Preliminary Results
Calyx Group PLC
17 April 2007
For immediate release 17th April 2007
CALYX GROUP PLC
('Calyx', 'the Group' or 'the Company')
Preliminary Results for the Year Ended 31st December 2006
Calyx, one of the largest single-source providers of Networked IT services in
both the United Kingdom and Ireland, today announces its preliminary results,
for the year ended 31st December 2006. These include the results of Entropy for
10 months, the Matrix Companies for 61/2 months and Mentec for half a month.
Financial Highlights:
• Group turnover up 130% to Euro88.5 million (2005: Euro38.4 million), of
which Euro43.7 million came from existing operations
• Group operating profit before goodwill amortisation and exceptional items
up 147% to Euro9.4 million (2005: Euro3.8 million)
• Earnings before interest, depreciation, amortisation and share options
charge up 141% to Euro11.1 million (2005: Euro4.7 million)
• Profit before tax up 29% to Euro2.2 million (2005: Euro1.7 million)
• Adjusted earnings per share (i.e. excluding goodwill amortisation and
exceptional items) up 49% to 10.61c (2005 7.17c)
Operational Highlights:
• Three more significant acquisitions in the year
• Admission to IEX in June 2006 to complement existing AIM listing
• Successful equity issue in June 2006 raising Stg17.5 million
• Full integration of all business acquired to date continues and will be
completed within the next six months
• The strategic focus on increasing the support services proportion of the
business is benefiting trading and there were some notable contract wins in
the second half of the year
Commenting on the preliminary results Maurice Healy, Chief Executive of Calyx,
said:
'2006 has once again seen dramatic growth and development of the Group. In the
year we concluded three significant transactions and as a result the Group has a
substantial market position in the ICT services space across Ireland and the UK.
'I am pleased to announce another set of strong results today'
For further details please contact:
Calyx Group plc
Maurice Healy, Chief Executive Tel: +353 (1) 883 5509
Buchanan Communications (UK)
James Strong Tel: +44 (0)20 7466 5000
Murray Consultants (Ireland)
Jim Milton Tel: +353 (86) 255 8400
Chairman's Statement
During the year, Calyx has continued its strong growth. The acquisition of the
Matrix Companies in June was a milestone in the development of the Group and
they have provided the Group with a significant platform for growing revenues in
the UK market. In addition, the acquisitions of Entropy and Mentec have
significantly enhanced the service offering of the Group, both in Ireland and
the UK.
The Group provides a flexible range of service and product offerings and
continues to find that customers want to outsource more of their network
operations to a trusted partner. In the role of trusted partner Calyx provides
their customers with a fully managed, end to end solution in data, voice,
security, systems integration, applications, IP and carrier services. In
addition the Group with its complete service and product offering is ideally
placed to take advantage of the growing market for converged services.
Financial results
Group turnover for the year was Euro88.5 million (2005: Euro38.4 million), of
which Euro43.7 million came from existing operations. The overall gross margin
percentage achieved of 38.2% is slightly below that achieved in 2005 (38.7%) as
it reflects the inclusion of the results of the Matrix companies for six and a
half months. These businesses have historically had lower margins than the
existing Irish companies due to a proportion of their business being carrier
services (which has lower margins than other businesses in the Group) and the
fact that they predominately outsource engineering work to third parties. The
Group's overall margin in 2007 will reflect the inclusion of a full year of the
results of the Matrix companies.
Operating profit before goodwill amortisation and exceptional items for the year
was Euro9.4 million (2005 Euro3.8 million). Excluding acquisitions, the
operating profit before goodwill amortisation and exceptional items of the Group
for the year was Euro4.7 million. As noted in the trading statement issued in
December 2006, the results for the period were adversely impacted by the
performance of Calyx (UK) Limited (formerly ITS Technology Services Limited),
which was acquired in October 2005. This business experienced some disruption
during the process of rebranding and integrating it into the Group, although
this has now turned around. Trading in the Matrix Companies acquired in June
2006 exceeded expectations. As a result, the first earn-out payment of Stg3.0
million was paid in full in March 2007.
Earnings before interest, depreciation, amortisation and share options charge ('
EBITDA') for the year was Euro11.1 million (2005: Euro4.7 million). The Group
has adopted FRS 20 and the resulting share option charge in the year was Euro0.2
million. The EBITDA margin for the group was 12.6% (2005: 12.0%) which reflects
progress that the Group has made in driving cost synergies through integrating
businesses it has acquired.
Exceptional costs of Euro2.0 million were incurred. Of this, Euro0.5 million
relates to the write off of leasehold improvements arising from the relocation
of the Irish businesses, Euro0.5 million relates to rentals on buildings which
the Group has vacated and Euro1.0 million relates to integration and
reorganisation costs. The goodwill amortisation charge in the period was
Euro2.8 million, of which Euro1.9 million relates to the three acquisitions made
during the period.
Profit before tax for the year was Euro2.2 million (2005 Euro1.7 million). The
total tax charge for the year is Euro1.0 million, of which Euro1.2 million
relates to profit before goodwill amortisation and exceptional items. The
effective tax rate of 17.4% on profit before goodwill amortisation and
exceptional items is a function of profits arising in the Republic of Ireland
which are taxed at 12.5% and profits arising in the United Kingdom which are
taxed at 30%. The Group's effective tax rate is likely to be higher in 2007 as
the proportion of profits arising in the United Kingdom increases.
Basic (FRS 3) earnings per share for the year were 2.28c (2005 4.01c). Adjusted
earnings per share (i.e. excluding goodwill amortisation and exceptional items)
for the year were 10.61c (2005 7.17c).
Strategy
The strategy of both the UK and Irish businesses is to increase the support
services proportion of the overall business. This has been successfully
implemented and support services revenue was Euro33.1 million (2005: Euro12.2
million). There were some notable blue chip contract wins such as Red Bee Media
and Thus in the second half of the year. As a result, the level of recurring
business of the Group going into 2007 increased to 37% of turnover expectations
for 2007.
Financing
To finance the acquisition of the Matrix Companies in June 2006, the Group
placed 25 million shares at 70p raising Stg17.5 million of new equity capital.
In addition, the Group increased its senior debt facilities by drawing down a
new Stg25 million eight year debt facility. To finance the acquisition of Mentec
in December 2006, the Group drew down Euro9.75 million of a new Euro12 million
debt facility.
As at 31 December 2006 the Group had cash (net of overdrafts) of Euro9.6
million, virtually all of which is held in sterling. Bank loans as at 31
December 2006 amounted to Euro58.5 million of which Euro37.3 million relates to
the Stg25 million sterling loan taken out to fund the acquisition of the Matrix
Companies.
The Group's net debt position changed from net debt of Euro7.9 million at the
start of the year to Euro50.7 million at the end of the year. There was a net
cash inflow from operating activities of Euro7.0 million (2005: outflow of
Euro0.5 million) and also a net cash inflow of Euro23.7 million from the equity
issue in June 2006. Net debt principally increased as a result of expenditure on
acquisitions (Euro67.0 million) and fixed assets (Euro3.3 million).
The balance sheet at the 31 December 2006 includes the full net assets of the
Matrix Companies, Entropy and Mentec whereas the profit and loss account for the
year to 31 December 2006 only includes the results of Entropy for 10 months, the
Matrix Companies for 61/2 months and half a month of Mentec.
Acquisitions
On 1 March 2006, the Group acquired Entropy Limited ('Entropy'), the Dublin
based IT security specialist, for a total consideration of up to Euro4.9 million
to be satisfied by cash of Euro3.7 million and the issue of Calyx shares with a
market value of Euro1.2 million. Euro3.0 million was paid to the vendors and
Euro1.0 million of Calyx Group plc shares were issued to them on completion. A
further Euro0.5 million was paid and Euro0.2 million Calyx Group plc shares were
issued in March 2007. A final payment of Euro0.2 million will be paid this month
as a result of the business achieving its earn out targets.
On 13 June 2006, the Group acquired the Matrix Companies (which comprised of MXC
Integration Limited, Network Partners Holdings Limited and their subsidiaries)
for a total consideration of up to Stg40.5 million. Of this, Stg33.5 million was
paid in cash and Stg2.0 million of Calyx Group plc shares were issued on
completion. In addition, payments of up to Stg3.0 million and Stg2.0 million
were payable based on earn outs in the periods June to December 2006 and January
to May 2007 respectively. As noted above, the first earn-out was paid in full in
March 2007 and, as announced in December 2006, an agreement was entered into
with the vendors of the Matrix Companies to waive the requirement for them to
meet the profit target for the five months to 31 May 2007 in order to trigger
payment of the second earn-out payment. In accordance with that agreement, Fujin
were released from their lock-in over the Calyx shares they held. In addition,
Stg1.7 million will be paid to Fujin Technology plc ('Fujin') in June 2007
instead of the second earn-out payment, which would have been up to Stg2.0
million on achievement of the profit target.
On 12th December 2006, the Group acquired Mentec International Limited ('Mentec
') and various associated companies. Based in Dublin and Leicestershire, Mentec
is an innovative provider of ICT applications and services. An initial cash
consideration of Euro9.7 million and Calyx shares with a value of Euro2.3
million was paid on completion of the acquisition. Further cash consideration of
Euro3.0 million will be paid, and shares to the value of Euro1.0 million will be
issued, in June 2007.
The Group is continuing to review corporate and strategic developments in its UK
and Irish markets and will consider further acquisition opportunities in these
markets where appropriate.
Board changes
During the year, the Board was strengthened by the appointment of two additional
independent non-executive directors, Gary Kennedy and Nicholas Koumarianos and
by the appointment of Peter Jenkins as Chief Financial Officer.
Judith O'Brien is stepping down as an executive director. However, we are very
pleased that she has agreed to stay on the Board in a non-executive capacity.
As announced in December, following the agreement with Fujin, Ian Smith resigned
from the Board of Calyx Group plc.
Management changes
During the year, a Group Business Improvement Director, Jack Cunnane was
appointed. Jack joined us from Hewlett Packard where he was Operations Director
- Global Competency Centre.
Andy Mills has been appointed as Managing Director of Calyx's UK ICT integration
and carrier services operations. Andy was previously Sales Director of MXC
Integration Limited. Ger Coakley is responsible for Calyx's Irish ICT
integration and applications businesses and reporting to him, Kevin Haverty,
formerly MD of Mentec, is now responsible for both Mentec and the data business
in Ireland.
Tony Weaver, who was Managing Director of the Matrix Companies, left the Group
at the end of December 2006 and has returned to Fujin.
Employees
2006 saw major changes in the development of the Group. These changes have been
driven by the hard work and dedication of our employees and I would like to
sincerely thank them for their enormous efforts this year.
Current trading
Trading in the first quarter was broadly in line with expectations. The interest
charge for the full year is likely to be higher than expectations and accounting
for the Group's share options scheme in accordance with FRS 20 is currently
expected to result in a higher charge than in 2006.
Maurice Healy
Chairman
17th April 2007
Group Profit & Loss Account
for year ended 31 December 2006
Note 2006 2005
Before Goodwill Exceptional Total
goodwill amortisation items
amortisation
and
exceptional
items
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Group turnover 2 88,463 88,463 38,410
Existing operations 43,725 43,725 36,626
Acquisitions 44,738 44,738 1,784
Cost of sales (54,663) (54,663) (23,554)
Gross profit 33,800 0 0 33,800 14,856
Administrative expenses (24,438) (1,960) (26,398) (11,640)
Goodwill amortisation (2,832) (2,832) (667)
Group operating profit 3 9,362 (2,832) (1,960) 4,570 2,549
Existing operations 4,735 (982) (1,960) 1,843 2,549
Acquisitions 4,627 (1,900) 2,727
Interest receivable and similar income 236 236 73
Interest payable and similar charges (2,564) (2,564) (879)
Profit on ordinary activities before tax 7,034 (2,832) (1,960) 2,242 1,743
Tax on profit/(loss) on ordinary 4 (1,222) 227 (995) (298)
activities
Retained profit for the period 5,812 (2,832) (1,733) 1,247 1,445
Basic earnings per share (cents) 5 2.28c 4.01c
Adjusted earnings per share (cents) 5 10.61c 7.17c
Group Balance Sheet
as at 31 December 2006
Group
2006 2005
Restated
Euro'000 Euro'000
Fixed Assets
Intangible assets 96,326 16,402
Tangible assets 8,146 3,076
Investments in subsidiaries 0 0
104,472 19,478
Current assets
Stocks 3,009 2,134
Debtors 38,342 9,751
Cash at bank and in hand 14,594 6,462
55,945 18,347
Creditors: amounts falling due (60,072) (16,259)
within one year
Net current assets / (liabilities) (4,127) 2,088
Total assets less current liabilities 100,345 21,566
Creditors: amounts falling due (55,633) (9,944)
after more than one year
Net assets 44,712 11,622
Capital and reserves
Called up equity share capital 6,926 3,859
Share premium account 35,502 8,524
Merger reserve (2,499) (2,499)
Share option reserve 231 31
Profit and loss account 3,342 1,530
Shares to be issued 1,210 177
Equity shareholders' funds 44,712 11,622
Group Cash Flow Statement
for the year ended 31 December 2006
2006 2005
Note Euro'000 Euro'000
Net cash (outflow)/inflow from operating activities 8 6,997 (527)
Returns on investments and servicing of finance
Interest received 236 73
Interest (1,803) (667)
paid
Interest paid on finance leases and hire purchase (40)
contracts
Net cash outflow from returns on investment and (1,567) (634)
servicing of finance
Tax paid (1,068) (28)
Capital expenditure
Purchase of intangible fixed assets (38) (61)
Purchase of tangible fixed assets (1,223) (1,570)
Proceeds from sale of tangible fixed assets 22 29
Net cash outflow from capital expenditure and (1,239) (1,602)
financial investment
Acquisitions and disposals
Purchase of subsidiary undertakings (64,437) (3,628)
Cash in acquisitions 909
Disposal of financial investments 101
Deferred consideration on prior year acquisitions (1,987) (487)
Net cash outflow from acquisitions (65,515) (4,014)
Net cash (outflow)/inflow before financing (62,392) (6,805)
Financing
New loans 46,300 4,300
Issue of equity share capital 23,675 9,150
Repayment of loan notes (1,773)
Capital element of finance lease repayments (697) (330)
Net cash inflow from financing 69,278 11,347
Increase/(Decrease) in cash 9 6,886 4,542
Statement of total recognised gains and losses
for year ended 31 December 2006
2006 2005
Euro'000 Euro'000
Profit for the year 1,247 1,445
Currency translation effects:
On foreign currency net investments 565 (2)
Total recognised gains for the year 1,812 1,443
Reconciliation of movement in shareholders' funds
for year ended 31 December 2006
Share Share Merger Share Profit Shares Total
option to be
capital premium reserve reserve and loss issued
€'000 €'000 €'000 €'000 €'000 €'000 €'000
Balance at 1 January 2005 2,540 0 (2,499) 0 704 0 745
Preference shares redeemed (39) (39)
Shares issued on listing on AIM 1,318 9,185 10,503
Share issue costs (998) (998)
Shares issued to acquire Quality Care
Limited
and ITS Technology Services 40 337 377
Ltd
Profit for the year 1,445 1,445
Prior year adjustment (617) (617)
Exchange translation adjustment (2) (2)
Share options issued in year 31 31
Shares to be issued 177 177
Balance at 31 December 2005 3,859 8,524 (2,499) 31 1,530 177 11,622
Shares issued on listing on AIM 2,500 23,085 25,585
Share issue costs (1,910) (1,910)
Shares issued to acquire Entropy
Limited,
Matrix Limited and Mentec 567 5,803 6,370
Limited
Shares issued to acquire ITS Technology (177) (177)
Services Limited
Profit for the year 1,247 1,247
Exchange translation adjustment 565 565
Share options issued in year 200 200
Shares to be issued 1,210 1,210
Balance at 31 December 2006 6,926 35,502 (2,499) 231 3,342 1,210 44,712
Notes to the preliminary results
for the year ended 31 December 2006
1. Basis of preparation of preliminary announcement
The financial information in this preliminary announcement is extracted from the
Group's financial statements for the year ended 31st December 2006. These are
currently unaudited. This preliminary announcement does not constitute
statutory accounts as defined in the Irish Companies (Amendment) Act 1986. The
financial information for the year ended 31 December 2005 in this preliminary
announcement is derived from the Group's statutory accounts which have been
delivered to the Irish Companies Registration Office and on which the auditors
gave an unqualified opinion.
2. Accounting policies
The financial statements are prepared in accordance on a going concern basis in
accordance with applicable Financial Reporting Standards, published by the
Accounting Standards Board, as promulgated by the Institute of Chartered
Accountants in Ireland. The financial statements are prepared under the
historical cost convention and are expressed in the company's functional
currency of the euro. The financial statements for the year ended 31 December
2006 have been prepared using accounting policies consistent with those applied
in the previous year other than the following item
The accounting policies of Entropy, Matrix and Mentec have been reviewed on
acquisition. Where they were not consistent with those of the Group, fair value
adjustments have been made to the carrying value of assets and liabilities
acquired. As a result of these reviews, a decision has been taken to change the
Group's accounting policy in respect of revenue recognition on maintenance
contracts to come in line with those of the acquired companies. The impact of
this change is to increase Creditors: amounts falling due within one year and
Profit and loss reserve by Euro617,000.
2. Geographical analysis
2006 2005
Euro'000 Euro'000
Turnover
Ireland 44,268 37,505
UK 44,195 905
88,463 38,410
Operating Profit before goodwill amortisation and exceptional items
Ireland 5,321 3,820
UK 4,041 (36)
9,362 3,784
3. Operating profit
Operating profit is after charging/(crediting):
2006 2005
Euro'000 Euro'000
Depreciation 1,546 817
Goodwill amortisation 2,832 667
Other intangible asset amortisation 28 22
Share option charge 200 31
Exceptional items 1,960 568
Exceptional costs comprise
2006 2005
Euro'000 Euro'000
Rationalisation and integration costs 977 576
Onerous leases 485 0
Loss/(profit) on disposal of fixed assets 498 (8)
1,960 568
4. Tax on profit on ordinary activities
2006 2005
Euro'000 Euro'000
Current year taxation
Corporation tax 397 291
Prior years' taxation
Under provision in respect of prior years 0 0
Deferred taxation
Origination and reversal of timing differences 598 7
995 298
5. Earnings per ordinary share
The calculation of basis earnings per share is based on earnings of Euro1,247
million (2005: Euro1,445 million) and 54,798,897 (2005: 36,017,872) ordinary
shares, being the weighted average number of ordinary shares in issue during the
period.
2006 2005
Weighted Weighted
average Earnings average Earnings
Earnings number per share Earnings number per share
Euro'000 of shares cents Euro'000 of shares cents
Basic EPS 1,247 54,798,897 2.28c 1,445 36,017,872 4.01c
Goodwill amortisation 2,832 54,798,897 5.17c 667 36,017,872 1.85c
Exceptional item 1,733 54,798,897 3.16c 568 36,017,872 1.58c
Adjusted earnings per share 5,812 54,798,897 10.61c 2,680 36,017,872 7.17c
6. Dividends
No interim dividend is proposed.
7. Acquisitions
On 1st March 2006, the Group acquired Entropy Limited. Euro3.0 million was paid
in cash and shares with a market value of Euro1.0 million were issued to the
vendor. A further Euro0.5 million was paid and Euro0.2 million Calyx Group plc
shares were issued in March 2007. A final payment of Euro0.2 million will be
paid this month. The cash consideration is included in creditors at 31st
December 2006.
On 13th June 2006, the Group acquired the integration businesses of Matrix
Communications Group plc. Stg33.5 million was paid in cash and shares with a
market value of Stg2.0 million were issued to the vendor. In addition Stg3.0
million was paid during March 2007 as part of an earn out clause. A final Stg1.7
million will be paid in June 2007. These amounts were included in creditors at
31st December 2006.
On 12th December 2006, the Group acquired Mentec International Limited and
associated companies. An initial cash consideration of Euro9.7 million and Calyx
shares with a value of Euro2.3 million was paid on completion of the
acquisition. Further cash consideration of Euro3.0 million will be paid, and
shares to the value of Euro1.0 million will be issued, in June 2007. The cash
consideration is included in creditors at 31st December 2006.
8. Reconciliation of operating profit/ (loss) to net cash inflow from operating
activities
2006 2005
Euro'000 Euro'000
Operating profit 4,570 2,549
Depreciation of tangible fixed assets 1,546 817
Profit on disposal of tangible fixed assets 498 (8)
Loss / (profit) on disposal of financial assets - (18)
Amortisation of goodwill 2,832 667
Other intangible asset amortisation 28 22
Share option charges 200 31
Foreign exchange gain on UK loan notes - (2)
Decrease / (increase) in stocks 123 (309)
(Increase) in debtors (8,737) (836)
Increase/(Decrease) in creditors 5,937 (3,440)
Net cash (outflow)/inflow from operating activities 6,997 (527)
9. Reconciliation of net cash flow to movement in net debt
2006 2005
Euro'000 Euro'000
Increase/(Decrease) in cash in the period 6,886 4,542
Loans advanced (46,300) (4,300)
Loan notes paid - 1,773
Loans in acquisitions (1,436) -
Capital element of finance leases 697 330
Change in net debt resulting from cash flow (40,153) 2,345
New finance leases (2,085) (76)
Foreign exchange differences (585) -
Movement in net debt in the period (42,823) 2,269
Net debt at beginning of the period (7,877) (10,146)
Net debt at end of the period (50,700) (7,877)
10. Analysis of movement in net debt
1 January Cash flow Foreign Acquisitions Other 31 December
2006 exchange non cash 2006
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Cash at bank and in hand 6,462 7,954 178 14,594
Bank overdrafts (3,976) (1,068) (5,044)
Net cash balances 2,486 6,886 178 0 0 9,550
Bank loans (10,006) (46,300) (763) (1,436) (58,505)
Finance leases (357) 697 (2,085) (1,745)
Net Debt (7,877) (38,717) (585) (1,436) (2,085) (50,700)
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