Final Results
Dowlis Corporate Solutions plc
20 March 2006
Date: 20 March 2006
On behalf of: Dowlis Corporate Solutions plc ('Dowlis' or 'the
Company')
Embargoed until: 0700hrs
Dowlis Corporate Solutions plc
Preliminary Results 2005
Dowlis Corporate Solutions plc, the marketing, information and logistics
solutions business, today announced its preliminary results for the period 30
July 2004 to 31 December 2005.
The key highlights are:
• Merger of Corporate Solutions and Dowlis in September 2004
• Acquisition of Aviation Gifts for £237,000 in May 2005 and set up of
Dowlis Communications in February 2005
• Flotation on AIM in November 2005 and raising of £4.0m net of expenses
• Turnover in the 12 months to December 2005 was £20.4m
• Normalised profit before tax, goodwill amortisation and one off
exceptional items for the 12 months to December 2005 was £1.2m
• Normalised basic earnings per share, before tax, goodwill amortisation
and one-off exceptional items for the 12 months to December 2005 were
3.24p per share
• Net funds of £1.5m at year end
Post Balance Sheet Events
• Acquisition of Envoy catalogue for £200,000 in January 2006
• Acquisition of Ross Promotional Products Limited for £825,000 in
February 2006 also providing Group with a Scottish base
Commenting on the Group's inaugural set of results as a Group and as an AIM
listed company, Colin Cooke, Chairman, said:
'These are the inaugural set of preliminary results for the Dowlis group which
follows its successful flotation on AIM in November 2005. Significant progress
has been made towards our goal of developing a profitable group that has a clear
focus on delivering marketing solutions that utilise our systems, processes and
link with a wide supply network.
'Current trading for the early part of the year has been encouraging, and we are
already beginning to leverage the benefits of the two new businesses. We look
forward to the coming year with confidence and will continue to build the Group
organically and through synergistic acquisition.'
Enquiries:
Dowlis Corporate Solutions plc www.dowlis.com
Martin Varley (Chief Executive) 0870 224 6677
David Gray (Finance Director) 07775 848 252
Redleaf Communications
Emma Kane/Miranda Good 020 7955 1410
Corporate Synergy PLC
Rhodri Cruwys 020 7448 4400
Zeus Capital
Alex Clarkson 0161 831 1512
• Publication quality photographs are available via Redleaf.
Chairman's Statement
It gives me great pleasure to present the inaugural set of preliminary results
for the Dowlis group which follows its successful flotation on AIM in November
2005.
Turnover and profits
This report covers the period from incorporation on 30 July 2004 to 31 December
2005. However, I am concentrating in this report on the 12 months to 31 December
2005 which is the first full year of trading for the Group. Turnover in the 12
months to 31 December 2005 was £20.4m and normalised profit before tax, goodwill
amortisation and one-off exceptional items was £1.2m.
The one-off exceptional items relate to the reorganisation of the Dowlis
business and the centralising of our warehouse facility in new premises in
Manchester, which had a total cost of £206,000 and £240,000, being those costs
of listing on AIM that under the requirements of FRS25 are not eligible to be
deducted from the share premium account. Basic earnings per share, before
goodwill amortisation and one-off costs for the 12 months to 31 December 2005,
were 3.24p per share and, after goodwill amortisation and one-off costs, 1.13p
per share. No dividend will be paid this year as stated in the Admission
document.
Cash resources and investment
The successful admission to AIM raised £4.0m net of expenses and, following
receipt of these funds, short term debt and loans were repaid. At the year end,
the Group had £1.5m cash in hand.
Post balance sheet events
At the time of the Group's admission to AIM it stated its intention of
increasing revenues through the sales channels of Trade Only(TM)and information
services by attracting additional suppliers and distributors through the website
and establishing additional UK Promotional Products sales offices. Since the
year end, we have acquired two businesses: In January we acquired the Envoy
catalogue at a total cost of £200,000 - Envoy provides product information and
selling resources to UK based promotional merchandise companies. Then in
February we acquired Ross Promotional Products Limited for a total consideration
of £825,000. This acquisition provides a Scottish facility from which to serve
the Group's increasing client base in Scotland.
Board and employees
The dedication and effort that has been demonstrated by our talented team over
the past 18 months has been exemplary. It is a result of this that significant
progress has been made towards our goal of developing a profitable group that
has a clear focus on delivering marketing solutions that utilise our systems,
processes and link with a wide supply network.
Outlook
Current trading for the early part of the year has been encouraging, and we are
already beginning to leverage the benefits of the two new businesses. We look
forward to the coming year with confidence and will continue to build the Group
organically and through acquisition.
Colin Cooke
Chairman
20 March 2006
Chief Executive Review
The last 18 months have seen a complete transformation of the businesses that
make up the Dowlis Group. In September 2004 Corporate Solutions, which was
formed just two years earlier, merged with Dowlis, a company that had been in
the promotional merchandise business for 30 years. After a short period of
consolidation, we acquired two businesses and then in November 2005 successfully
floated on AIM.
Today, the Dowlis Group specialises in providing corporate solutions across
three key areas:
• Marketing Solutions
Promotional Products - Dowlis is the UK's second largest distributor of
promotional products, personalised to support clients' wider marketing campaigns
Dowlis Communications - Manchester based design and marketing including print
and brochure production, media planning and buying
• Information Solutions
Portal - bespoke, industry specific website that contains detailed information
on over 2,000 products - revenue is generated from suppliers wishing to be
featured on the site, at exhibitions and from advertising contributions in
catalogues
Technology - the Group's offering is underpinned by its propriety software which
has been designed in-house to provide users with innovative solutions to day to
day requirements associated with promotional products and provides the Group
with a competitive advantage over others in the industry
• Logistics Solutions
The Group is a supplier to independent distributors and partners of a wide range
of products that are sourced, stocked and personalised in house using the latest
technology
This structure enables the Group to provide services direct to large corporate
entities and to the SME market via distributors, and also to generate revenue by
providing product information to distributors from suppliers, enabling them to
communicate and transact with each other more effectively.
The progress the team has made in such a short time is very encouraging. As with
many smaller companies the process of listing on AIM distracts much of the
senior resource needed to implement new ideas and grow the business, and I am
delighted that we are now through that process. We are continually looking at
ways to innovate additional solutions for customers, identify new markets and
opportunities, and take time and cost out of our process through the adoption of
best practice and the use of technology where practical.
Marketing Solutions
Promotional Products
As a distributor of promotional merchandise we source products from around the
world which are personalised in accordance with the client's brand and design
guidelines in support of their wider marketing campaigns.
Since the merger of Dowlis and Corporate Solutions and due to our wider service
offering with increased creative resources, we have gained several new large
corporate accounts. Customers include the AA, Airbus, GlaxoSmithKline, Legal &
General and 3. In May 2005, we acquired the Aviation Gifts business which
specialises in the supply of accurate and manufacturer approved models to major
airlines throughout Europe and the Middle East which in turn has provided the
opportunity to supply other products of the Group to these customers. The
addition of Ross Promotional Products gives the Group a base from which to serve
our increasing client base in Scotland.
In the summer of 2005, we consolidated our warehouse and distribution facility
into a new purpose built premises in Manchester and closed the ageing warehouse
premises at Byfleet, Birmingham and the original Manchester warehouse. We have
invested heavily in the latest technology and systems to improve efficiencies
and lower distribution costs. This gives us the extra capacity needed to drive
the business forward offering even higher levels of service and responsiveness
to our growing customer base.
Dowlis Communications
This was established in 2005 and provides a range of services which cover all
aspects of design and marketing, including print and brochure production, media
planning and buying. This will provide the platform for additional services that
can be added to the marketing services aspect of the business.
We are always cautious about building into our plans 'cross selling' benefits,
preferring to discount talk of easily achieved extra business from clients. We
are, therefore, pleased that the business has recently won the first Point of
Sale order from one of the Group's major clients.
Information Solutions
Trade Only(TM) - publishing
This division produces the main catalogue used by the Group and manages the
relationships with suppliers that pay to be included in the publication. Due to
space constraints, suppliers cannot include all of their products in the
catalogue and, in order to gain exposure for the rest of their range through
distributors, they enter these into our fast growing portal that is growing in
use by around 20% per month.
The addition of the Envoy catalogue will provide further momentum to the Group
strategy of being a useful link between suppliers and distributors. The
Catalogue features promotional merchandise for corporate customers and is
supported by over 60 suppliers with approximately 50,000 catalogues distributed
through 45 regionally separated distributors. The Envoy catalogue group will
benefit from adopting our leading technology for the efficient management of
product databases and order processing software as well as the Virtual Sample
technology, over which the Group has exclusive rights in the UK market.
Visitor numbers at the Roadshow, which was held at five locations in January of
this year, were up 15% compared to 2005. The events continue to attract much
attention from suppliers not currently members of the Trade Onlycatalogue.
In addition to the Roadshow, a new, one day 'National' show has been planned for
September 2006.
Logistics Solutions
Trade Only(TM) - Product Supply
This business sources, personalises and supplies promotional products to
independent distributors who then sell them on to their customers. Of the
estimated 2,000 UK distributors we receive orders from over 600, a figure that
is growing each week.
Sales of catalogues to distributors is some 30% ahead of the same period last
year reflecting the more comprehensive nature of the catalogue and the wider
acceptance by distributors of this publication. We have seen a general increase
in the number of catalogues purchased by distributors and a substantial increase
in the number of distributors that use our web technology to promote products to
their own customers.
Conclusion
We have started the new financial year with confidence and our businesses are in
a healthy position with many good opportunities to explore. Our recent modest
size acquisitions are performing in line with expectations and we look forward
to the coming year with a clear strategy and sufficient new ideas to enjoy a
successful year.
Martin Varley
Chief Executive
20 March 2006
Group Finance Director's Review
This is the first Annual Report for the Group since the Company's incorporation
in July 2004, and also the first set of results published as a quoted company.
As a result, these accounts cover the period from 30 July 2004 to 31 December
2005 and the profit and loss statement covers that period although, as there was
no trading until the merger in September 2004, the trading is for the 15 month
period. Also shown are the results for the 12 months ended 31 December 2005
which we believe are more relevant to our shareholders and will form the basis
of the comparisons in the future. Having established the Group with the merger,
the most significant event of the period was the admission to AIM and raising
£4.0m net of expenses.
Trading results
Turnover for the 15 months to 31 December was £26.2m and for the 12 months to
the same date £20.4m. Operating profit before exceptional items and goodwill
amortisation was £1.582m for the 15 months and £1.345m for 12 months. We have
begun to see an improvement in the operating margins both at the gross level,
due to an increasing contribution from Trade OnlyTM, and after administration
costs. We have built a cost base to support higher volumes and expect to see
continued improvement in this regard.
The two principal businesses are Marketing Solutions and Information and
Logistics Solutions, which can supply some products to Promotional Products,
hence the internal sales, but which will continue to sell to the large number of
smaller distributors in the sector. The split between the two main sales
channels was:
12 months 15 months
Turnover £m £m
Marketing Solutions 19.1 24.8
Information and Logistics Solutions 1.9 2.2
Less internal sales (0.6) (0.8)
Total 20.4 26.2
12 months 15 months
Operating profit before one-off items and goodwill amortisation £m £m
Marketing Solutions 1.1 1.4
Information and Logistics Solutions 0.2 0.2
Total 1.3 1.6
Non-operating exceptional items
A total of £206,000 arises from the move to the new central warehouse facility
in Manchester and reorganisation costs. We closed the Byfleet warehouse in
September and the Birmingham facility in November, although have retained an
office there which specialises in corporate clothing, and moved out of the old
Manchester premises. In addition, we incurred several one-off costs in
reorganising the Promotional Products sales function and central administration.
We incurred total costs of £489,000 in connection with the AIM listing process
and related placing of new shares. In accordance with the requirements of FRS25,
the costs incurred have been deducted from equity to the extent that they
related to the issues of the new shares and the balance of £240,000 has been
charged to profit. These costs have been shown separately as non-operating
exceptional items.
Interest cost
Until 7 November 2005, the Group was a net borrower. The merger was completed
with the creation of loan notes to the owners of the Dowlis business. This loan
of £1.2m along with short term bank debt was repaid out of the proceeds of the
flotation and left the Group with surplus funds. At the 31 December 2005 the
Group had a surplus of £1.5m.
Taxation
The charge for the 15 months includes an adjustment to create the deferred tax
reserve, effectively a prior year adjustment. The charge for the 12 months is
close to the prevailing tax rate of 30% before goodwill amortisation. Tax
charges in future years should follow this pattern.
Earnings per share
Normalised earnings per share before goodwill amortisation and non-operating
exceptional items for the 12 months to 31 December 2005 are 3.24p - based on a
weighted average number of shares of 26,884,005. The diluted earnings per share
in the 12 months on a normalised basis are 3.24p based on the addition of 34,758
shares being the dilutive effect of shares under option. These figures should
not be regarded as being representative for the future because of the impact on
the weighting following the share issue and the benefit of the cash received in
the profit and loss, all of which happened late in the period.
Cash flow and investment
The cash flow is shown for the full period from incorporation to 31 December
2005 and includes the impact of the merger and AIM listing.
The net cash inflow from operating activities and non-operating exceptional
items was £930,000. The total capital expenditure was £660,000 and relates
primarily to the new warehouse facility and IT development of the Trade Only
software. Acquisitions are primarily the costs associated with the merger plus
the acquisition of Aviation Gifts.
The AIM listing raised £4.5m before expenses of £0.5m. We then repaid the loan
notes totalling £1.2m and short term debt. At the year end, we had surplus cash
of £1.5m. Since the year end we have put in place an overdraft facility for £1m
and acquired the Envoy catalogue business and Ross Promotional Products Limited
for a combined sum of £1.025m, part of which was satisfied by the issue of
357,894 new shares to the value of £170,000.
Financial instruments and foreign exchange risk
Until the flotation, the main financial instrument the Group held was its bank
loan and loan debt, both now repaid. Other financial instruments such as trade
debtors and trade creditors arise directly from operations. The Group has no
overseas assets or liabilities apart from trade related purchases and any
currency rate movements have had no material impact.
Carrying values
The Directors have carried out a review of the carrying values of the intangible
and tangible assets. We have concluded that as each of those businesses acquired
are performing at or above the level when acquired no change to the carrying
values is necessary. The balance of fixed assets is relatively new and again no
provisions are required.
Accounting policies and Corporate Governance
As an AIM listed company we are not required to adopt international accounting
standards until 2007 or to comply with the combined code in respect of Corporate
Governance. However, we have looked at the international accounting standards,
and do not believe that the impact of conversion will be significant. Under IFRS
we will no longer amortise goodwill and we will need to apply the new rules on
share option recording and disclosures.
As regards corporate governance we do support the principles of corporate
governance and have sought to comply where practicable, using the guidance for
AIM companies established by the Quoted Companies Alliance.
David Gray
Finance Director
20 March 2006
Consolidated profit and loss account
for the period from 30 July 2004 to 31 December 2005
Year ended Period ended
Notes 31 31
December December
2005 2005
proforma
£000 £000
Turnover 1 20,398 26,225
Cost of sales (13,573) (17,709)
Gross profit 6,825 8,516
Administrative expenses (5,664) (7,162)
Operating profit 1,161 1,354
Non-operating exceptional items 2 (446) (446)
Operating profit before exceptional item and 1,345 1,582
goodwill amortisation
Non-operating exceptional items:
- Fundamental restructuring of acquired operations 2 (206) (206)
- Costs of listing 2 (240) (240)
(446) (446)
Goodwill amortisation (184) (228)
Profit on ordinary activities before finance 715 908
charges
Interest receivable 17 22
Interest payable and similar charges (130) (170)
Profit on ordinary activities before taxation 602 760
Taxation 3 (298) (380)
Profit for the financial year / period 304 380
All activities relate to acquisitions in the
current period
Earnings per share
Basic 4 1.13p 1.43p
Diluted 4 1.13p 1.43p
The company has prepared the proforma results for the twelve months ended 31
December for information purposes only.
There are no recognised gains and losses in the period, other than those
mentioned above
Consolidated balance sheet
as at 31 December 2005
£000 £000
Fixed assets
Intangible assets 1,669
Tangible assets 815
2,484
Current assets
Stocks 1,245
Debtors 4,918
Cash at bank and in hand 1,537
7,700
Creditors: amounts falling due within one year (4,596)
Net current assets 3,104
Total assets less current liabilities 5,588
Creditors: amounts falling due after more than one year (15)
Provisions for liabilities and charges (77)
Net assets 5,496
Capital and reserves
Called up share capital 150
Share premium account 4,966
Profit and loss account 380
Equity shareholders' funds 5,496
Consolidated cash flow statement
for the period 30 July 2004 to 31 December 2005
Notes £000 £000
Net cash inflow from operating activities 5 930
Returns on investment and servicing of finance 5 (148)
Taxation (96)
Capital expenditure
Purchase of tangible fixed assets (660)
Sale of tangible fixed assets 14
Net cash outflow for capital expenditure (646)
Acquisitions and disposals 5 (1,003)
Cash outflow before financing (963)
Financing
Proceeds from issue of share capital 4,500
Expenses of share issue taken to share premium (165)
Repayment of loan notes (1,200)
Repayment of bank loans (110)
Repayment of loans acquired (490)
Repayment of capital elements of hire purchase contracts (35)
Net cash inflow from financing 2,500
Increase in cash in period 5 1,537
Reconciliation of net cash flow to movement in net debt
for the period 30 July 2004 to 31 December 2005
Notes £000
Increase in cash in period 1,537
Repayment of bank loans 110
Repayment of trading loans 490
Repayment of loan notes 1,200
Repayment of capital elements of hire purchase contracts 35
Change in net debt/funds resulting from cash flows 5 3,372
Bank loans acquired with subsidiary (110)
Trading loans acquired with subsidiary (490)
Loans notes issued during acquisition (1,200)
Hire purchase creditors acquired with subsidiaries (68)
Net debt at 30 July 2004 -
Net funds at 31st December 2005 1,504
Notes to the accounts
for the period ended 31 December 2005
1 Turnover and segmental information
The turnover, profit before tax and operating assets relate to one principal
activity, the manufacture and sale of advertising and business gifts, which is
wholly undertaken in the United Kingdom.
Turnover, analysed by destination is all to United Kingdom customers.
2 Exceptional items
These costs arise from the move to the new central warehouse facility in
Manchester from the now closed facilities at Byfleet, Birmingham and the
previous Manchester premises. In addition several one-off costs were incurred
reorganising the promotional products sales functions and central
administration. The total cost for these matters was £206,000, all in the 12
months period to 31 December 2005. In addition the company incurred costs of
£240,000 in respect of the listing and placing that under the requirements of
FRS25 are not eligible to be deducted from share premium as they did not solely
relate to the raising of equity finance. The total costs of the listing and
placing amounted to £489,000 (see Chairman's Statement).
3 Taxation
Period ended
31 December
2005
£000
Analysis of charge
Current taxation
UK corporation tax on profits for the period 303
Deferred tax
Origination and reversal of timing differences 77
Tax on profit on ordinary activities 380
4 Earnings per share
Year ended Period ended
31 December 31 December
2005 2005
£000 £000
Basic and diluted earnings 304 380
Adjustment for amortisation of goodwill 184 228
Adjusted loss for earnings before amortisation of goodwill 488 608
Adjustment for exceptional items 446 446
Tax on exceptional items (62) (62)
Adjusted loss for earnings before amortisation of goodwill and exceptional 872 992
items
Earnings per share
Basic 1.13p 1.43p
Before goodwill amortisation 1.82p 2.29p
Before goodwill amortisation and exceptional items 3.24p 3.74p
Diluted 1.13p 1.43p
Earnings per share is calculated by dividing the profit after tax by
26,518,018 for the 15 months to 31 December 2005, being the weighted average
number of shares in issue during the period. The earnings per share before
amortisation of goodwill uses the profit after tax, adjusted to exclude the
effect of the amortisation of goodwill divided by the weighted average number of
shares. The profit before amortisation of goodwill and exceptional items uses
the profit after tax, adjusted to exclude the effect of amortisation of goodwill
and exceptional items net of tax divided by the weighted average number of
shares. The calculation for the 12 months is the same except that the weighted
average number of shares in the year was 26,884,005. The diluted earnings per
share uses the profit after tax divided by the weighted average number of shares
plus 28,006 shares representing the dilutive effect of the weighted average
number of shares under option during the period (34,758 shares for the 12
months).
The calculation for the period ended 31 December 2005 has been based on the 15
month period since the merger of the businesses, prior to that the companies did
not trade and had one ordinary £1 share.
5 Notes to accompany Group cash flow statement
(a) Reconciliation of operating profit to operating cash flows
Period ended
31 December
2005
£000
Operating profit 1,354
Depreciation 152
Amortisation 228
Loss on sale of fixed assets 39
Increase in stocks (188)
Increase in debtors (480)
Increase in creditors and provisions 153
Exceptional Items (328)
Net cash inflow from operating activities 930
(b) Analysis of cash flows for items netted in cash flow statement
Period ended
31 December
2005
£000
Returns on investment and servicing of finance
Interest paid on loans and overdrafts (167)
Interest received 22
Interest paid on hire purchase arrangements (3)
Cash outflow for returns on investment and servicing of finance (148)
Acquisitions and disposals
Payments for intangible assets (120)
Costs paid to acquire subsidiaries (128)
Net overdrafts acquired with subsidiaries (541)
Deferred consideration paid (214)
Net cash outflow from acquisitions (1,003)
(c) Analysis of net debt
30 July Non cash 31 December
2004 Cash flow movements 2005
£000 £000 £000 £000
Cash at bank - 1,537 - 1,537
- 1,537 - 1,537
Bank loans acquired with subsidiaries - 110 (110) -
Trading loans acquired with - 490 (490) -
subsidiaries
Loan notes issued - 1,200 (1,200) -
Hire purchase - 35 (68) (33)
- 1,835 (1,868) (33)
Total - 3,372 (1,868) 1,504
(d) Cash flows relating to exceptional items
The net cash inflow from operating activities included cash outflows of £328,000
in respect of the exceptional items detailed in note 2.
6 This statement which has been agreed with the auditors was approved by the
Board on 20 March 2006. It is not the Group's statutory accounts. The
statutory accounts for the year ended 31 December 2005 have not yet been
approved, audited or filed. Copies of the 2005 Annual Report, which will be
posted to shareholders in April 2006, may be obtained from the date of posting,
from the registered office of the company, Canada Road, Byfleet, Surrey, KT14
7HQ. This is the first set of results for the Group. There are no comparative
figures.
7 Accounting Policies.
The accounting policies adopted by the Group in preparation of the accounts are
consistent with the accounting policies disclosed in the Admission Document
This information is provided by RNS
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