Unaudited)

(Audited)


£'000 

£'000 

£'000 

Cash flows from operating activities




Loss before income tax

  (203)

  (289)

(591)





Adjustments for:




Depreciation 

  25 

  35 

91 

Interest expense

  18 

  4 

15 

Interest income

  (1)

  (1)

(1)

Impairment loss

  - 

  - 

31 

Provision for inventory obsolescence

  - 

  - 

40 

Share options expenses

  2 

  1 

Loss arising on derivative financial instrument

  52 

  - 

Unrealised exchange loss

  41 

  - 

Cash outflow before working capital changes

  (66)

  (250)

(413)

Increase in contract work-in-progress

  (161)

  - 

(24)

(Increase)/decrease in trade and other 

receivables

   

  (156)

   

  85 


94 

Decrease/(increase) in inventories

  1 

  3 

(19)

Increase/(decrease) in trade and other 

payables


  64 

   

  (116)


(363)

Cash used in operations

  (318)

  (278)

(725)

Interest paid

  (3)

  (4)

(8)

Income tax paid

  (1)

  - 

Net cash flows used in operating activities

  (322)

  (282)

(733)








Kenetics Group Limited - Interim financial information

Six months ended 30 June 2009



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (continued)






 

6 months 

6 months 

12 months 


Ended 

Ended 

Ended 


30 June 

30 June 

31 December 


2009 

2008 

2008 


(Unaudited)

(Unaudited)

(Audited)


£'000 

  £'000 

£'000 

Cash flows from investing activities




Purchase of plant and equipment

  (20)

  (6)

(13)

Capital contribution from minority interest

  - 

  8 

11 

Interest received

  1 

  1 

Net cash flows (used in)/ generated from 

investing activities


  (19)

   

  3 

 

(1)





Cash flows from financing activities




Receipt of loan from director

  258 

  168 

221 

Repayment of hire purchase loan

  (1)

  (3)

(8)

Proceeds from convertible loan

  - 

  372 

Proceeds from bank loan

  208 

  - 

  - 

Repayment of bank loan

  (25)

  - 

  - 

Difference of fixed deposit balance due 

to accumulation of interest


  - 


  (1)


(2)

Net cash flows generated from financing activities 

  440 

  164 

583 





Net increase/(decrease) in cash in hand 

and at bank


  99 


  (115)


(151)

Effect of exchange rate changes

  9 

  (5)

60 

Cash in hand and at bank at beginning of period

  (131)

  (39)

(40)

Cash in hand and at bank at end of period

  (23)

  (159)

(131)

Fixed deposit

  112 

  97 

128 

Bank overdraft

  94 

  169 

172 

Cash and cash equivalents per balance sheet

  183 

  107 

169 









Kenetics Group Limited - Interim financial information

Six months ended 30 June 2009



1.    Business of Kenetics Group Limited


The Company was incorporated in Jersey on 22 June 2006. The condensed consolidated financial information of the Company for the six months ended 30 June 2009 comprise the Company and its subsidiaries, Kenetics Innovations Pte Ltd and Kenetics Innovations (Beijing) Co., Ltd.


The registered office of the Company is located at Walker House, 28-34 Hill Street, St Helier, Jersey JE4 8PN.


The Group is in the business of electronics design and manufacturing and producing of electrical and electronic goods.



2.    Basis of preparation of interim condensed consolidated financial information


The interim condensed consolidated financial information for the six months ended 30 June 2009 has been prepared in accordance with the accounting policies set out in the annual report and financial statements for the year ended 31 December 2008, except for the adoption of the new/revised IAS that are applicable for the current financial period. The adoption of the new/revised IAS have no material effect on the financial statements, except for IAS 1 as noted below.


On 1 January 2009, the Group adopted the revised IAS 1 (Revised 2007), Presentation of Financial Statements (IAS 1(R)). IAS 1(R) requires owner and non-owner changes in equity to be presented separately. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line. The revised IAS 1(R) also introduces the statement of comprehensive income which presents all items of income and expense recognised in profit or loss, together with all other items of comprehensive income, either in one single statement of comprehensive income, or in two linked statements. The Group has opted to present the comprehensive income in two statements. In addition, the Consolidated Balance Sheet has been renamed to Consolidated Statement of Financial Position and the Consolidated Cash Flows Statement has been renamed to Consolidated Statement of Cash Flows.


IAS 1(R) is a disclosure standard and has no impact on the financial position and results of the Group.



3.    Bank loan


The Group drew down a new bank loan of £234,900 from United Overseas Bank in March 2009 and will be repayable over 2 years by 24 monthly instalments commencing from April 2009. This bank loan is secured by joint and several guarantee by certain shareholders of the Company. Interest on the bank loan is fixed at 5% per annum. In the event of default in repayment of the instalment, a default interest of 3.5% per annum over the prescribed rate is chargeable over the overdue instalment.



4.    Convertible loan


On 28 July 2008, the Company entered into a Convertible Loan Agreement ('CLA') with Wong Kai Yun (the 'Lender'), sister of the Chairman of the Company to obtain a principal loan of £371,747. The loan may be converted into shares of the Company on written notification at any time from 1 August 2008 in whole or in part.


On 18 March 2009, both parties have entered into a Supplement Agreement to amend certain terms and conditions of CLA as follows:


a)

the Lender may at any time after 30 June 2010, after giving the Company not less than 3 months prior notice in writing, require the Company to repay the whole or any part of the loan until the said loan is fully repaid.


b)

the Company shall pay to the Lender interest at the rate of 6% per annum on the whole or part of the loan as shall remain unpaid from 1 July 2009 up to the date of actual payment.


c)

the exchange rate is fixed at S$2.18 to £1 for conversion of the loan into shares of the Company. 



5.    Loss per share


Basic loss per share has been calculated on the basis of the losses attributable to ordinary shareholders divided by 26,349,466 (30/06/08: 26,349,466, 31/12/08: 26,349,466), being the weighted average number of ordinary shares issued by the Company.

    

In accordance with IAS 33 and as the Group has reported a loss for the period, the potential

ordinary shares are not dilutive.



6.    Exchange rates


    The reporting currency of the Company is deemed to be Sterling Pounds. The functional currencies of Kenetics Innovations Pte Ltd and Kenetics Innovations (Beijing) Co Ltd are in Singapore dollars and Chinese Renminbi respectively. The following exchange rates have been used in preparing this financial information:

    


 


 

S$1 = £

RMB1 = £

30 June 2009

0.41640

0.08872

Average rates

0.45012

0.09844




7.    Income tax


There was no income tax expense for the 6 months ended 30 June 2008 and the 12 months ended 31 December 2008 as the Group has been loss making during these periods. The income tax expense for the 6 months ended 30 June 2009 amounted to £1,000 and was an under-provision of tax provision in the prior year.



8.    Nature of financial information


The interim financial information set out above is neither audited nor reviewed and does not represent the statutory financial statements for Kenetics Group Limited or for any of the entities comprising the Kenetics Group for the period ended 30 June 2009. The figures for the year ended 31 December 2008 were extracted from the consolidated financial statements which 

have been presented to the shareholders. The auditors' report on those financial statements was unqualified.


The Board approved the interim financial information for the period ended 30 June 2009 on 8 September 2009.


These interim results are available on the Company's website www.kenetics-group.com






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