TIDMPEG
RNS Number : 1866P
Petards Group PLC
30 September 2013
30 September 2013
PETARDS GROUP PLC
INTERIM RESULTS ANNOUNCEMENT
Petards Group plc ('Petards'), the AIM quoted developer of
advanced security and surveillance systems, reports its interim
results for the six months to 30 June 2013.
Highlights
-- Revenues of GBP3.6 million (2012: GBP4.7 million)
-- Gross margin 40% (2012: 41%)
-- Operating loss GBP299,000 (2012: GBP51,000 profit)
-- Loss before tax GBP338,000 (2012: GBP22,000 profit)
-- Basic and diluted loss per share of 3.11 p (2012: 0.35p earnings)
-- Net cash outflow from operating activities of GBP1.0 million (2012: GBP0.9 million inflow)
-- Net debt of GBP1.0 million (30 June 2012: GBP0.8 million; 31 December 2012: GBP0.1 million)
Commenting on the current outlook, Raschid Abdullah, Chairman,
said:
"The Company currently has no bank borrowings. However the Board
recognises that to sustain and grow the business additional working
capital finance is required and it is presently reviewing its
options for raising additional equity and debt. The 'Fit for
Growth' programme which has already produced savings in the cost
base will continue into 2014.
While orders have been slow in the first half of 2013 all of the
signs are that order intake will improve in the second half
although it is largely 2014 that will see the benefit of this
trend."
Contacts:
Petards Group plc www.petards.com
Raschid Abdullah, Chairman +44 (0) 7768 9050 004
WH Ireland Limited www.wh-ireland.co.uk
Mike Coe +44 (0) 117 945 3470
Chairman's Statement
Corporate Overview
So far 2013 has proven to be one of the most challenging periods
in Petards' history.
During the period and the third quarter of 2013 the Company has
undergone a restructuring of its operations, acquired its largest
shareholder providing much needed cash for development of the
business, won a three year contract from another new international
train building customer, Hitachi Rail Europe, commenced shipments
of product on the circa GBP8 million order it was awarded last year
by Siemens Rail Systems and laid the groundwork for future long
term orders such that it is expected that in 2014 Petards will be
working with at least five of the world's largest train
builders.
The Company presently has no bank or trade finance borrowings.
To meet its present and forecast commitments the directors are
considering the merits of seeking borrowings in a market where
there is a perceived reluctance to lend to smaller companies such
as Petards. It will also consider raising equity.
Another alternative which might be considered is that of forming
strategic alliances with financially stronger partners. However,
this would be done with some reluctance as at this stage of the
Company's development such moves would be unlikely to achieve the
underlying value the directors believe exists and should accrue to
Petards' shareholders.
Operating Review
Trading conditions for the first half of the year have proven
difficult with order intake across most areas of the Company's
business, particularly orders for delivery in the current year,
falling considerably below expectations as delays have been
experienced in contracts being placed.
Initial costs on the previously referred to GBP8 million
contract for the supply of on board CCTV systems to Siemens Rail
Systems ("Siemens") for the Thameslink Rolling Stock Procurement
Project ("Thameslink") have also been higher than expected. The
principal reason for the cost overrun was the further development
of our eyeTrain product to meet the high specification and exacting
quality requirements of this prestigious project.
While the cost overrun is disappointing the product range
developed lends itself to being used on other similar Siemens
global projects and we are presently discussing the possibility of
it being used on the first phase of a new build train project
outside of the EU between 2014 and 2016.
In addition decisions are now expected in the final quarter of
the current year and the first quarter of 2014 on a number of
contracts which have experienced delays. These possible contracts
relate to all our product areas but would be of particular benefit
to those areas of transport and defence.
On the plus side we were pleased to have been recently awarded a
multi-million euro framework contract by Hitachi Rail Europe for
automatic passenger counting systems to be installed on its Class
800 series trains for the Inter City Express programme. The initial
"call off" order is for the Great Western Main Line, the value of
which is in excess of EUR1 million for delivery over the next three
years.
Petards through its wholly owned subsidiary Petards Joyce-Loebl
has had a long relationship with the MOD based on its proven
technical capability and high service levels. The completion of the
Chinook Defensive Aids Suite upgrade contract in the second half of
2012 served to reduce year on year revenues within the defence area
of the business as in 2013 order inflow was reduced while the UK
Government reviewed its medium-term commitments. However, Petards
Joyce-Loebl has several tenders outstanding with the MOD, orders
for which are expected to be placed during 2013.
Orders for our emergency services products continued to be
affected by budgetary constraints within law enforcement agencies.
However, the launch of our new in-car speed detection and video
system Provida 4000, following receipt of its UK Home Office
approvals, resulted in some early sales as several police forces
placed initial orders which it is anticipated will lead to further
sales. Export markets continue to have the potential for further
sales of our complete range of emergency services products in
particular in the Middle East where a number of tenders remain
outstanding.
In July of this year the board introduced the 'Fit for Growth'
programme. This is an on-going programme designed to evaluate all
personnel for their capabilities and to ensure that they are
positioned correctly within the organisation and to refine or in
some cases redesign operational practices to improve efficiencies
and make the Company's products more effective and competitive in
their markets.
The majority of personnel have responded positively to the
challenges the 'Fit for Growth' programme presented, with the
result that for 2014 the operational side of the business is
expected to be a leaner and much improved performer in its market
places for the benefit of all its stakeholders, not least customers
and shareholders.
On 2(nd) September Paul Negus (48) was appointed as Business
Development Director for Petards Joyce-Loebl. Paul has had a long
involvement in the provision of CCTV and automatic number plate
recognition (ANPR) solutions. He brings to Petards considerable
experience having until recently held the post of Managing Director
at PIPS Technology Limited both as a privately owned company and
also following its acquisition by New York Stock Exchange listed
Federal Signal Inc.
Overview of the Results
The financial information contained within this interim report
is based upon the Group's unaudited results
for the six months to 30 June 2013.
Revenues for the first six months of 2013 were GBP3.6 million
(2012: GBP4.7 million), the loss before and after tax for the
period was GBP338,000 (2012: GBP22,000 profit) and the loss per
share was 3.11p (2012: 0.35p earnings).
The reduction in revenues mainly related to our defence
products; lower shipments of electronic countermeasure equipment
being partly offset by strong demand for communication systems from
the UK MOD. Gross margins at 40% remained similar to those achieved
in the first half of last year (2012: 41%) with overheads 8% lower
at GBP1.7 million (2012: GBP1.9 million).
Net cash outflows from operations were GBP1.0 million (2012:
GBP0.9 million inflow), a substantial proportion of which was in
respect of an increase in inventories relating to the non-recurring
costs referred to above for the Siemens Thameslink contract. Net
debt at 30 June 2013 was GBP1.0 million (31 December 2012: GBP0.1
million).
Acquisitions
On 1 July 2013 Petards announced an agreed offer for the entire
issued share capital of Water Hall Group plc for a consideration
valued at GBP3.067 million. The consideration is comprised of
10,954,854 new Petards ordinary shares of 1 pence each and
1,752,775 new convertible redeemable loan notes of GBP1 each with a
coupon of 7% p.a. The loan notes have a five year term and may be
converted at any time into new Petards shares at a subscription
price of 8 pence per share.
The benefit to Petards was that of a much needed injection of
cash at a time when other forms of funding were not immediately
available to it.
I am pleased to report that on 30 August 2013 the offer was
declared wholly unconditional and on 20 September 2013 acceptances
in excess of 90% of Water Hall's issued share capital had been
received thereby enabling Petards to implement compulsory 'buy out'
procedures for the outstanding minority shareholders which it will
formally announce at the time of the next closing date for the
offer.
Outlook
Petards operates in a long term business built on long term
relationships with its customers and suppliers. There are other
related areas in which the business has the ability to develop, in
particular but not exclusively within transport which is not only a
growing sector but also a global one.
To succeed it is important that the strength of the balance
sheet, financing mechanisms for export sales in particular and
profitability are all improved such that the directors and
management can pursue commercial opportunities on a sustainable
basis. In addition it needs an appropriate cost base. The 'Fit for
Growth'programme which has already produced savings in the cost
base will continue into 2014.
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