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Kenetics Group Ltd (KEN)

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Monday 13 September, 2010

Kenetics Group Ltd

Half Yearly Report

RNS Number : 5327S
Kenetics Group Limited
13 September 2010
 



For release: 0700, 13 September 2010

 

 

KENETICS GROUP LIMITED

 

INTERIM FINANCIAL INFORMATION

FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

Kenetics Group Limited

("Kenetics" or "the Company" or "the Group")

 

Interim Results

 

 

Kenetics Group Limited (AIM: KEN) the Radio Frequency Identification (RFID) company focused on Security and RFID systems and products, announces its interim results for the six month period ended 30 June 2010.

 

Key Points

 

·   Consolidated turnover fell 17% to £472,000 (H1 2009: £570,000).

·   Consolidated loss on ordinary activities after tax and expenses was up 6.4% £217,000 (H1 2009: £204,000).

·    Increase in materials cost due to the manufacturing of the production units of On-Board Bus Equipment ("OBE") in fulfillment of the Singapore Land Transport Authority ("LTA") contracts, which was offset by reduction in employee benefits expenses and other operating expenses.

·    In-house testing of the OBE systems for the LTA contracts has been completed.

·    Delivery of the production systems will begin in September 2010 for deployment in October 2010.

 

Commenting on the results, Ken Wong, Chairman and CEO said: "We feel confident that the LTA trials will be successfully completed by the end of the year and the Company will continue to seize the opportunities not only in Singapore but also in the region to grow the business"

 

 

For further information, please contact:

Ken Wong, Chairman and CEO

Kenetics Group Limited 

Tel: +65 6749 0083

Website:www.kenetics-group.com 

 

Dominique Doussot

ZAI Corporate Finance Ltd

(Nominated Advisor)

Tel: +44 207 060 1760

 

Alex Mattey / Ian Callaway

SVS Securities (PLC)

(Broker)

Tel: +44 207 638 5600

 


Jeremy Carey / Andrew Dunn


Tavistock Communications Ltd


Tel: +44 207 920 3150

 

 

CHAIRMAN'S STATEMENT

 

The first half year performance has been affected by the delay in the start of the deployment and trials for the OBE systems for the LTA contracts. This delay was mainly due to operational issues which arose during the testing of the OBE systems and the integration of the systems with the fare collection software developed for the Singapore public transport operations, which include both the bus and rail systems.

 

The testing of the OBE system has now been completed and the certification of the system is expected to be completed by end September 2010 before the actual installation begins.

 

I am pleased to announce that the deployment and trials will start on 1 October 2010 with 10 buses and all 170 buses to be commissioned by end Nov 2010. The trial period will be shortened to two months, from Oct 2010 to Dec 2010, as many issues were resolved during the in-house testing phases. It is expected by LTA that the two month trial period will be sufficient to detect and resolve any further issues that may arise. Delivery of the first 40 systems is scheduled for the 17 September 2010 and the balance of 130 system by the end of October 2010.

 

The Contactless Smart Card (CSC) Reader developed for the LTA rail (subway) systems has been successfully completed. The readers have been deployed in eleven stations and are currently undergoing a three month trial. I am pleased to mention that the reader has now been adopted for the bus systems as well. It will be deployed together with the OBE system trials in October 2010. 880 readers are manufactured and awaiting loading of the fare collection software by LTA. 631 reader units had been programmed as at 30 Aug 2010.

 

In my statement with the full year results for 2009, the directors stated that the Group would be seeking additional funds in the form of equity financing in two phases during 2010. On 21 June 2010, we announced that we had raised £300,000 (gross) by way of a Placing of 7,500,000 new shares at 4.0p per share, to provide continued working capital to fulfill the LTA contracts. The second phase will focus in raising £2 million to provide the necessary financial resources to bid for the subsequent commercial roll-out contracts for both the rail and bus systems.

  

Despite the delay in the deployment of the OBE systems for the bus trials, the Company is leveraging on the completion of the development and testing of the OBE hardware and systems. Working with its partners, Kenetics has been involved in marketing the OBE systems to other countries, particularly in South East Asia. A trial system with two buses is expected to begin in Vietnam by the end of 2010. The Board feels confident that the LTA trials will be successfully completed by the end of the year and the Company will continue to seize the opportunities not only in Singapore but also in the region to grow the business

 

 

Ken Wong, Chairman and CEO

 

Kenetics Group Limited

 

10 September 2010

 

 

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT

 








6 months

6 months

12 months



Ended

Ended
Ended



30 June

30 June
31 December



2010

2009

2009



(Unaudited)

(Unaudited)

(Audited)


 

£'000

£'000

£'000






Continuing operations





Revenue


472 

570 

1,422 

Other operating income


36 

80 

Changes in inventories of finished





   goods and work-in-progress


12 

(21)

(47)

Raw materials and consumables used


(227)

(163)

(430)

Employee benefits expenses


(278)

(329)

(723)

Depreciation of plant and equipment


(21)

(25)

(51)

Other operating expenses


(131)

(202)

(378)

Loss arising on derivative financial instrument


 

 

(52)

 

(20)

Finance costs


(43)

(17)

(58)

Loss before income tax


(216)

(203)

(205)

Income tax expense


(1)

(1)

17 

Loss for the period


(217)

(204)

(188)






Loss attributable to:





Owners of the Company


(217)

(204)

(188)

Minority interests




(217)

(204)

(188)











Loss per share (pence) - Basic

and diluted


 

(0.81)

 

(0.77)

 

(0.68)

 

 

 

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 








6 months

6 months

12 months



Ended

Ended
Ended



30 June

30 June
31 December



2010

2009

2009



(Unaudited)

(Unaudited)

(Audited)


 

£'000

£'000

£'000











Loss for the period


(217)

(204)

(188)






Other comprehensive income:





 





Foreign currency translation


(4)

(1)

 





Total comprehensive expense

for the period


 

(213)

 

(208)

 

(189)

 





 





 





 





 





Total comprehensive





expense attributable to:





Owners of the Company


(213)

(208)

(189)

Minority interests




(213)

(208)

(189)











 

 

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 




 


30 June

30 June

31 December


2010

2009

2009


(Unaudited)

(Unaudited)

(Audited)


£'000

£'000

£'000

Non-current assets




Plant and equipment

308 

100 

208 

Available for sale financial asset

Total non-current assets

308 

100 

208 





Current assets




Contract work-in-progress

355 

526 

Inventories

642 

449 

504 

Trade receivables

26 

90 

204 

Other receivables

174 

186 

208 

Cash and cash equivalents

146 

183 

137 

Total current assets

1,343 

908 

1,579 

Total assets

1,651 

1,008 

1,787 





EQUITY AND LIABILITIES




Equity attributable to owners of the Company




Share capital

408 

264 

333 

Share premium

628 

280 

403 

Share option reserve

Merger reserve

370 

370 

370 

Foreign currency translation reserve

24 

17 

20 

Accumulated losses

(1,591)

(1,374)

(1,374)

Total equity

(161)

(438)

(244)





Non-current liabilities




Amount owing to director

318 

Bank loan

81 

29 

Total non-current liabilities

399 

29 

 

 

 

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

 




 


30 June

30 June

31 December


2010

2009

2009


(Unaudited)

(Unaudited)

(Audited)


£'000

£'000

£'000

Current liabilities




Excess of progress billings over




   contract work-in-progress 

-

-

8

Trade payables

169

55

265

Other payables

212

137

165

Amount owing to directors

599

190

792

Convertible loan

491

416

463

Derivative financial instrument

20

52

20

Bank loan

220

103

202

Bank overdraft - secured

101

94

87

Total current liabilities

1,812

1,047

2,002

Total liabilities

1,812

1,446

2,031

Total equity and liabilities

1,651

1,008

1,787

 




 





KENETICS GROUP LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR 6 MONTHS ENDED 30 JUNE 2010

 


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


 

 

Non-

controlling

  interest


 

 

 

Total

equity


£'000


£'000


£'000


£'000


£'000


£'000 


£'000 


£'000 


£'000


£'000 

Balance as at 01/01/09

 

264


 

 280


 


 

16


 

370


 

   21 


 

(1,186)


 

 (232)


 

-


 

  (232)

Share option 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)

Share options granted

-


-


(1)


         -


      -


          - 


           - 


        (1)


-


     (1)

Equity component of convertible loan

 

-


 

-


 

       - 


 

         -


 

       -


 

          - 


 

          (16)


      

      (16)


 

-


 

  (16)

Issue of ordinary shares

 

69


 

123


 


 

-


 

-


 


 

 - 


 

 192 


 

-


 

192 

Total comprehensive income for the period

 

-


 

-



 

-



 

 3 


 

           16 


 

 19 


 

-


 

 19 

Balance as at 31/12/09

 

333


 

403


 

 4 


 

-


 

   370


 

20 


 

     (1,374)


 

(244)


 

-


 

(244)

Share options granted

-


-


 (4)


-


-




   (4)


-


   (4)

Issue of ordinary shares

 

75


 

225


 

       - 


 

-


 

       -


 

         - 


 


 

300 


 

-


 

  300 

Total comprehensive expense for the period

        

       

-


       

     

-



         

        

         -



 

 

 4 


      

       

        (217)


 

   

    (213)


 

 

-


 

 

 (213)

Balance as at 30/06/10

 

408


 

628


 


 

-


 

370


 

24 


 

(1,591)


 

(161)


 

-


 

(161)


 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

 






6 months

6 months

12 months


Ended

Ended
Ended


30 June

30 June
31 December


2010

2009

2009


(Unaudited)

(Unaudited)

(Audited)


£'000

£'000

£'000

Cash flows from operating activities




Loss before income tax

(216)

(203)

(205)





Adjustments for:




Depreciation

21 

25 

51 

Interest expense

43 

18 

58 

Interest income

(1)

Provision for diminution of investment in




 subsidiary

(4)

Share options expenses

Loss arising on derivative financial instrument

52 

20 

Unrealised exchange loss

18 

41 

61 

Cash outflow before working capital changes

(138)

(66)

(14)

(Increase)/decrease in contract

work-in-progress

194 

(161) 

(495)

(Increase)/decrease in trade and other

receivables

           

241 

(156)

 

(283)

Decrease/(increase) in inventories

(106)

(217)

Increase/(decrease) in trade and other

payables

 

(103)

64 

 

271 

Cash generated from/(used in) operations

88 

(318)

(738)

Interest paid

(8)

(3)

(13)

Income tax paid

(1)

(1)

17 

Net cash flows generated from/(used in)

operations

79 

(322)

 

(734)





 

 

 

 

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (continued)

 






6 months

6 months

12 months


Ended

Ended
Ended


30 June
30 June
31 December


2010

2009

2009


(Unaudited)

(Unaudited)

(Audited)


£'000

£'000

£'000

Cash flows from investing activities




Purchase of plant and equipment

(109)

(20)

(147)

Interest received

Net cash flows (used in)/ generated from

investing activities

 

(109)

(19)

 

(146)





Cash flows from financing activities




Receipt of loan from director

45 

258 

513 

Issue of ordinary shares

193 

Repayment of hire purchase loan

(1)

(1)

Proceeds from bank loan

33 

208 

313 

Repayment of bank loan

(59)

(25)

(81) 

Difference of fixed deposit balance due

to accumulation of interest

 

(1)

 

 

(1)

Net cash flows generated from financing activities

18 

440 

936 





Net increase/(decrease) in cash in hand

and at bank

 

(12)

 

99 

 

56 

Effect of exchange rate changes

(2)

Cash in hand and at bank at beginning of period

(69)

(131)

(131)

Cash in hand and at bank at end of period

(83)

(23)

(69)

Fixed deposit

128 

112 

119 

Bank overdraft

101 

94 

87 

Cash and cash equivalents per balance sheet

146 

183 

137 





 

 

 

 

 

 

 

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

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 2010 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, PO Box 498, 28-34 Hill Street, St Helier, Jersey JE4 5TF.

 

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

 

These interim consolidated financial statements are for the six months ended 30 June 2010 and have been prepared in accordance with International Accounting Standard 34 "Interim Financial Statements". The accounting policies applied are consistent with International Financial Reporting Standards (IFRS) adopted for use by the European Union. The accounting policies and methods of computation used in the interim consolidated financial statements are consistent with those used in the Annual Report for 2009 and are expected to be applied for the year ended 31 December 2010.


The interim results for the six months ended 30 June 2010 are not necessarily indicative of the results to be expected for the full year 2010

 

 

3.      Share Capital

 

On 16 June 2010, 7.5 million new ordinary shares for a total consideration of £300,000 were issued to provide for additional working capital for the LTA projects. The share premium for the issue amounts to £225,000.

 

For details of the above, please refer to the announcement made by the Company on 21 June 2010.

 

 

4.      Loss per share

 

         Basic loss per share has been calculated on the basis of the losses attributable to ordinary shareholders divided by 26,915,219 (30/06/09: 26,349,466, 31/12/09: 27,480,973), 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.

 

 

Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

5.      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 2010

0.47441

0.09773

Average rates

0.47145

0.09675

 

 

6.      Income tax

 

There was no income tax expense for the 6 months ended 30 June 2010, as the Group has been loss making during this period. The income tax expense for the 6 months ended 30 June 2010 amounted to £662 was an under-provision of tax in prior year.

 

 

7.      Segment reporting

 

The Group has adopted IFRS 8 which is required for all annual reports and interim financial statements starting 1 January 2009 or later.

 

For management purposes, the Group is currently organised around differences in regulatory environment and geographical areas; and has three reportable segments as follows:

 

I.          The Singapore segment designs, manufactures and produce all kinds of electrical and electronic goods.

II.          The China segment imports and exports goods and services, and to act as an agent.

III.         The UK segment provides management services to entities in the group.

 

Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.

 

Group financing (including finance costs) is managed on a group basis and is not allocated to operating segments. Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

 


 

KENETICS GROUP LIMITED

FOR 6 MONTHS ENDED 30 JUNE 2010

 

Segment reporting (cont'd)









 

Operating Segments

UK


Singapore


China


Elimination


Consolidated Total

 

 

 

 

 

6

Months

Ended

30

June

2010

6

Months

Ended

30

June

2009

12

Months

Ended

31

December

2009


6

Months

Ended

30

June

2010

6

Months

Ended

30

June

2009

12

Months

Ended

31

December

2009


6

Months

Ended

30

June

2010

6

Months

Ended

30

June

2009

12

Months

Ended

31

December

2009


6

Months

Ended

30

June

2010

6

Months

Ended

30

June

2009

12

Months

Ended

31

December

2009


6

Months

Ended

30

June

2010

6

Months

Ended

30

June

2009

12

Months

Ended

31

December

2009


£'000

£'000

£'000


£'000

£'000

£'000


£'000

£'000

£'000


£'000

£'000

£'000


£'000

£'000

£'000

Total external

revenue


472 

570

1,422 



-


472 

570 

1,422 

Inter-segment

Revenue

198 


-



-

(198)






















Finance

Income


 1

    1 



-


 1 

Depreciation


20 

26

  49 



-

(2)


21 

25 

51 

Unallocated

finance costs

-


-

-



-


43 

17 

58 





















Reportable

segment profit /(loss) before

tax

(166)

(112)

  (80)


(47)

11

 (115)


(7)

(26)

(41)


4

(76)

31 


(216)

(203)

(205)





















Income tax

expense

(1)

(1)

  (1)


-

  18 



-


 (1)

 (1)

17 

Reportable segment profit

/(loss) after

tax

(167)

(113)

 (81)


(47)

11

 (97)


(7)

(26)

(41)


4

(76)

31 


(217)

(204)

(188)






















Kenetics Group Limited - Interim financial information

Six months ended 30 June 2010

 

 

7.      Segment reporting (cont'd)

 

Geographical information





Sales to external customers


6 months

6 months

12 months


Ended

Ended
Ended


30 June

30 June
31 December


2010

2009

2009


£'000

£'000

   £'000

Asia Pacific

            387

           489

1,262

Europe

              80

             78

154

Others

                5

               3

6


            472

           570

1,422

 

 

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 2010. The figures for the year ended 31 December 2009 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 2010 on 10 September 2010.

 

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

 

 

9.      Subsequent event

 

On 1 July 2010, the Company entered into an interest-bearing redeemable convertible loan agreement with an external party, to obtain a principal loan of £300,000. The principal loan will be due for repayment on 30 June 2012 and the interest will be payable monthly at the rate of 12% per annum. The loan may be converted on written notification at any time after the expiry of the loan in whole or in part provided the always that the total number of shares shall not at any time exceed 1% of the Borrower's total shareholding.

 

The Company has received the loan amount of £300,000 in cash.


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