TIDMPEG
RNS Number : 3331B
Petards Group PLC
20 September 2018
20 September 2018
Petards Group plc
("Petards", "the Group" or "the Company")
Interim results for the six months ended 30 June 2018
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 ended 30 June 2018.
Key Highlights:
-- Operational
o Order book at 30/06/2018 GBP20 million (31/12/2017- GBP18
million)
o Current order coverage for H2/2018 in excess of GBP9.5 million
and almost GBP8 million scheduled for 2019
o Orders for eyeTrain of over GBP6.5 million received since
30/06/2018, adding to coverage for 2019 and beyond
o Strong revenue performance arising from Defence related
products
o Acquisition of RTS Solutions ("RTS") successfully completed in
May 2018
o QRO secured two significant framework agreements generating
new orders of over GBP1 million
o Continued investment in eyeTrain software solutions
-- Financial
o Revenue increased 21% to GBP9.7 million (2017 - GBP8.0
million); 20% excluding RTS
o Gross margins 34.6% (2017 - 38.6%) reflecting higher levels of
Defence product revenues
o Adjusted EBITDA up 17% to GBP1,085,000 (2017 - GBP925,000)
o Adjusted pre-tax profit up 17% to GBP602,000 (2017 -
GBP515,000)
o Pre-tax profit up 2% to GBP514,000 (2017 - GBP503,000)
o Cash generated from operating activities GBP966,000 (2017 -
GBP218,000 outflow)
o Cash balances of GBP2.3 million at 30/06/2018 (31/12/2017 -
GBP1.3 million)
o Net cash GBP1.0 million (post RTS acquisition) (31/12/2017 - GBP1.3 million)
o Diluted EPS 0.88p (2017 - 0.98p)
Commenting on the current outlook, Raschid Abdullah, Chairman,
said:
"The Group continues to benefit from a good balance sheet and a
strong forward order book of GBP20 million which has been further
enhanced with the recently announced award of three contracts
totalling over GBP6.5 million from Bombardier and Siemens."
"The Board is also pleased with the performance of its more
recent acquisitions, QRO and RTS, and continues to review other
acquisition opportunities."
"With the June 2018 order book containing revenues of
approaching GBP10 million for the second half of 2018 and almost
GBP8 million for 2019, the Board remains confident in the future
prospects for the Group."
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 and www.whirelandcb.com
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 in the first six months of 2018 the
Group recorded growth in revenues, profits and operating cash
generation over the same period in 2017. The Group has continued to
make good progress against its strategic objectives in the first
half of 2018 achieving organic growth and adding to its software
solution portfolio with the successful completion of the
acquisition of RTS Solutions ("RTS").
Group pre-tax profits were up by 2% to GBP514,000 (June 2017 -
GBP503,000) on revenues of GBP9.7 million, a 21% increase over the
first half of 2017 (June 2017 - GBP8.0 million). While eyeTrain
products continue to account for the largest proportion of the
Group's revenues, Petards' Defence products performed strongly.
Defence related revenues were up GBP2.5 million on the same period
in 2017, but as these generally attract lower margins, the change
in mix meant overall gross margin was 34.6%, compared with 36.8% in
2017.
Business overview
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, and web-based real-time
safety critical integrated software applications supporting the UK
rail network infrastructure sold under the RTS brand to Network
Rail and its Tier 1 contractors;
-- Traffic - 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 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
During the six months ended 30 June 2018 the Group continued to
perform well across all its chosen markets. The pick-up in activity
in our defence markets reported in March has boosted revenues from
this sector in the first half of 2018 and was the main driver
behind the 21% increase in revenues over the comparable period in
2017. Deliveries of the Group's eyeTrain on-board train solutions
remained strong although, as explained below, recorded revenues
were less than 2017 following the adoption of the new revenue
recognition accounting standard IFRS 15. Within the Traffic market,
demand for QRO's products and services was very strong, although
ProVida revenues were down on the first half of 2017.
Revenues from eyeTrain continue to be the largest element of
overall Group revenues with deliveries in the six months to June
2018 being spread across multiple projects with the major global
train builders such as Siemens, Bombardier, Hitachi and Stadler,
mainly for new train build projects. While there were no major
eyeTrain orders received in the period, shortly after 30 June three
significant contracts totalling over GBP6.5 million that had been
expected in the first half year were secured.
As I have commented on previously, in recent years the volume of
new rolling stock ordered has driven demand for Petards' eyeTrain
solutions. That continues to be the case and in addition more
opportunities are arising for larger UK retrofit projects utilising
the additional system functionality developed by Petards in recent
times such as Driver Controlled Operation ("DCO") and Automatic
Selective Door Opening ("ASDO"). We are hopeful that further
retrofit orders will be forthcoming.
As previously anticipated, as the eyeTrain installed base has
increased, so have revenues from service and spares and these
totalled around GBP0.8 million for the first half year. This is an
important area of the business and one that we continue to focus on
continuing to grow.
The Group has continued to invest in the development of its core
eyeTrain solutions and in customer specific functionality and that
is expected to continue in the second half year. On completion of
the current development phase we anticipate that the required level
of ongoing investment will reduce.
As I have mentioned, revenues from Defence products were up
significantly on the first six months of 2017. The main drivers of
this were the receipt and delivery of GBP1.5 million in contracts
for the provision of communications equipment and services under
the framework agreement Petards presently operates for the MOD.
While such orders are received on an ongoing basis, these were
larger than usual. In addition, the Group successfully completed
the delivery of the GBP1 million "Emulator" contract from the MOD.
This tool will enable the MOD to use Petards ALE-47 Threat Adaptive
Countermeasures Dispenser System (TACDS) more effectively and so
better protect its large transport aircraft.
Engineering services performed by Petards, for the MOD in
particular, represent an important contributor to the Group's
profits. We were therefore very pleased that the MOD exercised its
option to extend Petards' existing three year contract for a
further two years to 31 December 2021 for the support of ALE 47 and
M147 TACDS Systems which are fitted to Puma, Chinook, Merlin, and
C130J aircraft. The contract extension is worth GBP1.1 million for
which Petards will continue to perform core post design services.
This should be further supplemented by additional engineering,
repair, refurbishment and manufacturing orders that are expected to
significantly enhance the value of the extended agreement.
QRO was acquired by Petards over two years ago and we are
pleased with the progress it has made. As I reported in March,
early in 2018 QRO secured two non-exclusive framework agreements to
provide ANPR equipment and services. The first is a 4 year
framework contract with Thames Valley Police and Hampshire
Constabulary which can be extended at their option by a further 3
years. The second is a 3 year framework contract with Cheshire
Police which again at their option may be extended by up to a
further 3 years. Other UK forces may utilise these framework
agreements to procure their own ANPR equipment and services and as
a consequence QRO has recorded a strong order intake in the first
half year, with over GBP1 million of orders being placed under
these agreements.
QRO has always had strong relationships with UK police forces.
However, as was hoped, these framework agreements are providing
opportunities with other UK forces that were previously unavailable
to it. As a result, QRO's overall order intake for the first six
months of 2018 exceeded that achieved in the whole of 2017 by some
margin. Revenues from the Group's other Traffic products under the
ProVida brand were similar to those achieved in the second half of
2017 but were lower than achieved in the first half of 2017. QRO
revenues were up on the first six months of 2017 and as the
majority of the orders received by QRO in that period will be
delivered in the second half of 2018, overall we expect Traffic
products to achieve a strong performance for 2018.
Acquisition
On 11 May RTS was acquired by the Group for an initial
consideration of GBP1.0 million, contingent consideration of up to
GBP0.5 million plus a payment of GBP0.6 million made on a pound for
pound basis for surplus cash in RTS's balance sheet on acquisition.
In June GBP0.25 million of the contingent consideration was paid
and the board considers at this stage that it is likely that the
balance of GBP0.25 million will also be payable in 2019. The
consideration was satisfied in cash from Petards' existing cash
reserves and a new GBP1.25 million five year bank term loan.
RTS is a specialist transportation software engineering company
delivering a suite of web-based, real-time safety critical
applications, whose main customers are Network Rail and its Tier 1
contractors. It supplies end-to-end integrated solutions that
support the UK rail network infrastructure by maximising
effectiveness for operational, engineering and maintenance
programmes. These solutions include incident and fault management,
work site management, resource management, machine plant management
and asset/inventory management applications.
The acquisition of RTS adds to Petards' existing capabilities in
the rail sector providing the Group with an entry into the UK rail
infrastructure market, strengthens the Group's portfolio of
software solutions and adds a strong base of recurring
revenues.
On revenues of GBP128,000, RTS made a contribution of GBP48,000
to the Group's profits in the 6 weeks following its acquisition
(before acquisition costs and amortisation of acquisition related
intangibles). In that period it also added significantly to its
order book for recurring revenues by securing the renewal of a
contract with Network Rail. The contract is for the provision of
software licences, maintenance and third line support in respect of
Network Rail's real time failure and incident management system
that supports the UK's national rail infrastructure. The new
contract will generate annual revenues in excess of GBP250,000 and
runs until June 2023, the final two years of which are at Network
Rail's option and will be added to the order book on the exercise
of those options.
Financial review
Operating performance
Overall revenues for the six months ended 30 June 2018 increased
by 21% to GBP9.7 million (30 June 2017 - GBP8.0 million) and by 20%
excluding RTS. This is the first reporting period that the Group
has reported under IFRS 15 "Revenue from contracts with customers"
and its implementation has not altered the revenue recognition
policy for the majority of the Group's revenue streams. The one
area of the Group's business in which the adoption of IFRS 15 has
resulted in a change, is that of the work performed relating to the
delivery of customer specific development projects.
Prior to the adoption of IFRS 15, the Group recognised such
revenue upon achievement of specific pre agreed, customer-set
milestones (other than advance payments) and for which the Group
could invoice the customer for payment. Under IFRS 15, work of this
nature will result in later recognition of the related revenue and
predominantly affects eyeTrain revenues. As a consequence, the
adoption of IFRS 15 has reduced eyeTrain revenues in the period
ended 30 June 2018. The Group has adopted IFRS 15 using the
"cumulative effect" method under which comparative information is
not restated. The cumulative effect of revising the revenue and
profit previously recognised up to 31 December 2017 is shown as an
adjustment to brought forward retained earnings, details of which
are set out in Note 5 to the Interim Statement. The reduction in
revenue and cost previously recorded has increased both contract
assets and contract liabilities accordingly, details of which are
set out on the Statement of Financial position.
Overall margins for the six months ended 30 June 2018 were 34.6%
(June 2017 - 38.6%). The reduction over the comparable period in
2017 largely reflects the product mix with lower margin Defence
products comprising a larger proportion of revenues in 2018.
Total charges for amortisation, depreciation and share based
payments were GBP157,000 higher than the first six months of 2017
following the investment in product and infrastructure made during
2017. Costs of GBP77,000 were also incurred relating to the
acquisition of RTS. Together these factors led to an increase in
administrative expenses that totalled GBP2.8 million for the six
months ended 30 June 2018 (June 2017 - GBP2.5 million).
Adjusted earnings before interest, tax, depreciation,
amortisation, acquisition costs and share based payment charges
("Adjusted EBITDA") improved by 17% to GBP1,085,000 (June 2017 -
GBP925,000). As a result of higher amortisation and depreciation
charges, operating profits reduced by 13% to GBP517,000 (June 2017
- GBP591,000).
Net financial expenses totalled GBP3,000 (June 2017 - GBP88,000)
with the reduction arising due to the conversion of the Group's 7%
convertible loan notes in the latter part of 2017. With no tax
charge, profits before and after tax on the Group's activities
increased by 2% to GBP514,000 (June 2017 - GBP503,000). On an
adjusted basis, pre-tax profits increased 17% to GBP602,000 (2017 -
GBP515,000). While profits increased, diluted earnings per share
were 10% lower at 0.88p (June 2017 - 0.98p) as in 2018 there is no
add back of interest payable on convertible loan notes (June 2017 -
GBP73,000 add back).
Cash and cash flow
The Group generated a net operating cash inflow for the period
of GBP966,000 (June 2017 - GBP218,000 outflow) resulting in cash
balances at 30 June 2018 increasing to GBP2.3 million (31 Dec 2017
- GBP1.3 million). The GBP1.25 million 5 year term loan that funded
the majority of the RTS acquisition, repayable in equal quarterly
instalments, resulting in a net cash position at 30 June 2018 of
GBP1.0 million (31 December 2017 - net cash GBP1.3 million).
Outlook
The Group continues to benefit from a good balance sheet and a
strong forward order book of GBP20 million which has been further
enhanced with the recently announced awards of three contracts
totalling over GBP6.5 million from Bombardier and Siemens.
The Board is also pleased with the performance of its more
recent acquisitions, QRO and RTS, and continues to review
opportunities for other acquisitions.
With the June 2018 order book containing revenues of approaching
GBP10 million for the second half of 2018 and almost GBP8 million
for 2019, the Board remains confident in the future prospects for
the Group.
Raschid Abdullah
20 September 2018
Condensed Consolidated Income Statement
for the six months ended 30 June 2018
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
Note 2018 2017 2017
GBP000 GBP000 GBP000
Revenue 9,672 7,972 15,581
Cost of sales (6,326) (4,896) (9,566)
Gross profit 3,346 3,076 6,015
Administrative expenses 6 (2,829) (2,485) (4,770)
--------- --------- ------------
Adjusted EBITDA* 1,085 925 1,619
Amortisation of intangibles (364) (242) (547)
Depreciation (116) (80) (162)
Exceptional income 8 - - 362
Exceptional acquisition costs (77) - -
Share based payment charges (11) (12) (27)
Operating profit 517 591 1,245
Financial income (including
exceptional financial income
of GBPnil (2017 GBP340,000) 7,8 4 - 340
Financial expenses (including
exceptional financial expense
of GBPnil, (2017 GBP211,000) 7,8 (7) (88) (380)
Profit before tax 514 503 1,205
Income tax 9 - - 32
Profit for the period attributable
to equity shareholders of
the company 514 503 1,237
--------- --------- ------------
Basic earnings per share
(pence) 12 0.92 1.39 3.31
Diluted earnings per share
(pence) 12 0.88 0.98 2.32
--------- --------- ------------
The Group has adopted IFRS 15 using the cumulative effect
method, under which the comparative information is not restated
(Note 5). The cumulative effect of adopting IFRS 15 is recognised
in equity at the date of first adoption on 1 January 2018.
* Earnings before financial income and expense, depreciation,
amortisation, exceptional items, share based payment charges and
tax.
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2018
Notes Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
Profit for period 514 503 1,237
Other comprehensive income
Items that may be reclassified
to profit:
Release of foreign currency
reserve on abandonment of
US subsidiary
(included in financial expenses) 7,8 - - 211
Total comprehensive income
for the period 514 503 1,448
--------- --------- ------------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2018
Currency
Share Share Equity Retained Translation Total
capital premium Reserve earnings reserve Equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January
2017 (audited) 357 68 200 3,768 (211) 4,182
Profit for the period - - - 503 - 503
Total comprehensive income
for the
Period - - - 503 - 503
Conversion of convertible
loan notes 7 51 (2) - - 56
Exercise of share options 3 22 - - - 25
Equity-settled share
based payments - - - 12 - 12
Balance at 30 June 2017
(unaudited) 367 141 198 4,283 (211) 4,778
-------- -------- -------- --------- ------------ -------
Balance at 1 January
2017 (audited) 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 (audited) 558 1,473 25 5,174 - 7,230
-------- -------- -------- --------- ------------ -------
Balance at 1 January
2018 (audited) 558 1,473 25 5,174 - 7,230
Impact of change in accounting
policy * - - - (564) - (564)
-------- -------- -------- --------- ------------ -------
Adjusted balance at 1
January 2018 558 1,473 25 4,610 - 6,666
Profit for the period - - - 514 - 514
-------- -------- -------- --------- ------------ -------
Total comprehensive income
for the period - - - 514 - 514
Exercise of share options 17 144 (11) 11 - 161
Equity-settled share
based payments - - - 11 - 11
-------- -------- -------- --------- ------------ -------
Balance at 30 June 2018
(unaudited) 575 1,617 14 5,146 - 7,352
-------- -------- -------- --------- ------------ -------
* The Group has adopted IFRS 15 using the cumulative effect
method, under which the comparative information is not restated
(Note 5). The cumulative effect of adopting IFRS 15 is recognised
in equity at the date of first adoption on 1 January 2018.
Condensed Consolidated Statement of Financial Position
at 30 June 2018
Unaudited Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
ASSETS GBP000 GBP000 GBP000
Non-current assets
Property, plant and equipment 756 667 825
Intangible assets 10 3,819 2,044 2,488
Deferred tax assets 344 364 344
--------- --------- ------------
4,919 3,075 3,657
--------- --------- ------------
Current assets
Inventories 2,254 1,060 1,192
Contract assets ** 3,873 - -
Due from construction contract
customers * - 1,768 2,211
Trade and other receivables 3,886 3,392 3,743
Cash and cash equivalents 2,272 1,543 1,324
--------- --------- ------------
12,285 7,763 8,470
--------- --------- ------------
Total assets 17,204 10,838 12,127
========= ========= ============
EQUITY AND LIABILITIES
Equity attributable to equity
holders
of the parent
Share capital 575 367 558
Share premium 1,617 141 1,473
Equity reserve 14 198 25
Currency translation reserve - (211) -
Retained earnings * 5,146 4,283 5,174
Total equity 7,352 4,778 7,230
--------- --------- ------------
Non-current liabilities
Interest-bearing loans and
borrowings 11 1,016 1,503 23
--------- --------- ------------
1,016 1,503 23
--------- --------- ------------
Current liabilities
Interest-bearing loans and
borrowings 11 265 7 15
Contract liabilities *** 2,938 - -
Due from construction contract
customers * - - 382
Trade and other payables 5,633 4,550 4,477
--------- --------- ------------
8,836 4,557 4,874
--------- --------- ------------
Total liabilities 9,852 6,060 4,897
--------- --------- ------------
Total equity and liabilities 17,204 10,838 12,127
========= ========= ============
* The Group has adopted IFRS 15 using the cumulative effect
method, under which the comparative information is not restated
(Note 5). The cumulative effect of adopting IFRS 15 is recognised
in equity at the date of first adoption on 1 January 2018.
** The balance at 30 June 2018 includes GBP2,151,000
representing the impact of the adoption of IFRS 15.
*** The balance at 30 June 2018 includes GBP2,748,000
representing the impact of the adoption of IFRS 15.
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2018
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
Cash flows from operating
activities
Profit for the period 514 503 1,237
Adjustments for:
Depreciation 116 80 162
Amortisation of intangible
assets 364 242 547
Equity settled share-based
payment expenses 11 12 27
Financial income (4) - (340)
Financial expense 7 88 380
Income tax (credit)/charge - - (32)
--------- --------- ------------
Operating cash flows before movement
in working capital 1,008 925 1,981
Change in inventories (1,062) (875) (1,450)
Change in contract assets (3,873) - -
Change in amounts due from
construction contract customers 2,211 - -
Change in trade and other
receivables (61) (992) (1,003)
Change in contract liabilities 2,938 - -
Change in amounts due to construction
contract customers (382) - -
Change in trade and other
payables 169 793 1,057
--------- --------- ------------
Cash generated from operations 948 (149) 585
Interest received 4 - -
Interest paid (40) (69) (107)
Income tax received 54 - 61
--------- --------- ------------
Net cash from operating activities 966 (218) 539
--------- --------- ------------
Cash flows from investing
activities
Acquisition of subsidiary,
net of cash acquired 10 (1,169) - -
Acquisition of property, plant
and equipment (47) (291) (509)
Capitalised development expenditure (206) (294) (1,043)
--------- --------- ------------
Net cash outflow from investing
activities (1,422) (585) (1,552)
--------- --------- ------------
Cash flows from financing
activities
Bank loan received 11 1,250 - -
Finance lease repayments (7) (1) (10)
Proceeds from exercise of
share options 161 25 25
--------- --------- ------------
Net cash inflow from financing
activities 1,404 24 15
--------- --------- ------------
Net increase/(decrease) in
cash
and cash equivalents 948 (779) (998)
Cash and cash equivalents
at start of period 1,324 2,322 2,322
--------- --------- ------------
Cash and cash equivalents
at end of period 2,272 1,543 1,324
========= ========= ============
Cash and cash equivalents
comprise:
Cash and cash equivalents
per balance sheet 2,272 1,543 1,324
========= ========= ============
* The Group has adopted IFRS 15 using the cumulative effect
method, under which the comparative information is not restated
(Note 5). The cumulative effect of adopting IFRS 15 is recognised
in equity at the date of first adoption on 1 January 2018.
Notes
1 Reporting entity
Petards Group plc (the 'Company') is incorporated and domiciled
in England and its shares are publicly traded on the Alternative
Investment Market ('AIM') of the London Stock Exchange. These
condensed consolidated interim financial statements ('interim
financial statements') as at and for the six months ended 30 June
2018 comprise the Company and its subsidiaries (together referred
to as the 'Group'). The Group is primarily involved as a developer
of advanced security and surveillance systems.
Copies of these interim statements 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 Basis of preparation
As permitted, these interim financial statements have been
prepared in accordance with AIM Rules for Companies and are not
required to comply with IAS 34 'Interim Financial Reporting' to
maintain compliance with IFRS. They should be read in conjunction
with the Group's last annual consolidated financial statements as
at and for the financial year ended 31 December 2017 ('last annual
financial statements'). They do not include all of the financial
information required for a complete set of IFRS financial
statements, however selected explanatory notes are included to
explain events and transactions that are significant to the
understanding of the changes in the Group's financial position and
performance since the last annual financial statements. This
financial information does not constitute statutory accounts as
defined in Section 435 of the Companies Act 2006.
The comparative amounts for the financial year ended 31 December
2017 in these interim statements are not the Group'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 is the first set of Group financial statements where IFRS
15 and IFRS 9 have been applied. Changes to significant accounting
policies are described at Note 4.
3 Use of judgements and estimates
In preparing these interim financial statements, management has
made judgements and estimates that affect the application of
accounting policies and the reported amounts of assets,
liabilities, income and expense. Actual amounts may differ from
these estimates.
The significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty were the same as those described in the last annual
financial statements, except for new significant judgements and the
key sources of estimation uncertainty related to the application of
IFRS 9 and IFRS 15, which are described at Note 4.
4 Changes in significant accounting policies
In preparing these interim financial statements, the Board have
considered the impact of new standards which will be applied in the
2018 annual financial statements. Other than the adoption of IFRS 9
Financial Instruments and IFRS 15 Revenue from Contracts with
Customers, which are both effective for accounting periods starting
on or after 1 January 2018, there are not expected to be any
changes in the accounting policies compared with those applied for
the financial year ended 31 December 2017. A full description of
these accounting policies is contained in the Group's 2017 Annual
Report and Accounts, which is available on the Company's
website.
These interim financial statements have been prepared in
accordance with the recognition and measurement requirements of
International Financial Reporting Standards issued by the
International Accounting Standards Board, as adopted by the
European Union as effective for periods beginning on or after 1
January 2018.
IFRS 9 Financial instruments (effective 1 January 2018)
IFRS 9 addresses the classification and measurement of financial
assets and liabilities and replaces IAS 39. Among other things, the
standard introduces a forward- looking credit loss impairment model
whereby entities need to consider and recognise impairment triggers
that might occur in the future (an 'expected loss' model). The
Board has considered the potential impact of the introduction of
IFRS9 and determined that it does not have a significant impact on
the numbers reported in these interim financial statements or as
previously presented.
IFRS 15 Revenue from contracts with customers (effective 1
January 2018)
IFRS 15 sets out a single and comprehensive framework for
revenue recognition. The guidance in IFRS 15 is considerably more
detailed than previous IFRSs for revenue recognition (IAS 11
Construction Contracts and IAS 18 Revenue and associated
interpretations).
The Group has adopted IFRS 15 from 1 January 2018. The Group has
adopted IFRS 15 retrospectively and has chosen to apply the
cumulative effect approach. As a result, the Group has restated its
opening equity position as at 1 January 2018 to reflect the impact
of transitioning to IFRS 15. A summary of the effect of the impact
of the adoption of IFRS 15 is set out at Note 5. This adjustment
primarily reflects the impact of unbundling a handful of contracts
according to what the Group has assessed to be the performance
obligations to be delivered to the customer.
In line with the requirements of the standard with regards to
the transition option adopted, the Group has not restated its
comparative information which continues to be reported under
previous revenue standards, IAS 11 and IAS 18.
IFRS 16 Leases
The Group currently plans to adopt IFRS 16 initially on 1
January 2019. The Group has not yet determined which transition
approach to apply.
5 Impact of the adoption of IFRS 15
An assessment of the impact of IFRS 15 has been completed,
including a comprehensive review of the contracts that were not
completed contracts at the date of initial application, across the
Group's revenue streams.
This review has ascertained that GBP564,000 of profit taken in
the previous periods to 31 December 2017 is now deferred to future
periods. The effect on these interim financial statements of the
adoption of IFRS 15 is to reduce profit by GBP33,000 with profits
of GBP597,000 to be recognised after 30 June 2018.
In addition to the impact on equity following transition to IFRS
15 at 1 January 2018, the Group's consolidated balance sheet is
also impacted as a result of moving away from IAS 11 balance sheet
captions to those prescribed by IFRS 15. The main reclassification
adjustment is in relation to reclassifying amounts due to/from
Construction Contract Customers to Contract Assets or Contract
Liabilities.
The Group recognises revenue when it transfers control over a
product or service to its customer. Revenue is measured based on
the consideration specified in a contract with a customer and
excludes amounts collected on behalf of third parties.
Where a modification to an existing contract occurs, the Group
assesses the nature of the modification and whether it represents a
separate performance obligation required to be satisfied by the
Group or whether it is a modification to the existing performance
obligation.
The Group does not expect to have any contracts where the period
between the transfer of the promised goods or services to the
customer and payment by the customer exceeds one year. As a
consequence, the Group does not adjust its transaction price for
the time value of money.
A summary of the new accounting policies and the nature of the
changes to previous accounting policies in relation to the Group's
various goods and services are set out below.
Type of Nature, timing and satisfaction Nature of change in
product of performance obligations accounting policy
or service and significant payment terms
Revenue Revenue from sales of goods No material impact on
from the and equipment is recognised the adoption of IFRS
sale of on despatch unless the customer 15.
goods and specifically requests deferred
equipment delivery. For deliveries deferred
at the customer's request,
revenues are recognised when
the customer takes title to
the goods provided that it
is probable that delivery
will be made, the goods are
identified and ready for delivery
and usual payment terms apply.
------------------------------------- -------------------------------
Revenue Revenue from service contracts, No material impact on
from service where services are performed the adoption of IFRS
contracts by an indeterminate number 15.
of acts over a specified period
of time, is recognised on
a straight line basis over
the period of the contract.
------------------------------------- -------------------------------
Revenue Construction contracts comprise
from construction contracts specifically negotiated
contracts for the construction and delivery
of a combination of electronic
services and/or electronic
assets. A typical contract
identifies the consideration
applicable to each and milestones
are usually specified for
the provision of electronic
services.
Each contract is reviewed
to identify and assess distinct
performance obligations, and
the consideration applying
to each.
An expected loss on a contract
is recognised immediately
in the income statement.
------------------------------------- -------------------------------
Revenue deriving from the There is no material
provision of electronic assets impact on the adoption
is recognised at the point of IFRS 15.
in time that the assets are
provided.
------------------------------------- -------------------------------
Revenue deriving from the The impact of IFRS 15
provision of electronic services, on this element of contract
which is normally classified revenue is to defer
as non-recurring development revenue and profit until
expenditure, is recognised the completion of each
at the point that each development development service
service obligation has been obligation.
completed.
Under IAS 11 revenue
If at the end of a reporting was recognised in proportion
period the provision of this to the stage of completion
service is incomplete, costs of the contract, which
incurred are included in the was assessed by reference
balance sheet as Contract to the completion of
Assets. Costs include all each agreed milestone.
expenditure related directly
to specific projects and an Previously, contract
allocation of fixed and variable work in progress represented
overheads incurred in the the gross unbilled amount
Group's contract activities expected to be collected
based on normal operating from customers for contract
capacity. work performed to date.
It was measured at cost
plus any appropriate
profit recognised to
date less progress billing
and recognised losses.
Payments from customers,
to the extent that they
If at the end of a reporting exceed income recognised,
period the provision of this were included as payments
service is incomplete, payments on account within trade
received from customers on and other payables.
the achievement of milestones
are included in the Balance
Sheet as Contract Liabilities
until the provision of the
service is complete.
------------------------------------- -------------------------------
6 Administrative expenses
Legal and professional fees incurred in connection with the
acquisition of RTS Solutions (Holdings) Limited and RTS Solutions
(UK) Limited in 2018 totalled GBP77,000 and were charged to the
Condensed Consolidated Income Statement within administrative
expenses. The audited results as at and for the year ended 31
December 2017 include within administrative expenses, an
exceptional credit of GBP362,000 (Note 8).
7 Financial income and expenses
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2018 2017 2017
Recognised in profit or loss
Exceptional interest income
(Note 8) - - 340
Other exchange gains 4 - -
--------- --------- ------------
Financial income 4 - 340
--------- --------- ------------
Interest expense on financial
liabilities
at amortised cost 7 75 133
Exceptional foreign exchange
loss (Note 8) - - 211
Other exchange losses - 13 36
--------- --------- ------------
Financial expenses 7 88 380
--------- --------- ------------
8 Exceptional items
The 2017 audited results included two exceptional items.
Firstly, the Group accepted an offer to settle a historic matter,
which was unrelated to the current trading activities of the Group
and which arose over ten years ago. Under the settlement, 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 was also unrelated to the current
trading activities of the Group. During 2017 the Board decided that
the US subsidiary that had been dormant for several years should be
abandoned, and any future activities that the Group may undertake
in the US would not be conducted through the subsidiary. The
GBP211,000 deficit on the Group's currency translation reserve was
reclassified from equity to income and shown as an expense.
9 Taxation
No provision for taxation has been made in the Condensed
Consolidated Income Statement for the six months to 30 June 2018
based on the estimated tax provision required for the year ending
31 December 2018. No provision was required in the six months to 30
June 2017.
10 Acquisition of RTS Solutions (Holdings) Limited and RTS Solutions (UK) Limited
On 11 May 2018, the Group acquired the entire issued share
capital of RTS Solutions (Holdings) Limited which was the sole
shareholder of RTS Solutions (UK) Limited ("RTS") for GBP2.1
million, comprising GBP1.5 million for the business and GBP0.6
million for surplus cash. This consideration was settled by an
initial cash consideration of GBP1 million, funded by a 5 year bank
loan and GBP547,000 paid from internal cash reserves. Further
deferred consideration of GBP250,000 was paid in June 2018, funded
by an additional drawdown on the 5 year bank loan and a further
GBP55,000 was paid in July, funded from cash reserves. A final
payment of GBP250,000 is subject to RTS achieving certain financial
targets during the 12 months ending 31 March 2019. The Group
currently assesses the probability of this payment being made as
high.
During the period from acquisition to 30 June 2018, RTS
contributed GBP128,000 of revenue and GBP48,000 of profit to the
Group.
The provisional fair values of identifiable assets and
liabilities acquired, purchase consideration and goodwill are as
follows:
Provisional
fair value Provisional
Book value adjustments fair values
GBP000 GBP000 GBP000
Net assets acquired:
Intangible assets - 601 601
Property, plant & equipment 2 - 2
Inventory 18 - 18
Trade and other receivables 131 - 131
Cash and cash equivalents 628 - 628
Trade and other payables (166) - (166)
------------- ------------- --------------
613 601 1,214
------------- -------------
Goodwill 888
--------------
Total consideration 2,102
--------------
Cash flow:
Total consideration 2,102
Less deferred consideration (305)
--------------
Total consideration paid in the period 1,797
Cash included in undertaking acquired (628)
--------------
Net cash consideration in cash flow
statement 1,169
--------------
The above intangible assets and goodwill amounting to
GBP1,489,000 are included within Intangible Assets on the Condensed
Consolidated Statement of Financial Position. The Group also
capitalised development expenditure of GBP206,000 during the
period. Total amortisation of Group intangibles amounting to
GBP364,000 has been expensed during the period.
11 Interest-bearing loans and borrowings
This note provides information about the contractual terms of
the Group's interest-bearing loans and borrowings measured at
amortised cost.
Current liabilities
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
Bank loan 250 - -
Finance lease liabilities 15 7 15
---------- ---------- -------------
265 7 15
========== ========== =============
Non-current liabilities
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
Convertible loan notes - 1,485 -
Bank loan 1,000 - -
Finance lease liabilities 16 18 23
---------- ---------- -------------
1,016 1,503 23
========== ========== =============
On 11 May 2018 Santander UK plc provided the Company with a loan
facility of GBP1.25 million repayable by equal quarterly
instalments over 60 months. The interest rate is set at LIBOR plus
3.19% and the loan is secured by a fixed and floating charge over
the assets of the Group.
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 30 June 2018 and 31 December 2017
there were no outstanding loan notes (30 June 2017:
GBP1,484,804).
12 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 Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2018 2017 2017
Earnings
Profit for the year (GBP000) 514 503 1,237
========= ========= ============
Number of shares
Weighted average number of ordinary
shares ('000) 56,047 36,149 37,418
========= ========= ============
Diluted earnings per share
Diluted earnings per share assumes conversion of all potentially
dilutive ordinary shares, which arise from share options (and in
June 2017 convertible loan notes), 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 any interest on
convertible loan notes for the period.
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2018 2017 2017
Adjusted earnings
Profit for the year (GBP000) 514 576 1,368
========= ========= ============
Number of shares
Weighted average number of ordinary
shares ('000) 58,598 58,607 58,844
========= ========= ============
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SFUEFUFASEIU
(END) Dow Jones Newswires
September 20, 2018 02:01 ET (06:01 GMT)
Petards (LSE:PEG)
Historical Stock Chart
From Apr 2024 to May 2024
Petards (LSE:PEG)
Historical Stock Chart
From May 2023 to May 2024