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Vebnet (Hldgs) PLC (VBT)

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Thursday 13 September, 2007

Vebnet (Hldgs) PLC

Final Results

Vebnet Holdings PLC
13 September 2007


                             VEBNET (HOLDINGS) PLC
                              PRELIMINARY RESULTS
                            YEAR ENDED 30 JUNE 2007

Vebnet, the AIM-listed, leading UK provider of technology and other employee
benefit solutions, announces strong advances in its business during the year.
Substantial growth was achieved in revenues and pre-tax profits. The company's
customer base has grown by 38% and nearly 250,000 employees now use its core FIX
&FLEX(R) technology. Vebnet has profitably extended its range of services to
include consultancy, communications, helpdesk and outsourced administration. It
has successfully turned around its 2006 acquisition, 4th Contact, into profit.

                          Un-audited     Audited           Un-audited
                          Year ended     Year ended        Six months ended
                          30 June 2007   30 June 2006      31 December 2006
                          £'000             £'000                 £'000
Turnover                  5,245             3,910                 2,102
EBITDA                    532               339                   (40)
Profit/(Loss) before tax  329               180                   (100)
Earnings/(Loss) per sha   3.5p              2p                    (1p)
Net assets                2,858             2,411                 2,518
Cash in hand              1,894             2,672                 1,076

Highlights


   • Forward momentum in core FIX&FLEX(R) business in every important
    respect:

    - Revenues from core business increased in this period by 33% to £3,845k
     (£2,900k).
    - Direct channel now delivers 70% of new sales, reflecting the return on
      investment made in sales and marketing resources in 2006.
    - The number of employees using FIX&FLEX(R) during the year increased by
      42%. At 30 June 2007 this totalled to 244,924.
    - FIX&FLEX(R) customer numbers increased from 86 to 119, an increase of
      38%
    - New direct customers included BUPA (4,500 employees), Centrica (10,000
      employees) and Kingston Communications (2,500 employees).

   • Vebnet acquired 4th Contact Limited ('4th Contact') from Star Technology
    Services Limited, part of Messagelabs Group, in October 2006 for a maximum
    consideration of £661k. This acquisition, which was previously loss-making,
    contributed £613k in revenues and £43k in post tax profit for the year
    ending 30 June 2007.

   • Revenues from continuing operations increased from £3,910k to £5,245k,
    an increase of 34% despite a reduction in revenue from Prudential UK of
    £424k.

   • Vebnet added an employee helpdesk to its range of services and now
    provides telephone support to 11 of its clients. The number of clients who
    outsource administration to Vebnet increased to 17.

   • Vebnet launched the UK's first-ever payroll giving carbon offset scheme
    in partnership with PURE the Clean Planet Trust charity. This initiative
    allows individuals to calculate their domestic carbon emissions online and
    offset these through a charitable donation via payroll in a tax efficient
    way. First clients for this product have been Centrica and Swiss Re.

   • Trading since the year-end has been very encouraging:

    - Scheduled implementations for the current financial year is 22, worth
      £1,200k in new revenue.

    - In addition, our forward sales pipeline is very strong, underpinning
      both our FY08 and FY09 revenue plans.
    - Vebnet continues to look for and evaluate acquisition opportunities in
      which there are strong synergies with existing businesses and which will 
      be earnings and value enhancing.

Derek Scott, Chairman, stated: 'We have achieved much this year. The core
business has again grown substantially over the course of 12 months, and we have
exceeded market expectations in both top line and bottom line measures. '

Referring to current trading and prospects, Derek Scott added, 'Business in the
first ten weeks of the new financial year has been very encouraging. The Board
remain confident that this rate of growth will be sustainable in future years.
We continue to look out for opportunities to add shareholder value through
profitable sales growth both here in the UK and in certain key overseas
markets.'

Enquiries

Vebnet
Gerry O'Neill (CEO)                      0131 270 5502; 07990 584096
                                         [email protected]
Stephen Thurlow (CFO)                    0131 270 5503; 07899 912522
                                         [email protected]
Seymour Pierce (NOMAD and broker)
Jonathan Wright                          0207 107 8000
                                         [email protected]

Note to Editors

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

                             VEBNET (HOLDINGS) PLC
                              PRELIMINARY RESULTS
                            YEAR ENDED 30 JUNE 2007

INTRODUCTION

Vebnet specialises in the development, deployment and support of internet-based
technology for fixed and flexible employee benefits and online Total Reward
Statements (TRS). Founded in 2000 and admitted to AIM in 2003, Vebnet has
rapidly become one of the UK's leading providers of this technology. Through
extensive, specialist experience of the employee benefits market, Vebnet is
able, working alone or with partners, to identify and implement the realistic
business case behind successful use of flexible benefits. This will ensure that
clients are able to achieve a return on their investment. Vebnet launched its
core FIX&FLEX(R) product in 2002. This is both sold on a direct basis and
distributed via some of the UK's leading benefit consultants and a select group
of other strategic partners.

FINANCIAL HIGHLIGHTS

Vebnet maintained its year-on-year growth in developing its core business with
sizeable increases in customer numbers, top-line and recurring revenues, EBITDA
and pre-tax profit. Turnover from continuing operations increased by 34% to
£5,245k (2006 - £3,910k). This was despite a reduction in revenue from
Prudential UK of £424k reflecting a decision by Prudential UK not to invest
further in their worksite-marketing proposition.

Revenues from Vebnet's core FIX&FLEX(R) product increased by 33% to £3,845k
(2006 - £2,900k). Recurring licence and renewal revenue at the year-end also
increased from £1,787k pa to £2,521k pa, an increase of 41%. Vebnet generated
significant new revenues of £856k from existing clients through selling
additional services including bespoke consultancy, development, helpdesk,
communications and outsourced administration

Vebnet acquired 4th Contact Limited ('4th Contact') from Star Technology
Services Limited, part of Messagelabs Group, in October 2006 for a maximum
consideration of £661k. This acquisition, which was previously loss-making,
contributed £613k in revenues and £43k in profit for the year ending 30 June
2007. Intangible assets represent goodwill arising on the acquisition of 4th
Contact.

Operating costs increased from £3,794k to £4,990k, reflecting :

   • Our investment to extend the management, sales and marketing teams in
     the last quarter of 2006, in order to drive and support the growth in core
     business
   • 4th Contact's post-acquisition costs between 2 October 2006 and 30 June
     2007
   • Costs associated with the Prudential development project.

Vebnet's development cost base has been re-aligned to reflect Prudential UK's
decision to exit the worksite marketing business and headcount has been reduced
to a level reflecting a core business delivery model consolidated around FIX&
FLEX(R) and providing improved support for 4th Contact's client base.

The company delivered a pre- and post-tax profit of £329k (2006 - £180k) and
basic earnings per share increased from 2.0p to 3.5p.

Vebnet will adopt for the first time International Accounting Standards - IFRS,
from next financial year. The principal differences will be in the
capitalisation of certain research and development costs and amortisation of
intangible assets. Research and development costs written-off in the current
financial year were £1,429k (2006 - £1,359k). Amortisation of intangible assets
in the current year was £92k. The Directors will be investigating how much of
such expenditure will in the future be required to be capitalised and amortised
over it's useful life.

SALES

FIX&FLEX(R)

As of 30 June 2007, 244,924 employees were accessing FIX&FLEX(R) compared with
171,994 on 30 June 2006, an increase of 42%. Our pre-existing client base also
extended the number of their employees accessing FIX&FLEX(R) by approximately
14,000. Clients increased by 33 to 119. Although our client base covers most
sectors of the market, we are very strong in the Telecommunications,
Professional Services and Financial Services sectors.

Last year we allocated additional resources to implement a series of marketing
initiatives focussed on increasing the number of clients won through our direct
channel. This channel delivered 70% of new sales, representing 23 new clients
covering 37,000 employees and generating £1.1m of revenue.

New direct customers won in the UK included BUPA (4,500 employees), Centrica
(10,000 employees) and Kingston Communications (2,500 employees). Overseas we
implemented a new flex scheme in Spain for Banesto (part of Banco Santander) and
one in Hong Kong for Prudential (Asia).

Approximately 60% of our new clients had less than 1,000 employees initially
accessing FIX&FLEX(R) but with most of these organisations we believe there is
potential to extend the offering to other areas of their business and a wider
employee base. However, the majority of more recent client wins has been with
employers with more than 1,000 employees.

Working Wealth

Vebnet acquired 4th Contact (including its Working Wealth application) in
October 2006 and the business has been turned around into profitability. All
client retention and recurring revenue targets, post acquisition, are being met.
At 30 June 2007 19,138 employees were accessing Working Wealth. Since October
2006, however, two clients have switched from Working Wealth to FIX&FLEX(R) and
we expect more clients to follow in the second half of the current financial
year.

Holiday Pay Fund

During the year a separate subsidiary was created called Vebnet (Services)
Limited to act as a holiday pay fund manager for some of our existing clients.
In the year we have implemented four such arrangements, generating revenues of
£201k.

OPERATIONS

Throughout the year we restructured our organisation around business units that
are more aligned to the delivery of client services - Implementation, Helpdesk &
Administration and Scheme Rollovers. New business units will, going forward, be
managed as profit-driven business units with their own KPIs aligned to Vebnet's
overall business objectives.

As we grow the business, we have introduced a number of initiatives around key
business processes to ensure even greater efficiency in delivery and quality
across all clients. These initiatives, together with enhanced focus on
developing the talents of our people, will be the foundation of our next phase
of organic growth.

PRODUCT DEVELOPMENT

FIX&FLEX(R) continued to evolve as a product and a number key elements of
functionality were added this year to support new client implementations. One
major component was the HR importer - a critical module for accurate importing
and processing of key HR change data including leavers, joiners and lifestyle
events. This is now embedded within the set-up and configuration functionality
of FIX&FLEX(R). The result is that bespoke and complex HR interfaces can now be
built as configuration options rather than developed on an individual basis by
the software engineering team. This means faster implementation cycles and much
improved quality.

There have also been a number of architectural changes to FIX&FLEX(R) including
the implementation of our strategic web and application server architecture
(Jboss/ Linux) into the v2.33 release. We also physically moved our
infrastructure stacks to a new hosting partner, Lumison, in March 2007. This
provides our clients and partners with both increased quality and improved
resilience.

ADDITIONAL SERVICES

We have continued to grow the bespoke consulting side of our business and now
around 75% of new direct client wins includes a consultancy component. For
communications we have developed core product toolkits for clients and also
offer a customised benefits communication service involving a variety of media -
print, web and animation. Vebnet, Mercer and ING Direct, were recognised with
the Employee Benefits 2007 Award for 'Most Successful New Benefits Launch'. Much
of this was down to effective combination of both online and offline
communication to drive awareness and participation in the new ING Direct flex
scheme.

In February 2007, Vebnet added an employee helpdesk capability to its range of
services and now provides telephone support in both the enrolment cycle and
throughout the benefit year for 11 of its clients. We have also extended the
number of outsourced administration clients to 17.

Vebnet is always striving to bring innovation to the employee benefits market.
In February 2007 we launched the UK's first-ever payroll giving carbon offset
scheme in partnership with PURE the Clean Planet Trust charity. This initiative
allows individuals to calculate their domestic carbon emissions online and
offset these through a charitable donation via payroll in a tax efficient way.
First clients for this product have been Centrica and Swiss Re.

MARKET

The market for flexible benefit technology solutions in the UK continues to grow
and is buoyant. In total we estimate that on both a direct and indirect basis
Vebnet technology is used in at least 30% of new flex schemes that go live each
year in the UK - making us market leader. We believe this is a strong
endorsement of the underlying technology, the quality of our people and our
multi-channel distribution strategy.

Our sales pipeline for new flex schemes is strong and we have also been
successful in benefiting from the inevitable churn we are beginning to see,
particularly with mid to large flex schemes where clients are going out to
tender to replace an existing provider.

Our view is that superior technology for flexible benefits will not in itself be
a differentiator in the market. Differentiation will come from the combination
of market leading technology and a service offering of direct benefit to our
clients' business. We still, however, envisage that FIX&FLEX(R) will be a key
component in the standardisation of flexible benefit scheme administration. The
market remains fragmented and we believe there will be further consolidation in
the years ahead.

COMPETITION

We believe the characteristics that differentiate Vebnet from other technology
competitors are:

   • The depth of functionality, and ease of configuration, of FIX&FLEX(R).
   • The quality of our clients and partners.
   • The accumulated knowledge base and experience.
   • The quality, energy and dedicated commitment of our people.

Our main target market (employers with more than 1,000 employees), unlike the
low functionality, commoditised SME sector, is the one where our experience and
technological edge make us an ideal solution provider. We believe there will be
opportunities to extend our partner network as other employee benefit
consultants re-evaluate their present offer, establish more effective
partnerships for the provision of technology and focus on their own key strength
- consulting services. This year we added Towers Perrin as a new UK partner in
March 2007 and have already won new business with them.

Our ethos is all about creating innovative employee benefit solutions, delivered
on market leading technology and representing good value for money.

MARKET PROFILE

This year Vebnet messages have reached a circulation of well over one million
readers in printed publications alone. If you extend this to online, the actual
readership/circulation figure is inevitably much higher. Coverage of our
products and services is now extending from the employee benefit trade press to
the wider HR community via key magazines like People Management, HR Magazine and
Personnel Today.

Our Head of Flexible Benefits Consulting, Marcus Underhill, is quoted
extensively as a subject expert in employee benefits and rewards. This puts us
in a strong position to influence the shape of the market in the future, thus
ensuring that the products and services we offer are aligned to the areas of
biggest opportunity.

SENIOR MANAGEMENT TEAM AND BOARD

During the year Vebnet strengthened its management team with two further senior
appointments - Rachel Ferguson as HR Director and Pat Appleby. Rachel,
previously a senior HR professional at Prudential (UK), will have both an
internal facing role, driving a number of HR initiatives to support the strong
growth Vebnet is experiencing, as well as key client facing work. Pat, who
previously worked at Mercer HR Consulting, is responsible for the delivery of
benefit communication services to clients.

Finally, Evan Davidge, a leading industry expert on reward strategy and
implementation, was appointed as a consultant to Vebnet in August 2006 and
Graeme Bissett, a leading corporate financier, was appointed as a strategic
advisor to the Vebnet (Holdings) plc Board in February 2007.

CURRENT TRADING & OUTLOOK

Business in the first ten weeks of the new financial year has also been very
encouraging:

   • Scheduled implementations for the current financial year is 22, adding
     at least a further 65,000 employees and £1,200k in new revenue.
   • A series of core process re-engineering activities and internal HR
     initiatives have been introduced and are progressing well as we scale the
     business.

Our forward sales pipeline is very strong, underpinning both our FY08 and FY09
revenue plans. We are seeing further momentum in Vebnet's core business and the
Board remains confident that this rate of growth will be sustainable in future
years. We continue to look out for opportunities to add shareholder value,
through profitable sales growth in both the UK and in certain key overseas
markets, and also by seeking synergistic acquisitions which will be both
earnings and value enhancing.



Derek Scott
Chairman 13 September 2007



Unaudited Consolidated Profit and Loss Account
for the year ended 30 June 2007

                                     Unaudited         Unaudited       Audited
                                    Year ended  Six months ended    Year ended
                                  30 June 2007  31 December 2006  30 June 2006
                                         £'000             £'000         £'000

TURNOVER
Existing Operations                      4,632             1,873         3,910
Acquisitions                               613               229            --
                                    ------------      ------------ ------------

Continuing Operations                    5,245             2,102         3,910
Cost of sales                           (2,295)           (1,102)       (1,595)
                                    ------------      ------------  ------------

GROSS PROFIT                             2,950             1,000         2,315
Administrative expenses                 (2,695)           (1,147)       (2,199)
                                    ------------      ------------  ------------

OPERATING PROFIT/(LOSS)
Existing Operations                        212              (177)          116
Acquisitions                                43                30            --
                                    ------------      ------------ ------------

Continuing Operations                      255              (147)          116
Interest payable and similar
charges                                     (1)                -            (3)
Interest receivable and
similar income                              75                47            67
                                    ------------      ------------  ------------

PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE TAXATION                 329              (100)          180

Tax (charge) on ordinary                   --            --                --
activities                         ------------  ------------      ------------

PROFIT/(LOSS) ON ORDINARY
ACTIVITIES AFTER TAXATION                  329              (100)          180
                                    ============      ============  ============

EARNINGS/(LOSS) PER SHARE
Basic earnings/(loss) per
share                                      3.5p               (1p)         2.0p
Diluted earnings/(loss) per
share                                      3.5p               (1p)         2.0p

Statement of total recognised gains and losses

There were no recognised gains or losses in the current or prior year other than
those included in the profit and loss account.

Unaudited Consolidated Balance Sheet
at 30 June 2007



                                Unaudited          Unaudited          Audited
                                       At                 At               at
                             30 June 2007   31 December 2006     30 June 2006
                                    £'000              £'000            £'000

FIXED ASSETS
Intangible assets                     649                --               --
Tangible assets                       334                999              303
                               ------------       ------------     ------------

                                      983                999              303

CURRENT ASSETS
Debtors                             2,262              2,087              888
Cash at bank and in hand            1,894              1,076            2,672
                               ------------       ------------     ------------

                                    4,156              3,163            3,560

CREDITORS: amounts falling
due within one year                (2,281)            (1,644)          (1,452)
                               ------------       ------------     ------------

NET CURRENT ASSETS                  1,875              1,519            2,108
                               ------------       ------------     ------------

TOTAL ASSETS LESS CURRENT
LIABILITIES                         2,858              1,519            2,411
                               ------------       ------------     ------------

NET ASSETS                          2,858              2,518            2,411
                               ============       ============     ============

CAPITAL AND RESERVES
Called up share capital             9,324              9,324            9,178
Share premium account                 639                640              580
Other reserves                     (2,951)            (2,950)          (2,951)
Profit and loss account            (4,154)            (4,496)          (4,396)
                               ------------       ------------     ------------

EQUITY SHAREHOLDERS' FUNDS          2,858              2,518            2,411
                               ============       ============     ============




Unaudited Consolidated Cash Flow Statement
for the year ended 30 June 2007

                                              Unaudited   Unaudited    Audited
                                                   Year  Six months       Year
                                                  ended       ended      ended
                                                30 June 31 December    30 June
                                                   2007        2006       2006
                                                  £'000       £'000      £'000

Net cash (outflow)/inflow
from operating activities                           (77)     (1,072)       438

Returns on investments and
servicing of finance                                 89          61         53

Capital expenditure and
financial investment                               (224)        (68)      (137)

Acquisitions and disposals                         (468)       (468)        --
                                              ----------- ----------- ----------

Net cash (outflow)/inflow
before financing                                   (680)     (1,547)       354

Financing                                           (98)        (49)       992
                                              ----------- ----------- ----------

(Decrease)/increase in cash
for the period                                     (778)     (1,596)     1,346
                                              =========== =========== ==========

Reconciliation of net cash flow to movement
in net funds

(Decrease)/increase in cash
in the period                                      (778)     (1,596)     1,346

Cash outflow from capital
element of finance lease
payments                                             11           8         24
                                              ----------- ----------- ----------

Movement in net funds in the
period                                             (767)     (1,588)     1,370

Net funds at the beginning of
the period                                        2,661       2,661      1,291
                                              ----------- ----------- ----------

Net funds at the end of the
period                                            1,894       1,073      2,661
                                              =========== =========== ==========

Reconciliation of operating profit/(loss) to
net cash inflow from operating activities
Operating profit/(loss)                             255        (147)       116
Depreciation and amortisation                       278         107        223
Movement in debtors                              (1,383)     (1,167)       174
Movement in creditors                               773         135        (75)
                                              ----------- ----------- ----------
Net cash (outflow)/inflow
from operating activities                           (77)     (1,072)       438
                                              =========== =========== ==========

                         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 2006 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 2007 are unaudited
and have been prepared on the basis of the accounting policies set out in the
audited report and accounts for the year ended 30 June 2006.
3.      Copies of the Annual Accounts will be sent to shareholders together with
notice for the AGM to be held in Edinburgh on 28 November 2007 and will be
available at the Company's office, 5-9 Thistle Street, Edinburgh, EH2 1DF, or
from the Company's website at www.vebnet.com.
4.      There is no taxation charge for the period due to the availability of
brought forward trading losses.
5.      The basic earnings per share is based on the profit on ordinary
activities after taxation of £329k (2006: £180k) and on the weighted average
number of shares in issue during the year of 9,324k (2006: 9,178k).
6.      The diluted earnings per share is calculated as above except for the
inclusion within the weighted average number of shares in issue of 33,296
potential shares deriving from share options in issue during the year,
calculated in accordance with Financial Reporting Standard 22 'Earnings per
Share'.
7.      The Directors do not propose the payment of a final dividend.
8.      The Preliminary Results were approved by the Board of Directors on the
12 September 2007.




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