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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Horizon Tech. | LSE:HOR | London | Ordinary Share | IE0006881506 | ORD EUR0.07 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 92.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:9935P Horizon Technology Group PLC 13 March 2008 Horizon Technology Group plc Dublin: HOR.I London: HOR.L ADR: HZNTY Preliminary results for the year to 31 December 2007 Profit after tax up 6.2% Dublin & London | 13 March, 2008: Horizon Technology Group plc, a leading system integrator and distributor of information technology products in the UK and Ireland, today announces its preliminary results for the year to 31 December 2007. 2007 2006 Change 2007 Financial Highlights Euro 000 Euro 000 (Excluding discontinued operations) Revenue 288,213 257,895 12% Gross profit 53,200 43,042 24% Gross margin % 18.5% 16. 7% EBITDA1 10,651 10,021 6% EBITDA1 as a % of revenue 3.7% 3. 9% Profit after tax 5,892 5,549 6% Profit after tax as a % of revenue 2.0% 2.2% Net cash/(debt) 4,135 (6,979) Return on invested capital2 28.5% 22.4% +610Bps Diluted adjusted EPS (Euro cent)3 9.39 cent 9.16 cent 3% 1 Before material items 2 EBITDA divided by shareholders' funds plus debt less cash 3 Adjusted for unwinding of discount factor, amortisation/reduction of intangible assets and material items 2007 Operational Performance 2007 was a year of further progress for Horizon against each of its growth objectives: O Horizon continued to focus on increasing the higher margin services orientation to its business. O Horizon has broadened its range of global IT vendors and is now established as the number one channel outsourcing partner in the UK for Sun Microsystems, Juniper, F5, Nortel (data products), Tandberg, EMC and Oracle. O Horizon has rapidly become the number one channel development partner for EMC and Oracle in the UK following the establishment of these businesses in the second half of 2006. O Horizon continues to enhance its relationship with IBM through the extension of its partnership into the Irish market. O Horizon received three awards from IBM including the global International Beacon Award for its contribution to IBM business growth in 2007. O Successfully established a new corporate governance consulting division and secured early customer wins. 2007 Financial Performance The group invested considerable resources in building a services capability and infrastructure to support revenue growth in 2008 and beyond, particularly in its EMC, IBM and Oracle business units in the UK. This investment, combined with the cancellation or deferral of a few key orders from the financial services and government sectors, resulted in a lower growth rate in profitability during 2007. Some of the deferred orders have since been received, others are still expected early in 2008 and none have been cancelled. For the sixth consecutive year, Horizon has delivered earnings growth in 2007, albeit at a slower pace than in the recent past: O Revenue growth of 12% year-on-year. O 82% of revenue emanates from the UK. O Gross profit growth of 24% year-on-year. O EBITDA growth of 6% year-on-year. O Diluted adjusted EPS growth is 3%. O Strong cash conversion - cash inflow from operations was Euro12.6m or 118% of EBITDA. O Return on invested capital up from 22.4% to 28.5%, an increase of 610 basis points. O Strong balance sheet - net cash of Euro4 million against net debt of Euro7 million at the end of 2006. Outlook Taking global market conditions and the weakness of sterling into account, the directors are confident of the group's growth prospects in 2008. Gary Coburn, Horizon's Chief Executive Officer commented: "Horizon continues to develop as a valued and capable outsourcing partner for major global IT vendors. During 2007, we strengthened our position with existing partners and made significant progress with new partners such as Oracle, EMC and IBM. In addition, we continued to deliver both acquisition and organic growth during 2007 - both of which remain a focus for growth into 2008. Despite a challenging second half in 2007, Horizon has very strong businesses with key market positions, providing significant benefits to customers while ensuring resilient profitability, strong cash flow and superior returns to shareholders." Cathal O'Caoimh, Horizon's Chief Financial Officer, added: "Strong financial focus on working capital management and cash flow has driven a significant improvement in the group's balance sheet. Cash flow from operations was Euro12.6m, 118% of EBITDA and return on invested capital increased 610 basis points to 28.5%. Horizon ended 2007 with net cash of Euro4 million against net debt of Euro7 million at the end of 2006. Horizon is well positioned to deliver earnings growth and shareholder value in 2008 and beyond." For further information please contact: Horizon Technology Group plc Gary Coburn, Chief Executive Officer Cathal O'Caoimh, Chief Financial Officer 353 1 620 4900 K Capital Source Mark Kenny/Jonathan Neilan 353 1 631 5500 ABOUT HORIZON Horizon Technology Group plc is a leading technical integrator and distributor of information technology products in the UK and Ireland. For more information about Horizon Technology Group plc, visit www.horizon.ie. CHAIRMAN'S STATEMENT For the sixth consecutive year Horizon has delivered earnings growth in 2007, albeit at a slower pace than in the recent past. The company generated significant free cash flow and increased the return on invested capital. During the year, the group invested considerable resources in building a services capability and infrastructure to support revenue growth in 2008 and beyond, particularly in its EMC, IBM and Oracle business units. This investment, combined with the cancellation or deferral of a few key orders from the financial services and government sectors in December, resulted in a lower growth rate in profitability during 2007. Nevertheless, EBITDA grew 6% and diluted adjusted EPS increased by 3%. Although some of the deferred orders have since been received and others are still expected early in 2008, the extent of the impact on the 2007 outcome was exacerbated because the group's revenue has become increasingly weighted towards the end of each quarter. Horizon continues to deliver on its objective of focussing on higher margin, service rich, enterprise solutions businesses resulting in gross margin increase from 16.7% to 18.5% between 2006 and 2007. The business with the fastest growth in EBITDA over the last two years was the Irish based enterprise applications and services (EAS) operation. While this business only accounts for a small portion of group revenues, it contributes 31.5% of group EBITDA, a significant increase on just 19% two years ago. The group's UK operations now generate 82% of revenues - because of the size of the potential market, it is likely to drive the group's future revenue growth. The focus on higher margin businesses yielded significant improvement in EBITDA margin within the Irish operation from 10.5% in 2006 to 12.8% in 2007, resulting in 8% growth in EBITDA despite a fall in Irish revenue. The group continued its focus on cost control and efficiency gains during this period, maintaining very high consultant utilisation rates. The increase in services revenue and the group's investment in new partnerships have a direct impact on headcount and cost structure. Average headcount was 349 in 2007, up from 266 the previous year. The growth is principally in revenue generating technical consultants and sales personnel and includes the full impact of acquisitions completed in 2006. In addition to the increased focus on higher margin businesses, Horizon continued to deliver on a number of other strategic objectives during 2007: O Driving earnings growth in each of the businesses acquired in 2006 - the three successful acquisitions, EquIP, EPC and WBT, have been fully integrated into Horizon's operations and contributed very positively to profitability in 2007. O Investment and development of new partnerships - the group's new developments with Oracle and EMC have produced consistent improvements in performance during 2007. O Building market share with new vendor partners - the group's market share with IBM, EMC, Oracle and Tandberg have all grown significantly during 2007. O Maintaining and enhancing market share with key vendors - Horizon is now the number one channel partner in the UK for each of Sun Microsystems, Juniper, F5, Nortel (data products), Tandberg, EMC and Oracle. O Horizon has rapidly become the number one channel development partner for EMC in the UK following the establishment of this business in the second half of 2006. O Successfully established a new corporate governance consulting division and secured early customer wins. Horizon remains active in identifying potential acquisition opportunities in the services and software sectors in Ireland and in the enterprise infrastructure sector in the UK. While many acquisition opportunities exist, the group remains focused on completing transactions, which offer a compelling fit with Horizon's existing business and are accretive to Horizon's earnings within the first 12 months of acquisition. The group's cash flow and financial position strengthened during 2007. Net cash of Euro4 million at the year-end represents a significant improvement on net debt of Euro7 million at 31 December 2006. Cash flow generated from continuing operations amounted to Euro12.6 million or 118% of EBITDA in the period. The group's focus on effective working capital management delivered a significant reduction in working capital days from 25 days in 2006 to 10 days in 2007, As a result, the group drove return on invested capital up from 22.4% to 28.5%, an increase of 610 basis points. Horizon has a strong balance sheet and substantial unused credit facilities which provide significant financial capacity for accretive and value enhancing acquisitions and developments in 2008 and beyond. MARKET REVIEW During 2007, the enterprise solutions markets in both the UK and Ireland showed solid revenue growth with increased outsourcing by organisations, driven by the desire to remain focused on their core business and to retain flexibility in their workforce. As a result, the Irish market for consulting services has experienced an increase in demand with market revenues increasing in double-digit percentages. The UK and Irish enterprise infrastructure markets are growing, albeit in single digit percentages. There is also continuing growth-based investment particularly for project services. The intense competition within the market continues - both between IT vendors and within the channel. Late in 2007, certain sectors of the market showed signs of a slow-down as organisations began to react to a potential deterioration in global economic growth rates. In this regard, the financial services sector actively cut back on expenditure late in 2007 reflecting the specific issues facing that sector. Other sectors remained buoyant, particularly Irish government departments. STRATEGY Horizon's objective and strategy remain constant - to deliver shareholder value through the development of the business as a technical integrator and distributor of information technology products in the UK and Ireland. The group's focus is to generate long-term growth in shareholder value by investing resources judiciously to capitalise upon future growth opportunities while maintaining a strong financial position. The board continues to periodically review all options available to pro actively maximise shareholder value. Geographically, Horizon will continue to focus on supplying a wide range of IT services and products within the Irish market and, in the UK, focus on the provision of enterprise solutions in partnership with system integrators and leading global IT vendors. Looking to 2008, continued growth in earnings will be delivered by: O An increasing services orientation within Horizon's business; O Maintaining high market share with existing key vendors; O Profitably building market share with new vendor partners; O Select acquisition opportunities; and O Capitalising on Horizon's operational gearing. The group will continue to monitor the IT markets in the UK and Ireland to identify new opportunities to deliver profitable growth through either bolt-on acquisition or organic development, while continuing to develop existing businesses to enhance profitability and cash flow. The group will continue to develop its strong market positions, to strengthen relationships with customers and vendors and to invest resources in the on-going development of a highly motivated team of professionals dedicated to the continued success of the business. OUTLOOK Horizon has very robust businesses with key market positions that generate strong cash flow and can deliver a superior performance going forward. Horizon's growth prospects are underpinned by rigorous cost control, the group's ability to leverage growth in earnings from greater utilisation of operational capacity and continued focus on higher margin services rich segments of the IT market. Horizon will maintain its focus on delivering organic and acquisitive growth in 2008. Horizon's organic revenue growth will be influenced by the broader market growth rate, the extent to which major IT vendors outsource to their channel and the pace of organic development. As global IT vendors focus on their own internal core competencies and cost controls, they are increasingly outsourcing technical services, marketing and supply chain functions to channel partners. Horizon is uniquely positioned to address these market trends. Like many companies, the directors note that a global economic slowdown could have an impact on market conditions. Specific sectors of the market were impacted at the end of 2007 and the directors expect that these same sectors could be challenged in 2008. However, to date there is no evidence that the market has been or will be impacted. While international market conditions remain uncertain and notwithstanding the weakness of sterling, the directors remain confident of the group's prospects in 2008. TRADING REVIEW Over the last two years, Horizon has shifted its business to become exclusively focused on the higher margin, services rich enterprise solutions market. Following the disposal of the group's volume distribution business, together with the completion of a series of acquisitions and organic developments during 2006 and 2007, the group continues to enhance the margins within its business. Following this shift in the focus of the business, the group's gross margin has expanded from 16.7% in 2006 to 18.5% in 2007. 2007 was Horizon's sixth consecutive year of growth in EBITDA and diluted adjusted earnings per share. While growth slowed during 2007, the group is profitable, cash generative and has significant financial capacity to support further acquisition and organic growth opportunities. The group operates through two primary geographic divisions - Ireland and the UK. Horizon supplies a wide range of IT services and products within the Irish market and, in the UK, focuses on the provision of enterprise solutions in partnership with system integrators and leading global IT vendors. The UK now represents 82% of the group's revenue stream and 47% of the group's EBITDA. UNITED KINGDOM In the United Kingdom, the group focuses exclusively on the provision of enterprise infrastructure and services. It assists customers, usually via a system integrator, in implementing IT strategies through the provision of IT infrastructure, development and consulting services. Its customer base is predominantly comprised of blue-chip companies and government departments. It has a current full time equivalent staff count of 191 employees. UNITED KINGDOM 31 Dec 2007 31 Dec 2006 Euro'000 Euro'000 Revenue 236,485 198,395 EBITDA 5,905 5,481 Percentage margin 2.5% 2.8% The group's UK revenue, at Euro236 million increased 19% on 2006 levels. This growth in revenue is mostly organic and principally reflects the group's recently established partnerships with EMC, Oracle, IBM and Tandberg in the UK market. As part of the group's focus on the development of a services revenue base, it has invested considerable resources in building a services capability and infrastructure to support revenue growth in future years, particularly in its EMC, IBM and Oracle business units. These investments reduce short term earnings but will deliver incremental growth in 2008 and beyond. Horizon UK focuses on the enterprise segment of the IT market, specialising in the provision of high-end and mid-range infrastructure and services. Horizon's objective is to become the leading channel partner to its key vendors and has achieved substantial revenue growth, out-performing the market by focusing on the continuing development of relationships with key system integrators. During 2007, Horizon enjoyed a number of new project wins across various industry sectors in the UK, such as: O Horizon Data Management delivered a significant data storage project in the healthcare sector, in partnership with System Integrator, Softcat, to provide patient record information to remote clinics; O Horizon Clarity worked in partnership with UKN in implementing a 3,700 seat thin client virtual desktop project for the UK government's Rural Payments Agency; O Horizon Data Management worked in partnership with Ioko to design and implement a major multi-vendor storage solution for the BUPA Hospitals' Spire transition project; and O Horizon Enterprise Systems was selected as the partner to provide and implement the IBM infrastructure for the data centre in Services Birmingham, a joint venture partnership between Birmingham City Council and Capita Group plc. Horizon is now established as the number one channel outsourcing partner in the UK for Sun Microsystems, Juniper, F5, Nortel (data products), Tandberg, EMC and Oracle. Of particular note is that Horizon has rapidly become the number one channel development partner for EMC in the UK following the establishment of this business in the second half of 2006 - a performance of which the group is very proud. The group's UK business, Horizon UK, has six operating units: O Horizon Clarity - Horizon Clarity is Sun Microsystems' largest partner in the UK, providing data-centre technology to the UK's largest corporates in partnership with system integrators. Horizon continued to develop this position through 2007 winning a number of mid-range infrastructure projects in partnership with global system integrators and managed services providers. O Horizon EquIP - Horizon EquIP is a networking and security technology business providing products and services from Juniper Networks, F5 Networks and Nortel Networks, among others. Horizon EquIP is now firmly established as the number one channel outsourcing partner for Juniper, Nortel (data products) and F5 in the UK market. O Horizon Enterprise Systems - This business was established in 2006 to focus on providing UK system integrators and their customers with a wide range of IBM specific enterprise infrastructure products and services. This business reported a strong performance for 2007 and Horizon received three awards from IBM including the global International Beacon Award for its contribution to IBM business growth in 2007. O Horizon Data Management - The group's data management business in the UK continues to grow rapidly and Horizon has now become the number one channel development partner for EMC in the UK. This business, which was only established in the second half of 2006 generated a positive contribution in 2007. O Horizon Software - Late in 2006, Oracle selected Horizon UK as its channel development partner in the UK, tasking Horizon with the on-going development of the existing Oracle channel with a primary focus on partners selling to enterprise customers. This business, which was only established in the second half of 2006 generated a positive contribution in 2007. O Horizon Solutions - This business unit was introduced in early 2007 and is now Tandberg's main channel development partner in the UK. In partnership with specialist reselling partners, it provides Tandberg's market-leading IP video-conferencing solution to a range of corporate and government customers in the UK. Again, it contributed positively to group earnings in 2007. IRELAND In Ireland, the group operates in the enterprise solutions market and assists customers in implementing IT strategies through the provision of IT infrastructure, applications software development, implementation consulting and support services. Its customer base is predominantly comprised of blue-chip companies and government departments. The division includes the Irish enterprise application and services (EAS) business and the Irish enterprise infrastructure and services (EIS) businesses. It has a current full time equivalent staff count of 158 employees. IRELAND 31 Dec 2007 31 Dec 2006 Euro'000 Euro'000 Revenue 53,014 59,974 EBITDA 6,781 6,283 Percentage margin 12.8% 10.5% The group's Irish revenue, at Euro53 million declined 11.6% on 2006 levels reflecting a change in mix towards higher-margin services businesses. EBITDA, at Euro6.8 million, increased by 7.9% compared to 2006 while EBITDA margin increased from 10.5% to 12.8% Horizon's Irish enterprise applications and services operation (EAS) delivered good growth in earnings in 2007. The consulting business has continued to build on its market-leading position by delivering growth in each of the service divisions in which it operates: O Business Intelligence - Client Solutions is the leading business intelligence provider in the Irish market building data warehouse facilities for Ireland's largest corporates. Sectors that have been particularly strong during 2007 include financial services and government departments. O Application Development - This division continues to meet the software development needs of some of Ireland's largest enterprises. The core services provided include turnkey solution delivery from analysis to design to post implementation support, technical consultancy services and project management consultancy services. Horizon also offers a suite of application lifecycle management tools that enable customers to meet compliance requirements and to streamline their own internal software development processes. Some successful solution deployments during 2007 include projects in Irish Life and Permanent, the Gift Voucher Shop and O2. O Enterprise Resource Planning - This division is the only Irish indigenous mySAP-consulting partner and provides the full mySAP solution in the Irish market, including software license, implementation consulting and ongoing support services. Demand for SAP project services continued to experience growth in 2007 and Horizon successfully completed a number of significant projects during the year. O Business Service Management (BSM) - This division continues to develop satisfactorily in partnership with BMC and its products, including Remedy. It provides a complete range of BMC Software services including sales, consulting, implementation and support to existing and new BMC Software customers. BSM is a fast-growing segment of the IT market and continues to represent an exciting growth opportunity for the group. O Corporate Governance - The group established a new corporate governance consulting division. Although still at a developmental stage, this new division has secured early customer wins including the Electricity Supply Board and Eircom. O Learning Management Solutions - Since its acquisition in August 2006, WBT has performed ahead of expectation with new contract wins in both the US and Europe. WBT Systems helps organisations implement advanced learning and performance enhancement solutions. WBT has over one million licensed users across the globe and has built a strong revenue stream of services into its enterprise customer base. During 2007, Horizon successfully won a number of new consulting projects in Ireland, such as: O Gift Voucher Shop (GVS) - Building on the successful development project in GVS, Horizon developed the Corporate (B2B) Website, enabling e-business transactions to be completed on the internet. O Bord Gais - Following a competitive tendering process Horizon won the contract to deliver a significant data warehousing solution. O UCC - Horizon won, also by open tender, a significant data warehousing project in the University. In Ireland, Horizon Open Systems, the group's enterprise infrastructure and services business (EIS) is a channel partner of Sun Microsystems which specialises in the provision of infrastructure and professional services to blue-chip enterprises, government departments and global systems integrators. While overall revenue in the Irish EIS operation declined in 2007, an increased services orientation within the business delivered growth in earnings. Horizon Open Systems works with a range of blue-chip companies and Government departments within the Irish market including O2, Vodafone, Irish Life and Pensions, Bank of Ireland and AIB Bank and Revenue Commissioners, the Department of the Environment and the Department of Justice as well as newer entrants such as Newbay and Jinny. During 2007, Horizon Enterprise Systems expanded its IBM partnership into Ireland where it specialises in the provision of IBM enterprise products and services to the Irish corporate and government markets. The partnership with IBM continues to perform in line with the group's expectations and builds on a very successful partnership in the UK. FINANCIAL REVIEW Key performance indicators for 2007, reported under International Financial Reporting Standards, are outlined in the table below: 2007 2006 Change 2007 Financial Highlights Euro 000 Euro 000 (Excluding discontinued operations) Revenue 288,213 257,895 12% Gross profit 53,200 43,042 24% Gross margin % 18.5% 16.7% EBITDA1 10,651 10,021 6% EBITDA as a % of revenue 3.7% 3.9% Profit after tax 5,892 5,549 6% Profit after tax as a % of revenue 2.0% 2.2% Return on invested capital2 28.5% 22.4% +610Bps Net cash/(debt) 4,135 (6,979) Interest cover3 7.2x 7.5x Diluted adjusted EPS (Euro cent)4 9.39 cent 9.16 cent 3% 1 Before material items 2 EBITDA divided by Shareholder's funds plus debt less cash 3 Interest cover calculated on operating profit adjusted for tax, amortisation of intangibles and depreciation. 4 Diluted adjusted EPS represents earnings based on 79,764,000 shares over profit after tax adjusted for unwinding of discount factor, amortisation/ reduction of intangible assets and material items. Revenue and gross profit Group revenue increased 12% in 2007 compared to 2006, which represents both organic revenue growth and the full year impact of the acquisitions completed in 2006. The fastest rates of revenue growth occurred in the UK EIS business and the Irish application consulting operation. While revenue grew 12%, absolute gross profit grew 24% as a result of the expansion of gross margin from 16.7% to 18.5%, reflecting the group's shift towards services and margin-rich activities. Earnings and taxation Horizon continued to deliver earnings growth in 2007 albeit at a lower pace than has been the case for the last five years. EBITDA grew 6% reflecting the weakness in the broader economic environment and the consequent deferral or cancellation of orders at the end of the year. Profit after taxation grew 6% and diluted adjusted EPS increased 3% to 9.39cent. The taxation charge for the year was particularly low at Euro136,000, an effective tax rate of 2%, primarily due to the utilisation of tax losses not previously recognised. At the balance sheet date, the group has unused tax losses against which no deferred tax asset has been recognised of Euro28.5 million (2006: Euro33.4million) available for offset against future profits. These losses, which may be carried forward indefinitely, will provide the group with reduced tax charges in future periods. The group continued its focus on cost control, efficiency and productivity during the year. Average headcount increased 31% from 266 to 349 as a result of the acquisitions completed in 2006 and the organic development of new revenue sources both in the UK EIS operation and the Irish application consulting business. Cost per employee reduced by 1%. Cash flow, liquidity and funding The group's cash flow and financial position was strengthened further in 2007, particularly as a result of the Euro12.6 million net cash inflow from continuing operating activities. As a result, the group had net cash of Euro4.1million at 31 December 2007 compared to net debt of Euro7.0 million at 31 December 2006. At the end of 2007, net cash of Euro4.1million comprised cash balances of Euro11.0 million (2006: Euro8.4 million) partially offset by borrowings of Euro6.9 million (2006: Euro15.4 million). A constant focus on the working capital employed in the business drove return on invested capital up from 22.4% to 28.5%, an increase of 610 basis points. Likewise, cash flow generated from operations amounted to 118% of EBITDA. Total equity increased to Euro41.4 million at the end of 2007 (2006: Euro37.8 million), demonstrating the further strengthening of the group's financial position. The following table compares the working capital cycle at 31 December 2007 with the previous year: WORKING CAPITAL CYCLE 2007 2006 Days Days Inventory days 19 32 Debtors' days 79 75 Creditors' days 88 82 Working capital cycle 10 25 Following a relentless drive to improve the return on invested capital, the group reduced its working capital cycle by 15 days to 10 days, principally by reducing inventory days from 32 to 19 days. Horizon's revenue has become increasingly weighted towards the end of each quarter, which pushes up the absolute value of both debtors and creditors at the year-end date. Nevertheless, the debtor-credit imbalance has widened in the group's favour from 7 days to 9 days. Net finance cost, inclusive of the notional interest charge on property provisions, reduced from Euro1.5 million in 2006 to Euro1.4 million in 2007. In line with normal seasonal working capital patterns and as the Group's working capital was lowered over the course of the year, the group's finance cost was cut significantly, particularly in the final quarter of 2007. Horizon has significant financial capacity with unused credit facilities, in respect of which all conditions precedent had been met at 31 December 2007, of Euro35 million. Material items During 2007, the group's bad debt provision was increased by Euro831,000 to reflect exposure to a significant UK customer whose business went into administration. Horizon aims to minimise financial loss arising from credit risk by insuring debtors' balances where such insurance is available and the cost is not excessive when compared to the risks covered. Uninsured credit is only provided to customers who demonstrate an appropriate payment history, satisfy creditworthiness procedures and remain within specific credit limits. This customer met these criteria for a period of nearly six years before it went into administration. This is the first material bad debt that the group has incurred in the past seven years, reflecting the robust credit risk policies adopted by the group. Acquisitions and disposal During 2007, the group issued 788,647 new ordinary shares as deferred consideration in respect of the acquisition of WBT Systems Limited, paid Euro2,326,000 as the final payment for the acquisition of EquIP Limited and as the first earn-out for Enterprise Process Consulting Group Limited and received Euro2,232,000 as the final consideration for the sale of Clarity Computer (Distribution) Limited. Share premium reduction During the year, the group obtained shareholder and High Court approval to reduce its share premium account by Euro59,000,000, the amount necessary to eliminate historical losses and restore the profit and loss account to a nil position. This change makes it possible for the group to return capital to shareholders. Post balance sheet events There have been no significant events between the balance sheet date and the date of this announcement. CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2007 Total Total Year ended Year ended 31 Dec 2007 31 Dec 2006 Euro'000 Euro'000 REVENUE 288,213 257,895 Cost of sales (235,013) (214,853) ________ ________ GROSS PROFIT 53,200 43,042 Other income 985 895 Staff costs (30,599) (23,604) Other operating charges (12,935) (10,312) ________ ________ EBITDA 10,651 10,021 Depreciation (1,128) (801) Amortisation/reduction of intangible assets (1,274) (1,099) Integration costs - (410) LTIP - (165) Increase in bad debt provision (831) - ________ ________ OPERATING PROFIT FROM CONTINUING OPERATIONS 7,418 7,546 Finance costs (net) (1,390) (1,497) ________ ________ PROFIT FROM CONTINUING OPERATIONS BEFORE TAXATION 6,028 6,049 Income tax expense (136) (500) ________ ________ PROFIT FROM CONTINUING OPERATIONS 5,892 5,549 DISCONTINUED OPERATIONS Loss from discontinued operations (183) (1,493) ________ ________ PROFIT RETAINED FOR THE FINANCIAL YEAR (all attributable 5,709 4,056 to the equity holders of the parent) ________ ________ EARNINGS PER SHARE (cent): (all for profit attributable to the ordinary equity holders of the parent) Basic 7.20 5.23 Basic continuing 7.43 7.15 Basic continuing adjusted* 9.45 9.24 Diluted 7.16 5.18 Diluted continuing 7.39 7.09 Diluted continuing adjusted * 9.39 9.16 *Adjusted for unwinding of discount factor, amortisation/reduction of intangible assets and material items. CONSOLIDATED BALANCE SHEET at 31 December 2007 2007 2006 Euro'000 Euro'000 NON-CURRENT ASSETS Property, plant and equipment 3,474 2,637 Intangible assets 24,243 26,453 Deferred income tax assets 958 1,093 __________ __________ 28,675 30,183 __________ __________ CURRENT ASSETS Inventories 13,421 20,516 Trade and other receivables 73,529 64,135 Cash and cash equivalents 11,007 8,435 __________ __________ 97,957 93,086 __________ __________ TOTAL ASSETS 126,632 123,269 __________ __________ CURRENT LIABILITIES Trade and other payables 73,274 62,566 Income tax payables 1,189 1,899 Financial liabilities 6,095 13,999 Provisions 796 727 __________ __________ 81,354 79,191 __________ __________ NON-CURRENT LIABILITIES Trade and other payables 149 1,239 Financial liabilities 777 1,415 Deferred tax liabilities 1,827 1,692 Provisions 1,077 1,951 __________ __________ 3,830 6,297 __________ __________ TOTAL LIABILITIES 85,184 85,488 __________ __________ NET ASSETS 41,448 37,781 __________ __________ CAPITAL AND RESERVES Issued share capital 5,762 5,696 Share premium 19,755 79,021 Shares to be issued - 670 Other reserves (2,357) 121 Retained earnings/(losses) 33,565 (32,412) Cost of shares of the company held in an ESOP (15,277) (15,315) __________ __________ TOTAL EQUITY 41,448 37,781 __________ __________ CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2007 2007 2006 Euro'000 Euro'000 OPERATING ACTIVITIES Profit from continuing activities before tax 6,028 6,049 Finance costs (net) 1,390 1,497 __________ __________ Operating profit from continuing activities 7,418 7,546 Movement of provisions for liabilities (797) (894) Depreciation, amortisation/reduction of intangible assets 2,402 1,900 Share based payments expenses 374 567 Decrease/(increase) in working capital 4,799 (3,921) __________ __________ 14,196 5,198 Interest paid (1,303) (1,235) Interest element of finance lease payments (3) (7) Income tax paid (365) (862) Interest received 76 47 __________ __________ NET CASH INFLOW FROM CONTINUING OPERATING ACTIVITIES 12,601 3,141 Net cash outflow from discontinued operations (1) (3,497) __________ __________ NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 12,600 (356) __________ __________ INVESTING ACTIVITIES Payments to acquire property, plant and equipment-continuing (2,025) (1,042) operations Payments to acquire property, plant and equipment-discontinued - (53) operations Proceeds from disposal of property, plant and equipment 49 60 Payments to acquire intangible assets (97) (96) Purchase of subsidiary undertaking net of cash acquired (2,326) (12,537) Sale of subsidiary undertaking net of cash disposed 2,232 8,852 Refund of deposits pledged as security 109 108 __________ __________ NET CASH OUTFLOW FROM INVESTING ACTIVITIES (2,058) (4,708) __________ __________ FINANCING ACTIVITIES Issue of shares and exercise of share options 69 8,681 Expenses on issue of ordinary share capital and capital reduction (7) (406) Repurchase of share options - (839) Capital element of finance lease rental payments (37) (15) (Decrease)/increase in short term and long term borrowings (558) 1,928 _________ _________ NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES (533) 9,349 _________ _________ NET INCREASE IN CASH AND CASH EQUIVALENTS 10,009 4,285 Currency translation differences relating to cash and cash 501 (64) equivalents CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (5,170) (9,391) __________ __________ CASH AND CASH EQUIVALENTS AT END OF YEAR 5,340 (5,170) ___________ ___________ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2007 Shares Retained Cost of Share to be Share earnings/ Other shares capital issued premium (losses) reserves held by Total ESOP Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 At 1 January 2006 5,169 - 71,426 (36,280) (215) (15,468) 24,632 Changes in equity for 2006: Translation of overseas - - - - 336 - 336 subsidiaries (net) _____ _____ _____ _____ _____ _______ _____ Total expense recognised directly - - - - 336 - 336 in equity Profit for the year - - - 4,056 - - 4,056 _____ _____ _____ _____ _____ _______ _____ Total recognised income and - - - 4,056 336 - 4,392 expense for 2006 Shares to be issued for - 670 - - - - 670 acquisition Share issue 516 - 7,963 - - - 8,479 Expenses on issue of shares - - (406) - - - (406) Exercise of options 11 - 38 - - 153 202 Cash settlement of share options - - - (674) - - (674) Share based payment - - - 402 - - 402 Tax on share based payments taken - - - 84 - - 84 directly to reserves _____ _____ _____ _____ _____ _______ _____ At 1 January 2007 5,696 670 79,021 (32,412) 121 (15,315) 37,781 Changes in equity for 2007: Translation of overseas - - - - (2,478) - (2,478) subsidiaries (net) _____ _____ _____ _____ _____ _______ _____ Total expense recognised directly - - - - (2,478) - (2,478) in equity Profit for the year - - - 5,709 - - 5,709 _____ _____ _____ _____ _____ _______ _____ Total recognised income and - - - 5,709 (2,478) - 3,231 expense for 2007 Shares to be issued for - (670) - - - - (670) acquisitions Share Issue 55 - 615 - - - 670 Expenses on issue of shares - - (7) - - - (7) Exercise of options 11 - 20 - - 38 69 Capital reduction - - (59,894) 59,894 - - - Share based payment - - - 374 - - 374 _____ _____ _____ _____ _____ _______ _____ At 31 December 2007 5,762 - 19,755 33,565 (2,357) (15,277) 41,448 _____ _____ _____ _____ _____ _______ _____ 2007 2006 Euro'000 Euro'000 Cost of shares of the company held in an ESOP Share capital (212) (216) Share premium (15,065) (15,099) _______ _____ (15,277) (15,315) _______ _____ SUPPLEMENTARY INFORMATION 1. SEGMENT INFORMATION The group's primary segment reporting format is geographical as the group's risks and rates of return are affected predominantly by the geographical areas in which it operates. Secondary segment information is reported by business segment. The operating businesses are organised and managed separately according to the two geographical areas within which the group's assets are located - the United Kingdom and Ireland. The group's two business segments are its Enterprise Infrastructure and Services (EIS) operation and its Enterprise Applications and Services (EAS) business. EIS focuses on the provision of enterprise infrastructure and services and assists customers, usually via a system integrator, in implementing IT strategies, while EAS operates in the enterprise solutions market and assists customers in implementing IT strategies through the provision of IT infrastructure, applications software development, implementation consulting and support services. Transfer prices between business segments are on an arm's length basis in a manner similar to transactions with third parties. Year ended 31 December 2007 Continuing Operations Discontinued Total Operations Operations Ireland UK Unallocated/ Total Ireland Other Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Revenue Sales to external 52,721 235,492 - 288,213 - 288,213 customers Inter-segment sales 293 993 (1,286) - - - __________ __________ __________ __________ __________ __________ Segment revenue 53,014 236,485 (1,286) 288,213 - 288,213 __________ __________ __________ __________ __________ __________ Result EBITDA 6,781 5,905 (2,035) 10,651 - 10,651 Depreciation (228) (779) (121) (1,128) - (1,128) Amortisation/reduction (480) (751) (43) (1,274) - (1,274) of intangible assets Material items - (831) - (831) - (831) __________ __________ __________ __________ __________ __________ Segment result 6,073 3,544 (2,199) 7,418 - 7,418 __________ __________ __________ Net finance costs (1,390) - (1,390) Loss on disposal - (183) (183) __________ __________ __________ Profit before tax 6,028 (183) 5,845 Income tax expense (136) - (136) __________ __________ __________ Profit after tax 5,892 (183) 5,709 __________ __________ __________ Continuing Operations Discontinued Total Operations Operations Unallocated/ Ireland UK Other Total Ireland Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Assets and liabilities Segment assets 20,055 103,963 2,614 126,632 - 126,632 Segment liabilities 16,977 66,310 1,897 85,184 - 85,184 Other segment information Capital expenditure Property, plant and 170 1,847 8 2,025 - 2,025 equipment Intangible assets - 107 51 158 - 158 Year ended 31 December 2006 Continuing Operations Discontinued Total Operations Operations Ireland UK Unallocated/ Total Ireland Other Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Revenue Sales to external 59,633 198,262 - 257,895 84,748 342,643 customers Inter-segment sales 341 133 (474) - - - __________ __________ __________ __________ __________ __________ Segment revenue 59,974 198,395 (474) 257,895 84,748 342,643 __________ __________ __________ __________ __________ __________ Result EBITDA 6,283 5,481 (1,743) 10,021 521 10,542 Depreciation (200) (489) (112) (801) (105) (906) Amortisation/reduction (252) (743) (104) (1,099) (51) (1,150) of intangible assets Material items - (410) (165) (575) - (575) __________ __________ __________ __________ __________ __________ Segment result 5,831 3,839 (2,124) 7,546 365 7,911 __________ __________ __________ Net finance costs (1,497) (676) (2,173) Loss on disposal - (1,268) (1,268) __________ __________ __________ Profit before tax 6,049 (1,579) 4,470 Income tax expense (500) 86 (414) __________ __________ __________ Profit after tax 5,549 (1,493) 4,056 __________ __________ __________ Continuing Operations Discontinued Total Operations Operations Unallocated/ Ireland UK Other Total Ireland Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Assets and liabilities Segment assets 28,205 89,962 5,102 123,269 - 123,269 Segment liabilities 22,845 59,557 3,086 85,488 - 85,488 Other segment information Capital expenditure Property, plant and 243 1,035 6 1,284 53 1,337 equipment Intangible assets 3,112 13,972 16 17,100 32 17,132 Business segments The following tables present revenue, expenditure and certain asset information regarding the group's business segments for the years ended 31 December 2007 and 2006. Year ended 31 December 2007 Continuing Operations Discontinued Total Operations Operations EIS EAS Unallocated/ Total Distribution Other Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Revenue Sales to external 266,021 22,192 - 288,213 - 288,213 customers Inter-segment sales 1,008 278 (1,286) - - - __________ __________ __________ __________ __________ __________ Segment revenue 267,029 22,470 (1,286) 288,213 - 288,213 __________ __________ __________ __________ __________ __________ Other segment information Segment assets 110,552 13,467 2,613 126,632 - 126,632 Capital expenditure Property, plant and 1,853 164 8 2,025 - 2,025 equipment Intangible assets 107 - 51 158 - 158 Year ended 31 December 2006 Continuing Operations Discontinued Total Operations Operations EIS EAS Unallocated/ Total Distribution Other Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Revenue Sales to external 237,309 20,586 - 257,895 84,748 342,643 customers Inter-segment sales 185 289 (474) - - - __________ __________ __________ __________ __________ __________ Segment revenue 237,494 20,875 (474) 257,895 84,748 342,643 __________ __________ __________ __________ __________ __________ Other segment information Segment assets 101,531 16,636 5,102 123,269 - 123,269 Capital expenditure Property, plant and 1,078 200 6 1,284 53 1,337 equipment Intangible assets 13,976 3,108 16 17,100 32 17,132 2. EARNINGS PER ORDINARY SHARE 2007 2006 The computation of basic and diluted earnings Euro'000 Euro'000 per share is set out below: Numerator Profit after tax 5,709 4,056 Discontinued operations net of tax 183 1,493 __________ __________ Profit from continuing activities 5,892 5,549 Material items (net of tax) 582 431 Unwinding of discount factor 160 302 Amortisation of intangibles 855 884 __________ __________ Profit after tax adjusted * 7,489 7,166 __________ __________ Denominator Weighted average number of shares in issue for the year 79,251 77,591 ('000)(1) (2) Dilutive potential ordinary shares: Employee share options ('000) 513 667 __________ __________ Diluted weighted average number of ordinary shares (' 79,764 78,258 000) (2) (3) __________ __________ Earnings per share Basic (cent) 7.20 5.23 Basic continuing (cent) 7.43 7.15 Basic continuing adjusted (cent)* 9.45 9.24 Diluted (cent) 7.16 5.18 Diluted continuing 7.39 7.09 Diluted continuing adjusted (cent)* 9.39 9.16 Earnings per share Basic Discontinued (cent) (0.23) (1.92) Diluted Discontinued (cent) (0.23) (1.92) *Adjusted for unwinding of discount factor, amortisation/ reduction of intangible assets and material items. (1) Weighted average number of ordinary shares for 2006 includes shares to be issued after the year end. (2) Own shares held in an ESOP are deducted when computing basic, diluted and adjusted EPS. (3) 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, namely share options. 3. BASIS OF PREPARATION The financial information presented in this report has been prepared in accordance with the group's accounting policies under International Financial Reporting Standards (IFRS). The group's accounting policies under IFRS are based on the International Financial Reporting Standards and Interpretations issued by the International Accounting Standards Board (IASB) and on International Accounting Standards (IAS) and Standing Interpretations approved by the predecessor International Accounting Standards Committee that have been subsequently authorised by the IASB and remain in effect. The accounting policies adopted are consistent with those of the previous financial year except in relation to the adoption of new and amended IFRS and IFRIC interpretations during the year. Adoption of these revised standards and interpretations did not have any effect on the financial performance or position of the group in the current or prior periods. 4. STATUTORY ACCOUNTS AND BOARD APPROVAL The board of directors approved the preliminary announcement for the year to 31 December 2007 on 11 March 2008. The financial information set out above does not constitute statutory accounts for the year ending 31 December 2007 or year ending 31 December 2006. The full accounts for the year ended 31 December 2006 prepared in accordance with International Financial Reporting Standards (IFRS), and containing an unqualified audit report, have been filed with the Irish Companies Registration Office. The statutory accounts for 2007 will be finalised on the basis of the financial information presented by the directors in the preliminary announcement, and together with the auditors report thereon, will be delivered to the Registrar of Companies following the company's Annual General Meeting. This information is provided by RNS The company news service from the London Stock Exchange END FR MGGMFRZNGRZM
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