TIDMINNO
Innovise plc
("Innovise" or the "Company")
Half-Yearly Report
Chairman's statement
Highlights
* Turnover increased to GBP5.14 million from GBP3.29 million in H1 2008
* Operating profit before interest, tax and amortisation of intangible assets
rose to GBP0.67 million from GBP0.65 million in H1 2008
* Infrasolve Limited acquired in January 2009
* Strong cash generated by operations of GBP0.62 million, equating to 92% cash
conversion
* Integration of recently acquired businesses well advanced and new
acquisition announced today.
I am pleased to report that Innovise continued to achieve encouraging progress
during the six months to 31 March 2009. The enlarged group has sharpened its
focus and reorganised into two specialist divisions: Innovise Enterprise
Service Management and Innovise Software Solutions.
Despite challenging trading conditions, the company delivered an increase in
turnover and operating profit before amortisation of goodwill with the benefit
of Infrasolve following its acquisition in January this year.
These results demonstrate the commitment and the ability of the Innovise
leadership team to pursue sustainable profitable growth through a focused
strategy of targeted acquisitions, business integration and optimisation, and
disciplined financial management.
Today we have announced the purchase of Harbrook Consulting Ltd. This
acquisition is highly complementary to that of Infrasolve and our earlier
acquisition (in December 2007) of Abilitec. These three businesses will be
combined to form the new Innovise Enterprise Service Management (ESM) division.
Although the overall economic situation remains difficult, we are well
positioned in our niche markets to prosper in the medium term. Our staff have
worked hard to achieve solid results during the current downturn, and your
Board is committed to maintaining a clear focus on long-term growth while
managing costs, short-term profit and cash flow rigorously. We see great
opportunity for the future, and accordingly we will continue to make strategic
investments in acquisitions as well as in organic growth to ensure that
Innovise emerges strongly from the recession.
Vin Murria
Chairman
Chief Executive's review
During the six-month period ended 31 March 2009, Innovise made further
significant progress in implementing its long-term growth strategy while
maintaining a strong cash position and optimising our cost structure in the
face of the global economic downturn.
In January this year, we announced our largest acquisition to date with the
purchase of Infrasolve Limited for a total consideration of GBP6.76 million,
including GBP4 million in Innovise shares and a further deferred GBP1 million
payable in either shares or cash at the company's option.
The acquisition of Infrasolve, together with that of Abilitec Limited a year
earlier, has positioned us as a market leader in the provision of IT Service
Management (ITSM) solutions. This strong position is further enhanced by the
addition of Harbrook announced today.
In order to better focus investment and maximise synergy, we are restructuring
the group into two divisions: Innovise ESM (combining Abilitec, Infrasolve and
Harbrook) and Innovise Software Solutions (combining Innovise Software and
Innovise Managed Services).
Financial
Both sales and operating profit before amortisation of intangibles increased in
this interim period as a result of our recent acquisitions.
Total turnover for the period was GBP5.14 million, an increase of more than 55%
from the GBP3.29 million reported for the six months to 31 March 2008.
Adjusted operating profit (before interest, tax and amortisation of intangible
assets) rose to GBP0.67 million from GBP0.65 million in the previous interim
period.
Innovise remains focused on increasing recurring sales, which grew to GBP1.66
million from GBP1.20 million in the corresponding period last year. The company
also places great emphasis on disciplined management of working capital in
order to maximise cash generation, and was able to convert over 90% of
operating profit into cash during the period. (Cash flow conversion is defined
as cash generated by operations as a percentage of operating profit before
amortisation of goodwill.) Cash in hand at 31 March 2009 was significantly
ahead of budget at GBP0.80 million.
The Board is not recommending payment of an interim dividend.
Driving value through targeted growth, synergy and financial discipline
While current market conditions are undoubtedly challenging and the economic
outlook uncertain, Innovise remains committed to creating shareholder value by
expanding its position as trusted adviser to customers in its niche markets. We
expect this objective to be better realised with the reorganisation of our
business into two operating divisions, each with a distinct market focus.
During the second half of the year, we will continue to focus on building our
competitive advantage through rigorous operational and financial management. In
addition, we will continue to position the group for eventual recovery of the
economy by implementing organic investments, which will likely cap short-term
profit growth, and by seeking further value-adding acquisitions while retaining
modest financial leverage.
Mike Taylor
Chief Executive Officer
Unaudited consolidated income statement
for the six months ended 31 March 2009
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2009 2008 2008
Notes GBP GBP GBP
REVENUE 5,135,329 3,288,440 8,266,696
Cost of sales (2,483,626) (1,207,119) (3,334,173)
GROSS PROFIT 2,651,703 2,081,321 4,932,523
Administrative expenses (2,217,726) (1,582,245) (3,806,620)
OPERATING PROFIT BEFORE 670,252 651,824 1,468,899
AMORTISATION OF INTANGIBLE
ASSETS
Amortisation of intangible (236,275) (152,748) (342,996)
assets
OPERATING PROFIT 433,977 499,076 1,125,903
Finance income 22,605 14,116 31,305
Finance costs (92,950) (85,336) (209,402)
PROFIT BEFORE TAX 363,632 427,856 947,806
Tax expense (80,712) (110,000) (191,630)
PROFIT FOR THE PERIOD 282,920 317,856 756,176
ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
EARNINGS PER SHARE
Basic earnings per share 2 0.9p 1.2p 2.8p
Diluted earnings per share 2 0.8p 1.2p 2.8p
Unaudited consolidated interim statement of recognised income and expense
for the six months ended 31 March 2009
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2009 2008 2008
GBP GBP GBP
Profit for the period 282,920 317,856 756,176
Net expense recognised directly
in equity:
Reduction in value of derivative (50,000) - (20,000)
financial instrument taken to
hedging reserve
Total recognised income and 232,920 317,856 736,176
expense for the year
Unaudited consolidated balance sheet
as at 31 March 2009
Unaudited Unaudited Audited
As at As at As at
31 March 31 March 30 September
2009 2008 2008
Notes GBP GBP GBP
ASSETS
NON-CURRENT ASSETS
Goodwill 13,371,832 7,615,276 8,179,882
Other intangible assets 2,443,980 1,670,503 1,480,255
Property, plant and equipment 214,465 140,445 211,713
Investments in subsidiaries 51 10,286 51
16,030,328 9,436,510 9,871,901
CURRENT ASSETS
Inventories - 6,000 -
Trade and other receivables 3,650,115 2,526,201 2,128,747
Current tax assets - - 12,468
Cash and cash equivalents 804,122 797,167 930,129
4,454,237 3,329,368 3,071,344
TOTAL ASSETS 20,484,565 12,765,878 12,943,245
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (3,288,542) (2,793,908) (2,427,702)
Current tax liabilities (653,759) (275,417) (266,900)
Loans (500,000) (479,504) (1,000,000)
Obligations under finance (12,500) (12,500) (12,500)
leases
(4,454,801) (3,561,329) (3,707,102)
NET CURRENT LIABILITIES (564) (231,961) (635,758)
NON-CURRENT LIABILITIES
Convertible loan stock (1,006,419) (188,079) (189,579)
Other loans (1,339,771) (2,464,560) (1,580,171)
Deferred tax liabilities (674,162) (452,600) (401,450)
Obligations under finance (7,917) (20,417) (14,167)
leases
Provisions (32,500) (20,000) (20,000)
Derivative financial (70,000) - (20,000)
instrument
(3,130,769) (3,145,656) (2,225,367)
TOTAL LIABILITIES (7,585,570) (6,706,985) (5,932,469)
NET ASSETS 12,898,995 6,058,893 7,010,776
EQUITY ATTRIBUTABLE TO
EQUITY HOLDERS OF THE PARENT
Called up share capital 2,256,310 2,069,473 2,129,031
Shares to be issued 1,000,000 1,769,312 500,000
Equity reserve 19,421 19,421 19,421
Share premium account 1,083,917 937,667 937,667
Merger reserve 8,177,225 1,566,000 3,300,754
Reverse acquisition reserve (918,040) (918,040) (918,040)
Retained earnings 1,350,162 615,060 1,061,943
Hedging reserve (70,000) (20,000)
TOTAL EQUITY 3 12,898,995 6,058,893 7,010,776
Unaudited consolidated cash flow statement
for the six months ended 31 March 2009
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2009 2008 2008
GBP GBP GBP
Operating profit 433,977 499,076 1,125,903
Depreciation of property, plant and 47,136 30,433 71,313
equipment
Amortisation of intangible assets 236,275 152,748 342,996
Share-based payment 5,299 4,803 13,366
Operating cash flows before 722,687 687,060 1,553,578
movements
in working capital
Decrease in inventories - - 6,000
Increase in receivables (78,717) (824,057) (343,614)
(Decrease)/increase in payables (24,431) 790,793 369,308
Cash generated by operations 619,539 653,796 1,585,272
Tax paid (net of refunds) (32,858) (68,640) (221,166)
Net cash flow from operating 586,681 585,156 1,364,106
activities
Investing activities
Interest received 22,605 14,116 31,305
Purchase of property, plant and (44,628) (14,364) (119,805)
equipment
Acquisition of subsidiaries (1,760,250) (3,301,839) (3,425,549)
Cash balances of acquired 942,345 361,071 423,141
subsidiaries
Net cash used in investing (839,928) (2,941,016) (3,090,908)
activities
Financing activities
Repayment of borrowings (756,250) (6,250) (390,887)
Interest paid (66,510) (77,997) (189,456)
Proceeds on issue of shares 150,000 - -
New loans raised 800,000 2,438,225 2,438,225
Net cash from financing activities 127,240 2,353,978 1,857,882
Net (decrease)/increase in cash and (126,007) (1,882) 131,080
cash equivalents
Cash and cash equivalents at 930,129 799,049 799,049
beginning of period
Cash and cash equivalents at end of 804,122 797,167 930,129
period
Notes to the unaudited interim report
for the six months ended 31 March 2009
1. BASIS OF PREPARATION
Innovise plc is a company incorporated in the United Kingdom under the
Companies Act 1985. Its registered office address is Hellier House, Wychbury
Court, Two Woods Lane, Brierley Hill, DY5 1TA.
The condensed consolidated interim financial statements of the company for the
six months ended 31 March 2009 comprise the company and its subsidiaries
(together referred to as "the group"). These interim statements do not
constitute statutory accounts as defined in Section 434 of the Companies Act
2006. The interim financial information has been prepared using the same
accounting policies, presentation, method of computation and estimation
techniques as are expected to be adopted in the group financial statements for
the year ending 30 September 2009 and which were adopted in the audited group
financial statements for the year ended 30 September 2008.
The financial information for the year ended 30 September 2008 has been
extracted from the statutory accounts for that period. The auditors' report on
the statutory accounts was unqualified and did not contain a statement under
Section 237 of the Companies Act 1985. A copy of those financial statements has
been filed with the Registrar of Companies.
The condensed consolidated interim financial statements have been prepared
using accounting policies consistent with International Financial Reporting
standards (IFRSs) as adopted in the EU. While the financial figures included in
this half yearly report have been computed in accordance with IFRSs as adopted
in the EU applicable to interim periods, this half yearly report does not
contain sufficient information to constitute an interim financial report as
that term is defined in IAS 34.
The condensed consolidated interim financial statements are presented in pounds
sterling because that is the currency of the primary economic environment in
which the group operates, and were authorised for issue on 12 June 2009.
Copies of the interim report for the period ended 31 March 2009 are being sent
to all shareholders. Further copies can be obtained from the registered office
during normal business hours, and the report is also available on the company's
website, www.innovise.com.
2. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2009 2008 2008
GBP GBP GBP
Earnings for the purpose of basic 282,920 317,856 756,176
earnings per share being net profit
attributable to equity holders of
the parent
Effect of dilutive potential
ordinary shares:
Interest on convertible loan stock 1,949 4,284 8,388
(net of tax)
Earnings for the purposes of 284,869 322,140 764,564
diluted earnings per share
Number of shares
Weighted average number of ordinary 33,033,524 26,645,040 26,669,344
shares for the purpose of basic
earnings per share
Effect of dilutive potential
ordinary shares:
Share options and warrants 170,903 280,538 260,248
Convertible loan notes 500,000 500,000 500,000
Shares potentially issuable in 961,539 - -
settlement of deferred
consideration on acquisition of
Infrasolve Limited
Weighted average number of ordinary 34,665,966 27,425,578 27,429,592
shares for the purpose of diluted
earnings per share
Adjusted earnings per share
Adjusted earnings per share calculated before deducting amortisation of
intangible assets and the tax attributable thereto are presented below in order
to assist in an understanding of the underlying performance of the business.
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2009 2008 2008
GBP GBP GBP
Adjusted earnings
Earnings for the purposes of 282,920 317,856 756,176
basic earnings
per share being net profit
attributable to equity holders of
the parent
Amortisation of intangible assets 236,275 152,748 342,996
Tax credit attributable to (63,288) (44,297) (96,817)
amortisation
Earnings for the purposes of 455,907 426,307 1,002,355
adjusted basic earnings per share
calculation
Interest on convertible loan 1,949 4,284 8,388
stock (net of tax)
Earnings for the purposes of 457,856 430,591 1,010,743
adjusted diluted earnings per
share
Adjusted basic earnings per share 1.4p 1.6p 3.8p
Adjusted diluted earnings per 1.3p 1.6p 3.7p
share
The number of shares for the purpose of calculating the adjusted earnings per
share figures is as set out on the previous page.
3. CONSOLIDATED RECONCILIATION OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2009 2008 2008
GBP GBP GBP
Opening equity 7,010,776 5,466,922 5,466,922
Issue of ordinary shares for cash 150,000 - -
Issue of ordinary shares for 5,000,000 - 1,794,312
acquisitions
Shares to be issued for 500,000 269,312 (1,000,000)
acquisitions (new potential issues
less shares issued in the period)
Share-based payments 5,299 4,803 13,366
Reduction in value of derivative (50,000) - (20,000)
financial instrument
Profit for the period 282,920 317,856 756,176
12,898,995 6,058,893 7,010,776
4. CHANGES IN DEBT
During the period, the company issued GBP800,000 of convertible loan stock
redeemable in January 2012 and repaid GBP500,000 of other loans.
5. ACQUISITIONS
On 21 January 2009, the group acquired 100% of the issued ordinary share
capital of Infrasolve Limited. Goodwill arising on the acquisition of
Infrasolve Limited has been capitalised. The purchase of Infrasolve Limited has
been accounted for by the purchase method of accounting. The book and fair
value of net assets and liabilities acquired are set out below:
Book value Fair value
GBP GBP
Intangible assets - 1,200,000
Plant and equipment 5,260 5,260
Trade and other receivables 1,442,651 1,442,651
Cash and cash equivalents 942,345 942,345
Trade and other payables (885,271) (885,271)
Current tax liabilities (288,185) (288,185)
Provisions (12,500) (12,500)
Deferred tax - (336,000)
Net assets acquired 1,204,300 2,068,300
Goodwill 4,690,700
Fair value of consideration 6,759,000
Consideration satisfied by:
Cash 1,667,500
10,000,000 ordinary shares in Innovise plc 4,000,000
at 40p
Deferred consideration taken to equity 1,000,000
Directly attributable costs 91,500
6,759,000
Under the terms of the agreement for the acquisition of Infrasolve Limited,
deferred consideration of GBP0.5 million is payable in January 2010 and a further
GBP0.5 million in January 2011. The deferred consideration is payable in cash or
in ordinary shares at 40p at the company's option. Deferred consideration is
included within equity because there is no obligation on the company to settle
this in cash.
Goodwill not separately recognised as an intangible asset comprises the skilled
workforce and management, synergies anticipated with existing group operations
and the potential to expand the supply of the company's services to new
customers.
During the period, the company issued 2,352,941 shares in respect of the
maximum contingent consideration payable for the acquisition of Abilitec. These
shares have been reflected in equity at a price of 42.5p, being their fair
value at the date of acquisition. Further goodwill of GBP500,000 has been
reflected in respect of this acquisition, being the excess over the actual
number and value of consideration shares over the original estimate of the
earn-out shares that would be issued.
In addition, a further amount of GBP1,250 has been allocated to the cost of
goodwill in the period, being further costs arising in relation to the
acquisition of Abilitec Limited in the previous financial year.
Contact:
Mike Taylor 0870 626 0400
Chief Executive Officer, Innovise plc
Tony Edwards 0870 626 0400
Finance Director, Innovise
Liam Murray or Jo Turner 020 7492 4777
Dowgate Capital Advisers Ltd
Ruari McGirr or Mark Anwyl 020 7628 5582
St Helen's Capital plc
Ian Foster 07739 185 050
Wordsworth Communication Ltd
END
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