Petards Share Discussion Threads

[rivaldo] 08/11/2022 09:36

Good to see Eyetrain being used by Network Rail to adopt "novel technology" to spot and alert areas of track and surroundings which are overgrown with leaves/vegetation/branches etc and reduce delays and track problems:

[rivaldo] 07/11/2022 11:58

Techinvest's new issue is now out, so it should be OK to post their review of the interims from last month's issue:

"Petards Group
9p (PEG; AIM)

Petards’ results for the six months ended June 30 reflect challenging conditions within the UK retail markets. Revenue was £5.5m, down from £7.7m in the first half last time. However, the result in the comparative period benefited from revenues of £1.8m from two individual shipments of equipment, one relating to Rail and one to Defence. Gross profit margin increased to 49.3% from 39.6% a year earlier due to enhanced contribution from higher margin engineering and support services and a lower cost base. Adjusted EBITDA was 35.4% lower at £0.61m and post-tax profit was £0.1m compared to £0.43m in the first half of 2021. Diluted earnings per share fell from 0.74p last time to 0.17p.

Cash generated from operating activities declined by 32.9% to £1.12m, but net funds at the period end were up by £1.0m to £2.5m (4.3p per share).

One bright spot from the results was the improved performance from the traffic management systems unit, QRO, where revenues were up over 30%. Petards’ defence business also traded above expectations in terms of revenue and margins and delivered a good result for the first half of the year. Activities in the period included the delivery of new equipment to the RAF as part of the JETS threat simulator systems five-year framework contract secured last year. The rail market, by contrast, remains challenging for Petards and the period saw a marked reduction
in eyeTrain revenues. However, revenues from spares and repairs services were back to pre-Covid levels and the company is experiencing a higher level of enquiries and tenders for rolling stock refurbishment and upgrade programmes.

All expiring RTS software licenses and support contracts were renewed with an increased number of users, and the group order book at the period end was £6.0m. Petards added that it expects further progress in the second half, leading to a
satisfactory and cash generative performance for the year as a whole.

Petards’ activities generally performed well during the first half, apart from eyeTrain where delays in order placement for new systems reduced revenues. The order book at £6.0m remains supportive and should be bolstered in the second
half by an anticipated increase in refurbishment and upgrade contracts, which management believe will prove a precursor to securing future larger contract awards as rail passenger journeys continue to recover from the extreme low of the Covid crisis in 2020. Continue to hold."

[jeevsje] 03/11/2022 14:15

Tbh, paying close to 10% higher for that £16k. Something is going on.

[the oak tree] 03/11/2022 11:19

Up approx 15% on what is a high volume for PEG. No news I can see but perhaps others know something. Having said that its only £16k worth of shares so hardly massive.

Happy to hold.

[chunkster] 12/10/2022 15:14

Another person sold out!! Surely this company should delist

[rivaldo] 15/9/2022 09:11

H1 results are out - pretty good considering the hiatus in Rail.

Against a £5.3m m/cap, PEG generated in just 6 months £1.1m of operating cash flows, and increased the cash pile to £2.5m - 47% of the m/cap.

With £606k EBITDA in H1, RTS, QRO and Defence are all doing fine. It's just a case of patience and time waiting for Rail to rebound, which perhaps we're seeing the first signs of given the narrative as regards increased order activity and the resumption of the InnoTrans exhibition in Berlin.

[jeevsje] 12/9/2022 15:03

Half year results out in a few days' time.

[chesty1] 01/9/2022 12:22

Still holding long here BUT what a boring share chart.

[jeevsje] 10/8/2022 21:23

Thanks Rivaldo.

[rivaldo] 10/8/2022 11:05

Hi jeevsje, at present I can buy at least 20k at 9.8p online.

[jeevsje] 10/8/2022 08:08

Are you able to get buy quotes, Rivaldo? NT to buy or close to 10.3p to buy 3k.

[rivaldo] 09/8/2022 14:26

Techinvest updated on PEG a couple of issues ago and is a useful summary - note the 3.8p per share of cash together with the 1p+ EPS forecasts:

"Results for the year ended December 31 showed revenues up 4.4% to £13.57m. Gross profit margin increased to 44.9% from 36.4% a year earlier, reflecting a significant restructuring of the business in 2020. Adjusted EBITDA increased by 379% to £1.53m, while pre-tax profit reached £0.86m compared to a loss of £0.58m in fiscal 2020. Basic earnings per share were 1.51p.

Cash generation from operating activities was strong at £0.74m, contributing to cash balances at the period-end of £2.27m (3.8p per share) and minimal debt.

The order book at December 31 was circa £7.0m, with £8.0m revenue coverage for fiscal 2022. QRO Solutions had another record year in terms of revenue, cash flow and profitability. This was helped by the on-time delivery of an export order worth in excess of £0.5m to a new customer for ProVida speed enforcement systems, and increasing sales of the NASBox, whose rights were acquired in 2020, with 400 units being delivered in 2021.

Petards is expecting the coming year for QRO to continue strongly, with the addition of six new UK police forces to QRO’s customer list and the launch of several new products. RTS Solutions had another solid year in terms of its revenue, profitability and cash flow, and licence and maintenance contract renewals totalling £0.8m were received for its rail infrastructure focused software offering. Petards’ Defence made an increased contribution to group profitability.Following the board’s decision in 2020 to focus on securing smaller orders, order intake increased in 2021 and a 5-year framework contract, which was secured in June from the MOD for the support of threat simulator systems, is expected to give rise to additional order flow in the coming years.

Current macro-economic conditions are particularly tough for small companies like Petards (£6.8m market cap). In that context, this was a solid financial performance from the company and the strong order book provides encouragement for the current year. We view the product base as a significant strength of Petards’ business. The company’s software-driven video and other sensing systems for on-train applications, sold under the eyeTrain brand, have a strong customer base among global train builders, integrators and rail operators. Likewise, in the traffic segment there is good demand for the company’s Automatic Number Plate Recognition systems for lane and speed enforcement and other applications, sold under the QRO and ProVida brands to UK and overseas law enforcement agencies and commercial customers. Progress is also being made in the defence sector where Petards provides electronic countermeasure protection systems, mobile radio systems and related engineering services, sold predominantly to the MOD.

The consensus market forecast for the current year is for earnings per share of 1.03p, rising to 1.1p for fiscal 2023. A prospective P/E of 10.9 for eighteen months out looks undemanding. Continue to hold."

[rivaldo] 16/5/2022 11:06

Hybridan also issued a research note after the recent results.

For this year they forecast 1.05p EPS, £1.58m EBITDA and £0.6m PBT.

The gross cash pile increases to £2.7m, i.e 40% of the m/cap.

They conclude:

"Petards also continues to review relevant acquisition opportunities and retains a strong discipline when it comes to agreeing fair value. Meanwhile shares in Petards trade at under 0.5x forward revenues, 10.7x earnings and an EV/EBITDA multiple of just over 2.5x which in our view offers compelling value."

This is interesting:

"Petards notes that the Petards Virtual Technology Centre has been successful in providing a focussed technical forum to drive forward the Group’s product development plans. Petards is presently trialling with a major train operator, an artificial intelligence and machine learning solution which utilises Petards’ existing technology. If successful, this on-train solution would provide rail operators with the potential for real time data analytics to identify on-track hazards and safety improvements to their rail networks."

[the oak tree] 05/5/2022 10:46

Excellent results IMO.
Chart wise we've been trading sideways for a year now. These results break us out of that and I can see the previous high being over taken in due course.

[rivaldo] 05/5/2022 10:39

It is, but I've already explained why, and we've known about that for a long time now. The large, long-term contracts will return, it's just a question of when, could be sooner, could be later.

As WH Ireland say this morning, "the nature of the pipeline of tender opportunities has changed resulting in the shortening of the order book". So the additional shorter-term, higher margin contracts which PEG are winning don't bulk up the long-term order books since they're fulfilled much more quickly, but they do enable the Rail division to continue in a steady state whilst QRO achieves record revenues and profitability.

WH Ireland forecast £0.6m PBT this year (up from £0.5m last year), with 1p EPS.

They note that the cash pile at Dec'21 was £1.9m pre IFRS, which they forecast to rise further to £2.7m at the end of this year - 36% of the m/cap.

They see 13.5p fair value presently on a P/E basis, which imo is short-sighted as it completely ignores the £1.9m cash pile.

On an EV/EBITDA basis, PEG are on a multiple of just 3.7, which more accurately reflects the value.

Today's narrative explicitly points out that PEG have been looking for acquisitions which han't panned out yet. This could bring in an instant £100k-£200k of profit uplift or added value, so the cash pile should not be left out of the equation.

[chunkster] 05/5/2022 09:26

I get the margins and the cost restructuring is all a big well done, but the point is the order book isn't steady it is quite clearly shrinking!!!!!

[dealit] 05/5/2022 09:24

The government stated that UK`s public transport systems will receive billions to improve passenger experience and encourage being greener. We as a country will have to spend more on defence improving NATO after lessons learned i.e Russia. IMHO PEG will do well in the future.

[rivaldo] 05/5/2022 08:45

That's more to do with the hiatus in large rail contracts which we've known about for a long time now and is why the share price is where it is.

The smaller, but more consistent and shorter-term projects which PEG have been winning keep that order book steady, and together with the work PEG have done on margins are ensuring profitability - and cash flows - continue at decent levels.

The rail contract situation is already baked into the share price and £7m m/cap imo, especially given the £1.5m cash pile. At some point, whether this year or next, those large rail contracts will come back. Patience is required, but given PEG's illiquidity anyone wanting to build a stake will have to have done so prior to that.

[chunkster] 05/5/2022 08:10

Order book a massive concern here, been shrinking for last couple of years!!!

[rivaldo] 05/5/2022 07:45

2020's truly exceptional cash generation was due to £1.7m of tax credits relating to one-off claims from prior years! Strip those out and last year's cash generation remains very impressive, especially against the teeny-tiny m/cap.

And the company is confident for this year:

"With scheduled deliveries of £8 million already secured for the current year by the end of the first quarter, the Board has confidence that the Group is positioned to make further progress in 2022."

[bio_tango] 05/5/2022 07:31

Cash generation down to £745,000 (2020: £2,398,000)
Order book down to circa £7 million (30 June 2021: circa £9 million)

[rivaldo] 05/5/2022 07:24

Terrific results today from this £6.5m m/cap company considering the pandemic.

EBITDA was £1.53m - up from £0.32m.

The cash pile is up to £1.5m - almost a quarter of the m/cap. Operating cash inflows were £1.53m, with £0.75m cash inflows from operating activities.

Note that almost the entire £0.6m R&D was written off against profits this year, so the profit performance is even more praiseworthy.

And performance to date this year has been ahead of expectations too.

PEG are right to caution against over-optimism on this front given the hiatus in large projects from the GBR formation, But it's obvious that QRO is booming, Defence and RTS are doing well and the core rail business is ticking over nicely.

Imagine what PEG might achieve once those larger projects start to return.

Great to see both the rail business and QRO selling internationally now too:

[rivaldo] 19/4/2022 08:25

Chelverton Growth Trust, which owns 3.54% of PEG (worth £210,000), reported their interims late last week.

They had this very bullish comment about PEG:



"Petards is also expected to shortly produce its 2021 annual accounts showing a return to profitability. A recent large buy-back and cancellation of its own shares demonstrates that the company has a strong balance sheet and that its Board considers the shares to be materially undervalued."

[powen1979] 14/3/2022 12:10

Good spot - There are other similar uk SMEs on AIM with upside potential who have strong defence customer base who might also see upside from the current disaster.

[rivaldo] 14/3/2022 12:06

You and me both :o))

As well as ANPR and defence, one would have thought that the massive UK investment in rail rolling stock and refurbishment will pay big dividends at some point.

Plus PEG have £2.7m net funds to use for more acquisitions (against a £6.6m m/cap).

The potential for big upside remains, though it'll require more patience. Unless the above promise starts to be fulfilled with a contract RNS or two.