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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Maxima Hldgs | LSE:MXM | London | Ordinary Share | GB00B034R743 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 23.75 | 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:0265C Maxima Holdings PLC 14 August 2007 Embargoed until 0700 14 August 2007 Maxima Holdings plc ("Maxima" or the "Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MAY 2007 Maxima Holdings plc, (AIM: MXM.L) the AIM listed provider of IT solutions and managed services, today announces its preliminary results for the year to 31 May 2007 which have come in slightly ahead of market expectations. Financial Highlights * Revenues up 66% to #31.8m (2006: #19.1m) * Recurring revenues remain at 56% of turnover * Operating profit* up 85% to #6.3m (2006: #3.4m), an operating margin of 19.7% (2006: 17.5%) * Profit before tax* up 76% to #5.8m (2006: #3.3m) * Statutory profit before tax up 62% to #4.2m (2006: #2.6m) * Net debt at 31 May 2007 of #6.6m (2006: #3.1m), after net cash outflows on acquisitions of #15.2m. A placing of shares in May 2007 raised #11.5m net. * Adjusted earnings per share* up 46% to 25.9p (2006: 17.8p) * Final dividend up 36% to 3.4p (2006: 2.5p) per share proposed, making a total dividend of 5.2p for the year (2006: 4.0p) * before exceptional items, amortisation of intangibles and share based payments Operational Highlights * Four acquisitions made and successfully integrated * Benefits of scale and cross selling now becoming evident * Investment in developing a Microsoft Dynamics AX based solution for the construction sector * Commencement of fully staffed 24x7 support and managed service operations * Market conditions favourable and organic growth increasing Chief Executive, Kelvin Harrison commented "Maxima has had an excellent year during which our core businesses have performed well whilst we made four further acquisitions. We now have a complete offering of application and infrastructure software solutions and managed services and provide our clients with a one-stop-shop for all their IT needs. The new financial year has got off to a good start with some important contract renewals and key new business wins including our first major Microsoft Dynamics AX project, as well as the acquisition of Centric Networks Ltd. Maxima is in an exciting phase of its development as we now build greater scale within our chosen markets." For further information please contact: Maxima Kelvin Harrison, Chief Executive 01242 211211 Linda Andrews, Group Finance Director 0141 880 1000 Cenkos Stephen Keys 020 7397 8926 Smithfield Tania Wild / Reg Hoare 020 7360 4900 Notes to editors: Maxima Holdings plc floated on AIM in November 2004 at an issue price of 110p. It was established to acquire businesses supplying IT solutions and managed services, with the objective of building a focused IT services group. On flotation it immediately acquired Azur Holdings Ltd, bringing together a management team with the skill, experience and incentive to deliver significant shareholder value, through a combination of acquisitive and organic growth. The business implements and supports enterprise and infrastructure software solutions for mid-sized, UK-based manufacturing, distribution and service organisations. These solutions are based upon leading software suites as well as products developed in-house. It has since made a further nine acquisitions: * August 2005 - Ringwood Group plc, a specialist in content and document management solutions, based on Microsoft technologies; * September 2005 - Hanston Technology Partners Ltd, a fast growing managed services business providing applications support and consultancy services to Oracle users; * January 2006 - The MFG/PRO business of Seabrook Research Ltd, the sole Irish distributor of MFG/PRO, a manufacturing package for which Maxima was already the sole UK distributor; * May 2006 - QED Business Systems Ltd, which provides managed services for critical mainframe and mid-range computer systems and applications software; * October 2006 - Cognition Solutions Ltd, provider of enterprise software solutions to the construction and facilities management sector; and * November 2006 - IIL (Intertech Solutions Ireland) Ltd, which provides IT infrastructure solutions and managed services based upon Citrix technologies; * March 2007 - SevenThree Ltd, supplier of customer relationship management software solutions to the construction sector; * May 2007 - 3net Limited, an IT Services business, providing consultancy, solutions delivery and managed services in networking and security infrastructure; and * July 2007 - Centric Networks, a managed services business whose skills lie in operating systems, networking, security and remote access. Maxima has grown to become an IT systems integration and managed services company with a proven track record of delivering innovative and flexible IT solutions and services. Maxima's in-depth knowledge of industry and business, coupled with its skills and understanding of leading software suites such as Oracle, Microsoft and SAP ensures its solutions and services deliver real business benefits. The group prides itself on the quality of its service, which leads to strong customer relationships and high retention rates. CHAIRMAN'S STATEMENT Introduction I am very pleased to report on another successful year for Maxima Holdings plc. Maxima was established to acquire businesses in the highly fragmented computer software and services market, with the objective of building a focused and significant IT services group. Our progress has continued apace. The original business that floated in 2004, together with the businesses acquired in 2005/6, have traded well, supporting four further earnings enhancing acquisitions. The businesses acquired have all been fully integrated into our trading arms, Maxima Solutions and Maxima Managed Services. Results Revenues have increased, both organically and through acquisitions, and net margins have continued to improve as the business has built scale. In each acquisition, we have used a judicious blend of cash and consideration shares, balancing the need to incentivise and lock-in vendors and limit dilution of existing shareholders, whilst maintaining sufficient debt headroom to be able to continue our acquisitive strategy. I should like to thank those institutional investors who subscribed to our successful placing in May raising #11.5 million to facilitate the purchase of 3net Limited. The level of net debt at the year end was just over one times historic EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation). Board As we have continued to grow, we have reinforced the board, adding skills and experience that are directly relevant to the business. I was pleased to welcome Kim Nicholson to the board in January 2007 as a non-executive director. Kim is a corporate finance lawyer with extensive experience in the technology sector. After the year end, in July 2007, Mark Morris FCA also joined the board as a non-executive director. Mark had 10 years experience with Sytner Group, the highly acquisitive prestige car dealers, as Finance Director and latterly as Managing Director. We are also in the process of strengthening the executive element of the board. Staff As a specialist service company with a very high degree of client contact, we are crucially dependent upon retaining a highly skilled and motivated workforce. As the business grows through acquisition it is also important to gain synergies through effective communication and cooperation between the various teams of specialists, whilst always providing high levels of customer service. I would like to express my sincere appreciation to our long standing members of staff for their continued dedication and loyalty and to our new joiners, whether through acquisition or recruitment, for the way they have worked together to enable us to achieve our goals this year. Prospects Market conditions continue to be stable. We continue to derive the majority of our business from our extensive client base, predominantly in the mid-market, but our propositions are also competitive and successful in the new business market. We are confident that with the full year contribution from the acquisitions made during 2006/7 we will show substantial growth in the current financial year. We have already made one acquisition in the new financial year and continue to source a healthy pipeline of attractive acquisition opportunities; we expect to make further purchases during the year. Dividend The directors recommend a final dividend of 3.4p per share (2006: 2.5p), payable to shareholders on record as at 28 September 2007 on 19 October 2007, making a total of 5.2p per share for the year (2006: 4p). This is in line with the stated policy of a progressive dividend, whilst recognising the need to conserve cash in order to finance further acquisitions. M J Brooke Chairman 13 August 2007 CHIEF EXECUTIVE'S REVIEW Introduction Maxima has continued to successfully execute its strategy of building a focussed and significant IT Services group and this has continued to deliver strong earnings growth. The businesses acquired during prior years have performed well and we have made four further acquisitions during the year. Two are enterprise software solutions businesses and two are managed service businesses with a focus on IT infrastructure, i.e. networks, security and remote access. Maxima now has a complete offering of applications and infrastructure software solutions and managed services addressing the needs of mid-market customers in the UK and Ireland. These solutions and managed services are based upon technologies and products from world-class vendors including Microsoft, Oracle, SAP, IBM, Citrix and Cisco, overlaid with proprietary templates, tools and processes that we have developed ourselves. We have integrated our operating businesses into two trading arms, Maxima Solutions and Maxima Managed Services, operating from twelve offices across the UK, one in Ireland and one in the USA. We have common infrastructure, business processes and shared back office functions such as finance, administration and human resources across the group. There is a high degree of cross-selling and cross-delivery between the various units. Maxima Solutions delivers and supports enterprise software solutions including ERP (Enterprise Resource Planning), CRM (Customer Relationship Management) and document management, based upon its own IPR and products from leading vendors such as SAP, QAD and Microsoft. It was formed from Azur Group (acquired upon flotation of Maxima in November 2004), Ringwood Software (acquired in August 2005) and Seabrook (acquired in January 2006). To this we added Cognition Solutions in October 2006 and SevenThree in March 2007; both of these businesses have a focus on the construction sector. Maxima Managed Services offers 24x7 management of software applications and infrastructure, across a broad range of leading technologies including Oracle, Microsoft, Computer Associates and Citrix. It was formed by the merger of Hanston Technology Partners (acquired in September 2005) and QED Business Systems (acquired in May 2006). To this we added Intertech in November 2006 and 3net in May 2007. Market conditions Market conditions, as expected, have remained stable. The independent analyst Ovum reports overall UK Software & IT Services market growth of 6.1% in 2006 and predict growth of 6.4% p.a. for 2007 to #29.4 billion. Growth is forecast to continue at an overall average rate of 5.8% p.a. The enterprise software segment is predicted to grow more rapidly than the services segment with ERP and CRM continuing to do well in the mid-market (companies of #50 - #500 million in revenue). A detailed forecast is shown in the table below. Ovum also reports continuing vendor consolidation, with Infor Inc. alone acquiring Systems Union, SSA Global, Extensity, Baan, E.piphany, Infinium Software, EXE Technologies, Arzoon, Marcam, Mapics, Lily Software, Daly.commerce and Brain to name but a few. IBM, Oracle and Microsoft have also been very active in making acquisitions. The UK Enterprise Software & IT Services Market Size Average (#billion) growth 2006 2007 2008 2009 2010 p.a. _______________________________________________ Infrastructure software 2.2 2.4 2.6 2.8 3.0 7.7% Applications software 1.8 2.0 2.2 2.4 2.6 10.1% Information management 0.6 0.7 0.7 0.8 0.9 11.0% ____________________________________________________________________________ Total enterprise software 4.6 5.0 5.5 6.0 6.5 9.1% ____________________________________________________________________________ Infrastructure services 9.0 9.5 9.9 10.3 10.7 4.3% Project services 7.9 8.2 8.5 8.8 9.1 4.1% Application management 1.6 1.6 1.7 1.7 1.8 2.4% Business process outsourcing 4.6 5.0 5.5 6.1 6.6 9.5% ____________________________________________________________________________ Total IT services 23.0 24.3 25.6 26.8 28.0 5.2% ____________________________________________________________________________ ____________________________________________________________________________ Total software & IT services 27.7 29.4 31.2 32.9 34.7 5.8% ____________________________________________________________________________ Source: Ovum Market Trends February 2007 The 2006 NCC (National Computing Centre) Survey showed that just 28% of IT spending was on capital and development projects with 68% of expenditure being operational. It also reported a median corporate IT spend of 2.5% of turnover, up from 2.4% in 2005; the median spend per end user was #3,981. Stefan Foster, the Managing Director of NCC said "Results tell us that IT decision makers are confident, but not over enthusiastic, about future prospects. The environment is stable with modest growth in most sectors and organisations are typically making incremental rather than wholesale changes to their IT provision. IT vendors will face a tougher environment and will clearly need to demonstrate added value to win over customers". The survey also showed a 5% increase in expenditure on central systems, but an 8% decrease on desktop systems, as well as continued rapid convergence of IT and telecommunications with CRM and Document Management remaining key technologies. As Maxima has grown, so has the diversity of its client base and therefore it is now less relevant to provide a breakdown of markets by vertical sector. One area however where we are encountering particularly buoyant conditions is the construction sector, driven by investment across commercial property, housing and public infrastructure such as health, education and leisure e.g. 2012 Olympic Games. The construction sector has an annual output of #102 billion and represents 8% of UK GDP; one in ten people employed in the UK work in construction and there are 28,400 firms employing more than 24 people. (Source: DTI & Construction News). Microsoft is the most dominant phenomenon in the IT marketplace today, particularly for medium-sized businesses. In its financial year to 30 June 2007 it surpassed $50 billion in revenues for the first time, 15% growth over the prior year. This was fuelled by probably the most important set of new product releases in its history, not just Vista and Office 2007, but also Sharepoint Portal Server 2007, Dynamics CRM Version 3 and Dynamics AX Version 4. As an indication of the impact of these launches on the marketplace for IT services, independent analysts IDC have estimated that for every $1 spent on Vista, $13.31 will be spent with Microsoft's partners. Regent Associates analysis of technology (information technology, communications and electronic media) transactions in 2006 reported 3,295 acquisitions of European technology companies, up 8% on 2005, with UK & Ireland being the most active region. Maxima's strategy Our consistent strategy, which we are successfully executing in both our existing operations and in seeking acquisitions, aims to achieve higher growth rates and operating margins than industry averages, by taking careful account of the market conditions and trends described above: *We have developed a complete solutions and managed services offering for medium-sized organisations embracing both applications and infrastructure software. We have depth of expertise in each individual area together with the integration skills necessary to bring them together. This is a strong differentiator in the market where the majority of our competitors are only able to offer individual elements. *Manufacturing is our biggest single market, and we are increasing our focus on providing those products and services for which there is greatest demand and concentrating on those market verticals where UK industry is strongest. Key verticals are contract manufacturing, service industries, medical and pharmaceutical and food & beverages. *We are increasing our presence in other market sectors that have better overall growth prospects, for instance Construction and Facilities Management. *Compliance with legislation and directives in all kinds of contexts is the driver behind much IT investment, and our sales proposition in both business and document management software and services is therefore very much geared towards creating compliant processes and audit traceability for our clients. *Sales of managed services, as opposed to new turnkey solution sales, are an important means of winning new clients. Service excellence is the key to success here. This model increases the amount of recurring revenues, and with efficient processes can lead to very high staff utilisation levels and profitability. *We continue to strengthen our relationships with Microsoft, Oracle, SAP and IBM, as we believe that their market positions will continue to dominate and we can benefit from their vast R & D and marketing budgets. Operational review Maxima has invested in two major developments during the year: * Major enhancement of our capability in infrastructure managed services and solutions This was achieved through the acquisitions of IIL (Intertech Ireland) Ltd in November 2006 and 3net Ltd in May 2007. (This capability was further strengthened after the year end through the acquisition of Centric Networks Ltd on 19th July 2007). These businesses are being integrated with our pre-existing infrastructure team. In addition, shortly after the acquisition of Intertech we began offering a fully staffed 24x7 support and managed service (as opposed to using an external call centre with technical staff operating on a call-out basis). We will continue to offer a wide range of infrastructure services around network, security, remote access and operating systems. Most importantly though, we are now cross-selling these capabilities into our existing applications software clients. We can also offer a one-stop-shop which is what we find mid-market clients are increasingly looking for. * Creation of a market-leading solution for the Construction and Facilities Management Sector This has been achieved through the acquisition and subsequent investment in new solutions based upon Microsoft Dynamics technology. Cognition Solutions Ltd, acquired in October 2006, brought a customer base of almost 300 organisations in the construction and facilities management sectors using its Intellect enterprise software solution. SevenThree Ltd was acquired in March 2007 and is a specialist in CRM software, principally operating in the construction and building products sectors. These businesses have been merged within Maxima Solutions and we have invested jointly with Microsoft in building a state of the art solution for the construction sector based upon Microsoft Dynamics AX technologies. We have conducted a major cross-training exercise as skills in these new technologies are not available in the market place. We have also transferred some of our most talented sales and delivery staff into this business unit and just after the year end won our first major contract. A strong characteristic of the business continues to be the high level of recurring revenues (from support and maintenance) which has remained steady at 56% with a total of 92% of revenues coming from existing customers. The broadening of our offering, particularly into infrastructure software solutions and services, together with good account management has resulted in increased levels of cross-selling across the group. The two operating businesses have both also enjoyed good levels of new business wins: * Maxima Solutions: - 11 new customers for SAP Business One, a software product that targets the SME market - 2 new customers for QAD Applications, together with our first major Services Oriented Architecture project using the Sonic Enterprise Service Bus technology from Progress Software Corporation - 4 new customers for Intellect, our construction industry solution - 8 new customers for Microsoft CRM, including cross sales into other business units - 8 new customers for our document management solutions which are now largely aligned with Microsoft .NET and Sharepoint technologies - Substantial repeat business from customers of our own products and very low client attrition rates * Maxima Managed Services: - 19 new customers for Oracle managed services - 19 new customers for Citrix managed services including in December 2006 a Euro4 million contract for a major petrochemical company - A high level of renewals of managed service contracts Conclusions Maxima has had another successful year as a public company. Our listing on AIM has enabled us to both attract acquisition targets and to finance those acquisitions. Our principal criterion is that target businesses should be capable of fitting the blended business model and processes that we have successfully developed. We are acutely aware of the need to strike a sensible compromise between valuation and risk. Nevertheless, we believe that the assumption on which Maxima's strategy is based, namely that there are considerable opportunities to create shareholder value through consolidation opportunities in the IT services market, remains valid. All the acquisitions we have made are complementary and earnings enhancing. We have continued to build a pipeline of opportunities and expect to make further acquisitions this financial year. Whilst rapidly integrating the acquisitions, we have maintained strong internal management and control of our existing businesses, driving increased group profit and profitability. We believe that our offering into the market is now complete and further acquisitions will serve to enhance that offering and increase scale. In the mid-market clients demand a high degree of flexibility and responsiveness and it is these characteristics, together with an ability to provide technology solutions that address real business needs that drive our success. I should like to sincerely thank all members of the team for their continued loyalty and commitment to Maxima during this exciting phase of our development. Kelvin F Harrison Chief Executive 13 August 2007 FINANCIAL REVIEW Trading Results Revenues for the year to 31 May 2007 increased 66% to #31.8m (2006: #19.1m) with the four acquisitions in the year contributing #6.1m. Recurring revenues, those from annual support and maintenance contracts, remained strong at 56% (2006: 56%). Gross margins moved down to 75% (2006: 78%) as a result of a changed business mix, particularly with the Intertech acquisition made this year which has a higher proportion of reselling elements. Operating profit before amortisation, share based payments and exceptional costs increased by 85% to #6.3m (2006: #3.4m) with the operating profit percentage increasing to 19.7% (2006: 17.5%). Higher utilisation of staff, the benefits of the acquisition strategy on the scale of the business and a continued focus on costs contributed to the improvement in the operating profit percentage. Amortisation of intangibles was #1.4m (2006: #0.3m), which reflects eight acquisitions completed by Maxima in the last two years. Intangibles are amortised over periods not exceeding 7 years from their date of acquisition. Exceptional costs of #0.1m (2006: #0.2m) were incurred for redundancy and restructuring costs. Profit before tax increased 62% to #4.2m (2006: #2.6m) after net interest costs of #0.4m (2006: #0.1m) The key performance indicators used by the Board to measure the success of the business are the levels of operating margins, the level of recurring revenues, staff utilisation and cash generation, each of which has met or exceeded our expectations as indicated by the numbers in this report. Earnings per share and dividends Basic earnings per share rose 33% to 19.2p (2006: 14.4p). Adjusted earnings per share, before amortisation, share based payments and exceptional costs, increased 46% to 25.9p (2006: 17.8p). An interim dividend of 1.8p per share (2006: 1.5p) was paid on 10 May 2007, and subject to shareholder approval, a final dividend of 3.4p per share will be paid on 19 October 2007 to shareholders on the register at close of business on 28 September 2007. This will make a total dividend of 5.2p (2006: 4.0p) per share, an increase of 30% over the prior year. Acquisitions The Company completed the acquisition of four businesses during the year for a total consideration of #31.0m, funded by the issue of 3,750,505 shares and #23.0m in cash. In May 2007, the company placed 4,423,077 shares at 260p per share, raising #11.0m net of expenses. None of the acquisitions completed in the year included earn-out arrangements, allowing us the flexibility to manage and integrate the businesses as required. The acquisitions contributed #6.1m to revenues and #1.2m to profit before tax after allocation of group overheads. On 19 July 2007 the company acquired Centric Networks Limited for a total consideration of up to #6.4m. The details of this and the acquisitions made during the financial year are included in notes 6 and 8. Cash flow and net debt Net debt at the year end was #6.6m. As a result of significant tax payments and the movements in working capital the business generated #2.0m (2006: #2.0m) from operations. In working capital, the movement was significantly impacted where one large receivable was paid post 31 May 2007. Net interest payments of #0.4m were made in the year, with interest covered more than 10 times on an annualised basis by earnings before interest, tax and amortisation. Capital structure and treasury policy The group finances its operations through a mixture of cash generation and related retained profit, and a mixture of medium and long term bank facilities with Barclays Bank PLC, to ensure that sufficient liquidity is available to meet its foreseeable funding requirements. The Group's facilities are floating rate and it uses interest rate instruments to hedge its interest rate risk on borrowings where appropriate. The group had committed borrowing facilities of #9.5m at the 31 May 2007, comprising a #2.5m long-term loan facility and #7m revolving credit facility. #9.5m was drawn under these facilities at the year end and a further #4m was committed post year end and drawn on 19 July 2007 to help finance the acquisition of Centric Networks Limited. Cash balances at the year end were #2.8m and Centric Networks Limited had cash balances on acquisition of #1.4m. In June 2007, #4.0m of the group's interest rate risk was hedged for the period to June 2010. Taxation An effective current tax rate of 27.6% (2006: 24.9%) reflected positive benefits from the utilisation of losses, allowable purchased goodwill and the exercise of share options qualifying for taxation relief. The Group has #0.4m (2006: #0.8m) of tax losses available. Deferred tax arose on share based payments and amortisation of intangibles resulting in a reduction in the income statement tax charge of #0.3m (2006: #0.1m). Principal risks and uncertainties Maxima is exposed to significant risks and uncertainties, although these are not considered to be any more severe than for comparable quoted companies pursuing a similar strategy. Formal risk analysis, review and control is a board level activity which also flows down to day to day operations through our ISO 9001 accredited quality processes. The principal risks have been analysed as: Strategy: Market conditions are subject to long term trends and disruptive changes. Our plans are designed to respond to these changes whilst having the flexibility to take advantage of opportunities created by disruptive events. Acquisitions: Acquisitions offer the opportunity to achieve rapid growth, particularly into a new area, but are inherently risky. We minimise this risk by carefully screening targets against tested criteria, comprehensive due diligence, pricing the acquisition to reflect these risks, thorough integration planning and meticulous execution of these plans. Staff: Maxima is a services business and relies heavily on having a skilled and experienced workforce at all levels matched to our clients' needs. We pay close attention to career appraisal, development and training. We also offer competitive remuneration packages including share option schemes, appropriate tools and good working conditions. This minimises staff attrition which we believe is below the sector average. We also have an excellent record of staff continuity post acquisitions. Clients: Maxima's large client base, many of whom have been with us for many years is a strength, but could easily be eroded if service levels and value were not maintained. A broad spread of clients across several market sectors mitigates the risk of adverse conditions in any one sector. There are no clients upon which the Group is critically dependent, the top ten clients representing some 35% of revenues in the year to 31 May 2007. The very high levels of recurring revenues and repeat business and low attrition rates are evidence of our success. Suppliers: Maxima relies on technology from partners for most of the solutions and services we sell. We are therefore dependent upon the quality of this technology and our ability to negotiate good terms and maintain good relationships with these partners. We work with world-class technology partners and invest heavily in maintaining good relationships with them, principally by selling substantial amounts of their technology. We have also spread our risks by working with several of the main software firms reducing the potential impact should one of these partners change its policies or let us down. Business continuity: Maxima's computing and communications infrastructure is integrated but distributed across its office estate providing resilience. (This was seriously tested during the July 2007 floods when our main Cheltenham site lost water supplies for more than a week, coupled with a threatened loss of power and communications. Staff were able to work uninterrupted using back-up facilities on other sites and an uninterrupted service was delivered to all our clients). Financial: Maxima has some exposure to credit risk as well as interest and exchange rate fluctuation. Credit checks are carried out before bidding for work with new clients and outstanding debt is checked before taking significant additional business from existing clients; we also employ qualified and experienced credit control staff. Borrowings are kept to modest levels and the board reviews performance against bank covenants monthly. Interest and exchange rate hedging/swaps are employed as appropriate. Internal controls and approval levels are documented and enforced. International Financial Reporting Standards (IFRS) Maxima has chosen to adopt International Financial Reporting Standards, as adopted by the European Union this year, one year earlier than required. The date of transition is 1 June 2005 and the opening balance sheet at that date and the comparative figures for the year ended 31 May 2006 have been restated under IFRS. IFRS differs from UK GAAP in a number of areas and this has resulted in some changes to Maxima's previously reported figures. The key changes are: * Non-amortisation of goodwill * The treatment under IFRS of the acquisition of Azur Holdings Limited by Maxima Holdings plc as a reverse acquisition. * The recognition of intangible assets on the acquisition of businesses and their amortisation * The inclusion of a fair value charge in relation to employee share based benefit schemes The change to IFRS did not impact on the operational performance of the business nor did it impact cash flow. Linda Andrews Finance Director 13 August 2007 CONSOLIDATED INCOME STATEMENT Year ended 31 May 2007 2007 2006 #000 #000 ______________________________________________________________________________ Revenue 31,767 19,132 Cost of sales (7,838) (4,142) ______________________________________________________________________________ Gross profit 23,929 14,990 Administrative expenses (17,677) (11,635) ______________________________________________________________________________ Amortisation of intangibles (1,426) (341) Share based payments (134) (73) Redundancy and re-organisation costs (87) (236) ______________________________________________________________________________ Operating profit 4,605 2,705 Finance costs (507) (229) Finance income 84 156 ______________________________________________________________________________ Profit before income tax 4,182 2,632 Taxation (822) (536) ______________________________________________________________________________ Profit for the year attributable to equity holders 3,360 2,096 ______________________________________________________________________________ Earnings per share - total and continuing Basic 19.2p 14.4p Diluted 18.7p 14.1p ______________________________________________________________________________ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the year ended 31 May 2007 2007 2006 #000 #000 ______________________________________________________________________________ Profit for the year 3,360 2,096 Foreign translation gain 35 7 ______________________________________________________________________________ Total recognised income and expense for the year attributable to shareholders 3,395 2,103 ______________________________________________________________________________ MAXIMA HOLDINGS plc CONSOLIDATED BALANCE SHEET At 31 May 2007 2007 2006 #000 #000 ______________________________________________________________________________ Assets Non-current assets Property, plant & equipment 943 556 Goodwill 34,689 15,270 Other intangible assets 10,535 3,315 ______________________________________________________________________________ Total intangibles 45,224 18,585 ______________________________________________________________________________ Total non-current assets 46,167 19,141 ______________________________________________________________________________ Current assets ______________________________________________________________________________ Inventory 106 27 Trade and other receivables 11,153 6,359 Short term investments - 23 Cash and cash equivalents 2,861 3,006 ______________________________________________________________________________ Total current assets 14,120 9,415 ______________________________________________________________________________ Total assets 60,287 28,556 ______________________________________________________________________________ Liabilities Current liabilities Trade and other payables (3,831) (1,559) Deferred income (9,493) (7,045) Borrowings (776) (700) Accruals (2,446) (2,142) Current tax liabilities (230) (1,132) ______________________________________________________________________________ Total current liabilities (16,776) (12,578) ______________________________________________________________________________ Non-current liabilities Borrowings (8,790) (5,450) Finance leases (40) - Deferred tax (2,994) (789) Long term provisions (325) (325) ______________________________________________________________________________ Total non-current liabilities (12,109) (6,564) ______________________________________________________________________________ Total liabilities (28,885) (19,142) ______________________________________________________________________________ Net assets 31,402 9,414 ______________________________________________________________________________ Equity attributable to equity holders of the parent Share capital 244 160 Reverse acquisition reserve (9,180) (9,180) Share premium account 28,521 17,270 Capital redemption reserve 50 50 Merger reserve 9,559 1,766 Currency translation reserve 42 7 Retained earnings 2,166 (659) ______________________________________________________________________________ Total equity 31,402 9,414 ______________________________________________________________________________ CONSOLIDATED CASH FLOW STATEMENT Year ended 31 May 2007 2007 2006 ______________________________________________________________________________ #'000 #'000 Operating activities Operating profit 4,605 2,705 Adjustments for: Depreciation charge 334 180 Share based payment expense 134 73 Amortisation of intangibles 1,426 341 ______________________________________________________________________________ Operating cash flows before movements in working capital 6,499 3,299 Movement in inventories (116) (38) Movement in receivables (1,938) (99) Movement in payables (200) (927) Taxation paid (2,203) (193) ______________________________________________________________________________ Net cash from operating activities 2,042 2,042 ______________________________________________________________________________ Cash flows from investing activities: Interest received 84 156 Interest paid (430) (139) Sale of short term investments 23 - Purchase of property, plant & equipment (236) (195) Proceeds from sale of property, plant & equipment 17 25 Acquisition of subsidiaries (net of cash acquired) (15,209) (12,232) Development expenditure (59) (48) ______________________________________________________________________________ Net cash used in investing activities (15,810) (12,433) ______________________________________________________________________________ Cash flows from financing activities: Proceeds from long term borrowings 4,000 6,500 Repayment of long term borrowings (700) (350) Repayment of finance leases (69) Dividends paid (734) (469) Proceeds from issue of shares 11,126 4,791 ______________________________________________________________________________ Net cash from financing activities 13,623 10,472 ______________________________________________________________________________ Net decrease in cash & cash equivalents (145) 81 Cash and cash equivalents at beginning of period 3,006 2,925 ______________________________________________________________________________ Cash and cash equivalents at end of period 2,861 3,006 ______________________________________________________________________________ Notes 1. Basis of preparation This preliminary statement was approved by the directors on 13th August 2007. The financial information set out above does not constitute the company's statutory financial statements for the year ended 31 May 2007 but is derived from those financial statements. The comparative figures are those of the financial statements for the period ended 31 May 2006. The report of the auditors was unqualified and did not contain a statement under s.237 (2) or (3) Companies Act 1985. The statutory financial statements for the year ended 31 May 2007 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The financial information contained in this Preliminary Statement does not constitute statutory accounts as defined by Section 240 of the Companies Act. The Group's financial statements have been prepared in accordance with International Financial Reporting Standards. 2. Segmental analysis Segment information is presented in respect of the Group's business and geographical segments. The primary format, business segments, is based on the Group's management and internal reporting structures. Revenues are attributed to one division or another and there is no significant cross charging between divisions. At 31 May 2007 the Group is primarily organised into two main business segments. Maxima Solutions sells, provides consultancy and supports a range of enterprise applications, both of its own software and that of third parties. Maxima Managed Services provides managed services and support around infrastructure services such as security, networks and database administration. There are no other services provided by the Group which would constitute a separately disclosable segment. Segment results and assets and liabilities include items directly attributable to a segment. Unallocated items comprise mainly tax related items. _______________________________________________________________________________ Year ended 31 May 2007 Maxima Maxima Managed Solutions Services Total ________________________________________ #000 #000 #000 _______________________________________________________________________________ Revenue 18,796 12,971 31,767 _______________________________________________________________________________ Operating profit before amortisation 3,699 2,332 6,031 Amortisation of intangibles (437) (989) (1,426) _______________________________________________________________________________ Operating profit 3,262 1,343 4,605 Net financial expense (423) ________ Profit before income tax 4,182 Income tax expense, net (822) ________ Profit for the period 3,360 _______________________________________________________________________________ Balance Sheet Assets Segment assets 18,763 38,592 57,355 Unallocated assets 2,932 _______________________________________________________________________________ Consolidated total assets 60,287 _______________________________________________________________________________ Liabilities Segment liabilities 10,319 5,101 15,420 Unallocated liabilities 13,465 _______________________________________________________________________________ Consolidated total liabilities 28,885 _______________________________________________________________________________ Capital expenditure 2,976 6,406 9,382 Depreciation 240 94 334 _______________________________________________________________________________ _______________________________________________________________________________ Year ended 31 May 2006 Maxima Maxima Managed Solutions Services Total ________________________________________ #000 #000 #000 _______________________________________________________________________________ Revenue 15,314 3,818 19,132 _______________________________________________________________________________ Operating profit before amortisation 2,079 967 3,046 Amortisation of intangibles (110) (231) (341) _______________________________________________________________________________ Operating profit 1,969 736 2,705 Net financial income (73) ________ Profit before income tax 2,632 Income tax expense, net (536) ________ Profit for the period 2,096 _______________________________________________________________________________ Balance Sheet Assets Segment assets 10,119 14,375 24,494 Unallocated assets 4,062 _______________________________________________________________________________ Consolidated total assets 28,556 _______________________________________________________________________________ Liabilities Segment liabilities 8,979 1,523 10,502 Unallocated liabilities 8,640 _______________________________________________________________________________ Consolidated total liabilities 19,142 _______________________________________________________________________________ Capital expenditure 1,138 2,924 4,062 Depreciation 161 19 180 _______________________________________________________________________________ 3. Tax on profit on ordinary activities 2007 2006 #000 #000 _______________________________________________________________________________ The tax charge/(credit) represents: Current tax 1,153 655 Adjustments in respect of prior periods (1) - _______________________________________________________________________________ Total current tax 1,152 655 Deferred tax - origination and reversal of timing differences (330) (119) _______________________________________________________________________________ Taxation 822 536 _______________________________________________________________________________ UK tax is calculated at 30 per cent (2006: 30%) of taxable profit. Overseas tax is calculated at the rates ruling in the relevant countries. The total tax charge for the year represents an effective rate of 19.6 per cent (2006: 20 per cent). The tax charge is explained as follows: 2007 2006 #000 #000 _______________________________________________________________________________ Profit before tax 4,182 2,632 Profit on ordinary activities multiplied by standard rate of corporation tax of 30% 1,255 790 Effect of: Expenses not deductible for tax purposes (145) (89) Tax effect of share-based remuneration (86) (147) Utilisation of tax losses not recognised for deferred tax (87) (39) Movement in other deferred tax not recognised (62) 21 Differences in tax rates (51) - Marginal relief (1) - Prior year adjustments in relation to subsidiary undertakings (1) - _______________________________________________________________________________ Charge for period 822 536 _______________________________________________________________________________ 4. Dividends on shares classed as equity 2007 2007 2006 2006 pence per share #000 pence per share #000 _______________________________________________________________________________ Paid during the year Final dividend for prior year 2.5 400 1.5 235 Interim dividend for current year 1.8 334 1.5 234 _______________________________________________________________________________ 4.3 734 3.0 469 _______________________________________________________________________________ The directors propose that a final dividend of 3.4p will be paid to the shareholders on 19 October 2007. The dividend is subject to the approval of shareholders at the Annual General Meeting and has not been included as a liability in these accounts. The total estimated cost of the dividend to be paid is #0.8m. 5. Earnings per share The calculation of basic earnings per share is based on the earnings attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the year. The calculation of diluted earnings per share is based on earnings per share attributable to ordinary shareholders and the weighted average number of ordinary shares that would be in issue, assuming conversion of all dilutive potential ordinary shares into ordinary shares. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. 2007 2006 #000 #000 _______________________________________________________________________________ Earnings Net profit after tax for the year attributable to equity holders 3,360 2,096 _______________________________________________________________________________ Weighted average number of ordinary shares No. No. 000 000 For basic earnings per share 17,525 14,550 Dilutive share options 406 286 _______________________________________________________________________________ For diluted earnings per share 17,931 14,836 _______________________________________________________________________________ Basic earnings per share 19.2p 14.4p Fully diluted earnings per share 18.7p 14.1p _______________________________________________________________________________ The directors believe that, in addition to the statutory figures, profit and earnings per share figures adjusted for the amortisation of intangibles, share based payments and restructuring costs represents a more consistent measure of underlying performance. A reconciliation of the statutory profit to these profit figures and the resultant earnings per share figures are: 2007 2006 #000 #000 _______________________________________________________________________________ Operating profit 4,605 2,746 Share-based payments 134 73 Amortisation of intangibles 1,426 341 Redundancy and re-organisation costs 87 236 _______________________________________________________________________________ Adjusted operating profit 6,252 3,396 Net interest (423) (73) _______________________________________________________________________________ Adjusted profit on ordinary activities before tax 5,829 3,323 Tax on profit on ordinary activities (822) (536) Tax on share-based payments, amortisation and restructuring costs (475) (190) _______________________________________________________________________________ Adjusted profit after tax 4,532 2,597 _______________________________________________________________________________ Adjusted basic earnings per share 25.9p 17.8p Adjusted diluted earnings per share 25.3p 17.5p _______________________________________________________________________________ 6. Acquisitions The Group acquired 100% of the issued ordinary share capital of four companies during the year. The book and fair values of the companies acquired were as follows: Cognition Maxima Services SevenThree 3Net Ireland Fair Fair Fair Fair Book Value Fair Book Value Fair Book Value Fair Book Value Fair Value Adj. value Value Adj. value Value Adj. value Value Adj. value Total #000 #000 #000 #000 #000 #000 #000 #000 #000 #000 #000 #000 #000 _____________________________________________________________________________________________________________________ Intangible Assets - 2,237 2,237 - 1,236 1,236 - 162 162 - 4,954 4,954 8,589 Property, plant & equipment 339 - 339 43 - 43 10 - 10 108 - 108 500 Deferred tax - - - - - - - - - - - - - Trade and other receivables 1,085 (118) 967 821 - 821 204 - 204 889 - 889 2,881 Cash & cash equivalents 3,274 - 3,274 457 - 457 26 - 26 4,059 - 4,059 7,816 Trade and other payables (1,075) (288) (1,363) (643) (20) (663) (164) - (164) (512) - (512) (2,702) Deferred income (1,350) - (1,350) (167) - (167) (237) - (237) (1,374) - (1,374) (3,128) _____________________________________________________________________________________________________________________ Net assets 4,104 1,727 1 8,124 13,956 Goodwill 3,443 2,433 1,261 9,933 17,060 _______ _______ _______ _______________ Cost of acquisition 7,547 4,160 1,262 18,057 31,026 _____________________________________________________________________________________________________________________ Net outflow arising on acquisition: Shares 2,200 1,344 456 4,000 8,000 _________________________________________________________________________________ Cash 5,200 2,758 777 14,000 22,735 Costs 147 58 29 56 290 Accrued consideration - - - - - Cash and cash equivalents acquired (3,274) (457) (26) (4,059) (7,816) _____________________________________________________________________________________________________________________ Net cash outflow 2,073 2,359 780 9,997 15,209 _____________________________________________________________________________________________________________________ No. of share issued 1,365,612 738,648 175,115 1,471,130 Date of acquisition 06/10/2006 11/11/2006 06/03/2007 24/05/2007 _____________________________________________________________________________________________________________________ The fair value of the shares issued was based on the average mid-market price for the five days prior to the completion of the acquisition. Cognition Solutions Limited Cognition provides ERP software and services to the construction market. The goodwill arising on the acquisition reflects the profitability of the business and the specialised, industry specific knowledge of the staff to support the product going forward. The fair value adjustments bring the bad debt provisioning and provisions for contract over-runs in line with Maxima's policies. The intangible fair value adjustment reflects the customer relationships the company has. Maxima Services Ireland Limited (formerly IIL (Intertech Solutions Ireland) Limited) Intertech provides managed services and related products around Citrix technologies. The goodwill arising on the acquisition reflects the relationships senior management have with key partners, the quality and experience of the staff acquired and the expansion of the Group's geographical coverage. The fair value of the intangibles is based on the order backlog for contracts with over 12 months remaining and the value of the relationships with customers. SevenThree Limited SevenThree is a specialist provider of Microsoft Customer Relationship Management software to the construction industry. The goodwill arising on the acquisition recognises the specialised, industry specific knowledge of the staff and the benefit to the Group in merging this construction industry specific software set with that of the Cognition Solutions construction industry solutions. Intangibles have been valued on the basis of the customer relationships that SevenThree has built up. The Directors have reviewed the carrying value of the assets acquired of SevenThree and have determined that no other fair value adjustments are required. 3net Limited 3net is an infrastructure and networking services provider without a specific vertical market. Due to the timing of the acquisition of 3net Limited, the Directors continue to review the carrying value of the assets and liabilities acquired. These fair values are therefore provisional. The fair value of the intangibles is based on the order backlog for contracts with over 12 months remaining and the value of the relationships with customers. The goodwill arising on the acquisition recognises that 3net completes Maxima's offering and provides Maxima's customers with a complete technology offering. Deferred Considerations An amount of Euro30,000 was paid during the year in connection with a deferred consideration on the acquisition of the trade and assets of Seabrook Research Limited acquired in the financial year to 31 May 2006. This resulted in #27,000 being credited back to goodwill. 7. Called up share capital and capital reserves 31 May 2007 31 May 2006 No. of shares #000 No. of shares #000 Authorised Ordinary shares of 1p each 95,000,000 950 95,000,000 950 Redeemable deferred shares of 1p each - - 5,000,000 50 ______________________________________________________________________________ 95,000,000 950 100,000,000 1,000 ______________________________________________________________________________ Called up, allotted and fully Number of Ordinary Share Merger paid Ordinary shares of 1p Shares Shares Premium Reserve Total each #000 #000 #000 #000 ______________________________________________________________________________ At 1 June 2005 11,939,281 119 12,510 - 12,629 Issue of shares (net of expenses) 4,067,819 41 4,760 1,766 6,567 ______________________________________________________________________________ At 31 May 2006 16,007,100 160 17,270 1,766 19,196 Exercise of employee share options 250,000 2 273 - 275 Issue of shares (net of expenses) 8,173,582 82 10,978 7,793 18,853 ______________________________________________________________________________ At 31 May 2007 24,430,682 244 28,521 9,559 38,324 ______________________________________________________________________________ The merger reserve arises from the issue of shares as part of consideration for the acquisitions completed by the Group. The authorised and issued redeemable deferred shares were cancelled during the year. The Group issued the following ordinary shares during the year as part consideration for the acquisition of 100% of the acquired company: Acquisition Date of Allotment Number of shares ___________________________________________________________________________ Cognition Solutions Limited 13/10/2006 1,365,612 Maxima Services Ireland Limited (formerly IIL (Intertech Ireland Solutions) Limited) 17/11/2006 738,648 SevenThree Limited 19/03/2007 175,115 3net Limited 24/05/2007 1,471,130 A further 4,423,077 shares were issued on 24 May 2007 through a placing of shares. The ordinary shares issued are equity shares and each have one vote per share. The redeemable deferred shares are equity shares which carry no entitlement to dividend and do not confer the right to vote. Share options The Company has granted options to directors and employees. The exercise price of the granted options is equal to the market price of the shares on the date of grant. Options are exercisable after three years only if the target for Earnings per share growth, or sales targets are met. Risk At 1 Granted Lapsed Exercised Expected Expected free Dividend June during during during At 31 May Dates Exercise volatility life rate yield Date of 2006 year year year 2007 exercisable price % (years) % % Grant ________________________________________________________________________________________________________________________ 24 November 803,834 - (23,834) 250,000 530,000 November 2007 1.10 35 3.75 4.4 1.7 2004 - November 2014 ________________________________________________________________________________________________________________________ 28 August - 327,744 (65,591) - 262,153 August 2009- 1.55 30 3.75 4.75 2.5 2006 August 2016 ________________________________________________________________________________________________________________________ 22 - 375,705 (3,657) - 372,048 September 1.292 30 3.96 4.75 2.5 September 2009-March 2006 2012 ________________________________________________________________________________________________________________________ Weighted #1.10 #1.412 #1.424 #1.10 #1.26 average price Out of the 1,164,201 (2006: 803,834) outstanding options, no share options were exercisable at 31 May 2007. The weighted average value of options granted during the year determined using the Black Scholes valuation model was #0.49 per option (2006: #0.28). The volatility assumption is based upon historic share price volatility in the software sector. The weighted average share price of options exercised during the year is #2.295 (2006: nil). 8. Post balance sheet acquisitions The Group acquired 100% of the issued ordinary share capital of Centric Networks Limited a networking and infrastructure based services business after the balance sheet date. Due to the recent completion of the acquisition, the fair values of the significant assets and liabilities assumed are preliminary and pending finalisation of valuations. Book and Fair value #000 ______________________________________________________________________________ Intangible assets - Property, plant & equipment 156 Deferred tax - Trade and other receivables 687 Cash & cash equivalents 1,455 Trade and other payables (555) Deferred income (849) ______________________________________________________________________________ Net assets 894 Goodwill 5,547 ________ Cost of acquisition 6,441 ______________________________________________________________________________ Net outflow arising on acquisition: Shares 1,500 Accrued consideration 500 ________ Cash 4,400 Costs 41 Cash and cash equivalents acquired (1,455) ______________________________________________________________________________ Net cash outflow 2,986 ______________________________________________________________________________ No. of shares issued 485,123 Date of acquisition 19/07/2007 ______________________________________________________________________________ 9. Annual report and accounts A copy of the Annual Report and Accounts for the year ended 31 May 2007 will be sent to shareholders and copies will be available from the Company's registered office at Cotswold Court, Lansdown Road, Cheltenham GL50 2JA or by visiting our website at www.maxima.co.uk The annual general meeting of the Company will be held at the offices of Olswang, 90 High Holborn, London WC1V 6XX on 27 September 2007 at 9.00am. This information is provided by RNS The company news service from the London Stock Exchange END FR GUUCURUPMGRW
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