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Vebnet (Hldgs) PLC (VBT)

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Thursday 09 September, 2004

Vebnet (Hldgs) PLC

Final Results

Vebnet Holdings PLC
09 September 2004


                VEBNET (HOLDINGS) PLC - PRELIMINARY ANNOUNCEMENT

   • Vebnet, the Edinburgh-based AIM-traded provider of technology based
    employee benefit solutions, announces significant progress in developing its
    business in the year ended 30 June 2004 with substantial growth in quality
    customer numbers, turnover and recurring revenues.

                         Unaudited            Audited                Unaudited
                        Year ended         Year ended              6 months to
                      30 June 2004       30 June 2003         31 December 2003
                             £'000              £'000                    £'000

Turnover                     1,042                668                      380
Loss before tax              (915)            (1,258)                    (610)
Basic loss per share         (12p)              (20p)                     (8p)
Net assets                   1,168              1,310                      700
Cash included above          1,284              1,265                      595

   • Revenues for the 12 months ended 30 June 2004 of £1,042,000, a 56%
    increase.


   • Cash placing in February 2004 to raise £787,500 (before expenses)
    provided additional financial flexibility.


   • The number of employees using FIX&FLEX(R), the group's core product, as
    at 30 June 2004 was 49,975, an increase of 252%. New clients include BT,
    British American Tobacco, Serono, Novar and Wanadoo.


   • Licence agreements were signed with Watson Wyatt, the global consulting
    firm, and KPMG People Services, part of the global professional services
    firm. 8 client implementations are already underway under these licence
    agreements and a clear pipeline of prospects established.


   • Selected by 2 national Independent Financial Adviser networks (Millfield
    Employer Partnership and Inter-Alliance) as the recommended provider of
    employee benefit technology solutions for their clients.


   • Acquired the rights to Spektra's OTS technology to facilitate
    connectivity between FIX&FLEX(R) and life and pension companies.


   • Successfully implemented Total Remuneration Statements (TRS) for 28,000
    BT employees.


   • Won its first client in both Spain (with Towers Perrin) and Portugal
    (with Watson Wyatt).


   • Implemented the hosting of the Youatwork voluntary benefit application
    on behalf of Barclays Bank. Going forward, Vebnet will host this application
    for all Youatwork clients (currently over 100).


   • Referring to current trading and prospects, Derek Scott, Chairman, said,
    'Trading in the first two months of the new financial year has been very
    encouraging. We have seen a number of new customer wins for FIX&FLEX(R) and
    TRS, and significant progress in negotiations with prospective licence
    partners. We remain confident about the Company's longer term prospects.'

Notes for Editors:

Vebnet develops and deploys technology for the management and administration of
fixed, flexible and voluntary employee benefit programmes, using internet/
intranet delivery platforms. Vebnet's core product, FIX&FLEX(R), was launched in
September 2001, with the first customer implementation of this technology in
March 2002. This product is sold to corporate customers through both licence and
direct channels.

Enquiries:

Vebnet (Holdings) plc
Derek Scott (Chairman)                                           07710 209 807
Gerry O'Neill (Chief Executive Officer)                          07990 584 096
Stephen Thurlow (Chief Financial Officer)                        0131 270 5503

Bankside Consultants Limited
Charles Ponsonby                                                 0207-444 4166



                              CHAIRMAN'S STATEMENT

Vebnet develops and deploys technology for the management and administration of
fixed, flexible and voluntary employee benefit programmes, using internet/
intranet delivery platforms. Vebnet's core product, FIX&FLEX(R), was launched in
September 2001, with the first customer implementation of this technology in
March 2002. This product is sold to corporate customers through both licence and
direct channels.



Financial Highlights


During the year to 30 June 2004, Vebnet made significant progress in developing
its business. The principal features of the year have been the substantial
growth in quality customer numbers, turnover and recurring revenues. Turnover
increased by 56% to £1,042k (2003 - £668k). Revenues grew across both the
licence and direct channels.

Total operating costs before exceptional items increased to £1,980k (2003 -
£1,855k), reflecting the continued investment in engineering to enhance FIX&FLEX
(R) and support both customers and distribution partners. The pre-tax loss
before taxation decreased to £915k (2003 - £1,258k).

Year-end net cash balances stood at £1,284k (2003 - £1,265k). For the six months
ended 30 June 2004, the Group reached cash flow breakeven at the operating
level, although an accounting loss before taxation of £305,000 was recorded for
the same period after accounting for deferred income. Due to some seasonality in
Vebnet's implementation schedule, however, there is likely to be a loss in cash
flow terms for the 6 months ending 31 December 2004, but a return to being cash
flow positive for the 6 months ending 30th June 2005 which will be sustainable
thereafter.



Cash Placing

In February 2004, we were pleased to announce that, in order to satisfy
institutional demand, 750,000 new ordinary shares were placed principally with
funds managed by Liontrust Asset Management and Hargreave Hale at a price of
105p per share, representing a discount of 6.04 per cent. to the average closing
market price for the 10 business days ended 12 February 2004, raising £787,500
(before expenses).

Although Vebnet already had sufficient financial resources to trade through to
cash break-even point, the placing proceeds provided additional flexibility to
gear up the Group's operating infrastructure in response to increasing market
interest in its product proposition. They also provide major prospective
customers with additional reassurance as to the financial stability of the
Group.



Partnerships & New Business

During the period under review, Vebnet concluded two new 3-year licence deals.
One was with Watson Wyatt, the global consulting firm specialising in human
capital and financial management. This is a strategic licence for Watson Wyatt
to sell Vebnet's FIX&FLEX(R) technology to its client base. A licence agreement
was also signed with KPMG People Services, part of the global services firm.
KPMG will promote an employee benefit package called RewardWise to its client
base. The core component of RewardWise is FIX&FLEX(R). Both partnerships have
delivered new clients to Vebnet, with other implementations scheduled within the
current financial year.

In January 2004, Vebnet launched a new offering, works4you, in partnership with
Scottish Life, the Edinburgh-based marketing division of Royal London, one of
the leading life and pensions companies in the UK. works4you is an online
employee benefit communication and administration platform available exclusively
through Scottish Life's range of Retirement Solutions group pension
arrangements. It contains additional features designed to help companies save
time and money and improve their employees' understanding of the value of the
benefits they receive. This product has been very well received in the market
and was a nominated finalist in the 2004 Money Marketing Awards. In addition,
works4you was a winner in category 'Best Specialist Application' in the Pensions
Management Technology Awards 2004.

Vebnet was also selected by two national Independent Financial Adviser (IFA)
networks, Millfield Employer Partnership and Inter Alliance, as the recommended
provider of employee benefit technology solutions for their clients.

Towers Perrin is now promoting Vebnet's technology in Spain and has won its
first client for FIX&FLEX(R). Vebnet has also won its first client in Portugal
with Watson Wyatt and has received warm interest from these and other major
benefit consultants to take its technology into new markets in Continental
Europe.

As of 30 June 2004, 49,975 employees, each generating licence revenue, were
connected to FIX&FLEX(R) compared with 14,187 on 30 June 2003. New clients
include BT, British American Tobacco, Serono, Novar and Wanadoo.

Vebnet also implemented the hosting of the Youatwork voluntary benefit
application on behalf of Barclays Bank. Going forward, Vebnet will host this
application for all Youatwork clients, of which there are over 100 spanning the
public and private sectors.



Product Development

We believe FIX&FLEX(R) provides the most comprehensive flexible benefits
solution in the market place today and we intend to maintain our leadership
position through a series of ongoing enhancements. There were several releases
of FIX&FLEX(R) throughout the year, taking the core product up to version 2.26.
These releases were driven mostly by customer demand for new features but,
overlaid on top of the drive for more features, several strategic initiatives
were implemented as well. These included refactoring one of the core elements of
the product, the benefits enrolment form, to make it more easily maintainable
and customisable to meet changing customer requirements. Similarly, the
groundwork was completed to allow the porting of FIX&FLEX(R) to the latest
generation of enterprise application servers. After an extensive evaluation
process, we decided to move away from Sun's iPlanet family of application
servers to IBM's WebSphere environment. The first demonstration systems running
FIX&FLEX(R) on WebSphere went live in June. We are now seeing the benefits of
this port in ease of development, management and application performance.
Another strategic initiative was the successful acquisition of the Open
Transaction Server (OTS) application from Spectra. This software technology will
enable a key part of the Vebnet strategy to integrate in real-time with third
parties such as product providers and payroll systems.

Vebnet successfully implemented Total Remuneration Statements (TRS) for 28,000
BT employees in April 2004. This was a significant milestone for Vebnet and FIX&
FLEX(R) in that it proved the scaleability of both the underlying architecture
and application. As a consequence of this, both Vebnet and its partners are now
being invited to tender on large-scale implementations of FIX&FLEX(R) and TRS in
the confidence that our technology provides a viable solution for large employee
bases.

A significant proportion of our product development is carried out in
conjunction with our licence partners and the costs recharged accordingly. As a
result, we expect product development revenues to be a significant element of
Group revenues for the foreseeable future.



Current Trading

Trading since the year-end has been very encouraging. Six new direct clients for
implementations of flexible benefits and/or TRS have selected Vebnet. In
addition, our partners have won eight new clients, all requiring implementation
within the current financial year. We have made significant progress in
negotiations with new prospective licence partners, which should lead to at
least one new major licence agreement this financial year.



Outlook

We will continue to focus on growing revenue through licensing FIX&FLEX(R) to
major partners who can offer this solution to their customer base - national
IFAs, global benefit consultants, major accountancy practices and complementary
technology solution providers. Through this channel, we are able to gain
significant market exposure for a business of our present size. We believe over
time our licence partners will deliver more customers to Vebnet than our direct
channel. With each of these partners, we anticipate strong demand for accessing
Vebnet's software development capability, resulting in additional revenues.

Discussions are ongoing about licensing FIX&FLEX(R) in other European markets
and by the end of the current financial year Vebnet expects to have signed
agreements to take its technology into other geographical markets through
partnerships with one or more of the major benefit consultants.

With our direct channel, we are seeing a strong increase in the number of
inquiries from company prospects and we anticipate closing several new
significant sales in the current financial year.

We believe the market-leading reputation of the Group's technology has already
been established and the interest being shown by top quality names in potential
licence relationships should provide the elements required for continuing
substantial growth.

Whilst market confidence remains less certain and the sales cycle long, we
believe that, through the strength of our product, and our existing and future
licence agreements, we will be able to make FIX&FLEX(R) an industry standard
platform for flexible benefit enrolment and administration.



Derek Scott
Chairman



                      CONSOLIDATED PROFIT AND LOSS ACCOUNT
                          FOR THE YEAR TO 30 JUNE 2004


                                  Unaudited        Audited           Unaudited
                                 Year ended     Year ended    Six months ended
                               30 June 2004   30 June 2003    31 December 2003
                                      £'000          £'000               £'000
Turnover                              1,042            668                 380

Cost of sales                          (473)          (234)               (210)
                                 ------------   ------------        ------------
Gross profit                            569            434                 170

Administrative expenses
(including in 2003
exceptional costs of reverse
acquisition of £241k)                (1,507)        (1,862)               (790)
Negative goodwill written
back                                      -            146                   -
                                 ------------   ------------        ------------
Operating loss                         (938)        (1,282)               (620)

Net interest receivable                  23             24                  10
                                 ------------   ------------        ------------
Loss on ordinary activities
before taxation                        (915)        (1,258)               (610)

Tax on loss on ordinary
activities                                -            (30)                  -
                                 ------------   ------------        ------------
Loss for the financial period          (915)        (1,288)               (610)
                                 ------------   ------------        ------------

Basic loss per share                    (12p)          (20p)                (8p)

Diluted loss per share                  (12p)          (20p)                (8p)


                           CONSOLIDATED BALANCE SHEET
                                        
                                AT 30 JUNE 2004


                                 Unaudited        Audited           Unaudited
                                    At              At                At
                              30 June 2004   30 June 2003    31 December 2003
                                     £'000          £'000               £'000
Fixed assets
Tangible fixed assets                  289            140                 172

Current assets
Debtors                                324            536                 297
Cash at bank and in hand             1,284          1,265                 595
                                ------------   ------------        ------------
                                     1,608          1,801                 892
                                ------------   ------------        ------------

Creditors: amounts falling
due within one year                   (690)          (631)               (364)
                                ------------   ------------        ------------
Net current assets                     918          1,170                 528
                                ------------   ------------        ------------

Creditors: amounts falling
due after more than one year           (39)             -                   -
                                ------------   ------------        ------------
Net assets                           1,168          1,310                 700
                                ============   ============        ============

Capital and reserves
Called up share capital              8,435          7,474               7,685
Share premium account                  273            213                 213
Other reserves                      (2,951)        (2,703)             (2,914)
Profit and loss account             (4,589)        (3,674)             (4,284)
                                ------------   ------------        ------------
Equity shareholders' funds           1,168          1,310                 700
                                ------------   ------------        ------------




                        CONSOLIDATED CASH FLOW STATEMENT

                          FOR THE YEAR TO 30 JUNE 2004

                                  Unaudited       Audited         Unaudited
                                 Year ended     Year ended    Six months ended
                                30 June 2004   30 June 2003   31 December 2003
                                       £'000          £'000              £'000

Net cash outflow from
operating activities*                   (603)        (1,186)              (599)

Cash inflow from returns on
investments and servicing of
finance                                   30             47                  4
Net cash (outflow) from
capital expenditure and
financial investments                   (173)          (125)               (75)
Taxation                                   -            159                  -
Acquisition and disposals                  -          1,694                  -
                                  ------------   ------------        -----------
Net cash (outflow)/inflow
before financing                        (746)           589               (670)

Financing                                765            460                  -
                                  ------------   ------------        -----------
Increase/(decrease) in cash               19          1,049               (670)
                                  ============   ============        ===========

Reconciliation of net cash flow
to movement in net funds

Increase/(decrease) in cash               19          1,049               (670)
Cash outflow from capital
elements of finance lease
payments                                   9              -                  -
                                  ------------   ------------        -----------
Change in net funds arising
from cash flows                           28          1,049               (670)
New finance leases                       (70)             -                  -
                                  ------------   ------------        -----------
Movement in net funds in the
year                                     (42)         1,049               (670)

Net funds at the beginning of
the period                             1,265            216              1,265
                                  ------------   ------------        -----------
Net funds at the end of the
period                                 1,223          1,265                595
                                  ============   ============        ===========

* RECONCILIATION OF OPERATING
LOSS TO OPERATING CASH FLOWS

Operating loss                          (938)        (1,282)              (620)
Depreciation                              94             42                 43
Decrease/(increase) in
debtors                                  204           (195)               245
Increase/(decrease) in
creditors                                 37            249               (267)
                                  ------------   ------------        -----------
Net cash inflow from
operating activities                    (603)        (1,186)              (599)
                                  ------------   ------------        -----------



NOTES TO THE RESULTS STATEMENT

1.      The audited/unaudited results above do not amount to statutory accounts
within the meaning of Section 240 of the Companies Act 1985. Statutory accounts
for the 12 months to 30 June 2003 have been filed with the Registrar of
Companies. The Auditors' Report on these accounts was unqualified.

2.      The Preliminary Results for the year ended 30 June 2004 have been
prepared on the basis of the accounting policies set out in the audited report
and accounts for the year ended 30 June 2004.

3.      Copies of the Annual Accounts for the year ended 30 June 2004 will be
sent to shareholders and available from the Company on request at 7-11 Melville
Street, Edinburgh EH3 7PE.

4.      The basic loss per share is based on the loss for the financial period
of £915,000 (2003 - £1,288,000) and on the weighted average number of ordinary
shares in issue during the year of 7,927,165 (2003 - 6,398,882). The weighted
average number of ordinary shares for the year ended 30 June 2003 assumed that
the 5,788,509 ordinary shares issued in relation to the reverse acquisition
existed prior to the transaction. Issues of shares in Vebnet Limited during the
period from 1 July 2002 to 15 January 2003 were treated in proportion to the
share capital of Vebnet Limited at the date of the reverse acquisition.
Stockbourne plc shares have been included since 15 January 2003 and all other
shares have been included in the computation based on the weighted average
number of days since their issue. The figure has been restated to include within
the number of ordinary shares issued in relation to the reverse acquisition,
211,428 contingently issuable shares, which were issued to the former Vebnet
Limited shareholders during the year ended 30 June 2004.

5.      Diluted loss per share is caculated on the basis of the loss
attributable to ordinary shareholders and the weighted average number of
ordinary shares for the purpose of calculating the diluted earnings per ordinary
share being identical to those used for basic earnings per ordinary share. This
is because the exercise of share options would have the effect of reducing the
loss per ordinary share and is therefore not dilutive under the terms of
Financial Reporting Standard 14 'Earnings per share'.

Diluted loss per share for 2003 is calculated as above but is not restated, as
the contingent shares to be issued were included as dilutive items within the
prior year financial statements.


6.      As intimated at the time of the reverse acquisition, the Directors do
not propose the payment of a dividend for the foreseeable future.




                      This information is provided by RNS
            The company news service from the London Stock Exchange
                                             

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