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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Intechnology | LSE:ITO | London | Ordinary Share | GB0001388932 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 24.00 | 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:3408N InTechnology PLC 09 June 2005 9th June 2005 InTechnology plc Preliminary results for the year ended 31 March 2005 InTechnology plc ("InTechnology" or "the Company"), Europe's leading provider of data storage, security and network solutions and managed services, announces final results for the year ended 31 March 2005. Despite tough trading conditions in the IT market, InTechnology is reporting strong sales growth in all areas of its Specialist Distribution business and a breakthrough into monthly operating profit (before amortisation of goodwill) for its Managed Services Division. Financial highlights * Total turnover increased 28% to #283.5m (2004 restated*: #221.9m) - Specialist Distribution turnover up 26% to #261.4m (2004 restated: #207.4m) - Managed Services turnover up 52% to #22.1m (2004: #14.5m) * Gross profit increased 31% to #52.9m (2004 restated: #40.5m) * EBITA increased to #4.4m (2004 restated: #1.4m) * Group operating loss reduced to #0.3m (2004 restated: #3.0m) * Cash at bank and in hand of #10.5m (2004: #16.4m) and net debt increased to #22.2m (2004: #10.4m) to fund growth in of working capital, particularly in Continental Europe Operational highlights * Specialist Distribution division: - All areas enjoyed good revenue growth, despite difficult trading conditions - Particularly strong performance in Security solutions - Continental Europe sales up 73% - Network products division started during the year * Managed Services division: - Monthly operating profit (before amortisation of goodwill) achieved in the second half year - New long term contracts signed with Jarvis Rail plc, Balfour Beatty, T-Mobile, Wanadoo and London Business School - 60% of customers now taking two or more services (of the 10 managed services now offered by InTechnology) - Partnership signed with IBM to sell VBAK service through IBM's UK sales network * See Note 3 and interim results Commenting on the results, Peter Wilkinson, CEO of InTechnology said: "We are pleased with the progress made by the Group this year, characterised in particular by significant revenue growth across our Specialist Distribution business and, latterly, by reaching monthly operating profit (before amortisation of goodwill) in our Managed Services division. "We are optimistic about prospects for our business in the year ahead. We are confident that sales volumes can increase to counter the pressures on gross margin within our Specialist Distribution division. The strong performance of these established businesses, together with increased recurring revenue streams and exciting initiatives in our Managed Services division, give me confidence in our prospects for future growth and profitability." For further information: InTechnology plc 020 7786 3400 Peter Wilkinson / Andrew Kaberry Financial Dynamics 020 7831 3113 Giles Sanderson / James Melville-Ross / Juliet Clarke Note to editors: InTechnology plc is a 22-year old AIM listed public company, employing 500 people in France, Germany, Italy, Netherlands, Portugal, Spain, Switzerland and headquartered in the UK. InTechnology provides IT infrastructure solutions, products and services to business, through a network of value-added resellers, systems integrators and consultants. The company's offering unifies all areas of IT infrastructure to help organisations: * Store data in the face of 100% year-on-year growth in data volumes * Manage data for optimum business efficiency and reduced operational cost * Protect data against ever increasing threats from malicious attack to data loss * Network data to maximise network computing opportunities * Liberate corporate data to maximise its value for the organisation More details about InTechnology (LSE, AIM: ITO) are available at www.intechnology.co.uk Chairman's Statement In the year ended 31 March 2005 InTechnology has made clear and sustained progress across all parts of the group. Most significantly we reduced operating losses (before amortisation of goodwill) within our Managed Services division to #2.0m (2004: #7.8m) achieving the breakthrough into monthly operating profit (before amortisation of goodwill) during the second half of the financial year. Managed Services division operating losses were reduced to #4.3m (2004: #10.0m). Revenues in the Specialist Distribution division increased by 26% to #261.4m (2004 restated: #207.4m). Through investment in recent years, InTechnology has developed a range of managed services which allow organisations to free up valuable management time by outsourcing specific areas of IT infrastructure. This division now has a portfolio of 10 services, from data backup and IP telephony to hosting and other network services, and is a fundamental part of our long-term competitive strategy. Despite difficult trading conditions in the IT market, our distribution business has enjoyed revenue growth in each of its geographic territories. Distribution agreements with new vendors and extensions to existing contracts have contributed to this growth, with particularly excellent results coming from sales of security solutions in the UK and Continental Europe. In the final quarter of the year we began the distribution of network products, thus providing a natural link between storage and security and completing our IT infrastructure offering. InTechnology's corporate objectives remain consistent and clear - to offer a complete range of products, solutions and services to meet the IT challenges organisations face in today's network-based computing environment. We also remain committed to selling through the IT channel of resellers, consultants and systems integrators. Our strategy is serving us well and has put the business in a strong position to meet the challenges of the IT market in the year ahead. Finally, the energy, technical ability and enthusiasm of our people never fails to impress me and I would like to thank all our staff, as well as our vendor and reseller partners, for their contributions to InTechnology in the last year. Lord Parkinson Chairman 9 June 2005 Chief Executive's Review Overview We are very pleased with the progress made by the Group this year, characterised in particular by significant revenue growth across our Specialist Distribution business and, latterly, by reaching monthly operating profit (before amortisation of goodwill) in our Managed Services division. In a challenging trading environment, we have seen our operating profit (before amortisation of goodwill) increase to #4.4m (2004 restated: #1.4m). Group operating loss was reduced to #0.3m (2004 restated: #3.0m). We have aggressive plans for future revenue growth and increased profitability and we have already restructured our sales team, brought on board new vendors and, with the intellectual property in the business, developed our own service technologies to support this objective. We are confident that our strategy remains sound and that we are on track to meet our expectations of sustainable profitability. Managed Services Our managed services portfolio allows organisations to outsource specific areas of IT infrastructure to free up valuable staff resource, improve service levels, reduce operational cost and deliver the flexibility to scale the service according to business requirements. The Managed Services division has required significant investment in the five years since commencement, culminating this year in an increase in sales revenue of 52% to #22.1m (2004: #14.5m). In addition, the division has moved into monthly operating profit (before amortisation of goodwill) in the second half of the year. This positive contribution is a key factor in the significant reduction in Group operating loss this year. During the year we have seen many new long-term contracts from blue-chip and public sector organisations including Jarvis Rail plc, Balfour Beatty, T-Mobile, Wanadoo and London Business School. This new business, together with our existing customer base, means we have grown our annualised recurring revenue stream to #23.2m (2004: #18.0m). We are also delighted that 60% (2004: 58%) of our customers take 2 or more of our range of ten managed services (2004: six). We expect to build on this trend with new services launched during the last year and further services to be launched in the new fiscal year. These include: * IP Voice Connect(TM): an IP telephony service for business * A new version of our successful VBAK(R) data backup and recovery service aimed at the SME market * Information Lifecycle Management ("ILM") pay-as-you-go service Another major development is an exciting partnership with IBM Business Continuity & Recovery Services, which will see our VBAK(R) service sold to IBM customers through their UK sales network. We are already an IBM Premier Business Partner for hardware and software distribution and I expect this extension of our long-standing relationship to make a major contribution to sales revenue next year. Specialist Distribution Despite a difficult trading environment throughout the IT market, in particular pressure on margins from vendors and customers, our Specialist Distribution division has increased sales by: * 16% in the UK * 73% in Continental Europe Gross margins have, however, been squeezed as pressures from vendors and customers have intensified. We have seen much success this year in the Distribution market, including: * A strong performance in sales of Network Appliance solutions in the year - we expect to see the growth continue * Becoming Europe's leading distributor of CheckPoint * Extending our storage agreement with Sun Microsystems to Channel Development Partner for the entire product range including storage, enterprise servers and mobile computing * Becoming recognised as one of the leading distributors for Nokia secure mobile connectivity solutions in Europe, the Middle East and Africa ('EMEA') Following our acquisition of the specialist security distributor Allasso on 31 July 2003, we have now completed the integration of all its operations across Continental Europe, maximising the efficiency of the business with centralised logistics, consistent processes and a single management information system. These internal changes are combined with a focus on developing customer relationships on a pan-European basis with large resellers. We are particularly pleased that our security expertise was recognised by Microsoft in Q4 when they chose InTechnology to help them move into the European IT security market. In a new partnership agreement with Microsoft and Network Engines, we will be distributing Microsoft ISA server software on the Network Engines platform in a 12-month exclusive agreement throughout the UK and Continental Europe. Also, with corporate networks struggling to cope with exponential increases in network traffic, we began distribution of network solutions in H1 to exploit this expanding market. Our experience in running our own national ethernet network in the UK ('LANnet') means we can leverage our existing skills to deliver data networking, WAN/LAN, VPN, ethernet switching and wireless networks. To date, we have signed distribution agreements to sell Nortel and Juniper network products across the UK and Continental Europe. Finally, in June 2004, we acquired the trade and assets of NetConnect Training from NetConnect Limited for cash consideration of #900,000 and contingent consideration to a maximum of #100,000. The business is fully integrated into the Group and operates under the InTechnology name. As a result, we are the UK's leading provider of authorised storage, security and internet training, and the world's largest CheckPoint, Nokia and Clearswift authorised training providers. Trading and operating performance We achieved encouraging revenue growth across all divisions, with Group turnover increasing to #283.5m this year (2004 restated: #221.9m) * #198.2m (2004 restated: #170.8m) for the UK specialist distribution division * #63.2m (2004: #36.6m) for the Continental Europe specialist distribution division * #22.1m (2004: #14.5m) for Managed Services division However, against a background of gross margin erosion across the industry, our UK storage margins fell by 0.9% and security solutions margins by 2.4% year-on-year. In the European market, we experienced a 2.5% drop in margins but nonetheless won increased market share. The Group had a net cash outflow from operating activities of #2.0m (2004: #3.5m inflow). This was largely as a result of an increase in working capital requirements as we grew turnover in our European subsidiaries and funded unusually high stock levels with a major storage vendor. Cash at bank and in hand at the year-end was #10.4m (2003: #16.4m). However, funding of working capital to support European growth together with continuing capital expenditure in our Managed Services division contributed to an increase in net debt to #22.2m (2004: #10.4m). Meeting customer expectations In the first half of the year, we carried out a full review of our customers' requirements and have now implemented changes to our organisational structure in order to meet these needs and maximise our sales opportunities. Customer sales focus on the following: * Developing the resellers' market opportunities from the full InTechnology range of products, solutions and services. * Maximising margins by reducing the cost of sale * Accelerating the speed at which the sale is closed by the reseller In support of customer sales, we have Vendor teams to maintain our speciality and expertise around our core competencies in Storage, Data Management, Security and Networks. A sea change in the marketplace We are experiencing a sea change in the IT sales channel in relation to the market for services; traditional reseller business models which relied solely on sales of hardware to established end user customers, are no longer sustainable. End users increasingly want to outsource parts of their IT infrastructure to save cost and enable them to focus on their own core IT objectives. As a result, we are experiencing strong interest from major channel reseller partners in our managed services portfolio and see this as further confirmation that our strategy is sound. Outlook We are optimistic about prospects for our business in the year ahead. We are confident that sales volumes can increase to counter the pressures on gross margin within our Specialist Distribution division. The strong performance of these established businesses, together with increased recurring revenue streams and exciting initiatives in our Managed Services division, give me confidence in our prospects for future growth and profitability. Peter Wilkinson Chief Executive Officer 9 June 2005 Consolidated profit & loss account For the year ended 31 March 2005 2005 2004 (Unaudited) (Audited) (Restated) Note #'000 #'000 Turnover Continuing operations 282,262 221,868 Acquisition 1,260 - 2, 3 283,522 221,868 Cost of sales (230,579) (181,331) Gross profit 3 52,943 40,537 Net operating expenses before depreciation and amortisation of goodwill (42,204) (33,524) Depreciation (6,388) (5,640) Amortisation of goodwill (4,635) (4,403) Net operating expenses (53,227) (43,567) Group operating (loss)/profit Continuing operations (551) (3,030) Acquisition 267 - Group operating loss 2 (284) (3,030) Net interest payable (2,181) (1,050) Loss on ordinary activities before taxation (2,465) (4,080) Tax on loss on ordinary activities 3, 4 (110) (809) Loss sustained for the financial year 3 (2,575) (4,889) EBITA 4,351 1,373 Loss per share (pence) Basic and diluted 5 (1.84) (3.54) Adjusted earnings/(loss) per share (pence) Basic and diluted 5 1.48 (0.35) EBITA comprises earnings before interest, taxation, and amortisation of goodwill. There is no difference between the loss on ordinary activities before taxation and the loss sustained for the financial year and their historical cost equivalents. Consolidated statement of total recognised gains and losses for the year ended 31 March 2005 2005 2004 (Unaudited) (Audited) (Restated) Note #'000 #'000 Loss sustained for the financial year (2,575) (4,889) Unrealised gain on revaluation of land & buildings 1,754 - Exchange gain/(loss) on translation of overseas subsidiaries 172 (301) Exchange (loss)/gain on translation of hedging loan (172) 301 Total recognised gains and losses relating to the year (821) (4,889) Prior year adjustment 3 (753) - Total recognised gains and losses since last annual report (1,574) (4,889) Consolidated balance sheet As at 31 March 2005 2005 2004 (Unaudited) (Audited) (Restated) Note #'000 #'000 Fixed assets Intangible assets 74,813 76,910 Tangible assets 14,773 13,443 89,586 90,353 Current assets Stocks 13,179 10,811 Debtors - amounts falling due within one year 105,399 91,265 Cash at bank and in hand 10,488 16,379 129,066 118,455 Creditors - amounts falling due within one year (118,174) (98,395) Net current assets 10,892 20,060 Total assets less current liabilities 100,478 110,413 Creditors - amounts falling due after more than one year (9,001) (18,246) Provisions for liabilities and charges - (144) Net assets 2 91,477 92,023 Capital and reserves Called up share capital - equity 1,411 1,384 - non-equity 480 480 Share premium account 188,668 188,420 Revaluation reserve 1,754 - Profit and loss account (100,836) (98,261) Shareholders' funds (including non-equity interests) 91,477 92,023 Consolidated cash flow statement for the year ended 31 March 2005 2005 2004 (Unaudited) (Audited) Note #'000 #'000 Net cash (outflow)/inflow from operating activities 6 (2,000) 3,485 Returns on investments and servicing of finance Interest received 160 324 Interest element of finance lease payments (282) (220) Interest paid (2,033) (1,104) Debt issue costs - (300) Net cash outflow from returns on investments and servicing of finance (2,155) (1,300) Taxation paid (1,135) (1,305) Capital expenditure and financial investment Purchase of tangible fixed assets (6,106) (4,010) Sale of tangible fixed assets 1,542 349 Net cash outflow from capital expenditure and financial investment (4,564) (3,661) Acquisitions Purchase of subsidiary undertakings (including costs) (980) (18,578) Net cash at bank acquired with purchase of subsidiary undertakings - 2,731 Net cash outflow for acquisitions (980) (15,847) Net cash outflow before financing (10,834) (18,628) Financing Issue of ordinary share capital 275 32 Net increase in borrowings 6,615 18,090 Capital element of finance lease payments (1,991) (1,173) Net cash inflow from financing 4,899 16,949 Decrease in cash in the year 7 (5,935) (1,679) Notes to the Preliminary Announcement For the year ended 31 March 2005 1 Basis of preparation The financial information included in this Preliminary Announcement does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The financial information has been prepared on the basis of accounting policies consistent with those set out in the statutory Annual Report and Accounts for the year ended 31 March 2004, other than as described in note 3, which have been filed with the Registrar of Companies and on which the auditors gave an unqualified opinion. The Annual Report and Accounts for the year ended 31 March 2005, on which the auditors have still to report, will be delivered to the Registrar of Companies and will be posted to shareholders on 6 July 2005. Further copies are available on request from the registered office of the Company at Nidderdale House, Beckwith Knowle, Otley Road, Harrogate, HG3 1SA. 2 Segmental information Turnover Turnover Operating (loss)/profit by by by destination source source 2005 2004 2005 2004 2005 2004 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Restated) (Restated) (Restated) #'000 #'000 #'000 #'000 #'000 #'000 Geographical analysis United Kingdom 217,761 184,093 220,339 185,294 (403) (3,787) Continental Europe 64,970 37,174 63,183 36,574 119 757 North America 207 293 - - - - Africa 68 176 - - - - Rest of the World 516 132 - - - - Total 283,522 221,868 283,522 221,868 (284) (3,030) Turnover Operating profit/(loss) Before goodwill After goodwill amortisation amortisation 2005 2004 2005 2004 2005 2004 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Restated) (Restated) (Restated) #'000 #'000 #'000 #'000 #'000 #'000 Business analysis Specialist Distribution 261,449 207,374 6,321 9,131 3,967 7,015 Managed Services 22,073 14,494 (1,970) (7,758) (4,251) (10,045) Total 283,522 221,868 4,351 1,373 (284) (3,030) Net assets Including Excluding goodwill goodwill 2005 2004 2005 2004 (Unaudited) (Audited) (Unaudited) (Audited) (Restated) (Restated) #'000 #'000 #'000 #'000 Geographical analysis United Kingdom 78,586 79,797 9,031 7,752 Continental Europe 12,891 12,226 7,633 7,361 Group Total 91,477 92,023 16,664 15,113 Business analysis Specialist Distribution 55,926 38,479 16,067 (1,196) Managed Services 25,063 37,165 (9,891) (70) 80,989 75,644 6,176 (1,266) Cash 10,488 16,379 10,488 16,379 Group Total 91,477 92,023 16,664 15,113 The acquisition of the trade and assets of NetConnect Training (included in the above tables) contributed #1,260,000 of turnover, #305,000 of operating profit before goodwill amortisation and #267,000 of operating profit after goodwill amortisation to the Specialist Distribution division in the period following completion of the acquisition on 18 June 2004. The net operating cash inflows have not been disclosed since they were not significant. The segmental analysis above excludes net interest payable of #2,181,000 (2004: #1,050,000) which is not analysed by business segment. 3 Prior year adjustment During the year, the Group has completed a comprehensive review of its accounting policy for revenue recognition in light of the guidance provided by Application Note G, an amendment to FRS 5. The review identified instances where sales of equipment have been recognised before the Group has fulfilled all of its contractual obligations to the customer. As a result, the Group has amended its procedures such that it now only recognises revenue on the sale of equipment when the goods are received by the customer and when there are no unfulfilled obligations that affect the customer's final acceptance of the equipment. Previously, revenue was recognised on shipment of equipment to the customer. The cumulative effect of the changes relating to previous years has been recognised in the results as a prior year adjustment and comparative figures have been restated in accordance with the revised accounting policy. The effects of the changes on turnover, cost of sales, gross margin and the tax charge for the year ended 31 March 2004 are summarised as follows: Turnover Cost of sales Gross margin Tax #'000 charge #'000 #'000 #'000 Year ended 31 March 2004 As previously stated 223,509 (182,706) 40,803 (889) Restated 221,868 (181,331) 40,537 (809) The net effect of the change in policy in the year ended 31 March 2004 is to reduce turnover by #1,641,000, reduce gross margin by #266,000, reduce the tax charged on loss on ordinary activities by #80,000 and increase the loss sustained for the financial year by #186,000. The net effect of the change in policy in the year ended 31 March 2005 is to increase turnover by #3,823,000, increase gross margin by #535,000, increase the tax charged on loss on ordinary activities by #160,700 and reduce the loss sustained for the financial year by #374,300. The cumulative effect of implementing the revised policy is to reduce Group reserves at 31 March 2004 by #753,000, summarised as follows: Trade Trade creditors - amounts Net assets debtors falling due within 1 year #'000 #'000 #'000 Year ended 31 March 2004 As previously stated 83,273 (89,650) 92,776 Restated 90,942 (98,072) 92,023 4 Tax on profit on ordinary activities 2005 2004 (Unaudited) (Audited) (Restated) #'000 #'000 Tax charge comprises: United Kingdom corporation tax at 30% (2004: 30%) Current (952) (632) Prior year adjustment (note 3) - 80 Over provision in respect of prior years 265 198 UK current tax (687) (354) Overseas current tax (337) (430) Overseas over provision in respect of prior years 19 - Total current tax (1,005) (784) Deferred tax current year 256 (25) Deferred tax in respect of prior years 639 - (110) (809) The tax charge is higher (2004: higher) than the standard rate of corporation tax in the UK. The differences are explained as follows: 2005 2004 (Unaudited) (Audited) (Restated) #'000 #'000 Loss on ordinary activities before taxation (2,465) (4,080) At standard rate of corporation tax of 30% (2004: 30%) (740) (1,224) Effects of: Amortisation of goodwill 1,391 1,321 Expenses not deductible for tax purposes 171 366 Adjustment to tax charge in respect of previous periods (284) (198) Capital allowances for year lower than depreciation 255 161 Overseas tax rates/losses not used 100 251 Other timing differences 112 107 1,005 784 At 31 March 2005, the Company had accumulated tax losses of #2,973,000 (2004: #2,973,000) which are available for offset against future trading profits of certain Group operations, subject to agreement with the relevant tax authorities. 5 Loss per share Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of #2,575,000 (2004 restated: #4,889,000) by the weighted average number of ordinary shares in issue during the year of 139,575,879 (2004: 138,245,916). The adjusted basic loss per share has been calculated to provide a better understanding of the underlying performance of the Group as follows: 2005 2004 (Unaudited) (Audited) (Restated) Basic and diluted Basic and diluted (Loss)/ (Loss)/ (Loss)/ (Loss)/ earnings earnings earnings earnings per share per share #'000 pence #'000 pence Loss attributable to ordinary (2,575) (1.84) (4,889) (3.54) shareholders Amortisation of goodwill 4,635 3.32 4,403 3.19 Adjusted basic earnings/(loss) per 2,060 1.48 (486) (0.35) share The loss attributable to ordinary shareholders and the weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share. This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of FRS 14 "Earnings per share". 6 Reconciliation of operating (loss)/profit to net cash (outflow)/inflow from operating activities 2005 2004 (Unaudited) (Audited) Continuing Acquisition Total (Restated) #'000 #'000 #'000 #'000 Operating (loss)/profit (551) 267 (284) (3,030) Depreciation of tangible fixed assets 6,388 - 6,388 5,640 Goodwill amortisation 4,597 38 4,635 4,403 Profit on disposal of tangible fixed assets (262) - (262) (87) Exchange movements 14 - 14 (14) Increase in stocks (2,609) - (2,609) (46) Increase in debtors (12,829) (72) (12,901) (18,999) Increase/(decrease) in creditors and provisions 3,093 (74) 3,019 15,618 Net cash (outflow)/inflow from operating (2,159) 159 (2,000) 3,485 activities 7 Analysis of net debt At 1 April Cashflow Exchange Other At 31 March 2004 movements non-cash 2005 (Audited) changes (Unaudited) #'000 #'000 #'000 #'000 #'000 Cash at bank and in hand 16,379 (5,935) 44 - 10,488 Finance leases (3,465) 1,991 - (1,070) (2,544) Debt due after more than one year (15,679) 7,738 (27) - (7,968) Debt due within one year (7,640) (14,353) (108) (75) (22,176) Net debt (10,405) (10,559) (91) (1,145) (22,200) This information is provided by RNS The company news service from the London Stock Exchange END FR EANKPEAPSEFE
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