Share Name Share Symbol Market Type Share ISIN Share Description
21ST Cent Tech LSE:C21 London Ordinary Share GB0008866310 ORD 6.5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 2.75p 2.50p 3.00p 2.75p 2.75p 2.75p 0 07:58:03
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Support Services 11.6 -2.3 -2.5 - 2.56

21st Century Technology PLC Final Results

26/05/2017 7:01am

UK Regulatory (RNS & others)


21st Century Technology (LSE:C21)
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6 Months : From Mar 2017 to Sep 2017

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TIDMC21

RNS Number : 2973G

21st Century Technology PLC

26 May 2017

26 May 2017

21(st) Century Technology plc

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

Final Results for the year ended 31 December 2016

21(st) Century Technology plc (AIM: C21), the specialist provider of tailored solutions to the transport community, solving complex operational requirements both on and off vehicle, announces its final results for the year ended 31 December 2016.

Financial Headlines

   --     Revenue GBP11.6m (2015: GBP12.2m) 
   --     Underlying loss GBP1.4m before tax (2015: underlying profit GBP0.05m) 
   --     Loss per share 2.47p (2015: 5.17p) 
   --     Cash at year end GBP0.5m (2015: GBP1.0m) 

-- GBP0.3m debt financing raised and GBP0.4m invoice discounting facility opened to support working capital requirements

   --     Cost base restructured to generate annualised savings of GBP1.4m 

Operational Headlines

   --     Five-year renewal of First UK Bus framework to 2021 
   --     Framework with Arriva UK Bus extended for two years with an optional third year 
   --     Secured first airport contract combining Fleet and Passenger segments of the business 
   --     Ongoing investment in R&D extends our own IP in new technologies and software 
   --              Customer trials of innovative low-power, solar and E-ink information systems 
   --              Journeo Remote Condition Monitoring 
   --     Unified businesses under a single 21(st) Century brand identity 
   --     Relocated sales, service and central support functions to new Ashby-de-la-Zouch head office 
   --     All ISO accreditations for Fleet and Passenger segments renewed via audit 

Russ Singleton, CEO of 21(st) Century Technology plc, said: "We made real strides last year with major framework renewals, organisational restructuring and innovative new sales. However the financial performance in H2 was poor as rail and passenger orders anticipated earlier in the year did not materialise. We raised finance in order to support working capital requirements going forward, significantly reduced our cost base and are starting to see our strategy working. We have created a strong platform for growth and are pleased to be looking to the future with confidence."

Enquiries:

 
   21(st) Century Technology       Russ Singleton                Tel: 0844 871 
    plc                                                           7990 
   finnCap Limited 
   Nominated Adviser               Julian Blunt/Scott            Tel: 020 7220 
                                    Mathieson                     0500 
   Media enquiries 
   Communications Portfolio        Ariane Comstive / Helen       Tel: 07785 922 
                                    Carpanini                     354/ 
                                                                  020 7536 2007 
 

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Notes to editors:

'Connected Systems for Connected Journeys'

21(st) Century Technology is the specialist provider of tailored solutions to the transport community, solving complex operational requirements both on and off the vehicle. Comprised of a Fleet Systems division and a Passenger Systems division, 21(st) Century Technology provides integrated solutions both on and off the vehicle to deliver 'connected systems for connected journeys'.

Fleet Systems: include CCTV video surveillance; to improve passenger & driver safety, vehicle & driver performance monitoring, real-time on-board IT subsystems management and automatic passenger counting.

Passenger Systems: include the design & manufacture of all the necessary hardware and software for electronic passenger information systems, off-vehicle smart ticketing and way-finding.

With over 20 years' experience in the transport industry, 21(st) Century Technology specialises in providing innovative, cost-effective technology lead solutions to improve the passenger experience and provide operational benefits to fleet and network operators.

Further information on the company is available on www.21stplc.com or search for 21(st) Century Technology on LinkedIn and @21stCenturyLtd on Twitter.

Chairman's statement

The Company made significant progress in a number of areas during what turned out to be an otherwise challenging year.

The main highlights came through towards the latter part of the year. Our Fleet Systems segment secured long-term framework renewals with two major customers: First UK Bus for 5 years and Arriva UK Bus for 2 years with a customer option to extend for a further year. In addition there were important contract wins: a project of c. GBP1m to upgrade CCTV and associated equipment for a large Antipodean bus operation; and a landmark development for OFJ Connections Gatwick Airport to provide integrated real-time passenger information and connected bus systems with a value of another c. GBP1m, including ongoing support.

The Gatwick contract is important because it is the first example of 21(st) Century combining its Fleet Systems and Passenger Systems expertise to design an innovative solution that drives real benefits to our customers as they in turn enhance the travel experience for their passengers.

As reported in the Interim Results the Board anticipated that the Group's full year revenue would be lower than last year resulting in a significant loss for the full year ending 31 December 2016.

In summary we identified two areas of concern:

-- The level of new business in Passenger Systems had fallen below our expectations and that the broadly acceptable H1 performance was being achieved at the cost of depleting its order book.

-- Whilst invoicing in H1 for the Rail section of Fleet Systems was acceptable, the order book was eroding to a level where H2 success was reliant on winning and delivering one of the major projects being bid.

The actions we undertook to mitigate these areas of concern are set out in our Strategic Report.

Trading results

 
                                          2016     2015 
                                         GBP'm    GBP'm 
-------------------------------------  -------  ------- 
 Revenue                                  11.6     12.2 
-------------------------------------  -------  ------- 
 Gross profit                              4.7      5.5 
-------------------------------------  -------  ------- 
 Gross profit percentage                   41%      45% 
-------------------------------------  -------  ------- 
 Other income                              0.1        - 
-------------------------------------  -------  ------- 
 Underlying administrative expenses      (6.2)    (5.4) 
-------------------------------------  -------  ------- 
 Underlying (loss)/profit                (1.4)      0.1 
-------------------------------------  -------  ------- 
 Share-based payments                    (0.3)    (0.3) 
-------------------------------------  -------  ------- 
 Reorganisation costs                    (0.5)    (0.1) 
-------------------------------------  -------  ------- 
 One-off legal costs and acquisition 
  costs                                  (0.0)    (0.2) 
-------------------------------------  -------  ------- 
 Total administrative expenses           (7.0)    (6.0) 
-------------------------------------  -------  ------- 
 Operating loss before impairment        (2.3)    (0.5) 
-------------------------------------  -------  ------- 
 Goodwill impairment                         -    (4.3) 
-------------------------------------  -------  ------- 
 Operating Loss                          (2.3)    (4.8) 
-------------------------------------  -------  ------- 
 Taxation                                  0.0    (0.0) 
-------------------------------------  -------  ------- 
 Loss after taxation                     (2.3)    (4.8) 
-------------------------------------  -------  ------- 
                                         Pence    Pence 
-------------------------------------  -------  ------- 
 Basic loss per share                   (2.47)   (5.17) 
-------------------------------------  -------  ------- 
 

Group results for the year ended 31 December 2016 show an underlying loss before tax of GBP1,397,000 (2015: underlying profit of GBP52,000). This is mainly attributable to sales volumes being lower than management expectations in both segments, leading to a GBP0.6m reduction in Passenger Systems margins in H2 and a GBP0.7m reduction in Rail margins across the year in Fleet Systems. This was at the higher end of expectations and is explained in detail in the trading results analysis section of the Strategic Report. Significant cost base and organisational changes have taken place to ensure the business returns to a cash generative and profitable operation.

The effect of share-based payments, one-off legal costs and reorganisation costs resulted in a loss before tax of GBP2.3m (2015: loss of GBP4.8m after also charging acquisition and one-off legal costs). The basic loss per share is 2.47p (2015: 5.17p).

The cost base reduction and restructuring is now nearing completion, generating savings of c. GBP1.4m on an annualised basis. The programme accelerated the consolidation of our operations and was completed whilst ensuring that the changes did not impact our ability to maintain the high level 24/7 service and support required by our customers.

To support the businesses working capital requirements, the Company raised GBP300k of debt financing and opened a GBP400k invoice discounting facility. The debt financing was provided by Directors, senior management and shareholders, and as a further commitment to ensuring the success of the business, a number of Directors and senior management significantly reduced their remuneration.

People

We remain fortunate to have many talented and loyal staff in the 21(st) Century Group and it has been particularly commendable how everybody has dealt with the large-scale changes across 2016. They have embraced the centralisation of shared services for logistics, purchasing and finance and managed the associated building moves: downsizing to serviced offices in Croydon, expanding in Coventry to handle all Group inventory and the new head office in Ashby-de-la-Zouch.

Our technically agile development teams have taken a major leap forward under the leadership and guidance of Dr Andy Houghton, our Group CTO, who was appointed in January 2016.

We welcome Nick Lowe to the Board as CFO and look forward to working with him. I would like to take this opportunity to thank Glenn Robinson for the contribution and support he has made in the three and a half years on the Board in that role.

I would like to pass on my sincere thanks and that of the Board to everybody involved as we build a more capable and successful business.

Outlook

We are continuing to transform 21(st) Century from a business that provides standalone, on-vehicle CCTV and IT sub-systems integration towards one that provides fully connected systems on and off vehicles in towns and cities and in the transport network's bus and rail stations.

We are diversifying our customer base, accessing new markets and delivering innovative solutions based on our own technologies, software and applications. Our first in-house developed product, marketed under the Journeo brand name, is entering fleet service this year, combining diagnostic and communications management software into a cloud-based web service.

We now have the platform and capabilities needed to build sales into our main customer segments and extend into related or adjacent markets over the coming years. Management expect that this will lead the Group to a return to profitability. Performance in the first quarter of 2017 was in line with management expectations.

Following the Group's Annual General Meeting, the CEO, Russ Singleton, will review these areas in more detail and a copy of his presentation will be added to our website.

Mark Elliott

Non-executive Chairman

25 May 2017

Strategic Report

We continued to make progress on our strategy implementation and the goals set out in last year's report:

   --     improve customer service; 
   --     increase technical capability; 
   --     empower management; 
   --     secure positive outcomes from contract negotiations and renewals; 
   --     develop new lines of business and diversify client base; and 
   --     preserve cash. 

The performance and progress on the first four points has been good, as evidenced in our operational headlines. Establishing new lines of business and preserving cash remain priorities.

We have strengthened our sales and marketing functions, consolidated many operations into a single location in Ashby-de-la-Zouch, unified the brand under the 21(st) Century banner and currently operate through two segments: Passenger Systems and Fleet Systems.

Principal activities

The Group's principal activities are being a specialist provider of tailored solutions to the transport community, solving complex operational requirements both on and off the vehicle.

Fleet Systems solutions include video surveillance to improve passenger and driver safety, vehicle and driver performance monitoring and automatic passenger counting.

Passenger Systems information solutions include the necessary hardware and software for electronic passenger information systems, off-vehicle smart ticketing and wayfinding.

Business model

The business model is to compete in the market as an open provider of technology solutions, working with global-scale product companies and local specialists to deliver highly reliable and cost-effective solutions for the transport community over the lifecycle of the systems. The service offering includes design, tailoring, installation, on-site support and back-office systems.

We compete by striving to offer better integrated solutions at reduced costs to our customers. We carefully select niche markets where we can generate significant market share to generate the economies of scale needed. Our customers in the transport community include fleet operators, vehicle manufacturers, local authorities and Passenger Transport Executives (PTE).

Key performance indicators

The Group uses a number of key performance indicators (KPIs) to monitor progress against its objectives. The key KPIs are:

 
                                           2016       2015 
                                        GBP'000    GBP'000 
------------------------------------  ---------  --------- 
 Revenue                                 11,555     12,232 
------------------------------------  ---------  --------- 
 Gross profit                             4,687      5,466 
------------------------------------  ---------  --------- 
 Underlying administrative expenses       6,203      5,414 
------------------------------------  ---------  --------- 
 Total administrative expenses            6,985      5,952 
------------------------------------  ---------  --------- 
 Underlying (loss)/profit               (1,397)         52 
------------------------------------  ---------  --------- 
 Operating loss before impairment       (2,298)      (486) 
------------------------------------  ---------  --------- 
 Net current (liabilities)/assets         (392)      1,362 
------------------------------------  ---------  --------- 
 Net cash flows from operating 
  activities                              (435)      (498) 
------------------------------------  ---------  --------- 
 Cash and cash equivalents                  511      1,010 
------------------------------------  ---------  --------- 
                                          Pence      Pence 
------------------------------------  ---------  --------- 
 Loss per share - basic                  (2.47)     (5.17) 
------------------------------------  ---------  --------- 
 Loss per share - diluted                (2.47)     (5.17) 
------------------------------------  ---------  --------- 
 

In addition, operational performance measures are monitored at a major account level with exceptions raised to the Board. The underlying loss is reconciled to the IFRS operating loss within the business review and results section below.

Fleet Systems

In the bus sector we continue to support Arriva, First UK Bus, Keolis, Translink and Nobina, our major fleet asset clients. We were delighted that First UK Bus renewed its framework agreement for 5 years in August 2016 and this was followed later in the year with a 2 year extension to the Arriva framework agreement with a customer option of an additional year extension through to February 2019. These commitments are tangible endorsements of the value we deliver to our major fleet customers.

Major projects completed in the year included:

   --     vehicle power systems upgrade to 1,800 vehicles for a large bus fleet customer; 
   --    fleet-wide deployment of IP and cloud-based bus CCTV and Wi-Fi solution; and 

-- the design and supply of 130 ruggedised digital video recorders for one of London's light rail services to satisfy an urgent operational requirement.

Our development initiative to enter the market for small and medium-sized vehicle operators had some success in specialist niche applications towards the end of the year and this is where we plan to concentrate in future. Notable contract wins included:

-- c. GBP1m contract to upgrade CCTV and associated equipment for an Antipodean bus operation; and

-- a landmark project for OFJ Connections Gatwick Airport to provide integrated real-time passenger information and connected bus systems, with ongoing support, at c. GBP1m.

I am particularly pleased with the Gatwick order as it is the first example of 21(st) Century combining its Fleet and Passenger Systems' design capabilities. A major rationale for our acquisition of the Passenger Systems business was the potential to enter new markets. In this case we were able to offer an innovative and cost-effective solution which delivers real operational benefits to our operator customer and in turn enhances the passenger travel experience for its customers.

Our core strength in rail is mainly in CCTV technology and engineering where we have market leading solutions for both forward-facing and in-carriage systems in freight and passenger rail, with associated support and maintenance. The year started well with the London light rail project mentioned above as well as winning the first major design contract for Abbey Wood, a Crossrail station. Whilst this design has been a success, anticipated follow on orders were slower to come through than expected and due to our capital constraints we took the decision to refocus on multimodal customers and their fleets. The withdrawal from design works has allowed us to move to a much lower cost base for our rail activities.

At an operational level we secured renewals of ISO 9001, ISO 18001 and RISQS approvals across 2016.

Passenger Systems

The acquisition strategy for the division remains sound, as it allows us to broaden our customer base into the much larger PTE and local authority customer base where we can offer hardware and software design capabilities. While we continue to work with many local authorities, in our Interim Report we highlighted that the performance in the Passenger Systems business was well below expectations. This was the result of a shortfall in order intake that resulted from a combination of delayed or reduced spending by local authorities and the rebuilding of the sales and marketing functions following the acquisition.

In order to ensure that the lower sales levels would no longer produce a loss we took immediate action to adjust the cost base and accelerated the integration of the Passenger Systems business into the wider Group. In the meantime, a new sales team was recruited, supported by an experienced interim Sales Director with a focus on building sales, exhibitions, trade PR and customer relations.

We identified maintenance of real-time information estates and associated data processing as clear areas for growth. With the introduction of our national service team we were pleased to see a 6% increase in maintenance revenues when annualised against the previous year. PTEs and local authorities continue to look to improve the travel information provided to the public and it is essential that the investment they have made in the hardware is supported by a robust service both on the street and in the cloud.

The business continues to drive innovation with a number of newly developed solutions designed to deliver long-term cost efficiencies and reduced carbon footprints. Active trials of solar-powered passenger information systems and working examples of E-ink displays are being viewed with encouraging initial feedback from our customer base.

Our developments in smart ticketing solutions have started to gain market traction following the installation of our first fully integrated system, iPoint, in Weston-super-Mare and ticket vending machines in Blackburn and Accrington bus stations, both of which have been positively received. We now have a platform to further develop and display our capabilities to the industry and have secured a further contract in 2017 for multiple systems.

We now have a growing pipeline of opportunities, greater technical capabilities, a lower cost base and a more appropriate structure on which to grow.

Central services

We began the year comprising two separate businesses: Fleet Systems, our original bus and rail CCTV business, and Passenger Systems, following the acquisition of RSL the year before. Our plan to migrate the two businesses in a programme covering 18 months was accelerated due to the performance issues across 2016.

In order to reduce the cost base it was clear that we needed to centralise the majority of operations and remove any duplicated staffing costs. A key part was negotiating an early exit from the 25,000 sq ft Croydon facility enabling us to centralise into a new and more affordable head office in the Midlands at Ashby-de-la-Zouch.

This has been a major reorganisation involving the merger and relocation of operations. Our new Ashby head office serves as the centre of our activities and is the base for all our sales, service and central support functions. We maintain a serviced office in Croydon to provide a local service to our important London customers and as a base for key staff. Our Coventry centre has been expanded to serve as our national production and logistics centre and we maintain offices in Stockholm to service our Scandinavian customers.

Business review and results

The performance of the Group was affected by challenging marketing conditions leading to an underlying loss of GBP1,397k (2015: profit of GBP52k). These results were at the higher end of management expectations due to lower than expected order intake in H2, particularly in the Rail element of our Fleet Systems segment and in Passenger Systems.

Total revenue fell in the year by 6% despite the additional four months of Passenger Systems sales in its first full year where turnover increased 30% to GBP4,715k (2015: 8 months GBP3,631k).

Basic loss per share is 2.47p (2015: loss per share of 5.17p).

The results include the first full year trading of our Passenger Systems operating segment (2015: eight months) and the segmental results are:

 
                                Fleet   Passenger                  Fleet   Passenger 
                              Systems     Systems       Total    Systems     Systems       Total 
                                 2016        2016        2016       2015        2015        2015 
                              GBP'000     GBP'000     GBP'000    GBP'000     GBP'000     GBP'000 
--------------------------  ---------  ----------  ----------  ---------  ----------  ---------- 
 Revenue                        6,923       4,715      11,638      8,601       3,631      12,232 
 Intersegment sales                                      (83)                                  - 
--------------------------  ---------  ----------  ----------  ---------  ----------  ---------- 
                                                       11,555                             12,232 
--------------------------  ---------  ----------  ----------  ---------  ----------  ---------- 
 Gross profit                   2,268       2,419       4,687      3,555       1,911       5,466 
--------------------------  ---------  ----------  ----------  ---------  ----------  ---------- 
 Underlying (loss)/profit       (748)       (460)     (1,208)        213          49         262 
--------------------------  ---------  ----------              ---------  ---------- 
 Central costs                                          (189)                              (210) 
                                                   ----------                         ---------- 
 Underlying profit/(loss)                             (1,397)                                 52 
--------------------------  ---------  ----------  ----------  ---------  ----------  ---------- 
 

Fleet Systems sales overall were down 20%, with the varying reductions in the elements of the segment being Bus 11%, International 23% and Rail 38%. Bus and International sales recovered in H2 after a poor H1 but Rail H2 sales were down GBP586k on H1 as no major on-board project sales were won in the year.

In H2 Passenger Systems sales slowed markedly and the small underlying loss in H1 of GBP41k finished the year at GBP460k loss. The business was right-sized across H2 with significant cost-cutting, but the H2 drop in gross profit of GBP601k could not be offset.

Overall gross profit fell 14% in the year but again Passenger Systems increased 27% with the full year effect. Fleet gross profit was down 36% and again this was across all elements of the segment: Bus 19%, International 37% and Rail 64%. The bulk of the fall in Bus and International was due to the reduction in sales but also there was a reduction in gross profit margins. The magnitude of the margin fall in Rail was GBP686k, which came from the reduced sales and a margin fall from 53% in 2015 to 31% in the current year. The margin fall came about from particular lower margin projects and the move to design works with greater outsourced content and lower margins.

Underlying administrative costs increased by 15%, which is mainly the effect of the full year of Passenger Systems. The overall underlying loss of GBP1,397k (2015: profit of GBP52k) is mainly attributable to the GBP601k margin reduction in H2 in Passenger Systems and the GBP686k reduction in Rail margins in Fleet Systems.

The underlying operating profit reconciles to the IFRS operating loss as follows:

 
                            Fleet   Passenger                  Fleet   Passenger 
                          Systems     Systems       Total    Systems     Systems       Total 
                             2016        2016        2016       2015        2015        2015 
                          GBP'000     GBP'000     GBP'000    GBP'000     GBP'000     GBP'000 
----------------------  ---------  ----------  ----------  ---------  ----------  ---------- 
 Underlying profit          (748)       (460)     (1,208)        213          49         262 
 Central costs                                      (189)          -           -       (210) 
 Acquisition costs 
  and one-off legal 
  costs                         -        (44)        (44)       (75)        (84)       (159) 
 Reorganisation 
  costs                     (410)       (124)       (534)       (56)           -        (56) 
 Share-based payments       (323)           -       (323)      (323)           -       (323) 
----------------------  ---------  ----------  ----------  ---------  ----------  ---------- 
 Operating loss 
  pre-impairment          (1,481)       (628)     (2,298)      (241)        (35)       (486) 
 Goodwill impairment                                         (4,318)           -     (4,318) 
----------------------  ---------  ----------  ----------  ---------  ----------  ---------- 
 Operating loss           (1,481)       (628)     (2,298)    (4,559)        (35)     (4,804) 
----------------------  ---------  ----------  ----------  ---------  ----------  ---------- 
 

The operating loss before impairment was GBP2,298k (2015: GBP486k).

Technology report

The particular challenge of this last year has been to bring previously disparate parts of 21(st) Century together into a single entity. While this has been accomplished in part through relocation, the potential synergy that exists is best realised by creating a technological bridge too.

Between them, Fleet and Passenger Systems span a broad spectrum of technologies ranging from managing and maintaining the systems that acquire vehicle information, at one end, through to displaying elements of that information on real-time passenger signage, at the other. In the middle there exists a raft of underlying technologies, necessary to turn raw information into something both useable and useful.

Through greater ownership of this technological pathway, bringing key components in-house, we have been able to target more elements of available projects and, significantly, have greater control over the quality and services that can be offered to them. We no longer have to make do with how things have been done historically; we can innovate and shape solutions of the future.

Creating and acquiring these technological stepping stones has necessitated an elevation of our in-house capabilities. Being able to produce both hardware and software solutions allows us to hit the customised sweet spot that lies between commoditised, off-the-shelf, components and completely bespoke solutions. While this may be accomplished in part through outsourcing, investing in core in-house IP is seen as a key and foundational part of making a truly agile business that can respond quickly to the diverse challenges that an evolving passenger-centric transportation infrastructure engenders.

There is no intention to re-invent the wheel. Where global solutions exist to problems or local ones adequately address a niche we are happy to act as integrator. However, where this is not the case and we have customer-driven sales opportunities or the possibility of improving systems through technology evolution, we will invest our resources for the benefit of our customers.

The first examples of the change to our capabilities can be seen in three particular development projects in Q4 of 2016:

   --     Gatwick Airport; 
   --     Journeo remote condition monitoring; and 
   --     data broking - the extension of our software to serve more user types 

Our challenge for 2017 is to do more of these projects whilst ensuring our technology platform is fully scalable and modular to maximise our ability to respond to customer needs.

Principal risks and uncertainties

The management of the business and the execution of the Group's strategy are subject to a number of risks. Risks are formally reviewed by the Board and, where possible, appropriate processes are put in place to monitor and mitigate them. If more than one event occurred, it is possible that the overall effect of such events would compound the possible adverse effects on the Group. The key business risks affecting the Company are set out below:

 
 Risk or uncertainty and                                         Mitigation 
  potential impact 
--------------------------------------------------------------  ---------------------------------- 
 Dependence on major customers 
-------------------------------------------------------------------------------------------------- 
      Currently the Fleet Systems                                These risks are mitigated 
       segment has a high dependence                              by monitoring and managing 
       on a small number of                                       the business' operational 
       customers who are of                                       performance measures, 
       a far greater scale than                                   including response times 
       the Group. This generates                                  and CCTV availability, 
       three distinct risks,                                      with operational dashboards 
       each of which could have                                   agreed with each customer, 
       a significant impact                                       and by regular communication 
       on the business:                                           at Director level. Additionally 
        *    the loss of any single major customer;               there are long-term framework 
                                                                  agreements in place with 
                                                                  two of our largest customers. 
        *    pressure on price and margin; and 
                                                                  Whilst diversification 
                                                                  into the Passenger Systems 
        *    changes to their vehicle replacement or retro-fit    segment has reduced this 
             schedules                                            risk significantly, it 
                                                                  remains a large risk. 
                                                                  A key focus remains to 
                                                                  win new business with 
                                                                  public transport companies 
                                                                  in the UK and overseas, 
                                                                  thereby reducing reliance 
                                                                  on the existing customer 
                                                                  base. 
--------------------------------------------------------------  ---------------------------------- 
 Reduction in government spending on public transport 
-------------------------------------------------------------------------------------------------- 
 Our Group revenues are                                          We now have a more diversified 
  strongly linked to the                                          position in the transport 
  overall health of the                                           sector where we operate 
  UK public transport sector,                                     nationally rather than 
  which in turn is significantly                                  regionally across bus 
  affected by levels of                                           and rail networks, on 
  government funding at                                           and off vehicles. 
  local, regional and national 
  levels. 
--------------------------------------------------------------  ---------------------------------- 
 Major project delivery 
-------------------------------------------------------------------------------------------------- 
 Failure to deliver a                                            Risk assessments are 
  major project on time                                           conducted for all projects 
  or to specification,                                            and the major ones are 
  or technical performance                                        also subject to Board 
  falling significantly                                           approval. 
  short of customer expectations,                                 Major projects are reviewed 
  would have potentially                                          at various levels and 
  significant adverse financial                                   frequencies throughout 
  and reputational consequences.                                  the project lifecycle. 
--------------------------------------------------------------  ---------------------------------- 
 Dependence on key suppliers 
-------------------------------------------------------------------------------------------------- 
 Wherever possible the                                           On certain projects there 
  Group endeavours to retain                                      is technical risk with 
  a choice of suppliers                                           our suppliers when they 
  for its components and                                          are developing systems 
  finished goods. In instances                                    for our customers' applications. 
  where we are currently                                          We manage this risk with 
  reliant on one supplier,                                        rigorous project management 
  we are constantly looking                                       and the involvement of 
  for ways to minimise                                            our internal R&D team. 
  technical and commercial 
  risk. 
--------------------------------------------------------------  ---------------------------------- 
 Competition 
--------------------------------------------------------------  ---------------------------------- 
 The Group may face increased                                    The Group will continue 
  competition as the technology                                   to increase its technical 
  on and off vehicles moves                                       capability to capitalise 
  away from point solutions                                       on our current market 
  to broader integrated                                           position and work closely 
  solutions. This changing                                        with technology partners 
  technology landscape                                            to broaden our skills. 
  creates openings for                                            We are targeting becoming 
  new product and service                                         a larger group via organic 
  entrants who may possess                                        growth and potential 
  better technical and                                            acquisitions to provide 
  capital resources than                                          better economies of scale 
  the Group.                                                      and increased industry 
                                                                  knowledge. 
--------------------------------------------------------------  ---------------------------------- 
 Technology 
-------------------------------------------------------------------------------------------------- 
 The future success of                                           This involves keeping 
  the Group's activities                                          pace with changes and 
  depends upon it creating                                        improvements in relevant 
  a leading position for                                          technology, and having 
  innovative systems within                                       the integration skills 
  both the Fleet Systems                                          necessary to create added 
  and Passenger Systems                                           value for our customers 
  segments. As a smart                                            on the move and in the 
  integrator we require                                           back office. The Group 
  both a breadth of knowledge                                     now has a development 
  and a deeper understanding                                      team and strong relationships 
  in areas of software                                            with partner organisations. 
  integration. 
 
  Market adoption and timing 
  are difficult to predict, 
  particularly in the emerging 
  opportunities in the 
  ticketing arena. 
--------------------------------------------------------------  ---------------------------------- 
 

Future developments

The current trading and outlook is covered in the Chairman's Statement and a more detailed shareholder presentation will be made immediately following the Group's Annual General Meeting (AGM) in June 2017.

Signed on behalf of the Board

Russ Singleton

Chief Executive

25 May 2017

Consolidated statement of comprehensive income

for the year ended 31 December 2016

 
                                                         2016      2015 
                                              Notes   GBP'000   GBP'000 
--------------------------------------------  -----  --------  -------- 
Revenue                                        2, 3    11,555    12,232 
Cost of sales                                         (6,868)   (6,766) 
--------------------------------------------  -----  --------  -------- 
Gross profit                                      3     4,687     5,466 
Underlying administrative expenses                    (6,203)   (5,414) 
Other income                                              119         - 
Underlying (loss)/profit                              (1,397)        52 
Share-based payments                                    (323)     (323) 
Acquisition costs                                           -     (116) 
One-off legal costs                                      (44)      (43) 
Reorganisation costs                              8     (534)      (56) 
--------------------------------------------  -----  --------  -------- 
Total administrative expenses                         (6,985)   (5,952) 
--------------------------------------------  -----  --------  -------- 
Operating loss before impairment                      (2,298)     (486) 
Goodwill impairment                                         -   (4,318) 
--------------------------------------------  -----  --------  -------- 
Operating loss                                        (2,298)   (4,804) 
Finance expense                                          (11)      (11) 
--------------------------------------------  -----  --------  -------- 
Loss before taxation from continuing 
 operations                                           (2,309)   (4,815) 
Taxation credit/(charge)                          4         6      (10) 
--------------------------------------------  -----  --------  -------- 
Loss for the year being total comprehensive 
 loss attributable to owners of the 
 parent                                               (2,303)   (4,825) 
--------------------------------------------  -----  --------  -------- 
Loss per share                                    5 
Basic                                                 (2.47p)   (5.17p) 
Diluted                                               (2.47p)   (5.17p) 
--------------------------------------------  -----  --------  -------- 
 

Consolidated statement of changes in equity

for the year ended 31 December 2016

 
                                                                       Total 
                                                                      equity 
                                  Share     Share   Retained   shareholders' 
                                capital   premium   earnings           funds 
                                GBP'000   GBP'000    GBP'000         GBP'000 
-----------------------------  --------  --------  ---------  -------------- 
Balance at 1 January 2015         6,061         8        807           6,876 
Loss and total comprehensive 
 income for the year                  -         -    (4,825)         (4,825) 
Share-based payments                  -         -        323             323 
-----------------------------  --------  --------  ---------  -------------- 
Balance at 31 December 2015       6,061         8    (3,695)           2,374 
-----------------------------  --------  --------  ---------  -------------- 
Loss and total comprehensive 
 income for the year                  -         -    (2,303)         (2,303) 
Share-based payments                  -         -        323             323 
-----------------------------  --------  --------  ---------  -------------- 
Balance at 31 December 2016       6,061         8    (5,675)             394 
-----------------------------  --------  --------  ---------  -------------- 
 

Consolidated statement of financial position

at 31 December 2016

 
                                                2016      2015 
                                     Notes   GBP'000   GBP'000 
-----------------------------------  -----  --------  -------- 
Assets 
Non-current assets 
Goodwill                                 6     1,345     1,345 
Other intangible assets                          847       913 
Plant and equipment                              149       216 
Trade and other receivables                       39        83 
-----------------------------------  -----  --------  -------- 
                                               2,380     2,557 
-----------------------------------  -----  --------  -------- 
Current assets 
Inventories                                    1,510     1,082 
Trade and other receivables                    3,549     4,423 
Current tax asset                                  -        74 
Cash and cash equivalents                        511     1,010 
-----------------------------------  -----  --------  -------- 
                                               5,570     6,589 
-----------------------------------  -----  --------  -------- 
Total assets                                   7,950     9,146 
-----------------------------------  -----  --------  -------- 
Liabilities 
Current liabilities 
Trade and other payables                     (5,303)   (4,752) 
Loans and borrowings                            (54)     (109) 
Provisions                                     (605)     (366) 
-----------------------------------  -----  --------  -------- 
                                             (5,962)   (5,227) 
-----------------------------------  -----  --------  -------- 
Net current (liabilities) / assets             (392)     1,362 
-----------------------------------  -----  --------  -------- 
Non-current liabilities 
Trade and other payables                       (569)     (561) 
Loans and borrowings                           (300)      (49) 
Deferred tax liability                          (44)      (57) 
Provisions                                     (681)     (878) 
-----------------------------------  -----  --------  -------- 
Total liabilities                            (7,556)   (6,772) 
-----------------------------------  -----  --------  -------- 
Net assets                                       394     2,374 
-----------------------------------  -----  --------  -------- 
 
  Shareholders' equity 
Share capital                                  6,061     6,061 
Share premium account                              8         8 
Retained earnings                            (5,675)   (3,695) 
-----------------------------------  -----  --------  -------- 
Total equity                                     394     2,374 
-----------------------------------  -----  --------  -------- 
 

Consolidated statement of cash flows

for the year ended 31 December 2016

 
                                                       2016      2015 
                                            Notes   GBP'000   GBP'000 
------------------------------------------  -----  --------  -------- 
Net cash flows from operating activities        7     (435)     (498) 
------------------------------------------  -----  --------  -------- 
Cash flows from investing activities 
Acquisition of subsidiary undertaking: 
Net cash paid to vendors                                  -   (1,010) 
Acquisition costs                                         -     (116) 
Cash in subsidiary undertaking                            -       317 
------------------------------------------  -----  --------  -------- 
                                                          -     (809) 
Purchases of property, plant and 
 equipment                                             (85)     (116) 
Disposals of property, plant and 
 equipment                                               40        16 
Purchases of intangible assets                        (229)     (110) 
------------------------------------------  -----  --------  -------- 
Net cash flows from investing activities              (274)   (1,019) 
------------------------------------------  -----  --------  -------- 
Cash flows from financing activities 
Issue of loan notes                                     300         - 
Repayment of loans                                    (104)      (83) 
------------------------------------------  -----  --------  -------- 
Net cash flows from financing activities                196      (83) 
------------------------------------------  -----  --------  -------- 
Net decrease in cash and cash equivalents             (513)   (1,600) 
Cash and cash equivalents at beginning 
 of year                                              1,010     2,661 
Effect of foreign exchange rate 
 changes                                                 14      (51) 
------------------------------------------  -----  --------  -------- 
Cash and cash equivalents at end 
 of year                                                511     1,010 
------------------------------------------  -----  --------  -------- 
 

Notes to the consolidated financial information

for the year ended 31 December 2016

1. Basis of preparation

The Group financial statements are prepared in accordance with International Financial Reporting Standards and IFRIC interpretations issued and effective (or adopted early) and endorsed by the European Union at the time of preparing these financial statements and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.

The financial information contained in this announcement does not constitute statutory accounts for the year ended 31 December 2016 or 31 December 2015. The financial information for the years ended 31 December 2016 and 31 December 2015 is derived from the statutory accounts for those periods which include audit reports which are unqualified, do not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and do 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 2015 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2016 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 along with the principal risks and uncertainties.

The Group's net underlying loss for the year was GBP1,397k (2015: underlying profit GBP52k). As at 31 December 2016 the Group had net current liabilities of GBP392k (2015: net current assets GBP1,362k) and net cash reserves of GBP511k (2015: GBP1,010k).

In 2016 the Directors identified a need to raise finance to cover liquidity issues pending the anticipated return of the Group to profitability and raised GBP300,000 from the issue of loan notes in December 2016 and arranged a GBP400,000 invoice discounting facility. Current trading is in line with management forecasts and restructuring efforts are substantially complete.

The Directors have prepared Group cash flow projections for the period to 30 June 2018 based on latest forecasts that show that the Group will be able to operate within the Group current funding resources. It is important that we achieve sales forecasts and the profile of cash receipts.

As with all businesses there are particular times of the year where our working capital requirements are at their peak. However the Group is well placed to manage business risk effectively and the Board reviews the Group's performance against budgets and forecasts on a regular basis to ensure action is taken when needed.

These projections indicate that the Group will operate within available facilities throughout the projection period and therefore based on these projections, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and for at least twelve months from the date of these financial statements. The Directors therefore continue to adopt the going concern basis in preparing the financial statements.

2. Revenue

The revenue split between goods and services is:

 
                                               2016      2015 
                                            GBP'000   GBP'000 
-----------------------------------------  --------  -------- 
Goods                                         8,435     9,407 
Services                                      3,120     2,825 
-----------------------------------------  --------  -------- 
                                             11,555    12,232 
-----------------------------------------  --------  -------- 
Construction contracts included in goods      3,384     2,862 
-----------------------------------------  --------  -------- 
 

3. Segmental reporting

IFRS 8 requires operating segments to be determined on the basis of those segments whose operating results are regularly reviewed by the Board of Directors (the Chief Operating Decision Maker as defined by IFRS 8) to make strategic decisions.

Last year, with the acquisition of RSL Group, we moved to two strategic operating segments: Fleet Systems and Passenger Systems. In addition, there are central functions that provide services to the two strategic operating segments.

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

Revenue and gross profit

 
                                  Gross               Gross 
                      Revenue    profit   Revenue    profit 
                         2016      2016      2015      2015 
                      GBP'000   GBP'000   GBP'000   GBP'000 
-------------------  --------  --------  --------  -------- 
Fleet Systems           6,923     2,268     8,601     3,555 
Passenger Systems       4,715     2,419     3,631     1,911 
Intersegment sales       (83)         -         -         - 
Total                  11,555     4,687    12,232     5,466 
-------------------  --------  --------  --------  -------- 
 

Major customers

In the year, two customers within the Fleet Systems segment accounted for over 10% of the Group revenue at 18% and 13%. In the prior year there were three Fleet Systems customers that each accounted for over 10% of revenue at 19%, 18% and 11%. There were no major customers within the Passenger Systems segment

Underlying (loss)/profit

 
                               2016      2015 
                            GBP'000   GBP'000 
-------------------------  --------  -------- 
Fleet Systems                 (748)       213 
Passenger Systems             (460)        49 
-------------------------  --------  -------- 
                            (1,208)       262 
Central                       (189)     (210) 
-------------------------  --------  -------- 
Underlying (loss)/profit    (1,397)        52 
-------------------------  --------  -------- 
 

Reconciling to loss before interest and tax

 
                                            One-off                                            Loss 
                    Underlying                legal                                          before 
                     operating   and reorganisation  Share-based  Operating     Goodwill   interest 
                          loss                costs     payments       loss   impairment    and tax 
2016                   GBP'000              GBP'000      GBP'000    GBP'000      GBP'000    GBP'000 
------------------  ----------  -------------------  -----------  ---------  -----------  --------- 
Fleet Systems            (748)                (410)        (323)    (1,481)            -    (1,481) 
Passenger Systems        (460)                (168)            -      (628)            -      (628) 
------------------  ----------  -------------------  -----------  ---------  -----------  --------- 
                       (1,208)                (578)        (323)    (2,109)            -    (2,109) 
Central                  (189)                    -            -      (189)            -      (189) 
------------------  ----------  -------------------  -----------  ---------  -----------  --------- 
                       (1,397)                (578)        (323)    (2,298)            -    (2,298) 
------------------  ----------  -------------------  -----------  ---------  -----------  --------- 
 
 
                                   Acquisition, 
                                        one-off 
                                          legal                                            Loss 
                    Underlying              and                                          before 
                     operating   reorganisation  Share-based  Operating     Goodwill   interest 
                        profit            costs     payments       loss   impairment    and tax 
2015                   GBP'000          GBP'000      GBP'000    GBP'000      GBP'000    GBP'000 
------------------  ----------  ---------------  -----------  ---------  -----------  --------- 
Fleet Systems              213            (131)        (323)      (241)      (4,318)    (4,559) 
Passenger Systems           49             (84)            -       (35)            -       (35) 
------------------  ----------  ---------------  -----------  ---------  -----------  --------- 
                           262            (215)        (323)      (276)      (4,318)    (4,594) 
Central                  (210)                -            -      (210)            -      (210) 
------------------  ----------  ---------------  -----------  ---------  -----------  --------- 
                            52            (215)        (323)      (486)      (4,318)    (4,804) 
------------------  ----------  ---------------  -----------  ---------  -----------  --------- 
 

Net assets attributed to each business segment represent the net external operating assets of that segment, excluding goodwill, bank balances and borrowings which are shown as unallocated amounts, together with central assets and liabilities.

Net assets

 
                        Assets  Liabilities  Net assets    Assets  Liabilities  Net assets 
                          2016         2016        2016      2015         2015        2015 
                       GBP'000      GBP'000     GBP'000   GBP'000      GBP'000     GBP'000 
--------------------  --------  -----------  ----------  --------  -----------  ---------- 
Fleet Systems            3,814      (4,042)       (228)     4,203      (3,684)         519 
Passenger Systems        2,246      (3,148)       (902)     2,519      (2,893)       (374) 
--------------------  --------  -----------  ----------  --------  -----------  ---------- 
                         6,060      (7,190)     (1,130)     6,722      (6,577)         145 
Goodwill                 1,345            -       1,345     1,345            -       1,345 
Cash and borrowings        511        (354)         157     1,010        (158)         852 
Unallocated                 34         (12)          22        69         (37)          32 
--------------------  --------  -----------  ----------  --------  -----------  ---------- 
Total                    7,950      (7,556)         394     9,146      (6,772)       2,374 
--------------------  --------  -----------  ----------  --------  -----------  ---------- 
 

Geographical segments

 
                                   Gross               Gross 
                       Revenue    profit   Revenue    profit 
                          2016      2016      2015      2015 
                       GBP'000   GBP'000   GBP'000   GBP'000 
--------------------  --------  --------  --------  -------- 
UK                      10,462     4,057    10,803     4,705 
--------------------  --------  --------  --------  -------- 
International 
- Scandinavia              626                 978 
- Other EU                 361                 451 
- Non-EU                   106                   - 
--------------------  --------  --------  --------  -------- 
Total international      1,093       630     1,429       761 
--------------------  --------  --------  --------  -------- 
Total                   11,555     4,687    12,232     5,466 
--------------------  --------  --------  --------  -------- 
 

Assets and liabilities by location

 
                        2016      2015 
                     GBP'000   GBP'000 
------------------  --------  -------- 
Assets 
UK                     7,914     9,105 
International             36        41 
------------------  --------  -------- 
Total assets           7,950     9,146 
------------------  --------  -------- 
 
  Liabilities 
UK                   (7,514)   (6,719) 
International           (42)      (53) 
------------------  --------  -------- 
Total liabilities    (7,556)   (6,772) 
------------------  --------  -------- 
 

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

4. Taxation

(a) Analysis of (credit)/charge in year:

 
                                                  2016      2015 
                                               GBP'000   GBP'000 
--------------------------------------------  --------  -------- 
Current tax 
Prior year overprovision                             -      (68) 
UK corporation tax on the loss for the year 
 (20%)                                               -         - 
Swedish corporation tax on the profit for 
 the year (22%)                                      7        13 
Deferred tax (credit)/charge 
- Temporary differences tax losses                   -        36 
- Temporary differences decelerated capital 
 allowances                                          -        37 
- Temporary differences on acquisition            (13)       (8) 
 
Total tax (credit)/charge for the year             (6)        10 
--------------------------------------------  --------  -------- 
 

(b) Factors affecting the total tax (credit)/charge for the year

The tax assessed for the year differs from the standard rate of corporation tax in the UK at 20% (2015: 20.25%).

The differences are explained below:

 
                                                    2016      2015 
                                                 GBP'000   GBP'000 
----------------------------------------------  --------  -------- 
Loss on ordinary activities before tax           (2,309)   (4,815) 
----------------------------------------------  --------  -------- 
Loss on ordinary activities multiplied 
 by standard rate of corporation tax 
 in the UK of 20% (2015: 20.25%)                   (462)     (975) 
Effects of: 
Expenses not deductible for tax purposes              53       955 
Change in unrecognised deferred tax 
 assets                                              408       123 
Brought forward tax losses used (previously 
 not recognised)                                     (5)      (37) 
Prior year overprovision                               -      (68) 
Prior year deferred tax previously recognised          -        73 
Difference in tax rates                                -         4 
Deferred tax on acquisition                            -      (65) 
Total tax (credit)/charge for the year               (6)        10 
----------------------------------------------  --------  -------- 
 

(c) Deferred tax asset/(liability)

The unrecognised and recognised deferred tax assets/(liability) comprise the following:

 
                                    Unrecognised         Recognised 
-------------------------------  ------------------  ------------------ 
                                     2016      2015      2016      2015 
Group                             GBP'000   GBP'000   GBP'000   GBP'000 
-------------------------------  --------  --------  --------  -------- 
Tax losses                            573       202         -         - 
Decelerated capital allowances         62        82         -         - 
Arising on acquisition                  -         -      (44)      (57) 
-------------------------------  --------  --------  --------  -------- 
                                      635       284      (44)      (57) 
-------------------------------  --------  --------  --------  -------- 
 

The Group has GBP3,372,000 of unutilised tax losses (2015: GBP1,009,000) which may be carried forward indefinitely.

5. Loss 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.

 
                                         2016                 2015 
--------------------------------  -------------------  ------------------- 
                                            Per share            Per share 
                                    Losses     amount    Losses     amount 
Group                              GBP'000      Pence   GBP'000      Pence 
--------------------------------  --------  ---------  --------  --------- 
Basic EPS 
Losses attributable to Ordinary 
 Shareholders                      (2,303)     (2.47)   (4,825)     (5.17) 
--------------------------------  --------  ---------  --------  --------- 
Diluted EPS 
Losses attributable to Ordinary 
 Shareholders                      (2,303)     (2.47)   (4,825)     (5.17) 
--------------------------------  --------  ---------  --------  --------- 
 

Details of the weighted average number of Ordinary Shares used as the denominator in calculating the earnings per Ordinary Share are given below:

 
                                              2016    2015 
                                              '000    '000 
------------------------------------------  ------  ------ 
Basic weighted average number of shares     93,240  93,240 
Dilutive potential Ordinary Shares               -       - 
------------------------------------------  ------  ------ 
Diluted weighted average number of shares   93,240  93,240 
------------------------------------------  ------  ------ 
 

6. Goodwill

Goodwill acquired in a business combination is allocated at acquisition to the cash generating unit (CGU) that is expected to benefit from that business combination. The Group has two CGUs which are its two operating segments, Fleet Systems and Passenger Systems. The carrying amount of goodwill has been allocated to the CGUs as follows:

 
                         Fleet  Passenger 
                       Systems    Systems     Total 
                       GBP'000    GBP'000   GBP'000 
--------------------  --------  ---------  -------- 
Deemed cost: 
At 1 January 2015        4,318          -     4,318 
Acquisition                  -      1,345     1,345 
Impairment             (4,318)          -   (4,318) 
--------------------  --------  ---------  -------- 
At 31 December 2015          -      1,345     1,345 
Impairment                   -          -         - 
At 31 December 2016          -      1,345     1,345 
--------------------  --------  ---------  -------- 
 

The Group tests goodwill annually for impairment as at 31 December, or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts of the CGUs are determined based on a value-in-use calculation which uses cash flow projections based on financial budgets and business plans approved by the Directors covering a five-year period. Cash flows beyond that period have been extrapolated in perpetuity assuming no growth, which the Directors consider to be a conservative approach.

The goodwill in relation to the Fleet Systems CGU became fully impaired in the year to 31 December 2015, based on forecasts that suggested a broadly neutral cash flow.

The key assumptions for the value-in-use calculations are those regarding discount rates and sales forecasts.

The discount rates needed to equate the net present value from these cash flows to the carrying value of goodwill are compared to the required rate of return from the CGU based upon an assessment of the time value of money, prevailing interest rates and the risks specific to the CGU. If this discount rate is in excess of the required rate of return then it is assumed that no impairment has occurred to the carrying value of goodwill.

The discount rates are as follows:

 
                      2016   2015 
                       %      % 
-------------------  -----  ----- 
 Fleet Systems        N/A    16 
 Passenger Systems    14     14 
-------------------  -----  ----- 
 

The discount rates used are based on the Board's judgement considering macroeconomic factors and reflecting specific risks in each segment such as the nature of the market served, the concentration of customers, cost profiles and barriers to entry.

Passenger Systems also has intangible assets, see Note 11, which are considered in the same value-in-use calculations as goodwill.

The Passenger Systems cash flow projections used to determine value in use are based upon assumptions of sales, margins and cost bases. Of these assumptions the value in use is most sensitive to the level of sales. Margins are fixed in the forecast based upon past experience; the cost base is similarly based upon past experience but also takes into account savings from restructuring and will vary depending upon the level of sales. In accordance with the requirements of IAS 36 our value-in-use calculations do not include cash flows from restructurings to which the Group is not yet committed.

The level of sales is the key assumption used in the cash flow forecast. Sales have been determined by management using estimates based upon past experience and future performance with reference to market position and the sales pipeline. Due to the difficult macroeconomic environment there has been a reduction in the availability of contracts, which has in turn resulted in pressure on margins. This has been reflected in the sales forecasts. Furthermore, the 2017 forecast reflects a major restructuring to a level reflecting current order intake and the near-term sales pipeline. The 2018 forecast predicts growth of 22%. The remaining three years are based upon compound sales growth of 5%.

The value-in-use calculation supports the carrying value of the CGU with headroom of GBP116k. A sensitivity analysis has been performed on the impairment test. The Directors consider that an absolute change in the key sales assumption is possible and a reduction of 5% points in the growth rate in 2018 to 17% would result in an impairment charge being recognised for the current carrying value of goodwill in relation to Passenger Systems of GBP713k. If sales forecasts were down 10% across the whole period and overheads were partially scaled back by 5% then the impairment charge would be GBP1,072k.

Based on the review the discount rate applied to equate the net present value of the forecast cash flows to the carrying value of goodwill and the intangible assets was 14.9%, whereas the required rate of return of the CGU is 14%.

In view of this, the Directors consider that no impairment of goodwill or intangible assets is required.

7. Reconciliation of operating loss to net cash outflow from operating activities

 
                                                      2016      2015 
                                                   GBP'000   GBP'000 
------------------------------------------------  --------  -------- 
Loss for the year                                  (2,303)   (4,825) 
Adjustments for: 
- Finance income                                        11        11 
- Goodwill impairment                                    -     4,318 
- Income tax credit                                      -      (55) 
- Profit on disposal of fixed assets                     4       (4) 
- Deferred tax (credit)/charge                        (13)        65 
- Depreciation of property, plant and equipment        107       114 
- Amortisation of intangible fixed assets              295       143 
- Share-based payment expense                          323       323 
- Foreign exchange rate                               (32)       116 
- Acquisition costs                                      -       116 
- Increase in provisions                                42       132 
------------------------------------------------  --------  -------- 
Operating cash flows before movement in working 
 capital                                           (1,566)       454 
Increase in inventories                              (428)      (38) 
Decrease/(Increase) in receivables                   1,026   (1,506) 
Increase in payables                                   551       596 
------------------------------------------------  --------  -------- 
Cash outflow from operations                         (417)     (494) 
Income taxes (paid)/received                           (7)         7 
Interest paid                                         (11)      (11) 
------------------------------------------------  --------  -------- 
Net cash outflow from operating activities           (435)     (498) 
------------------------------------------------  --------  -------- 
 

8. Reorganisation costs

 
                        2016      2015 
                     GBP'000   GBP'000 
------------------  --------  -------- 
Passenger Systems        124        56 
Fleet Systems            410         - 
                         534        56 
------------------  --------  -------- 
 

Current Year reorganisation costs relate to restructuring programmes arising during the year, the disposal of the Group's leased premises in Croydon, and the December 2016 agreed restructuring programme. All exceptional items relate to administrative expenses.

9. Availability of audited accounts:

Copies of the 2016 audited accounts will be made available following the announcement of the date of our AGM. They will also be available 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

END

FR AAMMTMBATTBR

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May 26, 2017 02:01 ET (06:01 GMT)

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