TIDMPEG
RNS Number : 8629M
Petards Group PLC
19 September 2019
19 September 2019
Petards Group plc
("Petards", "the Group" or "the Company")
Interim results for the six months ended 30 June 2019
Petards Group plc (AIM: PEG), the AIM quoted developer of
advanced security and surveillance systems, is pleased to report
its interim results for the six months ended 30 June 2019.
Key Highlights:
-- Operational
o Order book at 30 June 2019 over GBP15 million (June 2018:
GBP19 million)
o Current order coverage for H2/2019 circa GBP7 million with
GBP7 million scheduled for 2020
o Strong revenue performance for Rail and Traffic products with
both up circa 40% over June 2018, but lower Defence activity levels
from H2/2018 have continued into 2019
o New investment in operational and product development
capability at QRO
o Major investment in eyeTrain software solutions of recent
years now largely complete
-- Financial
o Revenue down 8% to GBP8.9 million (2018: GBP9.7 million)
o Gross margin increased to 37.5% (2018: 34.6%)
o Margin increase offset lower revenues; Gross profit GBP3.3
million (June 2018: GBP3.3 million)
o Adjusted EBITDA GBP766,000 (2018: GBP1,085,000)
o Pre-tax profit GBP206,000 (2018: GBP514,000)
o Cash utilised by operating activities GBP633,000 (June 2018:
GBP966,000 generated)
o Net debt at 30 June 2019 GBP0.7 million* (31 Dec 2018: net
cash GBP1.0 million)
o Diluted EPS 0.35p (2018: 0.88p)
* Includes GBP0.5 million debt relating to lease liabilities on
adoption of IFRS 16 at 1 January 2019. Net cash of GBP1.0 million
at 31 December 2018 excluded these liabilities.
Commenting on the current outlook, Raschid Abdullah, Chairman,
said:
"The Group continues to benefit from a good order book which at
30 June 2019 included revenues of almost GBP7 million for the
second half of 2019. This has been supplemented by orders received
since June, the majority of which will benefit 2020.
There is also a strong pipeline of new contracts under
negotiation which it is anticipated will add to the Group's order
book in due course. The Group continues to secure the majority of
opportunities available to it, although more recently the timing of
expected orders has been later than originally envisaged. Some of
the Department for Transport (DfT) franchising decisions during
2019 have affected the timing of some orders.
The Board remains confident in the Group's future prospects and
expects to return a satisfactory, albeit lower than previously
anticipated, performance for 2019 weighted towards the second half
of the year."
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
Contacts:
Petards Group plc www.petards.com
Raschid Abdullah, Chairman Mb: 07768 905004
WH Ireland Limited, Nomad and www.whirelandcb.com
Joint Broker
Mike Coe, Chris Savidge Tel: 0117 945 3470
Hybridan LLP, Joint Broker www.hybridan.com
Claire Louise Noyce Tel: 020 3764 2341
claire.noyce@hybridan.com
Chairman's statement
I am pleased to report that for the first six months of 2019 the
Group has delivered revenues, margins and profits slightly ahead of
the Board's expectations. In 2018 the Group's revenues and profits
for both the first and second half years were broadly similar
whereas, as I reported in April, the results for 2019 are expected
to be weighted towards the second half of the year.
Group pre-tax profits for the six months ended 30 June 2019 were
GBP206,000 (June 2018: GBP514,000) on revenues of GBP8.9 million,
8% lower than the first half of 2018 (June 2018: GBP9.7 million).
This reduction in revenues reflected the anticipated lower activity
levels in Defence products on which I have previously reported.
However, it was pleasing that the majority of that shortfall was
offset by strong performances in Rail and Traffic products,
revenues for which were both up by 40% or more on the same period
last year. As margins on those revenues tend to be higher, this
resulted in the gross margin improving to 37.5% compared with the
34.6% achieved in the same period last year with gross profit
maintained at GBP3.3 million (June 2018: GBP3.3 million).
Business overview
Petards' operations continue 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, 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 - electronic countermeasure protection systems,
mobile radio systems and related engineering services sold
predominantly to the UK Ministry of Defence (MOD).
Operating review
Other than Defence products, the Group performed well during the
first half of the year with deliveries of both eyeTrain and Traffic
solutions both ahead of the same period in 2018. The Group's
eyeTrain security, surveillance and other systems continue to
represent the majority of the Group's revenues. During the period
these systems were supplied on a number of major rolling stock
projects being undertaken by all four of the major train builders
that currently utilise eyeTrain for their new build UK rolling
stock. The majority of those projects include the supply of the
Group's advanced and innovative software systems for on-board
safety critical applications systems such as Driver Controlled
Operation (DCO) and Automatic Selective Door Opening (ASDO).
The Group has invested heavily in its eyeTrain software
solutions and while it remains committed to ensuring these maintain
leading positions, the rate of required investment has, as
expected, been reducing in recent months, and is expected to fall
further. Software engineering activities have now substantially
moved from development to operational support. The expectation now
is that the benefits of the above investment will be realised on
subsequent projects. The modular product design should result in a
much higher-level commonality of software and standardised
components giving rise to operational and cost efficiencies.
Revenues from eyeTrain spares and service support were up around
20% on last year and the opportunity for this growth rate to
increase more substantially remains, as the warranty periods of
some of the significant projects completed in recent years
expire.
The largest eyeTrain order in the period was secured in April,
with Bombardier Transportation (Bombardier) placing an order worth
in excess of GBP1.5 million for systems to be fitted to its Aventra
trains. There are many factors that drive new major project awards
for the Group's rail products amongst which are increased network
capacity requirements, passenger safety, and upgraded rolling stock
following new franchise awards or rail services. The recent
decisions by the DfT concerning certain franchise awards are now
expected to delay into 2020 the placement of one or two larger
orders that the Group had previously anticipated would be placed
during 2019. Nevertheless, the Group remains well placed to secure
other orders during the remainder of 2019 similar to the one above
placed by Bombardier.
The Group's other rail products are the track side software
solutions for safety critical support systems supplied by RTS
Solutions (RTS), acquired in May 2018. RTS, which enjoys a high
level of recurring revenues for software licencing and support,
continued to make steady progress during the period.
It was pleasing that shortly after the half year, RTS secured
the first of the projects affected by the customer related project
delays that affected its performance in 2018. The GBP0.3 million
order, which should be substantially completed by the year end, is
to provide additional functionality to a software safety system
operated by Network Rail that is already supported by RTS. There
are signs that the other main project that was affected may also be
resolved soon, although it is likely that this would not be
deliverable until 2020. While its initial rate of progress has been
slower than hoped, the Board remains confident that RTS has
considerable potential to expand and develop its business and
become a larger contributor to future Group profits.
Traffic product revenues were up 40% on the comparable period
last year, following a strong performance for the 2018 full year.
However, as order intake was slower than that seen in 2018 the
Board anticipates that Traffic revenues for 2019 are likely to
remain at a similar level to those achieved in 2018.
Nevertheless the organic growth strategy being pursued in this
area, built on introducing new products and services to meet
increasing customer requirements, is showing encouraging signs. To
support this strategy, investment in both QRO's operational and
product development capability was made. Amongst these have been
the relocation of QRO's operations to a more suitable facility
close to its previous premises in Northamptonshire, and the
recruitment of experienced product developers to the Traffic
products development team. While both increase the ongoing cost
base, the Board believes that the benefits will to be seen in the
results for 2020 and beyond.
As outlined in my opening remarks above, the difficulties
experienced in our Defence markets in the second half of 2018 have
continued into 2019. The Group's results for the first half of
2018, benefitted from a significant level of revenues relating to
the MOD radio catalogue framework agreement that the Group had held
for many years. Following the expiry of the agreement in September
2018 the Group's revenues from mobile radio systems have markedly
reduced. We understand that it is still the MOD's intention to
proceed with a re-tender process for the radio catalogue, the
timing of which is still uncertain. Once that takes place, we are
hopeful that Petards' experience in this sphere makes it well
placed to secure any new framework agreement.
While the radio catalogue's impact on revenues for the first
half year was anticipated, other delays in order placement,
tendering processes and customer programmes will mean that Defence
related revenues in the second half year of 2019 are likely to be
lower than previously expected. An example of this was the recently
announced GBP1.1 million contract awarded to Petards by a major UK
defence systems contractor to provide electronic countermeasures
equipment to be fitted to certain MOD aircraft. Whilst it was
pleasing to have added this to the order book, changes to its
scope, timing and delivery schedule mean that no deliveries will be
made in 2019 and the entire order is scheduled for delivery in
2020.
However, despite this there are a number of positives in the
Defence sector. There are a number of outstanding tenders across
the Group's entire Defence products range and as we have seen in
the past the outlook can change quite quickly with improving
circumstances. In addition, having confirmed customer interest,
some investment has been made in prototyping a video related
product that if successful, might give rise to a new area of future
business. Another bright spot is that the level of higher margin
Defence engineering services has held up well for which the Group
has the security of long-held framework contracts, the latest
extensions to which still have more than two years to run.
As eyeTrain software development activities have tapered off,
the number of subcontract engineers engaged has fallen
substantially reducing the cost and attendant cash outflow. The
Group has also taken the opportunity to re-balance certain other
areas of its business, the restructuring costs for which of circa
GBP0.1 million were expensed in the first half of the year.
While organic growth is an essential element, the Board's
approach to build and develop the Group means it continues to view
selective acquisitions as being the best way to accelerate the
Group's growth and to expand its source of revenue and
profitability. The Board remains active in its pursuit of this
strategy.
Financial review
Operating performance
Revenues for the six months ended 30 June 2019 totalled GBP8.9
million (30 June 2018: GBP9.7 million). While Defence related
revenues were significantly lower, those for Rail and Traffic
increased with Rail comprising over 70% of Group revenues for the
period. This change in mix gave rise to an increase in the reported
gross margin to 37.5% (June 2018: 34.6%). This offset the effect of
lower revenues with gross profit for the period totalling GBP3.3
million (June 2018: GBP3.3 million).
Administrative expenses were up GBP231,000 to GBP3.1 million
compared with the comparable period in 2018. On a like-for-like
basis the increase was GBP308,000 once the effect of the 2018 RTS
acquisition costs of GBP77,000 is taken into account. The primary
drivers of this increase were the investment made in QRO's product
development team, the relocation of QRO's operations and the other
Group restructuring costs referred to above.
Adjusted earnings before interest, tax, depreciation,
amortisation, acquisition costs and share based payment charges
("Adjusted EBITDA") were GBP766,000 (June 2018: GBP1,085,000) with
operating profits of GBP255,000 (June 2018: GBP517,000).
Net financial expenses totalled GBP49,000 (June 2018: GBP3,000)
and included interest on the term loan that funded the acquisition
of RTS in May 2018. A further GBP11,000 relates to the adoption of
IFRS 16 referred to below.
With no tax charge, profits before and after tax on the Group's
activities were GBP206,000 (June 2018: GBP514,000) giving rise to
diluted earnings per share of 0.35p for the first half of the year
(June 2018: 0.88p).
Impact of the implementation of IFRS 16
The Group has adopted IFRS 16 using the modified retrospective
approach to transition with effect from 1 January 2019. Upon
adoption, leases which had previously been classified as 'operating
leases' under IAS 17 are now been recognised on balance sheet as
lease liabilities. At 30 June 2019 the impact has been to increase
both the Group's net debt and tangible fixed assets by GBP0.5
million. Further details of the impact of the adoption of IFRS 16
are provided at note 4.
Cash, cash flow and net debt
While inventories reduced by GBP0.5 million since December 2018,
overall working capital increased by GBP1.5 million with
receivables increasing by GBP1.7 million. This increase in
receivables led to a cash outflow from operating activities for the
six months ended 30 June 2019 of GBP0.6 million (June 2018: GBP1.0
million inflow).
After investment in capitalised development expenditure of
GBP0.5 million, the net effect of IFRS right-of-use assets and
related liabilities and debt repayments of GBP0.2 million, cash
balances at 30 June 2019 were GBP0.8 million (31 Dec 2018: GBP2.1
million).
Net debt at 30 June 2019 was GBP0.7 million (Dec 2018: GBP1.0
million net cash), of which GBP0.5 million relates to the addition
of IFRS 16 lease liabilities that were previously off-balance sheet
at 31 December 2018 under the previous accounting standard.
Outlook
The Group continues to benefit from a good order book which at
30 June 2019 included revenues of almost GBP7 million for the
second half of 2019. This has been supplemented by orders received
since June, the majority of which will benefit 2020.
There is also a strong pipeline of new contracts under
negotiation which it is anticipated will add to the Group's order
book in due course. The Group continues to secure the majority of
opportunities available to it, although more recently the timing of
expected orders has been later than originally envisaged.
The Board remains confident in the Group's future prospects and
expects to return a satisfactory, albeit lower than previously
anticipated, performance for 2019 weighted towards the second half
of the year.
Raschid Abdullah
19 September 2019
Condensed Consolidated Income Statement
for the six months ended 30 June 2019
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
Note 2019 2018 2018
GBP000 GBP000 GBP000
Revenue 8,851 9,672 19,973
Cost of sales (5,536) (6,326) (13,089)
Gross profit 3,315 3,346 6,884
Administrative expenses (3,060) (2,829) (5,728)
---------- --------- ------------
Adjusted EBITDA* 766 1,085 2,057
Amortisation of intangibles (336) (364) (590)
Depreciation (160) (116) (209)
Acquisition costs - (77) (77)
Share based payment charges (15) (11) (25)
Operating profit 255 517 1,156
Financial income - 4 3
Financial expenses (49) (7) (33)
Profit before tax 206 514 1,126
Income tax 5 - - 17
Profit for the period attributable
to equity shareholders of
the company 206 514 1,143
---------- --------- ------------
Other comprehensive income
Other comprehensive income
for the period, net of tax - - -
Total comprehensive income
for the period 206 514 1,143
---------- --------- ------------
Basic earnings per share
(pence) 7 0.36 0.92 2.01
Diluted earnings per share
(pence) 7 0.35 0.88 1.95
---------- --------- ------------
* Earnings before financial income and expense, depreciation,
amortisation, acquisition costs, share based payment charges and
tax.
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2019
Share Share Equity Retained Total
capital premium Reserve earnings Equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2018 (audited) 558 1,473 25 5,174 7,230
Adjustment on initial application
of IFRS 15 * - - - (564) (564)
Adjusted balance at 1 January
2018 (audited) 558 1,473 25 4,610 6,666
Profit for the period - - - 514 514
-------- -------- -------- --------- -------
Total comprehensive income
for the period - - - 514 514
Exercise of share options 17 144 (11) 11 161
Equity-settled share based
payments - - - 11 11
-------- -------- -------- --------- -------
Balance at 30 June 2018
(unaudited) 575 1,617 14 5,146 7,352
-------- -------- -------- --------- -------
Balance at 1 January 2018 (audited) 558 1,473 25 5,174 7,230
Adjustment on initial application
of IFRS 15 * - - - (468) (468)
Adjusted balance at 1 January
2018 (audited) 558 1,473 25 4,706 6,762
Profit for the year - - - 1,143 1,143
-------- -------- -------- --------- -------
Total comprehensive income
for the year - - - 1,143 1,143
Exercise of share options 17 144 (11) 11 161
Equity-settled share based
payments - - - 25 25
-------- -------- -------- --------- -------
Balance at 31 December 2018
(audited) 575 1,617 14 5,885 8,091
-------- -------- -------- --------- -------
Balance at 1 January 2019 (audited) 575 1,617 14 5,885 8,091
Profit for the period - - - 206 206
-------- -------- -------- --------- -------
Total comprehensive income
for the period - - - 206 206
Equity-settled share based
payments - - - 15 15
-------- -------- -------- --------- -------
Balance at 30 June 2019
(unaudited) 575 1,617 14 6,106 8,312
-------- -------- -------- --------- -------
* The Group adopted IFRS 15 using the cumulative effect method,
under which the comparative information was not restated. The
cumulative effect of adopting IFRS 15 was recognised in equity at
the date of first adoption on 1 January 2018. The adjustment on
initial application included in the 2018 Interim Results of
GBP564,000 was stated before tax. This was revised to GBP468,000 in
the financial statements for the year ended 31 December 2018 to
include the related deferred tax charge.
Condensed Consolidated Statement of Financial Position
at 30 June 2019
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
ASSETS GBP000 GBP000 GBP000
Non-current assets
Property, plant and equipment 1,366 756 943
Intangible assets 4,797 3,819 4,676
Deferred tax assets 284 344 284
--------- --------- ------------
6,447 4,919 5,903
--------- --------- ------------
Current assets
Inventories 3,638 6,127 4,104
Trade and other receivables 4,139 3,886 2,553
Cash and cash equivalents 815 2,272 2,117
--------- --------- ------------
8,592 12,285 8,774
--------- --------- ------------
Total assets 15,039 17,204 14,677
========= ========= ============
EQUITY AND LIABILITIES
Equity attributable to equity
holders
of the parent
Share capital 575 575 575
Share premium 1,617 1,617 1,617
Equity reserve 14 14 14
Retained earnings 6,106 5,146 5,885
Total equity 8,312 7,352 8,091
--------- --------- ------------
Non-current liabilities
Interest-bearing loans and
borrowings 6 1,140 1,016 883
--------- --------- ------------
1,140 1,016 883
--------- --------- ------------
Current liabilities
Interest-bearing loans and
borrowings 6 375 265 265
Trade and other payables 5,212 8,571 5,438
--------- --------- ------------
5,587 8,836 5,703
--------- --------- ------------
Total liabilities 6,727 9,852 6,586
--------- --------- ------------
Total equity and liabilities 15,039 17,204 14,677
========= ========= ============
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2019
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2019 2018 2018
GBP000 GBP000 GBP000
Cash flows from operating
activities
Profit for the period 206 514 1,143
Adjustments for:
Depreciation 160 116 209
Amortisation of intangible
assets 336 364 590
Equity settled share-based
payment expenses 15 11 25
Financial income - (4) (3)
Financial expense 49 7 33
Income tax (credit)/charge - - (17)
--------- --------- ------------
Operating cash flows before movement
in working capital 766 1,008 1,980
Change in inventories 466 (2,724) 1,024
Change in trade and other
receivables (1,674) (61) 1,344
Change in trade and other
payables (250) 2,725 (1,834)
--------- --------- ------------
Cash (absorbed by)/generated
from operations (692) 948 2,514
Interest received - 4 3
Interest paid (49) (40) (58)
Income tax received 108 54 56
--------- --------- ------------
Net cash (outflow)/inflow
from operating activities (633) 966 2,515
--------- --------- ------------
Cash flows from investing
activities
Acquisition of subsidiary,
net of cash acquired - (1,169) (1,224)
Acquisition of property, plant
and equipment (27) (47) (325)
Capitalised development expenditure (457) (206) (1,444)
--------- --------- ------------
Net cash outflow from investing
activities (484) (1,422) (2,993)
--------- --------- ------------
Cash flows from financing
activities
Bank loan received - 1,250 1,250
Bank loan repaid (125) - (125)
Finance lease repayments - (7) (15)
Repayment of principal under
lease liabilities (60) - -
Proceeds from exercise of
share options - 161 161
--------- --------- ------------
Net cash (outflow)/inflow from
financing activities (185) 1,404 1,271
--------- --------- ------------
Net (decrease)/increase in
cash
and cash equivalents (1,302) 948 793
Cash and cash equivalents
at start of period 2,117 1,324 1,324
--------- --------- ------------
Cash and cash equivalents
at end of period 815 2,272 2,117
========= ========= ============
Cash and cash equivalents
comprise:
Cash and cash equivalents
per balance sheet 815 2,272 2,117
========= ========= ============
Notes
1 Reporting entity
Petards Group plc (the 'Company') is incorporated and domiciled
in England and its shares are publicly traded on the Alternative
Investment Market ('AIM') of the London Stock Exchange. These
condensed consolidated interim financial statements ('interim
financial statements') as at and for the six months ended 30 June
2019 comprise the Company and its subsidiaries (together referred
to as the 'Group'). The Group is primarily involved as a developer
of advanced security and surveillance systems.
Copies of these interim statements will be available on the
Company's website (www.petards.com) and from the Company's
registered office at Parallel House, 32 London Road, Guildford, GU1
2AB.
2 Basis of preparation
As permitted, these interim financial statements have been
prepared in accordance with AIM Rules for Companies and are not
required to comply with IAS 34 'Interim Financial Reporting' to
maintain compliance with IFRS. They should be read in conjunction
with the Group's last annual consolidated financial statements as
at and for the financial year ended 31 December 2018 ('last annual
financial statements'). They do not include all of the financial
information required for a complete set of IFRS financial
statements, however selected explanatory notes are included to
explain events and transactions that are significant to the
understanding of the changes in the Group's financial position and
performance since the last annual financial statements. This
financial information does not constitute statutory accounts as
defined in Section 435 of the Companies Act 2006.
The comparative amounts for the financial year ended 31 December
2018 in these interim statements are not the Group's statutory
accounts for that financial year. Those accounts have been reported
on by the Company's auditors and delivered to the Registrar of
Companies. The report of the auditors was (i) unqualified, (ii) did
not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
This is the first set of Group financial statements in which
IFRS 16 has been applied. The impact of the application of IFRS 16
is set out at Note 4. The Group's last annual financial statements
were the first set of Group financial statements in which IFRS 15
and IFRS 9 have been applied.
3 Use of judgements and estimates
In preparing these interim financial statements, management has
made judgements and estimates that affect the application of
accounting policies and the reported amounts of assets,
liabilities, income and expense. Actual amounts may differ from
these estimates.
The significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty were the same as those described in the last annual
financial statements, except for new significant judgements and the
key sources of estimation uncertainty related to the application of
IFRS 16, which are described at Note 4.
4 Changes in significant accounting policies
In preparing these interim financial statements, the Board have
considered the impact of new standards which will be applied in the
2019 annual financial statements. Other than the adoption of IFRS
16 ' Leases' which is effective for accounting periods starting on
or after 1 January 2019, there are not expected to be any changes
in the accounting policies compared with those applied for the
financial year ended 31 December 2018. A full description of these
accounting policies is contained in the Group's 2018 Annual Report
and Accounts, which is available on the Company's website.
These interim financial statements have been prepared in
accordance with the recognition and measurement requirements of
International Financial Reporting Standards issued by the
International Accounting Standards Board, as adopted by the
European Union as effective for periods beginning on or after 1
January 2019.
IFRS 16 Leases
The Group adopted IFRS 16 'Leases' with effect from 1 January
2019 using the modified retrospective approach to transition. The
new standard requires that the Group's leased assets are recorded
as right-of-use assets together with their corresponding lease
liabilities. Adoption of the new standard has had a material impact
on the Group's interim financial statements, with right-of-use
assets of GBP381,000 recognised on transition together with a
corresponding lease liability. As at 30 June 2019 the right-of-use
assets were GBP460,000 and the lease liabilities were
GBP460,000.
Under IFRS 16, the operating lease expense previously recorded
in operating costs of GBP62,000 has been replaced by a depreciation
charge of GBP51,000, which is lower than the operating lease
expense recognised under IAS 17, the previous accounting standard
for leases, and a separate interest expense of GBP11,000 has been
recorded in finance expense.
There has been no material overall profit or cash impact for the
six month period to 30 June 2019.
There was no impact on the application of IFRS 16 on opening
reserves on 1 January 2019.
On transition the lease liabilities have been measured at the
present value of the remaining lease payments, discounted using the
incremental borrowing rate on the date of transition. The
incremental borrowing rate applied to the Group's lease portfolio
on 1 January 2019 was 4.25%.
In addition, the Group applied the following available practical
expedients permitted by the standard:
-- the exclusion of leases relating to low-value assets (less
than GBP5,000 when new);
-- the exclusion of short-term leases, being those with a lease
term of 12 months or less;
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease; and
-- reliance on its assessment of whether leases are onerous
immediately prior to the date of transition.
The Group's lease accounting policy adopted from 1 January 2019
is as follows:
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, comprising the initial amount of the lease
liability plus any initial direct costs incurred and any lease
payments made at or before the lease commencement date, 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 the useful life of the asset or
the end of the lease term. 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 rate cannot readily be
determined, the incremental borrowing rate is used. The lease
liability is subsequently measured at amortised cost using the
effective interest method. It is re-measured when there is a change
in future lease payments arising from a change in an index or a
rate or a change in the Group's assessment of whether it will
exercise an extension or termination option. When the lease
liability is re-measured, a corresponding adjustment is made to the
right-of-use asset.
Judgements are involved in determining the lease term,
particularly if extension or termination options are included in
property leases across the Group. In determining the lease term,
management considers all facts and circumstances that create an
economic incentive to extend or termination a property lease.
Termination options are only included in the lease term if it is
reasonably certain that the lease will not be terminated. The
assessment of the lease term is reviewed if a significant event or
a significant change in circumstances occurs that is within the
control of the Group.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets are assets with a
value of less than GBP5,000 when new, typically small items of IT
equipment, office equipment and office furniture.
The Group's lease accounting policy adopted up to 31 December
2018 is as follows:
Finance leases
Leases in which the Group assumes substantially all the risks
and rewards of ownership of the leased asset are classified as
finance leases. Leased assets acquired by way of finance lease are
stated at an amount equal to the lower of their fair value and the
present value of the minimum lease payments at inception of the
lease, less accumulated depreciation and impairment losses.
Depreciation is charged to the income statement on a straight
line basis over the estimated useful lives of each part of an item
of property, plant and equipment.
Operating lease payments
Payments under operating leases are recognised in the income
statement on a straight line basis over the term of the lease.
Lease incentives received are recognised in the income statement as
an integral part of the total lease expense.
5 Taxation
No provision for taxation has been made in the Condensed
Consolidated Income Statement for the six months to 30 June 2019
based on the estimated tax provision required for the year ending
31 December 2019. No provision was required in the six months to 30
June 2018.
6 Interest-bearing loans and borrowings
This note provides information about the contractual terms of
the Group's interest-bearing loans and borrowings measured at
amortised cost.
Current liabilities
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2019 2018 2018
GBP000 GBP000 GBP000
Bank loan 250 250 250
Lease liabilities * 125 15 15
---------- ---------- -------------
375 265 265
========== ========== =============
* Includes GBP103,000 at 30 June 2019 as a result of the
application of IFRS 16.
Non-current liabilities
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2019 2018 2018
GBP000 GBP000 GBP000
Bank loan 750 1,000 875
Lease liabilities * 390 16 8
---------- ---------- -------------
1,140 1,016 883
========== ========== =============
* Includes GBP357,000 at 30 June 2019 as a result of the
application of IFRS 16.
7 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to the shareholders by the weighted
average number of shares in issue.
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2019 2018 2018
Earnings
Profit for the year (GBP000) 206 514 1,143
========= ========= ============
Number of shares
Weighted average number of ordinary
shares ('000) 57,468 56,047 56,752
========= ========= ============
Diluted earnings per share
Diluted earnings per share assumes conversion of all potentially
dilutive ordinary shares, which arise from share options, and is
calculated by dividing the profit for the period attributable to
the shareholders by the assumed weighted average number of shares
in issue.
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended 30 Year ended
June June 31 December
2019 2018 2018
Earnings
Profit for the year (GBP000) 206 514 1,143
========= ========= ============
Number of shares
Weighted average number of ordinary
shares ('000) 59,695 58,598 58,627
========= ========= ============
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SFDFIAFUSELU
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September 19, 2019 02:00 ET (06:00 GMT)
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