TIDMMSS
RNS Number : 4470U
Managed Support Services PLC
22 December 2011
FOR IMMEDIATE RELEASE 22 December 2011
Managed Support Services plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011
Managed Support Services plc ("MSS") announces its Interim
Results for the six months ended 30 September 2011.
-- Sale of Compliance Division for GBP3 million
-- Sale of Building Services Division for a headline price of GBP6.5 million
-- New Investment Policy adopted following disposal of all trading companies
-- Board maximising cash and reducing costs whilst actively
pursuing investment opportunities
Commenting on the results, Simon Beart, Chief Executive
said:
"We believe the disposal of the Group's trading activities was
well timed given the worsening trading environment and the very
poor outlook for the Building Services sector.
The Board is now actively considering alternative proposals for
the Group"
FOR FURTHER INFORMATION, PLEASE CONTACT:
Managed Support Services plc:
Simon Beart, Chief Executive 07710 444370
Piers Wilson, Finance Director 01483 735703
Cenkos Securities plc:
Nick Wells / Stephen Keys 020 7397 8900
Chief Executive's Review
Summary
The results for the six month period ended 30 September 2011 are
primarily of historic interest only, since all the Group's trading
activities have now been sold, following completion of the recent
sale of the Building Services Division to Initial Rentokil
("Initial").
The profit and loss account for the period treats all trading
subsidiaries as discontinued, although completion of the Initial
sale took place on 5 December 2011.
The Board is now responsible for maximising the value of the
deferred consideration payable under the Initial disposal and
thereafter reducing Group costs and liabilities.
Trading
It became apparent during the first quarter of the year that
those subsidiaries which were dependent on capital expenditure
decisions by customers were going to encounter hostile trading
conditions. The Board duly announced in June that material trading
losses were being encountered by our small shop fitting subsidiary
MSS Interiors, and the larger Installation division of our Building
Services operation.
Losses in these units accumulated very rapidly, despite an
almost instant reaction to reduce headcount and activity. As losses
continued, the decision to close MSS Interiors was ultimately taken
and the unit ceased trading in early November, but not before
incurring trading losses in the first half of GBP211,000. MSS
Interiors was a business acquired by the previous management team
for in excess of GBP5 million, despite being a vendor dependent,
low value added shop fitting business, with no likely disposal
value. However, the unit had generated modest profits until this
year.
In respect of the Installation activities, this unit represented
the already much reduced residual commitment to the high risk, low
margin, Installation service formed around an acquisition made by
the previous management. This service was valued by certain
customers, and was therefore not closed in 2010, but revenue and
profitability remained unpredictable and the business frequently
required material working capital funding.
The Installation activity also required capital expenditure
commitments by customers. Consistent with our experience at MSS
Interiors, the Installations unit witnessed a very rapid downturn
in activity from April of this year. Turnover levels were reduced
to expectations of less than GBP3 million per annum, having been at
over twice that level in prior years.
In addition, the Group experienced a reduction in the
discretionary, maintenance related, expenditure by customers. This
spend made up approximately 50 per cent. of the revenue within the
Group's core Building Services business.
The Building Services recurring revenues held up reasonably well
in the half, but profitability was inevitably sensitive to any
reduction in the discretionary expenditure element that normally
accompanies the planned maintenance revenues.
The core offering of Building Services to our diverse customer
base, with a recurring revenue level of approximately GBP10 million
contributed reasonable operating profits in the period, before
central costs, although still below management's expectations due
to the reduction in discretionary spending.
The Group's Health & Safety Division traded well from
acquisition and enjoyed a successful and profitable first half up
to the point of disposal at the end of August, to Capita Group plc
("Capita").
Strategic Review
In the light of these market conditions and in particular in the
context of larger competitors having to cease trading, it became
clear to the Board that the Group's target corporate customers were
unlikely to place material new business with smaller suppliers,
such as MSS. This lack of customer confidence in the supply chain
was particularly frustrating given the quality of our offering and
the recent, material contract wins with existing major
customers.
The Board therefore decided that the preferable strategy was to
realise value from the Group's assets rather than continue to
compete in favourable markets.
It was initially agreed to dispose of the Group's Compliance
Division. In August 2011, the Group received GBP3.1 million
following the sale of the Compliance Division to Capita which
represented a small profit on the Group's investment in the
Division. The Compliance Division had traded very well since
acquisition, benefitting from improved internal process, the
imposition of management disciplines and the appointment of a
professional Managing Director.
It was clearly a disappointment to sell the Compliance Division,
which was operating in an attractive sector. However, with
insufficient capital to fund the Group's desired buy and build
strategy, a profitable disposal represented the correct option.
Immediately following the disposal of the Compliance Division,
the Group received unsolicited offers for the Building Services
Division and details in respect of the division were circulated to
a number of potential acquirers.
The Division was subsequently sold for a headline price of
GBP6.5 million, subject to retentions, working capital adjustments
and the novation of customer contracts. The price again represented
a small profit when compared to the acquisition cost of the two
subsidiaries making up almost the whole Division, Status and ECS,
which were acquired for a combined net price, including fees of
GBP6.1 million.
It is expected that the majority of the deferred Initial
consideration will be received in March 2012 with the final balance
to be received in June 2012.
Balance sheet
The Group's balance sheet is presented with the net assets of
the trading subsidiaries shown as assets held for sale. Completion
of the Initial transaction took place in the second half. At year
end, it is anticipated that the balance sheet will merely show cash
balances and a small level of trade creditors.
In total, the subsidiaries acquired during 2010 were sold for a
profit of some GBP700,000. The principal diminution of shareholder
value over the last two years therefore, reflects the GBP4.5
million costs of closing the major part of the contracting division
during the year ended March 2010 and the funding of losses in that
year, during which time the Board was examining the potential for
major transactions. The remaining element of cash losses represents
the funding of adverse working capital movements and the trading
losses from the legacy units.
In respect of the Loan Note Holders, proposals are being made
whereby redemption of the Loan Notes reflects the timing of the
receipt of the initial and deferred consideration arising from the
sale of the Building Services division.
Investment Policy
The shareholders approved an Investing Policy at the General
Meeting on 5 December 2011. This policy enables the shares to
remain trading on AIM and enables the Board to examine a reasonably
wide range of transactions and strategies in order hopefully to
recover further shareholder value. The Board is already considering
potential acquisitions but such proposals need to be in respect of
profitable, cash generative enterprises with competitive positions
that are sustainable in a continuing recession.
In the event that no suitable proposal emerges, the Board will
ultimately arrange for the residual cash balances to be returned to
shareholders in a tax efficient and low cost manner. It should be
noted that any distribution of funds can only take place after the
Group's tax computations to 31 March 2012 are agreed with HMRC and
the warranty periods arising from the disposals have expired at
August 2013.
The Board is also mindful that continued running costs need to
be reduced. A substantial reduction has already been achieved
following the closure of the Woking office and the resignation from
the Group of Jamie Reynolds. It is anticipated that further costs
savings will be implemented before the financial year end.
Summary
In spite of many, significant new customer wins and the creation
of two profitable divisions that were readily sold to two major
corporate acquirors, the strategy of creating a substantial
building services operator was frustrated by market conditions and
the collapse of trading at the Group's legacy subsidiaries. These
legacy subsidiaries at one stage made a reasonable contribution to
central costs but proved too frail in current markets.
The Board is conscious that shareholders need to see an
improvement in shareholder value. Every attempt will be made to
identify an attractive opportunity whilst controlling costs.
Simon D. Beart
Chief Executive
CONSOLIDATED INCOME STATEMENT
for the period ended 30 September
2011
Six months Six months
ended ended Year ended
30 September 30 September 31 March
Note 2011 2010 2011
GBP'000 GBP'000 GBP'000
Continuing operations
Administrative expenses before
items
identified below (530) (398) (1,103)
------------------------ ---------------------- ------------------------
OPERATING (LOSS) BEFORE ITEMS (530) (398) (1,103)
IDENTIFIED BELOW
Amortisation of intangible assets - - (693)
Increase in share based payment
reserve (86) (150) (236)
------------------------ ---------------------- ------------------------
OPERATING LOSS (616) (548) (2,032)
Financial income - 4 -
------------------------ ---------------------- ------------------------
LOSS BEFORE TAX (616) (544) (2,032)
Income tax 3 - - (24)
LOSS FOR THE PERIOD FROM
CONTINUING
OPERATIONS (616) (544) (2,056)
Discontinued operations
(Loss) / profit for the period
from
discontinued operations (762) 173 674
Continuing and discontinued
operations
LOSS FOR THE FINANCIAL PERIOD (1,378) (371) (1,382)
======================== ====================== ========================
Basic (loss) / earnings per
ordinary
share
Continuing operations 4 (0.29) (0.33) (1.10)
Discontinued operations 4 (0.36) 0.10 0.36
Diluted (loss) / earnings per
ordinary
share 4
Continuing operations 4 (0.29) (0.32) (1.08)
Discontinued operations (0.36) 0.10 0.35
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
for the period ended 30 September
2011
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
At beginning of period 9,342 7,568 7,568
Loss for the financial period (1,378) (371) (1,382)
Issue of share capital - 446 446
Increase in share premium account - 2,474 2,474
Increase in share based payments
reserve 86 150 236
AT END OF PERIOD 8,050 10,267 9,342
======================== ====================== ========================
Equity comprises share capital, share premium, merger reserve, share based
payments reserve, special reserve and retained profit.
CONSOLIDATED BALANCE SHEET
as at 30 September 2011
30 September 30 September 31 March
Note 2011 2010 2011
GBP'000 GBP'000 GBP'000
CURRENT ASSETS
Trade and other receivables 158 144 60
Cash and cash equivalents - 296 404
Assets held for sale 14,190 21,827 20,406
14,348 22,267 20,870
------------------------------------ ----------------------------- --------------------
TOTAL ASSETS 14,348 22,267 20,870
==================================== ============================= ====================
CURRENT LIABILITIES
Trade and other payables (313) (615) (738)
Short term borrowings (1,224) (1,129) (2,784)
Deferred consideration (275) (266) -
Liabilities held for sale (3,986) (9,990) (7,506)
(5,798) (12,000) (11,028)
------------------------------------ ----------------------------- --------------------
NET CURRENT ASSETS 8,550 10,267 9,842
------------------------------------ ----------------------------- --------------------
NON CURRENT LIABILITIES
Trade and other payables 5 (500) - (500)
------------------------------------ ----------------------------- --------------------
TOTAL LIABILITIES (6,298) (12,000) (11,528)
==================================== ============================= ====================
NET ASSETS 8,050 10,267 9,342
==================================== ============================= ====================
EQUITY
Share capital 9 2,098 2,098 2,098
Share premium account 9 7,373 7,373 7,373
Special reserve - 4,647 -
Share based payments reserve 1,542 1,370 1,456
Retained earnings (2,963) (5,228) (1,610)
TOTAL EQUITY 8,050 10,267 9,342
==================================== ============================= ====================
Simon Beart Piers Wilson
Director Director
CONSOLIDATED CASH FLOW STATEMENT
for the period ended 30 September
2011
Six months Six months
ended ended Year ended
30 September 30 September 31 March
Note 2011 2010 2011
GBP'000 GBP'000 GBP'000
CASH FLOW FROM OPERATING ACTIVITIES
Net cash used in operating activities
of continuing operations 7 (500) (472) (1,090)
Net cash used in operating activities
of discontinued operations 7 (1,275) (1,148) (1,701)
NET CASH USED IN OPERATING ACTIVITIES (1,775) (1,620) (2,791)
-------------------------------- ---------------------------- ---------------------
INVESTING ACTIVITIES
Interest received - 4 -
Deferred consideration - (200) (466)
Net cash from / (used in) investing
activities by continuing operations - (196) (466)
Net cash from / (used in) investing
activities by discontinued operations 2,949 (5,218) (6,080)
NET CASH FROM / (USED IN) INVESTING
ACTIVITIES 2,949 (5,414) (6,546)
-------------------------------- ---------------------------- ---------------------
FINANCING ACTIVITIES
Net proceeds of share issue - 2,925 2,920
Proceeds on issue of convertible loan
notes - - 500
Net cash from financing activities
by continuing operations - 2,925 3,420
Net cash (used in) / from financing
activities by discontinued operations (1,674) 911 2,827
NET CASH (USED IN) / FROM FINANCING
ACTIVITIES (1,674) 3,836 6,247
-------------------------------- ---------------------------- ---------------------
NET DECREASE IN CASH (500) (3,198) (3,090)
CASH AT THE BEGINNING OF PERIOD 404 3,494 3,494
CASH AT THE END OF THE PERIOD (96) 296 404
================================ ============================ =====================
NOTES TO THE FINANCIAL STATEMENTS
30 September 2011
1 GENERAL INFORMATION AND ACCOUNTING POLICIES
These interim consolidated financial statements are for the six months
ended 30 September 2011. The interim financial report, which has not been
audited or reviewed, has been prepared in accordance with International
Financial Reporting Standards (IFRS) adopted for use in the European Union.
The information for the period ended 31 March 2011 does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006.
A copy of the statutory accounts for that year has been delivered to the
Registrar of Companies. The auditors reported on those accounts: their
report was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or (3) of
the Companies Act 2006.
The annual financial statements are prepared in accordance with IFRSs
as adopted by the European Union. The condensed set of financial statements
included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34 "Interim Financial Reporting",
as adopted by the European Union.
The same accounting policies, presentation and methods of computation
are followed in the condensed set of financial statements as applied in
the Group's latest audited financial statements, except as described below.
Adoption of new and revised
standards
The following new standards and amendments to standards are mandatory
for the first time for the financial year beginning 1 April 2011.
IFRS 10, "Consolidated Financial Statements" (effective for fiscal periods
beginning on or after 1(st) January 2013).
IFRS 13, "Fair Value Measurement" (effective for fiscal periods beginning
on or after 1(st) January 2013)
Going concern
The Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not less
than 12 months from the date of this report. Accordingly, they continue
to adopt the going concern basis in preparing the financial statements.
2 BUSINESS, GEOGRAPHICAL AND SEGMENTAL REPORTING
The Group's operations were only in the United Kingdom. Following the
disposal of the Group's Compliance division, the cessation of operations
at its Interior Contractors division and the sale of the Building Services
division, the results reported in the Consolidated Income Statement relate
solely to the Central division. The Building Services segment, Interior
Contracts segment and the Compliance segment are now reported under Discontinued
operations.
3 TAX
Corporation tax charge for the six month period has been estimated at
GBPnil (six months ended 30 September 2010: GBPnil). No deferred tax asset
has been recognised in relation to the losses in the period.
NOTES TO THE FINANCIAL STATEMENTS
30 September 2011
4 EARNINGS PER ORDINARY SHARE
The calculation of basic and diluted loss per share is based on the following
data:
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Continuing operations
Loss for the financial period (616) (544) (2,056)
==================== ===================== ============
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 209,802,191 165,203,976 187,503,084
Potentially dilutive ordinary shares 2,750,000 3,500,000 2,750,000
Weighted average number of shares
for the purposes of diluted earnings
per share 212,552,191 168,703,976 190,253,084
==================== ===================== ============
Basic (loss) / profit per
ordinary
share (pence)
Continuing operations (0.29) (0.33) (1.10)
Discontinued operations (0.36) 0.10 0.36
Diluted (loss) / profit per
ordinary
share (pence)
Continuing operations (0.29) (0.32) (1.08)
Discontinued operations (0.36) 0.10 0.35
5 BORROWINGS
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Bank loans due for settlement within
one year 1,224 1,129 3,017
==================== ===================== ============
NOTES TO THE FINANCIAL STATEMENTS
30 September 2011
6 CONVERTIBLE SECURED LOAN NOTES
Convertible Loan Notes were issued on 31 March 2011 with a total nominal
value of GBP500,000. The Convertible Loan Notes are convertible by the
Note holder into new Managed Support Services plc Ordinary Shares at a
conversion price of 5 pence per Ordinary Share.
If conversion does not take place before 31 January 2015, the Convertible
Loan Notes will be redeemed at par by the Company. The notes yield 7%per
annum paid semi annually in arrears.
7 NOTES TO THE CASH FLOW STATEMENT
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Operating loss from continuing
activities (616) (548) (1,339)
Adjustments for:
Share based payments 86 150 236
Operating cash flows before movement
in working capital (530) (398) (1,103)
Decrease / (increase) in receivables 359 (123) (39)
(Decrease) / increase in payables (329) 49 187
Decrease in provisions - - (135)
Cash utilised by operations (500) (472) (1,090)
Net cash used in operating activities
of continuing operations (500) (472) (1,090)
Net cash used in operating activities
of discontinued operations (1,275) (1,148) (1,701)
Net cash flow from operating activities (1,775) (1,620) (2,791)
==================== ===================== ============
8 DIVIDEND
No dividend is proposed in respect of the period to 30 September 2011
(2010: GBPnil).
9 SHARE CAPITAL
30 September 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Authorised
250,000,000 ordinary shares of
1p each (2010: 250,000,000 ordinary
shares of 1p each) 2,500 2,500 2,500
==================== ===================== ============
Issued and fully paid
209,802,191 ordinary share of 1p
each 2,098 2,098 2,098
==================== ===================== ============
NOTES TO THE FINANCIAL STATEMENTS
30 September 2011
10 RELATED PARTY TRANSACTIONS
Apart from the remuneration of the Directors, who are key management personnel
of the Group, there have been no other material transactions with the
Board.
EVENTS AFTER THE BALANCE SHEET
11 DATE
On 5th December 2011, the Group disposed of its interests in the Building
Services division to Rentokil Initial plc for an initial cash consideration
of GBP4,000,000. Additional consideration of up to GBP2,500,000 is payable
within six months.
12 RISKS AND UNCERTAINTIES
The Board continuously assesses and monitors the key risks of the business.
The key risks that could affect the Group's medium term performance and
the factors which mitigate these risks have not changed from those set
out on pages 9 and 10 of the Group's 2011 Annual Report, a copy of which
is available on the Group's website www.managedsupportservicesplc.com.
The Chief Executive's Review includes consideration of uncertainties affecting
the Group in the remaining six months of the year.
RESPONSIBILITY STATEMENT
The Directors confirm that this consolidated interim report has been prepared
in accordance with IAS34 'Interim Financial Reporting' and that the Chief
Executive's statement includes a fair review of the information required by
DTR 4.2.7R (indication of important events during the first six months and
description of principal risks and uncertainties for the remaining six months
of the year); and of the information required by DTR 4.2.8R (disclosure of
related parties' transactions and changes therein).
S D Beart P L S Wilson
CHIEF EXECUTIVE GROUP FINANCE DIRECTOR
This information is provided by RNS
The company news service from the London Stock Exchange
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