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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