I am pleased to report that the Company’s turnover in the six months ended 31 December 2019 was £4,518,000 (H1 2019: £2,901,000), an increase of 56 per cent over the comparable period last year, resulting in a profit before taxation of £111,000 (H1 2019: loss of £164,000) and a profit after taxation of £283,000 (H1 2019: £12,000). Our current order book had been strong on all fronts and everything was looking good – and then the country and the Company were hit with Coronavirus which is causing all sorts of problems; in particular it has affected access to client sites and deferment of decisions on new orders.
QM Systems
During the initial six month period QM has continued its positive trend both in growth in revenue and profit. This presented an almost doubling in sales when compared with the same period last year and has generated a profit of £335k after interest and management charges paid to the Company (H1 2019: £73k). This represents an excellent performance for this subsidiary of the group.
During the period, order intake was very strong with approximately £3.4 million of orders received. Moving into the final six months of the current financial year, QM’s orderbook is full, ensuring a strong start to the second half of the year. However, Coronavirus has hit and, whilst we are doing everything we can to mitigate its impact while keeping our employees and stakeholders safe and also keeping the operational facility open and running, we are in unchartered waters as to how this will play out.
To support this sustained period of growth, QM continued to recruit within Design and Manufacturing roles. In particular QM has invested significantly into the Project Management team to ensure that it continues to offer the high level of support that its clients require.
QM has seen continued sales of a number of our products, particularly the Q-Mac range of versatile carousel conveyors, with its largest to date, a 60 station carousel being manufactured for an automotive client. QM has also seen sales of its Electronic Interface module to a core Petrochemical Client and its PERA product continues to sell well within the Aerospace industry.
QM has been awarded a second phase of project work with its partner Penso to deliver an expansion of the automated Carbon Fibre manufacturing facility. This second phase enables a new range of larger carbon fibre composite vehicles to be manufactured within Penso’s production cell.
QM’s work with Cox Powertrain to deliver a complete turnkey production facility for the manufacture of its innovative high power diesel outboard motor is now drawing to a close as QM completes the final commissioning activities and Cox begins the volume ramp up.
In October 2019, the Group acquired a small company called Wessex Precision Instruments. The company manufactures a range of slip testing equipment for ensuring floor surfaces perform as required. The products are sold to contract slip testing companies and laboratories that test floor and road surface performance. The company is small today, however it presents a great opportunity for growth into this emerging sector. The company now forms part of QM’s Test division.
Thomson Engineering Design (“TED”)
TED’s performance has again improved, generating a small profit after tax on a revenue of £364k (H1 2019: £224k). During the period a number of loan units of the Thomson De-clipper and 7 Sleeper Spreader units were manufactured for use as demonstration and stock sale units. All units are currently out on loan. This has enabled a number of TED’s clients to be offered a ‘Try before you buy’ service. This has directly led to a number of requests for quotation that TED fully expects will turn into product sales as budgets become available after the Coronavirus situation has been resolved.
Order intake and quotation activity within the domestic market has remained relatively static, predominantly with interest focused on TED’s latest products in rail clipping and de-clipping and sleeper handling. However, during the same period, TED has seen a significant increase in international enquiries with a number of substantial orders being received from outside of the UK. In particular TED has received a £140k order for a range of new rail equipment for a company based in New Zealand, which will be used on a project in Australia.
Also during the period work has begun on diversifying TED’s capabilities into other markets. TED has seen orders received for a new gimbal product from an automotive client that totals approximately £150k. The first 30 units have been manufactured and shipped with a further 24 units to be shipped by the end of April. TED is expecting more orders for this new and exciting product range, again when the economy recovers from the effects of the Coronavirus.
Adien
During this review period Adien demonstrated an effective start to the year’s trading. The renewal of significant long term framework contracts ensured the supply of continued work producing good margins.
The award of major contracts within different sectors: Telecomms 5G, Defence consultancy, Distilleries, and Balfour Beatty all contain significant sub contract elements that provide increased profitability above the core survey elements of the contract, these include the provision of: Traffic Management, CCTV, Jetting, Laser scanning and Drone 3D surveys with inspections. The activity levels in both England and Scotland remain consistently high and Adien has now recruited additional staff with experience in the relevant industry sectors.
The order book was looking very strong with the upturn in Defence, Telecomms 5G and SSEN, plus infrastructure renewal, however Coronavirus is now impacting on our ability to deliver to site and it is too early to quantify what impact Covid-19 will have on Adien.
Related party transactions
My letter of financial support dated 24 October 2018 was renewed on 7 October 2019 for a further year.
In addition to the loans I have provided to the Company in previous years, my fellow directors and I have deferred a certain proportion of our fees and interest payments until the Company is in a suitably strong position to make the full payments. During the six months ended 31 December 2019, these deferred fees and interest payments amounted to approximately £72,000 in total, all of which have been accrued in the Company’s accounts, and as at 31 December 2019 amounted in total to £1,420,000.
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