TIDMMXM
RNS Number : 4851Q
Maxima Holdings PLC
04 August 2010
Embargoed until 0700
4 August 2010
Maxima Holdings plc
('Maxima' or the 'Company')
FULL YEAR REPORT FOR THE YEAR ENDED 31 MAY 2010
Maxima Holdings plc (AIM: MXM), the leading IT business systems and managed
services company, is pleased to announce its audited consolidated results for
the year ended 31 May 2010.
Financial Highlights
· Revenues of GBP51.0m (2009: GBP56.6m)
· Adjusted operating profit of GBP5.6m* (2009: GBP8.3m*)
· Adjusted profit before tax GBP4.9m* (2009: GBP7.1m*)
· Loss before tax of GBP0.8m (2009: Loss GBP9.6m) after GBP1.8m (2009:
GBP4.2m) of exceptional items
· Adjusted basic earnings per share 13.4p* (2009: 21.2p*); basic loss per
share 2.7p (2009: 36.8p)
· Net cash flow from operating activities was GBP6.1m (2009: GBP5.2m)
· The Group had net debt of GBP11.8m at the end of the period (31 May 2009:
GBP15.5m)
· Net finance costs in the period totalled GBP0.7m, covered 7.5 times by
adjusted operating profit*
· Dividend of 3.0p per share (2009: 4.5p) in line with stated dividend
policy
· 60% recurring revenue (2009: 56%)
(*before amortisation of intangibles, impairment of goodwill, share-based
payments, and exceptional charges)
Operational Highlights
· 31% growth in new bookings in H2 2010 over H1 2010 (2.5% FY2010 over
FY2009)
· 119 new clients won during the period (2009: 87) and strong contract
renewal rate
· GBP2.5m of new Microsoft Dynamics projects sold during the period
· Over GBP12.7m of multi-year Infrastructure Service contracts placed by 4
customers
· 31 new Virtualisation contracts won
· More than GBP2.5m of Business Intelligence orders placed by major UK
banks
· Former QAD customers continue to invest in Maxima's wider services
· 14% net reduction of on-shore staff, inclusive of 61 new starters
· 48% increase in off-shore staff in India
Commenting on the results, Graham Kingsmill, Maxima's Chief Executive Officer,
said:
"Our aim to simplify and focus Maxima's operational processes and value
proposition in order to retain existing and attract new customers gathered
momentum, particularly in the second half of the year. Initiatives to drive
economic efficiencies through greater use of our off-shore capability and
improved internal infrastructure are progressing well, although many of the
benefits are still to be realised.
"There are encouraging signs of recovery in those parts of the business which we
have identified as being core competencies for Maxima. The opportunity ahead is
the controlled management and migration of customers to the new more focused
services and solutions now available. Enquiries, pipeline and order intake
improved in our core areas through the year as a result of increased focus,
rigour in sales execution and new skills being added to the business."
Enquiries
Maxima Holdings plc
Graham Kingsmill David Memory
Chief Executive Officer Chief Financial
Officer
Tel: +44 (0)1242 211 211 Tel: +44 (0)1242
211 211
Cenkos (Nominated advisor to the Company)
Stephen Keys / Beth McKiernan
Tel: +44 (0)20 7397 8900
Hogarth PR
Reg Hoare / James White / Vicky Watkins
Tel: +44 (0)20 7357 9477
Notes to Editors
Maxima (AIM:MXM) is a leading IT business systems and managed services company,
providing Business Solutions and Support Enablement Services to over 1,400
organisations across the UK, Ireland and the USA. The Company's core service
offerings include virtualisation, network infrastructure and communications,
business intelligence and comprehensive Microsoft Dynamics AX/CRM solutions for
key sectors including construction, manufacturing and services.
Report for the year ended 31 May 2010
Director's Report
Chairman's Statement
Introduction
I am pleased to report on the Company's continued good progress in executing the
plans we presented to shareholders a year ago. As planned, we have invested in
people, intellectual property and infrastructure including:
· Recruitment of 61 new staff (although net reduction of 58) in the UK as
we aligned the business with the market areas in which we see greatest growth
opportunity, namely, Microsoft Business Solutions, Virtualisation, Business
Intelligence and Unified Infrastructure
· Expansion of the scope of our MAXcel software solution, based upon
Microsoft Dynamics AX/CRM and continued development of our proprietary
implementation methodologies and templates for implementation of applications
software including Business Intelligence
· Major front office and back office improvements:
* Launch of Competency Centresin which we demonstrate our products and services
to clients
* Consolidation of our customer support centres, including rapid expansion of
our Hyderabad support centre and implementation of new customer support systems
Results
Trading results, although lower than last year, were in line with expectations.
This fall reflected the challenging economic environment affecting our customers
as well as a year of planned investment in the business. Revenues totalled
GBP51.0m (2009: GBP56.6m) giving adjusted operating profit of GBP5.6m* (2009:
GBP8.3m*). Adjusted profit before tax was GBP4.9m* (2009: GBP7.1m*) resulting in
adjusted basic earnings per share of 13.4p* (2009: 21.2p*). A statutory loss
before tax of GBP0.8m (2009: Loss GBP9.6m) has been reported which includes the
impact of GBP1.8m (2009: GBP4.2m) of exceptional items.
Recurring revenues continued to provide a solid foundation and increased as a
percentage of overall revenues. The difficult trading environment however
reduced product and consulting revenues. Cash flow continued to be strong, and
net debt was reduced to GBP11.8m (2009: GBP15.5m), which is ahead of market
expectations. We also took the opportunity towards the year end of renegotiating
the terms of our facilities with Barclays Bank to remove certain restrictions.
The revised facilities run through to 2013 on attractive terms.
(*before amortisation of intangibles, impairment of goodwill, share-based
payments, and exceptional charges)
Board & Senior Management
I am very happy with the way in which the Board has conducted business this year
after the major changes of 2009. It has brought stability and experience to the
challenges faced by the new Executive Directors, Graham Kingsmill and David
Memory, as they have re-shaped the business to address the market conditions of
today and tomorrow. In light of this, I have moved to become non-executive
Chairman with effect from 1 July 2010, though I will continue to support the
executive directors on corporate, client-facing and some specialist matters,
should the need arise.
I am very pleased that during the course of the year Paul Adams and Fraser
Fisher were promoted to the roles of Divisional Managing Director of our
Business Solutions and Support Enablement Services Divisions respectively.
Fraser joined the business in 2007 with the acquisition of Centric Networks Ltd,
a company he founded and Paul was recruited later that year after an early
career in sales with IBM . Both have demonstrated strong leadership and business
development qualities and I wish them every success in their new roles.
Staff
Maxima is fortunate to have a strong, resourceful and adaptable workforce, who
have continued to provide excellent levels of customer service whilst the
business has undergone substantial restructuring, with many new joiners and
leavers. I should like to express my sincere thanks to all staff who have
contributed to this successful year for their efforts and loyalty.
Prospects
Our clients are predominantly UK-headquartered and as a result of the recession
have, for the last two years, been aggressive in looking for operational cost
savings and cautious in making new IT investments.
In recent months we have noticed signs of improved confidence, which have
enabled us to start benefiting from the changes and investments that we have
made in Maxima. As a result of a pick-up in sales during the second half of the
year, we have entered the new financial year with a strong order book. Trading
in the first quarter of the new financial year has been encouraging and we look
forward to 2011 with confidence that this year of investment has positioned the
Company for future growth.
Our tightly focused offering enables our clients to take full advantage of our
differentiated business applications software in a resilient hosted environment,
based on strong partnerships with Microsoft , SAP , Citrix , Oracle and IBM.
This, together with high levels of recurring revenues from our large and diverse
client base gives us high confidence in our ability to achieve organic growth
and continue to pay down our debt. However, in the event that we find
acquisition opportunities that are strongly aligned with our new business
propositions and structure and are at affordable prices, we may return to
acquisitive growth.
Dividend
The directors recommend a final dividend of 2.0p per share (2009: 2.5p), to be
paid on 8 October 2010 to shareholders on the register as at 10 September 2010,
making a total of 3.0p per share for the year (2009: 4.5p). Our consistent
policy is to pay out a proportion of operating profit to shareholders as
dividends, whilst continuing to pay down debt and preserving the capacity to
consider further acquisitions.
Kelvin Harrison
Chairman of the Board
3 August 2010
Results for the year ended 31 May 2010
Director's Report
Chief Executive's Review
Introduction
For the year ended 31 May 2010, Maxima continued to make progress towards
delivering on its strategic plan presented in August 2009, focusing particularly
on areas of core competence where we can respond best to the demands of key
customers whilst driving improved efficiencies by simplifying our operational
processes.
The last two years have seen the IT industry impacted by a 'perfect storm'
created by the credit crunch which impacted business confidence and resulted in
extended technology replacement cycles. However, there are now increasing signs
of the market returning to growth, with recent research pointing to an increase
in purchases of IT Infrastructure. Indeed, Gartner is now projecting that all
vertical markets will return to growth, and will be particularly responsive to
those vendors that continue to offer solutions that help achieve cost
optimisation during 2010 and 2011.
Organisations that have been through these challenging market conditions
acknowledge that there is a need to do things differently and, in keeping with
this necessity, Maxima has, over the last year, been re-engineering its
business. This translates into operating in ways that are less complex,
achieving a lower cost base, targeting rapid payback for customers, and
increased rigour around sales and performance management.
Customer opportunity
Across all parts of the Company, management has concentrated and prioritised
activities towards three areas of customer opportunity:
· IT life extension and managed migration services targeting our longer
standing customers
· The sale of selected new solutions and services to existing and new
customers
· Industry orientated Business Solutions and Unified Infrastructure
Services working in close collaboration with the best technology partners
We differentiate ourselves from competitors through the careful selection and
grouping of technology and skills and through reference examples of our core
competence. This is further enhanced by concentrating on a limited number of
industry sectors where Maxima has historic knowledge and Intellectual Property
(IP) for software and service enhancement. The provision of both Business
Solutions and Infrastructure Support Enablement Services from one organisation
with agile and flexible delivery options allows us to offer customers real
choice and varied investment alternatives.
Technology partners and Cloud computing
We have accelerated our plans to align Maxima with the largest and most
influential technology partners, taking advantage of increasing demand for the
supply of Cloud services where the need to orchestrate the convergence of
multiple technologies in a commercially flexible framework is the key success
factor.
Cloud Computing is an IT delivery approach that provides utility-style,
on-demand IT applications and services, hosted on a virtualised infrastructure,
and typically delivered across the Internet or a corporate network on a
pay-as-you-go basis. This is increasingly attractive to a broad range of
customers in that it provides a way to update or increase capacity and
functionality without needing to invest in new infrastructure or license new
software. Cloud technology is paid for incrementally and thus encompasses
subscription-based propositions like SaaS (Software as a Service).
Maxima is well positioned for Cloud Computing, with all the key components for
providing customers with utility style IT solutions. Our large customer base has
again proved invaluable in ensuring that Maxima is not only responsive to
organisations' needs but also increasingly agile in customising solutions to
meet specific requirements.
A combination of core infrastructure skills, a comprehensive Managed Services
offering, and strong applications expertise means that Maxima is ready to
support customers' Cloud Computing needs. The Company also has the operational
infrastructure in place, as well as applications from partners such as Microsoft
and IBM, to offer customised Cloud Computing delivery solutions where customers
can be charged on a per usage basis.
We have reduced the number of partners we work with in order to concentrate our
efforts and improve the value proposition through the addition of
Maxima-developed IP.
Growth engines
We have identified four growth engines for Maxima in the future. They have been
selected based upon our past experience, core skills and more recent success
with customers. There is a strong focus on financial return for customers:
working on the basis that unless customers easily identify rapid return, they
are unlikely to buy. To support our growth engines, organisational changes have
been necessary. Maxima was historically organised into eleven operating units,
however we have now reduced this to two. Maxima's two business units each have
two areas of core competence:
In the Support Enablement Services unit which represents circa 60% of staffing
we concentrate activities on:
· Virtualisation Services
· Unified Network Infrastructure and Communications Services
In the Business Solutions unit which enhances technology from Microsoft and SAP
we concentrate activities on:
· Business Intelligence with particular focus on the financial services
industry
· Microsoft Dynamics AX/CRM for construction, service management and
manufacturing industries
Our plans to build four Competency Centres are on track, with the first two
centres for promoting our capabilities around Virtualisation and Microsoft
Business Solutions, opening on time at the end of May 2010. These centres will
play a significant role in the growth of Maxima enabling us to showcase, with
selected partners, the benefits of the technology we support and the unique
skills and experience that add the Maxima value. The remaining two competency
centres are scheduled to open before the end of the calendar year.
Sales success
We are already seeing this approach proving to be successful, with highlights
including a 31% increase in new sales orders in the second half of the year over
the first half and an overall 2.5% increase in new sales orders from the
previous year. The integration of our specialist Citrix team in Ireland with the
UK core business has resulted in a significant increase of Virtualisation
projects in the UK. New multi-year Unified Infrastructure projects valued in
excess of GBP12.7m have been won from 4 customers resulting in an absolute
increase of 25% in revenue from the top 10 customers. New Microsoft Business
Solutions customers have been added with over GBP1m of contracts signed in the
second half of the year and a number of long standing customers deciding to
migrate to Microsoft from older more bespoke solutions. Increased concentration
on the financial services sector for our Business Intelligence activities has
resulted in over GBP2.5m of orders taken.
Maxima serves over 1,400 clients, primarily medium-sized UK-based organisations
with a turnover of between GBP5m and GBP500m. Increasingly larger organisations
are also now contracting with Maxima, particularly in areas where we have unique
skills and competencies.
Customer examples include: Orange UK, Mars, AG Barr plc, The Murphy Group,
Caledonian MacBrayne, Hill and Smith Ltd, Anglian Group, Namesco Limited and
Arts Council.
Economic efficiencies
Maxima has focused on delivering a reliable performance, managing headcount, and
taking significant steps to reduce costs. Throughout the year we have continued
to align Maxima staffing levels with our stated business goals. This process has
seen the recruitment of 61 new employees into the UK & Ireland business,
bringing new skills and experience to strengthen our defined areas of
competence, while overall UK & Ireland staff levels have reduced by 58 over the
period.
Adopting centralised shared services and increasing the volume of work carried
out in India has started to make a positive contribution although there are
still many more benefits to be realised in the future. Projects to improve
network connectivity, unified communications and customer support have all
started in the year and will deliver benefits going forward. Magnifying our
focus on credit control has greatly assisted in cash generation resulting in net
debt reducing from GBP15.5m to GBP11.8m and days receivable down from 61 to 49.
Banking facilities renewed
The board has worked with Barclays Bank to renegotiate facilities that were
originally agreed in 2005 when Maxima and market conditions were much different
from those today. Our recent success of paying down debt ahead of expectations
enabled us to agree the facilities at competitive interest rates and with some
technical restrictions removed. The total cost for arranging the new facilities
including fees and legal expenses was circa GBP0.5m.
Market Conditions
Maxima is addressing challenging market conditions by implementing new
opportunity management and qualification processes. Focusing on better quality
opportunities has helped deliver an increase in our win rate, and improved our
ability to deliver stronger margins. More recently, there have been encouraging
signs that volumes are increasing, complementing the improved win rate. The
increase in booking volume in the latter part of the year is attributed to
improved sales execution and the presentation of improved value propositions.
The tougher macroeconomic environment has meant the days of automatic contract
renewal or extension have been superseded by higher service demands from
customers and procurement led initiatives driving lower prices. In most cases we
have been able to respond favourably to customers using our scale and
relationship with key suppliers to get improved pricing. The increased
competitive nature of our business sector is a doubled edged sword; on the
negative side we have to compete hard to retain business with existing
customers, and on the positive side we are able to attack our competitors'
customers with alternative propositions. There are still many risks associated
with service transfer from one supplier to another, but the lure of improved
pricing is attracting organisations to consider competitive options. The new
focus and operating structure within Maxima is targeted at being more attractive
to new customers and improving the cost and service quality of existing
customers. Our decision to focus on a reduced service portfolio will result in
some existing contracted revenue being at risk. There is, however, evidence that
contracts in new areas of focus can address any losses and still support
incremental growth.
There has been some reduction in day rates for consulting services compared to
the same period last year, but by concentrating on the higher value specialist
services, Maxima is controlling the impact on margins. Despite customers being
more risk averse, taking longer on technology selection and negotiating harder
for new systems, Maxima has benefited from having a large installed base with
customers who are more comfortable investing with a supplier they already know.
As previously announced, on 20 October 2009 the company was informed by QAD that
they intended to end a long standing distribution partnership with Maxima,
indicating that they were going to sell direct to customers rather than through
Maxima. Although this was disappointing news, it is encouraging that many of the
customer relationships will be maintained as Maxima has been successful in
cross-selling many other products and services unrelated to QAD. Maxima takes
pride in the customer relationships derived through the QAD product, which in
many cases have been active for 10 years or more. As a result of our good
service reputation, we believe that circa 75% of impacted customers will
continue to invest in other business solutions and services offered by the
company.
Operating Review
Following the appointment of the new Maxima board and senior management team a
number of operational successes have been achieved including:
· Existing Managed Services customers who have renewed and extended
services with Maxima - including two multi-year service contracts valued at over
GBP6.5m which were part of a group of existing and new customer wins relating to
our specialist Unified Network Infrastructure and Communications capability
· Two new customer "Cloud type" wins valued at more than GBP6.2m over three
years which include the supply of converged services from multiple suppliers
into a flexible commercial framework to provide the customer what they need when
they need it
· Multiple new contract wins for Maxima's Citrix Virtualisation capability
· Concentrated efforts to drive the partnering relationship with Microsoft
have resulted in 6 new Microsoft Dynamics AX contracts signed with organisations
such as Anglian Building Products Ltd
· New orders from UK based Microsoft Business Partners for the Maxima
developed MAXcel which is the company's suite of business management software
that leverages the power of Microsoft Dynamics AX to support the needs of the
construction, service management and manufacturing industries
· New contracts placed by major banks wanting to access Maxima's specialist
domain expertise in Business Intelligence technology from SAP and Microsoft
· Centralised Maxima shared service functions making a positive
contribution helping to minimise costs, recruit new skills and generate new
opportunities
· Focused efforts in credit control resulting in a very pleasing level of
cash collection, enabling net debt to be reduced ahead of expectation to
GBP11.8m
· New investment in partner management has supported greater partner
collaboration, resulting in new pipeline opportunities being generated
· Investment in new marketing staff and management, enabling the roll-out
of a re-branding programme, simplification of marketing messages and a refresh
of all communications media
· Doubling of engineering staff in Hyderabad to provide support and
development services
· Two out of four Competency Centres opened in the Thames Valley and Dublin
Maxima continues to have high visibility of future revenues with 60% of total
revenues represented by recurring revenues from support and managed services in
the period, high levels of repeat business and a good order book for project
work. We have a broad spread of clients across a number of industry sectors with
a good mix of transaction values - all helping to ensure that our risk profile
is manageable. While the current economic climate has driven a small number of
customers to either reduce or cancel services, we have had very few customers
that have been forced out of business. Maxima's business strategy is to provide
exemplary levels of customer service around market-leading solutions - leading
to high levels of customer retention. We have also adopted a policy of working
closely with any customers who are experiencing trading difficulties, and this
has resulted in any potential customer and financial losses being minimised.
Outlook
The last year has been one of considerable change for Maxima, as the business
adjusts and adapts its operating activities to an evolving business climate. At
the core of Maxima is a loyal and committed customer base, which we're pleased
to say has continued to invest its trust and money in the combined skill,
knowledge and experience of Maxima staff, and our vision for the future.
The outlook for Maxima is positive and exciting following the re-engineering
work by Maxima staff over the last year. This has significantly strengthened the
organisation, and provides a relevant and robust platform for both the continued
support of existing customers and the attraction of new ones. Like most
companies operating in the UK market, success is only available to companies
like Maxima that have made the effort to adapt to materially different market
conditions and changing customer demands. We believe Maxima is well placed to
take advantage of the changes that we have made, and that market conditions
present us with a significant opportunity for growth through competitive
engagement.
Graham Kingsmill
Chief Executive Officer
3 August 2010
Results for the year ended 31 May 2010
Director's Report
FINANCIAL REVIEW
Introduction
Maxima made significant financial progress during the year and we are beginning
to see the benefits of the many management actions we have taken to improve the
organisation. We have reduced our cost base, dealt with some legacy issues in
areas such as property, improved our cash flow, and put the Company on a much
sounder financial footing in terms of its banking facilities and debt. This
progress was made despite trading results being lower than last year, for
reasons explained in the Chairman's and Chief Executive's sections above.
Trading results
Overall revenues for the year to 31 May 2010 decreased from GBP56.6m to
GBP51.0m. This was largely as a result of the termination of the QAD partnership
and due to lower sales of product and consultancy services generally, but this
masked a number of successes in other areas of the business such as Unified
Infrastructure and Microsoft related Business Solutions. Recurring revenues have
improved to 60% (2009: 56%) and gross margins are level with last year at 70%.
Whilst the tougher environment has had an impact on margins on product sales,
there has been a compensating effect of the sales mix due to a lower proportion
of product sales this year (down 3% to 15% this year).
Earnings before interest, tax, amortisation, impairment, share based payments
and exceptional charges decreased to GBP5.6m (2009: GBP8.3m), resulting in an
adjusted operating profit margin of 11.0% (2009: 14.6%). Margins were partly
impacted due to planned investment in our sales and marketing effort, but were
also reduced by the termination of the QAD partnership.
Amortisation of intangibles reduced to GBP3.5m (2009: GBP4.0m), reflecting the
acquisitions completed by Maxima in recent years. The decrease in the charge is
explained by the fact that intangibles relating to earlier acquisitions are now
fully amortised (intangibles being amortised over periods not exceeding 7 years
from their date of acquisition).
Exceptional items comprise three categories of costs all of which have been
incurred to ensure that Maxima is better positioned and has a stronger and more
competitive operating platform whilst reducing risk:
1. Redundancy and re-organisation costs:
Phase 1 of our re-organisation plan was completed during the year and these are
the costs incurred for redundancies and for the rebranding of the Group. The
costs also include redundancy costs associated with the termination of the QAD
relationship. With the recent restructuring to two operating divisions, there
will be further costs of redundancies in the current year, but on a lesser scale
to that seen during the past twelve months.
2. Property costs:
During the year there were further property rationalisation costs mostly
associated with the further reorganisation of the property in Cheltenham, where
the QAD division was based. Our plan going forward is to continue with the
rationalisation program which will include the Aylesbury and Crewe locations.
3. Bank refinancing costs:
The fees and fair value write off for renegotiation of the bank facilities
represent the difference between the fair value of the new facility and the
carrying value of the old liability, together with the bank and adviser fees
incurred during the renegotiation.
Loss before tax and after the adjustments above together with net finance costs
of GBP0.7m (2009: GBP1.1m) and share based payment costs of GBP0.3m (2009:
GBP0.1m) was GBP0.8m (2009: GBP9.6m). The key performance indicators used by the
Board to measure the business are:
1. Operating margins
2. The level of recurring revenues
3. New orders
4. Cash generation
(Loss)/Earnings per share and dividends
Basic loss per share was 2.7p (2009: loss 36.8p). Adjusted earnings per share,
before amortisation, share based payments, exceptional redundancy and
re-organisation costs, impairment and fair value charges, fell to 13.4p (2009:
21.2p). An interim dividend of 1.0p per share was paid on 31 March 2010, and
subject to shareholder approval, a final dividend of 2.0p per share will be paid
on 8 October 2010 to shareholders on the register at close of business on 10
September 2010. This will make a total full year dividend of 3.0p (2009: 4.5p)
per share, in line with reduced earnings before interest, tax, amortisation,
share based payments, and exceptional redundancy and re-organisation costs.
Cash flow and net debt
This year the Group generated GBP6.1m of cash from operations, against GBP5.2m
last year. This reflects lower profitability, but is offset by a reduction in
trade debtors, reflecting better cash collection, and a repayment of overpaid
taxation in the prior year. Net debt was GBP11.8m, down GBP3.7m from GBP15.5m
last year, ahead of market expectations.
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
borrowing where appropriate.
The original facility letter was agreed in 2005. Since then the strategy of the
Group has been modified substantially, with the result that there were a number
of technical restrictions which were no longer appropriate for the efficient
management of the Group. The facilities have therefore been renegotiated to
amend the restrictions and also to reduce the quantum. The fees and fair value
write off for renegotiation of the bank facilities was amounted to GBP0.5m,
which is included in the exceptional items. Interest rates will remain
competitive, varying from 1.5% to 3.0% above LIBOR.
The Group had committed borrowing facilities of GBP15.0m at 31 May 2010,
comprising a GBP3.0m term loan facility, repayable in six instalments until 31
May 2013, a GBP11.0m revolving credit facility repayable by 31 May 2013 (with
reductions of GBP0.25m at 31 May 2011 and 30 November 2011 and quarterly
thereafter until final repayment of the balance on 31 May 2013) and a GBP1.0m
overdraft facility. GBP12.5m was drawn under these facilities at the year end.
Cash balances at the year-end were GBP0.7m, which together with the overdraft
facility allows GBP3.2m of headroom. At 31 May 2010, the Group held a cap and
collar interest rate derivative covering GBP8.0m of the debt (of which GBP4.0m
expires on 30 June 2010 and a further GBP4.0m expires on 30 November 2011).
Taxation
The effective tax rate of 13.7% (2009: 4.1%), arises largely as a result of
there being limited tax relief on goodwill. The Group has GBP0.1m (2009:
GBP0.1m) of tax losses available. Deferred tax arose on share based payments,
amortisation of intangibles, goodwill, research and development costs, and the
re-measurement of the derivative instruments.
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 not changed during the
year under review and 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.
There is a risk, particularly in the current climate, that where we seek to
invest in the business for future growth, we will not be able to achieve growth
as quickly as forecast. We minimise the impact of this by careful measurement
against budgets and appropriate action on the cost base should that prove
necessary.
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 2010 (2009: 28%). The 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 and we
continue to monitor risks to continuity at each site.
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 prudent 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. Further consideration of the financial risks
is set out in Note 19 of the Annual Report and Accounts for the year ended 31
May 2010.
David Memory
Chief Finance Officer
3 August 2010
CONSOLIDATED INCOME STATEMENT
Year ended 31 May 2010
+-----------------------------------------+------+----------+--+----------+
| | | 2010 | | 2009 |
+-----------------------------------------+------+----------+--+----------+
| | Note | GBP000 | | GBP000 |
+-----------------------------------------+------+----------+--+----------+
| | | | | |
+-----------------------------------------+------+----------+--+----------+
| Revenue | | 51,006 | | 56,609 |
+-----------------------------------------+------+----------+--+----------+
| Cost of sales | | (15,323) | | (17,192) |
+-----------------------------------------+------+----------+--+----------+
| Gross profit | | 35,683 | | 39,417 |
+-----------------------------------------+------+----------+--+----------+
| Administrative expenses | | (30,080) | | (31,160) |
+-----------------------------------------+------+----------+--+----------+
| Earnings before interest, tax, | | 5,603 | | 8,257 |
| amortisation, impairment, share based | | | | |
| payments and redundancy and | | | | |
| re-organisation costs | | | | |
+-----------------------------------------+------+----------+--+----------+
| Amortisation of intangibles | | (3,495) | | (4,031) |
+-----------------------------------------+------+----------+--+----------+
| Impairment of goodwill | | - | | (8,413) |
+-----------------------------------------+------+----------+--+----------+
| Share based payments | | (319) | | (93) |
+-----------------------------------------+------+----------+--+----------+
| Exceptional redundancy and | 4 | (1,829) | | (3,652) |
| re-organisation costs | | | | |
+-----------------------------------------+------+----------+--+----------+
| | | | | |
+-----------------------------------------+------+----------+--+----------+
| Operating loss | | (40) | | (7,932) |
+-----------------------------------------+------+----------+--+----------+
| Exceptional charge for movement in | | - | | (551) |
| derivative instruments carried at fair | | | | |
| value | | | | |
+-----------------------------------------+------+----------+--+----------+
| Finance costs | | (754) | | (1,176) |
+-----------------------------------------+------+----------+--+----------+
| Finance income | | 12 | | 27 |
+-----------------------------------------+------+----------+--+----------+
| Loss before income tax | | (782) | | (9,632) |
+-----------------------------------------+------+----------+--+----------+
| Taxation | 5 | 107 | | 400 |
+-----------------------------------------+------+----------+--+----------+
| Loss for the year attributable to | | (675) | | (9,232) |
| equity holders | | | | |
+-----------------------------------------+------+----------+--+----------+
| Loss per share - total and continuing | 2 | | | |
+-----------------------------------------+------+----------+--+----------+
| Basic | | (2.7)p | | (36.8)p |
+-----------------------------------------+------+----------+--+----------+
| Diluted | | (2.7)p | | (36.8)p |
+-----------------------------------------+------+----------+--+----------+
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 May 2010
+------------------------------------------------+--------+--+---------+
| | 2010 | | 2009 |
+------------------------------------------------+--------+--+---------+
| | GBP000 | | GBP000 |
+------------------------------------------------+--------+--+---------+
| Loss for the year | (675) | | (9,232) |
+------------------------------------------------+--------+--+---------+
| | | | |
+------------------------------------------------+--------+--+---------+
| Other comprehensive income | | | |
+------------------------------------------------+--------+--+---------+
| Exchange gain on translating foreign | 8 | | 41 |
| operations | | | |
+------------------------------------------------+--------+--+---------+
| Other comprehensive income, net of tax | 8 | | 41 |
+------------------------------------------------+--------+--+---------+
| | | | |
+------------------------------------------------+--------+--+---------+
| | | | |
+------------------------------------------------+--------+--+---------+
| Total comprehensive income for the year | (667) | | (9,191) |
| attributable to equity holders of the parent | | | |
| entity | | | |
+------------------------------------------------+--------+--+---------+
CONSOLIDATED BALANCE SHEET
At 31 May 2010
+------------------------------------------+------+----------+--+----------+
| | | 2010 | | 2009 |
+------------------------------------------+------+----------+--+----------+
| | Note | GBP000 | | GBP000 |
+------------------------------------------+------+----------+--+----------+
| Assets | | | | |
+------------------------------------------+------+----------+--+----------+
| Non-current assets | | | | |
+------------------------------------------+------+----------+--+----------+
| Property, plant & equipment | | 1,265 | | 1,361 |
+------------------------------------------+------+----------+--+----------+
| Goodwill | 6 | 40,921 | | 41,021 |
+------------------------------------------+------+----------+--+----------+
| Other intangible assets | 6 | 5,704 | | 8,880 |
+------------------------------------------+------+----------+--+----------+
| Total intangibles | | 46,625 | | 49,901 |
+------------------------------------------+------+----------+--+----------+
| Total non-current assets | | 47,890 | | 51,262 |
+------------------------------------------+------+----------+--+----------+
| Current assets | | | | |
+------------------------------------------+------+----------+--+----------+
| Inventory | | 329 | | 405 |
+------------------------------------------+------+----------+--+----------+
| Trade and other receivables | | 11,639 | | 14,363 |
+------------------------------------------+------+----------+--+----------+
| Cash and cash equivalents | | 781 | | 2,421 |
+------------------------------------------+------+----------+--+----------+
| Total current assets | | 12,749 | | 17,189 |
+------------------------------------------+------+----------+--+----------+
| Total assets | | 60,639 | | 68,451 |
+------------------------------------------+------+----------+--+----------+
| Liabilities | | | | |
+------------------------------------------+------+----------+--+----------+
| Current liabilities | | | | |
+------------------------------------------+------+----------+--+----------+
| Trade and other payables | | (3,604) | | (4,153) |
+------------------------------------------+------+----------+--+----------+
| Deferred income | | (10,708) | | (10,653) |
+------------------------------------------+------+----------+--+----------+
| Borrowings | | (1,031) | | (1,096) |
+------------------------------------------+------+----------+--+----------+
| Accruals | | (4,347) | | (4,218) |
+------------------------------------------+------+----------+--+----------+
| Current tax liabilities | | (109) | | - |
+------------------------------------------+------+----------+--+----------+
| Short term provisions | | (856) | | (804) |
+------------------------------------------+------+----------+--+----------+
| Total current liabilities | | (20,655) | | (20,924) |
+------------------------------------------+------+----------+--+----------+
| Non-current liabilities | | | | |
+------------------------------------------+------+----------+--+----------+
| Borrowings | | (11,530) | | (16,812) |
+------------------------------------------+------+----------+--+----------+
| Deferred tax | | (2,262) | | (2,899) |
+------------------------------------------+------+----------+--+----------+
| Long term provisions | | (2,218) | | (2,640) |
+------------------------------------------+------+----------+--+----------+
| Total non-current liabilities | | (16,010) | | (22,351) |
+------------------------------------------+------+----------+--+----------+
| Total liabilities | | (36,665) | | (43,275) |
+------------------------------------------+------+----------+--+----------+
| Net assets | | 23,974 | | 25,176 |
+------------------------------------------+------+----------+--+----------+
| Equity attributable to equity holders of | | | | |
| the parent company | | | | |
+------------------------------------------+------+----------+--+----------+
| Share capital | 8 | 253 | | 253 |
+------------------------------------------+------+----------+--+----------+
| Reverse acquisition reserve | | (9,180) | | (9,180) |
+------------------------------------------+------+----------+--+----------+
| Share premium account | 8 | 28,794 | | 28,794 |
+------------------------------------------+------+----------+--+----------+
| Capital redemption reserve | | 50 | | 50 |
+------------------------------------------+------+----------+--+----------+
| Merger reserve | 8 | 4,595 | | 4,595 |
+------------------------------------------+------+----------+--+----------+
| Currency translation reserve | | 201 | | 193 |
+------------------------------------------+------+----------+--+----------+
| Retained earnings | | (739) | | 471 |
+------------------------------------------+------+----------+--+----------+
| Total equity | | 23,974 | | 25,176 |
+------------------------------------------+------+----------+--+----------+
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 May 2010
All attributable to the owners of the Company
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| |Note | Share | Share | Merger | Reverse | Other | Retained | | Total |
| | |Capital |Premium |Reserve |Acquisition |Reserves | Earnings | | |
| | | |Account | | Reserve | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | | GBP000 |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Balance at 1 June | | 250 | 28,624 | 11,022 | (9,180) | 202 | 4,588 | | 35,506 |
| 2008 | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Loss for the year | | - | - | - | - | - | (9,232) | | (9,232) |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Other | | | | | | | | | |
| comprehensive | | | | | | | | | |
| income | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Foreign | | - | - | - | - | 41 | - | | 41 |
| translation gain | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Total | | - | - | - | - | 41 | (9,232) | | (9,191) |
| comprehensive | | | | | | | | | |
| income for the | | | | | | | | | |
| year ended 31 May | | | | | | | | | |
| 2009 | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Transfer from | | - | - | (6,427) | - | - | 6,427 | | - |
| Merger Reserve | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Employee share | | | | | | | | | |
| options scheme: | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Value of | | - | - | - | - | - | 93 | | 93 |
| employee services | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Proceeds from | | 3 | 170 | - | - | - | - | | 173 |
| shares issued | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Dividends paid | 3 | - | - | - | - | - | (1,405) | | (1,405) |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Transactions with | | 3 | 170 | (6,427) | - | - | 5,115 | | (1,139) |
| owners | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Balance at 31 May | | 253 | 28,794 | 4,595 | (9,180) | 243 | 471 | | 25,176 |
| 2009 | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Loss for the year | | - | - | - | - | - | (675) | | (675) |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Other | | | | | | | | | |
| comprehensive | | | | | | | | | |
| income | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Foreign | | - | - | - | - | 8 | - | | 8 |
| translation gain | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Total | | - | - | - | - | 8 | (675) | | (667) |
| comprehensive | | | | | | | | | |
| income for the | | | | | | | | | |
| year ended 31 May | | | | | | | | | |
| 2010 | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Employee share | | | | | | | | | |
| options scheme: | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Value of | | - | - | - | - | - | 319 | | 319 |
| employee services | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Deferred tax | | - | - | - | - | - | 31 | | 31 |
| thereon | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Dividends paid | 3 | - | - | - | - | - | (885) | | (885) |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Transactions with | | - | - | - | - | - | (535) | | (535) |
| owners | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
| Balance at 31 May | | 253 | 28,794 | 4,595 | (9,180) | 251 | (739) | | 23,974 |
| 2010 | | | | | | | | | |
+-------------------+------+---------+---------+---------+-------------+----------+----------+----------+---------+
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 May 2010
+-------------------------------------------+------+----------+----------+---------+
| |Note | 2010 | | 2009 |
+-------------------------------------------+------+----------+----------+---------+
| | | GBP000 | | GBP000 |
+-------------------------------------------+------+----------+----------+---------+
| Operating activities | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Loss before tax | | (782) | | (9,632) |
+-------------------------------------------+------+----------+----------+---------+
| Adjustments for: | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Interest payable | | 754 | | 1,176 |
+-------------------------------------------+------+----------+----------+---------+
| Exceptional redundancy and | | 1,829 | | 3,652 |
| re-organisation costs | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Exceptional charge for movement in | | - | | 551 |
| derivative instruments carried at fair | | | | |
| value | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Interest receivable | | (12) | | (27) |
+-------------------------------------------+------+----------+----------+---------+
| Depreciation charge | | 622 | | 620 |
+-------------------------------------------+------+----------+----------+---------+
| Share based payment expense | | 319 | | 93 |
+-------------------------------------------+------+----------+----------+---------+
| Impairment of goodwill | | - | | 8,413 |
+-------------------------------------------+------+----------+----------+---------+
| Amortisation of intangibles | | 3,495 | | 4,031 |
+-------------------------------------------+------+----------+----------+---------+
| Operating cash flows before movements in | | 6,225 | | 8,877 |
| working capital | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Movement in inventories | | 75 | | (93) |
+-------------------------------------------+------+----------+----------+---------+
| Movement in receivables | | 2,135 | | 1,070 |
+-------------------------------------------+------+----------+----------+---------+
| Movement in payables | | (2,558) | | (2,629) |
+-------------------------------------------+------+----------+----------+---------+
| Taxation repaid/ (paid) | | 240 | | (2,049) |
+-------------------------------------------+------+----------+----------+---------+
| Net cash from operating activities | | 6,117 | | 5,176 |
+-------------------------------------------+------+----------+----------+---------+
| Cash flows from investing activities: | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Interest received | | 12 | | 27 |
+-------------------------------------------+------+----------+----------+---------+
| Purchase of property, plant & equipment | | (565) | | (614) |
+-------------------------------------------+------+----------+----------+---------+
| Proceeds from sale of property, plant & | | 36 | | 57 |
| equipment | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Acquisition of subsidiaries (net of cash | | - | | (8,485) |
| acquired) | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Warranty claim received | | 100 | | - |
| Expenditure on research & development | | (319) | | (391) |
| activities capitalised | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Net cash used in investing activities | | (736) | | (9,406) |
+-------------------------------------------+------+----------+----------+---------+
| Cash flows from financing activities: | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Interest paid | | (789) | | (1,103) |
+-------------------------------------------+------+----------+----------+---------+
| Proceeds from long term borrowings | | 12,500 | | 6,000 |
+-------------------------------------------+------+----------+----------+---------+
| Repayment of long term borrowings | | (17,750) | | (1,000) |
+-------------------------------------------+------+----------+----------+---------+
| Repayment of finance leases | | (97) | | (143) |
+-------------------------------------------+------+----------+----------+---------+
| Dividends paid | | (885) | | (1,405) |
+-------------------------------------------+------+----------+----------+---------+
| Proceeds from issue of shares | | - | | 100 |
+-------------------------------------------+------+----------+----------+---------+
| Net cash from financing activities | | (7,021) | | 2,449 |
+-------------------------------------------+------+----------+----------+---------+
| Net decrease in cash & cash equivalents | 7 | (1,640) | | (1,781) |
+-------------------------------------------+------+----------+----------+---------+
| Cash and cash equivalents at beginning of | | 2,421 | | 4,202 |
| period | | | | |
+-------------------------------------------+------+----------+----------+---------+
| Cash and cash equivalents at end of | | 781 | | 2,421 |
| period | | | | |
+-------------------------------------------+------+----------+----------+---------+
Notes
1. Basis of preparation
This preliminary statement was approved by the directors on 3 August 2010.
The financial information set out above does not constitute the company's
statutory financial statements for the year ended 31 May 2010 but is derived
from those financial statements. The comparative figures are those of the
financial statements for the year ended 31 May 2009. The report of the auditors
was unqualified and did not contain a statement under section 498(2) or (3) of
the Companies Act 2006. The statutory financial statements for the year ended 31
May 2010 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.
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards, as adopted by the EU.
2. Loss 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.
+-------------------------------------+---+----------+--------------+
| | | 2010 | 2009 |
+-------------------------------------+---+----------+--------------+
| | | GBP000 | GBP000 |
+-------------------------------------+---+----------+--------------+
| Loss | | | |
+-------------------------------------+---+----------+--------------+
| Net loss after tax for the year | | (675) | (9,232) |
| attributable to equity holders | | | |
+-------------------------------------+---+----------+--------------+
| | | No. | No. |
| Weighted average number of ordinary | | 000 | 000 |
| shares | | | |
+-------------------------------------+---+----------+--------------+
| For basic earnings per share | | 25,261 | 25,087 |
+-------------------------------------+---+----------+--------------+
| Dilutive share options | | 1,302 | 260 |
+-------------------------------------+---+----------+--------------+
| For diluted earnings per share | | 26,563 | 25,347 |
+-------------------------------------+---+----------+--------------+
| Basic loss per share | | (2.7)p | (36.8)p |
+-------------------------------------+---+----------+--------------+
| Fully diluted loss per share | | (2.7)p | (36.8)p |
+-------------------------------------+---+----------+--------------+
Under IAS 33 "Earnings per share", the shares cannot be dilutive if they
decrease a loss per share, and therefore the dilution impact has been ignored
for the purposes of calculating the loss per share this year.
The directors believe that, in addition to the statutory figures,
(loss)/earnings per share figures adjusted for the amortisation of intangibles,
impairment, share based payments, redundancy and re-organisation costs and fair
value charges represent a more consistent measure of underlying performance. A
reconciliation of the statutory loss to these profit figures and the resulting
earnings per share figures is given below:
+----------------------------------------+----------+----------+--------------+
| | | 2010 | 2009 |
+----------------------------------------+----------+----------+--------------+
| | | GBP000 | GBP000 |
+----------------------------------------+----------+----------+--------------+
| Operating loss | | (40) | (7,932) |
+----------------------------------------+----------+----------+--------------+
| Share-based payments | | 319 | 93 |
+----------------------------------------+----------+----------+--------------+
| Amortisation of intangibles | | 3,495 | 4,031 |
+----------------------------------------+----------+----------+--------------+
| Impairment of goodwill | | - | 8,413 |
+----------------------------------------+----------+----------+--------------+
| Redundancy and re-organisation costs | | 1,829 | 3,652 |
+----------------------------------------+----------+----------+--------------+
| Adjusted operating profit | | 5,603 | 8,257 |
+----------------------------------------+----------+----------+--------------+
| Net interest | | (742) | (1,149) |
+----------------------------------------+----------+----------+--------------+
| Adjusted profit on ordinary activities | | 4,861 | 7,108 |
| before tax | | | |
+----------------------------------------+----------+----------+--------------+
| Tax on profit on ordinary activities | | 107 | 400 |
+----------------------------------------+----------+----------+--------------+
| Tax on share-based payments, | | (1,580) | (2,177) |
| amortisation and redundancy and | | | |
| re-organisation costs | | | |
+----------------------------------------+----------+----------+--------------+
| Adjusted profit after tax | | 3,388 | 5,331 |
+----------------------------------------+----------+----------+--------------+
| Adjusted basic earnings per share | | 13.4p | 21.2p |
+----------------------------------------+----------+----------+--------------+
| Adjusted diluted earnings per share | | 12.8p | 21.0p |
+----------------------------------------+----------+----------+--------------+
3. Dividends on shares classed as equity
+----------------------------+-----------+--------+-----------+--------+
| | 2010 | 2010 | 2009 | 2009 |
+----------------------------+-----------+--------+-----------+--------+
| | pence per | GBP000 | pence per | GBP000 |
| | share | | share | |
+----------------------------+-----------+--------+-----------+--------+
| Paid during the year | | | | |
+----------------------------+-----------+--------+-----------+--------+
| Final dividend for prior | 2.5p | 632 | 3.6p | 900 |
| year | | | | |
+----------------------------+-----------+--------+-----------+--------+
| Interim dividend for | 1.0p | 253 | 2.0p | 505 |
| current year | | | | |
+----------------------------+-----------+--------+-----------+--------+
| | 3.5p | 885 | 5.6p | 1,405 |
+----------------------------+-----------+--------+-----------+--------+
The directors propose that a final dividend of 2.0p will be paid to the
shareholders on 8 October 2010. 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 GBP0.5m.
4. Exceptional redundancy and reorganisation costs
+-----------------------------------+-------------+--------+--------+
| | | 2010 | 2009 |
+-----------------------------------+-------------+--------+--------+
| | | GBP000 | GBP000 |
+-----------------------------------+-------------+--------+--------+
| Redundancy and re-organisation costs | 737 | 905 |
| Provision for onerous leases | 459 | 2,747 |
| Fair value write off associated with | 526 | - |
| renegotiation of bank facilities | 107 | - |
| Rebranding and other costs | | |
+-------------------------------------------------+--------+--------+
| | 1,829 | 3,652 |
+-------------------------------------------------+--------+--------+
| | | |
+-----------------------------------+-------------+--------+--------+
The redundancy and reorganisation costs have been incurred in delivering the
first phase of the divisional restructuring of the business, as well as costs
associated with staff changes following the termination of the QAD partnership.
The onerous lease costs represent the additional costs of vacant property at
Cheltenham as a result of the reorganisation that followed the termination of
the QAD partnership.
The fees and fair value write off for renegotiation of the bank facilities
represent the difference between the fair value of the new facility and the
carrying value of the old liability, together with the bank and adviser fees
incurred during the renegotiation. The rebranding costs are costs relating to
the rebranding of the Group that took place at the beginning of the year.
5. Tax on loss
+-----------------------------------------------+---------+----------+
| | 2010 | 2009 |
+-----------------------------------------------+---------+----------+
| | GBP000 | GBP000 |
+-----------------------------------------------+---------+----------+
| The tax credit represents: | | |
+-----------------------------------------------+---------+----------+
| Current year tax charge | 488 | 395 |
+-----------------------------------------------+---------+----------+
| Adjustments in respect of prior periods | (37) | (17) |
+-----------------------------------------------+---------+----------+
| Total current tax | 451 | 378 |
+-----------------------------------------------+---------+----------+
| Deferred tax - origination and reversal of | (558) | (778) |
| timing differences | | |
+-----------------------------------------------+---------+----------+
| Taxation | (107) | (400) |
+-----------------------------------------------+---------+----------+
UK tax is calculated at 28 per cent (2009: 28 per cent) of taxable profit.
Overseas tax is calculated at the rates ruling in the relevant countries. The
total tax credit for the year represents an effective rate of 13.68 per cent
(2009: 4.15 per cent). The tax credit is explained as follows:
+----------------------------------------------+---------+----------+
| | 2010 | 2009 |
+----------------------------------------------+---------+----------+
| | GBP000 | GBP000 |
+----------------------------------------------+---------+----------+
| Loss before tax | (782) | (9,632) |
+----------------------------------------------+---------+----------+
| | | |
+----------------------------------------------+---------+----------+
| Loss multiplied by standard rate of | (219) | (2,696) |
| corporation tax of 28% (2009: 28%) | | |
+----------------------------------------------+---------+----------+
| | | |
+----------------------------------------------+---------+----------+
| Effect of: | | |
+----------------------------------------------+---------+----------+
| Expenses not deductible for tax purposes | 115 | 2,518 |
+----------------------------------------------+---------+----------+
| Additional deduction for R&D expenditure | (13) | (18) |
+----------------------------------------------+---------+----------+
| Utilisation of tax losses not recognised for | (20) | (237) |
| deferred tax | | |
+----------------------------------------------+---------+----------+
| Movement in other deferred tax not | 34 | 80 |
| recognised | | |
+----------------------------------------------+---------+----------+
| Differences in tax rates | 33 | (30) |
+----------------------------------------------+---------+----------+
| Prior year adjustments in relation to | (37) | (17) |
| subsidiary undertakings | | |
+----------------------------------------------+---------+----------+
| Credit for period | (107) | (400) |
+----------------------------------------------+---------+----------+
6. Intangible assets
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| | | Customer | Order | Development | Total | |
| | Goodwill | relationships | backlog | costs | other | Total |
| | | | | | intangibles | |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| Cost | | | | | | |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| At 1 June 2008 | 41,434 | 13,308 | 1,842 | 540 | 15,690 | 57,124 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| Additions | - | - | - | 391 | 391 | 391 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| Adjustment to | (427) | - | - | - | - | (427) |
| prior period | | | | | | |
| acquisition | | | | | | |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| On business | 8,427 | 1,112 | 895 | - | 2,007 | 10,434 |
| combinations | | | | | | |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| At 1 June 2009 | 49,434 | 14,420 | 2,737 | 931 | 18,088 | 67,522 |
| Warranty claim | (100) | - | - | - | - | (100) |
| Additions | - | - | - | 319 | 319 | 319 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| At 31 May 2010 | 49,334 | 14,420 | 2,737 | 1,250 | 18,407 | 67,741 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| Accumulated | | | | | | |
| amortisation | | | | | | |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| At 1 June 2008 | - | 3,636 | 1,244 | 297 | 5,177 | 5,177 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| Charge for the | - | 2,818 | 971 | 242 | 4,031 | 4,031 |
| year | | | | | | |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| Impairment | 8,413 | - | - | - | - | 8,413 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| At 1 June 2009 | 8,413 | 6,454 | 2,215 | 539 | 9,208 | 17,621 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| Charge for the | - | 2,659 | 522 | 314 | 3,495 | 3,495 |
| year | | | | | | |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| At 31 May 2010 | 8,413 | 9,113 | 2,737 | 853 | 12,703 | 21,116 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| Carrying | | | | | | |
| amount: | | | | | | |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| At 31 May 2010 | 40,921 | 5,307 | - | 397 | 5,704 | 46,625 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| At 31 May 2009 | 41,021 | 7,966 | 522 | 392 | 8,880 | 49,901 |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
| | | | | | |
+-----------------+----------+---------------+---------+-------------+-------------+--------+
During the current year a claim was made against a warranty relating to the
acquisition of DXI, which was settled in an amount of GBP100,000 (2009: GBPNil).
In accordance with IFRS 3 'Business Combinations', this has been applied to the
value of goodwill arising in relation to that acquisition. No change has been
made to the fair value of any of the other assets/liabilities in connection with
the acquisition.
Following internal reorganisation, the Group has redefined the cash-generating
units (CGUs) that are appropriate for the ongoing measurement of the carrying
value of goodwill. The Business Solutions division represents a combination of
two previous divisions which were called the Business Solutions and Information
Management divisions (collectively Maxima Solutions) and the Support Enablement
Services division represents a combination of the previous Support and
Enablement Services division with MS Infrastructure (Ireland) (collectively
Maxima Managed Services). This has not had a material impact upon the impairment
provision that would have been deemed necessary under the previous definition of
CGUs. Goodwill acquired in a business combination has been re-allocated to the
new CGUs that are expected to benefit from that business combination. The
carrying amount of goodwill has been allocated as follows:
+----------------------------------------+------------+------------+
| | 2010 | 2009 |
+----------------------------------------+------------+------------+
| | GBP000 | GBP000 |
+----------------------------------------+------------+------------+
| | | |
| Business Solutions | 12,357 | 12,357 |
| | | |
+----------------------------------------+------------+------------+
| Support Enablement Services | 28,564 | 28,664 |
| | | |
+----------------------------------------+------------+------------+
| | 40,921 | 41,021 |
+----------------------------------------+------------+------------+
Impairment tests for goodwill
Goodwill acquired through business combinations has been allocated for
impairment testing purposes to individual CGUs, which never exceed the size of a
reportable segment. The Group conducts annual impairment tests which are only
reperformed in the intervening period if an impairment triggering event occurs.
An impairment test of the Business Solutions division was completed following
the announcement of the termination of the QAD partnership and no impairment
provision was considered necessary at the time.
When conducting an impairment review, the recoverable amounts of the CGUs are
based on value in use calculations. Value in use is calculated based upon
discounted cash flows into the future. The future cash flows are derived from
the approved budget for the year ended 31 May 2011 which are then extrapolated
based upon management's expectations on operating performance and growth
prospects. The most sensitive assumptions are those regarding growth rates and
discount rates. Budgeted cash flows for the financial year to 31 May 2011 were
extrapolated for a period of ten years at projected growth rates and thereafter
using a terminal multiplier based on industry growth rates and P/E ratios,
together with management's view of the observable markets as well as historical
and estimated requirements by customers for the products and services.
Management has forecast growth rates for years 2 to 5 were 4% for Support
Enablement Services (2009: 3%) and 3% for Business Solutions (2009: 3%) and then
assumed growth of 2.25% thereafter in both divisions (2009: 3%). Projected cash
flows, pre-tax, were discounted at 8.5% (2009: 9.0%) per annum for both CGUs, to
calculate their net present value, the discount rate reflecting the time value
of money, the nature and risks to the CGUs and bank borrowings being the same
across the CGUs.
As a result of these tests, no impairment provision (2009: GBP8,413,000) is
considered necessary. The key assumptions that are most sensitive in the
calculation of the carrying value of goodwill are those relating to discount and
growth rates. Management has considered a 1% movement in each measure as this is
the maximum likely movement that it believes is likely (ie a 1% absolute
movement in the discount rate represents a shift of 12% of the assumed rate and
a 1% absolute movement in growth rates represents a shift of at least 25% of the
assumed growth rates). Neither sensitivity would give rise to the need for
impairment in either division.
7. Analysis of changes in net debt
+------------------------------------+----------+---------+----------+
| | At 1 | | At 31 |
| | June | Cash | May |
| | 2009 | flow | 2010 |
+------------------------------------+----------+---------+----------+
| | GBP000 | GBP000 | GBP000 |
+------------------------------------+----------+---------+----------+
| Cash at bank and in hand | 2,421 | (1,640) | 781 |
+------------------------------------+----------+---------+----------+
| Finance leases | (158) | 97 | (61) |
+------------------------------------+----------+---------+----------+
| Bank loan | (17,750) | 5,250 | (12,500) |
+------------------------------------+----------+---------+----------+
| | (15,487) | 3,707 | (11,780) |
+------------------------------------+----------+---------+----------+
8. Called up share capital and capital reserves
+-------------------------------+------------+--------+------------+--------+
| | 31 May 2010 | 31 May 2009 |
+-------------------------------+---------------------+---------------------+
| | No. of | GBP000 | No. of | GBP000 |
| | shares | | shares | |
+-------------------------------+------------+--------+------------+--------+
| Authorised | | | | |
+-------------------------------+------------+--------+------------+--------+
| Ordinary shares of 1p each | 95,000,000 | 950 | 95,000,000 | 950 |
+-------------------------------+------------+--------+------------+--------+
+------------------------+------------+----------+---------+---------+---------+
| Called up, allotted | Number | Ordinary | Share | Merger | |
| and fully paid | of | Shares | Premium | Reserve | Total |
| Ordinary shares of 1p | Shares | | | | |
| each | | | | | |
+------------------------+------------+----------+---------+---------+---------+
| | | GBP000 | GBP000 | GBP000 | GBP000 |
+------------------------+------------+----------+---------+---------+---------+
| At 1 June 2008 | 25,009,695 | 250 | 28,624 | 11,022 | 39,896 |
+------------------------+------------+----------+---------+---------+---------+
| Exercise of employee | 90,000 | 1 | 99 | - | 100 |
| share options | | | | | |
+------------------------+------------+----------+---------+---------+---------+
| Impairment on business | - | - | - | (6,427) | (6,427) |
| combination | | | | | |
+------------------------+------------+----------+---------+---------+---------+
| Issue of shares (net | 161,708 | 2 | 71 | - | 73 |
| of expenses) | | | | | |
+------------------------+------------+----------+---------+---------+---------+
| At 31 May 2009 and 31 | 25,261,403 | 253 | 28,794 | 4,595 | 33,642 |
| May 2010 | | | | | |
+------------------------+------------+----------+---------+---------+---------+
The merger reserve arises from the issue of shares as part of consideration for
certain acquisitions completed by the Group. The transfer from the merger
reserve in 2009 represents a release of the reserve to the extent it was created
on business combinations where the purchased goodwill has now been impaired.
9. Annual Report and Accounts
A copy of the Annual Report and Accounts for the year ended 31 May 2010 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 Company's offices,
1st Floor, Parkview 1230, Arlington Business Park, Reading, Berkshire, RG7 4GA
at midday on 23rd September 2010.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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