Last checked at 16 Sep 2009 07:00
Embargoed until 0700, 16 September 2009
Kenetics Group Limited
Interim Results
Kenetics Group Limited ("Kenetics" or "the Company" or "the Group"), the Radio Frequency Identification (RFID) company focused on Security and RFID systems and products, announces its interim report for the 6 months ended 30 June 2009.
Key Points
Consolidated turnover versus the corresponding period in 2008 improved by 143% to £570,000 (six months ended 30 June 2008: £235,000).
Consolidated loss on ordinary activities after tax and expenses was £204,000 (six months ended 30 June 2008: £289,000).
Cash outflow before working capital changes reduced to £66,000 from £250,000 in the corresponding period in 2008.
There was an increase of other operating expenses to £202,000 (six months ended 30 June 2008: £145,000), mainly due to a loss in foreign exchange of £52,000 (six months ended 30 June 2008: £21,000 gain in exchange) in the translation of Singapore Dollars to Sterling during the first half of the year.
The Company is pleased to announce that it is making good progress with the two Singapore Land Transport Authority ("LTA") contracts, which were earlier reported. These contracts have contributed to the significant increase in revenue in the first half of the year.
The directors believe that these contracts with LTA will enable the Company to withstand the worst effects of the current economic uncertainty on the sector.
Commenting on the results, Ken Wong, Chairman and CEO said:
"The first half year performance has been very encouraging despite the current global downturn in business activities. I am pleased to report that we are making good progress in the two LTA contracts that we gained in the second half of last year and the first quarter of this year. For the initial contract on the Contactless Smart Card (CSC) Reader, the development and testing stages have been successfully completed. Production of the Readers has started and field trials are expected to commence in the second half of the year. Similarly, the design of the On-Board Bus Equipment (OBE) under the second contract has been completed and prototypes will begin after the review of the designs.
Notwithstanding these contracts, we have been sustaining our industrial product sales despite the weaker market conditions, resulting in about one third of the revenue coming from this business segment. The efforts made by our Japanese partner have begun to bear fruit and sales orders are coming in for the products introduced in Japan.
With regards to the Company's working capital position, as at 30 June 2009 the Company had net liabilities of £438,000, after taking into account of £508,000 owing to the Directors. The Company currently receives, and will continue to receive, adequate financing through loans made by Directors but recognizes that further third party funding will be required in the short to medium term to finance the increased level of business activities. The Company is talking to its advisers with regards to securing such future funding and further announcements will be made in due course.
Despite the global markets continuing to look uncertain, the Company is leveraging on the good progress made in the LTA contracts and expects to introduce the new products for field trials on buses and rail systems in the second half of the year. The Board feels confident that further progressive improvements will be made and the Company will continue to seize the opportunities to grow the business"
For more information, please contact:
| Ken Wong, Chairman and CEO |
| Kenetics Group Limited |
| Tel: +65 6749 0083 |
| Website:www.kenetics-group.com |
| David Newton |
| ZAI Corporate Finance Ltd |
| (Nominated Advisor) |
| Tel: +44 207 060 1760 |
| Peter Ward / Ian Callaway |
| SVS Securities (PLC) |
| (Broker) |
| Tel: +44 207 638 5600 |
| Jeremy Carey / Andrew Dunn | |
| Tavistock Communications Ltd | |
| Tel: +44 207 920 3150 |
Kenetics Group Limited - Interim financial information
Six months ended 30 June 2009
CONDENSED CONSOLIDATED INCOME STATEMENT
| 6 months | 6 months | 12 months | ||
| Ended | Ended | Ended | ||
| 30 June | 30 June | 31 December | ||
| 2009 | 2008 | 2008 | ||
| (Unaudited) | (Unaudited) | (Audited) | ||
| £'000 | £'000 | £'000 | ||
| Continuing operations | ||||
| Revenue | 570 | 235 | 556 | |
| Other operating income | 36 | - | 1 | |
| Changes in inventories of finished | ||||
| goods and work-in-progress | (21) | (13) | (4) | |
| Raw materials and consumables used | (163) |
(83) | (293) | |
| Employee benefits expenses | (329) | (245) | (463) | |
| Depreciation of plant and equipment | (25) | (35) | (91) | |
| Other operating expenses | (202) | (145) | (283) | |
| Loss arising on derivative financial instrument | (52) | - | - | |
| Finance costs | (17) | (3) | (14) | |
| Loss before income tax | (203) | (289) | (591) | |
| Income tax expense | (1) | - | - | |
| Loss for the period | (204) | (289) | (591) | |
| Loss attributable to: | ||||
| Owners of the Company | (204) | (282) | (580) | |
| Minority interests | - | (7) | (11) | |
| (204) | (289) | (591) | ||
| Loss per share (pence) - Basic and diluted | (0.77) | (1.07) | (2.24) |
Kenetics Group Limited - Interim financial information
Six months ended 30 June 2009
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| 6 months | 6 months | 12 months | ||
| Ended | Ended | Ended | ||
| 30 June | 30 June | 31 December | ||
| 2009 | 2008 | 2008 | ||
| (Unaudited) | (Unaudited) | (Audited) | ||
| £'000 | £'000 | £'000 | ||
| Loss for the period | (204) | (289) | (591) | |
| Other comprehensive income: | ||||
| Foreign currency translation | (4) | (6) | 48 | |
| Total comprehensive expense for the period | (208) | (295) | (543) | |
| Total comprehensive | ||||
| expense attributable to: | ||||
| Owners of the Company | (208) | (288) | (532) | |
| Minority interests | - | (7) | (11) | |
| (208) | (295) | (543) | ||
Kenetics Group Limited - Interim financial information
Six months ended 30 June 2009
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
| 30 June | 30 June | 31 December |
| 2009 | 2008 | 2008 | |
| (Unaudited) | (Unaudited) | (Audited) | |
| £'000 | £'000 | £'000 | |
| Non-current assets | |||
| Plant and equipment | 100 | 124 | 121 |
| Available for sale financial asset | - | 24 | - |
| Total non-current assets | 100 | 148 | 121 |
| Current assets | |||
| Inventories | 449 | 248 | 332 |
| Trade receivables | 90 | 55 | 68 |
| Other receivables | 186 | 41 | 72 |
| Cash and cash equivalents | 183 | 107 | 169 |
| Total current assets | 908 | 451 | 641 |
| Total assets | 1,008 | 599 | 762 |
| EQUITY AND LIABILITIES | |||
| Equity attributable to owners of the Company | |||
| Share capital | 264 | 264 | 264 |
| Share premium | 280 | 280 | 280 |
| Share option reserve | 5 | 28 | 3 |
| Equity component of convertible loan | - | - | 16 |
| Merger reserve | 370 | 370 | 370 |
| Foreign currency translation reserve | 17 | (33) | 21 |
| Accumulated losses | (1,374) | (914) | (1,186) |
| Total equity | (438) | (5) | (232) |
| Non-current liabilities | |||
| Amount owing to director | 318 | - | 272 |
| Bank loan | 81 | - | - |
| Total non-current liabilities | 399 | - | 272 |
|
|
|
|
|
Kenetics Group Limited - Interim financial information
Six months ended 30 June 2009
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)
|
| 30 June | 30 June | 31 December |
| 2009 | 2008 | 2008 | |
| (Unaudited) | (Unaudited) | (Audited) | |
| £'000 | £'000 | £'000 | |
| Current liabilities | |||
| Trade payables | 55 | 76 | 50 |
| Other payables | 137 | 132 | 115 |
| Amount owing to directors | 190 | 223 | 21 |
| Obligations under finance leases | - | 4 | 1 |
| Convertible loan | 416 | - | 363 |
| Derivative financial instrument | 52 | - | - |
| Bank loan | 103 | - | - |
| Bank overdraft - secured | 94 | 169 | 172 |
| Total current liabilities | 1,047 | 604 | 722 |
| Total liabilities | 1,446 | 604 | 994 |
| Total equity and liabilities | 1,008 | 599 | 762 |
KENETICS GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR 6 MONTHS ENDED 30 JUNE 2009
| Attributable to owners of the Company | |||||||||||||||||||
| Group | Share capital | Share premium | Share Option reserve | Equity Component of convertible loan | Merger reserve | Foreign Currency Translation Reserve | Accumulated Losses | Total | Minority Interest | Total Equity | |||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Balance as at 1/1/08 | 264 | 280 | 27 | - | 370 | (27) | (632) | 282 | - | 282 | |||||||||
| Share option granted | - | - | 1 | - | - | - | - | 1 | - | 1 | |||||||||
| Acquisition of additional interest in subsidiary | - | - | - | - | - | - | - | - | 7 | 7 | |||||||||
| Total comprehensive expense for the period | - |
- |
- | - |
- |
(6) | (282) |
(288) | (7) |
(295) | |||||||||
| Balance as at 30/06/08 | 264 | 280 | 28 | - | 370 | (33) | (914) | (5) | - | (5) | |||||||||
| Share options granted | - | - | 1 | - | - | - | - | 1 | - | 1 | |||||||||
| Share options lapsed | - | - | (26) | - | - | - | 26 | - | - | - | |||||||||
| Equity component of convertible loan |
- |
- |
- |
16 |
- |
- |
- |
16 | - |
16 | |||||||||
| Acquisition of additional interest in subsidiary | - | - | - | - | - | - | - | - | 4 | 4 | |||||||||
| Total comprehensive income/(expense) for the period | - | - | - | - | - |
54 |
(298) | (244) | (4) | (248) | |||||||||
| Balance as at 31/12/08 | 264 | 280 | 3 | 16 | 370 | 21 | (1,186) | (232) | - | (232) | |||||||||
| Share options granted | - | - | 2 | - | - | - | - | 2 | - | 2 | |||||||||
| Equity component of convertible loan | - | - | - | (16) | - | - | 16 | - | - | - | |||||||||
| Total comprehensive expense for the period |
- |
- |
- |
- |
- |
(4) |
(204) |
(208) | - | (208) | |||||||||
| Balance as at 30/06/09 | 264 | 280 | 5 | - | 370 | 17 | (1,374) | (438) | - | (438) | |||||||||
Kenetics Group Limited - Interim financial information
Six months ended 30 June 2009
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
| 6 months | 6 months | 12 months | |
| Ended | Ended | Ended | |
| 30 June | 30 June | 31 December | |
| 2009 | 2008 | 2008 | |
| (Unaudited) | (Unaudited) | (Audited) | |
| £'000 | £'000 | £'000 | |
| Cash flows from operating activities | |||
| Loss before income tax | (203) | (289) | (591) |
| Adjustments for: | |||
| Depreciation | 25 | 35 | 91 |
| Interest expense | 18 | 4 | 15 |
| Interest income | (1) | (1) | (1) |
| Impairment loss | - | - | 31 |
| Provision for inventory obsolescence | - | - | 40 |
| Share options expenses | 2 | 1 | 2 |
| Loss arising on derivative financial instrument | 52 | - | - |
| Unrealised exchange loss | 41 | - | - |
| Cash outflow before working capital changes | (66) | (250) | (413) |
| Increase in contract work-in-progress | (161) | - | (24) |
| (Increase)/decrease in trade and other receivables |
(156) |
85 | 94 |
| Decrease/(increase) in inventories | 1 | 3 | (19) |
| Increase/(decrease) in trade and other payables | 64 |
(116) | (363) |
| Cash used in operations | (318) | (278) | (725) |
| Interest paid | (3) | (4) | (8) |
| Income tax paid | (1) | - | - |
| Net cash flows used in operating activities | (322) | (282) | (733) |
Kenetics Group Limited - Interim financial information
Six months ended 30 June 2009
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (continued)
|
| 6 months | 6 months | 12 months |
| Ended | Ended | Ended | |
| 30 June | 30 June | 31 December | |
| 2009 | 2008 | 2008 | |
| (Unaudited) | (Unaudited) | (Audited) | |
| £'000 | £'000 | £'000 | |
| Cash flows from investing activities | |||
| Purchase of plant and equipment | (20) | (6) | (13) |
| Capital contribution from minority interest | - | 8 | 11 |
| Interest received | 1 | 1 | 1 |
| Net cash flows (used in)/ generated from investing activities | (19) |
3 |
(1) |
| Cash flows from financing activities | |||
| Receipt of loan from director | 258 | 168 | 221 |
| Repayment of hire purchase loan | (1) | (3) | (8) |
| Proceeds from convertible loan | - | - | 372 |
| Proceeds from bank loan | 208 | - | - |
| Repayment of bank loan | (25) | - | - |
| Difference of fixed deposit balance due to accumulation of interest | - | (1) | (2) |
| Net cash flows generated from financing activities | 440 | 164 | 583 |
| Net increase/(decrease) in cash in hand and at bank | 99 | (115) | (151) |
| Effect of exchange rate changes | 9 | (5) | 60 |
| Cash in hand and at bank at beginning of period | (131) | (39) | (40) |
| Cash in hand and at bank at end of period | (23) | (159) | (131) |
| Fixed deposit | 112 | 97 | 128 |
| Bank overdraft | 94 | 169 | 172 |
| Cash and cash equivalents per balance sheet | 183 | 107 | 169 |
Kenetics Group Limited - Interim financial information
Six months ended 30 June 2009
1. Business of Kenetics Group Limited
The Company was incorporated in Jersey on 22 June 2006. The condensed consolidated financial information of the Company for the six months ended 30 June 2009 comprise the Company and its subsidiaries, Kenetics Innovations Pte Ltd and Kenetics Innovations (Beijing) Co., Ltd.
The registered office of the Company is located at Walker House, 28-34 Hill Street, St Helier, Jersey JE4 8PN.
The Group is in the business of electronics design and manufacturing and producing of electrical and electronic goods.
2. Basis of preparation of interim condensed consolidated financial information
The interim condensed consolidated financial information for the six months ended 30 June 2009 has been prepared in accordance with the accounting policies set out in the annual report and financial statements for the year ended 31 December 2008, except for the adoption of the new/revised IAS that are applicable for the current financial period. The adoption of the new/revised IAS have no material effect on the financial statements, except for IAS 1 as noted below.
On 1 January 2009, the Group adopted the revised IAS 1 (Revised 2007), Presentation of Financial Statements (IAS 1(R)). IAS 1(R) requires owner and non-owner changes in equity to be presented separately. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line. The revised IAS 1(R) also introduces the statement of comprehensive income which presents all items of income and expense recognised in profit or loss, together with all other items of comprehensive income, either in one single statement of comprehensive income, or in two linked statements. The Group has opted to present the comprehensive income in two statements. In addition, the Consolidated Balance Sheet has been renamed to Consolidated Statement of Financial Position and the Consolidated Cash Flows Statement has been renamed to Consolidated Statement of Cash Flows.
IAS 1(R) is a disclosure standard and has no impact on the financial position and results of the Group.
3. Bank loan
The Group drew down a new bank loan of £234,900 from United Overseas Bank in March 2009 and will be repayable over 2 years by 24 monthly instalments commencing from April 2009. This bank loan is secured by joint and several guarantee by certain shareholders of the Company. Interest on the bank loan is fixed at 5% per annum. In the event of default in repayment of the instalment, a default interest of 3.5% per annum over the prescribed rate is chargeable over the overdue instalment.
4. Convertible loan
On 28 July 2008, the Company entered into a Convertible Loan Agreement ("CLA") with Wong Kai Yun (the "Lender"), sister of the Chairman of the Company to obtain a principal loan of £371,747. The loan may be converted into shares of the Company on written notification at any time from 1 August 2008 in whole or in part.
On 18 March 2009, both parties have entered into a Supplement Agreement to amend certain terms and conditions of CLA as follows:
| a) | the Lender may at any time after 30 June 2010, after giving the Company not less than 3 months prior notice in writing, require the Company to repay the whole or any part of the loan until the said loan is fully repaid. |
| b) | the Company shall pay to the Lender interest at the rate of 6% per annum on the whole or part of the loan as shall remain unpaid from 1 July 2009 up to the date of actual payment. |
| c) | the exchange rate is fixed at S$2.18 to £1 for conversion of the loan into shares of the Company. |
5. Loss per share
Basic loss per share has been calculated on the basis of the losses attributable to ordinary shareholders divided by 26,349,466 (30/06/08: 26,349,466, 31/12/08: 26,349,466), being the weighted average number of ordinary shares issued by the Company.
In accordance with IAS 33 and as the Group has reported a loss for the period, the potential
ordinary shares are not dilutive.
6. Exchange rates
The reporting currency of the Company is deemed to be Sterling Pounds. The functional currencies of Kenetics Innovations Pte Ltd and Kenetics Innovations (Beijing) Co Ltd are in Singapore dollars and Chinese Renminbi respectively. The following exchange rates have been used in preparing this financial information:
|
| ||
|
| S$1 = £ | RMB1 = £ |
| 30 June 2009 | 0.41640 | 0.08872 |
| Average rates | 0.45012 | 0.09844 |
7. Income tax
There was no income tax expense for the 6 months ended 30 June 2008 and the 12 months ended 31 December 2008 as the Group has been loss making during these periods. The income tax expense for the 6 months ended 30 June 2009 amounted to £1,000 and was an under-provision of tax provision in the prior year.
8. Nature of financial information
The interim financial information set out above is neither audited nor reviewed and does not represent the statutory financial statements for Kenetics Group Limited or for any of the entities comprising the Kenetics Group for the period ended 30 June 2009. The figures for the year ended 31 December 2008 were extracted from the consolidated financial statements which
have been presented to the shareholders. The auditors' report on those financial statements was unqualified.
The Board approved the interim financial information for the period ended 30 June 2009 on 8 September 2009.
These interim results are available on the Company's website www.kenetics-group.com.