Petards Regulatory News (PEG)

7 Dec 2005 07:01

Petards Group PLC07 December 2005 7 December 2005 PETARDS GROUP PLC: PRELIMINARY ANNOUNCEMENT OF REVISED AUDITED ACCOUNTS FOR THE YEAR ENDED 31DECEMBER 2004 CHAIRMAN'S STATEMENT Revised Accounts The revised Report and Accounts for the year ended 31 December 2004 replace theoriginal Report and Accounts that were approved by the Board on 19 May 2005,circulated to shareholders on 10 June 2005 but withdrawn before the planned AGM.The revised Report and Accounts were approved by the Board on 6 December 2005and are now the statutory accounts of the Company for that financial year. The directors became aware after the original Report and Accounts had beenpublished that they contained material errors and therefore did not comply withthe requirements of the Companies Act 1985. The revised Report and Accounts forthe year ended 31 December 2004 have been prepared as at 19 May 2005, the datethat the original Report and Accounts were approved, and not at the date ofrevision. Accordingly they do not deal with events between those two dates. The errors discovered were the result of a breakdown in accounting controls atJoyce-Loebl Limited. They concerned the accounting for costs incurred onlong-term contracts, and the recording of work in progress and advance paymentsfrom customers over a number of years. The correction of the errors relating to2003 and before, have been adjusted by way of a prior year adjustment, detailsof which are set out in note 7 to this statement. The majority of the contractsconcerned had been completed prior to 31 December 2004 and the remainder havebeen completed during the first half of 2005. Contracts awarded during 2005 arenot affected. The breakdown in accounting controls is specific to Joyce-Loebland does not impact the Group's other operations. Action has been taken torectify the control shortcomings and the processes by which long-term contractsare monitored and accounted for by Joyce-Loebl. Operations During 2004 we achieved many of the further steps necessary to make the PetardsGroup a successful and profitable company in the future. All therationalisation in the Petards division has been completed and the division isoperating from one location at Sunbury-on-Thames. The overheads have beenreduced correspondingly. Product quality and customer service levels areimproving and this will continue to be an aspect of strong focus. We have greatly strengthened the board level executive team as reported belowand the senior management team is now made up of experienced and technicallystrong people who are committed to the future success of the Company. Inparticular the new team has a commerciality that was previously lacking andwhich was at the root of many of the Group's problems. Financial strength We have led a hand to mouth existence since the Company breached its bankingcovenants when its shares were suspended in 2002. Although we have had thesupport of our bankers throughout, the lack of capital has severely hampered ouroperations. The Board has kept this matter constantly under review. The impact of the accounting errors at Joyce-Loebl is that previously reportedconsolidated losses after tax for each of the years back to 2002 and prior wereunderstated and consequently Consolidated Shareholders' Funds at 31 December2004 shown in the original Report and Accounts were overstated by £6.4m. During the second half of 2004, the Board had been seeking to strengthen thebalance sheet by making a merger or acquisition of a company with tradingsynergies in order to provide greater critical mass. In the event, discussionswith two suitable businesses came to nothing. The Board therefore decided toraise additional capital and its proposals were sent to shareholders in December2004. Following the share placing and restructured banking facilities, whichwere completed in January, we began 2005 with a stronger financial base, whichhas since benefited the Group's operations. Profit and loss account The trading performance in 2004 showed an improvement in all the key measures.Turnover for the year ended 31 December 2004 was £22.6m, an increase of 9% overthe figure of £20.8m in the previous year. Gross profit grew by 30% to £6.5m(2003: £5.0m) and the gross margin improved from 24% to 29%. Administrationexpenses before exceptional items were lower by 7% at £9.4m (2003: £10.1m). Theoperating loss for the year amounted to £3,325,000 an improvement on the 2003loss of £5,713,000. After net finance charges of £223,000 (2003: £4,000 credit)the loss before tax for the year was £3,570,000 (2003: £5,709,000 loss). Theloss per share was 5.5 pence (2003: 9.0 pence). Balance sheet At 31 December 2004 Consolidated Shareholders' Funds were in deficit by £6.6m(31 December 2003: deficit of £3.0m). Total net borrowings were £7.4m (31December 2003: £5.8m). The Company wrote to shareholders on 20 December 2004setting out proposals for an increase in share capital for consideration at anextraordinary general meeting that was held on 24 January 2005. Post balance sheet events On 28 January 2005 the Company announced that it had raised £5.1m of capital(net of expenses) by means of a placing of 557m new ordinary shares. On thesame date it entered into a new £5m five-year term loan and £1m working capitalfacility with its bankers, Bank of Scotland. Dividends The Board is not recommending the payment of a dividend. Name change On 10 February 2005 the Company changed its name from Screen PLC to PetardsGroup plc. The Petards brand has been used for the Group's security andsurveillance products for many years and is well known within the industry inthe UK and abroad. We plan to build the business going forward on this name andto retain the Joyce-Loebl name within Joyce-Loebl's traditional defence markets. The Board On 14 September 2004 Geoff Carswell resigned as a director and as ManagingDirector of Joyce-Loebl Limited. He was succeeded as Managing Director ofJoyce-Loebl by Bill Conn, who was appointed a director of the Company on 1February 2005. Chris Langridge resigned as a director on 1 February 2005 andwas succeeded as Finance Director by Andy Wonnacott FCA who was appointed on 7March 2005. On 24 March 2005 David Hayes was appointed Chief Executive and Ireverted to non-executive Chairman. Staff I should like to express my thanks to all the Group's employees who havecontributed strongly to the changes and improvements which we have seen in theCompany over the last twelve months. Tim Wightman6 December 2005 PETARDS GROUP PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2004 Before Exceptional After Restated (note exceptional exceptional 7) items items (note 2) items Year ended Year ended Year ended Year ended Note 31 December 2004 31 December 2004 31 December 2004 31 December 2003 £'000 £'000 £'000 £'000 TurnoverContinuing operations 22,162 - 22,162 18,048Discontinued operations 443 - 443 2,754 22,605 - 22,605 20,802Cost of sales (16,153) - (16,153) (15,835) Gross profit 6,452 - 6,452 4,967 Exceptional items 2 - (402) (402) (314)Goodwill amortisation and impairment (25) - (25) (278)Other administrative (9,350) - (9,350) (10,088)expenses Total administrative (9,375) (402) (9,777) (10,680)expenses Operating lossContinuing operations (2,870) (402) (3,272) (5,956)Discontinued operations (53) - (53) 243Total operating loss (2,923) (402) (3,325) (5,713)Profit on disposal ofdiscontinued operations 702 - Costs of fundamental reorganisation (724) -Loss on ordinary activities (3,347) (5,713)before interestNet interest (payable)/ (223) 4receivableLoss on ordinary activities (3,570) (5,709)before taxationTaxation - 144Loss on ordinary activitiesafter taxation being lossfor the financial year (3,570) (5,565) Loss per shareBasic and diluted 4 (5.5p) (9.0p) PETARDS GROUP PLCCONSOLIDATED BALANCE SHEET As at 31 December 2004 31 December 2004 Restated (note 7) 31 December 2003 £'000 £'000Fixed assets Intangible assets 365 616Tangible assets 969 942 1,334 1,558 Current assetsStocks 3,539 4,915Debtors 4,577 5,857Cash at bank and in hand 249 - 8,365 10,772 Creditors: amounts falling due within one year (16,278) (15,185) Net current liabilities (7,913) (4,413) Total assets less current liabilities (6,579) (2,855) Creditors: amounts falling due after more than one (25) (158)year Net liabilities (6,604) (3,013) Capital and reservesCalled up share capital 654 654Share premium account 23,660 23,660Profit and loss account deficit (30,918) (27,327)Equity shareholders' deficit (6,604) (3,013) PETARDS GROUP PLCCONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2004 Year ended Year ended 31 December 2004 31 December 2003 Note £'000 £'000 £'000 £'000 Net cash outflow from operating activities 5 (1,819) (2,729) Returns on investments and servicing of financeInterest received 294 288Interest paid (503) (259)Finance lease interest paid (14) (25) Net cash (outflow) / inflow from returns on (223) 4investments and servicing of finance TaxationUK corporation tax - 144 Capital expenditurePurchase of tangible fixed assets (541) (333)Sale of tangible fixed assets 97 16 Net cash outflow from capital expenditure (444) (317) Acquisitions and disposalsSale of business 835 - Net cash outflow before financing (1,651) (2,898) FinancingIssue of shares - 1,048Repayment of principal under finance leases (114) (137) Net cash (outflow) / inflow from financing (114) 911 Decrease in cash in the year (1,765) (1,987) PETARDS GROUP PLCCONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 December 2004 Restated (note 7) 31 December 31 December 2004 2003 £'000 £'000 Loss for the financial year (3,570) (5,565) Currency translation difference on foreign currency net investments (21) (50) Total recognised losses relating to the year (3,591) (5,615) Prior year adjustment (as explained in note 7) (5,225) Total losses recognised since last annual report (8,816) RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDSFor the year ended 31 December 2004 Year ended Restated (note 7) 31 December 2004 Year ended 31 December 2003 £'000 £'000 Loss for the financial year (3,570) (5,565)Other recognised gains and losses (21) (50)New share issues - 1,092Expenses of share issues - (44)Opening equity shareholders' (deficit) / funds (originally (3,013) 1,554£2,212,000 before prior year adjustment of £5,225,000) Closing equity shareholders' deficit (6,604) (3,013) 1. Basis of preparation These financial statements do not constitute financial statements within themeaning of Section 240 of the Companies Act 1985. The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 December 2003 or 2004. Statutoryaccounts for 2003 have been delivered to the Registrar of Companies, and thosefor 2004 will be delivered. The auditors have reported on those accounts; theirreports were unqualified and did not contain statements under section 237(2) or(3) of the Companies Act 1985. The financial statements have been prepared in accordance with UK generallyaccepted accounting practice and on the basis of accounting policies consistentwith those applied in previous periods. 2. Exceptional items 2004 2003Operating exceptional items £'000 £'000 Costs of aborted acquisitions 113 -Warranty costs 289 -Goodwill impairment - 229Reorganisation costs - 314 402 543 During the year the group incurred professional fees in connection with theacquisition of businesses that did not proceed to completion. In addition, inthe first half year remedial costs were incurred to rectify issues with theoriginal version of the Advantage.Net software at existing customer sites. 2004 2003Non-operating exceptional items £'000 £'000 Profit on disposal of discontinued business (702) -Costs of fundamental restructuring 724 - 22 - In March 2004, the net assets and business of Petards Emergency Services Ltdwere sold for a cash consideration of £866,000. The profit is shown net ofgoodwill of £226,000 and associated costs. The costs of the fundamental reorganisation arose from the integration of sixbusinesses at six locations into one company at one location. 3. Dividend The Board of directors does not recommend the declaration of a dividend for theyear ended 31 December 2004. 4. Loss per share The calculation of the basic loss per share is based on the loss for the year onordinary activities after taxation of £3,570,000 (2003 loss £5,565,000) dividedby the weighted average number of ordinary 1p shares of 65,420,479 (2003 -61,777,457). Due to the group's loss for the year the diluted loss per share is the same asthe basic loss per share. 5. Net cash outflow from operating activities 2004 2003 £'000 £'000 Operating loss (3,325) (5,713)Goodwill amortisation and provision for impairment 25 278Depreciation of tangible fixed assets 387 613(Profit) / loss on sale of tangible fixed assets (15) 16Cash flows relating to fundamental reorganisation (383) -Decrease in stocks and work in progress 1,219 416Decrease / (increase) in debtors 878 (2,753)(Decrease) / increase in creditors (596) 4,414Exchange differences (9) - Net cash outflow from operating activities (1,819) (2,729) 6. Post balance sheet events On 28 January 2005 the company announced that it had raised £5.1m of capital,net of expenses, by means of a placing of 557m new ordinary shares. On the samedate it entered into a new £5m five-year term loan and a £1m working capitalfacility with its bankers, Bank of Scotland. The table below illustrates theimpact of these transactions as if they were completed on 31 December 2004: As reported at Adjustments Proforma at 31 Dec 2004 31 Dec 2004 £'000 £'000 £'000 Fixed assets 1,334 - 1,334 Net current liabilities excluding cash and bank loans and (569) - (569)overdraftsCash 249 2,402 2,651Bank loans and overdrafts (7,593) 6,593 (1,000) Net current assets / (liabilities) (7,913) 8,995 1,082 Creditors: amounts falling due after one year (25) (3,925) (3,950) Net liabilities (6,604) 5,070 (1,534) Called up share capital 654 5,570 6,224Share premium account 23,660 (500) 23,160Profit and loss account deficit (30,918) - (30,918) Equity shareholders' deficit (6,604) 5,070 (1,534) 7. Prior year adjustment The prior year adjustment relates to fundamental errors arising as a result of abreakdown in accounting controls at one of the company's subsidiaryundertakings, Joyce-Loebl Limited. Those errors concerned the accounting forcosts incurred on long-term contracts, and the recording of work in progress andadvance payments from customers over a number of years. The prior year adjustment has the following impact on the 2003 profit and lossaccount: As previously Prior year reported adjustment As restated £'000 £'000 £'000 Turnover 21,253 (451) 20,802Cost of sales (12,535) (3,300) (15,835) Gross profit 8,718 (3,751) 4,967Administrative expenses (10,680) - (10,680) Operating loss (1,962) (3,751) (5,713) Net interest receivable 4 - 4 Loss before taxation (1,958) (3,751) (5,709) The prior year adjustment impacts the following 2003 balance sheet captions: As previously Prior year reported adjustment As restated £'000 £'000 £'000 Stocks 6,490 (1,575) 4,915Debtors 5,927 (70) 5,857Creditors due within one year (11,605) (3,580) (15,185) Net current assets / (liabilities) 812 (5,225) (4,413) 8. Revised report and accounts As set out in the Chairman's Statement, errors arose as a result of a breakdownof internal controls at one of the company's subsidiary undertakings, Joyce-Loebl Limited. They concerned the accounting for costs incurred on long-termcontracts, and the recording of work in progress and advance payments fromcustomers over a number of years. The impact of the errors is that previously reported consolidated losses aftertax for the year ended 31 December 2003 were understated by £3.8m, and those for2004 were understated by £1.1m. Losses in the years ended 2002 and prior wereunderstated by a total of £1.5m. Consequently shareholders' funds at 31December 2004 shown in the original Report and Accounts were overstated by£6.4m. Copies of the Revised Report and Accounts will be sent to shareholders in theweek ending 16 December 2005. 9. 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