Final Results
Ninth Floor (The) PLC
5 November 2001
The Ninth Floor plc ('Ninth Floor' or 'the Company')
Preliminary results for the year ended 31 May 2001
Chairman's statement
Introduction
We have totally transformed the Ninth Floor. Since the year ended 31 May 2001,
the group has changed dramatically, and now concentrates solely on
technology-led total solutions for corporate clients.
Our strategy is to bring together synergistically linked companies to provide
comprehensive IT and security businesses. As part of this strategy we have
sold Swansea City AFC and acquired Farsight Ltd ('Farsight') and Applied
Infrastructure Management Services Ltd ('AIMS'). Further acquisitions will be
identified. For these reasons, and for the sake of clarity, I am reporting on
the current position as well as the last financial year.
Results and Dividends for the year to 31 May 2001
Pre-tax losses on ordinary activities were £2,731,000 (2000, profit of £
664,000). These results include the losses of Swansea City AFC, a discontinued
activity, of £1,124,000.
No dividend is recommended.
Trading Review & Current Activity
Swansea City Association Football Club
After an unsuccessful 2000 - 2001 season, Swansea City AFC was relegated.
Sadly market conditions were such that the proposed flotation of Swansea City
Football Club plc had to be aborted. In July 2001, the company was sold for £
1.00.
Farsight
Farsight and its subsidiary IOMM Software Ltd, a leading security surveillance
specialist, were acquired in April 2000. Full details of the acquisition were
given in last year's Annual Report. Since then they have benefited from our
considerable further investment.
In November 2000, we moved the two companies from their city centre location
to a new purpose built 10,000 square foot location on the outskirts of
Peterborough, designed to meet the latest security requirements of BS 5979
(Category II, layered approach). Farsight was the first company of its kind in
the country to attain this highest standard accreditation.
We continue to invest in E-surveillance, the internet software that enables
any business to monitor their premises and other assets over broadband and/or
wireless technologies rather than by more expensive ISDN (Black Box) solutions
used by our competitors. Because of the success of our E-surveillance
software, we are exercising our option to acquire the remaining 40% of the
equity of IOMM Software Ltd. It is being renamed Farsight Software Ltd and
will be a wholly owned subsidiary of the Group.
Farsight focuses on three main areas: remote video monitoring, consultancy and
software applications. The company continues to provide total security
solutions to major blue chip organizations such as ICL, Cap Gemini, American
Insurance Group, and TT Electronics.
Farsight is currently working on a major consortium bid with Sony, which will
provide substantial opportunities to both organizations. It has also been
nominated as the company to provide surveillance services to Telewest
Communications Ltd, which will include a trial of the new E-surveillance, IP
software. Services and support continue to ICL via their facilities management
organization, Chesterton Workplace Management.
Sony, JVC and Axis are investing heavily in the manufacture of IP addressable
devices and are collaborating with Farsight to develop further and implement
E-surveillance applications for use worldwide. One of the latest uses of the
software's innovative design is the European Community-funded Goodwin Project
based in Hull.
We see the USA as a considerable future opportunity. This massive market is
well behind the UK in usage of CCTV and related security applications but they
are more receptive to developing technologies and have a more mature
networking infrastructure. We are testing the potential by selling small,
controlled quantities of e-surveillance into the USA and by trials at schools
in Alabama and California.
Applied Infrastructure Management Services Ltd (AIMS)
On 5 June 2001 at our extraordinary general meeting, it was agreed that we
should acquire the entire issued share capital of AIMS and its subsidiaries,
Professional IT Management and Applied Business Solutions. This acquisition
has now been completed.
AIMS is a specialist company advising on designs and delivering effective,
innovative and robust infrastructures. Our senior professionals specialise in
optimising IT operational effectiveness in the increasingly important and
challenging arenas of call/contact centers and rationalised core IT functions,
particularly within the Finance and Telecommunications industries.
The acquisition of an already successful company like AIMS is critical to our
strategy of concentrating on technology-led solutions and is demonstrated by
its continued work with blue chip companies such as BT, Cahoot Bank of the
Abbey National Group, First National, and First Data Resources.
Significant increases in income and profits are resulting from growth of
business with existing clients, and from attracting new clients. We have also
signed a strategic partner alliance agreement with Answerthink Inc, an
American NASDAQ quoted consultancy company.
Board Changes
Inevitably, a complete change of strategy requires changes to the Board.
In August 2001, Neil McClure, the previous Joint Chairman and Chief Executive,
left the Company to pursue other interests.
On 1st July 2001, we strengthened the Board by the appointment as a
non-executive director, of Colin Fisher who has extensive experience in the
financial services sector and IT. Colin was director of Information
Technology, Lloyds Bank plc, one of the largest users of computer technology
in Europe. Among a number of top level jobs, he was also director of Lloyds
TSB branch network and is currently on the board of Morgan Stanley Dean Witter
Bank.
Conclusion
The last twelve months have seen substantial change within the group. We have
put an unsatisfactory period of unprofitable trading firmly behind us. Your
Directors are committed to ensure that enhanced shareholder value is delivered
by continuing to implement our stated strategy and rooting out any
unprofitable activities.
Alan Wix
Chairman and Chief Executive
Consolidated profit and loss account for the year ended 31 May 2001
2001 2000
(Unaudited) (Audited)
£000's £000's
Turnover
Continuing operations 681 60
Discontinued operations 2,467 8,168
3,148 8,228
Cost of sales (41) (2,913)
Gross profit 3,107 5,315
Net operating expenses (5,761) (7,089)
Exceptional net operating expenses (185) (54)
Total net operating expenses (5,946) (7,143)
Operating loss
Continuing operations (1,713) (814)
Discontinued operations (1,126) (1,014)
Total operating loss (2,839) (1,828)
Profit on disposal of subsidiary -
discontinued operations - 2,557
Interest payable and similar charges (26) (120)
Interest receivable 134 55
(Loss)/profit on ordinary activities before
taxation (2,731) 664
Taxation 150 (150)
(Loss)/profit on ordinary activities after
taxation (2,581) 514
Minority interests - -
(Loss)/profit for the financial year (2,581) 514
(Loss)/earnings per ordinary share (5.24)p 1.16p
Fully diluted (loss)/earnings per
ordinary share (5.24)p 1.12p
There is no material difference between the (loss)/profit on ordinary
activities before taxation and the (loss)/profit for the year as stated above,
and their historical cost equivalents.
The Group has no recognised gains and losses other than those presented above
and therefore no separate statement of total recognised gains and losses has
been presented.
Balance sheets at 31 May 2001
Group Group
(Unaudited) (Audited)
2001 2000
£000's £000's
Fixed assets
Intangible assets 2,502 2,796
Tangible assets 1,969 1,453
Investments - -
4,471 4,249
Current assets
Stocks 18 24
Debtors: amounts falling due outside one year - -
Debtors: amounts falling due within one year 558 1,804
Cash at bank and in hand 993 1,842
1,569 3,670
Creditors: amounts falling due within one year (1,544) (1,296)
Net current assets 25 2,374
Total assets less current liabilities 4,496 6,623
Creditors: amounts falling due after more (265) (67)
than one year
Accruals and deferred income (1,016) (728)
Net assets 3,215 5,828
Capital and reserves
Share capital 4,919 4,939
Share premium account 3,895 3,895
Capital redemption reserve 20 -
Profit and loss account (5,619) (3,006)
3,215 5,828
Minority interests - -
Equity shareholders' funds 3,215 5,828
Consolidated cash flow statement for the year ended 31 May 2001
2001 2000
(Unaudited) (Audited)
£000's £000's
Net cash outflow from operating
activities (1,876) (3,489)
Returns on investments and servicing
of finance
Interest received 134 55
Interest element of finance lease payments (19) -
Interest paid (7) (120)
108 (65)
Taxation
United Kingdom corporation tax paid - -
Capital expenditure and financial investment
Purchase of tangible fixed assets (695) (98)
Player registration fees (50) (110)
(745) (208)
Acquisitions and disposals
Purchase of subsidiary - (753)
Net cash acquired with subsidiary - 20
Disposal of subsidiary - deferred consideration 1,448 5,461
(net)
Net overdraft disposed of with subsidiary - 26
1,448 4,754
Net cash (outflow)/inflow before management
of liquid resources and financing (1,065) 992
Financing
Repayment of loan (86) (21)
Issue of new share capital - 82
Redemption of share capital (32)
Issue of principal under finance leases 334 59
Increase in invoice discounting facility - 692
Net cash inflow from financing 216 812
(Decrease)/increase in cash in the year (849) 1,804
Reconciliation of operating loss to net cash flow from operating activities
2001 2000
£000's £000's
Operating losses (2,839) (1,828)
Amortisation of intangible fixed assets 344 215
Depreciation of tangible fixed assets 179 69
Decrease in stocks 6 53
(Increase)/ decrease in debtors (202) 385
Increase/(decrease) in creditors 325 (2,363)
Increase/(decrease) in long term accruals and
deferred income 311 (20)
Net cash flow from operating activities (1,876) (3,489)
The directors consider it to be impracticable to analyse the operating cash
flows between continuing and discontinued activities.
Notes to Preliminary results for the year ended 31 May 2001
1. Earnings/(loss) per ordinary share
Basic earnings per share (EPS) is calculated by dividing the earnings
attributable to ordinary shareholders, namely a loss of £2,581,000 (2000:
profit £514,000) by 49,218,056 10p ordinary shares (2000: 44,123,153 10p
ordinary shares), being the weighted average number of ordinary shares in
issue and ranking for dividend during the year.
2001 2000
Earnings Weighted Per share Earnings Weighted Per share
/ (loss) average amount / (loss) average amount
£000's number of (pence) £000's number of (pence)
shares shares
000's 000's
Basic EPS (2,581) 49,218 (5.24) 514 44,123 1.16
Effect of - - - - 1,930 (0.04)
dilutive
securities:
Options
Diluted EPS (2,581) 49,218 (5.24) 514 46,053 1.12
2. Reconciliation of net cash flow to movement in net funds/(debt)
2001 2000
£000's £000's
Movement in cash in year (849) 1,804
Cash inflow from increase in debt (248) (730)
Change in net debt resulting from cash flows (1,097) 1,074
Net debt movement on disposal of subsidiary - 2,955
Movement in net funds/(debt) in the year (1,097) 4,029
Net funds/(debt) at 1 June 2000 1,720 (2,309)
Net funds/ at 31 May 2001 623 1,720
3. Analysis of net funds/(debt)
At 1 June Cash flow At 31 May
2000 £000's 2001
£000's £000's
Cash in hand at bank 1,842 849 993
Debt due after 1 year (57) 57 -
Debt due within 1year (29) 29 -
Finance leases (36) (334) (370)
(122) (248) (370)
1,720 (1,097) 623
4. Post balance sheet events
Capital restructuring
On 5 June 2001, the existing authorised and issued ordinary shares of 10p each
in the Company were sub-divided into 1 ordinary share of 1p each and 9
deferred shares of 1p each. The existing unissued ordinary shares of 10p each
were subdivided into 10 ordinary shares of 1p each.
The deferred shares will carry no voting rights, no rights to dividends or
other distributions and on a winding up holders of deferred shares will only
be paid out once the holders of ordinary shares have been paid all the capital
paid up on their shares, together with an aggregate premium of £100,000,000.
The deferred shares are, therefore, effectively worthless.
Issue of ordinary shares
On 5 June 2001, the Company issued 24,693,809 1p ordinary shares, raising £
987,752 before expenses of approximately £350,000.
Acquisition of AIMS
On 5 June 2001, the Company acquired the entire issued share capital of AIMS
and its subsidiary undertakings, Professional IT Management Services Limited
and Applied Business Solutions Consultancy Limited (together 'the AIMS
Group'). The consideration consisted of £1,500,000 in cash and the issue of
28,000,000 ordinary shares of 1p each in the Company, together with deferred
consideration contingent on the results for the year ending 31 May 2002 as
follows:
(i) If profit before taxation of the AIMS Group for the year ending 31 May
2002 is between £1,500,000 and £1,750,000, an additional sum of £1,500,000
shall be payable.
(ii) If profit before taxation of the AIMS Group for the year ending 31 May
2002 is between £1,750,000 and £2,000,000, an additional sum of £3,000,000
shall be payable.
(iii) If profit before taxation of the AIMS Group for the year ending 31 May
2002 exceeds £2,000,000, an additional sum of £5,000,000 shall be payable.
The contingent consideration shall, at the option of the Ninth Floor, take the
form of ordinary shares or unsecured variable rate loan notes issued by the
Ninth Floor and repayable in three annual equal installments commencing after
one year from the date of their issue.
The fair value of the net assets of the AIMS Group at the date of acquisition
was approximately £385,000.
Disposal of Swansea City Football Club plc and Swansea City Association
Football Club Limited
On 11 July 2001, the Ninth Floor sold its entire shareholding in Swansea City
Football Club plc to one of the directors of that company for consideration of
£1. Swansea City Association Football Club Limited is a wholly owned
subsidiary of Swansea City Football Club plc.
Swansea City Association Football Club Limited also sold and leased back its
two freehold properties to The Ninth Floor plc in July 2001 for cash
consideration of £200,000. The Ninth Floor sold these properties for cash
consideration of £70,000 in October 2001.
Further details of these post balance sheet events are given in the
Chairman's Statement.
5. Statutory accounts
The financial information contained in this announcement does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985. The figures for the year ended 31 May 2000 have been extracted from the
statutory accounts which have been filed with the Register of Companies and
which are available on request from the Company Secretary, The Observatory,
Leofric Square, Vicarage Farm Road, Peterborough PE1 5TP. The auditor's report
on those accounts was unqualified and did not contain any statement under
section 237(2) or section 237(3) of the Companies Act 1985. The directors have
not yet signed the statutory accounts and the auditors have yet to issue their
report for the financial year ended 31 May 2001.
Enquiries:
Alan Wix, Chairman and Chief Executive, The Ninth Floor plc 020 7643 5300
Mark Percy, Seymour Pierce Limited 0207 648 8700