Petards Regulatory News (PEG)

28 Jun 2007 07:01

Petards Group PLC28 June 2007 PETARDS GROUP PLC: PRELIMINARY RESULTS ANNOUNCEMENT Petards Group plc ('Petards'), the AIM quoted developer of advanced surveillancesystems, announces preliminary results for the year ended 31 December 2006. In his statement to shareholders, Tim Wightman, non-executive Chairman, said: "During 2006 Petards' financial recovery continued and the year ended on astrong note with operating profits and cash flows showing improvements over theprior year. Following a strong performance in the second half year, Petards made anoperating profit before exceptional items of £0.6m (2005: £0.02m) on turnover of£23.2m (2005: £21.8m) for the year ended 31 December 2006. Operating profitafter exceptional items was £0.1m." Highlights • Turnover up 6% to £23.2m (2005: £21.8m)• Gross profit of £8.4m up 19% (2005: £7.0m)• Operating profit before exceptional items of £576,000 (2005: £23,000)• Operating profit after exceptional items of £94,000 (2005: £23,000)• Loss before tax reduced to £293,000 (2005: £482,000 loss)• Operating cash inflow £1.0m (2005: £0.7m outflow)• Further progress in US market; turnover up 48% to £2.0m.• Benefits of sales synergies between group companies now being realised; £3m order received in January 2007 from BAE Systems for software and hardware.• Acquired EIMC, specialist supplier of camera technologies, in March 2006 Commenting on outlook, Tim Wightman, non-executive Chairman, said: "Global demand for advanced security and surveillance systems such as thoseoffered by Petards continues to grow and we see strong opportunities within theUS in particular. Order intake in the early part of 2007 has been encouragingalthough in some sectors there have been delays in the placement of orders. We remain confident that the order intake for 2007 will show significant growthover 2006 although the timing of the receipt of those orders will largelydetermine the pace at which our recovery in profitability proceeds. While sixmonths remain until the end of the 2007 financial year, the Board currentlyexpects that delays are likely to result in the company reporting profits forthe current year that fall short of market expectations." Contacts: Petards Group plc Parkgreen Communications Tim Wightman, Chairman Paul McManusAndy Wonnacott, Finance Director Tel: 020 7479 7933Tel: 01932 788 288 Mob: 07980 541 893 CHAIRMAN'S STATEMENT Introduction During 2006 Petards' financial recovery continued and the year ended on a strongnote with operating profits and cash flows both showing improvements over theprior year. In the interim statement last September I commented upon thecompletion of structural changes required to implement our longer term strategyand the exploitation of synergies between different parts of the group. I ampleased to say that we have seen the associated benefits starting to berealised. Results Following a strong performance in the second half year, Petards made anoperating profit before exceptional items of £0.6m (2005: £0.02m) on turnover of£23.2m (2005: £21.8m) for the year ended 31 December 2006. Operating profitafter exceptional items was £0.1m. Our focus on improving margins continued toshow progress and gross margins were up from 32% to 36%. The loss before taxwas reduced to £0.3m (2005: £0.5m). The group generated an operating cash inflow of £1.0m (2005: £0.7m outflow), animprovement of £1.7m over the prior period. Business Review The strategy followed by the Board has been to put in place a structure thatwould enable the group to exploit the synergies that exist between its variousbusinesses being a combination of operational, technological and market factors.It is pleasing to see that the benefits of this have now started to comethrough. The most significant of these to date has been our success incapitalising upon Petards Joyce-Loebl's routes to market into the defenceindustry to enable us to sell solutions from elsewhere in the group. A goodexample of this was when we were able to capitalise upon our reputation andheritage in our traditional defence market to enable our non-defence business tosecure a contract earlier this year worth in excess of £3m to provide BAESystems with software and hardware as part of a UK Government project. Our fledging US business also made progress during the year growing turnover to£2.0m (2005: £1.3m) despite the weakening dollar. We consider the US to providea significant opportunity over the medium term and during 2006 we invested andcontinue to invest in growing its sales and technical resources as well aspromoting the Petards brand. Its first major order of UVMS(TM) network videorecording systems for a casino for the Choctaw Nation in late 2005 was followedby further orders in 2006 totalling more than $3m. We also secured our firstorder for UVMS(TM) in the US rail sector when the State of Minnesota selected itfor use on its metro transit system. The acquisition of EIMC in March 2006 added to our camera technologycapabilities both for infrared and daylight applications. The businessperformed well in the 10 months that it was part of the group contributingoperating profits and operating cash inflows of £0.2m. We maintained our strong position in the transport sector winning contracts foreyeTrain(TM) on-board CCTV, including a supply and installation contract forArriva Trains Wales worth £2.0m as well as smaller orders such as those fromPorterbrook for South West Trains and the Tyne & Wear Metro operated by Nexus.We are seeing many exciting opportunities within this market. However, rail isa complex industry to sell into, particularly in the UK due to its fragmentedownership, and we have seen slippage in the placement of orders on a number ofopportunities which we believe we are well positioned to secure. We have beendeveloping complementary products to enhance our offering such as forward facingcameras on trains, driver monitors and passenger load counting systems. Our traditional defence business has seen mixed results over the year as thedemands of operations in Iraq and Afghanistan have drawn resources away fromother programmes resulting in delays in order placement. However, operations inthose regions gave rise to a number of orders totalling over £4m for ourcountermeasure sensors and dispensers that provide defensive systems foraircraft protection. People The group has undergone immense change over the past two years and the benefitsof these changes are now being seen. The delivery of change within the businessis dependant upon the hard work and commitment of our people and I would like torecord my thanks to them for their efforts. Outlook Global demand for advanced security and surveillance systems such as thoseoffered by Petards continues to grow and we see strong opportunities within theUS in particular. The Board is conscious that certain market opportunitiesrequire greater resources than are available to the group. It is thereforeconstantly appraising the potential to partner or combine with other businessesto create synergies and critical mass. Order intake in the early part of 2007has been encouraging although as I mentioned before, in some sectors there havebeen delays in the placement of orders. We remain confident that the order intake for 2007 will show significant growthover 2006 although the timing of the receipt of those orders will largelydetermine the pace at which our recovery in profitability proceeds. While sixmonths remain until the end of the 2007 financial year, the Board currentlyexpects that delays are likely to result in the company reporting profits forthe current year that fall short of market expectations. Tim Wightman27 June 2007 PETARDS GROUP PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2006 Before Exceptional exceptional items (note 3) Total items Year ended Year ended Year ended Year ended Note 31 December 2006 31 December 2006 31 December 2006 31 December 2005 (as restated) (note 29) (note 8) £'000 £'000 £'000 £'000TurnoverContinuing operations 21,336 - 21,336 21,839Acquisitions 7 1,899 - 1,899 - 23,235 - 23,235 21,839Cost of sales (14,839) - (14,839) (14,793)Gross profit 8,396 - 8,396 7,046 Administrative expensesGoodwill amortisation and (60) - (60) (31)impairmentOther administrative (7,760) (482) (8,242) (6,992)expensesTotal administrative (7,820) (482) (8,302) (7,023)expenses Operating profit / (loss)Continuing operations 357 (467) (110) (258)Acquisitions 7 219 (15) 204 281Operating profit/(loss) 576 (482) 94 23Interest payable and (387) (505)similar chargesLoss on ordinary activities (293) (482)before taxationTax on loss on ordinary (12) 115activities Loss for the financial year (305) (367) Loss per share - continuingoperationsBasic and diluted 4 (0.05p) (0.06p) There is no difference between the loss above and the loss as presented on ahistorical cost basis. PETARDS GROUP PLCCONSOLIDATED BALANCE SHEETAs at 31 December 2006 31 December 2006 31 December 2005 £'000 £'000Fixed assetsIntangible assets 1,061 783Tangible assets 836 887 1,897 1,670Current assetsStocks 2,345 2,799Debtors 4,734 4,662Cash at bank and in hand 502 550 7,581 8,011 Creditors: amounts falling due within one year (8,027) (7,547) Net current (liabilities) / assets (446) 464 Total assets less current liabilities 1,451 2,134 Creditors: amounts falling due after more than oneyear (3,224) (3,964)Provisions for liabilities (121) - Net liabilities (1,894) (1,830) Capital and reservesCalled up share capital 6,367 6,224Share premium account 23,255 23,198Profit and loss account deficit (31,516) (31,252)Shareholders' deficit (1,894) (1,830) PETARDS GROUP PLCCONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2006 Year ended Year ended 31 December 2006 31 December 2005 Note £'000 £'000 £'000 £'000 Net cash inflow/(outflow) from operating 5 activities 992 (674) Returns on investments and servicing of financeBank interest paid (625) (179)Finance lease interest paid (8) (6) Net cash outflow from returns on investments and servicing of finance (633) (185) Taxation 70 - Capital expenditurePurchase of tangible fixed assets (364) (246)Sale of tangible fixed assets 6 47 Net cash outflow from capital expenditure (358) (199) Acquisitions and disposalsPurchase of subsidiary undertaking (71) -Net overdrafts and cash acquired with (109) - subsidiaryPurchase of business (8) (562) Net cash outflow from acquisitions and (188) (562) disposals Net cash outflow before financing (117) (1,620) FinancingIssue of shares - 5,108(Decrease)/increase in bank loans (546) 3,266Finance lease capital repayments (59) (79) Net cash (outflow) / inflow from financing (605) 8,295 (Decrease) / increase in cash in the year 6 (722) 6,675 PETARDS GROUP PLCCONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFor the year ended 31 December 2006 31 December 2006 31 December 2005 (as restated) (note 8) £'000 £'000 Loss for the financial year (305) (367) Currency translation difference on foreign currency net (3) - investments Total recognised losses relating to the year (308) (367) RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSFor the year ended 31 December 2006 Group Year ended Year ended 31 December 2006 31 December 2005 (as restated) (note 8) £'000 £'000 Loss for the financial year (305) (367)Credit in relation to share based payments 44 33Other recognised gains and losses (3) -New shares issued 200 5,570Expenses of share issue - (462)Opening equity shareholders' deficit (1,830) (6,604) Closing equity shareholders' deficit (1,894) (1,830) PETARDS GROUP PLCNOTES TO THE PRELIMINARY RESULTS ANNOUNCEMENTFor the year ended 31 December 2006 1. Basis of preparation The financial information contained in this document contains abridgedpreliminary financial information for the year ended 31 December 2006 togetherwith comparatives. Comparatives have been restated where appropriate as detailedin note 8. It has been prepared on the basis of the policies applied in the consolidatedstatutory accounts for the year ended 31 December 2006. These policies remainunchanged from those applied in the consolidated statutory accounts for the yearended 31 December 2005 except that FRS 20 "Share-based payment" has been adoptedfor the first time in 2006. The comparatives have been restated accordingly(note 8). These financial statements do not constitute financial statements within themeaning of Section 240 of the Companies Act 1985. Statutory accounts for 2005have been delivered to the registrar of companies, and those for 2006 will bedelivered following the company's annual general meeting. The auditors havereported on those accounts; their reports were unqualified and did not containstatements under section 237(2) or (3) of the Companies Act 1985. 2. Dividend The Board of Directors does not recommend a dividend for the year ended 31December 2006. 3. Exceptional items During 2006 the group incurred costs in connection with the reorganisation ofits production, finance and administrative functions. The total cost of£482,000 includes a £57,000 provision for the estimated disposal costs for ashort leasehold property that was vacated as part of that reorganisation. 4. Loss per share The calculation of the basic loss per share on continuing operations is based onthe loss for the year of £305,000 (2005: loss £367,000) divided by the weightedaverage number of ordinary 1p shares in issue of 634,084,114 (2005:579,691,942). Due to the group's loss for the year the diluted loss per shareis the same as the basic loss per share. The loss per share is whollyattributable to continuing operations. 5. Net cash inflow / (outflow) from operating activities 2006 2005 £'000 £'000 Operating profit 94 23Goodwill amortisation 60 31Depreciation of tangible fixed assets 467 420Profit on sale of tangible fixed assets (4) (6)Share based payment expenses 44 33Cash flows relating to fundamental reorganisation - (341)Decrease in stocks and work in progress 871 770Decrease in debtors 168 356Decrease in creditors and provisions (708) (1,960) Net cash inflow/(outflow) from operating activities 992 (674) 6. Analysis of net cash Acquisitions (excluding cash At 1 January Other non and At 31 December 2006 cash overdrafts) Cash flow changes 2006 £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 550 (48) - - 502Overdrafts - (674) - - (674) 550 (722) - - (172)Debt due within 1 year (550) (165) - (60) (775)Debt due after 1 year (3,935) 775 (64) - (3,224)Finance leases (84) 59 - (16) (41) Total (4,019) (53) (64) (76) (4,212) 7. Acquisition On 8 March 2006 the group acquired the entire share capital of EuropeanInnovation Manufacturing Centre Limited ("EIMC"). An initial payment of£225,000 comprising of £25,000 in cash and £200,000 by way of the issue of14,285,714 new ordinary shares at 1.4p was made on acquisition, and £46,000 ofcosts were incurred associated with the acquisition. Further payments may bemade based upon the operating profits of EIMC for the period ending 31 December2007 as follows. For profits of between £440,000 and £530,000 an amount of upto £45,000 is payable; for profits between £530,000 and £660,000 a furtheramount of up to £130,000 is payable. The additional consideration payable forany excess of operating profits above £660,000 will be paid at a multiple of 1.5times. The maximum total additional consideration payable is £1.5m. Thedirectors currently estimate that no additional consideration will be payableand therefore no provision for deferred consideration has been made. In the event that any further payments should become payable they would besatisfied by either the issue of loan notes or new ordinary shares at theprevailing market price. The vendors of EIMC may elect whether to opt for loannotes or new ordinary shares for the first £175,000 of any additionalconsideration in respect of 2007. The group has the option as to whether thebalance of any further payments is satisfied by way of loan notes or newordinary shares. The acquisition has been accounted for using the acquisition method ofaccounting. The book values of this acquisition were: Book and fair value £'000 Net assets acquired:Tangible fixed assets 55Stock 417Debtors 252Cash at bank and in hand 3Creditors due within 1 year (560)Bank loan and finance leases (76)Bank overdraft (112) Net liabilities (21) Goodwill arising on acquisition 292 271 Satisfied by:Cash consideration 25Costs associated with acquisition 46 71Shares issued 200Deferred consideration - 271 The directors have considered the value above and believe that book and fairvalues are not materially different. 8. Prior year adjustment (FRS 20 "Share-based payment") The comparative figures for 2005 have been restated for the requirements of FRS20 "Share-based payment" which has been adopted for the first time in thisreport. Under FRS 20, the fair value of options granted is recognised as anemployee expense with a corresponding increase in equity. The fair value ismeasured at grant date and spread over the period during which the employeesbecome unconditionally entitled to the options. The fair value of the optionsgranted has been measured using an option pricing model taking into account theterms and conditions upon which the options were granted. The amount recognisedas an expense is adjusted to reflect the actual number of share options thatvest, except where variations are due only to share prices not achieving thethreshold for vesting. This has resulted in a prior year adjustment in 2005.The charge in respect of the share based payments is matched by an equal andopposite adjustment to profit and loss reserves, thereby having no net impact onthe group's closing reserves. The full movement on reserves is shown in theReconciliation of movements in shareholders' funds. The effect on the 2005results is set out below: Group profit and loss account 2005 £'000 Loss on ordinary activities after taxation as originally reported (334)Charge in respect of share based payments - continuing operations (33) _______Loss on ordinary activities after taxation as restated (367) The above has no effect on the 2005 group balance sheet. The total recognisedgains and losses in 2005 are increased by £33,000. 9. Report and accounts Copies of the Report and Accounts will be sent to shareholders in due course. 10. Announcement Copies of this announcement will be available from the Nominated Adviser: Collins Stewart, 9th Floor, Wood Street, London, EC2V 7QR for 14 days from thedate of this announcement. This information is provided by RNS The company news service from the London Stock Exchange