REG - Petards Group PLC - Half-year Report
26/09/2023 07:00
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RNS Number : 5802N Petards Group PLC 26 September 2023
26 September 2023
Petards Group plc
("Petards", "the Group" or "the Company")
Interim results for the six months ended 30 June 2023
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 2023 (the "Period").
Key Highlights:
· Financial
o Revenue £4.4 million (H1 2022: £5.5 million)
o Gross profit margin 47.3% (H1 2022: 49.3%)
o Adjusted EBITDA loss of £59,000 (H1 2022: £606,000 profit)¹
o Post-tax loss £301,000 (H1 2022: £101,000 profit)
o Cash generated from operating activities £250,000 (H1 2022: £1,120,000)
o Net funds at 30 June 2023 £1.7 million (31 December 2022: net funds £1.7
million)²
o Diluted EPS loss of 0.53p (H1 2022: earnings of 0.17p)
· Operational
o Continued cash generative operating performance
o Rail and defence markets remained challenging but Rail tendering
activities were significantly higher in the Period than in recent years
o Recent new product launches with first orders already received which
include:
§ QRO's new mobile digital video surveillance product on QBOX platform
§ OWL IP ANPR system; and
§ RTS's Mobile digital solution
o Further QRO and Petards Rail products scheduled to launch in the coming
months and 2024
o Order book at 30 June 2023 of £4 million (31 December 2022: £4 million)
o The board is encouraged by the fact that vendors' value aspirations are
now showing a new realism and it continues to seek and review acquisition
opportunities.
¹ Earnings before financial income and expenses, tax, depreciation,
amortisation and share based payment charges
² Total net funds comprise cash and cash equivalents less interest-bearing
loans and borrowings (including lease liabilities)
Commenting on the current outlook, Raschid Abdullah, Chairman, said:
"The first half of 2023 proved to be challenging, and while the board is
confident of an improved performance in second half year, it now believes that
it is likely that the outturn for the year will be below current market
expectations.
The Group's businesses have good management teams with strategic plans in
place, to achieve growth in 2024 and 2025 with an ungeared balance sheet and
the financial resources to support. These include plans for the launch of
exciting new products over the coming months, many of which incorporate
artificial intelligence and data solutions with increased functionality. The
successful deployment of these new products and the improved prospects for
acquisitions mean the board remains confident for the future."
This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.
Contacts:
Petards Group plc www.petards.com (http://www.petards.com)
Raschid Abdullah, Chairman Mb: 07768 905004
( ) ( )
WH Ireland Limited, Nomad and Joint Broker www.whirelandcb (http://www.whirelandcb) .com
Mike Coe, Sarah Mather (Corporate Finance) Tel: 0207 220 1666
Fraser Marshall (Corporate Broking)
Hybridan LLP, Joint Broker www.hybridan.com (http://www.hybridan.com)
Claire Louise Noyce Tel: 020 3764 2341
claire.noyce@hybridan.com
( )
Chairman's statement
Petards Business Overview
Petards continues to focus upon the development, supply and maintenance of
technologies used in advanced security, surveillance and ruggedised electronic
applications, the principal 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
under the RTS brand.
· Traffic - Automatic Number Plate Recognition (ANPR) systems for lane
and speed enforcement and other applications, and UK Home Office approved
mobile speed enforcement systems, sold under the QRO and ProVida brands to UK
and overseas law enforcement agencies and commercial customers; and
· Defence - engineering services relating to electronic countermeasure
protection systems, threat simulation systems and mobile radio systems and
other defence related engineering equipment sold predominantly to the UK
Ministry of Defence (MOD).
Trading
Trading for the Period proved to be most challenging with good performances
from QRO and RTS being offset by disappointing performances from Rail and
Defence. The overall result for the Group was a loss after tax of £301,000
(H1 2022: £101,000 profit) on revenues of £4.4 million (H1 2022: £5.5
million).
Adjusted EBITDA for the Period was a loss of £59,000 (H1 2022: £606,000
profit). The Group generated net cash from operations of £0.3 million (H1
2022: £1.1 million), with cash balances closing at £1.8 million (31 December
2022: £2.0 million) and net funds of £1.7 million (31 December 2022: £1.7
million).
Operating Review
Of the Group's businesses, Rail found trading conditions challenging with only
one major UK order of note available to be won during the Period within its
sector, for which the train builder opted to remain with its incumbent
supplier rather than change to Petards Rail. The Rail division relies on the
central government budgets and policy at a time when government expenditure
has been constrained and delays in finalising the implementation of strategic
policies for Great British Rail (GBR). Slightly against this trend was RTS
where demand for its software for trackside working remained at a reasonable
level.
The level of activity within the Defence business weakened as the MOD's focus
and budget has been on supporting Ukraine in its war with Russia rather than
on the types of defence services provided by Petards.
QRO, whose law enforcement customers are also dependant on public expenditure
funding, started the year more slowly following its exceptional performance
last year. Nevertheless, it has continued to perform well, launching new
products and has a strong pipeline of near term order opportunities. It
continues to grow its market presence and has recently received a £0.2
million order from a new UK police force customer, further consolidating its
position in the UK ANPR market.
During the Period Petards Rail experienced a significant increase in new
business opportunities and has issued tenders of £16 million so far this
year. Nearly £6 million of this relates to opportunities for which customers
are presently indicating first deliveries in 2024 and these are either for
upgrades to our existing eyeTrain systems or where Petards has the advantage
of being the current supplier.
While there can be no certainty as to how many of these tenders will convert
into new business, we anticipate an improving situation, and the board
believes that 2024 will be a year of recovery in Petards Rail's financial
performance. This is against the background of our lower cost base which has
maintained our core operational capabilities whilst supporting our expanding
customer service level agreements.
Petards continues to invest in the new products for which there is customer
driven support. Recent new product launches for which initial orders have
already been received include those from both RTS and QRO. RTS has launched
its mobile solution which increases the efficiency of engineering teams by
securely providing real time digitised reporting of trackside workers
activities back to base.
In addition to QRO's launch in March 2023, of its mobile digital video
surveillance product running on its QBOX platform, QRO has added a new UK
designed OWL IP ANPR system to its product range. Recognising an increasing
desire for UK built cameras, QRO has developed a UK designed and built AI
Smart camera that it expects to launch during the fourth quarter of this year.
Working with customers, Petards Rail's new product developments include
initiatives designed to improve passenger train door safety and new AI ready
cameras. These developments are well advanced with planned launches in
early 2024.
Financial Review
Operating performance
Revenues for the Period totalled £4.4 million (H1 2022: £5.5 million), with
lower Defence revenues accounting for the majority of the reduction compared
with the first half of 2022.
The Group's overall gross profit margin remained robust, albeit that it was
down slightly at 47.3% (H1 2022: 49.3%) resulting from higher materials costs
at QRO due to inflation. These are kept under constant review by local
management and margin improvements are sought through re-design and new
product introductions.
Administrative expenses were broadly unchanged at £2.6 million (H1 2022:
£2.6 million).
Adjusted EBITDA for the Period was a loss of £59,000 (H1 2022: £606,000
profit), and with amortisation and depreciation charges reducing slightly
compared to the first half of 2022, this gave rise to an operating loss of
£489,000 (H1 2022: £125,000 profit).
After net financial expenses of £11,000 (H1 2022: £24,000) and a tax credit
of £199,000 (H1 2022: nil), arising from the recent confirmation of R&D
credits relating to the prior year, the Group's loss after tax for the Period
was £301,000 (H1 2022: £101,000 profit). The basic and diluted loss per
share was 0.53p (H1 2022: basic and fully diluted profit of 0.18p and 0.17p
respectively).
Cash, cash flow and net debt
The Group generated net cash from operating activities in the Period of £0.25
million (H1 2022: £1.1 million).
After repayment of debt and interest of £0.1 million, cash balances at 30
June 2023 were £1.8 million (31 December 2022: £2.0 million). Net funds at
30 June 2023, after deducting lease liabilities, were £1.7 million (31
December 2022: £1.7 million).
The Group presently has an undrawn £2.5 million overdraft facility which
along with existing cash resources, gives the Group sufficient capacity to
fund organic growth, product development and its working capital requirements.
During the Period the final instalments of the five year loan that funded the
acquisition of RTS Solutions in 2018 were made resulting in the Group becoming
ungeared with no bank debt.
Acquisitions
The board believes that significant growth for Petards will best be achieved
through a combination of organic revenue growth, improved operational
performance and selective acquisitions. As I reported in May this year,
several businesses have been reviewed which would complement the Group's
activities and support its growth. The board is encouraged by the fact that
vendors' value aspirations are now showing a new realism and it continues to
seek and review acquisition opportunities.
Outlook
The first half of 2023 proved to be challenging, and while the board is
confident of an improved performance in second half year, it now believes that
it is likely that the outturn for the year will be below current market
expectations.
The Group's businesses have good management teams with strategic plans in
place, to achieve growth in 2024 and 2025 with an ungeared balance sheet and
the financial resources to support. These include plans for the launch of
exciting new products over the coming months, many of which incorporate
artificial intelligence and data solutions with increased functionality. The
successful deployment of these new products and the improved prospects for
acquisitions mean the board remains confident for the future.
Raschid Abdullah
26 September 2023
( )
Condensed Consolidated Income Statement
for the six months ended 30 June 2023
Note Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2023 2022 2022
£000 £000 £000
Revenue 4,403 5,521 10,872
Cost of sales (2,320) (2,801) (5,330)
Gross profit 2,083 2,720 5,542
Administrative expenses (2,572) (2,601) (5,323)
Other income - 6 6
Adjusted EBITDA* (59) 606 1,161
Amortisation of intangibles (254) (313) (586)
Depreciation of property, plant and equipment (69) (77) (149)
Amortisation of right of use assets (107) (91) (200)
Share based payment charges - - (1)
Operating (loss)/profit (489) 125 225
Finance income 7 - 1
Financial expenses
(18) (24) (48)
(Loss)/profit before tax (500) 101 178
4 199 - 346
Income tax
(Loss)/profit for the period attributable to equity shareholders of the (301) 101 524
company
Other comprehensive income - - -
Total comprehensive (expense)/income for the period (301) 101 524
Earnings per ordinary share (pence)
Basic 8 (0.53) 0.18 0.93
Diluted 8 (0.53) 0.17 0.91
* Earnings before financial income and expenses, tax, depreciation,
amortisation and share based payment charges
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2023
Share Share Equity Retained Total
capital premium Treasury shares reserve earnings equity
£000 £000 £000 £000 £000 £000
At 1 January 2022 (audited) 575 1,624 14 5,612 7,722
(103)
Profit for the period - - - - 101 101
101
Total comprehensive income for the period - - - - 101
At 30 June 2022 (unaudited) 575 1,624 14 5,713 7,823
(103)
At 1 January 2022 (audited) 575 1,624 14 5,612 7,722
(103)
Profit for the year - - - - 524 524
Total comprehensive income for the year 524 524
- - - -
Equity settled share based payments - - - - 1 1
At 31 December 2022 (audited) 575 1,624 14 6,137 8,247
(103)
At 1 January 2023 (audited) 575 1,624 14 6,137 8,247
(103)
Loss for the period - - - - (301) (301)
Total comprehensive income for the period (301)
- - - - (301)
At 30 June 2023 (unaudited) 575 1,624 (103) 14 5,836 7,946
Condensed Consolidated Statement of Financial Position
at 30 June
2023
Unaudited Unaudited Audited
30 June 30 June 31 December 2022
2023 2022 £000
£000 £000
ASSETS
Non-current assets
Property, plant and equipment 604 656 593
Right of use assets 129 316 236
Intangible assets 3,740 3,720 3,829
Investments 5 5 5
Deferred tax assets 407 396 519
4,885 5,093 5,182
Current assets
Inventories 1,776 1,488 1,841
Trade and other receivables 5 2,201 2,285 2,502
Cash and cash equivalents 1,804 3,019 2,016
5,781 6,792 6,359
Total assets 10,666 11,885 11,541
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Share capital 575 575 575
Share premium 1,624 1,624 1,624
Treasury shares (103) (103) (103)
Equity reserve 14 14 14
Retained earnings 5,836 5,713 6,137
Total equity 7,946 7,823 8,247
Non-current liabilities
Interest-bearing loans and borrowings 7 78 120 105
78 120 105
Current liabilities
Interest-bearing loans and borrowings 7 53 382 234
Trade and other payables 6 2,589 3,560 2,955
2,642 3,942 3,189
Total liabilities 2,720 4,062 3,294
Total equity and liabilities 10,666 11,885 11,541
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2023
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2022
2023 2022
£000 £000 £000
Cash flows from operating activities
(Loss)/profit for the period (301) 101 524
Adjustments for:
Depreciation of property, plant and equipment 69 73 149
Amortisation of right of use assets 107 95 200
Amortisation of intangible assets 254 313 586
Profit on disposal of property, plant and equipment - - (15)
Financial income (7) - (1)
Financial expenses 18 24 48
Equity settled share-based payment expenses - - 1
Income tax charge/(credit) (199) - (346)
Operating cash flows before movement in
working capital (59) 606 1,146
Change in inventories 65 170 (182)
Change in trade and other receivables 431 (296) (334)
Change in trade and other payables (366) 640 (47)
Cash generated from operations 71 1,120 583
Tax received 179 - -
Net cash from operating activities 250 1,120 583
Cash flows from investing activities
Acquisition of property, plant and equipment (79) (43) (61)
Acquisition of intangible assets - - (93)
Sale of property, plant and equipment - - 20
Interest received 7 - -
Capitalised development expenditure (164) - (164)
Net cash outflow from investing activities (236) (43) (298)
Cash flows from financing activities
Bank loan repaid (125) (125) (250)
Interest paid on lease liabilities (9) (12) (24)
Interest paid on loans and borrowings (3) (7) (12)
Principal paid on lease liabilities (83) (185) (248)
Other interest and foreign exchange losses (6) (6) (12)
Net cash outflow from financing activities (226) (335) (546)
Net (decrease)/increase in cash and cash equivalents (212) 742 (261)
Total movement in cash and cash equivalents
in the period (212) 742 (261)
Cash and cash equivalents at 1 January 2,016 2,277 2,277
Cash and cash equivalents 1,804 3,019 2,016
Notes to the financial statements
1. Reporting entity
Petards Group plc (the 'Company') is incorporated and domiciled in England and
its shares are publicly traded on AIM, a market operated by the London Stock
Exchange. These condensed consolidated interim financial statements ('interim
financial statements') as at and for the six months ended 30 June 2023
comprise the Company and its subsidiaries (together referred to as the
'Group').
Copies of these interim financial 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 2021
('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 figures for the financial year ended 31 December 2022 set out
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.
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.
4. Taxation
The £199,000 credit in the Period predominantly relates to enhanced tax
deductions for R&D tax claims and losses surrendered for R&D tax
credits in respect of the prior year. These claims are recognised when receipt
is determined to be probable. No provision for taxation has been made in the
Condensed Consolidated Income Statement for the six months to 30 June 2023
based on the estimated tax provision required for the year ending 31 December
2023 (H1 2022: nil).
5. Trade and other receivables
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2022
2023 2022
£000 £000 £000
Trade receivables 1,160 1,974 1,957
Corporation tax recoverable 308 - 179
Other receivables and prepayments 733 311 366
2,201 2,285 2,502
6. Trade and other payables
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2022
2023 2022
£000 £000 £000
Trade payables 506 843 782
Contract liabilities 1,031 1,366 671
Non-trade payables and accrued 1,052 1,351 1,502
expenses
2,589 3,560 2,955
7. Interest-bearing loans and borrowings
Current liabilities
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2022
2023 2022
£000 £000 £000
Bank loan - 250 125
Lease liabilities 53 132 109
53 382 234
Non-current liabilities
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 2022 31 December 2022
2023
£000 £000 £000
Lease liabilities 78 120 105
78 120 105
( )
8. 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 Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2022
2023 2022
Earnings
(Loss)/profit for the period (£000) (301) 101 865
Number of shares
Weighted average number of ordinary shares ('000) 56,528 56,528 56,528
Diluted earnings per share
Diluted earnings per share assumes conversion of all potentially dilutive
ordinary shares, which arise from share options that would decrease earnings
per share or increase loss per share from continuing operations 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. Due to
the loss in the first half of 2023 the share options in issue had an
anti-dilutive effect.
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2022
2023 2022
Earnings
(Loss)/profit for the period (£000) (301) 101 524
Number of shares
Weighted average number of ordinary shares ('000) 57,829 57,832 57,830
( )
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