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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 GBP0.1m (2009: GBP1.0m)
-- Profit after tax GBP0.4m (2009: GBP1.1m)
-- Gross margins 38% (2009: 38%)
-- Net debt at 31 December 2010 GBP2.0m (Dec 2009: GBP0.7m)
-- Basic and diluted EPS of 0.06p (2009: 0.17p)
Other highlights
-- GBP4m eyeTrain orders from Bombardier and Transys to upgrade
Southeastern Trains' fleet
-- Deliveries for GBP3m 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 GBP11.4m (2009: GBP15.9m) from which
the Group made a profit before tax of GBP0.1m (2009: GBP1.0m).
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 GBP4.2m and were 11% lower than
the prior year (2009: GBP4.8m) and reflected actions taken to
reduce overheads to match the lower revenue levels and our ongoing
focus on their control.
Net financial expenses were GBP0.2m lower than the prior year
(2009: GBP0.3m), arising predominantly from a GBP0.1m foreign
exchange gain as compared with a GBP0.2m loss in 2009.
Profits after tax were GBP0.4m (2009: GBP1.1m) and included a
net tax credit of GBP0.3m (2009: GBP0.1m).
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
GBP0.9m (2009: GBP2.0m 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
GBP1m 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 GBP2.0m (2009: GBP0.7m), 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 GBP0.4m to GBP1.05m 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 GBP3.2m (2009: GBP3.4m), 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 GBP0.4m resulted in
total equity at 31 December 2010 of GBP0.1m (2009: GBP0.3m
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 GBP4m 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: GBP4.2m). 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 GBP1m 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 GBP0.8m (2009: GBP0.7m) of which
GBP0.3m was capitalised (2009: GBP0.5m). Amortisation increased in
the year to GBP0.3m (2009: GBP0.2m) 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 GBP0.1m (2009: GBP0.3m 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
GBP000 GBP000
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
GBP000 GBP000
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
Currency
Share Share Retained translation Total
capital premium earnings differences equity
GBP000 GBP000 GBP000 GBP000 GBP000
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
GBP000 GBP000
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
GBP000 GBP000
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
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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
GBP000 GBP000
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 GBP6,139,000
(2009: GBP3,052,000) in respect of construction contracts. The
balance comprises revenue from sales of goods and services.
3 Taxation
Recognised in the income statement
2010 2009
GBP000 GBP000 GBP000 GBP000
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
GBP000 GBP000
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 GBP364,000
(2009: GBP1,108,000) 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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