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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bns Telecom | LSE:BTP | London | Ordinary Share | GB00B0MV3J01 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 6.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:6297I
BNS Telecom Group plc
28 November 2007
28 November 2007
BNS Telecom Group plc
Preliminary Results to the year ended 31 July 2007
BNS Telecom Group plc, one of the UK's leading providers of white labelled
telecoms services to the UK SME and corporate market, today publishes its
audited preliminary results for the year ended 31 July 2007. This follows the
Group's extensive statement on trading and the outcome of the strategic review
on its Network Services Division, published on 29 October 2007.
Highlights
* Turnover up 32 per cent. to #34.91 million (2006: #26.47 million)
o Business Reseller Division up 29 per cent. to #26.20 million (2006:
#20.37 million) including contribution of #3.45 million from 3g
o Network Services Division #8.70 million (2006: #6.09 million)
* Business Reseller Division operating profits up 198 per cent. to #1.52
million (2006: #0.51 million)
* Network Services Division closed on 29 October 2007
* Group loss per share of 7.01p (2006: earnings per share 0.47p)
* Customer base up 7 per cent. to 7,013 (2006: 6,250), average monthly churn
down to 1.5 per cent. (2006: 1.6 per cent.).
* Acquisition of 3g - completed in March 2007 and now successfully integrated
* Long term service provider contract signed with Vodafone UK in March 2007
* Successful development of Hosted IP Telephony services
Graham Wilson, Chairman, said:
"Our core reseller Division has performed well and following the acquisition
and integration of 3g is now in a much stronger position to strengthen its
market position. However, the Network Services Division did not meet our
expectations and having reviewed all options, we closed the business.
"Following the development of our IP suite of products, we now have an excellent
platform for further growth, with growing forward revenue visibility and cash
generation, as we exploit the strong demand from SMEs for IP telephony products.
"
Enquiries:
BNS Telecom Group plc
Garry Moat, Chief Executive Tel: 01661 839 554
Andrew Goldwater, Finance Director
KBC Peel Hunt Ltd
Jonathan Marren/David Anderson Tel: 020 7418 8900
College Hill
Adrian Duffield/Rozi Morris Tel: 020 7457 2020
Overview
The Group's core Business Reseller Division, including 3g Comms ("3g") acquired
during the second half of the financial year, performed well and showed good
organic growth in sales and operating profit. However, the Network Services
Division, which was the subject of a detailed and extensive strategic review
initiated on 14 June 2007, was closed on 29 October 2007, the Board having
explored all options for this division. Strenuous efforts were made to dispose
of the Network Services Division over recent months and whilst there was
interest from a number of potential acquirers, the Board concluded that the best
option was the rapid closure of the Division.
The Business Reseller Division increased sales from #20.37 million in 2006 to
#26.20 million in 2007, including a revenue contribution of #3.45 million from
3g in the four months under BNS ownership. Operating profits for this enlarged
division grew by 210 per cent. to #1.59 million before goodwill charges. A new
service provider contract with Vodafone was signed and most significantly the
Group started to market its newly developed Hosted IP Telephony service.
The Board believes the development of its IP Telephony service will result in a
transformation of BNS from "reseller" in 2006, to "switched reseller" and now to
"IP carrier". This will enable BNS to exploit the growing demand from SMEs for
VoIP products and services.
The Network Services Division consisted of four businesses acquired over the
last two years. The expected revenue growth and operational leverage did not
materialise and all the businesses underperformed. Following the strategic
review the Board completed the Division's closure at 29 October 2007.
Consequently the Network Services Division reported a heavy level of losses and
impairment charges.
Separately, the Group completed a sale and leaseback on its head office premises
at Prudhoe in Northumberland generating a one-off cash inflow of #4.79 million
including a profit of #1.02 million.
Financials
Group turnover increased by 32 per cent. to #34.91 million for the year to 31
July 2007. This largely arose as a result of a 29 per cent. rise in sales in the
enlarged Business Reseller Division to #26.20 million (2006: #20.37 million),
including a four month contribution of #3.45 million from 3g. Excluding 3g, the
Business Reseller Division increased turnover by 12 per cent. to #22.75 million
(2006: #20.37 million). The Network Services Division, which has now been
discontinued, contributed turnover of #8.70 million (2006: #6.09 million).
The core Business Reseller Division substantially increased operating profit to
#1.69 million (2006: #0.55 million) before goodwill charges of #0.06 million
(2006: #nil) and operating exceptional items of #0.12 million (2006: #0.04
million).
The total operating loss in the discontinued Network Services Division was #5.97
million (2006: profit #0.03 million). This total loss comprised trading losses
in the order of #1.50 million, balance sheet write-offs (including bad debt
provisions) of approximately #2.8 million and non cash costs relating to
goodwill and fixed asset impairment of some #1.70 million.
Group operating loss before goodwill charges and exceptional items was #1.77
million (2006: profit #0.64 million). Total Group operating loss was #4.45
million (2006: profit #0.54 million).
During the year, the Group completed a sale and lease back of its freehold head
office facilities for #4.79 million in cash, giving rise to a profit on disposal
of #1.02 million. This reduced the loss on ordinary activities before interest
and taxation to #3.43 million (2006: profit #0.54 million).
Net interest payable in the year increased to #0.30 million (2006: #0.07
million) as a result of increased interest charges associated with the debt
taken on to finance the development of the head office building and the
acquisition of 3g. This resulted in a pre tax loss for the year of #3.73
million (2006: profit #0.47 million).
The Group had a tax credit in the period of #0.20 million (2006: charge #0.22
million) as a result of the utilisation of tax losses arising during the year in
the Network Services Division. The credit has also been increased by an
overprovision in 2006 and a release of a deferred tax liability during the year.
Loss per share for the year was 7.01p (2006: earnings of 0.47p) reflecting the
operating loss in the Network Services Division. Adjusted Basic Loss per share
excluding the after tax effect of goodwill charges, share-based payment charges
and other exceptional items was 3.71p (2006: earnings of 0.61p).
The Board is not proposing the payment of a final dividend (2006: Nil). An
interim dividend of 0.5 pence per share was paid on 27 December 2006. It is the
intention of the Board to resume dividend payments as soon as future
profitability permits.
The Group experienced a net operating cash outflow of #0.88 million during the
year. Of the outflow, #2.89 million reflects the funding of working capital in
the Network Services business. This was partially offset by a positive cash
inflow from operating activities in the Business Reseller Division and #4.79
million proceeds from the sale and leaseback of the Group's head office
property. The proceeds were used to repay an on-demand loan of #3.5 million
taken out specially to fund development of the head office property. The Group
subsequently financed the #4.85 million acquisition of 3g through a new banking
facility.
At the 31 July 2007, the Group had net debt of #2.75 million (2006: debt #0.73
million).
On 30 March 2007, the Group completed the acquisition of the entire share
capital of 3g Comms Limited and 3g Landline Limited (together '3g') for a total
cash consideration of #4.85 million. The acquisition provided the Group with an
immediate increase in scale in the mobile market as well as potential cross
selling opportunities. It also provided the Group with a significant market
presence in the Birmingham area, allowing cross-selling opportunities for other
BNS fixed line products to the 3g customer base. At the 31 July 2007, 3g had
13,306 mobile subscribers and 321 fixed line customers.
Earlier in the year, BNS completed the acquisition of 70 per cent. of the share
capital of Citygate Telecom Limited on 18 October 2006 for #100,000. However,
this operation was subsequently closed, being part of the Network Services
Division.
The Group invested #1.7 million in tangible fixed assets during the year. Of
this total #0.95 million was invested to complete the head office building and
#0.2 million was invested in the VoIP platform. Total expenditure on the head
office buildings amounted to #2.7 million, of which #1.77 million was disclosed
as assets in course of construction at the prior year end. The #1 million book
value of the original head office building was also disposed of as part of the
sale and leaseback transaction. Capital expenditure in the second half of the
year was much reduced as anticipated at the half year stage.
Business Review
BNS Telecom Group is one of the leading providers of telecoms services to the
SME and Corporate markets in the UK.
BNS provides customers with fixed line access and calls, together with hardware
supply and maintenance. This year, in response to rapid developments in the
business telecoms market, the Group has increased its mobile communications
volumes through the acquisition of 3g and added VoIP services to its product
portfolio to broaden its ability to service customers and provide for the
emerging demand in the SME sector for IP Telephony.
The Business Reseller Division, comprising direct selling operations, contracts
directly with SME and corporate customers and manages the white label joint
marketing relationships.
The recently acquired 3g has a service provider agreement with Vodafone UK,
providing mobile voice and data solutions to 13,000 subscribers, primarily in
the SME market. The business also sells a small amount of fixed line telecoms.
The Network Services Division comprised the four acquisitions completed in 2006,
together with Citygate, acquired in this year. Following the detailed review of
the Division the Group has now exited from the main revenue generating streams:
card services and wholesale international telecommunication services. The
remaining component of the Division, the Network Operation Centre, has been
restructured and incorporated into the Business Reseller Division and will
continue to provide the technical support for the Group's IP based products and
development activities.
Business Reseller Division
The Business Reseller Division offers a "one-stop shop" telecoms service to the
SME and corporate markets in the UK. Through the direct sales channel BNS
contracts directly with the end user for fixed line access and calls, hardware
supply, hardware maintenance, mobile telecoms access and calls and VoIP
services. Hardware is typically supplied to a finance company who leases the
equipment to an end user. The services are offered to customers as packages
tailored to the needs of an individual business.
The Hosted IP Telephony solution was launched to the SME and corporate market in
the second quarter of the financial year and to date the Group has a total
contracted value of over #4 million. These contracts are typically for three,
five or seven years. The Board expects the Hosted IP product suite to provide
the Group with a highly visible, stable revenue stream as deferred income is
released to profits over the life of contracts.
The Business Reseller Division uses a number of marketing approaches including
white label branding from the joint marketing partners to approach potential
customers. Approximately 74.5 per cent. of BNS customers have been sourced
through joint marketing brands (2006: approximately 72 per cent.). All
customers contract directly with BNS, allowing BNS to manage the targeting of
new business and the ongoing customer relationships.
The strategy is to broaden the Business Reseller Division's geographical base
through regional and national partner brands. New partners launched in the year
include Derbyshire Chamber Telecom, Bedford and Luton Chamber Telecom and
Barnsley Chamber Telecom. In addition, BNS has recently re-signed several of
its existing national partners on two and three year contracts.
The South Region sales team continues to support Southern England based partners
and with the growing Birmingham based sales team, the management believe it now
has the broad geographical coverage of Central England to add to the strong
presence in the North of England and Scotland. BNS will continue to develop new
partners in 2008 and will flex the sales force as demand requires.
On a like for like basis the customer base has grown by approximately 6.6 per
cent. to 7,023 customers at 31 July 2007 (2006: 6,250). In addition to this, 3g
had 1,875 customers at 31 July 2007.
The Group has continued to reduce customer churn, through both broadening the
range of products taken by customers and improving the customer services
systems. Average monthly churn in the year reduced to approximately 1.5 per
cent. (2006: approximately 1.6 per cent.).
Over 86 per cent. of the customer base takes more than one service from the
Group. ARPU (average revenue per user) per month, has fallen by approximately
9.3 per cent. over the year to #254 (2006: #280) largely reflecting the
continued price competition in the telecoms market. All current customers are
now committed to spend a minimum of #25 per month resulting in the closure of
231 uneconomic customer accounts during the year.
Fixed Line
2007 2006
Turnover (#'m) 8.67 8.30
Lines volume 44,467 43,908
Fixed lines connected by the Group increased by approximately 1.3 per cent. to
44,467 and turnover increased by approximately 1.2 per cent. to #8.57 million.
Pricing has remained broadly neutral compared to 2006.
This revenue stream provides wholesale line rental (WLR) to customers at a
discount to BT Retail standard pricing. Discounts are based on contract terms
of one, three or five year duration.
At 31 July 2007, approximately 45.0 per cent. (2006: approximately 38.5 per
cent.) of customers were committed to one year contracts, approximately 16.0 per
cent. (2006: approximately 12.5 per cent.) of customers were committed to three
year contracts and approximately 39.0 per cent. (2006: approximately 49.0 per
cent.) were committed to five year contracts. As anticipated, customers
continue to move to contracts of shorter duration, reflecting competitive
conditions in the fixed line market.
The Group continues to resell broadband where requested by customers, but
structural changes in the broadband market in 2006 made significant investment
by BNS in the development of broadband packages unattractive. BNS expects its
broadband revenues to increase during 2008 as part of the IP Telephony product
offering.
Calls Traffic (CPS)
2007 2006
Turnover (#'m) 9.30 9.36
This revenue stream provides carrier pre select (CPS) calls traffic over fixed
lines from a range of suppliers including BT and Thus. The Group has continued
to experience pricing pressure in a very competitive market. The Group
continues to negotiate with suppliers to reduce buy in costs in order to protect
margins. Average selling prices during 2007 have reduced by approximately 5.6
per cent. compared to 2006.
All current CPS customers are contracted for one, three or five year terms. The
Group has continued to increase the length of contracts. At 31 July 2007, no
(2006: approximately 53.8 per cent.) customers were on contracts with a 30 day
notice period, approximately 68 per cent. (2006: approximately 31.3 per cent.)
of customers were on one year contracts, approximately 22.0 per cent. (2006:
approximately 8.2 per cent.) of customers were on three year contracts and
approximately 10 per cent. (2006: approximately 6.5 per cent.) were on five year
contracts.
Hardware supply and maintenance
2007 2006
Turnover (#'m) 3.35 2.28
This revenue stream supplies and maintains equipment from a number of suppliers
including LG, Samsung and Cisco. Following disappointing sales performance in
the first half of 2006, the Group renewed its hardware and maintenance sales
pitch in the second half of the 2006 financial year and sales have shown a
sustained and significant improvement.
The improved sales performance also generated better margins compared with 2006.
BNS is particularly pleased to see such a resilient sales performance at a
time when many customers who previously opted for traditional fixed line
telephone hardware may be considering hosted IP Telephony based solutions in its
place.
As at 31 July 2007, 2,388 customers (2006: 2,251) had maintenance contracts with
the Business Reseller Division.
Mobile
2007 2006
Turnover (#'m) 4.86 0.43
Subscribers 16,341 1,403
The Vodafone UK service provider contract win was secured in March 2007. This
enables the Group to offer BNS branded products direct to customers. These
products can be tailored in a more interesting and customer centric way whilst
generating opportunities for improved margins. The announcement of service
provider status was closely followed by the acquisition of 3g which immediately
added 12,982 mobile SIMs to the existing subscriber base. This customer base had
grown to 13,306 by 31 July 2007 and is in addition to the 3,035 subscribers
within the BNS base. 3g has integrated well into the Group and continues to
have a highly productive working relationship with Vodafone. This was
demonstrated recently when BNS was appointed a Vodafone Premier Partner, one of
only five in the UK.
These developments have been a significant step in the Group's strategy to
deliver a converged fixed and mobile solution and the directors believe BNS'
credibility in the mobile sector has been significantly boosted as a result.
Network Services Division
2007 2006
Turnover (#'m) 8.7 6.09
Gross profit (#'m) 0.09 1.14
Gross margin (%) 1.0% 18.7%
The Network Services Division comprised three revenue streams: International
Telecommunications Services, Card Services and SMS Mobile Services.
As announced in June 2007, the initial review revealed a significant
underperformance during the third quarter and an over ambitious expectation for
the final quarter of the financial year. The poor trading performance was
heavily influenced by a customer base across the division which yielded very low
margins.
Corrective actions taken to address the issues identified to reduce continuing
losses resulted in substantial exceptional costs being incurred during the final
quarter of the year under review. The cost of these actions, being asset
impairment, increased debtor provisioning and costs of contract termination, are
reflected within discontinued operations in the results.
The remaining component of the division, the Network Operation Centre, has been
restructured and incorporated into the Business Reseller Division and will
continue to provide the technical support for the Group's IP based products and
development activities.
Product Development
BNS has developed a suite of IP Telephony products relevant to all sizes of
business from SMEs to the large corporates. These products include a state of
the art carrier grade IP Centrex that is sold on a 'per seat' basis. BNS has
also now launched the BNS Smart Box to provide the benefits of IP Telephony
without replacing the traditional telephone system.
BNS launched its first fixed and mobile converged telecoms product, WiDial, in
April 2007 and this is proving a positive factor in generating IP Telephony
orders. This is a low cost virtual mobile network using VoIP and Wi-Fi
technology to enable business users to connect to the Hosted IP Telephony
platform and to gain access to other users and features using mobile phone
devices without connecting to GSM providers.
The Group has also now launched an advanced call recording system enabling the
recording of inbound and outbound calls.
It is expected that this new product portfolio will have an important influence
on the future growth of BNS.
International Financial Reporting Standards ("IFRS")
The Group is set to report under IFRS for the year to 31 July 2008. The interim
results for the 26 weeks ending 31 January 2008 will be the first results to be
affected. Currently the Group is assessing the potential impact but does not
anticipate any significant changes in results arising from changes in accounting
policies. The move to IFRS will not change how the Group is managed and will
have no impact on cash flow.
Outlook
Having integrated 3g into the Group and successfully launched the new IP-based
Telephony solutions to the market, BNS' strategy during 2008 is organic growth
through the cross-selling of products to its enlarged customer base whilst also
continually looking to add new customers.
The development of the suite of IP Telephony solutions over the last two years
has given the Group an excellent platform for profitable growth. The sales
order intake from the IP-based products reported at the half year has started to
be converted to cash. The Group has now secured a total contracted value of over
#4 million which includes a significant element of deferred income.
The Directors believe that the outlook for the Group is now considerably more
favourable and anticipate strong cash generation in the current financial year.
Group profit and loss account
Notes Restated
2007 2006
#000 #000
Turnover
Continuing operations 22,752 20,373
Acquisitions 3,449 -
26,201 20,373
Discontinued operations 8,710 6,092
Total Group turnover 2 34,911 26,465
Cost of sales (25,461) (17,880)
Gross profit 9,450 8,585
Net operating expenses (13,896) (8,044)
Group operating (loss)/profit (4,446) 541
Continuing operations 1,305 511
Acquisitions 219 -
1,524 511
Discontinued operations (5,970) 30
Total Group operating (loss)/profit (4,446) 541
Analysed as:
Operating (loss)/profit before goodwill charges and (1,775) 638
operating exceptional items
Goodwill charges and exceptional items 5 (2,619) (55)
FRS 20 Share based payment charge 1 (52) (42)
Total Group operating (loss)/profit (4,446) 541
Continuing operations:
Profit on disposal of tangible fixed assets 1,018 -
(Loss)/profit on ordinary activities before
interest and taxation (3,428) 541
Bank and other interest receivable 21 89
Interest payable and similar charges (324) (161)
(Loss)/profit on ordinary activities
before taxation (3,731) 469
Tax credit/(charge) on (loss)/profit on
ordinary activities 6 196 (220)
Notes Restated
2007 2006
#000 #000
(Loss)/profit on ordinary activities after taxation (3,535) 249
Minority interest 23 (23)
(Loss)/profit for the financial year (3,512) 226
Earning per ordinary share p p
Basic 7 (7.01) 0.47
Adjusted 7 (3.71) 0.61
Diluted 7 (7.01) 0.46
Group statement of total recognised gains and losses
for the year ended 31 July 2007
Restated
2007 2006
#000 #000
(Loss)/profit for the financial year (3,512) 226
Prior year adjustments (as explained in note 2) (143)
Total gains and losses recognised since last annual report (3,655)
Group balance sheet
Restated
Notes As at 31 July As at 31 July
2006
2007
#000 #000
Fixed assets
Intangible assets 4,906 2,044
Tangible assets 2,201 5,824
7,107 7,868
Current assets
Stocks 316 270
Debtors 4,227 3,877
Cash at bank and in hand 2,148 2,614
6,691 6,761
Creditors: amounts falling due within one year (10,284) (10,515)
Net current liabilities (3,593) (3,754)
Total assets less current liabilities 3,514 4,114
Creditors: amounts falling due after one year (3,340) (300)
Provisions for liabilities and charges 130 (36)
44 3,778
Capital and reserves
Called up share capital 12 5,012 5,012
Share premium account 12 2,245 2,245
Profit and loss account 12 (3,274) 268
Other reserves 12 (3,939) (3,770)
Total shareholders' funds 12 44 3,755
Equity minority interest - 23
Capital employed 44 3,778
Group cash flow statement
Notes 2007 2006
#000 #000
Net cash (outflow)/inflow from operating activities 10 (884) 423
Returns on investments and servicing of finance
Interest received 21 89
Interest paid (320) (161)
Loan issue costs (47) -
Net cash outflow from returns on investments and servicing of (346) (72)
finance
Taxation
Corporation tax paid (226) (332)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (1,443) (2,682)
Payments to acquire intangible assets (159) -
Receipts from sales of tangible fixed assets 4,804 522
Receipt from loan made to related company - 799
Net cash inflow/(outflow) from capital expenditure and 3,202 (1,361)
financial investment
Acquisitions and disposals
Purchase of subsidiary undertakings (4,906) (944)
Cash and cash equivalents acquired 1,599 173
Net cash outflow on acquisitions and disposals (3,307) (771)
Equity dividends paid (251) -
Net cash outflow before financing (1,812) (2,113)
Financing
Issue of ordinary share capital (net of expenses) - 2,726
New bank loan 5,824 3,229
Repayment of long term bank loan (3,808) (1,902)
Capital element of hire purchase contracts (476) (706)
Net cash inflow from financing 1,540 3,347
(Decrease)/increase in cash in the year 11 (272) 1,234
Notes
1. Basis of preparation and new accounting policies
The accounting policies used in the preparation of these results are consistent
with those used in the 2007 Annual Report. The financial information has been
prepared under the historical cost convention and in accordance with applicable
UK accounting standards, modified to include the revaluation of certain freehold
land and buildings.
The Group has adopted FRS 20 'Share Based Payments' which is applicable for the
first time. The adoption of FRS 20 has resulted in a change in accounting
policy for share-based payment transactions. FRS 20 requires the fair value of
options and share awards which ultimately vest to be charged to the profit and
loss account over the vesting or performance period. For equity-settled
transactions the fair value is determined at the date of the grant using an
appropriate pricing model. If an award fails to vest as the result of certain
types of performance condition not being satisfied, the charge to the income
statement will be adjusted to reflect this.
The adoption of FRS 20 has resulted in additional staff costs of #52,000 (2006:
#42,000) which have been recognised in the profit and loss account.
2. Prior year adjustments
Following the acquisition of 3g during the financial year, the Group has
revisited its accounting policy for subscriber acquisition costs, the direct
third party costs of recruiting and retaining new mobile contracts. Previously
these costs were capitalised as an intangible asset and amortised over the
period expected to benefit from the contract. This policy was acceptable under
UK GAAP. The policy adopted by 3g historically has been to expense these costs
when incurred. The Directors believe that, in light of the majority of the
mobile customer base being within 3g, it is now appropriate for the whole Group
to adopt this policy of expensing subscriber acquisition costs when incurred.
Furthermore, this policy is acceptable under both UK GAAP and IFRS and the
Directors also believe it is consistent with emerging sector best practice. The
effect of this change in accounting policy has been to decrease the net book
value of intangible assets in the Group balance sheet as at 31 July 2006 by
#128,000 with a corresponding decrease in the Group profit for the year ended 31
July 2006.
On the 28 February 2006, the Company subscribed for 45% of the share capital of
UK Telecoms Limited for #45. The Company had no assets or liabilities at the
date of acquisition and the Group's share of #11,000 of its operating losses was
recognised in the profit and loss account in the prior year. The equity method
of accounting was adopted in the financial statements for the year ended 31 July
2006. During the year ended 31 July 2007, the Directors have revisited the
method of accounting for its 45% investment in UK Telecoms Limited and they have
concluded that it is more appropriate to adopt acquisition accounting and to
consolidate the results and cash flows of UK Telecoms as a subsidiary
undertaking. The Directors now believe that due to the Board of UK Telecoms
consisting of only BNS appointees, the Group exercised a controlling influence
over the operating and financial policies of UK Telecoms from the 28 February
2006. The effect of this prior year adjustment is to decrease the profit of the
preceding period by #15,000 represented by an increase in turnover of #667,000,
an increase in cost of sales of #336,000, an increase in net operating expenses
of #357,000 and a reduction in the previously recognised loss in associates of
#11,000. The balance sheet has been impacted by an increase in stock of
#49,000, an increase in debtors of #866,000 and an increase in creditors of
#930,000 at 31 July 2006. At the 31 July 2007, UK Telecoms was no longer
trading and therefore the results for the period have been included in
discontinued operations in the profit and loss account.
3. Basis of consolidation
The consolidated financial information includes the results of the Company and
its subsidiary undertakings from the date of acquisition using the acquisition
method of accounting. Goodwill arising on consolidation, representing the
excess of the fair value of consideration given over the fair value of the
acquired net assets, is capitalised in the consolidated balance sheet and
amortised over its estimated economic life of up to 20 years.
4. Group turnover and segmental information
Turnover, which is stated net of value added tax, represents the sales value of
work done, recognised in accordance with the accounting policies stated in the
2007 Annual Report. Turnover and profit before tax are attributable to the
supply and maintenance of telecommunication services and systems to the SME and
Corporate markets.
All assets are held in the UK. The Group operates within three geographical
segments, the UK, the rest of Europe and the rest of the World.
The discontinued operations comprise the trading activities of the Network
Services Division which comprised International Telecommunications Services,
Card services and SMS Mobile services.
The results of 3g Comms Limited and 3g Landline Limited, which were acquired on
30 March 2007, all relate to the supply and maintenance of telecommunication
services to the SME and Corporate markets in the UK.
5. Exceptional items
2007 2006
#000 #000
Recognised in arriving at operational (loss)/profit:
Impairment of goodwill 929 -
Amortisation of intangible fixed assets 178 55
Impairment of tangible fixed assets 668 -
Restructuring charges 714 -
Onerous lease provision (see below) 130 -
2,619 55
Recognised below operating profit:
Profit on disposal of land and buildings (1,108) -
1,601 55
The onerous lease provision is in respect of properties vacant at the year end.
Provisions have been recognised to cover the rents and service charges for the
period that each property is expected to be vacant, being up to the lease expiry
or break clause if earlier. Provisions are calculated using the current costs
of rents and service charges on each individual lease arrangements. These
expected costs have been offset by rental income that the Group expects to
receive from sublets on each property provided. The remaining terms of the
property leases range from 5 months to 22 months.
The tax effect in the profit and loss account relating to the exceptional items
recognised below operating profit is #nil.
6. Taxation
(a) Tax on (loss)/profit on ordinary activities
The tax credit/(charge) is made up as follows:
2007 2006
#000 #000
Current tax:
UK corporation tax - (224)
Tax over/(under) provided in previous years 160 (2)
Total current tax 160 (226)
Deferred tax:
Origination and reversal of timing differences 34 3
Prior year adjustment 2 3
Group deferred tax 36 6
-------- --------
Tax credit/(charge) on (loss)/profit on ordinary activities 196 (220)
(b) Factors affecting current tax credit/(charge)
The tax assessed on the (loss)/profit on ordinary activities for the year is
higher than the standard rate of corporation tax in the UK of 30 per cent (2006:
30 per cent). The differences are reconciled below:
Restated
2007 2006
#000 #000
(Loss)/profit on ordinary activities before taxation (3,731) 469
(Loss)/profit on ordinary activities before taxation multiplied by
standard
rate of UK corporation tax of 30 per cent (2006: 30 per cent) (1,119) 141
Effects of:
Non deductible expenses and non taxable income 404 52
Capital allowances (in excess of)/less than depreciation 252 3
Losses brought forward (7) -
Other tax adjustments (40) 1
Non-deductible share-based payment charge 16 17
Losses carried forward 494 10
Adjustments in respect of previous periods (160) 2
Current tax (credit)/charge (160) 226
(c) Factors that may affect future tax charges
To the extent that tax losses carried forward can be utilised against profits
from the same trade, future tax costs will be reduced.
(d) Deferred tax
The deferred tax asset not recognised in the financial statements is as follows:
2007 2006
#000 #000
Tax losses 721 279
The deferred tax liability recognised is made up as follows:
2007 2006
#000 #000
Accelerated capital allowances - 36
7. Earnings per share
(a) Basic (loss)/earnings per share
The calculation of (loss)/earnings per share is based on the net (loss)/profit
for the financial year and on the weighted average number of ordinary shares
outstanding during the year.
(Restated)
2007 2006
#000 #000
Basic (loss)/earnings per share (3,512) 226
(Loss)/profit attributable to equity shareholders 50,123 47,899
Basic weighted average number of shares
Basic (loss)/earnings per share (pence) (7.01)p 0.47p
(b) Adjusted earnings per share
Adjusted earnings per share excludes the after tax effect of goodwill charges,
share-based payment charges and other exceptional items as detailed in note 5.
The Directors believe that this gives a better indication of underlying
commercial performance.
2007 2006
#000 #000
Adjusted earnings per share (3,512) 226
(Loss)/profit after tax
Exceptional items (note 5) 1,601 55
FRS 20 Share-based payment charges 52 42
Tax effect of above adjustments - (30)
Adjusted (loss)/profit after tax (1,859) 421
Number of shares 50,123 47,899
Adjusted (loss)/earnings per share (pence) (3.71)p 0.61p
(c) Diluted (loss)/earnings per share
The calculation of diluted (loss)/earnings per ordinary share is identical to
that used for the basic loss per ordinary share for the year ended 31 July 2007.
This is because the exercise of the options would have the effect of reducing
the loss per ordinary share and is, therefore, not dilutive under the terms of
FRS 22.
Earnings and the number of shares used in the calculations of earnings per share
at 31 July 2006 are set out below:
(Restated)
2006
Diluted earnings per share #000
Profit after tax 226
Diluted weighted average number of shares 48,916
Diluted earnings per share 0.46p
8. Dividends
2007 2006
#000 #000
Paid during the year
Final dividend for 2006: 0.05p (2005: nil) 251 -
9. Acquisitions
On 30 March 2007, BNS Telecom Group plc acquired 100 per cent. of the issued
share capital of 3g for total consideration, including costs of #4,848,000. A
preliminary assessment of the book value and fair value of the net assets
acquired gives rise to goodwill of #3,702,000. The goodwill has been
capitalised and is being amortised over 15 years, which is based upon the
Directors' estimate of the useful economic life.
The last financial statements of 3g were prepared for the period 1 January 2006
to 31 December 2006, in which they reported turnover of #10,461,000, operating
profit of #631,000 and retained profits of #465,000. In the period from 1
January 2007 to 30 March 2007, 3g reported turnover of #2,636,000 and operating
profit of #64,000 and retained profits of #52,000.
Earlier in the year, BNS completed the acquisition of 70 per cent. of the share
capital of Citygate Telecom Limited on 18 October 2006 for #100,000. However,
this operation was subsequently closed, being part of the Network Services
Division.
During the year, an additional #7,000 consideration has been paid in respect of
an acquisition in the prior year, which has increased the goodwill.
10. Net cash (outflow)/inflow from operating activities
(Restated)
2007 2006
#000 #000
Operating (loss)/profit (4,446) 541
Share-based payment 52 42
Depreciation of tangible assets 1,541 741
Profit on disposal of tangible fixed assets - 16
Amortisation of intangible fixed assets 1,107 55
Decrease/(increase) in stocks 84 (80)
Decrease/(increase) in debtors 780 (1,361)
(Decrease)/increase in creditors (132) 469
Increase in provisions 130 -
Net cash (outflow)/inflow from operating activities (884) 423
11. Reconciliation of net cash flow to movement in net debt
2007 2006
#000 #000
Cash flows
(Decrease)/increase in cash in the year (272) 1,234
Cash inflow from increase in loans (5,824) (3,229)
Loan issue costs 47 -
Repayment of long term bank loans 3,808 1,902
Repayment of capital element of finance leases and hire purchase contracts 476 706
Changes in net debt resulting from cash flow (1,765) 613
New finance leases and hire purchase contracts (249) (248)
Amortisation of loan issue costs (4) -
Movement in net debt in the year (2,018) 365
Opening net debt (730) (1,095)
Closing net debt (2,748) (730)
Analysis of changes in net debt
At 1 August Cash flow Non cash At 31 July
2006 flows 2007
#000 #000 #000 #000
Cash at bank and in hand 2,614 (466) - 2,148
Bank overdrafts (246) 194 - (52)
Cash 2,368 (272) - 2,096
Finance leases and hire purchase (722) 476 (249) (495)
contracts
Loans (2,376) (1,969) (4) (4,349)
Net debt (730) (1,765) (253) (2,748)
12. Reserves
Share Share Profit and loss Other Total
capital premium account reserve shareholders'
account funds
#000 #000 #000 #000
#000
At 31 July 2005 4,331 - 140 (3,910) 561
Merger adjustment - - (140) 140 -
Profit for the year, restated - - 226 - 226
Share-based payment - - 42 - 42
Shares issued 681 3,019 - - 3,700
Costs incurred in issue of - (774) - - (774)
shares
At 31 July 2006, restated 5,012 2,245 268 (3,770) 3,755
Loss for the year - - (3,512) - (3,512)
Share-based payment - - 52 - 52
Dividends paid - - (251) - (251)
Realised revaluation surplus - - 169 (169) -
At 31 July 2007 5,012 2,245 (3,274) (3,939) 44
13. Statutory Accounts and AGM
The Board approved the preliminary results for the year ended 31 July 2007 on 26
November 2007. The financial information does not constitute the Group's
statutory accounts for the years ended 31 July 2006 and 31 July 2007. The
financial information is derived from the Group financial statements for the
year ended 31 July 2007. The Group financial statements on which the auditors
have given an unqualified audit report does not contain a statement under
section 237(2) or (3) of the Companies Act 1985. The financial statements for
the year ended 31 July 2007 will be sent to the shareholders and delivered to
the Registrar of Companies shortly following which they will be available on the
company's website www.bnstelecomplc.com.. They will also be available at the
registered office of the Company, Telecom House, Princess Way, Low Prudhoe,
Northumberland, NE42 6NJ during normal business hours.
The Company's AGM will take place at 10.00 am on 21 December 2007 at the
Company's registered office of Telecom House, Princess Way, Low Prudhoe,
Northumberland, NE42 6NJ.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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