ASLR.L Regulatory News (ASLR)

14 Jun 2006 07:01

Pentagon Protection PLC14 June 2006 For Immediate Release PENTAGON PROTECTION PLC 14 June 2006 INTERIM RESULTS Pentagon Protection Plc, the provider of safety and security products forcommercial and architectural glass, announces its interim results for the sixmonths ending March 2006. The period under review saw much needed change and, as indicated in the February2006 trading update, the Group has carried through a major restructuring thebusiness and its focus. A major part of the restructuring was the successfuldivestment (announced in May 2006) of the Company's loss-making automotivedivision, permitting a strengthening of focus on the high potentialopportunities within the buildings sector, a core area of competence for theGroup. The losses generated in the period were therefore in line with expectations. We are also pleased to announce that Alan Nicholl, previously Managing Directorof Pentagon Protection, has been appointed as interim Chairman. Financial Highlights: • Turnover up from £1.369m to £1.430m, an increase of 4.4%. • Gross profit up from £515k to £683k, an increase of 32.6%. • The loss is up from £563k to £638k, an increase of 13.3% • No Interim dividend Graham Bannerman, Pentagon Chief Executive commented: 'In reaction to the suffering of continued losses from the automotive divisionwe underwent a major strategic review. I am happy to report that our growingdomestic and overseas order books are already justifying the Company's muchneeded restructuring. The team is now single-mindedly focused on completing thisprocess. By building on the Company's proven strengths we look forward toreporting further and profitable new business wins in the second half andbeyond.' Contact: •Graham Bannerman 01494 793 333 (CEO Pentagon Protection Plc) •Ben Knowles 020 7786 9600 Parkgreen Communications Mob. 07900 346 978 Chairman's statement Introduction I have just taken over as interim Chairman of Pentagon Protection Plc, havingheld the role of Managing Director for the past two years. We are currently indiscussions with a major figure within the glass surfacing industry in regardsoffering him the role of Chairman. Meanwhile I very much look forward to puttingmy extensive experience at Pentagon to good use in steering the Group into anexciting new future as we concentrate all our attention and resources on thebuildings sector. The six months ended 31 March 2006 was a period during which the Group continuedto bear the losses of its automotive division. As a result, the Group continuedto generate losses in the six months at approximately the same rate as duringthe last financial year. During the period under review a great deal of management effort was focused onsecuring a disposal of the automotive division as well as the development of astrategic plan for how to take the Group forward once the disposal was complete.I am happy to say that the former has been achieved and the latter is in placeand we are already witnessing the benefits. Financial Review Turnover for the period under review was £1,429,799 compared with £1,369,389 forthe comparable six month period in the previous financial year, an increase of4.4%. The Group achieved a considerably improved gross profit on these sales of£682,581, as compared to £515,364 for the equivalent period last year,representing a gross profit margin of 48%, compared to 37% achieved in the sixmonths ended 31 March 2005. This is not quite as exciting as it appears because48% is in line with our normal expectations. Administrative expenses for the six months, at £990,338, were considerablyhigher than the figure for the equivalent period last year (£742,288), as aresult of the cost of setting up an administrative capability in a number ofdifferent territories around the world, most notably in the USA and Bahrain.Although these costs obviously impact on the current period, they should paydividends in improved turnover in the future. A further element of theseadministrative expenses relates to costs of improving the company's marketingstrength. This is obviously key to improving turnover and thereforeprofitability in the future. This is also an area where the Directors plan tofocus more funds and efforts in the future. The increased level of administrative expenditure led to an operating loss of£637,953, up 14% on the equivalent period last year. Despite this loss, and nofund raising since the year end (30 September 2005) the company's cash reservesheld up, with cash at 31 March 2006 of £82,026, compared to £121,188 at 31 March2005. The basic loss per share was 0.38p, compared to 0.4p for the six months ended 31March 2005, and the diluted loss per share for this period was 0.33p, comparedto 0.4p for the six months 31 March 2005. The Directors have not proposed a dividend, in line with their continuing policyat the current time. Operational Highlights • Disposal on May 1st of loss-making automotive division PentagonGlassTech Ltd. and related automotive franchising division Pentagon GlassTechFranchising Ltd., for a nominal amount inclusive of all liabilities.• Streamlined the Board to reflect buildings division focus, with GrahamBannerman continuing as CEO, Stephen Harrhy as International Sales Director,Haytham ElZayn as Non-Executive Director and my appointment as interim Chairman. • Commenced US operations in partnership with Allegiance Holdings, with first contracts in place • Progressed negotiations to acquire a leading UK-based competitor to consolidate Pentagon's domestic leadership position in the commercial buildings market. • In negotiation to secure exclusive global supply and distribution rights to patented superior window-frame anchoring technology resulting in a proven superior 'system' of window glass protection and secured a core customer. • Strong contract gains, including the Norwegian Embassy in Afghanistan, The Rockefeller Group in Nigeria, the Bahrain Defence Force, the British Council in Russia, Shell Oil in Libya, a three year maintenance contract for Changi Airport in Singapore and the a large commercial bank in Bahrain. • Progressed negotiations with a prospective Business Partner in China. Business Review The most significant event to occur in the ten weeks since my predecessor'sreport on the 30 September 2005 financial statements is that we have finallydivested ourselves of the loss making automotive division, Pentagon Glass Tech.It was with some sadness that we signed the contracts, since this divisionformed the original company on which Pentagon Protection Plc was founded.However, there remains a positive ongoing relationship with Glass Tech's newowners. For example, we have an arrangement that we can still use the superbshowroom at Acton whenever necessary, our websites are still inter-related andof course the extensive network of franchises still bears our name. We believethat the advantages of such a positive association going forward, combined withthe improvement to our results of losing the extensive overheads associated withthe Acton operation, can only benefit the group's shareholders. The disposal was finalised on 1 May 2006, and your newly streamlined Board hasspent the period since then reviewing staffing, operations, sales and marketingstrategies, acquisition policies and financial projections. Whilst the CEO, Graham Bannerman and I have focussed on the UK, our other twoDirectors have been working for us in the larger global environment. Haytham ElZayn, our American Investor/Director, has been gearing up operationsin the USA. Training of sales teams has taken place, offices have beenestablished, intellectual property issues have been resolved and the first salescontracts have now been completed. Our International Sales Director, Steve Harrhy, has spent most of his time overthe past few months in the Middle East and Far East. As a result of theseefforts, we have secured further contracts as detailed under 'OperationalHighlights' above. After seven months of negotiations with a prospective business partner in China,contracts have been initiated with the principals of the Chinese company. Outlook Development of overseas market is looking extremely positive. Meanwhile, wecontinue to review the best way to cement our leading position in the UK marketfor safety and security products for commercial and architectural glass. Alan Nicholl, Chairman Consolidated Profit and Loss AccountFor the six months ended 31 March 2006 Audited Unaudited six months ended year ended 31 March 31 March 30 September 2006 2005 2005 Notes £ £ £ Turnover 2 1,429,799 1,369,389 3,619,939Cost of sales (747,218) (854,025) (2,051,278) --------- --------- ---------Gross profit 682,581 515,364 1,568,661 Selling and distribution costs (296,998) (321,162) (631,058)Administrative expenses (990,338) (742,288) (2,058,501)Other operating income 32,273 44,533 26,828Amortisation of goodwill (65,471) (55,329) (130,526) --------- --------- ---------Operating loss (637,953) (558,882) (1,224,596) --------- --------- ---------Interest receivable 1,830 4,232 8,245Interest payable (2,262) (8,845) (19,451) --------- --------- ---------Loss on ordinaryactivities before taxation (638,385) (563,495) (1,235,802) Tax on loss on ordinary activities - - - --------- --------- ---------Loss on ordinaryactivities after taxation (638,385) (563,495) (1,235,802)Losses bought forward (1,357,118) (510,767) (121,316) --------- --------- --------- Accumulated lossescarried forward (1,995,503) (1,074,262) (1,357,118) ========= ========= =========Loss per share: 3Basic (0.38)p (0.40)p (0.82)pDiluted (0.33)P (0.40)p (0.70)p Total recognised gains and lossesThe group has no recognised gains or losses other than those included in theprofit and loss account. The notes form part of this interim report. Consolidated Balance SheetAs at 31 March 2006 Unaudited six Audited months ended year ended 31 March 31 March 30 September 2006 2005 2005 Notes £ £ £ Fixed assetsIntangible assets 2,323,622 2,362,358 2,389,093Tangible assets 178,836 216,762 202,038 --------- --------- --------- 2,502,458 2,579,120 2,591,131 Current assetsStocks 123,855 145,221 201,923Debtors 980,748 998,814 1,262,218Cash at bank and in hand 82,026 121,188 471,347 --------- --------- --------- 1,186,629 1,265,223 1,935,488 Creditors: Amounts fallingdue within one year (828,430) (600,755) (1,024,298) --------- --------- ---------Net current assets 358,199 664,468 911,190 --------- --------- ---------Total assets less currentliabilities 2,860,657 3,243,588 3,502,321 Creditors: Amounts fallingdue after more than one year (5,289) (15,774) (8,568)Provisions for liabilities andCharges (195,000) (195,000) (195,000) --------- --------- --------- 2,660,368 3,032,814 3,298,753 ========= ========= ========= Capital and reservesCalled up share capital 4 165,918 151,345 165,918Share premium account 5 4,297,803 3,763,581 4,297,803Merger reserve 5 192,150 192,150 192,150Profit and loss account 5 (1,995,503) (1,074,262) (1,357,118) --------- --------- ---------Equity shareholders' funds 2,660,368 3,032,814 3,298,753 ========= ========= ========= The interim results were approved by the board on: 13 June 2006 The notes form part of this interim report Consolidated Cash Flow StatementFor the six months ended 31 March 2006 Unaudited six Audited months ended year ended 31 March 31 March 30 September 2006 2005 2005 £ £ £ Net cash outflowfrom operating activities (268,300) (326,893) (870,798) Returns on investmentsand servicing of finance (432) (4,613) (11,206) Capital expenditure andfinancial investment (6,140) (8,939) (13,653)Acquisitions and disposals - (55,000) (55,000) --------- --------- ---------Net cash outflow beforemanagement of liquidresources and financing (274,872) (395,445) (950,657)Financing (89,485) (85,149) 813,709 --------- --------- ---------Decrease in cashin the period (364,357) (480,594) (136,948) ========= ========= ========= Reconciliation of net cash flow to movement in net funds/(debt) Decrease in cashin the period (364,357) (480,594) (136,948) Cash movements relating todebt and lease financing 89,485 85,149 (264,914) --------- --------- ---------Movement in net funds/(debt)resulting from cash flows (274,872) (395,445) (401,862) --------- --------- ---------Change in net funds/(debt) (274,872) (395,445) (401,862) Net funds/(debt) at1 October 2005 147,262 419,688 549,124 --------- --------- ---------Net funds/(debt) at 31 March 2006 (127,610) 24,243 147,262 ========= ========= ========= The notes form part of this interim report Notes to the Interim ReportFor the six months ended 31 March 2006 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 convention The financial statements have been prepared under the historical cost conventionand are in accordance with applicable accounting standards. Basis of consolidation The group financial statements consolidate the financial statements of thecompany and all its subsidiary undertakings as at 31 March 2006 using mergeraccounting or acquisition accounting depending on the circumstances surroundingthe combination of each subsidiary undertaking and after eliminating intra-grouptransactions. 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 2005 has beenextracted from the statutory accounts which have been delivered to the Registrarof Companies and on which the auditors gave an unqualified opinion. Turnover Turnover represents net invoiced sales of goods, excluding value added tax andtrade discounts. Goodwill Goodwill 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. Notes to the Interim report (continued)For the six months ended 31 March 2006 Depreciation Depreciation 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 Stocks Stocks 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 tax Provision 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 Development Development 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 Currencies Assets 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. Notes to the Interim report (continued)For the six months ended 31 March 2006 Hire purchase and leasing commitments Assets 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. Pensions The group operates a defined contribution pension scheme. Contributions payablefor the period are charged in the profit and loss account. Invoice discounting The group discounts some of its trade debts. The accounting policy is to includetrade debt within one year and record cash advances within creditors due withinone year. Discounting fees are charged to the profit and loss account whenincurred. Bad debts are borne by the group and are also charged to the profitand loss account when incurred. 2. TURNOVER The turnover for the period is attributable to the principal activities of thegroup. 3. LOSS PER SHARE The calculations of loss per share are based on the following losses and numbersof shares: Audited Unaudited six months ended year ended 31 March 31 March 30 September 2006 2005 2005 £ £ £Loss for the financialperiod (638,385) (563,495) (1,235,802) ========= ========= =========Weighted averagenumber of shares:Basic 165,918,156 141,542,261 151,488,970Diluted 190,767,457 141,542,261 176,338,271 ========= ========= ========= Notes to the Interim report (continued)For the six months ended 31 March 2006 4. CALLED UP SHARE CAPITAL Unaudited Unaudited AuditedAuthorised 31 Mar 06 31 Mar 05 30 Sept 05number: £ £ £ 200,000,000 0.1p ordinary 200,000 200,000 200,000 Allotted, issued and fully paidnumber:156,918,156 0.1p ordinary 165,918 151,345 165,918 ========= ========= ========= 5. MOVEMENT IN RESERVES Profit and loss Share Merger account premium reserve Total £ £ £ £ At 01.10.05 (1,357,118) 4,297,803 192,150 3,132,835 Loss for the period (638,385) - - (638,385) --------- --------- --------- ---------At 31.03.06 (1,995,503) 4,297,803 192,150 2,494,450 ========= ========= ========= ========= 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. Directors, Secretary and Advisers Directors: G H Bannerman S D Harrhy A R Nicholl H Elzayn (appointed 26 October 2005) R Bambra (resigned 13 April 2006) G P Russell (resigned 13 April 2006) D A Thomas (resigned 13 April 2006) Secretary: T B Harrington Registered office: Pentagon House Unit 4, Acton Park Estate The Vale London W3 7QE Registered number: 04488281 (England and Wales) Nominated Adviser: Seymour Pierce Bucklersbury House 3 Queen Victoria Street London, EC4N 8EL Auditors: Warrener Stewart Harwood House 43 Harwood Road London, SW6 4QP Solicitors: Sherrards 3rd Floor 45 Grosvenor Road St Albans Herts, AL1 3AW Registrars: Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield, HD8 0LA This information is provided by RNS The company news service from the London Stock Exchange