RNS Number:5930J
Chelford Group PLC
28 September 2006
FOR IMMEDIATE RELEASE 28 September 2006
Chelford Group plc
INTERIM RESULTS FOR THE 6 MONTHS TO 30 JUNE 2006
Chelford Group plc ("Chelford" or the "Group"), the specialist IT solutions
group, announces its unaudited interim results for the six months to 30 June
2006. These results are reported under IFRS.
Key points:
* The financial results for the period were:
o Revenue up 41% to #9.17m (H1, 2005: #6.49m);
o Earnings before tax and amortisation of goodwill: #453,000 (H1, 2005:
#702,000)
o Profit before tax: #231,000 (H1, 2005: #702,000); and
o Basic earnings per share before amortisation of goodwill: 4.55p (H1,
2005: 7.85p).
* Strong cash generation resulted in net cash of #1.11m (31 December 2005:
#0.87m) after providing for #0.43m in deferred consideration payments on
acquisitions.
* Results reflect a cost over-run on a fixed price contract (now
substantially completed) and delays in certain contracts moving from Q2 into
the second half of 2006.
* New customers signed in the period include Almac Sciences, Meadowbrook
Foods, LDH, Taylors of Harrogate, Henry Schien, Beam Global, Indigo
Lighthouse, Beko and Telesoft.
* New reporting structure for the enlarged business following the
acquisition of Agility Systems and Shian in 2005.
On outlook, William Birkett, Chelford's Chairman stated:
"The Board will continue to pursue organic growth and will seek further
acquisitions which fit with the Group's strategy.
"Group order intake continues to be strong, with an increase of 49% over the
same period in 2005. The Board expects revenue to grow significantly during the
current year and remains confident of the Group's future prospects."
For further information, please contact:
Trevor Lewis, Chief Executive today: 020-7367-8888
thereafter: 01256-685400
Mark Taylor, Charles Stanley 020-7149-6000
Securities
Steve Liebmann, Bankside 020-7367-8883 or 07802-888159
About Chelford
Chelford Group plc, the IT solutions group is headquartered in Basingstoke,
Hampshire and its shares are quoted on AIM ( stock code: CHR). Chelford provides
specialist systems solutions for its target markets based upon its own IPR, SAP,
Microsoft and RFID technologies.
CHAIRMAN'S STATEMENT
Introduction
The results for the six months to 30 June 2006 represent an important milestone
for Chelford. Following the acquisitions of Agility Systems and Shian which were
completed during the second half of 2005, these are the first results which
include all the Group businesses for the entire period.
The enlarged Group now operates in three principal arenas: IT solutions and
services built around its own intellectual property, SAP solutions and Microsoft
solutions. Accordingly, the results for the half year are being presented under
this new structure. Further details are provided below and full comparative
segmental information is provided in the notes on both the new and old bases.
During the half year, Chelford continued to make good progress operationally and
in increasing revenue but, as reported on 19 July 2006, the profit for the
period was held back by a significant over-run on a fixed price contract within
the SAP division (the majority of this contract has now been successfully
delivered) and delays in potential contracts moving into the second half of
2006, thereby reducing licence revenue. The Group continued its strong cash
generation.
Results and finance
The analysis of revenue and profit for the six months ended 30 June is as
follows:
2006 2005 Change
Revenue: Chelford Solutions #4.92m #3.80m 29%
Chelford SAP Solutions #3.89m #2.69m 45%
Chelford Solutions for #0.35m - -
Microsoft
Total #9.16m #6.49m 41%
Operating Chelford Solutions #0.53m #0.44m 21%
profit*:
Chelford SAP Solutions (#0.07m) #0.22m (130%)
Chelford Solutions for (#0.02m) - -
Microsoft
Total #0.44m #0.66m (34%)
Operating profit before financial income #0.22m #0.66m (66%)
* Operating profit before charging amortisation of intangibles and interest
Revenue increased 41% to #9,162,000 (H1, 2005: #6,494,000), with organic growth
accounting for 14% of this increase. Earnings before tax and amortisation of
intangibles were #453,000 (H1, 2005: #702,000). The profit before tax for the
period was #231,000 (H1, 2005: #702,000). Basic earnings per share for the
period were 1.43p (H1, 2005: 7.85p) and basic earnings per share before
amortisation were 4.55p (H1, 2005: 7.85p).
The amortisation of intangibles associated with the acquisition of Agility
Systems and Shian in 2005 was #222,000 (H1, 2005: #nil). During the period,
Chelford Solutions expensed #320,000 of research (H1, 2005: #298,000) and no
development expenditure was capitalised (H1, 2005: #355,000).
The cash balance as at 30 June 2006 was #1,111,000, against #869,000 on 31
December 2005, an increase of #242,000 after providing for deferred
consideration payments on acquisitions of #431,000. The strong cash generation
was assisted by significant maintenance billings that were invoiced and
collected in the period.
An Agility earn-out relating to 2005 performance of #431,000 was paid during the
period, out of a maximum of #500,000. Up to a further #300,000 is payable in
early 2007, based on the 2006 performance of the company. Shian's performance
during its earn-out which ended on 30 April 2006 was affected by a delay in a
major contract. As a result, the net cost of the acquisition was #1.23 million;
this compares with an agreed maximum consideration of #2.2 million, net of cash
within the company at the time of acquisition. We are pleased to report that the
delayed contract is now engaged and the business is performing in line with
Chelford's original expectations.
GROUP STRUCTURE
With Agility Systems and Shian now integrated successfully into the Group, the
opportunity is being taken to present the Group under a structure comprising
three main operating areas: Chelford Solutions, Chelford SAP Solutions and a new
company, Chelford Solutions for Microsoft.
Chelford Solutions incorporates SSI, Agility Systems and RFID Solution Centre
and focuses on enterprise solutions and services for the Food and Drink,
Chemicals and Pharmaceuticals, Mills and Metals and Transport and Logistics
markets. Chelford Solutions are based on the Group's IPR in the TROPOS ERP and
Supply Chain product, the i-Link System Integration and Supply Chain Execution
products and our RFID products.
Chelford SAP Solutions incorporates the original SAP operation acquired in
December 2002 and the SAP operation of the Shian acquisition made in October
2005. The business is SAP's leading mid-market, value-added reseller for
Warehousing and Distribution and Consumer Packaged Goods. It also provides
consultancy and services (including near-shore support and training) to major
SAP users. Target markets for Chelford SAP Solutions are Consumer Packaged
Goods, High Tech, Grocery Distribution, Healthcare Logistics and multi-channel
sales. Chelford SAP Solutions has a close working relationship with SAP.
Chelford Solutions for Microsoft has been formed from the Microsoft operation of
Shian. The current focus of the business is on Business Collaboration, Business
Intelligence, system integration, custom software development and near-shore
support services. Target markets, in addition to those markets in which the
other Group companies operate, are Financial Services and the Public Sector. The
Microsoft operation offers significant opportunities for growth and is an area
for further investment. As a Gold Partner certified in multiple capabilities,
the Group has a close working relationship with Microsoft.
To ensure that the Group optimises opportunities in the markets which it serves
and to ensure that every opportunity is taken to cross-sell products and
services both to customers within the Group and in support of new business
opportunities, a Marketing Director was appointed in April 2006 to develop and
execute our group marketing strategies.
GROUP OPERATIONS
In a competitive market the strength of the Group's products and services, its
people, its referenceability and its processes continue to provide competitive
advantage in attracting new customers. New customers signed in the period
include Almac Sciences, Meadowbrook Foods, LDH, Taylors of Harrogate, Henry
Schien, Beam Global, Indigo Lighthouse, Beko and Telesoft. The opportunity to
deliver added-value services into the customer base continues to be strong.
Chelford Solutions
During the first half year Chelford Solutions increased revenue by 29% to
#4,918,000 (H1, 2005: #3,804,000) and achieved an operating profit before
amortisation of #528,000 (H1, 2005: #438,000), an increase of 21%. SSI and
Agility Systems continued to attract new name customers and continued to work
with the customer base on business improvement programmes. The RFID market shows
active interest but projects have been slow to develop. Our vertical market
focus continues to ensure good opportunities for Chelford Solutions with
regulatory compliance being a key driver. The new version of TROPOS for smaller
food companies won its first contract and is achieving a good pipeline and there
is good demand for our supply chain execution products. We continue to invest in
our own IPR, extending our products and improving our ability to meet the needs
of our customers and prospects in our target markets.
Chelford SAP Solutions
Chelford SAP Solutions increased revenue by 45% to #3,889,000 (H1, 2005:
#2,690,000), but incurred an operating loss before amortisation of #66,000 (H1,
2005: #221,000), due to a significant cost over-run on a fixed-price contract.
The majority of this contract has now been successfully delivered, management
strengthened and processes tightened to ensure improved control of SAP contract
delivery. In addition to winning customers new to SAP, the company won a number
of new service and support contracts during the first half year. We continue to
recruit to deliver a greater proportion of our service work with our own
consultants, thereby improving margins. We are now reaching a critical mass and,
with our near-shore support operations, we can offer cost-effective support
services, enabling us to compete for new business in larger companies.
Chelford for Microsoft
Although an emerging business, still at an early stage of development, Chelford
for Microsoft achieved revenues of #355,000 and incurred an operating loss
before amortisation of #24,000. A new Business Development Director has been
recruited to take the business forward. We see this area of the Group's activity
as a significant opportunity for growth, both in new business and in
complementing and expanding the products and service opportunities of all Group
operating companies. With the joint SAP/Microsoft Duet initiative now in
progress, the Group is strongly placed to take full advantage of the opportunity
this represents.
STAFF
The Group now employs in excess of 165 people at its offices in Basingstoke,
Darlington and Glasgow. I would like to extend my thanks to the management and
staff for their drive and commitment in continuing to take the business forward.
OUTLOOK FOR 2006
The Board will continue to pursue organic growth and will seek further
acquisitions which fit with the Group's strategy.
Group order intake continues to be strong, with an increase of 49% over the same
period in 2005. The Board expects revenue to grow significantly during the
current year and remains confident of the Group's future prospects.
William Birkett
Chairman
CONSOLIDATED INCOME STATEMENT (Unaudited)
FOR THE SIX MONTHS ENDED 30 JUNE 2006
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
#000 #000 #000
Revenue 9,162 6,494 14,494
Cost of sales (4,952) (3,474) (8,153)
_________ _________ _________
Gross profit 4,210 3,020 6,341
Other operating income 40 - 81
Administrative expenses (4,034) (2,361) (5,123)
Before amortisation of intangible 438 659 1,435
assets
Amortisation of intangible assets (222) - (136)
Operating profit before financial 216 659 1,299
income
Operating profit before financial 216 659 1,299
income
_________ _________ _________
Financial Income 17 43 72
Financial Expense (2) - (4)
_________ _________ _________
Profit before tax 231 702 1,367
Income tax charge (129) (182) (147)
_________ _________ _________
Profit for the period 102 520 1,220
_____ _____ _____
Basic and fully diluted earnings per 1.43p 7.85p 17.98p
share
_____ _____ _____
Statement of recognised income and expense (Unaudited)
for the six months ended 30 June 2006
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
#000 #000 #000
Net income recognised directly in - - -
equity
Profit for the period 102 520 1,220
_________ _________ _________
Total recognised income and expense
attributable to equity holders of the
parent 102 520 1,220
_____ _____ _____
CONSOLIDATED BALANCE SHEETS (Unaudited)
AS AT 30 JUNE 2006
30 June 30 June 31 Dec
2006 2005 2005
#000 #000 #000
Non-current assets
Intangible assets 9,689 5,561 10,928
Property, plant and equipment 469 418 466
Deferred tax assets 197 - 197
_______ _______ _______
10,355 5,979 11,591
Current assets
Trade and other receivables 5,320 4,281 6,322
Cash at bank and in hand 1,111 2,639 869
_______ _______ _______
6,431 6,920 7,191
_______ _______ _______
Total assets 16,786 12,899 18,782
_____ _____ _____
Current liabilities
Trade and other payables (5,063) (3,770) (5,525)
Income tax payable (429) (208) (499)
________ ________ ________
(5,492) (3,978) (6,024)
________ ________ ________
Non-current liabilities
Trade and other payables (300) - (1,935)
Deferred tax liability (2) - (2)
_______ _______ _______
(302) - (1,937)
_______ _______ _______
Total liabilities (5,794) (3,978) (7,961)
_____ _____ _____
Net assets 10,992 8,921 10,821
_____ _____ _____
Equity attributable to equity holders
of the parent
Share capital 7,141 6,622 7,108
Share premium 3,337 2,612 3,326
Retained earnings 514 (313) 387
_______ _______ _______
Total equity 10,992 8,921 10,821
_____ _____ _____
CONSOLIDATED CASH FLOW STATEMENT (Unaudited)
FOR THE SIX MONTHS ENDED 30 JUNE 2006
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
#000 #000 #000
Cash flow from operating activities
Profit for the period 102 520 1,220
Adjustments for:
Depreciation, amortisation and 302 67 276
impairment
Financial income (17) (43) (72)
Financial expense 2 - 4
Taxation 129 182 147
_______ _______ _______
Operating profit before changes in
working capital and provisions
518 726 1,575
Decrease in stock - - 2
Increase/(decrease) in trade and other 923 (432) (1,540)
receivables
Increase/(decrease) in trade and other (831) 632 1,581
payables
_______ _______ ________
610 926 1,618
Cash generation from the operations
Interest paid (2) - (4)
Tax paid 131 - 131
_______ _______ _______
Net cash from operating activities 739 926 1,745
_______ _______ _______
Cash flow from investing activities
Interest received 17 43 32
Deferred consideration (431) - -
Acquisition of subsidiary - net of cash - - (2,539)
acquired
Acquisition of property, plant and (83) (54) (91)
equipment
Development expenditure of intangible - (355) (355)
assets
_______ _______ _______
Net cash from investing activities (497) (366) (2,953)
_______ _______ ________
Net increase in cash and cash 242 561 (1,209)
equivalents
Cash and cash equivalents at 1 January 869 2,078 2,078
_______ _______ _______
Cash and cash equivalents at end of 1,111 2,639 869
period
_____ _____ _____
NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited)
FOR THE SIX MONTHS ENDED 30 JUNE 2006
1. Basis of Accounting
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's 2005 financial statements.
The results for the full year 2005 have been extracted from the Group's full
accounts for that year, which included an unqualified audit report, and have
been filed with the Registrar of Companies.
The financial statements for the half year ended 30 June 2006 have not been
audited.
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 structure.
Segment results and assets and liabilities include items directly attributable
to a segment. Unallocated items comprise mainly amortisation and tax charges.
Segment capital expenditure is the total cost incurred during the period to
acquire segment assets that are expected to be used for more than one period.
Business segments: new reporting structure
30 June 2006
Chelford Chelford Chelford Chelford
Group Solutions SAP Microsoft Total
#000 #000 #000 #000 #000
Revenue - 4,918 3,889 355 9,162
_______ _______ _______ _______ _______
Operating profit before
amortisation
- 528 (66) (24) 438
Amortisation of intangibles - (186) (24) (12) (222)
_______ _______ _______ _______ _______
Operating profit 216
Net financial income 15
Profit before tax 231
Income tax charge (129)
_______
Profit for the period 102
_____
Total assets 9,175 3,784 3,583 244 16,786
_____ _____ _____ _____ _____
Total liabilities (1,217) (2,120) (2,314) (143) (5,794)
_____ _____ _____ _____ _____
Capital expenditure
(including development
expenditure) - 67 14 2 83
_______ _______ _______ _______ _______
Depreciation - 58 18 4 80
_______ _______ _______ _______ _______
Development costs expensed - 320 - - 320
_______ _______ _______ _______ _______
Business segments: new reporting structure (note 2 continued)
30 June 2005
Chelford Chelford Chelford Chelford
Group Solutions SAP Microsoft Total
#000 #000 #000 #000 #000
Revenue - 3,804 2,690 - 6,494
_______ _______ _______ _______ _______
Operating profit before
amortisation
- 438 221 - 659
Amortisation of intangibles - - - - -
_______ _______ _______ _______ _______
Operating profit 659
Net financial income 43
Profit before tax 702
Income tax charge (182)
_______
Profit for the period 520
_____
Total assets 7,807 2,507 2,585 - 12,899
_____ _____ _____ _____ _____
Total liabilities (137) (2,233) (1,608) - (3,978)
_____ _____ _____ _____ _____
Capital expenditure
(including development
expenditure) - 34 375 - 409
_______ _______ _______ _______ _______
Depreciation - 49 18 - 67
_______ _______ _______ _______ _______
Development costs expensed - 298 - - 298
_______ _______ _______ _______ _______
Business segments: new reporting structure (note 2 continued)
31 December 2005
Chelford Chelford Chelford Chelford
Group Solutions SAP Microsoft Total
#000 #000 #000 #000 #000
Revenue - 8,872 5,535 87 14,494
_______ _______ _______ _______ _______
Operating profit before
amortisation
- 1,369 57 9 1,435
Amortisation of intangibles - (124) (8) (4) (136)
_______ _______ _______ _______ _______
Operating profit 1,299
Net financial income 68
Profit before tax 1,367
Income tax charge (147)
_______
Profit for the period 1,220
_____
Total assets 10,788 4,228 3,566 200 18,782
_____ _____ _____ _____ _____
Total liabilities (2,201) (3,584) (2,071) (105) (7,961)
_____ _____ _____ _____ _____
Capital expenditure
(including development
expenditure) - 76 370 - 446
_______ _______ _______ _______ _______
Depreciation - 104 35 1 140
_______ _______ _______ _______ _______
Development costs expensed - 525 - - 525
_______ _______ _______ _______ _______
Revenue
(by destination of goods)
30 June 30 June 31 Dec
2006 2005 2005
#000 #000 #000
United Kingdom 8,944 6,298 14,135
Europe 55 45 110
Rest of the world 163 151 249
_______ _______ _______
9,162 6,494 14,494
_____ _____ _____
The Group's geographical segmental results and net assets derived from its
principal activity in Europe and the Rest of the world is less than 10% of the
consolidated results and is therefore considered not to be significant to the
financial statements.
Segmental analysis: previous reporting structure (continued)
30 June 2006
Chelford SSI SSI SAP Agility Shian Total
Group Holdings Ltd Solutions Group Ltd
plc
#000 #000 #000 #000 #000 #000 #000
Revenue - - 4,009 3,369 910 874 9,162
_______ _______ _______ _______ _______ _______ ______
Operating profit
before amortisation
- - 450 (185) 78 95 438
Amortisation of - - - - (186) (36) (222)
intangibles
_______ _______ _______ _______ _______ _______ ______
Operating profit 216
Net financial income 15
Profit before tax 231
Income tax charge (129)
______
Profit for the period 102
_____
Total assets 9,175 29 2,887 3,357 868 470 16,786
_____ _____ _____ _____ _____ _____ _____
Total liabilities (1,217) - (1,592) (2,158) (528) (299) (5,794)
_____ _____ _____ _____ _____ _____ _____
Capital expenditure
(including
development
expenditure)
- - 63 12 3 5 83
_______ _______ _______ _______ _______ _______ ______
Depreciation - - 48 14 10 8 80
_______ _______ _______ _______ _______ _______ ______
Development costs
expensed
- - 249 - 71 - 320
_______ _______ _______ _______ _______ _______ ______
Segmental analysis: previous reporting structure (continued)
30 June 2005
Chelford
Group SSI SSI SAP Agility Shian
plc Holdings Ltd Solutions Group Ltd Total
#000 #000 #000 #000 #000 #000 #000
Revenue - - 3,804 2,690 - - 6,494
_______ _______ _______ _______ _______ _______ ______
Operating profit
before amortisation
- - 438 221 - - 659
Amortisation of - - - - - - -
intangibles
_______ _______ _______ _______ _______ _______ ______
Operating profit 659
Net financial income 43
Profit before tax 702
Income tax charge (182)
______
Profit for the period 520
_____
Total assets 7,807 9 2,498 2,585 - - 12,899
_____ _____ _____ _____ _____ _____ _____
Total liabilities (137) - (2,233) (1,608) - - (3,978)
_____ _____ _____ _____ _____ _____ _____
Capital expenditure
(including
development
expenditure)
- - 34 375 - - 409
_______ _______ _______ _______ _______ _______ ______
Depreciation - - 49 18 - - 67
_______ _______ _______ _______ _______ _______ ______
Development costs
expensed
- - 298 - - - 298
_______ _______ _______ _______ _______ _______ ______
Business segments: previous reporting structure (note 2 continued)
31 December 2005
Chelford SSI SSI SAP Agility Shian Total
Group Holdings Ltd Solutions Group Ltd
plc
#000 #000 #000 #000 #000 #000 #000
Revenue - - 7,963 5,357 909 265 14,494
_______ _______ _______ _______ _______ _______ ______
Operating profit
before amortisation
- - 1,039 38 330 28 1,435
Amortisation of - - - - (124) (12) (136)
intangibles
_______ _______ _______ _______ _______ _______ ______
Operating profit 1,299
Net financial income 68
Profit before tax 1,367
Income tax charge (147)
______
Profit for the period 1,220
_____
Total assets 10,788 17 3,209 3,359 1,002 407 18,782
_____ _____ _____ _____ _____ _____ _____
Total liabilities (2,201) - (2,901) (1,921) (683) (255) (7,961)
_____ _____ _____ _____ _____ _____ _____
Capital expenditure
(including
development
expenditure)
- - 76 370 - - 446
_______ _______ _______ _______ _______ _______ ______
Depreciation - - 98 34 6 2 140
_______ _______ _______ _______ _______ _______ ______
Development costs
expensed
- - 525 - - - 525
_______ _______ _______ _______ _______ _______ ______
3. Earnings per share
Earnings per share have been calculated by dividing the Group's profit on
ordinary activities after taxation by the number of issued ordinary shares.
30 June 30 June 31 Dec
2006 2005 2005
Weighted number of shares in issue
in period
7,118,456 6,621,666 6,784,383
________ ________ ________
Profit on ordinary activities 102,000 520,000 1,220,000
after taxation
_______ _______ ________
Basic and fully diluted earnings 1.43p 7.85p 17.98p
per share
_____ _____ _____
4. Reconciliation of movement in equity
30 June 30 June 31 Dec
2006 2005 2005
#000 #000 #000
Profit for the period 102 520 1,220
Shares issued 44 - 1,200
Equity-settled share-based 25 - -
transactions
_______ _______ _______
Net increase in equity 171 520 2,420
Opening equity 10,821 8,401 8,401
________ _______ _______
Closing equity 10,992 8,921 10,821
_____ _____ _____
5. Analysis of movement in net debt
At 1 Jan At 30 June
2006 Cash flow 2006
#000 #000 #000
Cash in hand, at bank 869 242 1,111
_______ _______ _______
Total 869 242 1,111
____ ____ _____
6. Nature of Financial Information
The interim financial information for the six months ended 30 June 2006 was
approved by the Board on 27 September 2006.
7. Availability of Interim Report
A copy of this Interim Report is being sent to shareholders and copies are
available from the Company's Registered Office at Chelford House, Hampshire
International Business Park, Crockford Lane, Basingstoke RG24 8WH or by visiting
our web site at www.chelfordgroup.com
This information is provided by RNS
The company news service from the London Stock Exchange
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