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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:2421E InTechnology PLC 08 June 2006 8th June 2006 InTechnology plc Preliminary results for the year ended 31 March 2006 InTechnology plc ("InTechnology" or "the Company") the UK's leading provider of data storage, security and network solutions and managed services, announces its unaudited final results for the year ended 31 March 2006. Operational performance * UK Specialist Distribution division: o Strong operating profit recovery in H2, following reorganisation programme * Managed Services division: o Increased turnover and first full year operating profit before amortisation of goodwill and exceptional items o Creation of new Managed Voice Services business to concentrate on voice IP and related network services * Continental European distribution business o Disposal on 31 March 2006 o Cash inflow during the financial year resulting from the sale will eliminate much of the Group's debt Financial performance * Total turnover from continuing operations declined to #215.0m (2005: #220.3m) * Operating profit from continuing operations before amortisation of goodwill and exceptional items increased to #6.0m (2005: #4.0m) * H2 operating profit from continuing operations before amortisation of goodwill and exceptional charges increased to #4.8m from #1.2m in H1 * Operating loss from continuing operations for the year of #0.9m (2005: #0.4m) due to exceptional costs of #2.4m incurred to reduce operating cost base * The pre-tax loss from discontinued European operations accounted for #9.0m (2005: #0.2m profit) of the Group loss of #12.1m (2005: #2.5m loss) * Cash balances at the year end increased to #12.7m (2005: #10.5m) and net debt reduced to #19.5m (2005: #22.2m) For further information: InTechnology plc 01423 877 442/3 Peter Wilkinson / Andrew Kaberry Financial Dynamics 020 7831 3113 James Melville-Ross / Juliet Clarke Note to editors: InTechnology plc is a 23-year old AIM listed public Company, employing 360 people 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 The past year has seen some important changes for InTechnology and I am pleased that the Company has ended the year in a strong position for sustained growth and profitability in the future. The reorganisation programme which we initiated in the first half of the year enabled us to achieve operating profit before amortisation of goodwill and exceptional items in our continuing operations of #6.0m (2005: #4.0m) despite a fall in turnover to #215.0m (2005: #220.3m). Total Group turnover was #284.7m (2005: #283.5m) and the operating loss for the Group after the restructuring was #6.2m (2005: #0.3m loss). Our Managed Services Division has shown robust performance with an increase in sales to #25.3m (2005: #22.1m), operating profit before amortisation of goodwill and exceptional items of #1.8m (2005: #2.0m loss), and an expanding range of services. The operating loss for the Division was #1.5m (2005: #4.3m). In order to build on the rapidly-growing market in IP telephony, we have set up a new team to increase sales focus in this area. Other parts of the Division have been re-organised for maximum effectiveness and customer satisfaction. Organisations of all sizes subscribe to these services in order to achieve efficiency gains and mitigate risk in the management of the IT infrastructure which underpins their operations. Pressure on margins in our UK Specialist Distribution Division has been severe and we therefore implemented a cost control programme in the first half of the year. In the second half of the year we achieved operating profit growth compared with the first half of the year, which we plan to build on in the year ahead. Our European Specialist Distribution business delivered disappointing results throughout the year and on 31 March 2006 it was sold to Magirus International GmbH. This will allow us to focus management effort in the UK. The clear objectives for the coming year are to continue to grow our Managed Services business and to focus on key areas of profitability in our UK Specialist Distribution business. I would like to thank the staff whose loyalty, energy and professional skills have kept pace with the many developments in the Company in the past year and also our partners in all areas of the business. I look forward to an exciting and successful year ahead. Lord Parkinson Chairman 8 June 2006 Chief Executive's Review Overview At the time of our interim results last year we reported that significant efforts would be taken in the second half of the year to focus on the parts of the business that are performing well and to take action to correct those parts of the business where we saw continued margin pressure. These efforts were focused on three areas: 1. To increase the trading profitability of our Managed Services division and to seek new opportunities for growth 2. To improve profitability in our UK Specialist Distribution business 3. To review the strategic options available to us with our European Specialist Distribution business I am pleased to report that we achieved encouraging results in all three areas, resulting in a strong recovery in our continuing operations in the second half of the year, which reported operating profits before amortisation of goodwill and exceptional charges of #4.8m (first half year of the year: #1.2m). Full year operating loss from continuing operations was #0.9m (2005: #0.4m loss) largely as a result of exceptional costs of #2.4m (2005: #nil) incurred to reduce our operating cost base. Managed Services' revenues grew 14 per cent to #25.3m (2005: #22.1m) and we have recently embarked on a number of exciting new initiatives in this division. UK Specialist Distribution revenues declined 4 per cent to #189.6m (2005: #198.3m) but the second half year's performance was encouraging, helped by cost cutting and revenue growth. The European Distribution companies were sold on 31 March 2006 after growing revenues but incurring operating losses as margin pressures intensified. The resulting cash inflow from the sale in the new fiscal year will substantially reduce Group debt. The pre-tax loss from discontinued European operations accounted for #9.0m (2005: #0.2m profit) of the Group pre-tax loss of #12.1m (2005: #2.5m loss). We exited the year in good shape, the reward for spending a considerable amount of management time on eliminating losses and driving greater efficiencies. We have established a platform of profitability and we look forward to devoting all our management effort to achieving our plans for future revenue growth and increased profitability. Managed Services We were very pleased this year with the continued growth and regular quarterly operating profit before amortisation of goodwill and exceptional items of the Managed Services Division, a goal which we have been targeting for a number of years. Operating profit before amortisation of goodwill and exceptional charges was #1.8m (2005: #2.0m loss). Operating loss was #1.5m (2005: #4.3m). At 31 March 2006 contracted recurring annualised revenues had increased by 23% to #28.3m (2005: #23.0m). However, it has become obvious over the past few months that the Division has suffered from our attempts to integrate it alongside a distribution business. This has resulted in the Division having a number of separated departments, causing a lack of efficiency, cohesion and vision. Over the past 3 months this has been addressed and we have made a number of changes to rectify matters: Currently spread across three separate buildings in Harrogate, by the end of June 2006, all the head office Managed Services employees will reside in a single office adjacent to our Northern data centre, also in Harrogate. The sales force has been split into a new business team and a customer care team. This will allow us to better focus our efforts on building a new client base whilst also improving the relationship and interaction with our existing customers. We have invested in new CRM and ERP systems to support this important part of the business. We have strengthened our position in the IP Voice market by creating a new sales division of highly skilled and experienced telephony experts and have enhanced our portfolio. This focus on an exciting, rapidly-growing market creates significant opportunities for us and we will continue to look at expanding the number of services which we offer. It is encouraging that the Division now achieves a gross margin value in excess of 80 per cent of that earned by UK Specialist Distribution, and this year we expect it to exceed that earned in Distribution. Moreover, many direct operating costs such as network and data centres are fixed and so higher services revenues will continue to improve operating margins. Our strategic objective of the Division earning operating margin percentages in excess of Distribution will be achieved over the next few years. During the year, we have achieved significant contract wins including Galliford Try PLC, Barker & Stonehouse, London Borough of Bromley, Carl Bro Limited, Denton Wilde Sapte, Devonshire Claims Services Holdings Limited, Colemans CTTS, Carey Jones Architects and The Financial Training Company (Kaplan Inc). We have had substantial success with our VBAK service and we have launched a pay-as-you-go ILM ('Information Lifecycle Management') service for archiving email and file system data. This year we will be launching our new Managed Exchange service, which offers medium sized business an enterprise class e-mail service with 99.9% availability. Specialist Distribution (UK) Despite a difficult first half of the year, with gross margins being squeezed by vendors and customers, the second half year's performance was encouraging, helped by cost cutting and revenue growth. Our relationship with IBM continues to grow from strength to strength and our HP business increased profitability in the second half of the year. We were extremely encouraged by the growth we achieved with NetApp and Symantec (formerly Veritas). Our security business had an excellent year, despite withdrawing from certain high volume but low margin business. We have created a new quote and configuration team and a new internal sales team, which have both proven to be extremely successful in the second half of the year and have given us great encouragement for the future. Further achievements this year included winning the following awards: Symantec Master Reseller of the Year 2005 CA EMEA Storage Partner of the Year 2005 Nortel Distributor of the Year 2005 World's largest Check Point and Nokia Training Provider 2005 Check Point's Most Outstanding Authorised Training Provider in EMEA award 2005 Juniper Authorised Training Centre of Excellence 2005 Specialist Distribution (Europe) Our European Distribution businesses were sold on 31 March 2006 and are shown as discontinued operations in the consolidated financial statements. Turnover increased by 10 per cent to #69.8m (2005: #63.2m), but reduced gross margins resulted in operating losses before exceptional reorganisation charges and amortisation of goodwill. We had provided an exceptional charge in the unaudited Interim results for the period ended 30 September 2005 in order to radically reduce on-going operating costs. Shortly afterwards we were approached by some of the European management team to undertake a management buy-out, which eventually failed. However, this prompted a number of European trade enquiries resulting in the sale of the subsidiaries to Magirus International GmbH, a German distributor. The provisional loss on disposal is estimated to be #3.7m as the final consideration is dependent on collection of accounts receivable and the valuation of inventories and will be finalised on 31 March 2007. However, the sale also includes repayment of the inter-company trade debt accounts of #15.8m, which had continued to increase reflecting strong revenue growth in Spain and Italy where long trade credit periods are normal, whereas security products were purchased in the UK on monthly credit terms. Debt At 31 March 2006 cash balances and net debt respectively were #12.7m and #19.5m (2005: #10.5m and #22.2m). The cash inflow during the coming year from the sale of the European subsidiaries is approximately #19m and will eliminate much of the Group's debt. Board On 23 May, we appointed Mark Lower, the Managing Director of our recently launched Managed Voice Services division, to the Board. He joins from next generation telecommunications company Evoxus, where he was CEO. Under his management, Evoxus, a spin off from BT, grew turnover from #3m to #20m in 3 years. He previously worked at BT for 22 years, leaving the company as Commercial & New Business Director of BT Wholesale. Outlook We ended the year in good shape, having just completed a period when we have made some difficult decisions. Our UK Specialist Distribution Division benefited in the second half of the year from cost reduction and revenue growth and whilst market conditions will remain tough there is still an opportunity to increase profits and generate positive cash flow. We are very fortunate to have a Managed Services Division with recurring revenues where we can now focus more of our efforts, selling high margin proprietary services; we believe, as discussed previously, that this Division will continue to be successful and profitable in the year ahead. Also, following the disposal of the loss-making division, the Group's senior management team can now focus its attention on profit making. We are confident that we will deliver increased profits in the future. Peter Wilkinson Chief Executive Officer 8 June 2006 Consolidated profit & loss account For the year ended 31 March 2006 2006 2005 (Unaudited) (Audited) Note #'000 #'000 Turnover Continuing operations 214,966 220,339 Discontinued operations 69,763 63,183 2 284,729 283,522 Cost of sales (235,656) (230,579) Gross profit 49,073 52,943 Net operating expenses before depreciation, amortisation of goodwill and exceptional items (39,359) (42,204) Depreciation (5,716) (6,388) Amortisation of goodwill (4,732) (4,635) Exceptional costs of reorganisation: - Continuing operations 3 (2,387) - - Discontinued operations 3 (3,104) - Net operating expenses (55,298) (53,227) Group operating (loss)/profit Continuing operations (885) (403) Discontinued operations (5,340) 119 Group operating loss 2 (6,225) (284) Loss on sale of subsidiary undertakings 4 (3,661) - Net interest payable (2,226) (2,181) Loss on ordinary activities before taxation (12,112) (2,465) Tax on loss on ordinary activities 5 451 (110) Loss sustained for the financial year (11,661) (2,575) Loss per share (pence) Basic and diluted 6 (8.26) (1.84) 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 2006 2006 2005 (Unaudited) (Audited) #'000 #'000 Loss sustained for the financial year (11,661) (2,575) Unrealised gain on revaluation of land & buildings - 1,754 Exchange gain on translation of overseas subsidiaries - 172 Exchange loss on translation of hedging loan - (172) Total recognised gains and losses relating to the year (11,661) (821) Consolidated balance sheet As at 31 March 2006 2006 2005 (Unaudited) (Audited) Note #'000 #'000 Fixed assets Intangible assets 65,104 74,813 Tangible assets 10,424 14,773 75,528 89,586 Current assets Stocks 6,622 13,179 Debtors - due within one year 89,247 105,399 Cash at bank and in hand 12,719 10,488 108,588 129,066 Creditors - amounts falling due within one year (100,285) (118,174) Net current assets 8,303 10,892 Total assets less current liabilities 83,831 100,478 Creditors - amounts falling due after more than one year (4,015) (9,001) Net assets 2 79,816 91,477 Capital and reserves Called up share capital - equity 1,411 1,411 - non-equity 480 480 Share premium account 188,668 188,668 Revaluation reserve 1,754 1,754 Profit and loss account (112,497) (100,836) Shareholders' funds (including non-equity interests) 79,816 91,477 Shareholders' funds comprise: Equity interests 77,576 89,237 Non-equity interests 2,240 2,240 79,816 91,477 Consolidated cash flow statement for the year ended 31 March 2006 2006 2005 (Unaudited) (Audited) Note #'000 #'000 Net cash inflow/(outflow) from operating activities 7 10,667 (2,000) Returns on investments and servicing of finance Interest received 92 160 Interest element of finance lease payments (232) (282) Interest paid (2,008) (2,033) Net cash outflow from returns on investments and servicing of finance (2,148) (2,155) Taxation paid (822) (1,135) Capital expenditure and financial investment Purchase of tangible fixed assets (2,077) (6,106) Sale of tangible fixed assets 67 1,542 Net cash outflow from capital expenditure and financial investment (2,010) (4,564) Acquisitions and disposals Purchase of subsidiary undertakings (including costs) - (980) Cash disposed of on sale of subsidiary undertakings (2,185) - Net cash outflow for acquisitions and disposals (2,185) (980) Net cash inflow/(outflow) before financing 3,502 (10,834) Financing Issue of ordinary share capital - 275 Net increase in borrowings 431 6,615 Capital element of finance lease payments (1,706) (1,991) Net cash (outflow)/inflow from financing (1,275) 4,899 Increase/(decrease) in cash in the year 2,227 (5,935) Notes to the Preliminary Announcement For the year ended 31 March 2006 1 Basis of preparation The unaudited 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 2005 which have been filed with the Registrar of Companies and on which the auditors gave an unqualified opinion, with the exception of the adoption of FRS 21 'Events after the balance sheet date' and FRS 22 'Earnings per share'. The Annual Report and Accounts for the year ended 31 March 2006, on which the auditors have still to report, will be delivered to the Registrar of Companies and will be posted to shareholders on 5 July 2006. 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 Group operating (loss)/profit by by by destination source source 2006 2005 2006 2005 2006 2005 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) #'000 #'000 #'000 #'000 #'000 #'000 Geographical analysis United Kingdom 210,944 217,761 214,966 220,339 (885) (403) Continental Europe 72,488 64,970 69,763 63,183 (5,340) 119 North America 555 207 - - - - S and Cen America 151 - - - - - Africa 455 68 - - - - Asia 136 516 - - - - Total 284,729 283,522 284,729 283,522 (6,225) (284) Turnover Group operating profit/(loss) Before goodwill After goodwill amortisation amortisation and exceptional items and exceptional items 2006 2005 2006 2005 2006 2005 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) #'000 #'000 #'000 #'000 #'000 #'000 Business analysis Specialist Distribution 259,395 261,449 2,228 6,321 (4,763) 3,967 Managed Services 25,334 22,073 1,769 (1,970) (1,462) (4,251) Total 284,729 283,522 3,997 4,351 (6,225) (284) Net assets Including Excluding goodwill goodwill 2006 2005 2006 2005 (Unaudited) (Audited) (Unaudited) (Audited) #'000 #'000 #'000 #'000 Geographical analysis United Kingdom 79,939 78,586 14,835 9,031 Continental Europe (123) 12,891 (123) 7,633 Group Total 79,816 91,477 14,712 16,664 Business analysis Specialist Distribution 45,069 55,926 12,638 16,067 Managed Services 22,028 25,063 (10,645) (9,891) 67,097 80,989 1,993 6,176 Cash 12,719 10,488 12,719 10,488 Group Total 79,816 91,477 14,712 16,664 The segmental analysis above excludes net interest payable of #2,226,000 (2005: #2,181,000) which is not analysed by business segment. 3 Exceptional costs of reorganisation The exceptional costs of reorganisation for continuing operations of #2,387,000 (31 March 2005: #nil) relate to headcount reductions of #1,255,000, property related costs of #760,000 and fixed asset write-offs of #372,000. Reorganisation costs of #2,017,000 (31 March 2005: #nil) have been paid in the year. The corporation tax effect of these costs is a credit of #600,000. The exceptional costs of reorganisation for discontinued operations of #3,104,000 (31 March 2005: #nil) relate to headcount reductions of #1,627,000, property related costs of #787,000, fixed asset write-offs of #357,000, provision for on-going support services of #206,000 and legal and professional fees of #127,000. Reorganisation costs of #784,000 (31 March 2005: #nil) have been paid in the year. The corporation tax effect of these costs is a credit of #43,000. 4 Loss on sale of European Operations On 31 March 2006 the Group substantially ended its European operations by selling Allasso SAS, Allasso GmbH, Allasso Iberia SAU, Allasso Italia Srl and Allasso Benelux bv ('Allasso Europe') for provisional consideration of Euro7,573,000 (#5,285,000) and also repayment of inter-company debt of Euro22,700,000 (#15,800,000). Consideration may be subject to change dependent on collection of accounts receivable and the valuation of inventories and will be finalised on 31 March 2007. This resulted in a provisional loss on disposal of Euro5,246,000 (#3,661,000). As a result of the material change in the nature and focus of the Group's operations that this disposal represented, the European operations have been shown as discontinued operations in the financial statements. The corporation tax effect of this disposal is a charge of #62,000. 5 Tax on loss on ordinary activities 2006 2005 (Unaudited) (Audited) #'000 #'000 Tax charge comprises: United Kingdom corporation tax at 30% (2005: 30%) Current (600) (952) Over provision in respect of prior years 207 265 UK current tax (393) (687) Overseas current tax (62) (337) Overseas over provision in respect of prior years 7 19 Total current tax (448) (1,005) Deferred tax current year - origination and reversal of timing differences (47) 256 Deferred tax in respect of prior years 946 639 451 (110) The tax credit/(charge) is higher (2005: higher) than the standard rate of corporation tax in the UK. The differences are explained as follows: 2006 2005 (Unaudited) (Audited) #'000 #'000 Loss on ordinary activities before taxation (12,112) (2,465) At standard rate of corporation tax of 30% (2005: 30%) (3,634) (740) Effects of: Amortisation of goodwill 1,409 1,391 Expenses not deductible for tax purposes 3 171 Adjustment to tax charge in respect of previous periods (214) (284) Capital allowances for year lower than depreciation 489 255 Other permanent differences 473 - Overseas tax rates/losses not used - 100 Deferred tax not recognised 879 - Loss on sale of subsidiaries 1,104 - Disallowable exceptional costs 475 - Utilisation of losses (536) - Other timing differences - 112 448 1,005 At 31 March 2006, the Company had accumulated tax losses of #1,188,000 (2005: #2,973,000) which are available for offset against future trading profits of certain Group operations, subject to agreement with the relevant tax authorities. 6 Loss per share Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of #11,661,000 (2005: #2,575,000) by the weighted average number of ordinary shares in issue during the year of 141,111,944 (2005: 139,575,879). The adjusted basic earnings per share has been calculated to provide a better understanding of the underlying performance of the Group as follows: 2006 2005 Basic and diluted Basic and diluted (Loss)/ (Loss)/ (Loss)/ (Loss)/ earnings earnings earnings earnings per share per share (Unaudited) (Audited) (Unaudited) (Audited) #'000 pence #'000 pence Loss attributable to ordinary shareholders (11,661) (8.26) (2,575) (1.84) Amortisation of goodwill 4,732 3.35 4,635 3.32 Exceptional costs of reorganisation (note 3) 4,848 3.44 - - Loss on sale of subsidiary undertakings (note 4) 3,723 2.64 - - Adjusted basic earnings per share 1,642 1.17 2,060 1.48 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 22 'Earnings per share'. 7 Reconciliation of operating loss to net cash inflow/(outflow) from operating activities 2006 2005 #'000 #'000 (Unaudited) (Audited) Operating loss (6,225) (284) Depreciation of tangible fixed assets 5,716 6,388 Goodwill amortisation 4,732 4,635 Exceptional costs of reorganisation - fixed asset depreciation 332 - Loss/(profit) on disposal of tangible fixed assets 331 (262) Exchange movements 5 14 Decrease/(increase) in stocks 5,227 (2,368) Increase in debtors (2,844) (12,901) Increase in creditors and provisions 3,393 2,778 Net cash inflow/(outflow) from operating activities 10,667 (2,000) 8 Analysis of net debt At 1 April Cashflow Disposals Exchange Other non-cash At 31 March 2005 movements changes 2006 (Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) #'000 #'000 #'000 #'000 #'000 #'000 Cash at bank and in hand 10,488 2,227 - 4 - 12,719 Finance leases (2,544) 1,706 13 - (656) (1,481) Debt due after more than one year (7,968) 4,252 - (8) - (3,724) Debt due within one year (22,176) (4,683) - (32) (75) (26,966) Net debt (22,200) 3,502 13 (36) (731) (19,452) This information is provided by RNS The company news service from the London Stock Exchange END FR EANKXELAKEFE
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