LONDON (ShareCast) - (Sharecast News) - Petards Group's shares tumbled on Wednesday after the company reported a slight drop in annual profits after cost increases offset revenue growth.
The advanced security and surveillance systems developer recorded revenue of £20.0m for 2018, an increase of 28% compared to the year before, though cost of sales climbed by 37% to £13.1m and administrative costs rose by 20% to £5.7m, resulting in a 7% drop in profit before tax to £1.1m.

Costs were mainly driven higher by higher amortisation and depreciation charges, acquisition fees, higher indirect staff costs and one-off Defence product tendering costs.

The Traffic division had an "excellent" year and Rail products continued to provide the majority of the AIM traded company's revenues, with around 60% relating to eyeTrain, but the Defence division suffered from a "difficult" second half of the year, according to a statement from Petards.

Furthermore, the ministry of defence has not yet sought to re-tender the radio catalogue framework agreement which expired in September 2018 after being held by the group over the past five years, .

The MOD is still expected to re-tender in due course, but the delay means that the large orders received in 2018 are not expected to be repeated in 2019, though chairman Raschid Abdullah insisted that a strong order book of over £19m, of which over £13m was scheduled to convert into revenue during 2019, provided the company with "good visibility to plan for the future".

"The group has a strong pipeline of new contracts under negotiation which it is anticipated will add to the orders for delivery in the second half of 2019 and for 2020. These together with the group's strong market position provides the board with confidence in its prospects for the year ahead," said Abdullah.

The order book came in £1.0m higher than at the same point the year before, while cash and cash equivalents stood at £2.1m, up from £1.3m.

Osman Abdullah, chief executive of Petards, said: "In common with most UK companies, Petards would not be immune to any potential adverse impact that a disorderly Brexit might have on the wider economy. However, the board's current assessment is that the specific sectors in which the group operates are not significantly exposed to particular Brexit risk, although some impact may be felt in the days immediately following any disorderly Brexit."

Petards Group's shares were down 8.00% at 23.00p at 0903 BST.

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