Final Results

Embargoed Release: 07:00hrs Wednesday 16 March 2005 Toad Group Plc (`Toad' or the `Group') Preliminary Results Announcement for the Year Ended 31st December 2004 Highlights * Operating profit before intangibles up on last year * Strong growth in hands-free installations * 25% stake taken in high growth business supplying CCTV for public transport vehicles * Net debt down despite Â£1.78m spend on above investment * Move to AIM proposed for Spring `05 Chairman's Statement Trading Results I am pleased to report that despite a difficult year for our mature businesses we have recorded a slight increase in operating profit after interest payable but before amortisation and impairment of intangibles at Â£1.5m (2003: Â£1.4m). This has been achieved by tight control of all operations combined with shifting the focus of the business into new growth markets. This has required some investment, but disciplined working capital management has meant that we have been able to fund a Â£1.8m cash investment (including costs) in a high growth business and at the same time actually reduce our net debt to Â£3.7m (2003: Â£3.9m). Our results are summarised as follows: 2004 2003 Â£m Â£m Turnover 34.6 33.2 Gross profit 14.2 13.3 Gross profit percentage 41% 40% Operating expenses excluding amortisation and impairment of (12.2) (11.3) intangibles Operating profit before amortisation and impairment of 2.0 2.0 intangibles Operating profit before amortisation and impairment of 1.5 1.4 intangibles but after interest payable Sales overall increased by Â£1.4m to Â£34.6m (2003: Â£33.2m) mainly due to significant growth by our Technical Services Division where sales are up by Â£ 3.2m (160%) boosted by mobile phone hands-free installations. We are now handling around 3,000 hands-free installations a month from virtually a standing start at the end of 2003. Conversely our mature businesses have seen some inevitable decline. Car audio insurance replacement was down by Â£2.4m (23%) on 2003 and car security distribution sales were down Â£1.3m (21%) on the prior year, but by sourcing new products, extending our ranges, increasing market penetration and looking to new markets, sales in our other business areas increased by Â£1.9m although margins have been under pressure. This Â£1.9m includes Â£0.8m from the sale of distribution rights for Actra in the UK public transport sector to 21st Century Crime Prevention Services Limited ('21st Century'), a company in which the group subsequently took a 25% stake (see below). Increases in operating expenses in the period (excluding amortisation and impairment of intangibles) reflect our investment in training and infrastructure to support new growth areas. Our biggest single operational investment this year has been to enhance our engineering and call centre resource to support the growth in the hands-free installation business. The benefit of this can be seen in the enhanced gross margin with the related labour cost included in operating expenses. Operating expenses also include product development costs written off of Â£ 170,000 and costs of Â£110,000 incurred to investigate several acquisition opportunities in the year. Amortisation and impairment of intangibles and tax 2004 2003 Â£m Â£m Operating profit before amortisation and impairment of intangibles 1.5 1.4 but after interest payable Amortisation and impairment of intangibles (0.7) (0.3) Net profit before tax 0.8 1.1 Tax - 0.2 Minority interests - (0.1) Net profit after tax and minority interests 0.8 1.2 At the end of the year the directors undertook a detailed review of the carrying value of the group's intangible fixed assets. After due consideration of all the factors it was decided that the remaining balances in respect of Metvale (the acquisition of an audio insurance replacement business dating from January 1999) and Actra (development costs in respect of our telematics product accumulated since 2001) should be written off. This has resulted in a one-off impairment charge of Â£0.4m in the year but as a result there will be no further amortisation charges in respect of these intangibles in future years. Last year's results were enhanced by a tax credit resulting from an accounting requirement to recognise a deferred tax asset in respect of previous years' trading losses. An equivalent asset remains in the balance sheet at 31 December 2004. The net tax charge is Â£nil in 2004 (2003: credit of Â£0.2m) and the group has Â£2.6m (2003: Â£4.0m) of tax losses available for carry forward. Investment in associate In December we acquired a 25% stake in 21st Century for Â£1.65m (before costs) in cash together with options to acquire the remaining 75% in two tranches of 24% and 51%, for a further total cash payment of Â£5.05m. 21st Century is a fast growing supplier of specialist CCTV security systems for public transport vehicles. These systems have the support of transport authorities and operating companies who are keen to increase passenger numbers by reducing crime on public transport vehicles and defeat fraudulent or bogus insurance claims. As well as supplying security solutions to numerous public transport companies, 21st Century is the preferred supplier to Arriva's UK Bus Division with whom it has developed a bespoke system. Synergy from this acquisition comes from leveraging our installation and customer services capabilities to accelerate growth. We are excited by the prospects for this business and our close working relationship will enable us to assess the progress of the company before we exercise our options to take 100% ownership. In view of the encouraging early progress of 21st Century the directors are keen to exercise the company's first option to acquire a further 24% of 21st Century at the option price of Â£750,000 in cash. These additional preference shares yield a dividend entitlement of Â£245,000 per annum which will bring the cumulative dividend entitlement to Â£500,000 per annum. The directors intend to exercise this option only once the company has moved across to AIM (see below) to avoid the disproportionate costs which would otherwise be associated with the transaction if the company were to remain on the Official List. Proposed move to AIM The board is planning to move the company's ordinary shares from the Official List of the United Kingdom Listing Authority (the 'Official List') to the AIM market of the London Stock Exchange ('AIM') in the second quarter of 2005. As an AIM company, the company will continue to be subject to the regulatory and disciplinary controls of the London Stock Exchange. The board believes that AIM, with its lower cost of complying with continuing obligations, is a more appropriate market for the company given its size and shareholder base and would allow the company to pursue acquisitions in the most cost effective manner. Shareholders should be reassured that, so far as is known to the directors, with the exception of shares held in a Personal Equity Plan or an Individual Savings Account, the transfer to AIM will in no way affect their ability to hold shares in the company and existing share certificates will remain valid. Shareholders should note that shares held in companies trading on AIM are treated as unquoted for purposes of certain tax reliefs, although shareholders should seek their own financial advice on this point. Board change In January this year Stuart Gall our Marketing Director gave notice of his intention to leave the company in the Spring of 2005 to pursue other interests in the biotechnology sector. Stuart has been with the company from the very beginning and I would like to thank him for his invaluable contribution over the past 11 years. Staff I would also like to take this opportunity to thank all the staff for their hard work over the last year. It is through their dedication and enthusiasm that we have been able to maintain the profitability of the group in the face of significant market pressure within a number of the businesses in which we operate. Strategy and current trading While it is pleasing to be able to report an operating profit before amortisation and impairment of intangibles in line with the prior year, we remain determined to grow this business. Current trading is in line with market expectations. We continue to generate cash from our mature businesses to fund growth opportunities and we are actively looking to grow by acquisition. Peter Ward Chairman Operating Review The Toad Group of companies operate in two divisions: Services: Insurance Services is the provision of claims handling and fulfilment for the UK's major insurance companies. The core business is founded on the replacement of stolen in-car audio equipment. Insurance Services represents 25% (2003: 33%*) of group turnover. Technical Services is the supply and installation of mobile phone hands-free kits, security, telematics and sat-nav systems to fleet and other non-insurance customers. Technical Services represents 15% (2003: 6%*) of group turnover. Distribution: Supply of third party in-car entertainment systems, own-brand security systems and interface cables to the retail or wholesale trade, vehicle and motorcycle manufacturers. Distribution represents 60% (2003: 61%*) of our total turnover. *Note that 2003 comparative figures have been amended to reclassify certain categories of income in line with classifications adopted in the current year Services Insurance Services turnover at Â£8.7m was down 21% on the previous year (2003 sales: Â£11.0m). The fall in sales is attributable to the maturity of the car audio insurance replacement market. We are actively looking for other opportunities in insurance services. Technical Services turnover increased by 260% to Â£5.2m (2003 sales: Â£2.0m). Â£ 3.3m (2003: Â£0.3m) of the total sales figure was attributable to income from the installation of mobile phone hands-free car kits - most of which comes from our contract with UTL who manage the installation logistics on behalf of Vodafone. Technical Services turnover also includes Â£0.8m from the sale of certain distribution rights in Actra. Distribution Distribution turnover increased to Â£20.7m (2003: Â£20.2m). Sales of satellite navigation and in-car entertainment systems performed strongly to reach Â£12.7m an increase of 18% on the previous year and this offset the decline in sales within the car security market. The extension of the product range within Datatool, our motorcycle security and accessories business has yielded some early success - in particular, with sales of motorcycle battery chargers which increased by over 150% in the year. Sales of the Reevu crash helmet, for which we have the UK distribution rights, are due to start during 2005. Operating expenses Group operating expenses excluding amortisation and impairment of intangibles have increased to Â£12.2m up Â£0.9m on the prior year. More than half of this increase is attributable to our investment in recruitment and training of engineers and call centre staff to service the growing hands-free installation business. These costs are however covered by the enhanced gross margin which has arisen from the hands-free installation revenue included in sales. The remainder of the increased operating expenses representing a rise of 3.5% includes the costs of relocating Datatool at the beginning of the year to share our head office facility, R&D costs for new products and services, increased advertising and marketing spend for new products and services and professional costs associated with several acquisition opportunities which were reviewed in the year. In addition, at the year end the directors undertook a review of the carrying value of investments in the company and made a provision against these of Â£ 7.3m. This provision does not impact on the group balance sheet or group results for the year. 21st Century On 18 December 2004 we completed a transaction to acquire 25% of 21st Century with an option to acquire the remaining 75%. 21st Century supplies and installs CCTV security systems for use on public transport vehicles and has preferred supplier status with Arriva's UK Bus Division. 21st Century employs sub-contract labour to carry out its installations. We are training our engineers to carry out this work alongside existing contractors and thereby accelerate the growth of this business. We will also be able to draw on our sales and support infrastructure to enhance the existing service and accommodate growth in the customer base. 21st Century has two classes of shares, being ordinary and preference shares. The preference shares and ordinary shares rank pari-passu in all respects except to the extent that the preference shareholders have the first entitlement to dividends before the ordinary shareholders. Our initial 25% investment of Â£1.65m in cash was made by way of preference shares in 21st Century which yield a cumulative dividend entitlement of Â£ 255,000 per annum. 49% of the share capital is represented by preference shares and our initial investment included an amount in respect of options to buy the remaining preference shares for Â£750,000 which will bring our dividend entitlement to Â£500,000 per annum. We then have an option to acquire the remaining 51% of the business for Â£4.3m. Working capital and net debt Net cash flow from operations was Â£3.0m (2003: Â£2.6m). Interest and finance costs paid were Â£0.5m (2003: Â£0.5m). Net capital expenditure was Â£0.5m (2003: Â£ 0.6m) and the cash paid in respect of the acquisition of the stake in 21st Century including professional fees was Â£1.8m (2003: Â£nil). As a result net debt at the year end was reduced to Â£3.7m (2003: Â£3.9m). Conversion of redeemable preference shares On 23 December 2004 the preference shareholder, Carglass Luxembourg Sarl - Zug Branch, converted its 3,114,582 convertible redeemable preference shares in the company into new ordinary shares of 10p each in accordance with the terms of the preference shares. These new ordinary shares rank pari-passu with the existing ordinary shares and represent 3.8% of the enlarged ordinary share capital. Revaluation of freehold property The group's freehold property at Mitcham was revalued on 10 December 2004, on the basis of open market valuation by independent qualified valuers. This valuation has been incorporated into the financial statements and the resulting revaluation adjustment has been taken to revaluation reserve. The revaluation resulted in a revaluation surplus of Â£1,406,000. People We have continued our investment in training with particular emphasis on our engineering workforce to support the growth in the mobile phone installation business. The experience and facilities developed in this exercise will be invaluable in helping us meet the growth in CCTV installations into public transport vehicles, which our alliance with 21st Century will bring. Nick Grimond Managing Director Consolidated profit and loss account For the year ended 31 December 2004 Continuing operations Before Amortisation 2004 2003 amortisation and (restated) and impairment impairment of of intangibles intangibles Notes Â£'000 Â£'000 Â£'000 Â£'000 Turnover 1 34,574 - 34,574 33,235 Cost of sales (20,380) - (20,380) (19,910) ________ __________ ________ ________ Gross profit 14,194 - 14,194 13,325 Other operating (12,187) (687) (12,874) (11,679) expenses _________ __________ ________ ________ Group operating 2,007 (687) 1,320 1,646 profit Share of operating (3) (3) (6) - profit in associate-acquisition __________ __________ ________ _________ Total operating 2,004 (690) 1,314 1,646 profit Interest payable and (547) - (547) (586) similar charges __________ __________ ________ _________ Profit on ordinary 1,457 (690) 767 1,060 activities before taxation Taxation - - - 200 __________ __________ ________ _________ Profit on ordinary 1,457 (690) 767 1,260 activities after taxation Minority (1) - (1) (86) interests-equity __________ __________ ________ _________ Profit for the year 1,456 (690) 766 1,174 attributable to members of the parent company ========= ========= ======= ======== Earnings per 1.85p 0.97p 1.55p share-basic -diluted 1.79p 0.94p 1.48p There are no differences between the historical cost profit and the results shown above for both periods. Consolidated statement of total recognised gains and losses For the year ended 31 December 2004 2004 2003 Â£'000 Â£'000 Profit/(loss) for the financial year - Group 772 1,174 - Associate company (6) - _______ _______ 766 1,174 Unrealised surplus on revaluation of 1,406 - freehold property _______ _______ Total recognised gains for the year 2,172 1,174 ====== ====== - Group 2,178 1,174 - Associate company (6) - _______ _______ Total recognised gains for the year 2,172 1,174 ====== ====== Balance sheets At 31 December 2004 Notes 2004 Group 2004 Company Â£'000 2003 Â£'000 2003 Â£'000 Â£'000 Fixed assets Intangible assets 634 1,321 - - Tangible assets 4,406 2,906 - - Investments 2 1,774 - 10,562 16,115 ________ _________ ________ ________ 6,814 4,227 10,562 16,115 ________ _________ ________ ________ Current assets Stocks 3,678 3,755 - - Debtors 5,000 5,153 4,184 6,950 Cash at bank and in 809 541 - 29 hand ________ __________ _________ ________ 9,487 9,449 4,184 6,979 Creditors: amounts (7,626) (6,281) (1,099) (1,049) falling due within one year ________ __________ _________ ________ Net current assets 1,861 3,168 3,085 5,930 ________ __________ _________ ________ Total assets less 8,675 7,395 13,647 22,045 current liabilities Creditors: amounts (975) (1,892) (975) (1,890) falling due after more than one year ________ __________ _________ ________ Net assets 7,700 5,503 12,672 20,155 ======= ========= ======== ======= Capital and reserves Called up share 8,169 8,144 8,169 8,144 capital Share premium account 12,110 12,110 12,110 12,110 Share capital to be 43 43 43 43 issued Merger reserve - - 1,001 1,001 Revaluation reserve 1,406 - - - Profit and loss (14,028) (14,794) (8,651) (1,143) account ________ __________ _________ ________ Total shareholders' funds Equity 7,700 4,724 12,672 19,376 Non-equity - 779 - 779 7,700 5,503 12,672 20,155 ________ __________ _________ ________ Minority interest - - - - ________ __________ _________ ________ Capital employed 3 7,700 5,503 12,672 20,155 ======= ========= ======== ======= Consolidated statement of cash flows For the year ended 31 December 2004 Notes 2004 2003 Â£'000 Â£'000 Net cash inflow from operating 4 3,002 2,551 activities _______ ______ Returns on investments and servicing of finance Interest paid (461) (493) Interest paid on finance leases (2) (8) _______ ______ (463) (501) _______ ______ Taxation UK corporation tax refunded - 155 _______ ______ Capital expenditure Purchase of intangible fixed - (9) assets Purchase of tangible fixed assets (513) (668) Sale of tangible fixed assets 5 38 ________ ________ (508) (639) ________ ________ Acquisitions Purchase of investment in (1,780) - associate ________ ________ Cash inflow before financing 251 1,566 ________ ________ Financing Issue of shares 25 691 Repayment of long term borrowings (1,000) (1,000) Repayment of principal under (13) (103) finance leases ________ ________ (988) (412) ________ ________ (Decrease)/increase in cash in 6 (737) 1,154 the year ======= ======= Notes to the financial statements at 31 December 2004 1. Segmental reporting Turnover consists primarily of sales made in the United Kingdom. Export sales are not material. The analysis by business area is based upon the group's reporting structure. Sales between segments are not material. Turnover Profit before tax Restated Before After After amortisation amortisation amortisation and and and impairment impairment impairment of of of intangibles intangibles intangibles 2004 2003 2004 2004 2003 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Business analysis Services 13,897 12,986 1,147 575 679 Distribution 20,677 20,249 310 192 381 _______ _______ _______ _______ _______ 34,574 33,235 1,457 767 1,060 ======= ======= ======= ======= ======= Net assets Excluding Including Including Intangible Intangible Intangible assets assets assets 2004 2004 2003 Â£'000 Â£'000 Â£'000 Business analysis Services 3,479 3,479 1,809 Distribution 3,387 4,021 3,494 _____ _____ ______ 6,866 7,500 5,303 Central 200 200 200 _____ _____ _____ Total 7,066 7,700 5,503 ===== ===== ===== Central net assets comprise assets, partially offset by liabilities, that cannot practicably be divided between the segments and comprise the deferred corporation tax asset. 2. Fixed asset investments Details of the group's investments are: Interest in associate Â£'000 Cost: At 1 January 2004 - Addition -Net assets 94 -Goodwill 1,686 Share of loss in period (3) _____ At 31 December 2004 -Net assets 91 -Goodwill 1,686 _____ 1,777 _____ Accumulated amortisation of goodwill: At January 2004 - Charge for the period (3) _____ At 31 December 2004 (3) _____ Net book amount: At 31 December 2004 -Net assets 91 -Goodwill 1,683 _____ 1,774 ===== Purchase of an associate On 18 December 2004 the company acquired a 25% interest in 21st Century Crime Prevention Services Limited ('21st Century') by way of preference shares which will yield an annual dividend entitlement of at least Â£255,000. The company has also acquired (i) an option to buy further preference shares for Â£750,000 in cash which will bring its holding in 21st Century up to 49% and its annual dividend entitlement up to at least Â£500,000 and; (ii) an option to acquire the remaining 51% of the business for Â£4.3m in cash. Should the company not exercise these options by 18 December 2006, the majority shareholders in 21st Century have the option to buy back the 25% interest currently held by the company. Details of the company's investments are: Interests in group Undertakings Â£'000 Cost: 18,931 At 1 January 2004 Additions 1,780 _____ At 31 December 2004 20,711 _____ Amounts provided: At 1 January 2004 (2,816) Provided in the year (7,333) _____ At 31 December 2004 (10,149) _____ Net book amount: At 31 December 2004 10,562 ===== Net book amount: At 31 December 2003 16,115 ===== At the year end the directors undertook a review of the carrying value of the company's investments which comprise its interests in group undertakings and increased the amount provided against these investments to Â£10,149,000. 3. Reconciliation of movements in shareholders' funds 2004 2003 Â£'000 Â£'000 Group Opening shareholders' funds 5,503 3,638 Placing of shares - 691 Exercise of share options 25 - Revaluation surplus 1,406 - Profit for the year 766 1,174 _______ _______ Closing shareholders' funds 7,700 5,503 ====== ====== 2004 2003 Â£'000 Â£'000 Company Opening shareholders' funds 20,155 17,721 Placing of shares - 691 Exercise of share options 25 - (Loss)/profit for the year (7,508) 1,743 _______ _______ Closing shareholders' funds 12,672 20,155 ====== ====== 4. Reconciliation of operating profit to net cash inflow from operating activities 2004 2003 Â£'000 Â£'000 Operating profit 1,314 1,646 Depreciation on tangible fixed assets 414 417 Amortisation and impairment of intangible fixed 690 304 assets Decrease in stocks 77 350 Decrease/(increase) in debtors 153 (540) Increase in creditors 354 374 _______ _______ Net cash inflow from continuing operating activities 3,002 2,551 ======= ======= 5. Reconciliation of net cash flow to movement in net debt 2004 2003 Â£'000 Â£'000 (Decrease)/increase in cash in the year (737) 1,154 Cash outflow from movement in debt 1,013 1,103 _______ _______ Change in net debt arising from cash flows 276 2,257 Other - amortisation of loan issue costs (85) (85) _______ _______ Movement in net debt in the year 191 2,172 Net debt at 1 January (see note 6) (3,916) (6,088) _______ _______ Net debt at 31 December (see note 6) (3,725) (3,916) ======= ======= 6. Analysis of net debt At Cash flow Non cash At 31 December movement 31 December 2003 2004 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in 541 268 - 809 hand Bank overdrafts (1,552) (1,005) - (2,557) _______ _______ _______ _______ (1,011) (737) - (1,748) _______ _______ _______ _______ Finance leases (15) 13 - (2) Short term bank loans (1,000) 1,000 (1,000) (1,000) Other loans (1,890) - 915 (975) _______ _______ _______ _______ (3,916) 276 (85) (3,725) ======= ======= ======= ======= The net non cash movement relates to amortised loan issue costs during the year. 7.Restatements The company has reviewed its presentation of certain amounts The group receives rebates from suppliers and pays rebates to customers representing contributions to marketing costs. Previously these contributions were included in turnover and cost of sales respectively. Rebates received and paid have been reclassified to other operating expenses. Rebates received in 2004 were Â£553,000 (2003: Â£541,000) and rebates paid were Â£223,000 (2003: Â£ 312,000) In previous years bought ledger discounts received were included in turnover. These have now been reclassified as a deduction from cost of sales. Bought ledger discounts received in 2004 were Â£300,000 (2003: Â£326,000) In previous years intercompany sales by Integrated Technologies (International) Limited to Toad (UK) Limited were not eliminated on consolidation. The consolidated turnover and cost of sales figures have been reduced by intercompany sales in 2004 of Â£418,000 (2003: Â£259,000). The impact of the restatement of the above amounts on the results for 2003 can be summarised as follows: Restatement 2003 Increase/ Increase/ (Decrease)/ (decrease) in (decrease) in increase in sales cost of sales operating expenses Â£'000 Â£'000 Â£'000 Rebates received (541) - (541) Rebates paid - (312) 312 Bought ledger discounts (326) (326) - Intercompany sales (259) (259) - _______ _______ _______ (1,126) (897) (229) ====== ======= ======= 8. Related party transactions 21st Century Crime Prevention Services Limited ('21st Century') Mr Paul Frodsham, Managing Director and majority shareholder in 21st Century, is the brother-in-law of Mr Wilson Jennings a main board director and Company Secretary of Toad Group plc. On 17th December 2004, the group sold the distribution rights to Actra within the UK public transport market to 21st Century for Â£850,000. On 18th December 2004, Toad Group plc acquired a 25% stake in 21st Century along with options to acquire the remaining share capital (further details are given in note 14) for Â£1,650,000. At 31 December 2004 there was an amount of Â£149,000 included within other debtors (2003: Â£nil) outstanding and payable by 21st Century to the group. 9. Publication of non-statutory accounts and basis of preparation The financial information contained in this preliminary announcement does not constitute statutory accounts for the year ended 31 December 2004. The financial information for the year ended 31 December 2003 is derived from the statutory accounts for that period which have been delivered to the Registrar and included an audit report which was unqualified and did not contain a statement under either Section 237(2) or Sections 237(3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2004 will be finalised on the basis of the financial information presented by the directors in the preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. -END- For Further Information: Peter Ward Toad Group Plc 020 8710 4015 Chairman Andrew Tan Hansard Communications 020 7245 1100 Account Executive

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