RNS Number:1196S
XKO Group PLC
17 November 2003
FOR IMMEDIATE RELEASE 17 November 2003
XKO GROUP plc
INTERIM RESULTS ANNOUNCEMENT FOR THE
SIX MONTHS ENDED 30 SEPTEMBER 2003
XKO Group, the business management software and IT services provider to the mid
range SME market announces its interim results for the six months ended 30
September 2003.
KEY POINTS
* Turnover up 5% from #21.6 million to #22.7 million
* Adjusted operating margin* up from 5.9% to 7.2%
* Adjusted pre tax profit* up 28% from #1.2 million to #1.5 million
* Adjusted EPS* up 24% from 3.8p to 4.7p
* Dividend up 15% to 0.23p per share
*Adjusted amounts are calculated before goodwill (#1,539,000), exceptional items
(#401,000) and LTIP costs (#64,000). The statutory pre tax loss after goodwill,
exceptional items and LTIP costs was #480,000.
Commenting on the results, Simon Beart, Chief Executive said:
"It is encouraging that recent trading has shown some improvement in parts of
the Group, particularly in our professional services area, whilst activity
elsewhere has remained generally stable. We are actively seeking acquisitions
to expand the Group's customer base and increase recurring revenues".
FOR FURTHER INFORMATION, PLEASE CONTACT:
XKO Group plc:
Brian Beverley, Chairman 07770 680085
Simon Beart, Chief Executive 07710 444370
Rob Kimber, Group Finance Director 01932 575208
Buchanan Communications:
Richard Darby 020 7466 5000
Nicola Cronk
NOTES TO EDITORS
XKO is a leading supplier of business management software and IT infrastructure
services to the mid range SME market under the "XKO OneStop" brand.
SMEs require technology solutions to solve increasingly complex business issues,
ideally from one supplier. XKO, in recognising this need is a comprehensive "
one stop shop" provider of software and services to the building supply chain
market, in which it is dominant, as well as to the travel, distribution and
financial services markets.
The customer base comprises approximately 2,500 UK businesses served by nearly
500 employees operating out of 10 UK locations.
CHAIRMAN'S STATEMENT
It gives me pleasure to report that the Group has enjoyed another period of
growth with adjusted profits (before goodwill, exceptionals and LTIP costs)
showing strong progress at the operating and pre tax levels.
Turnover grew by 5 per cent. despite flat market conditions suggesting out
performance by XKO and confirming the diversity and strength of our broad
customer base. Adjusted profit before tax increased by 28 per cent. to #1.5
million resulting in a highly satisfactory growth in adjusted earnings per share
of 24 per cent. The Board is hopeful of further progress and is accordingly
proposing an interim dividend of 0.23p representing an increase of 15 per cent.
over the previous, comparable period. The statutory loss before tax was
#480,000.
During the period we acquired The Control Group ("Control") for a cash price of
#1.2 million and we have subsequently provided for #0.3 million of consequential
reorganisation costs to recognise the costs of reducing Control's overheads and
the integration of the unit into our divisional structure. Control has been
immediately reorganised onto a profitable basis and is currently expected to
meet the profit expectations at the time of the acquisition.
As a consolidator in the business management software and services arena,
focusing primarily on mid to high level SMEs, we expect to make further similar
acquisitions. Indeed, the Board continues to examine a number of opportunities,
concentrating on identifying units that can broaden our customer base and
increase recurring revenues. XKO's market is served by an excess of IT
suppliers with small operations. As one of the few large scale providers in
this market, XKO can improve the performance of acquired units by delivering
leading products to customers whilst offering customers the certainty of long
term support and product development. Acquisitions therefore represent good
opportunities for the Group at this stage of its development.
The period has also seen further improvements in our management teams at the
unit level, although sadly Rob Kimber, our Group FD, will be leaving us in due
course. Rob has had a successful and busy period with the Group but in order to
attend to pressing family responsibilities has announced his intention to take a
period of retirement when a suitable replacement can be found. We are obviously
sad to see Rob leave and a replacement will be identified in due course.
Recent trading levels have shown some improvement in parts of the Group,
particularly in our web services and e-Commerce teams, whilst elsewhere activity
has generally remained stable. The Board views these trends as encouraging and
anticipates favourable results from existing operations whilst actively seeking
further acquisitions to enhance long term growth.
Brian C. Beverley
Chairman
CHIEF EXECUTIVE'S REVIEW
Group strategy
XKO Group is a nationwide supplier of business management software and IT
infrastructure services. We have a large customer base extending to some 2,500
customers, generating high levels of contracted, services revenues. When
evaluating IT spend, customers in our target markets seek to meet their IT needs
by working with substantial, well funded and branded suppliers capable of
delivering long term support. XKO enjoys these competitive advantages. As the
Group continues to expand, our market positioning becomes increasingly
attractive to customers.
Trading review
The period has witnessed improved demand for XKO's services particularly in the
professional services area, delivering e-Commerce and web services. This demand
has helped to secure good utilisation rates and organic profit growth in a
market where new licence business remains at reduced levels. Areas of success
include our building supply chain unit, which has doubled in scale since the
acquisition of a competitor in June 2002 and now offers one of the most popular
and highly respected solutions in its vertical market. We have had good success
with the OneStop offering in this vertical market where our customers' full IT
needs are met. In the second half of the year we will also be marketing an
attractively priced ASP option.
Our other vertical markets include electrical assembly, specialist distribution
and travel. These units have already benefited from new management and will
continue to take market share. We also have successful units dedicated to the
supply of specialist IT support and infrastructure solutions to the financial
services markets. These units enjoy high market share and a reputation for
professional delivery. The teams have performed well yet again and are highly
experienced and this is reflected in the excellent performance for the half.
The period also includes the initial contribution from The Control Group
acquired in April 2003. Control is a business software supplier with comparable
customers to those already within the Group. The acquisition of Control was
consistent with our strategy of expanding the Group customer base, increasing
recurring revenues and further consolidating the market. Control was rapidly
integrated within the business software division and has traded profitably and
to expectation from the date of acquisition. Senior management was replaced
immediately after completion. Control's customers have responded positively to
improved service, delivered by a stable public company, working through
professional managers.
We will look to replicate this acquisition model as we continue to search
actively for similar opportunities where we can exploit our proven management
skills.
Simon D. Beart
Chief Executive
FINANCE DIRECTOR'S REVIEW
The Group has made a good start to the year recording an adjusted profit before
tax (before goodwill, exceptionals and LTIP costs) of #1.5 million (2002/03:
#1.2 million) on turnover of #22.7 million
(2002/03: #21.6 million). The statutory pre tax loss for the period was
#480,000. An analysis of the statutory loss is set out in note 4.
The results include a six month contribution from The Control Group which was
acquired on 4 April 2003. The net consideration for the Control acquisition
will be approximately #1.6 million including professional fees. This has been
funded by a revised term loan facility of #3.4 million and a revised overdraft
facility of
#3.0 million. The term loan has already been reduced to #2.65 million.
Net debt was #2.1 million as at 30 September 2003, as compared to #675,000 at 31
March 2003.
The Group requires limited capital employed and has again generated a high
profit and cash return on invested capital. For the six month period, adjusted
operating profit before goodwill amortisation, exceptionals and LTIP costs was
#1.6 million, equivalent to an annualised operating ROCE of 230 per cent. as
compared to 86 per cent. in the year ended 31 March 2003. Free cash flow was
#1,192,000 after capital expenditure prior to the cash funding of exceptional
costs, a free cash ROCE of 167 per cent. Cash generation reflects highly
satisfactory debtor control. Debtor days were maintained at 42 whilst
conversion of operating profit into operating cash before exceptionals was 80
per cent.
Goodwill arising from the Control acquisition will be approximately #2.4
million. This amount will be amortised over the two accounting years ending
March 2005 in line with the Group accounting policy and industry trends. The
anticipated charge for the current accounting year is #1.2 million of which
#600,000 has been charged in the first half.
The Board is proposing an interim dividend of 0.23 pence per share payable on 20
February 2004 to all shareholders on the register as at 30 January 2004 (2002/
03: 0.2 pence).
Robert Kimber
Group Finance Director
17 November 2003
Consolidated Profit and Loss Account
For the six months ended 30 September 2003
Audited
6 months 6 months 12 months
ended ended ended
Continuing 30 September 30 September 31 March
activities Acquisition 2003 2002 2003
#'000s #'000s #'000s #'000s #'000s
Notes
Turnover 21,836 858 22,694 21,614 43,627
Operating profit before amortisation of
goodwill and exceptional items 1,509 133 1,642 1,270 2,607
Amortisation of goodwill (934) (605) (1,539) (395) (1,275)
Exceptional and reorganisation costs (79) (322) (401) (556) (1,617)
Debtor recovery - - - 89 -
Long Term Incentive Plan costs (64) - (64) (75) (89)
Operating (loss)/profit 432 (794) (362) 333 (374)
Net interest payable (118) (76) (171)
(Loss)/profit on ordinary activities (480) 257 (545)
before taxation
Tax on (loss)/profit on ordinary 5 (228) (152) (247)
activities
(Loss)/profit on ordinary activities (708) 105 (792)
after taxation
Dividends 6 (64) (55) (193)
Retained (loss)/profit for the period (772) 50 (985)
Adjusted earnings per ordinary share 4 4.7p 3.8p 8.9p
Basic and diluted (loss)/earnings per
share 4 (2.6p) 0.4p (2.9p)
Dividend per share 6 0.23p 0.2p 0.7p
Consolidated Balance Sheet
As at 30 September 2003
Audited
30 September 30 September 31 March
2003 2002 2003
#'000s #'000s #'000s
Fixed assets
Intangible assets 4,285 3,955 3,405
Tangible assets 354 706 423
4,639 4,661 3,828
Current assets
Stocks 935 1,050 711
Debtors 6,986 8,165 6,747
Cash at bank and in hand 826 898 1,325
8,747 10,113 8,783
Creditors: amounts falling due within one year (10,559) (10,621) (9,979)
Net current liabilities (1,812) (508) (1,196)
Total assets less current liabilities 2,827 4,153 2,632
Creditors: amounts falling due after more than one year (1,107) (2,225) (1,159)
Provisions for liabilities and charges (517) - (633)
Deferred income (6,928) (5,680) (5,857)
Net liabilities (5,725) (3,752) (5,017)
Capital and reserves
Called up share capital 7,212 7,209 7,212
Shares to be issued 303 472 239
Share premium account 9,611 9,611 9,611
Profit and loss account (22,851) (21,044) (22,079)
Shareholders'deficit (5,725) (3,752) (5,017)
Equity (6,025) (4,052) (5,317)
Non Equity 300 300 300
Shareholders'deficit (5,725) (3,752) (5,017)
Consolidated Cash Flow Statement
For the six months ended 30 September 2003
Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2003 2002 2003
Notes #'000s #'000s #'000s
Cash inflow from operating activities 2 539 1,068 2,928
Returns on investments and servicing of finance (120) (48) (152)
Taxation (166) (54) (85)
Net capital expenditure (83) (99) (40)
Acquisitions 7 (1,930) (2,197) (3,002)
Net cash acquired with subsidiaries 361 - -
Equity dividends paid - (135) (190)
Net cash outflow before financing (1,399) (1,465) (541)
Financing
Issue of ordinary share capital - 155 158
Movement in debt financing 900 1,286 786
(Decrease)/increase in cash in the period (499) (24) 403
Notes
1. Reconciliation of net cash flow to movement in net debt
Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2003 2002 2003
#'000s #'000s #'000s
(Decrease)/increase in cash in the period (499) (24) 403
Cash flow from increase in debt financing (900) (1,286) (786)
Movement in net debt in the period (1,399) (1,310) (383)
Net debt at start of period (675) (292) (292)
Net debt at end of period (2,074) (1,602) (675)
2. Reconciliation of operating (loss)/profit to net cash flow from operating
activities
Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2003 2002 2003
#'000s #'000s #'000s
Operating (loss)/profit (362) 333 (374)
Goodwill amortisation 1,539 395 1,275
Long Term Incentive Plan costs 64 75 89
Depreciation 171 283 511
Profit/(loss) on sale of fixed assets 3 (21) (26)
Net movement in working capital (501) 3 1,453
Cash spend in respect of reorganisation provisions and accruals (375) - -
Net cash inflow from operating activities 539 1,068 2,928
3. Reconciliation of movement in shareholders' funds
Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2003 2002 2003
#'000s #'000s #'000s
(Loss)/profit for the financial period (708) 105 (792)
Dividends payable (64) (55) (193)
New share capital - 274 277
Shares to be issued 64 (78) (311)
Net (reduction)/increase in shareholders' funds (708) 246 (1,019)
Opening shareholders' funds (5,017) (3,998) (3,998)
Closing shareholders' funds (5,725) (3,752) (5,017)
4. Adjusted profit before tax and earnings per share
Adjusted profit before tax
Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2003 2002 2003
#'000s #'000s #'000s
(Loss)/profit after tax (708) 105 (792)
Tax 228 152 247
(Loss)/profit before tax (480) 257 (545)
Goodwill amortisation 1,539 395 1,275
Exceptionals 401 467 1,617
Long Term Incentive Plan costs 64 75 89
Adjusted profit before tax 1,524 1,194 2,436
Basic earnings per share
Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2003 2002 2003
In issue at end of period 27,648,314 27,634,814 27,648,314
Average number of shares in issue during period 27,648,314 27,258,916 27,386,987
Effect of dilutive potential share options 77,330 -
-
Shares used to calculate adjusted diluted
earnings per share 27,725,644 27,258,916 27,386,987
#'000s #'000s #'000s
(Loss)/profit after tax (708) 105 (792)
Consultancy start up costs - 156 238
Reorganisation costs 401 400 1,617
Debtor recovery - (89) -
Long Term Incentive Plan costs 64 75 89
Goodwill amortisation 1,539 395 1,275
Adjusted earnings 1,296 1,042 2,427
Basic (loss)/earnings per share (2.6p) 0.4p (2.9p)
Basic adjusted earnings per share 4.7p 3.8p 8.9p
Diluted adjusted (loss)/earnings per share
Diluted adjusted (loss)/earnings per share is 4.7 pence per share for the six
months to 30 September 2003.
5. Taxation
The taxation charge for the period is based upon the estimated rate for
the full year, being 15 per cent.
6. Dividends
An interim dividend of 0.23 pence per share is proposed. The dividend
will be paid on 20 February 2004 to shareholders on the register as at 30
January 2004.
7. Acquisitions
On 4 April 2003 the Group acquired The Control Group Limited and has
adopted the principles of acquisition accounting. The following adjustments
have been made to the book values to arrive at provisional fair values. Fair
values are provisional arising from the short timescale since acquisition.
Net assets at Fair value Fair value at
Acquisition Adjustments Acquisition
#'000s #'000s #'000s
Debtors 218 - 218
Cash 362 - 362
Trade creditors and accruals (293) (158) (451)
Deferred income (619) - (619)
Net liabilities (332) (158) (490)
Goodwill 2,420
Total acquisition cost, including expenses 1,930
Total cost net of cash balances acquired 1,568
8. Basis of preparation
The financial information contained in this interim report does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The interim financial information has been prepared on the basis of
the accounting policies set out in the Company's statutory accounts for the
twelve months ended 31 March 2003. The figures for the six months ended 30
September 2003 and the six months ended 30 September 2002 are neither audited
nor reviewed. The figures for the twelve months ended 31 March 2003 have been
extracted from the statutory accounts filed with the Registrar of Companies
which contained an unqualified audit report and no adverse statement under
Section 237(2) and (3) of the Companies Act 1985.
9. Interim report
Copies of this interim report are being sent to all shareholders and are
available to the public from the Company's offices at Systems House, Foundry
Court, Gogmore Lane, Chertsey, Surrey KT16 9AP. This interim release will also
be available on the Group's website www.xko.co.uk
17 November 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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