TIDMPEG
RNS Number : 6206H
Petards Group PLC
14 March 2018
14 March 2018
Petards Group plc
("Petards", "the Group" or "the Company")
Final results for the year ended 31 December 2017
Petards Group plc (AIM: PEG), the AIM quoted developer of
advanced security and surveillance systems, is pleased to report
its final results for the year ended 31 December 2017.
Key Highlights:
-- Operational
o Order book at 31 December 2017 over GBP18 million (31 Dec
2016: GBP20 million)
o Order coverage for 2018 in excess of GBP12 million and over
GBP5 million scheduled for 2019
o With addition of Stadler customer list now includes six of the
world's top ten train builders
o Exports comprise over one third of revenues for second
consecutive year
o Significant investment in new eyeTrain hardware with greater
software functionality
o GBP0.7 million settlement in respect of historic claim
-- Financial
o Total revenues increased 2% to GBP15.6 million (2016: GBP15.3
million)
o Gross margins up to 38.6% (2016: 36.3%)
o Adjusted EBITDA* GBP1,619,000 (2016: GBP1,621,000)
o Operating profit GBP1,245,000 (2016: GBP1,095,000)
o Pre-tax profit up 30% to GBP1,205,000 (2016: GBP925,000)
o Net cash GBP1,286,000 (31 Dec 2016: GBP775,000)
o Basic EPS increased 28% to 3.31p (2016: 2.59p)
o Diluted EPS increased 25% to 2.32p (2016: 1.86p)
o Significantly strengthened balance sheet with shareholders'
funds up over 70%
*Adjusted EBITDA comprises operating profit adjusted to remove
the impact of depreciation, amortisation, exceptional items,
acquisition costs and share based payments. A reconciliation of
Adjusted EBITDA to operating profit is included on the face of the
consolidated income statement.
Commenting on the current outlook, Raschid Abdullah, Chairman,
said:
"The Group's order book at 31 December 2017 was over GBP18
million, of which GBP12 million is expected to be taken to revenue
during 2018. We are also engaged in on-going discussions for new
projects across all areas of our business, many of which our
customers have themselves already been awarded. This coupled with a
strong balance sheet provides the board with confidence for the
Group's prospects in 2018 and beyond."
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
Contacts:
Petards Group plc www.petards.com
Raschid Abdullah, Chairman Mb: 07768 905004
WH Ireland Limited, Nomad www.whirelandcb.com
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
claire.noyce@hybridan.com
Chairman's statement
I am pleased to report that Petards had another good year in
2017 during which the Group made a substantial investment in its
eyeTrain hardware and software and achieved record pre-tax profits.
Year on year Total Equity was up over 70% leaving Petards well
positioned for its future growth ambitions.
Group revenues increased for the fourth successive year to
GBP15.6 million (2016: GBP15.3 million) after including a full year
contribution from QRO Solutions (QRO). The increase in gross
margins achieved in the first half year was also maintained. Gross
margins were up from 36% in 2016 to over 38% and the Group posted
pre-tax profits of GBP1,205,000 up 30% on the GBP925,000 reported
for 2016. Basic earnings per share increased by 28% to 3.3p and
fully diluted earnings per share by 25% to 2.3p.
As I reported in September, the first half of 2017 provided a
strong platform for the full year with the Group securing
strategically significant eyeTrain orders totalling GBP7.3 million
from Stadler Bussnang AG ("Stadler") for its FLIRT UK vehicles and
Bombardier Transportation (Bombardier") for its new Aventra trains.
We are proud of the fact that our customer list now includes six of
the world's top ten rolling stock manufacturers. The global rail
market continues to offer excellent opportunities and investment in
UK rolling stock remains substantial. Having such blue chip
companies within Petards customer base positions the Group well to
continue to win new orders on the back of their success.
The contract awards referred to above, together with those
secured in the final quarter of 2016, required the Group to develop
additional hardware and software functionality for its eyeTrain
systems. Therefore, during 2017 the Group invested over GBP1
million developing its eyeTrain solutions for the future. The scale
of this development was significant and some delays in the
programme were experienced that resulted in approximately GBP1
million of revenues being deferred into 2018. These related to
scheduled deliveries of both software and equipment and accordingly
profit before tax from trading operations for 2017 was below that
previously expected and consequently adjusted EBITDA for the year
was GBP1,619,000 (2016: GBP1,621,000)
However, offsetting this, the 2017 results did benefit from the
net effect of two exceptional items. First, the Group accepted an
offer to settle a historic matter, unrelated to the current trading
activities of the Group, which arose over ten years ago. Under the
settlement, in January 2018 the Group received a total of
GBP702,000 in cash comprising an amount of GBP362,000 plus
compensatory interest of GBP340,000. The Board considers this to be
a very satisfactory outcome. The second exceptional item concerned
the reclassification of the GBP211,000 deficit on the Group's
currency translation reserve from equity to income and shown as a
financial expense. This follows the Board's decision that any
future activities that the Group may undertake in the US will not
be conducted through its existing dormant US subsidiary. The
reclassification has no impact on the Group's net assets or
cash.
The nature of the Group's revenue mix has continued the trend of
recent years with its rail related products now accounting for
approximately two thirds of Group revenues. As a result of its
success in securing a flow of orders from major train manufacturers
and operators, revenues from Rail products increased by 15%
compared to 2016. The majority of the Group's overseas sales also
derive from the rail sector with overall Group exports representing
34% of 2017 revenues.
On the recent launch of its new website, the Group has re-named
the product group under which its ProVida and QRO solutions fall,
from 'Emergency Services' to 'Traffic Technology'. This better
reflects the nature of this element of the Group's business and the
broadening of its customer base following the acquisition of QRO in
2016. Both the ProVida and QRO names will continue to be marketed.
Traffic product revenues increased 13% over the prior year and it
is pleasing that QRO has succeeded in expanding the use of its
Automatic Number Plate Recognition (ANPR) solutions within
commercial applications. It has also recently been awarded two
multi-year framework contracts, the first with Thames Valley Police
and Hampshire Constabulary and the second with the Cheshire Police.
Both contracts are expected to contribute to revenues in 2018.
While both Rail and Traffic products showed revenue growth in
2017, as I indicated at the half year stage, revenues from Defence
reduced being almost 30% lower than in 2016. The reduction arose as
2016 benefitted from the final deliveries on a large MOD electronic
countermeasures software upgrade ordered in 2014 and from a GBP0.8
million MOD order for radio equipment. While the Group entered 2018
with a similar overall order book for Defence products to that of
the prior year, orders scheduled for delivery in 2018 are almost
40% higher than at the same stage last year. This position has been
further bolstered since the year end with the recently announced
receipt of a GBP1.5 million order from the MOD for radio equipment
and related engineering services. The board is therefore optimistic
that the actions taken over the past twelve months will result in
higher revenues from this sector in the current financial year.
It was pleasing that in December loan note holders voted
overwhelming to the full conversion of the Group's GBP1,480,000
outstanding 7% convertible loan notes into Petards ordinary shares.
The Group's balance sheet has been substantially strengthened with
the removal of the loan note liability that was due for redemption
in September 2018 and will benefit from the related interest
savings. With the conversion of loan notes and comprehensive income
for the year of GBP1,448,000 shareholders' funds increased by over
70% to GBP7.2 million.
While the significant investment in product development had an
impact on the Group's cash resources, the Group closed the year
with net cash of GBP1,286,000 (2016: GBP775,000). This was further
enhanced on receipt of the GBP702,000 settlement in January 2018 I
referred to above.
2017 proved to be both an exciting and challenging year and the
board is appreciative of the significant contribution made by the
Group's employees. On behalf of the board I would like to express
my sincere thanks to them all for their contribution in delivering
success for our customers and shareholders alike. I look forward
their continued efforts on which the future success of the Group
depends.
The board believes that a broader portfolio of products,
including software, data analytics and services would provide
greater opportunities for Petards to expand its earnings and
enhance shareholder value. We continue to review a number of
potential acquisitions and will keep shareholders informed as to
progress.
The Group's order book at 31 December 2017 was over GBP18
million, of which GBP12 million is expected to be taken to revenue
during 2018. We are also engaged in on-going discussions for new
projects across all areas of our business, many of which our
customers have themselves already been awarded. This coupled with a
strong balance sheet provides the board with confidence for the
Group's prospects in 2018 and beyond.
Raschid Abdullah
Chairman
Strategic Report
Business review
Petards' operations continue to be focused upon the development,
supply and maintenance of technologies used in advanced security,
surveillance and ruggedized electronic applications, the main
markets for which are:
-- Rail - software driven video and other sensing systems for
on-train applications sold under the eyeTrain brand to global train
builders, integrators and rail operators;
-- Traffic - in-car speed enforcement and end-to-end ANPR
systems sold under the ProVida and QRO brands to UK and overseas
law enforcement agencies and UK based commercial customers; and
-- Defence - electronic countermeasure protection systems,
mobile radio systems and related engineering services sold
predominantly to the UK Ministry of Defence ("MOD").
Operating review
The largest order secured by the Group in 2017 was one for
GBP4.3 million placed by Stadler in the first quarter of the year.
Its addition to the list of global train builders that have
selected eyeTrain systems was a significant milestone for the
Group. Swiss-headquartered Stadler is the world's sixth largest
manufacturer of rolling stock but until recently had not supplied
into the UK. The order placed related to Stadler's entry into the
UK mainline rolling stock market. As well as long established
products such as saloon CCTV, pantograph monitoring, forward facing
and track debris cameras and video management software, it included
systems such as Automatic Selective Door Opening ("ASDO"). This
technology enables train operators to operate longer trains that
can be immediately and, crucially, safely deployed onto services
where stations have short passenger platforms. ASDO systems
automatically combine multiple data sources to identify which
carriage doors should not open at each stopping station.
During the year the Group also had a number of significant
projects underway with Siemens Mobility ("Siemens"), Bombardier,
Hitachi Rail Europe and First Greater Western. Revenues from these
accounted for over 85% of the total for eyeTrain systems for the
year, amongst which was the Siemens Thameslink project. Awarded
back in 2012, the majority of equipment had been delivered by the
end of 2017 with the final shipments being made in the first
quarter of 2018. In addition, the first deliveries were also made
in the year in respect of the GBP3 million order placed by
Bombardier for fitment to its new Aventra trains.
The scale of investment in the development of new eyeTrain
software and hardware products during the year presented the Group
with a number of challenges. Not least of these was the need to
scale up our software
development team. In doing so we set out to ensure that we
retained the core software skills in-house while having the
flexibility to supplement this with subcontractors as required.
The 2017 edition of the Long Term Rolling Stock Strategy
published by leading players in the UK rail industry forecast that
the number of vehicles in service will increase by 20-25% in the
period to 2024. Its view of the longer term outlook was for an
increase of between 41% and 89% over the next 30 years in the UK
rolling stock fleet.
The Group has developed a good position and close relationship
with the major train builders within the niche of the rail sector
in which it operates. Investment in rolling stock both in the UK
and overseas continues to grow. Therefore, we are confident that
the Group is well positioned to benefit from such growth.
Elsewhere in the Group, while revenues from our defence products
remained under pressure, actions taken during 2017 give rise to
cautious optimism for prospects in 2018. A strong order intake in
the first half of 2017 was followed by a quieter second half, while
revenues were at similar levels in both periods. The main Defence
Services revenue streams continued to relate to the fields of
electronic countermeasures and radio systems.
The Group provides services to the MOD in support of ALE 47 and
M147 Threat Adaptive Countermeasures Dispensing Systems fitted to
Puma, Chinook, Merlin, and C130J aircraft. 2017 was the first year
of the renewed three year contract under which these services are
supplied. Petards receive a core engineering fee for the
performance of post design services ("PDS"), with additional orders
being placed as required for engineering, repair, refurbishment and
manufacturing activities. Such additional orders were placed in the
year, an example being the GBP1 million order to supply an emulator
system to the RAF and on which some deliveries were completed. As
the MOD has the option to extend the contract by up toa further two
years, the PDS contract provides a confirmed level of work for the
foreseeable future. In addition to being a Tier 1 supplier to the
UK MOD, Petards also supplies countermeasure systems to prime
defence contractors such as Leonardo MV and revenues during 2017
included equipment deliveries in respect of their upgrade of The
Royal Navy's Merlin Mk 3 helicopters.
Petards also has longstanding specialist engineering expertise
in the field of radio communications. Orders and revenues for
personal mobile radios supplied to the MOD under the framework
contract held by Petards were lower than 2016. Unlike the prior
year there were no single large orders in 2017. However, as
recently announced, this disappointment has been tempered by the
receipt of a series of radio orders totalling GBP1.5 million after
the year end.
Following its acquisition in 2016, 2017 was QRO's first full
year as a member of the Petards Group and it contributed to the 13%
increase in revenues from the Traffic market. It invested in its
software team both to explore opportunities for its products
outside of the law enforcement market and to develop its CSGS ANPR
Management Server software. QRO is working closely with the Home
Office and Cheshire Police to test CSGS ANPR Management Server's
performance feeding ANPR data to the UK's new National ANPR Service
(NAS). Once in operation all ANPR reads from cameras operated by UK
police forces will be fed into NAS which requires individual forces
to have software that integrates with its systems. Cheshire Police
has the largest throughput of ANPR data of any force in the UK and
it is therefore pleasing that in the ongoing tests QRO's software
is performing well in this challenging environment.
During the year QRO also submitted bids to secure two
non-exclusive framework agreements to provide ANPR equipment and
services. Shortly after the year end it learned that it had secured
a four year framework contract with Thames Valley Police and
Hampshire Constabulary which can be extended at their option by a
further three years. It also secured a three year framework
contract with Cheshire Police which again may be extended by up to
a further three years. Other UK forces may utilise these framework
agreements to procure their own ANPR equipment and services and so
they represent a good opportunity for QRO to make sales to both
existing and new customers.
The Traffic market is also served by Petards' ProVida speed
enforcement and ANPR products and these again provided a useful
contribution to revenues and profits, the majority of which was
derived from UK customers.
The Group closed 2017 with an order book of over GBP18 million
(2016: GBP20 million). This order book provides very good
visibility of revenues with over GBP12 million scheduled for
delivery before the end of 2018. This position has been further
strengthened by orders placed to date in 2018 that include the
recent GBP1.5 million MOD radio orders.
Brexit
While over 30% of the Group's revenues for the past two years
were exported to the EU the majority of these have related to UK
based projects such as Thameslink. The market sectors to which
Petards supplies tend to be highly regulated and the Group does not
anticipate Brexit to change existing regulations significantly.
Like most businesses it is affected by any inflationary pressures
in the supply chain but again these are not considered to be
specific to the sectors in which the Group operates.
Within the rail industry the 2017 Long Term Rolling Stock
Strategy expressed the view that while Brexit impacts remain
unknown, the scenarios covered by the "worst case" industry
modelling already cater for impacts much worse than the Office of
Budgetary Responsibility predictions for Brexit. The proportion of
electric rolling stock is forecast to rise to over 85% by 2034, and
the analysis indicates that overall between 11,000 and 16,000 new
electric vehicles alone will be required over the 30 years to 2046.
These expectations are driven by the benefits they will provide to
passengers and the wider community, such as improvements to
capacity, punctuality, reliability, passenger facilities and the
environment.
At present the outlook for Petards' defence products is
considered to be positive in the medium to long term as the MOD,
encouraged by Brexit, turns to cheaper UK suppliers and is released
from EU competition rules. Major programmes such as the Challenger
II Life Extension, the Mechanised Infantry Vehicle and Type 31e
Frigate programmes appear to be moving in this direction.
Financial review
Operating performance
Revenues for the year increased to GBP15.6 million (2016:
GBP15.3 million) with exports of GBP5.3 million again comprising
over a third of the total (2016: GBP5.3 million). The majority of
exports in both years related to shipments of eyeTrain system to
Siemens in Germany.
The increase in gross margins over the prior year experienced in
the first half of 2017 was maintained for the year as a whole,
increasing to 38.6% (2016: 36.3%). Margins for both eyeTrain and
Traffic products were up on those achieved in 2016 whereas these on
Defence products were down 5-10% year on year.
Reported administrative expenses increased by GBP302,000 over
the prior year from GBP4,468,000 to GBP4,770,000. This was
predominantly due to higher indirect staff costs arising from
recruitment during the year, higher depreciation and amortisation
costs related to investments in facilities and product development
made in 2016 and 2017, offset by the GBP362,000 exceptional
settlement income.
Earnings before interest, tax, depreciation, amortisation,
exceptional items and share based payment charges ("adjusted
EBITDA") totalled GBP1,619,000 (2016: GBP1,621,000) and operating
profit increased by 14% to GBP1,245,000 (2016: GBP1,095,000).
The net financial expense excluding exceptional financial income
of GBP129,000 was GBP169,000 (2016: GBP170,000). The two
exceptional items within net financial expense were the interest
income of GBP340,000 relating to the settlement of the historic
matter and a GBP211,000 charge arising from the reclassification of
the deficit on the Group's currency translation reserve from equity
to income. While taken as a charge to profit in 2017, the
corresponding credit is shown within the Consolidated Statement of
Comprehensive Income and it therefore has no overall impact on the
Group's net assets or cash.
The Group again benefitted from the receipt of research and
development tax credits. A tax credit of GBP32,000 arose in 2017
(2016: GBP15,000 tax charge). Profit after tax increased by 36% to
GBP1,237,000 (2016: GBP910,000) giving rise to an increase of 28%
in basic earnings per share which rose to 3.31p (2016: 2.59p).
Fully diluted earnings per share increased 25% to 2.32p (2016:
1.86p).
Following the approval by the holders of the 7% convertible loan
notes issued in 2013, the outstanding balance of GBP1,480,000 was
converted into new Petards ordinary shares on 15 December 2017.
These loan notes were due to mature in September 2018 and their
conversion will save approximately GBP75,000 in interest payments
in 2018.
The conversion of the loan notes and retention of total
comprehensive income for the year of GBP1,448,000 significantly
strengthened the balance sheet. Total equity at 31 December 2017
totalled GBP7.2 million (2016: 4.2 million).
Research and development
During 2017 the Group made a significant investment in product
development. This investment totalled GBP1,290,000 (2016:
GBP785,000) of which GBP1,043,000 was capitalised (2016:
GBP645,000). The capitalised costs relate to the Group's new
eyeTrain products. The Group remains committed to developing its
products and services to maintain and grow its market position and
service its customers. In order to achieve this goal it is
anticipated that the level of expenditure required in 2018 will be
lower than for 2017.
Cash and cash flow
Having completed the full conversion of the loan notes, at 31
December 2017 the Group's net cash totaled GBP1,286,000 (2016:
GBP775,000). Post year-end its cash balances increased on receipt
of the GBP702,000 settlement of the historic claim.
Net cash flows from operating activities for the year were
GBP539,000 (2016: GBP998,000). These were reflective of a good
operating performance, offset by an increase of GBP1,396,000 in
working capital that mainly related to the major rail projects in
progress at the year end.
Osman Abdullah
Chief Executive
Condensed Consolidated Income Statement
for the year ended 31 December 2017
Note 2017 2016
GBP000 GBP000
Revenue 2 15,581 15,311
Cost of sales (9,566) (9,748)
Gross profit 6,015 5,563
Administrative expenses 3 (4,770) (4,468)
Adjusted EBITDA* 1,619 1,621
Amortisation of intangibles (547) (335)
Depreciation (162) (107)
Exceptional income 3 362 -
Exceptional acquisition
costs - (57)
Share based payment
charges (27) (27)
Operating profit 1,245 1,095
Financial income (including
exceptional financial
income of GBP340,000,
2016: GBPnil) 3 340 4
Financial expenses
(including exceptional
financial expense of
GBP211,000, 2016: GBPnil) 3,4 (380) (174)
Profit before tax 1,205 925
Income tax 5 32 (15)
Profit for the year
attributable to equity
shareholders of the
company 1,237 910
Basic earnings per
share (pence) 8 3.31 2.59
Diluted earnings per
share (pence) 8 2.32 1.86
* Earnings before financial income and expense, tax,
depreciation, amortisation, exceptional items and share based
payment charges
Condensed Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017
Notes 2017 2016
GBP000 GBP000
Profit for period 1,237 910
Release of foreign
currency reserve on
abandonment of US subsidiary
(included in financial
expenses) 3,4 211 -
Total comprehensive
income for the year 1,448 910
Condensed Consolidated Statement of Changes in Equity
for the year ended 31 December 2017
Currency
Share Share Equity Special Retained translation Total
capital premium reserve reserve earnings reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
January 2016 349 14 203 8 2,823 (211) 3,186
Profit for the
year - - - - 910 - 910
Total comprehensive
income for the
year - - - - 910 - 910
Conversion of
convertible
loan
notes 8 54 (3) - - - 59
Equity-settled
share based
payments - - - - 27 - 27
Settlement of
non-consenting
creditors - - - (8) 8 - -
Balance at 31
December 2016 357 68 200 - 3,768 (211) 4,182
Balance at 1
January 2017 357 68 200 - 3,768 (211) 4,182
Profit for the
year - - - - 1,237 - 1,237
Other comprehensive
income - - - - - 211 211
Total comprehensive
income for the
year - - - - 1,237 211 1,448
Conversion of
convertible
loan notes 198 1,383 (169) - 142 - 1,554
Exercise of
share options 3 22 (6) - - - 19
Equity-settled
share based
payments - - - - 27 - 27
Balance at 31
December 2017 558 1,473 25 - 5,174 - 7,230
Condensed Consolidated Balance Sheet
at 31 December 2017
2017 2016
ASSETS GBP000 GBP000
Non-current assets
Property, plant and
equipment 825 456
Intangible assets 2,488 1,992
Deferred tax assets 344 364
3,657 2,812
Current assets
Inventories 3,403 1,953
Trade and other receivables 3,743 2,398
Cash and cash equivalents 1,324 2,322
8,470 6,673
Total assets 12,127 9,485
EQUITY AND LIABILITIES
Equity attributable
to equity holders of
the parent
Share capital 7 558 357
Share premium 1,473 68
Equity reserve 25 200
Currency translation
reserve - (211)
Retained earnings 5,174 3,768
Total equity 7,230 4,182
Non-current liabilities
Interest-bearing loans
and borrowings 6 23 1,540
23 1,540
Current liabilities
Interest-bearing loans
and borrowings 15 7
Trade and other payables 4,859 3,756
4,874 3,763
Total liabilities 4,897 5,303
Total equity and liabilities 12,127 9,485
Condensed Consolidated Statement of Cash Flows
for the year ended 31 December 2017
2017 2016
GBP000 GBP000
Cash flows from operating
activities
Profit for the year 1,237 910
Adjustments for:
Depreciation 162 107
Amortisation of intangible
assets 547 335
Equity settled share-based
payment expenses 27 27
Financial income (340) (4)
Financial expense 380 174
Income tax (credit)/charge (32) 15
Operating cash flows
before movement in
working capital 1,981 1,564
Change in trade and
other receivables (1,003) (224)
Change in inventories (1,450) 241
Change in trade and
other payables 1,057 (660)
Cash generated from
operations 585 921
Interest received - 4
Interest paid (107) (137)
Income tax received 61 210
Net cash from operating
activities 539 998
Cash flows from investing
activities
Acquisition of subsidiary,
net of cash acquired - (239)
Acquisition of property,
plant and equipment (509) (266)
Capitalised development
expenditure (1,043) (645)
Net cash outflow from
investing activities (1,552) (1,150)
Cash flows from financing
activities
Finance lease repayments (10) (4)
Proceeds from exercise
of share options 25 -
Net cash inflow/(outflow)
from financing activities 15 (4)
Net decrease in cash
and cash equivalents (998) (156)
Cash and cash equivalents
at start of period 2,322 2,478
Cash and cash equivalents
at end of period 1,324 2,322
Cash and cash equivalents
comprise:
Cash and cash equivalents
per balance sheet 1,324 2,322
Notes
1 Basis of preparation
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 2017 or 31
December 2016 but is derived from those accounts. Statutory
accounts for 2016 have been delivered to the registrar of companies
and those for 2017 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 undersection 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, Adjusted EBITDA and operating
profit on the same basis as set out in the Consolidated Income
Statement no further reconciliation is considered necessary.
Revenue by geographical destination can be analysed as
follows:
2017 2016
GBP000 GBP000
United Kingdom 10,227 9,990
Continental Europe 4,930 4,929
Rest of World 424 392
Total revenues 15,581 15,311
Included in the above amounts are revenues of GBP9,660,000
(2016: GBP8,178,000) in respect of construction contracts. The
balance comprises revenue from sales of goods and services.
3 Exceptional Items
The 2017 results include two exceptional items. First, the Group
accepted an offer to settle a historic matter, unrelated to the
current trading activities of the Group, which arose over ten years
ago. Under the settlement, on 9 January 2018 the Group received a
total of GBP702,000 in cash comprising an amount of GBP362,000 plus
compensatory interest of GBP340,000.
The second exceptional item is also unrelated to the current
trading activities of the Group. During the year the Board decided
that the US subsidiary that has been dormant for several years
should be abandoned, and any future activities that the Group may
undertake in the US will not be conducted through the subsidiary.
The GBP211,000 deficit on the Group's currency translation reserve
has been reclassified from equity to income and shown as an
expense.
4 Financial income and expenses
2017 2016
GBP000 GBP000
Recognised in profit or
loss
Exceptional interest income
(note 3) 340 -
Interest on bank deposits - 4
Financial income 340 4
Interest expense on financial
liabilities at amortised
cost 133 159
Exceptional foreign exchange
loss (note 3) 211 -
Other exchange losses 36 15
Financial expenses 380 174
5 Taxation
Recognised in the income statement
2017 2016
GBP000 GBP000 GBP000 GBP000
Current tax (credit)/expense
Current tax charge 5 -
Adjustments in
respect of prior
years (57) (41)
Total current tax (52) (41)
Deferred tax expense/(credit)
Origination and
reversal of temporary
differences 5 17
Recognition of
previously unrecognised
tax losses (148) (51)
Utilisation of
recognised tax
losses 303 192
Adjustment in respect
of prior years (162) (102)
Tax rate change 22 -
Total deferred
tax 20 56
Total tax (credit)/charge
in income statement (32) 15
Reconciliation of effective tax rate
2017 2016
GBP000 GBP000
Profit before tax 1,205 925
Tax using the UK corporation
tax rate of 19.25%
(2016: 20%) 232 185
Non-deductible expenses 81 54
Fixed asset differences - 2
Utilisation of tax losses - (26)
Recognition of previously
unrecognised tax losses (148) (38)
Change in unrecognised
temporary differences - (2)
Adjustments in respect
of prior years (219) (143)
Effect of rate change 22 (17)
Total tax (credit)/charge (32) 15
6 Interest-bearing loans and borrowings
This note provides information about the contractual terms of
the Group's non-current interest-bearing loans and borrowings
measured at amortised cost.
2017 2016
GBP000 GBP000
Non-current liabilities
Convertible loan notes - 1,521
Finance lease liabilities 23 19
23 1,540
The convertible loan notes of GBP1 each, carried a fixed
interest rate of 7% per annum and were convertible into ordinary
shares of 1p each at any time prior to maturity on 10 September
2018. The conversion price was 8p. Following a general meeting of
the loan note holders, all outstanding loan notes were converted on
15 December 2017.
Therefore, at 31 December 2017 there were no outstanding loan
notes (2016: GBP1,579,909).
7 Share capital
At 31 December At 31 December
2017 2016
No. No.
Number of shares in issue
- allotted, called up
and fully paid
Ordinary shares of 1p
each 55,768,229 35,707,101
GBP000 GBP000
Value of shares in issue
- allotted, called up
and fully paid
Ordinary shares of 1p
each 558 357
The Company's issued share capital comprises 55,768,229 ordinary
shares of 1p each all of which have equal voting rights.
During the year the Company issued 19,748,628 ordinary 1p shares
following conversion of GBP1,579,909 convertible loan notes at a
conversion price of 8p each. A further 312,500 shares were issued
at a price of 8p each on exercise of share options.
8 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to the shareholders by the weighted
average number of shares in issue.
2017 2016
Earnings
Profit for the year (GBP000) 1,237 910
Number of shares
Weighted average number
of ordinary shares ('000) 37,418 35,199
Diluted earnings per share
Diluted earnings per share assumes conversion of all potentially
dilutive ordinary shares, which arise from both convertible loan
notes and share options, and is calculated by dividing the adjusted
profit for the year attributable to the shareholders by the assumed
weighted average number of shares in issue. The adjusted profit for
the year comprises the profit for the year attributable to the
shareholders after adding back the interest on convertible loan
notes for the year.
2017 2016
Adjusted earnings
Profit for the year (GBP000) 1,368 1,060
Number of shares
Weighted average number
of ordinary shares ('000) 58,844 56,881
______________________________
This information is provided by RNS
The company news service from the London Stock Exchange
END
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