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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Altea Green Power Spa | BIT:AGP | Italy | Ordinary Share |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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RNS Number:7370M
AIT Group PLC
25 June 2003
For further information, please contact:
AIT Group plc Tel: 0207 831 3113 (on the day)
Richard Hicks, Chairman Tel: 01491 416600 (thereafter)
Nick Randall, Chief Executive
Matthew White, Chief Financial Officer
Financial Dynamics Tel: 020 7831 3113
Edward Bridges/Ben Way
AIT Group plc
PRELIMINARY RESULTS
YEAR ENDED 31 MARCH 2003
AIT Group plc today announces preliminary results and an update of the progress
made by the new management team in turning the business around.
Key points:
* Full year turnover of #17.6 million (2002: #36.2 million)
* Operating loss of #16.7 million (before exceptional costs of #23.5
million) (2002: operating loss #6.8million before exceptional costs
of #1.9 million)
* Loss before tax of #41.2 million (2002: loss before tax of #9.3
million)
* Loss per share (basic) 306.0p (2002: 40.6p)
* New management team in place led by Nick Randall, CEO
* Restructuring now complete
- Annual operating cost base reduced from #44 million to an
annual run rate of #19 million in current year
* Stage 1 of turnaround plan now completed with cost base aligned to
realistic core business levels:
- Operating costs (before exceptional costs) reduced to
#11.4 million in the second half from #22.8 million in the
first half
- Operating loss (before exceptional costs) reduced
significantly to #2.3 million in second half versus loss of
#14.4 million in the first half
- Cash of #2.7 million on the balance sheet at end of second
half
- Long term debt of #9.0 million
* Second half
- Results ahead of analyst expectations
- Revenues up 9% in second half at #9.2 million versus
#8.4 million in first half
* Strengthened financial position
- Successful fundraising of #20.5 million new equity in October
2002
- Raising of an additional #5 million through the issue of
convertible loan notes
* Product success and market potential
- Two key Portrait reference sites now live: Nationwide
Building Society (12,000 users) and Rainier Pacific Bank
- Product gaining market recognition - selected as preferred
software supplier for a contact handling system for a leading
UK Police Force to deal with both their emergency and
non-emergency calls
- Significant services undertaken on behalf of Lloyds TSB
Insurance
- Addresses a growing market with Gartner currently forecasting
the CIM market to expand progressively over the next 3 to 5
years
Richard Hicks, Chairman commented today:
"The past year has been a turbulent one for the Group, starting with a period of
great difficulty but leading, I am pleased to say, to a successful re-financing
and the appointment of a new management team. Our new Chief Executive, Nick
Randall, has brought great skill and energy to the Group and I am delighted with
the speed with which he has undertaken the creation of this new team and has
implemented a thorough review of the business.
We have consistently described our turnaround plan as having three phases.
First, to rationalise the business; second, to stabilise the business and
deliver a period of at least modest profit; and third, to re-establish the
sustained growth that was a feature of the business for so many years. We have
now completed Stage 1 of our turnaround plan and are moving firmly onto Stage 2.
I now feel that the Group is in a good position to succeed in completion of
our turnaround plan."
Nick Randall, AIT's Chief Executive Officer added:
"Our flagship product, Portrait is now live and operational with over 12,000
users at Nationwide. AIT has an outstanding reputation in the UK financial
services market and our partner base is proving successful in leading us into
other vertical sectors and geographies. Our focus niche, Customer Interaction
Management, represents 30% of the US$10 billion CRM market and this sector is
set to expand progressively in the next 3 to 5 years.
Our objective in Stage 2 of the turnaround plan is to return the business to
profitability in the current financial year. I am encouraged by the progress
achieved to date and the visibility of revenues that we are achieving in the
software support and services areas. The year has started out well in terms of
new licence wins and the prospects are continuing to build."
Notes to editors:
AIT Group plc specialises in the development of Customer Interaction Management
solutions for corporates and public sector agencies, deploying multi-channel
systems encompassing telephone, internet, branch, interactive TV and mobile
telephony. It has developed its specialist knowledge over 17 years, through
successful delivery of over 70 customer-centric solutions for its blue chip
client base.
Clients include Alliance & Leicester, Bradford & Bingley, Britannic Money, First
Data Europe, Lloyds TSB, Marks & Spencer Financial Services, Nationwide,
NatWest, The Woolwich, Komercni Banka (Czech Republic), KeyCorp & Rainier
Pacific Bank (US) and Benkar Advantage (Turkey).
For more information on AIT, visit the website at www.aitgroup.com.
CHAIRMAN'S STATEMENT
The past year has been a turbulent one for the Group, starting with a period of
great difficulty but leading, I am pleased to say, to a successful re-financing
and the appointment of a new management team. Our new Chief Executive, Nick
Randall, has brought great skill and energy to the Group and I am delighted with
the speed with which he has created this new team and has implemented a thorough
review of the business.
Our delivery teams have continued to serve our customers to a very high standard
and far-reaching change has also been achieved in the scale and depth of our
sales team. As a result, we have more than achieved our short-term goal of
stabilising revenues, with revenues up in the second half by some 9% on the
first half. The progress being made by both teams bodes well for the future
sales prospects of the business.
Operating costs have been reduced from approximately #44 million per annum to an
annual run rate in the current financial year of approximately #19 million to
achieve a cost base that is favourably aligned with current revenue prospects.
This has been achieved, in part, through a substantial reduction in full time
staff, though I am pleased to say that we have retained our key staff and an
appropriate balance of services and product development personnel.
Our Portrait product has been widely praised in evaluation by customers but of
course, it is most satisfying to be able to report that these positive
evaluations have been converted into highly successful implementations at
Nationwide Building Society in the UK and Rainier Pacific Bank in the US. The
implementation at Nationwide, with over 12,000 users, is one of the largest CIM
implementations ever undertaken in Europe and demonstrates the scalability,
robustness and ease of implementation of our Portrait product.
We now have a strong backlog developing for Portrait implementations. We have
previously said that we would start to seek applications for our Portrait
product within vertical sectors outside the financial services industry,
typically within organisations where efficiency and high levels of customer
service are essential. I am pleased to say that this strategy has borne fruit
through the award of a very important project for a leading UK Police Force.
Bringing together the product knowledge from the former IMA team has also helped
define an exciting future product strategy. This alongside the support of our
key distribution partner, Unisys, and technology partner, Microsoft, should lead
us into new market sectors outside our traditional financial services vertical.
We have consistently described our turnaround plan as having three phases.
First, to rationalise the business; second, to stabilise the business and
deliver a period of at least modest profit; and third, to re-establish the
sustained growth that was a feature of the business for so many years. We have
now completed the first phase and are moving with confidence into phase two.
A great deal has been achieved since September 2002 - our operating costs have
been dramatically reduced, our new product has been successfully implemented in
two very substantial projects and we have completed an effective reorganisation
and strengthening of our international sales and marketing team. Our partner
network is helping us build new business as we go forward and our new product
development strategy is powerfully focused on our core CIM niche of the CRM
marketplace. Although I am sure that there will be more challenges ahead, and
market conditions remain difficult, I now feel that the Group is in a good
position to succeed in completion of our turnaround plan.
I would like to take this opportunity to pay tribute to the high level of
commitment and support that our customers, suppliers and shareholders have shown
to AIT in this difficult year, and in particular, to our staff whose continuing
enthusiasm and hard work has played a fundamental part in taking the business
forward.
Richard Hicks
Chairman
24 June 2003
CHIEF EXECUTIVE OFFICER'S REVIEW
This is my first report to shareholders as the new CEO of AIT. I have now been
here for nine months during what has been a period of major change and
reorganisation.
AIT was formed seventeen years ago and during the first fifteen years had an
enviable track record of expanding sales and profitability. It also
successfully established itself as a leading provider of innovative and creative
software solutions for the financial services community.
Since joining AIT, I have had many meetings with customers. This confirmed what
many already knew - the Group has an excellent reputation for achieving both the
customers' technical objectives and, perhaps most importantly, for ensuring that
the key business benefits underlying the investment in and implementation of
AIT's products are actually delivered. In an industry where software has often
failed to deliver satisfactory results, it has been encouraging to find that AIT
has so many positive testimonials.
Shareholders will be aware of the hiatus that occurred in May 2002 when the
Group's position was threatened by a combination of poor trading conditions and
the debt burden resulting from the acquisition of the IMA business in September
2001. This set of circumstances, which occurred following the preliminary
announcement for the year ended 31 March 2002, has been discussed in depth in
stock exchange announcements, circulars to shareholders and our interim
statement. I do not intend to dwell on these events further within this review.
The challenges and the key objectives for the new AIT team have been to raise
the capital necessary to re-structure the business and then to move forward to
implement our turnaround plan. AIT raised #20.5 million of new equity in 2002
and since the appointment of the new management team we have been taking the
necessary steps to retain the best of the traditional AIT business whilst at the
same time positioning ourselves to become a highly focused and international
software product company.
At the start of 2002, AIT comprised two separate organizations: the first being
the original AIT business based here in the UK and the second the more
international IMA software products business. One of our key challenges during
the past financial year has been to integrate these two quite separate
businesses into a new combined operation. I am pleased to report that this has
now been achieved and that the new AIT management team is now a strong blend of
the very best talent from both organisations. Effectively IMA has now become
the heart of AIT's activities in the Americas.
New Management Team
We now have a new Senior Management Team reporting directly to me that is
providing the overall direction and day-to-day management of AIT. The team are
experienced professionals and I am very impressed with the way they are working
together effectively to both help develop and to implement our new forward
strategy. The Team comprises:
Matthew White - Finance and Administration
Geoff Probert - Software Development
Paul Frederick - Business Development
Jeff Dirubio - Acting Head of Worldwide Sales and Marketing
Financial Overview for the year ended 31 March 2003
The year ended 31 March 2003 must be viewed as two distinct periods. The first
half results reflected the massive impact that the events that occurred in May
and June 2002 had on the Group's trading. Inevitably, key customers cancelled
or delayed their plans to place new business with AIT, which had a major impact
on top line performance. In the second half of the year we were able to
substantially reduce our operating cost base from #22.8 million in the first
half down to #11.4 million in the second half.
The overall loss we are reporting is better than we forecast at the time of the
refinancing and better than analyst projections. Sales for the full year were
#17.6 million versus #36.2 million in the prior year. The operating loss for
the full year, before exceptional items, was #16.7 million.
One of our key initiatives upon joining AIT in September 2002 was to reduce our
cost base to reflect expected levels of revenues. As a result, the swift
actions taken to reduce our operational cost base enabled us to stem the
operating losses (before exceptional items) from #14.4 million in the first half
to #2.3 million in the second half of the financial year.
A comparison of second half operating performance versus the first half
operating performance is outlined below:
6 months to 6 months to Year to
30/09/2002 31/03/2003 31/03/2003
#m #m #m
Sales 8.4 9.2 17.6
Operating costs before exceptional items 22.8 11.4 34.3
Operating loss before exceptional items (14.4) (2.3) (16.7)
In addition to the reported operating loss, we have included #23.9 million of
exceptional costs in our full year results. Following an impairment review of
our investments, carried out in accordance with Financial Reporting Standard 11:
("Impairment of Fixed Assets and Goodwill"), we consider it appropriate to write
down the goodwill arising on our prior acquisition of IMA by #10.4 million. We
incurred a charge of #2.6 million on the impairment and disposal of our equity
investments in associated undertakings and a further #0.5 million impairment
charge against own shares held. The balance of the exceptional charges relates
to costs associated with our restructuring and reorganisation activities as well
as provisions for various property leases and other contracts. The overall loss
before tax including exceptional charges for the full year was #41.2 million.
(2002: loss of #9.3 million).
We exited the year with #2.7 million in cash, which was ahead of plan, and long
term debt of #9.0 million.
Fundraising
In order to improve the AIT balance sheet and to ensure we have sufficient funds
to complete the second and third stages of our turnaround plan, we have decided
to raise #5 million of new finance. This is in the form of convertible loan
notes, which convert into ordinary shares in AIT at a price of 25 pence, as soon
as shareholder approvals are obtained. Further details are provided in a
separate announcement made today.
With the revenue base now stabilised and costs reduced significantly to reflect
the changed circumstances of the Group and the general trading environment, the
Group now has a solid foundation for the continued implementation of our
turnaround plan.
The AIT Turnaround Plan
As part of re-financing activities our new management team has developed a
turnaround plan for AIT. Our plan has three distinct stages:-
Stage 1
The rationalisation and downsizing of the combined AIT/IMA business to achieve
an overhead cost base in line with realistic core business levels. This stage
has been completed.
Stage 2
The stabilisation of AIT to clearly demonstrate that the business is under
strict financial control and is profitable. This stage began at the start of
the current financial year and is expected to last for twelve to eighteen
months.
Stage 3
The development of our business to become a leading player in the market sectors
we now address. We plan to achieve this by exploiting the clear technical lead
of our new Portrait product and through the expansion of our international sales
capability through direct and partner channels. Our objective in Stage 3 is to
return AIT to the type of growth and profitability experienced during the first
fifteen years of the Company's existence.
In future reports to shareholders I shall report on our progress with reference
to these three important stages in our turnaround programme.
Achievements so far
Stage 1 of our turnaround plan is now complete. We have reduced our operating
costs from #44 million to the current annual run rate of #19 million. This has
been achieved through a significant reduction in global headcount (from 515 as
at 1 April 2002 to 174 as at 31 March 2003) as well as reducing the number of
offices from five in the UK to one office in Henley and from three in the USA
down to one main sales office in Connecticut and a small support office in
California. We have also applied very strict financial controls in all
operating areas, resulting in substantial savings in our overall cost structure.
Despite the significant reduction in headcount we have emerged with a strong new
organisation with employees who are highly motivated to complete the turnaround
plan. We have retained forty staff working on Portrait new product development
and have increased our overall direct sales resources substantially.
A key aspect of Stage 1 was to retain the loyalty of AIT and IMA customers
worldwide and I am pleased that this has been achieved. As an example of this,
we have worked on a major project with Lloyds TSB Insurance and we expect this
collaboration to continue throughout 2003.
Live at Nationwide/Rainier Portrait is now live and fully operational with over
12,000 users at Nationwide. This makes it one of the largest successful
Customer Interaction Management implementations in the Financial Services
marketplace. Nationwide is the largest Building Society in the world, with over
10 million customers and over 12.55 million products. The Society has retained
its mutual status, which means that ownership is held by its customers (or
members) and the organisation is managed solely for the benefit of these
members.
As Nationwide has mutual status, it is extremely important to them that their
customers are treated equally and individually and Portrait is enabling them to
achieve this.
"AIT has delivered a system that has not only met, but exceeded our expectations
in terms of performance and reliability and this is a huge achievement," said
Francis Walsh, Divisional Director Technology at Nationwide Building Society
Portrait is now also live at Rainier Pacific Bank, which is headquartered in
Tacoma, Washington, USA. Rainier Pacific Bank is one of the most successful
community banking institutions in the Puget Soundregion of America, with 38,000
customers and over 100 products within banking, insurance, investment, lending,
and financial planning. Portrait is enabling the Bank to increase productivity
by automating processes and streamlining activities throughout its organisation.
AIT is continuing to work with RainierPacific Bank and future projects will
deliver integrated online self-service functionality.
The Professional Services team, led by Gareth Evans, has ensured that these two
customer implementations now provide very important reference sites for
potential customers worldwide. In addition to the two live sites, we also have
a number of prospects interested in Portrait implementations, which we are
working on either directly or via our partner network.
Sales Reorganisation
We quickly realised during the first three months of our turnaround program that
in parallel with the rationalisation activities we would need to quite radically
overhaul the combined AIT and IMA client sales force. As a result we now have
three new, high calibre Vice Presidents of Regional Sales covering our three
main geographic territories:-
Europe, Middle East & Africa - Tracy Isacke (based in Henley, UK)
Asia Pacific - Chris Lowther (based in Singapore)
The Americas - Rich Morrison (based in Connecticut, USA)
Each territory has assembled a new team of professional sales staff who now sell
our Portrait product internationally. Initial results from the new sales
organisation are encouraging.
We have recently appointed Rajesh John as Head of Worldwide Marketing and
already he has made a major contribution in this important area.
Market Positioning
To date AIT has positioned itself as a Customer Relationship Management (CRM)
company. Our plans are to progressively position AIT as a lead player in the
focused niche called Customer Integration Management (CIM) within the CRM
marketplace. CIM focuses on sales and service application functionality on
multiple channel touch points including the call centre, branch and internet.
It is typically suited for multi product organisations which are focused on a
business to consumer customer base.
CRM Market Place
The vast majority of the work AIT has carried out to date is within the Customer
Interaction Management segment, hence we have decided to focus our activities
very specifically within this sector. We plan to integrate our Portrait product
with "best of breed" solutions in the ECommerce and marketing analytics sector
to ensure we can integrate optimum overall CRM solutions for our worldwide
customers.
In future we will be referring to AIT as a CIM company and all of our product
development activities will be oriented towards producing leading edge solutions
for this important market segment.
The CIM market niche represents 30% of the overall US$10 billion CRM
marketplace, with Analytics contributing 15%, E-Banking 10% and the balance
being more general Salesforce Automation. Importantly, industry analysts
predict that the CIM segment of the market will expand progressively over the
next three to five years. The financial services community represents the
largest user base in the CIM sector however, we are finding that other sectors
(e.g. government, utilities, telecoms and healthcare) are starting to see the
benefits that can be achieved by utilising advanced software products, such as
Portrait, to help in the very critical multi-channel, customer interaction area.
Partners and Alliances
Unisys
During the financial year, we significantly strengthened our partnership with
Unisys who is now a major global partner in the CIM area. We have embarked on a
number of important initiatives with Unisys in the sales and marketing area.
This partnership is also providing many opportunities for us to jointly
demonstrate our capabilities both within the Financial Services Sector and also
in other sectors, such as government, where Unisys has a significant market
presence.
Our Unisys partnership has already resulted in our Portrait product being
selected as the software supplier for a leading UK Police Force.
Unisys has a powerful worldwide sales and systems integration capability and I
am confident that by working together we can exploit many worldwide
opportunities for our new Portrait product range.
Microsoft
AIT has worked closely with Microsoft for a number of years and we were among
the first companies to adopt the new Microsoft .NET framework and web services
architecture. As a direct result of this relationship and the very successful
Nationwide implementation, we have expanded our relationship beyond the current
UK partnership agreement.
Regional Partners
We continue to work with and expand our network of regional partners who help us
exploit opportunities in particular market sectors and specific territorial
areas.
In particular we are working with:-
* KSI in Japan who have developed a Japanese version of Portrait.
* CPM who are working with their customer base in Brazil.
* CPL who are exploiting opportunities in the wholesale and investment
banking sector.
New Product Development
Over two hundred man years of effort have been invested in AIT's Portrait
product and it is now live and operational in two significant customer sites.
There have been a number of releases of the Portrait product over the past
fiscal year. Major feature enhancements include - Computer Telephony
Integration, Document Management, Batch Loading capability, Internationalisation
support, Host Integration Framework and a number of performance, scalability and
usability improvements. This was achieved during the second half of the
financial year and is a credit to the AIT development team led by Tim Shaw.
Now that Portrait is successfully operational we are starting to progressively
focus our New Product Development activities in the following areas:
* Expanding the depth and capability of the core product offering
* Starting to develop a range of more application specific products
based around our "Core" Portrait software
* Working with Partners to develop specific versions of Portrait for
new CIM Market Sectors (e.g. government)
* Integration and ongoing platform support for Edge and 3r product
lines.
* AIT also continues to pursue opportunities with partners to
integrate Portrait into other application environments and we
continue to develop the product to enable this to happen.
Portrait is a powerful product concept which enables organisations to improve
significantly the customer interaction process in either single or multi-channel
environments. Its Microsoft .NET architecture allows it to access remotely
distributed data rapidly and easily without large and expensive central
databases.
The critical element of Portrait is the process centric architecture which
allows business users and strategists to design, deploy, manage and change the
processes that drive customer interactions across all channels. Not only does
it enable companies to better understand customers, it also allows businesses to
act upon changes in customer behaviour, competitive actions, macro-economic
forces and regulatory compliance.
Changing processes and introducing new products or services is easy to introduce
- with no need for coding or armies of consultants. This is what significantly
differentiates Portrait from other less flexible product offerings.
Portrait makes companies successful by dramatically increasing their
responsiveness to change. We believe that Portrait is a powerful concept in the
CIM marketplace and we plan to continue to invest in new product development to
ensure we maintain our technical leadership. Over time, we plan to develop a
whole range of products for the global CIM market which will be based around the
Portrait concept.
AIT Staff
AIT has always had an excellent reputation for employing quality staff as well
as having a unique culture and I have been particularly impressed with the
commitment that the staff have shown during what has been a very challenging
period. We wish to retain the unique culture which exists within AIT and I
would like to take this opportunity to personally thank all our worldwide staff
for their support and the major contribution they have made to implement our
turnaround plan.
Going Forward
We have now completed Stage 1 of our turnaround plan and are moving firmly onto
stage 2. Our objective in stage 2 is to return the business to profitability in
the current financial year. I am encouraged by the progress achieved to date
and the visibility of revenues that we are achieving in the software support and
services areas.
The current financial year has started out well in terms of new licence wins and
the prospects are continuing to build. However, as always it is hard to predict
with confidence when new licence business will be signed. I am conscious that
shareholders will wish to be kept informed of our progress during the current
financial year and it is my intention to provide regular progress reports.
Clearly the market for any company selling software remains challenging.
However, looking beyond the coming financial year I remain confident that our
focus on the CIM marketplace, coupled with the clear innovative approach
embodied in our Portrait product range and our new initiatives in the direct and
partner sales areas, will enable us to return AIT to a sound track record of
growth in both sales and profitability as we move from Stage 2 to Stage 3 of our
turnaround plan.
The year ended 31 March 2003 presented many significant challenges to AIT and I
would like to thank our employees, shareholders, customers, suppliers and the
local community for the significant support they have shown to the Group.
Nick Randall
Chief Executive Officer
24 June 2003
FINANCIAL REVIEW
Revenues
Turnover for financial year 2003 was down 51% on prior year reflecting the
widely reported downturn in the worldwide CRM software market, exacerbated by
the period of financial uncertainty for the Group during the first half which
impaired AIT's ability to secure new contracts.
This was manifested by the reduction in licence sales and related revenues
during the year which fell to #8.4 million from #13.0 million in 2002, and
professional services revenue which fell to #9.2 million from #23.2 million in
2002.
Despite the trading difficulties in the first half, AIT maintained a loyal
customer base throughout the period and did not suffer any attrition from its
core Portrait and 3r customers during the year. We were also very pleased with
the rate of renewals of annual support of our extensive Edge customer base which
was significantly higher than we had forecast. This strong customer loyalty
gives us confidence that our products and service offerings remain competitive
and that they continue to meet customers' high expectations of benefits and
value delivery.
Our overseas markets continue to represent an increasing share of our business
and in 2003 revenues from the Americas region and AsiaPacific region accounted
for 16% and 8% of all revenues respectively, compared to 8% and 3% respectively
in 2002. Europe remains our most significant marketplace representing 76% of
all revenues in 2003 (2002: 89%).
Direct costs and overheads
The cost reductions achieved in the second half of 2003 as part of the first
stage of the turnaround plan were dramatic, but we have been careful not to
compromise the Group's long term viability for the sake of short term savings.
By far the largest cost reductions made were in respect of direct cost of sales,
reflecting the need to rebalance the capacity of our professional services
delivery team with the ongoing workload. We recognize the critical importance
of continued investment in sustainable levels of research and development and
targeted sales and marketing that will develop the business and deliver growth
in the future. In the second half of 2003 our investment in research and
development was 19% of sales in that period and sales and marketing represented
25%. The comparative figures for the full year to 31 March 2002 are 26%
(reflecting the enormous investment in development of Portrait) and 14%
respectively. We plan to increase investment in these areas on a prudent basis
as we go forward, while maintaining stringent cost containment on all other
areas of expense.
Not all cost savings were achievable immediately upon the inception of the
turnaround plan, however we had completed Stage 1 of the turnaround plan by the
end of financial year 2003 and were able to commence the new financial year with
a combined direct cost and overhead annualized run rate of approximately #19
million.
Dividend Policy
The Board's primary objective is to complete the turnaround plan and in doing so
to return AIT to a position of financial strength and sustainable profitability
and cash generation. Until the Board is confident that this has been achieved
in all respects, including reducing the Group's reliance on debt financing, the
Board believes it is in the best interests of shareholders to retain cash funds
within the Group to complete these important objectives.
Cashflow
Cash outflow from operating activities during the year was #16.8 million (2002:
#3.6 million) which included #5.4 million (2002: nil) cash outflows in respect
of restructuring and reorganisation costs. After taking into account further
cash flows for finance charges, tax, capital expenditure and acquisitions, total
cash outflow before financing was #16.9 million (2002: #15.7 million).
The #20.5 million raised from the refinancing during the year, plus #0.8 million
provided by a Director and former Directors, was offset by debt repayments of
#3.6 million and transaction costs of #2.2 million, to provide a net cash inflow
from financing of #15.5 million (2002: #8.5 million).
The net cash decrease for the year after financing inflows was #1.4 million
(2002: #7.3 million). Cash balances at year end stood at #2.7 million (2002:
#4.2 million).
The Group has rigorously managed its cash flows during the turnaround period and
strong cash management remains central to our turnaround strategy.
June 2003 Fundraising
In June 2003 the Group announced a #5 million fundraising to improve the AIT
balance sheet and to ensure the Group has sufficient funds to complete the
second and third stages of our turnaround plan.
This fundraising is in the form of unlisted unsecured convertible loan notes.
The loan notes are convertible into new ordinary shares of 2.5 pence each at a
price of 25 pence per share, a discount of 7.4 per cent to the closing
mid-market price on 24 June 2003. Conversion is conditional on shareholder
approval and conversion will take place automatically immediately thereafter.
On conversion, up to 20,000,000 new ordinary shares will be issued, representing
approximately 38.8 per cent of the fully diluted share capital of the Company.
Subsequent to conversion, certain of the loan note subscribers will together
hold more than 30 per cent of the issued share capital of the Company. The
Company will therefore be seeking a waiver from The Panel of Takeovers and
Mergers from the obligation of such holders to make a general offer under Rule 9
of The City Code on Takeovers and Mergers, which is subject to approval by
independent shareholders.
Interest at a rate of LIBOR minus 2 per cent is payable to the subscribers of
the loan notes quarterly in arrears, unless the loan notes are converted prior
to 31 October 2003, in which case no interest will accrue. If not previously
converted, the loan notes will have a term of five years. The loan notes may be
redeemed in whole or in part by the Company at any time after 30 September 2004.
If redemption of the loan notes occurs prior to the relevant shareholder
approvals being obtained, the repayment will be as follows: -
i. If redemption occurs prior to the third anniversary of issue, loan
note subscribers will be paid three times the face value of the loan notes plus
any unpaid accrued interest thereon; and
ii. If redemption occurs after the third anniversary of the loan note, the
subscribers will be paid the higher of three times the face value of the loan
note plus any unpaid accrued interest and the market value of the ordinary
shares, which the loan note would have represented had conversion taken place
(calculated on the basis of the average price of the previous 10 trading days)
plus any unpaid accrued interest.
Other Financial Instruments
The Group continues to benefit from the support of its major debt providers and
gross debt at the year end stood at #9.0 million (2002: #12.0 million). The key
components of this debt at 31 March 2003 were as follows:
Bank Term Loan - National Westminster Bank
Secured term loan of #6 million repayable in 16 quarterly instalments from
September 2003 to June 2007. The loan bears interest at 2% over base.
IMA Loan Notes
Unsecured loan notes of US$3.5 million (#2.2 million) to part fund the
acquisition of IMA in financial year 2002 repayable in 10 quarterly instalments
between July 2005 and October 2007. The loan notes bear interest at 6%.
Director's and Former Directors' Loans
Unsecured loans of #0.8 million repayable at any time (at the Company's
discretion) between September 2003 and August 2004. The Company has confirmed
that it does not intend to make repayment of these loans before August 2004.
The loans bear interest at 1% over base.
In consideration of the new fundraising described above, the Group's bankers
have agreed to provide further financial assistance by deferring #1.125 million
of scheduled term loan capital repayments previously falling due in financial
year 2004 so that capital repayments on the #6 million term loan now fall due in
16 quarterly instalments commencing April 2004. The Bank has further agreed to
provide a standby working capital facility of #0.5 million.
As a result of this revision to our banking facility, the #1.125 million of bank
debt shown in the 2003 balance sheet as falling due within one year will no
longer become payable during financial year 2004.
The injection of additional cash funding and the deferral of loan repayment
obligations since the year end have significantly bolstered our financial
position and have secured our financial requirements for the foreseeable future.
We are grateful for the continued support and assistance from our key
investors and bankers, for demonstrating their confidence in our future
prospects and for helping us succeed in delivering our turnaround plan.
Matthew White
Chief Financial Officer
24 June 2003
AIT GROUP PLC
GROUP PROFIT & LOSS ACCOUNT
for the year ended 31 March 2003
Before Exceptional Total
Exceptional Items Including
Items (Note 2) Total Exceptionals *
2003 2003 2003 2002
Notes #'000 #'000 #'000 #'000
TURNOVER 1 17,584 - 17,584 36,224
Cost of sales (15,101) (2,943) (18,044) (23,112)
GROSS (LOSS)/PROFIT 2,483 (2,943) (460) 13,112
Distribution costs (5,386) (674) (6,060) (4,966)
Administrative expenses (13,766) (19,903) (33,669) (16,817)
OPERATING LOSS (16,669) (23,520) (40,189) (8,671)
Share of associates' operating losses (141) - (141) (523)
Loss on disposal of associate - (382) (382) -
LOSS ON ORDINARY ACTIVITIES
BEFORE FINANCE CHARGES (16,810) (23,902) (40,712) (9,194)
Finance charges (515) (78)
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (41,227) (9,272)
Tax on loss on ordinary activities 405 973
LOSS FOR THE FINANCIAL YEAR
AFTER TAXATION (40,822) (8,299)
Dividends - (261)
RETAINED LOSS (40,822) (8,560)
Retained profit brought forward 112 8,672
RETAINED (LOSS)/PROFIT
CARRIED FORWARD (40,710) 112
Basic loss per Ordinary share of 2.5p
(2002: Ordinary share of 10p) 3 #(3.06) #(0.41)
Dividend per share Nil p 1.30p
*The results for 2002 include a #1,900,000 exceptional charge within cost of
sales.
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2003 2002
#'000 #'000
Loss for the financial year (40,822) (8,299)
Exchange translation differences 261 (180)
Total recognised losses in the year (40,561) (8,479)
AIT GROUP PLC
GROUP BALANCE SHEET
as at 31 March 2003
2002 2002
(restated (restated
2003 2003 see Note 4) see Note 4)
#'000 #'000 #'000 #'000
FIXED ASSETS
Intangible assets - goodwill 2,297 13,122
Tangible assets 1,302 1,996
Investments 1 2,508
3,600 17,626
CURRENT ASSETS
Debtors 4,114 9,731
Cash at bank and in hand 2,735 4,182
6,849 13,913
CREDITORS: Amounts falling due within one year (4,220) (15,647)
NET CURRENT ASSETS/(LIABILITIES) 2,629 (1,734)
TOTAL ASSETS LESS CURRENT LIABILITIES 6,229 15,892
CREDITORS: Amounts falling due after more
than one year (7,851) (20)
PROVISIONS FOR LIABILITIES
AND CHARGES (6,853) (2,880)
ACCRUALS AND DEFERRED INCOME (10,364) (9,580)
NET (LIABILITIES)/ASSETS (18,839) 3,412
CAPITAL AND RESERVES
Called up share capital 2,655 2,057
Share premium 20,042 2,330
Other reserve 336 75
Merger reserve (1,162) (1,162)
Profit and loss account (40,710) 112
SHAREHOLDERS' (DEFICIT)/FUNDS (18,839) 3,412
Shareholders' (deficit)/funds may be analysed
as:
Equity interests (20,878) 3,412
Non equity interests 2,039 -
(18,839) 3,412
AIT GROUP PLC
GROUP CASHFLOW STATEMENT
for the year ended 31 March 2003
2003 2002
Notes #'000 #'000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (i) (16,766) (3,573)
Returns on investments and servicing of finance
Interest received 132 218
Interest paid (641) (289)
Interest element of hire purchase agreements (6) (7)
(515) (78)
Taxation
Taxation received/(paid) 1,077 (1,225)
Capital expenditure
Payments to acquire tangible fixed assets (75) (444)
Proceeds from the sale of tangible fixed assets 59 27
(16) (417)
Acquisitions
Investments in associated undertakings (710) (2,802)
Proceeds from the sale of investments 10 -
Purchase of business undertakings - (8,326)
Net cash acquired with business undertakings - 1,395
(700) (9,733)
Equity dividends paid - (719)
CASH OUTFLOW BEFORE FINANCING (16,920) (15,745)
Financing
Issue of new shares (net of expenses) 18,310 479
Debt due in less than one year - 8,000
Repayment of debt (2,000) -
Loans received from Director and former Directors 754 -
Repayment of loan note (1,518) -
Hire purchase repayments in year (73) (13)
Cash inflow from financing 15,473 8,466
DECREASE IN CASH IN THE YEAR (ii) & (1,447) (7,279)
(iii)
(i) RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
2003 2002
#'000 #'000
Operating loss (40,189) (8,671)
Depreciation charges 685 346
Impairment of goodwill 10,434 -
Amortisation of goodwill 391 710
Provision against own shares 528 (41)
Provision against associate 2,156 300
(Profit)/loss on sale of fixed assets (6) 1
Decrease in debtors 4,874 1,214
Increase in creditors 286 668
Increase in provisions 4,044 1,900
Other 31 -
Net cash outflow from operating activities (16,766) (3,573)
(ii) ANALYSIS OF MOVEMENT IN NET DEBT
At 1 April Cash Foreign At 31 March
2002 Flow Other exchange 2003
#'000 #'000 #'000 #'000 #'000
Cash at bank and in hand 4,182 (1,447) - - 2,735
Debt due within one year (8,000) 2,000 4,875 - (1,125)
Debt due in more than one year - - (4,875) - (4,875)
Loan note (4,001) 1,518 - 261 (2,222)
Hire purchase (73) 73 - - -
Director's and former directors' - (754) - - (754)
loans
Net debt (7,892) 1,390 - 261 (6,241)
(iii) RECONCILIATION OF NET CASH OUTFLOW TO MOVEMENT IN NET DEBT
2003 2002
#'000 #'000
Decrease in cash in the year (1,447) (7,279)
Cash outflow (inflow) from decrease (increase) in debt and lease financing 2,837 (7,987)
Change in net debt resulting from cash flows 1,390 (15,266)
Loan notes used in consideration for acquisition of subsidiary - (3,821)
Translation difference 261 (180)
New finance leases - (34)
Movement in net debt in year 1,651 (19,301)
Net (debt)/funds as at beginning of year (7,892) 11,409
Net debt at end of year (6,241) (7,892)
AIT GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2003
1. SEGMENTAL INFORMATION
Turnover includes revenue recognised from licence, maintenance, support,
integration and development. Throughout the year, turnover was derived from a
single class of business, being the provision and maintenance of information
technology products and solutions.
Turnover by geographical destination for the year was as follows:
Year ended Year ended
31 March 2003 31 March 2002
#'000 #'000
Europe 13,425 32,378
North America 2,791 3,030
Rest of World 1,368 816
17,584 36,224
Turnover, operating loss and net assets by geographical source for the year were
as follows:
United Kingdom USA Group
2003 2002 2003 2002 2003 2002
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 13,425 31,353 4,159 4,871 17,584 36,224
Operating loss (28,345) (6,272) (11,844) (2,399) (40,189) (8,671)
Share of associates'
operating loss (141) (523) - - (141) (523)
Loss on disposal of (382) - - - (382) -
associate
Finance (charges) income (17) 144 (498) (222) (515) (78)
Loss on ordinary activities
before taxation (28,885) (6,651) (12,342) (2,621) (41,227) (9,272)
Net (liabilities) assets (6,035) 2,732 (12,804) 680 (18,839) 3,412
2. EXCEPTIONAL ITEMS
2003 2002
#'000 #'000
Goodwill impairment 10,434 -
Write down of associate investment 2,177 -
Write down of treasury shares 528 -
Restructuring and reorganisation costs 5,376 -
Onerous leases and other commercial liabilities 5,005 1,900
23,520 1,900
Loss on disposal of associate 382 -
23,902 1,900
As a result of an impairment review carried out in accordance with Financial
Reporting Standard 11 "Impairment of Fixed Assets and Goodwill" ("FRS11") the
goodwill attributed to the prior year acquisition of IMA Inc. has been written
down by #10.4 million during the year, based on revised forecasts discounted at
15%. Also in accordance with FRS11 the carrying value of the Group's investment
in its associate was written down by #2.2 million following an impairment review
carried out by the directors.
Investment in own shares is carried at the lower of cost or market value.
Following the suspension of the Company's shares in June 2002 and the subsequent
capital reorganisation, the value of the shares held have been significantly
reduced.
As part of the capital reorganisation undertaken during the year, the Group
incurred significant costs in restructuring and reorganising the business to
reflect revised business objectives. Following the restructuring of the
business the Group reassessed its contractual commitments with a number of its
business partners and has made provision against those commitments which the
directors now deem to have become onerous. These other commercial liabilities
represent liabilities of the Group arising from the settlement of business
arrangements with third parties
3. LOSS PER SHARE
Basic loss per share of #3.060 (2002: loss per share of #0.406) is based on the
loss after tax of #40,822,000 (2002: loss #8,299,000) and on a weighted average
of 13,340,969 shares (2002: 20,423,185 shares).
Financial Reporting Standard 14 requires presentation of diluted EPS when a
company could be called upon to issue shares that would decrease net profit or
increase net loss per share. For a loss making financial period where there are
outstanding share options or warrants, diluted loss per share would only be
increased by the exercise of out-of-the-money options or warrants. Since it
seems inappropriate to assume that option holders or warrant holders would act
irrationally, and since there are no other diluting items, diluted loss per
share equals basic loss per share.
4. STATUTORY FINANCIAL STATEMENTS
The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31 March 2003 or 2002, but is
derived from those financial statements. Statutory financial statements for 2002
have been delivered to the Registrar of Companies and those for 2003 will be
delivered prior to the Company's annual general meeting. The auditors have
reported on those financial statements; their reports were unqualified and did
not contain statements under s237(2) or (3) Companies Act 1985. The prior year
comparatives have been restated to reflect a reclassification of accruals and
deferred income, previously included within creditors due within one year and
now shown separately on the face of the balance sheet.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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