TIDMPNX
RNS Number : 9263W
Phoenix IT Group PLC
29 November 2010
29 November 2010
Phoenix IT Group plc
Interim Results for the six months ended 30 September 2010
Phoenix IT Group plc ('Phoenix' or 'the Group') the UK IT
services company, announces its interim results for the six months
ended 30 September 2010.
FINANCIAL HIGHLIGHTS
Financial performance
-- Group revenues increased by 13.4% to GBP138.4m (2009: GBP122.0m)
-- Group underlying* operating profit GBP17.3m (2009: GBP17.4m)
-- Underlying** profit before tax increased by 2.0% to GBP15.1m
(2009: GBP14.8m)
-- Net debt (including finance leases) reduced to GBP63.5m
(2009: GBP78.0m)
-- Underlying** diluted earnings per share increased by 3.6%
to 14.2p (2009: 13.7p)
-- Interim dividend rebased to 3.50 pence per share - an increase
of 62.8% (2009: 2.15 pence per share)
Statutory financial performance
-- Profit from operations GBP15.8m (2009: GBP15.9m)
-- Profit before tax GBP13.3m (2009: GBP13.3m)
-- Diluted earnings per share increased by 1.6% to 12.5p (2009:
12.3p)
-- Basic earnings per share increased by 0.8% to 12.9p (2009:
12.8p)
OPERATIONAL HIGHLIGHTS
-- ICM Continuous Business and Servo Divisions to merge from
1 April 2011
-- Revenue momentum and earnings growth quarter on quarter
-- Targeted investment to further develop "cloud" services
-- Continuing high demand for managed hosting services
-- New banking facilities materially increase the financial
resources of the Group
-- Good cash generation and further reduction in net debt
* Underlying - adjusted for non-recurring items GBPnil (2009:
GBPnil) and amortisation of acquired intangibles GBP1.5m (2009:
GBP1.5m)
**Underlying - adjusted for non-recurring items GBP0.3m (2009:
GBPnil) and amortisation of acquired intangibles GBP1.5m (2009:
GBP1.5m)
Commenting on these results, Nick Robinson, Chief Executive of
Phoenix, said:
"The Group has started the year well with revenue momentum
driven by acquisitions and new business wins in the previous
financial year along with continued progress within the existing
business. The fundamentals of our business remain unchanged:
recurring revenues, strong cash generation and a focus on niche
markets where higher margins and higher rates of growth can be
achieved. The second half has started well with an increase in
sales opportunities across all three divisions and we remain
confident that the Board's expectations for the full year will be
achieved."
Enquiries
Phoenix IT Group Tel: +44 (0)1604 769000
Peter Bertram Executive Chairman
Nick Robinson Chief Executive Officer
Financial Dynamics Tel: +44 (0)20 7831 3113
Charlie Palmer
Haya Herbert-Burns
Nicola Biles
Responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been
prepared in accordance with IAS 34 'Interim Financial
Reporting';
(b) the interim management report includes a fair review
of the information required by DTR 4.2.7R (indication
of important events during the first six months and
description of principal risks and uncertainties for
the remaining six months of the year); and
(c) the interim management report includes a fair review
of the information required by DTR 4.2.8R (disclosure
of related party transactions and changes therein).
By order of the Board
Peter Bertram
Executive Chairman
26 November 2010
This half-year interim management report covers the six months
ended 30 September 2010 and has been prepared to provide additional
information to the shareholders to assess the Group's strategies,
the success of those strategies and the potential for those
strategies to succeed in the future. This report should not be
relied on by any other party or for any other purpose.
Forward looking statements
Any forward looking statements made within this half-year
interim management report have been made in good faith by the
Directors based on the information available up to the date of the
Directors' approval of this report. These forward looking
statements should be treated with caution due to the inherent
uncertainties, including macroeconomic uncertainties, in the
markets that the Group serves and business risk factors which may
affect their outcome.
This interim management report has been prepared for the Phoenix
IT Group as a whole and therefore it gives greater emphasis to
those matters which are significant to Phoenix IT Group plc and its
subsidiary undertakings when viewed as a whole.
Interim management report to the members of Phoenix IT Group
plc
Introduction
The Group has made good progress during 2010 with revenues in
all Divisions increasing during the six months ended 30 September
2010.
Despite cutbacks in the public sector, the overall trend for
outsourcing remains positive and while pressures on public spending
may impact growth in the short term the requirement for the public
sector to achieve cost efficiencies offers opportunities for the
Group going forward. We continue to see outsourcing opportunities
in both the public and private sector as customers seek to reduce
their cost base.
We remain increasingly well positioned to take advantage of the
move to a new era in IT infrastructure, often known as the "cloud"
and during the last 18 months the Group has seen significant growth
in its data centre and hosting related businesses. In the Servo
(Mid-market Services) Division, the Virtual Shared Platform and
Managed Hosting offering is extremely popular; whilst in the ICM
Continuous Business (Business Continuity) Division the High
Availability data centre services; Data Replication and On-line
Backup are transforming the way in which clients store and recover
their critical business data and applications. For many customers
'continuous business' is now an achievable reality. Virtualisation
is now well established and will soon emerge in the desktop market
as well as becoming the established standard for implementing
servers in the data centre.
With this demand for both availability and technological change,
the lines have become blurred between what is a solution for
'normal' operations and what is a solution for disaster scenario.
From 1 April 2011 therefore, a single end-user based organisation
will be created by merging the ICM Continuous Business (Business
Continuity) and Servo (Mid-market Services) Divisions together.
Operating from 17 UK locations the combined businesses will
provide a breadth of complementary Phoenix Group services that
deliver high performance, availability of technology,
infrastructure, networks, workplace and professional services.
Results
Group revenues increased, as expected, by 13.4% to GBP138.4m
(2009: GBP122.0m). The Phoenix IT Services (Partner Services)
Division has seen revenues increase significantly following the
three large contract wins during the latter part of the previous
financial year, and our Servo (Mid-market Services) Division
continues to grow its contractual and professional services
revenues.
Profit before tax, non-recurring items and amortisation of
acquired intangibles increased by 2.0% to GBP15.1m (2009: GBP14.8m)
largely due to lower net finance costs of GBP2.2m (2009: GBP2.6m).
The lower finance costs reflect a fall in the cost of borrowing
combined with a lower level of average net borrowings
period-on-period. Profit from operations was GBP15.8m (2009:
GBP15.9m). Profit before tax was GBP13.3m (2009: GBP13.3m).
Trading in the second quarter (the three months from July 2010
to September 2010) has improved over the first three months (from
April 2010 to June 2010) of the current financial year as we have
seen a continuation of some of the trends identified in the second
half of the last financial year, particularly around the market for
"cloud" computing services. This market continues to develop at a
fast pace and covers a broad spectrum of services allowing
businesses to move all of their computing needs to a hosted
service, accessible over the internet.
The tax rate of 26.8% (2009: 27.6%) is based on the annual
effective rate applied to profit before tax for the period and
takes into account the announcement by the Chancellor of the
Exchequer in his Budget Speech to reduce the rate of Corporation
Tax from 28% to 27%. The Government has also indicated that it
intends to enact further reductions in the corporation tax rate of
1% per annum, reducing the rate to 24% by 1 April 2014. This
decrease had not been substantively enacted at the balance sheet
date and therefore has not been reflected in the interim
statement.
Diluted earnings per share increased to 12.5p (2009: 12.3p) and
adjusted diluted earnings per share (excluding amortisation of
acquired intangibles and non-recurring costs) increased to 14.2p
(2009: 13.7p).
Dividend
After careful consideration the Board has decided to rebase the
Group's dividends in light of its continued strong cash generation
and the greater flexibility afforded by the recent refinancing of
its borrowing facilities. The Group has investment opportunities,
both organic and acquisitive, within its chosen growing markets and
the Board believes these can be comfortably afforded within a
higher dividend pay-out ratio. The Board's objective will be to at
least maintain the rebased level of dividends in real terms within
a pay-out ratio of between about 35 and 45% of profit, subject to
unusual events or circumstances.
In this context the Board announces an interim dividend of 3.50p
per share, an increase of 62.8%. In addition to this rebasing, it
is the Board's intention to accelerate dividend payment dates. The
3.50p interim dividend will be payable on 17th January 2011 to
shareholders on the register on 7th January 2011.
Net debt and borrowing facilities
The Group has continued to generate cash and further pay down
debt. Net debt (including GBP12.3m of finance leases) decreased in
the period by GBP4.4m (2009: GBP10.4m) to GBP63.5m (2009: GBP78.0m,
31 March 2010: GBP67.9m). Capital investment has been focused on
developing existing facilities leading to an increase in spend (net
of disposals) of GBP8.4m (2009: GBP2.1m). We expect investment to
continue into the second half of this financial year with planned
expenditure in our data centres at Birstall and Farnborough and
business continuity facilities in Birmingham.
On 20 August 2010, the Group signed a new GBP90.0m, four year
revolving credit facility and renewed its GBP10.0m overdraft for a
further twelve months. The new facility was used to refinance the
Group's existing facility (due to expire in May 2012) and
significantly increases the amount of capital available for
investment. The new facilities are provided by Barclays Bank plc,
HSBC Bank plc, The Royal Bank of Scotland plc and Yorkshire Bank.
Arrangement and legal fees amounting to GBP1.6m are being amortised
straight line over the first 36 months of the new facility.
Review of operations
ICM Continuous Business (Business Continuity)
Reviewed six Reviewed six
months to 30 months to 30
September 2010 September 2009 change
Revenue GBP28.4m GBP26.1m + 9.1%
Profit from operations GBP6.9m GBP6.6m + 3.8%
Operating margin 24.1% 25.4%
Order book GBP116.9m GBP96.7m + GBP20.2m
Annual contract GBP55.4m GBP51.8m + GBP3.6m
value
Revenues for the period were GBP28.4m (2009: GBP26.1m),
including GBP1.1m in respect of Shadow Planner which was acquired
on 23 December 2009. Excluding the impact of Shadow Planner,
divisional revenues increased by 4.8% with growth being held back
by lower, traditional IT disaster recovery revenues, which were 38%
of divisional revenues for the six month period to 30 September
2010 (2009: 46%). The growth in "cloud" services and in particular
virtualisation is creating new solutions for IT business continuity
as an alternative to traditional disaster recovery options.
The business has continued to invest in new products and
services within the "cloud" and has expanded its infrastructure,
hosting and business continuity facilities. The impact of these
up-front investments has been to hold back the growth in operating
profit and a reduction in the operating margin, which decreased
from 25.4% to 24.1% during the first half of the current financial
year. Excluding the contribution from Shadow Planner, profit from
operations for the six month period ended 30 September 2010 was
GBP6.6m and the operating margin was 24.0%.
Total capital expenditure in the period was GBP4.3m (2009:
GBP1.3m) with investment in data centres at Hamilton and
Farnborough and business continuity facilities in Birmingham.
Included within the GBP4.3m of expenditure was GBP0.4m to complete
the development of a new version of business planning software
which was launched in June 2010.
The economic uncertainty around the London market that prevailed
during the last financial year has now started to ease and in June
2010 a five year extension to the Division's largest business
continuity contract was signed. The contract, due to expire on 31
March 2011, was extended until March 2016 with an annual contract
value of GBP3.4m.
Shadow Planner is now fully integrated into the ICM Continuous
Business (Business Continuity) Division and in June 2010 a new
version of its business planning software was successfully launched
in the UK. Shadow Planner contributed GBP0.3m of operating profit
in the first half of this financial year.
Annualised contract values increased by 7.0% to GBP55.4m (2009:
GBP51.8m) and the Division has seen a marked improvement in its
order intake with 20.9% increase in order book to GBP116.9m (2009:
GBP96.7m).
Syndicated seat utilisation increased to 54% at 30 September
2010 (2009: 50%).
Servo (Mid-market Services)
Reviewed six Reviewed six months
months to 30 to 30 September
September 2010 2009 change
Revenue GBP49.0m GBP44.1m + 11.0%
Profit from operations GBP3.5m GBP4.1m - 14.9%
Operating margin 7.2% 9.3%
Order book GBP65.6m GBP38.4m + GBP27.2m
Annual contract GBP48.6m GBP41.2m + GBP7.4m
value
Despite a sluggish first quarter, divisional revenues grew by
11.0% mainly due to the acquisition of support contracts from KCOM
Group plc during the last quarter of the previous financial year
combined with an increase in managed hosting activity and stronger
professional services revenues. More significantly, there has been
an increase in activity levels during the second quarter (the three
months from July 2010 to September 2010) over the first quarter
(the three months from April 2010 to June 2010) and this is
reflected in a considerably stronger financial performance for the
Division each quarter since the start of the current financial
year.
The business has continued to strengthen its sales and marketing
effort and following the appointment of a new Sales Director in
March 2010 there has been further significant investment in the
sales team and marketing resource. This continued investment has
however, contributed to a fall in operating profit and operating
margins during the first half of the current financial year to
GBP3.5m (2009: GBP4.1m).
There has been further progress in improving the quality of
business mix in the Division with the proportion of annuity
revenues increasing and the value of product revenues falling when
compared to the first six months of the previous financial year.
This continuing trend should help to improve the visibility of both
future earnings and revenue. There remains a clear focus in growing
annuity revenues with a particular emphasis on managed hosting.
During the first half of the current financial year, Servo
(Mid-market Services) received notice from one of its customers
that they had decided to in-source some of the activities provided
by the Group. This contract termination has an annualised contract
value of GBP3.5m (2009: GBP3.5m) and is due to terminate on 1
December 2010.
The Division has continued to extend its presence in the
mid-market sector and has been successful in winning further high
quality managed hosting annuity contracts. The hosting annual
contract base grew by 39.5% to GBP11.3m at 30 September 2010 (2009:
GBP8.1m) and there is a good pipeline for the second half.
The order book grew by 70.9% to GBP65.6m at 30 September 2010
(2009: GBP38.4m). Since 31 March 2010 the order book increased by
20.7% from GBP54.3m to GBP65.6m predominantly on the back of the
growth in managed hosting contracts.
The annualised contract value increased to GBP48.6m (2009:
GBP41.2m). Since 31 March 2010 the annualised contract value
increased by 1.5% from GBP47.9m to GBP48.6m.
Phoenix IT Services (Partner Services)
Reviewed six Reviewed six
months to 30 months to 30
September 2010 September 2009 change
Revenue GBP61.0m GBP51.8m + 17.7 %
Profit from
operations GBP8.6m GBP8.2m + 4.5 %
Operating margin 14.1% 15.9%
Order book GBP178.2m GBP131.6m + GBP46.6m
Annual contract GBP94.4m GBP85.7m + GBP8.7m
value
The difficult trading environment which prevailed during the
last financial year has now started to show signs of easing and the
Division's revenues increased by 17.7% to GBP61.0m (2009:
GBP51.8m). The increase in revenues is due to a partial recovery in
project and professional services revenues from the low levels
reported in the previous financial year combined with the
incremental effect of three outsourcing contracts which were won
during the latter part of the previous financial year. The
integration of these outsourcing contracts is now substantially
complete and over the contract terms they are still expected to
achieve low double digit margins after taking into account one-off
start-up costs relating to their implementation.
Profit from operations increased by 4.5% to GBP8.6m (2009:
GBP8.2m) through continued focus on providing higher margin
services and tight cost control. Operating margins decreased from
15.9% to 14.1% as a result of two of the three significant
outsourcing contracts being on course, as expected, to break-even
in their first year of operation.
During the first half of the current financial year Phoenix IT
Services (Partner Services) received notice from one of its
customers that they had decided to in-source some of the activities
provided by the Group. The contract, which was terminated with
effect from 30 September 2010, had an annual contract value of
GBP9.1m and has been deducted in arriving at the annual contract
value of GBP94.4m at 30 September 2010.
Although the current economic conditions and recent spending
review by the Government in October 2010 creates a degree of
uncertainty in terms of public sector spending levels,the overall
trend for outsourcing remains promising as government departments
seek to achieve cost efficiencies and reduce their cost base.
Contracts with central government currently represent 24% (2009:
27%) of Phoenix IT Services (Partner Services) revenues and despite
public sector spending cuts the Division remains well placed to
support outsourcing companies to deliver essential services at a
lower cost.
Defined benefit pension scheme
Following the acquisition of ICM Computer Group plc on 29 May
2007 the Group continued to operate a defined benefit scheme (the
"ICM Computer Group Pension and Assurance Scheme" or the "Scheme")
for certain of its employees. As at 6 April 2009, the date of the
last full actuarial valuation, there were 469 members of the
scheme. The Group does not operate any other defined benefit
pension schemes.
The pension deficit at 30 September 2010 was GBP5.4m (2009:
GBP3.2m). The deficit has increased in recent years, principally
due to an underperformance in expected asset returns and adverse
movements in discount rates applied to the Scheme's future
liabilities, much of which is beyond the control of the Trustees of
the scheme. The Group continues to work with the Trustees of the
Scheme to implement measures to reduce the volatility and risk in
the scheme, with the ultimate aim of eliminating the pension
deficit.
Following an extensive consultation process the Group closed the
Scheme to future accrual on 30 September 2010. All former members
have been given the opportunity to join the Group's defined
contribution pension scheme. The majority of the active membership
opted out of the Scheme and joined a Group Self-Invested Pension
Plan with Aegon Scottish Equitable.
The closure of the pension scheme to future accrual reduces the
Group's exposure to increasing gross pension scheme liabilities
with the potentially uncapped and increasing costs associated with
the provision of such pensions. This step will also reduce the
volatility in the income statement operating profit charge for
pensions.
On 6 June 2010 the Group reached agreement with the Trustees on
the terms of the triennial valuation as at 6 April 2009 and related
funding plan. On the basis of the assumptions agreed, the actuarial
deficit as at 6 April 2009 was GBP7.8m. This deficit has increased
from GBP2.6m at 6 April 2006 primarily due to the valuation date
coinciding with a low point in asset values. Under the revised
funding plan the Group's annual payments will increase from GBP0.7m
to GBP1.7m for the year to March 2011. The annual payments will
then reduce to GBP1.5m per year for the five years to March
2016.
Assets held for sale
As disclosed in the March 2010 Annual Report and Accounts,
included within current assets are a number of freehold properties
that are held for sale with a book value of GBP2.2m (2009:
GBP3.4m). Despite ongoing active marketing, adverse market
conditions mean these properties remain unsold at 30 September
2010.
In the event that one or more of these properties remain unsold
at 31 March 2011 their carrying value will be subject to further
review and in the current economic environment these valuations may
result in additional impairment provisions being required.
Non-recurring items
The ICM Computer Group Pension and Assurance Scheme was closed
to future service accrual with an effective date of 30 September
2010. The closure of the scheme to future service accrual resulted
in a non-cash curtailment gain of GBP0.4m and significantly reduces
future pension risks. One-off fees of GBP0.4m were incurred in
closing the Scheme to future service accrual and these have been
deducted from the curtailment gain in the Consolidated Statement of
Income.
Un-amortised costs relating to the previous banking facility
amounted to GBP0.3m. These costs have been reflected as
non-recurring un-amortised loan costs and loan break costs in the
Consolidated Statement of Income.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group have
been and are expected to remain consistent with those described on
pages 15 and 16 of the 2010 Annual Report and Accounts. These risks
include going concern, liquidity risk and interest rate risk. In
addition the Summary and outlook section of this statement provides
a commentary concerning the remainder of the current financial
year.
Going concern
The Directors are currently of the opinion that the Group's
forecasts and projections, taking account of reasonable possible
changes in trading performance and the risks referred to above,
show that the Group should be able to operate within its current
borrowing facilities and comply with its banking covenants. The
Group has adequate financial resources having refinanced its
facilities to a GBP90.0m rolling credit facility which runs until
August 2014 and an overdraft facility of GBP10.0m which is
renewable annually in August. Net debt (including finance leases of
GBP12.3m) was GBP63.5m at 30 September 2010.
Although the current economic conditions and recent spending
review by the Government in October 2010 create a degree of
uncertainty in terms of public sector spending levels, the Group
has a number of long-term contracts, a range of customers across
different business sectors, high levels of committed income and a
strong order book. The Group's forecasts and projections show that
the Group will be cash generative across the forecast period.
Consequently, the directors believe that the Group is well placed
to manage its business risks successfully despite the current
uncertain economic outlook.
The directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future (being at least 12 months from the date of this
report). Therefore they continue to adopt the going concern basis
in preparing the financial statements.
Board update
Having previously announced that the appointment of a new Group
Finance Director was "well advanced" those contractual negotiations
ended in late August 2010 when the selected candidate accepted
another position. Following the appointment of a new executive
search company further candidates have been identified and are
currently being interviewed.
Summary and outlook
The second quarter delivered a stronger financial performance
than the first quarter, particularly within the Servo (Mid-market
Services) Division. The second half of the current financial year
has started well with strong order intake in October and an
increase in sales opportunities across all three divisions.
The Group remains well positioned to take advantage of the move
to a new era in IT infrastructure, known as the "cloud", with
services such as managed hosting performing strongly. Our focus in
the second half of this year is to exploit these opportunities and
at the same time create a single end-user based organisation by
merging the ICM Continuous Business (Business Continuity) and Servo
(Mid-market Services) Divisions.
We will also continue to look very selectively at acquisition
opportunities to enhance our skills and profitability whilst
maintaining a prudent approach to expenditure and capital
investment.
As experienced in previous years, we expect a stronger trading
performance in the second half of the year and the Board remains
confident in its outlook for the current financial year and
beyond.
CONSOLIDATED STATEMENT OF INCOME
for the six months ended 30 September 2010
Reviewed
Reviewed six six months
months to to
30 September 30 September
2010 2009
Before Non-recurring
non-recurring items
items (note 5) Total Total
Note GBPm GBPm GBPm GBPm
--------------- ----- --------------- -------------- ------ -------------
Continuing
operations
Revenue 3 138.4 - 138.4 122.0
--------------- ----- --------------- -------------- ------ -------------
Profit from
operations
before
amortisation
of acquired
intangibles 17.3 - 17.3 17.4
Amortisation
of acquired
intangibles 4 (1.5) - (1.5) (1.5)
--------------- ----- --------------- -------------- ------ -------------
Profit from
operations 4 15.8 - 15.8 15.9
Investment
income 6 0.6 - 0.6 0.4
Finance costs 6 (2.8) (0.3) (3.1) (3.0)
--------------- ----- --------------- -------------- ------ -------------
Profit before
tax 13.6 (0.3) 13.3 13.3
Tax 7 (3.7) 0.1 (3.6) (3.7)
--------------- ----- --------------- -------------- ------ -------------
Profit for the
period 9.9 (0.2) 9.7 9.6
--------------- ----- --------------- -------------- ------ -------------
Earnings per
share
Basic 8 13.2p 12.9p 12.8p
--------------- ----- --------------- -------------- ------ -------------
Diluted 8 12.7p 12.5p 12.3p
--------------- ----- --------------- -------------- ------ -------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2010
Reviewed
Reviewed six six months
months to to
30 September 30 September
2010 2009
GBPm GBPm
---------------------------------------------- ------------- ---------------
Actuarial loss on defined benefit pension
scheme (1.5) (2.5)
Gain taken to equity in respect of cash flow
hedges 1.1 0.7
Tax on items taken directly to equity 0.1 0.5
---------------------------------------------- ------------- ---------------
Other comprehensive income for the period,
net of tax (0.3) (1.3)
Profit for the period 9.7 9.6
---------------------------------------------- ------------- ---------------
Total comprehensive income for the period 9.4 8.3
---------------------------------------------- ------------- ---------------
CONSOLIDATED BALANCE SHEET
as at 30 September 2010
Reviewed Audited
30 September 31 March
2010 2010
Note GBPm GBPm
------------------------------------------- ----- -------------- ----------
Non-current assets
Goodwill 181.0 180.2
Intangible assets 17.0 18.1
Property, plant and equipment 62.8 62.1
260.8 260.4
------------------------------------------- ----- -------------- ----------
Current assets
Inventories 14.4 13.0
Trade and other receivables 58.8 54.1
Cash and cash equivalents 17.3 10.3
------------------------------------------- ----- -------------- ----------
90.5 77.4
Assets held for sale 2.2 2.2
------------------------------------------- ----- -------------- ----------
92.7 79.6
------------------------------------------- ----- -------------- ----------
Total assets 353.5 340.0
------------------------------------------- ----- -------------- ----------
Current liabilities
Trade and other payables (46.2) (39.3)
Dividend payable (3.2) -
Current tax liabilities (4.9) (4.9)
Obligations under finance leases and hire
purchase contracts (5.1) (5.0)
Bank loans 11 - (15.7)
Provisions (0.4) (0.8)
Derivative financial instruments 12 - (1.1)
Deferred revenue (53.4) (55.7)
------------------------------------------- ----- -------------- ----------
(113.2) (122.5)
------------------------------------------- ----- -------------- ----------
Net current liabilities (20.5) (42.9)
------------------------------------------- ----- -------------- ----------
Non-current liabilities
Obligations under finance leases and hire
purchase contracts (7.2) (7.6)
Bank loans 11 (68.5) (49.9)
Provisions (4.8) (4.4)
Deferred tax liabilities (3.4) (4.3)
Deferred revenue (0.7) (0.7)
Other non-current liabilities (6.4) (6.5)
Retirement benefit obligations 13 (5.4) (5.1)
------------------------------------------- ----- -------------- ----------
(96.4) (78.5)
------------------------------------------- ----- -------------- ----------
Total liabilities (209.6) (201.0)
------------------------------------------- ----- -------------- ----------
Net assets 143.9 139.0
------------------------------------------- ----- -------------- ----------
Equity
Share capital 0.8 0.8
Share premium account 37.5 37.5
Merger reserve 57.5 57.5
Other reserves 1.0 -
Retained earnings 47.1 43.2
------------------------------------------- ----- -------------- ----------
Total equity 143.9 139.0
------------------------------------------- ----- -------------- ----------
The financial statements were approved by the Board of Directors
and authorised for issue on 26 November 2010.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended at 30 September 2010
Share
Share premium Merger Other Retained Total
capital account reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------- -------- --------- --------- --------- --------
Balance at 1
April 2009 0.8 37.4 57.5 (1.3) 32.0 126.4
--------------- -------- -------- --------- --------- --------- --------
Profit for the
period - - - - 9.6 9.6
Gain
recognised on
cash flow
hedge - - - 0.7 - 0.7
Actuarial loss
on defined
benefit
pension
scheme - - - - (2.5) (2.5)
Tax on items
taken
directly to
equity - - - (0.2) 0.7 0.5
Total
comprehensive
income for
the period
ended 30
September
2009 - - - 0.5 7.8 8.3
--------------- -------- -------- --------- --------- --------- --------
IFRS2 share
option
expense - - - 0.2 - 0.2
Dividends - - - - (4.7) (4.7)
Transfer to
retained
earnings on
exercise of
share
options - - - (0.1) 0.1 -
--------------- -------- -------- --------- --------- --------- --------
- - - 0.1 (4.6) (4.5)
--------------- -------- -------- --------- --------- --------- --------
Balance at 30
September
2009 0.8 37.4 57.5 (0.7) 35.2 130.2
--------------- -------- -------- --------- --------- --------- --------
Balance at 1
April 2010 0.8 37.5 57.5 - 43.2 139.0
--------------- -------- -------- --------- --------- --------- --------
Profit for the
period - - - - 9.7 9.7
Gain
recognised on
cash flow
hedge - - - 1.1 - 1.1
Actuarial loss
on defined
benefit
pension
scheme - - - - (1.5) (1.5)
Tax on items
taken
directly to
equity - - - (0.3) 0.4 0.1
--------------- -------- -------- --------- --------- --------- --------
Total
comprehensive
income for
the period
ended 30
September
2010 - - - 0.8 8.6 9.4
--------------- -------- -------- --------- --------- --------- --------
IFRS2 share
option
expense - - - 0.3 - 0.3
Dividends - - - - (4.8) (4.8)
Transfer to
retained
earnings on
exercise of
share
options - - - (0.1) 0.1 -
--------------- -------- -------- --------- --------- --------- --------
- - - 0.2 (4.7) (4.5)
--------------- -------- -------- --------- --------- --------- --------
Balance at 30
September
2010 0.8 37.5 57.5 1.0 47.1 143.9
--------------- -------- -------- --------- --------- --------- --------
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 September 2010
Reviewed Reviewed
six months six months
to to
30 September 30 September
2010 2009
Note GBPm GBPm
----------------------------------------- ----- ------------- -------------
Net cash from operating activities 15 13.3 14.3
Investing activities
Purchases of property, plant and
equipment (8.1) (2.4)
Proceeds on disposal of property, plant
and equipment 0.1 0.3
Purchases of intangible assets (0.4) -
Net cash used in investing activities (8.4) (2.1)
----------------------------------------- ----- ------------- -------------
Financing activities
Dividends paid (1.6) (1.6)
Repayments of borrowings (66.0) (13.0)
Decrease in obligations under finance
leases and hire purchase contracts (0.3) (1.7)
Net drawdown on rolling credit
facilities - 5.0
New bank loans raised 70.0 -
Net cash used in financing activities 2.1 (11.3)
----------------------------------------- ----- ------------- -------------
Net increase in cash and cash
equivalents 7.0 0.9
Cash and cash equivalents at beginning
of period 10.3 5.9
----------------------------------------- ----- ------------- -------------
Cash and cash equivalents at end of
period 17.3 6.8
----------------------------------------- ----- ------------- -------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 September 2010
1. Preparation of the interim financial information
The interim financial report for the half year ended 30
September 2010 has been prepared in accordance with the Disclosure
and Transparency Rules of the Financial Services Authority and with
IAS 34 Interim Financial Reporting. This report should be read in
conjunction with the annual financial statements for the year ended
31 March 2010, which have been prepared in accordance with
IFRSs.
The half year results are reviewed and were approved by the
Board of Directors on 26 November 2010.
The interim financial information does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. A
copy of the statutory accounts for the year ended 31 March 2010 has
been delivered to the Registrar of Companies. The auditors' report
on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under section
498 of the Companies Act 2006.
Going concern is discussed in the interim review. Based on the
assessment described, the Directors have a reasonable expectation
that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future. Accordingly,
they adopt the going concern basis in preparing the interim
financial statements.
2. Accounting policies
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 31 March 2010.
The following new standards, amendments to standards or
interpretations are mandatory for the first time for the year
ending 31 March 2011 but have no material impact on the Group's
financial statements:
-- IFRS 2 'Share-based payment' (amended) - amended to clarify
the accounting treatment for group share based payment
transactions. Effective for accounting periods beginning on or
after 1 January 2010.
-- IFRS 3 'Business combinations' (revised) & IAS 27
'Consolidated and Separate Financial Statements' (amended) -
effective for accounting periods beginning on or after 1 July 2009.
The revised standard introduces significant changes in the
accounting for business combinations. It requires that all
acquisition related costs are expensed in the period incurred
rather than included in the cost of the investment, that changes to
the contingent consideration following a business combination are
shown in the statement of comprehensive income instead of adjusting
goodwill and that changes to deferred tax assets relating to
business combinations are only reflected within goodwill if they
occur within the measurement period.
-- IFRS 5 'Non-current assets held for sale and discontinued
operations' (amended) - effective for accounting periods beginning
on or after 1 January 2010. It is amended to state that the
required disclosures for non-current assets classified as held for
sale or discontinued operations are specified in that standard.
-- IFRS 8 'Operating segments' (amended) - amended to state that
segment information with respect to total assets is required only
if such information is regularly reported to the chief operating
decision maker. Effective for accounting periods beginning on or
after 1 January 2010.
-- IAS 7 'Statement of cash flows' (amended) - amended to state
explicitly that only expenditures that result in the recognition of
an asset can be classified as a cash flow from investing
activities. Effective for accounting periods beginning on or after
1 January 2010.
-- IAS 17 'Leases' (amended) - the amendment clarifies the
classification of leases of land and buildings. Effective for
accounting periods beginning on or after 1 January 2010.
-- IAS 32 'Financial instruments: presentation' (amended) -
amendment addressing accounting for rights issues. Effective for
accounting periods beginning on or after 1 February 2010
-- IAS 38 'Intangible assets' (amended) - the amendments clarify
the description of valuation techniques commonly used by entities
when measuring the fair value of intangible assets acquired in a
business combination for which no active market exists. Effective
for accounting periods beginning on or after 1 July 2009.
-- IAS 39 'Financial instruments: recognition and measurement'
(amended) - clarifies the assessment of loan prepayment penalties
as embedded derivatives and the scope exemption for contracts
between an acquirer and a vendor in a business combination to buy
or sell an acquiree at a future date. Effective for accounting
periods beginning on or after 1 January 2010.
The following standards, interpretations, and amendments to
existing standards are not yet effective and have not been early
adopted by the Group:
-- IFRS 3 'Business combinations' (amended) - effective for
accounting periods beginning on or after 1 July 2010
-- IFRS 7 'Financial instruments: disclosures' (amended) -
effective for accounting periods beginning on or after 1 January
2011
-- IFRS 9 'Financial instruments: classification and
measurement' (amended) - effective for accounting periods beginning
on or after 1 January 2013
-- IAS 1 'Presentation of financial statements' (amended) -
effective for accounting periods beginning on or after 1 January
2011
-- IAS 24 'Related party disclosures' (revised) - effective for
accounting periods beginning on or after 1 January 2011
-- IAS 27 'Consolidated and separate financial statements'
(amended) - effective for accounting periods beginning on or after
1 July 2010.
-- IAS 34 'Interim financial reporting' (amended) - effective
for accounting periods beginning on or after 1 January 2011
-- IFRIC 14 'Prepayments of a minimum funding requirement'
(amended) - effective on or after 1 January 2011
3. Segmental reporting
The Board has determined that the primary segmental reporting
format is by business line, based on the Group's management and
internal reporting structure. The Group's operations are based
entirely in the UK.
Segment results include items directly attributable to a segment
as well as those that can be allocated on a reasonable basis.
Inter-segment turnover has been eliminated.
Six months ended Business Partner Mid-market
30 September 2010 continuity services services Corporate Total
GBPm GBPm GBPm GBPm GBPm
------------------- ------------ ---------- ----------- ---------- ------
Revenue 28.4 61.0 49.0 - 138.4
------------------- ------------ ---------- ----------- ---------- ------
Profit from
operations before
amortisation of
acquired
intangibles and
non-recurring
items 6.9 8.6 3.5 (1.7) 17.3
Amortisation of
intangibles (1.5)
------
Profit from
operations 15.8
Investment income 0.6
Finance costs (2.8)
Non-recurring (0.3)
------------------- ------------ ---------- ----------- ---------- ------
Profit before tax 13.3
------------------- ------------ ---------- ----------- ---------- ------
Six months ended Business Partner Mid-market
30 September 2009 continuity services services Corporate Total
GBPm GBPm GBPm GBPm GBPm
------------------- ------------ ---------- ----------- ---------- ------
Revenue 26.1 51.8 44.1 - 122.0
------------------- ------------ ---------- ----------- ---------- ------
Profit from
operations before
amortisation of
acquired
intangibles and
non-recurring
items 6.6 8.2 4.1 (1.5) 17.4
Amortisation of
intangibles (1.5)
------
Profit from
operations 15.9
Investment income 0.4
Finance costs (3.0)
------------------- ------------ ---------- ----------- ---------- ------
Profit before tax 13.3
------------------- ------------ ---------- ----------- ---------- ------
Balance sheet at
30 September Business Partner Mid-market
2010 continuity services services Corporate Total
GBPm GBPm GBPm GBPm GBPm
Segment assets 136.7 73.3 126.2 - 336.2
Unallocated
assets 17.3
----------------- ------------ ---------- ----------- ---------- --------
Total assets 353.5
----------------- ------------ ---------- ----------- ---------- --------
Segment
liabilities (55.5) (44.3) (29.9) (3.0) (132.7)
Unallocated
liabilities (76.9)
----------------- ------------ ---------- ----------- ---------- --------
Total
liabilities (209.6)
----------------- ------------ ---------- ----------- ---------- --------
Balance sheet at Business Partner Mid-market
31 March 2010 continuity services services Corporate Total
GBPm GBPm GBPm GBPm GBPm
Segment assets 138.9 67.5 123.2 0.1 329.7
Unallocated
assets 10.3
----------------- ------------ ---------- ----------- ---------- --------
Total assets 340.0
----------------- ------------ ---------- ----------- ---------- --------
Segment
liabilities (55.3) (38.0) (32.9) 1.0 (125.2)
Unallocated
liabilities (75.8)
----------------- ------------ ---------- ----------- ---------- --------
Total
liabilities (201.0)
----------------- ------------ ---------- ----------- ---------- --------
4. Profit from operations
Reviewed Reviewed
six months six months
to 30 September to 30 September
2010 2009
GBPm GBPm
------------------------------- ----------------- -----------------
Revenue 138.4 122.0
Raw materials and consumables (3.8) (3.2)
Staff costs (52.7) (47.3)
Depreciation (6.6) (6.7)
Amortisation of intangibles (1.5) (1.5)
Other operating charges (58.0) (47.4)
------------------------------- ----------------- -----------------
15.8 15.9
------------------------------- ----------------- -----------------
5. Non-recurring items
Reviewed Reviewed
six months six months
to 30 September to 30 September
2010 2009
GBPm GBPm
---------------------------------------- ----------------- -----------------
Curtailment gain in defined benefit 0.4 -
pension scheme
Legal and professional fees incurred in (0.4) -
relation to the closure of the defined
benefit pension scheme
Write-off of unamortised loan costs (0.3) -
following the arrangement of new bank
facilities
(0.3) -
---------------------------------------- ----------------- -----------------
Non-recurring items are items of income or expenditure that, in
management's judgement, should be disclosed separately on the basis
that they are material, either by their nature or their size.
Non-recurring items in the period ending 30 September 2010
comprise:
(a) In September 2010, the defined benefit pension plan was
closed to future service accrual beyond 30 September 2010. This
cessation of future service accrual resulted in an exceptional
curtailment gain of GBP0.4m in the period ended 30 September 2010.
Additionally, legal and professional fees of GBP0.4m were incurred
in order to effect this change.
(b) On 20 August 2010 the group successfully refinanced its debt
facilities and repaid its existing facility in full in advance of
its due date resulting in the write-off of unamortised loan costs
of GBP0.3m.
6. Finance costs and investment income
Reviewed six Reviewed six
months to 30 months to 30
September September
2010 2009
GBPm GBPm
------------------------------------------- -------------- --------------
Finance costs
Interest on bank overdraft and loans (1.7) (2.0)
Interest on obligations under finance
leases and hire purchase contracts (0.2) (0.3)
Amortisation of loan issue costs (0.2) (0.2)
Other interest (0.1) (0.1)
Interest cost on defined benefit pension
scheme liabilities (0.6) (0.4)
Non-recurring finance costs (0.3) -
Total interest expense (3.1) (3.0)
Investment income
Expected return on defined benefit
pension scheme assets 0.6 0.4
0.6 0.4
------------------------------------------- -------------- --------------
Net finance costs (2.5) (2.6)
------------------------------------------- -------------- --------------
7. Taxation
The Group tax charge represents the estimated annual effective
rate of 26.8% (September 2009: 27.6%) applied to the profit before
tax for the period.
The Finance Act 2010 was enacted in the interim period and
included a reduction in the main rate of corporation tax from 28%
to 27% with effect from 1 April 2011. This has reduced the deferred
tax liability by GBP0.2m, with a corresponding decrease in the
deferred tax expense, of which GBP0.3m credit has been recognised
in the income statement and GBP0.1m debit directly in equity. The
impact on the estimated annual effective tax rate is a reduction of
0.8%.
The Government has also indicated that it intends to enact
further reductions in the corporation tax rate of 1% per annum,
reducing the rate to 24% by 1 April 2014. This decrease had not
been substantively enacted at the balance sheet date and therefore
has not been reflected in the interim statement.
8. Earnings per share
Reviewed Reviewed
six months six months
to 30 September to 30 September
2010 2009
---------------------------------------- ----------------- -----------------
Adjusted earnings per share excluding
amortisation of acquired intangibles
and non-recurring items
Basic 14.7p 14.2p
-------------------------------------- ----------------- -----------------
Diluted 14.2p 13.7p
-------------------------------------- ----------------- -----------------
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings
GBPm GBPm
------------------------------------------------------ ------ ------
Earnings for the purposes of basic earnings per
share and diluted earnings per share being net
profit attributable to equity holders of the parent 9.7 9.6
Amortisation of acquired intangibles 1.5 1.5
Non-recurring items 0.3 -
Tax on amortisation of acquired intangibles and
non-recurring items (0.5) (0.4)
------------------------------------------------------ ------ ------
Earnings for the purposes of adjusted earnings
per share being net profit attributable to equity
holders of the parent excluding amortisation of
acquired intangibles and non-recurring items 11.0 10.7
------------------------------------------------------ ------ ------
Number of shares
Number Number
m m
------------------------------------------------ ------- -------
Weighted average number of Ordinary Shares for
the purposes of basic earnings per share 75.2 75.2
Effect of dilutive potential Ordinary Shares:
Share options 2.4 2.6
------------------------------------------------ ------- -------
Weighted average number of Ordinary Shares for
the purposes of diluted earnings per share 77.6 77.8
------------------------------------------------ ------- -------
9. Dividends
Reviewed Reviewed
six months six months
to 30 September to 30 September
2010 2009
GBPm GBPm
---------------------------------------- ----------------- -----------------
Amounts recognised as distributions to
Shareholders in the year:
Interim dividend for the year ended 31
March 2010 of 2.15p (2009: 2.10p) per
share 1.6 1.6
Final dividend for the year ended 31
March 2010 of 4.30p (2009: 4.20p) per
share 3.2 3.1
4.8 4.7
---------------------------------------- ----------------- -----------------
Proposed interim dividend for the year
ended 31 March 2011 of 3.50p (2010:
2.15p) per share 2.6 1.6
2.6 1.6
---------------------------------------- ----------------- -----------------
The final dividend was approved at the AGM on 26 August
2010.
The proposed interim dividend was recommended by the Board on 25
November 2010 and will be paid on 17 January 2011.
10. Capital expenditure
In the period, there were additions to property, plant and
equipment of GBP7.3m (period ended September 2009: GBP2.4m). There
were no significant disposals of property, plant and equipment
during the period (period ended September 2009: GBPnil).
There were additions to intangibles assets in the period of
GBP0.4m (period ended September 2009: GBPnil).
11. Bank loans
The following table analyses bank borrowings, excluding bank
overdrafts:
Reviewed Audited
30 September 31 March
2010 2010
GBPm GBPm
------------------ -------------- ---------
Current:
Bank loans - 15.7
Non-current:
Bank loans 68.5 49.9
------------------ -------------- ---------
Total borrowings 68.5 65.6
------------------ -------------- ---------
On 20 August 2010 the group successfully refinanced its debt
facilities, securing a GBP90m rolling credit facility for 4 years,
with no amortisation.
12. Derivative financial instruments
Reviewed Audited
30 September 31 March
2010 2010
Liability Liability
--------------------- ------------------------ ----------------------
Fair value Notional Fair value Notional
--------------------- ------------ ---------- ----------- ---------
GBPm GBPm GBPm GBPm
--------------------- ------------ ---------- ----------- ---------
Cash flow hedges
Interest rate swaps - - 1.1 42.0
--------------------- ------------ ---------- ----------- ---------
The interest rate swap expired on 30 September 2010.
13. Retirement benefit obligations
The Group operates a defined benefit scheme for certain
employees.
The most recent full actuarial valuation of the scheme's defined
benefit obligation was carried out at 6 April 2009 and updated to
30 September 2010 by a qualified independent actuary for IAS 19
purposes. During the period to 30 September 2010 the defined
benefit pension scheme was closed to future service accrual with an
effective date of 30 September 2010. Members of the scheme have
been invited to make contributions into the defined contribution
plan in future.
The major assumptions used by the actuary were:
Audited
Reviewed 31 March
30 September 2010 2010
% %
---------------------------------------- ------------------- ---------------
Discount rate 4.95 5.50
Expected return on equities, bonds and
cash 5.85 6.54
Expected rate of salary increases 4.00 4.45
Future pension increases 3.15 3.45
Inflation 3.35 3.80
Mortality tables used PCxA00(YOB) PCxA00(YOB)
Males 0.8LC Males 0.8LC
Females 0.6LC Females 0.6LC
---------------------------------------- ------------------- ---------------
The amount included in the balance sheet arising from the
Group's obligations in respect of its defined benefit scheme is as
follows:
Audited
Reviewed 31 March
30 September 2010 2010
GBPm GBPm
----------------------------------------------- ------------------ ---------
Present value of defined benefit obligations (23.4) (22.0)
Fair value of scheme assets 18.0 16.9
Deficit in scheme and liability recognised in
the balance sheet (5.4) (5.1)
----------------------------------------------- ------------------ ---------
14. Acquisition of subsidiary undertaking
On 26 February 2010 the Group acquired control of Aghoco 1000
Limited (Aghoco). As at 31 March 2010 the fair values assigned to
the assets and liabilities acquired were provisional. During the
period to 30 September 2010 there have been no significant
adjustments to the provisional fair values. A full review of the
provisional fair values to the Group will be performed by the first
anniversary of the acquisition and adjusted where necessary.
Provisional Revised
fair value Revaluation fair value
to Group to Group
------------------------------------- ------------ ------------ -----------
GBPm GBPm GBPm
------------------------------------- ------------ ------------ -----------
Fixed assets
Intangible asset arising on
acquisition 0.9 - 0.9
Current assets
Inventories 0.5 - 0.5
Trade and other receivables 2.9 - 2.9
Deferred tax asset 0.4 - 0.4
Total assets 4.7 - 4.7
------------------------------------- ------------ ------------ -----------
Liabilities
Trade and other payables (1.2) - (1.2)
Deferred revenue (2.5) - (2.5)
------------------------------------- ------------ ------------ -----------
Total liabilities (3.7) - (3.7)
------------------------------------- ------------ ------------ -----------
Net assets 1.0 - 1.0
------------------------------------- ------------ ------------ -----------
Goodwill 0.9 - 0.9
------------------------------------- ------------ ------------ -----------
1.9 - 1.9
------------------------------------- ------------ ------------ -----------
Satisfied by:
Cash 1.8 - 1.8
Cash - costs of acquisition 0.1 - 0.1
------------------------------------- ------------ ------------ -----------
1.9 1.9
------------------------------------- ------------ ------------ -----------
On 23 December 2009 the Group acquired the trade and certain
assets and liabilities of Office Shadow Limited. As at 31 March
2010 the fair values assigned to the assets and liabilities
acquired were provisional. During the period to 30 September 2010
these have been reviewed and adjusted as necessary and these
adjustments are set out in the following table.
Provisional Revised
fair value Revaluation fair value
to Group to Group
GBPm GBPm GBPm
------------------------------------- ------------ ------------ -----------
Fixed assets
Intangible asset arising on
acquisition 1.3 - 1.3
Total assets 1.3 - 1.3
------------------------------------- ------------ ------------ -----------
Liabilities
Trade and other payables (0.1) - (0.1)
Deferred revenue (1.2) (0.8) (2.0)
------------------------------------- ------------ ------------ -----------
Total liabilities (1.3) (0.8) (2.1)
------------------------------------- ------------ ------------ -----------
Net liabilities - (0.8) (0.8)
------------------------------------- ------------ ------------ -----------
Goodwill 0.5 0.8 1.3
------------------------------------- ------------ ------------ -----------
0.5 - 0.5
------------------------------------- ------------ ------------ -----------
Satisfied by:
Cash 0.4 - 0.4
Cash - costs of acquisition 0.1 - 0.1
------------------------------------- ------------ ------------ -----------
0.5 0.5
------------------------------------- ------------ ------------ -----------
The provisional fair values of the acquired identifiable assets
and liabilities have been amended to reflect the value of non-UK
revenue where the payment for services had been taken in
advance.
A full review of the provisional fair values to the Group will
be performed by 23 December 2010 and adjusted where necessary.
15. Notes to the cash flow statement
Reviewed six months to Reviewed six months to
30 September 30 September
2010 2009
GBPm GBPm
-------------------------- ----------------------- -----------------------
Profit from operations 15.8 15.9
Adjustments for:
Depreciation of
property, plant and
equipment 6.6 6.7
Profit on disposal of
property, plant and
equipment - (0.1)
Amortisation of acquired
intangibles 1.5 1.5
Share option costs 0.3 0.2
Retirement benefit -
difference between
contribution and amount
charged (1.3) (0.5)
Operating cash flows
before movements in
working capital 22.9 23.7
Increase in inventories (1.4) (0.6)
(Increase)/decrease in
receivables (4.7) 1.5
Increase/(decrease) in
payables 7.4 (5.2)
Decrease in deferred
revenue (3.1) (0.7)
------------------------- ----------------------- -----------------------
Cash generated by
operations 21.1 18.7
Income taxes paid (4.4) (1.8)
Interest paid (3.4) (2.6)
-------------------------- ----------------------- -----------------------
Net cash from operating
activities 13.3 14.3
-------------------------- ----------------------- -----------------------
Additions to fixtures and equipment during the period amounting
to GBP1.8m (period ended September 2009: GBP0.5m) were financed by
new finance leases.
Included within interest paid was GBP1.6m relating to loan issue
costs incurred in order to refinance the Group's debt
facilities.
16. Reconciliation of net borrowings
Reviewed six months to
30 September Reviewed six months to
2010 30 September 2009
GBPm GBPm
---------------------------- ----------------------- -----------------------
Increase in cash and cash
equivalents during the
period 7.0 0.9
Movement in borrowings (2.6) 9.5
Movement in net borrowings
during the period 4.4 10.4
Net borrowings brought
forward (67.9) (88.4)
---------------------------- ----------------------- -----------------------
Net borrowings carried
forward (63.5) (78.0)
---------------------------- ----------------------- -----------------------
Cash and cash equivalents 17.3 6.8
Other current borrowings (73.6) (20.8)
Non-current borrowings (7.2) (64.0)
---------------------------- ----------------------- -----------------------
Net borrowings carried
forward (63.5) (78.0)
---------------------------- ----------------------- -----------------------
17. Related party transactions
The Group's significant related parties are its associates as
disclosed in the Phoenix IT Group plc Annual Report and Accounts
for the year ended 31 March 2010. There were no material related
party transactions in the interim period or the prior interim
period to 30 September 2009.
Financial calendar
Ex dividend date 5 January 2011
Record date for 7 January 2011
dividend
Dividend payment 17 January 2011
date
INDEPENDENT REVIEW REPORT TO PHOENIX IT GROUP PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2010 which comprises the consolidated
statement of income, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement and
related notes 1 to 17. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements 2410 issued by the
Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state
to them in an independent review report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdoms'
Financial Services Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (United Kingdom and Ireland) 2410,
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (United Kingdom and Ireland)
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report of the six months ended 30
September 2010 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditors
26 November 2010
London, United Kingdom
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DQLFLBFFEFBK
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