RNS Number:0626M
Helphire Group PLC
09 June 2003
Date Monday, 9 June 2003
Contacts Mark Jackson/David Lindsay
Helphire Group plc 01225 321 000
Chris Steele/David Bick
Holborn Public Relations 020 7929 5599
chris.steele@holbornpr.co.uk
HELPHIRE GROUP PLC
Preliminary Results for the year ended March 31st 2003
*Turnover up 69%
*Pre-tax profit on ordinary activities #5.3m (2002: #0.2m)
*Record earnings of 6.3 pence per share
*Enhancement of gross margin to 46% (2002: 40%)
*Key strategic business alliances continue to build volumes
*New service offerings developed targeting Insurers and Fleets
*New head office premises purchased to enable continued growth
*Dividend payments restored on approval at AGM
Commenting on the results Chairman Michael J Symons said "We are delighted with
the Group's return to significant growth and the generation of record earnings.
Our expectations are that volumes will continue to grow through new commercial
arrangements"
Chairman's statement
2003 has been an important year for the Company and this has been reflected in
the growth of the business. Credit hire volumes increased by 60% when compared
to the previous year and turnover increased by 69% to #55.8 million (#32.9
million in 2002) resulting in pre-tax profits on ordinary activities of #5.3
million (#0.2 million in 2002). The Group generated cash from operating
activities for the year of #2.7 million.
Growth has resulted from both increased levels of business from existing sources
and the acquisition of a number of significant key accounts.
The 'pipeline' of business prospects currently in negotiation or involved in
trials means that further significant progress is in prospect this year.
Strategy
The strategic objective of the Group remains to position itself as a supplier of
services to accident victims in co-operation with insurers and to generate
additional revenue streams from the development of new insurance-related
products.
By working more closely with the insurance industry we have now progressed to
the point where a growing number of insurers are key account clients,
outsourcing claims management to the Group.
The insurance-related products portfolio within the 'InsureAssist' division has
been increased with the launch of 'Total Accident Management'. This provides an
accident management solution for vehicle fleet operations, which incorporates
the benefits of non-fault accident management. The UK fleet market is in excess
of three million commercial vehicles. 'Total Accident Management' was launched
in June 2003 and has already acquired its first customer.
The Market Place
The breakdown of sources of business referring accident victims to the Group
continues to evolve as the market matures. Insurance brokers, including both
large chains and small high street brokers, account for 45% of cases, vehicle
body repair shops 20%, with insurer originated cases accounting for the balance
of 35%.
Over 60% of business is now provided by 'key accounts' each referring over 100
cases per month. The 'One Call' service, which has the capability of taking
first calls from all accident victims, both fault and non-fault, allows
outsourcing of frontline claims handling to the Group. This allows the Group to
evaluate and classify carefully every case with regard to liability, maximising
the number of non-fault cases acquired from a given source.
The Accident Management Association (AMA) has continued to play an important
role in the development of the industry. The AMA now has over thirty member
organisations and continues to be key in representing the industry, particularly
with regard to relations with the insurance community and negotiations in
respect of pricing and payment terms under the ABI protocol. The competition
situation remains stable with only a small number of larger companies active in
the market place.
Infrastructure Developments
The infrastructure of the Group as at the end of financial year 2003 had the
capacity to process approximately 50,000 cases. With a target market of 1.7
million non-fault motor accident victims each year it is important to grow
capacity in line with business opportunities.
Three major projects have been undertaken in order to maintain and strengthen
the infrastructure capacity.
* A new telephone system with a total capacity of over 1,000 users and a
variety of new facilities has been purchased at a cost of #1.25 million and is
now fully operational.
* A major software development project has been commenced in partnership
with Oracle Corporation. This will unify the databases used by all systems in
the organisation and confer greater flexibility for the customisation of service
delivery for key account clients.
* A 60,000 square foot call centre facility has been purchased at a cost
of #13 million including expected refurbishment costs of #4.4 million. This will
house up to 1,000 staff and will also fulfil the role of company headquarters.
When completed, this will result in a total claims-handling capacity of almost
200,000 cases per annum consolidated in Bath.
The Coming Year
The major task for the next twelve months is to manage the infrastructure
development whilst continuing to expand the client base. The Board looks to the
future with optimism and accordingly is pleased to reinstate the payment of
dividends recommending a final dividend for the year of 1.5p per share. It is
intended thereafter to resume dividend payments on a half yearly basis.
I would like to take this opportunity to thank all the staff who have worked so
hard to achieve such an impressive growth in both business levels and profits.
Michael J Symons Executive Chairman
9 June 2003
Finance Director's review
The re-engineering of the Group's business model in 2001 predicted a return to
significant growth after a period of consolidation. I am pleased to report that
growth has this year resulted in profits on ordinary activities before taxation
of #5.3 million (2002 - #0.2m).
Turnover
Turnover at #55.8 million grew by 69%, with credit hire volumes increasing by
60%. Given that hire cases drive the majority of other income streams these
statistics reflect the uplift in yield per case.
The growth in credit repair volumes over the same period was 8%. This lower
growth reflects a characteristic of new business derived from insurer key
accounts who initially decided to manage their own repairs whilst outsourcing
hires to the Group. A gradual reversal of this trend is occurring as it becomes
clear that the Group's management of repairs results in further savings for the
insurer.
Gross Margins
The consolidated gross margin has increased from 40% to 46% due to the change in
mix of hire and repair along with the enhanced contribution from other services.
It is anticipated that this margin will now remain relatively stable. In the
event that credit repair conversion improves this margin will fall but at the
same time improving the contribution per hire case and the return on capital
employed.
Operating Margin
The operating margin was 9.8% (2002 : 2.1%) and is expected to increase due to
the positive impact of operational gearing. In anticipation of further growth in
business volumes in the year ending 31 March 2004 further investment in new
premises, telephone equipment and information technology has been made to ensure
that the required capacity is in place. Whilst operating margins are expected to
be relatively flat in the first half of the coming year, due to the increase in
the deprecation charge associated with the investment in infrastructure, an
uplift in margin is expected for the full year with further improvement in the
year to 31 March 2005.
Debtors
The debtor book consists of 'old' and 'new' debtors' generated pre and post the
ABI scheme respectively.
Since April 2002, the balance of old debtors has fallen from #9 million to below
#5 million whilst new debtors have increased from #21 million to #29 million.
Despite this increase the age profile of new debts has reduced, demonstrating
the improved collection as well as the high levels of business generated during
the second half of the year.
Working Capital and Cash Flow
As targeted, the Group generated a cash surplus for the first time since
restructuring in the six months to 30 September 2002. Due to the growth rate
achieved in the second half of the year #1 million of cash was consumed
resulting in cash from operating activities of #2.7 million. Given the Directors
expectations for growth it is anticipated that this cash flow pattern will be
repeated on a seasonal basis with a net inflow of cash achieved on an annual
basis.
Bank borrowings as at 31 March 2003 stood at #16.8 million (2002 : #7.4million),
and include #9 million relating to our new premises in Bath. Working capital is
drawn from a #15 million revolving facility provided by the Bank of Scotland
whilst the mortgage on the Bath property is provided by the Allied Irish Bank.
The Bank of Scotland facility is due to expire at the end of June 2004.
The Group's financial instruments comprise borrowings, some cash and liquid
reserves and various items such as trade debtors and trade creditors that have
arisen directly from operations. The main purpose of these instruments is to
raise finance for the Group's operations. It is, and has been throughout the
period under review, the Group's policy that no trading in financial instruments
shall be undertaken.
The main risks arising from the Group's financial instruments are interest rate
risk and liquidity risk. The Board reviews and agrees policies for managing the
risks as they are summarised below. These policies have remained unchanged since
1 April 2002.
Interest Rate Risk
The company finances its operations from a mixture of equity and bank
borrowings. The Group borrows in sterling at floating rates of interest. No
interest rates caps or swaps are used to manage exposure to interest rate
fluctuations.
Liquidity Risk
During the year, the Group has sought to lengthen the maturity of a significant
proportion of its banking facilities. At the year-end all of the Group's bank
borrowings were repayable after more than 12 months.
Capital expenditure
Capital expenditure during the year was #12.4 million. The main item of
expenditure was the acquisition of Pinesgate, a 60,000 square foot development
in Bath, which is currently being refurbished as a call centre and new Group
head office facility.
Acquisitions
On 16 April 2002 the Group acquired the entire issued share capital of
e-register Limited, a company engaged in online services for a total
consideration of #0.6m.
Deferred Tax
Due to the losses made in the year ended 31 March 2001 losses carried forward
have generated a deferred tax asset of #2m which represents the value of the tax
saving throughout the Group on expected profits in the year ended 31 March 2004.
Share Capital
On 13 November 2002 the Group obtained approval from the High Court to reduce
its share premium account by #44,600,000. Consequently the resumption of
dividend payments will be possible once these accounts have been filed and
shareholder approval is obtained at the AGM on 2 September 2003.
David Lindsay Group Finance Director
9 June 2003
Consolidated Profit and Loss Account
for the year ended 31 March 2003
------------------------------- -------- --------
2003 2002
#'000 #'000
------------------------------- -------- --------
Turnover
Continuing operations 55,659 32,940
Acquisitions 132 -
------------------------------- -------- --------
Continuing operations 55,791 32,940
------------------------------- -------- --------
Cost of sales (30,238) (19,929)
------------------------------- -------- --------
Gross profit 25,553 13,011
Administrative expenses:
Exceptional - 3,319
Other (20,847) (16,294)
------------------------------- -------- --------
Total (20,847) (12,975)
Other operating income 771 675
------------------------------- -------- --------
Operating profit/(loss)
Continuing operations 6,050 711
Acquisitions (573) -
------------------------------- -------- --------
Continuing operations 5,477 711
------------------------------- -------- --------
Finance charges (224) (520)
------------------------------- -------- --------
Profit on ordinary activities before taxation 5,253 191
Tax on profit on ordinary activities 2,000 934
------------------------------- -------- --------
Profit for the financial year 7,253 1,125
Dividends paid and proposed on equity shares (1,717) -
------------------------------- -------- --------
Retained profit for the year 5,536 1,125
------------------------------- -------- --------
Earnings per share
Basic 6.33p 1.00p
------------------------------- -------- --------
Diluted 5.94p 0.95p
------------------------------- -------- --------
All turnover and operating profit arose from continuing operations.
Consolidated Balance Sheet
at 31 March 2003
-------------------------------- -------- ---------
2003 2002
#'000 #'000
-------------------------------- -------- ---------
Fixed assets
-------------------------------- -------- ---------
Goodwill 1,754 1,002
Tangible assets 13,263 3,010
-------------------------------- -------- ---------
15,017 4,012
-------------------------------- -------- ---------
-------------------------------- -------- ---------
Current assets
Debtors 44,140 36,416
Cash at bank and in hand 3,069 1,581
-------------------------------- -------- ---------
47,209 37.997
-------------------------------- -------- ---------
Creditors
Amount falling due within one year (21,133) (16,170)
-------------------------------- -------- ---------
Net current assets 26,076 21,827
-------------------------------- -------- ---------
Total assets less current liabilities 41,093 25,839
Creditors:
Amounts falling due after more than one year (8,108) (591)
-------------------------------- -------- ---------
Net assets 32,985 25,248
-------------------------------- -------- ---------
Capital and reserves
Called-up share capital 5,733 5,639
Share premium account 21,270 63,763
Profit and loss account 5,982 (44,154)
-------------------------------- -------- ---------
Equity shareholders' funds 32,985 25,248
-------------------------------- -------- ---------
Consolidated Cashflow Statement
for the year ended 31 March 2003
-------------------------------- -------- --------
2003 2002
#'000 #'000
-------------------------------- -------- --------
Net cash inflow from operating activities 2,645 6,366
Returns on investments and servicing of finance (224) (520)
Taxation - 934
Capital expenditure and financial investment (10,828) 350
Acquisitions and disposals (574) -
-------------------------------- -------- --------
Cash (outflow)/inflow before financing (8,981) 7,130
Financing 10,469 (11,217)
-------------------------------- -------- --------
Increase/(decrease) in cash in the year 1,488 (4,087)
-------------------------------- -------- --------
Notes 31 March 2003
1. Earnings per share
The calculation of basic earnings per share is based on the profit after tax of
#7.3m (2002 - #1.1m) and 114,526,270 ordinary shares being the weighted average
number of ordinary shares in issue during the year ended 31 March 2003 (2002 -
112,793,820). The calculation of diluted earnings per share is based on the
profit after tax and 122,192,128 (2002 - 117,797,980) potential ordinary shares.
2. Turnover
The Directors consider that the activities of the Group represent a single
business segment, being accident management services. However, an analysis of
turnover is given below for additional information:
-------------------------------- -------- --------
2003 2002
#'000 #'000
-------------------------------- -------- --------
Accident management assistance and related services,
primarily vehicle hire 36,564 20,864
Vehicle repair 19,227 12,076
-------------------------------- -------- --------
55,791 32,940
-------------------------------- -------- --------
3. Reconciliation of Operating Profit to Operating Cashflows
-------------------------------- -------- --------
2003 2002
#'000 #'000
-------------------------------- -------- --------
Operating profit/(loss) 5,477 711
Depreciation and amortisation charges 2,257 2,200
Gain on sale of tangible fixed assets (50) (78)
(Increase)/decrease in debtors (5,690) 5,911
(Increase)/decrease in creditors 651 (2,378)
-------------------------------- -------- --------
Net cash inflow from operating activities 2,645 6,366
-------------------------------- -------- --------
3. Reconciliation of Operating Profit to Operating Cashflows (continued)
Analysis of Cashflows
-------------------------------- -------- --------
2003 2002
#'000 #'000
-------------------------------- -------- --------
Returns on investments and servicing of finance
Interest paid (40) (274)
Interest element of finance lease rentals (184) (246)
-------------------------------- -------- --------
Cash outflow (224) (520)
-------------------------------- -------- --------
Taxation
UK corporation tax received - 934
-------------------------------- -------- --------
Cash inflow - 934
-------------------------------- -------- --------
Capital expenditure and financial investment
Purchase of tangible fixed assets (10,955) (217)
Sale of tangible fixed assets 127 567
-------------------------------- -------- --------
Net cash (ouflow)/inflow (10,828) 350
-------------------------------- -------- --------
Acquisitions and disposals
Acquisition of e-register Limited (574) (574)
-------------------------------- -------- --------
Net cash outflow (574) -
-------------------------------- -------- --------
-------------------------------- -------- --------
2003 2002
'000 '000
-------------------------------- -------- --------
Financing
Issue of ordinary share capital (net of expenses) 2,179 8
Expenses of prior year share issue - (135)
New secured loans advanced 9,406 -
Payment of secured loans - (9,390)
Capital element of finance lease rental payments (1,116) (1,700)
-------------------------------- -------- --------
Net cash inflow/(outflow) 10,469 (11,217)
-------------------------------- -------- --------
3. Reconciliation of Operating Profit to Operating Cashflows (continued)
Analysis and Reconciliation of Net Debt
------------------ -------- -------- -------- ---------
1 April Other non-cash
2002 Cashflow Changes 31 March 2003
#'000 #'000 #'000 #'000
----------------- -------- --------- --------- ---------
Cash in hand and at 1,581 1,488 - 3,069
bank
Bank loans and (7,411) (2,181) - (9,592)
overdrafts
----------------- -------- --------- --------- ---------
(5,830) (693) - (6,523)
Debt due after 1 year - (7,225) - (7,225)
Finance leases (1,555) 1,116 (1,407) (1,846)
----------------- -------- --------- --------- ---------
Net debt (7,385) (6,802) (1,407) (15,594)
----------------- -------- --------- --------- ---------
2003 2002
#'000 #'000
----------------- -------- --------- --------- ---------
Increase/ (decrease) in
cash in the year 1,488 (4,087)
Cash (inflow)/outflow
from (increase)/
reduction in debt and
lease financing (8,290) 11,090
----------------- -------- --------- --------- ---------
Change in net debt
resulting from cash
flows (6,802) 7,003
New finance leases (1,407) (941)
----------------- -------- --------- --------- ---------
Movement in net debt in (8,209) 6,062
year
Net debt at start of (7,385) (13,447)
year
----------------- -------- --------- --------- ---------
Net debt at end of (15,594) (7,385)
year
----------------- -------- --------- --------- ---------
4. Status of Audit
Based on audited accounts the financial information set out above does not
constitute the company's statutory accounts for the years ended 31 March 2003 or
2002, but is derived from those accounts. Statutory accounts for 2002 have been
delivered to the Registrar of Companies and those for 2003 will be delivered
following the company's annual general meeting. The auditors have reported on
those accounts; their reports were unqualified and did not contain statements
under s237(2) or (3) Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
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