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PEBBLE BEACH SYSTEMS GROUP PLC Interim / Quarterly Report 2021
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Interim / Quarterly Report
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National Storage Mechanism | Additional information 
RNS Number : 0382L
Pebble Beach Systems Group PLC
08 September 2021
Pebble Beach Systems Group plc
Results for the half-year ended 30 June 2021
Pebble Beach Systems Group plc (the "Group", "Company" or "Pebble"), a leading global software business specialising in playout automation and content management solutions for the broadcast and streaming service markets, is pleased to announce its unaudited half-year results for the six months ended 30 June 2021.
Financial highlights
· Orders received up 64% to £6.4m (H1 20: £3.9m).
· Revenue up 9% to £4.9m (H1 20: £4.5m), recurring revenue up 10% to £2.05m (H1 20: £1.86m).
· Adjusted EBITDA1 up 14% to £1.7m (H1 20: £1.5m), representing 35% of revenue (H1 20: 34%).
· Profit before tax up 36% to £1.0m (H1 20: £0.7m).
· Adjusted earnings per share up 33% to 0.8p (H1 20: 0.6p).
· Net cash from operating activities up 32% to £1.8m (H1 20: £1.4m).
· Net debt2 down £1.1m in last six months to £6.6m at 30 June 2021.
Operational highlights
· The delays in customers order placement that were experienced in H2 2020 have eased significantly in the period.
· The capabilities of our Pebble Control application have been further enhanced.
· Development of our Oceans platform continues to plan.
· Strategic move to a fully remote operating model delivering operational benefits in terms of resilience, organisational growth, and performance.
Current trading and outlook
· Sustained growth in the period with a further increase in our pipeline by 7% coming on top of a 64% increase in our order intake.
· Well positioned to sustain performance into second half and beyond.
· Considering ways in which to now further accelerate growth.
John Varney, Non-Executive Chairman of Pebble Beach Systems Group plc, said:
"The Group has clearly delivered an excellent performance for the first half of 2021. These results and our continued investment in new software solutions coupled with our new remote operating model, has demonstrated that we are correct to have confidence in our ability to continue to grow this year and to take that momentum into 2022."
Notes
1 Adjusted EBITDA, a non-GAAP measure, is EBITDA before non-recurring items and foreign exchange gains/losses.
2 Net debt is the aggregation of cash and bank borrowings, excluding IFRS 16 leases
For further information please contact:
| Peter Mayhead - CEO David Dewhurst - CFO |
+44 (0) 75 55 59 36 02 |
| finnCap Ltd (Nominated Adviser and Broker) Marc Milmo / Teddy Whiley - Corporate Finance |
+44 (0) 207 220 0500 |
| Tim Redfern / Sunila de Silva - ECM |
The Company is quoted on the LSE AIM market (PEB.L). More information can be found at www.pebbleplc.com.
About Pebble Beach Systems
Pebble Beach Systems (trading as Pebble) is a world leader in designing and delivering automation, integrated channel and virtualised playout solutions, with scalable products designed for applications of all sizes. Founded in 2000, Pebble has commissioned systems in more than 70 countries, with proven installations ranging from single up to over 150 channels in operation, and around 2000 channels currently on air under the control of our automation technology. An innovative, agile company, Pebble is focused on discovering its customers' requirements and pain points, designing solutions which will address these elegantly and efficiently, and delivering and supporting these professionally and in accordance with its users' needs.
Forward-looking statements
Certain statements in this announcement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that the Group has continued its robust response to the challenges presented by COVID-19 and has now fully embraced remote working as its primary means of operation. The order intake increased 64% from the comparative period of 2020, benefitting from two large orders totalling £1.5 million, deferred because of COVID-19 into 2021, confirming our prior confidence that COVID-19 had merely delayed a number of projects in the pipeline.
We delivered revenue up 9% on the comparative period of 2020, when the pandemic was just starting to impact, so it is encouraging to see business recover and flourish. Recurring revenue from our service contracts was up 10% and this remains an important element of our growth plans.
We continue to see an increasing opportunity for our software and are accelerating our investment in cloud and IP-based technology which will facilitate the delivery of our software solutions on new commercial offerings or a subscription basis that some customers are keen to explore. The investment in our new digital platform, Oceans, also combines the benefits of current technologies enabling our customers to establish all-IP workflows and continuing to benefit from their existing investments. We firmly believe that increasing the rate of investment in our new technology is critical to meet the market demand for all-IP and cloud-based solutions.
Financial performance
· Orders received up 64% to £6.4m (H1 20: £3.9m)
o Includes £1.5m delayed from 2020 but still up 26% allowing for these COVID-19 related delayed contracts.
· Revenue up 9% to £4.9m (H1 20: £4.5m), recurring revenue up 10% to £2.05m (H1 20: £1.86m).
· Adjusted EBITDA1 up 14% to £1.7m (H1 20: £1.5m), representing 35% of revenue (H1 20: 34%).
· Net cash from operating activities up 32% to £1.8m (H1 20: £1.4m);
o Funded increased investment in capitalised R&D of £0.7m (H1 20: £0.6m).
Operational performance
· Four significant new project wins in the period
o £1.2m project underway in partnership with Qvest, a leading Systems Integrator, to fully upgrade ORF's existing playout capability with all-IP and UHD capability retaining Pebble as the automation provider.
o Two significant projects totalling £1.5m were won in the period to enable new customers in Europe and the Far East to migrate from legacy solutions historically supplied by competitors Imagine and Grass Valley.
o A key project was won and delivered in the period for an existing customer, TV2 Denmark, to enable them to broadcast the recent European football tournament on their "TV2 Play" online platform.
· Ongoing software development
o The capabilities of Pebble Control have been further enhanced with the release of the VideoIPath integration allowing control of Software Defined Networks through Sony's Nevion orchestration product.
o Five positions filled in the period as we move to expand our software development capability to meet both long term roadmap and immediate customer requirements.
o Two new R&D projects have been launched to develop our next generation Media Processing and Automation Engines native to the Oceans platform. These applications will sit alongside Pebble Control and our upcoming Pebble Orchestration engine thus enabling us to fulfil the technical element of our strategy to offer customers the full flexibility only achievable with the Oceans platform offering IP native next generation media management, automation, and control.
· Remote operating model
o The move to remote working has significantly curtailed the ongoing impact of COVID-19 on our operations and the sizeable increase in order intake demonstrates that we are able to do business; however, there is no doubt that our selling and delivery efforts continue to experience some delays as the result of international travel restrictions.
o We have further enhanced our commitment to a fully remote operating model with the recent vacation of one of our two Weybridge office units and the commencement of the process to hire a Head of Remote to work with the management over the next twelve months to support our transformation to a world class fully remote organisation.
· Inventory build
o The worldwide shortage of semiconductors is having some impact on project delivery timescales for those projects where customers have asked us to supply configured hardware. We have mitigated the impact by temporarily increasing our hardware inventory.
Cash flows and net debt
The Group held cash and cash equivalents of £1.4 million at 30 June 2021 (H1 2020: £1.4 million). The table below summarises the cash flows for the half year.
| 2021 | 2020 | |
| £'million | £'million | |
| Cash generated from operating activities | 1.8 | 1.4 |
| Net cash used in investing activities | (0.7) | (0.7) |
| Net cash used in financing activities | (0.5) | (0.4) |
| Net increase in cash and cash equivalents | 0.6 | 0.3 |
| Cash and cash equivalents at 1 January | 0.8 | 1.1 |
| Cash and cash equivalents at 30 June | 1.4 | 1.4 |
As at 30 June 2021 net debt2, excluding the impact of IFRS16, was £6.6 million (cash £1.4 million and bank debt of £8.0 million). The Group was using all £8.0 million of its available facilities at 30 June 2021, having re-paid £0.5 million in the period.
Going concern
The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to continue in business for the foreseeable future. In making this assessment, which covers a minimum period of twelve months from approval of this half-year report, the Directors have considered the Group's trading forecast, cash flow forecasts, available headroom and projected financial covenants on the banking facility, and levels of recurring support revenue. (See Note 3 below).
Board
On 4 May 2021, Chris Errington, a partner at our largest shareholder Kestrel Partners LLP, was appointed to the Board as a non-executive director.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group remain consistent with the Principal Risks and Uncertainties reported in the Group's 31 December 2020 Annual Report. Since the 2020 Annual Report, the impact of the COVID-19 pandemic on the business continues to be monitored by the Board.
Current trading and outlook
Globally, all sectors are still impacted by the ongoing effects of COVID-19, but our results for the first half show those effects are lessening, despite some customers still displaying a cautionary approach to their investment decisions.
Our pipeline remains strong with good growth evident during H1 which has continued into the second half. Our results for the first half of the year and our continued investment in new software solutions coupled with our new remote operating model, has demonstrated that we are correct to have confidence in our ability to continue to grow this year and to take that momentum into 2022.
John Varney
Non-Executive Chairman
CONSOLIDATED INCOME STATEMENT
for the half year ended 30 June 2021
| 6 months to 30 June 2021 | 6 months to 30 June 2020 | Year ended 31 December 2020 |
||
| (Unaudited) | (Unaudited) | (Audited) | ||
| Notes | £'000 | £'000 | £'000 | |
| Revenue | 4 | 4,889 | 4,486 | 8,393 |
| Cost of sales | (1,025) | (1,116) | (1,964) | |
| Gross profit | 3,864 | 3,370 | 6,429 | |
| Sales and marketing expenses | (789) | (901) | (1,687) | |
| Research and development expenses | (638) | (605) | (1,263) | |
| Administrative expenses | (1,233) | (878) | (1,870) | |
| Foreign exchange (losses)/gains | (33) | 103 | 15 | |
| Other expenses | - | (156) | (156) | |
| ### Operating profit | 5 | 1,171 | 933 | 1,468 |
| Operating profit is analysed as: | ||||
| Adjusted EBITDA | 1,733 | 1,515 | 2,658 | |
| Exchange (losses)/gains (charged)/credited to the income statement | (33) | 103 | 15 | |
| Earnings before interest, tax, depreciation and amortisation (EBITDA) | 1,700 | 1,618 | 2,673 | |
| Depreciation | (114) | (124) | (234) | |
| Amortisation and impairment of acquired intangibles | - | (156) | (156) | |
| Amortisation of capitalised development costs | (415) | (405) | (815) | |
| Finance costs | (168) | (195) | (374) | |
| Finance income | - | 1 | 1 | |
| Profit before tax | 1,003 | 739 | 1,095 | |
| Tax | 6 | (19) | 6 | 199 |
| ### Profit for the period being attributable to owners of the parent | 984 | 745 | 1,294 | |
| Earnings per share attributable to the owners of the parent during the period |
||||
| Basic earnings per share | 7 | 0.8p | 0.6p | 1.0p |
| Diluted earnings per share | ||||
| Diluted earnings per share | 7 | 0.8p | 0.6p | 1.0p |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half year ended 30 June 2021
| 6 months to 30 June 2021 | 6 months to 30 June 2020 | Year ended 31 December 2020 |
|||
| (Unaudited) | (Unaudited) | (Audited) | |||
| £'000 | £'000 | £'000 | |||
| Profit for the financial year | 984 | 745 | 1,294 | ||
| Other comprehensive income - items that may be reclassified subsequently to profit or loss: | |||||
| Exchange differences on translation of overseas operations | 6 | (49) | 26 | ||
| # Total profit for the period attributable to owners of the parent | 990 | 696 | 1,320 |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
for the half year ended 30 June 2021
| Ordinary shares £000 |
Share premium £000 |
Capital redemption reserve £000 |
Merger reserve £000 |
Translation reserve £000 |
Accumulated losses £000 |
Total £000 |
|
| At 1 January 2021 | 3,115 | 6,800 | 617 | 29,778 | (150) | (43,626) | (3,466) |
| Share based payments: value of employee services | - | - | - | - | - | 13 | 13 |
| Transactions with owners | - | - | - | - | - | 13 | 13 |
| Retained profit for the period | - | - | - | - | - | 984 | 984 |
| Exchange differences on translation of overseas operations | - | - | - | - | 6 | - | 6 |
| Total comprehensive income/expense for the period | - | - | - | - | 6 | 984 | 990 |
| At 30 June 2021 (Unaudited) | 3,115 | 6,800 | 617 | 29,778 | (144) | (42,629) | (2,463) |
| At 1 January 2020 | 3,115 | 6,800 | 617 | 29,778 | (176) | (44,976) | (4,842) |
| Share based payments: value of employee services | - | - | - | - | - | 6 | 6 |
| Transactions with owners | - | - | - | - | - | 6 | 6 |
| Retained profit for the period | - | - | - | - | - | 745 | 745 |
| Exchange differences on translation of overseas operations | - | - | - | - | (49) | - | (49) |
| Total comprehensive income/expense for the period | - | - | - | - | (49) | 745 | 696 |
| At 30 June 2020 (Unaudited) | 3,115 | 6,800 | 617 | 29,778 | (225) | (44,225) | (4,140) |
| At 1 January 2020 | 3,115 | 6,800 | 617 | 29,778 | (176) | (44,976) | (4,842) |
| Share based payments: value of employee services | - | - | - | - | - | 12 | 12 |
| Unclaimed dividends | - | - | - | - | - | 44 | 44 |
| Transactions with owners | - | - | - | - | - | 56 | 56 |
| Retained profit for the year | - | - | - | - | - | 1,294 | 1,294 |
| Exchange differences on translation of overseas operations | - | - | - | - | 26 | - | 26 |
| Total comprehensive income/expense for the period | - | - | - | - | 26 | 1,294 | 1,320 |
| At 31 December 2020 (Audited) | 3,115 | 6,800 | 617 | 29,778 | (150) | (43,626) | (3,466) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2021
| 30 June 2021 | 30 June 2020 | 31 December 2020 |
||
| (Unaudited) | (Unaudited) | (Audited) | ||
| Notes | £'000 | £'000 | £'000 | |
| ### Assets | ||||
| ### Non-current assets | ||||
| Intangible assets | 8 | 5,297 | 4,730 | 5,001 |
| Property, plant and equipment | 1,114 | 1,151 | 1,208 | |
| 6,411 | 5,881 | 6,209 | ||
| ### Current assets | ||||
| Inventories | 282 | 188 | 148 | |
| Trade and other receivables | 3,057 | 3,344 | 3,125 | |
| ### Cash and cash equivalents | 1,444 | 1,395 | 826 | |
| 4,783 | 4,927 | 4,099 | ||
| ### Liabilities | ||||
| Current liabilities | ||||
| Financial liabilities - borrowings | 1,300 | 1,520 | 1,800 | |
| Trade and other payables | 4,521 | 4,437 | 4,059 | |
| Lease liabilities - current | 143 | 126 | 145 | |
| 5,964 | 6,083 | 6,004 | ||
| ### Net current liabilities | (1,181) | (1,156) | (1,905) | |
| ### Non-current liabilities | ||||
| Financial liabilities - borrowings | 6,750 | 7,650 | 6,750 | |
| Lease liabilities - non-current | 943 | 991 | 1,020 | |
| Deferred tax liabilities | - | 224 | - | |
| 7,693 | 8,865 | 7,770 | ||
| Net liabilities | (2,463) | (4,140) | (3,466) | |
| Equity attributable to owners of the parent | ||||
| Ordinary shares | 3,115 | 3,115 | 3,115 | |
| Share premium account | 6,800 | 6,800 | 6,800 | |
| Capital redemption reserve | 617 | 617 | 617 | |
| Merger reserve | 29,778 | 29,778 | 29,778 | |
| Translation reserve | (144) | (225) | (150) | |
| Retained earnings | (42,629) | (44,225) | (43,626) | |
| ### Total equity | (2,463) | (4,140) | (3,466) |
CONSOLIDATED STATEMENT OF CASH FLOWS
for the half year ended 30 June 2021
| 6 months to 30 June 2021 | 6 months to 30 June 2020 | Year ended 31 December 2020 |
||
| (Unaudited) | (Unaudited) | (Audited) | ||
| Notes | £'000 | £'000 | £'000 | |
| Cash flows from operating activities | ||||
| Cash generated from operations | 9 | 2,030 | 1,603 | 2,484 |
| ### Interest paid | (168) | (195) | (374) | |
| ### Taxation paid | (19) | (16) | (46) | |
| ### Net cash from operating activities | 1,843 | 1,392 | 2,064 | |
| ### Cash flows from investing activities | ||||
| Interest received | - | 1 | 1 | |
| Purchase of property, plant and equipment | (21) | (63) | (107) | |
| Expenditure on capitalised development costs | (711) | (620) | (1,301) | |
| ### Net cash used in investing activities | (732) | (682) | (1,407) | |
| ### Cash flows from financing activities | ||||
| Net cash used in repayment of financing activities | (500) | (380) | (1,000) | |
| Net cash used in financing activities | (500) | (380) | (1,000) | |
| Net increase/(decrease) in cash and cash equivalents | 611 | 330 | (343) | |
| ### Effect of foreign exchange rate changes | 7 | (79) | 25 | |
| Cash and cash equivalents and overdrafts at 1 January | 826 | 1,144 | 1,144 | |
| ### Cash and cash equivalents and overdrafts at period end | 1,444 | 1,395 | 826 | |
| ### Net debt comprises: | ||||
| ### Cash and cash equivalents and overdrafts | 1,444 | 1,395 | 826 | |
| ### Borrowings | (8,050) | (9,170) | (8,550) | |
| ### Net debt at period end | (6,606) | (7,775) | (7,724) |
NOTES TO THE HALF-YEAR REPORT
for the six months ended 30 June 2021
1. GENERAL INFORMATION
The Pebble Beach Systems Group is a leading global software business specialising in solutions for playout automation and content, serving customers in the broadcast markets.
The Company is a public limited company and is quoted on the Alternative Investment Market (AIM) of the London Stock Exchange. The Company is incorporated and domiciled in the UK, with registered number of 04082188.. The address of its registered office is 12 Horizon Business Village, 1 Brooklands Road, Weybridge, Surrey, KT13 0TJ.
This half-year results announcement was approved by the board on 7 September 2021.
2. BASIS OF PREPARATION
The financial information for the period ended 30 June 2021 set out in this half-year report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2020 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified.
The half-year financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 31 December 2021. The Group financial statements for the year ended 31 December 2020 were prepared under International Financial Reporting Standards as adopted by the European Union. These interim financial statements have been prepared on a consistent basis and format. The Group has not applied IAS 34 'Interim Financial Reporting', which is not mandatory for AIM companies, in the preparation of these interim financial statements.
3. GOING CONCERN
The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to continue in business for the foreseeable future. In making this assessment, which covers a minimum period of twelve months from approval of this half-year report, the Directors have considered the Group's trading forecast, cash flow forecasts, available headroom and projected financial covenants on the banking facility, the levels of opportunities in the pipeline and recurring support revenue.
Pebble along with most companies has been impacted by the COVID-19 pandemic and recurring national lockdowns, however the impact on our Group has in the main been limited to the initial disruption of the early stages of the emerging challenges, including the on-going restrictions on physical movement of staff around the world. We moved to remote working and have adopted that as our primary mode of operation.
We remain cautious in respect of the ongoing impact of the COVID-19 pandemic. From our experience of the impact of the pandemic since March 2020, we are confident we are fundamentally resilient to the challenges it brings due to the Group's ability to service its customers remotely and its recurring revenue base from support contracts.
On the basis of the above considerations, the Directors have a reasonable expectation that the Group will have adequate resources to continue in business for the foreseeable future and therefore continue to adopt the going concern basis in preparing the interim financial statements.
4. SEGMENTAL REPORTING
The Group's internal organisational and management structure and its system of internal financial reporting to the Board of Directors comprise of Pebble Beach Systems Limited and PLC costs. The chief operating decision-maker has been identified as the Board.
The Board reviews the Group's internal financial reporting in order to assess performance and allocate resources. Management have therefore determined that the operating segments for the Group will be based on these reports.
The Pebble Beach Systems Limited business is responsible for the sales and marketing of all Group software products and services.
The table below shows the analysis of Group external revenue and operating profit by business segment.
| Pebble Beach Systems | PLC costs | Total | |
| £'000 | £'000 | £'000 | |
| 6 months to 30 June 2021 (Unaudited) | |||
| Total revenue | 4,889 | - | 4,889 |
| Adjusted EBITDA | 1,987 | (254) | 1,733 |
| Depreciation | (114) | - | (114) |
| Amortisation of capitalised development costs | (415) | - | (415) |
| Exchange losses | (31) | (2) | (33) |
| Finance costs | (19) | (149) | (168) |
| Intercompany finance income/(costs) | 46 | (46) | - |
| ### Profit/(loss) before taxation | 1,454 | (451) | 1,003 |
| Taxation | (77) | 58 | (19) |
| ### Profit/(loss) for the period being attributable to owners of the parent | 1,377 | (393) | 984 |
| 6 months to 30 June 2020 (Unaudited) | |||
| Total revenue | 4,486 | - | 4,486 |
| Adjusted EBITDA | 1,755 | (240) | 1,515 |
| Depreciation | (124) | - | (124) |
| Amortisation and impairment of acquired intangibles | (156) | - | (156) |
| Amortisation of capitalised development costs | (405) | - | (405) |
| Exchange gains | 96 | 7 | 103 |
| Finance costs | (24) | (171) | (195) |
| Finance income | 1 | - | 1 |
| ### Profit/(loss) before taxation | 1,143 | (404) | 739 |
| Taxation | 6 | - | 6 |
| ### Profit/(loss) for the period being attributable to owners of the parent | 1,149 | (404) | 745 |
| Year to 31 December 2020 (Audited) | |||
| Total revenue | 8,393 | - | 8,393 |
| Adjusted EBITDA | 3,234 | (576) | 2,658 |
| Depreciation | (234) | - | (234) |
| Amortisation of acquired intangibles | (156) | - | (156) |
| Amortisation of capitalised development costs | (815) | - | (815) |
| Exchange (losses)/gains | (3) | 18 | 15 |
| Finance costs | (40) | (334) | (374) |
| Finance income | 1 | - | 1 |
| Intercompany finance income/(costs) | 217 | (217) | - |
| ### Profit/(loss) before taxation | 2,204 | (1,109) | 1,095 |
| Taxation | (152) | 351 | 199 |
| ### Profit/(loss) for the year being attributable to owners of the parent | 2,052 | (758) | 1,294 |
Geographic external revenue analysis
The revenue analysis in the table below is based on the geographical location of the customer of the business.
| 6 months to 30 June 2021 (Unaudited) |
6 months to 30 June 2020 (Unaudited) |
Year ended 31 December 2020 (Audited) |
|
| Total £'000 |
Total £'000 |
Total £'000 |
|
| By market | |||
| UK & Europe | 3,002 | 2,532 | 4,855 |
| North America | 327 | 276 | 842 |
| Latin America | 156 | 339 | 333 |
| Middle East | 776 | 1,118 | 2,114 |
| Asia / Pacific | 628 | 221 | 249 |
| 4,889 | 4,486 | 8,393 |
Net assets
The table below summarises the net assets of the Group by division. Balance sheet reporting is disclosed by the divisional assets and liabilities of the Group as this is consistent with the presentation of internal information provided to the Executive Management Board and the Board of Directors.
| 6 months to 30 June 2021 | 6 months to 30 June 2020 | Year ended 31 December 2019 |
|
| Total | Total | Total | |
| (Unaudited) | (Unaudited) | (Audited) | |
| £'000 | £'000 | £'000 | |
| By division: | |||
| Pebble Beach Systems | 5,410 | 5,404 | 5,018 |
| PLC costs | (7,873) | (9,544) | (8,484) |
| (2,463) | (4,140) | (3,466) |
5. OPERATING PROFIT
The following items have been included in arriving at the operating profit for the business:
| 6 months to 30 June 2021 | 6 months to 30 June 2020 | Year ended 31 December 2020 |
|
| Total | Total | Total | |
| (Unaudited) | (Unaudited) | (Audited) | |
| £'000 | £'000 | £'000 | |
| Depreciation of property, plant and equipment | 114 | 124 | 234 |
| Amortisation of acquired intangibles | - | 156 | 156 |
| Exchange losses/(gains) charged/(credited) to profit and loss | 33 | (103) | (15) |
| Research and development expenditure in the year which includes: | 638 | 605 | 1,263 |
| - Amortisation of capitalised development costs | 415 | 405 | 815 |
6. INCOME TAX EXPENSE
| 6 months to 30 June 2021 | 6 months to 30 June 2020 | Year ended 31 December 2020 |
|
| Total | Total | Total | |
| (Unaudited) | (Unaudited) | (Audited) | |
| £'000 | £'000 | £'000 | |
| Current tax | |||
| UK corporation tax | - | - | - |
| Foreign Tax - current year | 19 | 16 | 35 |
| ### Adjustments in respect of prior years | - | - | 11 |
| ### Total current tax | 19 | 16 | 46 |
| Deferred tax | |||
| UK corporation tax | - | (22) | (276) |
| Foreign Tax - current year | - | - | 26 |
| Adjustments in respect of prior years | - | - | 5 |
| ### Total deferred tax | - | (22) | (245) |
| ### Total taxation | 19 | (6) | (199) |
In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate would increase from 19 per cent to 25 per cent. Deferred taxes at the balance sheet date have been measured using current rate of 19 per cent and this is reflected in these financial statements. It is likely that the overall effect had a rate of 25 per cent been used, would be no change to the tax charge for the period nor to the deferred tax liability.
7. EARNINGS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive shares are those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. The average market value of the Company's shares for the purpose of calculating the dilutive effect of share options was based on quoted market prices for the year during which the options were outstanding.
Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.
| 6 months to 30 June 2021 (Unaudited) | |||||
| Earnings £'000 |
Weighted average number of shares '000s |
Earnings per share pence |
|||
| Basic earnings per share | |||||
| Profit attributable to ordinary shareholders | 984 | 0.8p | |||
| Basic earnings per share | 984 | 124,477 | 0.8p | ||
| Diluted earnings per share | |||||
| Profit attributable to ordinary shareholders | 984 | 0.8p | |||
| Diluted earnings per share | 984 | 126,909 | 0.8p | ||
| 6 months to 30 June 2020 (Unaudited) | ||||||
| Earnings £'000 |
Weighted average number of shares '000s |
Earnings per share pence |
||||
| Basic earnings per share | ||||||
| Profit attributable to ordinary shareholders | 745 | 0.6p | ||||
| Basic earnings per share | 745 | 124,477 | 0.6p | |||
| Diluted earnings per share | ||||||
| Profit attributable to ordinary shareholders | 745 | 0.6p | ||||
| Diluted earnings per share | 745 | 126,564 | 0.6p | |||
| Year ended 31 December 2020 (Audited) | |||||
| Earnings £'000 |
Weighted average number of shares '000s |
Earnings per share pence |
|||
| Basic earnings per share | |||||
| Profit attributable to ordinary shareholders | 1,294 | 1.0p | |||
| Basic earnings per share | 1,294 | 124,477 | 1.0p | ||
| Diluted earnings per share | |||||
| Profit attributable to ordinary shareholders | 1,294 | 1.0p | |||
| Diluted earnings per share | 1,294 | 126,862 | 1.0p | ||
Adjusted earnings
The directors believe that adjusted EBITDA, adjusted earnings and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These measures are used by management for internal performance analysis and incentive compensation arrangements. The term "adjusted" is not a defined term used under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. The principal adjustments are made in respect of the amortisation of acquired intangibles, share based payment expense, non-recurring items and exchange gains or losses charged to the income statement and their related tax effects. This definition was updated in 2020 and the comparative figure for H1 2020 is restated.
The reconciliation between reported and underlying earnings and basic earnings per share is shown below:
| 6 months to 30 June 2021 | 6 months to 30 June 2020 | Year ended 31 December 2020 |
||||
| Total | Total | Total | ||||
| (Unaudited) | (Unaudited) | (Audited) | ||||
| Earnings | Earnings | Earnings | ||||
| £'000 | Pence | £'000 | Pence | £'000 | Pence | |
| Reported earnings per share | 984 | 0.8p | 745 | 0.6p | 1,294 | 1.0p |
| Amortisation of acquired intangibles after tax | - | 0.0p | 126 | 0.1p | 126 | 0.1p |
| Share based payment expense | 13 | 0.0p | 27 | 0.0p | 12 | 0.0p |
| Exchange (gains)/losses | 27 | 0.0p | (83) | (0.1)p | (12) | 0.0p |
| Adjusted earnings per share | 1,024 | 0.8p | 815 | 0.6p | 1,420 | 1.1p |
8. INTANGIBLE ASSETS
| Goodwill £'000 |
Acquired customer relationships £'000 |
Acquired intellectual property £'000 |
Capitalised development costs £'000 |
Total £'000 |
|
| Cost | |||||
| At 1 January 2020 (audited) | 3,218 | 4,493 | 3,350 | 4,122 | 15,183 |
| Additions (unaudited) | - | - | - | 620 | 620 |
| At 30 June 2020 (unaudited) | 3,218 | 4,493 | 3,350 | 4,742 | 15,803 |
| At 1 January 2020 (audited) | 3,218 | 4,493 | 3,350 | 4,122 | 15,183 |
| Additions (audited) | - | - | - | 1,301 | 1,301 |
| At 1 January 2021 (audited) | 3,218 | 4,493 | 3,350 | 5,423 | 16,484 |
| Additions (unaudited) | - | - | - | 711 | 711 |
| At 30 June 2021 (unaudited) | 3,218 | 4,493 | 3,350 | 6,134 | 17,195 |
| Accumulated amortisation | |||||
| At 1 January 2020 (audited) | - | 4,337 | 3,350 | 2,825 | 10,512 |
| Charge for the period (unaudited) | - | 156 | - | 405 | 561 |
| At 30 June 2020 (unaudited) | - | 4,493 | 3,350 | 3,230 | 11,073 |
| At 1 January 2020 (audited) | - | 4,337 | 3,350 | 2,825 | 10,512 |
| Charge for the year (audited) | - | 156 | - | 815 | 971 |
| At 1 January 2021 (audited) | - | 4,493 | 3,350 | 3,640 | 11,483 |
| Charge for the period (unaudited) | - | - | - | 415 | 415 |
| At 30 June 2021 (unaudited) | - | 4,493 | 3,350 | 4,055 | 11,898 |
| Net book value | |||||
| At 30 June 2021 (unaudited) | 3,218 | - | - | 2,079 | 5,297 |
| At 31 December 2020 (audited) | 3,218 | - | - | 1,783 | 5,001 |
| At 30 June 2020 (unaudited) | 3,218 | - | - | 1,512 | 4,730 |
| At 1 January 2020 (audited) | 3,218 | 156 | - | 1,297 | 4,671 |
The amortisation of development costs is included in research and development expenses in the Consolidated Group Income Statement. Within capitalised development costs there are £2.8 million (2020: £2.0 million) of fully written down assets that are still in use.
9. CASH FLOW GENERATED FROM OPERATING ACTIVITIES
Reconciliation of profit before taxation to net cash flows from operating activities.
| 6 months to 30 June 2021 | 6 months to 30 June 2020 | Year ended 31 December 2020 |
|
| Total | Total | Total | |
| (Unaudited) | (Unaudited) | (Audited) | |
| £'000 | £'000 | £'000 | |
| Profit before tax | 1,003 | 739 | 1,095 |
| Depreciation of property, plant and equipment | 114 | 124 | 234 |
| Amortisation and impairment of development costs | 415 | 405 | 815 |
| Amortisation and impairment of acquired intangibles | - | 156 | 156 |
| Share based payment expense | 13 | 6 | 12 |
| Finance income | - | (1) | (1) |
| Finance costs | 168 | 195 | 374 |
| Increase in inventories | (134) | (48) | (8) |
| Decrease in trade and other receivables | 68 | 124 | 343 |
| Increase/(decrease) in trade and other payables | 383 | (97) | (536) |
| Net cash generated from operating activities | 2,030 | 1,603 | 2,484 |
10. NET FUNDS
Reconciliation of change in cash and cash equivalents to movement in net cash:
| Net cash and cash equivalents £'000 |
Other borrowings £'000 |
Total net cash £'000 |
|
| At 1 January 2021 | 826 | (8,550) | (7,724) |
| Cash flow for the period before financing | 1,111 | - | 1,111 |
| Movement in borrowings in the period | (500) | 500 | - |
| Exchange rate adjustments | 7 | - | 7 |
| Cash and cash equivalents at 30 June 2021 (Unaudited) | 1,444 | (8,050) | (6,606) |
| At 1 January 2020 | 1,144 | (9,550) | (8,406) |
| Cash flow for the period before financing | 710 | - | 710 |
| Movement in borrowings in the period | (380) | 380 | - |
| Exchange rate adjustments | (79) | - | (79) |
| Cash and cash equivalents at 30 June 2020 (Unaudited) | 1,395 | (9,170) | (7,775) |
| At 1 January 2020 | 1,144 | (9,550) | (8,406) |
| Cash flow for the year before financing | 657 | - | 657 |
| Movement in borrowings in the year | (1,000) | 1,000 | - |
| Exchange rate adjustments | 25 | - | 25 |
| Cash and cash equivalents at 31 December 2020 (Audited) | 826 | (8,550) | (7,724) |
Ends
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