Petards Regulatory News (PEG)

29 Sep 2006 09:36

Petards Group PLC29 September 2006 PETARDS GROUP PLC: INTERIM RESULTS Petards Group plc ('Petards'), the AIM quoted developer of advanced surveillancesystems, announces interim results for the six months to 30 June 2006, a periodduring which it continues to implement its strategy to transform itself into afocused Group capable of making sustainable profits and cash flows. In his statement to shareholders, Tim Wightman, Chairman, said: "From an operational perspective we have now completed the structural changesnecessary to implement the Board's longer term strategy that was embarked uponover 18 months ago. That strategy was to put in place a structure that enabledthe Group to exploit the synergies that exist between its various businesses.Those synergies arise from an overlap between the businesses and are acombination of operational, technological and market factors." Financial Highlights • Turnover of £10.4m (2005: £13.0m - inc. exceptional increase in defence sales in H1 2005) • Gross profit of £3.6m (2005: £4.3m) • Operating loss before exceptional expenses from reorganisation of £179,000 (2005: £257,000 profit) • Operating loss after exceptional expenses of £598,000 (2005: £257,000 profit) • Loss before tax of £736,000 (2005: £83,000 loss) • Loss per share of 0.12p (2005: 0.02p loss) • Operating cash inflow of £345,000 (2005: £432,000 outflow) • No dividend (2005: nil) Other highlights • Centralisation to Gateshead site expected to result in approximately £0.6m savings in 2007 (with £0.4m exceptional costs charged in current period) • Further exploitation of synergies between technologies used on different platforms • £1.8m contract to supply and install eyeTrainTM on 133 trains for Arriva Trains Wales • £0.9m repeat order to supply displays to Alstom for Belgian railways • £2m countermeasures orders from UK MoD for the Royal Navy and Army Lynx aircraft • £0.25m countermeasures order from Bell Helicopters for the Norwegian Air Force • Growing market presence in the USA for Group technologies • EIMC, acquired in March 2006, has performed well • Appointment of Bill Conn as Group Chief Executive Commenting on outlook, Tim Wightman, Chairman, said: "The Board expects that profit before exceptional items for the year will showan improvement over 2005 and is encouraged by the promising pipeline of ordersthat should secure the Group's continued recovery in 2007 and beyond." Contacts: Petards Group plc Parkgreen Communications Ltd Tim Wightman, Chairman Paul McManusAndy Wonnacott, Finance Director Tel: 020 7493 3716Tel: 01932 788 288 Mob: 07980 541 893 CHAIRMAN'S STATEMENT I am pleased to present my report on the Group's activities and results for thesix months to 30 June 2006. Introduction During the period to the date of this report the management has continued toimplement its strategy to transform the Group from a fragmented business with ahigh cost base making significant losses, to a focussed Group capable of makingsustainable profits and cash flows. Operations From an operational perspective we have now completed the structural changesnecessary to implement the Board's longer term strategy that was embarked uponover 18 months ago. That strategy was to put in place a structure that enabledthe Group to exploit the synergies that exist between its various businesses.Those synergies arise from an overlap between the businesses and are acombination of operational, technological and market factors. Following the appointment of Bill Conn as Group Chief Executive and inconjunction with the acquisition of EIMC, the Group's production, purchasing,finance and administrative functions were centralised onto our Gateshead site.This restructuring gave rise to an exceptional cost of £419,000 in the periodbut will result in anticipated cost savings of approximately £600,000 in 2007.The benefits for customers of combining all of our production onto our largestsite will be enhanced quality and an improvement in delivery schedules. The synergies between the technologies used on our different platforms are alsobeing exploited further. By bringing together our engineering resources acrossour product range we are benefiting from the sharing of experience gained insimilar applications across the Group. For example, our expertise in the designand production of ruggedised equipment for the military is being applied to ourProvida in-car digital recording systems and our UVMSTM network video recordingsoftware is being integrated with eyeTrainTM, our on-board digital CCTV system.Our long history and respected position as a supplier within the defenceindustry is starting to result in opportunities for our surveillancetechnologies within that sector. In addition within the rail industry, ourability to supply both on-board and land based surveillance solutions is provingattractive to customers. We continued to win significant contracts during the period. In the transportsector, we secured the £1.8m contract to supply and install eyeTrainTM to 133trains for Arriva Trains Wales and a repeat order worth £0.9m to supplypassenger information displays to Alstom for the Belgian railway. While demandfor countermeasure dispensing systems peaked at the time of the early stages ofthe Iraqi conflict, during the period we received £2m of orders for thesesystems from the UK MOD for the Royal Navy and Army Lynx Aircraft and a further£0.25m from Bell Helicopters for the Norwegian Air Force. Customer interest inUVMSTM is continuing to grow and the systems installed in the first halfincluded one for the new Ascot racecourse. In addition, prospects for UVMSTMwithin our US customer base remain strong particularly within the casinoindustry. We have been steadily growing our market presence in the USA for ourother technologies and have been developing partner and customer relationshipsfrom which we believe benefits will accrue in 2007. At 30 June 2006 the orderbook stood at over £14m. Since its acquisition in March, EIMC has performed well and demand to date forits range of infra-red cameras for use within ANPR (Automatic Number PlateRecognition) systems has been strong. Results The trading performance in the first half year showed an improvement over thesecond half of 2005, but was behind that reported for the first half of 2005.On continuing operations, turnover for the six months to 30 June 2006 was £9.4m(2005: £13.0m) while the turnover of EIMC which we acquired in March was £1m.The reduction in turnover from continuing operations reflected an exceptionalincrease in defence sales in the first half of 2005 following the military phaseof the war in Iraq. Those sales were not repeated in 2006. In addition, as Ireported in June 2006, software sales were significantly lower as compared withthe first half of 2005. Gross margins increased to 35% (2005: 33%) despite thelower software sales which attract better margins. The operating loss for the period, before exceptional expenses arising on thereorganisation, was £179,000 (2005: £257,000 profit as restated). This is aftera charge of £19,000 (2005: £15,000) relating to the implementation of FRS 20 "Share based payments" which has been implemented for the first time and forwhich comparative figures for prior periods have been restated. After theexceptional expenses of £419,000 the Group made a loss for the financial periodof £736,000 (2005: £83,000 loss as restated) and the underlying loss per sharewas 0.12p (2005: loss 0.02p). Cash flow The operating cash inflow for the period was £345,000 (2005: £432,000 outflow)which is stated after outflows of £0.2m in respect of exceptional reorganisationcosts. Net interest paid in the period amounted to £433,000 which included £295,000paid in January in respect of 2005. Net cash outflows associated with theacquisition of EIMC amounted to £187,000 which together with capital expenditureof £144,000 resulted in a cash outflow before financing of £419,000. Dividends The Board is not recommending the payment of a dividend. Outlook While the first half year's operating result is behind that of last year, theBoard is confident that in the second half year the Group will be profitable.We are anticipating significant deliveries to customers during the last quarterand expect that profit before exceptional items for the year will show animprovement over 2005. The Board is encouraged by the promising pipeline oforders that should secure the Group's continued recovery in 2007 and beyond. Tim Wightman 29 September 2006 Consolidated Profit and Loss Account Unaudited Unaudited Audited 6 months Year to to 30 June 31 December 6 months to 30 June 2006 2005 2005 (As (As restated) restated) Before Exceptional After exceptional items exceptional items (note 4) items £'000 £'000 £'000 £'000 £'000 Note TurnoverContinuing operations 9,429 - 9,429 13,003 21,839Acquisitions 993 - 993 - - 10,422 - 10,422 13,003 21,839 Cost of sales (6,820) - (6,820) (8,723) (14,793) Gross profit 3,602 - 3,602 4,280 7,046 Exceptional administrative expenses 4 - (419) (419) - -Goodwill amortisation (28) - (28) (12) (31)Other administrative expenses (3,753) - (3,753) (4,011) (6,992) Total administrative expenses (3,781) (419) (4,200) (4,023) (7,023) Operating (loss) / profitContinuing operations (396) (404) (800) 257 23Acquisitions 217 (15) 202 - - Total operating (loss) /profit (179) (419) (598) 257 23before interest and taxation Interest payable (138) (340) (505) Loss on ordinary activities before (736) (83) (482)taxation Taxation on loss on ordinary - - 115activities Loss for the financial period (736) (83) (367) Loss per share - basic and diluted 6 (0.12p) (0.02p) (0.06p) Consolidated Balance Sheet Unaudited Unaudited Audited as at as at as at 30 June 30 June 2005 31 December 2005 2006 (As restated) (As restated) Note £'000 £'000 £'000 Fixed assetsIntangible assets 1,056 353 783Tangible assets 889 961 887 1,945 1,314 1,670Current assetsStocks 2,997 2,372 2,799Debtors 4,628 4,500 4,662Cash at bank 26 2,019 550 7,651 8,891 8,011 Creditors: amounts falling due within one year 8 (8,292) (7,673) (7,547) Net current (liabilities) / assets (641) 1,218 464 Total assets less current liabilities 1,304 2,532 2,134 Creditors: amounts falling due after more than oneyearBank loan and finance leases (3,651) (4,096) (3,964) Net liabilities (2,347) (1,564) (1,830) Capital and reservesCalled up share capital 6,367 6,224 6,224Share premium account 23,255 23,198 23,198Profit and loss deficit (31,969) (30,986) (31,252) Equity shareholders' deficit (2,347) (1,564) (1,830) Consolidated Cash Flow Statement Unaudited Unaudited Audited 6 months to 30 6 months to 30 Year to 31 December June 2006 June 2005 2005 £'000 £'000 £'000 Net cash inflow / (outflow) from operating 345 (432) (674)activities Net cash outflow from returns on investments and (433) (212) (185)servicing of finance Taxation - - - Net cash outflow from capital expenditure (144) (184) (199) Net cash outflow from acquisitions (187) - (562) Net cash outflow before financing (419) (828) (1,620) Net cash (outflow) / inflow from financing:Issue of equity shares net of expenses - 5,108 5,108Net (payments) / receipts from loans (222) 3,820 3,266Net (decrease) / increase in finance leases (29) 44 (79) (Decrease) / increase in cash in the period (670) 8,144 6,675 Reconciliation of Consolidated Movements in Shareholders' Funds Unaudited Unaudited Audited 6 months to 30 6 months to 30 Year to 31 December June 2006 June 2005 2005 £'000 £'000 £'000 Loss for the period as restated (736) (83) (367) Credit in relation to share based payments 19 15 33(note 2)New share issues 200 5,570 5,570Expenses of share issues - (462) (462) Net (decrease) / increase in shareholders' (517) 5,040 4,774funds Opening shareholders' deficit (1,830) (6,604) (6,604) Closing shareholders' deficit (2,347) (1,564) (1,830) Notes 1. Non Statutory Accounts The unaudited financial information for the six months to 30 June 2006 has beenprepared in accordance with applicable United Kingdom Accounting Standards usingaccounting policies consistent with those set out in the accounts for the yearended 31 December 2005 except for the adoption of FRS 20 ("Share based payments"). These statements do not constitute financial statements within the meaning ofsection 240 of the Companies Act 1985. These statements have not been audited.No financial statements will be filed for the six months ended 30 June 2006. The financial information for the year ended 31 December 2005 has been derivedfrom the statutory accounts for that period, which have been filed with theRegistrar of Companies. The auditors' report on those accounts was unqualifiedand did not contain any statement under section 237(2) or (3) of the CompaniesAct 1985. 2. Prior year adjustment (FRS 20 "Share based payments") The comparative figures for 2004 and 2005 have been restated for therequirements of FRS 20 "Share based payments" which has been adopted for thefirst time in this report. Under FRS 20, the fair value of options granted isrecognised as an employee expense with a corresponding increase in equity. Thefair value is measured at grant date and spread over the period during which theemployees become unconditionally entitled to the options. The fair value of theoptions granted has been measured using an option pricing model taking intoaccount the terms and conditions upon which the options were granted. The amountrecognised as an expense is adjusted to reflect the actual number of shareoptions that vest, except where variations are due only to share prices notachieving the threshold for vesting. This has resulted in prior yearadjustments in 2004 and 2005. The charge in respect of the share based paymentsis matched by an equal and opposite adjustment to profit and loss reserves,thereby having no net impact on the Group's closing reserves. The full movementon reserves is shown in the Reconciliation of movements in shareholders' funds.The effect on the period profit after interest and tax for the periods is setout below: 2005 2005 H1 Full year £'000 £'000Loss after interest and tax as originally reported (68) (334)Charge in respect of share based payments - continuing operations (15) (33) _______ _______Loss after interest and taxation as restated (83) (367) 3. Acquisition On 8 March 2006 the Company acquired the entire share capital of EuropeanInnovation Manufacturing Centre Limited ("EIMC") for a maximum totalconsideration of £1.8 million. An initial £225,000 was paid comprising of£25,000 in cash and the balance in 14,285,714 new ordinary shares at 1.4p.Further payments up to a total aggregate maximum of £1,500,000 will be made on aperformance-related basis for the ten months ending 31 December 2006 and theyear ending 31 December 2007. These further payments will be satisfied byeither the issue of loan notes or new Petards shares at the prevailing marketprice. The vendors of EIMC may elect whether to opt for loan notes or newPetards Shares for the first £133,500 of the further payment in respect of 2006and the first £175,000 in respect of 2007. Petards have the option as towhether the balance of any further payments is satisfied by way of loan notes ornew Petards shares. 4. Exceptional administrative expenses The exceptional administrative expenses incurred relate to re-organisation costsfollowing the centralisation of the Group's production, purchasing, finance andadministrative functions during the period. The exceptional administrativeexpenses have no effect on the tax charge for the period. 5. Taxation No provision for taxation has been made in the profit and loss account for thesix months to 30 June 2006 based on the estimated tax provision required for theyear ending 31 December 2006. No provision was required in the six months to 30June 2005. 6. Loss per share The calculation of the basic loss per share is based on the loss for the periodon ordinary activities after taxation of £736,000 (2005: restated loss £83,000)divided by the weighted average number of ordinary 1p shares of 631,418,341(2005: 540,299,162). 7. Recognised gains and losses There were no recognised gains or losses in the period other than the loss forthe six months to 30 June 2006. 8. Creditors: amounts falling due within one year Unaudited Unaudited Audited as at 30 June 2006 as at 30 June 2005 as at 31 December 2005 £'000 £'000 £'000 Bank overdrafts, loan and finance leases 889 1,000 605Trade creditors 3,535 2,677 3,204Other creditors 3,868 3,996 3,738 _______ _______ _______ 8,292 7,673 7,547 9. Further copies Copies of the interim statement will be sent to shareholders. Further copieswill be available from the Company's registered office at Petards House, 8Windmill Business Village, Brooklands Close, Sunbury on Thames, Middlesex TW167DY for the next 14 days. This information is provided by RNS The company news service from the London Stock Exchange