235212 Petards Cover spread 24/03/2015 11:47 Page 1
390 Princesway
Team Valley
Gateshead
Tyne and Wear
NE11 0TU
+44 (0) 191 420 3000
Tel:
Fax: +44 (0) 191 420 3030
www.petards.com
Group PLC
Group PLC
Annual Report and Accounts 2014
n
t i o
M o
Visionary Solutio n s fo r a W o rl d i n
235212 Petards Cover spread 24/03/2015 11:47 Page 2
Contents
Directors, Officers and Advisors 1
Chairman’s Statement 2
Strategic Report 5
Directors’ Report 7
Remuneration Report 10
Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements 12
Independent Auditor’s Report to the Members of Petards Group plc 13
Consolidated Income Statement 14
Consolidated Statement of Comprehensive Income 14
Statements of Changes in Equity 15
Balance Sheets 16
Statements of Cash Flows 17
Notes 18
Notice of Annual General Meeting 41
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 1
Directors, Officers and Advisors
Directors:
(Chairman)
Raschid Abdullah
Osman Abdullah
Terry Connolly FCA
Paul Negus
Andy Wonnacott FCA
Company Secretary:
Andy Wonnacott FCA
Registered Office:
390 Princesway
Team Valley
Gateshead
Tyne and Wear
NE11 0TU
Company Registration Number:
2990100
Independent Auditor:
Nominated Advisor & Joint Broker:
Joint Broker:
Registrar:
KPMG LLP
Quayside House
110 Quayside
Newcastle upon Tyne
NE1 3DX
WH Ireland Limited
4 Colston Avenue
Bristol
BS1 4ST
Hybridan LLP
Birchin Court
20 Birchin Lane
London
EC3V 9DU
Share Registrars
Suite E First Floor
9 Lion and Lamb Yard
Farnham
Surrey
GU9 7LL
Website:
www.petards.com
1
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 2
Chairman’s Statement
Corporate overview
I am pleased to report that for the year to 31 December 2014 Petards Group plc (“Petards” or “the Group” or “the Company”) recorded pre-
tax profits of £620,000 building on the return to pre-tax profitability of £273,000 announced at the interim stage.
This has been achieved with no diminution of order book which stood at £20 million at the start of 2015 of which over 50% is scheduled to
be delivered in the current year.
The Group’s strengthened financial position has also enabled investment to be made in both our people and products, which the Board
have continued into 2015.
Operating review
The Group serves three sectors, those of:
•
•
•
Transport (Rail – software driven video systems mounted in-train and externally and automatic passenger counting systems)
Defence (Electronic defensive countermeasures and mobile radio systems predominantly to the UK Ministry of Defence (“MOD”))
Emergency Services (Mobile speed enforcement and ANPR systems predominantly to the Law Enforcement Agencies sold under the
Provida brand).
Having built a solid foundation for the future based on a strong order book and appropriate financing in the latter part of 2013, the
challenges faced by the Group in 2014 were to continue to develop the Group’s potential while profitably delivering on the order book and
at the same time maintaining its level. I am pleased to say that these challenges were met successfully.
The Board’s strategy to develop the Group’s presence in the new train build market continues to bear fruit. At the half year stage I reported
on the five year framework agreement that the Group had entered into with Siemens’ rail business. To date, under the framework
agreement two significant orders have been obtained. While under the framework agreement there can be no guarantee that future
business will be obtained, it has provided Petards with the opportunity to develop its strategic relationship with Siemens, a leader in the
global rail market.
In addition, during the year significant orders as well as day to day transactional business was obtained from other leading global new train
builders including Bombardier Transportation and Hitachi Rail Europe.
While every new train builder has its own preferred way of operating with its suppliers, wherever possible it remains management’s
objective to seek to work closer with its customers in the areas of product development and service within an established framework.
Defence products continue to form an important part of the Group’s revenues and profitability with several significant contracts being
secured during the year, in particular a £4.5 million order from the MOD in June to modify electronic countermeasures equipment fitted to
many of its aircraft was followed in December by an order from MOD for in excess of £1 million for electronic countermeasures equipment
for helicopters in the Royal Navy’s Merlin fleet.
In addition, the Board and management were pleased to be awarded by the MOD in open tender an ‘enabling contract’ to supply it with
private mobile radio equipment, ancillaries and engineering support. The contract, which has historically produced annual revenues of
circa £500,000, is for two years with the MOD having the option to extend for a further two years and replaces the previous contract the
Company had held for a number of years.
While Emergency Services forms the smallest of the three areas in which Petards operates it is a useful contributor of revenue working from
a small operational cost base and provides a useful contribution when measured on returns on capital employed and Group resources
utilised. Its Provida 4000 in-car video evidence and speed enforcement system remains one of only two such systems that currently have UK
Home Office Type Approval. During the year it received a steady flow of orders from UK Law Enforcement Agencies with trading in the
second half year being broadly similar to that experienced in the first half. As well as the home market, Emergency Services products also
have the potential for sales to overseas markets, an area of marketing activity management intends to selectively pursue in 2015.
2
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 3
Revenues for eyeTrain products were higher in the second half of the year with deliveries on projects for Bombardier, Hyundai Rotem and
Siemens being the main contributors. The MOD’s Secure Management Radio Equipment (“SMRE”) project won in 2013 formed a significant
proportion of Defence revenues in the first half year. However, as the majority of the related equipment had been delivered by June,
deliveries in the second half were much less significant and by the year end almost 95% of the equipment had been delivered. The SMRE
contract includes £1.7 million for the support of that equipment for 10 years, revenues for which will be recognised over the period that
the support is provided.
As I reported in September, our ‘Fit 4 Growth’ is now focussed on the continuous improvement and development of the Group.
Since the beginning of the second half of 2014, additional resources have been recruited to support both increased levels of activity and to
enhance the Group’s business and product development service offering to its customers. The Board recognises the importance of such
costs remaining in step with revenues and profitability and as such they will continue to be closely monitored.
Overview of the results
The results for 2014 benefitted significantly from a strong opening order book with revenues more than doubled to £13.5 million (2013:
£6.3 million) on which the Group made an operating profit of £0.8 million (2013: £1.3 million loss). While revenues for Provida remained flat,
those for eyeTrain and Defence products both saw increases well in excess of 100% over the previous year resulting from significant orders
received from the MOD, Siemens, Bombardier and Hyundai Rotem.
Gross margin for the second half year was higher than that achieved in the first half year at 33.8% (H1 2014: 27.4%) and totalled 30.4% for
the year (2013: 40.4%). The differing product mix was the principal reason for this improvement as the first half year, in line with
management’s forecasts, included the supply of a significant volume of lower margin third party equipment on the SMRE project whereas
the second half revenues included a much greater proportion of Petards own eyeTrain related products and services.
Administrative expenses of £3.3 million for the year remained tightly controlled and were £0.5 million lower than the prior year when they
totalled £3.8 million including £0.3 million of restructuring costs.
Net financial expenses were £0.1 million almost all of which related to cash and amortised interest on the 7% convertible loan notes issued
in September 2013. The prior year net expense of £1.1 million included exceptional finance costs of £1.0 million relating to the debt for
equity swap undertaken with Water Hall Group in 2013.
As a consequence of brought forward losses from previous years, there is no tax payable in respect of the Group’s profit for the year (2013:
£0.1 million credit) resulting in a profit after tax of £0.6 million (2013: £2.3 million loss).
The profits generated in the year served to further strengthen the balance sheet and shareholders’ funds increased to £2.4 million (2013:
£1.7 million). While working capital increased slightly in the second half year the Group generated an operating cash inflow for the year of
£0.8 million (2013: £1.3 million cash outflow). After investing activities, primarily related to product development, net debt remained at
£0.1 million (2013: £0.1 million) and comprised convertible loan notes which mature in September 2018 of £1.5 million net of cash balances
of £1.4 million.
Dividends
The Board is conscious of the value of dividends to investors. While the return to profitability is encouraging and the balance sheet is in
good shape, the Board would wish to see further evidence of the Group’s recovery before recommending joining the dividend list. In
addition, the Company has a considerable deficiency on its distributable reserves which in any event presently prevents the payment of
dividends.
In anticipation that the Group’s recovery will prove sustainable during 2015 and beyond, it is the intention of the Board to review how best
to address this matter. Any solution to clear the way for dividend payments at the appropriate time is likely to require the consent of both
shareholders and the Court.
Product development
The Board recognises the importance of the Group investing to develop its portfolio of products and services to both maintain its
competitive position and to grow revenues. Costs for product development for the year that totalled almost £0.75 million, were
predominantly focussed on the development of the Petards eyeTrain product which the Board believes is an area of the Group’s business
that offers significant growth potential. While remaining a key area of focus for both eyeTrain and Provida, the level of development
expenditure required in 2015 to achieve this is anticipated to be significantly lower.
3
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 4
Chairman’s Statement
(continued)
Personnel
While directors formulate strategy and set capital allocation, performance objectives and key management rewards for the Group, delivery
thereon is very much the result of the efforts and commitment of our people at operational level. Over the past 18 months, Petards Joyce-
Loebl, the Company’s operational unit located in Gateshead, has undergone considerable change in operating structure and personnel with
approximately 35% either having moved on or been replaced and others taking broader roles and more responsibility coupled with
accountability.
On behalf of the Board I welcome those who have joined the Company during 2014 and thank all our people for their valued contribution to
the delivery of a significant improvement in the Group’s operating performance. The Board looks forward to their continued support and
contribution in 2015 which it believes has the ingredients to be an exciting period in the Group’s development.
Strategy
The Board believes that Petards operates in growth areas and that it has the products and services plus available technical and technological
skills to develop new products as well as the sales and marketing abilities to become a larger and more successful operator in each of the
sectors in which it operates.
The Group’s relationships with its predominantly international ‘blue chip’ and government agency customer base and their strength, often
global, in the sectors which the Company serves gives rise to the opportunity to develop Petards business through the provision of good
quality professional service in support of its existing and future product ranges.
While the Board is mindful of economic cycles and the impact they can have on businesses and business plans, and the risks associated with
over expansion, it believes that in the short to medium term the current management structure coupled with the balance sheet and financial
stability of the Group, is capable of continued implementation of the Strategy in pursuit of the achievement of its strategic objectives.
Further details of the underlying key elements and risks of the Board’s strategy will be found on pages 5 and 6 of the Report & Accounts.
Outlook
Investment in new rail transport rolling stock has continued to benefit from government initiatives around the world and there is no obvious
sign that this is to likely change in the foreseeable future. The directors are confident that UK rail operating franchise renewals over the
coming years will result in new opportunities for Petards’ products and services.
Petards position as a long established specialist “value added” re-seller within the UK defence industry is expected to continue to provide a
platform to develop this area of the Group’s business. While defence budgets remain under scrutiny the areas in which the Group operates
are niche and are not expected to be materially affected. Further, the Board believes that with additional management attention and
resource being devoted to it, the Emergency Services will make a larger contribution to Group sales and profits in 2015.
I am pleased to say for the year to date the Group has traded in line with expectations and that it remains well placed to add to the
achievements of 2014. The visibility provided by the Group’s current forward order book and its pipeline of order prospects provides the
Board with confidence that further progress will be made in 2015.
Raschid Abdullah
Chairman
13 March 2015
4
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 5
Strategic Report
The directors present their strategic report for the year ended 31 December 2014.
Principal activities and business model
Petards Group plc was listed on AIM in 1997 and the Group supplies advanced security and surveillance systems to three markets:
Transport – Software driven on-board digital video and sensor systems for fitment to new build or retrofitted to existing rolling stock.
Applications include Driver Only Operation (DOO), condition monitoring, saloon car CCTV, drivers view cameras and automatic passenger
counting systems.
Defence – Electronic defensive countermeasure systems for fitment to rotary and fixed wing aircraft, threat simulation systems and mobile
radios predominantly for the UK Ministry of Defence.
Emergency Services – Mobile speed enforcement and ANPR systems mainly supplied to law enforcement agencies and is sold under the
Provida brand.
The Group’s customer base predominantly comprises international ‘blue chip’ and government agencies and their strength, often global,
gives rise to the opportunity to develop Petards business through the provision of good quality professional service in support of its existing
and future product ranges.
The Group develops its own products and services for sale to the Transport and Emergency Services markets whereas within the Defence
market, in which it has a heritage of over 60 years, it is a specialist “value added” re-seller and supplier of related engineering services.
The Board believes that the Group operates in growth areas and that it has the products and services plus available technical and
technological skills to develop new products as well as the sales and marketing abilities to become a larger and more successful operator in
each of the sectors in which it operates.
The Group’s overriding objective is to achieve attractive and sustainable rates of growth and returns for shareholders and its strategy to
achieve this objective is:
•
•
•
•
•
to focus upon the Group’s core products which are used in the rail transport, emergency services and defence industries;
to continue to invest in developing technologies to enhance its product portfolio;
to increase revenues both organically by exploiting the synergies within the Group and by acquisition;
to expand revenues globally into the Group’s target markets; and
to improve operating margins through cost management.
Business review and results
A review of the development and performance of the Group’s business during the financial year, and of its position at the end of the year,
are included in the Chairman’s Statement. Key performance indicators and further information on the principal risks and uncertainties facing
the Group are shown below.
Key performance indicators
The Group uses a number of key performance indicators (KPIs) to monitor its progress against its objectives. In addition to on time delivery
and quality standards, the key KPIs are:
Revenue
EBITDA
Operating cash inflow/(outflow)
Total net cash/(debt)
Current net cash/(debt)
2014
£000
13,462
1,015
761
(90)
1,434
2013
£000
6,259
(716)
(1,263)
(78)
1,440
5
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 6
Strategic Report
(continued)
Total net cash/(debt) comprises cash and cash equivalents (note 16) and interest bearing loans and borrowings (note 17).
Current net cash/(debt) comprises cash and cash equivalents (note 16) and current liabilities in respect of interest bearing loans and
borrowings (note 17).
EBITDA comprises operating profit/(loss) adjusted to remove the impact of depreciation, amortisation, exceptional items and share based
payments. A reconciliation of EBITDA to operating profit/(loss) is included on the face of the income statement.
Principal risks and uncertainties
The management of the business and the execution of the Group’s strategy is subject to a number of risks. The main business risks affecting
the Group are as follows:
The Group may face increased competition – the Group may face greater competition including that from competitors with greater capital
resources than those of the Group.
The Group may need future access to capital – the Group’s capital requirements depend on numerous factors. In order to make future
acquisitions and to fund growth, the Group may require further financing. This may not be able to take place if financing is not available.
The financial results of the Group can be materially affected by the timing of large contracts – the Group’s revenue is generated from a
mix of longer and shorter lead time orders. The timing of order placement and delivery of the larger orders is inherently difficult to predict
potentially causing material fluctuations in actual results compared with expectations or plans.
Government expenditure – many of the industries that utilise the Group’s products receive funding from central and local governments. The
levels of funding for those industries may impact on demand for the Group’s products. The Group has sought to mitigate this potential
exposure by increasing its geographic customer base and by supplying a range of products and services.
Dependence on key personnel – the Group’s performance depends to a significant extent upon a limited number of key employees. The loss
of one or more of these key employees and the inability to recruit people with the appropriate experience and skills could have a material
adverse effect on the Group. The Group has endeavoured to ensure that these key employees are incentivised but their retention cannot be
guaranteed.
Technological changes – the Group’s product offerings may be under threat should technologies be developed by competitors that render
those products either redundant or uncompetitive. This could potentially result in a reduction in revenues generated by the products
affected. The Group also incurs expenditure in developing new products and services. Should such development projects not be successfully
completed or result in offerings that are not attractive to customers, the costs incurred may not be fully recoverable.
Currency risk – the Group buys from suppliers and sells to customers based outside of the UK and consequently these dealings may be in
foreign currencies that are subject to exchange rate fluctuations. The Group actively manages these exposures with foreign currency
instruments, unless there is a natural hedge between purchases and sales. The principal currencies involved are US dollars and Euros.
Further details regarding the key accounting estimates and judgements are included in note 1.
Future developments
A review of future developments is set out in the Outlook section of the Chairman’s Statement.
Signed on behalf of the Board
Raschid Abdullah
Director
390 Princesway
Team Valley
Gateshead
Tyne and Wear
NE11 0TU
13 March 2015
6
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 7
Directors’ Report
The directors present their report and financial statements for the year ended 31 December 2014.
Research and development
The Group is committed to research and development activities in order to secure competitive advantage in the markets in which it
operates. An amount of £661,000 (2013: £371,000) has been capitalised during the year which relates to the ongoing development of our
eyeTrain products. In addition, the Group expensed other development expenditure totalling £80,000 (2013: £132,000) directly to the
income statement.
Corporate governance
The Board supports the recommendations of the Financial Reporting Council’s revised Corporate Governance Code and believes in applying
these in a sensible and pragmatic manner taking into account the size of the Group. Companies with securities listed on AIM are not required
to comment on their compliance with the provisions set out in the Corporate Governance Code. However, the following information is
provided to demonstrate how the directors have addressed Corporate Governance in the year ended 31 December 2014.
Board of Directors and Directors’ interests
The Board currently comprises an executive Chairman, three executive and one non-executive directors as follows:
Raschid Abdullah (Executive Chairman) was appointed to the Board in January 2013 and until its purchase by Petards, was also executive
chairman of Water Hall Group plc, an AIM listed company. He was previously executive chairman of Evered Holding plc, a fully listed public
company specialising in industrial and quarry related products, from 1982 to 1989. Raschid started his commercial life within the
construction industry in the areas of building product supplies and the provision of specialist subcontracting services starting his first
business in 1971 which he sold to a competitor in 1976. He then joined the family business providing a range of services to clients in the
Middle East. These included owning and operating family and procurement offices for prominent families and their businesses, and co-
investing in the UK stock market with a number of Middle Eastern families. He is a Life Fellow of the Royal Society of Arts.
Osman Abdullah (Director) was appointed in September 2010 as a non-executive director becoming chairman of Petards Joyce-Loebl, the
Group’s principal trading subsidiary, in 2013, to oversee its reorganisation and implementation of the ‘Fit for Growth’ programme. Given the
nature of these additional responsibilities and the likelihood that they will continue for the foreseeable future his position on the board is
now considered to be that of an executive director. He was Chief Executive of Evered Holdings plc, a fully listed public company specialising
in industrial and quarry related products from 1981 to 1989. He also served as a non-executive director of Umeco plc from 1993 to 2005
which achieved considerable acquisition and product led growth over that period. He has a broad range of commercial experience with
industrial and supply chain businesses together with extensive experience in the Middle East, particularly in Saudi Arabia.
Terry Connolly FCA (non-executive Director) was appointed in August 2007 and had a career in advertising and the entertainment sector
where, as Group Managing Director of Chrysalis, he was responsible for taking that company to a public listing. Since 1989 he has been a
self-employed consultant specialising in strategic and corporate affairs.
Paul Negus (Director) was appointed to the Board on 3 September 2014 and is responsible for business development for Petards Joyce-
Loebl’s rail products. He has considerable commercial experience having spent eight years as Managing Director of PIPS Technology Limited,
a developer of automatic number plate recognition and CCTV systems first under private ownership and latterly under the ownership of
Federal Signal Inc.
Andy Wonnacott FCA (Finance Director) was appointed to the Board in March 2005. He has many years’ experience having held both finance
director and group controllership positions within private equity backed and fully listed UK businesses operating in global markets in the
defence, rail, space and capital goods industries having spent the first ten years of his career with Ernst & Young.
Bill Conn served as a non-executive director during the year but stepped down as a director on 13 January 2014.
Directors’ interests in the share capital of the Company are set out in the Remuneration Report.
The Board meets monthly to consider the operating and financial performance of the Group and is responsible for approving Group policy
and strategy. The non-executive director is considered to be independent of management and free from any commercial relationship
(except as a shareholder) with the Company, thereby allowing him to exercise full independent judgement on any issue that may arise. The
Board has appointed two standing committees, which are as follows:
7
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 8
Directors’ Report
(continued)
The Audit Committee convenes at least twice a year and is responsible for ensuring that the financial performance of the Group is properly
reported on and monitored, and for meeting the auditors and reviewing their reports in relation to the accounts and the audit.
The Remuneration Committee convenes at least twice a year and is responsible for setting the scale and structure of the executive
directors’ remuneration. It also recommends the allocation of share options to directors and other employees.
The responsibilities of both Committees are presently undertaken by the Company’s Senior Independent Director, Terry Connolly, who
chairs these Committees and who seeks independent advice from outside advisors as he feels is appropriate and necessary.
The functions of the Nomination Committee are performed by the Board as a whole.
Internal control
The Board is ultimately responsible for the Group’s system of internal control and for reviewing its effectiveness. Any such system can only
be designed to manage, rather than eliminate, the risk of failure to achieve the Company’s objectives and can only provide reasonable,
rather than absolute, assurance against material misstatement or loss.
The directors monitor the operation of internal controls. The objective of the system is to safeguard Group assets, ensure proper
accounting records are maintained and that the financial information used within the business and for publication is reliable. Internal
financial control procedures undertaken by the Board include the review and approval of annual budgets, review of monthly financial
reports and monitoring performance against budget, prior approval of all significant expenditure including all major investment decisions,
and review of treasury policy.
The Board has reviewed the operation and effectiveness of the Group’s system of internal controls for the financial period and the period
up to the date of approval of the financial statements.
Financial instruments and financial risk management
The Group finances its operations through a mixture of cash resources, retained earnings, convertible loan notes and share capital. Its
principal financial instruments comprise cash and convertible loan notes together with trade receivables and trade payables.
The Group’s other financial instruments arise from its day to day operations and comprise primarily of short term debtors and creditors
and, where deemed appropriate, forward currency contracts.
Further details of the Group’s financial instruments are given in note 23 to the financial statements and the directors consider the principal
risks associated with the Group’s financial instruments to be liquidity risk and currency risk.
Employment policies
The Group has established policies to comply with the relevant legislation and codes of practice regarding employment and equal
opportunities. It keeps its employees informed of matters affecting them as employees through regular team briefings throughout the year
and has a policy that training, career development and promotion opportunities should be available to all employees.
It is our policy to give full and fair consideration to applications for employment by people who are disabled, to continue wherever possible
the employment of staff who become disabled and to provide equal opportunities for the career development of disabled employees.
Disclosure of information to auditor
The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware, there is no relevant
audit information of which the Company’s auditor is unaware; and each director has taken all the steps that they ought to have taken as a
director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that
information.
8
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 9
Substantial shareholdings
At 9 March 2015 the Company was aware of the following disclosable interests in three percent or more of its issued share capital.
Name of holder
El-Khereiji Financial Company WLL
PFS Downing Active Management Fund
Mr A Perloff
Charwell Investments Limited
Mr O Abdullah
Mr R Abdullah
Mr P Lobbenberg and Family
Number
of shares
Percentage
held
2,871,756
2,325,000
1,750,000
1,694,592
1,208,198
1,206,118
1,153,050
8.3%
6.7%
5.0%
4.9%
3.5%
3.5%
3.3%
Going concern
After making detailed enquiries, the Board has a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future and accordingly continues to prepare the financial statements on a going concern basis.
Auditor
In accordance with section 489 of the Companies Act 2006, a resolution for the appointment of KPMG LLP as auditor of the Company is to
be proposed at the forthcoming Annual General Meeting.
By order of the Board
Andy Wonnacott
Company Secretary
390 Princesway
Team Valley
Gateshead
Tyne and Wear
NE11 0TU
13 March 2015
9
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 10
Remuneration report
Remuneration Committee
The Remuneration Committee is presently comprised of and chaired by Mr T Connolly.
Remuneration Policy
The Remuneration Committee reviews the performance of executive directors and sets the scale and structure of their remuneration and
other benefits. Individual rewards and incentives are aligned with the performance of the Group and the interests of the shareholders and
are set at an appropriate level in order to attract, retain and motivate executives who are expected to meet challenging performance criteria.
The committee also recommends the allocation of share options to directors and other employees.
Service Contracts
No directors have contracts of service with notice periods that exceed 12 months.
Directors’ Emoluments
Details of individual director’s emoluments are set out in note 4 to the financial statements.
Directors’ Share Interests
The directors’ beneficial interests in the shares of the Company at the year end were as follows:
R Abdullah
O Abdullah
T Connolly
P Negus
A Wonnacott
*at date of appointment.
Ordinary Shares
of 1p each
Ordinary Shares
of 1p each
At 31 December 2014 At 31 December 2013
1,206,118
1,208,198
30,000
–
20,000
1,206,118
1,208,198
30,000
–*
20,000
Directors’ Interests in Share Options
At 31 December 2014 the number of options to subscribe for ordinary shares of 1p held by directors were as follows:
R Abdullah
O Abdullah
A Wonnacott
Number of
options at
1 January
2014
1,312,500
1,312,500
46,100
19,800
30,000
Surrendered
during
the year
–
–
(46,100)
(19,800)
(30,000)
Number of
options at
31 December
2014
1,312,500
1,312,500
–
–
–
Exercise price
£
Date first
exercisable
0.08
0.08
1.60
1.00
1.00
25.11.13
25.11.13
07.03.08
17.01.09
27.07.09
Expiry
date
24.11.23
24.11.23
06.03.15
16.01.16
26.07.16
10
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 11
None of the directors exercised any options during the year.
The share price at 31 December 2014 was 11.9p and the share price has ranged during the year from 8.9p to 14.0p.
There have been no changes to directors’ interests since the year end.
Non-executive Directors
Fees for non-executive directors are determined by the Board as a whole having regard to the time devoted to the Company’s affairs. Non-
executive directors are not part of any pension, share option or bonus schemes of the Group.
Terry Connolly
Director
13 March 2015
11
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 12
Statement of Directors’ Responsibilities in Respect of the
Annual Report and the Financial Statements
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare group and parent company financial statements for each financial year. As required by AIM
Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the
EU and applicable law and have elected to prepare the parent company financial statements on the same basis.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and parent
company financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent
company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s
website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
12
235212 Petards Annual Report pp01-pp13 24/03/2015 12:17 Page 13
Independent Auditor’s Report to the Members of
Petards Group plc
We have audited the financial statements of Petards Group plc for the year ended 31 December 2014, set out on pages 14 to 40. The
financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 12, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on,
the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2014
and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in
accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Nick Plumb (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Quayside House
110 Quayside
Newcastle upon Tyne
NE1 3DX
13 March 2015
13
235212 Petards Annual Report pp14-pp17 24/03/2015 12:18 Page 14
Consolidated Income Statement
For year ended 31 December 2014
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit/(loss)
Analysed as:
Earnings before interest, tax, depreciation and amortisation (‘EBITDA’)
Depreciation and amortisation
Share based payments
Restructuring costs
Financial income
Financial expenses
Profit/(loss) before tax
Income tax
Profit/(loss) for the year attributable to equity shareholders of the parent
Earnings per ordinary share (pence)
Basic
Diluted
Note
2
3, 4
5
5
6
8
8
2014
£’000
13,462
(9,370)
–––––––––
4,092
(3,323)
–––––––––
769
1,015
(246)
–
–
–––––––––
769
–––––––––
–––––––––
3
(152)
–––––––––
620
–
–––––––––
620
–––––––––
–––––––––
1.80
1.37
–––––––––
–––––––––
2013
£’000
6,259
(3,733)
–––––––––
2,526
(3,856)
–––––––––
(1,330)
(716)
(308)
–
(306)
–––––––––
(1,330)
–––––––––
–––––––––
20
(1,078)
–––––––––
(2,388)
95
–––––––––
(2,293)
–––––––––
–––––––––
(15.87)
(15.87)
–––––––––
–––––––––
Consolidated Statement of Comprehensive Income
For year ended 31 December 2014
Profit/(loss) for the year
Other comprehensive income
Items that may be reclassified to profit:
Currency translation on foreign currency net investments
Total comprehensive income for the year
2014
£’000
620
2013
£’000
(2,293)
–
–––––––––
620
–––––––––
–––––––––
(13)
–––––––––
(2,306)
–––––––––
–––––––––
14
235212 Petards Annual Report pp14-pp17 24/03/2015 12:18 Page 15
Statements of Changes in Equity
For year ended 31 December 2014
Group
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Equity
reserve
£’000
Retained
earnings
£’000
Balance at 1 January 2013
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Purchase of own shares
Sale of own shares
Water Hall transaction (note 3)
Share issue: placing
Expenses of share issue
Conversion of convertible loan notes
Balance at 31 December 2013
Balance at 1 January 2014
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Conversion of convertible loan notes
Exercise of share options
Balance at 31 December 2014
6,412
–
–
–––––––––
–
(592)
592
110
115
–
8
–––––––––
6,645
–––––––––
–––––––––
6,645
–
–
–––––––––
–
4
2
–––––––––
6,651
–––––––––
–––––––––
24,152
–
–
–––––––––
–
–
–
–
1,035
(87)
53
–––––––––
25,153
–––––––––
–––––––––
25,153
–
–
–––––––––
–
23
16
–––––––––
25,192
–––––––––
–––––––––
–
–
–
–––––––––
–
–
–
1,112
–
(37)
–
–––––––––
1,075
–––––––––
–––––––––
1,075
–
–
–––––––––
–
–
–
–––––––––
1,075
–––––––––
–––––––––
–
–
–
–––––––––
–
–
–
213
–
–
(7)
–––––––––
206
–––––––––
–––––––––
206
–
–
–––––––––
–
(2)
–
–––––––––
204
–––––––––
–––––––––
(28,849)
(2,293)
–
–––––––––
(2,293)
–
3
–
–
–
7
–––––––––
(31,132)
–––––––––
–––––––––
(31,132)
620
–
–––––––––
620
2
–
–––––––––
(30,510)
–––––––––
–––––––––
Currency
translation
differences
£’000
(198)
–
(13)
–––––––––
(13)
–
–
–
–
–
–
–––––––––
(211)
–––––––––
–––––––––
(211)
–
–
–––––––––
–
–
–
–––––––––
(211)
–––––––––
–––––––––
Total
equity
£’000
1,517
(2,293)
(13)
–––––––––
(2,306)
(592)
595
1,435
1,150
(124)
61
–––––––––
1,736
–––––––––
–––––––––
1,736
620
–
–––––––––
620
27
18
–––––––––
2,401
–––––––––
–––––––––
Company
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Equity
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at 1 January 2013
6,412
24,152
–
–
(24,615)
5,949
Loss for the year
Total comprehensive income for the year
Water Hall transaction (note 3)
Share issue: placing
Expenses of share issue
Conversion of convertible loan notes
Balance at 31 December 2013
Balance at 1 January 2014
Loss for the year
Total comprehensive income for the year
Conversion of convertible loan notes
Exercise of share options
Balance at 31 December 2014
–
–––––––––
–
110
115
–
8
–––––––––
6,645
–––––––––
–––––––––
6,645
–
–––––––––
–
4
2
–––––––––
6,651
–––––––––
–––––––––
–
–––––––––
–
–
1,035
(87)
53
–––––––––
25,153
–––––––––
–––––––––
25,153
–
–––––––––
–
23
16
–––––––––
25,192
–––––––––
–––––––––
–
–––––––––
–
1,112
–
(37)
–
–––––––––
1,075
–––––––––
–––––––––
1,075
–
–––––––––
–
–
–
–––––––––
1,075
–––––––––
–––––––––
–
–––––––––
–
213
–
–
(7)
–––––––––
206
–––––––––
–––––––––
206
–
–––––––––
–
(2)
–
–––––––––
204
–––––––––
–––––––––
(1,922)
–––––––––
(1,922)
–
–
–
7
–––––––––
(26,530)
–––––––––
–––––––––
(26,530)
(10)
–––––––––
(10)
2
–
–––––––––
(26,538)
–––––––––
–––––––––
(1,922)
–––––––––
(1,922)
1,435
1,150
(124)
61
–––––––––
6,549
–––––––––
–––––––––
6,549
(10)
–––––––––
(10)
27
18
–––––––––
6,584
–––––––––
–––––––––
Further details of the Merger reserve and Equity reserve can be found in notes 21 and 22.
15
235212 Petards Annual Report pp14-pp17 24/03/2015 12:18 Page 16
Balance Sheets
At 31 December 2014
Note
9, 10
11
11
12
13
14
15
16
16
20
22
21
17
18
13
17
18
ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Development costs
Investments in subsidiary undertakings
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents – escrow deposits
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital
Share premium
Equity reserve
Merger reserve
Currency translation reserve
Retained earnings deficit
Total equity
Non-current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Deferred tax liabilities
Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Total liabilities
Total equity and liabilities
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
187
401
1,103
–
516
–––––––––
2,207
–––––––––
1,439
2,982
54
1,434
–––––––––
5,909
–––––––––
8,116
–––––––––
6,651
25,192
204
1,075
(211)
(30,510)
–––––––––
2,401
–––––––––
–––––––––
1,524
–
100
–––––––––
1,624
–––––––––
–
4,091
–––––––––
4,091
–––––––––
5,715
–––––––––
–––––––––
8,116
–––––––––
–––––––––
165
401
640
–
653
–––––––––
1,859
–––––––––
1,779
983
–
1,440
–––––––––
4,202
–––––––––
6,061
–––––––––
6,645
25,153
206
1,075
(211)
(31,132)
–––––––––
1,736
–––––––––
–––––––––
1,518
–
128
–––––––––
1,646
–––––––––
–
2,679
–––––––––
2,679
–––––––––
4,325
–––––––––
–––––––––
6,061
–––––––––
–––––––––
–
–
–
9,395
144
–––––––––
9,539
–––––––––
–
4,790
–
898
–––––––––
5,688
–––––––––
15,227
–––––––––
6,651
25,192
204
1,075
–
(26,538)
–––––––––
6,584
–––––––––
–––––––––
1,524
3,567
–
–––––––––
5,091
–––––––––
–
3,552
–––––––––
3,552
–––––––––
8,643
–––––––––
–––––––––
15,227
–––––––––
–––––––––
–
–
–
9,395
144
–––––––––
9,539
–––––––––
–
4,756
–
1,014
–––––––––
5,770
–––––––––
15,309
–––––––––
6,645
25,153
206
1,075
–
(26,530)
–––––––––
6,549
–––––––––
–––––––––
1,518
3,567
–
–––––––––
5,085
–––––––––
–
3,675
–––––––––
3,675
–––––––––
8,760
–––––––––
–––––––––
15,309
–––––––––
–––––––––
These financial statements were approved by the board of directors on 13 March 2015 and were signed on its behalf by:
Raschid Abdullah
Director
Registered number: 2990100
16
235212 Petards Annual Report pp14-pp17 24/03/2015 12:18 Page 17
Statements of Cash Flows
For year ended 31 December 2014
Note
Group
Company
9
11
5
5
19
6
Cash flows from operating activities
Profit/(loss) for the year
Adjustments for:
Depreciation
Amortisation of intangible assets
Financial income
Financial expense
Equity settled share-based payment expenses
Income tax (credit)/charge
Exchange differences
Operating cash flows before movement in
working capital
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Cash generated from operations
Interest received
Interest paid
Tax received
Net cash from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Capitalised development expenditure
Cash deposits held in escrow
Net cash outflow from investing activities
9, 10
11
16
Cash flows from financing activities
Proceeds from exercise of share options
Proceeds from share issue
Expenses of share issue
Water Hall transaction
Proceeds from sale of own shares
Repayment of bank borrowings
Net cash inflow from financing
activities
Net (decrease)/increase in cash and cash
equivalents
Water Hall transaction: Settlement of working
capital facility
Total movement in cash and cash equivalents in the year
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
3
3
16
2014
£’000
620
48
198
(3)
152
–
–
–
–––––––––
1,015
(2,035)
340
1,340
–––––––––
660
3
(110)
208
–––––––––
761
–––––––––
(70)
(661)
(54)
–––––––––
(785)
–––––––––
18
–
–
–
–
–
–––––––––
2013
£’000
(2,293)
47
261
(20)
1,078
–
(95)
(13)
–––––––––
(1,035)
647
(568)
(267)
–––––––––
(1,223)
20
(60)
–
–––––––––
(1,263)
–––––––––
(40)
(371)
77
–––––––––
(334)
–––––––––
–
1,150
(87)
(83)
595
(42)
–––––––––
2014
£’000
(10)
–
–
(3)
149
–
–
–
–––––––––
136
(34)
–
(132)
–––––––––
(30)
3
(107)
–
–––––––––
(134)
–––––––––
–
–
–
–––––––––
–
–––––––––
18
–
–
–
–
–
–––––––––
2013
£’000
(1,922)
–
–
–
1,447
–
–
–
–––––––––
(475)
(357)
–
995
–––––––––
163
–
(24)
–
–––––––––
139
–––––––––
–
–
–
–––––––––
–
–––––––––
–
1,150
(87)
(155)
–
(42)
–––––––––
18
–––––––––
1,533
–––––––––
18
–––––––––
866
–––––––––
(6)
(64)
(116)
1,005
–
–––––––––
(6)
1,440
–––––––––
1,434
–––––––––
–––––––––
1,551
–––––––––
1,487
(47)
–––––––––
1,440
–––––––––
–––––––––
–
–––––––––
(116)
1,014
–––––––––
898
–––––––––
–––––––––
–
–––––––––
1,005
9
–––––––––
1,014
–––––––––
–––––––––
17
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 18
Notes
(forming part of the financial statements)
1. Accounting policies
Petards Group plc (the “Company”) is a company incorporated in the UK.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”). The parent
company financial statements present information about the Company as a separate entity and not about its Group.
Statement of compliance
Both the parent company financial statements and the Group financial statements have been prepared and approved by the directors in
accordance with International Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”). On publishing the parent company
financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the
Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial
statements.
Basis of preparation
The financial information is presented in pounds sterling, rounded to the nearest thousand, and is prepared on the historical cost basis.
The financial statements were approved by the board of directors on 13 March 2015.
Information on the Group’s business activities, together with the factors likely to affect its future development, performance and position are
set out in the Strategic Report. Further information on the financial position of the Group, its cash flows and liquidity position are described
in the Chairman’s Statement. In addition note 23 to the financial statements includes the Group’s objectives, policies and processes for
managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity
risk.
The Group currently meets its day to day working capital requirements through its own cash resources. The Group has prepared forecasts
which have been flexed to take into account reasonably possible changes in future trading performance, in particular to take into account
uncertainty as to the timing of contract awards. This reflects the fact that the Group contracts with a number of customers across different
industries and that the Group’s revenue is generated from a mix of longer and shorter lead time orders. The timing and delivery of the larger
orders are difficult to predict, and can cause material fluctuations in actual results compared with forecast results. These flexed forecasts
show that the Group should be able to operate within the level of its cash resources and accordingly the financial statements have been
prepared on a going concern basis.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
consolidated financial statements.
Various Adopted IFRSs, which became effective for the first time, were adopted by the Group in these financial statements. None of the
Adopted IFRSs adopted by the Group had a significant impact on the Group’s result for the year or equity.
The preparation of financial statements requires the directors to make judgements, estimates and assumptions that may affect the
application of accounting policies and the reported amounts of assets and liabilities, and income and expenses. The key areas requiring the
use of estimates and judgements which may significantly affect the financial statements are considered to be:
a)
identification of construction contracts and revenue and profit recognition on construction contracts (notes 2 and 14)
A proportion of the Group’s contracts are treated as construction contracts under IAS 11. This requires management to make a
judgement at the commencement of each contract as to whether or not it should be accounted for as a construction contract under
IAS 11. Construction contracts comprise contracts specifically negotiated for the construction and delivery of a combination of electronic
assets and/or electronic services in a single package which are so closely related as to be in essence part of a single project with an
overall profit margin and are performed concurrently or in a continuous sequence. Profit is recognised over the life of the contract on the
basis of forecast revenues and costs. These estimates are updated on a regular basis. This can lead to previous estimates being amended
which may have an impact on the final profit to be recognised on the contract;
b) Measurement of the recoverable amounts of cash generating units containing goodwill (note 11)
This requires the identification of appropriate cash generating units and the allocation of goodwill to these units. The assessment of
impairment involves assumptions on the estimated future operating cash flows from these cash generating units and the comparison of
these cash flows to the carrying value of the goodwill;
18
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 19
1. Accounting policies (continued)
Basis of preparation (continued)
c) Recognition of deferred tax assets (notes 6 and 13)
The Group has substantial deferred tax assets. In determining how much of these assets can be recognised this requires an assessment
of the extent to which it is probable that future taxable profits will be available. This assessment is based on management’s future
assessment of the Group’s financial performance and forecast financial information;
d) Capitalised development expenditure (note 11)
This involves the identification of development expenditure which is recoverable through future product revenue together with an
assessment of the estimated useful economic life of any asset recognised. Assets recognised in this way are also subject to impairment
reviews.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis for making the judgements about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates.
Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes
into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the
acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
Inter-company balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated
when preparing the consolidated financial information.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Non-
monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the
date of the transaction. Foreign exchange differences arising on translation are recognised in the income statement.
The balance sheet assets and liabilities of foreign subsidiaries are translated into sterling at the exchange rate at the balance sheet date, and
the income statement is translated at the average rate. Gains and losses are then taken to reserves.
The Group has taken advantage of the relief available in IFRS 1 to deem the cumulative translation differences for all foreign operations to be
zero at the date of transition to Adopted IFRSs (1 January 2006).
Classification of financial instruments issued by the Group
Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the
following two conditions:
(a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to
exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company (or
Group); and
(b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company
exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes
the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and share
premium account exclude amounts in relation to those shares.
Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance payments associated with financial
instruments that are classified in equity are treated as distributions and are recorded directly in equity.
19
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 20
Notes
(forming part of the financial statements) (continued)
1. Accounting policies (continued)
Debt for equity swap
Equity instruments issued to a creditor to extinguish all or part of a financial liability are measured at fair value. The difference between the
fair value of the equity instruments issued, and the financial liability extinguished, is recognised in profit or loss.
Investments in subsidiaries
Investments in subsidiaries are carried at cost less impairment in the Company balance sheet.
Derivative financial instruments
Derivative financial instruments are recognised initially at fair value and subsequently re-measured. The gain or loss on remeasurement to
fair value is recognised immediately in the income statement.
Intra-group financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the
Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee
contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the
guarantee.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property,
plant and equipment.
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. Land is not depreciated. The estimated useful lives are as follows:
Leasehold improvements
Plant and equipment:
Plant and equipment
Computer equipment
Furniture and fittings
Motor vehicles
life of lease straight line
3-10 years
3-5 years
3-5 years
4-5 years
The residual value and useful economic life are reassessed annually.
Intangible assets and goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units and is not amortised but
is tested annually for impairment.
Business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of
subsidiaries. In respect of business acquisitions that have occurred since 1 January 2006, goodwill represents the difference between the
cost of the acquisition and the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Identifiable intangibles
are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.
IFRS 1 grants certain exemptions from the full requirements of Adopted IFRSs in the transition period. The Group elected not to restate
business combinations that took place prior to transition date. In respect of acquisitions prior to 1 January 2006, goodwill is included at
transition date on the basis of its deemed cost, which represents the amount recorded under UK GAAP.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
Amortisation is charged on a straight line basis over the estimated useful lives of intangible assets. Other intangible assets are amortised
from the date they are available for use.
20
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 21
1. Accounting policies (continued)
Research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Expenditure on activities for the development of new or substantially improved products is capitalised if the product is technically and
commercially feasible, and the Group has the technical ability and has sufficient resources to complete development and if the Group can
measure reliably the expenditure attributable to the intangible asset during its development. The expenditure capitalised includes the cost
of materials, direct labour and an appropriate proportion of overheads. Development expenditure not meeting the above criteria is
recognised in the income statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated
amortisation and impairment losses.
Internally generated development expenditure is amortised on a straight-line basis over the period which Directors expect to obtain
economic benefits (3 to 5 years from asset being available for use). Where no internally generated intangible asset can be recognised,
development expenditure is recognised as an expense in the period in which it is incurred.
Construction contracts
Construction contracts comprise contracts specifically negotiated for the construction and delivery of a combination of electronic assets
and/or electronic services in a single package which are so closely related as to be in essence part of a single project with an overall profit
margin and are performed concurrently or in a continuous sequence.
Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, to the extent that it is probable
that they will result in revenue and can be measured reliably. As soon as the outcome of a contract can be estimated reliably, contract
revenue and expenses are recognised in profit or loss in proportion to the stage of completion of the contract.
The stage of completion is assessed by reference to completion of a physical proportion of the contract work. When the outcome of a
contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be
recoverable. An expected loss on a contract is recognised immediately in the income statement.
Contract work in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to
date. It is measured at cost plus any appropriate profit recognised to date less progress billing and recognised losses. Cost includes all
expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities
based on normal operating capacity.
Payments from customers, to the extent that they exceed income recognised, are included as payments on account within trade and other
payables.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and includes expenditure
incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories
and work in progress, cost includes an appropriate share of overheads based on normal operating capacity. Net realisable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that
are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash
equivalents for the purpose only of the statement of cash flows.
Impairment
The carrying amounts of the Group’s assets, other than inventories and deferred tax assets are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
Goodwill is allocated to cash generating units and is tested annually for impairment and more frequently if there are indications of
impairment.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount.
Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash generating units are allocated
first to reduce the carrying amount of any goodwill allocated to cash generating units and then to reduce the carrying amount of the other
assets in the unit on a pro rata basis. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or groups of assets.
21
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 22
Notes
(forming part of the financial statements) (continued)
1. Accounting policies (continued)
Reversals of impairment
An impairment loss in respect of goodwill is not reversed.
An impairment loss in respect of other assets is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the
income statement over the period of the borrowings on an effective interest basis.
Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as service is
provided.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A
liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present
legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be
estimated reliably.
Share-based payment transactions
Options granted under the Group’s employee share schemes are equity settled. The grant date fair value of options granted to employees
is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become
unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation model, taking into
account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the
actual number of share options that vest except where forfeiture is due only to share prices not achieving the threshold for vesting.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and
it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected, risk adjusted, future cash flows at a pre-tax risk-free rate.
Revenue
Revenue is measured at the fair value of consideration received or receivable in the normal course of business, net of discounts, VAT and
other sales related taxes provided that it can be measured reliably.
Revenue from sales of goods and equipment is recognised on despatch unless the customer specifically requests deferred delivery. For
deliveries deferred at the customer’s request, revenues are recognised when the customer takes title to the goods provided that it is
probable that delivery will be made, the goods are identified and ready for delivery and usual payment terms apply.
Revenue from service contracts, where services are performed by an indeterminate number of acts over a specified period of time, is
recognised on a straight line basis over the period of the contract.
Revenue from certain of the Group’s contracts is recognised in accordance with IAS 11 Construction Contracts by reference to the stage of
completion of the contract, as set out in the accounting policy for construction contracts. Construction contracts comprise contracts
specifically negotiated for the construction and delivery of a combination of goods and/or services in a single package which are so closely
related as to be in essence part of a single project and are performed concurrently or in a continuous sequence.
Expenses
Operating lease payments
Payments under operating leases are recognised in the income and expenditure account 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.
22
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 23
1. Accounting policies (continued)
Finance income
Finance income comprises interest receivable on funds invested, foreign exchange gains and changes in fair value of financial assets
through profit and loss. Interest income is recognised in the income statement as it accrues using the effective interest method.
Finance expenses
Finance expenses comprise interest payable on borrowings, foreign exchange losses and changes in fair value of financial assets through
profit and loss. In 2013 it also included the loss arising on the Water Hall transaction – see note 3.
Taxation
Income tax on the profit or loss for the period comprises both current and deferred tax. Income tax is recognised in the income statement
except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the carrying amounts of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised.
Standards and interpretations issued but not applied
The following standards and amendments to standards which will be relevant to the Group have been issued and endorsed by the EU but
have not been applied by the Group in these financial statements as they are not yet effective.
•
•
Annual Improvements to IFRSs 2010 – 2012 Cycle;
Annual Improvements to IFRSs 2011 – 2013 Cycle.
None of these standards and amendments are currently expected to have a material effect on the financial statements when they are
adopted.
23
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 24
Notes
(forming part of the financial statements) (continued)
2. Segmental information
The analysis by geographic segment below is presented in accordance with IFRS 8 on the basis of those segments whose operating results
are regularly reviewed by the Board of Directors (the Chief Operating Decision Maker as defined by IFRS 8) to make strategic decisions, to
monitor performance and allocate resources.
The directors consider the Group to have only one segment in terms of products and services, being the development, supply and
maintenance of technologies used in advanced security, surveillance and ruggedized electronic applications.
As the Board of Directors receives revenue, EBITDA and operating profit/(loss) on the same basis as set out in the consolidated Income
Statement no further reconciliation is considered to be necessary.
Revenue by geographical destination can be analysed as follows:
United Kingdom
Continental Europe
Rest of World
2014
£’000
2013
£’000
10,773
1,724
965
––––––––––
13,462
––––––––––
––––––––––
5,482
488
289
––––––––––
6,259
––––––––––
––––––––––
Included in the above amounts are revenues of £9,793,000 (2013: £862,000) in respect of construction contracts. The balance comprises
revenue from sales of goods and services. Details of the Group’s main customer in the year are given in note 15.
3. Expenses and auditor’s remuneration
Profit/(loss) before tax is stated after charging/(crediting):
Amortisation of development costs
Development costs expensed directly to income
Depreciation of property, plant and equipment, owned
Gain on disposal of property, plant and equipment
Net write down of inventories
One off costs:
Restructuring costs
Finance costs (see below)
Auditor’s remuneration:
Audit of these financial statements
Amounts receivable by the company’s auditor and its associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation
Other services pursuant to such legislation
Other services relating to taxation
Services relating to corporate finance transactions
2014
£’000
198
80
48
(12)
91
2013
£’000
261
132
47
–
6
–
–
––––––––––
––––––––––
306
978
––––––––––
––––––––––
2014
£’000
14
2013
£’000
21
35
5
14
–
––––––––––
––––––––––
32
3
13
17
––––––––––
––––––––––
Amounts receivable by the Company’s auditor and its associates in respect of services to the Company, other than the audit of the
Company’s financial statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis.
24
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 25
3. Expenses and auditor’s remuneration (continued)
Finance costs
On 29 August 2013 the Group completed a debt for equity swap with Water Hall Group plc (‘the Water Hall transaction’). Under the terms of
the arrangement, the Group issued equity, share options, and convertible loan notes with a combined fair value of £2,975,000 to:
(i)
settle its working capital facility of £1,551,000
(ii) purchase its own shares to the value of £592,000 and
(iii) acquire the remaining net assets of Water Hall Group plc which comprised cash of £72,000 and net liabilities of £68,000 relating to trade
and other payables net of VAT receivables.
The loss on this transaction of £860,000 was included in total exceptional finance costs for 2013 of £978,000; the balance included
transaction expenses of £118,000 (transaction expenses totalled £155,000 of which £37,000 was allocated to merger reserve). The net cash
effect of this transaction was an outflow of £83,000. In addition the Group’s overdraft of £1,551,000 was settled. The debt for equity swap
resulted in the Group obtaining control of the Water Hall Group plc legal entity with the result that, from 29 August 2013, Water Hall Group
plc has been consolidated into the accounts.
4. Staff numbers and costs
The aggregate payroll costs, including directors, were as follows:
Wages and salaries
Share based payments (note 19)
Social security costs
Other pension costs (note 19)
The average number of employees during the year (including directors) was as follows:
Direct labour
Development
Sales
Administration
Group
2014
£’000
2013
£’000
2,616
–
259
191
––––––––––
3,066
––––––––––
––––––––––
2,999
–
344
223
––––––––––
3,566
––––––––––
––––––––––
Group
2014
£’000
2013
£’000
43
8
10
14
––––––––––
75
––––––––––
––––––––––
47
8
12
16
––––––––––
83
––––––––––
––––––––––
25
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 26
Notes
(forming part of the financial statements) (continued)
4. Staff numbers and costs (continued)
Details of individual director’s emoluments are as follows:
Name of director
R Abdullah
O Abdullah
T Connolly
W Conn¹
P Negus²
T Wightman³
A Wonnacott
Salaries
and fees
£’000
Compensation
£’000
Other
benefits
£’000
Total
2014
£’000
Total
2013
£’000
Pension
2014
£’000
Pension
2013
£’000
97
83
18
5
50
–
103
––––––––––
356
––––––––––
––––––––––
28
28
–
–
–
–
–
––––––––––
56
––––––––––
––––––––––
10
11
–
–
–
–
2
––––––––––
23
––––––––––
––––––––––
135
122
18
5
50
–
105
––––––––––
435
––––––––––
––––––––––
69
44
18
18
–
6
105
––––––––––
260
––––––––––
––––––––––
–
–
–
–
–
–
47
––––––––––
47
––––––––––
––––––––––
–
–
–
–
–
–
47
––––––––––
47
––––––––––
––––––––––
¹ Resigned 13 January 2014
² Appointed 3 September 2014. All fees for the services of P Negus are payable to Adcel Limited.
³ Resigned 21 January 2013
Ex-gratia payments were made to R Abdullah and O Abdullah during the year of £27,875 each by way of compensation for the termination of
their employment with Water Hall Group plc.
Details of related party transactions with directors are included in note 27 and directors’ interest in share options are disclosed in the
remuneration report.
No performance bonus is payable in respect of the year ended 31 December 2014 (2013: £nil).
5. Financial income and expense
Recognised in profit or loss
Interest on bank deposits
Net foreign exchange gain
Financial income
Interest expense on financial liabilities at amortised cost
Net foreign exchange loss
Water Hall transaction (see note 3)
Financial expenses
2014
£’000
2013
£’000
3
–
––––––––––
3
––––––––––
––––––––––
£’000
150
2
–
––––––––––
152
––––––––––
––––––––––
–
20
––––––––––
20
––––––––––
––––––––––
£’000
100
–
978
––––––––––
1,078
––––––––––
––––––––––
26
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 27
6. Taxation
Recognised in the income statement
Current tax credit
Adjustments in respect of prior years
Total current tax
Deferred tax (credit)/expense
Origination and reversal of temporary differences
Recognition of previously unrecognised tax losses
Utilisation of recognised tax losses
Adjustment in respect of prior years
Total deferred tax
Total tax credit in income statement
2014
2013
£’000
£’000
£’000
£’000
(109)
––––––––––
(36)
––––––––––
(109)
(36)
(15)
(72)
169
27
––––––––––
4
(161)
23
75
––––––––––
109
––––––––––
–
––––––––––
––––––––––
(59)
––––––––––
(95)
––––––––––
––––––––––
The deferred tax charge of £27,000 in respect of prior years arose from the surrender of tax losses for R&D credits relating to 2013. The
associated R&D credits of £109,000 are included in the current tax credit.
Factors that may affect future current and total tax charges
The main rate of UK corporation tax changed from 23% to 21% with effect from 1 April 2014.
The main rate of UK corporation tax will reduce further to 20% with effect from 1 April 2015. This tax change became substantively enacted
in July 2013 and therefore the effect of this rate reduction on the deferred tax balances as at 31 December 2014 has been included in the
figures above.
Reconciliation of effective tax rate
Profit/(loss) before tax
Tax using the UK corporation tax rate of 21.5% (2013: 23.25%)
Non-deductible expenses
Non-taxable income
Utilisation of tax losses
Effect of tax losses generated in year not provided for in deferred tax
Change in unrecognised temporary differences
Adjustments in respect of prior years
Enhanced deduction in respect of R&D
Effect of rate change
Total tax charge/(credit)
2014
£’000
2013
£’000
620
––––––––––
––––––––––
(2,388)
––––––––––
––––––––––
133
36
–
(87)
–
7
(82)
–
(7)
––––––––––
–
––––––––––
––––––––––
(555)
256
(7)
(23)
133
1
39
–
61
––––––––––
(95)
––––––––––
––––––––––
7. Profit for the financial year – parent company
As permitted by Section 408 of the Companies Act 2006, the parent company’s income statement has not been included in these financial
statements. The parent company’s loss for the financial year was £10,000 (2013: £1,922,000 loss).
27
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 28
Notes
(forming part of the financial statements) (continued)
8. Earnings per share
Basic earnings per share
The calculation of basic earnings per share for 2014 was based on the profit attributable to ordinary shareholders of £620,000 (2013:
£2,293,000 loss) divided by the weighted average number of ordinary shares outstanding during the year ended 31 December 2014 of
34,514,108 (2013: 14,455,511).
Diluted earnings per share
Diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, which arise from both convertible loan notes and
share options, and is calculated by dividing the adjusted profit for the year attributable to the shareholders of £769,000 by the assumed
weighted average number of shares in issue of 55,931,285. The adjusted profit for the year comprises the profit for the year attributable to
the shareholders after adding back the interest on convertible loan notes for the year, net of any tax impact.
At 31 December 2013 diluted earnings per share was identical to the basic earnings per share as the Group was in loss.
9. Property, plant and equipment – Group
Cost
Balance at 1 January 2013
Acquisitions
Disposals
Balance at 31 December 2013
Balance at 1 January 2014
Acquisitions
Disposals
Balance at 31 December 2014
Depreciation and impairment
Balance at 1 January 2013
Depreciation charge for the year
Disposals
Balance at 31 December 2013
Balance at 1 January 2014
Depreciation charge for the year
Disposals
Balance at 31 December 2014
Net book value
At 1 January 2013
At 31 December 2013 and 1 January 2014
At 31 December 2014
10. Property, plant and equipment – Company
The Company had no property, plant and equipment in 2013 or 2014.
28
Leasehold
improvements
£’000
Plant and
equipment
£’000
Motor
vehicles
£’000
225
–
–
––––––––––
225
––––––––––
––––––––––
225
16
–
––––––––––
241
––––––––––
––––––––––
155
8
–
––––––––––
163
––––––––––
––––––––––
163
9
–
––––––––––
172
––––––––––
––––––––––
940
40
(15)
––––––––––
965
––––––––––
––––––––––
965
43
(8)
––––––––––
1,000
––––––––––
––––––––––
838
39
(15)
––––––––––
862
––––––––––
––––––––––
862
39
(8)
––––––––––
893
––––––––––
––––––––––
7
–
–
––––––––––
7
––––––––––
––––––––––
7
11
–
––––––––––
18
––––––––––
––––––––––
7
–
–
––––––––––
7
––––––––––
––––––––––
7
–
–
––––––––––
7
––––––––––
––––––––––
Total
£’000
1,172
40
(15)
––––––––––
1,197
––––––––––
––––––––––
1,197
70
(8)
––––––––––
1,259
––––––––––
––––––––––
1,000
47
(15)
––––––––––
1,032
––––––––––
––––––––––
1,032
48
(8)
––––––––––
1,072
––––––––––
––––––––––
70
––––––––––
––––––––––
102
––––––––––
––––––––––
–
––––––––––
––––––––––
172
––––––––––
––––––––––
62
––––––––––
––––––––––
103
––––––––––
––––––––––
–
––––––––––
––––––––––
165
––––––––––
––––––––––
69
––––––––––
––––––––––
107
––––––––––
––––––––––
11
––––––––––
––––––––––
187
––––––––––
––––––––––
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 29
11. Intangible assets – Group
Cost
Balance at 1 January 2013
Additions – internally developed
Balance at 31 December 2013
Balance at 1 January 2014
Additions – internally developed
Balance at 31 December 2014
Amortisation and impairment
Balance at 1 January 2013
Amortisation for the year
Balance at 31 December 2013
Balance at 1 January 2014
Amortisation for the year
Balance at 31 December 2014
Net book value
At 1 January 2013
At 31 December 2013 and 1 January 2014
At 31 December 2014
Goodwill
£’000
Development
costs
£’000
401
–
––––––––––
401
––––––––––
––––––––––
401
–
––––––––––
401
––––––––––
––––––––––
–
–
––––––––––
–
––––––––––
––––––––––
–
–
––––––––––
–
––––––––––
––––––––––
1,723
371
––––––––––
2,094
––––––––––
––––––––––
2,094
661
––––––––––
2,755
––––––––––
––––––––––
1,193
261
––––––––––
1,454
––––––––––
––––––––––
1,454
198
––––––––––
1,652
––––––––––
––––––––––
Total
£’000
2,124
371
––––––––––
2,495
––––––––––
––––––––––
2,495
661
––––––––––
3,156
––––––––––
––––––––––
1,193
261
––––––––––
1,454
––––––––––
––––––––––
1,454
198
––––––––––
1,652
––––––––––
––––––––––
401
––––––––––
––––––––––
530
––––––––––
––––––––––
931
––––––––––
––––––––––
401
––––––––––
––––––––––
640
––––––––––
––––––––––
1,041
––––––––––
––––––––––
401
––––––––––
––––––––––
1,103
––––––––––
––––––––––
1,504
––––––––––
––––––––––
Development costs relate to the ongoing development of eyeTrain and ProVida products and include an amount of £123,000 for which
amortisation has not yet commenced.
Amortisation
The amortisation charge is recognised within administrative expenses in the income statement.
Impairment testing
The Group considers that for the purpose of goodwill impairment testing it has one cash generating unit involved in the development,
supply and maintenance of technologies used in advanced security, surveillance and ruggedised electronic applications. The carrying value
of the goodwill is as follows:
Technologies used in advanced security and surveillance systems
Goodwill
2014
£’000
2013
£’000
401
––––––––––
––––––––––
401
––––––––––
––––––––––
29
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 30
Notes
(forming part of the financial statements) (continued)
11. Intangible assets – Group (continued)
Impairment is tested by calculating its value in use by reference to discounted cash flow forecasts over a five year period. The key
assumptions for the value in use calculation are those regarding the growth rates, discount rates and expected changes in profit margins
during the period. These are based on approved forecasts for the next year and an assumption of no growth thereafter (2013: approved
forecasts for the next year and an assumption of no growth thereafter) and are based on forecast profit margin being maintained (2013: profit
margin maintained). The discount rate applied is 10% (2013: 10%).
Given the carrying value of the above, no reasonably possible change in discount rate or other key assumption would lead to an impairment.
The Company had no intangible assets in 2013 or 2014.
12. Investments in subsidiary undertakings
The Group and Company have the following investments in subsidiary undertakings:
Nature of business
Holding
Proportion held
Group
Company
Name of company
Country of
operation and
registration
Petards Limited
Petards Joyce-Loebl Limited
Joyce-Loebl Group Limited
Joyce-Loebl Limited
Petards International Limited
Petards Inc
PI Vision Limited
Water Hall Group plc
England
England
England
England
England
USA
England
England
Company
Cost
At 1 January 2013
Additions
At 31 December 2013
Specialist electronic systems
Specialist electronic systems
Dormant
Dormant
Dormant
Dormant
Dormant
Non trading
At 1 January and 31 December 2014
Provisions for impairment in value
At 1 January 2013, 31 December 2013 and 31 December 2014
Net book value
At 1 January 2013
At 31 December 2013 and 1 January 2014
At 31 December 2014
30
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Common stock
Ordinary shares
Ordinary shares
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
Shares in
subsidiary
undertakings
£’000
Loans to
subsidiary
undertakings
£’000
Total
£’000
13,164
1,742
––––––––––
14,906
––––––––––
––––––––––
75
–
––––––––––
75
––––––––––
––––––––––
13,239
1,742
––––––––––
14,981
––––––––––
––––––––––
14,906
––––––––––
––––––––––
75
––––––––––
––––––––––
14,981
––––––––––
––––––––––
5,586
––––––––––
––––––––––
–
––––––––––
––––––––––
5,586
––––––––––
––––––––––
7,578
––––––––––
––––––––––
75
––––––––––
––––––––––
7,653
––––––––––
––––––––––
9,320
––––––––––
––––––––––
75
––––––––––
––––––––––
9,395
––––––––––
––––––––––
9,320
––––––––––
––––––––––
75
––––––––––
––––––––––
9,395
––––––––––
––––––––––
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 31
13. Deferred tax assets and liabilities
Group
Recognised deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Provisions
Tax value of loss carry-forwards
Intangible fixed assets
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Assets
2014
£’000
2013
£’000
Liabilities
2014
£’000
2013
£’000
Net
2014
£’000
2013
£’000
42
25
449
–
––––––––––
516
–
––––––––––
516
––––––––––
––––––––––
59
23
571
–
––––––––––
653
–
––––––––––
653
––––––––––
––––––––––
–
–
–
(100)
––––––––––
(100)
–
––––––––––
(100)
––––––––––
––––––––––
–
–
–
(128)
––––––––––
(128)
–
––––––––––
(128)
––––––––––
––––––––––
42
25
449
(100)
––––––––––
416
–
––––––––––
416
––––––––––
––––––––––
59
23
571
(128)
––––––––––
525
–
––––––––––
525
––––––––––
––––––––––
Unrecognised deferred tax assets are attributable to the following:
Property, plant and equipment
Provisions
Tax value of loss carry-forwards
Tax assets
There is no expiry date on the above unrecognised deferred tax assets.
Movement in deferred tax during the year
Property, plant and equipment
Provisions
Tax value of loss carry-forwards
Intangible fixed assets
Movement in deferred tax during the prior year
Property, plant and equipment
Provisions
Tax value of loss carry-forwards
Intangible fixed assets
Assets
2014
£’000
Assets
2013
£’000
292
41
1,861
––––––––––
2,194
––––––––––
––––––––––
292
23
1,787
––––––––––
2,102
––––––––––
––––––––––
1 January
2014
£’000
Recognised
in income
£’000
31 December
2014
£’000
59
23
571
(128)
––––––––––
525
––––––––––
––––––––––
(17)
2
(122)
28
––––––––––
(109)
––––––––––
––––––––––
42
25
449
(100)
––––––––––
416
––––––––––
––––––––––
1 January
2013
£’000
Recognised
in income
£’000
31 December
2013
£’000
86
22
479
(122)
––––––––––
465
––––––––––
––––––––––
(27)
1
92
(6)
––––––––––
60
––––––––––
––––––––––
59
23
571
(128)
––––––––––
525
––––––––––
––––––––––
31
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 32
Notes
(forming part of the financial statements) (continued)
13. Deferred tax assets and liabilities (continued)
Company
Recognised deferred tax assets are attributable to the following:
Tax value of loss carry-forwards
Tax assets
Unrecognised deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Provisions
Tax value of loss carry-forwards
Tax assets
There is no expiry date on the above unrecognised deferred tax assets.
14. Inventories
Raw materials and consumables
Work in progress
Assets
2014
£’000
Assets
2013
£’000
144
––––––––––
144
––––––––––
––––––––––
144
––––––––––
144
––––––––––
––––––––––
Assets
2014
£’000
Assets
2013
£’000
26
25
416
––––––––––
467
––––––––––
––––––––––
26
23
445
––––––––––
494
––––––––––
––––––––––
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
472
967
––––––––––
1,439
––––––––––
––––––––––
354
1,425
––––––––––
1,779
––––––––––
––––––––––
–
–
––––––––––
–
––––––––––
––––––––––
–
–
––––––––––
–
––––––––––
––––––––––
The Directors consider all inventories to be essentially current in nature although the duration of certain contracts is such that a proportion
of inventories will not be realised within 12 months. It is not possible to determine this amount with precision as this is dependent on a
number of issues including future order volumes, the timing of project milestones and customer call off schedules.
Inventories recognised as cost of sales in the year amounted to £8,141,000 (2013: £2,251,000). Included in this is a net write-down of
inventories to net realisable value of £91,000 (2013: £6,000). At 31 December 2014 inventories are shown net of provisions of £337,000 (2013:
£245,000).
Construction contracts
The net balance on construction contracts is analysed into assets and liabilities as follows:
Contracts in progress at the balance sheet date:
Work in progress
Payments on account (note 18)
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
967
(78)
––––––––––
889
––––––––––
––––––––––
1,294
–
––––––––––
1,294
––––––––––
––––––––––
–
–
––––––––––
–
––––––––––
––––––––––
–
–
––––––––––
–
––––––––––
––––––––––
Work in progress related to construction contracts in progress at the balance sheet date comprise cumulative costs incurred plus recognised
profits less losses of £10,722,000 (2013: £2,451,000) less cumulative progress billings received and receivable of £10,541,000 (2013:
£1,157,000).
32
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 33
15. Trade and other receivables
Trade receivables
Amounts owed by group undertakings
Other receivables
Prepayments and accrued income
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
2,750
–
–
232
––––––––––
2,982
––––––––––
––––––––––
831
–
36
116
––––––––––
983
––––––––––
––––––––––
–
4,773
8
9
––––––––––
4,790
––––––––––
––––––––––
–
4,727
20
9
––––––––––
4,756
––––––––––
––––––––––
At 31 December 2014 trade receivables include retentions of £1,000 (2013: £nil) relating to completed contracts.
The Group has a variety of credit terms depending on the customer. The majority of the Group’s sales are made to government agencies and
blue chip companies and consequently have very low historical default rates.
At 31 December 2014 trade receivables are shown net of an allowance for credit notes of £13,000 (2013: £16,000) arising from the ordinary
course of business, as follows:
Group
Balance at 1 January
Utilised during the year
Released during the year
Balance at 31 December
The ageing of trade receivables at the balance sheet date was:
Group
Not past due date
Past due date (0-90 days)
Past due date (over 90 days)
Individually impaired amounts
Group
Not past due date
Past due date (0-90 days)
Past due date (over 90 days)
Individually impaired amounts
2014
£’000
2013
£’000
16
(3)
–
––––––––––
13
––––––––––
––––––––––
17
–
(1)
––––––––––
16
––––––––––
––––––––––
2014
Credit note
provision
£’000
–
–
–
(13)
––––––––––
(13)
––––––––––
––––––––––
2013
Credit note
provision
£’000
–
–
–
(16)
––––––––––
(16)
––––––––––
––––––––––
Net trade
receivables
£’000
1,827
915
8
–
––––––––––
2,750
––––––––––
––––––––––
Net trade
receivables
£’000
586
245
–
–
––––––––––
831
––––––––––
––––––––––
Gross trade
receivables
£’000
1,827
915
8
13
––––––––––
2,763
––––––––––
––––––––––
Gross trade
receivables
£’000
586
245
–
16
––––––––––
847
––––––––––
––––––––––
Management have no indication that any unimpaired amounts will be irrecoverable. No other receivables are past due in either the current
or prior year.
33
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 34
Notes
(forming part of the financial statements) (continued)
15. Trade and other receivables (continued)
Various departments of the Ministry of Defence accounted for £7,478,000 of Group revenues during the year (2013: £2,864,000) of which
£359,000 was included in carrying amount of trade receivables at 31 December 2014 (2013: £330,000).
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
UK
Europe
Other regions
Group
2014
£’000
2013
£’000
1,345
727
678
––––––––––
2,750
––––––––––
––––––––––
719
106
6
––––––––––
831
––––––––––
––––––––––
The Group’s exposure to credit and currency risks and impairment losses related to trade receivables are disclosed in note 23.
The Company has no trade receivables. Amounts owed by group undertakings are repayable on demand but have no fixed repayment
dates.
16. Cash and cash equivalents
Cash and cash equivalents – escrow deposits
Escrow deposit
Cash and cash equivalents
Cash and cash equivalents per balance sheet and per cash flow statement
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
54
––––––––––
––––––––––
–
––––––––––
––––––––––
–
––––––––––
––––––––––
–
––––––––––
––––––––––
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
1,434
––––––––––
––––––––––
1,440
––––––––––
––––––––––
898
––––––––––
––––––––––
1,014
––––––––––
––––––––––
The Group’s exposure to credit and currency risk related to cash and cash equivalents are disclosed in note 23.
17. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group and Company’s interest-bearing loans and borrowings, which are
measured at amortised cost. For more information about the Group and Company’s exposure to interest rate and foreign currency risk,
see note 23.
Non-current liabilities
Convertible loan notes
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
1,524
––––––––––
––––––––––
1,518
––––––––––
––––––––––
1,524
––––––––––
––––––––––
1,518
––––––––––
––––––––––
The convertible loan notes of £1 each were issued in 2013 in connection with the purchase of the entire share capital of Water Hall
Group plc. The loan notes carry a fixed interest rate of 7% per annum and are convertible into ordinary shares of 1 pence each at any time
prior to maturity. Interest is paid quarterly and the loan notes mature on 10 September 2018.
During the year £26,792 of the issued convertible loan notes were converted into ordinary shares (2013: £68,055).
34
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 35
18. Trade and other payables
Non-current liabilities
Amounts owed to group undertakings
Current liabilities
Trade payables
Amounts owed to group undertakings
Payments on account
Non-trade payables and accrued expenses
Interest payable
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
–
––––––––––
––––––––––
–
––––––––––
––––––––––
3,567
––––––––––
––––––––––
3,567
––––––––––
––––––––––
1,480
–
385
2,184
42
––––––––––
4,091
––––––––––
––––––––––
1,016
–
3
1,627
33
––––––––––
2,679
––––––––––
––––––––––
26
3,238
–
246
42
––––––––––
3,552
––––––––––
––––––––––
155
3,250
–
237
33
––––––––––
3,675
––––––––––
––––––––––
No amounts included in current liabilities are expected to be settled in more than 12 months (2013: £nil). In both 2014 and 2013 amounts
payable to group undertakings in current liabilities are due on demand but have no fixed repayment dates.
Non-current amounts owed to group undertakings are repayable after more than one year but do not have fixed repayment dates.
19. Employee benefits
Defined contribution plans
The Group operates a defined contribution pension plan.
The total expense relating to defined contribution plans in the current year was £191,000 (2013: £223,000).
Share-based payments
At 31 December 2014 the Group had an Enterprise Management Incentive Scheme (‘EMI Scheme’), and an Unapproved Share Option
Scheme (‘Unapproved Scheme’).
The terms and conditions of the grants are as follows, whereby all options are settled by physical delivery of shares:
Date of grant
Scheme
Jan 2006
Aug 2007
Nov 2013
EMI Scheme
EMI Scheme
EMI Scheme
Exercise
price
Number of
shares granted
£1.00
£1.00
£0.08
20,500
10,000
2,625,000
Vesting conditions
Exercise period
(2)
(2)
(1)
Jan 2009 – Jan 2016
Aug 2010 – Aug 2017
Nov 2013 – Nov 2023
(1) Fully vested.
(2) 3 years service and EPS achieved of 0.275p indexed from 31 December 2006 at 3% over RPIX.
35
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 36
Notes
(forming part of the financial statements) (continued)
19. Employee benefits (continued)
Outstanding at beginning of the year
Granted during the year
Exercised during the year
Waived during the year
Outstanding at the end of the year
Exercisable at the end of the year
2014
2013
Number of
shares
2,976,400
–
(225,000)
(95,900)
––––––––––
2,655,500
––––––––––
––––––––––
2,655,500
––––––––––
––––––––––
Weighted
average
exercise
price
£
0.13
–
0.08
1.29
––––––––––
0.09
––––––––––
––––––––––
0.09
––––––––––
––––––––––
Number of
shares
126,400
2,850,000
–
–
––––––––––
2,976,400
––––––––––
––––––––––
2,976,400
––––––––––
––––––––––
Weighted
average
exercise
price
£
1.22
0.08
–
–
––––––––––
0.13
––––––––––
––––––––––
0.13
––––––––––
––––––––––
225,000 options were exercised during the period (2013: none exercised). The weighted average share price at the date of exercise was £0.125.
The options outstanding at 31 December 2014 had exercise prices ranging from £0.08 to £1.00 and the weighted average remaining
contractual life of the options was 8.82 years.
The Group and Company recognised a total expense of £nil (2013: £nil) in respect of equity settled share options.
20. Share capital
Number of shares in issue – allotted, called up and fully paid
Ordinary shares of 1p each
Deferred shares of 1p each
Value of shares in issue – allotted, called up and fully paid
Ordinary shares of 1p each
Deferred shares of 1p each
At
31 December
2014
No
At
31 December
2013
No
34,731,871
630,342,900
––––––––––––
665,074,771
––––––––––––
––––––––––––
34,171,975
630,342,900
–––––––––––
664,514,875
–––––––––––
–––––––––––
£’000
£’000
348
6,303
–––––––––––
6,651
–––––––––––
–––––––––––
342
6,303
–––––––––––
6,645
–––––––––––
–––––––––––
The Company’s issued share capital comprises 34,731,871 ordinary shares of 1p each and 630,342,900 deferred shares of 1p each. The ordinary
shares have equal voting rights. The deferred shares have no voting rights and are not entitled to any dividends or repayment and have no
other right or participation in the profits of the Company.
During the year the Company issued 334,896 ordinary 1p shares following the conversion of £26,792 convertible loan notes at a conversion
price of 8p each and 225,000 ordinary 1p shares following the exercise of share options at an exercise price of 8p each.
21. Merger reserve
The Merger reserve arose in 2013 on the issue of 10,954,844 ordinary shares of 1p as part of the Water Hall transaction (see note 3) whereby
Water Hall Group plc became a wholly owned subsidiary of the Group. The premium on the shares issued of £1,075,000 (after deduction of
share issue expenses of £37,000) was credited to a merger reserve in accordance with section 612 of the Companies Act 2006.
36
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 37
22. Equity reserve
The Equity reserve arose in 2013 on the issue of convertible loan notes and share options as part of the Water Hall transaction (see note 3).
The Equity reserve relates to the equity ‘component’ of the convertible loan notes of £182,000 and the fair value of the share options issued
of £31,000.
23. Financial risk management
The Group and Company’s policy is to maintain a strong capital base with a view to ensuring that entities within the Group will be able to
continue as going concerns.
The Group’s and Company’s principal financial instruments comprise short term debtors and creditors, short term bank deposits, cash,
convertible loan notes and, when required, forward currency contracts and options. Neither the Group nor the Company trades in financial
instruments but, where appropriate, uses derivative financial instruments in the form of forward foreign currency contracts and options to
help manage foreign currency exposures. The prime objective of the Group’s and Company’s policy towards financial instruments is to
manage their working capital requirements and finance their ongoing operations.
Capital management
The Group and Company’s policy is to maintain a strong capital base with a view to ensuring that entities within the Group will be able to
continue as going concerns. The Group and Company finance their operations through retained earnings, cash resources, the convertible
loan notes, share placings and the management of working capital. It is the intention to issue new shares when satisfying share based
incentive schemes. Capital is defined as total equity as set out in the Balance Sheet.
Management of financial risk
The main risks associated with the Group’s financial instruments have been identified as credit risk, liquidity risk and foreign currency risk.
The main risks associated with the Company’s financial instruments have been identified as liquidity risk. The Board is responsible for
managing these risks and the policies adopted, which have remained largely unchanged throughout the year.
Credit risk
The carrying amount of financial assets included in the balance sheet, which represents the maximum credit risk, and the headings in which
they are included are as follows:
Current assets
Trade receivables
Amounts owed by group undertakings
Other receivables
Cash and cash equivalents
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
2,750
–
–
1,434
––––––––––
4,184
––––––––––
––––––––––
831
–
36
1,440
––––––––––
2,307
––––––––––
––––––––––
–
4,773
8
898
––––––––––
5,679
––––––––––
––––––––––
–
4,727
20
1,014
––––––––––
5,761
––––––––––
––––––––––
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers. The Group’s risk is influenced by the nature of its customers.
The majority of sales are made to government agencies and blue chip companies. New customers are analysed for creditworthiness
before the Group’s standard payment and delivery terms and conditions are offered and appropriate credit limits set. Customers that fail to
meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis. The carrying amount of trade
receivables in the balance sheet represents the maximum exposure to credit risk and further details are given in note 15 to the financial
statements. The Board considers the Group’s exposure to credit risk to be acceptable and normal for an entity of its size given the industries
in which it operates.
Surplus cash balances are placed on short term deposit with UK banks.
37
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 38
Notes
(forming part of the financial statements) (continued)
23. Financial risk management (continued)
Interest rate risk
Interest rate risk reflects the Group’s and Company’s exposure to fluctuations to interest rates in the market. The risk arose in the past
because the Group financed its operations through bank borrowings and borrowed at floating rates of interest. This risk was monitored
against market conditions and appropriate interest swap arrangements entered. No such arrangements have been entered into in 2013
or 2014.
Since the completion of the Water Hall transaction the Group has financed its operations from its own cash resources and the convertible
loan note issued carries a fixed rate of interest and so the Group and Company have no material interest rate risk.
The interest rate risk profile of the Group’s and Company’s interest bearing financial instruments was as follows:
Interest rate risk profile of financial assets
Floating rate assets (by currency):
Sterling
US dollar
Euro
Interest rate profile of financial liabilities
Fixed rate liabilities (by currency):
Sterling
Floating rate liabilities (by currency):
Sterling
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
1,389
17
28
––––––––––
1,434
––––––––––
––––––––––
1,407
31
2
––––––––––
1,440
––––––––––
––––––––––
898
–
–
––––––––––
898
––––––––––
––––––––––
1,014
–
–
––––––––––
1,014
––––––––––
––––––––––
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
1,524
––––––––––
––––––––––
1,518
––––––––––
––––––––––
1,524
––––––––––
––––––––––
1,518
––––––––––
––––––––––
–
––––––––––
––––––––––
–
––––––––––
––––––––––
–
––––––––––
––––––––––
–
––––––––––
––––––––––
The current and prior year fixed rate financial liabilities comprised the 7% convertible loan notes.
Liquidity risk
The carrying amount of financial liabilities included in the balance sheet and the headings in which they are included are as follows:
Group
2014
£’000
4,091
–
2013
£’000
2,679
–
Company
2014
£’000
314
3,238
2013
£’000
425
3,250
1,524
–
––––––––––
5,615
––––––––––
––––––––––
1,518
–
––––––––––
4,197
––––––––––
––––––––––
1,524
3,567
––––––––––
8,643
––––––––––
––––––––––
1,518
3,567
––––––––––
8,760
––––––––––
––––––––––
Current liabilities
Trade and other payables
Amounts owed to group undertakings
Non-current liabilities
Convertible loan notes
Amounts owed to group undertakings
38
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 39
23. Financial risk management (continued)
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effect of netting
agreements:
Non-derivative financial liabilities
Convertible loan notes
Trade and other payables
Non-derivative financial liabilities
Convertible loan notes
Trade and other payables
Carrying
amount
£’000
Contractual
cash flows
£’000
2014
1 year
or less
£’000
1 to
<2 years
£’000
2 to
<5 years
£’000
5 years
and over
£’000
1,524
4,091
2,103
4,091
––––––––––
6,194
––––––––––
––––––––––
118
4,091
––––––––––
4,209
––––––––––
––––––––––
118
–
––––––––––
118
––––––––––
––––––––––
1,867
–
––––––––––
1,867
––––––––––
––––––––––
–
–
––––––––––
–
––––––––––
––––––––––
Carrying
amount
£’000
Contractual
cash flows
£’000
2013
1 year
or less
£’000
1 to
<2 years
£’000
2 to
<5 years
£’000
5 years
and over
£’000
1,518
2,679
2,221
2,679
––––––––––
4,900
––––––––––
––––––––––
118
2,679
––––––––––
2,797
––––––––––
––––––––––
118
–
––––––––––
118
––––––––––
––––––––––
1,985
–
––––––––––
1,985
––––––––––
––––––––––
–
–
––––––––––
–
––––––––––
––––––––––
Liquidity risk is the risk that the Group and Company will not be able to access the necessary funds to finance their operations. Their own
cash resources are the predominant source of funds. Surplus cash is placed on short term deposit with UK banks.
The Group manages its liquidity risk by monitoring existing facilities and cash flows against forecast requirements based on a rolling cash
forecast.
The directors consider that the carrying amounts of financial assets and liabilities approximate their fair values.
Foreign currency risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional
currencies of Group entities. About 13% (2013: 8%) of the Group’s sales are to customers in Continental Europe and a further 7% (2013: 5%)
are to customers in the Rest of the World. These sales are priced in sterling and euros. The Group’s policy is to reduce currency exposures on
sales through, where appropriate, forward foreign currency contracts. The Group also makes purchases in sterling, euros and US dollars and
this provides an element of natural hedge. All the other sales are denominated in sterling.
Currency risk of financial assets and liabilities
The Group also has non-structural currency exposures i.e. those exposures arising from sales and purchases by group companies in currencies
other than that company’s functional currency. These exposures give rise to net currency gains/losses recognised in the income statement,
and represent monetary assets and liabilities of the Group that were not denominated in the functional currency of the company involved.
As at 31 December 2013 and 2014 the significant exposures in this respect were trade receivables and payables and were as follows:
Currency
US Dollar
Euro
2014
Receivables
£’000
–
139
––––––––––
139
––––––––––
––––––––––
2014
Payables
£’000
2013
Receivables
£’000
2013
Payables
£’000
(314)
(99)
––––––––––
(413)
––––––––––
––––––––––
–
12
––––––––––
12
––––––––––
––––––––––
(38)
(11)
––––––––––
(49)
––––––––––
––––––––––
In the opinion of the directors the business has no significant exposure to market risk arising from currency exchange or other price
fluctuations at 31 December 2014 and it has therefore not been deemed necessary to include a sensitivity analysis.
39
235212 Petards Annual Report pp18-pp40 24/03/2015 12:18 Page 40
Notes
(forming part of the financial statements) (continued)
24. Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
Group
2014
£’000
2013
£’000
Company
2014
£’000
2013
£’000
128
400
344
––––––––––
872
––––––––––
––––––––––
119
418
435
––––––––––
972
––––––––––
––––––––––
–
–
–
––––––––––
–
––––––––––
––––––––––
–
–
–
––––––––––
–
––––––––––
––––––––––
Group
During the year £138,000 was recognised as an expense in the income statement in respect of operating leases (2013: £157,000).
The Group leases its office and factory facilities under operating leases and these comprise £95,000 of the above total (2013: £95,000).
Land and buildings have been considered separately for lease classification.
25. Capital commitments
Neither the Group nor the Company had entered into any such commitments (2013: none).
26. Contingent liabilities
The Company has guaranteed the contract performance of subsidiary companies amounting to £428,000 (2013: £387,000).
27. Related party transactions
Transactions with subsidiaries – Company
During the year the Company provided administrative services to subsidiary undertakings totalling £980,000 (2013: £nil). At 31 December 2014
the Company was due £4,727,000 from its subsidiary undertakings (2013: £4,727,000).
There is no ultimate controlling party of Petards Group plc.
Transactions with key management personnel
The directors are the key management personnel of the Group. Details of directors remuneration, share options and pension benefits can be
found in note 4.
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235212 Petards Annual Report pp41-imprint 24/03/2015 12:17 Page 41
Notice of Annual General Meeting
Notice is hereby given that the 2015 Annual General Meeting of Petards Group plc (the “Company”) will be held at The County Club,
158 High Street, Guildford, Surrey, GU1 3HJ on 22 April 2015 at 11.00 a.m. for the following purposes:
Ordinary Business
1. To receive and consider the audited accounts of the Company for the year ended 31 December 2014 together with the directors' report
and the auditor’s report.
2. To elect Paul Negus as a director.
3. To re-appoint KPMG LLP as auditor to hold office from the conclusion of the meeting until the conclusion of the next general meeting at
which the accounts are laid before the Company.
4. To authorise the directors to fix the auditor’s remuneration.
Special Business
To consider and, if thought fit, pass the following resolutions which will be proposed as to resolution number 5 as an ordinary resolution and
as to resolution number 6 as a special resolution:
5. That, in substitution for all existing authorities, to the extent unused, and pursuant to section 551 of the Companies Act 2006 (the “Act”)
the directors of the Company be and they are hereby generally and unconditionally authorised to exercise all the powers of the
Company to allot shares in the Company or to grant rights to subscribe for or convert any security into shares in the Company up to an
aggregate nominal amount of £114,650 (being approximately 33% of the present issued ordinary share capital of the Company)
provided that this authority, unless renewed, shall expire on the conclusion of the next annual general meeting of the Company, save
that the directors be and they are hereby entitled, as contemplated by section 551(7) of the Act, to make at any time prior to the expiry
of such authority any offer or agreement which would or might require shares to be allotted or rights to subscribe for or convert
securities into shares to be granted after the expiry of such authority and the directors may allot shares or grant rights to subscribe for or
convert securities into shares in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.
6. That, subject to resolution 5 above being duly passed, the directors of the Company be and they are hereby empowered pursuant to
section 570 of the Act to allot equity securities (within the meaning of section 560 of the Act) in the capital of the Company for cash
pursuant to the authority conferred by resolution 5 above as if section 561(1) of the Act did not apply to such allotment, provided that
this power shall be limited to the allotment of equity securities:
(a)
in connection with an offer of such securities by way of rights, or other pre-emptive offer, to holders of ordinary shares in
proportion (as nearly as may be practicable) to their respective holdings of such shares, but subject to such exclusions or other
arrangements as the directors may deem necessary or expedient in relation to fractional entitlements or any legal or practical
problems under the laws of any relevant territory, or the requirements of any regulatory body or stock exchange; and
(b)
otherwise than pursuant to (a) above up to a maximum aggregate nominal amount of £52,115 (being approximately 15% of the
present issued ordinary share capital of the Company)
provided that such power shall expire at the conclusion of the next annual general meeting of the Company, save that the Company
may make an offer or agreement prior to such expiry which would or might require equity securities to be allotted after the expiry of
such power, and the directors may allot equity securities in pursuance of that offer or agreement as if such power had not expired.
By Order of The Board
Andy Wonnacott
Company Secretary
25 March 2015
Company Number: 2990100
Registered Office: 390 Princesway
Team Valley
Gateshead
Tyne and Wear
NE11 0TU
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235212 Petards Annual Report pp41-imprint 24/03/2015 12:17 Page 42
Notice of Annual General Meeting
(continued)
Notes:
1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the
meeting. A shareholder may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise
the rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company.
2. A Form of Proxy is enclosed for use at the AGM. Please read carefully the instructions on how to complete the form. To be valid it must
be received by post or (during normal business hours only) by hand to the Company's registrars, Share Registrars Limited, Suite E, First
Floor, 9 Lion & Lamb Yard, Farnham, Surrey GU9 7LL, or by fax to Share Registrars Limited on 01252 719232 or by scan and email to
Share Registrars Limited at proxies@shareregistrars.uk.com no later than 48 hours (excluding non-working days) before the time
appointed for holding the meeting.
3. The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described in paragraph 6 below) will
not prevent a shareholder attending the meeting and voting in person if he/she wishes to do so.
4. To be entitled to attend and vote at the meeting or any adjournment (and for the purpose of the determination by the Company of the
votes they may cast), shareholders must be registered in the Register of Members of the Company 48 hours (excluding non-working
days) before the time appointed for holding the meeting or adjourned meeting. Changes to the Register of Members after the relevant
deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.
5. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using
the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST
members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able
to take the appropriate action on their behalf.
6.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST
Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications, and must
contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST).
The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a
previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID 7RA36) 48 hours
(excluding non-working days) before the time appointed for holding the meeting or adjourned meeting. For this purpose, the time
of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from
which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any
change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
7. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland
Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will,
therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take
(or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure
that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted
by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors
or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the
CREST system and timings.
8. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
9. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers
as a member provided that they do not do so in relation to the same shares.
10. The service contracts of the executive directors and letter of appointment of the non-executive director are available for inspection
at 390 Princesway, Team Valley, Gateshead, Tyne & Wear, NE11 0TU during normal business hours (excluding weekends and public
holidays) from the date of this notice until the date of the AGM and, on the date of the AGM, at the place of the AGM from at least
15 minutes prior to the AGM until the conclusion of the AGM.
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235212 Petards Annual Report pp41-imprint 24/03/2015 12:17 Page 44
Perivan Financial Print 235212
235212 Petards Cover spread 24/03/2015 11:47 Page 1
390 Princesway
Team Valley
Gateshead
Tyne and Wear
NE11 0TU
+44 (0) 191 420 3000
Tel:
Fax: +44 (0) 191 420 3030
www.petards.com
Group PLC
Group PLC
Annual Report and Accounts 2014
n
t i o
M o
Visionary Solutio n s fo r a W o rl d i n