JOURNEO PLC

Earnings Release • May 9, 2014

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RNS Number : 6610G

21st Century Technology PLC

09 May 2014

21st Century Technology plc

("21st Century" or "the Group")

Preliminary results for the year ended 31 December 2013

21st Century Technology plc (AIM: C21), the specialist service providers of CCTV and monitoring systems to the fleet and network operators in the Bus & Rail industries, today announces its preliminary results for the year ended 31 December 2013.

Board and management changes

·     Significant changes to the Board in the last 4 months of 2013 following decision to re-focus the Group in order to maximise value to shareholders

·     New CEO and FD appointed to bring a fresh strategic approach

·     Immediate actions taken upon their appointment to stabilise the Group and improve customer service

Financial highlights

·     Results broadly in line with half year statement announced in August 2013

·     Profit after tax shows a small loss of £0.2m (2012: profit after tax £1.3m)

·     Basic loss per share of 0.26p (2012: earnings per share 1.45p)

Operational highlights

·     The Group remains the preferred supplier of mobile CCTV to two of the largest bus operators - Arriva UK Bus and First Group UK Bus

·     Go-Ahead contract did not renew in mid-August 2013

·     Two new UK rail sector contracts won with a total value of £2.3m for advanced CCTV systems

Post year end

·     Thorough review of the business undertaken by new management team

·     International sales efforts have been pared back

·     Main focus on key accounts and retention of two major customers

The new management team will be providing more detail on their strategic approach in an announcement and presentations to shareholders at the time of the AGM on 5 June 2014.

Commenting on the results, Russ Singleton Chief Executive Officer of 21st Century, said:

"Following my appointment to the Board in October 2013 we took immediate action to stabilise the Group and have since been carrying out a detailed review of the business.  We are now in a better position to understand the direction we need to take in order to deliver long-term growth.

"The Group's principal activities will remain in the road and rail based public transport vehicle sector.  However the business model needs to change from providing point solutions for the supply and installation of CCTV, black-box and other monitoring systems towards highly integrated on-board technologies and the supporting back-office requirements. This can be summarised as providing managed services for connected public service vehicles (PSVs).

"Glenn Robinson, the Group's FD, and I joined 21st Century because we have a firm belief that we have an opportunity to deliver sustainable returns to shareholders; we have also invested in the business ourselves.  However, there are a number of immediate challenges facing us and we are working hard to deliver the best outcome.  We have already made a number of changes to reduce costs and improve customer service.  We have also made some key appointments that strengthen the leadership, technical ability and industry knowledge of the team.  This will help us take advantage of the opportunities we have.

"I am looking forward to meeting shareholders at the time of our AGM in June and providing more detail on our approach to meeting the changing needs of our customers." 

A copy of this announcement is available on the Group's website: www.21stplc.com

Enquiries:

21 Century Technology plc	Russ Singleton/Glenn Robinson	Tel: 0203 651 9172
finnCap Limited		Tel: 0207 220 0500
Nominated Adviser	Julian Blunt/Henrik Persson
Corporate Broking	Tom Jenkins/Simon Starr
Communications Portfolio	Ariane Comstive/Helen Carpanini	Tel: 0207 536 2028

Chairman's Statement

The Group has gone through a period of significant change since our Interim Results announced in August 2013. 

Against a back drop of a challenging market environment, the changing needs of our customers and non-renewal of a key contract, the Board was looking to re-focus the Group in order to maximise value to shareholders.  As part of this re-focus we were looking to appoint industry experts with an entrepreneurial background who would be able to bring a fresh approach to the business. 

In October 2013 I was delighted to announce the appointment to the Board of Russ Singleton as Chief Executive Officer and Glenn Robinson as Group Finance Director, following an initial approach by them. Following their appointment they purchased shares and were granted share options. At this time Wilson Jennings stepped down from the Board.

Russ Singleton has a successful track record in the electronic security industry in both quoted and non-quoted companies. He was a founder of Synectics plc, formerly Quadnetics plc, and was instrumental to their significant growth based on a core of innovative CCTV solutions for niche markets supplemented by targeted acquisitions. As I stated at the time of their appointment their combined skill and experience gives us a powerful team to lead the business.  Their impressive track record of building small-to-mid scale security businesses will be particularly valuable to 21st Century as we look to build on the current platform.

Since their appointment they have undertaken a thorough review of the business.  They are beginning to apply their approach to the business to deliver sustainable long-term organic and acquisitive growth.  Immediate actions were taken to stabilise the Group: to improve customer service, increase technical capability, empower management and preserve cash. The changes are still ongoing and will be implemented during the course of this year.

Trading results

Group results for the year ended 31 December 2013 show a small loss after tax of £0.2m (2012: profit after tax £1.3m). The basic loss per share is 0.26p (2012: earnings per share 1.45p).

	2013 £m	2012 £m
Revenue	10.8	14.0
Gross profit	4.1	5.8
Gross profit percentage	38%	41%
Net operating expenses	(4.3)	(3.9)
(Loss)/profit before taxation	(0.2)	1.8
Taxation	(0.0)	(0.5)
(Loss)/profit after taxation	(0.2)	1.3
	Pence	Pence
Basic (loss)/earnings per share	(0.26)	1.45

The outcome for the year is broadly in line with our statement at the half year.  However, it is a disappointing result after the hard work and investments made, particularly in our product based expansion into continental Europe, this was compounded by Go-Ahead's decision not to renew our contract in mid-August 2013.

We remain the preferred supplier of mobile CCTV to two of the largest bus operators - Arriva UK Bus and First Group UK Bus - and we have recently secured short-term extensions to both contracts whilst they prepare for renewal in 2014. The steps referred to above to improve customer service, increase technical ability and empower management, significantly improve the renewal prospects and we are working very hard to ensure that these customers are retained given their importance to the Group.

During the year we also gained two more UK rail sector customers for our advanced CCTV systems.  The first, in September 2013, was a £0.4m contract with GB Rail Freight. The second, in November 2013, was a £1.9m contract with one of the UK's train operating companies. These important wins signify a growing adoption of our systems in the rail market and are part of our multi-modal approach to servicing our fleet customers.

Board changes

There have been significant changes to the Board over the year. On 9 January 2013 I moved from non-executive director to Interim Finance Director and on 22 August 2013, following the resignation of Jan Holmstrom, I was appointed Executive Chairman.

Also on 22 August 2013 David Voss retired as a non-executive director and James Cumming joined as a non-executive director.

On 10 October 2013 Wilson Jennings resigned as Chief Executive.  At the same time, Russ Singleton and Glenn Robinson were appointed to the Board as Chief Executive and Group Finance Director respectively.

Dividend

The Group paid its maiden dividend in June 2013 of £652,678 representing 0.7p per share. However, in the light of current trading the dividend policy will be put on hold until the Group returns to sustainable profitability.

Current trading and outlook

International sales efforts have been pared back and we have focused our efforts on key account services rather than a product led geographic expansion. This has resulted in our French subsidiary ceasing to trade and reduction in associated UK based sales support staff. The UK overhead was further reduced to reflect the loss of the major customer account and market conditions. The overall effect was a 17% reduction in headcount in the first quarter of 2014.

At the same time we have restructured and strengthened the management of the business in 2014 to better serve our customers.

The expectation for the current year is for revenues to be similar to 2013 although, as already stated, revenues are sensitive to the retention of the customer accounts mentioned above. 

Summary

Whilst there have been a number of challenges in the last year I am cautiously optimistic about our future, not least because of the new energy, drive and direction brought about by the new leadership team. 

We are currently trading in line with Board expectations and every effort is being made to develop new lines of business and secure positive outcomes from the important contract negotiations and renewals due later on this year.

I would like to pass on the Board's sincere thanks and appreciation to all members of staff for their hard work and dedication. 

Mark W Elliott

Chairman

8 May 2014

Consolidated statement of comprehensive income

for the year ended 31 December 2013

	Notes	2013 £'000	Restated 2012 £'000
Revenue	2	10,826	14,026
Cost of sales		(6,756)	(8,266)
Gross profit	2	4,070	5,760
Administrative expenses		(4,293)	(3,940)
Operating (loss)/profit		(223)	1,820
Finance income		5	14
(Loss)/Profit before taxation		(218)	1,834
Taxation		(26)	(486)
(Loss)/Profit for the year being total comprehensive income attributable to owners of the parent		(244)	1,348
(Loss)/Earnings per share	3
Basic		(0.26p)	1.45p
Diluted		(0.26p)	1.45p

Consolidated statement of changes in equity

for the year ended 31 December 2013

	Share capital	Share Premium	Retained Earnings	Total equity shareholders' funds
	£'000	£'000	£'000	£'000
Balance at 1 January 2012	9,223	-	581	9,804
Issue of shares to satisfy share options	101	8	-	109
Cancellation of share capital	(3,263)	-	-	(3,263)
Profit and total comprehensive income for the year	-	-	1,348	1,348
Balance at 31 December 2012	6,061	8	1,929	7,998
Dividends Paid (Note 5)	-	-	(653)	(653)
(Loss) and total comprehensive income for the year	-	-	(244)	(244)
Share based payments	-	-	29	29
Balance at 31 December 2013	6,061	8	1,061	7,130

The new 10p Ordinary Shares were issued following the exercise of 1,011,150 employee share options during 2012:

Option exercise date	Number of shares issued	Exercise price per share	Nominal value	Share premium
			£'000	£'000
16 January 2012	236,150	10.0p	24	-
29 March 2012	75,000	12.5p	7	2
20 June 2012	450,000	10.0p	45	-
20 June 2012	250,000	12.5p	25	6
	1,011,150		101	8

Following approval by shareholders at the Annual General Meeting held on 30 May 2012 and the subsequent confirmation of the High Court on 27 June 2012, a return of capital of £3,263,387 in cash, representing 3.5p per Ordinary Share was paid to shareholders in early July 2012.  This reduction in the share capital of the company became effective on 27 June 2012 and the nominal value of the Ordinary Shares was reduced from 10p to 6.5p per share at that date.

Consolidated statement of financial position

at 31 December 2013

			2013 £'000			2012 £'000
Assets
Non-current assets
Goodwill			4,318			4,318
Other intangible assets			-			121
Property, plant and equipment			202			187
Deferred tax asset			44			74
			4,564			4,700
Current assets
Inventories			1,723			2,006
Trade and other receivables			2,061			2,886
Current tax asset			116			-
Cash and cash equivalents			1,343			1,714
			5,243			6,606
Total assets			9,807			11,306
Liabilities
Current liabilities
Trade and other payables			(1,610)			(2,370)
Current tax liabilities			(8)			(281)
Provisions			(433)			(237)
			(2,051)			(2,888)
Net current assets			3,192			3,718
Non-current liabilities
Provisions			(626)			(420)
Total liabilities			(2,677)			(3,308)
Net assets			7,130			7,998
				2013 £'000	2012 £'000
Shareholders' equity
Share capital				6,061	6,061
Share premium account				8	8
Retained earnings				1,061	1,929
Total equity				7,130	7,998

Consolidated statement of cash flows

for the year ended 31 December 2013

	Notes	2013	2012
		£'000	£'000
Net cash flows from operating activities	4	602	(2)

Cash flow from investing activities
Disposal of freehold property		-	2,292
Purchases of property, plant and equipment		(111)	(154)
Purchases of intangible fixed assets		(209)	(90)
Net cash flows from investing activities		(320)	2,048

Cash flow from financing activities
Proceeds from the exercise of share options		-	109
Dividend Paid	5	(653)
Return of capital		-	(3,263)
Net cash flows from financing activities		(653)	(3,154)

Net decrease in cash and cash equivalents		(371)	(1,108)

Cash and cash equivalents at beginning of year		1,714	2,822

Cash and cash equivalents at end of year		1,343	1,714

Notes to the preliminary results announcement for the year ended 31 December 2013

1. Basis of preparation

While the financial information included in this preliminary results announcement has been computed in accordance with EU endorsed International Financial Reporting Standards (IFRSs) on a basis consistent with that adopted in the previous year, this announcement does not in itself contain sufficient information to comply with IFRSs.

The financial information contained in this preliminary announcement does not constitute statutory accounts for the year ended 31 December 2013 or 31 December 2012.  The financial information for the years ended 31 December 2013 and 31 December 2012 is derived from the statutory accounts for those periods which include audit reports which are unqualified and do not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.  The statutory accounts for the year ended 31 December 2012 have been delivered to the Registrar of Companies.  The statutory accounts for the year ended 31 December 2013 will be delivered to the Registrar of Companies following the company's Annual General Meeting

Going concern

The Group's business activities together with factors likely to affect its future development, performance and position are set out in the Strategic Report within the statutory financial statements and in the Chairman's Statement. In the course of the Directors' going concern review particular consideration was given to the Group's principal risks and uncertainties, including the prospect of losing one or more of the Group's key customers together with associated cost mitigation actions. On the basis of this review the Directors conclude that they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and for at least 12 months from the date of the report. For this reason the Directors continue to adopt the going concern basis in preparing the financial statements.

Restatement

The Group has restated the 2012 results to include direct labour costs and sub-contractors within cost of sales rather than within administrative expenses.

2.  Segmental reporting

The analysis by geographic segment below is presented in accordance with IFRS 8 on the basis of those segments whose operating results are regularly review by the Board of Directors (the Chief Operating Decision Maker as defined by IFRS 8) to make strategic decisions.

The Directors consider the Group to have only one segment in terms of products and services being the supply and installation of CCTV, black-box and other monitoring systems for use on public transport vehicles both in the UK and overseas.

As the Board of Directors, receives revenue, gross profit and operating (loss)/profit on the same basis as set out in the consolidated statement of comprehensive income, no further reconciliation is considered to be necessary.

Geographical Segments
	Revenue 2013 £'000	Gross profit 2013 £'000	Revenue 2012 £'000	Gross profit 2012 £'000
UK	8,785	2,870	9,227	3,336
International
Scandinavia	1,530		4,270
Other EU	511		529
Total International	2,041	1,200	4,799	2,424
Grand total	10,826	4,070	14,026	5,760

Major customers

In the year the Group had two customers that each accounted for over 10% of the revenue at 54% and 24%.  In the prior year there were three customers that each accounted for over 10% of the revenue at 60%, 19% and 12%.

Assets and liabilities by location
	2013 £'000	2012 £'000
Assets
UK	9,748	11,248
International	53	58
Total assets	9,807	11,306
Liabilities
UK	(2,620)	(3,229)
International	(57)	(79)
Total liabilities	(2,677)	(3,308)

All non-current assets are located in the United Kingdom.

3.  (Loss)/Earnings per ordinary share

Basic earnings per share ("EPS") is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.

For diluted earnings, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. 

	2013		2012
	Earnings £'000	Per share amount Pence	Earnings £'000	Per share amount Pence
Basic EPS
Earnings attributable to ordinary shareholders	(244)	(0.26)	1,348	1.45
Diluted EPS
Earnings	(244)	(0.26)	1,348	1.45

The dilutive effect of share options has not been disclosed within the consolidated statement of comprehensive income for earnings per share as the effect is anti-dilutive (i.e. decrease loss per share).

Details of the weighted average number of ordinary shares used as the denominator in calculating the earnings per ordinary share is given below:

	2013 '000	2012 '000
Basic weighted average number of shares	93,240	92,870
Dilutive potential ordinary shares	648	412
Diluted weighted average number of shares	93,888	93,282

4.  Reconciliation of operating loss to net cash inflow from operating activities

	2013 £'000	2012 £'000
(Loss)/Profit for the year	(244)	1,348
Adjustments for:
Finance income	(5)	(14)
Income tax (credit)/expense	(4)	440
Deferred tax charge	30	46
Depreciation of property, plant and equipment	96	54
Amortisation of intangible fixed assets	101	130
Impairment of intangible fixed assets	229	-
Share based payment expense	29	-
Increase in provisions	402	80
Operating cash flows before movement in working capital	634	2,084
Decrease/(increase) in inventories	283	(17)
Decrease/(increase) in receivables	825	(1,479)
Decrease in payables	(681)	(75)
Cash inflow from operations	709	513
Income taxes paid	(385)	(529)
Interest received	5	14
Net cash inflow/(outflow) from operating activities	602	(2)

5.  Dividends

The following dividends were paid by the Company during the year:

	2013		2012
	Pence per share	£'000	Pence per share	£'000
Final dividend paid in respect of prior year	0.7	653	-	-

6. Availability of audited accounts:

Copies of the 2013 audited accounts will be will be available later today on the Company's website (www.21stplc.com) for the purposes of AIM rule 26 and will be posted to shareholders in due course.

This information is provided by RNS

The company news service from the London Stock Exchange

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