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RNS Number : 0688S
Petards Group PLC
15 March 2016
15 March 2016
PETARDS GROUP PLC
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Petards Group plc ('Petards'), the AIM quoted developer of
advanced security and surveillance systems, reports its audited
results for the year ended 31 December 2015.
Key points:
-- Financial
o Results for 2015
-- Revenues GBP13.1 million (2014: GBP13.5 million)
-- Gross margin up to 35.2% from 30.4% in 2014
-- EBITDA increased 24% to GBP1,260,000 (2014: GBP1,015,000)
-- Operating profit increased 22% to GBP935,000 (2014:
GBP769,000 profit)
-- Profit after tax GBP765,000 (2014: GBP620,000 profit)
o Finance
-- Generated GBP1.2 million of operating cash inflows (2014:
GBP0.8 million)
-- Cash at 31 December 2015 GBP2.5 million (31 Dec 2014: GBP1.4
million) and no bank debt
-- Convertible loan notes of GBP1.5 million maturing in
September 2018 providing long term finance (31 Dec 2014: GBP1.5
million)
-- Basic EPS increased 22% to 2.19p earnings per share (2014:
1.80p)
-- Diluted EPS increased 18% to 1.62p earnings per share (2014:
1.37p per share)
-- Operational
o Closing order book GBP16 million (2014: GBP20 million)
o Order book for eyeTrain maintained with significant orders
received from Siemens Mobility, Bombardier Transportation and
Hitachi Rail Europe
o ProVida revenues up 35% on 2014
o Defence order intake disappointing but signs of improvement in
Q1 2016
o Recurring revenue orders for eyeTrain spares and support were
90% ahead of 2014
o Export revenues increased by 25% and totalled 26% of Group
revenues
-- Outlook
o Current order book contains GBP11 million scheduled for
delivery in 2016
Raschid Abdullah, Chairman of Petards, commented:
"Our strong opening order book together with recently received
orders provides GBP11 million of revenues that are presently
scheduled for delivery in 2016. With new projects still under
discussion, the board is confident that the Group is well
positioned to achieve another good year's performance in 2016."
Contacts
Petards Group plc www.petards.com
Raschid Abdullah, Chairman Mb: 07768 905004
WH Ireland Limited, Nomad www.wh-ireland.co.uk
and Joint Broker
Mike Coe, Ed Allsopp Tel: 0117 945 3470
Hybridan LLP, Joint Broker www.hybridan.com
Claire Louise Noyce Tel: 020 3764 2341
Chairman's statement
I am pleased to report to our shareholders and stakeholders that
the Company made considerable progress during the course of 2015
building on the foundations for growth that were laid down by the
board in the previous year. You will also note that the board has
decided to alter the layout of the annual report with the
Chairman's Statement now focussing on the key drivers and business
strategy with a separate in-depth operational business review
section.
We achieved a healthy increase in pre-tax profits which totalled
GBP762,000 for 2015 against the previous year's pre-tax profit of
GBP620,000, being a 23% increase year on year. Basic earnings per
share improved to 2.19p against 1.80p recorded for 2014 with fully
diluted earnings per share registering an increase to 1.62p
compared to 1.37p for 2014 representing increases of 21.7% and
18.2% respectively.
Although overall revenues at GBP13.1 million were broadly
similar to the previous year's of GBP13.5 million, gross margins
increased significantly to 35.2% against 30.4% for 2014. This was
largely a reflection of the changed product mix during the course
of the year with revenues being weighted towards our transport and
emergency services products and reduced levels of revenue being
recorded from lower margin defence products.
We entered 2016 with an overall order book of GBP16 million of
which approaching GBP10 million is scheduled to be delivered during
2016. Whilst this is ahead of the same period last year, active
negotiations continue to secure new projects in all of our product
areas. I was delighted that earlier this month we were successful
in winning a new MOD contract with a value in excess of GBP800,000
to be delivered during 2016 further strengthening our order book
position.
The improved performance in profitability for 2015 generated
excellent cash flow in the business during the course of the year
with Group cash balances growing from GBP1.4 million at the close
of 2014 to GBP2.5 million at the end of 2015, a GBP1.1 million
increase. Although the Group negotiated and put in place a small
bank overdraft facility, this was not required or utilised during
the course of the year.
We continued our 'Fit for Growth' programme that was initiated
at Petards Joyce-Loebl, the Group's principal trading subsidiary,
over two years ago which included designing new products,
recruitment and growing our software engineering skills to support
our customers on future projects. I would like to express on behalf
of the board, its sincere appreciation and thanks to all of our
employees with a warm welcome to those who joined us during the
course of the year, for their excellent contribution and valued
support to the business during the year and going forward into
2016.
In my statement last year I referred to the considerable deficit
that existed on distributable reserves within our balance sheet.
The board took steps to resolve this issue and High Court approval
was granted last December for a capital reduction. I am pleased to
inform shareholders that we now have positive distributable
reserves with a structured balance sheet to support the Group going
forward. This places the board in a better position for the
commencement of dividend payments at some future date. No dividend
is being proposed in respect of 2015 as it is presently considered
appropriate to retain our strong cash position to support
investment in our growth plans and acquisition strategy.
As a result of the past two years positive trading, improved
balance sheet and financial robustness following our initial
turnaround, we are now well positioned to pursue an earnings
enhancing acquisition strategy. We intend to expand the Group into
a larger and more prosperous business. The board has under review a
number of potential businesses to acquire and we will of course be
keeping shareholders fully advised of our progress.
Our strong opening order book together with recently received
orders provides GBP11 million of revenues that are presently
scheduled for delivery in 2016. With new projects still under
discussion, the board is confident that the Group is well
positioned to achieve another good year's performance in 2016.
Raschid Abdullah
Chairman
Business review
The Group continues to have one segment in terms of products and
services, being the development, supply and maintenance of
technologies used in advanced security, surveillance and ruggedized
electronic applications, the main markets for which are:
-- Rail Transport - software driven video and other sensing
systems for on-train applications (eyeTrain brand)
-- Defence - electronic countermeasure protection systems,
mobile radios and related engineering services
-- Emergency Services - in-car speed enforcement and ANPR systems (ProVida brand)
During 2015 good progress was made from both an operational and
financial perspective and the Group made significant improvements
in the majority of its key performance measures.
Operating review
The Group closed the year with a strong order book that provides
good visibility of earnings with 60% of the GBP16 million order
book scheduled for delivery in 2016. While the overall order book
is lower than that at the close of 2014, its composition remains
very encouraging with the 2015 closing order book for eyeTrain
products being maintained at the same level as that at 31 December
2014.
During the course of the year the Group secured a number of
significant orders for eyeTrain systems from train builders that
included Siemens Mobility Germany, Bombardier Transportation and
Hitachi Rail Europe. In addition, the trend of increasing recurring
revenues from spares and support reported at the half year
continued. Orders for spares and support were 90% ahead of those
received in 2014, supporting management's view that this will
increasingly become a significant contributor to revenues as the
eyeTrain installed base increases and the trains to which eyeTrain
systems are fitted enter operational service.
Looking to the future we are working on a number of exciting
opportunities for eyeTrain with both UK and overseas based train
builders and we anticipate that some of these will come to fruition
during the course of 2016.
The slower than anticipated order intake for our defence related
products and services reported at the half year continued into the
second half of 2015 which coupled with the delivery of substantial
milestones for projects in the 2015 opening order book, led to the
reduction in the Group's overall closing order book.
The GBP4.5 million software modification project for the MOD
secured in 2014 progressed to schedule and was over 80% complete by
the end of 2015. The project was a significant contributor to 2015
Group revenues and should be completed during the course of 2016.
While there remains a small amount of equipment to supply on the
RAF's Secure Management Radio Equipment (SMRE) contract, that
project has entered its support phase for which Petards holds a 10
year contract.
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Defence products remain an important element of Petards'
business and the Group continues to provide equipment and support
services to the MOD in the niche areas of its expertise which it
has operated in for many years. The nature of larger projects for
Petards' defence products, particularly those relating to
electronic countermeasures, means that the order book for these
products tends to follow a more variable trend than that for
eyeTrain and ProVida. Nevertheless, the Group remains well placed
to win defence business and has made some alterations to the way it
addresses this market. It is therefore encouraging that 2016 has
started well, an example of which was the recently announced GBP0.8
million order from the MOD for communication systems and related
support.
Demand for our ProVida products strengthened in the second half
of 2015 and revenues were up over 35% on the prior year.
Historically ProVida has had a strong overseas customer following
as well as within the UK, although the proportion of overseas
revenues for these products had been reducing in recent years. It
was pleasing that the growth in 2015 was driven by exports,
although it is too early to say whether this will be maintained as
2015 revenues benefitted from a large spares order from an existing
export customer.
Petards has operated within the speed enforcement and ANPR
markets for over 15 years and while it is presently the smallest
element of its business, management continues to consider this to
be an interesting market with scope for the Group to grow its
presence both in the UK and internationally.
Financial review
Operating performance
While revenues for the year ended 31 December 2015 were similar
to those in 2014, the profitability and operating cash flows were
significantly higher. Revenues for the year were GBP13.1 million
(2014: GBP13.5 million) and the improvement in gross margins seen
at the half-year stage over those achieved in 2014 was sustained.
Export revenues grew by over 25% and accounted for over a quarter
of Group revenues.
Margins increased to 35.2% (2014: 30.4%) driving earnings before
interest, tax, depreciation and amortisation (EBITDA) to
GBP1,260,000, an increase over 2014 of over 24% (2014:
GBP1,015,000). Operating profits increased by over 21% to
GBP935,000 (2014: GBP769,000).
The increase in margins arose from the revenue mix comprising a
larger proportion of higher margin eyeTrain and ProVida revenues
and due to the prior year containing GBP4.5 million of lower margin
equipment deliveries on the SMRE project.
Administrative expenses grew by 10% to GBP3.7 million (2014:
GBP3.3 million) primarily due to increases in the amortisation of
development costs capitalised in 2014 and payroll costs following
the strengthening of the team at Petards Joyce-Loebl.
Net financial expenses totalled GBP173,000 (2014: GBP149,000),
the increase being due to net foreign exchange losses of GBP25,000
and after a GBP3,000 tax credit (2014: GBPnil), profit after tax
totalled GBP765,000 (2014: GBP620,000).
Research and development
While product development costs incurred during the year were
much lower than in 2014, this was in line with our expectations
following two years of heavy investment. The Group remains
committed to developing its products and services to maintain and
grow its market position and service its customers. Capitalised
development expenditure for the year was GBP66,000 (2014:
GBP661,000), while development expenditure expensed in the year
increased to GBP217,000 (2014: GBP80,000).
Cash and cash flow
The Group's financial position continued to strengthen and at 31
December 2015 it held cash balances of GBP2.5 million, no bank debt
and had convertible loan notes maturing in September 2018 of GBP1.5
million (2014: GBP1.4 million cash, no bank debt and loan notes of
GBP1.5 million).
Cash flows from operating activities were up 54% to GBP1,174,000
(2014: GBP761,000) reflecting both the strong operating performance
in the year and a reduction in working capital.
Balance sheet
On 16 December 2015, following the approval of the High Court,
the Company completed the reduction of share capital (Capital
Reduction) approved by shareholders on 11 November 2015. The
Capital Reduction eliminated the deficit in the Company's retained
earnings that previously existed and consequently puts it in a
position to pay dividends to shareholders as and when the Board
deems it appropriate.
Taxation
Due to the availability of brought forward tax losses and
research and development tax credits, the Group did not incur a
corporation tax charge in respect of 2015 (2014: GBPnil). In 2014
the Group surrendered tax losses to receive cash payments of
GBP208,000 in respect of research and development tax credits. In
2015 it repaid GBP169,000 of those research and development tax
credits and instead utilised the related tax losses against taxable
profits making a net tax saving of over GBP140,000.
Osman Abdullah
Group Chief Executive
Consolidated Income Statement
for year ended 31 December 2015
Note 2015 2014
GBP000 GBP000
Revenue 2 13,072 13,462
Cost of sales (8,473) (9,370)
Gross profit 4,599 4,092
Administrative expenses (3,664) (3,323)
Operating profit 935 769
------------------------------------ ---- ------- -------
Analysed as:
Earnings before interest,
tax, depreciation and amortisation
('EBITDA') 1,260 1,015
Depreciation and amortisation (325) (246)
935 769
Financial income 3 3 3
Financial expenses 3 (176) (152)
Profit before tax 762 620
Income tax 4 3 -
Profit for the year attributable
to equity shareholders of
the parent 765 620
Earnings per share (pence)
Basic 8 2.19 1.80
Diluted 8 1.62 1.37
Consolidated Statement of Comprehensive Income
for year ended 31 December 2015
2015 2014
GBP000 GBP000
Profit for the year 765 620
Other comprehensive
income
Items that may be reclassified
to profit:
Currency translation on foreign - -
currency net investments
Total comprehensive
income for the year 765 620
Statement of Changes in Equity
for year ended 31 December 2015
Share Share Merger Special Retained Currency Total
capital premium reserve Equity reserve earnings translation equity
reserve differences
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January
2014 6,645 25,153 1,075 206 - (31,132) (211) 1,736
Profit for
the year - - - - - 620 - 620
Total comprehensive
income - - - - - 620 - 620
Conversion
of
convertible
loan notes 4 23 - (2) - 2 - 27
Exercise
of share
options 2 16 - - - - - 18
At 31 December
2014 6,651 25,192 1,075 204 - (30,510) (211) 2,401
At 1 January
2015 6,651 25,192 1,075 204 - (30,510) (211) 2,401
Profit for
the year - - - - - 765 - 765
Total comprehensive
income - - - - - 765 - 765
Equity-settled
share based
payments - - - - - 6 - 6
Conversion
of
convertible
loan notes 1 14 - (1) - - - 14
Capital reduction
(note 6) (6,303) (25,192) (1,075) - 8 32,562 - -
At 31 December
2015 349 14 - 203 8 2,823 (211) 3,186
Consolidated Balance Sheet
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at 31 December 2015
Note 2015 2014
GBP000 GBP000
ASSETS
Non-current assets
Property, plant and equipment 247 187
Goodwill 401 401
Development costs 902 1,103
Deferred tax assets 429 516
1,979 2,207
Current assets
Inventories 2,168 1,439
Trade and other receivables 1,861 2,982
Cash and cash equivalents
- escrow deposits - 54
Cash and cash equivalents 2,478 1,434
6,507 5,909
Total assets 8,486 8,116
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Share capital 7 349 6,651
Share premium 14 25,192
Equity reserve 203 204
Merger reserve - 1,075
Special reserve 8 -
Currency translation reserve (211) (211)
Retained earnings 2,823 (30,510)
Total equity 3,186 2,401
Non-current liabilities
Interest-bearing loans and
borrowings 5 1,543 1,524
Deferred tax liabilities - 100
1,543 1,624
Current liabilities
Other trade and other payables 3,757 4,091
3,757 4,091
Total liabilities 5,300 5,715
Total equity and liabilities 8,486 8,116
Consolidated Statement of Cash Flows
for year ended 31 December 2015
Note 2015 2014
GBP000 GBP000
Cash flows from operating
activities
Profit for the year 765 620
Adjustments for:
Depreciation 58 48
Amortisation of intangible
assets 267 198
Financial income 3 (3) (3)
Financial expense 3 176 152
Equity settled share-based
payment expenses 6 -
Income tax credit (3) -
Operating cash flows before
movement in working capital 1,266 1,015
Change in trade and other
receivables 1,138 (2,035)
Change in inventories (729) 340
Change in trade and other
payables (195) 1,340
Cash generated from operations 1,480 660
Interest received 3 3
Interest paid (146) (110)
Tax (paid)/received (163) 208
Net cash from operating activities 1,174 761
Cash flows from investing
activities
Acquisition of property,
plant and equipment (118) (70)
Capitalised development expenditure (66) (661)
Cash deposits held in escrow 54 (54)
Net cash outflow from investing
activities (130) (785)
Cash flows from financing
activities
Proceeds from exercise of
share options - 18
Net cash inflow from financing
activities - 18
Net increase/(decrease) in
cash and cash equivalents
in the year 1,044 (6)
Cash and cash equivalents
at 1 January 1,434 1,440
Cash and cash equivalents
at 31 December 2,478 1,434
1 Basis of preparation and status of financial information
The financial information set out in this statement has been
prepared in accordance with the recognition and measurement
principles of International Financial Reporting Standards as
adopted by the EU ("adopted IFRSs"), IFRIC interpretations and the
Companies Act 2006 applicable to companies reporting under IFRS. It
does not include all the information required for full annual
accounts.
The financial information does not constitute the Company's
statutory accounts for the years ended 31 December 2015 or 31
December 2014 but is derived from those accounts. Statutory
accounts for 2014 have been delivered to the registrar of
companies, and those for 2015 will be delivered in due course. The
auditor has reported on those accounts; his reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying his report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
2 Segmental information
The analysis by geographic segment below is presented in
accordance with IFRS 8 on the basis of those segments whose
operating results are regularly reviewed by the Board of Directors
(the Chief Operating Decision Maker as defined by IFRS 8) to make
strategic decisions, to monitor performance and to allocate
resources.
The Board of Directors regularly reviews the Group's performance
and balance sheet position for its entire operations as a whole.
The Board receives financial information, assesses performance and
makes resource allocation decisions for its UK based business as a
whole and therefore the directors consider the Group to have only
one segment in terms of products and services, being the
development, supply and maintenance of technologies used in
advanced security, surveillance and ruggedised electronic
applications.
As the Board receives revenue, EBITDA and operating profit on
the same basis as set out in the Consolidated Income Statement no
further reconciliation is considered to be necessary.
Revenue by geographical destination can be analysed as
follows:
2015 2014
GBP000 GBP000
United Kingdom 9,684 10,773
Continental Europe 2,552 1,724
Rest of World 836 965
____ ____
13,072 13,462
____ ____
Included in the above amounts are revenues of GBP8,192,000
(2014: GBP9,793,000) in respect of construction contracts. The
balance comprises revenue from sales of goods and services.
3 Financial income and expense
2015 2014
GBP000 GBP000
Recognised in profit or loss
Interest on bank deposits 3 3
Financial income 3 3
GBP000 GBP000
Interest expense on financial liabilities
at amortised cost 151 150
Net foreign exchange loss 25 2
Financial expenses 176 152
4 Taxation
Recognised in the income statement
2015 2014
GBP000 GBP000 GBP000 GBP000
Current tax expense/(credit)
Adjustments in respect
of prior years 10 (109)
Total current tax 10 (109)
Deferred tax (credit)/expense
Origination and reversal
of temporary differences (1) (15)
Recognition of previously
unrecognised tax losses (43) (72)
Utilisation of recognised
tax losses 170 169
Tax rate change 40 -
Adjustment in respect
of prior years (179) 27
Total deferred tax (13) 109
Total tax (credit)/charge
in income statement (3) -
Reconciliation of effective tax rate
2015 2014
GBP000 GBP000
Profit before tax 762 620
Tax using the UK corporation tax
rate of 20.25% (2014: 21.5%) 154 133
Non-deductible expenses 46 36
Non-taxable income (25) -
Utilisation of tax losses 15 (87)
Effect of tax losses generated in
year not provided for in deferred
tax (21) -
Change in unrecognised temporary
differences (43) 7
Adjustments in respect of prior
years (169) (82)
Effect of rate change 40 (7)
Total tax credit (3) -
5 Interest-bearing loans and borrowings
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