After a shaky start on AIM, Shieldtech has refinanced and returned to profitable trading. The company is now looking to pursue some international opportunities

After a shaky start on AIM, Shieldtech has refinanced and returned to profitable trading. The company is now looking to pursue some international opportunities

Following a loss-making maiden year as an AIM business, protection equipment specialist Shieldtech has been refinanced and restored to profitable trading. Sales momentum is behind this specialist supplier of body armour to police and military forces, and long-term growth prospects are compelling, with crime rates persistent and the terror threat undiminished.

Via its Aegis subsidiary, Shieldtech designs, makes and supplies body armour systems that provide users, including troops in Iraq and Afghanistan and almost half of UK police forces, with ‘the highest levels of operational comfort and durability’.

Under CEO Tony O’Neill, an experienced security sector mover and shaker, Shieldtech has proven its credentials as a reliable supplier of specialist body armour (tailored to size and gender) to the UK police, to which it also supplies tactical vests, ballistic shields and blankets.

Reversing into cash shell Base Group in the summer of 2007, Shieldtech’s first year as a quoted company was, however, a poor one. This reflected a period of weak UK demand due to the introduction of new ballistic protection standards from the relevant branch of the Home Office. Publication of these standards was delayed, leading to a prolonged testing process by the police and, in turn, delayed orders. As a result, sales in the year to June 2008 dropped from £11.5 million to £6 million, with losses spiralling after an £8.8 million acquisition-related impairment charge.

More recent annual numbers to June 2009, however, showed a significant turnaround, with sales surging 72 per cent higher to £10.3 million as activity levels recovered and ramped up. On an adjusted basis, losses of £863,000 were converted to pre-tax profits of £356,000. And in the final month of the financial year, Shieldtech was placed
on a firmer financial footing following a successful refinancing of the business.

Going forwards, O’Neill spies much growth to go for, with security issues at the forefront of government consciousness. ‘Gun and knife crime is on the increase and terrorism has not gone away,’ he explains. ‘In fact, I think it is going to get worse,’ he adds, pointing out that demand for body armour systems and other defence and detection products will increase as a result.

Positive contract momentum seems to support his view, with recent highlights including the securing of a deal (value undisclosed) under the Ministry of Defence’s £16 million defence clothing project, for the supply of soft armour protective ballistic panel inserts used in military body armour systems.

Contracts have been renewed with several UK police forces, as well as with the New Zealand police, while Shieldtech has signed a long-term agreement with UNICEF in a move opening up the potential to sell to other UN entities. Meanwhile, the company recently assumed responsibility for providing body armour to HM Revenue & Customs staff. In another exciting development, O’Neill says overseas interest in its products is building, with first orders received from several European nations, including France, Italy, Belgium and Portugal.

For now, the priority is on establishing a track record of profitable organic growth. But longer term, acquisitions that broaden the customer base in the homeland security sector are planned, with O’Neill and his team constantly running the rule over potential targets.