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Vebnet (Hldgs) PLC (VBT)

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Friday 16 September, 2005

Vebnet (Hldgs) PLC

Final Results

Vebnet Holdings PLC
16 September 2005

                             VEBNET (HOLDINGS) PLC

                            PRELIMINARY ANNOUNCEMENT

Vebnet, the Edinburgh-based, AIM-listed, leading provider of technology
for employee benefit solutions, announces more significant progress in
developing its business in the year ended 30 June 2005, with substantial
growth in customer numbers, turnover and recurring revenue resulting in its
first pre-tax profit.

                             Unaudited         Audited             Unaudited
                            Year ended      Year ended      Six months ended
                          30 June 2005    30 June 2004      31 December 2004
                                 £'000           £'000                 £'000
Turnover                         3,245           1,042                 1,062
EBITDA                             150            (844)                 (193)
Profit (Loss) before tax            13            (915)                 (258)
Earnings (Loss) per share          0.2p           (12p)                  (3p)
Net assets                       1,215           1,168                   910
Cash included above              1,326           1,284                   540


• Turnover increased by 212% to £3,245,925 (£1,041,559).
• The number of employees using FIX&FLEX(R), the Group's core product, as
  at 30 June 2005 was 93,213, an increase of 86%.
• New clients included Nationwide Building Society, KPMG, Logica CMG,
  Jacobs Babtie, Heineken and Wrigleys.
• Contract with Prudential UK, which manages more than 4,000 occupational
  pension schemes, to build the [email protected] system, an innovative employee
  benefit solution for the corporate market, based on Vebnet's core FIX&FLEX
  technology. IBM will host the system.
• Trading since the year end has also been very encouraging:
     o The number of implementations planned for the first half of the year is
       significantly higher than the comparable period last year.
     o FIX&FLEX(R) has been implemented, for flexible benefits, in a 14,000
       employee company.
     o The 28,000 BT employees who were issued with online Total Remuneration
       Statements in April 2004 are currently enrolling in flexible benefits 
       through FIX&FLEX(R).
     o Vebnet continues to be heavily involved in the application development
       of [email protected]

Derek Scott, Chairman of Vebnet, stated: 'This year we are delighted to report
more substantial growth in customer numbers, sales and recurring revenues,
culminating in our first pre-tax profit as an AIM-listed company. This
represents another major milestone for Vebnet.'

Referring to current trading and prospects, Derek Scott added 'Trading in the
first two months of the new financial year has also been very encouraging. We
have already seen a number of new and large customer wins for FIX&FLEX(R) and
remain confident about the Company's ability to sustain this growth momentum.'


Gerry O'Neill, CEO, Vebnet: 0131 270 5502; 07990 584096; [email protected]
Stephen Thurlow, Finance Director, Vebnet: 0131 270 5503; 07899 912522; 
[email protected]

Jonathan Wright, Seymour Pierce: 0207 107 8000; [email protected]

Charles Ponsonby, Bankside: 020 7444 4166; [email protected]

Note to Editors

Vebnet's core business is to develop, distribute and implement internet-based
technology solutions and services to support the communication, delivery and
administration of employee benefit schemes.


                              VEBNET (HOLDINGS) PLC

                              CHAIRMAN'S STATEMENT

Vebnet develops and deploys technology for the communication, management and
administration of employee benefit programmes, using internet/intranet delivery
platforms. Vebnet's core product, FIX&FLEX(R), was launched in September 2001,
and since then the product has been enhanced to include modules covering HR self
service, flexible benefits enrolment and administration, total reward
statements, and a holiday planner. The first customer implementation of FIX&FLEX
(R) was in March 2002, and at 30 June 2005 there were over 93,000 employees
using FIX&FLEX(R). FIX&FLEX(R) is sold to corporate customers through two
channels: directly via our sales and referral channel and indirectly through our
licence partner channel; partners include Watson Wyatt, KPMG People Services,
Entegria and Jardine Lloyd Thompson.

Financial Highlights

During the year to 30 June 2005, Vebnet continued to make significant progress
in developing its core business, with a substantial increase in customer
numbers, turnover and recurring revenues. Turnover increased by 212% to £3,245k
(2003 - £1,042k). Revenues from FIX&FLEX(R) grew across both licence and direct
channels. A significant part of this increase in revenue was, however,
development revenue relating to Vebnet's partnership with Prudential, announced
to the market on 19 October 2004 and subsequently updated on 10 June 2005. This
partnership is creating an employee benefit solution, branded [email protected], that
Prudential will promote to their corporate clients.

Total operating costs, including cost of sales, increased to £3,246k (2004 -
£1,980k). The increase is largely driven from the requirement to add headcount
to resource adequately the build and deployment of the [email protected] platform.

The company has delivered a pre- and post-tax profit of £13k, its first as an
AIM-listed company, compared with a loss of £915k for the year ended 30 June

Partnerships & Sales


As of 30 June 2005, 93,213 employees were connected to FIX&FLEX(R) compared with
49,975 on 30 June 2004, an increase of 86%. Our largest implementation last year
was with the Nationwide Building Society. In November 2004 Nationwide Building
Society launched a single website available to all of its 15,300 employees to
provide them with a comprehensive online reward platform. It was designed by
Vebnet, using FIX&FLEX(R) as the core platform, interfacing with Nationwide
Peoplesoft HR, Unipay payroll and the incentive management programme operated by
Grass Roots Group. The first two phases, flexible benefits and compensation and
benefit statements, were delivered in November 2004 and May 2005 respectively.
Nationwide Building Society employees have enjoyed flexible benefits for a
number of years, but the scheme was previously managed by paper based enrolment
and administration processes. Nationwide is now seeing the advantages of an
online platform with the highest ever take up in benefits as well as a more
effective means of communicating and administering them. In May 2005, using our
total reward statement module, Nationwide Building Society launched their
comprehensive on line compensation and benefit statements. Within the first
hour, over 4,000 employees had logged on to review their statements.

Our other two largest implementations were KPMG and Logica CMG, both similar
projects in size and complexity to Nationwide but one difference being that both
firms were replacing existing software systems. We believe these examples show
Vebnet is now very well placed to support large corporates who wish to work
directly with us in replacing their existing flex software and/or wish to move
the administration of their schemes in-house using FIX&FLEX(R).

At the other end of the spectrum, we have launched FIX&FLEX(R) with companies
such as James&Cowper,and Alternative Networks. The driver for these companies is
to communicate the employees' total reward more effectively and at the same time
provide a wider choice of benefits. The range of additional benefits, generally
available through salary sacrifice, gives employees opportunities to reduce the
amount of tax and national insurance paid by them.

Outside of the UK, we implemented clients located in Ireland (Heineken),
Portugal (Energias de Portugal) and Switzerland (Capital International), either
working directly with the client or through licence partners. We see increasing
interest in a single solution from multi-national companies.

The growth in the licence channel, with the exception of KPMG, however, was
below expectations. Some of our partners went through significant
re-organisations in 2005 which constrained their ability to sell. We are only
now beginning to see some strengthening of the sales pipeline from these
partners in this current financial year. By comparison, during the last
financial year, Vebnet implemented six new clients of KPMG, and we continue to
see a good pipeline of business from KPMG.

Vebnet anticipates developing proportionately more business, in the future,
through its direct and referral sales channel. Vebnet has seen a healthy trend
of organisations who wish to procure directly from Vebnet the full range of
services (including technology) to implement flexible benefits and/or online
total remuneration statements.

In terms of competition, there have been three new entrants of note to the UK
flex market over the last 12 months. While the market is growing as such new
entrants emerge, there remains a degree of confusion amongst buyers. Vebnet has
always positioned itself as having a premium product with a partner and client
base of high quality. This is something that competitors cannot necessarily
demonstrate and we believe this will increasingly become a differentiator for
Vebnet in the market, particularly for larger scheme implementations.


On 19 October 2004, Vebnet announced that it had entered into a partnership with
a major UK financial institution. This development is to build the [email protected]
platform - an employee benefit solution for the corporate market. Prudential UK,
which manages more than 4,000 occupational schemes, will promote this platform
as part of a range of employer focused solutions to its client base. IBM is
hosting the system. [email protected], which is an enhancement of Vebnet's core FIX&FLEX
(R) product, will deliver flexible benefits, total remuneration statements and
voluntary benefits to employers looking to introduce new employee benefit
packages or enhance their existing offerings.

The first phase of this development, a proof of concept, has been delivered. The
success of the proof of concept resulted in our engagement to deliver the next
phase of [email protected], which we announced to the market on 10 June 2005. This is
initially targeted at a number of early adopters. The Prudential's requirements
include porting FIX&FLEX(R) to use an Oracle database and also to interface to
its own strategic portal platform (Weblogic).

[email protected] will be marketed both directly and through Prudential UK's existing
relationships with employee benefit consultants. It will include a wide range of
products and providers for employers and their employees to choose from:
including private medical insurance, personal accident insurance, dental plans,
protection products, travel insurance, life assurance, health care cash plans,
child care, leisure and retail vouchers, as well as personal computers as part
of the Government's popular home computing initiative. In addition, [email protected]
will offer a full range of website marketing communication tools alongside
education and financial planning tools.

The development work related to [email protected] has contributed significant revenues in
the year ended 30 June 2005. While a proportion of these will be non-recurring,
we believe that, as the Prudential takes this product to market in the UK and
later overseas, development revenues will be replaced, over time, by a
combination of new development requirements, one-off set-up and implementation
fees, ongoing support costs and recurring annual licence fees.


In January 2004 Vebnet launched a new offering, works4you, in partnership with
Scottish Life, the Edinburgh based, marketing division of Royal London. This is
promoted as part of a range of retirement solutions and group pension
arrangements. Scottish Life continue to promote this product and works4you now
has over 100 live schemes.

Product Development

The development of FIX&FLEX(R) continues to be characterised by significant
functional enhancements. The functional development is primarily customer
driven. New development included payroll and provider reporting, data interface
with Human Resource systems, and security (including single sign on). Changes in
legislation also generated remunerative work including recent changes to the
provision of childcare vouchers. The increasing number of larger schemes drove
us to invest in optimising the more resource intensive administration functions,
which has resulted in some significant performance improvements for many of our

The migration to Websphere has delivered the anticipated benefits in terms of
improved performance, manageability and development productivity. This has been
evident in the implementation, on the latest release of FIX&FLEX(R), of flexible
benefits for our largest client, British Telecom. Independent penetration
testing of FIX&FLEX(R) was undertaken, which resulted in a clean bill of health.
Further evidence of the resilience of the platform was demonstrated during
disaster recovery testing when a simulated system failure was managed, with
recovery to another data centre, much faster than agreed service levels.

As the flexible benefit market grows and legislation changes around product
design and distribution, Vebnet continues to look at ways of capitalising on new
opportunities to promote and sell its technology. With the changes in PAYE and
National Insurance Contributions payable on childcare vouchers, Home Computer
Initiative (HCI) and bikes for work, we are seeing a lot of interest in the
market for a simplified flex solution just involving these three products. We
see this as a stepping stone towards full flex later on, but one that enables
employers and employees to receive real and measurable benefits starting with
lower implementation costs and faster implementation timescales. Vebnet is
currently working with its partners to determine how best to respond to this


Guy Sangster, who remained on the Board as a non-executive director following
the reverse takeover of Stockbourne plc in January 2003, will not be seeking
re-election at the 2005 AGM. We take this opportunity to thank Guy for his
contribution to the Stockbourne and Vebnet boards since 1993.

Another of our non-executive directors, Montague Samuels, who celebrated his
70th birthday earlier this year, will be seeking re-election at the 2005 AGM and
accordingly special notice to shareholders will be given to comply with the
requirements of Section 293 of the Companies Act 1985.

Current Trading

Trading since the year end has been very encouraging:

   • FIX&FLEX(R) has been implemented, for flexible benefits, in a 14,000
     employee company.
   • The 28,000 BT employees who were issued with online Total Remuneration
     Statements in April 2004 are currently enrolling in flexible benefits
     through FIX&FLEX(R).
   • Vebnet continues to be heavily involved in the applications development
     of [email protected]

The volume of new scheme implementations scheduled to go live during the first
half of the current financial year is significantly higher than the previous
financial year. This covers both direct sales and new client wins through our
licence partners. In order to manage increasing demand for its technology,
Vebnet has recruited a new Client Services Director, Mark Dixon. Mark is
responsible for new client implementations, scheme rollovers and outsourced flex
administration. In addition, Vebnet has added two new sales people, including a
new Sales Director, James Verner, who will focus on building the direct sales
channel. James brings with him a wealth of expertise in terms of both the
benefits sales process and management of a sales team. With this additional
resource, Vebnet is now in a much stronger position to promote its services
directly, and consequently there are a number of initiatives planned in the
current financial year to increase further awareness in the market of the Vebnet
brand and its FIX&FLEX(R) technology.


We will continue to focus on growing revenue both directly and through our
licence channel. We anticipate stronger growth in the direct channel and have
already added resource to drive this. For larger clients, we are seeing an
encouraging trend in sourcing multiple services from Vebnet - some of which we
will provide directly and others we will sub-contract to our partners.

A key strength of Vebnet, for larger flex implementations, is our ability to
provide development resource. This resource may be required for the development
of new functionality, interface build (with client HR and payroll systems) or
deployment of single sign-on. This is a differentiator of Vebnet compared with
its competitors. In addition, for these large clients, we have been able to
adopt many of the processes and methodologies that are utilised in the [email protected]
project, including a project office function with centralised planning, tracking
and control functions to ensure implementations can be delivered on time and to

FIX&FLEX(R) continues to be regarded as a market leading product. The quality of
existing clients and partners, we believe, remains a strong endorsement of both
our company and our technology. We believe that, through the strength of our
product and our existing and future licence agreements, we shall achieve our
objective of making FIX&FLEX(R) an industry standard platform for flexible
benefit enrolment and administration.

Reaching break even in the year ended 30 June 2005 represents another major
milestone for Vebnet. This was achieved ahead of the breakeven point publicly

Trading in the first two months of the new financial year has also been very
encouraging. We have already seen a number of new and large customer wins for
FIX&FLEX(R) and must remain confident about the Company's ability to maintain
this growth momentum..

Derek Scott                Gerry O'Neill              Stephen Thurlow
Chairman                   CEO                        CFO

                      Consolidated Profit and Loss Account
                        for the year ended 30 June 2005

                                        Unaudited        Audited    Unaudited
                                       Year ended     Year ended   Six months
                                     30 June 2005   30 June 2004  31 December
                                            £'000          £'000        £'000

TURNOVER                                    3,245          1,042        1,062

Cost of sales                               (1,62)          (473)        (490)
                                       ------------   ------------ ------------

GROSS PROFIT                                1,603            569          572

Administrative expenses                    (1,604)        (1,507)        (835)
                                       ------------   ------------ ------------

OPERATING LOSS                                 (1)          (938)        (263)

Net interest receivable and
similar income                                 14             23            5
                                       ------------   ------------ ------------

ACTIVITIES BEFORE TAXATION                     13           (915)        (258)

Tax charge on ordinary activities              --             --           --
                                       ------------   ------------ ------------

ACTIVITIES AFTER TAXATION                      13           (915)        (258)
                                       ============   ============ ============


Basic earnings/(loss) per
share                                         0.2p           (12p)         (3p)
Diluted earnings/(loss) per
share                                         0.2p           (12p)         (3p)

                           Consolidated Balance Sheet
                                 at 30 June 2005

                                  Unaudited            Audited       Unaudited
                                         At                 at              At
                               30 June 2005       30 June 2004     31 December
                                      £'000              £'000           £'000


Tangible assets                         389                289             291


Stock                                    84                 --              --
Debtors                                 967                324             747
Cash at bank and in hand              1,326              1,284             540
                                 ------------       ------------    ------------

                                      2,377              1,608           1,287

CREDITORS: amounts falling
due within one year                  (1,539)              (690)           (641)
                                 ------------       ------------    ------------

NET CURRENT ASSETS                      838                918             646
                                 ------------       ------------    ------------

LIABILITIES                           1,227              1,207             937

CREDITORS: amounts falling
due after more than one year            (12)               (39)            (27)
                                 ------------       ------------    ------------

NET ASSETS                            1,215              1,168             910
                                 ============       ============    ============


Called up share capital               8,469              8,435           8,435
Share premium account                   273                273             273
Other reserves                       (2,951)            (2,951)         (2,951)
Profit and loss account              (4,576)            (4,589)         (4,847)
                                 ------------       ------------    ------------

EQUITY SHAREHOLDERS' FUNDS            1,215              1,168             910
                                 ============       ============    ============

                        Consolidated Cash Flow Statement
                          for the year to 30 June 2005

                                          Unaudited        Audited   Unaudited
                                         Year ended     Year ended  Six months
                                       30 June 2005   30 June 2004  31 December
                                              £'000          £'000       £'000

Net cash inflow/(outflow)
from operating activities
(see below)                                     271           (603)       (665)

Returns on investments and
servicing of finance                             14             30           5

Capital expenditure and
financial investment                           (248)          (173)        (72)

Taxation                                         --             --          --

Acquisitions and disposals                       --             --          --
                                         ------------   ------------ -----------

Net cash inflow/(outflow)
before financing                                 37           (746)       (732)

Financing                                         5            765         (12)
                                         ------------   ------------ -----------

Increase/(decrease) in cash
for the year                                     42             19        (744)
                                         ============   ============ ===========

Reconciliation of net cash flow to
movement in net funds

Increase/(decrease) in cash
for the year                                     42             19        (744)

Reduction in lease
liabilities for capital
element of finance lease
payments                                         29              9          12
                                         ------------   ------------ -----------

Change in net funds arising
from cashflows                                   71             28        (732)

New finance leases                               (3)           (70)         --
                                         ------------   ------------ -----------

Movement in net funds in the
period                                           68            (42)       (732)

Net funds at the beginning of
the period                                    1,223          1,265       1,223
                                         ------------   ------------ -----------

Net funds at the end of the
period                                        1,291          1,223         491
                                         ============   ============ ===========

Operating loss                                   (1)          (938)       (263)

Depreciation and amortisation                   151             94          70

Movement in stock                               (84)            --          --

Movement in debtors                            (643)           204        (423)

Movement in creditors                           848             37         (49)
                                         ------------   ------------ -----------
Net cash inflow/(outflow)
from operating activities                       271           (603)       (665)
                                         ============   ============ ===========

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 year ended 30 June 2004 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 2005 are unaudited but 
     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 will be sent to shareholders together with 
     notice for the AGM to be held in Edinburgh on 30 November 2005 and are also
     available at the 5-9 Thistle Street Edinburgh EH2 1DF offices or from the
     Company's website at
4.   The basic earnings/(loss) per share is based on the profit on ordinary
     activities after taxation of £13k (2004: loss of £915k) and on the weighted
     average number of shares in issue during the year of 8,436,211 (2004:
5.   The diluted earnings per share is calculated as above except for the 
     inclusion within the weighted average number of shares in issue of 156,251
     potential shares deriving from share options in issue during the year,
     calculated in accordance with Financial Reporting Standard 14 'Earnings per
     Share'. For 2004, the loss attributable to ordinary shareholders and 
     weighted average number of ordinary shares for the purpose of calculating 
     the diluted earnings per ordinary share are 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 
6.   The Directors do not propose the payment of a final dividend.

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

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