Source - RNS
RNS Number : 1285J
Petards Group PLC
07 September 2016
 

7 September 2016

 

Petards Group plc

 ("Petards", "the Group" or "the Company")

 

Interim results for the six months ended 30 June 2016

 

Petards Group plc (AIM: PEG), the AIM quoted developer of advanced security and surveillance systems, is pleased to report its interim results for the six months to 30 June 2016.

 

Key Highlights:

 

·      Operational

Another set of strong trading results for the Group

Profits grow for fifth successive six-month period

Acquisition of QRO Solutions ("QRO") successfully completed in April 2016

Investment made in expanding the Group's software development capabilities

Order book at 30 June 2016: £12 million (31 Dec 2015: £16 million)

Order book increased post 30 June 2016 by receipt of over £4 million of orders including £3 million received from Bombardier Transportation and Hitachi Rail Europe

·      Financial

Total revenues increased 22% to £7.4 million (2015: £6.1 million)

EBITDA from continuing operations increased 27% to £776,000 (2015: £609,000)

Pre-tax profit from continuing operations up 48% to £526,000 (2015: £356,000)

Cash balances £2.0m (31 Dec 2015: £2.5 million) and no bank debt after acquisition of QRO

Basic EPS increased 32% to 1.36p (2015: 1.03p)

Diluted EPS increased 25% to 0.95p (2015: 0.76p)

 

Commenting on the current outlook, Raschid Abdullah, Chairman, said:

 

"With the strong results for the half year and the current orders scheduled for delivery in the second half year, the board is confident that the Group is well placed to deliver full year results in line with market expectations."

 

Contacts:

Petards Group plc

www.petards.com

 

Raschid Abdullah, Chairman

Mb:  07768 905004

 


Tel: 01483 230445

 

WH Ireland Limited, Nomad and Joint Broker

www.wh-ireland.co.uk

 

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

 

The first six months of the current financial year have been very busy with the Group trading well, the acquisition of QRO Solutions ("QRO") having been successfully completed, investment made in the Group's software capabilities and a number of exciting order prospects being under negotiation. 

 

With the Group's pre-tax profits up by one third to £475,000 over the corresponding period in 2015, this is the fifth successive six-month period in which the Group has recorded an increase in its profitability.  Revenues from continuing operations increased by 17% on the back of increased deliveries of the Group's eyeTrain surveillance products and by over 22% including QRO.

 

Business overview

 

Following the QRO acquisition the Group's 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 Transport - software driven video and other sensing systems for on-train applications sold under the eyeTrain brand to global train builders, integrators and rail operators;

·      Emergency Services - in-car speed enforcement and end-to-end Automatic Number Plate Recognition ("ANPR") systems sold under the ProVida and QRO brands to UK and overseas law enforcement agencies; and

·      Defence - electronic countermeasure protection systems, mobile radio systems and related engineering services sold predominantly to the UK Ministry of Defence ("MOD").

 

The Group performed well during the six months ended 30 June 2016, delivering organic growth in addition to the acquisition of QRO, and that performance is a summarised below.

 

Operating review

 

The growth in revenues during the period primarily resulted from a strong trading performance in respect of the Group's eyeTrain products with increased deliveries for the Siemens Mobility Thameslink project accounting for the majority of that increase.  The project, which is now almost 50% complete, is for the supply of on-board monitoring systems that will provide 115 Siemens Desiro City Electrical Multiple Unit (EMU) trains with Driver Only Operation (DOO) capability as well as the ability to monitor the overhead pantograph, saloon interiors and the track to both the front and rear of the trains.  The first of these trains have now entered service and once all have been commissioned the 115 trains, comprising 1,140 vehicles, will represent another substantial increase in Petards eyeTrain installed base.

 

Other eyeTrain projects contributing to revenues in the period included those for Siemens, Bombardier Transportation and Hitachi Rail Europe. Demand for eyeTrain spares, support and maintenance parts remained strong with revenues continuing at similar levels to those achieved in the corresponding period in 2015. Management's view is that as new trains fitted with Petards equipment enter service, these areas will grow and contribute significantly to recurring revenues and profitability.

 

Revenues from Defence and Emergency Services products in the period were lower than in the same period in last year.  In Defence, the first half of 2015 benefitted from revenues from the £4.5 million contract to modify electronic countermeasures equipment fitted to certain of the MOD's aircraft fleet.  With that programme substantially complete, its contribution to revenues in 2016 was much less significant.  However, much of that decrease was offset by the £800,000 contract from the MOD for the supply and delivery of radio equipment and support services, which was delivered in full in the first half of 2016.

 

Emergency Services product revenues in the first half of 2015 included a substantial spares order from an overseas government.  Once the effect of that order is removed, revenues (excluding QRO) for the first half of 2016 were up approximately 10%.

 

Operational improvements continue to be made and I am pleased to report that the investment made in strengthening the engineering capability within Petards Joyce-Loebl during 2015 has started to show the expected benefits.  Since then, in order to accelerate the Group's development of new product offerings and to enable it to be more proactive in the market place, additional investment in its software development operations has been implemented.  This included new software tools, improvements in software development processes and expanded test facilities, the benefits of which are now being felt in the delivery of current projects.

 

While the Group's trading performance has been strong, order intake during the period was slower than had been anticipated for both eyeTrain and ProVida products.  This contrasted with a better than anticipated order intake for Defence products following receipt of the £800,000 MOD radio order referred to above. 

 

The board believes the slower order intake was due to the timing of specific customer projects rather than any BREXIT effect.  Since the start of the third quarter, orders totalling over £4 million have been received.  These orders have included two previously announced orders from Bombardier Transportation totalling in excess £2.5 million for the supply of eyeTrain systems on two UK projects for fitment to ELECTROSTAR and the new AVENTRA EMU trains for delivery in 2017 and 2018.  A further order of approximately £0.6 million has been received from Hitachi Rail Europe for eyeTrain automatic passenger counting (APC) systems for delivery over the next three years.

 

The Group's order book at 30 June 2016 was £12 million of which just under half is scheduled for delivery in the second half of 2016.   The above orders grew the order book at 31 August 2016 to approximately £13.5 million, the majority of those new orders being in support of 2017 revenues.

 

 

Acquisition

 

In April, the board was pleased to welcome QRO into the Group following its acquisition for an initial consideration of £1,115,000 payable in cash from the Group's existing cash resources.  At the time of acquisition QRO's balance sheet included net cash balances of £876,000.   As the board considers at this stage that it unlikely that the contingent consideration of £140,000 will be payable, the resulting net cash consideration for the acquisition is expected to be £239,000.

 

QRO provides 'end-to-end' ANPR, security and speed enforcement solutions to UK police forces and to integrators serving the police and security markets.  Its systems integration expertise enables it to offer fixed site, mobile, re-deployable and hand-held ANPR systems which can be integrated into its own back office management suite of software; Check-IT ANPR, Check-IT CSGS, Check-IT Handheld and Multimedia Vault.  It comes to the Group with a strong service based operation, well established in its field, profitable, cash generative with recurring revenues and complements Petards existing Emergency Services ProVida brand.  

 

QRO made a small contribution (before acquisition costs) to the Group's profits in the 2½ months following its acquisition but grew its order book over that same period with an order intake of approaching £400,000.  Its contribution to profits would have been higher had it not been for revenues being deferred due to the late delivery of equipment by a key supplier, however, this issue has been resolved, the related shipments completed and I am pleased to say that QRO continues to trade profitably. 

 

Financial review

Operating performance

Revenues from continuing operations for the six months ended 30 June 2016 increased by 17% to £7.1million (June 2015: £6.1 million) with a gross margin in line with that recorded for the 2015 full year.  QRO contributed revenues of £0.3 million at a 40% gross margin taking Group revenues for the period to £7.4 million.

 

Administrative expenses from continuing operations grew to £1.9 million (June 2015: £1.8m) with much of this increase being payroll, training and recruitment costs relating to the investment in the software development capabilities of the Group.  Administrative expenses relating to QRO totalled £119,000 which with acquisition costs of £57,000, took Group administrative expenses to £2.1 million.

 

Earnings before interest, tax, depreciation & amortisation (EBITDA) from continuing operations improved by 27% to £776,000 (June 2015: £609,000) and operating profits by 39% to £604,000 (June 2015: £436,000).  A small contribution was made by QRO and after deducting acquisition costs the Group achieved an EBITDA of £786,000 and an operating profit of £553,000 for the half year.

 

Net financial expenses totalled £78,000, and with no tax charge, profits before and after tax on the Group's activities totalled £475,000, an increase of 33% (June 2015: £356,000) with diluted earnings per share increasing 25% to 0.95p (June 2015: 0.76p).

 

Research & Development

The Group continues to invest in its product offering and capitalised £265,000 during the period relating to development of its eyeTrain systems (June 2015: £27,000).

 

Cash and cash flow

The Group's financial position remains healthy with cash on its balance sheet and no bank debt.  At 30 June 2016, cash balances totalled £2.0 million (December 2015: £2.5 million) and it has undrawn working capital facilities of £0.5 million.

 

The net operating cash inflow for the period was £122,000 (June 2015: inflow of £558,000) with working capital movements reducing the cash generated.  The largest of these movements was a result of lower revenue volumes but much higher exports in the second quarter of 2016 compared with the last quarter of 2015, causing a significant reduction in output VAT payable.  Total cash outflows after investing activities amounted to £488,000 which includes the £239,000 net cash flow arising from the acquisition of QRO.

 

Outlook

 

Since the half year the Group has continued to trade well with new orders totalling over £4 million secured and with further business under negotiation for 2017 and beyond.

 

With the strong results for the first half year and the current orders scheduled for delivery in the second half year, the board is confident that the Group is well placed to deliver full year results in line with market expectations.

 

Raschid Abdullah

7 September 2016

 

 

 

 

Condensed Consolidated Income Statement

for the six months ended 30 June 2016

 






Note

Continuing Operations
30 June
2016

Acquisition

30 June
2016

Unaudited

6 months
ended
30 June
2016

Unaudited

6 months
ended
30 June
2015

Audited

year
ended
31 December 2015



£000

£000

£000

£000

  £000








Revenue


7,096

315

7,411

6,067

13,072

Cost of sales


(4,615)

(190)

(4,805)

(3,860)

(8,473)



             

             

             

             

             

Gross profit


2,481

125

2,606

2,207

4,599








Administrative expenses                                           

2

(1,877)

(176)

(2,053)

(1,771)

(3,664)



             

             

             

             

             

Operating profit/(loss)


604

(51)

553

436

935

Analysed as:







Earnings before interest, tax, depreciation and amortisation ('EBITDA')


776

10

786

 

609

1,260

Depreciation and amortisation


(159)

(4)

(163)

(172)

(325)

Exceptional item: Acquisition costs


-

(57)

(57)

-

-

Share based payments


(13)

-

(13)

(1)

-



             

             

             

             

             



604

(51)

553

436

935



             

             

             

             

             


 

2

 

-

 

2

 

1

 

3

Financial expenses

3

(80)

-

(80)

(81)

(176)



             

             

             

             

             

Profit before tax


526

(51)

475

356

762

Income tax

4

-

-

-

-

3



             

             

             

             

             

Profit for the period attributable to equity shareholders of the company



526


(51)


475


356


765



             

             

             

             

             







 

Basic earnings per share (pence)

6



1.36

  1.03

  2.19

Diluted earnings per share (pence)

6



0.95

  0.76

1.62





             

             

             

 



Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2016


Unaudited

6 months ended

30 June

2016

Unaudited

6 months ended

30 June 2015

Audited

year

ended

31 December 2015


£000

£000

£000





Profit for period

475

356

765


             

             

             

Total comprehensive income for the period

475

356

765


             

             

             

 

 

 

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 June 2016

 


 

Share

capital

 

Share

premium

 

Merger

reserve


Equity

reserve


Special

reserve

 

Retained

earnings

Currency

translation

differences

 

Total

equity


£000

£000

£000

£000

£000

£000

£000

£000










Balance at 1 January 2015 (audited)

6,651

25,192

1,075

204

-

(30,510)

(211)

2,401










Profit for the period

-

-

-

-

-

356

-

356


             

             

             

             

             

             

             

             

Total comprehensive income for the

 period

-

-

-

-

-

356

-

356

Conversion of convertible loan

 Notes

1

11

-

(1)

-

1

-

12

Equity-settled share based payments

-

-

-

-

-

1

-

1


             

             

             

             

             

             

             

             

Balance at 30 June 2015 (unaudited)

6,652

25,203

1,075

203

-

(30,152)

(211)

2,770


             

             

             

             

             

             

             

             










Balance at 1 January 2015 (audited)

6,651

25,192

1,075

204

-

(30,510)

(211)

2,401










Profit for the year

-

-

-

-

-

765

-

765


             

             

             

             

             

             

             

             

Total comprehensive income for the

 year

-

-

-

-

-

765

-

765

Conversion of convertible loan

 notes

1

14

-

(1)

-

-

-

14

Equity-settled share based payments

Capital Reduction

-

(6,303)

-

(25,192)

-

(1,075)

-

-

-

8

6

32,562

-

-

6

-


             

             

             

             

             

             

             

             

Balance at 31 December 2015 (audited)

349

14

-

203

8

2,823

(211)

3,186


             

             

             

             

             

             

             

             

 

Balance at 1 January 2016 (audited)

 

349

 

14

 

-

 

203

 

8

 

2,823

 

(211)

 

3,186










Profit for the period

-

-

-

-

-

475

-

475


             

             

             

             

             

             

             

             

Total comprehensive income for the

 period

-

-

-

-

-

475

-

475

Conversion of convertible loan

 notes

2

11

-

(1)

-

-

-

12

Equity-settled share based payments

-

-

-

-

-

13

-

13

Settlement of non-consenting creditors

-

-

-

-

(8)

8

-

-


             

             

             

             

             

             

             

             

Balance at 30 June 2016 (unaudited)

351

25

-

202

-

3,319

(211)

3,686


             

             

             

             

             

             

             

             



 

Condensed Consolidated Balance Sheet

at 30 June 2016           



Unaudited

30 June
2016

Unaudited

30 June
2015

Audited

31 December 2015

ASSETS


£000

£000

£000

Non-current assets





Property, plant and equipment


360

212

247

Goodwill                                                           5


703

401

401

Development costs


1,172

983

902

Deferred tax assets


429

514

429



             

             

             



2,664

2,110

1,979



             

             

             

Current assets





Inventories


2,075

1,864

2,168

Trade and other receivables


2,332

2,382

1,861

Cash and cash equivalents


1,990

1,968

2,478



             

             

             



6,397

6,214

6,507



             

             

             

Total assets


9,061

8,324

8,486



             

             

             

EQUITY AND LIABILITIES





Equity attributable to equity holders of the parent





Share capital


351

6,652

349

Share premium


25

25,203

14

Equity reserve


202

203

203

Merger reserve

Special reserve


-

-

1,075

-

-

8

Currency translation reserve


(211)

(211)

(211)

Retained earnings / (deficit)


3,319

(30,152)

2,823



             

             

             

Total equity


3,686

2,770

3,186



             

             

             

Non-current liabilities





Interest-bearing loans and borrowings


1,550

1,528

1,543

Deferred tax liabilities


9

100

-



             

             

             



1,559

1,628

1,543



             

             

             

Current liabilities





    Trade and other payables


3,816

3,926

3,757



             

             

             



3,816

3,926

3,757



             

             

             

Total liabilities


5,375

5,554

5,300



             

             

             

Total equity and liabilities


9,061

8,324

8,486



             

             

             

 

 

 

 

 

 

 

 

Condensed Consolidated Statement of Cash Flows

for the six months ended 30 June 2016


Unaudited

6 months ended
30 June
2016

Unaudited

6 months ended
30 June
2015

Audited

year
ended
31 December 2015


£000

£000

£000

Cash flows from operating activities




Profit for the period

475

356

765

Adjustments for:




Depreciation

43

26

58

Amortisation of intangible assets

119

147

267

Equity settled share-based payment expenses

13

1

6

Financial income

(2)

(1)

(3)

Financial expense

81

81

176

Income tax credit

-

-

(3)


             

             

              

Operating cash flows before movement in working capital

729

610

1,266

Change in trade and other receivables

(129)

600

1,138

Change in inventories

118

(425)

(729)

Change in trade and other payables

(536)

(160)

(195)


             

             

             

Cash generated from operations

182

625

1,480

Interest received

2

1

3

Interest paid

(62)

(68)

(146)

Income tax paid

-

-

(163)


             

             

             

Net cash generated from operating activities

122

558

1,174


             

             

             

Cash flows from investing activities




Acquisition of subsidiary, net of cash acquired                              5

(239)

-

-

Acquisition of property, plant and equipment

(106)

(51)

(118)

Capitalised development expenditure

(265)

(27)

(66)

Cash deposits held in escrow

-

54

54


             

             

             

Net cash used in investing activities

(610)

(24)

(130)


             

             

             

Net (decrease)/increase in cash and cash equivalents

(488)

534

1,044

Cash and cash equivalents at start of period

2,478

1,434

1,434


             

             

             

Cash and cash equivalents at end of period

1,990

1,968

2,478


             

             

             

Cash and cash equivalents comprise:




Cash and cash equivalents per balance sheet

1,990

1,968

2,478


             

             

             



Notes

1              Basis of preparation

The interim financial information set out in this statement for the six months ended 30 June 2016 and the comparative figures for the six months ended 30 June 2015 are unaudited. This financial information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.

 

The comparative figures for the financial year ended 31 December 2015 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

This interim statement, which is neither audited nor reviewed, has been prepared in accordance with the measurement and recognition criteria of International Financial Reporting Standards (IFRS) as adopted by the EU.  It does not include all the information required for the full annual financial statements, and should be read in conjunction with the financial statements of the Group as at and for the year ended 31 December 2015. As permitted, this interim statement has been prepared in accordance with AIM Rules for Companies and is not required to comply with IAS 34 'Interim Financial Reporting' to maintain compliance with IFRS.

The accounting policies applied in preparing these interim financial statements are the same as those applied in the preparation of the annual financial statements for the year ended 31 December 2015, as described in those financial statements other than standards, amendments and interpretations which became effective after 1 January 2016 and were adopted by the Group.  These have had no significant impact on the Group's profit for the period or equity.  The Board approved these interim financial statements on 6 September 2016.

 

Copies of this interim statement will be available on the Company's website (www.petards.com) and from the Company's registered office at Parallel House, 32 London Road, Guildford, GU1 2AB.

 

2             Administrative expenses

Legal, professional and stamp duty costs incurred in connection with the acquisition of QRO Solutions Limited totalled £57,000 and have been charged to the Condensed Consolidated Income Statement within administrative expenses (see also note 5).

3             Financial expenses

 


Unaudited

6 months ended

 30 June

2016

£000

Unaudited

6 months ended

30 June

2015

£000

Audited

year ended

31 December 2015

£000

Interest expense on financial liabilities at amortised cost:

-       Convertible loan notes at 7% p.a. (cash)

-       Convertible loan notes amortisation (non-cash)

-       Other (cash)

 

57

17

5

 

56

16

1

 

115

34

2

Net foreign exchange loss

1

8

25


             

             

             

Financial expenses

80

81

176


             

             

             

4             Taxation

No provision for taxation has been made in the Condensed Consolidated Income Statement for the six months to 30 June 2016 based on the estimated tax provision required for the year ending 31 December 2016.  No provision was required in the six months to 30 June 2015. 

 

5             Acquisition of QRO Solutions Limited

On 13 April 2016, the Group acquired the entire issued share capital of QRO Solutions Limited ("QRO") for a cash consideration of £1,115,000, funded by internal cash resources.  A further deferred consideration payment of £140,000 is subject to QRO achieving revenues of at least £1,750,000 and profits before tax of at least £240,000 for their financial year ending 30 November 2016. The Group currently assesses the probability of this payment being made at zero. 

The provisional fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:


 

Book value

£000

Provisional fair value adjustments

£000

 

Provisional fair values

£000

Net assets acquired:




Intangible assets

Property, plant & equipment

-

50

124

-

124

50

Inventory

Trade and other receivables

Cash and cash equivalents

Trade and other payables

26

333

876

(596)

-

-

-

-

26

333

876

(596)


             

            _

            _


689

124

813

Goodwill



302




            _

Total consideration, satisfied by Cash



1,115




            _

Cash flow:

Total consideration

Cash included in undertaking acquired

 

 

 

 

 

1,115

(876)        




            _

Net cash consideration in cash flow statement



239




            _

 

6             Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to the shareholders by the weighted average number of shares in issue.

 


Unaudited
6  months
ended
30 June
2016

Unaudited
6 months ended
30 June
2015

Audited
year
ended
31 December 2015

Earnings




Profit for the period (£000)

475

356

765


             

             

             

Number of shares




Weighted average number of ordinary shares ('000)

34,998

34,629

34,858


             

             

             

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 period attributable to the shareholders by the assumed weighted average number of shares in issue. The adjusted profit for the period comprises the profit for the period attributable to the shareholders after adding back the interest on convertible loan notes for the period.

 


Unaudited
6  months
ended
30 June
2016

Unaudited
6 months ended
30 June
2015

Audited
year
ended
31 December 2015

Adjusted earnings




Profit for the period (£000)

551

425

914


             

             

             

Number of shares




Weighted average number of ordinary shares ('000)

57.966

55,879

56,268


             

             

             

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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