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RNS Number : 2154I
Petards Group PLC
01 July 2013
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 2012.
Financial results
-- Revenues GBP9.0m (2011: GBP12.1m)
-- Operating profit GBP327,000 (2011: GBP335,000)
-- Profit before tax GBP206,000 (2011: GBP215,000)
-- Profit after tax GBP200,000 (2011: GBP312,000)
-- Gross margin 43% (2011: 37%)
-- Net debt at 31 December 2012 GBP0.1m (Dec 2011: GBP1.5m)
-- Basic and diluted EPS of 2.9p (2011: 4.9p)
Contacts
Petards Group plc www.petards.com
Raschid Abdullah, Chairman Tel: 0191 420 3000
Andy Wonnacott, Group Finance
Director
WH Ireland Limited www.wh-ireland.co.uk
Mike Coe Tel: 0117 945 3470
Chairman's statement
Introduction
2012 proved an eventful year for Petards Group plc ("Petards" or
"the Company"). In July, the Company secured an order of
approximately GBP8m for its Petards eyeTrain on board digital CCTV
systems. An indicative paper offer was received in September from
its major shareholder Water Hall Group plc ("Water Hall") which the
board did not believe would be acceptable to shareholders. This
view was affirmed by certain major shareholders who confirmed they
would not accept the indicative offer and therefore, having
consulted with advisors, the board concluded that there was no
purpose in continuing discussions. Following this the Company
raised GBP1.125m before expenses to fund working capital and
product development by way of an Open Offer. In addition, against a
background of difficult trading conditions the Company delivered
pre-tax profits of GBP206,000 (2011: GBP215,000).
Results
While revenues were lower at GBP9.0m (2011: GBP12.1m), higher
margins and lower overheads meant that the profitability at the
operating level remained similar to 2011 and the Group generated
operating profits of GBP327,000 (2011: GBP335,000).
Gross margins increased from 37% in 2011 to 43%. This increase
was the result of a number of factors. First, we achieved a higher
than forecast profitability on three large projects for transport
and defence products. The revenues for these projects spanned 2011
and 2012 but the benefit of the improved profitability was recorded
in the 2012 results. Secondly, higher costs incurred on projects in
2011 as a result of a fire at a key supplier in May 2011 were
recovered from insurers during the first half of 2012. Finally,
revenues from engineering support and spares were maintained. As
these attract higher than average margins, lower revenues from
other work meant the overall margin percentage for the business
increased.
Administrative expenses for the year reduced by GBP0.5m to
GBP3.6m a reduction of over 12% over those incurred in the prior
year (2011: GBP4.1m) and net financial expenses were in line with
those incurred in 2011 and totalled GBP121,000 (2011:
GBP120,000).
Profit after tax was GBP200,000 (2011: GBP312,000) and earnings
per share were 2.92p (2011: 4.90p) and are stated after a tax
charge of GBP6,000 compared with a GBP97,000 tax credit in 2011.
The principal reason for the charge in 2012 was that the Group took
the opportunity in the year to surrender tax losses previously
recognised as a GBP241,000 deferred tax asset, together with some
unrecognised deferred tax assets, in return for a cash refund of
GBP196,000 under the UK's R&D Relief Scheme. At 31 December
2012 the Group still had over GBP2.5m of unrecognised deferred tax
assets available to offset against future profits.
Cash and Balance Sheet
The Group generated a net operating cash inflow of GBP0.7m
(2011: GBP0.9m) which was higher than expected due to lower working
capital at the year end that arose from the earlier than forecast
receipt of customer payments and better than forecast credit terms
from suppliers. The lower working capital was a temporary effect
and the position normalised in January 2013.
While inventories remained at GBP1.2m year on year, GBP0.8m of
the 2012 balance relates to project work-in-progress
(2011:GBP0.1m). The increase in work-in-progress relates to the
large eyeTrain order referred to above.
In November 2012 the Group received net proceeds of GBP974,000
from an Open Offer and Placing to provide additional working
capital and to fund product development. Net debt (comprising the
overdraft and term loan, less cash) at 31 December 2012 was GBP0.1m
(2011: GBP1.5m), and during the year repayments of GBP0.5m were
made on our term loan, the final instalment of which, GBP42,000,
was made in January 2013.
The retention of profit after tax and the proceeds from the Open
Offer and Placing resulted in total equity increasing to GBP1.5m at
31 December 2012 (2011: GBP0.4m).
Business review
The Group's activities are focussed upon the design, development
and supply of ruggedised electronic systems predominantly for
fitment onto a variety of new build and existing vehicles used by
customers in the rail transport, defence and emergency services
industries as well as the provision of value added design and
support services for the supply, commissioning, maintenance and
obsolescence management of legacy systems.
Revenues from the Group's products for defence and emergency
services customers remained at similar levels to 2011 although the
expected growth in export orders for our emergency services
products continued to be subject to delays in contract awards.
Revenues from rail retrofit and refurbishment projects accounted
for the reduction in revenues and this market has been hindered by
the delays arising from the cancellation by the Department for
Transport of the InterCity West Coast franchise procurement in
October 2012. This resulted in the delay of other new rail
franchise awards that had been scheduled for 2012 and 2013. While a
new schedule of awards was issued by the Department for Transport
in March 2013, the new timetable is much later than was previously
the case and will impact in the short term on our revenues from the
retrofit and refurbishment orders that are expected to arise.
Petards has been very successful in the UK in recent years
supplying its eyeTrain systems to the train retrofit and
refurbishment market, but it has been the Group's strategy to also
become an established supplier to global train builders for new
build vehicles. The costs to train builders of making changes to
their supply chain and their focus on the ability of suppliers to
ensure availability of products fitted to their trains over the
long term mean that the barriers to entry are high. However,
successful suppliers to the new build train market benefit from a
more stable demand for their products than is the case in the
refurbishment market traditionally addressed by the Group. We have
been working on developing this market area for some time and have
had some success by, for example, being selected to supply eyeTrain
systems onto Bombardier's fleet of new Electrostar EMU trains for
the Stansted Express Service and to Hyundai Rotem for their fleet
of Matangi EMU trains for Greater Wellington Rail in New Zealand.
However, the award in July 2012 of a contract worth in the region
of GBP8m to supply eyeTrain systems to an international train
builder marked a significant milestone in the Group's progress in
this area of business. We have been working on other opportunities
in the new build market and we are hopeful that this will result in
us being able to report further progress in the near future.
The business model for the new build market is different from
that required for the retrofit and refurbishment markets and the
working capital dynamics are such that it requires a higher level
of working capital arising from the need for engineering and other
activities in the early stages of projects, particularly for the
initial projects with new customers, and because the timeframes
over which deliveries are made for such projects tend to be longer.
The fund raising undertaken in 2012 was recognition of this and as
the Group expands in this area further working capital will be
required.
Research and development
The Group continues to develop its product portfolio to satisfy
specific customer requirements on funded projects and at the
Group's cost in areas where it expects to be able to obtain a good
return on its investment.
During the year we completed development of our ProVida 4000
mobile time distance speed measurement device which has since
received Home Office Type Approval. Our similar ProVida 2000
product has been very successful since its launch over 10 years ago
and initial sales of ProVida 4000 have been made in 2013. The Group
has also produced prototype units of an automatic number plate
recognition system that has generated significant interest from
both end users and a major integrator and we are hopeful that this
interest will develop further over the coming months.
Development of our eyeTrain product portfolio also continued and
trial units of products focussed on providing data to help improve
rail network reliability have been purchased by users in the
UK.
Historically, while the Group has long been a supplier to the
defence industry, it has been a value added re-seller or has
developed products for customers for which they have paid and
retained the associated intellectual property rights. However, we
have identified a demand from defence forces for a training aid for
which we have the relevant experience and we are presently
considering how we can best develop this opportunity.
Employees
The strength of any business depends on the commitment of its
employees and in this, Petards is no different. The credible result
for 2012 reflects performances achieved against a background of
difficult trading conditions exacerbated by public sector
cutbacks.
The board's thanks go to all employees for their efforts on
behalf of the Company.
The Board and Senior Management
Following agreement being reached between the board and that of
Water Hall, a General Meeting requisitioned by Water Hall to effect
board changes was withdrawn on 22 January 2013. As agreed Tim
Wightman then resigned as chairman and a board member and I,
Raschid Abdullah chairman of Water Hall, was appointed a director
of the Company and elected executive chairman.
On behalf of the board I would like to thank Tim Wightman for
his efforts on behalf of the Company over his ten year period of
involvement both as an executive and non-executive director.
The board periodically reviews its blend and balance for its
effectiveness in meeting the demands of the operating and
development of Company.
Outlook
Petards' customer base comprises many leading international
train builders, the UK train operating companies, police and other
government agencies, including the UK Ministry of Defence.
That Petards has consistently produced quality technical
products that satisfy the exacting requirements of "blue chip"
customers against a background of an under-capitalised balance
sheet, speaks highly for the Company's intellectual property, its
personnel and their dedication to the business.
While necessary to maintain Petards' market position, the timing
of the decision to increase its presence in the new build train
market was shortly followed by sustained weakness in the UK and
other major global economies. In turn, this has impacted on the
speed with which orders have been placed by its customers such that
after achieving forecast revenue in the first quarter, revenue in
the second quarter has suffered sharply.
While in recent weeks there have been signs of some recovery in
the order intake, the Group's performance for 2013 will be highly
dependent upon the order inflow for the balance of 2013 and upon
the Group's ability to translate those into invoiced sales within
the year. However, the move towards increasing Petards presence in
the new build trains market means that revenues from its transport
products will in future benefit from improved forward
visibility.
Raschid Abdullah
Chairman
28 June 2013
Consolidated Income Statement
for year ended 31 December 2012
Note 2012 2011
GBP000 GBP000
Revenue 2 9,013 12,127
Cost of sales (5,125) (7,706)
Gross profit 3,888 4,421
Administrative expenses (3,561) (4,086)
Operating profit 327 335
Financial income - -
Financial expenses (121) (120)
Profit before tax 206 215
Income tax 3 (6) 97
Profit for the year attributable to
equity shareholders of the parent 200 312
Basic and diluted earnings per share
(pence) 5 2.92 4.90
Consolidated Statement of Comprehensive Income
for year ended 31 December 2012
2012 2011
GBP000 GBP000
Profit for the year 200 312
Other comprehensive income
Currency translation on foreign currency
net investments 16 10
Total comprehensive income
for the year 216 322
Statements of Changes in Equity
for year ended 31 December 2012
Share Share Retained Currency Total
capital premium earnings translation equity
differences
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2011 6,367 23,255 (29,342) (224) 56
Profit for the year - - 312 - 312
Other comprehensive income - - - 10 10
Total comprehensive income
for the year - - 312 10 322
Equity-settled share based
payments - - 14 - 14
Capital reorganisation
costs - (32) - - (32)
Balance at 31 December
2011 6,367 23,223 (29,016) (214) 360
Balance at 1 January 2012 6,367 23,223 (29,016) (214) 360
Profit for the year - - 200 - 200
Other comprehensive income - - - 16 16
Total comprehensive income
for the year - - 200 16 216
Equity-settled share based
payments - - (33) - (33)
Share issue: open offer
and placing 45 1,080 - - 1,125
Expenses of share issue - (151) - - (151)
Balance at 31 December
2012 6,412 24,152 (28,849) (198) 1,517
Consolidated Balance Sheet
at 31 December 2012
Note 2012 2011
GBP000 GBP000
ASSETS
Non-current assets
Property, plant and equipment 172 155
Goodwill 401 401
Development costs 530 577
Deferred tax assets 587 842
1,690 1,975
Current assets
Inventories 1,211 1,237
Trade and other receivables 1,528 3,087
Cash and cash equivalents - escrow
deposits 77 77
Cash and cash equivalents 5 21
2,821 4,422
Total assets 4,511 6,397
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
parent
Share capital 4 6,412 6,367
Share premium 24,152 23,223
Currency translation reserve (198) (214)
Retained earnings deficit (28,849) (29,016)
Total equity 1,517 360
Non-current liabilities
Interest-bearing loans and borrowings - 42
Deferred tax liabilities 122 144
122 186
Current liabilities
Interest-bearing loans and borrowings 94 1,459
Trade and other payables 2,778 4,392
2,872 5,851
Total liabilities 2,994 6,037
Total equity and liabilities 4,511 6,397
Consolidated Statement of Cash Flows
for year ended 31 December 2012
2012 2011
GBP000 GBP000
Cash flows from operating activities
Profit for the year 200 312
Adjustments for:
Depreciation 57 73
Amortisation of intangible assets 223 325
Financial expense 121 120
Equity settled share-based payment
expenses (33) 14
Income tax charge/(credit) 6 (97)
Exchange differences 16 -
Operating cash flows before movement
in working capital 590 747
Change in trade and other receivables 1,559 (679)
Change in inventories 26 (326)
Change in trade and other payables (1,581) 1,259
Cash generated from operations 594 1,001
Interest paid (123) (125)
Tax received 196 -
Net cash from operating activities 667 876
Cash flows from investing activities
Acquisition of property, plant and
equipment (74) (46)
Capitalised development expenditure (176) (201)
Cash deposits held in escrow - (77)
Net cash outflow from investing activities (250) (324)
Cash flows from financing activities
Proceeds from share issue 1,125 -
Expenses of share issue (151) -
Capital reorganisation costs - (32)
Repayment of bank borrowings (505) (503)
Net cash outflow from financing activities 469 (535)
Net increase in cash and cash equivalents 886 17
Cash and cash equivalents at 1 January (933) (953)
Effect of exchange rate fluctuations
on cash held - 3
Cash and cash equivalents at 31 December (47) (933)
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 2012
or 31 December 2011 but is derived from those accounts. Statutory
accounts for 2011 have been delivered to the registrar of
companies, and those for 2012, which were approved by the Board on
28 June 2013, 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.
On 27 June 2013 the Group's working capital facility was
acquired by Water Hall Group plc. Water Hall Group plc have put in
place a new GBP1.65m facility that runs to 30 June 2014. Whilst the
facility is repayable on demand, Water Hall Group plc has confirmed
that it is not its intention to exercise this right. The Group has
prepared forecasts which have been flexed to take into account
reasonably possible changes in future trading performance, in
particular to take into account uncertainty as to the timing of
contract awards. This reflects the fact that the Group contracts
with a number of customers across different industries and that the
Group's revenue is generated from a mix of longer and shorter lead
time orders. The timing and delivery of the larger orders are
difficult to predict, and can cause material fluctuations in actual
results compared with forecast results. These flexed forecasts show
that the Group should be able to operate within the level of its
current working capital facility and accordingly the financial
statements have been prepared on a going concern basis.
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 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.
As the Board of Directors receives revenue and operating
profit/(loss) on the same basis as for the statutory financial
statements no further reconciliation is considered to be
necessary.
As noted in the 2011 Annual Report and Accounts, our US
operation supporting existing UVMS network video
customers was no longer a significant area of our business and
it has been combined with our UK operation as one segment.
Revenue by geographical destination can be analysed as
follows:
2012 2011
GBP000 GBP000
United Kingdom 8,008 9,498
Continental Europe 479 1,624
Rest of World 526 1,005
9,013 12,127
Included in the above amounts are revenues of GBP2,859,000
(2011: GBP9,704,000)) in respect of construction contracts. The
balance comprises revenue from sales of goods and services.
3 Taxation
Recognised in the income statement
2012 2011
GBP000 GBP000 GBP000 GBP000
Current tax credit
Adjustment in respect of
prior years (227) -
Total current tax (227) -
Deferred tax
Origination and reversal
of temporary differences (14) (37)
Recognition of previously
unrecognised tax losses (31) -
Utilisation of recognised
tax losses 37 103
Adjustment in respect of
prior years 241 (163)
Total deferred tax 233 (97)
Total tax charge/(credit)
in income statement 6 (97)
The deferred tax charge of GBP241,000 in respect of prior years
arose from the surrender of tax losses for R&D credits relating
to 2010 and 2011. The associated cash receipts of GBP196,000 are
included in the current tax credit.
Reconciliation of effective tax rate
2012 2011
GBP000 GBP000
Profit before tax 206 215
Tax using the UK corporation tax rate of 24.5%
(2011: 26.5%) 50 57
Non-deductible expenses 8 6
Non-taxable income (8) -
Utilisation of tax losses (39) (50)
Effect of tax losses generated in year not
provided for in deferred tax 18 24
Change in unrecognised temporary differences (13) (14)
Adjustments in respect of prior years 14 (163)
Enhanced deduction in respect of R&D (80) -
Effect of rate change 56 43
Total tax charge/(credit) 6 (97)
4 Share capital
At 31 December At 31 December
2012 2011
No No
Number of shares in issue - allotted,
called up and fully paid
Ordinary shares of 1p each 10,866,445 6,367,100
Deferred shares of 1p each 630,342,900 630,342,900
641,209,345 636,710,000
GBP000 GBP000
Value of shares in issue - allotted, called
up and fully paid
Ordinary shares of 1p each 109 64
Deferred shares of 1p each 6,303 6,303
6,412 6,367
The Company's issued share capital comprises 10,866,445 ordinary
shares of 1p each and 630,342,900 deferred shares of 1p each. The
ordinary shares have equal voting rights. The deferred shares have
no voting rights and are not entitled to any dividends and have
no other right or participation in the profits of the Company.
On 22 November 2012, 4,499,345 ordinary shares of 1p each were
issued at a price of 25p each as part of an Open Offer and Placing.
Costs of GBP151,000 were incurred in connection with the Open Offer
and Placing.
5 Earnings per share
The calculation of basic earnings per share for 2012 was based
on the profit attributable to ordinary shareholders of
GBP200,000 (2011: GBP312,000) divided by the weighted average
number of ordinary shares outstanding during the year
ended 31 December 2012 of 6,846,538 (2011: 6,367,100).
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.
6 Copies
The Report and Accounts have been posted to shareholders and
copies are available on the Company's website (www.petards.com) and
from the Company's registered office at 390 Princesway, Team
Valley, Gateshead, Tyne and Wear, NE11 0TU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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