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RNS Number:9048O
Transcomm PLC
21 August 2003
FOR IMMEDIATE RELEASE 21 AUGUST 2003
TRANSCOMM PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
Transcomm plc ("Transcomm"), the wireless data network services group, announces
its interim results for the six months ended 30 June 2003.
Key Points:
*Continued profitability and cash generation at the operating level for
the interim period
*Further reductions in overhead base and improved margins
*The results for the year were:
Turnover #6.35m (2002 : #7.16m)
Operating profit #0.23m (2002 : #0.20m)
EBITDA #1.04m (2002 : #0.85m)
Earnings per share* 0.38p (2002 : 0.34p)
* Before amortisation of goodwill
*Completion of network upgrade
*Contract win with Metropolitan Police
On future prospects, Chairman, Rod Matthews MBE stated:
"It is our intention to broaden our service offerings via the development of
closer relationships with certain identified partners. By creating new strategic
alliances with organisations most suited to a set of defined parameters, we
intend to support and expand our existing customer base by leveraging our
considerable wireless data expertise with other complementary product and
service offerings in market sectors where our combined service differentiators
are most valued. We are currently involved in exploratory negotiations with a
number of organisations with which such an alliance could deliver enhanced
shareholder value, and are committed to ensuring that any proposal will be
earnings enhancing.
Having repaid our debt, we are now building cash reserves to enable us to
strengthen our balance sheet and provide us with greater flexibility to react to
certain opportunities including potential acquisitions should they present
themselves."
FOR FURTHER INFORMATION, PLEASE CONTACT:
Transcomm: 0208 9909090
www.transcomm.uk.com
Rod Matthews, Chairman
Andrew Carver, Chief Executive
Russell Backhouse, Finance Director
Chairman's Statement
INTRODUCTION
I am encouraged that the business has continued to build on the successes
achieved during 2002, and is now able to report its second successive profitable
interim results since my appointment as Chairman in May 2001. We have continued
to improve the efficiencies of our network operations during the first six
months of this year, this achievement in part driven by the successful
completion of a major upgrade of our network.
RESULTS
Revenues of our core business for the six months ended 30 June 2003 continued to
perform well. In comparison with our 2002 interim results, which reflected
revenues of approximately #0.70m in respect of the release of contract
retentions, core network service revenues showed a growth of 2% over that
achieved during the corresponding period in 2002. We continue to see increases
in data usage across the majority of our customers and the number of net
subscriber additions during the first half of 2003 has also grown, albeit this
growth has slowed to 3% compared with 10% for the comparative period last year,
partly as a result of continuing competitive activity and associated pricing
pressure. Other key performance indicators have been consistent with those of
the comparative period, with ARPU's of #27.02 (2002 #27.86) and churn of 4.1%
(2002 4.3%). Our core network service offerings were further supplemented by
professional service revenues of #0.41m resulting principally from our
strengthening position within the emergency services arena.
During the first quarter of 2003, the business was able to further reduce its
overhead base by the implementation of more automated network operating
practices introduced as part of the network upgrade, which we announced earlier
this year. Operating expenses for the half-year reflect termination and other
rationalisation costs of approximately #0.10m which were incurred as a direct
consequence of implementing these changes. As a result, both margin performance
and cash generation are expected to improve during the course of the second
half-year. After operating expenses of #2.97m (2002 #3.11m), the Group reported
EBITDA of #1.04m for the half-year (2002 #0.85m) and earnings per share of 0.21p
(2002 0.16p).
The initiatives taken during the course of the last 18 months are now
contributing strongly to the Group's ability to generate cash at the operating
level. I am pleased to report that at the half-year point, we had repaid our
bank borrowings and our balance sheet reflected a net cash position of #0.13m
(2002 #(0.97)m). This business improvement has allowed us to restructure our
financing arrangements to more traditional working capital facilities and is a
testament to the stewardship of our executive management team and the close
relationships that have been developed with our bankers. With a reduced
overhead base for the second half, we expect the operating cash flow per share
of 0.36p (2002 (0.05)p) for the first half to improve further during the
remainder of the year.
Despite our best efforts, we have so far been unable to transfer the tenancy
obligations of our vacant space at our offices in West Drayton to a third party.
Whilst we continue to pursue opportunities, the demand for business space
within the locality remains a concern, and a further review of our provisioning
in respect of this onerous contract will need to be made at the year end. At 30
June 2003, our balance sheet reflected a provision of #0.14m, an amount
equivalent to 6 months of the annual rental and service obligations of the
vacant space.
OPERATIONS
Our principle focus during the last six months of the year has been the
completion of the upgrade to our Mobitex wireless network. I am pleased to
report that this has now been completed with no adverse impact on the
performance of our network during the upgrade period. We are now able to offer
our customers enhanced network transit time, capacity management and resilience
and provide our users with improved traffic reporting tools facilitating traffic
reporting by the second. Moreover, our migration to this new network platform
will allow us to increase network efficiency, and allow greater optimisation of
the underlying backbone for future telecoms cost savings.
CURRENT TRADING
On 15 July 2003, we announced that the Group had secured commitments from the
Metropolitan Police to enhance connectivity resilience to our network and
further support the expansion of services for up to a maximum of 3,000 vehicles.
This increased focus on the emergency services sector and the contract successes
with both the Phase IV and Phase V contracts of the C3i project for the
Metropolitan Police, will positively impact on our results during 2003. We
continue to develop the relationships with our key partners, particularly in the
pay and display sector where through our partner Schlumberger Sema, we have been
able to increase unit volumes by 13% during this interim period. However, the
capacity of our existing sales team, which has been depleted over the period,
has been almost fully utilised with the management of existing customer accounts
which has in part contributed to the slowing growth in new subscriber
connections. To address this downturn and exploit new sales opportunities, we
have recently made a number of new sales appointments to increase the focus on
new sales in business critical, wireless data markets, most notably within the
Transport and Emergency Services sectors.
STRATEGY
Earlier this year I announced that it was our intention to broaden our service
offerings via the development of closer relationships with certain identified
partners. By creating new strategic alliances with organisations most suited to
a set of defined parameters, we intend to support and expand our existing
customer base by leveraging our considerable wireless data expertise with other
complementary product and service offerings in market sectors where our combined
service differentiators are most valued. We are currently involved in
exploratory negotiations with a number of organisations with which such an
alliance could deliver enhanced shareholder value, and are committed to ensuring
that any proposal will be earnings enhancing.
Having repaid our debt, we are now building cash reserves to enable us to
strengthen our balance sheet and provide us with greater flexibility to react to
certain opportunities including potential acquisitions should they present
themselves.
Rod A Matthews, MBE 20 August 2003
Chairman
Independent review report by KPMG Audit Plc to Transcomm plc
Introduction
We have been engaged by the company to review the financial information set out
within this interim statement and we have read the other information contained
in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company for our review work, for
this report, or for the conclusions we have reached.
Directors Responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
KPMG Audit Plc
Chartered Accountants
Reading
20 August 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT 6 Months 6 Months Year
For the six months ended 30 June 2003 Ended ended ended
30 June 30 June 31
December
2003 2002 2002
#'000 #'000 #'000
Unaudited Unaudited Audited
Turnover
- Continuing operations 2 6,354.0 7,158.7 13,827.3
Operating profit before
operating exceptional items
- Continuing operations - before 234.3 199.9 434.9
operating exceptional items
- Continuing operations - operating 3 - - (359.7)
exceptional items
Total operating profit 4 234.3 199.9 75.2
EBITDA* 1,037.9 853.8 1,354.5
Depreciation and asset (628.9) (470.4) (929.9)
disposals
Operating profit before 409.0 383.4 424.6
operating exceptional items,
impairment and amortisation of
goodwill
Amortisation of Goodwill (174.7) (183.5) (349.4)
Group operating profit 234.3 199.9 75.2
Net (17.5) (30.4) (41.9)
interest
Profit on ordinary activities 216.8 169.5 33.3
before taxation
Taxation 5 - - -
Retained profit for the 216.8 169.5 33.3
period
Earnings per 5p Ordinary 6 Pence Pence pence
Share
Basic 0.21 0.16 0.03
Diluted 0.20 0.15 0.03
Adjusted 0.38 0.34 0.72
There is no difference between the earnings on ordinary activities before
taxation and the retained profit for the period.
* Profit before interest, taxation, depreciation, and amortisation excluding
operating exceptional items and goodwill amortisation.
CONSOLIDATED BALANCE SHEET 30 June 30 June 31 December
as at 30 June 2003 2003 2002 2002
#'000 #'000 #'000
Notes Unaudited Unaudited Audited
Fixed assets
Intangible assets 7 2,445.4 2,786.0 2,620.1
Tangible assets 5,350.6 5,109.5 4,547.5
7,796.0 7,895.5 7,167.6
Current assets
Stock and work in progress 453.9 1,104.8 524.3
Debtors 4,257.6 5,518.5 4,511.0
Cash at bank and in hand 189.4 6.1 93.5
4,900.9 6,629.4 5,128.8
Creditors
Amounts falling due within (4,594.5) (6,579.3) (4,686.6)
one year
Net current assets 306.4 50.1 442.2
Total assets less current 8,102.4 7,945.6 7,609.8
liabilities
Creditors
Amounts falling due after one (410.9) (72.6) (35.0)
year
Provisions for liabilities (135.2) (520.0) (235.3)
and charges
Net assets 7,556.3 7,353.0 7,339.5
Capital and reserves 8
Called up share capital 5,141.0 5,104.4 5,141.0
Share premium account 17,059.6 16,973.5 17,059.6
Merger Reserve 4,412.2 4,412.2 4,412.2
Profit and loss account (19,056.5) (19,137.1) (19,273.3)
Equity shareholders' funds 7,556.3 7,353.0 7,339.5
CONSOLIDATED CASHFLOW STATEMENT 6 Months 6 Months Year
for the six months ended 30 June 2003 ended ended ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Unaudited Unaudited Audited
Net cash inflow/(outflow) from 366.9 (51.0) 1,281.5
operating activities
Returns on investments and servicing
of finance
- Net interest (17.5) (30.4) (41.9)
Taxation - - -
Capital expenditure and
financial investment
- Payments to acquire tangible (1,293.0) (498.0) (451.2)
fixed assets
- Receipts from sale of 12.1 25.3 80.9
tangible fixed assets
(1,280.9) (472.7) (370.2)
Acquisitions and disposals
- Exceptional costs of - (804.7) (1,275.4)
reorganisation
- (804.7) (1,275.4)
Net cash outflow before use of
liquid
resources and financing (931.5) (1,358.8) (406.1)
Financing
- Redemption of loan notes - (44.0) (44.0)
- Hire purchase and finance 1,149.6 (40.6) (112.9)
lease obligations
1,149.6 (84.6) (156.9)
Increase/(decrease) in cash in 218.1 (1,443.4) (563.0)
the period
RECONCILIATION OF MOVEMENTS IN
SHAREHOLDERS' FUNDS 6 Months 6 Months Year
for the six months ended 30 June 2003 ended ended ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Unaudited Unaudited Audited
Profit for the financial 216.8 169.5 33.3
period
New share capital - - 122.7
subscribed
Net addition to shareholders' 216.8 169.5 156.0
funds
Opening shareholders' 7,339.5 7,183.5 7,183.5
funds
Closing shareholders' 7,556.3 7,353.0 7,339.5
funds
NOTES TO THE ACCOUNTS
1 BASIS OF PREPARATION
The interim report is prepared in accordance with accounting policies expected
to apply for the financial year ended 31 December 2003. These policies are
unchanged from those set out in the Annual Report and Financial Statements of
the Group for the year ended 31 December 2002.
The interim report is unaudited and does not constitute
statutory financial statements, but has been reviewed by the
Auditors whose report is reproduced within this interim
statement. The interim statement for the six months ended 30
June 2003 was approved by the Board of Directors on 20 August
2003.
The Group profit and loss account, cashflow statement for the year ended 31
December 2002, the balance sheet and statement of net debt as at 31 December
2002, as presented in the interim statement are extracts from the statutory
financial statements for that period, which have been delivered to the
Registrar of Companies. The report of the auditors on the financial
statements for the year ended 31 December 2002 was unqualified and did not
contain a statement under section 237(2) or section 237(3) of the companies
Act 1985.
, and
Deferred
Taxation
Whilst the Group has recorded a profit for the six month period ended 30
June 2003, no deferred tax asset has been recognised
At 30 June 2003. A deferred tax asset for losses will not be recognised
until the Group has demonstrated consistent profitability over
a longer period of time.
2 TURNOVER
During the six month period to 30 June 2003, the Group operated
substantially one class of business, the supply of wireless data
services and products. All of the Group's business was generated
from its UK operations.
An analysis of the Group's turnover and
during the interim period is shown
below:
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
Network service 5,161.5 5,033.4 10,342.9
revenues
Equipment and 1,192.5 2,125.3 3,484.4
other services
6,354.0 7,158.7 13,827.3
3 OPERATING EXCEPTIONAL
ITEMS
Operating exceptional charges to the profit and loss account totalling
#359.7k during the year to 31December 2002, relate to management recruitment
costs relating to the appointment of A Carver as Chief Executive of the Group
(#82.5k), provision in respect of the write down of a leasing receivable
(#159.2k) and a further provision for premises costs associated with the
Group's vacant premises at West Drayton (#118k). Further details of the
Group's operating activities are more fully described in the audited accounts
which were published on 13 March 2003.
4 OPERATING PROFIT 6 Months 6 Months Year
ended ended ended
30 June 30 June 31 Deecember
2003 2002 2002
Group turnover - continuing
operations
Wireless data services & 6,354.0 7,158.7 13,827.3
products
Cost of sales
Wireless data services & (3,146.1) (3,847.9) (6,617.5)
products
Gross profit 3,207.9 3,310.8 7,209.8
Operating expenses:
Sales and marketing (1,155.3) (1,083.1) (1,683.1)
Administration (1,818.3) (2,027.8) (5,451.5)
Operating profit after operating 234.3 199.9 75.2
exceptional items
5 TAXATION
The tax charge provided for the year is based on the estimated effective tax
rate for each undertaking in the Group applicable to the period to 30 June 2003
as applied to the taxable profits for the period.
6 EARNINGS PER ORDINARY
SHARE
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary
shares in issue during the period. For diluted earnings per share, the weighted
average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The potential dilutive shares relate to share
options granted to employees and alike where the exercise price is less than the
average market price of the Company's ordinary shares during the period.
Reconciliation of the earnings and weighted average number of shares used
in the calculations are set out below:
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
Weighted average number
of ordinary shares
- basic and 102.8 M 102.8 m 102.7 m
adjusted
Shares under 8.1 M 8.0 m 4.2 m
option
Weighted average number
of ordinary shares
- diluted 110.9 M 110.8 m 106.9 m
#'000 #'000 #'000
Earnings for basic and diluted 216.8 169.5 33.3
earnings per share
calculations
Goodwill amortisation and 174.7 183.5 349.4
impairment
Exceptional and non 0.0 0 359.7
operating items
Earnings for adjusted earnings 391.5 353.0 742.4
per share calculation
Earnings
per share
- basic 0.21 P 0.16 p 0.03 p
- diluted 0.20 P 0.15 p 0.03 p
- basic 0.38 P 0.34 p 0.72 p
adjusted
Supplementary basic and diluted EPS have been calculated to exclude the effect of
amortisation of goodwill and operating exceptional items. The adjusted numbers
provide a more meaningful comparison for the 6 months to 30 June 2003, 30 June
2002 and year ended 31 December 2002.
7 FIXED ASSETS
Goodwill
#'000
Cost
7,932.6
Amortisation
At 1 January 2003 5,312.5
Charge for the 174.7
period
At 30 June 2003 5,487.2
Net Book Value
At 1 January 2003 2,620.1
At 30 June 2003 2,445.4
8
Share Profit and
Merger Premium loss
reserve account account
#'000's #'000's #'000's
At 1 January 2003 4,412.2 17,059.6 (19,273.3)
Retained profit for - - 216.8
the period
At 30 June 2003 4,412.2 17,059.6 (19,056.5)
9 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM
OPERATING ACTIVITIES
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Operating profit before exceptional 234.3 199.9 434.9
and non operating items
Depreciation and 788.9 660.1 1,289.9
amortisation
Loss/(Profit) on sale of 14.7 (6.2) (10.6)
tangible fixed assets
Decrease/(Increase) in 70.4 (270.0) 310.5
stocks
Decrease/(increase) in 253.4 (482.5) 295.8
debtors
Decrease in creditors (994.8) (152.3) (1,039.0)
Net cash inflow/(outflow) from 366.9 (51.0) 1,281.5
operating activities
10
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
218.1 (1,443.4) (563.0)
27.6 84.6 156.9
245.7 (1,358.8) (406.1)
New finance leases (1,177.2) - -
(931.5) (1,358.8) (406.1)
Opening net (debt)/ (183.4) 222.7 222.7
funds
Closing net debt (1,114.9) (1,136.1) (183.4)
11 ANALYSIS OF NET FUNDS
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Closing net funds/(debt) comprise
the following:
Cash at bank and in 189.4 6.1 93.5
hand
Due within one year:
Overdrafts (63.7) (978.9) (185.8)
Finance lease (830.6) (90.7) (56.1)
obligations
(894.3) (1,069.6) (241.9)
Due after more than
one year:
Finance lease (410.0) (72.6) (35.0)
obligations
(410.0) (72.6) (35.0)
Net debt (1,114.9) (1,136.1) (183.4)
Net cash 125.7 6.1 (92.3)
Financing (1,240.6) (1,142.2) (91.1)
(1,114.9) (1,136.1) (183.4)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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