TIDMPEB

RNS Number : 7314L

Pebble Beach Systems Group PLC

10 September 2019

Pebble Beach Systems Group plc

Results for the half year ended 30 June 2019

Pebble Beach Systems Group plc, a leading global software business specialising in solutions for playout automation and content serving customers in the broadcast markets, is pleased to announce its unaudited results for the half year ended 30 June 2019.

Financial Headlines

For the half year ended 30 June 2019

 
                                                  2019       2018 
-------------------------------------------  ---------  --------- 
 Order Intake                                  GBP5.2m    GBP4.2m 
 
 Revenue                                       GBP5.6m    GBP3.7m 
 
 Gross Margin                                  GBP4.2m    GBP2.7m 
                                                   75%        73% 
 
 Adjusted EBITDA*                              GBP2.0m    GBP0.6m 
 % of Revenue                                      35%        15% 
 
 Adjusted earnings per share*                     1.3p       0.2p 
 
 Net cash inflow from operating activities     GBP0.8m    GBP0.1m 
 
  Net Debt**                                   GBP9.0m    GBP9.4m 
 
 
 
 

Headlines

   --           Orders received in the period grew 23.6% to GBP5.2m (H1 2018: GBP4.2m) 
   --           Revenue up by 51% to GBP5.6m (H1 2018: GBP3.7m) 
   --           Adjusted EBITDA increased significantly in the period to GBP2.0m (2018: GBP0.6m) 
   --           Reported profit before tax GBP0.7m (2018: loss GBP0.9m) 
   --           Net debt further reduced as at 30 June 2019 GBP9.0m (31 December 2018: GBP9.4m) 

*Adjusted EBITDA, a non-GAAP measure, is EBITDA before non-recurring items and foreign exchange gains. Adjusted earnings per share is calculated on the same basis after taking account of related tax effects.

**Net debt at 31 December 2018 was GBP9.4m.

John Varney, Non-Executive Chairman of Pebble Beach Systems Group plc, said:

"We are greatly encouraged with the results for the first half of 2019. At the start of 2018, the Board put in place an aggressive plan to turn around the Company. The work that was done during 2018 was both necessary and detailed but, as is normal in turnaround situations, the numbers that we produced at the end of the year, whilst encouraging, did not reflect the scale of the progress we had made. It is therefore very pleasing indeed to be able to report such an impressive set of results for the first half of 2019. These are a huge testament to both the quality and hard work of the people within the business. Whilst the first part of the turnaround is complete, the marketplace in which we operate is fast moving and competitive and whilst we have improved our reputation and our market position, there is still a lot to do.

Looking into the second half of 2019 and beyond our focus is to continue to build on the trading performance improvements delivered in 2018 and capitalise on the opportunities presented by the changes in the broadcast market."

- ends -

For further information please contact:

 
                                        +44 (0) 75 55 59 
                                         36 02 
 John Varney, Non-Executive Chairman     +44 (0) 1932 333 
  Peter Mayhead, Chief Executive         790 
 
 finnCap (Nomad and Broker) 
  Marc Milmo / Hannah Boros               +44 (0) 207 220 0500 
 

The Company is quoted on the LSE AIM market (PEB.L). More information can be found at www.pebbleplc.com.

About Pebble Beach Systems

Pebble Beach Systems is a world leader in automation, channel in a box, integrated and virtualised playout technology, with scalable products designed for highly efficient multichannel transmission as well as complex news and sports television. Installed in more than 70 countries and with proven systems ranging from single up to over 150 channels in operation, Pebble Beach Systems offers open, flexible systems, which encompass ingest and playout automation, and complex file-based workflows. The Company trades in the US as Pebble Broadcast Systems.

Forward-looking statements

Certain statements in this announcement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast.

CHAIRMAN'S STATEMENT

In 2018, we embarked upon a strategic plan for the turnaround of the Company. In delivering the first profit after tax for a half year for continuing operations since 2014, we have demonstrated that we have the ability, and management capability, to deliver against this plan and to effect a successful turnaround.

We have a strong suite of automation, Channel in a Box and content management solutions that are increasingly relevant in a global broadcast sector that continues to go through significant change as the approach to the consumption of content continues to evolve. We are seeing excellent customer engagement and are very encouraged by the growth in orders seen in the period. We also recognise that the industry in which we are active will continue to see advancements in content delivery and therefore with a stronger platform now in place, a key part of our strategy will be to ensure we have the technology and software solutions that satisfies the needs of the broadcast industry.

I am pleased to report that trading in the first months of the second half of 2019 have been strong and we are firmly on track to meet management expectations. On behalf of the Board I would like to thank the executive team and all our hard-working staff for their diligence and efforts during the period.

John Varney

Non-Executive Chairman

CHIEF EXECUTIVE'S STATEMENT

I am delighted with the progress made by the Company in the period. Having set out the agenda for growth during the course of 2018 and focussed the Company on its core strength of broadcast playout solutions, the first six months of 2019 are very encouraging and provide the Company with a very good platform from which to fully capitalise on the market opportunity. The period saw strong order and revenue growth as well as a return to a profit before tax.

Orders received in the period grew 23.6% to GBP5.2 million (H1 2018: GBP4.2 million). Revenue is up by 51% to GBP5.6 million (H1 2018: GBP3.7 million). Adjusted EBITDA for the business of GBP2.0 million (2018: GBP0.6 million). Reported profit for the period was GBP0.7 million (2018: loss GBP0.9 million). Net debt further reduced as at 30 June 2019 to GBP9.0 million (31 December 2018: GBP9.4 million).

What we do: we support broadcasters around the world as they adapt to compete with new entrants in the video media space by providing solutions to support their transition from traditional broadcast infrastructure to more flexible IP based technologies. The majority of our customer base is made up of large, global companies who are often the broadcaster of choice in the territories that they operate. They have market positions that are often dominant in their geographies and are thus very keen to maintain their positions.

Our strategy: we will continue to develop and improve our technology to ensure we have a competitive offering both today and in the future. We do this by developing new products internally as well as constantly monitoring what new startups are offering.

Mission Statement: we want to support broadcasters as they adapt to compete with new entrants in the video media space by providing solutions to support their transition from traditional broadcast infrastructure to more flexible IP based technologies.

Sector: broadcasters are now investing into technology to allow them to compete with the digital media companies that have disrupted the industry. We are witnessing key media companies breaking away from the likes of Netflix and looking for solutions to compete in the digital media space. Our mission is clearly aligned with this sector development and has led to a 71% increase in the value of orders for investment into new systems for H1 2019 (GBP2.4 million) compared to H1 2018 (GBP1.4 million).

Financial Results

Pebble Beach Systems achieved H1 2019 revenue of GBP5.6 million (2018: GBP3.7 million).

Management is confident it will achieve its forecasts for the year as we head into H2 2019, with a backlog of orders of GBP5.2 million at 30 June 2019 (2018: GBP4.7 million) and a growing pipeline.

Adjusted EBITDA was GBP2.0 million in H1 2019 (2018: GBP0.6 million) before the deduction of depreciation and amortisation costs of GBP1.1 million.

In the first half, Central costs were GBP0.3 million (2018: GBP0.2 million). Reported profit before tax was GBP0.7 million (2018: loss GBP0.9 million).

The available Revolving Credit Facility (RCF) as at 30 June 2019 was GBP10.1 million (2018: GBP11.5 million) which had been fully drawn down. Interest paid on the RCF was GBP0.2 million (2018: GBP0.2 million). There is no overdraft facility (2018: GBP Nil). In H1 2019 in accordance with the terms of the RCF GBP0.6 million was paid down (2018: GBP Nil).

The Company continues to view investment in the development of new products and services as key to future growth. In the first half of 2019, Pebble Beach Systems capitalised GBP0.5 million of development costs (2018: GBP0.4 million) and amortised GBP0.4 million (2018: GBP0.4 million).

Dividends

As in previous years, the Board is not declaring an interim dividend.

Trading Outlook

The broadcast market continues to go through considerable changes with evolving technologies. The industry as a whole will benefit from higher spending from customers to invest in IP and cloud orientated infrastructures.

The momentum in spending and investment within the industry has been slow but is expected to grow and we are well positioned to take advantage of this.

Our customers continue to show clear signs of loyalty towards our world-class, specialist solutions and we are well-placed to deliver the requirements for the evolving technologies of IP and cloud orientated infrastructures.

Peter Mayhead

Chief Executive

For the six months ended 30 June 2019

FINANCIAL REVIEW

Divisions and Markets

For the half year ended 30 June 2019

Continuing Operations

 
                                 2019          2018   Change 
                                GBP'm         GBP'm        % 
-----------------------  ------------  ------------  ------- 
                          (Unaudited)   (Unaudited) 
 Pebble Beach Systems             5.6           3.7    49.1% 
                                                     ------- 
 Total Revenue                    5.6           3.7    49.1% 
-----------------------  ------------  ------------  ------- 
 Pebble Beach Systems             2.3           0.8   207.1% 
 Central                        (0.3)         (0.2)   -79.4% 
-----------------------  ------------  ------------  ------- 
 Total adjusted EBITDA            2.0           0.6   252.6% 
 

Pebble Beach Systems has contributed GBP5.6 million of revenue and GBP2.3 million of adjusted EBITDA in the six months to 30 June 2019.

Goodwill impairment

In accordance with the requirements of IAS 36 'Impairment of assets', goodwill is required to be tested for impairment on an annual basis, with reference to the value of the cash-generating units ("CGU") in question. The carrying value of goodwill at 30 June 2019 is GBP3.2 million (2018: GBP3.2 million) and relates solely to Pebble Beach Systems. There is significant headroom between the carrying value and the value of the forecast discounted cash flows.

Cash flows

The Group held cash and cash equivalents of GBP1.1 million at 30 June 2019 (2018: GBP1.3 million). Against this are set off debit balances of GBP Nil (2018: GBP0.3 million). The table below summarises the cash flows for the half year.

 
                                                      2019              2018 
                                               GBP'million       GBP'million 
-------------------------------------------  -------------  ---------------- 
 
 Cash generated from operating activities              0.8               0.1 
 Net cash used in investing activities               (0.4)             (0.3) 
 Net cash used in financing activities               (0.6)                 - 
 Effects of foreign exchange                             -                 - 
-------------------------------------------  -------------  ---------------- 
 Net decrease in cash and cash equivalents           (0.2)             (0.2) 
 Cash and cash equivalents at 1 January                1.3               1.2 
-------------------------------------------  -------------  ---------------- 
 Cash and cash equivalents at 30 June                  1.1               1.0 
-------------------------------------------  -------------  ---------------- 
 

As at 30 June 2019 net debt was GBP9.0 million (cash GBP1.1 million and bank debt of GBP10.1 million). At the end of August 2019, net debt had reduced to GBP8.9 million. The Group was using all GBP10.1 million of its available facilities in June 2019.

A marginally positive net increase in cash and cash equivalents is forecast for the second half of 2019. Scheduled debt repayments of GBP275,000 were made in March and June 2019. Further repayments of GBP275,000 are due in September and December 2019.

Foreign exchange

The principal exchange rates used by the Group in translating overseas profits and net assets into sterling are set out in the table below.

 
                                                  Period  Period 
                                Average  Average     end     end 
                                   rate     rate    rate    rate 
Rate compared to GBP sterling      2019     2018    2019    2018 
------------------------------  -------  -------  ------  ------ 
US dollar                         1.294    1.376   1.273   1.320 
------------------------------  -------  -------  ------  ------ 
 

Risk management

The Board regularly reviews the full range of business risks facing the Group. The approach adopted is to identify, evaluate and manage the likely impact of risk on the Group's business objectives. Where the risks are unavoidable, they are managed through business controls and where appropriate through insurance and treasury activities.

The Group has a programme of regular risk assessment, which incorporates internal control reviews of both a financial and non-financial nature. A process of continuous review has been in place throughout the year at an operating company level to consider the risk environment and the effectiveness of controls. The results of reviews, initiatives and progress on implementing control improvements are regularly reported to the Board.

CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2019

 
                                                           6 months      6 months     Year ended 
                                                         to 30 June    to 30 June    31 December 
                                                               2019          2018           2018 
                                                        (Unaudited)   (Unaudited)      (Audited) 
                                                Notes       GBP'000       GBP'000        GBP'000 
 
 Revenue                                          4           5,587         3,748          9,174 
 Cost of sales                                              (1,377)       (1,028)        (2,515) 
                                                       ------------  ------------  ------------- 
 Gross profit                                                 4,210         2,720          6,659 
 Sales and marketing expenses                               (1,052)       (1,196)        (2,163) 
 Research and development expenses                            (717)         (600)        (1,222) 
 Administrative expenses                                    (1,030)         (830)        (1,759) 
 Foreign exchange gains                                          24            26             28 
 Other expenses                                               (511)         (871)        (1,723) 
 Operating profit/(loss)                          5             924         (751)          (180) 
---------------------------------------------  ------  ------------  ------------  ------------- 
 Operating profit is analysed as: 
 Adjusted EBITDA                                              1,969           559          2,470 
 Non-recurring items                                              -         (167)          (304) 
 Exchange gains credited to the income 
  statement                                                      24            26             28 
---------------------------------------------  ------  ------------  ------------  ------------- 
 Earnings before interest, tax, depreciation 
  and amortisation (EBITDA)                                   1,993           418          2,194 
---------------------------------------------  ------  ------------  ------------  ------------- 
 Depreciation                                                 (126)          (65)          (127) 
 Amortisation and impairment of acquired 
  intangibles                                                 (511)         (704)         (1419) 
 Amortisation of capitalised development 
  costs                                                       (432)         (400)          (828) 
 Finance costs                                                (210)         (152)          (296) 
 Finance income                                                   1             3              4 
 Profit/(loss) before tax                                       715         (900)          (472) 
 Tax                                              6              68           117            253 
                                                       ------------  ------------  ------------- 
 Profit/(loss) for the period being 
  profit/(loss) attributable to owners 
  of the parent                                                 783         (783)          (219) 
 Net result from discontinued operations                         16            56            195 
                                                       ------------  ------------  ------------- 
 Net result for the period                                      799         (727)           (24) 
 
 Earnings per share from continuing 
  and 
  discontinued operations attributable 
  to the owners of 
  the parent during the period 
 Basic earnings/(loss) per share 
 From continuing operations                       7            0.6p        (0.6)p         (0.2)p 
 From discontinued operations                                  0.0p          0.0p           0.2p 
                                                       ------------  ------------  ------------- 
 From earnings/(loss) for the period                           0.6p        (0.6)p           0.0p 
---------------------------------------------  ------  ------------  ------------  ------------- 
 
 Diluted earnings/(loss) per share 
 From continuing operations                       7            0.6p        (0.6)p         (0.2)p 
 From discontinued operations                                  0.0p          0.0p           0.2p 
                                                       ------------  ------------  ------------- 
 From earnings/(loss) for the period                           0.6p        (0.6)p           0.0p 
---------------------------------------------  ------  ------------  ------------  ------------- 
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2019

 
                                                              6 months      6 months     Year ended 
                                                            to 30 June    to 30 June    31 December 
                                                                  2019          2018           2018 
                                                           (Unaudited)   (Unaudited)      (Audited) 
                                                               GBP'000       GBP'000        GBP'000 
 ------------------------------------------------------   ------------  ------------  ------------- 
 
  Profit/(Loss) for the financial year                             799         (727)           (24) 
  Other comprehensive income - items that 
   may be reclassified subsequently to profit 
   or loss: 
  Exchange differences on translation of 
   overseas operations 
  - continuing operations                                          (3)          (18)           (58) 
  - discontinued operations                                          -             3              2 
 
  Total profit/(loss) for the period attributable 
  to owners of the parent                                          796         (742)           (80) 
 ------------------------------------------------------   ------------  ------------  ------------- 
 
 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the half year ended 30 June 2019

 
                                                           Capital 
                                Ordinary      Share     redemption      Merger    Translation   Accumulated 
                                  shares    premium        reserve     reserve        reserve        losses      Total 
                                  GBP000     GBP000         GBP000      GBP000         GBP000        GBP000     GBP000 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 At 1 January 2019                 3,115      6,800            617      29,778          (195)      (46,260)    (6,145) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 Adjustment on adoption 
  of IFRS 16                           -          -              -           -              -         (203)      (203) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 Retained profit for 
  the period                           -          -              -           -              -           799        799 
 Exchange differences 
  on translation of 
  overseas operations                  -          -              -           -            (3)             -        (3) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 Total comprehensive 
  income/expense for 
  the period                           -          -              -           -            (3)           799        796 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 At 30 June 2019 (Unaudited)       3,115      6,800            617      29,778          (198)      (45,664)    (5,552) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 At 1 January 2018                 3,115      6,800            617      29,778          (139)      (46,236)    (6,065) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 Retained loss for 
  the period                           -          -              -           -              -         (727)      (727) 
 Exchange differences 
  on translation of 
  overseas operations                  -          -              -           -           (15)             -       (15) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 Total comprehensive 
  income/expense for 
  the period                           -          -              -           -           (15)         (727)      (742) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 At 30 June 2018 (Unaudited)       3,115      6,800            617      29,778          (154)      (46,963)    (6,807) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 At 1 January 2018                 3,115      6,800            617      29,778          (139)      (46,236)    (6,065) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 Retained loss for 
  the year                             -          -              -           -              -          (24)       (24) 
 Exchange differences 
  on translation of 
  overseas operations                  -          -              -           -           (56)             -       (56) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 Total comprehensive 
  income/expense for 
  the period                           -          -              -           -           (56)          (24)       (80) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 At 31 December 2018 
  (Audited)                        3,115      6,800            617      29,778          (195)      (46,260)    (6,145) 
-----------------------------  ---------  ---------  -------------  ----------  -------------  ------------  --------- 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2019

 
                                                    30 June       30 June   31 December 
                                                       2019          2018          2018 
                                                (Unaudited)   (Unaudited)     (Audited) 
                                       Notes        GBP'000       GBP'000       GBP'000 
 Assets 
 Non-current assets 
 Intangible assets                                    4,937         6,202         5,422 
 Property, plant and equipment                        1,253           232           232 
 Deferred tax assets                                      3             -             3 
                                               ------------  ------------  ------------ 
                                                      6,193         6,434         5,657 
                                               ------------  ------------  ------------ 
 Current assets 
 Inventories                                            238           220           210 
 Trade and other receivables                          2,972         2,774         2,391 
 Current tax assets                                       -            18            12 
 Cash and cash equivalents                            1,083         1,275         1,269 
                                               ------------  ------------  ------------ 
                                                      4,293         4,287         3,882 
 Liabilities 
 Current liabilities 
 Financial liabilities - borrowings                   1,310         1,288         1,100 
 Contract liabilities                                 1,883         2,522         2,323 
 Trade and other payables                             2,488         2,124         1,964 
 Provisions for other liabilities 
  and charges                                           167           400           367 
                                               ------------  ------------  ------------ 
                                                      5,848         6,334         5,754 
                                               ------------  ------------  ------------ 
 
 Net current liabilities                            (1,555)       (2,047)       (1,872) 
                                               ------------  ------------  ------------ 
 
 Non-current liabilities 
 Financial liabilities - borrowings                   8,790        10,500         9,550 
 Other Non-current liabilities                        1,107             -             - 
 Deferred tax liabilities                               293           527           380 
 Provisions for other liabilities                         -           167             - 
  and charges 
                                               ------------  ------------  ------------ 
                                                     10,190        11,194         9,930 
                                               ------------  ------------  ------------ 
 
 Net liabilities                                    (5,552)       (6,807)       (6,145) 
---------------------------------------------  ------------  ------------  ------------ 
 
 
   Equity attributable to owners of 
   the parent 
 Ordinary shares                                      3,115         3,115         3,115 
 Share premium account                                6,800         6,800         6,800 
 Capital redemption reserve                             617           617           617 
 Merger reserve                                      29,778        29,778        29,778 
 Translation reserve                                  (198)         (154)         (195) 
 Retained earnings                                 (45,664)      (46,963)      (46,260) 
                                               ------------  ------------  ------------ 
 Total equity                                       (5,552)       (6,807)       (6,145) 
---------------------------------------------  ------------  ------------  ------------ 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the half year ended 30 June 2019

 
 
                                                           6 months      6 months     Year ended 
                                                         to 30 June    to 30 June    31 December 
                                                               2019          2018           2018 
                                                        (Unaudited)   (Unaudited)      (Audited) 
                                                Notes       GBP'000       GBP'000        GBP'000 
 Cash flows from operating activities 
 Cash generated from operations                   8           1,063           291          2,039 
 Interest paid                                                (210)         (152)          (295) 
 Taxation paid                                                 (13)          (13)           (25) 
                                                       ------------  ------------  ------------- 
 Net cash from operating activities                             840           126          1,719 
                                                       ------------  ------------  ------------- 
 
 Cash flows from investing activities 
 Interest received                                                1             3              4 
 Proceeds from sale of property, plant 
  and equipment                                                   -             -              3 
 Purchase of property, plant and equipment                     (19)          (19)           (88) 
 Expenditure on capitalised development 
  costs                                                       (458)         (364)          (728) 
 
 Net cash (used in)/generated from investing 
  activities                                                  (476)         (380)          (809) 
                                                       ------------  ------------  ------------- 
 
 Cash flows from financing activities 
 Net cash used in repayment of financing 
  activities                                                  (550)             -          (850) 
 Net cash used in financing activities                        (550)             -          (850) 
                                                       ------------  ------------  ------------- 
 Net (decrease)/increase in cash and 
  cash equivalents                                            (186)         (254)             60 
 Effect of foreign exchange rate changes                          -           (8)           (40) 
                                                       ------------  ------------  ------------- 
 Cash and cash equivalents and overdrafts 
  at 1 January                                                1,269         1,249          1,249 
 Cash and cash equivalents and overdrafts 
  at period end                                               1,083           987          1,269 
                                                       ------------  ------------  ------------- 
 
 Net debt comprises: 
 Cash and cash equivalents and overdrafts                     1,083           987          1,269 
 Borrowings                                                (10,100)      (11,500)       (10,650) 
                                                       ------------  ------------  ------------- 
 Net debt at period end                                     (9,017)      (10,513)        (9,381) 
---------------------------------------------  ------  ------------  ------------  ------------- 
 

The cash and cash equivalents and overdrafts balance comprise credit balances of GBP1,083,000 (2018: GBP1,275,000) which have been set off against debit balances of GBP Nil (2018: GBP288,000).

NOTES TO THE FINANCIAL STATEMENTS

for the half year ended 30 June 2019

   1.   GENERAL INFORMATION 

The Pebble Beach Systems Group is a leading global software business specialising in solutions for playout automation and content, serving customers in the broadcast markets.

The Company is a public limited company and is quoted on the Alternative Investment Market (AIM) of the London Stock Exchange. The Company is incorporated and domiciled in the UK. The address of its registered office is 12 Horizon Business Village, 1 Brooklands Road, Weybridge, Surrey, KT13 0TJ.

The registered number of the Company is 04082188.

This half year results announcement was approved at close of business on 9 September 2019.

   2.   BASIS OF PREPARATION 

The Group financial statements have been prepared on a going concern basis in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), IFRIC interpretations and the Company Act 2006 applicable to companies reporting under IFRS.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Group financial statements are disclosed in note 4 of the Group financial statements.

During the current reporting period IFRS 16 Leases became effective. The Group has adopted the modified retrospective approach to implementation. Accordingly, comparative periods have not been restated.

From 1 January 2019, at inception of a contract, the Group assesses whether it is, or contains, a lease. A contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a time in exchange for consideration. A contract conveys the right to control the use of an asset, if the Group receives substantially all of the economic benefits from its use over time and controls how it is used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component based on their relative stand-alone prices.

For contracts entered into before 1 January 2019, the Group determined whether the arrangement was or contained a lease using the same assessment.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right of-of-use asset is initially measured at cost. Cost comprises the initial amount of the lease liability, adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of its useful life or the end of the lease term. Useful life is determined on the same basis as other property and equipment.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or if that cannot be determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The lease liability is measured at amortised cost using the effective interest method.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases that have a term of 12 months or less. The Group recognises the payments associated with these leases as an expense on a straight-line basis over the lease term.

Under the previous policy none of the Group's leases were classified as finance leases. Payments made under operating leases were recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognised as an integral part of the total lease expense, over the term of the lease.

The cumulative impact of the adoption of IFRS 16 has been accounted for as an adjustment to equity. For leases classified as operating leases in 2018 the Group did not recognise related assets or liabilities, and instead charged the cost to the income statement on a straight-line basis over the period of the lease and disclosed its total commitment in the notes to the financial statements. Instead of recognising an operating expense for its operating lease payments, the Group has recognised GBP21,000 interest on its lease liabilities and GBP67,000 amortisation on its right of use assets. Adjusted EBITDA has increased by GBP84,000 resulting from the reclassification of operating lease cost. It has not had a material effect on the Group's income or net assets.

In addition, standards or amendments issued but not yet effective are not expected to have a material impact on the net assets of the Group.

The financial information contained in these condensed financial statements has been computed in accordance with IFRS. However, this announcement, due to its condensed nature, does not itself contain sufficient information to comply with IFRS.

Going Concern

The directors are required to make an assessment of the Group's ability to continue to trade as a going concern.

At 30 June 2019 net debt was GBP9.0 million (2018: GBP10.5 million) comprising net cash of GBP1.1 million (2018: GBP1.0 million) and bank debt of GBP10.1 million (2018: GBP11.5 million).

We maintain a good relationship with our bank. The current loan agreement secures the facility until 30 November 2020 with banking covenants and a repayment schedule in place.

In order to assess the appropriateness of preparing the financial statements on a going concern basis, management have prepared detailed projections of expected cash flows. These projections include the continuing impact of cost reductions implemented in past years, and margin improvement strategies and sales growth in the future.

As part of the review, the Board considered sensitivities with regards to the timing of revenue growth coming from the transition in the broadcast industry from SDI to IP platforms. It looked at sensitivities regarding gross margin and sales growth. Finally, it considered sensitivities regarding the cost reductions.

The Board have concluded that the primary risk is one of ongoing trading and therefore the Group and hence the Company remains a going concern.

The Group has prepared forecasts which indicate that it is able to meet its ongoing banking covenants and debt reduction schedule.

We have a strong order book and pipeline which underpin our third and fourth quarter revenue.

The Board remains confident about the future prospects for the Group and have concluded that it is appropriate to prepare the Group interim financial statements on a going concern basis.

   3.   ACCOUNTING POLICIES 

Except as described above, the accounting policies applied are consistent with those of the annual report and financial statements for the year ended 31 December 2018, as described in those annual report and financial statements.

Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

Taxes on income in the half year periods are accrued using the tax rate that would be applicable to expected total annual earnings on a country by country basis.

   4.   SEGMENTAL REPORTING 

The Group's internal organisational and management structure and its system of internal financial reporting to the Board of Directors comprise of Pebble Beach Systems Limited and Central costs. The chief operating decision-maker has been identified as the Board.

The Board reviews the Group's internal financial reporting in order to assess performance and allocate resources. Management have therefore determined that the operating segments for the Group will be based on these reports.

The Pebble Beach Systems Limited business is responsible for the sales and marketing of all Group software products and services.

The table below shows the analysis of Group external revenue and operating profit from continuing operations by business segment.

 
                                                          Pebble   Central     Total 
                                                   Beach Systems 
                                                         GBP'000   GBP'000   GBP'000 
-----------------------------------------------  ---------------  --------  -------- 
 6 months to 30 June 2019 (Unaudited) 
 Total revenue                                             5,587         -     5,587 
                                                 ---------------  --------  -------- 
 
 Adjusted EBITDA                                           2,328     (359)     1,969 
 Depreciation                                              (126)         -     (126) 
 Amortisation and impairment of acquired 
  intangibles                                              (511)         -     (511) 
 Amortisation of capitalised development 
  costs                                                    (432)         -     (432) 
 Non-recurring items                                           -         -         - 
 Exchange (losses)/gains                                      20         4        24 
 Finance costs                                              (25)     (185)     (210) 
 Finance income                                                1         -         1 
 Profit/(loss) before taxation                             1,255     (540)       715 
 Taxation                                                     70       (2)        68 
 Profit/(loss) for the period being 
  attributable to owners of the parent                     1,325     (542)       783 
-----------------------------------------------  ---------------  --------  -------- 
 6 months to 30 June 2018 (Unaudited) 
 Total revenue                                             3,748         -     3,748 
 
 Adjusted EBITDA                                             758     (199)       559 
 Depreciation                                               (65)         -      (65) 
 Amortisation and impairment of acquired 
  intangibles                                              (704)         -     (704) 
 Amortisation of capitalised development 
  costs                                                    (400)         -     (400) 
 Non-recurring items                                       (167)         -     (167) 
 Exchange (losses)/gains                                      26         -        26 
 Finance costs                                                 -     (152)     (152) 
 Finance income                                                2         1         3 
 Loss before taxation                                      (550)     (350)     (900) 
 Taxation                                                    117         -       117 
 Loss for the period being attributable 
  to owners of the parent                                  (433)     (350)     (783) 
-----------------------------------------------  ---------------  --------  -------- 
 Year to 31 December 2018 (Audited) 
 Total revenue                                             9,174         -     9,174 
                                                 ---------------  --------  -------- 
 
 Adjusted EBITDA                                           2,867     (397)     2,470 
 Depreciation                                              (127)         -     (127) 
 Amortisation of acquired intangibles                    (1,419)         -   (1,419) 
 Amortisation of capitalised development 
  costs                                                    (828)         -     (828) 
 Non-recurring items                                     (3,858)     3,554     (304) 
 Exchange (losses)/gains                                      46      (18)        28 
 Finance costs                                                 -     (296)     (296) 
 Finance income                                                3         1         4 
 Intercompany finance income/(costs)                         118     (118)         - 
 (Loss)/profit before taxation                           (3,198)     2,726     (472) 
 Taxation                                                    254       (1)       253 
 Profit/(loss) for the year being attributable 
  to owners of the parent                                (2,944)     2,725     (219) 
-----------------------------------------------  ---------------  --------  -------- 
 

GBP3.5 million intercompany debt between Pebble Beach Systems Ltd and Pebble Beach Systems Group Plc was waived in December 2018.

Geographic external revenue analysis

The revenue analysis in the table below is based on the geographical location of the customer for continuing operations of the business.

 
                       6 months       6 months     Year ended 
                     to 30 June     to 30 June    31 December 
                                          2018 
                           2019    (Unaudited)           2018 
                    (Unaudited)                     (Audited) 
                          Total          Total          Total 
                        GBP'000        GBP'000        GBP'000 
----------------  -------------  -------------  ------------- 
 By market 
 UK & Europe              2,807          1,589          4,820 
 North America              222            251            585 
 Latin America              683            242            513 
 Middle East              1,720          1,608          2,931 
 Asia / Pacific             155             58            325 
                          5,587          3,748          9,174 
----------------  -------------  -------------  ------------- 
 

Net assets

The table below summarises the net assets of the Group by division. Balance sheet reporting is disclosed by the divisional assets and liabilities of the Group as this is consistent with the presentation of internal information provided to the Executive Management Board and the Board of Directors.

 
                            6 months      6 months     Year ended 
                          to 30 June    to 30 June    31 December 
                                2019          2018           2018 
                               Total         Total          Total 
                         (Unaudited)   (Unaudited)      (Audited) 
                             GBP'000       GBP'000        GBP'000 
----------------------  ------------  ------------  ------------- 
 By division: 
 Pebble Beach Systems          4,935         6,360          5,308 
 Central                    (10,487)      (13,167)       (11,453) 
                             (5,552)       (6,807)        (6,145) 
----------------------  ------------  ------------  ------------- 
 
   5.   OPERATING PROFIT 

The following items have been included in arriving at the operating profit for the continuing business:

 
                                                                 6 months      6 months     Year ended 
                                                               to 30 June    to 30 June    31 December 
                                                                     2019          2018           2018 
                                                                    Total         Total          Total 
                                                              (Unaudited)   (Unaudited)      (Audited) 
                                                                  GBP'000       GBP'000        GBP'000 
-----------------------------------------------------------  ------------  ------------  ------------- 
 Depreciation of property, plant and equipment                        126            65            127 
 Amortisation of acquired intangibles                                 511           704          1,419 
 Operating lease rentals                                                -            84            167 
 Exchange (gains)/ losses (credited)/charged 
  to profit and loss                                                 (24)          (26)           (28) 
 Research and development expenditure 
  in the year which includes:                                         717         1,222           1222 
 
        *    Amortisation of capitalised development costs            432           400            828 
-----------------------------------------------------------  ------------  ------------  ------------- 
 

Non-recurring items

The following items are excluded from management's assessment of profit because by their nature they could distort the Group's underlying quality of earnings. They are excluded to reflect performance in a consistent manner and are in line with how the business is managed and measured on a day-to-day basis:

 
                                             6 months      6 months     Year ended 
                                           to 30 June    to 30 June    31 December 
                                                 2019          2018           2018 
                                                Total         Total          Total 
                                          (Unaudited)   (Unaudited)      (Audited) 
                                              GBP'000       GBP'000        GBP'000 
--------------------------------------  -------------  ------------  ------------- 
 Rationalisation and Redundancy costs               -           167            358 
 Provision for former executive debt                -             -           (54) 
                                                    -           167            304 
 ----------------------------------------------------  ------------  ------------- 
 
   6.   INCOME TAX EXPENSE 
 
                                             6 months      6 months     Year ended 
                                           to 30 June    to 30 June    31 December 
                                                 2019          2018           2018 
                                                Total         Total          Total 
                                          (Unaudited)   (Unaudited)      (Audited) 
                                              GBP'000       GBP'000        GBP'000 
---------------------------------------  ------------  ------------  ------------- 
 Current tax 
 UK corporation tax                                 -             -             27 
 Foreign Tax - current year                        19             3              - 
 Adjustments in respect of prior years              -             -           (11) 
---------------------------------------  ------------  ------------  ------------- 
 Total current tax                                 19             3             16 
---------------------------------------  ------------  ------------  ------------- 
 
 Deferred tax 
 UK corporation tax                                 -         (120)          (269) 
 Total deferred tax                              (87)         (120)          (269) 
---------------------------------------  ------------  ------------  ------------- 
 
 Total taxation                                  (68)         (117)          (253) 
---------------------------------------  ------------  ------------  ------------- 
 

Changes to the UK corporation tax rates were substantively enacted on 7 September 2016. These include reductions to the main rate to reduce the rate to 17 per cent from 1 April 2020. Deferred tax has been provided for at the rate of 17 per cent (2018: 17 per cent).

   7.   EARNINGS PER ORDINARY SHARE 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive shares are those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

 
                                                                           Year ended 31 December 
                                     6 months to 30 June 2019                       2018 
                                            (Unaudited)                           (Audited) 
                                              Weighted                             Weighted 
                                               average    Earnings                  average    Earnings 
                                                number         per                   number         per 
                                Earnings     of shares       share   Earnings     of shares       share 
                                 GBP'000         '000s       pence    GBP'000         '000s       pence 
-----------------------------  ---------  ------------  ----------  ---------  ------------  ---------- 
 Basic earnings per share 
 Profit/(loss) attributable 
  to continuing operations           783                      0.6p      (219)                    (0.2)p 
 Profit attributable 
  to discontinued operations          16                      0.0p        195                      0.2p 
-----------------------------  ---------  ------------  ----------  ---------  ------------  ---------- 
 Basic earnings/(loss) 
  per share                          799       124,477        0.6p       (24)       124,477        0.0p 
-----------------------------  ---------  ------------  ----------  ---------  ------------  ---------- 
 Diluted earnings per 
  share 
 Profit/(loss) attributable 
  to continuing operations           783                      0.6p      (219)                    (0.2)p 
-----------------------------  ---------  ------------  ----------  ---------  ------------  ---------- 
 Profit attributable 
  to discontinued operations          16                      0.0p        195                      0.2p 
-----------------------------  ---------  ------------  ----------  ---------  ------------  ---------- 
 Diluted earnings/(loss) 
  per share                          799       124,577        0.6p       (24)       124,477        0.0p 
-----------------------------  ---------  ------------  ----------  ---------  ------------  ---------- 
 
 
                                     6 months to 30 June 2018 
                                            (Unaudited) 
                                              Weighted 
                                               average    Earnings 
                                                number         per 
                                Earnings     of shares       share 
                                 GBP'000         '000s       pence 
-----------------------------  ---------  ------------  ---------- 
 Basic loss per share 
 Loss attributable to 
  continuing operations            (783)                    (0.6)p 
 Profit attributable 
  to discontinued operations          56                      0.0p 
-----------------------------  ---------  ------------  ---------- 
 Basic loss per share              (727)       124,477      (0.6)p 
-----------------------------  ---------  ------------  ---------- 
 Diluted loss per share 
 Loss attributable to 
  continuing operations            (783)                    (0.6)p 
 Profit attributable 
  to discontinued operations          56                      0.0p 
-----------------------------  ---------  ------------  ---------- 
 Diluted loss per share            (727)       124,477      (0.6)p 
-----------------------------  ---------  ------------  ---------- 
 

Potential ordinary shares were non-dilutive in the prior periods because they would decrease the loss per share from continuing operations. Accordingly, there was no difference between basic and diluted EPS.

Adjusted earnings

The directors believe that adjusted EBITDA, adjusted profit before tax, adjusted earnings and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These measures are used by management for internal performance analysis and incentive compensation arrangements. The term "adjusted" is not a defined term used under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. The principal adjustments are made in respect of the amortisation of acquired intangibles and capitalised development costs, non-recurring items and exchange gains or losses charged to the income statement and their related tax effects.

The reconciliation between reported and underlying earnings and basic earnings per share is shown below:

 
                                                    6 months           6 months         Year ended 
                                                  to 30 June         to 30 June        31 December 
                                                        2019               2018               2018 
                                                       Total              Total              Total 
                                                 (Unaudited)        (Unaudited)          (Audited) 
                                                    Earnings           Earnings           Earnings 
                                             GBP'000   Pence   GBP'000    Pence   GBP'000    Pence 
------------------------------------------  --------  ------  --------  -------  --------  ------- 
 Reported earnings/(loss) per share 
  - continuing operations                        783    0.6p     (783)   (0.6)p     (219)   (0.2)p 
 Depreciation                                    105    0.1p        54     0.0p       105     0.1p 
 Amortisation of acquired intangibles 
  after tax                                      424    0.3p       584     0.4p     1,178     0.9p 
 Amortisation of capitalised development 
  costs                                          359    0.3p       332     0.3p       687     0.6p 
 Non-recurring items after tax                     -       -       135     0.1p       245     0.2p 
 Exchange losses/(gains)                        (19)    0.0p      (21)     0.0p      (23)     0.0p 
                                            --------  ------  --------  -------  --------  ------- 
 Adjusted earnings per share - continuing 
  operations                                   1,652    1.3p       301     0.2p     1,973     1.6p 
------------------------------------------  --------  ------  --------  -------  --------  ------- 
 
   8.   CASH FLOW GENERATED FROM OPERATING ACTIVITIES 

Reconciliation of loss before taxation to net cash flows from operating activities.

 
                                                     6 months      6 months     Year ended 
                                                   to 30 June    to 30 June    31 December 
                                                         2019          2018           2018 
                                                        Total         Total          Total 
                                                  (Unaudited)   (Unaudited)      (Audited) 
                                                      GBP'000       GBP'000        GBP'000 
-----------------------------------------------  ------------  ------------  ------------- 
 Profit/(loss) before tax - continuing 
  operations                                              715         (900)          (472) 
 Profit before tax - discontinued operations               16            56            184 
-----------------------------------------------  ------------  ------------  ------------- 
 Total profit/(loss) before tax                           731         (844)          (288) 
 Depreciation of property, plant and equipment            126            65            127 
 Loss on disposal of property, plant and 
  equipment                                                 -             -             10 
 Amortisation and impairment of development 
  costs                                                   432           400            828 
 Amortisation and impairment of acquired 
  intangibles                                             511           703          1,419 
 Finance income                                           (1)           (3)            (4) 
 Finance costs                                            210           152            295 
 Decrease/(increase) in inventories                      (28)             5             15 
 Decrease/(increase) in trade and other 
  receivables                                           (581)           955            848 
 Decrease in trade and other payables                   (137)         (942)          (811) 
 Decrease in provisions                                 (200)         (200)          (400) 
-----------------------------------------------  ------------  ------------  ------------- 
 Net cash generated from operating activities           1,063           291          2,039 
-----------------------------------------------  ------------  ------------  ------------- 
 
   9.   NET FUNDS 

Reconciliation of change in cash and cash equivalents to movement in net cash:

 
                                                   Net cash and   Other borrowings   Total net 
                                               cash equivalents            GBP'000        cash 
                                                        GBP'000                        GBP'000 
-------------------------------------------  ------------------  -----------------  ---------- 
 At 1 January 2019                                        1,269           (10,650)     (9,381) 
 Cash flow for the period before financing                  364                  -         364 
 Movement in borrowings in the period                     (550)                550           - 
 Exchange rate adjustments                                    -                  -           - 
-------------------------------------------  ------------------  -----------------  ---------- 
 Cash and cash equivalents at 30 June 
  2019 (Unaudited)                                        1,083           (10,100)     (9,017) 
-------------------------------------------  ------------------  -----------------  ---------- 
 At 1 January 2018                                        1,249           (11,500)    (10,251) 
 Cash flow for the period before financing                (254)                  -       (254) 
 Movement in borrowings in the period                         -                  -           - 
 Exchange rate adjustments                                  (8)                  -         (8) 
-------------------------------------------  ------------------  -----------------  ---------- 
 Cash and cash equivalents at 30 June 
  2018 (Unaudited)                                          987           (11,500)    (10,513) 
-------------------------------------------  ------------------  -----------------  ---------- 
 At 1 January 2018                                        1,249           (11,500)    (10,251) 
 Cash flow for the year before financing                    910                  -         910 
 Movement in borrowings in the year                       (850)                850           - 
 Exchange rate adjustments                                 (40)                  -        (40) 
-------------------------------------------  ------------------  -----------------  ---------- 
 Cash and cash equivalents at 31 December 
  2018 (Audited)                                          1,269           (10,650)     (9,381) 
-------------------------------------------  ------------------  -----------------  ---------- 
 

Ends

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END

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September 10, 2019 02:01 ET (06:01 GMT)

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