Final Results
FOR IMMEDIATE RELEASE
7 July 2011
Managed Support Services plc
PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 31 MARCH 2011
Managed Support Services plc ("MSS") announces its preliminary results for the year ended 31 March 2011
KEY HIGHLIGHTS
· Two acquisitions successfully completed
· Group turnover increased from £15.3 million to £26.6 million
· Return to normalised operating profit*
· Activity levels recovering in second quarter after slow start
* Normalised operating profit is stated before restructuring costs, amortisation of intangible assets, Share Based Payments and acquisition related costs. Statutory loss for the period was £1.38m.
Commenting on the results, Simon Beart, Chief Executive said:
"We have now assembled a nationwide capacity to deliver Building Services and Environmental Compliance to our growing customer base. We expect further new business gains in due course as the Group continues to gain recognition and profile in its markets."
FOR FURTHER INFORMATION, PLEASE CONTACT:
|
Managed Support Services plc: |
|
|
Simon Beart, Chief Executive Piers Wilson, Finance Director |
07710 444370 01483 735703 |
|
Cenkos Securities plc: |
|
|
Stephen Keys |
020 7397 8900 |
|
Camilla Hume |
|
|
Buchanan Communications: |
|
|
Richard Darby |
020 7466 5000 |
|
Nicola Cronk |
|
Notes to editors
Managed Support Services plc is a leading supplier of Environmental Compliance and technical Building Services. The Group provides a broad range of Environmental Compliance services and HVAC building maintenance services for commercial properties. MSS operates in a range of diverse markets with customers managing or owning commercial property, hotels and retail buildings. Further information is obtainable from www.mssplc.com.
CHIEF EXECUTIVE'S REVIEW
Overview
The year to March 2011 was our first full year of trading as a specialist Building Services provider. The Group now operates on a national basis. We specialise in providing complex, engineering based solutions for our customers, as well as the provision of planned and reactive maintenance, primarily for Heating, Ventilation and Air Conditioning ("HVAC") systems.
We believe customers understand and value our specialist focus on engineered solutions including the ability to manage large, capital projects. Where customers also wish for "soft" services such as cleaning or guarding, we provide these needs through partnership arrangements thereby giving our customers choice and access to best in class provision.
The substantial increase in turnover to £26.6 million from £15.3 million reflects previous acquisitions and the increased scale of the Group. Gross margin has also recovered substantially from the prior year. This improvement illustrates the benefits of margin management, improved sales mix and operational gearing.
Trading
Following last year's operating losses and low levels of turnover, it is a pleasure to be reporting an operating trading profit before exceptional items and other non trading costs of approximately £0.8 million for the year. The improvement in gross margin is obviously gratifying, reflecting growing efficiencies and the contribution of the higher margin Compliance units. This operating return represents only 2.9 per cent. on sales. The Board clearly has ambitions to improve this figure considerably.
During the year we completed the integrations of the separately acquired trading units of Status Building Services and Environmental Control Services ("ECS"), which together with the original maintenance activities within the Group, are now operating as one national unit, MSS Building Services. The integration process required the closure of surplus administration office space and considerable management simplification.
We also completed the acquisition of Data Sound Limited in April 2010, which now forms the core of our Health and Safety and Compliance offering, based in our Central London offices.
Finally, at the end of the year we upgraded our core IT systems from the previous, packaged solution to a much improved proprietary solution which offers superior management of the service elements of the business as well as improved day to day flexibility to control the complex, daily demands of a nationwide maintenance business.
In the context of achieving so much in the year, it was therefore disappointing to discover that there had been a significant, although temporary, failure to control certain contracts in the core maintenance unit. This led to cost recoverability issues and ultimately write offs. In normal circumstances these costs would have been recoverable. Further details are provided in the Financial Commentary.
The Group's UK Managing Director was not capable of meeting the challenge of integrating the enlarged Group and, as previously disclosed, he was dismissed. Thereafter, the Board moved swiftly to impose greatly improved internal controls. Within a very short period of time operational control was re-established.
The Board is pleased to report that not only are the improved KPIs and metrics clearly understood across the Group, but our proprietary IT platform, Nucleus is now delivering operational and reporting efficiencies and continues to impress with its functionality.
Nucleus is maintained by our offshore development office in India, modifications or extensions can therefore be delivered swiftly, at very modest cost. Nucleus is a lower cost and more functional solution than the third party packages available.
Group activities
The Group's Building Services offering focuses primarily on the provision of planned and preventative maintenance and complex engineering solutions. These services in the South are delivered by our London Regional management team based in the former ECS office in Wembley. This unit represents the consolidation of three former trading entities.
London Regional services the maintenance and complex engineering needs of several large, owner occupiers as well as a broad customer base of Managing Agents who maintain commercial real estate on behalf of their clients. The relevant customer properties are concentrated primarily within the M25. The location of the Wembley site is therefore ideal for management control and engineering efficiency.
Our engineering and HVAC services for the balance of the UK are managed from our Manchester office. Our Manchester office primarily serves the needs of our major Corporate customers. The expansion of our Manchester presence has been driven by the desire to support our major Corporate customers who have a concentration in and around Manchester and the North West. To deliver high levels of service it is important to offer proximity for customers.
Our Health & Safety and Compliance division enjoyed a robust trading year, although the development of our Water Services business has only picked up reasonable traction since the year end. The combination of these services, together with the ability to offer Fire & Electrical compliance means that we have a strong Compliance offering for our maintenance customers. Our core Compliance offering remains the provision of Health & Safety monitoring for a diversified customer base. Customer risks and legal exposures are managed by our team of Consultants and during the year we will be rolling out our in house software solution under the brand name Compleye.
The core compliance unit was acquired in April 2010 and now trades as MSS Heath & Safety Limited. This unit now enjoys the benefits of a corporate structure, accurate and timely financial reporting and experienced leadership. Our Health & Safety Consultants are a key asset and with improved customer interface, we expect the customer base to grow during the current year.
Board
Euan McAlpine, who has been a non executive director since September 2008, has decided not to apply for re-election at the General Meeting in August due to increasing commitments with his other directorships. We would like to thank Euan for his important and valuable contribution to the Group and we have benefited much from his relevant sector experience. The Board is currently seeking a replacement non executive director.
Group strategy
We believe that MSS has now established the key elements of a competitive and attractive Building Maintenance and Compliance services platform. It was therefore pleasing to announce a significant contract extension recently with Co-op Financial Services for their Leek campus with an annual contract value close to £1m.
We have a material commitment to new business sales to drive the expansion of our activities and as a result of our increasing recognition in the market, we now enjoy a promising bid pipeline. It seems reasonable to expect further new business wins over time.
It is our strategy to focus on sales led, organic growth, whilst continuing to improve the efficiency of the cost base. To the extent that the Group is able to win incremental business, net of the usual market churn, operational gearing will benefit net returns.
In terms of cash flow, following the issue of the Loan Notes in March, we will continue to invest in our supply chain, if necessary at the expense of the conversion rate of operating profit to cash flow. Our supplier base is critical to customer service levels. With regard to funding future growth, our facilities with Lloyds, which have recently been renewed, are ideally structured to manage the working capital needs arising from turnover growth.
Prospects
Last year saw many achievements at MSS including the creation of a nationwide brand and service capability, major Corporate customer gains and the integration of several acquisitions. The short term management failings were clearly a disappointment and a painful episode, but management redress was rapid and more importantly, effective.
Market conditions in the first quarter of our new financial year were very difficult. The well publicised travails of the construction sector during the last few months had a material impact on our capital project related units.
This will adversely impact our first half performance, however, we believe we are now seeing the prospect of activity levels recovering and there are further considerable benefits to emerge from the new operating structure. Our intention is to build sales and to finish the year with a satisfactory run rate of activity in what we hope will become slightly less demanding markets.
Simon Beart
Chief Executive
FINANCIAL COMMENTARY
Results
This year's results reflect the positive contribution made by the two businesses acquired during the year, the continued rationalisation of the cost base and the investment in our core IT platform to deliver future sustainable organic growth.
Revenue for the year was £26.6m an increase of £11.3m from the prior year figure of £15.3m. As noted above, this increase was primarily due to a full year contribution from acquisitions made in the previous year, notably Status Building Services, and the two acquisitions made this year, Data Sound and ECS. The value of the contracted revenue book, adjusted for acquisitions, has remained fairly stable during the year, with strong organic sales growth offset by higher than usual contract losses in the Status contract book as this business was rationalised and integrated into the Group.
The Group achieved a gross margin of 32 per cent. for the full year, compared to 24 per cent. last year and 32 per cent. for the first six months of the year. As noted in the interim results, this improvement from the prior year is largely as a result of a better mix of revenue. However, as the mix changes and with the continued difficult market conditions, it is expected that the Group's blended gross margin going forward will be in the region of 30 per cent.
The Group's adjusted operating profit (before restructuring costs, amortisation of intangible assets, share based payment charges and costs associated with acquisitions) was £0.8m. The statutory operating loss was £1.4m.
As described in the CEO's review, the non recurring restructuring costs during the year relate primarily to the one off costs incurred as a result of the mid year failure to control the recoverability of costs arising from maintenance contracts. As a result of this management failure, a total of £0.5m was written off as non recoverable during the year. By year end a significant system upgrade had been implemented so that WIP is now monitored daily and reported to the Board weekly. Full provision is made against all WIP over 60 days. In addition, an amount of £0.3m has been recognised in exceptional costs for redundancy and integration costs incurred in the year. These costs are shown as restructuring of activities in the Consolidated Income Statement.
The costs associated with acquisitions are now reported through the income statement, rather than as a cost of acquisition in the balance sheet, following the implementation of IFRS 3 (2008). The amounts in this year relate to corporate finance fees, legal fees and external due diligence fees incurred on the acquisitions of Data Sound and ECS.
Balance sheet
The Group ended the year with net debt of £2.7m, comprising £3.0m of short term borrowings from Lloyds Bank, £0.5m of Loan Notes and £0.8m of cash. The cash balance was higher than usual as the proceeds of the Loan Note were received on the last day of the financial year.
Core working capital, being the difference between trade debtors and trade creditors, increased during the year from £0.4m to £2.2m. This was partly as a result of acquisitions, but primarily due to an increase in Group debtor days from 48 to 55 and a decrease in group creditor days from 71 to 60. There have, however, been no material bad debts in the period. Creditor days have fallen significantly as we have made a conscious effort to speed up supplier payments to ensure supplier support. This process will continue in the current year with a target to reduce creditor days to less than 50.
Total Work in Progress at year end was £0.5m. This can be analysed as to £0.4m in relation to the maintenance business and £0.1m for the installation units. The maintenance related WIP arises due to the normal delay between performing work on site, and the processing of the relevant paperwork before the customer invoice can be raised. The current WIP balance represents approximately one week's worth of maintenance related revenue.
Cash flow
Operating cash outflow before restructuring cash costs was £1.7m compared to £1.8m last year. The operating cash outflow this year, is due almost entirely to the movement in working capital described above and a small reduction in provisions.
Capital expenditure in the year was £457,000, partly funded by a depreciation charge of £323,000. The largest spend was approximately £350,000 which was invested in IT equipment and the development of the Nucleus IT platform. This investment will improve the management of contracts and enable better utilisation and productivity of mobile engineers.
Acquisitions and deferred consideration
The Group made two acquisitions in the year with total net cash consideration of £6.3m. At year end the remaining deferred consideration in respect of these acquisitions was £350,000 payable in the year to 31 March 2012. The deferred consideration due at the end of the previous year being £1.27m was paid in full in the year.
The two acquisitions in the year resulted in the recognition at year end of additional intangible assets (customer relationships) of £2.6m and additional goodwill of £4m. The intangible asset is being amortised over a period of six years.
The acquisition of Data Sound was funded from existing cash balances, the acquisition of ECS was funded from the proceeds of a share placing undertaken at the time of the acquisition to raise approximately £2.9 million.
Bank facilities
The Group has recently renewed its working capital facility with Lloyds Banking Group, for a further year, with a maximum facility size of £3.5m. Interest is paid monthly at 2.5 per cent. over base rate.
Going concern
In determining that the Group's results can be presented on a going concern basis, the Directors have considered all relevant factors including forecast cash flows, borrowing facilities which have been recently renewed and risks related to its business activities. The Group Budget indicates operating profits and positive operating cash flow in the period to 31 March 2012 and the Group maintains and regularly reviews detailed daily/monthly cash flow forecasts for the following three months.
Having considered all these factors the Directors are satisfied that the Group has sufficient resources to enable it to continue to trade for at least twelve months from the date of signing the financial statements. Accordingly, these financial statements have been prepared on a going concern basis.
Tax
No taxation charge or deferred tax asset has been provided in the year in respect of trading during the period. The tax charge arising during the year represents a tax adjustment in relation to trading in a prior period. During the year the Group reached agreement with HMRC for the business of ECS to be transferred to MSS Building Services, to enable the use of carry forward tax losses in the company. No deferred tax asset has been recognised as at 31 March 2011.
Piers Wilson
Group Finance Director
|
Consolidated Income Statement |
|
|
|
|
|
for the year ended 31 March 2011 |
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
Note |
31 March 2011 |
|
31 March 2010 |
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
Revenue |
|
26,582 |
|
15,318 |
|
Cost of sales |
|
(18,167) |
|
(11,598) |
|
GROSS PROFIT |
|
8,415 |
|
3,720 |
|
|
|
|
|
|
|
Administrative expenses before items identified below |
|
(7,642) |
|
(5,400) |
|
|
|
|
|
|
|
OPERATING PROFIT / (LOSS) BEFORE ITEMS |
|
773 |
|
(1,680) |
|
IDENTIFIED BELOW |
|
|
|
|
|
|
|
|
|
|
|
Restructuring of activities |
|
(786) |
|
(573) |
|
Closure costs of MSS Projects Limited |
|
- |
|
(1,229) |
|
Non cash amortisation of intangible assets |
|
(693) |
|
(136) |
|
Impairment of goodwill |
|
- |
|
(1,000) |
|
Non cash increase in Share Based Payment reserve |
|
(236) |
|
(334) |
|
Costs associated with acquisitions |
|
(348) |
|
- |
|
OPERATING LOSS |
|
(1,290) |
|
(4,952) |
|
|
|
|
|
|
|
Financial income |
|
5 |
|
54 |
|
Financial expenses |
|
(71) |
|
(3) |
|
LOSS BEFORE TAX |
|
(1,356) |
|
(4,901) |
|
|
|
|
|
|
|
Income tax |
|
(26) |
|
50 |
|
|
|
|
|
|
|
LOSS FOR THE PERIOD |
|
(1,382) |
|
(4,851) |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Owners of the Company |
|
(1,377) |
|
(4,851) |
|
Non-controlling interests |
|
(5) |
|
- |
|
|
|
|
|
|
|
BASIC LOSS PER SHARE (pence) |
1 |
(0.74) |
|
(2.94) |
|
|
|
|
|
|
|
DILUTED LOSS PER SHARE (pence) |
1 |
(0.74) |
|
(2.94) |
|
|
|
|
|
|
|
All results are derived from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
There are no recognised gains or losses in either period other than the loss for that period and therefore no consolidated statement of comprehensive income is presented. |
||||
|
Consolidated statement of changes in equity |
|
|
|||||||
|
for the year ended 31 March 2011 |
|
|
|
|
|||||
|
|
|
||||||||
|
|
|
Year ended 31 March 2011 |
|
|
Year end 31 March 2010 |
|
|||
|
|
|
£'000 |
|
|
£'000 |
|
|||
|
|
|
|
|
|
|
|
|||
|
At beginning of period |
|
7,568 |
|
|
12,060 |
|
|||
|
Loss for the financial period |
|
(1,382) |
|
|
(4,851) |
|
|||
|
Issue of share capital |
|
446 |
|
|
- |
|
|||
|
Increase in share premium account |
|
2,474 |
|
|
- |
|
|||
|
Increase in share based payment reserve |
|
236 |
|
|
334 |
|
|||
|
Minority interest |
|
- |
|
|
25 |
|
|||
|
|
|
|
|
|
|
|
|||
|
AT END OF PERIOD |
|
9,342 |
|
|
7,568 |
|
|||
|
|
|
|
|
|
|
|
|||
|
Company statement of changes in equity |
|
|
|||||||
|
for the year ended 31 March 2011 |
|
|
|
|
|||||
|
|
|
||||||||
|
|
|
Year ended 31 March 2011 |
|
|
Year end 31 March 2010 |
|
|||
|
|
|
£'000 |
|
|
£'000 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
At beginning of period |
|
11,538 |
|
|
13,330 |
|
|||
|
Loss for the financial period |
|
(1,634) |
|
|
(2,126) |
|
|||
|
Issue of share capital |
|
446 |
|
|
- |
|
|||
|
Increase in share premium account |
|
2,474 |
|
|
- |
|
|||
|
Increase in share based payment reserve |
|
236 |
|
|
334 |
|
|||
|
|
|
|
|
|
|
|
|||
|
AT END OF PERIOD |
|
13,060 |
|
|
11,538 |
|
|||
|
Consolidated Balance Sheet |
|
|
|
|
|
as at 31 March 2011 |
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
Note |
31 March 2011 |
|
31 March 2010 |
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
NON CURRENT ASSETS |
|
|
|
|
|
Goodwill |
|
8,000 |
|
4,000 |
|
Other intangible assets |
|
4,145 |
|
2,165 |
|
Property, plant and equipment |
|
804 |
|
495 |
|
|
|
12,949 |
|
6,660 |
|
CURRENT ASSETS |
|
|
|
|
|
Work in progress |
3 |
499 |
|
205 |
|
Trade and other receivables |
4 |
6,594 |
|
3,885 |
|
Cash and cash equivalents |
|
815 |
|
4,135 |
|
Assets held for sale |
|
- |
|
180 |
|
|
|
7,908 |
|
8,405 |
|
|
|
|
|
|
|
TOTAL ASSETS |
|
20,857 |
|
15,065 |
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
Trade and other payables |
5 |
(7,641) |
|
(6,847) |
|
Short term borrowings |
|
(3,017) |
|
(177) |
|
Current tax liability |
|
(234) |
|
(117) |
|
Obligations under finance leases |
|
(66) |
|
(68) |
|
Provisions for liabilities |
|
(46) |
|
(190) |
|
|
|
(11,004) |
|
(7,399) |
|
|
|
|
|
|
|
NET CURRENT (LIABILITIES) / ASSETS |
|
(3,096) |
|
1,006 |
|
|
|
|
|
|
|
NON CURRENT LIABILITIES |
|
|
|
|
|
Convertible loan notes |
5 |
(500) |
|
- |
|
Obligations under finance leases |
|
(11) |
|
(22) |
|
Provisions for liabilities |
|
- |
|
(76) |
|
|
|
(511) |
|
(98) |
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
(11,515) |
|
(7,497) |
|
|
|
|
|
|
|
NET ASSETS |
|
9,342 |
|
7,568 |
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Share capital |
|
2,098 |
|
1,652 |
|
Share premium account |
|
7,373 |
|
4,899 |
|
Special reserve |
|
- |
|
4,647 |
|
Share based payments reserve |
|
1,456 |
|
1,220 |
|
Retained earnings |
|
(1,605) |
|
(4,875) |
|
Equity attributable to owners of the Company |
|
9,322 |
|
7,543 |
|
|
|
|
|
|
|
Non-controlling interests |
|
20 |
|
25 |
|
|
|
|
|
|
|
TOTAL EQUITY |
|
9,342 |
|
7,568 |
|
|
|
|
|
|
|
Company Balance Sheet |
|
|
|
|
|
as at 31 March 2011 |
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
31 March 2011 |
|
31 March 2010 |
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
NON CURRENT ASSETS |
|
|
|
|
|
Investments in subsidiaries |
|
475 |
|
475 |
|
|
|
|
|
|
|
|
|
475 |
|
475 |
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
Trade and other receivables |
|
13,309 |
|
8,612 |
|
Cash and cash equivalents |
|
405 |
|
3,494 |
|
|
|
|
|
|
|
|
|
13,714 |
|
12,106 |
|
|
|
|
|
|
|
TOTAL ASSETS |
|
14,189 |
|
12,581 |
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
Trade and other payables |
|
(624) |
|
(903) |
|
Provisions for liabilities |
|
(5) |
|
(140) |
|
|
|
(629) |
|
(1,043) |
|
|
|
|
|
|
|
NET CURRENT ASSETS |
|
13,085 |
|
11,063 |
|
|
|
|
|
|
|
NON CURRENT LIABILITIES |
|
|
|
|
|
Convertible loan notes |
|
(500) |
|
- |
|
|
|
|
|
|
|
|
|
(500) |
|
- |
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
(1,129) |
|
(1,043) |
|
|
|
|
|
|
|
NET ASSETS |
|
13,060 |
|
11,538 |
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Share capital |
|
2,098 |
|
1,652 |
|
Share premium account |
|
7,373 |
|
4,899 |
|
Special reserve |
|
- |
|
4,647 |
|
Share based payments reserve |
|
1,456 |
|
1,220 |
|
Retained earnings |
|
2,133 |
|
(880) |
|
TOTAL EQUITY |
|
13,060 |
|
11,538 |
|
Consolidated cash flow statement |
|
|
|
|
|
for the year ended 31 March 2011 |
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
Note |
31 March 2011 |
|
31 March 2010 |
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES |
|
(1,710) |
|
(1,774) |
|
BEFORE PAYMENT OF RESTRUCTURING COSTS |
7 |
|
|
|
|
|
|
|
|
|
|
Restructuring and cash closure costs |
|
(786) |
|
(2,137) |
|
NET CASH USED IN OPERATING ACTIVITIES |
|
(2,496) |
|
(3,911) |
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Interest received |
|
5 |
|
54 |
|
Proceeds from sale of assets held for sale |
|
150 |
|
- |
|
Proceeds on disposal of property, plant and equipment |
|
792 |
|
9 |
|
Purchases of property, plant and equipment |
|
(457) |
|
(270) |
|
Acquisition of businesses |
|
|
|
|
|
Cash paid |
|
(7,972) |
|
(4,216) |
|
Cash acquired |
|
1,677 |
|
710 |
|
Deferred consideration payments |
|
(1,266) |
|
(234) |
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES |
|
(7,071) |
|
(3,947) |
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Increase in short term borrowings |
|
2,840 |
|
(11) |
|
Repayment of obligations under finance leases |
|
(13) |
|
(21) |
|
Proceeds on issue of convertible loan notes |
|
500 |
|
- |
|
Net proceeds of share issue in subsidiary |
|
- |
|
25 |
|
Net proceeds of share issue |
|
2,920 |
|
- |
|
|
|
|
|
|
|
NET CASH FROM / (USED IN) FINANCING ACTIVITIES |
|
6,247 |
|
(7) |
|
|
|
|
|
|
|
NET DECREASE IN CASH |
|
(3,320) |
|
(7,865) |
|
|
|
|
|
|
|
CASH AT THE BEGINNING OF PERIOD |
|
4,135 |
|
12,000 |
|
|
|
|
|
|
|
CASH AT THE END OF THE PERIOD |
|
815 |
|
4,135 |
|
Company cash flow statement |
|
|
|
|
|
for the year ended 31 March 2011 |
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
31 March 2011 |
|
31 March 2010 |
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES |
|
(6,573) |
|
(9,408) |
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Interest received |
|
530 |
|
113 |
|
Proceeds from sale of investments |
|
- |
|
2,500 |
|
Purchases of businesses |
|
(466) |
|
(234) |
|
Investment in subsidiary |
|
- |
|
(475) |
|
|
|
|
|
|
|
NET CASH FROM INVESTING ACTIVITIES |
|
64 |
|
1,904 |
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Net proceeds of convertible loan stock issue |
|
500 |
|
- |
|
Net proceeds of share issue |
|
2,920 |
|
- |
|
|
|
|
|
|
|
NET CASH FROM FINANCING ACTIVITIES |
|
3,420 |
|
- |
|
|
|
|
|
|
|
NET DECREASE IN CASH |
|
(3,089) |
|
(7,504) |
|
|
|
|
|
|
|
CASH AT THE BEGINNING OF PERIOD |
|
3,494 |
|
10,998 |
|
|
|
|
|
|
|
CASH AT THE END OF THE PERIOD |
|
405 |
|
3,494 |
1. LOSS PER SHARE
|
The calculation of basic and diluted loss per share is based on the following data: |
|
|
|
||||
|
|
|
|
|
|
2011 |
|
2010 |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
Loss |
|
|
|
|
|
|
|
|
Loss for the purposes of basic and diluted earnings per share |
|
|
(1,382) |
|
(4,851) |
||
|
|
|
|
|
|
|
|
|
|
Number of shares |
|
|
|
|
|
|
|
|
Weighted average number of shares for the purposes of basic earnings per share |
187,503,084 |
|
165,203,976 |
||||
|
Potentially dilutive ordinary shares |
|
|
|
|
2,750,000 |
|
- |
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares for the purposes of diluted earnings per share |
190,253,084 |
|
165,203,976 |
||||
|
|
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share (p) |
|
|
|
|
(0.74) |
|
(2.94) |
|
|
|
|
|
|
|
|
|
|
Diluted loss per share (p) |
|
|
|
|
(0.74) |
|
(2.94) |
|
|
|
|
|
|
|
|
|
|
ADJUSTED PROFIT / (LOSS) PER SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss as above |
|
|
|
|
(1,382) |
|
(4,851) |
|
|
|
|
|
|
|
|
|
|
Restructuring of activities |
|
|
|
|
786 |
|
573 |
|
Amortisation of intangible assets |
|
|
|
|
693 |
|
136 |
|
Increase in share based payment reserve |
|
|
|
236 |
|
334 |
|
|
Closure costs of MSS Projects |
|
|
|
|
- |
|
1,229 |
|
Impairment of goodwill |
|
|
|
|
- |
|
1,000 |
|
Costs associated with acquisitions |
|
|
|
|
348 |
|
- |
|
Tax effect of items above at 28% (2010: 28%) |
|
|
|
- |
|
- |
|
|
|
|
|
|
|
681 |
|
(1,579) |
|
|
|
|
|
|
|
|
|
|
Adjusted basic profit / (loss) per share |
|
|
|
0.36 |
|
(0.96) |
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted profit / (loss) per share |
|
|
|
0.36 |
|
(0.96) |
|
2. ACQUISITION OF SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSS Health and Safety Limited |
|
|
|
|
|
|
(previously Data Sound Limited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
On 15 April 2010, the Group acquired 100% of the issued share capital of MSS Health and Safety Limited, gaining control, for a cash consideration of £2,942,000. This transaction has been accounted for by the purchase method of accounting. The acquisition was made for the long term interests of the Group. |
|||||
|
|
|
|
|
|
|
|
|
|
|
Final |
|
|
|
|
|
|
fair value |
|
Total final |
|
|
Book value |
|
adjustments |
|
fair value |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
Net assets acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant, property and equipment |
80 |
|
(72) |
|
8 |
|
Trade and other receivables |
605 |
|
(73) |
|
532 |
|
Cash and cash equivalents |
60 |
|
- |
|
60 |
|
Trade and other payables |
(329) |
|
(181) |
|
(510) |
|
Deferred Income |
(403) |
|
(500) |
|
(903) |
|
|
13 |
|
(826) |
|
(813) |
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
2,500 |
|
Intangible assets |
|
|
|
|
1,255 |
|
|
|
|
|
|
|
|
Gross consideration |
|
|
|
|
2,942 |
|
|
|
|
|
|
|
|
Satisfied by: |
|
|
|
|
|
|
Cash |
|
|
|
|
2,942 |
|
|
|
|
|
|
|
|
Directly attributable costs of £181,600 have been expensed to the Income statement. |
|
|
|||
|
|
|
|
|
|
|
|
Net cash outflow arising on acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash consideration |
|
|
|
|
2,942 |
|
Less cash and cash equivalents acquired |
|
|
|
|
(60) |
|
Net consideration |
|
|
|
|
2,882 |
|
|
|
|
|
|
|
|
The goodwill arising on the acquisition of MSS Health and Safety Limited is attributable to the anticipated profitability of the distribution of the Group's services in the new markets and the anticipated future operating synergies from the combination. The intangible asset represents acquired customer relationships. |
|||||
|
|
|
|
|
|
|
|
MSS Health and Safety Limited contributed £2,339,000 to revenue and a profit of £576,000 (before Group management charges) to loss before tax for the period between the date of acquisition and the balance sheet date. |
|||||
|
|
|
|
|
|
|
|
If the acquisition of MSS Health and Safety Limited had been completed on the first day of the financial year, Group revenues and Group loss attributable to equity holders of the parent would have been the same as those included in the Group's result. |
|||||
2. ACQUISITION OF SUBSIDIARIES (continued)
|
Environmental Control Services Limited |
|
|
|
|
|
|
On 30 September 2010, the Group acquired 100% of the issued share capital of Environmental Control Services Limited, gaining control, for a net cash consideration of £3,413,000. This transaction has been accounted for by the purchase method of accounting. The acquisition was made for the long term interests of the Group. |
|||||
|
|
|
|
|
|
|
|
|
|
|
Provisional |
|
Total |
|
|
|
|
fair value |
|
provisional |
|
|
Book value |
|
adjustments |
|
fair value |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Net assets acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant, property and equipment |
835 |
|
109 |
|
944 |
|
Trade and other receivables |
2,163 |
|
(233) |
|
1,930 |
|
Cash and cash equivalents |
1,617 |
|
- |
|
1,617 |
|
Trade and other payables |
(1,470) |
|
(466) |
|
(1,936) |
|
|
3,145 |
|
(590) |
|
2,555 |
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
1,500 |
|
Intangible assets |
|
|
|
|
1,325 |
|
Gross consideration |
|
|
|
|
5,380 |
|
|
|
|
|
|
|
|
Satisfied by: |
|
|
|
|
|
|
Cash |
|
|
|
|
5,030 |
|
Deferred consideration |
|
|
|
|
350 |
|
|
|
|
|
|
5,380 |
|
|
|
|
|
|
|
|
Directly attributable costs of £166,023 have been expensed to the Income statement. |
|
|
|||
|
|
|
|
|
|
|
|
Net cash outflow arising on acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash consideration |
|
|
|
|
5,030 |
|
Less cash and cash equivalents acquired |
|
|
|
|
(1,617) |
|
Net consideration |
|
|
|
|
3,413 |
|
|
|
|
|
|
|
|
The goodwill arising on the acquisition of Environmental Control Services Limited is attributable to the anticipated profitability of the distribution of the Group's services in the new markets and the anticipated future operating synergies from the combination. The intangible asset represents acquired customer relationships. |
|||||
|
|
|
|
|
|
|
|
Environmental Control Services Limited contributed £4,297,000 to revenue and a profit of £465,000 (before Group management charges) to loss before tax for the period between the date of acquisition and the balance sheet date. |
|||||
|
|
|
|
|
|
|
3. WORK IN PROGRESS
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
|
|
|
|
31 March |
|
31 March |
|
|
|
|
|
|
|
2011 |
|
2010 |
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Work in progress |
|
|
|
|
|
|
|
|
|
Maintenance contracts |
|
|
|
|
|
394 |
|
205 |
|
Installation projects |
|
|
|
|
|
105 |
|
- |
|
Maintenance contracts |
|
|
|
|
|
499 |
|
205 |
|
|
|
|
|
|
||||
|
The Maintenance contract WIP of £394,000 is stated at cost and arises due to the normal delay between performing work on site and the processing of the relevant paperwork prior to customer invoicing. The WIP arising on installations is the net figure, across all installation contracts, of the costs incurred in advance of billing (£357,000) and invoices raised in advance of incurring relevant costs (£252,000). |
||||||||
4. TRADE AND OTHER RECEIVABLES
|
|
Group |
|
Company |
|||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
Amounts receivable for the sale of goods |
5,974 |
|
3,612 |
|
- |
|
- |
|
||||
|
Allowance for doubtful debts |
(336) |
|
(296) |
|
- |
|
- |
|
||||
|
|
5,638 |
|
3,316 |
|
- |
|
- |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
Amounts due from Group undertakings |
- |
|
- |
|
13,249 |
|
8,591 |
|
||||
|
Other debtors |
158 |
|
113 |
|
30 |
|
6 |
|
||||
|
Prepayments |
798 |
|
454 |
|
30 |
|
15 |
|
||||
|
Corporation tax |
- |
|
2 |
|
- |
|
- |
|
||||
|
|
6,594 |
|
3,885 |
|
13,309 |
|
8,612 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
The average credit period taken on sale of goods is 56 days (2010: 48 days). The provision for estimated irrecoverable amounts from the sale of goods was £336,000 (2010: £296,000). In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. Accordingly, the Directors believe that there is no further credit risk provision required in excess of the allowance for doubtful receivables. |
||||||||||||
|
|
|
|
|
|
|
Group |
||||||
|
|
|
|
|
|
|
2011 |
|
2010 |
||||
|
Movement in the allowance for doubtful debts |
|
|
£'000 |
|
£'000 |
|||||||
|
|
|
|
|
|
|
|
|
|
||||
|
Balance at the beginning of the period |
|
|
|
|
|
296 |
|
338 |
||||
|
Acquired provision |
|
|
|
|
|
50 |
|
57 |
||||
|
Amount (released) / provided for in period |
|
|
|
|
|
(2) |
|
89 |
||||
|
Amounts written off as uncollectable |
|
|
|
|
|
(8) |
|
(188) |
||||
|
Balance at the period end |
|
|
|
|
|
336 |
|
296 |
||||
5. TRADE AND OTHER PAYABLES
|
|
Group |
|
Company |
||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
Trade creditors |
3,396 |
|
2,967 |
|
118 |
|
116 |
|
Amounts owed to group undertakings |
- |
|
- |
|
275 |
|
- |
|
Social security and other taxes |
653 |
|
215 |
|
- |
|
- |
|
Deferred consideration |
350 |
|
1,266 |
|
- |
|
466 |
|
Other creditors |
1,074 |
|
597 |
|
136 |
|
16 |
|
Deferred income |
1,044 |
|
522 |
|
- |
|
- |
|
Convertible loan notes |
500 |
|
- |
|
500 |
|
- |
|
Accruals |
1,124 |
|
1,280 |
|
95 |
|
305 |
|
|
8,141 |
|
6,847 |
|
1,124 |
|
903 |
|
|
|
|
|
|
|
|
|
|
Split as: |
|
|
|
|
|
|
|
|
Non current liabilities |
500 |
|
- |
|
500 |
|
- |
|
Current liabilities |
7,641 |
|
6,847 |
|
624 |
|
903 |
|
|
8,141 |
|
6,847 |
|
1,124 |
|
903 |
|
|
|
|
|
|
|
|
|
|
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 60 days (2010: 71 days) |
|||||||
|
Convertible Loan Notes were issued on 31 March 2011 with a total nominal value of £500,000. The Convertible Loan Notes are convertible by the Note holder into new Managed Support Services plc ordinary shares at the conversion price of 5 pence per ordinary share. The maximum number of new ordinary shares to be issued if all Loan Notes are converted is 10 million, equivalent to approximately 5 per cent. of the currently issued outstanding ordinary share capital.
If conversion does not take place before 31 January 2015, the Convertible Loan Notes will be redeemed at par by the Company. The notes yield 7 per cent. per annum, paid semi annually in arrears. |
|||||||
6. SHARE CAPITAL
|
|
|
|
|
|
|
31 March |
|
31 March |
|
|
|
|
|
|
|
2011 |
|
2010 |
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Issued and fully paid |
|
|
|
|
|
|
|
|
|
209,802,191 ordinary shares of 1p each (2010: 165,203,976) |
|
|
|
|
|
2,098 |
|
1,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
On 29 September 2010, 44,285,715 shares were placed at 7p per share, in addition a further, 312,500 shares were placed at 8p per share, in both cases in relation to the acquisition of Environmental Control Services Limited. |
||||||||
7. NOTES TO THE CASH FLOW STATEMENT
|
|
|
Group |
|
Company |
||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
|
Operating loss from continuing activities |
|
(1,290) |
|
(4,952) |
|
(2,164) |
|
(2,239) |
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment |
|
323 |
|
101 |
|
- |
|
- |
|
Amortisation of intangible assets |
|
693 |
|
136 |
|
- |
|
- |
|
Impairment of Goodwill |
|
- |
|
1,000 |
|
- |
|
- |
|
Impairment of investments |
|
- |
|
- |
|
- |
|
2,000 |
|
Share based payments |
|
236 |
|
334 |
|
236 |
|
334 |
|
Profit on disposal of investments |
|
- |
|
- |
|
- |
|
(1,463) |
|
(Profit)/loss on disposal of property, plant and equipment |
|
(15) |
|
11 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows before movement in working capital |
|
(53) |
|
(3,370) |
|
(1,928) |
|
(1,368) |
|
|
|
|
|
|
|
|
|
|
|
Decrease / (increase) in work in progress |
|
(244) |
|
267 |
|
- |
|
- |
|
Decrease / (Increase) in receivables |
|
(361) |
|
1,908 |
|
(4,697) |
|
(7,352) |
|
(Decrease) / increase in payables |
|
(1,433) |
|
(2,323) |
|
187 |
|
(306) |
|
Decrease in provisions |
|
(220) |
|
(506) |
|
(135) |
|
(382) |
|
|
|
|
|
|
|
|
|
|
|
Cash utilised by operations |
|
(2,311) |
|
(4,024) |
|
(6,573) |
|
(9,408) |
|
Income taxes (paid) / received |
|
(114) |
|
116 |
|
- |
|
- |
|
Interest paid |
|
(71) |
|
(3) |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities |
(2,496) |
|
(3,911) |
|
(6,573) |
|
(9,408) |
|
|
Restructuring costs paid in period |
|
786 |
|
2,137 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities before payment of restructuring costs |
(1,710) |
|
(1,774) |
|
(6,573) |
|
(9,408) |
|
|
|
|
|
|
|
|
|
|
|
8. The accounting policies adopted in the preparation of this audited preliminary announcement are consistent with those set out in the audited Group financial statements for the year ended 31 March 2011.
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2011 or 2010, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.
It is intended to post the Annual Report to shareholders in early July 2011, copies of this report will be available from the Company Secretary at One Crown Square, Church Street East, Woking, Surrey GU21 6HR and from the Company's website www.mssplc.com.
This announcement was approved by the Directors on 6 July 2011.
This information is provided by RNS
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