RNS Number:6063S
Business Systems Group Hldgs PLC
28 November 2003
28 November 2003
Business Systems Group Holdings plc ("BSG" or the "Group")
Interim results for the six months ended 30 September 2003
Business Systems Group Holdings plc, the information technology company
providing business solutions, products and services for the entire technology
lifecycle, today announces interim results for the six months ended 30 September
2003.
Highlights
The Group continues to pursue the strategy of moving the business into higher
margin services and solutions. Progress has been made in widening and developing
the services offerings, whilst winning new customers in the solutions business.
For the period under review the Group continued to suffer losses, principally
because of the continuing decline in the hardware business.
* Reduced pre tax loss of #407,000 for the six months, compared to a loss
of #446,000 in the first half of last year.
* Gross margins improved to 21% from 19% over the first half of last year
as a result of the improving sales mix and the continuing strength of margins
in Services and Solutions.
* Cash balance of #7.1m and no debt.
* Services and solutions business represented 60% of gross profit for the
six month period.
* Revenues down 26%, mainly due to a 34% reduction in hardware sales.
* Contracted revenues and gross profit have risen in the Group over the
last six months.
Contacts:
BSG Tel: 020 7880 8888
Nick Gerard, Group Chief Executive
James Wheaton, Group Finance Director
Buchanan Communications Tel: 020 7466 5000
Tim Thompson / Catherine Miles
CHAIRMAN'S STATEMENT
In my first reporting period as Chairman of Business Systems Group Holdings plc,
I am pleased to present the results for the Group for the six months ended 30
September 2003.
Financial Review
The Group has continued to make progress in its strategy of shifting the
emphasis of the business from the provision of hardware to that of services and
solutions. However, this change is being managed against a backdrop of very
difficult market conditions - a situation about which the Company informed its
investors in June when it announced its full year results.
In the first six months of the year, the Group incurred an operating loss of
#536k compared with an operating loss of #602k in the corresponding period of
the prior year. The loss before tax reduced slightly to #407k from #446k in the
corresponding period of the prior year.
The key points to note in the financial results for the period were:
*Revenues fell by 26% compared to the same period last year, falling from
#14.1m to #10.5m. The main reason for this was a 34% reduction in hardware
sales.
*Contractual revenues grew in all parts of the business in the first half
of the year. Services and solutions business now represents 60% of the
Group's gross profit.
*Gross margins rose in the first half to 21% compared to 19% in the same
period last year. This was due to the continuing shift of the business away
from hardware and to steady margins in services and solutions.
*Costs remain under tight control and the savings achieved via
restructuring over the last two years have been retained.
*The Group's balance sheet remains strong with #7.1m of cash and no debt.
This compares with #7.3m of cash a year ago and #7.6m at 31 March 2003.
*BSG Holdings plc is in the process of seeking shareholder and court
approval for a reduction in capital. If this is successful, this will allow
the company to eliminate the deficit on its profit and loss reserves using
the balance in the share premium reserve.
The Board does not recommend that an interim dividend be paid.
Operational Review
Customers continue to seek more return from their existing technology assets.
The Group is able to add more value to its clients' incremental technology
investments through its services and solutions businesses than through pure
infrastructure supply, whilst also generating more stable and predictable
revenue streams. The Group's focus has therefore been in developing its service
and solutions offerings and concentrating on winning contracted revenues across
all business lines.
*The managed services offerings have benefited from renewed focus and are
being repackaged and re-launched. This is part of creating a scalable and
resilient services model that can offer either individual lines of service
or a full service outsourcing package. The latter comprises a bespoke
combination of any of the services, provided by BSG, which a client needs.
Early success has resulted in #500k of contracts for managed wide area
networks (WANs), commencing in the second half of the year.
*Whilst the Group's Application Hosting Services have been a great success
in the last two years, the Group will be re-launching this line of service
during the next half year. This will further differentiate BSG from the bulk
hosting providers, offering services that measure performance and
availability at the customer application level and offering innovative real
time replication business continuity models. This remains a core part of the
Group's "data centre to desktop" service offering.
*The solutions business has grown its client base, particularly in the
financial services sector. This includes successfully delivering and
operating the pilot phase of a retail product selection tool for a major UK
clearing bank and using its reputation for cutting edge skills in software
design and user functionality, to win new contracts servicing organisations
who themselves provide software to the financial services sector.
Nevertheless, visibility remains a challenge and furthermore, in today's
cautious climate, projects continue to be phased by customers to give them
maximum flexibility. Whilst our solutions business has a unique phased
approach that is ideal for customers with this style of purchasing, it does
mean that true visibility remains limited.
Outlook
The Group is taking longer than anticipated to get back to profit due to
depressed demand and deflation in the hardware market. However the Board
believes the strategy of growing the services and solutions businesses remains
correct and the business is in good shape to take advantage of customer pressure
to get increased value and cost savings from their technology assets. Early
signs of success of the broader services offering and the widening of the
solutions customer base, mean that the Board expects the Group's results to
start to improve in the second half of the year. The focus on winning good
quality contracted business will continue. The Board is not relying on any
improvement in the technology market in the near term, and therefore there will
be a continued emphasis on the innovation of services, demonstrably adding value
to customers and containing costs.
Roger Keenan
Chairman
27 November 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 30 September 31 March
2003 2002 2003
Notes #'000 #'000 #'000
--------------- ------ ----------- -------- ----------
Turnover from
continuing operations 3 10,457 14,051 26,475
Cost of sales (8,279) (11,342) (21,074)
--------------- ------ ----------- -------- -----------
Gross profit 2,178 2,709 5,401
Net operating expenses (2,714) (3,311) (8,653)
--------------- ------ ----------- -------- -----------
Operating loss from
continuing operations 3,4 (536) (602) (3,252)
Net interest receivable 129 156 303
--------------- ------ ----------- -------- -----------
Loss on ordinary
activities before taxation (407) (446) (2,949)
Taxation - - 160
--------------- ------ ----------- -------- -----------
Loss on ordinary activities
after taxation (407) (446) (2,789)
--------------- ------ ----------- -------- -----------
Retained loss (407) (446) (2,789)
--------------- ------ ----------- -------- -----------
--------------- ------ ----------- -------- -----------
Basic loss per share 6 (0.52)p (0.55)p (3.44)p
Diluted loss per share 6 (0.50)p (0.55)p (3.44)p
--------------- ------ ----------- -------- -----------
There are no recognised gains or losses other than the loss for the current and
preceding financial periods. Accordingly no statement of total recognised gains
and losses is presented.
CONSOLIDATED BALANCE SHEET
Unaudited at Unaudited at Audited at
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
-------------------- ---------- ---------- ----------
Fixed Assets
Intangible assets - 1,265 -
Tangible assets 1,317 1,793 1,552
Investments in own shares 211 595 211
-------------------- ---------- ---------- ----------
1,528 3,653 1,763
-------------------- ---------- ---------- ----------
Current Assets
Stock 138 56 91
Debtors 3,312 3,768 4,381
Cash at bank and in hand 7,070 7,289 7,627
-------------------- ---------- ---------- ----------
10,520 11,113 12,099
Creditors
Amounts falling due within one (4,232) (5,033) (5,472)
year
-------------------- ---------- ---------- ----------
Net Current Assets 6,288 6,080 6,627
-------------------- ---------- ---------- ----------
Total Assets less Current 7,816 9,733 8,390
Liabilities
Provision for Liabilities and (833) - (1,000)
Charges
-------------------- ---------- ---------- ----------
Net Assets 6,983 9,733 7,390
-------------------- ---------- ---------- ----------
Capital and Reserves
Called up share capital 4,209 4,209 4,209
Share premium account 13,940 13,940 13,940
Profit and loss account (11,166) (8,416) (10,759)
-------------------- ---------- ---------- ----------
Equity Shareholders' Funds 6,983 9,733 7,390
-------------------- ---------- ---------- ----------
RECONCILIATION OF MOVEMENT
IN SHAREHOLDERS' FUNDS
Loss for the period (407) (446) (2,789)
-------------------- ---------- ---------- ----------
Net reductions to shareholders' funds (407) (446) (2,789)
Opening shareholders' funds 7,390 10,179 10,179
-------------------- ---------- ---------- ----------
Closing shareholders' funds 6,983 9,733 7,390
-------------------- ---------- ---------- ----------
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 30 September 31 March
2003 2002 2003
Notes #'000 #'000 #'000
---------------- ------ --------- ---------- ----------
---------------- ------ --------- ---------- ----------
Net cash outflow from
operating activities 8 (732) (657) (446)
---------------- ------ --------- ---------- ----------
Returns on investments
and servicing of
finance:
Net interest received 81 50 351
---------------- ------ --------- ---------- ----------
Net cash inflow from
returns on investments
and servicing of
finance 81 50 351
---------------- ------ --------- ---------- ----------
Taxation 165 - (4)
---------------- ------ --------- ---------- ----------
Capital expenditure and
financial investment:
Purchase of tangible (71) (530) (706)
fixed assets
Sale of tangible fixed - 15 21
assets
---------------- ------ --------- ---------- ----------
---------------- ------ --------- ---------- ----------
Net cash outflow from
capital expenditure and
financial investment (71) (515) (685)
---------------- ------ --------- ---------- ----------
---------------- ------ --------- ---------- ----------
Decrease in cash in the 10 (557) (1,122) (784)
period
---------------- ------ --------- ---------- ----------
NOTES
1. Basis of Preparation
The interim results which are unaudited, have been prepared in accordance with
applicable United Kingdom accounting standards using accounting policies
consistent with those set out in the accounts for the year ended 31 March 2003.
The financial information for the six months ended 30 September 2003 and 30
September 2002 has been neither audited nor reviewed and does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985.
The financial information for the year ended 31 March 2003 has been extracted
from the statutory accounts for that period which have been filed with the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain any statement under section 237(2) or (3) of the Companies
Act 1985.
The interim results for the six months ended 30 September 2003 were approved by
the Board of Directors on 27 November 2003.
2. Basis of Consolidation
The Group accounts incorporate the results of the company and its subsidiaries,
Business Systems Group Limited and Webgenerics Limited.
3. Analysis of turnover, operating loss and net assets
The Group operates in one principal activity, that of the provision of
integrated technology solutions, products and services. The activity is wholly
undertaken in the United Kingdom.
4. Operating Loss
The operating loss is stated after the following exceptional items:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
-------------------- ---------- ---------- ----------
Costs associated with - 162 -
redundancies
Diminution of value of
investment in own shares - - 384
Provision for unoccupied - - 1,000
property
Impairment of intangible fixed - - 1,182
assets
-------------------- ---------- ---------- ----------
5. Dividend
No interim dividend will be paid in respect of the six month period ending 30
September 2003 (2002: nil).
6. Earnings per share
Basic earnings per share have been calculated by dividing the loss on ordinary
activities after taxation by the weighted average number of ordinary shares in
issue during the current period.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue on the assumption of conversion of all
dilutive potential ordinary shares. The group has only one category of dilutive
potential ordinary shares, those share options granted under the Enterprise
Management Incentive Plan.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 30 September 31 March
2003 2002 2002
-------------------- ---------- ---------- ----------
Loss for the financial period
and basic and diluted earnings
attributable to ordinary
shareholders (#'000) (407) (446) (2,789)
Weighted average number of
ordinary shares ('000) 78,163 81,204 81,144
Effect of dilutive share options 3,238 - -
('000)
-------------------- ---------- ---------- ----------
Adjusted weighted average number
of ordinary share ('000) 81,401 81,204 81,144
-------------------- ---------- ---------- ----------
Earnings per share (0.52)p (0.55)p (3.44)p
Diluted earnings per share (0.50)p (0.55)p (3.44)p
-------------------- ---------- ---------- ----------
7. Copies of Report
The interim report will be mailed to shareholders and copies will also be
available at the Company's registered office at 226 - 236 City Road, London,
EC1V 2TT.
8. Reconciliation of operating loss to cash outflow from operating
activities
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
-------------------- ---------- ---------- ----------
Operating loss (536) (602) (3,252)
Depreciation of tangible 306 397 781
assets
Amortisation of intangible - 82 1,347
assets
(Profit)/loss on disposal of - (6) 21
fixed assets
(Decrease)/increase in (167) - 1,000
provisions
Diminution in value of
investment in own shares - - 384
(Increase)/decrease in stock (47) 81 46
Decrease in debtors 1,117 1,118 444
Decrease in creditors (1,405) (1,727) (1,217)
-------------------- ---------- ---------- ----------
-------------------- ---------- ---------- ----------
Net cash outflow from operating
activities (732) (657) (446)
-------------------- ---------- ---------- ----------
9. Analysis of Net Funds
Audited at Unaudited Unaudited at
1 April 2003 Cash flows 30 September
2003
#'000 #'000 #'000
-------------------- ---------- ---------- ----------
Cash at bank and in hand 7,627 (557) 7,070
-------------------- ---------- ---------- ----------
Net funds 7,627 (557) 7,070
-------------------- ---------- ---------- ----------
10. Reconciliation of net cash flow to movement in net funds
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 30 September 31 March
2003 2002 2003
#'000 #'000 #'000
-------------------- ---------- ---------- ----------
Decrease in cash in the period (557) (1,122) (784)
Net funds at start of the 7,627 8,411 8,411
period
-------------------- ---------- ---------- ----------
Net funds at end of the period 7,070 7,289 7,627
-------------------- ---------- ---------- ----------
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