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Share Name | Share Symbol | Market | Type |
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Intertainment AG | TG:ITN | Tradegate | 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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0.00 | 0.00% | 0.675 | 0.615 | 0.73 | 0.73 | 0.645 | 0.655 | 2,832 | 22:50:02 |
RNS Number:7837H ITNET PLC 21 February 2003 ITNET plc Preliminary Results for the year ended 31 December 2002 ITNET continues to deliver good earnings growth and improved margins ITNET plc, one of the leading IT, consulting and business process outsourcing companies, announces strong preliminary results for the year ended 31 December 2002. Year Highlights: * Profit before tax* up 29% to #16.4m (2001: #12.7m) * Operating margins* increased to 9.1% (2001: 7.5%) * Earnings per share* increased by 26% to 15.9p (2001: 12.5p) * Turnover up 1.4% to #179.0m (2001: #176.4m) * Strong cash generation with the net cash position increasing by #6.0m to #14.4m * Dividend up by 10% to 3.87p (2001: 3.52p) * Continued strong forward order book stands today at #295m *Before amortisation and impairment of goodwill, and exceptional items Commenting on the results, Bridget Blow, Chief Executive, said: "The confidence that we expressed a year ago that we would see another good performance in 2002 has been fully justified with the delivery of excellent profit growth, against a backdrop of continuing economic uncertainty. "During 2003, we intend to increase our investment in sales and marketing and in the development of new services both to consolidate our strong market position in Local Government and increase our market share particularly in Central Government and our vertical Commercial markets." Business Operating Highlights: * Local Government business performance positions us as one of the leading players in the Public Sector - the UK's fastest growing Software and IT Services market. Continued strong demand for ITNET's services has resulted in 20% growth in Local Government revenue in 2002, well ahead of industry growth rates. * Commercial Sector contract wins during 2002 with new and existing customers totalled #80m, covering a period of up to five years. * Whilst overall Commercial Sector revenues decreased by 13% in 2002, continued revenue growth was achieved in key vertical markets in the Commercial Sector - 9% in transportation and 11% in utility and services. * Strong demand for SAP services across both the Public and Commercial Sectors resulting in revenue growth of 44%. * Continuing strength in the consultancy area with excellent revenue growth of 28% for French Thornton. New Contract Announced today:- * Public Sector partnership with The London Borough of Richmond for ICT, consultancy and e-government services. The contract is worth #36m over ten years and begins immediately. Bridget Blow, Chief Executive continued: "Our Local Government business performance firmly positions us as one of the leading players in the Public Sector - the UK's fastest growing Software and IT Services market. We achieved excellent Public Sector revenue growth of 17% in 2002, added #71m to the Public Sector order book in 2002 and have a significant pipeline of bid opportunities going forward. "In the Commercial Sector where overall industry conditions remain difficult, our vertical market strategy we established 18 months ago has been successful. As well as revenue growth in two of our target sectors during 2002, we have seen a growth of 12% in the Commercial Sector year end order book. "We enter 2003 with no debt, a healthy order book and a leading position in the growing Local Government market. We continue to have a strong sales pipeline in our Local and Central Government markets. Overall, the Board anticipates another good performance in 2003." For further information: ITNET plc Bridget Blow, Chief Executive ) Tel: 020 7367 5100 (on 21 February 2003) Robin Taylor, Finance Director ) Tel: 0121 459 1155 (thereafter) Cubitt Consulting Fergus Wylie Tel: 020 7367 5100 Peter Ogden PRELIMINARY STATEMENT Review of Operations Public Sector Business wins with new and existing customers have resulted in revenue growth of 17% to #100.6m in 2002 (2001: #86.0m). Whilst market analysts predicted Public Sector IT services would grow at 9.6% during 2002 (Source: Ovum Holway), we have exceeded this forecast demonstrating our leading position in the sector. Contracts with new customers totalling #36m covering a period of up to 10 years have been signed in 2002 across both Local and Central Government. In this more competitive environment, maintaining customer relationships has been increasingly important. We have won new business worth #35m spread over 10 years with existing customers which include Hertfordshire County Council, Colchester Borough Council, the London Boroughs of Ealing and Hounslow, Birmingham City Council, South Buckinghamshire District Council and the Foreign and Commonwealth Office. Our Public Sector order book continues to be strong standing today at #202m. In addition, our conversion rate remains outstanding and we continue to win one out of every three contracts bid for in this sector. These wins have been in the area of IT solutions that transform an organisation's operations and meet the market's focus on 'Modernising Government'. Despite predictions that Government funding will cease in 2005 as the Modernising Government initiative comes to an end, we are confident that opportunities will continue to emerge until at least 2010. IT services will continue to be in demand as 'joined-up' Public Sector services continue to evolve. ITNET is firmly established as one of the leading players in Local Government and with this reputation will be able to capitalise on growth opportunities across both Local and Central Government. A key differentiator in the Local Government market is our ability to build successful branded 'add-on' services. Examples of these are our OneGov portfolio of services, the recognised industry standard in this arena, which has continued to win market share. During 2002, we won new contracts incorporating OneGov with Braintree District Council and Colchester Borough Council. We have also built our SAP services into a leading position in the Local Government market. In 2002 we won a new SAP contract worth #7.2m with Staffordshire County Council that is the largest UK SAP local authority implementation with 8,500 users. SAP services are also being provided in the new contract, announced today at the London Borough of Richmond, to provide ICT, consultancy and e-government services including the use of SAP Enterprise Portal technology designed to transform the Council's intranet and website. We have worked closely with a number of partners in 2002 and have secured a number of contracts leveraging these relationships. We are working with NTL supporting a community network for Cambridgeshire County Council and with Catalyst in the consultancy market. We believe one of the fastest growing opportunities in Local Government is the National Programme for IT in the NHS. The Government is investing #2.3bn over the next few years to 'join-up' the different Care organisations e.g. Health Authorities and Social Services aiming to provide Councils with a single view of its citizens. In January, we took advantage of this opportunity and announced a new partnership with Leeds City Council, providing a range of 'OneGov' style services, branded 'OneCare', targeted specifically at the growing Social Care market. We have agreed today revised arrangements with the London Borough of Islington for the delivery of benefits and IT services. The revised contract is for IT services only and reduces our year end order book by #15m. This contract will be profitable from 2003, following losses sustained in 2002. We are pleased by the way the new contract arrangements have been finalised and will work with Islington Council to continue to improve services and build upon the existing partnership. As Central Government works towards achieving 'joined-up' Government, we have increased our exposure and credibility in the market through consultancy services and being able to provide strategic advice to Government Departments and Agencies. Through our change and programme management consultancy, French Thornton, work has started with a number of Central Government organisations, developing business transformation programmes for the Department for Work and Pensions (DWP) and the North East Regional Smartcard Consortium. We announced our accredited supplier status with S-CAT, a catalogue-based procurement facility for Central Government, earlier in the year. We have already secured three new contracts via the S-CAT framework including work with the DWP, the Office For National Statistics and the Foreign and Commonwealth Office. Commercial Sector Overall Commercial Sector revenue decreased by 13% in 2002 to #78.4m (2001: #90.4m). Whilst some decline was anticipated given the decrease in the Easams business, the depressed market conditions in the general Commercial Sector have also had an impact. However, the vertical market strategy adopted 18 months ago has been successful and we are securing new business wins in our target sectors of transport and utility/services. As a result of these new wins, the Commercial Sector order book today stands at #93m. As transportation organisations start to investigate more effective ways of operating to take advantage of Government funding, the sector has provided exciting opportunities in 2002 with revenues increasing by 9%. One new customer using ITNET's expertise in this area is First Group and there has been additional business from our existing customer base at Transport for London. We have also invested in the development of OneTransport for this sector. This service aims to 'join-up' transport operations, reduce administrative costs, refocus resources and deliver a more customer-focused and responsive solution. The launch has been well received in the market and has resulted in a good pipeline of opportunities. In the utilities sector, we have secured new business wins with Bristol Water, Electralink, the Electricity Supply Board (ESB) and Energy Power Resources (EPRL), in addition to a new contract extension at Powergen. New contracts in the membership services sector include Dun and Bradstreet and The Mechanical-Copyright Protection Society-The Performing Rights Society. These new contracts have contributed to an 11% increase in revenues. The retail finance sector has proved the most challenging market in 2002 where the customer trend of reducing costs and optimising existing IT investments continues. Despite these challenges, we have signed three new projects with Staffordshire, Norwich and Peterborough, and West Bromwich building societies to implement security solutions and to provide windows 2000 migration design and CRM solutions enhancing customer contact and service. High levels of customer satisfaction are reflected in the significant number of contract renewals and extensions together worth #56m covering a period of up to five years. These include 3663, Centrica, Equitas, Powergen, Transport for London, Travel Inn and the VA Tech Group. Two desktop and applications services renewals were signed in 2002 with The Law Society and QBE. Consultancy Our change and programme management consultancy, French Thornton has achieved strong revenue growth of 28% in 2002, primarily as a result of its diverse sector experience. In 2002, it continued to exploit the buoyant Public Sector market capitalising on opportunities in Central Government, where it has undertaken strategic business transformation work. French Thornton is currently working with the Post Office Limited's Banking programme to deliver an online banking capability into every UK Post Office branch in April 2003. French Thornton played a key role in the delivery of the Banking programme, enabling the programme to reach critical milestones. Another new project in 2002 was working with the Department for Work and Pensions providing strategic support in the management of key supplier relationships and the development of an updated strategic IT programme. Results Group revenues in the second half of 2002 increased by 9.2% over the first half, to finish the year at #179.0m (2001: #176.4m). This increase was assisted by the continuing strength of our Local Government revenues which grew by 20% year on year and the solid progress of the Commercial vertical markets of transport and services, which grew by 9% and 11% respectively. Overall, Commercial Sector revenue decreased by 13% during the year to #78.4m (2001: #90.4m). The French Thornton consulting business continued its strong performance, reporting a 28% increase in revenues to #12.7m (2001: #9.9m). Following a strong year in 2001, revenues from application services grew by 5.2% to #45.0m (2001: #42.8m). A major contributor was the SAP business stream which recorded a 44% increase. The infrastructure business remained flat year on year at #99.9m (2001: #100.2m). Margins continued to improve in 2002 through tight cost control, the efficient utilisation of resources and a more profitable revenue mix. Headcount declined by 2% and contribution per head increased by 26% for the total Group. In addition, margins in French Thornton increased as a result of costs being lower in 2002 because of the distorting effect of higher acquisition related bonuses in 2001. We will continue our focus on cost control in all activities going forward, although the increase in employers' National Insurance from April 2003 will clearly have an impact. Operating profit* increased by 24% to #16.3m (2001: #13.2m). Return on sales increased from 7.5% to 9.1% with improvements shown in both Public and Commercial market sectors. Profit before tax* was up 29% to #16.4m (2001: #12.7m). Profit before tax (post-goodwill amortisation, impairment and exceptionals) was #7.3m (2001: #10.5m). Earnings per share* increased by 26% to 15.9p (2001: 12.5p). *Pre-goodwill amortisation, impairment and exceptionals The Directors are recommending a 10% increase in the final dividend to 2.66p (2001: 2.42p) which will bring the total dividend proposed to be paid to 3.87p (2001: 3.52p). The final dividend will, if approved by shareholders at the Annual General Meeting on 22 May 2003, be paid on 30 May 2003 to shareholders on the register at 28 March 2003. Free cash flow for the year was # 9.1m (2001: #13.4m). The increase in cash flows from operating profits was offset by increased accrued income in 2002 and the positive and distorting effect in 2001 of 2000 tax losses and the proceeds from the sale of the car fleet. The increase in accrued income primarily reflects the application of our revenue recognition policy on contracts where the customer pays for an outsourcing service evenly over a number of years following the delivery of the business solution. Trade debtors remained under tight control with days sales outstanding of 34 (2001: 35). In accordance with best practice, the Board has reviewed the value of the goodwill held on the balance sheet. An impairment charge of #4.0m was taken at the half year on the basis of estimated future growth rates from Technosys. The Board considers that the market for the e-commerce solutions expertise provided by the Technosys organisation (absorbed into our Commercial Sector in 2001) has weakened further and that it is appropriate to take an additional impairment charge of #2.3m. The remaining net book value of goodwill relating to the Technosys acquisition is #2.0m. While the revenues due to the acquisition of Easams in 2000 were always expected to decline, the reduction has been at a slower rate than anticipated. Accordingly, these higher than anticipated revenues have increased the deferred consideration payable and related goodwill by #1.0m. Given that all goodwill from the acquisition is being written off by the end of 2003, an additional amortisation charge of #0.7m has been incurred during 2002. There was exceptional income of #0.8m which arose in the first half of 2002 as a result of the movement in the ITNET share price since January 2000 and the consequent reduction in amounts payable by ITNET under the French Thornton earn-out agreement. At the year end, shares held in an employee share trust were revalued against the year end share price resulting in an exceptional charge of #0.7m. The Group continues to account for pensions under SSAP24 and based on a valuation date of 31 March 2002 there was an actuarial funding surplus of 120% for our defined benefits scheme. Notwithstanding this, the Board maintained higher than required contributions during 2002 in view of the falling equity markets and, going forward, no increases in contributions are currently anticipated. Using an FRS17 valuation basis, the deficit in the market value of the scheme's assets compared with the present value of the scheme's liabilities at 31 December 2002 was #7.6m, which compares to a surplus of #1.2m as at 31 December 2001. Outlook The Public Sector market continues to be buoyant. With our range of 'One' branded services and our SAP business, we have successfully developed branded, higher margin offerings that are well established in the Local Government space. The Office of Government Commerce has announced its objective of seeing new suppliers of all sizes entering the Central Government marketplace, and we are encouraged by the pipeline of new business opportunities available to us in this area. In the Commercial market, the general environment has continued to be difficult as customers maintain their focus on cost reductions to maximise their existing IT investments. There is little evidence that demand for new IT initiatives will increase in 2003. However, in this environment, which is likely to continue for some time, the vertical market strategy which we adopted 18 months ago, has proven to be effective and we are securing new business wins in these target sectors. We enter 2003 with no debt, a healthy order book and a leading position in the growing Local Government market. We continue to have a strong sales pipeline in our Local and Central Government markets. During 2003, we intend to increase investment in our sales and marketing and in the development of new services both to consolidate our strong market position in Local Government and increase our market share, particularly in Central Government and our vertical Commercial markets. Overall, the Board anticipates another good performance in 2003. ITNET plc Group Profit and Loss Account For the year ended 31 December 2002 Before Before Goodwill Goodwill Goodwill Goodwill Amortisation, Amortisation, Amortisation, Amortisation, Impairment Impairment Impairment Impairment As and and and and restated Exceptional Exceptional 2002 Exceptional Exceptional 2001 items items Total items items Total #'000 #'000 #'000 #'000 #'000 #'000 Turnover 178,992 - 178,992 176,446 - 176,446 Cost of sales (146,564) - (146,564) (146,729) - (146,729) Gross Profit 32,428 - 32,428 29,717 - 29,717 Other operating expenses before goodwill amortisation, impairment and exceptional items (16,118) - (16,118) (16,532) - (16,532) Goodwill amortisation - (2,834) (2,834) - (2,259) (2,259) Goodwill impairment - (6,276) (6,276) - - - Exceptional gain - 800 800 - - - Exceptional loss - (705) (705) - - - Total operating expenses (16,118) (9,015) (25,133) (16,532) (2,259) (18,791) Operating profit 16,310 (9,015) 7,295 13,185 (2,259) 10,926 Interest receivable 255 - 255 265 - 265 Interest payable (214) - (214) (724) - (724) Profit on ordinary activities before taxation 16,351 (9,015) 7,336 12,726 (2,259) 10,467 Tax on profit before exceptional items (4,913) - (4,913) (3,855) - (3,855) Tax on exceptional gain - (240) (240) - - - Profit on ordinary activities after taxation 11,438 (9,255) 2,183 8,871 (2,259) 6,612 Dividends paid and proposed (2,806) - (2,806) (2,499) - (2,499) Retained profit/(loss) for the financial year 8,632 (9,255) (623) 6,372 (2,259) 4,113 Earnings per share - Before goodwill amortisation, impairment and exceptional items 15.86 12.54 - Exceptional items (0.20) - - Before goodwill amortisation and impairment 15.66 12.54 - Goodwill amortisation and impairment (12.63) (3.19) - Post goodwill 3.03 9.35 - Fully diluted 3.01 9.12 ITNET plc Group Balance Sheet As at 31 December 2002 2002 2001 #'000 #'000 Fixed assets Intangible assets 14,105 23,015 Tangible assets 7,704 8,742 Investments 1,155 1,860 22,964 33,617 Current assets Stocks and work-in-progress 1,122 1,319 Debtors (Note 3) 31,534 23,796 Cash at bank and in hand 16,715 12,352 49,371 37,467 Creditors Amounts falling due within one year (Note 4) (51,989) (48,390) Net current liabilities (2,618) (10,923) Total assets less current liabilities 20,346 22,694 Creditors Amounts falling due after more than one year (122) (1,553) Provisions for liabilities and charges (500) (500) 19,724 20,641 Capital and Reserves Called up share capital - equity 7,309 7,160 Shares to be issued - 3,750 Share premium account 31,980 28,673 Profit and loss account (19,565) (18,942) Total shareholders' funds 19,724 20,641 ITNET plc Group Cash Flow Statement For the year ended 31 December 2002 2002 2001 #'000 #'000 Net cash inflow from operating activities (Note 5) 16,353 15,184 Returns on investments and servicing of finance 84 (388) Taxation (3,198) (801) Capital expenditure (4,092) (548) 9,147 13,447 Equity dividends paid (2,582) (2,243) Cash flow before management of liquid resources and financing 6,565 11,204 Financing (2,202) (14,725) Increase/(decrease) in cash equivalents 4,363 (3,521) Reconciliation of net cash flow to movement in net cash/(debt): Increase/(decrease) in cash in the year 4,363 (3,521) Decrease in debt and lease financing 2,108 14,725 New loan notes (500) (825) Loan note redemption 100 - Change in net cash 6,071 10,379 Opening net cash/(debt) at 1 January 8,371 (2,008) Net cash at 31 December 14,442 8,371 ITNET plc Notes to the accounts For the year ended 31 December 2002 1. Basis of preparation The accounts have been prepared on the basis of the accounting policies set out in the Group's Annual Report for the year ended 31 December 2002. The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2002 or 2001. The financial information for the year ended 31 December 2001 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 section 237(2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2002 will be finalised on the basis of the financial information set out in this preliminary announcement. Other operating expenses for 2001 have been restated to include only Group administration costs not directly attributable to business operations. This has resulted in a decrease of #818,000 in Other operating expenses and an increase of #818,000 in Cost of sales. 2. Earnings per share The calculation of earnings per share is based on an attributable profit of #2,183,000 (2001: #6,612,000) divided by 72,116,270 shares (2001: 70,744,906). The number of shares is based on the weighted average number of shares in issue during the year excluding those held by the QUEST which are treated as cancelled for earnings per share calculation purposes. The fully diluted earnings per share is based on 72,508,179 (2001: 72,508,015) Ordinary shares after adjusting for the full exercise of outstanding Share Options. 3. Debtors 2002 2001 #'000 #'000 Trade debtors 19,407 18,880 Deferred tax 1,582 1,524 Prepayments and accrued income 10,545 3,392 31,534 23,796 4. Creditors - Amounts falling due within one year 2002 2001 #'000 #'000 Loan notes - issued 1,225 825 Loan notes - to be issued 500 500 Trade creditors 10,430 9,514 UK corporation tax 3,158 1,145 Other taxation and social security 5,850 5,966 Amounts due under finance leases 926 2,103 Accruals and deferred income 27,931 26,592 Dividend payable 1,969 1,745 51,989 48,390 5. Net cash inflow from operating activities 2002 2001 #'000 #'000 Operating profit 7,295 10,926 Exceptional loss 705 - Exceptional gain (800) - Depreciation on fixed assets 5,228 5,454 Amortisation and impairment of goodwill 9,110 2,259 Profit on disposal of fixed assets (1) (20) (Increase)/decrease in debtors (7,680) 183 Decrease/(increase) in stocks 197 (978) Increase/(decrease) in creditors 2,299 (2,640) 16,353 15,184 This information is provided by RNS The company news service from the London Stock Exchange END FR NKKKKDBKBFBB
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