13
June 2024
Petards Group
plc
("Petards", "the Group"
or "the Company")
Final results for the year ended 31
December 2023
Petards Group plc (AIM: PEG), the
AIM quoted developer of advanced security and surveillance systems,
is pleased to report its audited final results for the year ended
31 December 2023.
Key
Highlights:
· Financial
o Total revenues £9,424,000
(2022: £10,872,000)
o Gross profit margin 50.5%
(2022: 51.0%)
o Adjusted EBITDA* £340,000
(2022: £1,161,000)
o Operating loss before
exceptional items £529,000 (2022: £225,000 profit)
o Exceptional acquisition and
reorganisation costs incurred £656,000 (2022: £nil)
o Loss after tax £1,050,000
(2022: £524,000 profit)
o Basic and diluted loss per
share 1.86p (2022: EPS basic 0.93p and diluted 0.91p)
o Net cash from operating
activities pre-exceptionals £660,000 (2022: £583,000)
o Current net funds £1,241,000
(31 Dec 2022: £1,891,000)
· Operational
o Strong revenues related to
service and engineering support, spares and repairs reflected in
high gross margin performance
o Operating cost reductions in
Q4 2023 expected to realise savings of over £0.4 million in
2024
o Order book at 31 December
2023: £2.4 million (31 Dec 2022: £4.1
million)
o 2023 new products included
QRO's Harrier AI camera launched in December for which significant
orders have been received in 2024
o Significant progress made
towards delivering on the Group's acquisition strategy
*Adjusted
EBITDA comprises operating profit adjusted to remove the impact of
depreciation, amortisation, exceptional items, acquisition costs
and share based payments. A reconciliation of Adjusted EBITDA to
operating profit is included on the face of the consolidated income
statement.
Commenting on the current outlook, Raschid Abdullah, Chairman,
said:
"Group trading was
slightly ahead of budget for the first quarter but the
second quarter has so far shown some signs of weakness
relating to delays in respect of some orders anticipated to be
received and delivered in the period. The current expectation is
that most, if not all, of these orders will be received during the
course of the year, revenues from which will be determined by the
timing of order receipt.
The board believes that the actions
it has put in place and its continued focus on costs and gross
profit margin performance should help to mitigate
the impact on the adjusted EBITDA for the
year."
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
|
Raschid Abdullah,
Chairman
|
Mb: 07768 905004
|
|
|
WH
Ireland Limited, Nomad and Joint Broker
|
https://www.whirelandplc.com/capital-markets
|
Mike Coe, Sarah Mather
|
Tel: 020 7220 1666
|
|
|
Hybridan LLP, Joint Broker
|
www.hybridan.com
|
|
Claire Louise Noyce
|
Tel: 020 3764 2341
claire.noyce@hybridan.com
|
|
Chairman's statement
Introduction
I am pleased to report that following
a difficult first half year, as was anticipated, trading in the
second six months of 2023 showed a marked improvement. Having
recorded a small adjusted EBITDA loss of £0.06 million in its 2023
unaudited interim results, the Group returned adjusted EBITDA
profits in the second half year of £0.40 million on higher revenues
of £5.02 million at 53% gross profit margin.
Revenues for the full year ended 31
December 2023 were £9.42 million (2022: £10.87 million), with gross
profit margin of 50% (2022: 51%) and an adjusted EBITDA of £0.34
million (2022: £1.16 million). Margins were a little higher
than expected as a result of the focus on service and engineering
support, spares and repairs.
The board is pleased to announce
progress on its acquisition strategy and is presently in advanced
stages of finalising a potential strategic acquisition that is very
close to completion. We have been seeking targets that will
both significantly increase the Group's scale and revenues, while
complementing the Group's present operations. Provided it is
taken to a successful conclusion, the Board considers that this
acquisition will achieve all of those aims. As well as being
complementary to the Group's existing activities within Defence,
Traffic and Rail, it will broaden its reach into new sectors,
including those of Energy, Aviation and Buses. It is expected
that the consideration will comprise cash and the issue of a small
number of Petards ordinary shares to the vendors. The
Company expects to announce further details on the progress it has
made on its acquisition strategy shortly.
The nature of this transaction
changed substantially during the course of negotiations, it having
initially been deemed to be a reverse take-over under AIM Rules,
which resulted in significant professional costs being
incurred. Under IFRS, the element incurred during 2023, has
been expensed in the year as exceptional acquisition costs of £0.58
million. Pre-exceptional costs, the Group recorded a
loss after tax for the year of £0.39 million (2022: £0.52 million
profit). After exceptional costs the loss after tax was £1.05
million.
Net cash generated from operating
activities before exceptional acquisition costs was £0.58 million
(2022: £0.58 million). Frustratingly this cash generation
would have improved to £0.86 million had a customer's payment of
£0.26 million been received on its due date, rather than on 2
January 2024.
After cash flows relating to the
exceptional acquisition costs, investment and financing activities,
net cash at 31 December 2023 closed at £1.24 million (31 December
2022: £2.02 million) with no bank debt. The £0.58 million
acquisition costs and the later customer receipt of £0.26 million
were the main reasons for the year-on-year reduction in net
cash.
The Group retains a strong balance
sheet with net assets at 31 December 2023 of £7.20 million (31
December 2022: £8.25 million).
At a trading level, Traffic had
another very strong year, albeit down on its record performance in
2022 and has started 2024 strongly which has included first, but
significant, orders for QRO's new Harrier AI camera. Present
indications are that QRO is set for another good performance in
2024.
Rail markets remained challenging, in
response to which during the last quarter of 2023 management
implemented further reductions in operating costs at a one-off cost
of £0.08 million. Together with other actions taken these are
expected to deliver annual savings in excess of £0.4
million.
As has been widely reported, new
train orders for the UK rail network have been in abeyance since
2019 which has had a significant impact on Petards eyeTrain
business. Hence, while not having a direct benefit for Petards,
Department for Transport's (DfT) announcement in April of its
intention to place an order on Alstom for some additional trains is
welcome and the industry expects more significant orders to be
placed by DfT in 2025 and 2026. While these are more positive
signs for the UK rail industry, sales cycles continue to be
elongated. In response, Petards is now structured on the
basis that, while during 2024 it anticipates receiving orders for
smaller add-ons and for enhanced functionality of customers'
existing systems, the market for larger orders is unlikely to be
forthcoming until next year.
At the interim stage I reported that
the Defence business had 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. Since
then, there have been encouraging signs that this may be changing
with the UK Government's recent commitment to higher overall
defence spending to counter the increasing threats being seen
globally.
In addition, this April saw the
completion of the latest of eight Challenger 3 prototypes being
built by Rheinmetall BAE Systems Land (RBSL) for the British Army
that incorporate Petards built Vehicle Integrated Control System
(VICS) engine management systems. RBSL are contracted to upgrade
one hundred and forty eight Challenger 2 vehicles to Challenger 3's
that are expected to remain in service until at least 2040. As VICS
systems have been in operational service on Challenger 2, we
believe Petards is well placed to provide new systems and support
during the development, production and support phases of the
project.
Environmental Social Governance (ESG)
The board seeks to implement ESG
ideals and objectives in a manner which is appropriate to its size
and scale and to highlight in the Chairman's corporate governance
statement any areas where it is not fully compliant and the reasons
why. As Petards grows, the board will continue to assess and
adapt its approach and, where appropriate, make changes in a
proportionate and commercial manner.
Personnel
Petards and
its future success very much depends on the quality, skills,
experience, and dedication of its people.
On behalf
of the board, I would like to thank all staff and directors, past
and present, for their contribution, diligence and support
throughout the year.
The
Board
During the year we welcomed two new
independent non-executive directors to the board and saw the
retirement of another.
Earlier in the year the board was
informed by Terry Connolly of his intention to retire as a
non-executive director on 31 December 2023. Terry, who had
been appointed to the board in 2007, has been a valued member of
the board providing impartial advice as the senior independent
director, as well as serving as chairman of the audit and
remuneration committees. We thank him for his sound counsel and
wish him a long and happy retirement.
In February 2023, we welcomed John
Wakefield who was appointed to the board as an independent
non-executive director and chairman of the nominations
committee. John is an experienced quoted company director and
corporate adviser, having qualified as a solicitor with McKenna
& Co (now CMS), before a long career in corporate finance at
Williams de Broe, Rowan Dartington & Co. and latterly WH
Ireland. Following Terry's retirement John was appointed as
senior independent non-executive director and chairman of the
remuneration committee.
We were also pleased to announce the
appointment of Geraint Davies as an independent non-executive
director in November. Until shortly before his appointment Geraint
had been an audit partner at EY, having held senior leadership
roles in its practices in the UK, Channel Islands, and
Europe. He has a long history of providing corporate and
M&A counsel to growth companies and their boards and has
succeeded Terry as chairman of the audit committee.
Acquisitions
The board believes that the
successful completion of the strategic potential acquisition
referred to above will lead to the Group entering an exciting new
phase in its development. The board is confident that by
continuing to follow its strategy of improved operational
performance and selective acquisitions, it is well placed to
develop the Group in 2024 and beyond.
Outlook
Group trading was
slightly ahead of budget for the first quarter but the
second quarter has so far shown some signs of weakness
relating to delays in respect of some orders anticipated to be
received and delivered in the period. The current expectation is
that most, if not all, of these orders will be received during the
course of the year, revenues from which will be determined by the
timing of order receipt.
The board believes that the actions
it has put in place and its continued focus on costs and gross
profit margin performance should help to mitigate
the impact on the adjusted EBITDA for the
year.
Raschid
Abdullah
Chairman
12 June 2024
Strategic report
Business review
During 2023 Petards' operations
continued to
be focused upon the
development, supply and maintenance
of technologies used in advanced security, surveillance and
ruggedised 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;
● 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, mobile radio systems; and other defence related equipment
sold predominantly to the UK Ministry of Defence
("MOD").
Our objective is to develop and grow
our businesses on a sustainable basis through increasing
profitability and free cash flow predominantly for re-investment
throughout the Group and through the fair treatment, ingenuity and
efforts of our primary asset, our people, working ethically and in
close partnership with our customers, suppliers and stakeholders
with the objective of delivering above average returns for our
investors.
Operating review
Following a difficult first half of
the year where the Rail business in particular found trading
conditions challenging, the second half saw
an improved performance for the Group.
Full year revenue was £9,424,000
(2022: £10,872,000). Revenue for the second half of the year was
£5,021,000 (H1 2023: £4,403,000) driven by a strong performance
from licencing, maintenance, spares, repairs and engineering
support activities within Rail, which grew 35% year on year. These
largely recurring revenue streams helped generate an improved gross
margin of 53% for the Group in H2 (H1 2023: 47%), giving an overall
gross margin for the year of 50% (2022: 51%).
Postponements concerning the
transfer of contracts to Great British Railways impacted the wider
UK rail market resulting in "maintain and operate" contracts being
let by the Department for Transport throughout the year. This
affected both the acquisition of new clients and orders for
eyeTrain systems. The UK rail market accounts for a
significant proportion of the Group's activities and while market
conditions remain difficult, we believe Petards Rail has positioned
itself with a more competitive offering without sacrificing the
quality of products, services or customer support and is well
positioned for growth once the new contracts are in
place.
Elsewhere in Rail, these challenging
market conditions restricted RTS in its ambitions to grow its
customer base for its software solutions such as Ops Suite and
Asset Management Services. During the year RTS
successfully secured the renewal of all its existing software
licence and maintenance contracts that came up for renewal in the
period. It also progressed the development of its mobile solution
for its existing software offering which is currently being
trialled.
Strategic report (continued)
Operating review (continued)
Our Defence activities contributed
slightly lower revenues than the prior year, though still made a
very good contribution to the overall Group's results. As part of
the wider IT environment improvement project within the business,
all IP drawings have been digitised during the year providing
faster retrieval and easier access to data. The Group has a long
history as a supplier to the MOD, DE&S and UK prime defence
contractors and it continued to operate as a provider of specialist
engineering services and value-added reseller to those
customers.
In the final quarter of 2023, a
reorganisation programme was undertaken at its Rail businesses
affecting certain management and back office roles which will see
overhead savings of over £0.4 million realised in 2024. An
exceptional cost of £77,000 was recognised in the year in respect
of this programme.
Within our Rail and Defence
business, investment in a new ERP system and network infrastructure
went live during the year. The system brings productivity
efficiencies through automation and enhanced data security and
backup.
QRO again delivered strong results
for the year though revenue was slightly down on the previous year.
The QRO brand continues to increase market share and has become one
of the UK's leading suppliers of ANPR solutions.
The Harrier AI ANPR camera was
launched at the national ANPR conference in November 2023. It is
designed and built by QRO in the UK and delivers real-time
analytics ANPR software-enabled data processing. It is
powered by machine learning algorithms, making it adaptive and
responsive to ever-changing road conditions. The camera has already
received significant orders for the current year and it is expected
that the Harrier camera will help drive QRO's growth in
2024.
Financial review
Operating
performance
Group revenues were lower at
£9,424,000 (2022: £10,872,000), largely because of the continued
delays in order placement for new-build and refurbishment train
programmes experienced in the transitioning to the new
organisational structure and operating model of the UK's railways
referred to above.
Gross profit margin remained strong
at 50% (2022: 51%) driven by the higher levels of recurring
licencing, maintenance, and support revenues across all of the
Group's activities.
Administrative expenses before
exceptional costs of £656,000 (2022: £nil) were £5,284,000 (2022:
£5,322,000). Reorganisation costs of £77,000 (2022: £nil)
were incurred in late 2023 to better align the cost base with the
lower revenue levels being experienced. Savings relating to
these costs will be realised in 2024.
Earnings before interest, tax,
depreciation, amortisation, exceptional items, acquisition costs
and share based payment charges ("adjusted EBITDA"), reduced from
£1,161,000 in 2022 to £340,000 in 2023.
Net financial expenses reduced to
£13,000 (2022: £47,000) due to reduced interest cost on lease
liabilities and lower interest on the Group's CBILs term loan as
that loan was repaid in full during the year.
The tax credit of £148,000 (2022:
£346,000 credit) comprised net credits of £184,000 in respect of
prior years and a net charge of £36,000 in respect of the current
year. The £184,000 prior year credit largely arose from SME
R&D reliefs relating to 2022 that were claimed and recognised
in 2023. Claims for 2023 R&D activities will be made and
recognised in 2024.
The overall result for the Group for
the year was a loss after tax of £1,050,000 (2022: profit of
£524,000) and represented a diluted loss per share of 1.86p (2022:
profit per share 0.91p).
Research and
development
The Group continued to invest in its
internally developed software and hardware solutions.
That investment totalled £373,000 in 2023
amounting to 4.0% of revenues (2022: £247,000), of which £349,000
was capitalised (2022: £164,000). The capitalised development costs
related to the new Harrier AI camera in our traffic business and
the ongoing development of the Group's rail
products.
Cash, cash flow and net
debt
The Group recorded a cash generative
operating performance with net cash inflows from operating
activities before exceptional costs totalling £660,000 (2022:
£583,000).
Capitalised development expenditure
and IT expenditure accounted for the majority of the £485,000 net
cash outflows from investing activities (2022: £298,000). The
net financing outflows of £294,000 (2022: £546,000) related to
repayments of the term loan and the principal repaid on lease
liabilities.
At 31 December 2023 the Group's cash
and cash equivalents were £1,241,000 (2022: £2,016,000).
During the year the lease at the main operating site expired and a
new lease has been put in place which has given rise to the
increase in the IFRS 16 lease liabilities. Consequently, net funds
at 31 December 2023 were £509,000 (2022: £1,677,000) after
deducting IFRS 16 lease liabilities of £732,000 (2022:
£214,000).
Post year end the Group has entered
into a new £2.5 million overdraft facility that may be utilised for
the Group's working capital purposes, and any other purpose which
its bankers may approve, on an "evergreen" basis. The Group's
previous 3-year £2.5 million overdraft facility was undrawn during
2023.
Osman
Abdullah
Group Chief Executive
Consolidated income
statement
for the year ended 31 December 2023
|
Note
|
2023
|
2022
|
|
|
£000
|
£000
|
|
|
|
|
Revenue
|
2
|
9,424
|
10,872
|
Cost of sales
|
|
(4,669)
|
(5,330)
|
|
|
|
|
Gross
profit
|
|
4,755
|
5,542
|
Administrative expenses
|
|
(5,940)
|
(5,322)
|
Other income
|
|
-
|
6
|
|
|
|
|
|
|
|
|
Adjusted EBITDA*
|
|
340
|
1,161
|
|
|
|
|
Amortisation of
intangibles
|
|
(523)
|
(586)
|
Depreciation of property, plant and
equipment
|
|
(161)
|
(149)
|
Amortisation of right of use
assets
|
|
(185)
|
(200)
|
Exceptional acquisition
costs
|
3
|
(579)
|
-
|
Exceptional reorganisation
costs
|
3
|
(77)
|
-
|
Share based payment
charges
|
|
-
|
(1)
|
|
|
|
|
Operating (loss)/profit
|
|
(1,185)
|
225
|
Finance
income
|
|
33
|
1
|
Finance
expenses
|
4
|
(46)
|
(48)
|
|
|
|
|
(Loss)/profit
before tax
|
|
(1,198)
|
178
|
Income tax
|
5
|
148
|
346
|
|
|
|
|
(Loss)/profit
for the year attributable to equity shareholders
of the
parent
|
|
(1,050)
|
524
|
|
|
|
|
Other
comprehensive income
|
|
-
|
-
|
|
|
|
|
Total
comprehensive (loss)/income for the year
|
|
(1,050)
|
524
|
|
|
|
|
(Loss)/profit per ordinary
share (pence)
|
|
|
|
Basic
|
6
|
(1.86)
|
0.93
|
Diluted
|
6
|
(1.86)
|
0.91
|
* Earnings before financial income
and expenses, tax, depreciation, amortisation, exceptional items,
acquisition costs and share based payment charges. See Alternative
Performance Measures Glossary at the end of this
announcement.
Statements of changes in
equity
for year ended 31 December
2023
|
|
Share
capital
|
Share
premium
|
Treasury
shares
|
Equity
reserve
|
Retained
earnings
|
Total
equity
|
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
|
|
At 1 January
2022
|
575
|
1,624
|
(103)
|
14
|
5,612
|
7,722
|
|
|
|
|
|
|
|
|
|
Profit for the
year
|
-
|
-
|
-
|
-
|
524
|
524
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
-
|
524
|
524
|
|
|
|
|
|
|
|
|
|
Contributions by and distributions to
owners
|
|
|
|
|
|
|
|
Equity-settled share
based payments
|
-
|
-
|
-
|
-
|
1
|
1
|
|
|
|
|
|
|
|
|
|
Total contributions by and distributions
to owners
|
-
|
-
|
-
|
-
|
1
|
1
|
|
|
|
|
|
|
|
|
|
At 31 December 2022
|
575
|
1,624
|
(103)
|
14
|
6,137
|
8,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January
2023
|
575
|
1,624
|
(103)
|
14
|
6,137
|
8,247
|
|
|
|
|
|
|
|
|
|
Loss for the
year
|
-
|
-
|
-
|
-
|
(1,050)
|
(1,050)
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
-
|
(1,050)
|
(1,050)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
575
|
1,624
|
(103)
|
14
|
5,087
|
7,197
|
|
|
|
|
|
|
|
Consolidated balance sheet
at 31 December 2023
|
|
Note
|
|
|
|
|
|
|
2023
|
2022
|
|
|
|
|
£000
|
£000
|
|
|
ASSETS
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
Property, plant and equipment
|
|
655
|
593
|
|
|
Right of use assets
|
|
691
|
236
|
|
|
Intangible assets
|
|
3,605
|
3,829
|
|
|
Investments in subsidiary
undertakings
|
|
5
|
5
|
|
|
Deferred tax assets
|
7
|
470
|
519
|
|
|
|
|
|
|
|
|
|
|
5,426
|
5,182
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Inventories
|
|
1,735
|
1,841
|
|
|
Trade and other receivables
|
|
2,323
|
2,502
|
|
|
Cash and cash equivalents
|
|
1,241
|
2,016
|
|
|
|
|
|
|
|
|
|
|
5,299
|
6,359
|
|
|
|
|
|
|
|
|
Total
assets
|
|
10,725
|
11,541
|
|
|
|
|
|
|
|
|
EQUITY AND
LIABILITIES
|
|
|
|
|
|
Equity attributable to equity holders of
the parent
|
|
|
|
|
Share capital
|
9
|
575
|
575
|
|
|
Share premium
|
|
1,624
|
1,624
|
|
|
Treasury shares
|
|
(103)
|
(103)
|
|
|
Equity reserve
|
|
14
|
14
|
|
|
Retained earnings
|
|
5,087
|
6,137
|
|
|
|
|
|
|
|
|
Total
equity
|
|
7,197
|
8,247
|
|
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
|
Interest-bearing loans and
borrowings
|
8
|
511
|
105
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Interest-bearing loans and
borrowings
|
8
|
221
|
234
|
|
|
Trade and other payables
|
|
2,796
|
2,955
|
|
|
|
|
|
|
|
|
|
|
3,017
|
3,189
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
3,528
|
3,294
|
|
|
|
|
|
|
|
|
Total equity
and liabilities
|
|
10,725
|
11,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of cash flows
for year ended 31 December 2023
|
Note
|
|
|
|
|
|
2023
|
2022
|
|
|
|
£000
|
£000
|
|
Cash flows
from operating activities
|
|
|
|
|
Profit/(loss) for the year
|
|
(1,050)
|
524
|
|
Adjustments
for:
|
|
|
|
|
Depreciation of property, plant and
equipment
|
|
161
|
149
|
|
Amortisation of right of use assets
|
|
185
|
200
|
|
Amortisation of intangible assets
|
|
523
|
586
|
|
Profit on disposal of property, plant and
equipment
|
|
(4)
|
(15)
|
|
Profit on disposal of right of use
assets
|
|
-
|
-
|
|
Financial income
|
|
(33)
|
(1)
|
|
Financial expenses
|
4
|
46
|
48
|
|
Equity settled share-based payment
expenses
|
|
-
|
1
|
|
Income tax credit
|
5
|
(148)
|
(346)
|
|
|
|
|
|
|
Operating cash
flows before movement in
working
capital
|
|
(320)
|
1,146
|
|
Change in inventories
|
|
106
|
(182)
|
|
Change in trade and other
receivables
|
|
-
|
(334)
|
|
Change in trade and other payables
|
|
(159)
|
(47)
|
|
|
|
|
|
|
Cash generated
from operations
|
|
(373)
|
583
|
|
Tax received
|
|
377
|
-
|
|
|
|
|
|
|
Net cash from operating
activities
|
|
4
|
583
|
|
|
|
|
|
|
Cash flows
from investing activities
|
|
|
|
|
Acquisition of property, plant and
equipment
|
|
(154)
|
(61)
|
|
Acquisition of intangible
assets
|
|
(30)
|
(93)
|
|
Sale of right of use assets
|
|
15
|
20
|
|
Sale of property plant and equipment
|
|
33
|
|
|
Capitalised development expenditure
|
|
(349)
|
(164)
|
|
|
|
|
|
|
Net cash outflow from investing
activities
|
|
(485)
|
(298)
|
|
|
|
|
|
|
Cash flows
from financing activities
|
|
|
|
|
Bank loan repaid
|
8
|
(125)
|
(250)
|
|
Interest paid on loans and
borrowings
|
8
|
(3)
|
(12)
|
|
Principal paid on lease
liabilities
|
8
|
(123)
|
(248)
|
|
Interest paid on lease liabilities
|
8
|
(32)
|
(24)
|
|
Other interest and foreign exchange
|
4
|
(11)
|
(12)
|
|
|
|
|
|
|
Net cash outflow from financing
activities
|
|
(294)
|
(546)
|
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
|
(775)
|
(261)
|
|
|
|
|
|
|
Total movement in cash
and cash equivalents in the year
|
(775)
|
(261)
|
|
Cash and cash equivalents at 1
January
|
|
2,016
|
2,277
|
|
|
|
|
|
|
Cash and cash
equivalents at 31 December
|
|
1,241
|
2,016
|
|
|
|
|
|
|
Notes
1
Basis of preparation
The financial information set out in this
statement has been prepared in accordance with the recognition and
measurement principles of International Financial Reporting
Standards ("IFRSs"), IFRIC interpretations and the Companies Act
2006 applicable to companies reporting under IFRS. It does not
include all the information required for full annual
accounts.
The financial information does not constitute
the Company's statutory accounts for the years ended 31 December
2023 or 31 December 2022 but is derived from those accounts.
Statutory accounts for 2022 have been delivered to the Registrar of
Companies and those for 2023 will be delivered in due course. The
Auditor has reported on those accounts; his reports (i) were
unqualified, (ii) did not include a reference to any matters to
which the Auditor drew attention by way of emphasis without
qualifying his report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
Going
concern
Petards is a critical supplier to many of its
customers supporting the UK's police and armed forces as well as
the safe running of the railways. The main risks to the
Group's cash flows identified are firstly, that customers may delay
or re-schedule deliveries for orders already in the Group's order
book and secondly that, in the short term, contract awards that the
Group was expecting to secure for revenue in 2024 may be
delayed. By their nature these risks are difficult for the
Group to directly influence or control, but by keeping in close
contact with our customers we are seeking to ensure that we are
well-informed about their plans and prepared to secure contracts
awards as and when the opportunities arise. The Group is fortunate
that its customer base comprises blue chip companies, the UK
Government and its agencies and its exposure to credit risk is
low.
The Group currently meets its day to day
working capital requirements through its own cash resources and its
available banking facilities. Post year end the Group has entered
in a new £2.5 million overdraft facility that may be utilised for
the Group's working capital purposes, and any other purpose which
its bankers may approve, on an "evergreen" basis. The previous
3-year £2.5 million overdraft facility was undrawn both during 2023
and in 2024 until its expiry.
The Group has prepared working capital
forecasts based on the 2024 budget updated for material known
changes since it was prepared. The time period reviewed is to
31 December 2025. At 31 May 2024 the Group had cash balances of
£1.8 million and its £2.5 million overdraft facility was
undrawn. The forecasts also consider the potential impact of
contract awards that the Group is expecting to secure for revenue
during the period that may be delayed or cancelled.
The Board has concluded, after reviewing the
work performed and detailed above that there is a reasonable
expectation that the Group has adequate resources to continue in
operation until at least 30 June 2025. Accordingly, they have
adopted the going concern basis in preparing these financial
statements.
2
Segmental information
The analysis by geographic segment below is
presented in accordance with IFRS 8 on the basis of those segments
whose operating results are regularly reviewed by the Board of
Directors (the Chief Operating Decision Maker as defined by IFRS 8)
to make strategic decisions, to monitor performance and allocate
resources.
The Board regularly reviews the Group's
performance and balance sheet position for its entire operations as
a whole. The Board receives financial information, assesses
performance and makes resource allocation decisions for its UK
based business as a whole, therefore the directors consider the
Group to have only one segment in terms of products and services,
being the development, supply and maintenance of technologies used
in advanced security, surveillance and ruggedized electronic
applications.
As the Board of Directors receives revenue,
Adjusted EBITDA and operating profit on the same basis as set out
in the consolidated income statement no further reconciliation or
disclosure is considered necessary.
Revenue by geographical destination can be
analysed as follows:
|
2023
|
2022
|
|
£000
|
£000
|
United Kingdom
|
9,187
|
10,524
|
Continental Europe
|
114
|
276
|
Rest of World
|
123
|
72
|
|
|
|
|
9,424
|
10,872
|
|
|
|
The timing of revenue recognition can
be analysed as follows:
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Products and services transferred at
a point in time
|
7,950
|
6,990
|
Products and services transferred over
time
|
1,474
|
3,882
|
|
|
|
|
9,424
|
10,872
|
|
|
|
3
Exceptional costs
During the year, exceptional costs totalling
£656,000 were incurred (2022: nil) in respect of corporate activity
and reorganisation costs. £579,000 related to legal and
professional costs incurred in respect of a potential acquisition,
which at the time these financial statements were approved by the
Board of Directors, was in the advanced stages of being
finalised. Costs of £77,000 were concerning the
reorganisation of the Group's Rail business.
4
Finance income and expenses
|
2023
|
2022
|
|
£000
|
£000
|
Recognised in
profit or loss
|
|
|
Interest on bank deposits
|
20
|
1
|
Other Interest
|
13
|
-
|
|
|
|
Finance income
|
33
|
1
|
|
|
|
|
|
|
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Interest expense on financial liabilities at
amortised cost
|
3
|
6
|
Interest expense on lease
liabilities
|
32
|
24
|
Other interest payable
|
-
|
6
|
Other exchange loss
|
11
|
12
|
|
|
|
Finance expenses
|
46
|
48
|
|
|
|
|
|
|
5
Taxation
Recognised in
the income statement
|
2023
|
2023
|
2022
|
2022
|
|
£000
|
£000
|
£000
|
£000
|
Current tax
(credit)/expense
|
|
|
|
|
Current tax charge
|
29
|
|
116
|
|
Adjustments in respect of prior
years
|
(312)
|
|
(224)
|
|
|
|
|
|
|
Total current tax
|
|
(283)
|
|
(108)
|
|
|
|
|
|
Deferred tax
(credit)/expense
|
|
|
|
|
Origination and reversal of temporary
differences
|
(7)
|
|
(144)
|
|
Derecognition of previously recognised
losses
|
20
|
|
-
|
|
Recognition of previously unrecognised
losses
|
(57)
|
|
-
|
|
Utilisation of recognised tax losses
|
51
|
|
27
|
|
Recognition of tax losses
|
-
|
|
(65)
|
|
Adjustment in respect of prior years
|
128
|
|
(56)
|
|
Effect of change in rate of corporation
tax
|
-
|
|
-
|
|
|
|
|
|
|
Total deferred tax
|
|
135
|
|
(238)
|
|
|
|
|
|
Total tax credit in income statement
|
|
(148)
|
|
(346)
|
|
|
|
|
|
The £312,000 credit to current tax in respect
of prior years predominantly relates to enhanced tax deductions for
R&D tax claims and losses surrendered for R&D tax credits
in respect of prior years. These claims are recognised when receipt
is determined to be probable.
Reconciliation
of effective tax rate
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Profit before tax
|
(1,198)
|
178
|
|
|
|
Tax using the UK corporation tax rate of 23.5%
(2022: 19%)
|
(282)
|
34
|
Items not deductible for tax
purposes
|
136
|
|
Non-deductible expenses
|
-
|
8
|
Non-taxable income
|
-
|
(1)
|
Utilisation of previously unrecognised tax
losses
|
(63)
|
(64)
|
Adjustments in respect of prior
years
|
(185)
|
(280)
|
Effect of differential tax rate for deferred
tax
|
5
|
(43)
|
Effect of tax losses generated in the year not
recognised
|
224
|
-
|
De-recognition of previously recognised
losses
|
20
|
-
|
Change in unrecognised temporary
differences
|
(3)
|
-
|
|
|
|
Total tax credit
|
(148)
|
(346)
|
|
|
|
Factors that may affect
future current and total tax charges
The main rate of UK corporation tax,
which was 19% at the start of the year, changed to 25% with effect
from 1 April 2023.
6
Earnings per share
Basic
earnings per share
Basic earnings per share is calculated by
dividing the profit/(loss) for the year attributable to the
shareholders by the weighted average number of shares in
issue.
|
2023
|
2022
|
Earnings
|
|
|
Profit for the year (£000)
|
(1,050)
|
524
|
|
|
|
Number of
shares
|
|
|
Weighted average number of ordinary shares
('000)
|
56,528
|
56,528
|
|
|
|
Basic profit
per share (pence)
|
(1.86)
|
0.93
|
|
|
|
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 year attributable to the shareholders by
the assumed weighted average number of shares in issue.
|
2023
|
2022
|
Adjusted
earnings
|
|
|
Profit for the year (£000)
|
(1,050)
|
524
|
|
|
|
Number of
shares
|
|
|
Weighted average number of ordinary shares
('000)
|
56,528
|
57,830
|
|
|
|
Diluted profit
per share (pence)
|
(1.86)
|
0.91
|
|
|
|
|
|
|
7
Deferred tax assets and liabilities
Recognised deferred tax assets and
liabilities are attributable to the following:
|
Assets
|
Liabilities
|
Net
|
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
Property, plant and equipment
|
-
|
-
|
(114)
|
(66)
|
(114)
|
(66)
|
Provisions
|
6
|
7
|
-
|
-
|
6
|
7
|
Tax value of loss carry-forwards
|
964
|
931
|
-
|
-
|
964
|
931
|
Intangible fixed assets
|
-
|
-
|
(386)
|
(353)
|
(386)
|
(353)
|
|
|
|
|
|
|
|
Tax assets/(liabilities)
|
970
|
938
|
(500)
|
(419)
|
470
|
519
|
Offset of tax
|
(500)
|
(419)
|
500
|
419
|
-
|
-
|
|
|
|
|
|
|
|
Net tax assets
|
470
|
519
|
-
|
-
|
470
|
519
|
|
|
|
|
|
|
|
Unrecognised deferred tax assets
are attributable to the following:
|
|
|
Assets
|
Assets
|
|
|
|
2023
|
2022
|
|
|
|
£000
|
£000
|
|
|
|
|
|
Property, plant and equipment
|
|
|
272
|
306
|
Provisions
|
|
|
-
|
2
|
Tax value of loss carry-forwards
|
|
|
2,009
|
1,829
|
|
|
|
|
|
Tax assets
|
|
|
2,281
|
2,137
|
|
|
|
|
|
There is no expiry date on the above
unrecognised deferred tax assets.
Movement in
deferred tax during the year
|
|
|
1 January
2023
|
Recognised
in income
|
31 December
2023
|
|
|
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(66)
|
(48)
|
(114)
|
Provisions
|
|
|
7
|
(1)
|
6
|
Tax value of loss carry-forwards
|
|
|
931
|
33
|
964
|
Intangible fixed assets
|
|
|
(353)
|
(33)
|
(386)
|
|
|
|
|
|
|
|
|
|
519
|
(49)
|
470
|
|
|
|
|
|
|
Movement in
deferred tax during the prior year
|
|
|
1 January
2022
|
Recognised
in income
|
31
December
2022
|
|
|
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(81)
|
15
|
(66)
|
Provisions
|
|
|
6
|
1
|
7
|
Tax value of loss carry-forwards
|
|
|
926
|
5
|
931
|
Intangible fixed assets
|
|
|
(455)
|
102
|
(353)
|
|
|
|
|
|
|
|
|
|
396
|
123
|
519
|
|
|
|
|
|
|
|
|
|
|
|
|
8
Interest-bearing loans and borrowings
This note provides information about the
contractual terms of the Group's interest-bearing loans and
borrowings, which are measured at amortised cost.
|
2023
|
2022
|
|
£000
|
£000
|
Non-current
liabilities
|
|
|
Lease liabilities
|
511
|
105
|
|
|
|
Current
liabilities
|
|
|
Bank loan
|
-
|
125
|
Current portion of lease liabilities
|
221
|
109
|
|
|
|
|
221
|
234
|
|
|
|
The interest rate on the bank loan that was
fully repaid in the year was set at The Bank of England bank rate
plus 3.25% and the loan was secured by a fixed and floating charge
over the assets of the Group. During the year the Group had
available an undrawn 3-year £2.5 million overdraft facility.
A new £2.5 million overdraft facility was entered into in May 2024
on an "evergreen" basis.
Changes in
liabilities from financing activities
|
|
Non-current loans and
borrowings
|
Current
loans and borrowings
|
Lease
liabilities
|
|
|
£000
|
£000
|
£000
|
|
|
|
|
|
Balance at 1 January 2023
|
|
-
|
125
|
214
|
Cash
items:
|
|
|
|
|
Repayment of bank loan and interest
|
|
-
|
(128)
|
-
|
Payment of lease liabilities
|
|
-
|
-
|
(155)
|
Non-cash
items:
|
|
|
|
|
New lease liabilities
|
|
-
|
-
|
641
|
Interest expense
|
|
-
|
3
|
32
|
|
|
|
|
|
Balance at 31
December 2023
|
|
-
|
-
|
732
|
|
|
|
|
|
|
|
Non-current loans and
borrowings
|
Current
loans and borrowings
|
Lease
liabilities
|
|
|
£000
|
£000
|
£000
|
|
|
|
|
|
Balance at 1 January 2022
|
|
125
|
250
|
392
|
Cash
items:
|
|
|
|
|
Repayment of bank loan and interest
|
|
-
|
(256)
|
-
|
Payment of lease liabilities
|
|
-
|
-
|
(272)
|
Non-cash
items:
|
|
|
|
|
New lease liabilities
|
|
-
|
-
|
70
|
Interest expense
|
|
-
|
6
|
24
|
Re-classified from current to non-current in
year
|
|
(125)
|
125
|
-
|
|
|
|
|
|
Balance at 31 December 2022
|
|
-
|
125
|
214
|
|
|
|
|
|
9
Share capital
|
|
|
At 31
December
2023
Number
|
At 31
December
2022
Number
|
Number of
shares in issue - allotted, called up and fully
paid
|
|
|
|
Ordinary shares of 1p each
|
|
57,528,229
|
57,528,229
|
|
|
|
|
|
£000
|
£000
|
Value of
shares in issue - allotted, called up and fully
paid
|
|
|
Ordinary shares of 1p each
|
575
|
575
|
|
|
|
The Company's issued share capital comprises
57,528,229 ordinary shares of 1p each of which 1,000,000 are held
in treasury. Therefore, the total number of voting rights in
the Company is 56,528,229.
10
Annual Report and Accounts
The Annual Report and Accounts will
be sent to shareholders shortly and will be available to download
on the Company's website www.petards.com.
|
Alternative Performance Measures Glossary
This report provides alternative
performance measures ("APMs"), which are not defined or specified
under the requirements of International Financial Reporting
Standards. The Board believes that these APMs provide management
with useful performance measurement indicators and readers with
important additional information on the business.
Adjusted
EBITDA
Adjusted EBITDA is earnings before
financial income and expenses, tax, depreciation, amortisation,
exceptional items, acquisition costs and share based payment
charges. Adjusted EBITDA is considered useful by the Board since by
removing exceptional items, acquisition costs and share based
payments, the year-on-year operational performance comparison is
more comparable.
Order intake
The value of contractual orders
received from customers during any period for the delivery of
performance obligations. This allows management to monitor the
performance of the business.
Order book
The value of contractual orders
received from customers yet to be recognised as revenue. This
allows management to monitor the performance of the business and
provides forward visibility of potential earnings.
Net
funds
Total net funds comprise cash and
cash equivalents less interest bearing loans and borrowings. This
allows management to monitor the indebtedness of the
Group.