Interim Results - 6 Months to 5 February 2000

InterX PLC 10 March 2000 INTERX PLC Interim Results For The 27 Week Period Ended 5 February 2000 InterX announces its results for the 27 weeks ended 5 February 2000. The results are released on the same day as InterX announces full details of its merger with Cromwell Media Limited ('Cromwell'), an internet software developer, and the terms of a placing and open offer to raise £50 million, net of expenses. * Turnover grew by 36 per cent. to £201m (1999: 148m) * Substantial investment in the development of InterX's internet businesses, IT Network Limited ('IT Network') and Cromwell. * Operating profits (before exceptional items) of £1.06m (1999: £4.61m) * Pre-tax profits (after exceptional items) of £451,000 (1999:£3.01m) * Earnings per share (after exceptional items) of 1.26p (1999: 9.60p) Richard Jewson, Chairman of InterX commented: 'The ability of Ideal Hardware, our IT distribution business, to continue to generate profits has been critical to our success in developing our internet businesses and being able to pursue the redirection of our Group strategy. I would like to thank all employees of the Group who have demonstrated an extraordinary willingness to embrace the change fundamental to our commitment to deliver shareholder value.' Enquiries: InterX 020 7457 2020 (today) 020 8410 7200 (thereafter) James Wickes, Chief Executive Email: jwickes@interx.co.uk Simon Barker, Commercial Director Email: sbarker@interx.co.uk Simon Miesegaes, Finance Director Email: smiesegaes@interx.co.uk Charterhouse Securities 020 7248 4000 Colin La Fontaine Jackson, Director Email: clafj@charterhouse.co.uk College Hill 020 7457 2020 Nicola Weiner Email: nicola@collegehill.com Mary Matthewson Email: mary@collegehill.com INTERX PLC Interim Results for the 27 week period ended 5 February 2000 Chairman's Statement I am pleased to announce that we have today sent to shareholders a circular detailing the following inter-conditional proposals (the'Circular'): * Proposed acquisition of Cromwell Media Limited; * Placing and Open Offer of 1,596,235 new InterX shares; * Proposed Board changes; and * Proposed Share Option Scheme Arrangements. Accordingly, these interim results should be read in the context of my letter to shareholders contained in the Circular. Results InterX plc ('InterX or the 'Group') announces that operating profits for the Group, before exceptional items, for the 27 weeks to 5 February 2000 were £1.06m (26 weeks to 29 January 1999: £4.61m). Pre-tax profits, after exceptional items, were £451,000 (1999: £3.01m), reflecting primarily the decision by the Board to invest the profits of the IT distribution business, Ideal Hardware plc ('Ideal') in the Group's internet business, as announced to shareholders in November 1999. Earnings per share, before exceptional items, were 1.26p (1999: 14.59p). Earnings per share, after exceptional items, were 1.26p (1999: 9.60p). Turnover grew by 36 per cent. to £201m (1999: £148m), of which some £22m (1999: £23m) related to Continental European sales. UK turnover increased by 43 per cent. (1999: 41 per cent.). Dividend The Directors have not declared an interim dividend (1999: 6.0p (net) per share). This reflects the policy adopted by the Board and announced to shareholders in November 1999, whereby profits from the distribution business, for as long as it remains in the Group, are to be used to fund the development of the Group's internet businesses. The Directors do not expect InterX to pay dividends for the foreseeable future. Ideal UK sales at Ideal have again grown strongly during the period, despite difficult and competitive market conditions. UK gross margin at 7.7 per cent. reflects the impact of expected lower margins resulting from our appointment as a distributor for Compaq in 1998. The Ideal Executive Board has now been in place for some eight months and has proved itself well able to take advantage of the opportunities that arise even in difficult market conditions. We continue to expand our supplier base and have recently been appointed by Acer (UK) Limited as UK distributor for their range of PCs, servers and notebooks. Additionally, Ideal has been appointed by Traxdata Limited as its exclusive distribution partner for the UK and Eire. Traxdata is the largest volume seller of CD-R/CD-RW media in Europe. Additionally, our investment in new service offerings, including the provision of financial, out-sourcing and training services, is beginning to deliver new sources of high margin revenue. With regard to the separation of Ideal from the Group, the Board is progressing the sale of Ideal and expects to be in advanced negotiations with a purchaser at the time of our Extraordinary General Meeting on 6 April 2000. IT Network Limited ('itnetwork.com') The first six months of the year have continued to demonstrate that the itnetwork.com business has global prospects - which, in order to be realised, will require material investment. Due to the restriction on funds, marketing has been limited. Despite this, new sponsors are being attracted to the advertising and sponsorship proposition, while certain new 'digital market exchanges', like www.hyporium.com and www.ace-quote.com, are linking their e-commerce systems to itnetwork.com. Revenue for the period was £0.50 million, with an additional £0.3 million of revenue deferred to future accounting periods. This means that since its launch last summer, the business has generated billings of over £1.27 million. We are currently recruiting more sales staff and are developing new revenue streams for the unique market intelligence automatically generated by the itnetwork's product information engine. We are also pleased to announce that as of 6 March 2000 itnetwork.com has entered into a strategic relationship with ComputerScope, a monthly IT magazine published in Ireland by the Scope Communications Group of Ireland. According to the Institute of Advertising Practitioners in Ireland/Business Readership Survey, ComputerScope is read by 9 out of 10 senior IT professionals in Ireland. The first phase of the agreement with ComputerScope will be implemented in March and will provide a co-branded version of itnetwork.com at www.techcentral.ie, that is, the on-line presence of ComputerScope. A future phase of the agreement is expected to result in the creation of a franchised version with local commercial content and incorporating localised information. Ireland is a strategically important market owing to the manufacturing and support presence of many major US IT companies including Microsoft, Intel, Dell, Gateway, Apple and EMC. The relationship is the first deliberate export of itnetwork.com outside the UK and is the initial step in its internationalisation. The placing will provide funds to grow the business both within the UK and overseas. The appointment of Rob Wirszycz as Chief Executive, from 6 March 2000, will provide the catalyst for this exciting growth phase. Rob's unique experience, gained from more than 20 years at all levels of the IT industry, together with his proven ability to deliver high value global strategic alliances, will be fundamental to IT Network's future success. Cromwell Media The first six months of the year has been a period of consolidation at Cromwell Media, with continued productisation of its software and significant investment in recruiting personnel at all levels, especially in the critical areas of software development, customer support and training services. Income has been derived from its established customers, itnetwork.com and silicon.com. Within the last two months, Cromwell has made senior appointments that augment the current management team and provide valuable expertise, specifically in the area of sales and marketing. Philip Crawford, currently President of EDS International, and Robert Bruce, previously in charge of sales at BroadVision UK, have joined as Chairman (part time) and Chief Executive, respectively. Cromwell's strategy for growth is to develop a network of highly-qualified and capable System Integrators supported by a direct sales effort focused on winning business from strategic reference sites in our target markets of financial services and media and publishing. I am pleased to report that not only have negotiations begun with potential System Integrator partners but we have now secured contracts from Royal SunAlliance Insurance UK and Cambridge University Press to develop BladeRunner systems and to assist in the ongoing development of their UK internet strategies. Capital Expenditure The Group is embarking upon a phase of significant investment. Details of the anticipated capital expenditure are disclosed in the Circular. Prospects The prospects for the Group are exciting. The significant funds being raised at the placing will enable the Group to commence the process of developing sizeable sales channels for its technology. As part of this process, it is intended to change the name of Cromwell Media Limited to InterX Technology Limited. These funds will also ensure that the Group can enter into an aggressive expansion phase for itnetwork.com, while securing opportunities in other vertical markets. To this end, on 2 March 2000 the Board signed non-binding heads of agreement to acquire PharmWeb for a cash, loan notes and share consideration of £20 million, subject to amongst other things, satisfactory due diligence. PharmWeb owns www.pharmweb.net, a pharmaceutical and health related portal, which was set up by Manchester University in 1994. The Board intends to use this acquisition as the platform to develop the IT Network.com business model within the global pharmaceutical industry. More details of this transaction will be provided to Shareholders upon completion of the acquisition. Finally, I would like to take this opportunity to thank all the employees of the Group who, over the last six months, have demonstrated an extraordinary willingness to embrace change and a desire to re-engineer the Group for the benefit of its shareholders. It is this, together with the developments described above, which gives the Board confidence in the future. Richard Jewson NON-EXECUTIVE CHAIRMAN 10 March 2000 INTERX PLC Interim Results for the 27 week period ended 5 February 2000 GROUP PROFIT AND LOSS ACCOUNT 27 weeks to 26 weeks to Year ended to 5 February 29 January 30 July 2000 1999 1999 (Unaudited) (Unaudited) (Audited) Notes £'000 £'000 £'000 Turnover 2,3 200,546 147,952 318,056 Cost of sales 185,785) (132,460) (288,512) Gross profit 2,3 14,761 15,492 29,544 Other income 994 - - Overheads (14,691) (10,878) (22,684) Exceptional items - Restructuring costs - Group - (160) (160) - Restructuring costs - Ideal - - (700) - IT Network development - (1,396) (3,688) Operating profit 2 1,064 3,058 2,312 Share of results of associated (185) (37) 42 undertaking Profit on ordinary activities 879 3,021 2,354 before interest Net interest payable (428) (12) (264) Profit on ordinary activities 451 3,009 2,090 before taxation Taxation on profit on 4 (184) (975) (761) ordinary activities Profit on ordinary activities 267 2,034 1,329 after taxation Dividends - (1,272) (2,967) Retained profit for the period 6 267 762 (1,638) Earnings per share (basic) 5 1.26p 9.60p 6.27p Exceptional items (net of taxation) - Restructuring costs - Ideal - - 2.28p - Restructuring costs - Group - 0.51p 0.75p - IT Network development - 4.48p 12.01p Earnings per share 1.26p 14.59p 21.31p (pre exceptionals) Earnings per share - fully 1.26p 9.32p 6.24p diluted Earnings per share - fully 1.26p 14.31p 21.21p diluted (pre exceptionals) First interim ordinary dividend - 6.00p 6.00p Final ordinary dividend - - 8.00p There were no recognised gains or losses in any of the above periods other than those shown in the profit and loss account. Turnover and operating profit were derived from continuing activities. There were no discontinued activities. INTERX PLC interim results for the 27 week period ended 5 february 2000 GROUP BALANCE SHEETS At At At 5 February 29 January 30 July 2000 1999 1999 (Unaudited) (Unaudited) (Audited) Notes £'000 £'000 £'000 Fixed assets Tangible fixed assets 19,054 17,448 19,431 Investment in associated company 2,051 54 120 21,105 17,502 19,551 Current assets Stocks 16,347 10,947 9,280 Debtors 49,210 51,158 52,324 Cash at bank and in hand - 12,435 8,241 65,557 74,540 69,845 Creditors: Amounts falling due within one (63,527) (72,155) (67,581) year Net current assets 2,030 2,385 2,264 Total assets less current 23,135 19,887 21,815 liabilities Creditors: Amounts falling due after more than one (7,217) (2,185) (6,387) year Provision for liabilities and (130) (5) (130) charges Net assets 15,788 17,697 15,298 Capital and reserves 6 Called up share capital (including shares to 1,065 1,061 1,063 be issued) Share premium account 2,884 2,664 2,663 Capital redemption reserve 31 31 31 Profit and loss account 11,808 13,941 11,541 Equity shareholders' funds 15,788 17,697 15,298 INTERX PLC GROUP CASH FLOW STATEMENTS 27 weeks 26 weeks Year ended to to 30 July 5 February 29 January 1999 2000 1999 (Audited) Notes (Unaudited) (Unaudited) £'000 £'000 £'000 Cash (outflow)/inflow from operating 7 (6,021) 3,106 1,056 activities Returns on investments and servicing of finance Interest received 59 214 337 Interest paid (505) (199) (522) Net cash (outflow)/inflow from returns on investments and servicing of finance (446) 15 (185) Taxation (226) (424) (2,787) Capital expenditure Purchase of tangible fixed assets (1,764) (4,330) (6,853) Sale of tangible fixed assets 6 4,800 4,800 Net cash (outflow)/inflow from capital (1,758) 470 (2,053) expenditure Acquisitions and disposals Increase in investment held in associated(2,100) - - undertaking Net cash outflow from acquisitions (2,100) - - Equity dividends paid (1,696) (1,695) (2,967) Net cash (outflow)/inflow before (12,247) 1,472 (6,936) financing Financing New bank loan acquired 1,500 - 4,940 Repayment of loans (707) (692) (1,419) Exercise of share options 223 - 1 Net cash inflow/(outflow) from 1,016 (692) 3,522 financing (Decrease)/increase in cash in the 8 (11,231) 780 (3,414) period Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the (11,231) 780 (3,414) period Net cash (inflow)/outflow from (increase)/decrease in debt (793) 692 (3,521) Change in net funds resulting from (12,024) 1,472 (6,935) cash flows Arrangement fee amortisation (37) (6) (19) Movement in net funds in the period (12,061) 1,466 (6,954) Net funds at start of period 8 447 7,401 7,401 Net(debt)/funds at end of period 8 (11,614) 8,867 447 NOTES 1. Basis of preparation The comparative figures for the 26 weeks to 29 January 1999 have been extracted from the Company's interim financial statements for that period. The comparative figures for the year ended 30 July 1999 have been extracted from the Group's statutory accounts to that date. These received an unqualified audit report, did not contain a statement under section 237(2) or 237(3) of the Companies Act 1985 and have been filed with the Registrar of Companies. This interim report, which is unaudited and does not constitute statutory accounts, has been prepared on the basis of the accounting policies laid down in those statutory accounts. 2. Segmental analysis of turnover and operating profit 27 weeks ended 5 February 26 weeks ended 29 January 2000 1999 IT Parent IT Parent Distri Network Company Total Distri Network Company Total bution bution £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Turnover 200,046 500 - 200,546 147,952 - - 147,952 Gross profit 14,543 218 - 14,761 15,492 - - 15,492 Operating profit -pre exceptional 3,857 (2,023) (770) 1,064 4,825 - (211) 4,614 items Operating profit - post exceptional3,857 (2,02 (770) 1,064 4,825 (1,396) (371) 3,058 items 3. Geographical analysis of turnover and gross profit Turnover and operating profit are derived entirely from operations in the UK. Distribution turnover and gross profit by destination are analysed below: 27 weeks ended 5 February 26 weeks ended 29 January 2000 1999 (unaudited) (unaudited) UK Europe Total UK Europe Total £'000 £'000 £'000 £'000 £'000 £'000 Turnover 177,627 22,419 200,046 124,530 23,422 147,952 Gross profit 13,715 828 14,543 14,767 725 15,492 Gross margin 7.7% 3.7% 7.3% 11.9% 3.1% 10.5% 4. Taxation The taxation charge for the period has been calculated at an estimated tax rate of 31 per cent. (1999: 32 per cent.). 5. Earnings per share Earnings per share for the period is based on the profit attributable to the weighted average of 21,227,188 (29 January 1999: 21,194,134; 30 July 1999: 21,194,134) ordinary shares in issue during the period. The diluted earnings per share for the period is based on the profit attributable to the adjusted weighted average of 21,227,188 (29 January 1999; 21,194,134; 30 July 1999; 21,285,389) ordinary shares for the period in issue during the period. 6. Share capital and reserves Movements in share capital and reserves were as follows: Capital Profit Share Share redemption and capital premium reserve loss Total reserve account £'000 £'000 £'000 £'000 £'000 At 31 July 1999 1,063 2,663 31 11,541 15,298 Share options 4 219 - - 223 exercised Deferred consideration for (2) 2 - - - Cromwell Media Retained profit for the period - - - 267 267 At 5 February 2000 1,065 2,884 31 11,808 15,788 Total Group reserves at 5 February 2000 include losses of £192,000 in respect of the Group's share of the results of the Associated undertaking. 7. Reconciliation of operating profit to net cash (outflow)/inflow from operating activities 27 weeks 26 weeks Year to to ended 5 February 29 January 30 July 2000 1999 1999 (unaudited) (unaudited) (audited) Operating profit 1,064 3,058 2,312 Depreciation charges 1,524 736 1,815 Profit/(loss) on disposal of fixed 5 (8) 11 assets Increase in stock (7,067) (4,699) (3,033) Decrease/(increase) in debtors 3,154 (18,618) (20,207) (Decrease)/increase in creditors (4,701) 22,637 20,158 Net cash (outflow)/inflow from (6,021) 3,106 1,056 operating activities 8. Analysis of net funds/(debt) At 31 Non At 5 July cash February 1999 Cash movements 2000 (audited) flow £'000 (unaudited) £'000 £'000 £'000 Cash at bank and in 8,241 (8,241) - - hand Bank overdraft - (2,990) - (2,990) 8,241 (11,231) - 2,990 Debt due within 1 (1,407) 707 (707) (1,407) year Debt due after 1 year (6,387) (1,500) 670 (7,217) (7,794) (793) (37) (8,624) Total Net 447 (12,024) (37) (11,614) funds/(debt) A copy of this report is being sent to all shareholders. Copies are available to the public on request from the Company's registered office, at Fountain Court, Cox Lane, Chessington, Surrey KT9 1SJ.

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