ANITE GROUP
Preliminary results for the year ended 30 April 2003
Chairman's Statement
Introduction
Anite is a worldwide IT solutions and services company. We provide
solutions, technology and business consulting, managed services and
systems integration. By providing repeatable solutions to the
public sector, travel industry, mobile telecoms and finance markets
worldwide, we are critical to our customers' operations. We are
leaders in several of our markets. The Group employs around 2,100
staff primarily based in the UK, France, Germany and the
Netherlands, with representation in a total of eleven countries
around the world.
A year in transition
As was indicated at the time of the interim results and at the
recent trading statement, the Group has been undergoing a
significant period of transition with associated one off issues in
a very challenging market. Our underlying performance for the year
(profit before tax of ongoing businesses, before exceptional items
and restructuring costs, and amortisation of goodwill) was down
despite an increase in orders and sales.
Accordingly, the Board has identified the problems facing the Group
and has taken action to improve its disappointing performance,
which has been reflected in the share price over the last two
years. These actions will take time to complete and the benefits
are expected to accrue over the next couple of years.
Against this background we have examined the business in depth,
looking critically at our cost base, the structure and management
of the Group. We have also reviewed the value of companies and
assets recently acquired. As a result, there has been a significant
goodwill write off, non-cash asset write downs and other one off
exceptional costs incurred leading to a significant overall loss
being reported. Although operational restructuring will continue
into the current year, the Board is now satisfied with the carrying
value of goodwill.
During the year some key issues were resolved, namely the earnout
renegotiations and the appointments of a new Finance Director and
interim Chief Executive. These herald a new period in the Group's
development. As markets remain tough with no immediate signs of
improvement, management is focused this year on cost control and
structuring the business to take advantage of our strong market
positions thus positioning the Group for recovery. The current
year will be one of consolidation.
Results
Underlying profits before tax (on ongoing businesses, before
exceptional items and restructuring costs, amortisation and
impairment of goodwill and closed businesses) fell to £18.6m (2002:
£30.0m). These profits were struck after higher development
spending (largely in the Public Sector) and higher interest charges
due to earnout payments (respectively increases of £4.0m and
£1.3m). Erosion of profits in Public Sector and steady performances
by the other three businesses, led to a reduction in operating
profits for the ongoing businesses (before goodwill and
exceptionals) to £21.0m (2002: £31.1m) and lower operating margins
of 10.0% (2002: 16.3%).
The total reported pre-tax loss (after amortisation and exceptional
items) of £112.5m (2002: profit £5.8m) reflects a major review of
goodwill relating to past acquisitions that was undertaken at both
the interim and full year stages. These reviews resulted in a
total impairment charge of £74.7m being included in these results.
It also reflects a number of exceptional items totalling £32.2m
relating to losses and closures of businesses, redundancy costs and
other write offs.
Adjusted basic earnings per share (ongoing businesses, before
goodwill amortisation and exceptional items) were 4.3p (2002:
7.8p), in part reflecting an increase of 11% in the number of
shares in issue. A maximum further increase in shares in issue of
5% is estimated in the current year. Total losses per share after
goodwill amortisation and exceptional items were 34.2p (2002:
losses per share 0.6p).
Turnover growth of 10% (of ongoing businesses) was achieved driven
by healthy order intake and by contributions from acquisitions made
in the previous financial year. Public Sector, Telecoms and Travel
all grew their revenues, whilst Consultancy fell slightly. The
Group's order intake totalled £220m in the year, which has resulted
in our annualised managed services and support revenues increasing
from 18% to 21% of total revenues.
Strong cash generation, which is a characteristic of our business,
has enabled the Group to pay out £26.8m of acquisition and earnout
commitments whilst keeping well within its total banking facilities
of £53.7m. Year-end net debt thus increased from £11.5m at 30 April
2002 to £16.3m at 30 April 2003, representing gearing of 27.5%
(2002: 6.3%). Net debt is anticipated to peak in the first half due
to lower profitability, cash restructuring costs and earnout
payments. Total earnout payments including loan notes for the
coming year are estimated at £13.9m of which £11m is anticipated to
be paid in the first half. Interest cover was 9 times.
During the year there has been a headcount reduction of around 100
(ongoing businesses), at a cost of £2.8m included in the
exceptional items. In the current year a headcount reduction of a
minimum 130 is being implemented across the Group (principally in
Public Sector, Telecoms and Travel) at a cost of approximately
£2.5m, principally in the first half.
Acquisitions and disposals
During the year, the Group completed just one small acquisition,
that of CME in June 2002 at a total consideration including earnout
of up to £0.9m. CME provides software solutions for the police
force and is now part of our Public Sector division. No further
acquisitions are expected.
On 1 January 2003 the Group completed the sale of its loss making
German subsidiary, Anite Consulting GmbH ('ACG'), previously knownas GMO and part of its Consultancy division, to its management
team. The disposal has enabled Anite to focus its continuing
management and resources in Germany on developing the faster
growing and higher margin elements of its Consultancy division
whilst eliminating the substantial recent losses made by ACG.
During the current year, we are reviewing certain peripheral
businesses within the Group and if appropriate will consider
disposing of some of these, which we do not expect to be material
in the context of the Group.
Earnouts
During the year 100% of the Group's total potential earnout
liabilities have been realised, renegotiated or capped.
The Board
As previously announced, there have been major board changes during
the year, which are intended to strengthen the Group's management.
On 22 May 2003, the Board announced that David Thorpe, a non-
executive Director since June 2002, had assumed the
responsibilities of Chief Executive for an interim period, intended
to be for no more than six months, as John Hawkins had ceased to be
a director and Chief Executive of the Company. A search for a new
Chief Executive commenced immediately and we will provide a further
update at the time of the Group's AGM on 24 September.
David until recently ran a significant international business and
has had strong public sector experience during his 25 years in the
IT software, services and outsourcing market, having served as
Corporate Vice President and President of Europe (a US$4bn
business) for Electronic Data Systems Inc ('EDS'), as well as beingUK Chief Executive and European Chief Operating Officer.
Following an announcement on 19 January 2003, Christopher Humphrey
joined the Group as its new Group Finance Director with effect from
3 February 2003, filling the position previously held by Simon
Hunt, who resigned on 4 September 2002. Christopher was Group
Finance Director of Critchley Group plc, from 1987-2000, during
which period the business floated on the stock market, undertook
fund raisings and acquisitions, before being sold.
Dividend policy
The Board has stated that rather than pay dividends, its free cash
flow should be reinvested in the business to ensure the Group is
not exposed to higher gearing whilst still making significant
earnout payments. In coming years as these earnout payments reduce,
it will be appropriate to review this policy.
Summary
As indicated, the year under review has been a year of transition
for Anite and the current financial year is expected to be one of
consolidation. The Board remains confident, however, in the
fundamental strengths of the business, its people, its strong
market positions, cash flow and long-term prospects. Once the
restructuring has been completed, we look forward to renewed
growth.
A further update on the Group's progress will be provided at the
Annual General Meeting on 24 September.
The interim Chief Executive, in his report that follows, outlines
the operational review that the Group has recently undertaken and
the updated strategy that is expected to drive Anite's recovery.
Alec Daly
Chairman
Chief Executive's Operating Review
Operational review and strategy
In the last few weeks, it has been the Board's main priority to
review the operating businesses and to update the current business
plan, such that the new Chief Executive, on appointment, will
inherit both a simplified structure and a more defined business
strategy, which can then be developed further to increase
shareholder value.
In short, our review has shown that against a background of slow
growth coupled with changes to our markets, it remains vital to
position the Group in the areas of greatest opportunity within each
of its businesses. These are not only in Public Sector, but also
across all our continuing businesses where we will utilise our
experience and market leading applications to deliver full
solutions and business process services. We will reduce our costs
by sourcing development and support work from lower cost countries.
The Group has strong positions in its key market sectors selling
its mission critical software applications, but needs to increase
its revenue by providing additional services and additionally
managing those software applications for its customers. We are
also seeking to develop the Group's international activities by
taking advantage of greater business integration.
The Group's strategy is therefore to strengthen its positions in
each of its chosen market sectors by providing a complete package
of services to its customers, from consultancy and software
applications to managed services.
In the immediate future we will focus on:
> Selling more services to our customers
> Creating and expanding alliances with other software companies
> Driving cost reduction and improving profitability, thus
reducing debt
These plans are already well under way, although the main benefits
are unlikely to flow through until the second half of the current
financial year and beyond. We are confident that they will restore
Anite's position and financial performance, thereby enhancing
shareholder value.
Divisional performance
Divisional performance* before Group central costs and interest was
as follows:
> Public Sector: turnover £74.7m, operating profits £0.0m, margin nil
> Travel: turnover £32.0m, operating profits £6.8m, margin 21.3%
> Telecoms: turnover £37.1m, operating profits £7.5m, margin 20.2%
> International: turnover £65.5m, operating profits £9.6m, margin 14.7%
*All references to performance in the following divisional reviews
relates to ongoing businesses (before exceptional items and
restructuring costs, closed businesses, amortisation and impairment
of goodwill).
Public Sector
Public Sector has had a difficult year despite seeing strong
revenue growth (both organic and from recent acquisitions).
Problems resulting from its management structure, poor integration
of acquisitions, significantly higher levels of development
spending and other costs and delays in the completion of products
in the local government area, have together impacted the business,
removing profits. As a result, the Public Sector has been
restructured to provide greater management and operational
visibility and accountability, resulting in redundancies and other
overhead reductions. This has also led to a review of our
activities in this area and as a result certain of them have been
closed.
Despite the problems in its local government operations, Public
Sector's underlying strong market position has enabled it to
increase order intake by 24% to £94.0m, and revenue was up 36% at
£74.7m, although operating profits fell to a breakeven position
(2002: £5.2m).
There were several notable client successes during the year. These
included the sales of the Pericles suite to a consortium of five
Derbyshire and Staffordshire authorities and the multi product sale
to the State of Victoria Office of Housing, and some Police and
e.government projects (the latter addressing the government's 2005
target for conducting government business electronically) that
reflected Anite's specialist experience and systems integration
capability. More recent successes have included winning and
successfully delivering (for the recent council elections on 1 May
2003) e.voting pilots for the Office of the Deputy Prime Minister
and the Surrey Alert contract, a system for co-ordination of local
and emergency agencies in event of a major disaster. This week the
newly formed Independent Police Complaints Commission has appointed
Anite as its preferred supplier to develop and manage a case
tracking system.
Long-term prospects for the business remain positive as the public
sector market continues to invest in IT with key drivers including
the government's 2005 e.government target and the continued focus
on better value and efficiency. Anite's reputation and strong
skill base position us well to capitalise on both market buoyancy
and customers' focus on risk controlled, value for money, IT.
The current year is therefore expected to see a similar pattern of
influences as last year with a focus on its cost base and
structure, whilst completing product development. This will have
an inevitable impact on short term margins and therefore the
underlying margins we have targeted from Public Sector will be only
realisable once the investment in new products has finished and
associated development spending begins to wind down.
Travel
Our Travel business is focused to provide managed services and
solutions to the European tour operating, ferry and cruise
marketplace. During the year the business benefited from the
integration of the FSS acquisition (previously a competitor, which
was acquired in December 2001) and cost savings made. Its
performance for the year as a whole was therefore satisfactory,
although it deteriorated as market conditions progressively
worsened into one of the most uncertain periods ever experienced by
the travel industry. Operating profits were £6.8m (2002: £5.8m) on
sales 7% higher at £32.0m (2002: £29.8m).
During the year Carus, FSS and OpenTur, all recent acquisitions,
were re-branded, the former two as Anite and the latter as Anite
OpenTur. Our long-term managed services contract for MyTravel
continues to be run successfully, and without interruption and this
customer in return continues to meet all its obligations to us.
First Choice, our largest travel customer, has recently renewed two
contracts for 2 and 3 years respectively, with significant multi-
million pound revenues expected over that period.
We are continuing to reorganise our travel businesses to reflect a
more integrated business and to realign our staff numbers to our
forecast revenue. Performance in the current year is expected to
continue to be impacted by the tough travel market conditions which
are inevitably leading to the deferral of customer projects,
mitigated in part by our strong market position and cost cutting.
Telecoms
The Telecoms business has grown its revenues in a tough market.
Sales were 5% up at £37.1m (2002: £35.5m) with operating profits of
£7.5m (2002: £11.6m). However, overall divisional profitability was
impacted by a number of industry and operating issues during the
year.
The core testing business, which represents over 90% of the
turnover of this business, continues to grow its revenues but
reported a reduction in its profitability for the second half and
the year as a whole due to pricing pressure in a competitive market
for the industry as a whole. 2G sales remained strong and
development investment in 3G solutions continued to be high. The
take up in 3G solutions is slower than anticipated and given
uncertainties surrounding the timing of market take up, an
exceptional charge has been taken for forward supply commitments.
Anite Calculus, the other part of the ongoing Telecoms business,
returned to profit in the second half, but profits fell for the
year as a whole.
As part of the Group's restructuring, we have exited from the loss
making Networks' products business through a combination of
closure, and disposal (of the WAM value added data services
monitoring product and other IPR), thus allowing management to
focus on the two ongoing Telecoms businesses. Since the year-end we
have moved some of our legacy product support and maintenance
activities to low cost facilities offshore.
Profitability in the short term is expected to be held back because
of continued sector issues as outlined above and first half
restructuring costs, against a background of uncertainty in the
rollout of 3G, although the division is expected to be capable of
sustaining good levels of profitability.
International
Outside the UK, the International business now consists of our
overseas consultancy and applications management and support
operations, being principally based in France, Germany and the
Netherlands. The ongoing businesses in this area remained
profitable, a creditable performance against a tough trading
background, with good margins being achieved. However, as expected
overall ongoing operating profits fell to £9.6m (2002: £12.3m).
Revenues fell by 6% to £65.5m (2002: £70.0m).
The business has benefited from its applications and management
support contracts, public sector contracts and annualised
application management contracts in Germany. The continuing German
businesses performed well following the sale completed on 1 January
2003 of our loss making German subsidiary, ACG, which was sold to
its management team.
The overall market for consultancy services remains difficult with
continued pressure on day rates, especially in the Netherlands. We
therefore continue to focus on utilisation levels and costs, in
order to sustain profitability and generate cash.
Development expenditure and offshore development
Total development spending in the year as a whole was £10.2m (2002:
£6.2m), largely focused on Public Sector and Telecoms. The level
of development spending is expected to increase by around 25% in
the current year.
It was decided not to proceed with the acquisition of Dati, the
Latvian based software development group. This resulted in a write
off of the option and associated accumulated costs of £0.9m.
However, we continue to trade with Dati and to utilise their
development teams who are involved with a number of projects
particularly in the Public Sector and are in discussions to see how
this strategic partnership can be enhanced.
We continue to seek out opportunities to move elements of our
development and support work offshore to ensure we remain
competitive.
Order Book
The Group has seen strong order intake of £206m for the year just
ended, with a healthy Group book to bill ratio of 1.0x and an
opening order book of £93m of which approximately £76m relates to
the current year. The order intake last year was as follows:
> Public Sector - an order intake to revenue ratio of 1.1x
giving the business a strong opening order book of £49m, up 27%
> Travel - an order intake to revenue ratio of 0.9x. First
Choice have recently renewed their relationship with Anite for a
further 3 years
> Telecoms - an order intake to revenue ratio of 1.0x
> International - an order intake to revenue ratio of 0.8x.
Approximately 25% of consultancy sales are represented by
applications management and support on annual contracts
Outlook
The year under review has been one of major changes for Anite and
the current financial year is expected to be one of consolidation.
The current year has started slowly but in line with our
expectations. As markets remain tough with no immediate signs of
improvement, a similar trading pattern to last year is expected in
the current year. First half profits will be less than those of the
first half of the previous year as a result of further
restructuring and higher development spending, especially in
respect of our Public Sector applications, which will enable us to
exploit the opportunities available in this market.
Management's task this year is to ensure that we take advantage of
any upturn and that Public Sector delivers its potential through
operational focus and resultant cost reductions.
A further update will be provided on the Group's progress at the
time of the Annual General Meeting on 24 September.
David Thorpe
Interim Chief Executive
Finance Director's Review
Overview
Group revenues of ongoing businesses increased by 10% to £209.3m
(2002: £190.2m), which was attributable to acquisitions made by the
Group since 1 May 2001. Closed businesses' revenues amounted to
£7.1m principally relating to the disposal of ACG and the closure
of some smaller businesses, respectively in Public Sector and
Telecoms.
Group underlying profits before tax (ongoing businesses, before
goodwill amortisation and impairment, closed businesses and
exceptional items) fell during the year reflecting a combination of
tough market conditions, which led to margin pressure in many of
the Group's businesses. Headline losses reflected a number of one
off issues during the year as the Group sought to resolve its
problems and position itself for recovery. These items are
discussed under the sections below.
Exceptional items, closed businesses and goodwill
Total exceptional items, closed businesses and goodwill are analysed below.
Exceptional Items
Exceptional items shown before operating profit £'000 £'000
Contract and purchasing provisions 3,600
Redundancy and restructuring costs 1,940
Severance of former FD and recruitment fees for new FD 854
Software impairment 2,463
Abortive acquisition (Dati) 916
----------
Total 9,773
Exceptional items shown after operating profit
Loss on sale of ACG 15,934
Loss on closure of other businesses (including
goodwill of £1.8m) 3,082
Write back of pension provision (1,460)
Consideration from previously disposed of businesses (514)
----------
Total 17,042
----------
Total exceptional items 26,815
Closed businesses shown before operating profit
Operating losses of disposed and closed businesses 4,378
Other costs shown after operating profit
Write down of own shares and other investments 964
----------
32,157
Goodwill shown before operating profit
Goodwill amortisation 24,295
Goodwill impairment charge 74,678
Total goodwill 98,973
----------
Total goodwill amortisation and impairment,
closed businesses, exceptional items and other
costs before taxation 131,130
==========
Taxation
Tax effect on before operating profit exceptional items (1,315)
Tax credit (2,342)
Total Taxation (3,657)
----------
Total goodwill amortisation and impairment,
closed businesses, exceptional items and other
costs after tax 127,473
==========
Goodwill
Goodwill is capitalised based on the maximum potential cost of an
acquisition including earnout and is written off over a maximum of
10 years. If earnouts below the maximum provided in the relevant
acquisition agreement are paid, the difference is credited against
goodwill.
The total goodwill charge for the year as a whole was £100.8m, made
up as follows:
> goodwill amortisation of £24.3m (2002: £24.3m)
> goodwill impairment of £76.5m, including £1.8m for closed
businesses (2002: nil), principally relating to Anite Calculus,
Datavance, Parsec and a further review of recent acquisitions in
Public Sector, Travel and Telecoms
After the above charges, total net carrying value of goodwill will
be £106.5m and we expect that the annualised level of goodwill
amortisation going forward will be approximately £15.4m.
Costs
Following a change made last year we now state divisional operating
profits before Group central costs. These costs include head office
staff costs, directors' remuneration, professional and office
costs, but exclude costs directly attributable to operations.
During the year these central costs before exceptionals of £1.8m
totalled £2.9m (2002: £3.8m).
Restructuring to focus the business and to align the businesses
with current market conditions continues and during the year there
has been a headcount reduction of around 100 staff in total
principally in Public Sector but also in other divisions. In the
current year we are continuing to focus on operating costs in all
businesses and a minimum reduction in staff numbers totalling 130
is being implemented (principally in Public Sector, Telecoms and
Travel).
As expected, development spending increased during the year to
£10.2m (2002: £6.2m) and a further increase of around 25% is
anticipated in the current year.
Interest costs doubled during the year due in part due to rising
net debt as earnout payments were made and comprises:
£m 2002/3 2001/2
Net bank interest 1.5 0.8
Loan notes 0.6 0.7
Short term deposits (0.2) (0.5)
Other 0.5 0.1
--------------------------------
Total 2.4 1.1
================================
Interest cover based on operating profits for the ongoing
businesses for the year as a whole was 9 times (2002: 27 times). In
the current year interest costs are expected to increase in the
first half due to rising net debt as further earnout payments are
made, but interest cover is expected to remain at comfortable
levels for the year as a whole.
Cash flow
There has been strong cash generation and conversion of operating
profit to net Group cash inflow and good control of working capital
during the year. Earnout payments of £26.8m were funded out of
cash flow and existing banking facilities which are currently
£53.6m.
In the current year payments in respect of vendor loan notes issued
and remaining earnouts are expected to be a maximum of £13.9m
dependent on performance, and these are expected to be funded out
of cash flow and existing banking facilities.
Taxation
The Group benefited from an exceptional tax credit of approximately
£2.3m relating to the release of prior year's tax provisions. The
tax rate for the ongoing business for the year was 24%, which level
is expected to be maintained for the foreseeable future.
Earnings per share
The number of shares in issue increased from 306,810,769 to
340,480,869 at the year end as a result of shares issued as part of
earnouts. The average number of shares in issue used to calculate
basic earnings per share was 331,614,000 (2002: 289,589,000), an
increase of 14.5%.
In the current year the actual number of shares in issue is
expected to increase by around 5% as a result of shares being
issued as part of earnouts.
Balance Sheet
At the year-end net debt (including outstanding loan notes and
after £26.8m of earnout payments) stood at £16.3m (30 April 2002:
£11.5m), and as a result the Group is operating comfortably within
its banking facilities of £53.7m. Gearing has risen from 6.3% to
28.0% reflecting the increase in net debt and the reduction in
shareholders funds resulting from the significant retained loss for
the year, which was largely due to the impairment of goodwill and
other exceptional items incurred.
In the current year net debt is expected to peak during the middle
part of the year following payment of current year earnouts.
Earnout Projections
During the year the earnout obligations for Anite.net, Calculus,
Carus, Didgicom, ITS, MSPS, Parsec and Rox together representing
the large majority of the Group's total potential earnout
liabilities were renegotiated and capped. In addition, during the
year it became clear that a number of minor earnout liabilities
were unlikely to achieve their full earnout.
The forecast outstanding earnouts are as follows:
2002/3 2003/4 2004/5 2005/6 Total
£m £m £m £m £m
Shares Cash Shares Cash Shares Cash Shares Cash Shares Cash
Already paid/shares issued 23.0 26.8 23.0 26.8
Expected to be paid/shares issued 8.0 13.9 0.6 4.7 0.0 6.8 8.6 25.4
-------------------------------------------------------------------------
Sub-total 23.0 26.8 8.0 13.9 0.6 4.7 0.0 6.8 31.6 52.2
Unlikely to be paid* 0.6 0.6
-------------------------------------------------------------------------
Total earnouts 23.0 26.8 8.6 13.9 0.6 4.7 0.0 6.8 32.2 52.2
-------------------------------------------------------------------------
Forecast weighted average number of shares 331.6 348.2 350.8
October 2002 forecast 334.6 347.5 351.7
* Note: based on the profit forecasts we are unlikely to pay part
of the earnouts for certain acquisitions.
Resulting from the renegotiations, over the three year period ended
30 April 2005 the actual number of shares in issue is expected to
increase by around 14% to approximately 350m when compared to the
number in issue at the year ended 30 April 2002 (306.8m). The
average number of shares in issue is therefore expected to be
significantly below that anticipated in July 2002, at the time of
the announcement of the Group's preliminary results for the year
ended 30 April 2002 (380m), and that forecast in the 2002 Annual
General Meeting trading statement on 4 September 2002 (369m).
The renegotiations of earnouts have provided:
> a full buy out of the Group's earnout obligations at a discount;
> or replacement of share issues with loan notes, thus reducing
dilution of earnings per share whilst taking advantage of the
Group's expected strong cash generation;
> for a fixed price at which shares are to be issued, thereby
creating certainty for shareholders
> a net decrease in the cost of investment of £7.1m
Current Financial Year
In the current financial year, restructuring will impact the
Group's first half performance, resulting in reduced profits
compared with last year. These costs are expected to include
redundancy, restructuring and other costs.
This year's emphasis will be on completing integration of
acquisitions in Public Sector, cost reduction across the Group,
strengthening internal controls and reporting, and maximising cash
generation.
Christopher Humphrey
Group Finance Director
Consolidated profit and loss account
for the year ended 30th April 2003
Unaudited Unaudited
Ongoing Closed
businesses businesses,
before goodwill Unaudited Audited
goodwill amortisation Total Total
amortisation and 2003 2002
and exceptional
exceptional items
items
£'000 £'000 £'000 £'000
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Turnover
Existing businesses 208,623 - 208,623 190,209
Acquisitions 659 - 659 -
-------------------------------------------------------------------------------------------------------
Ongoing businesses 209,282 - 209,282 190,209
Closed businesses- continuing operations - 7,054 7,054 9,573
Turnover - continuing operations 209,282 7,054 216,336 199,782
Discontinued operations - - - 2,728
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Turnover 209,282 7,054 216,336 202,510
Cost of sales
Cost of sales excluding exceptional items (116,484) (7,009) (123,493) (111,123)
Redundancy costs - (779) (779) -
Contract and purchasing provisions - (3,600) (3,600) -
Cost of sales (116,484) (11,388) (127,872) (111,123)
-------------------------------------------------------------------------------------------------------
Gross profit 92,798 (4,334) 88,464 91,387
Net operating costs
Goodwill amortisation - (24,295) (24,295) (24,265)
Goodwill impairment - (74,678) (74,678) -
Intangible asset impairment - (2,463) (2,463) -
Redundancy and restructuring costs - (2,015) (2,015) -
Abortive acquisition costs - (916) (916) -
Other operating costs (71,789) (4,423) (76,212) (63,167)
Net operating costs (71,789) (108,790) (180,579) (87,432)
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Operating (loss) / profit
- Existing businesses 20,946 (108,632) (87,686) 6,815
- Acquisitions 63 (114) (51) -
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- Ongoing businesses 21,009 (108,746) (87,737) 6,815
- Closed businesses - continuing operations - (4,378) (4,378) (1,617)
Operating (loss) / profit for continuing operations 21,009 (113,124) (92,115) 5,198
Operating loss for discontinued operations - - - (1,243)
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Operating (loss) / profit 21,009 (113,124) (92,115) 3,955
Share of associate's operating loss - - - (31)
(Loss) / profit on sale/closure of businesses - (17,042) (17,042) 2,955
Loss on sale of tangible fixed assets - - - (4)
-------------------------------------------------------------------------------------------------------
(Loss) / profit on ordinary activities
before finance charges 21,009 (130,166) (109,157) 6,875
Amounts written off investments and own shares - (964) (964) -
Finance charges - net (2,359) - (2,359) (1,111)
-------------------------------------------------------------------------------------------------------
(Loss)/ profit on ordinary activities before tax 18,650 (131,130) (112,480) 5,764
Tax on (loss) / profit on ordinary activities (3,607) 1,315 (2,292) (8,081)
Release of deferred tax (848) - (848) (57)
Release of prior years tax provisions - 2,342 2,342 794
Tax on (loss) / profit on ordinary activities (4,455) 3,657 (798) (7,344)
-------------------------------------------------------------------------------------------------------
Loss on ordinary activities after tax 14,195 (127,473) (113,278) (1,580)
Equity minority interests (16) - (16) (82)
-------------------------------------------------------------------------------------------------------
Loss for the financial year 14,179 (127,473) (113,294) (1,662)
Dividends paid and proposed - - - -
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Retained loss for the year 14,179 (127,473) (113,294) (1,662)
-------------------------------------------------------------------------------------------------------
Loss per share Basic (34.2)p (0.6)p
Diluted (34.2)p (0.6)p
Adjusted earnings per share based
on ongoing operations excluding
amortisation of goodwill and exceptional Basic 4.3p 7.8p
items Diluted 4.1p 7.3p
-------------------------------------------------------------------------------------------------------
Consolidated Statement of Total Recognised Gains and Losses
for the year ended 30th April 2003
Unaudited Audited
2003 2002
£'000 £'000
-------------------------------------------------------------------------------------------------------
Loss for the financial year - Group (113,294) (1,631)
- Associate - (31)
---------------------------------------
(113,294) (1,662)
Gain on foreign currency net investments 4,178 1,615
-------------------------------------------------------------------------------------------------------
Total recognised losses since last annual report and
financial statements (109,656) (47)
-------------------------------------------------------------------------------------------------------
Consolidated balance sheet
at 30th April 2003
Unaudited Audited
2003 2003 2002 2002
Restated
£'000 £'000 £'000 £'000
-------------------------------------------------------------------------------------------------------
Fixed assets
Goodwill 106,507 225,567
Other intangible assets 268 2,893
--------------- --------------
Intangible assets 106,775 228,460
Tangible assets 12,177 12,232
Investments 191 1,145
-------------------------------------------------------------------------------------------------------
119,143 241,837
Current assets
Stocks 7,850 9,819
Debtors 69,229 71,052
Short term deposits 2,048 16,026
Cash at bank and in hand 11,061 12,690
-------------------------------------------------------------------------------------------------------
90,188 109,587
Creditors: Amounts falling due within one year (110,767) (120,862)
-------------------------------------------------------------------------------------------------------
Net current liabilities (20,579) (11,275)
-------------------------------------------------------------------------------------------------------
Total assets less current liabilities 98,564 230,562
Creditors: Amounts falling due after
more than one year (3,546) (6,341)
Provisions for liabilities and charges (35,634) (43,203)
-------------------------------------------------------------------------------------------------------
Net assets 59,384 181,018
-------------------------------------------------------------------------------------------------------
Capital and reserves
Called-up share capital 34,098 30,731
Share premium account 22,473 22,468
Merger reserve 18,932 42,009
Shares to be issued 9,182 59,350
Other reserves - 270
Profit and loss account (25,301) 25,988
-------------------------------------------------------------------------------------------------------
Shareholders' funds 59,384 180,816
Minority interests - 202
-------------------------------------------------------------------------------------------------------
Total capital employed 59,384 181,018
-------------------------------------------------------------------------------------------------------
Shareholders' funds are analysed as:
2003 2002
£'000 £'000
-------------------------------------------------------------------------------------------------------
Equity interests 59,334 180,766
Non-equity interests 50 50
-------------------------------------------------------------------------------------------------------
59,384 180,816
-------------------------------------------------------------------------------------------------------
Consolidated cash flow statement
for the year ended 30th April 2003
Unaudited Audited
2003 2002
£'000 £'000
--------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 27,575 26,634
--------------------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Interest received 372 393
Interest paid (2,059) (1,130)
Interest element of finance lease rental payments (118) (49)
--------------------------------------------------------------------------------------------------------
Net cash outflow from returns on investments
and servicing of finance (1,805) (786)
--------------------------------------------------------------------------------------------------------
Taxation
Foreign taxation paid (2,169) (3,874)
UK corporation tax paid (972) (4,095)
--------------------------------------------------------------------------------------------------------
Net cash outflow (3,141) (7,969)
--------------------------------------------------------------------------------------------------------
Capital expenditure and financial investment
Purchase of tangible fixed assets (4,839) (5,475)
Purchase of software licences (539) (1,500)
Purchase of investment - (170)
Sale of tangible fixed assets 111 924
--------------------------------------------------------------------------------------------------------
Net cash outflow from capital expenditure and financial investment (5,267) (6,221)
--------------------------------------------------------------------------------------------------------
Acquisitions and disposals
Purchase of subsidiary undertakings (3,014) (9,181)
Net bank balance acquired with subsidiary undertakings 305 1,891
Sale of subsidiary undertakings (492) 5,855
Net bank balance of businesses sold (28) (3,252)
Investments acquired/ aborted and related costs (916) (715)
Deferred consideration paid for current and
previous years acquisitions (8,409) (15,611)
--------------------------------------------------------------------------------------------------------
Net cash outflow from acquisitions and disposals (12,554) (21,013)
--------------------------------------------------------------------------------------------------------
Cash inflow/(outflow) before management of
liquid resources and financing 4,808 (9,355)
--------------------------------------------------------------------------------------------------------
Management of liquid resources
Decrease/ (increase) in short term deposits 13,978 (6,553)
Disposal of current asset investment - 562
--------------------------------------------------------------------------------------------------------
Net cash inflow / (outflow) 13,978 (5,991)
--------------------------------------------------------------------------------------------------------
Financing
Issue of ordinary share capital 17 2,244
(Decrease) / increase in bank loans (7,519) 9,065
Capital element of finance lease rental payments (977) (188)
Redemption of vendor loan note instruments (13,821) -
--------------------------------------------------------------------------------------------------------
Net cash (outflow) / inflow from financing (22,300) 11,121
--------------------------------------------------------------------------------------------------------
Decrease in cash in the period (3,514) (4,225)
--------------------------------------------------------------------------------------------------------
Companies acquired in the year contributed £99,000 to the group's net operating cash flows and paid
£15,000 for capital expenditure and financial investment.
Companies sold in the year consumed £4,000 of the group's net operating cash flows, paid £nil
in respect of taxation and received £nil in respect of net returns on investment and
servicing of finance.