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Pebble Beach Sys Grp (PEB)

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Tuesday 10 September, 2019

Pebble Beach Sys Grp

Half-year Report

RNS Number : 7314L
Pebble Beach Systems Group PLC
10 September 2019
 

 

 

Pebble Beach Systems Group plc

Results for the half year ended 30 June 2019

 

Pebble Beach Systems Group plc, a leading global software business specialising in solutions for playout automation and content serving customers in the broadcast markets, is pleased to announce its unaudited results for the half year ended 30 June 2019.

 

Financial Headlines

For the half year ended 30 June 2019

                                                                                                  

 

2019

2018

 

Order Intake

£5.2m

£4.2m

 

 

 

 

 

Revenue  

£5.6m

£3.7m

 

 

 

 

 

Gross Margin

£4.2m

75%

£2.7m

73%

 

 

 

 

 

Adjusted EBITDA*

£2.0m

£0.6m

 

% of Revenue

35%

15%

 

 

 

 

 

Adjusted earnings per share*

1.3p

0.2p

 

 

 

 

 

Net cash inflow from operating activities

 

Net Debt**

£0.8m

 

£9.0m

£0.1m

 

£9.4m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Headlines

·           Orders received in the period grew 23.6% to £5.2m (H1 2018: £4.2m)

·           Revenue up by 51% to £5.6m (H1 2018: £3.7m)

·           Adjusted EBITDA increased significantly in the period to £2.0m (2018: £0.6m)

·           Reported profit before tax £0.7m (2018: loss £0.9m)

·           Net debt further reduced as at 30 June 2019 £9.0m (31 December 2018: £9.4m)

*Adjusted EBITDA, a non-GAAP measure, is EBITDA before non-recurring items and foreign exchange gains. Adjusted earnings per share is calculated on the same basis after taking account of related tax effects.

 

**Net debt at 31 December 2018 was £9.4m.

 

 

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

 

"We are greatly encouraged with the results for the first half of 2019. At the start of 2018, the Board put in place an aggressive plan to turn around the Company. The work that was done during 2018 was both necessary and detailed but, as is normal in turnaround situations, the numbers that we produced at the end of the year, whilst encouraging, did not reflect the scale of the progress we had made. It is therefore very pleasing indeed to be able to report such an impressive set of results for the first half of 2019. These are a huge testament to both the quality and hard work of the people within the business. Whilst the first part of the turnaround is complete, the marketplace in which we operate is fast moving and competitive and whilst we have improved our reputation and our market position, there is still a lot to do.

 

Looking into the second half of 2019 and beyond our focus is to continue to build on the trading performance improvements delivered in 2018 and capitalise on the opportunities presented by the changes in the broadcast market."

 

 

- ends -

 

 

 

 

For further information please contact:

 

John Varney, Non-Executive Chairman

Peter Mayhead, Chief Executive

+44 (0) 75 55 59 36 02

+44 (0) 1932 333 790 

 

 

 

finnCap (Nomad and Broker)

Marc Milmo / Hannah Boros

 

+44 (0) 207 220 0500

 

 

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

 

In 2018, we embarked upon a strategic plan for the turnaround of the Company. In delivering the first profit after tax for a half year for continuing operations since 2014, we have demonstrated that we have the ability, and management capability, to deliver against this plan and to effect a successful turnaround.

 

We have a strong suite of automation, Channel in a Box and content management solutions that are increasingly relevant in a global broadcast sector that continues to go through significant change as the approach to the consumption of content continues to evolve. We are seeing excellent customer engagement and are very encouraged by the growth in orders seen in the period. We also recognise that the industry in which we are active will continue to see advancements in content delivery and therefore with a stronger platform now in place, a key part of our strategy will be to ensure we have the technology and software solutions that satisfies the needs of the broadcast industry.

 

I am pleased to report that trading in the first months of the second half of 2019 have been strong and we are firmly on track to meet management expectations. On behalf of the Board I would like to thank the executive team and all our hard-working staff for their diligence and efforts during the period.

 

John Varney

Non-Executive Chairman

 

 

CHIEF EXECUTIVE'S STATEMENT

 

I am delighted with the progress made by the Company in the period. Having set out the agenda for growth during the course of 2018 and focussed the Company on its core strength of broadcast playout solutions, the first  six months of 2019 are very encouraging and provide the Company with a very good platform from which to fully capitalise on the market opportunity. The period saw strong order and revenue growth as well as a return to a profit before tax.

 

Orders received in the period grew 23.6% to £5.2 million (H1 2018: £4.2 million). Revenue is up by 51% to £5.6 million (H1 2018: £3.7 million). Adjusted EBITDA for the business of £2.0 million (2018: £0.6 million). Reported profit for the period was £0.7 million (2018: loss £0.9 million). Net debt further reduced as at 30 June 2019 to £9.0 million (31 December 2018: £9.4 million).

 

What we do: we support broadcasters around the world as they adapt to compete with new entrants in the video media space by providing solutions to support their transition from traditional broadcast infrastructure to more flexible IP based technologies. The majority of our customer base is made up of large, global companies who are often the broadcaster of choice in the territories that they operate. They have market positions that are often dominant in their geographies and are thus very keen to maintain their positions.

 

Our strategy: we will continue to develop and improve our technology to ensure we have a competitive offering both today and in the future. We do this by developing new products internally as well as constantly monitoring what new startups are offering.

 

Mission Statement: we want to support broadcasters as they adapt to compete with new entrants in the video media space by providing solutions to support their transition from traditional broadcast infrastructure to more flexible IP based technologies.

 

Sector: broadcasters are now investing into technology to allow them to compete with the digital media companies that have disrupted the industry. We are witnessing key media companies breaking away from the likes of Netflix and looking for solutions to compete in the digital media space.  Our mission is clearly aligned with this sector development and has led to a 71% increase in the value of orders for investment into new systems for H1 2019 (£2.4 million) compared to H1 2018 (£1.4 million).

 

Financial Results

 

Pebble Beach Systems achieved H1 2019 revenue of £5.6 million (2018: £3.7 million).

 

Management is confident it will achieve its forecasts for the year as we head into H2 2019, with a backlog of orders of £5.2 million at 30 June 2019 (2018: £4.7 million) and a growing pipeline.

 

Adjusted EBITDA was £2.0 million in H1 2019 (2018: £0.6 million) before the deduction of depreciation and amortisation costs of £1.1 million.

 

In the first half, Central costs were £0.3 million (2018: £0.2 million). Reported profit before tax was £0.7 million (2018: loss £0.9 million).

 

The available Revolving Credit Facility (RCF) as at 30 June 2019 was £10.1 million (2018: £11.5 million) which had been fully drawn down. Interest paid on the RCF was £0.2 million (2018: £0.2 million). There is no overdraft facility (2018: £ Nil). In H1 2019 in accordance with the terms of the RCF £0.6 million was paid down (2018: £ Nil).

 

The Company continues to view investment in the development of new products and services as key to future growth. In the first half of 2019, Pebble Beach Systems capitalised £0.5 million of development costs (2018: £0.4 million) and amortised £0.4 million (2018: £0.4 million).

 

Dividends

 

As in previous years, the Board is not declaring an interim dividend.

Trading Outlook

The broadcast market continues to go through considerable changes with evolving technologies. The industry as a whole will benefit from higher spending from customers to invest in IP and cloud orientated infrastructures.

 

The momentum in spending and investment within the industry has been slow but is expected to grow and we are well positioned to take advantage of this.

 

Our customers continue to show clear signs of loyalty towards our world-class, specialist solutions and we are well-placed to deliver the requirements for the evolving technologies of IP and cloud orientated infrastructures.

 

 

Peter Mayhead

Chief Executive

For the six months ended 30 June 2019

 

 

 

 

FINANCIAL REVIEW

 

Divisions and Markets

For the half year ended 30 June 2019

 

Continuing Operations

 

 

2019

£'m

2018

£'m

Change

%

 

(Unaudited)

(Unaudited)

 

Pebble Beach Systems

5.6

3.7

49.1%

Total Revenue

5.6

3.7

49.1%

Pebble Beach Systems

2.3

0.8

207.1%

Central

(0.3)

(0.2)

-79.4%

Total adjusted EBITDA

2.0

0.6

252.6%

 

 

Pebble Beach Systems has contributed £5.6 million of revenue and £2.3 million of adjusted EBITDA in the six months to 30 June 2019.

 

 

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 30 June 2019 is £3.2 million (2018: £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.

 

Cash flows

 

The Group held cash and cash equivalents of £1.1 million at 30 June 2019 (2018: £1.3 million). Against this are set off debit balances of £ Nil (2018: £0.3 million). The table below summarises the cash flows for the half year.

 

 

2019

2018

 

£'million

£'million

 

 

 

Cash generated from operating activities

0.8

0.1

Net cash used in investing activities

(0.4)

(0.3)

Net cash used in financing activities

(0.6)

-

Effects of foreign exchange

            -

               -

Net decrease in cash and cash equivalents

(0.2)

(0.2)

Cash and cash equivalents at 1 January

1.3

1.2

Cash and cash equivalents at 30 June

1.1

1.0

 

 

As at 30 June 2019 net debt was £9.0 million (cash £1.1 million and bank debt of £10.1 million). At the end of August 2019, net debt had reduced to £8.9 million. The Group was using all £10.1 million of its available facilities in June 2019.

A marginally positive net increase in cash and cash equivalents is forecast for the second half of 2019. Scheduled debt repayments of £275,000 were made in March and June 2019. Further repayments of £275,000 are due in September and December 2019. 

 

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

2019

Average

rate

2018

Period end

rate

2019

Period end

rate

2018

US dollar

1.294

1.376

1.273

1.320

 

 

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 INCOME STATEMENT

for the six months ended 30 June 2019

 

 

 

6 months to 30 June 2019

6 months to 30 June 2018

Year ended 31 December

2018

 

 

(Unaudited)

(Unaudited)

(Audited)

 

Notes

£'000

£'000

£'000

 

 

 

 

 

Revenue

4

5,587

3,748

9,174

Cost of sales

 

(1,377)

(1,028)

(2,515)

Gross profit

4,210

2,720

6,659

Sales and marketing expenses

(1,052)

(1,196)

(2,163)

Research and development expenses

 

(717)

(600)

(1,222)

Administrative expenses

 

(1,030)

(830)

(1,759)

Foreign exchange gains

 

24

26

28

Other expenses

 

(511)

(871)

(1,723)

Operating profit/(loss)

924

(751)

(180)

Operating profit is analysed as:

 

Adjusted EBITDA

 

1,969

559

2,470

Non-recurring items

 

-

(167)

(304)

Exchange gains credited to the income statement

 

24

26

28

Earnings before interest, tax, depreciation and amortisation (EBITDA)

 

1,993

418

2,194

Depreciation

 

(126)

(65)

(127)

Amortisation and impairment of acquired intangibles

 

(511)

(704)

(1419)

Amortisation of capitalised development costs

 

(432)

(400)

(828)

Finance costs

(210)

(152)

(296)

Finance income

 

1

3

4

Profit/(loss) before tax

715

(900)

(472)

Tax

68

117

253

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

 

783

(783)

(219)

Net result from discontinued operations

     

16

56

195

Net result for the period

 

799

(727)

(24)

 

 

 

 

 

Earnings per share from continuing and

discontinued operations attributable to the owners of

the parent during the period

 

 

 

 

 

Basic earnings/(loss) per share

 

 

 

 

From continuing operations

7

0.6p

(0.6)p

(0.2)p

From discontinued operations

 

0.0p

0.0p

0.2p

From earnings/(loss) for the period

 

0.6p

(0.6)p

0.0p

 

 

 

 

 

Diluted earnings/(loss) per share

 

 

 

 

From continuing operations

7

0.6p

(0.6)p

(0.2)p

From discontinued operations

 

0.0p

0.0p

0.2p

From earnings/(loss) for the period

 

0.6p

(0.6)p

0.0p

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2019

 

 

 

6 months to 30 June 2019

6 months to 30 June 2018

Year ended 31 December

2018

 

 

(Unaudited)

(Unaudited)

(Audited)

 

 

 

£'000

£'000

£'000

 

 

 

 

 

 

 

Profit/(Loss) for the financial year

 

799

(727)

(24)

 

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

 

 

 

 

 

Exchange differences on translation of overseas operations

 

 

 

 

 

- continuing operations

 

(3)

(18)

(58)

 

- discontinued operations

 

-

3

2

 

 

 

 

 

 

 

Total profit/(loss) for the period attributable to owners of the parent

 

796

(742)

(80)

             

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the half year ended 30 June 2019

 

 

Ordinary shares 

£000

Share

premium

£000

 Capital

redemption

reserve

£000

 Merger

reserve

£000

 Translation

reserve

£000

Accumulated losses

£000

 Total

£000

At 1 January 2019

3,115

6,800

617

29,778

(195)

(46,260)

(6,145)

Adjustment on adoption of IFRS 16

-

-

-

-

-

(203)

(203)

Retained profit for the period

-

-

-

-

-

799

799

Exchange differences on translation of overseas operations

-

-

-

-

(3)

-

(3)

Total comprehensive income/expense for the period

-

-

-

-

(3)

799

796

At 30 June 2019 (Unaudited)

3,115

6,800

617

29,778

(198)

(45,664)

(5,552)

At 1 January 2018

3,115

6,800

617

29,778

(139)

(46,236)

(6,065)

Retained loss for the period

-

-

-

-

-

(727)

(727)

Exchange differences on translation of overseas operations

-

-

-

-

(15)

-

(15)

Total comprehensive income/expense for the period

-

-

-

-

(15)

(727)

(742)

At 30 June 2018 (Unaudited)

3,115

6,800

617

29,778

(154)

(46,963)

(6,807)

At 1 January 2018

3,115

6,800

617

29,778

(139)

(46,236)

(6,065)

Retained loss for the year

-

-

-

-

-

(24)

(24)

Exchange differences on translation of overseas operations

-

-

-

-

(56)

-

(56)

Total comprehensive income/expense for the period

-

-

-

-

(56)

(24)

(80)

At 31 December 2018 (Audited)

3,115

6,800

617

29,778

(195)

(46,260)

(6,145)

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2019

 

 

 

30 June 2019

30 June 2018

31 December

2018

 

 

(Unaudited)

(Unaudited)

(Audited)

 

Notes

£'000

£'000

£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

4,937

6,202

5,422

Property, plant and equipment

 

1,253

232

232

Deferred tax assets

 

3

-

3

 

 

6,193

6,434

5,657

Current assets

 

 

 

 

Inventories

 

238

220

210

Trade and other receivables

 

2,972

2,774

2,391

Current tax assets

 

-

18

12

Cash and cash equivalents

 

1,083

1,275

1,269

 

 

4,293

4,287

3,882

Liabilities

 

 

Current liabilities

 

 

 

 

Financial liabilities - borrowings

 

1,310

1,288

1,100

Contract liabilities

 

1,883

2,522

2,323

Trade and other payables

 

2,488

2,124

1,964

Provisions for other liabilities and charges

 

167

400

367

 

 

5,848

6,334

5,754

 

 

 

 

 

Net current liabilities

 

(1,555)

(2,047)

(1,872)

 

 

 

 

 

Non-current liabilities

 

 

 

 

Financial liabilities - borrowings

 

8,790

10,500

9,550

Other Non-current liabilities

 

1,107

-

-

Deferred tax liabilities

 

293

527

380

Provisions for other liabilities and charges

 

-

167

-

 

 

10,190

11,194

9,930

 

 

 

 

Net liabilities

(5,552)

(6,807)

(6,145)

 

 

Equity attributable to owners of the parent

 

 

 

 

Ordinary shares

 

3,115

3,115

3,115

Share premium account

 

6,800

6,800

6,800

Capital redemption reserve

 

617

617

617

Merger reserve

 

29,778

29,778

29,778

Translation reserve

 

(198)

(154)

(195)

Retained earnings

 

(45,664)

(46,963)

(46,260)

Total equity

 

(5,552)

(6,807)

(6,145)

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the half year ended 30 June 2019

 

 

 

 

 

 

 

 

6 months to 30 June 2019

6 months to 30 June 2018

Year ended 31 December

2018

 

 

(Unaudited)

(Unaudited)

(Audited)

 

Notes

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

Cash generated from operations

8

1,063

291

2,039

Interest paid

 

(210)

(152)

(295)

Taxation paid

 

(13)

(13)

(25)

Net cash from operating activities

840

126

1,719

 

 

 

 

Cash flows from investing activities

 

 

 

Interest received

 

1

3

4

Proceeds from sale of property, plant and equipment

 

-

-

3

Purchase of property, plant and equipment

 

(19)

(19)

(88)

Expenditure on capitalised development costs

 

(458)

(364)

(728)

 

 

 

 

 

Net cash (used in)/generated from investing activities

(476)

(380)

(809)

 

 

 

 

Cash flows from financing activities

 

 

 

Net cash used in repayment of financing activities

 

(550)

-

(850)

Net cash used in financing activities

 

(550)

-

(850)

Net (decrease)/increase in cash and cash equivalents

 

(186)

(254)

60

Effect of foreign exchange rate changes

 

-

(8)

(40)

Cash and cash equivalents and overdrafts at 1 January

 

1,269

1,249

1,249

Cash and cash equivalents and overdrafts at period end

 

1,083

987

1,269

 

 

 

 

Net debt comprises:

 

 

 

Cash and cash equivalents and overdrafts

1,083

987

1,269

Borrowings

(10,100)

(11,500)

(10,650)

Net debt at period end

(9,017)

(10,513)

(9,381)

 

 

The cash and cash equivalents and overdrafts balance comprise credit balances of £1,083,000 (2018: £1,275,000) which have been set off against debit balances of £ Nil (2018: £288,000).

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the half year ended 30 June 2019

 

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 half year results announcement was approved at close of business on 9 September 2019.

 

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 IFRS 16 Leases became effective. The Group has adopted the modified retrospective approach to implementation. Accordingly, comparative periods have not been restated.

 

From 1 January 2019, at inception of a contract, the Group assesses whether it is, or contains, a lease. A contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a time in exchange for consideration. A contract conveys the right to control the use of an asset, if the Group receives substantially all of the economic benefits from its use over time and controls how it is used.

 

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component based on their relative stand-alone prices.

 

For contracts entered into before 1 January 2019, the Group determined whether the arrangement was or contained a lease using the same assessment.

 

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right of-of-use asset is initially measured at cost. Cost comprises the initial amount of the lease liability, adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of its useful life or the end of the lease term. Useful life is determined on the same basis as other property and equipment.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or if that cannot be determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The lease liability is measured at amortised cost using the effective interest method.

 

The Group has elected not to recognise right-of-use assets and lease liabilities for leases that have a term of 12 months or less. The Group recognises the payments associated with these leases as an expense on a straight-line basis over the lease term.

 

Under the previous policy none of the Group's leases were classified as finance leases. Payments made under operating leases were recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognised as an integral part of the total lease expense, over the term of the lease.

 

The cumulative impact of the adoption of IFRS 16 has been accounted for as an adjustment to equity. For leases classified as operating leases in 2018 the Group did not recognise related assets or liabilities, and instead charged the cost to the income statement on a straight-line basis over the period of the lease and disclosed its total commitment in the notes to the financial statements. Instead of recognising an operating expense for its operating lease payments, the Group has recognised £21,000 interest on its lease liabilities and £67,000 amortisation on its right of use assets. Adjusted EBITDA has increased by £84,000 resulting from the reclassification of operating lease cost. It has not had a material effect on the Group's income or net assets.

 

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.

 

The financial information contained in these condensed financial statements has been computed in accordance with IFRS. However, this announcement, due to its condensed nature, does not itself contain sufficient information to comply with IFRS.

 

Going Concern

 

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

 

At 30 June 2019 net debt was £9.0 million (2018: £10.5 million) comprising net cash of £1.1 million (2018: £1.0 million) and bank debt of £10.1 million (2018: £11.5 million).

 

We maintain a good relationship with our bank. The current loan agreement secures the facility until 30 November 2020 with banking covenants and a repayment schedule in place.

 

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 continuing impact of cost reductions implemented in past years, and margin improvement strategies and sales growth in the future.

 

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 gross margin and sales growth. Finally, it considered sensitivities regarding the cost reductions.

 

The Board have concluded that the primary risk is one of ongoing trading and therefore the Group and hence the Company remains a going concern.

 

The Group has prepared forecasts which indicate that it is able to meet its ongoing banking covenants and debt reduction schedule.

 

We have a strong order book and pipeline which underpin our third and fourth quarter revenue.

 

The Board remains confident about the future prospects for the Group and have concluded that it is appropriate to prepare the Group interim financial statements on a going concern basis.

 

3.   ACCOUNTING POLICIES


Except as described above, the accounting policies applied are consistent with those of the annual report and financial statements for the year ended 31 December 2018, as described in those annual report and financial statements.

 

Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

 

Taxes on income in the half year periods are accrued using the tax rate that would be applicable to expected total annual earnings on a country by country basis.

 

4.   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

£'000

£'000

6 months to 30 June 2019 (Unaudited)

 

 

 

Total revenue

5,587

-

5,587

 

 

 

 

Adjusted EBITDA

2,328

(359)

1,969

Depreciation

(126)

-

(126)

Amortisation and impairment of acquired intangibles

(511)

-

(511)

Amortisation of capitalised development costs

(432)

-

(432)

Non-recurring items

-

-

-

Exchange (losses)/gains

20

4

24

Finance costs

(25)

(185)

(210)

Finance income

1

-

1

Profit/(loss) before taxation

1,255

(540)

715

Taxation

70

(2)

68

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

1,325

(542)

783

6 months to 30 June 2018 (Unaudited)

 

 

 

Total revenue

3,748

-

3,748

 

 

 

 

Adjusted EBITDA

758

(199)

559

Depreciation

(65)

-

(65)

Amortisation and impairment of acquired intangibles

(704)

-

(704)

Amortisation of capitalised development costs

(400)

-

(400)

Non-recurring items

(167)

-

(167)

Exchange (losses)/gains

26

-

26

Finance costs

-

(152)

(152)

Finance income

2

1

3

Loss before taxation

(550)

(350)

(900)

Taxation

117

-

117

Loss for the period being attributable to owners of the parent

(433)

(350)

(783)

Year to 31 December 2018 (Audited)

 

 

 

Total revenue

9,174

-

9,174

 

 

 

 

Adjusted EBITDA

2,867

(397)

2,470

Depreciation

(127)

-

(127)

Amortisation of acquired intangibles

(1,419)

-

(1,419)

Amortisation of capitalised development costs

(828)

-

(828)

Non-recurring items

(3,858)

3,554

(304)

Exchange (losses)/gains

46

(18)

28

Finance costs

-

(296)

(296)

Finance income  

3

1

4

Intercompany finance income/(costs)            

118

(118)

-

(Loss)/profit before taxation

(3,198)

2,726

(472)

Taxation

254

(1)

253

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

(2,944)

2,725

(219)

 

 

£3.5 million intercompany debt between Pebble Beach Systems Ltd and Pebble Beach Systems Group Plc was waived in December 2018.

 

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.

 

 

 

6 months to 30 June

2019

(Unaudited)

6 months to 30 June 2018

(Unaudited)

Year ended 31 December

2018

(Audited)

 

Total

£'000

Total

£'000

Total

£'000

By market

 

 

 

UK & Europe

2,807

1,589

4,820

North America

222

251

585

Latin America

683

242

513

Middle East

1,720

1,608

2,931

Asia / Pacific

155

58

325

 

5,587

3,748

9,174

 

 

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.

 

 

 

6 months to 30 June 2019

6 months to 30 June 2018

Year ended 31 December

2018

 

Total

Total

Total

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

By division:

 

 

 

Pebble Beach Systems

4,935

6,360

5,308

Central

(10,487)

(13,167)

(11,453)

 

(5,552)

(6,807)

(6,145)

 

 

5.   OPERATING PROFIT

 

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

 

 

6 months to 30 June 2019

6 months to 30 June 2018

Year ended 31 December

2018

 

Total

Total

Total

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

Depreciation of property, plant and equipment

126

65

127

Amortisation of acquired intangibles

511

704

1,419

Operating lease rentals

-

84

167

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

(24)

(26)

(28)

Research and development expenditure in the year which includes:

717

1,222

1222

-       Amortisation of capitalised development costs

432

400

828

 

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: 

 

 

6 months to 30 June 2019

6 months to 30 June 2018

Year ended 31 December

2018

 

Total

Total

Total

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

Rationalisation and Redundancy costs

-

167

358

Provision for former executive debt

-

-

(54)

 

-

167

304

 

 

6.   INCOME TAX EXPENSE

 

 

6 months to 30 June 2019

6 months to 30 June 2018

Year ended 31 December

2018

 

Total

Total

Total

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

Current tax

 

 

 

UK corporation tax

-

-

27

Foreign Tax - current year

19

3

-

Adjustments in respect of prior years

-

-

(11)

Total current tax

19

3

16

 

 

 

 

Deferred tax

 

 

 

UK corporation tax

-

(120)

(269)

Total deferred tax

(87)

(120)

(269)

 

 

 

 

Total taxation

(68)

(117)

(253)

 

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 (2018: 17 per cent).

 

 

7.   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.

 

 

6 months to 30 June 2019

(Unaudited)

Year ended 31 December 2018

(Audited)

 

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 earnings per share

 

 

 

 

 

 

Profit/(loss) attributable to continuing operations

783

 

0.6p

(219)

 

(0.2)p

Profit attributable to discontinued operations

16

 

0.0p

195

 

0.2p

Basic earnings/(loss) per share

799

124,477

0.6p

(24)

124,477

0.0p

Diluted earnings per share

 

 

 

 

 

 

Profit/(loss) attributable to continuing operations

783

 

0.6p

(219)

 

(0.2)p

Profit attributable to discontinued operations

16

 

0.0p

195

 

0.2p

Diluted earnings/(loss) per share

799

124,577

0.6p

(24)

124,477

0.0p

 

 

 

6 months to 30 June 2018

(Unaudited)

 

 

Earnings

 £'000

 Weighted

average

number

 of shares

 '000s

 Earnings

 per share

 pence

 

 

 

Basic loss per share

 

 

 

 

 

 

Loss attributable to continuing operations

(783)

 

(0.6)p

 

 

 

Profit attributable to discontinued operations

56

 

0.0p

 

 

 

Basic loss per share

(727)

124,477

(0.6)p

 

 

 

Diluted loss per share

 

 

 

 

 

 

Loss attributable to continuing operations

(783)

 

(0.6)p

 

 

 

Profit attributable to discontinued operations

56

 

0.0p

 

 

 

Diluted loss per share

(727)

124,477

(0.6)p

 

 

 

 

Potential ordinary shares were non-dilutive in the prior periods because they would decrease the loss per share from continuing operations. Accordingly, there was no difference between basic and diluted EPS.

 

Adjusted earnings

 

The directors believe that adjusted EBITDA, 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 reconciliation between reported and underlying earnings and basic earnings per share is shown below:

 

 

6 months to 30 June 2019

6 months to 30 June 2018

Year ended 31 December

2018

 

Total

Total

Total

 

(Unaudited)

(Unaudited)

(Audited)

 

Earnings

Earnings

Earnings

 

£'000

Pence

£'000

Pence

£'000

Pence

Reported earnings/(loss) per share - continuing operations

783

0.6p

(783)

(0.6)p

(219)

(0.2)p

Depreciation

105

0.1p

54

0.0p

105

0.1p

Amortisation of acquired intangibles after tax

424

0.3p

584

0.4p

1,178

0.9p

Amortisation of capitalised development costs

359

0.3p

332

0.3p

687

0.6p

Non-recurring items after tax

-

-

135

0.1p

245

0.2p

Exchange losses/(gains)

(19)

0.0p

(21)

0.0p

(23)

0.0p

Adjusted earnings per share - continuing operations

1,652

1.3p

301

0.2p

1,973

1.6p

 

 

8.   CASH FLOW GENERATED FROM OPERATING ACTIVITIES

 

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

 

 

6 months to 30 June 2019

6 months to 30 June 2018

Year ended 31 December

2018

 

Total

Total

Total

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

Profit/(loss) before tax - continuing operations

715

(900)

(472)

Profit before tax - discontinued operations

16

56

184

Total profit/(loss) before tax

731

(844)

(288)

Depreciation of property, plant and equipment

126

65

127

Loss on disposal of property, plant and equipment

-

-

10

Amortisation and impairment of development costs

432

400

828

Amortisation and impairment of acquired intangibles

511

703

1,419

Finance income

(1)

(3)

(4)

Finance costs

210

152

295

Decrease/(increase) in inventories

(28)

5

15

Decrease/(increase) in trade and other receivables

(581)

955

848

Decrease in trade and other payables

(137)

(942)

(811)

Decrease in provisions

(200)

(200)

(400)

Net cash generated from operating activities

1,063

291

2,039

 

 

9.   NET FUNDS

 

Reconciliation of change 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 2019

1,269

(10,650)

(9,381)

Cash flow for the period before financing

364

-

364

Movement in borrowings in the period

(550)

550

-

Exchange rate adjustments

-

-

-

Cash and cash equivalents at 30 June 2019 (Unaudited)

1,083

(10,100)

(9,017)

At 1 January 2018

1,249

(11,500)

(10,251)

Cash flow for the period before financing

(254)

-

(254)

Movement in borrowings in the period

-

-

-

Exchange rate adjustments

(8)

-

(8)

Cash and cash equivalents at 30 June 2018 (Unaudited)

987

(11,500)

(10,513)

At 1 January 2018

1,249

(11,500)

(10,251)

Cash flow for the year before financing

910

-

910

Movement in borrowings in the year

(850)

850

-

Exchange rate adjustments

(40)

-

(40)

Cash and cash equivalents at 31 December 2018 (Audited)

1,269

(10,650)

(9,381)

 

 

 

 

Ends


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