Final Results

RNS Number : 8568F
Petards Group PLC
04 May 2011
 



 

4 May 2011

PETARDS GROUP PLC

 

PRELIMINARY RESULTS ANNOUNCEMENT

 

Petards Group plc ('Petards'), the AIM quoted developer of advanced security and surveillance systems, reports its audited result for the year ended 31 December 2010.

 

Despite the significant impact on revenues resulting from the Strategic Defence and Security Review and the Comprehensive Spending Review, Petards is pleased to report that the Group remained profitable during the year and secured a number of important orders.

 

Financial results

·       Profit before tax £0.1m (2009: £1.0m)

·       Profit after tax £0.4m (2009: £1.1m)

·       Gross margins 38% (2009: 38%)

·       Net debt at 31 December 2010 £2.0m (Dec 2009: £0.7m)

·       Basic and diluted EPS of 0.06p (2009: 0.17p)

 

Other highlights

·      £4m eyeTrain orders from Bombardier and Transys to upgrade Southeastern Trains' fleet

·      Deliveries for £3m East Coast Mainline project completed to schedule and budget

·      Customer spending in defence and emergency services industries impacted by government spending

·      Continued investment in technologies relating to eyeTrain and ProVida product ranges

 

Tim Wightman, Chairman of Petards, commented: 

"We are confident in our strategy to invest in our products and develop technologies that enable us to be competitive in our chosen markets.  We believe these markets continue to be attractive with the potential to yield good returns for the Group, although in the shorter term the UK defence and emergency services industries are likely to remain difficult. 

 

As we have indicated previously, as a consequence of some significant orders being secured towards the end of 2010, the Board expects that the phasing of deliveries will result in 2011 revenues being weighted towards the second half of the year."

 

 

 

 

 

 

Contacts

Petards Group plc

www.petards.com

Andy Wonnacott, Finance Director 

Tel: 0191 420 3000



WH Ireland Limited

www.wh-ireland.co.uk

Mike Coe, Marc Davies   

Tel:  0117 945 3470



 

 

 



 

Chairman's statement

 

Introduction

After making good progress and reporting greatly improved profitability over the course of the two previous years it is disappointing that in 2010 the performance of the Group suffered from the restrictions on Government spending related to the Strategic Defence and Security Review ('SDSR') and the Comprehensive Spending Review ('CSR').  Nevertheless despite the significant impact this had on revenues relating to our Defence and Emergency Services products, I am pleased to report that the Group still remained profitable.

 

Results

Revenues for the year were £11.4m (2009: £15.9m) from which the Group made a profit before tax of £0.1m (2009: £1.0m).  Overall gross margins achieved were 37.9% which, while in line with those achieved in the prior year (2009: 37.9%), were better than we had expected when I reported on our half year results. 

Administrative expenses totalled £4.2m and were 11% lower than the prior year (2009: £4.8m) and reflected actions taken to reduce overheads to match the lower revenue levels and our ongoing focus on their control.

Net financial expenses were £0.2m lower than the prior year (2009: £0.3m), arising predominantly from a £0.1m foreign exchange gain as compared with a £0.2m loss in 2009.

Profits after tax were £0.4m (2009: £1.1m) and included a net tax credit of £0.3m (2009: £0.1m). 

 

Cash and Balance Sheet

While we recorded a small operating cash inflow in the second half year, the overall operating cash outflow for the year was £0.9m (2009: £2.0m inflow).  As I have reported to you before, this outflow arose as a consequence of the exceptional performance in December 2009 when we received an early customer payment of over £1m relating to the shipment of equipment for which the supplier payment was not due until the first quarter of 2010.  Once this timing issue is taken into account, the cash flows for both 2009 and 2010 more closely align to the profits for the respective periods.

Net debt at 31 December 2010 was £2.0m (2009: £0.7m), the increase over the prior year arising from the timing issue referred to above.  The Group continues to make the scheduled repayments of its term loan which reduced by £0.4m to £1.05m over the year.

Inventories and work-in-progress, which had increased in the first half of 2010, reduced in the second half year as stocking levels were adjusted to reflect the lower revenues for the period. 

The Group has significant tax losses, the tax value of which amount to £3.2m (2009: £3.4m), and from which it has started to benefit over recent years.  Following the utilisation of some of these losses the Group has recognised an additional amount within deferred tax assets in the year-end balance sheet although almost 85% of the Group's potential deferred tax asset remains unrecognised.

The retention of the profit after tax of £0.4m resulted in total equity at 31 December 2010 of £0.1m (2009: £0.3m deficit).

 

Business review

The Group's operations continue to focus upon the design, development and supply of ruggedised electronic products and systems for the rail transport, defence and emergency services industries, many of which involve video technologies. I am pleased to say that sales for our eyeTrain on-board digital CCTV systems into the rail transport industry grew significantly over the period and should be sustained into 2011.  Significant contributors to revenues included the projects to supply and install eyeTrain CCTV and forward facing cameras as part of the refurbishment of East Coast Mainline Company's fleet, eyeTrain CCTV for Northern Rail's fleet refurbishment programme, as well as the supply of eyeTrain equipment to Bombardier Transportation for the new Electrostar EMU trains being built for operation on the Stansted Express services between Stansted Airport and London city.

We secured substantial orders from both Bombardier Transportation and Transys Projects during the latter part of 2010 for refurbishment projects they are undertaking to upgrade vehicles in Southeastern Trains' fleet.  These orders totalled over £4m and will contribute significantly to revenues in the second half of 2011.

As I reported last September, the SDSR and CSR had and are still having an adverse impact. The resultant reductions in UK government spending continued to have a marked effect on our revenues through the second half year from ProVida in-car video, speed detection and ANPR products as well as aircraft electronic countermeasures systems and ruggedised electronic control systems for armoured vehicles. 

The reduction in revenues from upgrades of electronic countermeasures systems for military aircraft arose from delays in decisions on procurement prior to the finalisation of the SDSR, and consequently the results include no revenues for such systems (2009: £4.2m).  We are hopeful that some orders will be placed during 2011 but revenues from those orders, should they be forthcoming, are subject to long procurement lead times.  However, the importance of our role in providing engineering expertise for the maintenance of electronic countermeasures systems to the MoD remains and our existing contract to provide such services was renewed for a further three years in December.

Revenues from our enabling contract to supply MoD Units and Establishments with private mobile radio equipment and engineering services continued to perform to our expectations.   In November we announced a contract to supply over £1m of new ruggedised equipment designed to interface with a new East Asian customer's existing air defence systems which we expect to deliver in the summer of 2011.

The curtailment of spending by UK police forces had an impact on sales of ProVida equipment in the UK during 2010 although it is in overseas markets that we see the most potential for these products in the short to medium term.  We continue to seek new channels for these products in Europe and further afield and in the last quarter of the year we secured potentially significant orders from new customers in Austria and Central America for our ANPR cameras. We are confident that the market potential for our ProVida products in the Middle East remains strong although follow-on projects from that secured in the latter part of 2009 in that region are taking longer to close than we expected.

As I indicated last year, while our US operation continues to support its existing UVMS network video software customers under our license arrangements with BAE Systems, it is not a significant area of our future business.

 

Research and development

The Group continued with its product development programme during the year and invested £0.8m (2009: £0.7m) of which £0.3m was capitalised (2009: £0.5m).  Amortisation increased in the year to £0.3m (2009: £0.2m) following the initial sales of new products and a full year's charge for our current core eyeTrain product.  Net of amortisation, capitalised development expenditure increased by £0.1m (2009: £0.3m increase).

 

In the second half year we received revenues from a new camera technology that we have incorporated into our eyeTrain systems that provides greatly enhanced picture quality over other systems on the market, particularly in the type of varied lighting conditions experienced on board trains.  Other enhancements to our digital CCTV systems were developed including specialist illuminators and interfaces to integrate with customers' on-board train management systems.

 

Employees

The more challenging environment in which we are operating places greater demands on our people and I would like to record the Board's thanks to them for their effort and commitment in meeting the expectations of our customers and improving the Group's operations during 2010. 

 

The Board

Osman Abdullah joined the Board as a non executive Director on 30 September 2010.  He has been appointed as the representative of Water Hall Group plc following its increased investment in the Company in June 2010.

 

Outlook

We are confident in our strategy to invest in our products and develop technologies that enable us to be competitive in our chosen markets.  We believe these markets continue to be attractive with the potential to yield good returns for the Group, although in the shorter term the UK defence and emergency services industries are likely to remain difficult. 

 

As we have indicated previously, as a consequence of some significant orders being secured towards the end of 2010, the Board expects that the phasing of deliveries will result in 2011 revenues being weighted towards the second half of the year.

 

 

Tim Wightman
Chairman                                                                                                                                                           

Consolidated Income Statement

for year ended 31 December 2010

 

Note

2010

2009

 

 

£000

£000


 

 

 

Revenue

2

11,392

15,946

Cost of sales

 

(7,069)

(9,908)

 

 

             

             

Gross profit

 

4,323

6,038

Administrative expenses

 

(4,238)

(4,770)

 

 

             

             

Operating profit

 

85

1,268

Financial income

 

53

14

Financial expenses

 

(85)

(262)

 

 

             

             

Profit before tax

 

53

1,020

Income tax

3

311

88


 

             

             

Profit for the year attributable to equity shareholders of the parent

 

364

1,108

 

 

             

             

 

 

 

 

Basic and diluted earnings per share (pence)

4

0.06

0.17

 

 

             

             

 



 

Consolidated Statement of Comprehensive Income

for year ended 31 December 2010

 

 

 

 

2010

2009

 

 

 

 

£000

£000

 

 

 

 

 

 

Profit for the year

 

 

 

364

1,108

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Currency translation on foreign currency net investments

 

(34)

127

 

 

 

 

             

             

Total comprehensive income for the year

 

 

 

330

1,235

 

 

 

 

             

             

 

 

 

Consolidated Statement of Changes in Equity

for year ended 31 December 2010

 

 

Share

capital

 

Share

premium

 

Retained

earnings

Currency

translation

differences

 

Total

equity

 

£000

£000

£000

£000

£000

 

 

 

 

 

 

Balance at 1 January 2009

6,367

23,255

(30,866)

(317)

(1,561)

 

 

 

 

 

 

Profit for the year

-

-

1,108

-

1,108

Other comprehensive income

-

-

-

127

127

 

             

             

             

             

             

Total comprehensive income for the year

-

-

1,108

127

1,235

Equity-settled share based payments

-

-

34

-

34

 

             

             

             

             

             

Balance at 31 December 2009

6,367

23,255

(29,724)

(190)

(292)

 

             

             

             

             

             

 

 

 

 

 

 

Balance at 1 January 2010

6,367

23,255

(29,724)

(190)

(292)

 

 

 

 

 

 

Profit for the year

-

-

364

-

364

Other comprehensive income

-

-

-

(34)

(34)

 

             

             

             

             

             

Total comprehensive income for the year

-

-

364

(34)

330

Equity-settled share based payments

-

-

18

-

18

 

             

             

             

             

             

Balance at 31 December 2010

6,367

23,255

(29,342)

(224)

56

 

             

             

             

             

             



 

Consolidated Balance Sheet

at 31 December 2010        

 

 

      

 

 

2010 

2009

 

 

£000

£000

ASSETS

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

 

182

267

Goodwill

 

401

401

Development costs

 

701

621

Deferred tax assets

 

790

356

 

 

             

             

 

 

2,074

1,645

 

 

             

             

Current assets

 

 

 

Inventories

 

911

941

Trade and other receivables

 

2,408

3,450

Cash and cash equivalents

 

-

701

 

 

             

             

 

 

3,319

5,092

 

 

             

             

Total assets

 

5,393

6,737

 

 

             

             

EQUITY AND LIABILITIES

 

 

 

Equity attributable to equity holders of the parent

 

 

Share capital

 

6,367

6,367

Share premium

 

23,255

23,255

Currency translation reserve

 

(224)

(190)

Retained earnings deficit

 

(29,342)

(29,724)

 

 

             

             

Total equity

 

56

(292)

 

 

             

             

Non-current liabilities

 

 

 

Interest-bearing loans and borrowings

 

550

1,050

Deferred tax liabilities

 

189

66

 

 

             

             

 

 

739

1,116

 

 

             

             

Current liabilities

 

 

 

Interest-bearing loans and borrowings

 

1,453

400

Other trade and other payables

 

3,145

5,513

 

 

             

             

 

 

4,598

5,913

 

 

             

             

Total liabilities

 

5,337

7,029

 

 

             

             

Total equity and liabilities

 

5,393

6,737

 

 

 

 

 

 

 

             

             

Consolidated Statement of Cash Flows

for year ended 31 December 2010

 

 

     

 

 

2010

2009

 

 

£000

£000

Cash flows from operating activities

 

 

 

Profit for the year

 

364

1,108

Adjustments for:

 

 

 

Depreciation

 

138

180

Amortisation of intangible assets

 

250

206

Financial income

 

(53)

(14)

Financial expense

 

85

262

Profit on sale of property, plant and equipment

 

(4)

-

Equity settled share-based payment expenses

 

18

34

Income tax credit

 

(311)

(88)

 

 

             

             

Operating cash flows before movement in working capital

 

487

1,688

Change in trade and other receivables

 

1,042

(822)

Change in inventories

 

30

432

Change in trade and other payables

 

(2,408)

800

 

 

             

             

Cash generated from operations

 

(849)

2,098

Interest received

 

53

14

Interest paid

 

(83)

(287)

Income tax received

 

-

205

 

 

             

             

Net cash from operating activities

 

(879)

2,030

 

 

             

             

Cash flows from investing activities

 

 

 

Sale of property, plant and equipment

 

4

-

Acquisition of property, plant and equipment

 

(53)

(110)

Capitalised development expenditure

 

(330)

(482)

 

 

             

             

Net cash outflow from investing activities

 

(379)

(592)

 

 

             

             

Cash flows from financing activities

 

 

 

Decrease in committed overdraft facility

 

-

(356)

Repayment of bank borrowings

 

(400)

(625)

 

 

             

             

Net cash outflow from financing activities

 

(400)

(981)

 

 

             

             

Net (decrease)/increase in cash and cash equivalents

 

 

(1,658)

 

457

Cash and cash equivalents at 1 January

 

701

268

Effect of exchange rate fluctuations on cash held

 

4

(24)

 

 

             

             

Cash and cash equivalents at 31 December

 

(953)

701

 

 

             

             



 

1              Basis of preparation and status of financial information

The preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU ("adopted IFRSs"), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. It does not include all the information required for full annual accounts.

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 31 December 2009 but is derived from those accounts.  Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditor has reported on those accounts; his reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying his report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

2              Segmental information

The analysis by geographic segment below is presented in accordance with IFRS 8 on the basis of those segments whose operating results are regularly reviewed by the Board of Directors (the Chief Operating Decision Maker as defined by IFRS 8) to make strategic decisions.

The Board of Directors consider the business from a geographic perspective, with consideration of the performance of its UK and US operations.

The directors consider the Group to have only one segment in terms of products and services, being the development, supply and maintenance of technologies used in advanced security, surveillance and ruggedised electronic applications.   An analysis of segmental information by geographical component is set out below.  This information is presented by geography of revenue by source.  There are no inter segment transactions.

As the Board of Directors receives segment revenue and operating profit/(loss) on the same basis as for the statutory financial statements no further reconciliation is considered to be necessary.

 

 

      UK

           USA

       Total

 

2010

2009

2010

2009

2010

2009

 

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

Segment revenue

11,315

15,783

77

163

11,392

15,946

 

             

             

             

             

             

             

Segment operating profit/(loss) before depreciation and amortisation

 

464

 

1,660

 

(8)

 

(6)

 

456

 

1,654

 

 

 

 

 

 

 

Depreciation of tangible fixed assets

(118)

(173)

(3)

(7)

(121)

(180)

Amortisation of intangible fixed assets

(250)

(206)

-

-

(250)

(206)

 

             

             

             

             

             

             

Segment operating profit/(loss)

96

1,281

(11)

(13)

85

1,268

 

             

             

             

             

 

 

Financial income

 

 

 

 

53

14

Financial expenses

 

 

 

 

(85)

(262)

 

 

 

 

 

             

             

Statutory profit before tax

 

 

 

 

53

1,020

 

 

 

 

 

             

             

Segment assets

5,293

6,534

100

203

5,393

6,737

Segment liabilities

(4,218)

(5,851)

(1,119)

(1,178)

(5,337)

(7,029)

 

             

             

             

             

             

             

Segment net assets/(liabilities)

1,075

683

(1,019)

(975)

56

(292)

 

             

             

             

             

             

             

 

 

 

 

 

 

 

Revenue by geographical destination can be analysed as follows:


2010


2009


£000


£000


 



United Kingdom

9,822


12,993

Continental Europe

1,037


1,798

Rest of World

533


1,155


             


             


11,392


15,946


             


             

Included in the above amounts are revenues of £6,139,000 (2009: £3,052,000) in respect of construction contracts.  The balance comprises revenue from sales of goods and services.

 

3              Taxation

Recognised in the income statement


                            2010

                      2009


£000

£000

£000

£000

 

 

 

 

 

Current tax credit

 

 

 

 

Current year

-

 

(52)

 

Adjustments in respect of prior years

-

 

(56)

 

 

             

 

             

 

Total current tax

 

-

 

(108)

 

 

 

 

 

Deferred tax (credit)/expense

 

 

 

 

Origination and reversal of temporary differences

10

 

148

 

Recognition of previously unrecognised tax losses

(222)

 

(184)

 

Adjustment in respect of prior years

(99)

 

56

 

 

             

 

             

 

Total deferred tax

 

(311)

 

20

 

 

             

 

             

Total tax credit in income statement

 

(311)

 

(88)

 

 

             

 

             

Reconciliation of effective tax rate

 

2010 

2009

 

£000

£000

 

 

 

Profit for the period

53

1,020

 

             

             

Tax using the UK corporation tax rate of 28% (2009: 28%)

15

286

Non-deductible expenses

67

64

Non-taxable income

(46)

(14)

Recognition of previously unrecognised tax losses

(122)

(184)

Utilisation of tax losses

(115)

(58)

Change in unrecognised temporary differences

(26)

(111)

Adjustments in respect of prior years

(99)

-

Enhanced deduction for R&D expenditure

-

(71)

Effect of rate change

15

-

 

             

             

Total tax credit

(311)

(88)

 

             

             

 

4              Earnings per share

The calculation of basic earnings per share for 2010 was based on the profit attributable to ordinary shareholders of £364,000 (2009: £1,108,000) divided by the weighted average number of ordinary shares outstanding during the year ended 31 December 2010 of 636,708,314 (2009: 636,706,423).

Diluted earnings per share is identical to the basic earnings per share.  None of the share options are dilutive as the exercise prices are higher than the average market price of the shares. 

 

 


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