Petards Share News (PEG)

(Sharecast News) - Security and surveillance systems developer Petards updated the market on the impact of the Covid-19 coronavirus pandemic on Friday, confirming that its offices and facilities remained open, and were operating effectively with a variety of safety measures to ensure social distancing and enhanced cleaning regimes.
The AIM-traded firm said all members of staff who can work from home have been doing so since mid-March.

For those staff who were unable to work from home, the company said it had extended the opening hours of its main facilities, enabling overall on-site daily activity levels to be maintained.

"Petards is a critical supplier to many of its customers and supports the UK's police and armed forces as well as the safe operation of the railways," the company said in its statement.

"The demands on those customers to deliver services to the public at the present time mean that in most cases they themselves are still operating at their pre Covid-19 activity levels.

"However, this does vary from customer to customer."

It said one of its larger train building customers paused production at the end of March for just over two weeks, but had since restarted production activities.

While that would have a short-term impact, present indications were that it would be recovered over the course of the year.

RTS, which provides software solutions and services to support the UK rail network, was actively negotiating a new contract with an existing customer to extend support services for a further four years, which if successful, would result in its budgeted revenue for the year being achieved.

Activity levels at QRO, which supplies the group's traffic products, were higher than expected in the first quarter of 2020, with March's order intake from UK police forces described as "particularly strong".

In order for QRO to continue to support them during the pandemic, Petards said its field service engineers had been designated as critical workers by police customers in support of their operational activities.

The group's defence activities in 2020 had so far performed to management expectations, although there was a risk that usual engineering services provided to the Ministry of Defence could reduce in the short term, with MoD project managers being redeployed to its Covid Support Force.

Petards said it has been a long-standing supplier of communication equipment and related services to the ministry, and was "pleased" its recent offer of support was accepted.

In conjunction with one of the group's radio equipment partners, Petards said it was providing the free loan and technical support of 500 radios for three months, to assist the Covid Support Force.

Those would be used by military personnel in their work, including supporting the new NHS Nightingale Hospitals and delivering supplies around the UK.

"The group's supply chain is being closely monitored and has not experienced any significant issues to date," the company added.

"However, there is evidence that a few suppliers are switching some of their production to support the supply of medical products for the UK government's Covid-19 response, and while this is not presently proving to be an issue, this may well change in what is a fluid situation."

Looking at its finances, Petards said cash and cost management was "always a key area" for the board, particularly in the present environment.

The group's cash balances at 31 March stood at ?0.6m, including research and development tax credits received in the first quarter.

A further research and development tax credit of ?0.5m was expected to be received before the end of April.

In addition to its cash resources, the board said the company's bankers had recently confirmed that the expiring facilities of ?0.75m, which were undrawn at year-end, would be renewed for a further two years at the same level and terms.

The group's net debt at 31 March totalled ?0.3m, excluding IFRS 16 lease liabilities of ?0.4m.

"The group is fortunate that its customer base comprises blue chip companies, the UK government and its agencies.

"Petards' customers are continuing to pay to terms and its exposure to credit risk is low."

Its board said it "welcomed" the UK government's initiatives to support businesses in the current crisis, with the company having now used the Coronavirus Job Retention Scheme for some of its employees who were currently unable to carry out their usual duties.

It said that, with the pandemic worsening, it was mindful of the Financial Reporting Council's most recent guidance recognising that additional time could be required to complete financial reporting and related audit activity.

The board had therefore decided to reschedule the announcement of its full audited results for 2019 towards the end of May.

It said it still expected that the full results would be consistent with its trading update on 4 February.

"The company is unable to provide forward guidance in the present challenging circumstances, with the main uncertainty presently concerning the risk that, in the short term, contract awards that the group was expecting to secure for revenue in 2020 may be re-phased or delayed," the board said of Petards' outlook.

"With the Department for Transport, the MoD and train operating companies focusing their efforts on dealing with Covid-19, the timing of these may not become clearer until the pandemic within the UK has abated.

"The board is keeping this under close review and intends to provide a further update when it announces the Group's final audited results for 2019."

Petards said the UK government had stated its commitment to further investment in the railways, law enforcement and security - areas in which the group enjoyed long-standing customer relationships.

"This, together with the group's current order book, provide the board with confidence for the group's future prospects."

At 0904 BST, shares in Petards Group were up 4.76% at 5.5p.