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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:1438X InTechnology PLC 24 May 2007 24 May 2007 InTechnology plc Preliminary results for the year ended 31 March 2007 InTechnology plc ("InTechnology" or "the Company"), the voice and data Managed Services provider, announces its results for the year ended 31 March 2007: Operational highlights: Transformational year * Focus on high margin Managed Services business; * Strategy to exit Distribution businesses completed through the disposal of UK Distribution in December 2006 for #41m; * Strategic #4m investment for 43% stake in Mobile Tornado Group plc in October 2006 enabled entry into mobile "Push To Talk" market; * Strengthening of new strategic focus through acquisition of Eescape Holdings Ltd for #3m in January 2007. Financial highlights: Group performance: * Turnover reduced to #186.0m (2006: #284.7m) due to disposal of distribution businesses; * Managed Services turnover increased to #33.0m (2006: #25.3m); * Group operating profit before amortisation of goodwill and exceptional items #4.5m (2006: #3.7m); * Operating profit after exceptional costs of #0.5m (2006: #6.5m loss); * Loss after tax of #15.9m (2006: #11.8m), distribution operations accounted for #11.8m (2006: #8.7m) of the Group loss; * Net cash of #10.3m following distribution sale (2006: #19.5m net debt); * Net tangible assets of #25.6m (2006: #14.0m). Commenting on the results, Peter Wilkinson, Chief Executive of InTechnology plc, stated: "This has been a significant year for the Company, during which we have implemented fundamental changes. Having disposed of all of our Distribution businesses and acquired Eescape Holdings Ltd, through which we have already achieved success in cross-selling products to our data services customers, our focus is on increasing our leading position as a Managed Services specialist in data and voice. This is a high margin market, in which we believe we will increase our penetration to deliver greater growth in revenues and profits. I am confident that without the distraction of the distribution business, we will continue to build on the successes we have made thus far." Enquiries: InTechnology plc 01423 850 000 Peter Wilkinson / Andrew Kaberry Financial Dynamics 020 7831 3113 James Melville-Ross / Hannah Sloane Chairman's introduction The past year has seen the transformation of InTechnology from a distribution dominated business to a specialist in data and voice Managed Services. I am pleased that the Company has ended the year with a strengthened balance sheet, with net cash of #10.3m (2006: #19.5m net debt), and is now in a strong position for sustained growth and profitability in the future. The pressure on the margins on our Distribution Division to which I referred to last year continued unabated during the early part of the year. Operating costs had been reduced to help alleviate the situation and profitability restored. Nevertheless, when we were approached informally during the summer of 2006 by companies interested in acquiring our Distribution business, the Directors took the view that a sale would be in the best interest of the Company and its shareholders. A sale was negotiated and completed during December for a consideration of #41 million cash. Therefore, as a result of the disposal of the Distribution Division, your Company is now purely a Managed Services business and I am pleased that the future success of InTechnology now rests solely on the expanding and profitable Managed Services business. To expand these managed services, during the second half of the year, two important investments were made: * In October 2006, a 43 per cent investment was made in Mobile Tornado Group plc, costing #4m. This takes our Group into mobile telephony; a promising high growth market for its Managed Services. * In January 2007, the whole issued capital of Eescape Holdings Ltd, and its trading subsidiary Evoxus Ltd, was acquired. This enables your company to offer a full range of telephony services to businesses as well as selling VoIP technologies. Our Group turnover reduced from #284.7m to #186.0m, but much of both figures arise from discontinued operations. Our Managed Services revenues increased to #33.0m from #25.3m. Group operating profit before amortisation of goodwill and exceptional items was #4.5m (2006: #3.7m). The Managed Services business contributed #1.5m of this (2006: #1.7m). This small reduction was affected by certain one-off costs. Exceptional costs were #nilm (2006: #5.5m). The loss on the sale of Distribution businesses was #6.1m (2006: #3.7m). The operating profit for the Group after exceptional costs was #0.5m (2006: #6.5m loss). Our objective for the coming year is clear. It is to continue growth in our Managed Services businesses. Management focus is entirely on expanding the data and voice services from which the company has already demonstrated its ability to earn higher margins from its recurring revenues. 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 24 May 2007 Chief Executive's review: Overview This financial year has been one of great change at InTechnology and we ended the year solely as a Managed Services business for Data and Voice. We completely exited the Distribution sector and made a key strategic investment and an acquisition, both of which strengthen our Managed Voice Services ("MVS") business. The cash proceeds from the sale of all Distribution businesses strengthened our balance sheet and resulted in the Company having net cash of #10.3m instead of net debt as in the previous year. The management team's key focus is grow revenues and increase operating margins. Trading and operating performance * From the continuing operations of the Managed Services business: * Turnover increased 30 per cent to #33.0m from #25.3m. Turnover from the acquisition accounted for #3.8m (12 weeks) * Earnings before interest, tax, amortisation of goodwill and exceptional charges were #1.5m (2006: #1.7m) and exceptional charges were #nil (2006: #1.0m) * From the discontinued operations of Specialist Distribution: * Turnover was #153.0m (2006: #259.4m) * Earnings before interest, tax, amortisation of goodwill and exceptional charges were #3.0m (2006: #2.0m) Please note that the 2007 results include nine months trading to 31 December 2006 and are only for UK Specialist Distribution. 2006 comparatives include twelve months trading for UK and European Specialist Distribution. * The sale of UK Specialist Distribution caused a write down of goodwill of #5.8m and because goodwill is not an eligible cost for taxation purposes there is a corporation tax charge of #7.0m. A final charge was made of #0.4m (2006: #3.7m) relating to the disposal of the continental European subsidiaries on 31 March 2006 * Group operating profit was #0.5m (2006: #6.5m loss) and the share of operating loss of our associated company, Mobile Tornado Group plc, "Mobile Tornado" was #0.8m loss (2006: #nil) * Net interest expense was #1.1m (2006: #2.2m). The Group net cash on 31 March 2007 was #10.3m (2006: #19.5m net debt) which reflects the receipts from the disposal of Distribution businesses Disposal of Specialist Distribution divisions Following the disposal of the continental European Distribution business on 31 March 2006 we received approaches during the summer months to purchase the UK Specialist Distribution division. A sale for a cash consideration of #41m was concluded on 29 December 2006, therefore completing InTechnology's withdrawal from all Distribution activities. In many of my reports over the past few years I have highlighted that Distribution was a difficult business to maintain, never mind to grow. There has been relentless pressure from Vendors leading to margin erosion, and a recognised trend towards consolidation in the distribution sector and in our customer base. These factors left me convinced that it was the right time to exit from this business. The sale to a European subsidiary of Arrow Electronics Inc., a USA distributor, was efficiently transacted and completion accounts have now been agreed. All our offices in continental Europe were either transferred to the purchaser or sub-let. In the UK, the purchaser accepted the lease liabilities of the offices in Theale and Threadneedle Street, London. The latter was also used by our Managed Services staff so we have leased an office suite at 17 St Helen's Place, off Bishopsgate in the City of London. The purchaser also entered into a lease of our Harrogate freehold land and buildings, and we are concluding sale negotiations of this freehold which will enhance our net cash position when the contract is completed. Acquisition and investment Mobile Tornado Group plc On 23 October 2006, we invested #4m cash in Mobile Tornado, listed on AIM, giving InTechnology a 43 per cent holding. Predating this investment both myself and Richard James, Director of Legal Affairs and Company Secretary, together held a further 16 per cent as private investors. I became non-executive Chairman of Mobile Tornado and Richard James became a Director. Mobile Tornado owns intellectual property ("IP") in an exciting part of the mobile and telco sector. Its technology is developed in Israel and its global sales and marketing activities are based in the UK. The technology is in the Push To Talk ("PTT") market, and subsets for PTT include Push To Video, Instant Messaging, Push to Mail and Mobile Tornado is currently developing applications with major infrastructure providers for the new emerging Internet protocol Multimedia Subsystem ("IMS") platform. Our #4m cash investment enables Mobile Tornado to further develop its IP and secure sales contracts. PTT is of particular interest to InTechnology. Since the investment we have spent considerable time and effort in developing a PTT managed service because Mobile Tornado had designed it primarily for an operator. We plan to launch in the UK our PTT managed service in July and already have considerable interest from a number of large volume clients. Agreement has been reached with Mobile Tornado for them to use the InTechnology PTT infrastructure for their other managed service customers throughout Europe for a fixed cost per user per month licence fee. Evoxus Limited ("Evoxus") In last year's Annual Report, we announced the creation of a new sales division to strengthen our position in the rapidly expanding IP Voice market. In order to further strengthen our position in the converging voice and data market we acquired for #3m cash the whole issued share capital of Eescape Holdings Ltd and its trading subsidiary Evoxus. In addition we repaid shareholder and other debt of #3.6m. The total cash investment was #6.6m and we took on working capital debt of #1.5m. Evoxus has recurring third party revenues of approximately #15m per annum derived primarily from the sale and management of phone minutes. It has an established infrastructure in place to manage large volumes of phone calls and this complements our new IPVoice product. Since the acquisition we have successfully integrated the Evoxus business with our own Managed Voice Services sales division and are growing its range of voice services including the PTT managed service. The enlarged Managed Voice Services business has already achieved success in cross selling its products to our data services customers. Managed Services ("MS") MS revenues increased by 30 per cent to #33.0m. Revenues from the acquisition of Evoxus were #3.8m. Operating profit before amortisation of goodwill and exceptional charges was #1.5m (2006: #1.7m) and this reduction was caused by three one-off factors: * There is an eighteen month programme finishing in September 2007 to migrate our VBAK customers onto a new technology platform. The cost of this last year was #0.5m. * The operating costs of the new Managed Voice Services sales and support teams created in May 2006 were #1.0m. Customer contracts were won but recognised revenues will only be achieved in the new financial year. * Certain general and administrative costs have been allocated between MS and the Distribution division. Following the sale of UK Distribution on 29 December 2006 the operating costs of the remaining MS division increased by #0.3m Our recurring annualised revenues at 31 March 2007 were #48.3m (2006: #28.5m) of which the Evoxus third party revenues were #15.0m. Our churn of contracts not renewed or lost for financial reasons was reduced to 6.6 per cent (2006: 9.7 per cent). In last year's report I mentioned the reorganisation that was underway in MS division: * The consolidation of the Harrogate offices from three separate buildings into one dedicated MS facility adjacent to our northern data centre. This was successfully completed on time. * The reorganisation of the sales forces into new business and customer care teams. This change, together with investment in new CRM and ERP systems, has had great impact and assisted the reduction in contract churn. We are far closer to our user base than we have ever been and, considering that this is our key asset in an annuity stream business, I intend to make sure it stays this way. During the year and with the sale of the Distribution business underway I carried out a major review of the MS business. The result is as follows: * InTechnology is completely focussed on its MS business without the constant distraction and resource demanding Distribution business. As a result, we now market our services direct to the end-user whereas in past years we were prevented by the perceived threats to the Distribution business and so marketed everything via partners. We can now maximise the opportunities from a user base of nearly 500 customers with new products and services. * We are now able to offer replication storage hardware with associated services within our Data Services product portfolio. This is another direct consequence of disposing of UK Distribution. * Recognising the continuing convergence of data and voice our new Managed Voice Services division required more strength and depth. The acquisiton of Evoxus and managed services opportunity from the investment in Mobile Tornado now enables InTechnology to offer very compelling services offerings to the market. Our centre of expertise for data is our Harrogate head office and that of voice in Reading, the offices of Evoxus. The new London office supports both. * To enable an increase in operating margins we must not only win and secure new business, but increase productivity. To do the latter we have embarked on an ambitious investment project to review and then automate all business processes. One target will be to limit the growth rate in staff numbers, currently 183, to well below the percentage increases in revenues. * We will create a new professional services division to maximise consultancy opportunities in our user base and will continue to invest in customer support, provisioning and service delivery. Board Steve Pearce resigned on 29 December 2006 following the disposal of our UK Distribution division to become its Managing Director. Steve had been with us since 1995 and held senior management roles in Managed Services and latterly UK Distribution. We shall miss the enthusiasm and commitment that he brought to the business and wish him well for the future. Mark Lower joined the Board on 23 May 2006, but resigned on 5 January 2007 in order to pursue other interests. Debt Our net cash at 31 March 2007 stood at #10.3m (2006: #19.5m net debt), thanks largely to the disposal of all Distribution businesses. Net cash will be increased by the proposed sale of our freehold land and buildings and receipt of all final Distribution sale consideration, less the final payment of the corporation tax arising on the sale of UK Distribution net assets. Outlook We start the new year in good shape with new products to be launched during this year in both Data and Voice divisions. The balance sheet is strengthened and the Evoxus acquisition has increased our recurring annualised revenues to #48m at the start of the year. The enlarged Managed Services business has great opportunities and it is our challenge to achieve these. The year has commenced in line with our expectations and therefore the Board remains confident of the outcome for this new year. Peter Wilkinson Chief Executive Officer 24 May 2007 Consolidated profit & loss account For the year ended 31 March 2007 (Unaudited) (Audited) 2007 2006 (Restated) Note #'000 #'000 Turnover Continuing operations - Existing 29,203 25,334 - Acquisitions 3,790 - Discontinued operations 153,030 259,395 186,023 284,729 Less: Share of turnover of associate (13) - Group Turnover 2 186,010 284,729 Cost of sales (148,632) (235,656) Gross profit 37,378 49,073 Net operating expenses before depreciation, amortisation of goodwill and exceptional items (28,115) (39,623) Depreciation (4,805) (5,716) Amortisation of goodwill (3,994) (4,732) Exceptional costs of reorganisation: - Continuing operations - (2,387) - Discontinued operations - (3,104) Net operating expenses (36,914) (55,562) Group operating profit/(loss) Continuing operations (804) (1,532) Acquisitions (60) - Discontinued operations 1,328 (4,957) Group operating profit/(loss) 2 464 (6,489) Share of operating loss of associate (781) - Total operating loss (317) (6,489) Loss on sale of business assets 3 (5,752) - Loss on sale of subsidiary undertakings 3 (373) (3,661) Net interest payable - Group (1,164) (2,226) - Associate 17 - Loss on ordinary activities before taxation (7,589) (12,376) Tax on loss on ordinary activities 4 (1,347) 530 Tax on sale of business assets 4 (6,999) - Loss sustained for the financial year (15,935) (11,846) Loss per share (pence) Basic and diluted 5 (11.23) (8.39) Consolidated statement of total recognised gains and losses for the year ended 31 March 2007 (Unaudited) (Audited) 2007 2006 (Restated) #'000 #'000 Loss sustained for the financial year - Group (15,171) (11,846) - Associate (764) - (15,935) (11,846) Prior year adjustment - FRS 20 'Share-based Payment' (407) - Total recognised gains and losses since last annual report (16,342) (11,846) Consolidated balance sheet As at 31 March 2007 Group (Unaudited) (Audited) 2007 2006 (Restated) #'000 #'000 Fixed assets Intangible assets 38,027 65,104 Tangible assets 9,611 10,424 Interest in associate 3,301 - 50,939 75,528 Current assets Stocks 92 6,622 Debtors 16,863 88,518 Cash at bank and in hand 12,782 12,719 29,737 107,859 Creditors - amounts falling due within one year (16,499) (100,285) Net current assets 13,238 7,574 Total assets less current liabilities 64,177 83,102 Creditors - amounts falling due after more than one year (594) (4,015) Net assets 63,583 79,087 Capital and reserves Called up share capital 1,899 1,891 Share premium account 188,843 188,668 Revaluation reserve 1,595 1,646 Share option reserve 829 581 Profit and loss account (129,583) (113,699) Shareholders' funds 63,583 79,087 Consolidated cash flow statement As at 31 March 2007 (Unaudited) (Audited) 2007 2,006 Note #'000 #'000 Net cash inflow from operating activities 6 12,437 10,667 Returns on investments and servicing of finance Interest received 204 92 Interest element of finance lease payments (194) (232) Interest paid (1,074) (2,008) Net cash outflow from returns on investments and servicing of finance (1,064) (2,148) Taxation paid (4,990) (822) Capital expenditure and financial investment Purchase of tangible fixed assets (3,145) (2,077) Sale of business assets 39,998 - Sale of tangible fixed assets 72 67 Net cash inflow/(outflow) from capital expenditure and financial investment 36,925 (2,010) Acquisitions and disposals Purchase of subsidiary undertakings (3,000) - Borrowings acquired with subsidiary undertakings (5,143) - Sale of subsidiary undertakings 4,630 - Cash disposed of on sale of subsidiary undertakings - (2,185) Investment in associated undertaking (4,000) - Net cash outflow for acquisitions and disposals (7,513) (2,185) Net cash inflow before financing 35,795 3,502 Financing Issue of ordinary share capital 183 - Capital element of finance lease payments (1,457) (1,706) Net (decrease)/increase in borrowings (34,455) 431 Net cash outflow from financing (35,729) (1,275) Increase in cash in the year 7 66 2,227 Notes to the Preliminary Announcement For the year ended 31 March 2007 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 2006 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 20, 'Share-based Payment'. The adoption of this standard represents a change in accounting policy and the comparative figures have been restated accordingly. The effects of the change on net operating expenses and the tax credit for the year ended 31 March 2006 are summarised as follows: The Group operates a number of equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the group revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the profit and loss account, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. Net operating Tax credit expenses #'000 #'000 Year ended 31 March 2006 As previously stated (55,298) 451 Restated (55,562) 530 The net effect of the change in policy in the year ended 31 March 2006 is to increase net operating expenses by #264,000, increase the tax credit on the loss on ordinary activities by #79,200 and increase the loss sustained for the financial year by #184,800. The cumulative effect of implementing the policy is to increase Group reserves at 31 March 2006 by #174,000 (2005: #95,000). The changes are summarised as follows: Share option Profit and Shareholders' reserve loss funds #'000 #'000 #'000 Year ended 31 March 2006 As previously stated - (112,389) 79,816 Restated 581 (112,796) 79,990 Year ended 31 March 2005 As previously stated - (100,836) 91,477 Restated 317 (101,058) 91,572 The Annual Report and Accounts for the year ended 31 March 2007, on which the auditors have still to report, will be delivered to the Registrar of Companies and will be posted to shareholders on 4 July 2007. Further copies are available on request from the registered office of the Company at Central House, Beckwith Knowle, Otley Road, Harrogate, HG3 1UG. 2 Segmental information Turnover Turnover Group operating profit/(loss) by by by destination source source (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) 2007 2006 2007 2006 2007 2006 (Restated) #'000 #'000 #'000 #'000 #'000 #'000 Geographical analysis United Kingdom 185,911 210,944 186,010 214,966 464 (1,149) Continental Europe 99 72,488 - 69,763 - (5,340) North America - 555 - - - - South and Central America - 151 - - - - Africa - 455 - - - - Asia - 136 - - - - Total 186,010 284,729 186,010 284,729 464 (6,489) Turnover Group operating profit/(loss) Before goodwill After goodwill amortisation amortisation and exceptional items and exceptional items (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) 2007 2006 2007 2006 2007 2006 (Restated) (Restated) #'000 #'000 #'000 #'000 #'000 #'000 Business analysis Continuing operations - Managed Services 32,980 25,334 1,503 1,699 (864) (1,532) Discontinued operations - Specialist 153,030 259,395 2,955 2,035 1,328 (4,957) Distribution Total 186,010 284,729 4,458 3,734 464 (6,489) Net assets/(liabilities) Including Excluding goodwill goodwill (Unaudited) (Audited) (Unaudited) (Audited) 2007 2006 2007 2006 (Restated) (Restated) #'000 #'000 #'000 #'000 Geographical analysis United Kingdom 63,701 80,113 25,674 15,009 Continental Europe (118) (123) (118) (123) Group Total 63,583 79,990 25,556 14,886 Business analysis Continuing operations - Managed Services (excluding cash) 50,801 22,065 12,774 (10,608) Discontinued operations - - - Specialist Distribution (excluding 45,206 12,775 cash) 50,801 67,271 12,774 2,167 Cash 12,782 12,719 12,782 12,719 Group Total 63,583 79,990 25,556 14,886 The segmental analysis above excludes net interest payable of #1,147,000 (2006: #2,226,000) which is not analysed by business segment. 3 Loss on sale of business assets and subsidiaries (Unaudited) (Audited) 2007 2006 #'000 #'000 Cash proceeds 41,000 - Less: Net assets disposed with distribution business (15,582) - Costs associated with the disposal (305) - Accelerated employee share option adjustment (61) - Gain on disposal of net tangible assets 25,052 - Goodwill disposed with distribution business (30,804) - Loss on sale of business assets (5,752) - Taxation (6,999) - Loss on sale of subsidiary undertakings (373) (3,661) On 29 December 2006 the Group sold the trade, net tangible assets and goodwill of its United Kingdom distribution business for a consideration of #41,000,000 in cash. #1,000,000 of the consideration remains unpaid at the year end and will be paid on agreement of the completion accounts. The sale resulted in a loss on disposal of #5,752,000 but because goodwill is not an allowable cost for taxation purposes there is a corporation tax charge on disposal of #6,999,000. On 31 March 2006 the Group had substantially sold its European operations which resulted in a provisional loss on disposal of Euro5,246,000 (#3,661,000) dependent on collection of debtors and the fair valuation of stock to be finalised on 31 March 2007. An additional loss on sale of subsidiary undertakings of #373,000 has been recognised on the disposal of the European operations. As a result of the material change in the nature and focus of the Group's operations that this disposal represented, the UK Distribution operations have been shown as discontinued operations in the financial statements (2006: the European operations were classified as discontinued operations). Cost of sales attributed to continuing operations were #11,797,000 and discontinued operations were #136,835,000. Net operating expenses attributed to continuing operations were #22,281,000 and discontinued operations were #14,769,000. 4 Tax on loss on ordinary activities (Unaudited) (Audited) 2007 2006 (Restated) #'000 #'000 Tax charge comprises: United Kingdom corporation tax at 30% (2006: 30%) Current (8,136) (600) Over provision in respect of prior years - 207 UK current tax (8,136) (393) Overseas current tax - (62) Overseas over provision in respect of prior years - 7 Total current tax (8,136) (448) Deferred tax current year - origination and reversal of timing differences (75) 32 Deferred tax in respect of prior years (135) 946 (8,346) 530 The tax charge is higher (2006: higher) than the standard rate of corporation tax in the UK. The differences are explained as follows: (Unaudited) (Audited) 2007 2006 (Restated) #'000 #'000 Loss on ordinary activities before taxation (7,589) (12,376) At standard rate of corporation tax of 30% (2006: 30%) (2,277) (3,713) Effects of: Amortisation of goodwill 1,232 1,409 Expenses not deductible for tax purposes - 3 Adjustment to tax charge in respect of previous periods - (214) Capital allowances for year lower than depreciation 275 489 Other permanent differences 2,094 473 Deferred tax not recognised 197 879 Taxable gain on disposal of Distribution business 6,999 1,104 Disallowable exceptional costs - 475 Utilisation of losses (384) (536) Other timing differences - 79 8,136 448 At 31 March 2007, the Company had accumulated tax losses of #17,000,000 (2006: #1,188,000 which should be available for offset against future trading profits of certain Group operations. 5 Loss per share Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of #15,935,000 (2006: #11,846,000) by the weighted average number of ordinary shares in issue during the year of 141,885,401 (2006: 141,111,944). The adjusted basic earnings per share has been calculated to provide a better understanding of the underlying performance of the Group as follows: (Unaudited) (Audited) 2007 2006 Basic and diluted Basic and diluted (Loss)/ (Loss)/ (Loss)/ (Loss)/ earnings earnings earnings earnings per share per share (Restated) (Restated) #'000 pence #'000 pence Loss attributable to ordinary shareholders - Continuing operations (4,139) (2.92) (6,889) (4.88) - Discontinued operations (11,796) (8.31) (4,957) (3.51) Total loss attributable to ordinary shareholders (15,935) (11.23) (11,846) (8.39) Employee share option adjustment 131 0.09 185 0.13 Amortisation of goodwill 2,796 1.97 3,312 2.35 Exceptional costs of reorganisation - - 5,491 3.89 Loss on sale of business assets (note 3) 5,734 4.04 - - Tax on sale of business assets (note 3) 6,999 4.93 - - Loss on sale of subsidiary undertakings (note 3) 373 0.26 3,661 2.59 Share of operating loss of associate 764 0.54 - - Adjusted basic earnings per share 862 0.61 803 0.57 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'. 6 Reconciliation of operating loss to net cash inflow/(outflow) from operating activities (Unaudited) (Audited) 2007 2006 (Restated) #'000 #'000 Continuing operations Operating loss (864) (1,149) Depreciation of tangible fixed assets 4,231 5,417 Goodwill amortisation 2,367 4,450 Exceptional costs of reorganisation - fixed asset depreciation - 83 (Profit)/loss on disposal of tangible fixed assets (35) 331 Exchange movements (17) 44 Share option non-cash change 164 70 Decrease in stocks 211 5,975 Decrease/(increase) in debtors 4,081 (4,726) Decrease in creditors and provisions (4,734) (333) Net cash inflow from continuing operations 5,404 10,162 Discontinued operations Operating profit/(loss) 1,328 (5,340) Depreciation of tangible fixed assets 574 299 Goodwill amortisation 1,627 282 Exceptional costs of reorganisation - fixed asset depreciation - 249 Share option non-cash change 23 194 Profit on disposal of tangible fixed assets (1) - Exchange movements 34 (39) Decrease/(increase) in stocks 6,374 (748) Decrease in debtors 56,172 1,882 (Decrease)/increase in creditors and provisions (59,098) 3,726 Net cash inflow from discontinued operations 7,033 505 Net cash inflow from operating activities 12,437 10,667 7 Analysis of net debt At 1 Cashflow Acquisition Disposals Exchange Other At 31 March April (excluding movements non-cash 2007 2006 cash and changes overdrafts) #'000 #'000 #'000 #'000 #'000 #'000 #'000 Cash at bank and in hand 12,719 66 - (3) - 12,782 Finance leases (1,481) 1,457 (297) - - (964) (1,285) Debt due after more than one year (3,750) 3,750 - - - - - Debt due within one year (26,940) 30,705 (4,846) - - (100) (1,181) Net debt (19,452) 35,978 (5,143) - (3) (1,064) 10,316 8 Acquisitions The group purchased Eescape Holdings Limited on 9 January 2007 for a total consideration of #3.0m. The total adjustments required to the book values of the assets and liabilities acquired in order to present the net assets at fair values in accordance with group accounting principles were #137,000, details of which are set out together with the resultant amount of goodwill arising. Eescape Holdings Limited contributed #162,000 to the group's net operating cash flows, received #51,000 of interest, #nil in respect of taxation and utilised #8,000 for capital expenditure. In its last financial year to 31 March 2006, Eescape Holdings Limited made a loss after tax of #2.0m. For the period since that date to the date of acquisition, Eescape Holdings Limited management accounts show: #'000 Turnover 12,030 Operating profit 91 Loss before taxation (149) Taxation - Total recognised loss for the period (149) Consistency of Book accounting Fair value policy Other value #'000 #'000 #'000 #'000 Tangible fixed assets 1,042 (92) (169) 781 Investments - - Stock 55 55 Debtors 3,088 3,088 Cash 2 2 Creditors (8,697) 104 20 (8,573) Net assets acquired (4,510) 12 (149) (4,647) Goodwill arising on acquisition 7,721 Consideration 3,074 - - 3,074 Discharged by: Cash consideration 3,000 3,000 Costs associated with the acquisition 74 74 3,074 - - 3,074 The fair value adjustment for alignment of accounting policies reflects the restatement of assets and liabilities in accordance with the group's policies including: the removal of capitalised development costs (#92,000). This information is provided by RNS The company news service from the London Stock Exchange END FR EAPSDASXXEFE
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