Interim Results
Pentagon Protection PLC
14 June 2006
For Immediate Release PENTAGON PROTECTION PLC 14 June 2006
INTERIM RESULTS
Pentagon Protection Plc, the provider of safety and security products for
commercial and architectural glass, announces its interim results for the six
months ending March 2006.
The period under review saw much needed change and, as indicated in the February
2006 trading update, the Group has carried through a major restructuring the
business and its focus. A major part of the restructuring was the successful
divestment (announced in May 2006) of the Company's loss-making automotive
division, permitting a strengthening of focus on the high potential
opportunities within the buildings sector, a core area of competence for the
Group.
The losses generated in the period were therefore in line with expectations.
We are also pleased to announce that Alan Nicholl, previously Managing Director
of Pentagon Protection, has been appointed as interim Chairman.
Financial Highlights:
• Turnover up from £1.369m to £1.430m, an increase of 4.4%.
• Gross profit up from £515k to £683k, an increase of 32.6%.
• The loss is up from £563k to £638k, an increase of 13.3%
• No Interim dividend
Graham Bannerman, Pentagon Chief Executive commented:
'In reaction to the suffering of continued losses from the automotive division
we underwent a major strategic review. I am happy to report that our growing
domestic and overseas order books are already justifying the Company's much
needed restructuring. The team is now single-mindedly focused on completing this
process. By building on the Company's proven strengths we look forward to
reporting further and profitable new business wins in the second half and
beyond.'
Contact:
•Graham Bannerman 01494 793 333
(CEO Pentagon Protection Plc)
•Ben Knowles 020 7786 9600
Parkgreen Communications Mob. 07900 346 978
Chairman's statement
Introduction
I have just taken over as interim Chairman of Pentagon Protection Plc, having
held the role of Managing Director for the past two years. We are currently in
discussions with a major figure within the glass surfacing industry in regards
offering him the role of Chairman. Meanwhile I very much look forward to putting
my extensive experience at Pentagon to good use in steering the Group into an
exciting new future as we concentrate all our attention and resources on the
buildings sector.
The six months ended 31 March 2006 was a period during which the Group continued
to bear the losses of its automotive division. As a result, the Group continued
to generate losses in the six months at approximately the same rate as during
the last financial year.
During the period under review a great deal of management effort was focused on
securing a disposal of the automotive division as well as the development of a
strategic plan for how to take the Group forward once the disposal was complete.
I am happy to say that the former has been achieved and the latter is in place
and we are already witnessing the benefits.
Financial Review
Turnover for the period under review was £1,429,799 compared with £1,369,389 for
the comparable six month period in the previous financial year, an increase of
4.4%. The Group achieved a considerably improved gross profit on these sales of
£682,581, as compared to £515,364 for the equivalent period last year,
representing a gross profit margin of 48%, compared to 37% achieved in the six
months ended 31 March 2005. This is not quite as exciting as it appears because
48% is in line with our normal expectations.
Administrative expenses for the six months, at £990,338, were considerably
higher than the figure for the equivalent period last year (£742,288), as a
result of the cost of setting up an administrative capability in a number of
different territories around the world, most notably in the USA and Bahrain.
Although these costs obviously impact on the current period, they should pay
dividends in improved turnover in the future. A further element of these
administrative expenses relates to costs of improving the company's marketing
strength. This is obviously key to improving turnover and therefore
profitability in the future. This is also an area where the Directors plan to
focus more funds and efforts in the future.
The increased level of administrative expenditure led to an operating loss of
£637,953, up 14% on the equivalent period last year. Despite this loss, and no
fund raising since the year end (30 September 2005) the company's cash reserves
held up, with cash at 31 March 2006 of £82,026, compared to £121,188 at 31 March
2005.
The basic loss per share was 0.38p, compared to 0.4p for the six months ended 31
March 2005, and the diluted loss per share for this period was 0.33p, compared
to 0.4p for the six months 31 March 2005.
The Directors have not proposed a dividend, in line with their continuing policy
at the current time.
Operational Highlights
• Disposal on May 1st of loss-making automotive division Pentagon
GlassTech Ltd. and related automotive franchising division Pentagon GlassTech
Franchising Ltd., for a nominal amount inclusive of all liabilities.
• Streamlined the Board to reflect buildings division focus, with Graham
Bannerman continuing as CEO, Stephen Harrhy as International Sales Director,
Haytham ElZayn as Non-Executive Director and my appointment as interim Chairman.
• Commenced US operations in partnership with Allegiance Holdings, with
first contracts in place
• Progressed negotiations to acquire a leading UK-based competitor to
consolidate Pentagon's domestic leadership position in the commercial
buildings market.
• In negotiation to secure exclusive global supply and distribution rights
to patented superior window-frame anchoring technology resulting in a proven
superior 'system' of window glass protection and secured a core customer.
• Strong contract gains, including the Norwegian Embassy in Afghanistan,
The Rockefeller Group in Nigeria, the Bahrain Defence Force, the British
Council in Russia, Shell Oil in Libya, a three year maintenance contract for
Changi Airport in Singapore and the a large commercial bank in Bahrain.
• Progressed negotiations with a prospective Business Partner in China.
Business Review
The most significant event to occur in the ten weeks since my predecessor's
report on the 30 September 2005 financial statements is that we have finally
divested ourselves of the loss making automotive division, Pentagon Glass Tech.
It was with some sadness that we signed the contracts, since this division
formed the original company on which Pentagon Protection Plc was founded.
However, there remains a positive ongoing relationship with Glass Tech's new
owners. For example, we have an arrangement that we can still use the superb
showroom at Acton whenever necessary, our websites are still inter-related and
of course the extensive network of franchises still bears our name. We believe
that the advantages of such a positive association going forward, combined with
the improvement to our results of losing the extensive overheads associated with
the Acton operation, can only benefit the group's shareholders.
The disposal was finalised on 1 May 2006, and your newly streamlined Board has
spent the period since then reviewing staffing, operations, sales and marketing
strategies, acquisition policies and financial projections.
Whilst the CEO, Graham Bannerman and I have focussed on the UK, our other two
Directors have been working for us in the larger global environment.
Haytham ElZayn, our American Investor/Director, has been gearing up operations
in the USA. Training of sales teams has taken place, offices have been
established, intellectual property issues have been resolved and the first sales
contracts have now been completed.
Our International Sales Director, Steve Harrhy, has spent most of his time over
the past few months in the Middle East and Far East. As a result of these
efforts, we have secured further contracts as detailed under 'Operational
Highlights' above.
After seven months of negotiations with a prospective business partner in China,
contracts have been initiated with the principals of the Chinese company.
Outlook
Development of overseas market is looking extremely positive. Meanwhile, we
continue to review the best way to cement our leading position in the UK market
for safety and security products for commercial and architectural glass.
Alan Nicholl, Chairman
Consolidated Profit and Loss Account
For the six months ended 31 March 2006
Audited
Unaudited six months ended year ended
31 March 31 March 30 September
2006 2005 2005
Notes £ £ £
Turnover 2 1,429,799 1,369,389 3,619,939
Cost of sales (747,218) (854,025) (2,051,278)
--------- --------- ---------
Gross profit 682,581 515,364 1,568,661
Selling and distribution costs (296,998) (321,162) (631,058)
Administrative expenses (990,338) (742,288) (2,058,501)
Other operating income 32,273 44,533 26,828
Amortisation of goodwill (65,471) (55,329) (130,526)
--------- --------- ---------
Operating loss (637,953) (558,882) (1,224,596)
--------- --------- ---------
Interest receivable 1,830 4,232 8,245
Interest payable (2,262) (8,845) (19,451)
--------- --------- ---------
Loss on ordinary
activities before taxation (638,385) (563,495) (1,235,802)
Tax on loss on
ordinary activities - - -
--------- --------- ---------
Loss on ordinary
activities after taxation (638,385) (563,495) (1,235,802)
Losses bought forward (1,357,118) (510,767) (121,316)
--------- --------- ---------
Accumulated losses
carried forward (1,995,503) (1,074,262) (1,357,118)
========= ========= =========
Loss per share: 3
Basic (0.38)p (0.40)p (0.82)p
Diluted (0.33)P (0.40)p (0.70)p
Total recognised gains and losses
The group has no recognised gains or losses other than those included in the
profit and loss account.
The notes form part of this interim report.
Consolidated Balance Sheet
As at 31 March 2006
Unaudited six Audited
months ended year ended
31 March 31 March 30 September
2006 2005 2005
Notes £ £ £
Fixed assets
Intangible assets 2,323,622 2,362,358 2,389,093
Tangible assets 178,836 216,762 202,038
--------- --------- ---------
2,502,458 2,579,120 2,591,131
Current assets
Stocks 123,855 145,221 201,923
Debtors 980,748 998,814 1,262,218
Cash at bank and in hand 82,026 121,188 471,347
--------- --------- ---------
1,186,629 1,265,223 1,935,488
Creditors: Amounts falling
due within one year (828,430) (600,755) (1,024,298)
--------- --------- ---------
Net current assets 358,199 664,468 911,190
--------- --------- ---------
Total assets less current
liabilities 2,860,657 3,243,588 3,502,321
Creditors: Amounts falling
due after more than one year (5,289) (15,774) (8,568)
Provisions for liabilities and
Charges (195,000) (195,000) (195,000)
--------- --------- ---------
2,660,368 3,032,814 3,298,753
========= ========= =========
Capital and reserves
Called up share capital 4 165,918 151,345 165,918
Share premium account 5 4,297,803 3,763,581 4,297,803
Merger reserve 5 192,150 192,150 192,150
Profit and loss account 5 (1,995,503) (1,074,262) (1,357,118)
--------- --------- ---------
Equity shareholders' funds 2,660,368 3,032,814 3,298,753
========= ========= =========
The interim results were approved by the board on: 13 June 2006
The notes form part of this interim report
Consolidated Cash Flow Statement
For the six months ended 31 March 2006
Unaudited six Audited
months ended year ended
31 March 31 March 30 September
2006 2005 2005
£ £ £
Net cash outflow
from operating activities (268,300) (326,893) (870,798)
Returns on investments
and servicing of finance (432) (4,613) (11,206)
Capital expenditure and
financial investment (6,140) (8,939) (13,653)
Acquisitions and disposals - (55,000) (55,000)
--------- --------- ---------
Net cash outflow before
management of liquid
resources and financing (274,872) (395,445) (950,657)
Financing (89,485) (85,149) 813,709
--------- --------- ---------
Decrease in cash
in the period (364,357) (480,594) (136,948)
========= ========= =========
Reconciliation of net cash flow to movement in net funds/(debt)
Decrease in cash
in the period (364,357) (480,594) (136,948)
Cash movements relating to
debt and lease financing 89,485 85,149 (264,914)
--------- --------- ---------
Movement in net funds/(debt)
resulting from cash flows (274,872) (395,445) (401,862)
--------- --------- ---------
Change in net funds/(debt) (274,872) (395,445) (401,862)
Net funds/(debt) at
1 October 2005 147,262 419,688 549,124
--------- --------- ---------
Net funds/(debt) at 31 March 2006 (127,610) 24,243 147,262
========= ========= =========
The notes form part of this interim report
Notes to the Interim Report
For the six months ended 31 March 2006
1. ACCOUNTING POLICIES
The following accounting policies have been used consistently in dealing with
items which are considered material in relation to the financial statements.
Accounting convention
The financial statements have been prepared under the historical cost convention
and are in accordance with applicable accounting standards.
Basis of consolidation
The group financial statements consolidate the financial statements of the
company and all its subsidiary undertakings as at 31 March 2006 using merger
accounting or acquisition accounting depending on the circumstances surrounding
the combination of each subsidiary undertaking and after eliminating intra-group
transactions.
The financial information set out in this interim report does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The financial information for the year ended 30 September 2005 has been
extracted from the statutory accounts which have been delivered to the Registrar
of Companies and on which the auditors gave an unqualified opinion.
Turnover
Turnover represents net invoiced sales of goods, excluding value added tax and
trade discounts.
Goodwill
Goodwill arising on the acquisition of a subsidiary undertaking is the
difference between the fair value of the consideration paid and the fair value
of assets acquired. It is capitalised and amortised through the profit and loss
account over the Directors' estimate of its useful economic life of 20 years.
Impairment tests on the carrying value of goodwill are undertaken:
• At the end of the first financial year following acquisition:
• In other periods if events or changes in circumstances indicate that the
carrying value may not be recoverable.
Notes to the Interim report (continued)
For the six months ended 31 March 2006
Depreciation
Depreciation is provided at the following annual rates in order to write off
each asset over its estimated useful life or, if held under a finance lease,
over the lease term, whichever is the shorter.
Short leasehold - over the term of the lease
Plant and machinery - 15% to 25% on reducing balance
Fixtures and fittings - 50% on cost and 25% on reducing balance
Motor vehicles - 25% on reducing balance
Computer equipment - 50% on cost
Stocks
Stocks and work in progress are valued at the lower of cost and net realisable
value, after making due allowance for obsolete and slow moving items.
Cost includes all direct expenditure and an appropriate proportion of fixed and
variable overheads.
Deferred tax
Provision is made in full for all taxation deferred in respect of timing
differences that have originated but not reversed by the balance sheet date,
except for timing differences arising on revaluations of fixed assets which are
not intended to be sold and gains on disposals of fixed assets which will be
rolled over into replacement assets. No provision is made for taxation on
permanent differences.
Deferred tax assets are recognised to the extent that it is more likely than not
that they will be recovered. Deferred tax balances are not discounted.
Research and Development
Development expenditure is capitalised on clearly defined projects whose outcome
can be assessed with reasonable certainty. Amortisation is commenced in the year
when significant revenues from the development occur and is charged at 33% of
net book value. All other research and development expenditure is written off in
the year in which it is incurred.
Foreign Currencies
Assets and liabilities in foreign currencies are translated into sterling at the
rates of exchange ruling at the balance sheet date. Transactions in foreign
currencies are translated into sterling at the rate of exchange ruling at the
date of transaction. Exchange differences are taken into account in arriving at
the operating result.
Notes to the Interim report (continued)
For the six months ended 31 March 2006
Hire purchase and leasing commitments
Assets obtained under hire purchase contracts or finance leases are capitalised
in the balance sheet. Those held under hire purchase contracts are depreciated
over their estimated useful lives. Those held under finance leases are
depreciated over their estimated useful lives or the lease term, whichever is
the shorter.
The interest element of these obligations is charged to the profit and loss
account over the relevant period. The capital element of the future payments is
treated as a liability.
Rentals paid under operating leases are charged to the profit and loss account
as incurred.
Pensions
The group operates a defined contribution pension scheme. Contributions payable
for the period are charged in the profit and loss account.
Invoice discounting
The group discounts some of its trade debts. The accounting policy is to include
trade debt within one year and record cash advances within creditors due within
one year. Discounting fees are charged to the profit and loss account when
incurred. Bad debts are borne by the group and are also charged to the profit
and loss account when incurred.
2. TURNOVER
The turnover for the period is attributable to the principal activities of the
group.
3. LOSS PER SHARE
The calculations of loss per share are based on the following losses and numbers
of shares:
Audited
Unaudited six months ended year ended
31 March 31 March 30 September
2006 2005 2005
£ £ £
Loss for the financial
period (638,385) (563,495) (1,235,802)
========= ========= =========
Weighted average
number of shares:
Basic 165,918,156 141,542,261 151,488,970
Diluted 190,767,457 141,542,261 176,338,271
========= ========= =========
Notes to the Interim report (continued)
For the six months ended 31 March 2006
4. CALLED UP SHARE CAPITAL
Unaudited Unaudited Audited
Authorised 31 Mar 06 31 Mar 05 30 Sept 05
number: £ £ £
200,000,000 0.1p ordinary 200,000 200,000 200,000
Allotted, issued and fully paid
number:
156,918,156 0.1p ordinary 165,918 151,345 165,918
========= ========= =========
5. MOVEMENT IN RESERVES
Profit
and loss Share Merger
account premium reserve Total
£ £ £ £
At 01.10.05 (1,357,118) 4,297,803 192,150 3,132,835
Loss for the period (638,385) - - (638,385)
--------- --------- --------- ---------
At 31.03.06 (1,995,503) 4,297,803 192,150 2,494,450
========= ========= ========= =========
6. COPIES OF THE INTERIM REPORT
Copies of the interim report are available from the company's registered office
at Pentagon House, Unit 4 Acton Park Estate, The Vale, Acton, London, W3 7QE.
Directors, Secretary and Advisers
Directors: G H Bannerman
S D Harrhy
A R Nicholl
H Elzayn (appointed 26 October 2005)
R Bambra (resigned 13 April 2006)
G P Russell (resigned 13 April 2006)
D A Thomas (resigned 13 April 2006)
Secretary: T B Harrington
Registered office: Pentagon House
Unit 4, Acton Park Estate
The Vale
London
W3 7QE
Registered number: 04488281 (England and Wales)
Nominated Adviser: Seymour Pierce
Bucklersbury House
3 Queen Victoria Street
London, EC4N 8EL
Auditors: Warrener Stewart
Harwood House
43 Harwood Road
London, SW6 4QP
Solicitors: Sherrards
3rd Floor
45 Grosvenor Road
St Albans
Herts, AL1 3AW
Registrars: Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield, HD8 0LA
This information is provided by RNS
The company news service from the London Stock Exchange
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