TIDMPEB

RNS Number : 3458Y

Pebble Beach Systems Group PLC

06 September 2022

Pebble Beach Systems Group plc

Results for the half-year ended 30 June 2022

Pebble Beach Systems Group plc (AIM: "PEB", "Pebble" or the "Group"), a leading global software business specialising in playout automation and content management solutions for the broadcast and streaming service markets, is pleased to announce its unaudited half-year results for the six months ended 30 June 2022, which are in line with the Trading Update announced on 2 August 2022 .

Financial highlights

-- Revenue up 3% to GBP5.0m (H1 21: GBP4.9m), recurring revenue up 9% to GBP2.24m (H1 21: GBP2.05m)

-- Whilst orders received reduced to GBP5.0m (H1 21: GBP6.4m) these are slightly improved against the underlying, COVID-adjusted, H1 21 order intake of GBP4.9m thus representing modest growth on a like for like basis.

-- Adjusted EBITDA(1) down to GBP1.3m (H1 21: GBP1.7m), representing 26% of revenue (H1 21: 35%)

-- Profit before tax reduced to GBP0.3m (H1 21: GBP1.0m) after c. GBP257k of non-recurring costs

   --      Adjusted earnings per share down to 0.4p (H1 21: 0.8p) 

-- Net cash generated from operating activities (after interest paid and IFRS 16 lease payments) was GBP0.6m (H1 21: GBP1.8m)

-- Gross bank debt reduced by GBP0.5m in last six months to GBP7.1m as at 30 June 2022. Net debt at 30 June 2022 was c.GBP6.3m representing a Net debt/last 12 month Adjusted EBITDA(1) of c.2.2x.

   --      Achieved a re-finance of the bank debt through to September 2024. 

Operational highlights

-- The delays in sourcing hardware items resulting from the worldwide shortage of semiconductors have been largely mitigated, including a measured investment in inventory to allow customer orders to be delivered.

   --      Investment in our new IP-native Oceans platform continues as planned. 

-- Strategic move to a fully remote operating model is delivering operational benefits in terms of resilience, organisational growth and employee satisfaction.

   --      Investigated ways to accelerate funding of growth initiatives. 

-- Significant success in the Middle East across multiple customers, defending our position in this key market.

-- Adding PayTV channels to a customer in Brazil, expanding a successful long term partnership with one of the largest broadcast organisations in the world.

   --      Breaking into new markets with 

o First order in Italy, to a sports broadcaster via a new channel partner.

o Automation and integrated channel contract awarded by a major Indonesian media corporation.

Current trading and outlook

-- Orders for the second half are forecast to be stronger than the first half, and an improved pipeline underpins this outlook. This will feed through to improved revenue in the second half.

-- Achieved revenue growth in the period despite a sense of a slowdown in decision making with the Russian invasion of Ukraine.

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

"The company has delivered a robust performance for the first half of 2022, despite some difficult headwinds.

Our continued long-term aim of investing in new software solutions whilst reducing our overall indebtedness remains central to our strategy to ensure we continue to be well positioned to benefit from the industry transition to IP as full-scale adoption occurs.

The Board continues to have confidence that the Group can deliver a strong second half with improved revenue and achieve market expectations.

Notes

(1) Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) a non-GAAP measure, is EBITDA before non-recurring items and foreign exchange gains/losses.

For further information please contact:

 
 
                                            +44 (0) 75 55 59 
   Peter Mayhead - CEO                      36 02 
 finnCap Ltd (Nominated Adviser 
  and Broker ) 
  Marc Milmo / Teddy Whiley - Corporate      +44 (0) 207 220 
  Finance                                    0500 
 Tim Redfern / Sunila de Silva 
  - ECM 
 

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 (trading as Pebble) is a world leader in designing and delivering automation, integrated channel and virtualised playout solutions, with scalable products designed for applications of all sizes. Founded in 2000, Pebble has commissioned systems in more than 70 countries, with proven installations ranging from single up to over 150 channels in operation, and around 2000 channels currently on air under the control of our automation technology. An innovative, agile company, Pebble is focused on discovering its customers' requirements and pain points, designing solutions which will address these elegantly and efficiently, and delivering and supporting these professionally and in accordance with its users' needs.

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

Introduction

I am pleased to report that the Group has continued its robust performance, benefiting from the opening up of business travel as COVID restrictions have been relaxed. This resilient performance has been delivered in spite of a background of war in Ukraine and hardware supply challenges demonstrating the strength of the business and the Group's positioning in its market. The first year of being a remote working operation has been a positive experience and we have invested in people, IT systems and activities to make this transition a success. The order intake of GBP5.0m in the period was modestly up on a like-for-like basis when adjusting for two large orders delivered in the comparative period in 2021 totalling GBP1.5 million, deferred from 2020 because of COVID which I identified in the interim statement last year.

We delivered revenue of GBP5.0m, up 3% on the comparative period of 2021. Recurring revenue from our service contracts was up 9% and this remains an important element of our growth plans.

Our accelerated investment in cloud and IP-based technology will facilitate the delivery of our software solutions to meet market demand, as we continue to see an increase in opportunity for our software. This, together with our continued investment in Oceans, Pebble's next generation technology platform, underlines our commitment to support broadcasters as the media landscape evolves and cloud and IP technologies are more widely adopted.

Financial performance

   --      Orders received in the period of GBP5.0m (H1 21: GBP6.4m); 

-- Revenue up 3% to GBP5.0m (H1 21: GBP4.9m), recurring revenue up 9% to GBP2.24m (H1 21: GBP2.05m);

-- Adjusted EBITDA(1) reduced to GBP1.3m (H1 21: GBP1.7m), representing 26% of revenue (H1 21: 35%), following planned investment in headcount, increased travel and marketing costs and costs associated with the transition to remote working;

-- Net cash from operating activities (after interest paid and IFRS 16 lease payments) fell to GBP0.6m (H1 21: GBP1.8m); and

-- Increased investment in capitalised R&D of GBP0.9m (H1 21: GBP0.7m) reflecting the Group's strategic focus on continued product enhancement.

Operational performance

   --      GBP3.6m new project wins in the period, including; 

-- GBP0.7m project won at the end of the first half from a national broadcaster in Finland. This is an upgrade and expansion of their current system providing a flexible hybrid solution allowing transition to IP-based technologies at a time and scale that meets their needs.

-- GBP0.6m from two contract wins in the Middle East region. One is an upgrade to an existing system for a customer who has belief in our technology vision. The other is a new customer, which is both a testament to the strength of our playout solution and to our reputation for service and investment in this important region.

-- Further channels added by a leading global provider of production services, expanding a successful relationship, providing sports playout for a leading US sports streaming platform. This is another project that sits at the heart of our mission of providing a flexible transition from traditional SDI infrastructure to IP-based playout.

   --      Ongoing software development 

-- Oceans Automation. Work continues on a cloud-native playout solution to complement our current enterprise level automation offering.

-- Media Processing Engine. Work is progressing on the software solution for video playout capability with preliminary integration with Oceans Automation achieved. The next milestones will include APIs, graphics management and subtitling.

-- Pebble Control. Development of the IP control tool is advancing with added control functionality with the release of the first device control version expected by the end of the year. We are co-chairing the work on the new open standards protocol and are simultaneously working on the implementation of it.

   --      Remote operating model 

-- We have recently completed our first year as a remote operating business. We invested in expert help, introduced new systems, held our first all-staff conference and have a clear vision of how we will move forward with our staff to deliver the benefits of this new model.

-- We have sourced a small workshop to allow us to move out of our existing location in Weybridge in the second half of 2022.

   --      Inventory build 

-- The worldwide shortage of semiconductors continues to have some impact on project delivery timescales for those projects where customers have asked us to supply configured hardware. We have mitigated some of the impact by a measured increase in our hardware inventory.

   --    Non-recurring charges 

-- During the period we explored a potential equity raise, led by a VCT qualifying raise, that would have provided the Group with additional capital primarily to accelerate our development of next generation solutions. Whilst we secured good levels of support from existing and new investors, a combination of a worsening global economic situation and falling investor sentiment for the equity markets generally led us to curtail our plans at a fairly late stage in the process. As a result, we incurred professional fees totaling GBP257k which have been disclosed separately in the income statement as non-recurring items.

Cash flows and net debt

The Group held cash and cash equivalents of GBP0.8 million at 30 June 2022 (H1 2021: GBP1.4 million). The table below summarises the cash flows for the half year.

 
                                                    2022          2021 
                                             GBP'million   GBP'million 
------------------------------------------  ------------  ------------ 
 
 Cash generated from operating activities            0.6           1.8 
 Net cash used in investing activities             (0.9)         (0.7) 
 Net cash used in financing activities             (0.5)         (0.5) 
 Net (decrease)/increase in cash and 
  cash equivalents                                 (0.8)           0.6 
 Cash and cash equivalents at 1 January              1.6           0.8 
------------------------------------------  ------------  ------------ 
 Cash and cash equivalents at 30 June                0.8           1.4 
------------------------------------------  ------------  ------------ 
 

As at 30 June 2022 net debt(2) , excluding the impact of IFRS16, was GBP6.3 million (cash GBP0.8 million and bank debt of GBP7.1 million). The Group was using all GBP7.1 million of its available facilities at 30 June 2022, having re-paid GBP0.5 million in the period.

Going concern

The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to continue in business for the foreseeable future. In making this assessment, which covers a minimum period of twelve months from approval of this half-year report, the Directors have considered the Group's trading forecast, cash flow forecasts, available headroom and projected financial covenants on the banking facility, the levels of opportunities in the pipeline and recurring support revenue (See Note 3 below).

Board Changes

As previously announced on 23 August 2022 David Dewhurst resigned as a Director of the company and has left the executive role of Chief Finance Officer. For the foreseeable future David will not be replaced and the finance function, as previously, will report to the CEO.

Principal risks and uncertainties

The principal risks and uncertainties facing the Group remain consistent with the Principal Risks and Uncertainties reported in the Group's 31 December 2021 Annual Report with one exception.

Since the publication of our 2021 Annual Report, we have Russia's invasion of Ukraine and the ongoing war. On a global basis this has increased financial instability and supply chain risks which may ultimately result in an adverse impact on the Group's businesses, operations, and cash flows. More specifically, we have customers in both Russia and Ukraine and therefore there is risk for the Group on our business in those regions, although this is not expected to impact revenue materially.

The impact of the COVID-19 pandemic on the business continues to be monitored by the Board.

Current trading and outlook

The first half year has seen continuing challenges that are common to the majority of technology suppliers at the present time. Customers continue to take time to place orders and the ongoing challenge of continued delays in the supply chain driven by chip manufacturing shortages are impacting projects of all scales, generating some delays.

However, I am pleased to report a modest growth in revenue and believe that the business has demonstrated its resilience in showing similar levels of growth in orders on the comparative period once figures for 2021 are normalised for the post COVID boost from delayed orders from 2020 being delivered in the first half of 2021.

We are seeing a vibrancy return to the market and a general opening up of trading, with conferences, trade shows and informal meetings all returning to pre-pandemic levels. The Board continues to have confidence that the Group can deliver a strong second half and achieve market expectations, with the forward order book and pipeline reflecting this confidence. This also supports our decision to invest more heavily in R&D and ensure that we continue to have the product portfolio to meet the future requirements of the broadcast and streaming service markets .

John Varney

Non-Executive Chairman

CONSOLIDATED INCOME STATEMENT

for the half year ended 30 June 2022

 
                                                           6 months      6 months     Year ended 
                                                         to 30 June    to 30 June    31 December 
                                                               2022          2021           2021 
                                                        (Unaudited)   (Unaudited)      (Audited) 
                                                Notes       GBP'000       GBP'000        GBP'000 
 
 Revenue                                          4           5,038         4,889         10,620 
 Cost of sales                                              (1,236)       (1,025)        (2,490) 
                                                       ------------  ------------  ------------- 
 Gross profit                                                 3,802         3,864          8,130 
 Sales and marketing expenses                                 (959)         (789)        (1,777) 
 Research and development expenses                            (838)         (638)        (1,417) 
 Administrative expenses                                    (1,334)       (1,233)        (2,782) 
 Foreign exchange gains/(losses)                                 47          (33)           (40) 
 Other expenses                                               (257)             -          (244) 
 Operating profit                                 5             461         1,171          1,870 
---------------------------------------------  ------  ------------  ------------  ------------- 
 Operating profit is analysed as: 
 Adjusted EBITDA                                              1,297         1,746          3,282 
 Non-recurring items                                          (257)             -          (244) 
 Share based payment expense                                   (20)          (13)           (53) 
 Exchange gains/(losses) credited/(charged) 
  to the income statement                                        47          (33)           (40) 
---------------------------------------------  ------  ------------  ------------  ------------- 
 Earnings before interest, tax, depreciation 
  and amortisation (EBITDA)                                   1,067         1,700          2,945 
---------------------------------------------  ------  ------------  ------------  ------------- 
 Depreciation                                                  (78)         (114)          (160) 
 Amortisation and impairment of acquired                          -             -              - 
  intangibles 
 Amortisation of capitalised development 
  costs                                                       (528)         (415)          (915) 
 Finance costs                                                (183)         (168)          (373) 
 Finance income                                                   -             -              - 
 Profit before tax                                              278         1,003          1,497 
 Tax                                              6            (17)          (19)           (31) 
                                                       ------------  ------------  ------------- 
 Profit for the period being attributable 
  to owners of the parent                                       261           984          1,466 
 
 Earnings per share 
  attributable to the owners of 
  the parent during the period 
 Basic earnings per share                         7            0.2p          0.8p           1.2p 
 
 Diluted earnings per share 
 Diluted earnings per share                       7            0.2p          0.8p           1.2p 
---------------------------------------------  ------  ------------  ------------  ------------- 
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the half year ended 30 June 2022

 
                                           6 months      6 months     Year ended 
                                              to 30         to 30    31 December 
                                          June 2022     June 2021           2021 
                                        (Unaudited)   (Unaudited)      (Audited) 
                                            GBP'000       GBP'000        GBP'000 
 -----------------------------------   ------------  ------------  ------------- 
 
  Profit for the financial 
   year                                         261           984          1,466 
  Other comprehensive income 
   - items that may be reclassified 
   subsequently to profit 
   or loss: 
  Exchange differences on 
   translation of overseas 
   operations                                     -             6            (1) 
 
  Total profit for the period 
   attributable to owners 
   of the parent                                261           990          1,465 
 ------------------------------------  ------------  ------------  ------------- 
 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the half year ended 30 June 2022

 
                                                       Capital 
                            Ordinary       Share    redemption      Merger     Translation     Accumulated 
                              shares     premium       reserve     reserve         reserve          losses      Total 
                              GBP000      GBP000        GBP000      GBP000          GBP000          GBP000     GBP000 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 At 1 January 2022             3,115       6,800           617      29,778           (151)        (42,107)    (1,948) 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 Share based payments: 
  value of employee 
  services                         -           -             -           -               -              20         20 
 Transactions with 
  owners                           -           -             -           -               -              20         20 
 Retained profit 
  for the period                   -           -             -           -               -             261        261 
 Exchange differences 
  on translation of 
  overseas operations              -           -             -           -               -               -          - 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 Total comprehensive 
  income/expense for 
  the period                       -           -             -           -               -             261        261 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 At 30 June 2022 
  (Unaudited)                  3,115       6,800           617      29,778           (151)        (41,826)    (1,667) 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 At 1 January 2021             3,115       6,800           617      29,778           (150)        (43,626)    (3,466) 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 Share based payments: 
  value of employee 
  services                         -           -             -           -               -              13         13 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 Transactions with 
  owners                           -           -             -           -               -              13         13 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 Retained profit 
  for the period                   -           -             -           -               -             984        984 
 Exchange differences 
  on translation of 
  overseas operations              -           -             -           -               6               -          6 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 Total comprehensive 
  income/expense for 
  the period                       -           -             -           -               6             984        990 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 At 30 June 2021 
  (Unaudited)                  3,115       6,800           617      29,778           (144)        (42,629)    (2,463) 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 At 1 January 2021             3,115       6,800           617      29,778           (150)        (43,626)    (3,466) 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 Share based payments: 
  value of employee 
  services                         -           -             -           -               -              53         53 
 Transactions with 
  owners                           -           -             -           -               -              53         53 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 Retained profit 
  for the year                     -           -             -           -               -           1,466      1,466 
 Exchange differences 
  on translation of 
  overseas operations              -           -             -           -             (1)               -        (1) 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 Total comprehensive 
  income/expense for 
  the period                       -           -             -           -             (1)          1, 466     1, 465 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 At 31 December 2021 
  (Audited)                    3,115       6,800           617      29,778           (151)        (42,107)    (1,948) 
-----------------------  -----------  ----------  ------------  ----------  --------------  --------------  --------- 
 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2022

 
                                                   30 June      30 June   31 December 
                                                      2022         2021          2021 
                                               (Unaudited)  (Unaudited)     (Audited) 
                                       Notes       GBP'000      GBP'000       GBP'000 
 Assets 
 Non-current assets 
 Intangible assets                       8           5,993        5,297         5,601 
 Property, plant and equipment                         346        1,114           349 
 
                                                     6,339        6,411         5,950 
                                              ------------  -----------  ------------ 
 Current assets 
 Inventories                                           510          282           430 
 Trade and other receivables                         3,805        3,057         3,632 
 Cash and cash equivalents                             799        1,444         1,639 
                                              ------------  -----------  ------------ 
                                                     5,114        4,783         5,701 
 Liabilities 
 Current liabilities 
 Financial liabilities - borrowings                  1,000        1,300         1,200 
 Trade and other payables                            5,904        4,521         5,832 
 Lease liabilities - current                           104          143           173 
                                              ------------  -----------  ------------ 
                                                     7,008        5,964         7,205 
                                              ------------  -----------  ------------ 
 
 Net current liabilities                           (1,894)      (1,181)       (1,504) 
                                              ------------  -----------  ------------ 
 
 Non-current liabilities 
 Financial liabilities - borrowings                  6,050        6,750         6,350 
 Lease liabilities - non-current                        62          943            44 
 Deferred tax liabilities                                -            -             - 
                                                     6,112        7,693         6,394 
                                              ------------  -----------  ------------ 
 
 Net liabilities                                   (1,667)      (2,463)       (1,948) 
------------------------------------  ------  ------------  -----------  ------------ 
 
 
   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                                 (151)        (144)         (151) 
 Retained earnings                                (41,826)     (42,629)      (42,107) 
                                              ------------  -----------  ------------ 
 Total equity                                      (1,667)      (2,463)       (1,948) 
------------------------------------  ------  ------------  -----------  ------------ 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the half year ended 30 June 2022

 
 
                                                         6 months      6 months     Year ended 
                                                       to 30 June    to 30 June    31 December 
                                                             2022          2021           2021 
                                                      (Unaudited)   (Unaudited)      (Audited) 
                                              Notes       GBP'000       GBP'000        GBP'000 
 Cash flows from operating activities 
 Cash generated from operations                 9             802         2,030          3,815 
 Interest paid                                              (183)         (168)          (373) 
 Taxation paid                                               (17)          (19)           (31) 
                                                     ------------  ------------  ------------- 
 Net cash from operating activities                           602         1,843          3,411 
                                                     ------------  ------------  ------------- 
 
 Cash flows from investing activities 
 Interest received                                              -             -              - 
 Purchase of property, plant and equipment                   (22)          (21)           (82) 
 Expenditure on capitalised development 
  costs                                                     (920)         (711)        (1,515) 
 
 Net cash used in investing activities                      (942)         (732)        (1,597) 
                                                     ------------  ------------  ------------- 
 
 Cash flows from financing activities 
 Net cash used in repayment of financing 
  activities                                                (500)         (500)        (1,000) 
 Net cash used in financing activities                      (500)         (500)        (1,000) 
                                                     ------------  ------------  ------------- 
 Net (decrease)/increase in cash and 
  cash equivalents                                          (840)           611            814 
 Effect of foreign exchange rate changes                        -             7            (1) 
                                                     ------------  ------------  ------------- 
 Cash and cash equivalents and overdrafts 
  at 1 January                                              1,639           826            826 
 Cash and cash equivalents and overdrafts 
  at period end                                               799         1,444          1,639 
                                                     ------------  ------------  ------------- 
 
 Net debt comprises: 
 Cash and cash equivalents and overdrafts                     799         1,444          1,639 
 Borrowings                                               (7,050)       (8,050)        (7,550) 
                                                     ------------  ------------  ------------- 
 Net debt at period end                                   (6,251)       (6,606)        (5,911) 
-------------------------------------------  ------  ------------  ------------  ------------- 
 

NOTES TO THE HALF-YEAR REPORT

for the six months ended 30 June 2022

   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, with registered number of 04082188. The address of its registered office is 12 Horizon Business Village, 1 Brooklands Road, Weybridge, Surrey, KT13 0TJ.

This half-year results announcement was approved by the board on 5 September 2022.

   2.        BASIS OF PREPARATION 

The financial information for the period ended 30 June 2022 set out in this half-year report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2021 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified.

The half-year financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 31 December 2022. The Group financial statements for the year ended 31 December 2021 were prepared under International Financial Reporting Standards as adopted by the European Union. These interim financial statements have been prepared on a consistent basis and format. The Group has not applied IAS 34 'Interim Financial Reporting', which is not mandatory for AIM companies, in the preparation of these interim financial statements.

   3.   GOING CONCERN 

The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to continue in business for the foreseeable future. In making this assessment, which covers a minimum period of twelve months from approval of this half-year report, the Directors have considered the Group's trading forecast, cash flow forecasts, available headroom and projected financial covenants on the banking facility, the levels of opportunities in the pipeline and recurring support revenue.

We maintain a good relationship with our bank. The current loan agreement secures the facility until 30 September 2024 with banking covenants and a repayment schedule in place.

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

The Directors have a reasonable expectation that the Group will have adequate resources to continue in business for the foreseeable future and therefore continue to adopt the going concern basis in preparing the interim financial statements.

   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 Group. 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 by business segment.

 
                                                          Pebble     Group     Total 
                                                   Beach Systems 
                                                         GBP'000   GBP'000   GBP'000 
-----------------------------------------------  ---------------  --------  -------- 
 6 months to 30 June 2022 (Unaudited) 
                                                 ---------------  --------  -------- 
 Total revenue                                             5,038         -     5,038 
                                                 ---------------  --------  -------- 
 
 Adjusted EBITDA                                           1,664     (367)     1,297 
 Depreciation                                               (78)         -      (78) 
 Amortisation of capitalised development 
  costs                                                    (528)         -     (528) 
 Share based payment expense                                   -      (20)      (20) 
 Non-recurring items                                           -     (257)     (257) 
 Exchange gains                                               47         -        47 
 Finance costs                                               (3)     (180)     (183) 
 Intercompany finance income/(costs)                         168     (168)         - 
 Profit/(loss) before taxation                             1,270     (992)       278 
 Taxation                                                  (116)        99      (17) 
 Profit/(loss) for the period being 
  attributable to owners of the parent                     1,154     (893)       261 
-----------------------------------------------  ---------------  --------  -------- 
 6 months to 30 June 2021 (Unaudited) 
                                                 ---------------  --------  -------- 
 Total revenue                                             4,889         -     4,889 
                                                 ---------------  --------  -------- 
 
 Adjusted EBITDA                                           1,987     (241)     1,746 
 Depreciation                                              (114)         -     (114) 
 Amortisation of capitalised development 
  costs                                                    (415)         -     (415) 
 Share based payment expense                                   -      (13)      (13) 
 Exchange gains                                             (31)       (2)      (33) 
 Finance costs                                              (19)     (149)     (168) 
 Finance income                                               46      (46)         - 
 Profit/(loss) before taxation                             1,454     (451)     1,003 
 Taxation                                                   (77)        58      (19) 
 Profit/(loss) for the period being 
  attributable to owners of the parent                     1,377     (393)       984 
-----------------------------------------------  ---------------  --------  -------- 
 Year to 31 December 2021 (Audited) 
                                                 ---------------  --------  -------- 
 Total revenue                                            10,620         -    10,620 
                                                 ---------------  --------  -------- 
 
 Adjusted EBITDA                                           3,862     (580)     3,282 
 Depreciation                                              (160)         -     (160) 
 Amortisation of capitalised development 
  costs                                                    (915)         -     (915) 
 Share based payment expense                                   -      (53)      (53) 
 Non-recurring items                                       (244)         -     (244) 
 Exchange (losses)/gains                                    (40)         -      (40) 
 Finance costs                                              (81)     (292)     (373) 
 Intercompany finance income/(costs)                         107     (107)         - 
 Profit/(loss) before taxation                             2,529   (1,032)     1,497 
 Taxation                                                  (298)       267      (31) 
 Profit/(loss) for the year being attributable 
  to owners of the parent                                  2,231     (765)     1,466 
-----------------------------------------------  ---------------  --------  -------- 
 

Geographic external revenue analysis

The revenue analysis in the table below is based on the geographical location of the customer of the business.

 
                        6 months      6 months     Year ended 
                      to 30 June    to 30 June    31 December 
                            2022          2021           2021 
                     (Unaudited)   (Unaudited)      (Audited) 
 
                           Total         Total          Total 
                         GBP'000       GBP'000        GBP'000 
----------------  --------------  ------------  ------------- 
 By market 
 UK & Europe               1,992         3,002          6,385 
 North America               643           327            927 
 Latin America               342           156            567 
 Middle East               1,991           776          1,940 
 Asia / Pacific               70           628            801 
                           5,038         4,889         10,620 
----------------  --------------  ------------  ------------- 
 

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     6 months     Year ended 
                          to 30 June        to 30    31 December 
                                2022    June 2021           2020 
                               Total        Total          Total 
                         (Unaudited)  (Unaudited)      (Audited) 
                             GBP'000      GBP'000        GBP'000 
----------------------  ------------  -----------  ------------- 
 By division: 
 Pebble Beach Systems          5,718        5,410          5,860 
 Group                       (7,385)      (7,873)        (7,808) 
                             (1,667)      (2,463)        (1,948) 
----------------------  ------------  -----------  ------------- 
 
   5.        OPERATING PROFIT 

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

 
                                                     6 months     6 months     Year ended 
                                                   to 30 June        to 30    31 December 
                                                         2022    June 2021           2021 
                                                        Total        Total          Total 
                                                  (Unaudited)  (Unaudited)      (Audited) 
                                                      GBP'000      GBP'000        GBP'000 
-----------------------------------------------  ------------  -----------  ------------- 
 Inventory recognised as an expense                       829          605          1,288 
 Director and employee costs                            2,923        2,507          5,888 
 Depreciation of property, plant and equipment             78          114            160 
 Exchange (gains)/losses (credited)/charged 
  to profit and loss                                     (47)           33             40 
 Amortisation of capitalised development 
  costs                                                   528          415            915 
-----------------------------------------------  ------------  -----------  ------------- 
 
   6.        INCOME TAX EXPENSE 
 
                                  6 months     6 months     Year ended 
                                to 30 June        to 30    31 December 
                                      2022    June 2021           2021 
                                     Total        Total          Total 
                               (Unaudited)  (Unaudited)      (Audited) 
                                   GBP'000      GBP'000        GBP'000 
----------------------------  ------------  -----------  ------------- 
 Current tax 
 UK corporation tax                      -            -              - 
 Foreign Tax - current year             17           19             31 
 Total current tax                      17           19             31 
----------------------------  ------------  -----------  ------------- 
 
 Deferred tax 
 UK corporation tax                      -            -              - 
 Total deferred tax                      -            -              - 
----------------------------  ------------  -----------  ------------- 
 
 Total taxation                         17           19             31 
----------------------------  ------------  -----------  ------------- 
 

In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate would increase from 19 per cent to 25 per cent. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

   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. The average market value of the Company's shares for the purpose of calculating the dilutive effect of share options was based on quoted market prices for the year during which the options were outstanding.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

 
                                          6 months to 30 June 2022 (Unaudited) 
 
                                                           Weighted 
                                                            average      Earnings 
                                                             number     per share 
                                             Earnings     of shares         pence 
                                              GBP'000         '000s 
------------------------------------  ---------------  ------------  ------------ 
 Basic earnings per share 
 Profit attributable to ordinary 
  shareholders                                    261                        0.2p 
 Basic earnings per share                         261       124,477          0.2p 
------------------------------------  ---------------  ------------  ------------ 
 Diluted earnings per share 
 Profit attributable to ordinary 
  shareholders                                    261                        0.2p 
------------------------------------  ---------------  ------------  ------------ 
 Diluted earnings per share                       261       126,761          0.2p 
------------------------------------  ---------------  ------------  ------------ 
 
 
 
 
                                         6 months to 30 June 2021 
                                                (Unaudited) 
 
                                                    Weighted 
                                                     average        Earnings 
                                                      number             per 
                                      Earnings     of shares           share 
                                       GBP'000         '000s           pence 
---------------------------------  -----------  ------------  -------------- 
 Basic earnings per share 
 Profit attributable to ordinary 
  shareholders                             984                          0.8p 
 Basic earnings per share                  984        124,477           0.8p 
---------------------------------  -----------  -------------  ------------- 
 Diluted earnings per share 
 Profit attributable to ordinary 
  shareholders                             984                          0.8p 
 Diluted earnings per share                984        126,909           0.8p 
---------------------------------  -----------  -------------  ------------- 
 
 
 
                                            Year ended 31 December 2021 
                                                      (Audited) 
 
                                                       Weighted 
                                                        average      Earnings 
                                                         number     per share 
                                         Earnings     of shares         pence 
                                          GBP'000         '000s 
------------------------------------  -----------  ------------  ------------ 
 Basic earnings per share 
 Profit attributable to ordinary 
  shareholders                              1,466                        1.2p 
 Basic earnings per share                   1,466       124,477          1.2p 
------------------------------------  -----------  ------------  ------------ 
 Diluted earnings per share 
 Profit attributable to ordinary 
  shareholders                              1,466                        1.2p 
------------------------------------  -----------  ------------  ------------ 
 Diluted earnings per share                 1,466       125,775          1.2p 
------------------------------------  -----------  ------------  ------------ 
 
 
 

Adjusted earnings

The directors believe that adjusted EBITDA, 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, share based payment expense, 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          6 months        Year ended 
                                        to 30 June        to 30 June       31 December 
                                              2022              2021              2021 
                                             Total             Total             Total 
                                       (Unaudited)       (Unaudited)         (Audited) 
                                      Earnings          Earnings          Earnings 
                                   GBP'000   Pence   GBP'000   Pence   GBP'000   Pence 
--------------------------------  --------  ------  --------  ------  --------  ------ 
 Reported earnings and earnings 
  per share                            261    0.2p       984    0.8p     1,466    1.2p 
 Share based payment expense            20    0.0p        13    0.0p        53    0.0p 
 Exchange (gains)/losses              (38)    0.0p        27    0.0p        32    0.0p 
 Non-recurring items                   208    0.2p         -    0.0p         -    0.0p 
                                  --------  ------  --------  ------  --------  ------ 
 Adjusted earnings and earnings 
  per share                            451    0.4p     1,024    0.8p     1,551    1.2p 
--------------------------------  --------  ------  --------  ------  --------  ------ 
 

8. INTANGIBLE ASSETS

 
                                                     Acquired        Acquired    Capitalised 
                                                     customer    intellectual    development 
                                    Goodwill    relationships        property          costs      Total 
                                     GBP'000          GBP'000         GBP'000        GBP'000    GBP'000 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
Cost 
At 1 January 2021 (audited)            3,218            4,493           3,350          5,423     16,484 
Additions (unaudited)                      -                -               -            711        711 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 30 June 2021 (unaudited)            3,218            4,493           3,350          6,134     17,195 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 1 January 2021 (audited)            3,218            4,493           3,350          5,423     16,484 
Additions (audited)                        -                -               -          1,515      1,515 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 1 January 2022 (audited)            3,218            4,493           3,350          6,938     17,999 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
Additions (unaudited)                      -                -               -            920        920 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 30 June 2022 (unaudited)            3,218            4,493           3,350          7,858     18,919 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
Accumulated amortisation 
At 1 January 2021 (audited)                -            4,493           3,350          3,640     11,483 
Charge for the period (unaudited)          -                -               -            415        415 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 30 June 2021 (unaudited)                -            4,493           3,350          4,055     11,898 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 1 January 2021 (audited)                -            4,493           3,350          3,640     11,483 
Charge for the year (audited)              -                -               -            915        915 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 1 January 2022 (audited)                -            4,493           3,350          4,555     12,398 
Charge for the period (unaudited)          -                -               -            528        528 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 30 June 2022 (unaudited)                -            4,493           3,350          5,083     12,926 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
Net book value 
At 30 June 2022 (unaudited)            3,218                -               -          2,775      5,993 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 31 December 2021 (audited)          3,218                -               -          2,383      5,601 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 30 June 2021 (unaudited)            3,218                -               -          2,079      5,297 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
At 1 January 2021 (audited)            3,218                -               -          1,783      5,001 
----------------------------------  --------  ---------------  --------------  -------------  --------- 
 

The amortisation of development costs is included in research and development expenses in the Consolidated Group Income Statement. Within capitalised development costs there are GBP3.6 million (2021: GBP2.8 million) of fully written down assets that are still in use.

9. CASH FLOW GENERATED FROM OPERATING ACTIVITIES

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

 
                                                     6 months     6 months     Year ended 
                                                   to 30 June        to 30    31 December 
                                                         2022    June 2021           2021 
                                                        Total        Total          Total 
                                                  (Unaudited)  (Unaudited)      (Audited) 
                                                      GBP'000      GBP'000        GBP'000 
-----------------------------------------------  ------------  -----------  ------------- 
 Profit before tax                                        278        1,003          1,497 
 Depreciation of property, plant and equipment             78          114            160 
 Amortisation and impairment of development 
  costs                                                   528          415            915 
 Non-recurring item                                         -            -            244 
 Share based payment expense                               20           13             53 
 Finance income                                             -            -              - 
 Finance costs                                            183          168            373 
 Increase in inventories                                 (80)        (134)          (282) 
 (Increase)/decrease in trade and other 
  receivables                                           (173)           68          (507) 
 (Decrease)/increase in trade and other 
  payables                                               (32)          383          1,362 
 Net cash generated from operating activities             802        2,030          3,815 
-----------------------------------------------  ------------  -----------  ------------- 
 
   10.        NET FUNDS 

Reconciliation of change in cash and cash equivalents to movement in net cash:

 
                                                   Net cash and   Other borrowings       Total 
                                               cash equivalents            GBP'000    net cash 
                                                        GBP'000                        GBP'000 
-------------------------------------------  ------------------  -----------------  ---------- 
 At 1 January 2022                                        1,639            (7,550)     (5,911) 
 Cash flow for the period before financing                (340)                  -       (340) 
 Movement in borrowings in the period                     (500)                500           - 
 Exchange rate adjustments                                    -                  -           - 
-------------------------------------------  ------------------  -----------------  ---------- 
 Cash and cash equivalents at 30 June 
  2022 (Unaudited)                                          799            (7,050)     (6,251) 
-------------------------------------------  ------------------  -----------------  ---------- 
 At 1 January 2021                                          826            (8,550)     (7,724) 
 Cash flow for the period before financing                1,111                  -       1,111 
 Movement in borrowings in the period                     (500)                500           - 
 Exchange rate adjustments                                    7                  -           7 
-------------------------------------------  ------------------  -----------------  ---------- 
 Cash and cash equivalents at 30 June 
  2021 (Unaudited)                                        1,444            (8,050)     (6,606) 
-------------------------------------------  ------------------  -----------------  ---------- 
 At 1 January 2021                                          826            (8,550)     (7,724) 
 Cash flow for the year before financing                  1,814                  -       1,814 
 Movement in borrowings in the year                     (1,000)              1,000           - 
 Exchange rate adjustments                                  (1)                  -         (1) 
-------------------------------------------  ------------------  -----------------  ---------- 
 Cash and cash equivalents at 31 December 
  2021 (Audited)                                          1,639            (7,550)     (5,911) 
-------------------------------------------  ------------------  -----------------  ---------- 
 

Ends

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September 06, 2022 02:00 ET (06:00 GMT)

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