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Vebnet (Hldgs) PLC (VBT)

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Wednesday 22 February, 2006

Vebnet (Hldgs) PLC

Interim Results

Vebnet Holdings PLC
22 February 2006




                  VEBNET (HOLDINGS) PLC - INTERIM ANNOUNCEMENT
                                        

Vebnet, the Edinburgh-based, AIM-traded leading provider of internet-based
technology for employee flexible benefit schemes, announces a near doubling of
turnover in the half year to 31 December 2005.


FINANCIAL HIGHLIGHTS


• Turnover totalled £2.1m (2004: £1.1m).

• The pre-tax profit of £0.1m compares with a loss of £0.3m, and
earnings per share of 1p compares with a loss per share of 3p.

• Net cash at 31 December 2005 of £1.35m represents an increase of 2%
since 30 June 2005, and excludes £1.04m of new money raised in the placing
announced on 22 December 2005 which was received after the balance sheet date.

• The placing, which was over subscribed, increased Liontrust's holding
to 10.4% and introduced three new institutional holders, including J P Morgan,
which now owns 8.1%, materially strengthening the institutional register.
Founding investor, Cross Atlantic, still retains an interest of 18.4%.


COMMERCIAL HIGHLIGHTS


• In the period, 18 new clients were added, bringing the number of
clients using FIX&FLEX(R), the Group's core product, as at 31 December 2005 to 67,
while the number of employees accessing FIX&FLEX(R) increased by 44% to 134,276 -
roughly doubling in a year.

• New client implementations included Britannia Building Society and
Tenon.

• Development revenue in this period on the Prudential Flexible Benefits
Solution moderated as we concluded Phase B of the build. Discussions are ongoing
with the Prudential on the next phase of development which may result in
additional revenue later this calendar year.

• Trading since the half year end has also been very encouraging. Seven
new FIX&FLEX(R) clients have been won. In addition, 21 new implementations of FIX&
FLEX(R) are scheduled for the second half, including a global investment bank
with over 12,000 employees.

Derek Scott, Chairman, commented: 'We are pleased with the progress made in the
last six months. Our core performance metrics - recurring revenues, new client
wins and employee enrolment numbers - continue to exhibit strong growth. We have
also strengthened the balance sheet and attracted three new institutional
investors in the process.


'Vebnet is enjoying good visibility of turnover and the Board is confident of
meeting market expectations of increased turnover for the year to 30 June 2006.
In addition, we expect the good commercial progress achieved in the first half
and in subsequent weeks to continue through the second half and beyond.'


Gerry O'Neill, Chief Executive, added: 'The progress Vebnet has made in the
first half reinforces our position as the leading provider of employee benefit
technology solutions. The quality of our client and partner base clearly
differentiates us in the market.'


ENQUIRIES:

Vebnet
Gerry O'Neill (CEO)                                               0131-270 5502;
                                                                  07990-584 096;
                                                              [email protected]
Stephen Thurlow (Finance Director)                                0131-270 5503;
                                                                  07899-912 522;
                                                            [email protected]
Seymour Pierce (NOMAD and broker)                                 020-7107 8000;

Jonathan Wright                                [email protected]
Bankside Consultants (PR)                                         020-7367 8851;

Charles Ponsonby                                  [email protected]



                             VEBNET (HOLDINGS) PLC


INTERIM ANNOUNCEMENT



The half year to 31 December 2005 was a further period of financial and
commercial progress.


FINANCIAL REVIEW


In the half year, turnover virtually doubled to £2,077,000 (2004: £1,062,000).


EBITDA increased to £164,000 (2004: a loss of £193,000). An operating loss of
£263,000 was transformed into an operating profit of £51,000, despite an
increase in administrative expenses to £1,119,000 from £835,000 as a result of
additional development costs required to build the Prudential Flexible Benefits
Solution and an increase in the UK sales and marketing team. With a small amount
of interest receivable in both periods, a pre-tax loss of £258,000 became a
pre-tax profit of £68,000. Earnings per share of 1p compared with a loss per
share of 3p.


Net cash at 31 December 2005 totalled £1,351,000, an increase of £25,000 since
30 June 2005. The closing balance does not include the £1,040,000 of new money
raised by the placing announced on 22 December 2005, in which 699,000 new shares
and 820,000 existing shares were placed at 150p per share. 750,000 of the latter
were sold by Cross Atlantic Technology Fund LP, the U.S. venture capitalist
which was Vebnet's principal initial funder and remains its largest shareholder,
with 18.4%. As a result of the placing, Liontrust took its holding to 10.4% and
three new institutional holders were introduced, including J P Morgan, which now
holds 8.1%, thus materially strengthening the institutional aspect of the share
register.


COMMERCIAL REVIEW


In the year to 30 June 2005, approximately one-half of all turnover comprised
development revenue relating to Vebnet's partnership with Prudential UK to build
the Prudential Flexible Benefits Solution, an innovative employee benefit
platform for the corporate market based on Vebnet's core FIX&FLEX(R) technology.
In the half year to 31 December 2005, Prudential was again the largest single
source of revenue, albeit with a reduced share.


In the half year, BT was again another major client, with 28,000 employees
enrolling for flexible benefits. Previously, Vebnet had provided this same
employee base with online Total Reward Statements. Other large clients whose UK
employees enrolled in flexible benefits on FIX&FLEX(R) included two major global
accountancy practices.


Eighteen new clients were added in the half year, bringing the total number of
clients using FIX&FLEX(R) as at 31 December 2005 to 67. New UK client
implementations included Britannia Building Society and Tenon.


The number of employees accessing FIX&FLEX(R) as at 31 December 2005 was 134,276,
which compares with 93,213 at 30 June 2005 and 68,759 at 31 December 2004 -
roughly doubling in a year. In this way, the Group's recurring revenues are
significantly stepping up.


Vebnet sells both directly and in partnership with organisations which are
active intermediaries in the employee benefits market. Direct clients have
tended to be the larger clients. However, partnership business remains a key
part of Vebnet's distribution strategy, with KPMG, Watson Wyatt and Entegria as
major introducers of new business.


MARKET AND MARKET POSITION


We continue to see a healthy interest from organisations wishing to introduce
more flexibility in terms of the structure of their benefit schemes. Some
companies opt to introduce online Total Reward Statements as a pre-cursor to
fully flexible benefits.


With the changes in PAYE and National Insurance contributions payable on
childcare vouchers, home computer initiative (HCI) and bikes for work, Vebnet
introduced a simplified flex configuration called SmartFlexTM. The first three
SmartFlexTM schemes are now being implemented. This is a way for companies to
introduce a degree of flexibility in benefit choice whilst generating
quantifiable savings for both employer and employees.


The quality of our client and partner bases has increasingly become a
differentiator in the market. As a result, Vebnet is being invited to tender
more and more on larger flex schemes - both new schemes and existing schemes,
currently with competitors.


Looking to the future, we have identified an opportunity for a new strategic
platform incorporating multi-company, multi-currency and multi-language
functionality. We are currently in the process of developing the high level
architectural and functional design for this platform.


CURRENT TRADING AND PROSPECTS


Trading since the half year end has also been very encouraging. Seven new FIX&
FLEX(R) clients have been won. In addition, 21 new implementations of FIX&FLEX(R)
are scheduled for the second half, including a global investment bank with over
12,000 employees.


Vebnet continues to enjoy good visibility of turnover and the Board is confident
of meeting market expectations of increased turnover for the year to 30 June
2006 irrespective of the second half contribution from the Prudential. In
addition, the Board expects the good commercial progress achieved in the first
half and subsequent weeks to continue through the second half and beyond.










Derek Scott

Chairman                                                 22 February 2006





                 Unaudited Consolidated Profit and Loss Account

                     for the six months to 31 December 2005




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

TURNOVER                                  2,077           1,062         3,245

Cost of sales                              (907)           (490)       (1,642)
                                     ------------    ------------  ------------

GROSS PROFIT                              1,170             572         1,603

Administrative expenses                  (1,119)           (835)       (1,604)
                                     ------------    ------------  ------------

OPERATING PROFIT/(LOSS)                      51            (263)           (1)

Net interest receivable
and similar income                           17               5            14
                                     ------------    ------------  ------------

PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE
TAXATION                                     68            (258)           13

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

PROFIT/(LOSS) ON ORDINARY
ACTIVITIES AFTER TAXATION                    68            (258)           13
                                     ============    ============  ============

EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per
share                                         1p             (3p)         0.2p


                      Unaudited Consolidated Balance Sheet

                              at 31 December 2005
                                        



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

FIXED ASSETS

Tangible assets                       396                  291             389

CURRENT ASSETS

Debtors                               858                  747           1,051
Cash at bank and in hand            1,351                  540           1,326
                               ------------         ------------    ------------

                                    2,209                1,287           2,377

CREDITORS: amounts
falling due within one
year                               (1,315)                (641)         (1,539)
                               ------------         ------------    ------------

NET CURRENT ASSETS                    894                  646             838
                               ------------         ------------    ------------

TOTAL ASSETS LESS CURRENT
LIABILITIES                         1,290                  937           1,227

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

NET ASSETS                          1,290                  910           1,215
                               ============         ============    ============

CAPITAL AND RESERVES

Called up share capital             8,475                8,435           8,469
Share premium account                 273                  273             273
Other reserves                     (2,950)              (2,951)         (2,951)
Profit and loss account            (4,508)              (4,847)         (4,576)
                               ------------         ------------    ------------

EQUITY SHAREHOLDERS'
FUNDS                               1,290                  910           1,215
                               ============         ============    ============


                   Unaudited Consolidated Cash Flow Statement

                     for the six months to 31 December 2005



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

Net cash inflow/(outflow)
from operating activities                       137          (665)         271

Returns on investments
and servicing of finance                         18             5           14

Capital expenditure and
financial investment                           (120)          (72)        (248)

Taxation                                         --            --           --

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

Net cash inflow/(outflow)
before financing                                 35          (732)          37

Financing                                        (9)          (12)           5
                                         ------------  ------------  -----------

Increase/(decrease) in
cash for the period                              26          (744)          42
                                         ============  ============  ===========

Reconciliation of net cash flow to
movement in net funds

Increase/(decrease) in
cash in the period                               26          (744)          42

Cash outflow from capital
element of finance lease
payments                                         16            12           29
                                         ------------  ------------  -----------

Change in net funds
arising from cashflows                           42          (732)          71

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

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

Net funds at the
beginning of the period                       1,291         1,223        1,223
                                         ------------  ------------  -----------

Net funds at the end of
the period                                    1,333           491        1,291
                                         ============  ============  ===========

Operating profit/(loss)                          51          (263)          (1)

Depreciation and
amortisation                                    113            70          151

Movement in stock                                84            --          (84)

Movement in debtors                             108          (423)        (643)

Movement in creditors                          (219)          (49)         848
                                         ------------  ------------  -----------
Net cash inflow/(outflow)
from operating activities                       137          (665)         271
                                         ============  ============  ===========



                     Notes to the Interim Results Statement


1.       The 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 2005 have been filed with the Registrar of Companies. The
Auditors' Report on these accounts was unqualified.

2.       This Interim Statement for the six months ended 31 December 2005 is
unaudited and has been prepared on the basis of the accounting policies set out
in the audited report and accounts for the year ended 30 June 2005.

3.       Copies of the Interim Report are being sent to shareholders and are
also available at the Company's office, 5-9 Thistle Street, Edinburgh, EH2 1DF,
or from the Company's website at www.vebnet.com.

4.       Earnings per share is based on the profit on ordinary activities after
taxation of £68,000 (2004: loss of £258,000) and on the weighted average number
of shares in the period of 8,470,917 (2004: 8,435,389).

5.       The Directors have not declared an interim dividend.







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