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Pebble Beach Sys Grp (PEB)

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Monday 25 June, 2018

Pebble Beach Sys Grp

Final Results

RNS Number : 3225S
Pebble Beach Systems Group PLC
25 June 2018
 

Pebble Beach Systems Group plc

Results for the year ended 31 December 2017

 

Pebble Beach Systems Group plc, a leading global software business specialising in solutions for playout automation, and content serving customers in the broadcast markets, today announces its final results for the year ended 31 December 2017.

 

Financial Headlines

                                                                                                  

 

 

2017

2016

Revenue

£10.3m

£10.9m

 

Adjusted* operating profit/(loss) - continuing operations

 

£0.5m

 

£(1.1)m

 

Adjusted* (loss)/earnings per share) - continuing operations

 

(0.2)p

 

(1.8)p




Operating loss - continuing operations

£(2.4)m

£(1.9)m

Basic (loss)/earnings per share

(2.1)p

(2.4)p




Net profit/(loss) from discontinued operations

£2.9m

£(52.4)




Net profit/(loss) for the year

£0.3m

£(55.3)

Basic (loss)/earnings per share

0.2p

(45.0)p




Net debt

£(10.3)m

£(14.5)m

Total dividend per share proposed

-

-

 

*Adjusted operating profit/(loss), a non-GAAP measure, is operating profit/(loss) before depreciation, the amortisation and impairment of goodwill and acquired intangibles, the amortisation of capitalised development costs, non-recurring items and foreign exchange gains (see note 4). Adjusted earnings per share is calculated on the same basis after taking account of related tax effects.

 

Headlines

·      Adjusted operating profit for the continuing business of £0.5 million (loss in 2016 £(1.1 million))

·      Steady performance of Pebble Beach Systems, despite general market conditions being challenging during ongoing period of technology change

·      Overall cost savings of £3.6 million from 2017 to 2018, achieved by the restructure of Pebble Beach Systems operations, closure of PLC head office, reduced headcount and reduced professional fees

·      On 22 June 2018 the Company agreed an amendment to the Revolving Credit and Term Loan Facilities agreement to secure the facility until 30 November 2019, including a simplification of banking covenants, enabling it to remain independent and continue to invest in product development

·      Net debt reduced from £14.5 million to £10.3 million during the year

·      Sale of hardware division on 2 February 2017 that generated an adjusted operating loss of £7.7 million in 2016

 

 

 

 

 

 

John Varney, Non-Executive Chairman of Pebble Beach Systems Group plc, said:

 

"2017 was a transitional year for the Group requiring significant management effort to complete the disposal of the loss making hardware division, and bring the Strategic Review process to a conclusion with a strategy to remain independent and grow the Group using Pebble Beach Systems Limited ("PBS") as the foundation.

 

Two significant keys to remaining independent are the securing of funding support and a return to positive cash generation. I am pleased that the necessary actions have been taken; the reduction of PLC related overheads, post period end operational headcount reduction and the agreement of new terms with our bank.

 

As we look forward into 2018, the refocussed Group is now able to enter a significant period in the industry as market opportunities created by the changes in the broadcast industry become clear, and PBS is able to build on its significant customer momentum.

 

I would like to thank all of our employees and my Board colleagues for their ongoing commitment as we head into 2018 and are now well placed to focus again on building the business to achieve success."



- ends -

 

For further information please contact:

 

John Varney, Non-Executive Chairman

+44 (0) 75 55 59 36 02



Shaun Dobson / James White

N+1 Singer

+44 (0) 20 74 96 30 00

 

The Company is quoted on the LSE AIM market (PEB.L).  More information can be found at www.pebbleplc.com.

About Pebble Beach Systems

 

Pebble Beach Systems is a world leader in automation, channel in a box, integrated and virtualised playout technology, with scalable products designed for highly efficient multichannel transmission as well as complex news and sports television. Installed in more than 70 countries and with proven systems ranging from single up to over 150 channels in operation, Pebble Beach Systems offers open, flexible systems, which encompass ingest and playout automation, and complex file-based workflows. The company trades in the US as Pebble Broadcast Systems. 

Forward-looking statements

Certain statements in this announcement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast.



 

CHAIRMAN'S STATEMENT

 

Introduction

 

2017 has been a year focused on successfully stabilising the Group following the disposal of the hardware division in Q1.   

 

Pebble Beach Systems is a world leader in automation, channel in a box, integrated and virtualised playout technology, with scalable products designed for highly efficient multichannel transmission as well as complex news and sports television. Installed in more than 70 countries and with proven systems ranging from single up to over 150 channels in operation, Pebble Beach Systems offers open, flexible systems, which encompass ingest and playout automation, and complex file-based workflows. The company also trades in the US as Pebble Broadcast Systems. 

Its products are flexible, reliable and scalable, and are designed to cater for all channel types. Its innovative solutions manage acquisition, file-based workflows, archiving and multi-channel playout at large and small installations worldwide.

 

Financial Results

 

Pebble Beach Systems delivered a sound financial performance.  Order intake for the full year of £10.5 million is below the previous year (2016: £11.7 million), which is due to an exceptionally large order received late in 2016, which wasn't expected to be repeated in 2017. Resultant revenue was £10.3 million (2016: £10.9 million).

 

The business has historically high margins which were under pressure during 2017 as a result of a number of projects being completed ahead of the Harmonic OEM agreement coming to an end in March 2018. The number of projects increased as Harmonic looked to utilise the non-refundable software licences. The margins are therefore expected to recover in FY18.

 

Adjusted operating profit was £0.5 million in 2017 (loss in 2016: £1.1 million) before non-recurring costs of £0.5 million, depreciation and amortisation costs of £2.3 million and exchange losses of £0.1 million are deducted. Central costs included were £1.3 million. Headcount reductions made in early FY18 from 78 to 62 will contribute to operating profit improvements in FY18.

 

In 2017, the Central costs were £1.3 million (2016: £4.2 million). This decrease is due to £0.5 million release of the Pebble Beach Systems VCP accrual in 2017 (2016: charge of £0.7 million), closure of the head office in Hungerford and consolidation of head office roles with the operating business in Weybridge. As we look forward to 2018 we expect to see a further reduction.

 

Net finance costs remained steady during 2017 reflecting the Group's paydown of some of its revolving credit facility ("RCF") and overdraft. The available RCF as at 31 December 2017 was £15.0 million (2016: £15.0 million) of which £11.5 million had been fully drawn down. Interest paid on the RCF was £0.3 million (2016: £0.3 million). In addition, there was an overdraft of £1.0 million (2016: £1.0 million) which was not utilised.

 

Liquidity risk has been reduced with combined secured bank loans and trade and other payables being reduced by £7.3 million from £23.4 million in 2016 to £16.3 million at the end of 2017.

 

The Company continues to view investment in the development of new products and services as key to future growth. In 2017 Pebble Beach Systems capitalised £0.8 million of development costs (amortised £0.65 million), (2016 £1.1 million) (amortised £0.36 million).

Strategic Review and Formal Sale Process ("FSP")

On 23 February 2017, the Company announced that, following the disposal of VCS, a strategic review and formal sales process (FSP) had been initiated to consider options available to reduce the Company's outstanding debt, including the possibility of a sale of the Group.

During the course of the FSP the Company engaged with a number of interested parties. These discussions did not result in an offer which was considered by the Board to reflect the value of the Group's operations and the Board decided to terminate the FSP.

Going Concern

The directors are required to make an assessment of the Group's ability to continue to trade as a going concern.

 

On 2 February 2017 the Group sold the trade and assets of the hardware division (VCS) to xG Technology Inc., which reduced the net debt of the Group to £12.0 million.

 

On 14 February 2017, the Group pursued a cost reduction strategy, resulting in the closure of the Head Office function, which was then no longer appropriate as the Company had a single operating subsidiary, Pebble Beach Systems Limited, which operates from a standalone site. Accordingly, notice was served on the Head Office team.

 

During 2017 the Group forecast that it would be in breach of its banking covenants for the foreseeable future

meaning it was reliant on the ongoing support of its bankers.

 

In December 2017 the Company commenced discussion with its bankers to secure the support required to remain independent.

 

By 31 December 2017 net debt had been reduced to £10.3 million (net cash £1.2 million and bank debt of £11.5 million). In addition, there was an available overdraft of £1.0 million which was not utilised.

 

In April 2018 the Company announced it had negotiated new heads of terms which were subject to a revision of the existing documentation. Today, the Company confirms that the amended Revolving Credit and Term Loan Facilities agreement has been signed with Santander UK PLC. The revision secures the facility until 30 November 2019 with simplified banking covenants and a reasonable repayment schedule.

 

In reaching their decision that the financial statements should be prepared on the going concern basis, the Board considered that the new signed facility with our bankers and their ongoing support indicates the Group's ability to continue as a going concern.

 

In order to assess the appropriateness of preparing the financial statements on a going concern basis, management have prepared detailed projections of expected cash flows. These projections include the impact of cost reductions of £3.6 million, £2.2 million delivered as part of the 2017 PLC cost reduction strategy and £1.4 million through operational costs savings completed in January 2018 in the Pebble Beach Systems operation.

 

As part of the review, the Board considered sensitivities with regards to the timing of revenue growth coming from the transition in the broadcast industry from SDI to IP platforms. It looked at sensitivities regarding the recovery of gross margin following the completion of the Harmonic OEM. Finally, it considered sensitivities regarding the cost reductions.

 

Given that both the margin recovery and cost reductions both pertained to items already completed prior to sign off of the accounts, the Board concluded that the primary risk is one of ongoing trading and therefore the Group remains a going concern.

xG Technology

As part of the revised business purchase agreement for the sale of VCS, it was agreed that the Group would retain the right to any sums received in the future in respect of an outstanding specific debtor, subject to a maximum sum of $2.0 million. The Group was reliant on xG Technology Inc. ("xG") fulfilling this contract to enable the Group to recover this debt.

In April 2017, the Company received $0.25 million in cash from xG against this debt.

In Q4 2017 xG advised on completion of the contract which was delaying receipt of the remaining $1.75 million. Following extensive discussions with xG, who were looking to offset alleged significant additional costs of completion and other VCS costs that xG considered should not be borne by it under the original agreement, the Board announced in December 2017 that there was no likelihood of agreement between xG and the Group and the collection of the remaining $1.75 million was unlikely without entering a protracted legal dispute. Accordingly, this debt has been fully impaired.

Subsequent to the decision not to pursue the remaining $1.75 million, it has come to light that xG have refused

to meet their legal obligations to clear two historic creditors totalling $390k, which have been provided for in full in the accounts.


Dividends

 

In view of the results for the year, the Board does not recommend payment of a final dividend for the year ended 31 December 2017.

 

Board changes

Following the sale of the hardware division in 2017, it was mutually agreed with the outgoing Executive Chairman, John Hawkins, that his role had become redundant. The Board wish to thank Mr Hawkins for his contribution to the restructuring of the Group over his six years as Executive Chairman.

Following the Board's decision to operate the Company, Pebble Beach Systems, as an independent entity, two appointments were made to the Board.

At the beginning of 2018 Peter Mayhead was appointed as Group Chief Executive Officer. 

In addition, as announced on 6 April 2018, the Board appointed Graham Pitman as Non-Executive Director.

Trading Outlook

The broadcast market continues to be challenging as customers assess how best to invest in the evolving technologies of IP and cloud-based infrastructures whilst maintaining their traditional infrastructure.

 

The Company is well placed to offer the market a solution which is able to bridge this transition period and is expected to maintain its sales performance through FY18 as the pipeline continues to be steady. At the same time, the Company will deliver improved profitability as a direct result of the restructure undertaken throughout 2017 and Q1 2018.

 

John Varney

Non-Executive Chairman's Statement

For the year ended 31 December 2017

 

 



 

FINANCIAL REVIEW

 

Divisions and Markets

For the year ended 31 December 2017

 

Continuing Operations

 

 

2017

£'m

2016

£'m

Change

%

Pebble Beach Systems

10.3

10.9

-5.1%

Total Revenue

10.3

10.9

-5.1%

Pebble Beach Systems

1.8

3.1

-44.0%

Central

(1.3)

(4.2)

-70.1%

Total adjusted operating profit/(loss)

0.5

(1.1)

-146.2%

 

 

Pebble Beach Systems has contributed £10.3 million of revenues and £1.8 million of adjusted operating profit in 2017. Non-recurring items excluded from adjusted profit are £0.6 million charge in respect of rationalisation and redundancy costs, including £0.3 million payment for director's loss of office and £0.1 million gain in respect of disposal of the Group's head office in Hungerford.

 

Discontinued Operations

 

 

2017

£'m

2016

£'m

Change

%

Vislink Communication Systems

1.0

31.7

-96.7%

Total Revenue

1.0

31.7

-96.7%

Profit/(loss) attributable to equity shareholders

2.9

(52.4)

-149.9%

 

The profit attributable to equity shareholders for discontinued operations was £2.9 million which includes £5.1 million from recycling translation reserve for discontinued operations.

 

Goodwill impairment

 

In accordance with the requirements of IAS 36 'Impairment of assets', goodwill is required to be tested for impairment on an annual basis, with reference to the value of the cash-generating units ("CGU") in question. The carrying value of goodwill at 31 December 2017 is £3.2 million (2016: £3.2 million) and relates solely to Pebble Beach Systems. There is significant headroom between the carrying value and the value of the forecast discounted cash flows.

 

Non-recurring items

 

The Group charged £2.2 million (2016: £0.7 million) of non-recurring costs to the consolidated income statement. The charge comprised:

 

·      £0.1 million gain on disposal of the Group's former head office (continuing operations)

·      £0.6 million charge in respect of rationalisation and redundancy costs including a £0.3 million termination payment for director's loss of office (continuing operations)

·      £1.3 million loss on disposal of the VCS business, including £1.3 million provision for the $1.75 million debt and £0.3 million for supplier provisions (discontinued operations)

·      £0.2 million charge in respect of capitalised development costs written off (discontinued operations)

·      £0.2 million in respect of disposal/sale costs (discontinued operations)

 

 

 

Cash flows

 

The Group held cash and cash equivalents of £1.2 million at 31 December 2017 (2016: £0.5 million). The table below summarises the cash flows for the year.

£'million

2017

2016




Cash used in operating activities

(2.6)

(1.8)

Net cash used in investing activities

7.1

(4.4)

Net cash from financing activities

(3.5)

4.2

Effects of foreign exchange

 (0.3)

         (0.8)

Net increase/(decrease) in cash and cash equivalents

0.7

(2.8)

Cash and cash equivalents at 1 January

0.5

3.3

Cash and cash equivalents at 31 December

1.2

0.5

 

As at 31 December 2017 net debt was £10.3 million (cash £1.8 million and bank debt of £12.1 million). At the end of January 2018, net debt had reduced to £9.9 million. The Group was using £11.5 million of its available facilities in December 2017.

On 2 February 2017 the Group sold the trade and assets of the hardware division (VCS) to xG, which reduced net debt to £12.0 million.

Foreign exchange

 

The principal exchange rates used by the Group in translating overseas profits and net assets into sterling are set out in the table below.

 

Rate compared to £ sterling

Average

rate

2017

Average

rate

2016

Year end

rate

2017

Year end

rate

2016

US dollar

1.289

1.354

1.351

1.230

 

 

Risk management

 

The Board regularly reviews the full range of business risks facing the Group. The approach adopted is to identify, evaluate and manage the likely impact of risk on the Group's business objectives. Where the risks are unavoidable they are managed through business controls and where appropriate through insurance and treasury activities.

The Group has a programme of regular risk assessment, which incorporates internal control reviews of both a financial and non-financial nature. A process of continuous review has been in place throughout the year at an operating company level to consider the risk environment and the effectiveness of controls. The results of reviews, initiatives and progress on implementing control improvements are regularly reported to the Board.

 

 

CONSOLIDATED GROUP INCOME STATEMENT

for the year ended 31 December 2017

 



2017

2016


Notes

£'000

£'000





Revenue

3

10,320

10,879

Cost of sales


(3,831)

(2,924)

Gross profit


6,489

7,955

Sales and marketing expenses


(2,351)

(3,052)

Research and development expenses


(1,762)

(1,596)

Administrative expenses


(2,718)

(4,945)

Foreign exchange gains


(95)

1,840

Other expenses


(1,931)

(2,100)

Operating loss

4

(2,368)

(1,898)

Operating loss is analysed as:



Adjusted operating profit/(loss)


500

(1,082)

Depreciation


(187)

(197)

Amortisation and impairment of acquired intangibles


(1,419)

(1,422)

Amortisation of capitalised development costs


(655)

(359)

Non-recurring items

3,4

(512)

(678)

Exchange (losses)/gains charged/credited to the income statement


(95)

1,840

Finance costs

5

(339)

(331)

Finance income

5

4

2

Loss before tax


(2,703)

(2,227)

Tax

6

95

(729)

Loss for the year being loss attributable to owners of the parent


(2,608)

(2,956)

Net result from discontinued operations

     

2,892

(52,358)

Net result for the year


284

(55,314)

 




Earnings per share from continuing and

discontinued operations attributable to the owners of

the parent during the year

 




Basic (loss)/earnings per share




From continuing operations

8

(2.1)p

(2.4)p

From discontinuing operations


2.3p

(42.6)p

From loss for the year


0.2p

(45.0)p





Diluted (loss)/earnings per share




From continuing operations

8

(2.1)p

(2.4)p

From discontinued operations


2.3p

(42.6)p

From loss for the year


0.2p

(45.0)p

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2017

 


 

2017

2016



£'000

£'000





Profit/(Loss) for the financial year


284

(55,314)

Other comprehensive income - items that may be reclassified subsequently to profit or loss:




Exchange differences on translation of overseas operations




- continuing operations


(92)

2,593

- discontinued operations


(176)

(2,230)

Recycle translation reserve for discontinued operations


(5,077)

-





Total loss for the year attributable to owners of the parent


(5,061)

(54,951)

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the year ended 31 December 2017

 


Ordinary shares 

£000

Share

premium

£000

 Capital

redemption

reserve

£000

 Merger

reserve

£000

 Translation

reserve

£000

Accumulated losses

£000

 Total

£000

At 1 January 2016

3,066

6,800

617

32,448

4,843

6,678

54,452

Share based payments: Value of employee services

-

-

-

-

-

1,247

1,247

Dividends payable (note 10)

-

-

-

-

-

(1,829)

(1,829)

Transaction with owners

-

-

-

-

-

(582)

(582)

Issued shares

49

-

-

-

-

-

49

Retained loss for the year

-

-

-

-

-

(55,314)

(55,314)

Exchange differences on translation of overseas operations

-

-

-

-

363

-

363

Total comprehensive income/expense for the period

49

-

-

-

363

(55,314)

(54,902)

At 31 December 2016

3,115

6,800

617

32,448

5,206

(49,218)

(1,032)

At 1 January 2017

3,115

6,800

617

32,448

5,206

(49,218)

(1,032)

Share based payments: Value
of employee services

-

-

-

-

-

28

28

Transaction with owners

-

-

-

-

-

28

28

Retained profit for the year

-

-

-

-

-

284

284

Transfer

-

-

-

(2,670)

-

2,670

-

Recycle translation reserve for discontinued operations

-

-

-

-

(5,077)

-

(5,077)

Exchange differences on translation of overseas operations

-

-

-

-

(268)

-

(268)

Total comprehensive income/expense for the period

-

-

-

(2,670)

(5,345)

2,982

(5,033)

At 31 December 2017

3,115

6,800

617

29.778

(139)

(46,236)

(6,065)

 

 



 

CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION

as at 31 December 2017

 



2017

2016

 

Notes

£'000

£'000

Assets




Non-current assets




Intangible assets


6,941

8,216

Property, plant and equipment


285

467

Deferred tax assets


-

-



7,226

8,683

Current assets




Inventories


225

206

Trade and other receivables


3,729

5,436

Current tax assets


5

254

Cash and cash equivalents


1,862

2,044

 


5,821

7,940

Assets of disposal group and non-current asset classified as held for sale


-

15,177

 


5,821

23,117

Liabilities




Current liabilities




Financial liabilities - borrowings


1,613

15,000

Trade and other payables


5,588

10,520

Current tax liabilities


-

-

Provisions for other liabilities and charges


400

391



7,601

25,911

Liabilities of disposal group classified as held for sale


-

5,014



7,601

30,925





Net current (liabilities)


(1,780)

(7,808)





Non-current liabilities




Financial liabilities - borrowings


10,500

-

Deferred tax liabilities


644

1,174

Provisions for other liabilities and charges


367

733



11,511

1,907

 




Net assets


(6,065)

(1,032)

 

 

Equity attributable to owners of the parent




Ordinary shares

10

3,115

3,115

Share premium account

10

6,800

6,800

Capital redemption reserve

10

617

617

Merger reserve


32,448

32,448

Translation reserve


(139)

5,206

Retained earnings


(46,236)

(49,218)

Total equity


(6,065)

(1,032)

 



 

CONSOLIDATED GROUP STATEMENT OF CASH FLOWS

for the year ended 31 December 2017

 



2017

2016


Notes

£'000

£'000

Cash flows from operating activities




Cash generated from operations

9

(2,761)

(1,235)

Interest paid


(348)

(351)

Taxation received/(paid)


528

(174)

Net cash from operating activities


(2,581)

(1,760)

 




Cash flows from investing activities




Interest received


47

2

Proceeds from sale of property, plant and equipment


510

80

Proceeds from sale of intangibles


7,493

-

Purchase of property, plant and equipment


(107)

(301)

Expenditure on capitalised development costs


(798)

(4,261)





Net cash generated from/(used in) investing activities


7,145

(4,480)





Cash flows from financing activities




Net new bank loans raised/(repaid)

11

(3,500)

6,000

Dividend paid

11

-

(1,829)

Issue / (purchase) of shares


-

49

Net cash from / (used in) financing activities


(3,500)

4,220

Net decrease in cash and cash equivalents and overdrafts


1,064

(2,020)

Effect of foreign exchange rate changes

11

(272)

(774)

Cash and cash equivalents and overdrafts at 1 January


457

3,251

Cash and cash equivalents and overdrafts at 31 December


1,249

457

 




Net debt comprises:




Cash and cash equivalents and overdrafts


1,249

457

Borrowings


(11,500)

(15,000)

Net debt at 31 December

11

(10,251)

(14,543)

 

The cash and cash equivalents and overdrafts balance comprise credit balances of £1,862,000 which have been set off against debit balances of £613,000.

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2017

 

1.   GENERAL INFORMATION

 

The Pebble Beach Systems Group is a leading global software business specialising in solutions for playout automation, and content serving customers in the broadcast markets.

 

The Company is a public limited company and is quoted on the Alternative Investment Market (AIM) of the London stock exchange. The Company is incorporated and domiciled in the UK. The address of its registered office is 12 Horizon Business Village, 1 Brooklands Road, Weybridge, Surrey, KT13 0TJ.  

 

The registered number of the Company is 04082188.

 

This final results announcement was approved for issue on 22 June 2018.

 

2.   BASIS OF PREPARATION

 

The Group financial statements have been prepared on a going concern basis in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), IFRIC interpretations and the Company Act 2006 applicable to companies reporting under IFRS.

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.  It also requires management to exercise judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Group financial statements are disclosed in note 4 of the Group financial statements.   

 

During the current reporting period there were no new standards or amendments which had a material impact on the net assets of the Group. In addition, standards or amendments issued but not yet effective are not expected to have a material impact on the net assets of the Group.

 

GOING CONCERN

 

The directors are required to make an assessment of the Group's ability to continue to trade as a going concern.

 

On 2 February 2017 the Group sold the trade and assets of the hardware division to xG, which reduced the net debt of the Group to £12.0 million.

 

At 31 December 2017 net debt was £10.3 million (net cash £1.8 million and bank debt of £12.1 million). In addition, there was an overdraft of £1.0 million which was not utilised.

 

During 2017 the Group forecast that it would be in breach of its banking covenants for the foreseeable future meaning it was reliant on the ongoing support of its bankers.

 

Following discussions with its bankers, in late 2017 the Company successfully reached an agreement with its bank which allowed the business to continue as an independent entity. Subsequently, in Q1 2018 the Company successfully negotiated new heads of terms, securing the support the Company needed to remain independent and continue as an independent entity.

 

In order to assess the appropriateness of preparing the financial statements on a going concern basis, management have prepared detailed projections of expected cash flows and these have been reviewed by the Board.

 

In reaching their decision that the financial statements should be prepared on the going concern basis, the Board considered that the new head of terms secured with our bankers and their ongoing support indicates the Group's ability to continue as a going concern.

 

 

 

 

3.   SEGMENTAL REPORTING

 

The Group's internal organisational and management structure and its system of internal financial reporting to the Board of Directors comprise of Pebble Beach Systems Limited and Central costs. The chief operating decision-maker has been identified as the Board.

 

The Board reviews the Group's internal financial reporting in order to assess performance and allocate resources. Management have therefore determined that the operating segments for the Group will be based on these reports.

 

The Pebble Beach Systems Limited business is responsible for the sales and marketing of all Group software products and services.

 

The table below shows the analysis of Group external revenue and operating profit from continuing operations by business segment.

 

 


Pebble Beach Systems

Central

Total

£'000

Year to 31 December 2017




Broadcast

-

10.320

Total revenue

10.320

-

10,320





Adjusted operating profit/(loss)

1,772

(1,272)

500

Depreciation

(157)

(30)

(187)

Amortisation and impairment of acquired intangibles

(1,419)

-

(1,419)

Amortisation of capitalised development costs

(655)

-

(655)

Non-recurring items

(113)

(399)

(512)

Exchange (losses)/gains

(95)

-

(95)

Finance costs

-

(339)

(339)

Finance income

73

(69)

4

Loss before taxation

(594)

(2,109)

(2,703)

Taxation

511

(416)

95

Loss for the year being attributable to owners of the parent

(83)

(2,525)

(2,608)

 




Year to 31 December 2016




Broadcast

-

10,879

Total revenue

10,879

-

10,879





Adjusted operating profit/(loss) (restated)

3,166

(4,248)

(1,082)

Depreciation

(175)

(22)

(197)

Amortisation and impairment of acquired intangibles

(1,422)

-

(1,422)

Amortisation of capitalised development costs

(359)

-

(359)

Non-recurring items

-

(678)

(678)

Exchange (losses)/gains

(295)

2,135

1,840

Finance costs

-

(331)

(331)

Finance income

69

(67)

2

Profit/(loss) before taxation

984

(3,211)

(2,227)

Taxation

342

(1,071)

(729)

Profit/(loss) for the year being profit/(loss) attributable to owners of the parent

1,326

(4,282)

(2,956)

 

 

 

 

Geographic external revenue analysis

 

The revenue analysis in the table below is based on the geographical location of the customer for continuing operations of the business.

 


2017

2016


 

Total

£'000

 

Total

£'000

By market



UK & Europe

4,655

5,360

North America

1,772

2,032

Latin America

357

1,122

Middle East and Africa

2,811

2,104

Asia / Pacific

725

261


10,320

10,879

 

 

 

Net assets

The table below summarises the net assets of the Group by division. Balance sheet reporting is disclosed by the divisional assets and liabilities of the Group as this is consistent with the presentation of internal information provided to the Executive Management Board and the Board of Directors.

 


2017

£'000

2016

£'000

By division:



Pebble Beach Systems

8,104

10,240

Central

Assets of disposal Group held for sale

Liabilities for disposal Group held for sale

(14,169)

-

-

(21,435)

15,177

(5,014)


(6,065)

(1,032)

 

4.   OPERATING LOSS

 

The following items have been included in arriving at the operating loss for the continuing business:

 


2017

£'000

2016

£'000

Depreciation of property, plant and equipment

187

197

Amortisation of acquired intangibles

1,419

1,422

Operating lease rentals

167

437

Exchange losses/(gains) charged/(credited) to profit and loss

95

(1,840)

Research and development expenditure expensed in the year which includes:

1,762

1,596

-       Amortisation of capitalised development costs

655

359

 

Non-recurring items

 

The following items are excluded from management's assessment of profit because by their nature they could distort the Group's underlying quality of earnings. They are excluded to reflect performance in a consistent manner and are in line with how the business is managed and measured on a day-to-day basis: 





2017

£'000

2016

£'000




Rationalisation and Redundancy costs

362

-

Provision for former executive debt

260

-

Gain on sale of head office

(110)

-

Liquidity advice and other costs

Increase in onerous property provision

-

-

176

502


512

678

 

 

5.   FINANCE COSTS - NET

 


 2017

£'000

 2016

£'000

Finance costs

(339)

(331)

Finance income

4

2

Finance costs - net

(335)

(329)

 

Finance costs represent interest payable on bank borrowings.

 

Finance income is derived from cash held on deposit.

 

6.   INCOME TAX EXPENSE

 


2017

£'000

2016

£'000




Current tax



UK corporation tax

-

(64)

Adjustments in respect of prior years

169

(67)

Total current tax

169

(131)




Deferred tax



UK corporation tax

(267)

900

Impact of change in tax rate

-

(40)

Adjustments in respect of prior years

3

-

Total deferred tax

(264)

860

 



Total taxation

(95)

729

 

The UK corporation tax rate decreased from 20 per cent to 19 per cent from 1 April 2017. Changes to the UK corporation tax rates were substantively enacted on 7 September 2016. These include reductions to the main rate to reduce the rate to 17 per cent from 1 April 2020.

 

Deferred tax has been provided for at the rate of 17 per cent (2016: 17 per cent).

 

7.   DIVIDENDS

 

In view of the results for the year the directors do not recommend payment of a final dividend for the year ended 31 December 2017.

 

8.   EARNINGS PER ORDINARY SHARE

 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

 

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive shares are those share options granted to employees where the exercise price is less than the average market price of the company's ordinary shares during the year.

 

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

 

 

 

 


2017

2016


Earnings

 £000

 Weighted

average

number

 of shares

 000s

 Earnings

 per share

 pence

Earnings

 £000

 Weighted

 average

 number

 of shares

 000s

 Earnings

 per share

 pence

Basic and diluted loss per share







Loss attributable to continuing operations

(2,608)


(2.1)p

(2,956)


(2.4)p

Profit/(loss) attributable to discontinued operations

2,892


2.3p

(52,358)


(42.6)p

Basic and diluted profit/(loss) per share

284

124,292

0.2p

(55,314)

122,804

(45.0)p

Potential ordinary shares are non-dilutive in the current and prior years as they would decrease the loss per share from continuing operations. Accordingly there is no difference between basic and diluted EPS.

 

Adjusted earnings

 

The directors believe that adjusted operating profit, adjusted profit before tax, adjusted earnings and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These measures are used by management for internal performance analysis and incentive compensation arrangements. The term "adjusted" is not a defined term used under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. The principal adjustments are made in respect of the amortisation of acquired intangibles and capitalised development costs, non-recurring items and exchange gains or losses charged to the income statement and their related tax effects. The definition has been changed from that used in 2016 and that year's figures restated.

 

The reconciliation between reported and underlying earnings and basic earnings per share is shown below:

 

 


2017


2016

 


Earnings

£'000


Earnings

£'000

 



Pence



Pence

Reported loss per share - continuing operations

(2,608)

(2.1)p


(2,956)

(2.4)p

Depreciation

155

0.1p


162

0.1p

Amortisation of acquired intangibles after tax

1,178

1.0p


1,166

1.0p

Amortisation of capitalised development costs

544

0.4p


294

0.3p

Non-recurring items after tax

413

0.3p


542

0.4p

Exchange losses/(gains)

77

0.1p


(1,485)

(1.2)p

Adjusted (loss)/earnings per share - continuing operations

(241)

(0.2)p


(2,277)

(1.8)p

 

 

9.   CASH FLOW GENERATED FROM OPERATING ACTIVITIES

 

Reconciliation of loss before taxation to net cash flows from operating activities.

 

 


2017

£'000

2016

£'000

Loss before tax - continuing operations

(2,703)

(2,227)

Loss before tax - discontinued operations

(2,847)

(53,410)

Total loss before tax

(5,550)

(55,637)

Depreciation of property, plant and equipment

187

701

(Profit)/Loss on disposal of property, plant and equipment

(110)

1,009

(Profit)/Loss on disposal of VCS

1,335

-

Amortisation and impairment of development costs

856

13,772

Amortisation and impairment of acquired intangibles

1,418

25,609

Share-based payment expense

28

1,247

Finance income

(47)

(2)

Finance costs

348

351

Decrease/(increase) in inventories

(19)

7,249

Decrease/(increase) in trade and other receivables

2,489

3,670

Increase/(decrease) in trade and other payables

(3,345)

376

Increase in provisions

(351)

420

Net cash generated from operating activities

(2,761)

(1,235)

 

 

10.  CALLED UP SHARE CAPITAL, SHARE PREMIUM AND CAPITAL REDEMPTION RESERVE

 


Number of shares

 

'000

Share Capital

 

£'000

Share Premium

 

£'000

Capital redemption reserve

£'000

Total

 

 

£'000

At 1 January 2017

124,603

3,115

6,800

617

10,532

Share issues

-

-

-

-

-

At 31 December 2017

124,603

3,115

6,800

617

10,532

 

 

11.  NET FUNDS

 

Reconciliation of decrease in cash and cash equivalents to movement in net cash:

 


Net cash and cash equivalents

£'000

Other borrowings

£'000

Total net cash

£'000

At 1 January 2017

457

(15,000)

(14,543)

Cash flow for the year before financing

4,564

-

4,564

Proceeds on issue of shares

-

-

-

Movement in borrowings in the year

(3,500)

3,500

3,500

Dividend paid

-

-

-

Exchange rate adjustments

(272)

-

(272)

Cash and cash equivalents at 31 December 2017

1,249

(11,500)

(10,251)

 

 

12.  POST BALANCE SHEET EVENTS

 

In January 2018 the Group completed a cost out program with the restructure of Pebble Beach Systems operations. Overall headcount has been reduced from 78 to 62 achieving a net salary saving of just over £1.0 million. Combined with savings from the closure of the North America operations PBS overheads have been reduced by £1.43 million. With additional saving from the closure of the PLC head office and reduced professional fees, overall cost savings from 2017 to 2018 total £3.6 million.

 

On 22 June 2018 the Group agreed terms with Santander UK PLC for an amendment to the current Revolving Credit and Term Loan Facilities agreement dated 17 March 2014 to secure the facility until 30 November 2019. The amendment included a repayment schedule totalling £1.0 million in each of 2018 and 2019, reducing the overall facility to £9.5 million at the end of November 2019. The amendment also included a simplification of banking covenants to an absolute EBITDA test and a margin of 2.5% over LIBOR.

 

The Board is pleased to confirm that following the announcement of its audited results for the year ended 31 December 2017, the annual report and financial statements has been posted to shareholders and a copy is also available to download from the Group's website at www.pebbleplc.com.

 

 

 

 

Ends


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