RNS Number:8679Q
Shieldtech PLC
27 March 2008
For immediate release 27 March 2008
Shieldtech plc (the "Company" or the "Group")
Interim results for the 6 months ended 31 December 2007
Shieldtech plc, a specialist provider of products and services to the Homeland
Security market, is pleased to announce its interim results for the 6 months
ended 31 December 2007.
Highlights
*Turnover �2.5m and operating loss before amortisation of intangible
assets and share based payments of �0.5m
*�5m contract won to supply innovative modular body armour to a major
overseas defence client
*14 product accreditations achieved to the new Home Office Scientific
Development Branch standard introduced in June 2007
*Significant new orders expected in the second half from a strong sales
pipeline
*Specific businesses targeted for acquisition to implement the "buy and
build" strategy
Tony O'Neill, Chief Executive, commented:
"After a modest first half, as anticipated on admission to AIM, we are confident
that the trading results of the current Group will improve substantially in the
second half as customers recommence placing orders following their review of the
implications of the new Home Office Scientific Development Branch standard.
"We are pleased to announce that, in line with the Board's strategy to build
upon the Group's presence in the Homeland Security market, we are in advanced
negotiations in relation to two complementary and strategic acquisitions and we
hope to be able to make a further announcement in this regard soon."
For more information please contact:
Shieldtech plc Tel: +44 (0) 1925 840048
Tony O'Neill, Chief Executive Officer
Robert Denton, Group Finance Director
Seymour Pierce Tel: +44 (0) 20 7107 8000
Nicola Marrin
Buchanan Communications Tel: +44 (0) 20 7466 5000
Tim Anderson / Isabel Podda / Ben Romney
Introduction
In July 2007 Shieldtech joined the AIM market and, having attracted a strong
experienced management team, we took the first step by way of the acquisition of
the Aegis group towards implementing our strategy to become a leading supplier
of products and services to the Homeland Security market. This growing market
offers attractive opportunities for the rapid development of the Group, both
organically and through acquisition.
Our intention is to continue to build through acquisition a group of companies
which will supply this market globally taking advantage of common needs, routes
to market and other synergies.
Our focus is defence, not attack. Our products and services assist personnel at
risk to carry out their daily duties more securely in the knowledge that their
physical protection is enhanced. We believe that there are strong opportunities
globally to provide high quality products to protect emergency services and
military personnel from the threats associated with terrorism, gun and knife
crime and armed conflicts.
Financial results
As predicted in the Admission Document, activity levels generally across our UK
market sector in the first half of our 2007/08 financial year were slow owing to
the revision of ballistic measurement standards by the Home Office Scientific
Development Branch ("HOSDB"). The adoption of new technical standards has
delayed procurement by several UK police forces. This significantly affected
Aegis and the Group's turnover in the six months ended 31 December 2007. However
gross margins were improved by implementing planned efficiencies, both in
manufacturing and administrative functions.
At this embryonic stage of the Group's development Aegis is our only trading
company. Notwithstanding its effective generation of gross profit and cash, the
modest scale of its business in the six months was not sufficient to cover
overheads, including those of the parent company which are needed to implement
the "buy and build" strategy to achieve the critical mass that is essential for
future growth.
The Group made an operating loss before amortisation of intangible assets and
share based payments of �563,000 on turnover of �2.457 million in the six months
ended 31 December 2007. The Group did not exist in its current form, nor trade,
in the corresponding period ended 31 December 2006.
As expected following the acquisition of Aegis it was necessary to normalise the
payment situation with key suppliers of Aegis. This led to an outflow of
�854,000 to bring those accounts up to date. Since then, operating cash flow has
improved following implementation of a detailed stockholding review and work
with suppliers to agree sustainable and mutually beneficial operating and
financial arrangements.
In accordance with International Financial Reporting Standards the results
incorporate charges in respect of:
* Share based payments - an estimate of �280,000 has been included in
respect of the share options and warrants granted in the period based upon
an independent valuation;
* Amortisation of intangible assets - an estimate of �132,000 has been
included in respect of the fair value attributed to the intangible assets of
Aegis, other than purchased goodwill, based upon an independent valuation.
It is the Company's policy not to recommend a dividend until the Group has
established a track record of earnings growth.
Operational progress
The sales pipeline has never been stronger with police forces in the UK and
overseas police and military customers evaluating proposals for substantial
contracts covering extensive equipment renewal programmes. The Directors believe
that a number of these potential contracts will be awarded in the current half
year. Meanwhile regular sales on a smaller scale continue.
We are pleased to report that Aegis has maintained its customer base. Within the
UK ten police forces are now purchasing new standard body armour, four more
forces are conducting pre-purchase wearer trials and two forces which previously
purchased competitor armour have moved to Aegis as a fully qualified source of
supply.
Product development and technical ability are essential to success for any
company operating within this marketplace. Aegis' recognised technical expertise
and reputation mean that it is particularly well placed to respond to the more
challenging technical standards and it maintains a strong competitive position
within the market place. We are delighted to report that Aegis has already
achieved fourteen product accreditations to the new HOSDB standard.
As UK market leader Aegis is placing further emphasis on the development of its
leadership position in the areas of innovation, design and development. These
areas are becoming of increasing importance to customers. Aegis is at an
advanced stage of agreeing a knowledge transfer partnership with a leading
University and is evolving various new products, including trialling a heat
management technology with a major police force (heat stress is often cited by
wearers of body armour as the major discomfort, especially
during hotter months), the development of armour more considerate to the female
form, collaborative research into improved biometrics to further protect the
vital organs of the body and the development of a flexible light armour solution
with a major overseas military force.
We have invested also in our sales structure in order to improve coverage of
customer accounts and to further increase the opportunity for the securing of UK
and overseas sales. Major export opportunities are currently being progressed
and there is a "pent-up" demand in the UK, where Aegis is confident that it will
retain a leading supplier position.
Recent contract wins
We are delighted to announce that Aegis has secured a contract for the supply of
a specially developed innovative modular body armour system to a major overseas
defence client. The contract has an initial value of �1.8 million for immediate
delivery with potential further sales, including upgrades, totaling �3.2 million
over three years. The contract was won against strong international competition
from companies from Europe, Australia and the USA.
Acquisition strategy
During the period Shieldtech has invested significant time and resources in
identifying and targeting specific acquisitions that would fit the Group's
strategy to expand its geographical presence, extend its product portfolio and
augment its service base in the Homeland Security market.
Our objective has been to find successful niche businesses which are leaders in
their chosen market, profitable, innovative or capable of being reinvigorated
and where sales, marketing and manufacturing efficiencies can be leveraged for
improved performance. From a lengthy list, we have identified a number of
businesses that meet these parameters and we are at varying stages of discussion
with their current owners.
Current trading
The slowness of the current UK police force procurement process and the
resultant short-fall in sales during the first six months is disappointing but
not unexpected and was foreseen in the Admission Document. This slowness has
continued in the early part of our current half year but the Board remains
confident that Aegis will win significant new orders during the remainder of
this half year as UK police forces move forward in their compliance with the new
HOSDB standard. Activities undertaken in the first half of the year are expected
to yield growth from overseas.
Outlook
It is less than nine months since the Company's admission to AIM. The
opportunities available to implement the "buy" part of the Group's strategy are
very exciting. It is important that we move forward and create scale in our
activities, breadth in our product portfolio and diversity in our geographical
markets. We have identified a specific target list of businesses that meet our
strategic acquisition criteria.
This combination of "buy" and "build" is our chosen way to enhance shareholder
value. We are delighted to have been supported by our shareholders at the time
of the placing and admission to AIM in July 2007 and look forward to their
ongoing involvement at this important stage of the Group's development.
Anthony O'Neill
27 March 2008
Unaudited Unaudited Audited
6 months 6 months 16 months
ended 31 ended ended
December 31 December 30 June
2007 2006 2007
�'000 �'000 �'000
Note
Continuing activities
Revenue 2,457 - -
Cost of sales (1,595) - -
Gross profit 862 - -
Administrative expenses
- amortisation of intangible (132) - -
assets
- share-based payments (280) - -
- other (1,425) (40) (105)
Total administrative expenses (1,837) (40) (105)
Operating loss (975) (40) (105)
Finance costs (60) - -
Finance income - - 1
Loss before income tax (1,035) (40) (104)
Income tax 191 - -
Loss for the period (844) (40) (104)
Attributable to
Equity holders of the Company (844) (40) (104)
Profit per share attributable to the equity
holders of the Company during the period
- Basic and diluted 4 (1.60)p (0.08)p (0.20)p
Consolidated interim income statement (unaudited)
for the six months ended 31 December 2007
Unaudited Unaudited 6 Audited
months ended
6 months 31 December 16 months
ended ended
31 December 30 June
2007 2006 2007
Note �'000 �'000 �'000
Assets
Non current assets
Property, plant and equipment 218 - -
Goodwill 10,714 - -
Other intangible assets 1,188 - -
Total non-current assets 12,120 - -
Current assets
Inventories 693 - -
Trade and other receivables 1,113 6 6
Total current assets 1,806 6 6
Total assets 13,926 6 6
Liabilities
Non current liabilities
Long term borrowings 750 - -
Obligations under finance leases 32
Deferred income tax liabilities 17 - -
Total non-current liabilities 799 - -
Current liabilities
Trade and other payables 1,280 118 147
Financial liability - borrowings 207 - 11
Obligations under finance leases 28 - -
Current tax liabilities 221 - -
Other borrowings 200 - -
Loan notes 207 - -
Total current liabilities 2,143 118 158
Total liabilities 2,942 118 158
Equity
Capital and reserves attributable to equity
holders of the Company
Share capital 9,009 8,498 8,498
Share premium 14,200 3,011 3,011
Share based payment 280 - -
Retained earnings (12,505) (11,621) (11,661)
Total shareholders' equity 10,984 (112) (152)
Total equity and liabilities 13,926 6 6
Consolidated interim balance sheet (unaudited)
for the six months ended 31 December 2007
Unaudited Unaudited 6 Audited
months ended
6 months 31 December 16 months
ended ended 30
June
31 December
2007 2006 2007
�'000 �'000 �'000
Note
Cash flows from operating
activities
Cash consumed by operations 6 (999) (11) (32)
Cash flows from investing
activities
Purchases of property plant (11) - -
and equipment
Acquisition of subsidiaries 7 (6,002) - -
Cash flows from financing
activities
Proceeds from the issue of 10,075 - -
ordinary shares
Payment for share issue costs (1,075) - -
New borrowings 1,000 - -
Repayment of borrowings (2,850) - -
Repayment of loan notes (260) - -
Repayment of finance lease (14) - -
Finance costs (60) - -
Finance income - - 1
Net decrease in cash and cash (196) (11) (31)
equivalents
Cash and cash equivalents at the (11) 11 20
beginning of the period
Cash and cash equivalents at the end (207) - (11)
of the period
Consolidated interim cash flow statement (unaudited)
for the six months ended 31 December 2007
Share
based
Ordinary Deferred payment
share share reserve
capital capital Share Retained Total
premium earnings equity
�'000 �'000 �'000 �'000 �'000 �'000
Balance at 30 June 2007 8,498 - - 3,011 (11,661) (152)
Changes in equity for the
six months to 31 December
2007
Total recognised income/
(loss)
- loss for the period - - - - (844) (844)
8,498 - - 3,011 (12,505) (996)
Share reorganisation (8,482) 8,482 - - - -
Issues of share capital
- acquisition of Aegis 108 - - 2,592 - 2,700
group
- other 403 - - 9,672 - 10,075
Share issue costs - - - (1,075) - (1,075)
Share based payment charge - - 280 - - 280
Balance at 31 December 527 8,482 280 14,200 (12,505) 10,984
2007
Balance at 28 February 8,498 - - 3,011 (11,557) (48)
2006
Changes in equity for the
sixteen months ended 30
June 2007
Total recognised income/ - - - - (104) (104)
(loss)
- loss for the period
Balance at 30 June 2007 8,498 - - 3,011 (11,661) (152)
Balance at 28 February 8,498 - - 3,011 (11,557) (48)
2006
Changes in equity for the
four months ended 30 June
2006
Total recognised income/ - - - - (24) (24)
(loss)
- loss for the period
Balance at 30 June 2006 8,498 - - 3,011 (11,581) (72)
Changes in equity for the
six months ended 31
December 2006
Total recognised income/ - - - - (40) (40)
(loss)
- loss for the period
Balance at 31 December 8,498 - - 3,011 (11,621) (112)
2006
Consolidated interim statement of changes in equity (unaudited)
for the six months ended 31 December 2007
Notes to the interim financial statements (unaudited)
1. Nature of operations and general information
Shieldtech plc ("the Company") and its subsidiaries (together "the Group") are
principally involved with the supply of products and services to the Homeland
Security market. The main activities of the Group currently are the design,
manufacture and distribution of body armour systems.
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 the registered office and
principal place of business is 5 Chesford Grange, Woolston, Warrington, WA1 4SZ.
These unaudited consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standard ('IFRS') IAS 34
Interim Financial Reporting. They do not include all the information required
for full annual financial statements and should be read in conjunction with the
consolidated financial statements of the Group as at and for the sixteen months
ended 30 June 2007 which have been delivered to the Registrar of Companies and
are also available on the Company's website at www.shieldtechplc.com. Those
financial statements received an unqualified audit report which did not contain
statements under section 237(2) and (3) of the Companies Act 1985.
Shieldtech plc's consolidated interim financial statements are presented in
pounds sterling (�), which is also the functional currency of the Company.
2. Accounting policies
These unaudited consolidated interim financial statements have been prepared
under the historical cost convention. The accounting policies used in these
interim financial statements are consistent with those applied in the audited
financial statements of the Group for the sixteen months ended 30 June 2007.
The principal accounting policies are set out below.
2.1 Consolidation
The Group's financial statements consolidate those of the Company and all of its
subsidiaries drawn up to 31 December 2007. 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.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange plus costs directly attributable to the
acquisition.
2.2 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. On
initial recognition the assets and liabilities of subsidiaries are included in
the consolidated balance sheet at their estimated fair values. 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.
2.3 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
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.
2.4 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.
2.5 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.
3. Segmental information
The business of the Group comprises one segment, body armour systems.
Accordingly no segmental information is provided.
4. Loss per share
The Company's share capital was reorganised on 12 July 2007 by consolidating
every 500 ordinary shares into 1 consolidated share and then subdividing each
consolidated share into 1 new ordinary share and 499 deferred shares. The effect
of the reorganisation was to reduce the number of ordinary shares by a factor of
500. On 13 July 40,000,000 new ordinary shares were placed to raise �10 million
and 10,800,000 new ordinary shares were issued as part of the consideration to
purchase the entire share capital of Aegis Engineering Holdings Limited
(formerly Shieldtech Limited) and its subsidiary Aegis Engineering Limited.
The loss per share is calculated by reference to the loss attributable to
ordinary shareholders divided by the weighted average number of ordinary shares
in issue during the period.
Unaudited Unaudited Audited
6 months ended 6 months 16 months
31 December ended 31 ended 30 June
December
2007 2006 2007
Loss attributable to equity holders of (844) (40) (104)
the Group (�'000)
Weighted average number of ordinary 52,763,139 52,499,762 52,499,762
shares in issue
Basic and diluted loss per share (1.60)p (0.08)p (0.20)p
(pence)
Loss attributable to equity holders of
the Group (�'000) - before
amortisation of intangible assets and (432) (40) (104)
share based payment charge
Basic and diluted loss per share
(pence)
(0.82)p (0.08)p (0.20)p
-before amortisation of intangible
assets and share based payment charge
Share options in issue are anti-dilutive in respect of the basic loss per share
calculation and have therefore been excluded in the above calculations of loss
per share.
5. Cash consumed by operations
Unaudited Unaudited Audited
6 months 6 months 16 months
ended ended ended
31 December 31 December 30 June
2007 2006 2007
�'000 �'000 �'000
Loss for the period (844) (40) (104)
Adjustments for:
- Depreciation 27 - -
- Amortisation of intangible assets 132 - -
- Share based payment charge 280 - -
- Finance costs 60 - -
- Finance income - - (1)
- Taxation income recognised in income (191) - -
statement
- Trade and other receivables 186 - (3)
- Inventories 204 - -
- Trade and other payables (853) 29 76
Cash consumed by operations (999) (11) (32)
6. Acquisition of subsidiaries
On 13 July 2007 the Company acquired the entire share capital of Aegis
Engineering Holdings Limited (previously named Shieldtech Limited) and its
wholly owned subsidiary Aegis Engineering Limited (together 'the Aegis group')
whose principal activity is the design is the design, manufacture and
distribution of body armour systems.
Book value Adjustments Fair value
�'000 �'000 �'000
Current assets
Cash and cash equivalents 196 - 196
Trade and other receivables 1,293 - 1,293
Inventories 897 - 897
Non-current assets
Property, plant and equipment 234 - 234
Intangible assets - 1,320 1,320
Current liabilities
Trade and other payables (1,986) - (1,986)
Obligations under finance leases (74) - (74)
Current income tax liabilities (412) - (412)
Deferred income tax liabilities (17) - (17)
Loan notes (467) - (467)
Non-current liabilities
Borrowings (2,800) - (2,800)
(3,136) 1,320 (1,816)
Goodwill on acquisition 10,714
Initial purchase consideration 8,898
The acquisition of the Aegis group has been recognised in these financial
statements on the basis of initial estimates of the fair values of the net
assets acquired and the goodwill arising. These estimates may be subject to
adjustment.
The initial purchase consideration was �8.5 million, satisfied by �5.8 million
in cash and by �2.7 million from the issue of 10.8 million new ordinary shares
at a market price of 25 pence each, and associated costs of �0.4 million. The
initial purchase consideration is subject to adjustments dependant on the
performance of the Aegis group in the two years ending 30 June 2008. The
adjustments arising in respect of the year ended 30 June 2007 were �nil. The
adjustment in respect of the year ending 30 June 2008 is based on an earn-out to
be determined by the adjusted profit of the Aegis group (between �2.8 million
and �4.2 million), subject to a maximum amount of �5.3 million.
Net cash flow on acquisition
�'000
Initial purchase consideration including associated costs 8,898
Less: non-cash consideration (2,700)
Consideration paid in cash (including associated costs) 6,198
Less: cash and cash equivalents acquired (196)
6,002
Goodwill arose in the business combination because the consideration included a
control premium and amounts in relation to revenue growth, future market
development and the assembled workforce of the Aegis group. These benefits are
not recognised separately from goodwill as the future economic benefits arising
from them cannot be reliably measured.
The Company also acquired the customer lists and customer relationships of the
Aegis group. The fair value of these intangible assets has been assessed and
separately recognised from goodwill because they are capable of being separated
from the Group and sold, transferred, licensed, rented or exchanged, either
individually or together with any related contracts.
7. Share capital reorganisation
The Company's share capital was reorganised on 12 July 2007 by:
- Consolidating every 500 ordinary shares into one consolidated share
- Sub-dividing each consolidated share into one new ordinary share and 499
deferred shares.
The new ordinary shares have rights identical in all respects to the previous
ordinary shares. The deferred shares have no voting or dividend rights and are
effectively valueless. It is the Board's intention to cancel these deferred
shares at the appropriate time.
8. Approval of these unaudited consolidated interim financial statements
These unaudited consolidated interim financial statements were approved and
authorised for issue by the Board of Directors on 27 March 2008.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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