RNS Number:5469I
ICM Computer Group PLC
11 March 2003
ICM COMPUTER GROUP PLC
Interim Results for the Six Months to 31 December 2002
11 March 2003
ICM, THE LEADING PROVIDER OF IT ASSURANCE SERVICES, INCREASES UNDERLYING INTERIM
OPERATING PROFIT BY 15%
Highlights
* Turnover up 19% to #38.6m (2001: #32.4m)
* Underlying operating profit up 15% to #2.5m (2001: #2.2m), excluding
exceptional item, amortisation and impact of Assurity acquisition
* Profit before tax #1.2m (2001: #1.9m) after higher interest
charges and a #0.7m one-off exceptional item
* Adjusted earnings per share up 4% to 7.6p (2001: 7.3p)
* Interim dividend raised by 5% to 1.16p per share (2001: 1.10p)
* Strong turnover growth in all divisions:
* IT Solutions up 17% to #20.5m
* IT Support up 15% to #13.6m
* Business Continuity up 46% (26% organic growth) to #4.5m
* 76% of gross profit now derived from long-term contracted
revenues
* #3.8m of cash generated before investment in Assurity
acquisition and investment in Business Continuity operations
Barry Roberts, ICM Chief Executive commented:
"We have delivered another solid performance with good top line growth in all of
our divisions in very difficult market conditions. Our IT Assurance strategy
continues to drive the business forward with strong growth in our contracted
services. We are still investing for the future in those areas of our business
where we believe that opportunity exists"
"We were very concerned to learn recently that, as part of a combined hardware
and software purchase contract with a large and reputable PC manufacturer, we
had, through no fault of our own, been supplied with a quantity of counterfeit
software. We were also disappointed that the manufacturer went into Receivership
in October 2002 and this limits our ability to seek redress from them. We are
working with Microsoft to resolve this issue with a small number of affected
customers. Pending clarification of the insurance position, we have taken a
prudent view of the matter and made a provision for the estimated maximum cost
of replacing the counterfeit product of #0.7 million."
"We have started the second half of our financial year with a strong contract
base and good prospects for further wins in IT Support and Business Continuity.
Weakening business confidence suggests a cautious, but not pessimistic, view on
our IT Solutions business in the second half of our financial year. Overall we
remain well placed to deliver satisfactory results in the current market
conditions."
Enquiries:
ICM Computer Group plc Tel: 020 7457 2020 (today)
Barry Roberts, Chief Executive 01924 422111 (thereafter)
Steve Wainwright, Finance & Commercial Director
College Hill Tel: 020 7457 2020
Adrian Duffield Email: adrian.duffield@collegehill.com
Clare Warren clare.warren@collegehill.com
ICM COMPUTER GROUP PLC
Interim Results for the Six Months ended 31 December 2002
Chairman's Statement
I am pleased to announce that we have continued to deliver solid results for the
first half of our financial year in a marketplace which continues to challenge
all IT companies.
Results
Turnover for the first half of our financial year rose 19% to #38.6 million
(2001: #32.4 million). This includes strong growth in all of our divisions
leading to a 17% organic growth in turnover together with an initial
contribution of #0.6 million from the Assurity business which we acquired in
August 2002.
Underlying operating profit (before amortisation of goodwill, exceptional item
and excluding losses of the acquired business), increased by 15% to #2.5 million
(#2.2 million). Including the losses from the Assurity business of #127,000 for
the four and a half months to December 2002, Group operating profit before
amortisation and exceptional item increased by 9% to #2.3m (#2.2m).
Net interest payable rose to #183,000 (2001: #125,000) as we continued our
investment programme in our Business Continuity activities and as a result of
the Assurity acquisition. This, together with the exceptional item of #0.7
million, meant that Profit before Tax fell to #1.2 million (2001: #1.9 million).
Adjusted earnings per share were up 4% to 7.6p (7.3p). Fully diluted the
earnings per share were 4.0p (2001: 6.6p) after the effects of the exceptional
item and a higher tax rate arising from the increase in amortisation.
Cash generation from operating activities was healthy at #3.8 million for the
period compared to #0.6 million for the comparative period. Capital expenditure
of #2.9 million was incurred during the six months, primarily on our Business
Continuity activities, and #2.7 million was expended on the acquisition of
Assurity. Net debt increased to #8.6 million (30 June 2002: #5.5 million) which
is secured against our freehold property portfolio of #11.6 million.
We have increased our interim dividend by 5% to 1.16 pence per share (2001: 1.10
pence per share) and this will be paid on 25 April 2003 to shareholders on the
register on 28 March 2003.
Exceptional item
In July 2002 the orchestrators of a major counterfeit software network were
convicted of conspiracy to defraud following an extensive police investigation.
The counterfeit software network had been operating in this country since 1997.
Counterfeit Microsoft Office software from this source found its way into a
large PC manufacturer which held a direct OEM license agreement for operating
systems from Microsoft.
ICM unknowingly purchased some of these counterfeit software products, between
two and five years ago, from that PC manufacturer as part of a routine combined
hardware and software supply agreement. ICM then supplied these products onward
to a small number of its customers.
We are currently working with Microsoft and with affected customers to resolve
this issue. Under normal circumstances ICM would seek redress from the equipment
manufacturer who supplied the software. However, the manufacturer went into
Receivership in October 2002.
We are investigating whether the cost of this exercise is covered under our
insurance policies. However, no definitive view on this has yet been received.
The Board has therefore decided to take a prudent view of the matter and to make
full provision of #0.7 million for the estimated maximum cost of product
replacement.
Assurity acquisition
We acquired Assurity Holdings Ltd on 12 August 2002 and the results of this
business have been consolidated from that date. Assurity provides Business
Continuity services to the London marketplace and now trades as ICM Assurity.
The Assurity business complements our existing regional business continuity
operations by extending our UK coverage and capability.
In the 15 months prior to the acquisition, Assurity's turnover was #1.8 million
and it reported an operating loss of #0.6 million. Since the acquisition, we
have been successful in both signing new business and in rationalising the
company's cost base. This has resulted in a significantly reduced operating loss
of #0.13 million for the four and a half months to 31 December 2002. We have
also integrated the management of both the ICM and Assurity businesses to create
a stronger team within the Business Continuity division - an important factor in
maximising the future growth of that division.
Review of Operations
Activity levels and margins in each of our three activities of IT Solutions, IT
Support and Business Continuity continued to be robust during the first half of
our financial year with 76% (2001: 75%) of gross profits now derived from
ongoing contracted revenue.
IT Solutions
Our IT Solutions business benefited during the period from a good order book
carried over from the previous financial year together with stabilising market
conditions during the first half of our financial year. As a result, turnover
levels in this division were up by 17% to #20.5 million compared to #17.5
million for the comparative period.
Quotation activity has remained healthy in this division but closing business
has continued to be unpredictable. The generally uncertain economic outlook
continues to affect business confidence and we have again started to see
evidence of projects being postponed or delayed as we move into the second half
of our financial year. We continue to monitor closely the overhead of this
business to ensure that it is consistent with expected activity levels.
IT Support
Turnover in our IT Support business grew by 15% to #13.6 million compared to
#11.8 million for the six months to 31 December 2001. Visibility in this area
continues to be strong, with #13.5 million of revenues in the Division already
committed for the second half of our financial year.
Customers of this division continue to focus on ensuring more reliability and
uptime by obtaining more effective support for their existing infrastructure and
as a consequence our Managed Services portfolio continues to be well received.
Looking forward, this division has a healthy pipeline of opportunity and
continues to expand its base of operations.
Business Continuity
The Business Continuity division grew turnover by 46% to #4.5 million compared
to #3.1 million for the same period in 2001. This was a combination of 26%
organic growth together with a contribution to turnover of #0.6 million from the
Assurity business.
On 4 December 2002 we announced a new mobile recovery facility providing
customers with rapid alternative access to Sun Microsystems' technology in the
event of a systems failure. Market research has shown that this recovery
service is the most powerful of its kind throughout Europe and we have already
signed business for this new platform.
The strong growth in this division reflects the continuing growth in the
contracted base of the Company and this is being assisted by increasing
awareness of our Business Continuity services together with the results of our
steady programme of investment in this activity. Sales pipeline and activity
levels remain high in this division and our order book again continues to be
strong with #4.6 million of revenues in the Division already committed for the
second half of our financial year.
Current Trading and Prospects
Our IT Assurance service continues to gain acceptance in the marketplace and
meet the needs of an increasingly cost-conscious customer base. We continue to
invest in expanding the operating base of our Business Continuity Division and
we see this as a key feature of our ongoing strategic development.
We have started the second half of our financial year with a strong contract
base and good prospects for further wins in IT Support and Business Continuity.
However, whilst quotation activity remains healthy in the IT Solutions arena, we
view the performance of this division in the second half of our financial year
with caution as business uncertainty increases.
We therefore remain alert to any changes in the market conditions and continue
to monitor our cost base and activity levels. However, overall we remain well
placed to deliver satisfactory results in the current market conditions.
George A Hayter
Chairman
11 March 2003
ICM COMPUTER GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months Six months
to 31 to 31 Year ended
December December 30 June
2002 2001 2002
Note #'000 #'000 #'000
TURNOVER
Continuing operations 38,017 32,384 68,871
Acquisitions 606 - -
38,623 32,384 68,871
OPERATING PROFIT / (LOSS) 2
Operating profit before amortisation and
exceptional item 2,476 2,160 5,032
Exceptional item (725) - -
Amortisation of goodwill (222) (123) (281)
Operating profit on continuing operations 1,529 2,037 4,751
Acquisitions (127) - -
1,402 2,037 4,751
Share of associate (10) 11 (15)
1,392 2,048 4,736
Net interest (183) (125) (258)
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 1,209 1,923 4,478
Tax on profit on ordinary activities 3 409 599 1,455
PROFIT FOR THE FINANCIAL PERIOD 800 1,324 3,023
Dividends 230 218 625
RETAINED PROFIT FOR THE PERIOD 570 1,106 2,398
DIVIDEND PER SHARE 1.16p 1.10p 3.16p
EARNINGS PER SHARE 4
Adjusted basic 7.6p 7.3p 15.0p
Basic 4.0p 6.7p 15.3p
Diluted 4.0p 6.6p 16.7p
ICM COMPUTER GROUP PLC
CONSOLIDATED BALANCE SHEET
As at 31 As at 31 As at 30
December December June
2002 2001 2002
#'000 #'000 #'000
FIXED ASSETS
Intangible assets 9,264 4,582 4,611
Tangible assets 20,654 16,762 19,533
Investments 16 3 16
29,934 21,347 24,160
CURRENT ASSETS
Stocks 5,656 4,695 5,056
Debtors 18,233 18,030 21,181
Cash at bank and in hand 2,863 1,137 2,545
26,752 23,862 28,782
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR 23,676 19,717 23,966
NET CURRENT ASSETS 3,076 4,145 4,816
TOTAL ASSETS LESS CURRENT
LIABILITIES 33,010 25,492 28,976
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR 10,163 5,286 7,433
PROVISIONS FOR LIABILITIES AND CHARGES 772 - 38
22,075 20,206 21,505
CAPITAL AND RESERVES
Called up share capital 990 989 990
Share premium account 2,037 2,031 2,037
Merger reserve 2,797 2,797 2,797
Capital redemption reserve 447 447 447
Profit and loss account 15,804 13,942 15,234
EQUITY SHAREHOLDERS' FUNDS 22,075 20,206 21,505
ICM COMPUTER GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months
to 31 to 31 Year ended
December December 30 June
2002 2001 2002
Note #'000 #'000 #'000
Net cash inflow from operating activities 5 3,761 623 5,500
Returns on investments and
servicing of finance (183) (125) (258)
Taxation (503) (512) (1,660)
Capital expenditure and financial investment (2,008) (3,503) (6,230)
Acquisitions and disposals (2,690) - -
Equity dividends paid (408) (382) (599)
NET CASH OUTFLOW BEFORE USE
OF LIQUID RESOURCES AND
FINANCING (2,031) (3,899) (3,247)
Financing 2,349 1,422 2,178
INCREASE / (DECREASE) IN CASH IN THE PERIOD 318 (2,477) (1,069)
ICM COMPUTER GROUP PLC
RECONCILIATION OF NET CASH Six months Six months
FLOW TO MOVEMENT IN NET DEBT to 31 to 31 Year ended
December December 30 June
2002 2001 2002
#'000 #'000 #'000
INCREASE / (DECREASE) IN CASH IN THE PERIOD 318 (2,477) (1,069)
Cash inflow from increase in debt and lease (2,349) (538) (2,171)
financing
CHANGE IN NET DEBT RESULTING
FROM CASH FLOWS (2,031) (3,015) (3,240)
New finance lease and hire purchase contracts (382) (884) (1,386)
Net debt arising on acquisition of business (750) - -
MOVEMENT IN NET DEBT IN THE PERIOD (3,163) (3,899) (4,626)
NET DEBT BROUGHT FORWARD (5,461) (835) (835)
NET DEBT CARRIED FORWARD (8,624) (4,734) (5,461)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' Six months Six months Year ended
FUNDS to 31 to 31 30 June
December December 2002
2002 2001
#'000 #'000 #'000
Profit for the financial period 800 1,324 3,023
Dividends (230) (218) (625)
570 1,106 2,398
Issue of ordinary shares - - 7
Net addition to shareholders' funds 570 1,106 2,405
Opening shareholders' funds 21,505 19,100 19,100
Closing shareholders' funds 22,075 20,206 21,505
1. Basis Of Preparation
These interim financial statements do not constitute statutory accounts within
the meaning of S240 of the Companies Act 1985 and have not been delivered to the
Registrar of Companies. They have been reviewed, but not audited, by the
auditors.
The interim financial information has been prepared on the basis of the
accounting policies which were applied in preparation of the annual financial
statements to 30 June 2002.
The amounts shown for the year ended 30 June 2002 have been extracted from the
audited accounts. Those accounts contain an unqualified auditors' report and do
not include any statement under Section 237 (2) or (3) of the Companies Act 1985
and have been delivered to the Registrar of Companies.
2. Operating profit
6 months ended 31 December 2002:
Continuing Acquisitions Six months
operations to 31
December
2002
#'000 #'000 #'000
Turnover 38,017 606 38,623
Raw materials and consumables 17,361 15 17,376
Staff costs 10,906 218 11,124
Depreciation 1,578 63 1,641
Amortisation of goodwill 222 - 222
Other operating charges 5,696 437 6,133
Exceptional item 725 - 725
Operating profit 1,529 (127) 1,402
6 months ended 31 December 2001:
Continuing Acquisitions Six months
operations to 31
December
2001
#'000 #'000 #'000
Turnover 32,384 - 32,384
Raw materials and consumables 15,018 - 15,018
Staff costs 8,807 - 8,807
Depreciation 1,480 - 1,480
Amortisation of goodwill 123 - 123
Other operating charges 4,919 - 4,919
Operating profit 2,037 - 2,037
Year ended 30 June 2002
Continuing Acquisitions Year to
operations 30 June
2002
#'000 #'000 #'000
Turnover 68,871 - 68,871
Raw materials and consumables 31,770 - 31,770
Staff costs 18,938 - 18,938
Depreciation 3,012 - 3,012
Amortisation of goodwill 281 - 281
Other operating charges 10,119 - 10,119
Operating profit 4,751 - 4,751
3. Tax on profit on ordinary activities
The charge for taxation is based on an estimate of the likely effective tax rate
anticipated for the full financial year.
4. Earnings per share
(a) Basic earnings per share
The figure for basic earnings per share is calculated by dividing the net profit
for the period attributable to ordinary shareholders ('Earnings') by the
weighted average number of shares in issue during the period.
Six months Six months
to 31 to 31 Year ended
December December 2001 30 June
2002 2002
Net profit for the period attributable to
ordinary shareholders (#'000) 800 1,324 3,023
Weighted average number of shares in
issue in the period 19,790,439 19,786,839 19,787,742
(b) Adjusted basic earnings per share
The adjusted basic earnings per share has been computed to restate the Earnings
per share figure to exclude the effects of the Amortisation of goodwill and the
exceptional item. Adjustment has been made as follows:
Six months Six months
to 31 to 31 Year ended
December December 2001 30 June
2002 2002
Net profit for the period attributable to
ordinary shareholders (#'000) 800 1,324 3,023
Add back:
Amortisation of goodwill 222 123 281
Exceptional item 725 - -
Tax effect of exceptional item (239) - -
Adjusted earnings 1,508 1,447 3,304
Weighted average number of shares in
issue in the period 19,790,439 19,786,839 19,787,742
(c) Diluted earnings per share
Diluted earnings per share is computed after taking into account the dilutive
effect of options over ordinary shares which have been granted by the Company.
The effect of these options is to increase the weighted average number of shares
in issue for the six months to 31 December 2002 by 191,986 shares to 19,982,425
(the six months to 31 December 2001 were increased by 401,981 shares to
20,188,820 and the year ended 30 June 2002 were increased by 393,318 shares to
20,181,060).
5. Reconciliation of operating profit to net cash inflow from operating
activities
Six months Six months Year ended
to 31 to 31 30 June
December December 2001
2002 2001
#'000 #'000 #'000
Operating profit 1,402 2,037 4,751
Depreciation 1,641 1,480 3,012
Amortisation of goodwill 222 123 281
Profit on sale of fixed assets (140) (38) (192)
Movement in stocks (600) (156) (552)
Movement in debtors 3,167 (1,111) (4,522)
Movement in creditors (1,931) (1,712) 2,722
Net cash inflow from
operating activities 3,761 623 5,500
6. Analysis of net debt
At 1 July Cash Flow Other non-cash On acquisition At 31 December
2002 movements of business 2002
#'000 #'000 #'000 #'000 #'000
Cash at bank and in hand 2,545 318 - - 2,863
Debt due within one year (31) 781 (754) (750) (754)
Debt due after one year (7,000) (3,583) 754 - (9,829)
Finance lease and hire (975) 453 (382) - (904)
purchase
(5,461) (2,031) (382) (750) (8,624)
7. Acquisition of subsidiary undertakings
ICM Computer Group plc acquired the entire issued share capital of Assurity
Holdings Limited on 12 August 2002.
The provisional assessment of the fair values of the net assets acquired are as
follows:
Book value on Fair value Fair value
acquisition adjustments of net
on assets
acquisition acquired
#'000 #'000 #'000
Tangible fixed assets 287 (55) 232
Goodwill 728 (728) -
Debtors 220 - 220
Cash at bank and in hand 103 - 103
Creditors and future obligations (2,570) (67) (2,637)
(1,232) (850) (2,082)
Goodwill arising on acquisition 4,875
Purchase consideration 2,793
Satisfied by:
Cash 2,651
Costs of acquisition 142
2,793
Fair value adjustments on acquisition represent a reassessment on acquisition of
the fair value of assets acquired and obligations taken over when compared to
their original book value on acquisition. In particular:
Fixed assets are adjusted to their economic value to the Group
Goodwill is written off in accordance with FRS7
Creditors and future are restated to the estimated fair value of the
obligations obligation taken over in respect of contracted
services
The provisional values represent the directors' current estimates of the net
assets acquired. However, in accordance with FRS 7 the values attributed may be
revised in the event that further information becomes available.
Assurity Holdings Limited
Assurity Holdings Limited reported turnover of #1.8 million and an unaudited
loss before tax of #593,000 in the fifteen month period ended 30 June 2002 and
losses of #38,000 on turnover of #174,000 for the six weeks prior to the
acquisition.
Assurity Holdings Limited contributed #606,000 to Turnover, #15,000 to Raw
materials and consumables, #218,000 to Staff costs, #63,000 to Depreciation,
#437,000 to Other operating charges, resulting in a loss of #127,000 and a net
operating cash outflow to the Group of #206,000 during the four and a half
months for which it was part of the Group.
8. Report
Copies of this report are being sent to all shareholders on the Register of
Members on 12 March 2002. Further copies of this report are available from The
Company Secretary, ICM House, Oakwell Way, Oakwell Park, Birstall, West Yorks.
WF17 9LU.
This information is provided by RNS
The company news service from the London Stock Exchange
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