RNS Number:0451Q
ICM Computer Group PLC
23 September 2003
ICM COMPUTER GROUP PLC
Preliminary Result for the year to 30 June 2003
SIGNIFICANT GROWTH FROM BUSINESS CONTINUITY AND
UNDERLYING OPERATING PROFIT UP BY 6% TO #5.3 MILLION
* Turnover up 13% to #77.8 million (2002: #68.9 million), 11% organic
growth
- IT Support: +12% to #27.8 million
- IT Solutions: +8% to #40.4 million
- Business Continuity: +43% to #9.6 million
* Underlying operating profit* up 6% to #5.3 million (2002: #5.0 million)
* Profit before tax #3.7 million (2002: #4.5 million) after higher
interest charge and #0.7 million exceptional item
* Adjusted earning per share 17.5p (2002; 16.7p), up 5%
* Proposed final dividend 2.15p, total for year up 5% to 3.31p (2002:
3.16p)
* Cash generation of #10.1 million (2002: #5.5 million)
* Assurity acquisition now profitable
* Business Continuity operations trebled in last five years
*Operating profit before the losses of Assurity, the exceptional item and
amortisation.
Barry Roberts, ICM Chief Executive, commented:
"This year we again achieved our target. We maintained our track record of good
organic growth and increased underlying operating profits whilst sustaining our
ambitious investment programme in our Business Continuity activities, which is
the fastest growing area of our business. These results are a very good
performance in the current tough market conditions.
"The ongoing contracted revenue provided by our IT Support and Business
Continuity operations remain the core of the Group's profitability contributing
some 76% of gross profits. Visibility in this area continues to be strong, with
#19.1 million of revenue in these divisions already committed for the first half
of the current financial year."
23 September 2003
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/Clare Warren
Financial Results
Group turnover for the year increased by 13% to #77.8 million (2002: #68.9
million) which includes organic growth in all three activities of IT Support, IT
Solutions and Business Continuity.
This performance reflects good growth in all divisions, together with a #1.3
million contribution to turnover from the Assurity business which was acquired
in August 2002. Notably, the Business Continuity operation maintained its growth
record reporting a 43% increase in turnover, whilst IT Support and IT Solutions
activities reported very creditable growth of 12% and 8% respectively. Gross
profits held up well during the year in all three divisions.
Underlying operating profit, (operating profit before the losses of Assurity,
the exceptional item and amortisation) rose 6% to #5.3 million (2002: #5.0
million).
After the exceptional item of #0.7 million and the increased interest charge,
Profit before Tax was #3.7 million compared to #4.5 million in the comparative
period.
Adjusted basic earnings per share, which excludes the exceptional item and
amortisation of goodwill, rose 5% to 17.5p (2002: 16.7p). Fully diluted earnings
per share fell to 12.3p (2002: 15.0p) after the effects of the exceptional item
and a higher tax rate arising from the increase in amortisation.
As a result of the continued strong overall performance of the Group, the Board
is recommending a final dividend of 2.15 pence per share. This gives a total
dividend for the year of 3.31 pence per share, an increase of 5% compared to
3.16 pence for the previous financial year.
Cash generation continued to be strong with net cash inflow from operating
activities of #10.1 million compared with #5.5 million in the previous year.
This represents 194% of operating profit before the exceptional item and
amortisation of goodwill (2002: 109%).
The Group have again continued to invest in the expansion and future growth of
the business this year with #8.3 million (2002: #8.1 million) of capital
expenditure. This was primarily used to further expand the capability of the
Business Continuity operation.
The effect of the capital expenditure and the acquisition of the Assurity
business was to push net debt to #8.7 million (2002: #5.5 million). Net debt is
secured on the Group's freehold property portfolio of #14.4 million.
Exceptional item
It was reported at the interim stage that provision had been made for the full
estimated costs of replacing software licences, purchased in good faith from
valid sources, but subsequently found to be counterfeit.
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.
Under normal circumstances ICM would seek redress from the equipment
manufacturer who supplied the software. However, the manufacturer went into
Receivership in October 2002 and therefore any recovery from this source is
uncertain.
As a result of this, the Board immediately made full and prudent provision of
#0.7 million for the estimated cost of product replacement. Of the total amount
accrued at the interim stage #0.4 million has been paid in procuring licences
and the balance is held pending the outcome of the investigation of other
customers affected.
Business Development
ICM continued to focus a significant proportion of its investment programme on
its committed strategy of building a UK-wide Business Continuity capability.
Business Continuity centres were acquired and refitted in Manchester and
Sevenoaks with the latter already booking customers since the year-end. In
September 2003 ICM exchanged contracts to acquire a site for a new Bristol
Business Continuity centre, the tenth such facility. When the conversion of
this centre has been completed ICM will able to provide facilities for over
2,500 recovery positions across the UK.
Acquisitions
ICM acquired Assurity Holdings Ltd on 12 August 2002. Assurity provides Business
Continuity services to the London marketplace and fits extremely well with ICM's
overall strategy, particularly in central London. It allows the full range of
IT Assurance services to be provided to City-based customers and complements the
High Wycombe and Sevenoaks Business Continuity Centres.
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, ICM
has been successful in both signing new business and in rationalising the
company's cost base. The company reported a loss for the first half of the
financial year of #0.13 million and moved into profitability in the second half
of the year reporting a loss for the period for which it was part of the Group
of #0.10 million.
The 'IT Assurance' strategy
The Group strategy is to offer all of its services to customers as part of a
total IT Assurance service. By doing so ICM better understand each customer's
requirement and can offer more tailored services to meet all their IT needs. The
main strength of the Group is that customers may contract for one, two or all
three services from ICM rather than from disparate organisations.
ICM's IT Assurance strategy which combines the three key areas of IT Support, IT
Solutions and Business Continuity continues to be very attractive with small and
mid-sized corporate customers. These customers typically require higher levels
of support than larger corporates who usually possess extensive IT skills in
house. This is demonstrated by the fact that 28% of revenues during the year
(2002: 26%) derived from customers who take all three services.
Divisional review
IT Support
Turnover in the IT Support business grew by 12% to #27.8 million (2002: #24.8
million). Visibility in this area continues to be strong, with #14.2 million of
revenues in the Division already committed for the first half of the current
financial year.
Gross profits in IT Support rose by 10%, which is slightly less than the
turnover growth, due to lower margins in the larger outsourcing contracts won
during the year.
IT Support services continue to be well received as customers continue to focus
on ensuring greater reliability and uptime by obtaining more effective support
for their existing infrastructure.
ICM's contracted support services are designed to assist customers in
maintaining high ongoing availability from their IT infrastructure and cover a
wide range of hardware and software support, hotline telephone support, helpdesk
services, facilities management and remote diagnostic and network management.
One particular highlight of the year under review has been the success of
managed outsourcing. This is a bespoke service to customers who wish to
contract out the management and running of their IT infrastructure whilst
retaining strategic control of their IT development. These contracts comprise on
or off-site helpdesks, support, network management and other tailored services
and are finding favour with mid-sized customers.
Looking forward, a lower contract base in the first half of the current
financial year, which will not be replaced until later in the financial year,
will hold back both turnover and contribution in the IT Support division for the
first half of the financial year. This is not expected to affect the outcome for
the year as a whole.
ICM is continuing to see a healthy pipeline for IT Support products, with
managed outsourcing, remote management, high availability services and hosting
services continuing to be strong differentiators in a very competitive market.
IT Solutions
Turnover in the IT Solutions business grew by 8% to #40.4 million (2002: #37.3
million) whilst continued focus on higher margin added value services, such as
the implementation of complex storage solutions, pushed gross profits up by 15%.
The IT Solutions business benefited from a good brought forward order book and
stabilising market conditions during the first half of the financial year.
However, as reported at the interim stage, ICM started to see evidence once
again of projects being postponed or delayed and this continued throughout the
second half of the financial year. This meant that a number of projects were
signed later than anticipated and therefore did not fall into the financial year
under review.
The IT solutions division delivers a wide range of infrastructure solutions to
the commercial and education marketplaces. These range from the integration and
installation of customer-defined hardware or software to consultancy,
specification and supply of complex connectivity solutions and 'turnkey'
multi-vendor networked systems.
Looking forward ICM continues to see a weak commercial IT marketplace but is
continuing to exploit opportunities in the education sector. The Group is
closely monitoring the overhead of this business and has made cost reductions to
ensure that its operating capacity is consistent with expected activity levels.
Business Continuity
The Business Continuity division grew turnover by 43% to #9.6 million compared
to #6.7 million for the same period in 2002. This was a combination of 23%
organic growth together with a #1.3 million contribution to turnover from the
Assurity business. The order book continues to be strong with #4.9 million of
revenues in the Division already committed for the first half of the current
financial year.
The strong growth in this division reflects the continuing improvement in the
contracted base of the Group and the increasing profile and awareness of ICM's
Business Continuity capabilities throughout the UK. ICM is now seeing real
returns on its extensive investment programme over the last few years. Gross
profits in this activity rose by 46% as a result of higher levels of utilisation
of Business Continuity Centres.
ICM offers four types of Business Continuity services:
* Relocatable Recovery provides for smaller IT equipment to be shipped to
and installed on the customer's site in the event of a disaster;
* Mobile Recovery utilises ICM's fleet of mobile computing data-centres
which can be deployed to a customer site in the UK following a disaster;
* Static Site Recovery provides access to powerful data centre facilities
via high speed communication links; and,
* Alternative Workplace Recovery allows customers to relocate staff to a
specified office configuration, including computer networks and office
equipment, within a Business Continuity Centre in the event that a
customer's offices become unusable through some unexpected event or
disaster.
In December 2002 ICM announced a new Mobile Recovery facility providing
customers with rapid access to Sun Microsystems' high end computing technology
in the event of a failure of their own Sun system. Market research has shown
that this recovery service is the most powerful of its kind throughout Europe
and ICM started to sign business for this facility in the second half of the
financial year. ICM also launched its mobile server farm of high end Intel
computers during the year which is also proving to be successful.
During the past year, ICM has continued to invest in and pursue its strategy to
build a national network of Business Continuity Centres.
In March 2003 ICM acquired the freehold of its Sevenoaks Business Continuity
Centre which, following a specialist refit, opened in July 2003. The centre
caters for 300 recovery positions and offers datacentre services which are
another area of rising customer demand in Business Continuity services. The
Sevenoaks Business Continuity Centre is located two miles from the M25, M26 and
M20 and is adjacent to the Sevenoaks main-line train station. It is already
generating strong interest from organisations both from inner London and Kent
looking for an outer London Business Recovery facility and it has already signed
its first customers. ICM now has a network of three sites in the South East
providing facilities in Sevenoaks, Wapping and High Wycombe.
ICM continued the specialist refit of its Manchester Business Continuity Centre
during the year and this opened for business at the end of August 2003. This
centre caters for 400 recovery positions together with datacentre capability.
The Group has already signed extensions to existing customer contracts to use
these facilities. The new centre is close to the M60 and M602 and is adjacent
to the Metro tram link to central Manchester. This new centre extends ICM's
capability in Manchester.
In September 2003 ICM exchanged contracts to purchase a site in Bristol which it
will refit as the Group's tenth Business Continuity Centre following completion
of the purchase in November 2003. This site will provide up to 400 recovery
positions together with datacentre capability and is based close to the M4 and
M5 junction and to the Bristol Parkway main-line railway station.
Looking forward the sales pipeline and activity levels remain high in this
division and this division has expanded its sales capacity in order to take
advantage of the market. ICM's strategy was vindicated during the year when it
was awarded the coveted Business Continuity Service Provider of the Year award.
Outlook
ICM will continue to develop and invest in its business in line with its
focussed IT Assurance strategy to drive future growth. The Group is also
committed to supplementing its organic growth with appropriate acquisitions and
remain active in the pursuit of other opportunities to strengthen its IT
Assurance services.
ICM continues to be tested by uncertain and unpredictable demand in its IT
Solutions division which is expected to continue while there is oversupply in
the marketplace. Nevertheless ICM continues to perform well in these market
conditions and has organised its cost model to operate in the more difficult
environment.
The Group started the new financial year with good contracted order books and
good visibility of income in the IT Support and Business Continuity activities.
However, as a result of a large contract which did not renew in the first
quarter, net contract gains within IT Support are expected to be skewed towards
the second half of the financial year. Overall, robust underlying demand for the
Group's IT Support services and strong growth in its Business Continuity
operations leave ICM well placed to deliver satisfactory annual results in line
with current expectations.
End
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 June 2003
Note 2003 2002
Before Goodwill Total Before Goodwill Total
goodwill amortisation goodwill amortisation
amortisation and amortisation
and exceptional and
exceptional item exceptional
item item
#'000 #'000 #'000 #'000 #'000 #'000
TURNOVER
Continuing operations 76,507 - 76,507 68,871 - 68,871
Acquisitions 1,336 - 1,336 - - -
77,843 - 77,843 68,871 - 68,871
OPERATING PROFIT 1
Continuing operations 5,342 (1,214) 4,128 5,032 (281) 4,751
Acquisitions (99) - (99) - - -
5,243 (1,214) 4,029 5,032 (281) 4,751
SHARE OF LOSS OF ASSOCIATE - - - (15) - (15)
5,243 (1,214) 4,029 5,017 (281) 4,736
Net interest payable (356) - (356) (258) - (258)
PROFIT ON ORDINARY ACTIVITIES 4,887 (1,214) 3,673 4,759 (281) 4,478
BEFORE TAXATION
Tax on profit on ordinary (1,212) (1,455)
activities
PROFIT FOR THE FINANCIAL YEAR 2,461 3,023
Dividends 3 655 625
RETAINED PROFIT FOR THE YEAR 1,806 2,398
EARNINGS PER SHARE 4
Basic 12.4p 15.3p
Diluted 12.3p 15.0p
Adjusted basic 17.5p 16.7p
BALANCE SHEETS
30 June 2003
Group Company
2003 2002 2003 2002
#'000 #'000 #'000 #'000
FIXED ASSETS
Intangible assets - goodwill 8,812 4,611 - -
Tangible assets 24,411 19,533 13,764 9,551
Investments 16 16 7,887 5,087
33,239 24,160 21,651 14,638
CURRENT ASSETS
Stocks 5,007 5,056 - -
Debtors 20,010 21,181 7,219 4,511
Cash at bank and in hand 3,595 2,545 174 682
28,612 28,782 7,393 5,193
CREDITORS: AMOUNTS FALLING DUE 27,006 23,966 9,492 4,622
WITHIN ONE YEAR
NET CURRENT ASSETS/(LIABILITIES) 1,606 4,816 (2,099) 571
TOTAL ASSETS LESS CURRENT 34,845 28,976 19,552 15,209
LIABILITIES
CREDITORS: AMOUNTS FALLING DUE 11,175 7,433 12,525 8,783
AFTER MORE THAN ONE YEAR
PROVISIONS FOR LIABILITIES AND CHARGES 359 38 232 55
23,311 21,505 6,795 6,371
2003 2002 2003 2002
#'000 #'000 #'000 #'000
CAPITAL AND RESERVES
Called up share capital 990 990 990 990
Share premium account 2,037 2,037 2,037 2,037
Merger reserve 2,797 2,797 2,797 2,797
Capital redemption reserve 447 447 - -
Profit and loss account 17,040 15,234 971 547
EQUITY SHAREHOLDERS' FUNDS 23,311 21,505 6,795 6,371
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2003
Note 2003 2002
#'000 #'000
Net cash inflow from operating activities 5 10,147 5,500
Returns on investments and (524) (258)
servicing of finance
Taxation (1,319) (1,660)
Capital expenditure and (7,124) (6,230)
financial investment
Acquisitions and disposals (2,697) -
Equity dividends paid (637) (599)
NET CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES (2,154) (3,247)
AND FINANCING
Financing 3,204 2,178
INCREASE/ (DECREASE) IN CASH IN THE YEAR 1,050 (1,069)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2003 2002
#'000 #'000
INCREASE/ (DECREASE) IN CASH IN THE YEAR 1,050 (1,069)
Cash inflow from increase in debt and lease (3,204) (2,171)
financing
CHANGE IN NET DEBT RESULTING FROM CASH FLOWS (2,154) (3,240)
New finance lease and hire purchase contracts (382) (1,386)
Net debt arising on acquisition of business (750) -
MOVEMENT IN NET DEBT IN THE YEAR (3,286) (4,626)
NET DEBT AT 1 JULY 2002 (5,461) (835)
NET DEBT AT 30 JUNE 2003 (8,747) (5,461)
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 30 June 2003
Group
There were no recognised gains or losses during the current and prior period
other than the retained profit for the year.
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 30 June 2003
2003 2002
Group #'000 #'000
Profit for the financial year 2,461 3,023
Dividends (655) (625)
1,806 2,398
Issue of ordinary shares - 7
Net addition to shareholders' funds 1,806 2,405
Opening shareholders' funds 21,505 19,100
Closing shareholders' funds 23,311 21,505
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. OPERATING PROFIT/(LOSS)
Continuing Acquisitions Total Continuing Total
operations 2003 operations 2002
#'000 #'000 #'000 #'000 #'000
Turnover 76,507 1,336 77,843 68,871 68,871
Raw materials and consumables* 34,294 8 34,302 31,770 31,770
Staff costs 22,354 446 22,800 18,938 18,938
Depreciation 3,157 114 3,271 3,012 3,012
Amortisation of goodwill 489 - 489 281 281
Other operating charges 12,085 867 12,952 10,119 10,119
Operating profit/(loss) 4,128 (99) 4,029 4,751 4,751
* Continuing operations includes an exceptional item of #725,000 further
details of which are contained in note 2.
2. 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.
Under normal circumstances ICM would seek redress from the equipment
manufacturer who supplied the software, however, the manufacturer went into
Receivership in October 2002.
A full provision of #725,000 for the estimated cost of product replacement has
been made during the year.
3. DIVIDENDS
2003 2002 2003 2002
(per share) (per share) #'000 #'000
Equity Shares
Ordinary shares of 5p each Final proposed 2.15 pence 2.06 pence 425 408
Interim paid 1.16 pence 1.10 pence 230 217
655 625
The date of the Annual General Meeting of the Company has been fixed for 11
November 2003 and the proposed final dividend of 2.15 pence per ordinary share
will be paid on 27 November 2003 to members on the register on 31 October 2003.
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 year.
Profit for the financial Earnings per share
year
2003 2002 2003 2002
#'000 #'000 pence pence
Earnings 2,461 3,023 12.4 15.3
Weighted average number of shares in 19,790,439 19,787,742
issue in the year
(b) 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 year ended 30 June 2003 by 194,750 (2002: 393,318) shares to
19,985,189 (2002: 20,181,059).
(c) Adjusted earning per share
The adjusted basic earnings per share is computed to restate the basic earnings
per share figure to exclude the effects of amortisation of goodwill and the
effects of the exceptional item. Adjustment has been made as follows:
Profit for the financial Earnings per share
year
2003 2002 2003 2002
#'000 #'000 pence pence
(Restated) (Restated)
Earnings 2,461 3,023 12.4 15.3
Add back:
Amortisation of goodwill 489 281 2.5 1.4
Exceptional item 725 - 3.7 -
Tax effect (218) - (1.1) -
Adjusted earnings 3,457 3,304 17.5 16.7
Weighted average number of shares in issue in 19,790,439 19,787,742
the year
5. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
2003 2002
#'000 #'000
Operating profit 4,029 4,751
Depreciation 3,271 3,012
Amortisation of goodwill 489 281
Profit on sale of fixed assets (240) (192)
Movement in stocks 49 (552)
Movement in debtors 1,309 (4,522)
Movement in creditors 1,240 2,722
Net cash inflow from operating activities 10,147 5,500
6. POST BALANCE SHEET EVENT
On 2 September 2003 the Company exchanged contracts to acquire the freehold of a
new Business Continuity site in Bristol for #3.8 million. The completion of the
purchase is scheduled for 28 November 2003.
7. The financial information set out does not constitute the Company's
statutory accounts for the years ended 30 June 2002 or 2003, 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 section
237(2) or (3) of the Companies Act 1985.
8. Copies of the full statutory accounts will be despatched to
shareholders in due course. Further copies will be available from the
Registered Office of the Company at 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
END
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