Interim Results

K3 Business Technology Group PLC 30 September 2004 30 September 2004 K3 BUSINESS TECHNOLOGY GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2004 Key Points â€¢ Strategy to refocus the business progressing well â€¢ Sale of Enterprise Systems Division for Â£1.92m - exit from very low growth business area - realised Â£1.3m profit â€¢ Acquisition of remaining 62% holding in PSE Ltd, the warehousing and distribution management software company in April 2004 - first step into retail and distribution sectors in line with strategy - business performing strongly â€¢ Flagship Microsoft-based CRM product, SmartVision, generating strong interest - Â£240,000 invested in development over first half - substantial pipeline of prospects â€¢ Turnover on continuing operations of Â£1.92m â€¢ Operating profit before goodwill amortisation and excluding profit on disposal of Enterprise Systems Division of Â£0.13m â€¢ Profit before tax of Â£1.17m - includes proceeds from sale of Enterprise Systems Division â€¢ Cash balance of Â£3.05m at 30 June 2004 Commenting on prospects, Chairman, George Matthews, said, 'We have ambitious growth plans for the Group, which are focused around the development of our Microsoft-based business solutions and expansion into the distribution and retail sectors. With our enhanced cash position, we are well placed to exploit acquisition opportunities that fulfil our criteria and are in active negotiations with a number of possible acquisitions that will strengthen our portfolio of Microsoft based business solutions for the Supply Chain Sector. We continue to view the Group's prospects very positively.' Enquiries: K3 Business Technology Group plc Andy Makeham, Chief Executive T: 01282 864111 David Bolton, Finance Director T: 01282 864111 Biddicks Katie Tzouliadis T: 020 7448 1000 Rowan Dartington & Co. Limited Barrie Newton, Managing Director T: 0117 933 0010 CHAIRMAN'S STATEMENT OVERVIEW We have ambitious growth plans for the Group, which are focused around the development of Microsoft-based business solutions and expansion into the distribution and retail sectors. Over the first half of 2004, we made constructive steps forward with our objectives. In March, we completed the sale of the Enterprise Systems Division, realising a profit of Â£1.30m and in April, we acquired the outstanding balance of shares in a warehousing and distribution management software business, PSE Ltd ('PSE'). The acquisition of PSE is important to us strategically, extending our footprint beyond our traditional manufacturing sector and into retail and distribution. I can also report good progress in the development of SmartVisionCRM, our new business solution product which has Microsoft's new CRM software embedded within it. We invested approximately Â£0.24m in its development during the first half, and we have a substantial pipeline of prospects. Our investment has been charged against profits. In April, we conducted a share consolidation of one 25p ordinary share for every five 5p ordinary shares previously in issue. As a consequence our shares in issue and our earnings per share have been restated accordingly. Financial Results Results for the first half reflect the disposal of our Enterprise Systems business. Turnover therefore reduced to Â£2.79m against Â£3.48m in the same period last year. As expected, turnover on continuing operations showed a small decline as we switched to generating demand for our SmartVisionCRM product, with Â£1.92m of sales against Â£2.23m in the same period last year. After costs of Â£0.24m relating to the development of our SmartVisionCRM business application, which commenced in January 2004, adjusted operating profit*1 on continuing operations was Â£0.05m (2003: loss of Â£0.25m). For the three months to June 2004, our new acquisition, PSE, contributed an adjusted operating profit*2 of Â£0.08m. For the two months to 29 February, prior to its disposal, our Enterprise Systems Division contributed an adjusted operating profit*3 of Â£0.01m. Overall, the Group's operating loss of Â£0.12m was better than expectations (2003: Â£0.39m which reflects the impact of write-offs of Â£0.55m). The sale of the Enterprise Systems Division resulted in a profit on disposal of Â£1.30m. Profit on ordinary activities before taxation was Â£1.17m (2003: loss of Â£0.43m). This resulted in earnings per share before amortisation of goodwill of 11.5p (2003: loss of 2.0p) and earnings per share of 9.0p (2003: loss per share of 4.0p). At 30 June 2004, the Group had a positive cash balance of Â£3.05m compared with Â£0.12m at 30 June 2003 and Â£1.23m at 31 December 2003. The Directors do not propose to pay a dividend (2003: nil). However, authority was obtained from shareholders in April for a share capital reduction which will enable us to seek the confirmation of the High Court which, if obtained, will enable us to pay dividends in the future. *1 Calculated before amortisation of goodwill of Â£0.15m and exceptional write offs of Â£nil. *2 Calculated before amortisation of goodwill of Â£0.02m and exceptional write offs of Â£nil. *3 Calculated before amortisation of goodwill of Â£0.08m and exceptional write offs of Â£nil. OPERATIONAL REVIEW Business Systems Division The Business Systems Division, based in Walton-on-Thames, turned in a good performance with sales of Sigma, Omnis, JobBOSS and SmartVision to both new and existing customers. Considerable interest has been shown in SmartVisionCRM, our new Microsoft centric business solution for the SME sector, and whilst this is still being developed, a strong pipeline of orders has been generated that is likely to benefit 2005. Enterprise Systems Division This Division, based at Crewe, was sold in March 2004 to Azur Group Limited for Â£1.92m, of which Â£0.05m is deferred, realising a profit on sale of Â£1.30m. The sale of the business is part of the management's strategy to focus on both developing the Group's Microsoft-based business solutions and expand the business into the distribution and retail sectors. Figures for the first half include the results of this Division for the period to 29 February. PSE In April, we announced the acquisition of the remaining 62% of the shares in PSE Limited, the warehousing and distribution software company based in Lancashire. We had previously acquired a 38% holding in PSE in November 2003. The balance of the shares in April was acquired for an initial consideration of Â£0.45m, bringing the total cash consideration for the entire share capital of PSE to Â£0.64m. With an estimated deferred consideration based on future growth in the business over the next three years of Â£0.25m, the expected total price is Â£0.89m. In its first three months as part of the Group, PSE won six new orders worth Â£0.4m and sales reached Â£0.46m in the period. This is substantially ahead of 2003 levels where sales for the twelve month period to 30 November 2003 were Â£1.18m. The strong first quarter performance was helped by orders from JJB Sports (clothing), Bright Minds (educational toys), and Rock Group (electronics). PSE contributed Â£0.08m to adjusted operating profit*2. The prospective orders are encouraging and should translate into a continued strong performance in the second half year. Outlook We expect market conditions in the manufacturing sector to remain challenging but are encouraged by the increasing interest in SmartVisionCRM and the level of order intake in PSE which should see it continue to perform well over the second half of the year. With our enhanced cash position, we are well placed to exploit acquisition opportunities that fulfil our criteria and are in active negotiations with a number of possible acquisitions that will strengthen our portfolio of Microsoft based business solutions for the Supply Chain Sector. We continue to view the Group's prospects very positively. George Matthews Chairman 30 September 2004 *2 Calculated before amortisation of goodwill of Â£0.02m and exceptional write offs of Â£nil. CONSOLIDATED PROFIT AND LOSS ACCOUNT For the six months ended 30 June 2004 Unaudited Unaudited Audited Six months Six months Year to 31 December 2003 to 30 June to 30 June Notes 2004 2003 Â£'000 Â£'000 Â£'000 Turnover Continuing 1,921 2,233 4,305 Acquisitions 456 - - Discontinued 413 1,250 2,697 Total 2,790 3,483 7,002 Operating profit before goodwill amortisation and exceptional write down 132 407 1,074 Goodwill amortisation (255) (243) (463) Exceptional write down - (550) (605) Continuing (104) (410) (276) Acquisitions 52 - - Discontinued (71) 24 282 Operating (loss) profit 3 (123) (386) 6 Profit (loss) on disposal of operations 1,303 - (100) Net interest payable and similar charges (6) (46) (105) Profit (loss) on ordinary activities before 1,174 (432) (199) taxation Tax on profit (loss) on ordinary activities (256) - (130) Profit (loss) for the financial period 918 (432) (329) Earnings (loss) per share (comparatives restated for share consolidation of one 25p share for every five 5p shares) Basic 6 9.0p (4.0p) (3.0p) Diluted 6 9.0p (4.0p) (3.0p) Basic before amortisation of goodwill 6 11.5p (2.0p) 1.5p Basic before amortisation of goodwill and 6 0.9p 3.5p 6.5p exceptional items The group has no recognised gains or losses in any of the above periods other than the profit (loss) for that period. CONSOLIDATED BALANCE SHEET As at 30 June 2004 Unaudited As Unaudited Audited at As at As at 31 30 June 30 June December 2003 2004 2003 Notes Â£'000 Â£'000 Â£'000 Fixed assets Goodwill 2,919 3,574 3,354 Tangible assets 317 425 342 Investments - - 190 3,236 3,999 3,886 Current assets Debtors 1,564 3,338 2,558 Cash at bank and in hand 3,045 122 1,226 4,609 3,460 3,784 Creditors: amounts falling due within one year 7 (3,921) (4,565) (4,706) Net current assets (liabilities) 688 (1,105) (922) Total assets less current liabilities 3,924 2,894 2,964 Creditors: amounts falling due after more than one year (12) (33) - Provisions for liabilities and charges - - - Net assets 3,912 2,861 2,964 Capital and reserves Called-up share capital 2,548 2,548 2,548 Shares to be issued 8 30 - - Share premium account 8 6,441 6,441 6,441 Other reserve 8 2,359 2,359 2,359 Profit and loss account 8 (7,466) (8,487) (8,384) Equity shareholders' funds 3,912 2,861 2,964 CONSOLIDATED CASH FLOW STATEMENT For the period ended 30 June 2004 Unaudited Unaudited Audited Six months Six months Year to 31 to 30 June 2004 to 30 June December 2003 2003 Notes Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities 9 703 113 1,365 Returns on investments and servicing of finance (6) (11) (23) Taxation - - (11) Capital expenditure and financial investment (25) (87) (99) Acquisitions and disposals 1,131 - (95) Cash inflow before financing 1,803 15 1,137 Financing 16 (16) (34) Increase (decrease) in cash in the period 1,819 (1) 1,103 NOTES TO THE FINANCIAL STATEMENTS 1. The interim financial information has been prepared in accordance with the accounting policies adopted in the accounts for the year ended 31 December 2003. 2. The financial information in this statement relating to the six months ended 30 June 2004 and the six months ended 30 June 2003 is unaudited and does not constitute full statutory accounts within the meaning of Section 240 of the Companies Act 1985. The figures for the year ended 31 December 2003 have been extracted from the statutory accounts which have been filed with the Registrar of Companies. The audit report was unqualified and did not contain any statement under section 237 (2) and (3) of the Companies Act 1985. 3. Operating profit (loss) The operating profit (loss) is stated after charging Â£0.24m for development costs relating to the SmartVisionCRM project (2003: is stated after charging a write down Â£0.55m relating to the disposal of the Group's interest in RAP Group Limited). 4. Acquisition of subsidiary undertaking On 5 April 2004 the company acquired the remaining 62% of the issued share capital of PSE Limited ('PSE'). The company acquired a 38% shareholding in PSE in November 2003 for an initial consideration of Â£0.19m. The balance of the shares were acquired for an initial consideration of Â£0.45m with further consideration payable based on PSE's revenues rising to Â£5m over the period up to 31 March 2007. The fair value of the total consideration is estimated to be Â£0.89m. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the group: Book value Fair value Fair value to adjustments the group Â£000 Â£000 Â£000 Fixed assets Tangible 67 - 67 Current assets Debtors 228 (25) 203 Cash 50 - 50 Total assets 345 (25) 320 Creditors Trade (106) - (106) Other (100) - (152) Accruals and deferred income (152) - (100) Total liabilities (358) - (358) Net liabilities (13) (25) (38) Goodwill 928 Consideration 890 Satisfied by Cash consideration 640 Deferred cash consideration 220 Shares to be issued 30 890 4. Acquisition of subsidiary undertaking (continued) The fair value adjustment relates to a provision against a debt which is not considered recoverable. Net cash inflows in respect of the acquisition comprised: Â£000 Cash at bank and in hand acquired 50 PSE earned a profit after taxation of Â£53k in the three months ended 30 June 2004. 5. Disposal of divisional undertaking On 29 February 2004 the group disposed on its interest in its Enterprise Systems Division to Azur Group Limited for a consideration of Â£1.92m. Net assets disposed of and the related sales proceeds were as follows: Â£000 Fixed assets Goodwill 1,108 Tangible 38 Creditors Deferred income (678) Net assets 468 Transaction costs of disposal 25 Other costs of disposal 126 Profit before tax on sale 1,303 Proceeds 1,922 Satisfied by Cash 1,872 Deferred cash consideration 50 1,922 In addition to the proceeds and the costs of the disposal, the company collected trade receivables and discharged trade payables generating a further Â£0.69m. 6. Earnings (loss) per share The calculations of earnings (loss) per share are based on the following earnings (losses) and numbers of shares (restated for the share consolidation of one 25p share for every five 5p share): 6. Earnings (loss) per share (continued) Basic and diluted Unaudited six months Unaudited six Audited year to 30 June 2004 months to 30 June 2003 to 31 December 2003 Â£'000 p Â£'000 p Â£'000 p Basic earnings (loss) per share 918 9.0 (432) (4.0) (329) (3.0) Effect of goodwill amortisation 255 2.5 243 2.0 463 4.5 Basic earnings (loss) per share before amortisation of goodwill 1,173 11.5 (189) (2.0) 134 1.5 Exceptional items (net of tax) *1(1,085) (10.6) *2 550 5.5 *2 524 5.0 Basic earnings per share before amortisation of goodwill and exceptional items 88 0.9 361 3.5 658 6.5 Number of shares Number of shares Number of shares Weighted average number of shares 10,192,428 10,192,428 10,192,428 *1 Exceptional item in six months to 30 June 2004 relates to profit on disposal of the Enterprise Systems Division of Â£1.30m less tax of Â£0.22m. *2 Exceptional item in six months to 30 June 2003 relates to write-off of irrecoverable balances from RAP Group of Â£0.61m less tax with a further loss on disposal of the legacy businesses in second half of 2003 arising from reduced deferred consideration of Â£0.10m which had no tax effect. 7. Creditors: amounts falling due within one year Included in creditors due within one year is deferred income of Â£1.49m (2003: Â£2.29m) relating to income from support which is generally invoiced in advance and recognised as revenue in equal monthly instalments over the relevant periods. 8. Reserves Share Shares to be Other Profit and premium issued reserve loss account account Â£'000 Â£'000 Â£'000 Â£'000 At 1 January 2004 6,441 - 2,359 (8,384) Deferred consideration in relation to - 30 - - acquisition of PSE Limited Retained profit for the period - - - 918 At 30 June 2004 6,441 30 2,359 (7,466) 9. Cash flow statement Reconciliation of operating (loss) profit to operating cash flows Unaudited Unaudited Audited Year Six months Six months to to 31 Dec to 30 Jun 2004 30 Jun 2003 2003 Â£000 Â£000 Â£000 Operating (loss) profit (123) (386) 6 Depreciation and fixed asset impairment 79 88 182 Loss on sale of tangible fixed assets - - 1 Amortisation of goodwill 255 243 463 Decrease in debtors 1,247 560 1,290 Decrease in creditors (755) (392) (577) 703 113 1,365 10. The above information is being sent to the shareholders and is available from the Company's registered office: Unit 19, Linden Business Centre, Linden Road, Colne, Lancashire, BB8 9BA. This information is provided by RNS The company news service from the London Stock Exchange

Companies

K3 Business Technology Group (KBT)

Full Archive

UK 100

Latest directors dealings

All directors dealings today