ASLR.L Regulatory News (ASLR)

RNS ANNOUNCEMENT

21 February 2014

Pentagon Protection plc

("Pentagon" or the "Company")

Final Results for the year ended 30 September 2013

Pentagon Protection plc (AIM: PPR), the glass protection and security products and services specialist, today announces its final results for the year ended 30 September 2013.

The audited Report and Accounts for the year ended 30 September 2013 will be sent to those shareholders who have requested a copy and will also be available on the Company's website: www.pentagonprotection.com on 21 February 2014.

Enquiries:

CHAIRMAN'S STATEMENT

I am writing to present the results for Pentagon Protection Plc for the year ended 30 September 2013.

In last year's report I cited the oft heard phrase, "it's always darkest before the dawn." The Group's performance in 2013 has lent truth to the wisdom in that saying. FY2013 was the company's best year ever, as the financial results highlighted below attest. Both our UK-based divisions were in sync and delivered record revenues and profits. Our focus in the previous year on growing our pipeline of opportunities while maximizing profits through improved operational efficiency paid off.

While we were very pleased with the sales of the group in the year under review and with the prospects for the future, there are also risks to watch out for. Economic conditions and budget constraints in the company's traditional markets - United Kingdom and Europe - have resulted in a shortage of large projects, the traditional engine powering our business model. To compensate for this, the Group has made a conscious decision to focus the bulk of its sales efforts in lucrative overseas markets, particularly Africa, the Middle East and the United States. While opportunities abound in Africa and the Middle East, political uncertainty and bureaucratic obstacles in these regions do add an extra layer of risk and result in longer sales cycles, which present cash flow difficulties.

Financial Review

The extensive efforts of the sales team, led by Steve Chambers, over the past two years have borne fruit. Turnover for the year, at £5.4 million, has grown by £3.4m since the year ended 30 September 2012. In percentage terms, protective film and anchoring income has increased by 93%, from £1,275,470 to £2,465,294 and income from security products and services has increased by 322% from £684,861 to £2,892,219. Another area of focus for the management over the past few years has been to improve efficiency and pricing. This was reflected in the financials this year, with a 5% increase in gross profit from 31% to 36%.

Despite the very big increase in sales, costs have been kept under control. In the case of administrative expenses, costs did increase slightly by 19% from £1,073,826 to £1,275,491, with most of the £202k increase relating to a doubtful debt provision, currency losses and increased salary costs. Distribution costs increased from £24,974 to £91,070, with the increase of £66k attributable almost entirely to freight costs.

Finance costs for the year increased as a result of the need to take short term finance to fund a large contract back in April 2013. In total, net finance costs increased from £33,214 to £158,575.

Despite the additional costs explained above, the Group generated a profit before tax for the year of £391,415 compared to a loss of £523,474 in 2012. The profit allowed partial repayment of the overdue shareholder loan that has been used to fund the Group's activities through the leaner times of the past few years, in addition to repaying other trade payables.

Turning to the balance sheet, total equity attributable to equity shareholders of the parent has turned around by £392,298 from (£129,849) to £262,449. The payables reduced from £1,006,774 to £822,141. The cash reduced from £114,954 to £9,529. This is mainly a result of the increase in trade receivables of £195,477 (from £626,081 to £821,558).

A general shortage of cash is the one frustration in what would otherwise be a very exciting period for the Board. Despite paying back a substantial amount of funds borrowed from me during the year, by year end the Group indebtedness to me was back up at £337,888 (compared to £491,556 at the beginning of the year). It is the Board's main strategic objective over the coming year to address the general lack of working capital in the business, so that all the great improvements that have been made in the sales and work delivery processes can be properly exploited for the benefit of the shareholders.

Operational Review

Our focus on improving our operational efficiencies paid off in 2013 and continues to pay off. Pentagon's ability to profitably complete projects and deliver products, both security products and window film, anywhere in the world is impressive.

Last year saw the company combine its two UK-based divisions, Pentagon and the SDS Group, into a new, larger and more modern facility. This consolidation was done to cut costs, simplify managerial oversight and improve on synergies between the two operating units. We've also made strides to simplify our supply chain, improve our project management in the field and diversify both our product offerings and the markets in which we operate. The rationale for all these changes was to improve the company's profits, now and in the future.

Strategic Focus

We currently have a sales pipeline of £19.4m, almost three-quarters of which is in Africa, demonstrating the commitment we have made to the continent. Of course this comes with more risk, as these projects take longer to close and care needs to be taken to ensure revenues are collected. We have implemented controls and procedures to address these issues.

Africa is not the only place we've focused our prospecting efforts. We are also pursuing several mid-to-large sized opportunities spread across the Middle East and throughout the UK. It is important for the company to have a continual focus on its home market as well. While there are fewer opportunities in the UK for both of our divisions, the fact remains that there are opportunities and we intend to compete for them.

The Board and I are especially excited about the potential for growth and the number of opportunities for the window film business in the United States. The market for window film in the United States is larger than that of Europe and is far more politically stable than either Africa or the Middle East. Although we have not yet capitalised on the enormous potential in the United States, we plan on increasing our efforts this year.

Our American division, International Glass Solutions, while it operated at a loss this year, still grew its sales and revenue by 54% over the last two years. I expect growth to continue.

Security Products

Our security division had a large order from a UK defence contractor in 2013. Historically, SDS Group has substantial sales every other year given its sales were largely weighted towards the UK defence industry. To counteract the cyclical nature of this business, we have broadened both our product offerings and expanded the customer base both in the UK and overseas. This has resulted in several large security-related sales opportunities for the company going forward. While the capture and timing of these projects can never be guaranteed, we expect some of these projects to materialise in 2014.

Current Trading and Future Prospects

There is always a level of uncertainty in business, especially in the economic climate that has characterised the past few years; nevertheless, I am excited about the upcoming year for Pentagon. As stated previously, all of our divisions have expanded the number of opportunities they are pursuing. The company is operating more efficiently than it has in the past and we are focused on growing revenues.

Conclusion

2013 was a great year for the company, a year that I hope is a bellwether for the future. As we move forward into 2014, I am hopeful that it will be another outstanding year. There are of course risks that we need to be aware of, as the Group is working in riskier markets. However, I am confident that the many improvements we have made to the systems, processes and procedures over the last couple of years will bear fruit, delivering great results for the coming year.

Finally, on behalf of the Board, I would like to thank all of our employees for their hard work and continued commitment to the Group and its success.

Haytham ElZayn

Chairman

20 February 2014

STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2013

The financial statements were approved by the directors and authorised for issue on 20 February 2014 and are signed on their behalf by S Chambers, Director

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2013

Revenue and operating profit/(loss) for the year all derive from continuing operations.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2013

All equity is attributable to equity shareholders of the parent.

Share capital

Represents the par value of shares in issue.

Share premium

Represents amounts subscribed for share capital in excess of nominal value, net of directly attributable issue costs.

Share based payments

Represents the reserve account which is used for the corresponding entry to the share based payment charge through the income statement.

Merger reserve

Represents the difference between the fair value and nominal value of the equity consideration provided in exchange for 90% or more of the equity instruments acquired in another entity.

Shares held by ESOP

These relate to shares held by the Pentagon Employee Share Ownership Plan and are used to assist in meeting the obligations under employee remuneration schemes.

Foreign currency translation reserve

The translation reserve represents the exchange gains and losses that have arisen on the retranslation of overseas operations.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 SEPTEMBER 2013

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2013

1. Accounting policies

1.1 Basis of preparation

The financial statements have been prepared in accordance with EU endorsed International Accounting Standards and International Financial Reporting Standards (collectively "IFRS") and the requirements of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements are presented in sterling and have been prepared on the historical cost basis, except where IFRS requires an alternative treatment. The principal variations from historical cost relate to financial instruments (IAS 39).

The Company is a public listed company, quoted on AIM and is incorporated and domiciled in the UK.

The Group had net assets of £262,449 as at 30 September 2013 (2012: net liabilities of £129,849) and generated a profit before tax of £391,415 (2012: loss before tax of £523,474) in the reporting period.

Despite the turnaround in the net assets at 30 September 2013 and the improvement in the results for the year then ended, the Group's trading since the year end has been below budget. This is because economic conditions and budget constraints in the Group's traditional markets, United Kingdom and Europe, have resulted in a shortage of large projects in these areas. While sales opportunities abound in Africa and the Middle East, political uncertainty and bureaucratic obstacles in these regions add an extra layer of risk and result in longer sales cycles, which present cash flow difficulties. Nonetheless, the holding company is currently being supported by the Group's Chairman, Haytham ElZayn, via a shareholders loan of £338k as at 30 September 2013. Mr ElZayn has agreed to defer repayment of this loan until the Group's financial situation has improved.

The Group has a sales pipeline totalling £19.4 million. Management is confident that a significant proportion of the sales pipeline will be converted into sales contracts in due course.

In the light of this and after taking into account all information that could reasonably be expected to be available, the directors are confident that the Group will remain in operational existence for the foreseeable future and that the going concern basis of preparation is appropriate to the Group's financial statements.

2. Related party disclosures

As well as remuneration of directors (note 18), the following transactions fall within the scope of IAS 24 Related Party Disclosures.

As at 30 September 2013, the Group owed Haytham ElZayn, the Chairman, £337,888 (2012: £491,556) in the form of a working capital loan. The loan bears interest at 3% over The Royal Bank of Scotland Plc's base rate and was secured during the previous year by a debenture and share charge over the investments of the Company, and any income and other rights relating to such investments. The interest paid on this loan during the year was £7,864 (2012: £12,396).

In addition Haytham ElZayn provided short term loan funding of $750,000 which was repaid in full at the end of the two month arrangement. The cost of the loan involved the payment of £9,856 in administrative fees and 5% interest per month amounting to £49,277 in total.

At the statement of financial position date £3,960 was owed by (2012: £162,845 owed to) Service Group Distribution, a company owned by Haytham ElZayn.

- End -

Notes to Editors:

About Pentagon Protection

Pentagon Protection is a trusted provider of global security and energy saving solutions for clients around the globe. Admitted to AIM in March 2003, Pentagon consists of three divisions focused on preventing and mitigating the terrorist and extremist threats, improving building security and energy efficiency and carbon reduction. Visit the website at www.pentagonprotection.com or contact us at info@pentagonprotection.com.

About SDS Group Ltd

The SDS Group was acquired by Pentagon Protection in September 2008 to enhance the group's portfolio of security products and services. SDS supplies training, consulting and security equipment, including highly-specialist security and search equipment, mainly to governments, police forces and security and defence forces in the UK and around the world. Visit the website at www.sdsgroupltd.co.uk or contact them at sales@sdsgroupltd.co.uk

About International Glass Solutions

In 2010 Pentagon acquired IGS, which specialises in window film installation and project management services for commercial and government buildings, retail clients and large office buildings around the world. Based in the United States, IGS improves the group's capability and increases our exposure and reach into the North American market. Visit the website at www.igsfilm.com or contact them at info@igsfilm.com