REG - Petards Group PLC - Interim Results
30/09/2024 07:00
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RNS Number : 1607G Petards Group PLC 30 September 2024
30 September 2024
Petards Group plc
("Petards", "the Group" or "the Company")
Interim results for the six months ended 30 June 2024
Petards Group plc (AIM: PEG), the AIM quoted developer of advanced security,
communications and surveillance systems, is pleased to report its interim
results for the six months ended 30 June 2024.
Key Highlights:
· Operational
o Completed £2.85 million acquisition of Affini Technology on 13 June
§ £2.52 million in cash and £0.33 million in Petards consideration shares
§ Cash element funded utilising Petards own cash and partial drawdown of its
working capital facility
§ acquired Affini balance sheet included cash of £0.46 million
o Strong sales of QRO's newly launched Harrier AI camera with a mobile
variant scheduled for launch later this year
o Continued cash generative operating performance
o Order book at 30 June 2024 of £7.1 million (31 Dec 2023: £2.4 million)
o Several significant contracts wins amounting to c£2.5 million announced
post June 2024 for Rail, QRO and Affini
· Financial
o Revenue £4.4 million (H1 2023: £4.4 million)
o Gross profit margin 49.0% (H1 2023: 47.3%)
o Adjusted EBITDA profit of £33,000 (H1 2023: £59,000 loss)¹
o Operating loss before exceptional items £466,000 (H1 2023: £489,000
loss)
o Exceptional acquisition costs incurred in period £412,000 (H1 2023:
£nil)
o Post-tax loss £928,000 (H1 2023: £301,000 loss)
o Cash generated from operating activities £438,000 (H1 2023: £250,000)
o Net debt at 30 June 2024 £680,000 (31 Dec 2023: net funds £1,241,000)²
o Diluted EPS loss of 1.63p (H1 2023: loss of 0.53p)
¹ Adjusted EBITDA is earnings before depreciation, amortisation, exceptional
items, acquisition costs and share based payments
² Net funds/(debt) comprise cash and cash equivalents less interest-bearing
loans and borrowings (excluding lease liabilities)
Commenting on the current outlook, Raschid Abdullah, Chairman, said:
"The successful acquisition of Affini and the improvement in the Group's order
book post June 2024 is encouraging. Order successes announced since June total
over £2.5 million across QRO, Affini and Rail.
"We are also pleased with Affini's encouraging start since becoming part of
the Group and expect it will be earnings accretive post funding costs in the
current year and beyond.
"Recent orders give the Board encouragement that, subject to other expected
orders being received in sufficient time, the second half of the year should
deliver a much-improved performance, albeit the result for the year may fall
short of current market expectations."
( )
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 905 004
Zeus Capital Limited, Nomad and Joint Broker
Mike Coe / Sarah Mather Tel: 020 3829 5000
Hybridan LLP, Joint Broker www.hybridan.com (http://www.hybridan.com)
Claire Louise Noyce Tel: 020 3764 2341
claire.noyce@hybridan.com (mailto:claire.noyce@hybridan.com)
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)
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Chairman's statement
Overview
I am pleased to report that while overall trading in the period to 30 June
2024 for Petards existing businesses remained similar to that for the first
half of 2023, before the close of the first half year, on 13 June 2024, the
Group had delivered upon a key strategic objective with the successful
completion of acquisition of Affini Technology ("Affini").
For the six months ended 30 June 2024, the Group returned a slight improvement
in adjusted EBITDA, recording a profit of £33,000 (June 2023: £59,000 loss)
on unchanged revenues of £4.4 million (June 2023: £4.4 million). Gross
profit margins were also up at 49.0% (June 2023: 47.3%). While Affini's
trading under the Group's ownership was only for the last two weeks of the
period, it did make a small positive contribution.
During the period, the Group generated cash from operations of £438,000 (June
2023: £250,000). After net cash outflows of £1,987,000 in respect of the
acquisition of Affini, the net decrease in the Group's cash was £1,921,000.
Net debt excluding lease liabilities at 30 June 2024 was £680,000 (31 Dec
2023: £1,241,000) which represented gearing of 10.3%.
Following its acquisition of Affini, Petards business is now focused upon the
development, supply and maintenance of technologies used in advanced security,
communications, 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.
· Defence - engineering services relating to electronic control
systems, threat simulation systems, mobile radio systems and other defence
related engineering equipment sold predominantly to the UK Ministry of Defence
(MOD).
· Communications - critical wireless communications solutions
provider to the transport, blue light, energy defence and construction
sectors. Affini's expertise covers the entire life cycle, enabling it to offer
an end-to-end service from strategy and design to maintenance and service
management.
Operating Review
Trading in the first six months was affected by delays in orders expected to
be received and delivered in part in the period. However, I am pleased to say
that post 30 June, a number of these orders for Rail and QRO have now been
received, although the customer delivery schedules for these now extend into
2025 rather than being fully deliverable in 2024.
While lower than expected, QRO revenues were five per cent up on the same
period in 2023 on slightly higher gross margins, but due to delays in forecast
orders, this was offset by lower revenues from the Group's Rail and Defence
activities. With the majority of revenues for Rail and Defence coming from
service, repair and support activities, the gross margin on those was also up
on those achieved in the first half of 2023.
QRO's new Harrier AI camera for roadside applications that was launched last
December has been well received by customers with strong sales being achieved
in the first half year. We are hopeful that the mobile version presently under
development, scheduled for launch later this year, will be similarly
successful.
The acquisition of Affini provides Petards with a fourth leg to its business,
that of critical wireless communications, and also adds a valuable stream of
recurring revenues for managed services and maintenance. In addition, while
Petards has had a long history of supplying communications equipment and
services to the UK MOD, Affini broadens the Group's reach for such services
into the transport, blue light, energy and construction sectors. Although it
is still early days, we also believe that the Group will benefit from some
complementary sales opportunities for both Affini and the rest of the Group in
due course.
As I reported in June, the nature of the transaction and the consideration
payable changed substantially during the course of negotiations, having until
its latter stages been deemed under AIM Rules to be a reverse take-over. While
this inevitably led to substantial exceptional acquisition costs being
incurred, the Board was very pleased to complete the transaction at a
valuation that did not constitute a reverse take-over, and without recourse to
a dilutive equity raise at a time when capital markets are challenging.
The consideration paid was £2.85 million, with £2.5 million payable in cash
and the balance in new Petards shares. The cash element was financed utilising
a combination of Petards own cash and by a partial draw down of its £2.5
million working capital facility. Also worthy of note is that at completion
Affini's balance sheet included £0.46 million of cash and its order book was
£5 million, having recently secured some significant project orders. Two
thirds of that order book related to recurring revenues.
Outlook
While the first half of 2024 has not been easy, the successful acquisition of
Affini and the improvement in the Group's order book post June 2024 is
encouraging. Order successes announced since June total over £2.5 million
across QRO, Affini and Rail.
Given the difficult market conditions in Rail in recent years, those orders
were particularly pleasing and had been anticipated for some time. While
there remain other prospects still to be awarded that fall into this category,
whether it is due to more certainty arising following the election or other
factors, it does feel as if rail customers are now starting to approve
projects that have been in abeyance for some time.
We are also pleased with Affini's encouraging start since becoming part of the
Group and expect it will be earnings accretive post funding costs in the
current year and beyond.
Recent orders received, along with others expected in the final quarter, give
the Board confidence that the second half of the year should deliver a
much-improved performance, albeit the result for the year may fall short of
current market expectations.
Raschid Abdullah
30 September 2024
Condensed Consolidated Income Statement
for the six months ended 30 June 2024
Note Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2024 2023 2023
£000 £000 £000
Revenue 4,415 4,403 9,424
Cost of sales (2,252) (2,320) (4,669)
Gross profit 2,163 2,083 4,755
Administrative expenses (3,041) (2,572) (5,940)
Adjusted EBITDA* 33 (59) 340
Amortisation of intangibles (297) (254) (523)
Depreciation of property, plant and equipment (108) (69) (161)
Amortisation of right of use assets (94) (107) (185)
Exceptional acquisition costs 9 (412) - (579)
Exceptional reorganisational costs - - (77)
Operating loss (878) (489) (1,185)
Finance income 28 7 33
Financial expenses
(78) (18) (46)
Loss before tax (928) (500) (1,198)
4 - 199 148
Income tax
Loss for the period attributable to equity shareholders of the company (928) (301) (1,050)
Other comprehensive income - - -
Total comprehensive expense for the period (928) (301) (1,050)
Loss per ordinary share (pence)
Basic 8 (1.63) (0.53) (1.86)
Diluted 8 (1.63) (0.53) (1.86)
* Earnings before financial income and expenses, tax, depreciation,
amortisation, exceptional items, acquisition costs and share based payment
charges
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2024
Share Share Equity Retained Total
capital premium Treasury shares reserve earnings equity
£000 £000 £000 £000 £000 £000
At 1 January 2023 (audited) 575 1,624 14 6,137 8,247
(103)
Loss for the period - - - - (301) (301)
(301)
Total comprehensive loss for the period - - - - (301)
At 30 June 2023 (unaudited) 575 1,624 14 5,836 7,946
(103)
At 1 January 2023 (audited) 575 1,624 14 6,137 8,247
(103)
Loss for the year - - - - (1,050) (1,050)
Total comprehensive loss for the year (1,050) (1,050)
- - - -
At 31 December 2023 (audited) 575 1,624 (103) 14 5,087 7,197
(103)
At 1 January 2024 (audited) 575 1,624 (103) 14 5,087 7,197
(103)
Share issue 42 284 - - - 326
Loss for the period - - - - (928) (928)
Total comprehensive income for the period 42 284 - - (928) (602)
- - (301)
At 30 June 2024 (unaudited) 617 1,908 (103) 14 4,159 6,595
Condensed Consolidated Statement of Financial Position
at 30 June 2024
Unaudited Unaudited Audited
30 June 30 June 31 December 2023
2024 2023
£000 £000 £000
ASSETS
Non-current assets
Property, plant and equipment 1,316 604 655
Right of use assets 894 129 691
Intangible assets 4,679 3,740 3,605
Investments 5 5 5
Deferred tax assets 729 407 470
7,623 4,885 5,426
Current assets
Inventories 1,766 1,776 1,735
Trade and other receivables 5 3,205 2,201 2,323
Cash and cash equivalents 199 1,804 1,241
5,170 5,781 5,299
Total assets 12,793 10,666 10,725
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Share capital 617 575 575
Share premium 1,908 1,624 1,624
Treasury shares (103) (103) (103)
Equity reserve 14 14 14
Retained earnings 4,159 5,836 5,087
Total equity 6,595 7,946 7,197
Non-current liabilities
Interest-bearing loans and borrowings 7 814 78 511
814 78 511
Current liabilities
Interest-bearing loans and borrowings 7 1,011 53 221
Trade and other payables 6 4,373 2,589 2,796
5,384 2,642 3,017
Total liabilities 6,198 2,720 3,528
Total equity and liabilities 12,793 10,666 10,725
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2024
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2023
2024 2023
£000 £000 £000
Cash flows from operating activities
Loss for the period (928) (301) (1,050)
Adjustments for:
Depreciation of property, plant and equipment 108 69 161
Amortisation of right of use assets 94 107 185
Amortisation of intangible assets 297 254 523
Profit on disposal of property, plant and equipment - - (4)
Financial income (28) (7) (33)
Financial expenses 78 18 46
Equity settled share-based payment expenses - - -
Income tax credit - (199) (148)
Operating cash flows before movement in
working capital (379) (59) (320)
Change in inventories (6) 65 106
Change in trade and other receivables 675 431 -
Change in trade and other payables 148 (366) (159)
Cash generated from operations 438 71 (373)
Tax received - 179 377
Net cash from operating activities 438 250 4
Cash flows from investing activities
Acquisition of property, plant and equipment (159) (79) (154)
Acquisition of intangible assets - - (30)
Sale of property, plant and equipment - - 15
Acquisition of subsidiary (2,449) - -
Cash with acquired subsidiary 462 - -
Interest received 28 7 33
Capitalised development expenditure (80) (164) (349)
Net cash outflow from investing activities (2,198) (236) (485)
Cash flows from financing activities
Bank loan repaid - (125) (125)
Interest paid on lease liabilities (30) (9) (32)
Interest paid on loans and borrowings (48) (3) (3)
Principal paid on lease liabilities (83) (83) (123)
Other interest and foreign exchange losses - (6) (11)
Net cash outflow from financing activities (161) (226) (294)
Net decrease in cash and cash equivalents (1,921) (212) (775)
Total movement in cash and cash equivalents
in the period (1,921) (212) (775)
Cash and cash equivalents at 1 January 1,241 2,016 2,016
Cash and cash equivalents (680) 1,804 1,241
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 2024
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 2023
('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 2023 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 auditor
and delivered to the Registrar of Companies. The report of the auditor 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
No provision for taxation has been made in the Condensed Consolidated Income
Statement for the six months to 30 June 2024 based on the estimated tax
provision required for the year ending 31 December 2024 (30 June 2023: nil).
5. Trade and other receivables
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2023
2024 2023
£000 £000 £000
Trade receivables 1,530 1,160 2,104
Corporation tax recoverable - 308 -
Other receivables and prepayments 1,675 733 219
3,205 2,201 2,323
6. Trade and other payables
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2023
2024 2023
£000 £000 £000
Trade payables 997 506 1,014
Contract liabilities 1,564 1,031 727
Non-trade payables and accrued expenses 1,812 1,052 1,055
4,373 2,589 2,796
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 2023
2024 2023
£000 £000 £000
Overdraft 879 - -
Lease liabilities 132 53 221
1,011 53 221
Non-current liabilities
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 2023 31 December 2023
2024
£000 £000 £000
Lease liabilities 814 78 511
814 78 511
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 2023
2024 2023
Earnings
Loss for the period (£000) (928) (301) (1,050)
Number of shares
Weighted average number of ordinary shares ('000) 56,897 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.
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December 2023
2024 2023
Earnings
Loss for the period (£000) (928) (301) (1,050)
Number of shares
Weighted average number of ordinary shares ('000) 56,897 57,839 56,528
9. Acquisition of Affini Technology Group Limited
On 13 June 2024, the Company completed the acquisition of 100% of the ordinary
shares of Affini Technology Group Limited ("ATGL") and therefore indirectly
its wholly owned subsidiary, Affini Technology Limited ("Affini") (together
"Affini Group"). Affini Group is a UK based critical communications solutions
provider to the transport, blue light, energy, defence and construction
sectors.
The following table summarises the provisional fair values of assets acquired,
and liabilities assumed at the acquisition date:
Provisional fair values
£000
Net assets acquired:
Property, plant & equipment 625
Right of use assets 289
Inventories 25
Trade and other receivables 1,558
Cash and cash equivalents 462
Trade and other payables (1,092)
Lease liabilities (304)
1,563
Goodwill 1,290
Total consideration 2,853
Directly related acquisition costs totalling £991,000 have been expensed to
the income statement of the Group, of which £412,000 was expensed in the six
months ended 30 June 2024 and £579,000 in the year ended 31 December 2023.
Management is still assessing the fair value of identifiable intangible assets
and will adjust the provisional fair values to recognise identified intangible
assets at year end, in line with paragraph 46 of IFRS 3. The recognition of
intangible assets identified, net of deferred tax, will have a corresponding
reduction in the value of goodwill recognised.
Purchase consideration: £000
Cash paid at completion 2,449
Retention cash 78
Equity consideration 326
Total consideration 2,853
The retention cash of £78,000 is payable as certain trade receivables are
paid by customers, of which £28,000 has been paid to the Sellers subsequent
to 30 June 2024.
The completion equity consideration of 4,176,810 ordinary shares in Petards
had a fair value of £326,000 based on the share price of Petards of 7p on the
date of the acquisition.
The net cash sum expended on the acquisition in the period ended 30 June 2024
was as follows:
Cash flow: £000
Cash paid as consideration on acquisition (2,449)
Cash included in undertaking acquired 462
Net cash outflow on acquisition (1,987)
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