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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Trenchant Capital Corp | CSE:TCC | CSE | Common Stock |
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RNS Number:0937Q
Trace Group PLC
24 September 2003
TRACE GROUP PLC
PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 31ST MAY 2003
CHAIRMAN'S STATEMENT
Results
At the half year I commented on the poor state of our key markets, and in
particular the financial markets. The underlying market position did not show
any significant signs of improvement in the second half either and trading
conditions remained tough. Whilst levels of selling activity and prospective
business have since grown to record levels in many of our businesses, there is
still a reluctance to commit to investment amongst our potential client base and
decision making continues to take longer than we would like.
Turnover for the year was #15.9 million (2002 - #20.6 million). The decline was
entirely attributable to our financial market businesses, where we are not
immune to the general market conditions which have been as bad as I can recall.
On a more positive note, our property management software business and our
recruitment business both improved turnover as did our fully managed payroll
operation. Our regular recurring maintenance and facilities management
activities provide us with a stable earnings stream and turnover from these
operations increased to #6.26 million (2002 - #5.46 million) with all areas
contributing to this improvement.
At the half year we reported gross margins down at 14.4%, in the main due to the
shortfall in package sales, and this level has broadly been maintained through
the second half. Continuing cost control resulted in a reduction in net
operating expenses and we are reporting an operating loss before goodwill and
property revaluation adjustments of #565,000 (2002 - profit #2.718 million).
We have continued to review the acquisition accounting for Trace Datawise
Financial Limited. As a result, it is the board's view that no further
provisions or adjustments are required over and above those processed 6 months
ago. After a provision for the reduction in the value of our freehold
properties, interest and tax, we are reporting a loss per share of 16.17p (2002
- earnings per share of 8.65p), with goodwill amortisation and impairment
accounting for 13.56p of this total (2002 - 4.39p).
The softening in the property market experienced last year has continued. As a
result, we have reduced the value of our freehold properties by #1.253 million,
with all but #168,000 being charged against the revaluation reserve. The
combination of this reduction and the goodwill adjustment has resulted in a fall
in shareholders' funds to #8.89 million (2002 - #15.40 million). This
represents net assets of 58.5p per share of which 51.1p is represented by net
tangible assets.
Group Operations
Trace Isys continued to be the strongest performer in the Group, although
trading below last year's levels. Package sales were hit as brokers deferred,
extended or in some cases shelved, plans for investment. By the end of the year
all of our clients had moved on to our e-Broking system enabling them to process
their business from initial client enquiry through to final account settlement
using a single integrated system. We have also become a reseller of Lexis, a
document management and workflow system, which will allow us to respond to the
insurance industry's aim of increasing the amount of business that is handled
electronically. Lexis is now available with our TWINS products and we are
hopeful of taking our first orders shortly. The London market is continuing its
drive toward electronic trading and settlement. As a result, and to enable
customers to benefit from this initiative, we are progressing our development to
implement electronic messaging within our core TWINS Transaction Server product.
Trace Solutions continued to operate at the improved level achieved last year
with new sales being made in both the corporate and managing agent sectors. We
have invested heavily in our new products in the last few years and are
beginning to benefit from the results. Development of our core property
management products has continued with several of our major clients involved in
projects that will increase our products' scope. 12 new clients were obtained
this year, the best performance in this business for several years. This
included the first sales of our new investment forecasting system, Cougar. Over
the past 18 months we have worked hard to establish ourselves in the corporate
market and property investor sector. Recent success will help us in our aim of
becoming a major supplier in both of these areas. We are looking to build on
our success and development efforts and will shortly be launching a brand new
product specifically for the property investor market. Links with other
software vendors have been developed to broaden our offering which can now also
run in a Windows XP environment. Our facilities management activity, whilst
small, has doubled this year and we expect this growth to continue.
Two of our businesses, Trace Financial and Trace Datawise, operate in financial
markets, specifically the wholesale banking and securities sector. This sector
has suffered as clients and potential clients have significantly cut back on
expenditure and reduced or deferred investment in software and systems. This
naturally has had a major impact on these two businesses. At the same time
there has also been a downward pressure on rates for bespoke and services work
and a reduction in the use of external resources by our clients.
Trace Financial had hoped to generate significant revenues from its corporate
actions management product, CAMS. Whilst interest has been high, a lack of
budget has been the key reason for prospects not moving ahead at this time.
Despite this, we now have three live corporate actions users. We have developed
Transformer, a new messaging product based around J2EE technology, which
complements our flagship message broker system, Cloverleaf, by providing
state-of-the art message transformation and data dictionary functionality. Our
established Trafic and real time processing operations continued at good levels.
Overall we maintained and developed excellent relationships with our clients,
which in turn have allowed our services revenues to hold up reasonably well. We
continue to invest in our products and have increased our marketing activity,
promoting our primary products and running a number of successful seminars and
other events throughout the year.
Trace Datawise had a challenging year. Its results have been disappointing,
trading at only half the level achieved in the previous financial year. The
issues faced were detailed in my last report where I also noted that
restructuring measures were being instigated. These measures have been
successful and the losses reported in the first half have now been significantly
reduced. Datawise is continuing to market its products, specifically WebTM and
a number of other web based products for Transfer Agents, Fund Distributors,
Custodians and Clearing Banks. There is the potential for a roll out of our
highly regarded WebTM product to new clients across Europe and the level of
interest being shown indicates that Datawise should be able to generate new
business when the market improves.
Trace Employer Services continued to grow its core fully managed payroll
business and is running at nearly double the rate of 12 months ago. New orders
are at an all time high with the size of individual orders also growing. We are
continuing with the development of new software to update facilities and improve
efficiency, with a consequent impact on the services we can provide. With our
processes ever improving, we will be looking to continue our growth organically
and through acquisition.
Prospect, our recruitment business, operated at similar levels to last year,
although a strong first half was followed by a much slower second half. This
was mainly due to the uncertainty in the recruitment sector created by the
situation in Iraq. Prospect's key niche, Operational Research and Decision
Support, continued to perform at consistent levels and provided a solid base for
the company. The recently restructured and refocused operation is being well
received by clients and we believe will deliver improving results when the
economy improves.
Current trading and prospects
Although our markets have been difficult, we are beginning to see the first
encouraging signs that the situation might improve as the year progresses. We
have carried out a broad ranging review across the group and have introduced
changes which we expect to result in significant financial benefits to the
group. Our controlled investments have helped us maintain a best of breed
portfolio of products and services. Our client relationships are excellent and
our good reputation continues to improve.
Prospective business is at record levels. Converting opportunities remains the
key. With our increasing competitiveness and extra marketing effort we feel we
are well placed to deliver an improved performance in the current year. With
the cost cutting measures we have introduced from the beginning of the current
year also coming in to effect, I believe we have a solid base for the future and
that all of our businesses are in a strong position to deliver an improved
result. It is against this background that the board has decided to recommend
the payment of a final dividend for the year ended 31st May 2003 of 0.5p per
share. This is expected to be paid on or about 3rd December 2003 to
shareholders on the register of members on 7th November 2003.
As ever, on behalf of the board my thanks go to our staff, our customers and
shareholders.
C W Ingham
CHAIRMAN
24th September 2003
Press enquiries: Richard Wolfe or Peter Stolerman at Trace Group plc
Telephone: 020 7825 1000
Fax: 020 7825 1001
Website: www.tracegroup.com
TRACE GROUP PLC
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31st MAY 2003
Year ended Year ended
31st May 31st May
2003 2002
#'000 #'000
TURNOVER 15,865 20,630
Cost of sales (13,703) (15,072)
____________ ____________
GROSS PROFIT 2,162 5,558
Net operating expenses (2,727) (2,840)
____________ ____________
(565) 2,718
Amortisation of goodwill (429) (659)
Impairment of goodwill (1,600) -
Permanent diminution in value of freehold properties (168) -
____________ ____________
OPERATING (LOSS)/PROFIT (2,762) 2,059
Net Interest payable (14) (14)
____________ ____________
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAX (2,776) 2,045
Tax credit/(charge) on (loss)/profit on ordinary activities 356 (750)
____________ ____________
(LOSS)/PROFIT ON ORDINARY ACTIVITIES AFTER TAX (2,420) 1,295
Dividend (75) -
____________ ____________
(LOSS)/PROFIT ON ORDINARY ACTIVITIES RETAINED FOR THE YEAR (2,495) 1,295
____________ ____________
(LOSS)/EARNINGS PER SHARE
Headline (loss)/earnings per share (1.49)p 13.04p
Amortisation and impairment of goodwill (13.56)p (4.39)p
Permanent diminution in value of freehold properties (1.12)p -
____________ ____________
BASIC (LOSS)/EARNINGS PER SHARE (16.17)p 8.65p
____________ ____________
DILUTED (LOSS)/EARNINGS PER SHARE (16.17)p 8.65p
____________ ____________
Notes:
1. The financial information set out in this press release does not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985. The results and cash flow statement for the year to 31st May 2002 and
the balance sheet as at that date have been extracted from the financial
statements of the Group for that period which have been delivered to the
registrar of companies and which carry an audit report that is unqualified and
includes no matter of adverse comment. Statutory accounts for the year ended
31st May 2003 will be finalised on the basis of the information presented in
this preliminary announcement and will be delivered to the registrar of
companies following their publication.
2. Basic (loss)/earnings per share has been calculated by dividing the
(loss)/profit on ordinary activities after tax by 14,959,334 (2002 -
14,988,949), being the weighted average number of ordinary shares in issue
during the year. As the exercise price for outstanding share options is higher
than the market price, there is no dilution in (loss)/earnings per share. In
accordance with FRS 14, the weighted average number of shares in the ESOP Trust
has been excluded from the calculation of basic (loss)/earnings per share.
3. This preliminary announcement has been prepared on the basis of the
accounting policies set out in the financial statements for the year ended 31st
May 2002.
4. The dividend is expected to be paid on or about 3rd December 2003 to
shareholders on the register of members on 7th November 2003.
5. Copies of the unaudited preliminary statement will be available to the
public at the Company's registered office at 224-232 St. John Street, London
EC1V 4QR.
TRACE GROUP PLC
UNAUDITED BALANCE SHEET AS AT 31st MAY 2003
31st May 31st May
2003 2002
#'000 #'000
FIXED ASSETS
Intangible assets 1,128 6,233
Tangible assets 5,819 7,113
Investments 259 267
______________ ______________
7,206 13,613
______________ ______________
CURRENT ASSETS
Stocks 720 896
Debtors - due within one year 5,373 6,005
Debtors - due after more than one year 526 334
Cash at bank and in hand 381 911
______________ ______________
7,000 8,146
______________ ______________
CREDITORS - AMOUNTS FALLING DUE
WITHIN ONE YEAR
Trade creditors (598) (1,148)
Other creditors (4,792) (5,215)
______________ ______________
(5,390) (6,363)
______________ ______________
NET CURRENT ASSETS 1,610 1,783
______________ ______________
TOTAL ASSETS LESS CURRENT LIABILITIES 8,816 15,396
______________ ______________
CAPITAL AND RESERVES
Called up share capital 759 759
Share capital to be issued 500 3,500
Share premium account 2,919 2,919
Revaluation reserve 458 1,543
Capital reserve 40 40
Capital redemption reserve 2 2
Profit and loss account 4,138 6,633
______________ ______________
EQUITY SHAREHOLDERS' FUNDS 8,816 15,396
______________ ______________
Notes:
1. The decrease in share capital to be issued results from the impairment
review carried out by the board in relation to the acquisition of Trace Datawise
Financial Limited.
2. Following an interim valuation of the group's freehold properties,
fixed assets have been reduced by #1.253m. Of this amount, #1.085 million has
been charged against the revaluation reserve with the remainder, #168,000, being
charged directly to the profit and loss account.
TRACE GROUP PLC
UNAUDITED CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MAY 2003
Year ended Year ended
31st May 31st May
2003 2002
#'000 #'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 66 469
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE -
net interest paid (14) (14)
CORPORATION TAX PAID (181) (1,138)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (408) (314)
Sale of fixed asset investments 26 -
Sale of tangible fixed assets 20 55
_________ _________
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (362) (259)
ACQUISITIONS
Payments to acquire subsidiary undertaking - (4)
_________ _________
NET CASH OUTFLOW FROM INVESTING ACTIVITIES - (4)
_________ _________
NET CASH OUTFLOW BEFORE FINANCING (491) (946)
FINANCING
Loan notes repaid (15) (15)
Capital element of hire purchase payments (24) (109)
Cost of own shares purchased - (21)
__________ __________
NET CASH OUTFLOW FROM FINANCING (39) (145)
__________ __________
DECREASE IN CASH (530) (1,091)
__________ __________
Note:
1. Reconciliation of operating (loss)/profit to net cash inflow from
operating activities:
Year ended Year ended
31st May 31st May
2003 2002
#'000 #'000
Operating (loss)/profit (2,762) 2,059
Amortisation and impairment of goodwill 2,029 659
Depreciation 430 456
Permanent diminution in value of freehold 168 -
properties
Amortisation of development costs 76 76
(Profit)/loss on disposal of tangible fixed (1) 14
assets
Profit on disposal of fixed asset investments (18) -
Decrease/(increase) in stocks 175 (681)
Decrease/(increase) in debtors 620 (1,866)
Decrease in creditors (651) (248)
__________ __________
NET CASH INFLOW FROM OPERATING ACTIVITIES 66 469
__________ __________
TRACE GROUP PLC
UNAUDITED RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31st MAY 2003
Year ended Year ended
31st May 31st May
2003 2002
#'000 #'000
(Loss)/profit attributable to members of the
Company (2,420) 1,295
Dividend (75) -
Revaluation deficit transferred from reserves (1,085) (779)
Adjustment in respect of prior year acquisition (3,000) -
Cost of own shares purchased - (21)
____________ ____________
Net (decrease)/increase in equity shareholders' (6,580) 495
funds
Equity shareholders' funds brought forward 15,396 14,901
____________ ____________
Equity shareholders' funds carried forward 8,816 15,396
____________ ____________
This information is provided by RNS
The company news service from the London Stock Exchange
END
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