REG - Petards Group PLC - Final Results
13/06/2024 07:00
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RNS Number : 2921S Petards Group PLC 13 June 2024
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 (http://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 (http://www.hybridan.com)
Claire Louise Noyce Tel: 020 3764 2341
claire.noyce@hybridan.com (mailto: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
Treasury Equity
Share Share shares reserve Retained Total
capital premium earnings 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 Recognised 31 December
2023 in income 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 Recognised 31 December
2022 in income 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 At 31
December December
2022
2023
Number
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
(http://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.
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