TIDMSTEC
RNS Number : 0309Z
Shieldtech PLC
15 September 2009
For immediate release
Shieldtech plc (the "Company" or the "Group")
Results for the year ended 30 June 2009
Shieldtech plc, a specialist provider of products and services to the Homeland
Security market, announces its results for the year ended 30 June 2009.
Highlights
* Turnover increased 72% to GBP10.3m (2008: GBP6.0m)
* Return to profit: Operating profit* GBP0.4m (2008: loss of GBP0.8m)
* Completed investment of new monies into the Group and refinancing of bank
facilities
* Trading momentum built up in the last quarter
* Awarded a contract to supply ballistic panels for "Osprey" body armour systems
to MoD
* Signed long term agreement with UNICEF
* Developed new body armour constructions addressing wearers' preferences
*before amortisation of intangible fixed assets, share based payments and any
charge for impairment of goodwill
Tim Wightman, Chairman, commented:
"We are confident that our market place will develop further in this current
financial year. The Group is well positioned with innovative new products and a
strong sales network to capitalise on exciting opportunities both in the UK and
overseas."
Contacts:
+---------------------------------------------+---------------------------+
| Shieldtech plc | Tel: +44 (0) 7774 698327 |
| Tony O'Neill, Chief Executive Officer | |
| Robert Denton, Group Finance Director | |
| | |
+---------------------------------------------+---------------------------+
| Seymour Pierce | Tel: +44 (0) 20 7107 8000 |
| Nicola Marrin/Mark Percy | |
+---------------------------------------------+---------------------------+
| Buchanan Communications | Tel: +44 (0) 20 7466 5000 |
| Tim Anderson / Isabel Podda / Ben Romney | |
| | |
+---------------------------------------------+---------------------------+
Chairman's Statement
It is less than four months since I wrote in last year's annual report,
publication of which was delayed until May 2009 whilst we negotiated the
refinancing of the Group, completed in June just before the year end.
The Group returned to profit in the year ended 30 June 2009 following the
disappointing results of the previous year. Activity levels generally began to
improve, both in the UK, where Aegis has been well established for some years,
and in targeted overseas markets. In conjunction with these efforts we
concentrated on achieving further manufacturing and administrative efficiencies.
Trading momentum built up through the last quarter of the year.
Financial results
Revenue in the year was GBP10.3m, 72% higher than the previous year's GBP6.0m.
The gross profit was GBP3.0m, GBP1.0m greater than the year before's GBP2.0m.
There was no goodwill impairment charge (2008: GBP8.8m), nor any share-based
payments charge (2008: GBP0.3m), and other administrative expenses reduced by
GBP0.2m to GBP2.5m (2008: GBP2.7m).
The operating profit was GBP0.2m compared to last year's loss of GBP10.1m. The
profit before tax was GBP0.1m (2008: loss GBP10.2m). The profit per share was
0.05 pence (2008: loss 18.94 pence). Net cash outflow from operating activities
was GBP0.1m (2008: GBP1.1m). In the last month of the financial year, following
Shareholders' approval, we refinanced the Group, as described below. This was
necessary since HSBC had reduced the Group's overdraft facility without prior
notice in the last quarter of the previous year in response to the losses made
and the "credit crisis". We are particularly grateful to our key suppliers who
assisted by permitting extensions to normal payment terms during the year.
At the end of the year total Shareholders' equity was GBP1.9m (2008: GBP1.8m)
and borrowings were GBP2.0m (2008: GBP1.5m).
Strategy
The Group's performance in 2008 curtailed its immediate plans to acquire further
businesses and thereby expand its customer base and portfolio to become a
leading supplier of products and services for customers across the Homeland
Security market. The Directors continue to believe there will be attractive
opportunities to grow by acquisition. However, the short-term priority is to
re-establish sustainable profitable organic growth. Although the global economic
climate remains difficult, we do not expect it to have a detrimental effect on
the overall demand for Aegis' products.
Business development
In June we announced that Aegis had been awarded a significant contract, the
value of which cannot be disclosed, as part of the UK MOD's defence clothing
project valued at a total of GBP16m to supply soft armour protective ballistic
panel inserts to be used within the "Osprey" body armour systems currently in
service with the Ministry of Defence. This armour is to protect military forces
engaged in active theatres. Deliveries under this contract were completed in the
first quarter of the current financial year.
During the year Aegis entered into a long-term agreement with UNICEF. This marks
a significant milestone for Aegis. Not only does it establish a specific new
customer but also this agreement facilitates the marketing and selling of our
products to other organisations and entities within, or associated with, the UN.
Aegis has already received initial orders, to be delivered in the first half of
the current financial year, and expects strong developments under these
arrangements this year.
There is increasing overseas interest in our products as Aegis develops its
network of agents and distributors. Initial orders have been received recently
from several European countries and Aegis expects to make further progress in
these markets this year.
We continue to develop new body armour constructions addressing the issues of
heat, flexibility and physical stress and so improve the comfort for wearers of
body armour systems. Aegis' resources, expertise and experience have been
enhanced by the recent appointment of a senior design manager.
Funding
On 24 June 2009 we completed the investment and refinancing proposed in the
circular dated 29 May 2009 and approved by Shareholders at the AGM on 22 June
2009.
The Company raised GBP1.1m, before expenses, by the issue of loan notes to three
individuals under a Loan Note Instrument creating GBP1.1m 8% fixed rate secured
loan notes 2011. The loan notes are secured by debentures granted by each
company in the Group and by guarantees and indemnities granted by the subsidiary
companies. The loan notes and the loan note securities are subject to the terms
of an intercreditor agreement and the loan notes are subordinated to the Bank.
The Company also issued warrants to subscribe for 20,625,000 ordinary shares at
an exercise price of 6 pence per ordinary share. The warrants are exercisable,
in whole or in part, at any time following the date falling six months from the
date of issue of the warrants. The warrants will lapse to the extent not
exercised by the fifth anniversary of the date of issue. In the event of the
full exercise of the warrants the new ordinary shares thereby created would
represent 28.1% of the Company's enlarged share capital.
In conjunction with the issue of the loan notes, HSBC provided facilities
comprising a GBP250,000 sterling net overdraft facility and a GBP900,000 LIBOR
term loan facility. These bank facilities are secured by debentures granted by
each company in the Group and by a composite guarantee entered into by each
company in the Group. The bank facilities and the bank securities are subject to
the terms of an intercreditor agreement and rank ahead of the loan notes and the
loan note securities.
The Board
As reported in last year's statement, Glenn Hopkinson retired as a Director of
the Company on 10 December 2008.
Adrian Bradshaw resigned as a Director of the Company on 22 June 2009. On the
same day, Prodaman Sarwal was elected a Director of the Company.
Staff
The Board is grateful for the efforts and contribution made by the entire
Group's staff in what has been a difficult year.
Prospects
The Board expects a further improvement in trading performance in the year to
June 2010.
As reported last year, it is expected that the contract for the supply of
certain body armour systems for the Metropolitan Police Authority will be put
out to tender this autumn. Aegis is one of four companies qualified to
participate in pre-tender discussions during which new products have been
developed for review. The results of this tender may have an influence on the
procurement strategies of other UK police forces, which will have the option of
purchasing under the Metropolitan Police Authority framework agreement or may
choose to continue with their own framework agreements and contracts. Aegis is
monitoring the situation carefully and expects to have products available to
meet both eventualities.
The euro:GBP exchange rate continues to be a major parameter affecting our
material costs, as we believe it does for our competitors in the UK market. We
continue to maintain a tight control on overhead costs to assist profitability.
The Board remains confident the Group will be able to capitalise on some
exciting opportunities with new, innovative, cost-effective solutions for both
existing customers and for new prospects in the UK and overseas.
T R Wightman
14 September 2009
Consolidated Income Statement
for the year ended 30 June 2009
+-------------------------------------+--------+--+-----------+----+------------+
| | Note | | 2009 | | 2008 |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | GBP000 | | GBP000 |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Revenue | | | 10,287 | | 5,986 |
+-------------------------------------+--------+--+-----------+----+------------+
| Cost of sales | | | (7,321) | | (4,002) |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Gross profit | | | 2,966 | | 1,984 |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Administrative expenses | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| amortisation of intangible fixed | | | (264) | | (264) |
| assets | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| share-based payments | | | - | | (280) |
+-------------------------------------+--------+--+-----------+----+------------+
| impairment of goodwill | | | - | | (8,808) |
+-------------------------------------+--------+--+-----------+----+------------+
| other | | | (2,524) | | (2,743) |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Total administrative expenses | | | (2,788) | | (12,095) |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Operating profit/(loss) | | | 178 | | (10,111) |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Finance costs | | | (86) | | (111) |
+-------------------------------------+--------+--+-----------+----+------------+
| Finance income | | | - | | 7 |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Profit/(loss) before income tax | | | 92 | | (10,215) |
+-------------------------------------+--------+--+-----------+----+------------+
| Income tax | | | (67) | | 220 |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Profit/(loss) for the year | | | 25 | | (9,995) |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Profit/(loss) per share | | | | | |
| attributable to the equity holders | | | | | |
| of the Company during the year | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
| Basic and diluted earnings/(loss) | 4 | | 0.05p | | (18.94)p |
| per share | | | | | |
+-------------------------------------+--------+--+-----------+----+------------+
Consolidated Balance Sheet
at 30 June 2009
+--------------------------------------+------+---+----------+---+------------+
| | Note | | 30 June | | 30 June |
+--------------------------------------+------+---+----------+---+------------+
| | | | 2009 | | 2008 |
+--------------------------------------+------+---+----------+---+------------+
| | | | GBP000 | | GBP000 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Assets | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Non-current assets | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Property, plant & equipment | | | 179 | | 207 |
+--------------------------------------+------+---+----------+---+------------+
| Goodwill | 5 | | 2,000 | | 2,000 |
+--------------------------------------+------+---+----------+---+------------+
| Other intangible assets | | | 792 | | 1,056 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| | | | 2,971 | | 3,263 |
+--------------------------------------+------+---+----------+---+------------+
| Current assets | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Inventories | | | 1,551 | | 771 |
+--------------------------------------+------+---+----------+---+------------+
| Trade and other receivables | | | 2,507 | | 1,962 |
+--------------------------------------+------+---+----------+---+------------+
| Cash and cash equivalents | | | 171 | | -- |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| | | | 4,229 | | 2,733 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Total assets | | | 7,200 | | 5,996 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Liabilities | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Non-current liabilities | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Financial liabilities -- borrowings | | | 1,588 | | 678 |
+--------------------------------------+------+---+----------+---+------------+
| Deferred income tax liabilities | | | 14 | | 14 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| | | | 1,602 | | 692 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Current liabilities | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Trade and other payables | | | 3,500 | | 2,635 |
+--------------------------------------+------+---+----------+---+------------+
| Financial liabilities -- borrowings | | | 240 | | 836 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| | | | 3,740 | | 3,471 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Total liabilities | | | 5,342 | | 4,163 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Equity | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Capital and reserves attributable to | | | | | |
| equity holders of the Company | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Share capital | | | 9,009 | | 9,009 |
+--------------------------------------+------+---+----------+---+------------+
| Share premium account | | | 14,200 | | 14,200 |
+--------------------------------------+------+---+----------+---+------------+
| Share-based payment reserve | | | 280 | | 280 |
+--------------------------------------+------+---+----------+---+------------+
| Retained earnings | | | (21,631) | | (21,656) |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Total Shareholders equity | | | 1,858 | | 1,833 |
+--------------------------------------+------+---+----------+---+------------+
| | | | | | |
+--------------------------------------+------+---+----------+---+------------+
| Total equity and liabilities | | | 7,200 | | 5,996 |
+--------------------------------------+------+---+----------+---+------------+
Consolidated Cash Flow Statement
for the year ended 30 June 2009
+-------------------------------------------+--+--+----------+----+------------+
| | | | 2009 | | 2008 |
+-------------------------------------------+--+--+----------+----+------------+
| | | | GBP000 | | GBP000 |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Cash flows from operating activities | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Profit/(loss) after taxation | | | 25 | | (9,995) |
+-------------------------------------------+--+--+----------+----+------------+
| Adjustments for: | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Depreciation | | | 58 | | 60 |
+-------------------------------------------+--+--+----------+----+------------+
| Impairment of goodwill | | | -- | | 8,808 |
+-------------------------------------------+--+--+----------+----+------------+
| Amortisation of intangible assets | | | 264 | | 264 |
+-------------------------------------------+--+--+----------+----+------------+
| Share-based payment charge | | | -- | | 280 |
+-------------------------------------------+--+--+----------+----+------------+
| Finance costs | | | 86 | | 111 |
+-------------------------------------------+--+--+----------+----+------------+
| Finance income | | | -- | | (7) |
+-------------------------------------------+--+--+----------+----+------------+
| Taxation charge/(credit) recognised | | | 67 | | (220) |
| in income statement | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| (Increase) in trade and other | | | (792) | | (444) |
| receivables | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| (Increase)/decrease in inventories | | | (780) | | 126 |
+-------------------------------------------+--+--+----------+----+------------+
| Increase in trade and other payables | | | 800 | | 433 |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Cash flows from operations | | | (272) | | (584) |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Income tax received/(paid) | | | 245 | | (444) |
+-------------------------------------------+--+--+----------+----+------------+
| Interest paid | | | (86) | | (106) |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Net cash outflow from operating | | | (113) | | (1,134) |
| activities | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Cash flows from investing activities | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Interest received | | | -- | | 7 |
+-------------------------------------------+--+--+----------+----+------------+
| Purchase of property, plant and equipment | | | (30) | | (33) |
+-------------------------------------------+--+--+----------+----+------------+
| Acquisition of subsidiaries | | | -- | | (6,002) |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Net cash used in investing activities | | | (30) | | (6,028) |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Cash flows from financing activities | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Proceeds from issue of share capital | | | -- | | 10,075 |
+-------------------------------------------+--+--+----------+----+------------+
| Payment for share issue costs | | | -- | | (1,075) |
+-------------------------------------------+--+--+----------+----+------------+
| New borrowings | | | 2,000 | | 1,000 |
+-------------------------------------------+--+--+----------+----+------------+
| Payment for arrangement costs for new | | | (200) | | -- |
| borrowings | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Repayment of borrowings | | | (850) | | (2,950) |
+-------------------------------------------+--+--+----------+----+------------+
| Repayment of loan notes | | | -- | | (467) |
+-------------------------------------------+--+--+----------+----+------------+
| Repayment of finance leases | | | (23) | | (23) |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Net cash generated from financing | | | 927 | | 6,560 |
| activities | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Net increase/(decrease) in cash and cash | | | 784 | | (602) |
| equivalents | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Cash and cash equivalents at beginning of | | | (613) | | (11) |
| year | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| | | | | | |
+-------------------------------------------+--+--+----------+----+------------+
| Cash and cash equivalents at end of year | | | 171 | | (613) |
+-------------------------------------------+--+--+----------+----+------------+
Basis of preparation of the preliminary results
The preliminary results for the year ended 30 June 2009 have been extracted from
the audited financial statements which have not yet been delivered to the
Registrar of Companies. The financial information set out in this announcement
does not constitute statutory financial statements for the year ended 30 June
2009 or 30 June 2008.
The statutory financial statements for the year ended 30 June 2009 were
unqualified and did not contain a statement under section 435 of the Companies
Act 2006. The statutory financial statements for the year ended 30 June 2008
have been delivered to the Registrar and were prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union, while the statutory financial statements for the year ended 30 June 2009
will be delivered to the Registrar f ollowing the Company's Annual General
Meeting. The preliminary results have been prepared in accordance with IFRS as
adopted by the European Union and were approved by the Board of Directors on 14
September 2009.
The Group accounting policies used in the preliminary results are consistent
with those applied in its most recent annual financial statements, an extract of
which is set out in note 2 below.
Notes to the Financial Statements
for the year ended 30 June 2009
1 NATURE OF OPERATIONS AND GENERAL INFORMATION
Shieldtech plc is the Group's ultimate parent Company. It is incorporated and
domiciled in England and Wales. Shieldtech plc's shares are listed on the AIM
market of the London Stock Exchange.
The address of its registered office and principal place of business is 5
Chesford Grange, Woolston, Warrington, WA1 4RQ.
The consolidated financial information extracted from the financial statements
of Shieldtech plc are presented in pounds sterling (GBP), which is also the
functional currency of the parent. The principal activity of the Company is a
holding company.
2 PRINCIPAL ACCOUNTING POLICIES
2.1 Basis of preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union (EU), including International Accounting Standards (IAS) and
interpretations issued by the International Financial Reporting Interpretations
Committee (IFRIC). Practice is continuing to evolve on the application and
interpretations of IFRS. Further standards may be issued by the International
Accounting Standards Board (IASB) and standards currently in issue and endorsed
by the EU may be subject to interpretations issued by IFRIC.
IFRS, as adopted by the EU, differs in certain respects from IFRS as issued by
the IASB. However, the consolidated financial statements for the period
presented would be no different had the Group applied IFRS as issued by the
IASB. References to IFRS hereafter should be construed as references to IFRS as
adopted by the EU.
The preparation of financial statements, in conformity with generally accepted
accounting principles under IFRS, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Although these estimates are based on
management's best knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates.
The financial statements have been prepared using the measurement basis
specified by IFRS for each type of asset, liability, income and expense. The
measurement bases are more fully described in the detailed accounting policies
below.
The financial statements have been prepared on a going concern basis under the
historical cost convention.
The Group's business activities, together with the factors likely to affect its
future development, performance and position, and its cash flows, liquidity
position and borrowing facilities are described in the Chairman's Statement. In
addition, Note 21 to the financial statements includes the Group's policies and
processes for managing its capital, its financial risk management objectives,
details of financial instruments and hedging activities and its exposure to
credit risk and liquidity risk. The Group meets its day-to-day working capital
requirements through an overdraft facility that is due for renewal on 22 May
2010. The current economic conditions create uncertainty over the level of
demand for the Group's products; the exchange rate between sterling and euro and
hence the cost of the Group's raw materials; and the availability of bank
finance in the foreseeable future.
The Group's forecasts and projections, taking account of reasonably possible
changes in trading performance, show the Group should be able to operate within
the level of its current facility. The Group will open renewal discussions with
the bank in due course and has not at this stage sought any written commitment
that the facility will be renewed. However, the Group has held discussions with
its bank about its future borrowing needs and no matters have been drawn to its
attention to suggest that renewal may not be forthcoming on acceptable terms.
After making enquiries the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future and accordingly continue to adopt the going
concern basis in preparing the annual report and financial statements.
2.2 Basis of consolidation
The Group financial statements consolidate those of the Company and all of its
subsidiary undertakings drawn up to the balance sheet date. Subsidiaries are
entities over which the Group has the power to control the financial and
operating policies so as to obtain benefits from its activities. The Group
obtains and exercises control through voting rights. Subsidiaries are
consolidated from the date on which control is transferred to the Group.
Unrealised gains on transactions within the Group are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
2.3 Business combinations
Acquisitions of subsidiaries are dealt with by the purchase method. The purchase
method involves the recognition at fair value of all identifiable assets and
liabilities, including contingent liabilities of the subsidiary, at the
acquisition date, regardless of whether or not they were recorded in the
financial statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are included in the
consolidated balance sheet at their fair values, which are also used as the
bases for subsequent measurement in accordance with Group accounting policies.
Goodwill is stated after separating out identifiable intangible assets.
2.4 Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets including separately
identifiable intangible assets and contingent liabilities of the acquired
subsidiary at the date of acquisition, regardless of whether or not they were
recorded in the financial statements of the subsidiary prior to acquisition.
Goodwill is tested annually for impairment.
Other intangible assets
Separately identifiable intangible assets are included at their fair value at
the date of acquisition and amortised over their estimated useful lives,
generally up to five years.
2.5 Property, plant and equipment
Property, plant and equipment are included at cost less accumulated depreciation
and provision for impairment. No depreciation is charged during the period of
construction or commissioning.
2.6 Depreciation
Depreciation is calculated to write down the cost, less any estimated residual
value, of all property, plant and equipment on a straightline basis over their
estimated useful economic lives as follows:
Long leasehold land and buildings term of lease
Plant and machinery up to 10 years
Other up to 5 years
Material residual value estimates are updated as required, but at least
annually, whether or not the asset is revalued.
2.7 Disposal of assets
The gain or loss arising on the disposal of an asset is determined as the
difference between the disposal proceeds and the carrying amount of the asset
and is recognised in the income statement.
2.8 Impairment testing of assets
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units). As a result, some assets are tested individually for impairment and some
are tested at cash-generating unit level.
Individual assets or cash-generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised where the asset's or cash-generating unit's
carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of fair value, reflecting market conditions less costs to sell, and value
in use based on an internal discounted cash flow evaluation. Impairment losses
recognised for cash-generating units, to which goodwill has been allocated, are
credited initially to the carrying amount of goodwill. Any remaining impairment
loss is charged pro rata to the other assets in the cash-generating unit. With
the exception of goodwill, all assets are subsequently reassessed for
indications that an impairment loss previously recognised may no longer exist.
2.9 Leased assets
In accordance with IAS17, the economic ownership of a leased asset is
transferred to the lessee if the lessee bears substantially all the risks and
rewards related to the ownership of the leased asset. The related asset is
recognised at the time of inception of the lease at the fair value of the leased
asset or, if lower, the present value of the minimum lease payment plus
incidental payments, if any, to be borne by the lessee. A corresponding amount
is recognised as a finance leasing liability.
The interest element of leasing payments is charged to the income statement in
constant proportion to the capital balance outstanding over the period of the
lease.
All other leases are regarded as operating leases and the payments made under
them are charged to the income statement on a straight-line basis over the lease
term. Lease incentives are spread over the term of the lease.
2.10 Investments
Investments in subsidiary companies are included at cost less provision for
impairment.
2.11 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
calculated on a FIFO basis and includes materials, direct labour and an
attributable proportion of manufacturing overheads based on normal levels of
activity. Net realisable value is based on estimated selling price less further
costs to be incurred to completion and disposal.
2.12 Cash and cash equivalents
For the purposes of the cash flow statement cash and cash equivalents comprise
cash in hand and demand deposits together with other short-term highly liquid
investments that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value. Bank overdrafts that
are repayable on demand form an integral part of the Group's cash management and
are also included as a component of cash and cash equivalents. For the purposes
of the balance sheet cash and cash equivalents are cash on hand and deposits
with banks and other financial institutions which are not restricted in their
use. Bank overdrafts are included in borrowings in current liabilities.
2.13 Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable. Revenue is reduced for any rebates and other similar allowances. The
Group recognises income on an order by order basis, in each case assessing when
substantially the risks and rewards have been passed to the customer. This
assessment is based on the terms and conditions for individual orders and
generally identifies the point of recognition as either the manufacture of a
bespoke product or its delivery.
Interest income is accrued on a time basis by reference to the principal
outstanding and at the effective interest rates applicable.
2.14 Foreign currency
Transactions in foreign currency are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses arising from the settlement of such transactions and
from the translation of monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are recognised in the income statement.
2.15 Employee benefits
Pension contributions - defined contribution scheme
The Group makes pension contributions only to defined contribution schemes.
These contributions are recognised in the income statement during the period in
which they become payable. The Group has no further payment obligations once the
contributions have been paid.
Share-based payments
The Group operates a number of equity-settled, share-based compensation plans.
The fair value of the services received in exchange for the grant of the options
and warrants is recognised as an expense in the income statement with a
corresponding adjustment to equity. The total amount to be expensed over the
vesting period, or on grant if there is no vesting period, is determined by
reference to the fair value of the options and warrants granted using an
appropriate pricing model.
2.16 Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
Current tax is the tax currently payable or receivable based on the taxable
profit or loss for the period. The Group's liability for current tax is
calculated using tax laws and rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between the
carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill, nor on the
initial recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit. In addition, tax
losses available to be carried forward as well as other income tax credits to
the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax
assets are recognised to the extent that it is probable that the underlying
deductible temporary differences will be able to be offset against future
taxable income. Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at the balance
sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the income statement, except where they relate to items that are
charged or credited directly to equity (such as the revaluation of land) in
which case the related deferred tax is also charged or credited directly to
equity.
2.17 Segment reporting
A segment is a distinguishable component of the Group that is engaged in
providing goods or services (business segment), or in providing goods or
services within a particular economic environment (geographical segment), which
is subject to risks and returns that are different from those of other segments.
2.18 Financial assets
All financial assets are recognised when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are classified into
the following specified categories: financial assets 'at fair value' through
profit or loss (FVTPL), 'held to maturity' investments, 'available for sale'
(AFS) financial assets and 'loans and receivables'. The classification depends
on the nature and purpose of the financial asset and is determined at the time
of initial recognition. The Group currently has only loans and receivables in
these financial statements.
Financial assets, other than those categorised as at fair value through profit
or loss, are initially recognised at fair value plus transaction costs.
Loans receivable are measured subsequent to initial recognition at amortised
cost using the effective interest method, less provision for impairment. Any
change in their value through impairment or reversal of impairment is recognised
in the income statement.
Provision against trade receivables is made when there is objective evidence
that the Group will not be able to collect all amounts due to it in accordance
with the original terms of those receivables. The amount of the write-down is
determined as the difference between the asset's carrying amount and the present
value of estimated future cash flows.
An assessment for impairment is undertaken on each financial asset at least at
each balance sheet date.
2.19 Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and
are recognised when the Group becomes a party to the contractual provisions of
the instrument. Financial liabilities are categorised as 'at fair value' through
profit or loss (FVTPL) and 'amortised cost'. The Group currently has no
liabilities categorised as FVTPL.
Other financial liabilities are initially recognised at fair value, net of
transaction costs, and are subsequently recorded at amortised cost using the
effective interest method, with interest-related charges recognised as an
expense in finance cost in the income statement. Finance charges, including
premiums payable on settlement or redemption and direct issue costs, are charged
to the income statement on an accruals basis using the effective interest method
and are added to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.
A financial liability is derecognised only when the obligation is extinguished,
that is, when the obligation is discharged or cancelled or expires.
2.20 Equity
Equity comprises:
Share capital - the nominal value of equity shares issued.
Share premium account - the excess over nominal value of the fair value of
consideration received for equity shares net of expenses of the share issue.
Share-based payment reserve - the fair value of share-based payments that has
been expensed in the income statement, until such share-based payments are
exercised.
Retained earnings - the retained profits and losses.
2.21 Critical accounting estimates and judgements
The preparation of the financial statements requires the use of estimates and
assumptions. These affect the classification and valuation of assets,
liabilities, income, expenses and contingent liabilities. Estimates and
assumptions mainly relate to the useful life of non-current assets, the
discounted cash flows used in impairment testing, the valuation of share-based
payments and provision for taxes. Estimates are based on historical experience
and other assumptions that are considered accurate in the circumstances. The
actual values may vary from the estimates. The estimates and the assumptions are
continually reviewed.
Critical accounting and valuation policies and methods are those that are most
important to the portrayal of the Group's financial position, results of
operations and cash flows, and that require the application of difficult,
subjective and complex judgements, often as a result of the need to make
estimates about the effects of matters that are inherently uncertain and may
change in subsequent periods. While not all of the significant accounting
policies require difficult, subjective or complex judgements, the Company
considers the following accounting policies to be significant.
Intangible assets
At 30 June 2009 the Group had intangible assets with a net carrying amount of
GBP2.792m, comprising goodwill of GBP2m and customer relationships of GBP0.792m.
Intangible assets other than goodwill are amortised over their estimated useful
lives. The estimated useful lives are based on estimates of the period during
which the assets will generate revenue. Intangible assets other than goodwill
are tested for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may no longer be recoverable.
Goodwill is tested annually for impairment. Impairment losses are measured by
comparing the carrying amount to the discounted cash flows expected to be
generated by the relevant cash-generating unit to which the goodwill belongs.
The impairment loss is first allocated to goodwill and then to the other assets
of a cash-generating unit. Estimating the discounted future cash flows involves
significant assumptions regarding future sales prices, sales volumes and costs.
The discounting process is also based on assumptions and estimations relating to
business-specific costs of capital, which in turn are based on country risks,
credit risks and additional risks resulting from the volatility of the
respective line of business.
Estimates are also used in the course of acquisitions to determine the fair
value of the assets and liabilities acquired. If any intangible assets are
identified, depending on the type of asset and the complexity of determining its
fair value, the Company either consults with an independent external valuation
expert or develops the fair value internally, using an appropriate valuation
technique which is generally derived from a forecast of the total expected
future net cash flows.
Although the Company believes that its estimates of the relevant expected useful
lives, its assumptions concerning the macroeconomic environment and developments
in the industries in which the Group operates and its estimations of the
discounted future cash flows are appropriate, changes in assumptions or
circumstances could require changes in the analysis. This could lead to
additional impairment charges in the future or to valuation write-backs should
the trends expected by the Company reverse.
Revenue recognition
The Group recognises income on an order by order basis, in each case assessing
when substantially the risks and rewards have been passed to the customer. This
assessment is based on the terms and conditions for individual orders and
generally identifies the point of recognition as either the manufacture of a
bespoke product or its delivery.
Share-based payments
The fair value of share-based payments is determined under the Black-Scholes
model and is dependent on estimates for the expected life of share options and
warrants, volatility of shares, risk-free yield rate to maturity and expected
dividend yield.
Borrowings
Borrowings are recognised initially at fair value on drawdown, net of
arrangement costs incurred, and are stated subsequently at amortised cost. The
Group determines the fair value at drawdown by reference to alternative
borrowings then available and discounted cashflows. The carrying amount of
borrowings approximates to their fair value as the impact of discounting is not
significant.
Income taxes
Estimates are made to compute provisions for taxes. Judgements are necessary to
determine whether deferred tax assets are recognised. These involve assessing
the probabilities that deferred tax assets resulting from deductible temporary
differences and tax losses can be utilised to offset future taxable income.
Uncertainties exist with respect to the interpretation of complex tax
regulations and the amount and timing of future taxable income. Differences
arising between the actual results and the assumptions made, or future changes
to such assumptions, could necessitate adjustments to tax income and expense in
future periods.
2.22 Adoption of new and revised standards
The following standards were relevant to the Group's activities at 30 June 2009,
although were not required to be adopted in the 30 June 2009 financial
statements:
IAS1 Presentation of Financial Statements (revised 2007) - IAS 1 (revised 2007)
is effective for periods beginning on or after 1 January 2009. As the changes
are presentational only the adoption will have no impact upon the results or net
assets of the Group.
Amendment to IFRS7 Financial Instruments: Disclosures - Improving Disclosures
about Financial Instruments. This amendment is effective for annual periods
beginning on or after 1 January 2009. The amendment expands significantly the
disclosure requirements of IFRS7, in particular in relation to fair values where
those values are not derived directly from quoted prices in active markets. A
three-level hierarchy for fair value disclosures is introduced. Changes are also
made to liquidity and risk disclosures, including maturity analysis. As the
changes are presentational only the adoption will have no impact upon the
results or net assets of the Group.
IFRS8 - Operating Segments was issued in November 2006 and is effective for
periods beginning on or after 1 January 2009. IFRS8 specifies how an entity
should report information about its operating segments in its financial
statements. Generally, financial information is required to be reported on the
same basis as is used internally for evaluating operating segment performance
and deciding how to allocate resources to operating segments. In addition an
entity is required to provide information about the extent of its reliance on
its major customers. As the changes are presentational only, the adoption will
have no impact upon the results or net assets of the Group.
IFRS3 Business Combinations and IAS27 (both revised 2008 and effective 1 July
2009). IFRS3 requires transactions costs to acquire a business to be expensed as
incurred rather than capitalised in the balance sheet and requires contingent
consideration to be recognised at fair value on acquisition with all subsequent
changes recognised in the income statement rather than against goodwill as
currently permitted. The Group will assess the impact of the new requirements
regarding acquisition accounting and consolidation in relation to future
acquisitions.
3. SEGMENTAL ANALYSIS
Segment information is presented in respect of the Group's business and
geographical segments. The primary format, business segments, is based on the
Group's management and internal reporting structure.
The Group operates in one business segment, that of the supply of goods and
services to the Homeland Security Market. The Group's results, assets and
liabilities are derived from the Group's single business segment.
All of the Group's production facilities are located in the United Kingdom. The
Group's results, assets and liabilities are derived from the Group's assets in
the UK.
4. EARNINGS/(LOSS) PER SHARE
The earnings/(loss) per share is based on the profit of GBP25,000 (2008: loss of
GBP9,995,000) and the weighted average of 52,788,223 (2008: 52,775,578) ordinary
shares of 1 pence each in issue.
+-----------------------------------------------+------------+--+--------------+
| | 2009 | | 2008 |
+-----------------------------------------------+------------+--+--------------+
| | | | |
+-----------------------------------------------+------------+--+--------------+
| | | | |
+-----------------------------------------------+------------+--+--------------+
| Profit/(loss) attributable to equity holders | 25 | | (9,995) |
| of the Group in GBP000 | | | |
+-----------------------------------------------+------------+--+--------------+
| | | | |
+-----------------------------------------------+------------+--+--------------+
| Weighted average number of ordinary shares in | 52,788,223 | | 52,775,578 |
| issue | | | |
+-----------------------------------------------+------------+--+--------------+
| | | | |
+-----------------------------------------------+------------+--+--------------+
| Basic and diluted earnings/(loss) per share | 0.05p | | (18.94)p |
+-----------------------------------------------+------------+--+--------------+
The profit/(loss) for the period and the weighted average number of ordinary
shares for the purpose of calculating the diluted earnings per share are the
same as for the basic earnings per share calculation due to the Company's
average share price during the year being lower than the exercise price for each
of the options and warrants in issue at the end of the year.
5GOODWILL
+-----------------------------------------+------+------------+----+-----------+
| | | 2009 | | 2008 |
+-----------------------------------------+------+------------+----+-----------+
| | | GBP000 | | GBP,000 |
+-----------------------------------------+------+------------+----+-----------+
| | | | | |
+-----------------------------------------+------+------------+----+-----------+
| Cost | | | | |
| | | | | |
+-----------------------------------------+------+------------+----+-----------+
| At the start of the year | | 10,808 | | -- |
+-----------------------------------------+------+------------+----+-----------+
| Movement in year | | -- | | 10,808 |
+-----------------------------------------+------+------------+----+-----------+
| | | | | |
+-----------------------------------------+------+------------+----+-----------+
| At the end of the year | | 10,808 | | 10,808 |
+-----------------------------------------+------+------------+----+-----------+
| | | | | |
+-----------------------------------------+------+------------+----+-----------+
| Impairment | | | | |
+-----------------------------------------+------+------------+----+-----------+
| At the start of the year | | 8,808 | | -- |
+-----------------------------------------+------+------------+----+-----------+
| Movement in year | | -- | | 8,808 |
+-----------------------------------------+------+------------+----+-----------+
| | | | | |
+-----------------------------------------+------+------------+----+-----------+
| At the end of the year | | 8,808 | | 8,808 |
+-----------------------------------------+------+------------+----+-----------+
| | | | | |
+-----------------------------------------+------+------------+----+-----------+
| Net book value | | | | |
+-----------------------------------------+------+------------+----+-----------+
| At the end of the year | | 2,000 | | 2,000 |
+-----------------------------------------+------+------------+----+-----------+
Goodwill arose on the acquisition by the Company of the Aegis group in July
2007, adding to the goodwill already recognised in the accounts of the Aegis
group. Total goodwill amounted to GBP10.808m. Goodwill represents the value
ascribed by the Company, at the time of the acquisition, incremental to the
separately identified tangible and intangible assets, including customer
relationships. In accordance with accounting standards the value of goodwill and
other intangible assets was reviewed in the light of events since the
acquisition. At the time of the acquisition it was known that revised regulatory
standards would be published in the principal markets in which the Aegis group
operates. It was expected that these markets would take a few months to adjust
to the revised standards. In the event the period of adjustment took much longer
than expected and the level of activity in the market reduced significantly. In
the year ended 30 June 2008 the Aegis group suffered a substantial reduction in
sales and operated at a loss. In parallel, business valuations generally fell
greatly, reflecting the global economic challenges that developed in both equity
and debt markets during 2008 and particularly the near complete retrenchment of
commercial banks from corporate lending.
At 30 June 2008 the Group assessed the carrying value of goodwill relating to
the Aegis group, on a value in use basis, and determined that it was appropriate
to reduce it to GBP2m. At 30 June 2009 the Group re-assessed the carrying value
of goodwill relating to the Aegis group and determined that it was not impaired.
The net book value of goodwill was determined from a value in use calculation
using a discounted cash flow model. The discount rate was 13%. Cash flow
forecasts of the Aegis group were prepared for the year ending 30 June 2010
based on past performance and expectations and extrapolated for a further three
years at a growth rate of 10% per annum then one year with no growth to give
five year projections.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ZGGMLKDVGLZM
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