ASLR.L Regulatory News (ASLR)

RNS Number : 0474J

Pentagon Protection PLC

24 March 2010

 

Pentagon Protection Plc

 

Final results for the year ended 30 September 2009

 

CHAIRMAN'S STATEMENT

 

Introduction

 

I have pleasure in presenting the results for the year ended 30 September 2009, the first full year in which I have been Chairman of Pentagon. This year has been one of tremendous turmoil in the global economy with an almost worldwide recession and shortage of liquidity in the debt markets. These external factors restricted some of our potential for growth over the past year and so we have concentrated our efforts on building the business to cope with the expected upturn in turnover and results once the economy becomes more settled. In particular, we commenced a rationalisation of our administration and business processes, the integration of the subsidiary acquired at the very end of last year, SDS, into the Pentagon Group and the development of trading relationships with business partners. To date we have made significant progress; SDS turnover is back up to the levels anticipated prior to acquisition, our cost structure is more streamlined, our partnership relationships have opened up new territories and products and we have secured significant contracts which will impact on the business over the coming 24 months.

 

Financial Review

 

The Group's turnover has more than doubled to £2,948,574 (2008: £1,444,247). This largely reflects the inclusion of SDS's full year turnover of £1,518,043, however Pentagon Protection (UK)'s sales have held up through the year achieving a turnover of £1,430,533 (2008: £1,444,247).

 

SDS's turnover was largely biased towards the second six months of the year, with more than 80% of sales being booked in the second half. The timing of sales in SDS is inevitably somewhat irregular, being largely driven by the budgetary requirements of large governmental organisations such as the MOD and the Metropolitan Police.

 

Whilst turnover and gross profit were both substantially higher than in 2008 (Gross Profit £715,297, 2008: £376,261) gross margin reduced from 26% in 2008 to 24% in 2009, reflecting the change in mix of business as well as the very competitive conditions we continue to face across all sectors.

 

The Group continued to control other expenditure during the year; distribution costs of £119,618 have reduced by 53% on 2008 expenditure of £256,691, whilst administrative expenses have risen following the acquisition of SDS Group Limited.

 

The increased turnover in the second half of the year served to reduce month on month operating losses and in the six months period ended 30 September, the loss excluding exceptional items was only £30,846, which represents a much improved performance.

 

Overall, the Group consolidated loss for the year was £1,349,862. This was arrived at after the recognition of an exceptional charge for a warranty claim of £925,800 (in 2008 there was an exceptional charge for impairment of goodwill of £2,389,093). The warranty claim is in respect of film supplied direct from the manufacturer to a Pentagon client in March 2005, which was not in accordance with the specification given in the purchase order. As explained in note 9, the Directors are confident that the cost of replacement of the film will be covered by the Group's insurance policy and they have also been advised that the Group has a valid claim against that manufacturer. However in accordance with International Accounting Standards, the anticipated insurance income cannot be recognised in this reporting period; rather it shall be recognised in the period in which it is received. Even after providing in full for the warranty claim, the loss per share has been reduced to 0.24p per share from 0.76p per share in 2008.

 

The Group balance sheet at the end of the period has net assets before the provision for the warranty claim of £1,021,145 (2008: £1,183,957) and after provision for the warranty claim of £95,345 (2008: £1,183,957).

 

The Board does not recommend the payment of a dividend.

 

 

 

Operational Review

 

The business has continued to consolidate its operations over the year, integrating SDS into the Pentagon Group and cross-selling wherever practicable. This, combined with the trading partnerships with Eruma plc and Westminster Group plc, has led to further opportunities for growth and it is our intention to build on this consolidation over the coming months. In particular, we are looking forward to generating increased turnover through the raised profile of the Group, now that Dr John Wyatt has joined the board.

 

The increased turnover has been generated across all operating regions and in the year under review 68% of turnover was generated in the UK with 14% being generated in the USA and 12.5% in Europe, Middle East and Africa and the balance in The Far East and Australasia. This expansion into the Asian and Australasian markets is particularly exciting as we continue to build the Pentagon brand. It is also very pleasing to note that despite the relative weakness of sterling, we have continued to grow our turnover in the UK at the same time as increasing our export activities.

 

The operational efficiencies referred to in my report last year are now bearing fruit and we are looking to continue building on these. We have recently appointed David Marks as COO and he has already introduced changes that we anticipate will be reflected in the financial results of the business in the short to medium term.

 

Current Trading and Future Prospects

 

Since the year end, we have been awarded a significant contract by the European Commission (EC), which was announced in The Official Journal of the European Union at just over 3 million Euros. The award of this prestigious contract is a reflection of Pentagon's worldwide brand positioning. In addition to this contract, the Group has been awarded a number of other new contracts for the supply of equipment and services over the next 12 months. The weakening pound has provided an opportunity for expanding our export market-place and we look forward to taking advantage of this opportunity as part of our strategy for continuing the business's development. To this end, we are currently conducting a small fund-raising, to generate working capital to finance the EC and other anticipated contracts.

 

I look forward to reporting to you on our current year in due course.

 

Haytham ElZayn

Chairman

 

23 March 2010

 

 

 

 

Enquiries:

 

Pentagon Protection Plc

Haytham ElZayn

Tel: 01494 793 333

 

Pentagon Protection Plc

David Marks

Tel: 01494 793 333

 

Seymour Pierce

Jonathan Wright

Tel: 020 7107 8000

GROUP INCOME STATEMENT

for the year ended 30 September 2009

________________________________________________________________________________

 

			2009				2008
		Notes	£				£
Revenue		2	2,948,574				1,444,247
Cost of sales			(2,233,277)				(1,067,626)
Gross profit			715,297				376,621
Distribution costs			(119,618)				(256,691)
Administrative expenses			(1,025,316)				(730,169)
Other operating income			4,623				-
OPERATING LOSS BEFORE EXCEPTIONAL ITEM			(425,014)				(610,239)
Exceptional item - provision		9	(925,800)				-
OPERATING LOSS BEFORE FINANCING ACTIVITIES			(1,350,814)				(610,239)
Impairment of goodwill		5	-				(2,389,093)
Finance income			6,611				10,974
Finance costs			(5,923)				(2,916)
LOSS BEFORE TAX			(1,350,126)				(2,991,274)
Tax			264				-
LOSS FOR THE PERIOD		3	(1,349,862)				(2,991,274)
Loss attributable to:
Equity holders of the parent			(1,349,862)				(2,991,274)
TOTAL RECOGNISED INCOME AND EXPENSES ATTRIBUTABLE TO:
Equity holders of the parent			(1,349,862)				(2,991,274)
Loss per share
Basic (pence per share)		4	(0.24)p			(0.76)p
Diluted (pence per share)		4	(0.24)p			(0.76)p
Revenue and operating loss for the year all derive from continuing operations.

 

BALANCE SHEETS

as at 30 September 2009

________________________________________________________________________________

								Group					Company
								2009			2008		2009		2008
						Notes		£			£		£		£
ASSETS
Non-current assets
Intangible assets								18,540			27,810		-		-
Goodwill						5		351,360			351,360		-		-
Property, plant and equipment								35,163			37,912		-		-
Investments						6		-			-		767,338		767,338
								405,063			417,082		767,338		767,338
Current assets
Inventories								173,058			195,961		-		-
Trade and other receivables						7		1,142,194			553,750		2,308,053		1,736,360
Cash and cash equivalents								44,467			523,122		679		323,394
								1,359,719			1,272,833		2,308,732		2,059,754
TOTAL ASSETS								1,764,782			1,689,915		3,076,070		2,827,092
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables						8		662,098			456,217		90,575		56,811
Borrowings								77,191			39,912		-		-
								739,289			496,129		90,575		56,811
Non-current liabilities
Borrowings								4,348			9,565		-		-
Provisions						9		925,800			-		-		-
Deferred tax liability						9		-			264		-		-
								930,148			9,829		-		-
Total liabilities								1,669,437			505,958		90,575		56,811
Equity
Issued capital					10		641,418			531,418			641,418		531,418
Share premium account							6,914,366			6,763,116			6,914,366		6,763,116
Shares held by ESOP					10		(4,541)			(4,541)			(4,541)		(4,541)
Retained earnings							(7,455,898)			(6,106,036)			(4,565,748)		(4,519,712)
Total equity attributable to equity shareholders of the parent
							95,345			1,183,957			2,985,495		2,770,281
TOTAL EQUITY AND LIABILITIES							1,764,782			1,689,915			3,076,070		2,827,092

 

The financial statements were approved by the directors and authorised for issue on 23 March 2010 and are signed on their behalf by

 

 

 

S D Harrhy

Director

STATEMENTS OF CHANGES IN EQUITY

for the year ended 30 September 2009

________________________________________________________________________________

 

Group					Share capital	Share premium account	Shares held by ESOP	Retained earnings			Totals
					£	£	£	£			£
At 1 October 2007					326,418	5,705,303	(4,541)	(3,114,762)			2,912,418
For the year to 30 September 2008:											-
Shares issued					205,000	1,057,813	-	-			1,262,813
Loss for the year					-	-	-	(2,991,274)			(2,991,274)
At 1 October 2008					531,418	6,763,116	(4,541)	(6,106,036)			1,183,957
For the year to 30 September 2009:
Shares issued					110,000	151,250	-	-			261,250
Loss for the year					-	-	-	(1,349,862)			(1,349,862)
At 30 September 2009					641,418	6,914,366	(4,541)	(7,455,898)			95,345
Company					Share capital	Share premium account	Shares held by ESOP	Retained earnings			Totals
					£	£	£	£			£
At 1 October 2007					326,418	5,705,303	(4,541)	(2,021,650)			4,005,530
For the year to 30 September 2008:											-
Shares issued					205,000	1,057,813	-	-			1,262,813
Loss for the year					-	-	-	(2,498,062)			(2,498,062)
At 1 October 2008					531,418	6,763,116	(4,541)	(4,519,712)			2,770,281
For the year to 30 September 2009:
Shares issued					110,000	151,250	-	-			261,250
Loss for the year					-	-	-	(46,036)			(46,036)
At 30 September 2009					641,418	6,914,366	(4,541)	(4,565,748)			2,985,495
All equity is attributable to equity shareholders of the parent.
Share premium
Represents amounts subscribed for share capital in excess of nominal value, net of directly attributable issue costs.
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.

CASH FLOW STATEMENTS

for the year ended 30 September 2009

________________________________________________________________________________

 

		Group				Company
		2009		2008		2009		2008
Notes		£		£		£		£
Operating activities
Loss before tax		(1,350,126)		(2,991,274)		(46,036)		(119,916)
Adjustments for:
Depreciation of property, plant and equipment		9,595		5,571		-
Amortisation of intangibles		9,270		-		-		-
Impairment of goodwill		-		2,389,093		-		-
Loss on disposal of property, plant and equipment		-		1,721		-		-
Changes in working capital:
Decrease in inventories		22,903		34,073		-		-
(Increase)/decrease in trade receivables		(588,444)		83,240		(571,693)		(473,071)
Increase/(decrease) in trade payables		206,353		(62,070)		33,764		(5,691)
Increase/(decrease) in provisions		925,800		(58,807)		-		(58,807)
Net finance (income)/cost		(688)		(8,058)		(6,385)		(10,948)
Net cash used in operating activities		(765,337)		(606,511)		(590,350)		(668,433)
Investing activities
Payments to acquire intangible fixed assets		-		(27,810)		-		-
Payments to acquire property, plant and equipment		(6,846)		(28,625)		-		-
Receipts from sales of property, plant and equipment		-		341		-		-
Acquisition of a subsidiary net of cash acquired		-		(267,163)		-		(437,921)
Interest received		6,611		10,974		6,385		10,948
Net cash used in investing activities		(235)		(312,283)		6,385		(426,973)
Financing activities
Increase/(decrease) in factor finance		37,279		14,416		-		-
Capital element of finance lease contracts		(5,217)		14,782		-		-
Proceeds from issue of shares		261,250		1,154,813		261,250		1,154,813
Interest paid		(5,923)		(2,916)		-		-
Net cash from financing activities		287,389		1,181,095		261,250		1,154,813
Net(decrease)/increase in cash and cash equivalents		(478,183)		262,301		(322,715)		70,355
Cash and cash equivalents at the start of the year		522,650		260,349		323,394		253,039
Cash and cash equivalents at the end of the year		44,467		522,650		679		323,394
Cash and cash equivalents consists of:
Cash and cash equivalents		44,467		523,122		679		323,394
Bank overdrafts		-		(472)		-		-
		44,467		522,650		679		323,394

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 September 2009

 

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 £95,345 as at 30 September 2009 (2008: net assets of £1,183,957) and sustained an operating loss of £1,350,814 (2008: loss £610,239) in the reporting period.

 

One of the subsidiaries of the Company, Pentagon Protection UK Limited (PPUK), has received notification of a warranty claim by one of its customers in respect of some goods that were supplied directly to that customer by a third party manufacturer (see note 9). Those goods were not in accordance with the specification made on the purchase order. The directors have been advised that PPUK has a valid claim against that manufacturer, although this will take time to pursue through legal channels. In the meantime, the directors are confident that the cost of replacement will be fully covered by the subsidiary's insurance policy, and a valid claim is currently in progress.

 

No other Group company has any cross guarantees in place in relation to this contract, or any other material liability of PPUK, therefore in the unlikely event that recompense is not received from either the supplier or the insurance company, there would be no adverse cash impact on Pentagon Protection Plc (PPPlc) or the other trading subsidiary. In considering the going concern status of PPPlc, the directors have also taken into account the following:

 

a) The value of the investment in PPUK was provided for in full in the year ended 30 September 2008;

b) The goodwill arising on the acquisition of PPUK was subject to a full impairment provision in the year ended 30 September 2008; and

c) There is an intercompany debt due from PPUK to PPPlc of £2.17m, which the directors have not provided against, on the grounds that they believe it will be repaid in full once PPUK is trading profitably in due course. As this is an intra Group item, it has no cash impact on the Group.

 

The Group continues to seek out further marketing opportunities and is confident of converting some of these into sales contracts in due course. Since the year end, the Group has generated an order book in excess of £3m, which will give visibility of earnings over the next 18 months to 2 years.

 

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.

 

At the date of issue of these financial statements, the following Standards and interpretations which have not been applied, were in issue but not yet effective:

 

IFRS 2 Share-based Payments

IFRS 3 Business Combinations

IFRS7 Financial Instruments: Disclosures

IFRS8 Operating segments

IFRS 17 Leases

IFRS 23 Borrowing costs

IFRS 27 Consolidated and Separate Financial Statements

IFRS 32 Financial Instruments: Presentation

IFRS 36 Impairment of Assets

IFRS 39 Financial Instruments: Recognition and measurement

IFRIC 17 Distribution of Non-cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

 

1.2 Basis of consolidation

The Group financial statements consolidate the financial statements of the company and all its subsidiary undertakings as at 30 September 2009. Control is achieved where the company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

 

Subsidiary undertakings are consolidated on the basis of the purchase method of accounting. Under this method of accounting the results of subsidiaries sold or acquired are included in the Income Statement up to, or from the date control passes.

 

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those of the group.

 

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

 

The Company has applied the exemptions under s230 of the Companies Act 1985 to not prepare a company income statement. The result for the year of the company was a loss of £46,036.

 

1.3 Revenue

Revenue represents the total amounts receivable by the group for goods and services supplied to third parties, net of value added tax and trade discounts.

 

1.4 Goodwill

Goodwill arising on the acquisition of a subsidiary represents the excess cost of acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Impairment provisions are only made when, in the opinion of the directors, sustainable future earnings from such subsidiaries are insufficient to support the carrying value of that goodwill. An impairment loss recognised for goodwill is not reversed in a subsequent period.

 

Goodwill arising on acquisition before the date of transition to IFRS has been retained at the previous UK GAAP amounts as at 30 September 2005, subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 2005 has not been reinstated and is not included in determining any subsequent profit or loss on disposal.

 

Disclosures have been included to reflect amendments to IFRS 3.

 

1.5 Property, plant and equipment

All property, plant and equipment is stated at historical cost less accumulated depreciation and subject to an impairment review. Cost includes expenditure attributable to the acquisition of the items.

 

Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:

 

Plant and machinery 10% to 25% on written down value

Fixtures & fittings 50% on cost and 25% on written down value

Motor vehicles 25% on written down value

 

 

1.6 Impairment

Fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable or as otherwise required by relevant accounting standards. Shortfalls between the carrying value of fixed assets and their recoverable amounts, being the higher of net realisable value and value-in-use, are recognised as impairments. Impairment losses are recognised in the profit and loss account.

 

 

1.7 Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange prevailing at the date of the transaction. Exchange differences are taken into account in arriving at the operating result.

 

1.8 Leasing

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payment, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs (see below).

 

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

 

Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

 

1.9 Pensions

The group operates a defined contribution scheme for its employees. The funds of this scheme are administered by trustees and are separate from the group. All payments are charged to the profit and loss account as and when they arise.

 

1.10 Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 

1.11 Inventories

Inventories are included at the lower of cost and net realisable value, after making provision for slow moving and obsolete items.

 

1.12 Financial instruments

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term deposits with maturities of three months or less. Bank overdrafts also form part of net cash and cash equivalents for the purposes of the cash flow statement.

 

Borrowings

Borrowings are recognised initially at fair value net of transaction costs incurred and such interest bearing liabilities are subsequently stated at amortised cost using the effective interest rate method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liabilities for at least 12 months after the balance sheet date.

 

Trade and other receivables

Trade and other non-interest bearing receivables are initially recognised at cost and are subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that it is uncertain if the amount due can be collected. Movement in the provision charged or credited in the period is recognised in the income statement.

 

The group discounts some of its trade receivables. The accounting policy is to continue to recognise the trade receivables within current assets and to record cash advances as borrowings within current liabilities. Discounting fees are charged in the income statement as finance costs.

 

Trade and other payables

Trade and other payables are not interest bearing and are initially recognised at cost and are subsequently measured at amortised cost using the effective interest method.

 

Investments in subsidiaries

Investments in subsidiaries are included in these financial statements at the cost of the ordinary share capital acquired. Adjustments to this value are only made when, in the opinion of the directors, a permanent diminution in value has taken place and where there is no prospect of an improvement in the foreseeable future.

 

1.13 Share based payments

The group has applied the exemption available under IFRS 1 and elects to apply IFRS 2 only to awards of equity instruments made after 7 November 2002 that had not vested by 1 January 2006.

 

Options are measured at fair value at grant date using the Black-Scholes model. The fair value is expensed on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest.

 

Employee Share Ownership Plan (ESOP)

The group has an Employee Share Ownership Plan to assist with the obligations under share option and other employee remuneration schemes. Shares in the group held by the ESOP are stated at cost and presented in the Balance Sheet as a deduction from equity under the heading of Shares Held by ESOP.

 

1.14 Intangible assets: Pre-contract costs

Directly attributable pre-contract costs have been recognised as an intangible fixed asset in accordance with the provisions of IAS 11. Such costs will be amortised over the contract period.

 

Costs that are directly attributable to the contract from the date of securing the contact to its final completion, as well as those costs that are incurred in securing the contract, are capitalised if they can be separately identified, measured reliably and if it is probable the contract will be obtained.

 

1.15 Critical accounting judgements and key sources of estimation uncertainty

Estimates and judgements are continually evaluated and are based on historical experience, internal controls, advice from external experts and other factors, including expectations of future events that are believed to be reasonable under circumstances.

 

The estimates and assumptions that have a significant risk of causing a material adjustment to the to the carrying amount of assets and liabilities within the next financial year are discussed below:

 

Business combinations

Goodwill arises only in business combinations. The amount of goodwill initally recognised depends on the allocation of the purchase price to the fair value of the identifiable assets and liabilities assumed. The determination of the fair value of assets and liabilities is based, to a considerable extent, on management's judgement.

 

 

 

2 Business and geographical segments

 

Based on the risks and returns the directors consider that the primary reporting format is by business segment. Results by business segment are as follows:

					2009		2008
					£		£
Protective Film and Anchoring
Turnover					1,430,533		1,444,247
Cost of sales					(1,103,321)		(1,067,626)
Gross profit					327,212		376,621
Overheads (net)					(709,676)		(866,944)
Operating loss before exceptional item					(382,464)		(490,323)
Exceptional item					(925,800)		-
Operating loss					(1,308,264)		(490,323)
Security Products and Services
Turnover					1,518,041		-
Cost of sales					(1,129,956)		-
Gross profit					388,085		-
Overheads (net)					(378,214)		-
Operating profit					9,871		-
Group Operating Expenses (net)
Overheads					(52,421)		(119,916)
Totals
Turnover					2,948,574		1,444,247
Cost of sales					(2,233,277)		(1,067,626)
Gross profit					715,297		376,621
Overheads (net)					(1,140,311)		(986,860)
Operating loss before exceptional item					(425,014)		(610,239)
Exceptional item					(925,800)		-
Operating loss					(1,350,814)		(610,239)

 

 

 

Assets and liabilities by business segment are as follows:
					2009		2008
					£		£
Protective Film and Anchoring
Total assets					732,138		639,496
Total liabilities					1,221,187		272,172
Depreciation and amortisation in period					16,290		5,571
Capital expenditure					3,338		56,435
Security Products and Services
Total assets					658,526		353,963
Total liabilities					357,675		176,975
Depreciation and amortisation in period					2,575		-
Capital expenditure					3,508		-
Plc
Total assets					374,118		696,456
Total liabilities					90,575		56,811
Capital expenditure					-		-
TOTAL ASSETS					1,764,782		1,689,915
TOTAL LIABILITIES					1,669,437		505,958

 

The secondary reporting format is by geographic segment based on location of customers. All of the business assets are located in the United Kingdom. External revenue by segment is as follows:

											2009		2008
											£		£
Continuing operations
United Kingdom											1,990,811		700,825
Americas											406,042		95,451
Europe											187,271		343,725
Africa and Middle East											178,577		303,275
Far East											102,100		971
Australasia											83,773		-
											2,948,574		1,444,247

 

 

 

3 Loss for the year before tax

											2009		2008
											£		£
Loss for the period is stated after charging:
Impairment of goodwill (note 5)											-		2,389,093
Exceptional item (note 9)											925,800
Depreciation:
- on owned assets											5,740		4,135
- on leased assets											3,856		1,436
Loss on disposal of property, plant and equipment											-		1,721
Operating lease rentals:
- Plant and machinery											21,530		20,154
- Other assets											18,897		15,268
Auditor's remuneration
- for audit of subsidiaries											13,750		10,200
- for audit of parent company											5,250		5,200
- for non audit services - corporation tax											2,600		2,200
- for non audit services - consultancy											-		10,000
Foreign exchange (gains)/losses											(23,469)		2,694

 

4 Loss per share

 

The calculations of loss per share are based on the following losses and number of shares:

 

				2009		2009		2008		2008
				Basic		Diluted		Basic		Diluted
Loss for the financial year				(1,349,862)		(1,349,862)		(2,991,274)		(2,991,274)
Weighted average number of shares for basic and diluted loss per share
				562,459,252		562,459,252		396,188,019		396,188,019

 

In accordance with the provisions of IAS33, shares under option are not regarded as dilutive in calculating earnings per share.

 

5 Goodwill

 

Group
										£
At 1 October 2007										2,389,093
Recognised on acquisition of subsidiary										351,360
At 30 September 2008										2,740,453
Additions										-
At 30 September 2009										2,740,453
Accumulated impairment losses
At 1 October 2008										2,389,093
Impaired in the year										-
At 30 September 2009										2,389,093
Carrying amount
At 30 September 2009										351,360
At 30 September 2008										351,360
At 1 October 2007										2,389,093

 

Goodwill arose in 2003 on the acquisition of Pentagon Protection (UK) Limited (formerly Pentagon Filmtek Limited). Prior to 1 October 2005, the goodwill arising was amortised over its estimated useful economic life of 20 years. After this date, the policy was changed to undertake annual impairment reviews in accordance with International Financial Reporting Standards.

 

£351,360 was recognised in the prior year as an addition to goodwill on the purchase of SDS Group Limited.

 

The Group tests annually for impairment or more frequently if there are indications that goodwill might be impaired.

 

Goodwill is allocated to cash generating units on the basis of business operations, with each subsidiary acquired representing a separate operation.

 

The Directors have carried out impairment tests on each operation and have concluded the following:

 

On the basis of forecast results for the next financial year, based principally on anticipated contract wins, the directors do not consider the goodwill recognised in respect of SDS Group Limited to be impaired.

 

£2,389,093 was recognised historically on the acquisition of Pentagon Protection (UK) Limited. Due to the lack of demand at 30 September 2008 for the offerings of this business segment, the directors considered the entire carrying value to be impaired in respect of this operation and wrote off the full value in 2008. The current recoverable amount is still considered to be £nil.

 

 

6 Investments

								Shares in group undertakings
Company									£
Cost or valuation
At 1 October 2007									2,610,510
Additions									545,921
At 30 September 2008									3,156,431
Additions									-
At 30 September 2009									3,156,431
Provision
At 1 October 2007									-
Provision in the year									2,389,093
At 30 September 2008									2,389,093
Provision in the year									-
At 30 September 2009									2,389,093
Net book value
At 30 September 2009									767,338
At 30 September 2008									767,338
At 30 September 2007									2,610,510

 

The company owns 100% of the ordinary share capital of the following subsidiary companies, which are incorporated in England:

 

Name Principal activity:

 

Pentagon Protection (UK) Limited Supply and application of solar, safety & security films

 

SDS Group Limited Supply of security equipment and security training consultancy

 

The accumulated provision relates to the impairment of the carrying value of the investment in Pentagon Protection (UK) Limited in the prior year, which was based on the Directors' consideration of its current value.

 

 

7 Trade and other receivables

 

			Group				Company
			2009		2008		2009		2008
			£		£		£		£
Trade receivables			1,013,851		487,205		-		-
Amounts owed by group undertakings			-		-		2,285,974		1,714,658
Prepayments and accrued income			69,352		59,193		2,708		21,702
Other receivables			58,991		7,352		19,371		-
			1,142,194		553,750		2,308,053		1,736,360

 

The directors consider the carrying value of trade receivables to equal their fair value. The average credit period taken on sales of goods is 97 days. No interest is charged on receivables.

 

At 30 September 2009, £77,771 of trade receivables were denominated in Euro (2008: £150,231) and £53,063 in US Dollars (2008: £110,938).

 

The allowance for doubtful debt is made up as follows:

 

			Group				Company
			2009		2008		2009		2008
			£		£		£		£
Opening balance as at 1 October			31,672		-		-		-
Provisions for receivables impairment			7,891		31,672		-		-
Receivables written off in the year			(23,579)		-		-		-
Unused amounts reversed			(8,093)		-		-		-
			7,891		31,672		-		-

 

The ageing analysis of the allowance for doubtful debts is as follows:

 

			Group				Company
			2009		2008		2009		2008
			£		£		£		£
Up to 3 months			3,299		31,672		-		-
Older than 3 months			4,592		-		-		-
			7,891		31,672		-		-

 

 

 

7 Trade and other receivables (continued)

 

The ageing analysis of receivables past due but not impaired is as follows:

 

			Group				Company
			2009		2008		2009		2008
			£		£		£		£
Up to 3 months			14,541		46,360		-		-
Older than 3 months			297,020		131,616		-		-
			311,561		177,976		-		-

 

Included within the debts older than 3 months are retentions which are not yet due to be paid of £53,410 (2008: £92,046).

 

8 Trade and other payables

 

					Group				Company
					2009		2008		2009		2008
					£		£		£		£
Trade payables					360,676		344,205		33,968		37,726
Other taxes and social security costs					61,738		25,635		-		-
Other payables					108,833		29,845		2,083		2,085
Accruals and deferred income					130,851		56,532		54,524		17,000
					662,098		456,217		90,575		56,811

 

The directors consider the carrying value of trade payables to equal their fair value. At 30 September 2009, £1,021 (2008: £Nil) of trade payables was denominated in US Dollars.

 

9 Provisions

			Group						Company
			£		£		£		£
			Deferred tax		Other		Total		Other
Balance at 1 October 2008			264		-		264		-
Provided in the year					925,800		925,800		-
Utilised in the year			(264)				(264)
Balance at 30 September 2009			-		925,800		925,800		-

 

 

 

The other provision relates to one of the subsidiaries of the Company, Pentagon Protection UK Limited (PPUK), which has received notification of a warranty claim by one of its customers in respect of some goods that were supplied directly to that customer by a third party manufacturer. Those goods were not in accordance with the specification made on the purchase order. The directors have been advised that PPUK has a valid claim against that manufacturer, although this will take time to pursue through legal channels. In the meantime, the directors are confident that the cost of replacement will be fully covered by the subsidiary's insurance policy, and a valid claim is currently in progress. However in accordance with IAS 37, the anticipated insurance income cannot be recognised in this reporting period; rather it shall be recognised in the period in which it is received. The Directors anticipate that cash flows relating to the replacement cost and the insurance income will arise in the next financial year.

 

10 Share Capital

								2009		2008
								£		£
1,000,000,000 Ordinary shares of 0.1p each								1,000,000		1,000,000
Issued and fully paid
As at 1 October 2008 (531,418,156 ordinary shares of 0.1p each)								531,418		326,418
Issue of Ordinary shares of 0.1p each								110,000		165,000
Issue of Ordinary shares of 0.1p each on acquisition of subsidiary								-		40,000
At 30 September 2009 (641,418,156 ordinary shares of 0.1p each)								641,418		531,418
Share transaction history
								Quantity of 0.1p shares
Share placings in the year were as follows:										Value
19 June 2009							110,000,000			0.25p

 

Share options

 

As at 30 September 2009 there were 10,592,105 share options outstanding under an Unapproved Executive Share Option scheme. These options are exercisable at 4.75p on or before 11 December 2014. There were also 2,579,534 options outstanding under an Enterprise Management Initiative Scheme exercisable at 4.75p per share on or before 9 February 2015.

 

In the opinion of the directors any charge in respect of the deemed cost of these options as determined under IFRS 2 "Share based payments" is immaterial to the results and financial position of the Group and Company.

 

Employee Share Ownership Plan

 

On flotation 4,541,262 shares were gifted into an Employee Share Ownership Plan at par. At 30 September 2009 1,941,635 of these shares remained unallocated.

					Group and company
					2009		2008
					£		£
Shares held by ESOP					4,541		4,541

 

 

 

11 This announcement has been extracted from the audited accounts for the year ended 30 September 2009 which are being posted to shareholders and will be available on the company's website and on which the auditors gave an unqualified audit opinion.