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Share Name | Share Symbol | Market | Type |
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Lehman Abs Corp. 7.75% Corporate Backed Trust Certificates, Federal Express Corp. Note-Backed Series 2001-37 | NYSE:XKO | NYSE | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 11.25 | 0.00 | 00:00:00 |
RNS Number:4556M XKO Group PLC 18 June 2003 FOR IMMEDIATE RELEASE 18 June 2003 XKO GROUP plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2003 XKO Group, the managed services and solutions provider, announces its preliminary results for the twelve months ended 31 March 2003. KEY POINTS * Turnover increased 12 per cent. to #43.6 million (2002:#38.9 million); excluding acquisitions, turnover increased 1 per cent. to #39.3 million; * Adjusted pre-tax profit increased 31 per cent. to #2.7 million* (2002:#2.0 million*); * Adjusted earnings per share increased 46 per cent. to 8.9p* (2002:6.1p*); * Final dividend of 0.5p per share, total dividend of 0.7p per share, up 40 per cent. (2002:0.5p); * Strong cashflow leaving low indebtedness of #675,000 at 31 March 2003, after total expenditure on acquisitions and related restructurings of over #3.5 million; * Profitability greatly increased at Aran, acquired in June 2002. Control Group, acquired since the year end, brings attractive customer base as well as Supply Chain Management technology. (* adjusted for goodwill amortisation, exceptional items and discontinued activities, reported loss before taxation #545,000, see note seven) Commenting on the outlook, Simon Beart, Chief Executive said: "There is, as yet, little evidence that spending will increase in the current year and sales cycles remain extended. Our strategy is not to wait for a recovery in our markets. We continue to engage actively with our very large customer base whilst searching for attractive, sensibly priced acquisitions that can enhance total shareholders' return." FOR FURTHER INFORMATION, PLEASE CONTACT: XKO Group plc: Brian Beverley, Chairman 07770 680085 Simon Beart, Chief Executive 07710 444370 Rob Kimber, Group Finance Director 01932 575208 Evolution Beeson Gregory: Chris Callaway 020 7071 4309 Rob Collins 020 7071 4311 Buchanan Communications: Richard Darby 020 7466 5000 Nicola Cronk CHAIRMAN'S STATEMENT The Group has made further progress in a busy year. Turnover has increased to #43.6 million from #38.9 million and we have achieved organic growth in sales of 1 per cent., after adjusting for acquisitions made during the year. Against the background of a difficult environment for IT companies, this is an achievement reflecting the diversity and stability of the Group. The Group's profit before tax, goodwill amortisation, exceptional items and discontinued activities (defined as "Adjusted PBT") was #2.67 million (2002: #2.04 million), an increase of some 31 per cent. This excellent performance translates into adjusted earnings per share of 8.9p (2002:6.1p). Following deduction of goodwill amortisation, exceptional items and discontinued activities the reported loss before taxation was #545,000 (2002:#14,938,000). Cashflow in the year was again good and as a result, the Board is now prepared to recommend a final dividend of 0.5p per share payable on 2 October 2003 to all shareholders on the register as at 5 September 2003. The total dividend for the year represents an increase of 40 per cent. over the prior year. Future dividend increases will be aligned with earnings growth and will also take into account the availability of earnings enhancing acquisitions. The Group's strategy during current markets remains unchanged. We intend to take advantage of our proven financial strength and management to continue to build and acquire market share in our selected markets. We have a significant and rapidly growing presence in the mid-range Business Applications market and a large scale Solutions capability operating nationwide. We are looking to expand both areas of activity. Consistent with this strategy we have continued to make acquisitions during the year and in addition we purchased The Control Group shortly after the year end for #1.2 million. This latest acquisition brings to the Group an attractive customer base as well as specialist Supply Chain Management ("SCM") technology. The SCM capabilities of the Control product are installed with global and FTSE scale customers. As a Group we now have the scale and skills to meet the requirements of such customers and we will be investing further in this product range for the benefit of all Group customers. Whilst it is possible that trading conditions in the sector may not deteriorate further, prospects remain unclear and customer budgets for IT spend in the current year are at best flat. However, our business is structured to operate profitably in these conditions. XKO will prosper by continuing to offer branded solutions, delivered by a publicly listed Group with financial resources and scale. Brian Beverley Chairman CHIEF EXECUTIVE'S REVIEW The XKO market proposition The Group has a broad product offering tailored, primarily, for the mid-range corporate market. We offer customers a range of well supported and actively developed enterprise applications, complemented by the provision of all their infrastructure and communications needs. We also have specialist skills in the financial services markets for the delivery of large scale infrastructure solutions. Customers now look to purchase the full range of our services to avoid the high cost of ownership and increasing complexity of IT. The Group has a competitive advantage in owning all the elements of the end to end solution. This is proving increasingly attractive as our customers increasingly look to devolve their technology problems to a competent and large scale provider. This broad business model is well suited to current market conditions and it is pleasing to note that an ever increasing number of customers purchase across the Group. As a result, the Group now enjoys annual, contracted revenues in excess of #15 million and a high level of repeat business. Financial Results Turnover from existing businesses for the year rose by 1 per cent. When compared to falling revenue levels across the sector this illustrates the benefits of our broad customer base, high level of contracted revenues and a diversified offering. The Group is not dependent on any one product set and has therefore proved resilient. Adjusted PBT was #2.67 million, a significant increase over #2.04 million in the prior year. This achievement reflects both profit growth in existing businesses and a good contribution from recent acquisitions, primarily Aran. Each acquisition requires substantial restructuring and often a material adjustment to the cost base. This is possible due to the scale of XKO's existing management team and resources. Creating these efficiencies involves significant exceptional costs in the year of acquisition, much of which is a cash spend. This year, restructuring and reorganisation costs relate primarily to Aran with associated costs incurred in reorganising existing units. In addition, we undertook a rationalisation of our UK Solutions businesses including a relocation of our London office and the consolidation of duplicated services. This also gave rise to significant one off costs. Finally, we are investing selectively in management change and this invariably has a cost. In the current year we expect minimal reorganisation costs and these will be absorbed within operating profit, unless further acquisitions are made. The reorganisation costs relating to the acquisition of Control will be separately disclosed. The strategy of acquisition at this stage in the cycle is only valid if the Group can generate sufficient cashflow to meet the cost of purchase and subsequent restructuring. Yet again, the Group has been highly cash generative as a result of which funding was available for the acquisition of The Control Group after the year end. We will continue to look for new acquisitions since we have the management and the appropriate methodology to create value from acquisitions in our selected market areas. Acquisitions The principal acquisition in the year was the purchase of Aran for a cost of #2.6 million which was completed in June 2002. We moved rapidly to rationalise the business and absorb the product set within our existing structure. We are pleased to report that following these actions turnover has been very satisfactory and profitability greatly increased. We have also invested in all of the key applications within Aran including the development of a new windows based alternative for many of our text users should they wish to have a choice of system. As a result we now have two directly comparable and equally functional solutions to suit the wishes of the customer. The Group has a broad portfolio of applications and it is our strategy to maintain and develop these applications as customers demand enhancement and development. In this manner we retain customer loyalty and revenues continue to flow from acquired units. Shortly after the year end, we acquired The Control Group for #1.2 million. The Control product set contains highly advanced technology particularly in respect of warehousing and Supply Chain Management ("SCM"). Control Group's customer base also contains many installations with major corporates. We intend to invest further in Control's product since we see considerable opportunity in the area of SCM, as customers seek to optimise the systems they already own. Development We are continually developing new offerings and solutions to our customer base. We see good opportunities in the provision of managed infrastructure services and for those customers with installed applications, we believe there will be a demand to develop functionality and we are well placed to offer these services. We retain our commitment to research and development therefore and following the acquisition of The Control Group this spend will increase. We will also be investing in the development of our core new business applications to reinforce our vertical presence in chosen markets. Outlook It is now several years since spending was buoyant in our sector. Recognising this, the Group was reorganised and selective acquisitions made in order to trade profitably in any environment. There is, as yet, little evidence that spending will increase in the current year and sales cycles remain extended. Our strategy is not to wait for a recovery in our markets. We continue to engage actively with our very large customer base whilst searching for attractive, sensibly priced acquisitions that can enhance total shareholders' return. Simon Beart Chief Executive FINANCIAL COMMENTARY Summary The Group recorded an Adjusted PBT of #2.67 million, a significant improvement on the prior year comparative of #2.04 million. The statutory pre tax loss for the year was #545,000 but this includes non-cash charges, in particular the amortisation of goodwill relating to recent acquisitions and exceptional items. The Group is managed and staff are rewarded against the achievement of adjusted operating profit and cash generation targets. Returns on acquisitions are evaluated by cash ROCE. The Group incurred substantial exceptional charges in the year of #1.71 million and a further loss on discontinued activities of #238,000. The principal component of the exceptional items is the costs arising from the rationalisation of recent acquisitions which amounted to #1,034,000. These costs were primarily redundancy and reorganisation costs incurred in order to achieve the desired level of profitability. Acquisitions The principal acquisition made in the year was the purchase of the Aran group of companies in June 2002. The cash amount paid and payable to the vendors and debt assumed amounted to approximately #2.6 million. Rationalisation and reorganisation costs were also incurred which will bring the total cost to #3.5 million. In November a small acquisition of the business and assets of Informed Systems Limited was made. Immediately after acquisition both companies were integrated into the financial and management structure of the Group. Following the year end, the Group purchased The Control Group for a cash consideration of #1.2 million. Control was acquired on a debt free, cash free basis with recurring revenues approximating to the consideration paid to vendors. Cashflow and indebtedness Continuous attention to working capital and the careful management of project deliveries has resulted in improved debtor days of 40 (2002:42 days). The Group was able to convert 112 per cent. of operating profit before goodwill amortisation and exceptionals into cashflow. The equivalent percentage in the previous year was 98 per cent. Total net indebtedness at the year end was low at #675,000 despite total expenditure on acquisitions and related restructurings of over #3.5 million. As a result of the Group's record of strong cashflows, the Group enjoys flexible bank facilities. Following the acquisition of Control Group, the Group has drawn down a three year term loan with #3.1 million currently outstanding. The Group has access to a total overdraft facility of #3 million in order to finance working capital needs and smaller acquisitions. Profitability The Board examines carefully returns on capital employed and the free cash return from existing operations and acquisitions. The operating ROCE for the year was 86 per cent. (2002:51 per cent.) being operating profit before goodwill and exceptionals, losses on discontinued activities and LTIP costs as a percentage of year end fixed assets, stocks and trade debtors less trade creditors. The free cash return rate at this level, after capital expenditure was 88 per cent. (2002:50 per cent.). Cash generation was therefore satisfactory and enabled the Board to propose a substantial dividend increase. Goodwill The Group continues to take a realistic view of the appropriate time over which acquisition related goodwill should be amortised. In the current market environment the Board is of the opinion that any amortisation period beyond three years is difficult to justify. This reflects the need to invest in and improve software applications and the very rapid changes in the technology marketplace. The Board has therefore continued to use this shorter timescale for amortising the goodwill which has arisen on the acquisition of Aran and Informed Systems Limited. The Board believes that this is a prudent application of the accounting policy. Dividend payment, capital expenditure, taxation The Board has recommended the payment of a final dividend of 0.5p per ordinary share which will be paid to all shareholders on the share register at 5 September 2003 with a payment date of 2 October 2003. Coupled with the interim dividend paid on 20 February 2003 of 0.2p per share this amounts to 0.7p per share which represents an increase of 40 per cent. on the total annual dividend last year. The total cash cost of the annual dividend is #193,000. Dividend cover remains at conservative levels in order to help fund the organic growth of the Group. The Group does not have material capital expenditure requirements and in the year to 31 March 2003 the net spend after disposals was #40,000. The effective tax rate, taking into account the exceptional items and other tax deductible expenses was 33 per cent. It is the Board's expectation that the underlying Group rate will continue in the range 20 per cent. to 22 per cent. for the foreseeable future. Financial instruments The Group's financial instruments during the period comprised a secured term loan from The Royal Bank of Scotland plc, bank overdrafts and cash. The main purpose of these financial instruments was to raise finance for the Group's operations. After the year-end, the Group has entered into an Amortising Base Rate Swap agreement, covering an initial amount of #1.5 million with The Royal Bank of Scotland plc in order to manage its interest rate risk. Interest rate risk The Group finances its operations through external borrowings. Group borrowings are denominated in sterling and bear interest with reference to floating LIBOR, with the exception of the Swap agreement mentioned in the previous paragraph. Liquidity risk The Group's policy to manage liquidity risk is to maintain its term loan at a level of between #2 million and #3.4 million and to ensure that sufficient overdraft facilities are in place. Foreign currency risk During the period the Group made minimal sales or purchases in foreign currencies. No foreign currency hedging was therefore undertaken during the period. Robert Kimber Group Finance Director Consolidated Profit and Loss Account for the year ended 31 March 2003 Total year Total year Existing Continuing Discontinued ended ended business Acquisitions operations activities 31 March 31 March 2003 2003 2003 2003 2003 2002 #'000s #'000s #'000s #'000s #'000s #'000s Turnover 39,279 4,088 43,367 260 43,627 38,880 Operating profit/(loss) before goodwill amortisation and exceptional costs 2,196 649 2,845 (238) 2,607 2,094 Goodwill amortisation - (1,275) (1,275) - (1,275) (16,019) Exceptional items (672) (1,034) (1,706) - (1,706) (783) Operating profit/(loss) 1,524 (1,660) (136) (238) (374) (14,708) Net interest payable (171) (230) Loss on ordinary activities before taxation (545) (14,938) Tax on loss on ordinary activities (247) (227) Loss on ordinary activities after taxation (792) (15,165) Dividends (193) (135) Retained loss for the (985) (15,300) year Adjusted earnings per ordinary share 8.9p 6.1p Basic loss per share (2.9p) (56.4p) Diluted loss per share (2.9p) (56.4p) Dividend per share 0.7p 0.5p There are no other recognised gains or losses in the year other than the loss for the year and accordingly a Statement of Total Recognised Gains and Losses is not provided. Consolidated Balance Sheet As at 31 March 2003 As at As at 31 March 31 March 2003 2002 #'000s #'000s Fixed assets Intangible assets 3,405 - Tangible assets 423 842 3,828 842 Current assets Stocks 711 931 Debtors 6,747 6,463 Cash at bank and in hand 1,325 922 8,783 8,316 Creditors: amounts falling due within one year (9,979) (8,177) Net current (liabilities)/assets (1,196) 139 Total assets less current liabilities 2,632 981 Creditors: amounts falling due after more than one year (1,159) (755) Provisions for liabilities and charges (633) - Accruals and deferred income (5,857) (4,224) Net (liabilities)/assets (5,017) (3,998) Capital and reserves Called up share capital 7,212 7,039 Shares to be issued 239 550 Share premium account 9,611 9,507 Profit and loss account (22,079) (21,094) Shareholders' (deficit)/funds (5,017) (3,998) Equity (5,317) (4,298) Non-equity 300 300 Shareholders' (deficit)/funds (5,017) (3,998) Consolidated Cashflow Statement For the year ended 31 March 2003 Year Year ended ended 31 March 31 March 2003 2002 #'000s #'000s #'000s Cash inflow from operating activities 2,928 1,911 Returns on investments and servicing of finance Interest paid (152) (216) Interest element of finance lease rental payments - (14) Net cash outflow from returns on investments and servicing of investments (152) (230) Taxation Corporation tax paid (85) (244) Capital expenditure Payments to acquire tangible fixed assets (174) (330) Proceeds from sale of fixed assets 134 326 Net cash outflow from capital expenditure (40) (4) Acquisitions Payments to acquire investments in subsidiaries (including expenses) (2,955) (163) Overdraft acquired with subsidiaries (47) - (3,002) (163) Equity dividends paid (190) - Net cash (outflow)/inflow before financing (541) 1,270 Financing Issue of ordinary share capital 158 - Bank loans drawn/(repaid) 786 (1,020) Capital element of finance leases repaid - (157) Net cash inflow/(outflow) from financing 944 (1,177) Increase in cash in the year 403 93 NOTES 1. Operating loss Year ended Year ended 31 March 31 March 2003 2002 #'000s #'000s Turnover 43,627 38,880 Cost of Sales (18,939) (17,538) Gross Profit 24,688 21,342 Administrative expenses before goodwill amortisation, discontinued activities and exceptional items (21,747) (19,071) Discontinued consultancy unit costs (334) (177) Amortisation of goodwill (1,275) (16,019) Exceptional items (1,617) (633) LTIP (89) (150) Total administrative expenses (25,062) (36,050) Operating loss (374) (14,708) 2003 2002 Operating loss is arrived at after charging/(crediting): #'000s #'000s Research and development costs 1,170 1,134 Discontinued consultancy unit loss 238 177 Amortisation cost of Long Term Incentive Plan 89 150 Depreciation of tangible fixed assets: Assets held under hire purchase contracts or finance leases - 59 Other owned assets 511 708 Amortisation of intangible fixed assets 1,275 16,019 Auditors' remuneration: Audit services 78 70 Non-audit services 31 40 Rentals under operating leases: Plant and other machinery 94 112 Other operating leases 887 778 Profit on sale of tangible fixed assets (26) (36) 2. Exceptional items 2003 2002 #'000s #'000s Redundancies and reorganisations 1,796 933 Debtor recovery (179) (300) LTIP 89 150 1,706 783 3. Tax on loss on ordinary activities 2003 2002 The taxation charge comprises: #'000s #'000s UK Corporation tax on profit of the period - - Overseas tax 209 168 Current tax 209 168 Deferred tax - current year 38 59 247 227 The tax charge is disproportionate to the accounting loss before taxation since the amortisation of goodwill is not tax deductible. Reconciliation to current tax charge: 2003 2002 #'000s #'000s Loss on ordinary activities before tax 545 14,938 Loss on ordinary activities before tax multiplied by standard rate of UK Corporation tax: 30% (164) (4,481) Expenses not deductible for tax purposes 469 4,823 Capital allowances in excess of depreciation 34 (27) Movement in short term timing differences 141 17 Foreign tax charged at lower rates than UK (181) (164) Trade losses acquired (90) - Current corporation tax charge for the period 209 168 The standard rate of tax used in the above reconciliation is the average United Kingdom corporation tax rate for the period concerned. 4. Reconciliation of movement in shareholders' funds Group 2003 2002 #'000s #'000s Opening shareholders' (deficit)/funds (3,998) 11,502 Loss for the financial year (792) (15,165) Dividends payable (193) (135) Movement as to shares to be issued (311) (200) New share capital subscribed 277 - Closing shareholders' (deficit)/funds (5,017) (3,998) 5. Notes to cashflow statement Reconciliation of operating loss to net cash inflow from operating activities 2003 2002 #'000s #'000s Operating loss (374) (14,708) Depreciation and amortisation 1,786 16,786 Profit on sale of fixed assets (26) (36) Decrease in stocks 220 13 Increase/(decrease) in creditors 541 (1,602) Decrease in debtors 781 1,458 Net cash inflow from operating activities 2,928 1,911 6. Analysis of net debt At 31 March Cash At 31 March 2002 Flow 2003 #'000s #'000s #'000s Cash in hand and at bank 922 403 1,325 Overdrafts - - - 922 403 1,325 Debt due within 1 year (1,214) 214 (1,000) Debt due after 1 year - (1,000) (1,000) Total debt (292) (383) (675) 7. Earnings per share Basic loss per ordinary share is calculated by dividing the loss attributable to ordinary shareholders of #792,000 (2002: loss #15,165,000) by the weighted average number of shares in issue during the year of 27,386,987 (2002: 26,909,154). FRS 14 requires presentation of diluted earnings per share 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 company with outstanding share options, net loss per share would only be increased by the exercise of out-of-the-money options. It seems unlikely that option holders would act irrationally, therefore no adjustment has been made to diluted loss per share for out-of-the-money share options. Accordingly, the diluted loss per share equals the basic loss per share of 2.9p (2002:56.4p). 2003 2002 #'000s #'000s Loss on ordinary activites after taxation (792) (15,165) Goodwill amortisation 1,275 16,019 LTIP 89 150 Exceptional items 1,617 633 Loss on discontinued activities 238 177 Adjusted profit after tax 2,427 1,814 Tax 247 227 Adjusted profit before tax 2,674 2,041 Adjusted earnings per share 8.9p 6.1p Earnings per share in the prior year has not been restated for discontinued activities. 8. The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 March 2003 or 2002. The financial information for the year ended 31 March 2002 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 March 2003 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 9. Copies of this preliminary statement may be obtained from the Company Secretary, XKO Group plc, Systems House, Foundry Court, Gogmore Lane, Chertsey, KT16 9AP or by visiting the Company's web site: www.xko.co.uk. 18 June 2003 This information is provided by RNS The company news service from the London Stock Exchange END FR DBGDLGDBGGXR
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