ASLR.L Regulatory News (ASLR)

29 Jun 2005 17:30

Pentagon Protection PLC29 June 2005 Pentagon Protection Plc Interim Results 2005 Mixed Results; Major Contract Gains; US Investment in Company and Collaboration Deal; Confident Outlook Pentagon Protection Plc ("Pentagon" or "the Company"), the provider ofprotective filming and glazing products to the commercial building andautomotive sectors, announces its Interim Results for the six months ended 31March 2005. David Thomas, Chairman, in his statement, reports: "Despite the temporary setbacks during the first half of the year, the Boardremains confident that the outlook for the future is positive, especially givenrecent contract gains from multinationals, the refocus towards engaging globalclients at HQ level, and the alliance with an established North American partnerthat we believe is well-placed to access the significant US market. Thesedevelopments are making the Company more competitive globally." Financial Highlights - Turnover: £1.37m (2004: £1.46m)- Operating loss: £558,882 (2004: profit £10,215)- Pre-tax loss: £563,495 (2004: profit £253)- Basic and diluted earnings per share: (0.4p), (2004: 0.0p)- Net assets: £3.0m (2004: £2.83m)- Cash £121,188 (2003: £274,696)- No dividend, in line with stated policy in prospectus. Corporate Highlights - Major overseas contracts with multinationals for offices and retail projects- Gestation period of securing some new contracts taken longer than expected- Recent contract gains to impact last quarter of 2005- Signals correctness of strategy to focus on global clients- Points to recovery as transition to more global business moves apace- Joint venture in Bahrain- US investment in Company and collaboration deal for US market Outlook In his statement, David Thomas, Chairman, said: "We look forward to reporting continued progress across all areas of thebusiness in the second half and beyond, as we recover the Group's momentum." Contact: David Thomas, Pentagon Protection PLC 020 8749 9749ChairmanPeter Binns Binns & Co PR Ltd 020 7786 9600Ben Knowles Binns & Co PR Ltd 020 7153 1487 CHAIRMAN'S STATEMENT INTRODUCTION AND FINANCIAL REVIEW The period under review for the six months to 31 March 2005 has been one ofmixed progress for Pentagon Protection. As indicated in both our AGM statementof 29 March 2005 and in a further announcement on 11 June 2005 the results wereadversely affected by one cancelled order and one delayed order. In addition,the gestation period of securing overseas contracts with two leading oil and gassector companies in the Middle East was longer than expected. Turnover for the period under review was £1,369,389 compared with £1,464,819 forthe comparable six month period in the previous financial year, with losses atthe operating and pre-tax levels of £558,882 (2004 profit: £10,215) and £563,495(2004 profit:£253), respectively. The cost of sales is higher at £854,025 (2004:£473,347), reflecting continued investment in the long-term development of thebusiness. Basic and diluted earnings per share are a loss of 0.4p per share(2004:0.0p). Net assets as at 31 March 2005 were £3.0m (2004: £2.83m).There is no dividend in line with policy, as stated in the prospectus. OPERATIONAL REVIEW During the first half of the year, the board has continued to invest in salesand marketing to strengthen Pentagon's presence internationally, which is nowbearing fruit, with encouraging recent progress evidenced by contract gains froma number of global companies. These include the oil and gas sector companies, toprotect the glass of their office buildings in the Middle East using ourproprietary FT800 Bomb Blast Film and anchoring systems. Other contracts secured since the half year end include contracts in Dubai, fora leading hotel and retail group, to protect the glass of a prestige retail/office centre in Dubai and from SKE GmbH ("SKE"), one of Germany's leadingfacilities management companies, to supply and install FT400 solar reflectingfilm at six American schools in Germany. We hope to extend our services to other geographical regions, such as North andSouth America and Europe and Africa through some of these companies and via SKEto other projects in Germany. Work on these contracts will commence in June and July of 2005 and will impactthe last quarter of Pentagon's final results for the year ended 30 September2005. A strategically significant development for the Group also occurred recently,with an agreement to enter the sizeable and lucrative US market.On 2 June 2005 the Company announced that it had entered into a letter of intentregarding an agreement with Mr. Haytham ElZayn, the Chairman of AllegianceHoldings LLC, a leading US automotive warranty group, to collaborate in theintroduction and development of Pentagon's products in the US market. Thedetails were as follows: • Mr ElZayn subscribed for 14,322,349 shares in Pentagon at 3.83p per share, for a total investment consideration of US$1 million (£548,546). • A new company, Allegiance Investment Company LLC (AICL), has been incorporated to act as the vehicle to market Pentagon's products and services throughout the United States. • Pentagon and AICL will enter into a licence agreement granting AICL the exclusive rights to trade within the USA as Pentagon's sole partner in the area of application of window films and anchoring products for architectural glass. • AICL will invest a further US$1million in the development and marketing of Pentagon's products into the US and international markets over the next 18 months. • Mr ElZayn has been invited to join the board of Pentagon. As part of the proposed agreement, Mr. ElZayn is to be granted options over18,677,651 ordinary shares in the Company, exercisable at 4.25p per share. Thisgrant of options requires approval of Pentagon shareholders via an ExtraordinaryGeneral Meeting scheduled for July 8 at 11.00 am, in the City of London.This is a significant step forward for the development of Pentagon's globalbusiness. The collaboration with AICL will permit Pentagon to tender for largerand more extended contracts and strengthen our position world-wide. It will openup new market possibilities with large construction companies and leadingcurtain wall designers.The Directors of Pentagon have chosen AICL as its strategic partner in the US,given its strong and successful management team and impressive network ofindustry leaders in, for example, Architectural Design and Construction andManufacturing and Property. The potential for Pentagon's products in the UnitedStates, with the current state of alert in North America with terrorism andhurricanes, has created a rapidly increasing general awareness of the need toprotect people and property from the inherent potential dangers of glass.Said Mr ElZayn, Chairman of AICL: "We are a company strategically focused on thebuilding and automotive aftermarket sectors. We have established a vast networkin both industries. In the building trade industry we reach the commercial,residential and OEM Sectors. Through the automotive aftermarket we provide arange of products through a sales network of over 200 outlets."He added: "AICL is very excited to introduce Pentagon Protection's state of theart product technology. We are experiencing growing demand in the flat glasssector for security, hurricane, solar and decorative products. The particularvalue enhancement that has positioned Pentagon Protection as the leader in thistechnology is their product line of anchoring systems, which will allow AICL tooffer solutions to any area in the flat glass arena, no matter how demanding." BUSINESS REVIEW Pentagon Filmtek Limited (Filmtek) - Commercial The non-fulfillment of two significant and high-profile contracts earlier in theyear has strengthened the board's resolve to reposition the Company's sales andmarketing strategy towards global clients, with the Middle East as a specificregional priority. Recent business gains are encouraging. They follow a growing list of blue-chipclient gains made earlier this year, which included Credit Suisse, StandardChartered, HSBC, Barclays Capital, Hitachi, Asda, Marks & Spencer and Boots. In the Middle East, the Group is in the process of establishing a joint venturein Bahrain with one of the region's largest automotive distributors and, at thesame time, opening a commercial office in Bahrain to manage and control ourexpanding Middle East operations. This will be operational by the end of thecurrent fiscal year. Pentagon GlassTech (GlassTech) - Automotive Despite a struggling market for new car sales, especially at the top end of themarket, sales of Pentagon GlassTech's products to the Motor Trade have heldsteady during the first half of the current fiscal year. Following the impact oflegislative changes last year, which resulted in a significant downwardcorrection in demand for window tinting, the Directors believe the worst appearsto be over and sales overall for GlassTech are moving forward encouragingly.This resurgence is being led by sales of our SupaGlass product, which has grownto 35% as a proportion of sales overall. SupaGlass is now being fitted to Police vehicles and for UK Governmentdepartments on special vehicles. With company vehicles now being viewed as anextension of the workplace, Health and Safety is anticipated to become a keydriver for demand for SupaGlass over the next few years. A number of significantprojects with major Original Equipment Manufacturers together with exclusivesupply arrangements with major Car Retail Groups are expected to contributesubstantially to revenues this fiscal year and in 2005/2006. Pentagon Pro-Marker - Building and Construction Pentagon's Pro-Marker provides a technically improved glass-etched security markfor use by glass and glazing industries in the face of new legislation. This newlegislation, driven by the UK's Glass & Glazing Federation, dictates that allnew building glass must be marked or etched with the confirmation of itscompliance with building regulations. Pentagon has recently appointed Bohle Ltd, one of Europe's leading equipmentsuppliers to the glass industry, to assist in the European distribution forPro-Marker. Sales are expected to grow steadily as anticipated regulatorychanges, which will stipulate a need to "mark" glass appropriately, draw nearer.In the meantime, Pro-Marker is rapidly earning a reputation for being the bestglass-etching device on the market and is currently attracting considerableinterest from international companies. OUTLOOK Despite the temporary setback during the first half of the year, the boardremains confident that the outlook for the future is positive, especially givenrecent contract gains from multinationals, the refocus towards engaging globalclients at HQ level, and the alliance with an established North American partnerwell-placed to access the significant US market. These developments are makingthe Company more globally competitive. We look forward to reporting continued progress across all areas of the businessin the second half and beyond, as we recover the Group's growth momentum. David ThomasChairman29 June 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 31ST MARCH 2005 Notes Unaudited Unaudited Audited year six months six months ended 31 March 31 March 30 September 2005 2004 2004 £ £ £TURNOVER 2 ---------- ----------- -----------Continuingoperations 1,369,389 755,757 1,462,714Acquisitions - 709,062 1,853,840 ---------- ----------- ----------- 1,369,389 1,464,819 3,316,554Cost of Sales (854,025) (473,347) (1,364,463) ---------- ----------- -----------GROSS PROFIT 515,364 991,472 1,952,091Selling anddistribution costs (321,162) (182,459) (501,997)Administrativeexpenses (742,288) (808,859) (1,192,343)Other operatingincome 44533 10,061 20,738Amortisation ofgoodwill (55,329) - (82,994) ---------- ----------- -----------OPERATING (LOSS)/PROFIT ---------- ----------- -----------Continuingoperations (558,882) (68,508) 17,980Acquisitions - 78,723 177,515 ---------- ----------- ----------- (588,882) 10,215 195,495 ---------- ----------- -----------Interestreceivable 4,232 1,025 3,125Interest payable (8,845) (10,987) (19,763) ---------- ----------- -----------(LOSS)/PROFIT ONORDINARYACTIVITIES BEFORETAXATION (563,495) 253 178,857Tax on (loss)/projt on ordinary - - -activities ---------- ----------- -----------(Loss)/Profit onordinaryactivities aftertaxation (563,495) 253 178,857Losses broughtforward (510,767) (689,624) (689,624) ---------- ----------- -----------Accumulated lossescarried forward (1,074,262) (689,371) (510,767) ---------- ----------- -----------Basid and dilutedearnings/(loss)per share 3 (0.4)p 0.00p 0.15p TOTAL RECOGNISED GAINS AND LOSSESThe group has no recognised gains or losses other than those included in theprofit and loss account CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH 2005 Notes Unaudited Unaudited six months six months Audited year ended ended ended 31 March 31 March 30 September 2005 2004 2004 £ £ £ FIXED ASSETS ----------- ----------- -------------Intangibleassets 2,362,358 2,348,873 2,430,844Tangibleassets 216,762 203,648 237,814 ----------- ----------- ------------- 2,579,120 2,552,521 2,668,658 ----------- ----------- -------------CURRENT ASSETS 145,221 62,770 156,276Stocks 998,814 1,002,792 1,219,965Debtors 121,188 274,696 601,782Cash at bank and inhand ----------- ----------- ------------- 1,265,223 1,340,258 1,978,023 ----------- ----------- -------------CREDITORS (795,755) (770,380) (777,972)Amounts falling duewithin one year ----------- ----------- -------------NET CURRENTASSETS 469,468 569,878 1,200,051 ----------- ----------- -------------TOTAL ASSETSLESS CURRENTLIABILITIES 3,048,588 569,878 1,200,051CREDITORS (15,774) (283,694) (22,400)Amounts fallind due aftermore than one yearPROVISIONS FORLIABILITIESAND CHARGES - - (250,000) ----------- ----------- ------------- 3,032,814 2,838,705 3,596,309 ----------- ----------- -------------CAPITAL ANDRESERVES 4 151,345 125,956 135,556Called upshare capital 5 - 750,000 750,000Shares to beissued 5 3,763,581 2,459,970 3,029,370Share premiumaccount 5 192,150 192,150 192,150Merger reserve 5 (1,074,262) (689,371) (510,767)Profit and loss account ----------- ----------- -------------EQUITYSHAREHOLDERS'FUNDS 3,032,814 2,838,705 3,596,309 ----------- ----------- ------------- The interim results were approved by the Board on 29 June 2005 CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31ST MARCH 2005 Unaudited Unaudited six months six months Audited ended ended year ended 31 March 31 March 30 September 2005 2004 2004 £ £ £Net cash inflow/(outflow) fromoperating activities (326,893) 42,196 244,587Returns on investments andservicing of finance (4,613) (9,961) (16,638)Capital expenditure and financialinvestment (8,939) (9,710) (410,522)Acquisitions and disposals (55,000) (943,263) (943,365) --------- ----------- ----------- Net cash outflow beforemanagement of liquid resourcesand financing (395,445) (920,738) (1,125,938)Financing (85,149) 943,331 1,475,611 --------- ----------- -----------(Decrease)/Increase in cash inthe period (480,594) 22,593 349,673 --------- ----------- ----------- Reconciliation of net cash flow tomovement in net funds/(debt)(Decrease)/Increase in cash inthe period (480,594) 22,593 349,673Cash movements relating to debtand lease financing 85,149 9,683 80,917 --------- ----------- -----------Movement in net funds/(debt)resulting from cash flows (395,445) 32,276 430,590 --------- ----------- -----------Change in net funds/(debt) (395 445) 32,276 430,590Net funds/(debt) at 1 October2004 419,688 (10,902) (10,902) --------- ----------- -----------Net funds at 31 March 2005 24,243 21,374 419,688 --------- ----------- ----------- NOTES TO THE INTERIM REPORTFOR THE SIX MONTHS ENDED 31ST MARCH 2005 1. ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing withitems which are considered material in relation to the financial statements. Accounting conventionThe financial statements have been prepared under the historical cost conventionand are in accordance with applicable accounting standards. Basis of consolidationThis interim report has been prepared in accordance with applicable accountingstandards and under the historical cost convention. On 11 December 2003 Pentagon Protection Plc acquired 100% of the issued sharecapital of Filmtek Limited. This subsidiary has been accounted for usingacquisition accounting and consequently only the results since 11 December 2003have been included in the consolidated profit and loss account. The financial information set out in this interim report does not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985.The financial information for the year ended 30 September 2004 has beenextracted from the statutory accounts which have been delivered to the Registrarof Companies and on which the auditors gave an unqualified opinion. TurnoverTurnover represents net invoiced sales of goods, excluding value added tax andtrade discounts. GoodwillGoodwill arising on the acquisition of a subsidiary undertaking is thedifference between the fair value of the consideration paid and the fair valueof assets acquired. It is capitalised and amortised through the profit and lossaccount over the Directors' estimate of its useful economic life of 20 years.Impairment tests on the carrying value of goodwill are undertaken: • At the end of the first financial year following acquisition; • In other periods if events or changes in circumstances indicate that the carrying value may not be recoverable. DepreciationDepreciation is provided at the following annual rates in order to write offeach asset over its estimated useful life or, if held under a finance lease,over the lease term, whichever is the shorter. Short leasehold - over the term of the leasePlant and machinery - 15% to 25% on reducing balanceFixtures and fittings - 50% on cost and 25% on reducing balanceMotor vehicles - 25% on reducing balanceComputer equipment - 50% on cost StocksStocks and work in progress are valued at the lower of cost and net realisablevalue, after making due allowance for obsolete and slow moving items. Cost includes all direct expenditure and an appropriate proportion of fixed andvariable overheads. Deferred taxProvision is made in full for all taxation deferred in respect of timingdifferences that have originated but not reversed by the balance sheet date,except for timing differences arising on revaluations of fixed assets which arenot intended to be sold and gains on disposals of fixed assets which will berolled over into replacement assets. No provision is made for taxation onpermanent differences. Deferred tax assets are recognised to the extent that it is more likely than notthat they will be recovered. Deferred tax balances are not discounted. Research and developmentDevelopment expenditure is capitalised on clearly defined projects whose outcomecan be assessed with reasonable certainty. Amortisation is commenced in the yearwhen significant revenues from the development occur and is charged at 33% ofnet book value. All other research and development expenditure is written off inthe year in which it is incurred. Foreign currenciesAssets and liabilities in foreign currencies are translated into sterling at therates of exchange ruling at the balance sheet date. Transactions in foreigncurrencies are translated into sterling at the rate of exchange ruling at thedate of transaction. Exchange differences are taken into account in arriving atthe operating result. Hire purchase and leasing commitmentsAssets obtained under hire purchase contracts or finance leases are capitalisedin the balance sheet. Those held under hire purchase contracts are depreciatedover their estimated useful lives. Those held under finance leases aredepreciated over their estimated useful lives or the lease term, whichever isthe shorter. The interest element of these obligations is charged to the profit and lossaccount over the relevant period. The capital element of the future payments istreated as a liability. Rentals paid under operating leases are charged to the profit and loss accountas incurred. PensionsThe group operates a defined contribution pension scheme. Contributions payablefor the period are charged in the profit and loss account. Invoice discountingThe group discounts some of its trade debts. The accounting policy is to includetrade debt within trade debtors due within one year and record cash advanceswithin creditors due within one year. Discounting fees are charged to the profitand loss account when incurred. Bad debts are borne by the group and are chargedto the profit and loss account when incurred. 2. TURNOVER The turnover for the period is attributable to the principal activities of thegroup. 3. EARNINGS/(LOSS) PER SHARE The calculations of earnings/(loss) per share are based on the following profits/(losses) and numbers of shares: Unaudited Six months Audited ended year ended 31 March 2005 31 March 2004 30 September 2004 £ £ £ Profit/(loss) for the financialperiod 563,495 253 178,857For basic and dilutedearnings/(loss) per share: 141,542,261 111,567,876 119,002,923Weighted average number ofshares 4. CALLED UP SHARE CAPITAL Authorised: Class: Nominal Unaudited AuditedNumber: value: 31 March 2004 30 September 2004 £ £200,000,000 Ordinary 0.1p 200,000 200,000 ---------- ----------- Allotted, issued and fullypaid:Number: Class: Nominal value: 31.03.05 30.09.04 £ £151,345,615 Ordinary 0.1p 151,345 135,556 ---------- ----------- Pentagon Protection Plc share transaction history On 21st January 2005 15,789,473 ordinary 0.1p shares were issued to the vendorsof Filmtek Limited for 4.75p each as part of their contingent consideration. 5. MOVEMENT IN RESERVES Profit and loss Share Merger Shares to be account premium reserve issued £ £ £ £ £At 1 October2004 (510,767) 3,029,370 192,150 750,000 3,460,753Deficit forthe period (563,495) - - - (563,495)Premium arisingon sharesissued duringthe period - 734,211 - - 734,211Shares issuedin the period - - - (750,000) (750,000) -------- --------- --------- --------- --------- At 31 March 2005 (1,074,262) 3,763,581 192,150 - 2,881,469 6. COPIES OF THE INTERIM REPORT Copies of the interim report are available from the company's registered officeat Pentagon House, Unit 4 Acton Park Estate, The Vale, Acton, London, W3 7QE. This information is provided by RNS The company news service from the London Stock Exchange