RNS Number : 5681A
SiRViS IT PLC
04 August 2008
SiRViS IT plc
Preliminary Results for the year ended 31 May 2008
SiRViS IT plc, which provides a range of IT services and sale of computer equipment across the United Kingdom, announces preliminary
results for the year to 31 May 2008.
Basis of reporting
The preliminary results have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) in issue as
adopted by the European Union (EU) for the first time; comparatives have been restated.
HIGHLIGHTS
* Revenue growth increased by 44% to �10.8m (2007: �7.5m);
* Recurring revenues represents 76% of revenue (2007: 79%);
* Adjusted operating profit* increased by 30% to �1,288,000 (2007: �992,000);
* Adjusted basic earnings* per share increased by 18% to 28.36p (2007: 24.02p);
* Profit after tax �642,000 (2007: �43,000 loss);
* Basic earnings per share 19.45p (2007: 1.50p loss);
* A recommended cash offer of 160 pence per share for the entire issued ordinary share capital of the Company from SiRViS IT
Holdings Limited, a private company wholly owned by the NAV Fund, a fund to which North Atlantic Value LLP acts as investment adviser, is to
be announced this morning via a separate announcement.
* Adjusted operating profit and adjusted basic earnings per share are stated before exceptional items, share-based payments and
amortisation of intangible assets.
Enquiries to:
Mark Lewis 01773 825516 SiRViS IT plc Chief Executive
Ian Bailey 01773 825516 SiRViS IT plc Finance Director
Geoff Nash 0207 600 1658 FinnCap Nominated Adviser
Chairman's Statement
I am pleased to report the results for the year ended 31 May 2008 which show a strong financial performance compared to last year.
The acquisition of Technology Management Group Limited ("TMG") which was acquired in May 2007 brought many synergies to the Group and
has been successfully integrated with our Group operations. A full twelve months of trading by the enlarged Group is included in the figures
for the year ended 31 May 2008.
International Financial Reporting Standards (IFRS)
These annual results are the first that the Group has reported based on International Financial Reporting Standards (IFRS) as adopted by
the EU and, consequently, the comparative figures in respect of last year have been restated from UK GAAP to IFRS.
The principal area of impact arising from IFRS has been the treatment of goodwill and intangible assets. The effect of IFRS on the
reporting of our cash flows remains unaffected.
Trading results
Revenue for the year increased by 44% to �10.8m (2007: �7.5m), with recurring revenues representing 76% of revenue (2007: 79%).
Operating profit, before exceptional items, share-based payments and amortisation of intangible assets, increased by 30% to �1,288,000
(2007: �992,000).
Adjusted basic earnings per share (before exceptional items, share-based payments and amortisation of intangible assets) increased by
18% to 28.36p per share (2007: 24.02p).
Profit after tax was �642,000 (IFRS presented 2007: �43,000 loss), resulting in a basic earnings per share of 19.45p (2007: 1.50p
loss).
Operating cash flow, before movements in working capital, was �1,344,000 compared to �93,000 last year.
Gross margin as a percentage of revenue has decreased from 36.4% to 32.7%, partly due to the contracts acquired from TMG being lower
margin contracts and general pricing pressure in a very competitive marketplace.
Business review
The Group acquired TMG during the latter part of the previous financial year. Quarter one of the financial year under review
concentrated on integrating TMG with the Group's operations. The cost saving benefits associated with this integration became effective in
August 2007, and I am pleased to report that the major customers of TMG have been very satisfied with the IT services provided.
In the second half of the year the Board has continued to focus on organic growth and cost control.
The Board has looked at other acquisition opportunities during the year, however, within a weakening economic and financial marketplace
the Board has taken the view that it would not overpay for acquisitions at a time when liquidity was declining.
Recommended Cash Offer
Today, the Board also announces a recommended cash offer of 160 pence per share for the entire issued ordinary share capital of the
Company from SiRViS IT Holdings Limited, a private company wholly owned by the NAV Fund, a fund to which North Atlantic Value LLP acts as
investment advisor.
The Board believes that the Offer represents a fair and reasonable value for the business which has struggled to generate enough scale
as a public company. The present valuation of the Group makes further acquisitions disproportionally dilutive and the current credit
conditions make raising debt both difficult and expensive. Accordingly the Board is not able to make any further acquisitions in the current
climate and the Group continues to bear the significant cost of being a public company.
As a result of these factors, the Independent Directors of the Board have concluded that the Group would be better placed to achieve the
opportunities available to it in an off-market environment and hence consider that the Offer represents a good opportunity for SiRViS IT plc
shareholders to realise a fair and reasonable value for their shares.
Share Consolidation
Following the approval of all the resolutions at the Annual General Meeting in September 2007, the shares were consolidated on a forty
to one basis.
Dividends
The Board does not propose a dividend and will be unable to declare one until such time as the accumulated deficit on the Company's
profit and loss account has been eliminated. When appropriate, proposals will be put to shareholders to approve the utilisation of the share
premium account to enable a dividend to be declared.
Employees
The Board recognises the importance of the Group's staff and management to the success of the Group and would like to thank all
employees for their commitment, expertise and considerable contribution during the year.
Outlook
Whilst current trading remains satisfactory, since the end of the financial year the Group has noticed some scaling back by retail
focused clients and increased pressure on margins. The Board currently anticipates that the weakening economy may well have an impact on the
future rate of growth.
Peter Addison
Non-executive Chairman
Consolidated Income Statement
for the year ended 31 May 2008
Year ended Year ended
31 May 31 May
2008 2007
Note �'000 �'000
Revenue 10,812 7,493
Cost of sales (7,272) (4,764)
Gross profit 3,540 2,729
Administrative expenses before exceptional items, share-based payments, and amortisation of (2,252) (1,737)
intangible assets
Operating profit before exceptional items, share-based payments, and amortisation of intangible 1,288 992
assets
Exceptional items - (946)
Share-based payment costs - (58)
Amortisation of intangible assets (276) -
Total administrative expenses (2,528) (2,741)
Operating profit/(loss) 1,012 (12)
Finance income 5 1
Finance costs (81) (28)
Profit/(loss) before taxation 936 (39)
Income tax expense (294) (4)
Profit/(loss) for the year 642 (43)
Earnings/(loss) per ordinary share 2
Basic 19.45p (1.50p)
Diluted 19.45p (1.50p)
All results for the group are derived from continuing operations in both the current and prior year.
There is no recognised income or expenses for the current or prior period other than stated above. As a
consequence, a statement of recognised income and expenses has not been presented.
Consolidated Balance Sheet
at 31 May 2008
2008 2007
Note �'000 �'000 �'000 �'000
ASSETS
Non-current assets
Property, plant & equipment 114 128
Goodwill 8,978 8,626
Other intangible assets 432 708
Total non-current assets 9,524 9,462
Current assets
Trade and other receivables 3 2,216 2,376
Inventories 4 588 696
Cash and cash equivalents 1,118 716
Total current assets 3,922 3,788
Total assets 13,446 13,250
LIABILITIES
Current liabilities
Trade and other payables 5 (2,252) (2,803)
Current borrowings 6a (1,208) (1,002)
Current tax payable (290) (16)
Current provisions 7 (991) (862)
Deferred income (1,951) (1,876)
Total current liabilities (6,692) (6,559)
Non-current liabilities
Non-current borrowings 6b (84) (188)
Non-current provisions 8 - (475)
Total non-current liabilities (84) (663)
Total liabilities (6,776) (7,222)
Net assets 6,670 6,028
EQUITY
Share capital 1,320 1,320
Share premium account 6,145 6,145
Retained earnings (795) (1,437)
Total equity 6,670 6,028
Consolidated Cash Flow Statement
for the year ended 31 May 2008
2008 2008 2007 2007
�'000 �'000 �'000 �'000
Cash flows from operating activities
Profit/(loss) after taxation for the period 642 (43)
Adjustments for:
Finance income (5) (1)
Finance costs 81 28
Taxation expense recognised in income statement 294 4
Depreciation of property, plant and equipment 56 47
Amortisation of intangible assets 276 -
Share-based payment expense - 58
702 136
Operating cash flows before movements in working capital 1,344 93
Decrease/(increase) in trade and other receivables 160 (441)
Decrease in inventories 108 39
(Decrease)/increase in trade payables (273) 321
Decrease in accruals (90) (140)
Increase/(decrease) in deferred income 75 (187)
(Decrease)/increase in provisions (610) 862
(630) 454
Cash generated from operations 714 547
Interest paid (76) (28)
Taxation paid (18) (55)
Net cash generated from operating activities 620 464
Cash flows from investing activities
Cash at bank acquired with subsidiary - 521
Purchase of subsidiary undertaking, net of cash acquired (88) (925)
Purchase of property, plant and equipment (42) (55)
Deferred consideration paid (195) (360)
Interest received 5 1
Net cash used in investing activities (320) (818)
Cash flows from financing activities
Net proceeds of ordinary share issue - 515
Payment of loan notes (360) -
Net cash (used in)/generated from financing activities (360) 515
Net (decrease)/increase in cash and cash equivalents (60) 161
Cash and cash equivalents at 1 June 74 (87)
Cash and cash equivalents at 31 May 14 74
Anaylised in balance sheet as:
Cash at bank and in hand 1,118 716
Bank overdraft (687) (642)
Bank borrowings (417) -
Cash and cash equivalents at 31 May 14 74
Consolidated Statement of Changes in Equity
at 31 May 2008
Share
Share premium Retained
capital account earnings Total
�'000 �'000 �'000 �'000
At 1 June 2006 1,141 5,809 (1,452) 5,498
Loss for the year and total recognised expenses for the year - - (43) (43)
Other movements
Proceeds from issue of shares 179 336 - 515
Equity settled share-based payment charge - - 58 58
At 31 May 2007 1,320 6,145 (1,437) 6,028
Profit for the year and total recognised expenses for the year - - 642 642
At 31 May 2008 1,320 6,145 (795) 6,670
Notes to the consolidated financial statements
1. Principal Accounting policies
Basis of preparation
The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards
(IFRS) in issue as adopted by the European Union (EU) and the Alternative Investment Market (AIM) Rules for Companies.
The policies have changed from the previous year when the financial statements were prepared under United Kingdom Generally Accepted
Accounting Practice (UK GAAP). The comparative information has been restated in accordance with IFRS, as disclosed in the Interim results
announcement.
2 Earnings/(loss) per ordinary share
The calculation of earnings/(loss) per share is based on the profit/(loss) for the financial year and the following number of
shares:
2008
2007
Number of
Number of
shares
shares
Weighted average number of shares
For basic earnings/(loss) per share 3,300,000
2,870,081
For diluted earnings/(loss) per share 3,300,000
2,870,081
Share options do not have a dilutive effect because the exercise prices were above the average share price during the period.
In view of the significant impact of the adoption of IFRS 2 Share Based Payments, amortisation of intangibles and
exceptional items on earnings per share calculated in accordance with IAS 33 Earnings Per Share, an adjusted
earnings/(loss) per share has been provided below as the Directors consider that they may be useful to shareholders and potential
investors.
2008
2007
Per share
Per share
amount Basic (Loss)/
amount Basic
Earnings and diluted Earnings
and diluted
�'000 p �'000
p
Profit/(loss) for the period 642 19.45
(43) (1.50)
Effect of share based payments - - 58
2.02
Previous years tax charge adjustment 18 0.55 4
0.14
Amortisation of intangibles 276 8.36 -
-
Adjusted earnings pre-exceptional items per share 936 28.36 19
0.66
Exceptional items (net of tax where applicable):
Aborted acquisition costs - - 29
1.01
Unsolicited approach costs - - 41
1.41
Restructuring provision - - 346
12.04
Onerous lease provision - - 256
8.90
Adjusted earnings per share 936 28.36 691
24.02
3 Trade and other receivables
2008
2007
�'000
�'000
Trade receivables 1,656
1,751
Prepayments and accrued income 560
625
2,216
2,376
The carrying value of trade receivables is considered a reasonable approximation of their fair value.
All of the receivables have been reviewed for indicators of impairment and no provision has been made (2007: Nil).
The trade receivables past due but not impaired are as follows:
2008
2007
�'000
�'000
Not more than 3 months 490
229
More than 3 months but not more than 6 months 75
28
565
257
4 Inventories
2008
2007
�'000
�'000
Finished goods and goods for resale 59
45
Maintenance stocks 529
651
588
696
Inventories are stated at fair value less cost to sell. During the year, a total of �1,452,000 of inventories was included in the
income statement as an expense (2007: �740,000). The amount of write down of inventories recognised as an expense
amounts to �410,000 (2007: �303,000).
5 Trade and other payables
2008
2007
�'000
�'000
Trade payables 655
942
Accrued expenses 1,029
1,112
Deferred consideration -
195
Other taxation and social security 568
554
2,252
2,803
The carrying value of trade payables is considered a reasonable approximation of their fair value.
6 Borrowings
6a Current borrowings
2008
2007
�'000
�'000
Loan notes 188
360
Bank overdraft 687
642
Bank borrowings 333
-
1,208
1,002
The current borrowings carry interest based on Barclays Bank PLC base lending rate and hence are considered to be carried at fair value.
6b Non-current borrowings
2008
2007
�'000
�'000
Loan notes -
188
Bank borrowings 84
-
84
188
The non-current borrowings carry interest based on Barclays Bank PLC base lending rate and hence are considered to be
carried at fair value.
7 Current provisions
Onerous Contingent
Restructuring lease consideration Total
�'000 �'000 �'000 �'000
At 1 June 2007 477 385 - 862
Additional provisions - - 264 264
Transfer from non-current provisions - - 475 475
Used during the year (449) (161) - (610)
28 224 739 991
At 31 May 2008
a. Restructuring provision represents redundancy costs and other expenses in relation to integrating the acquisition of
Technology Management Group Limited into Group operations.
b. Onerous lease provision represents the integration of two locations and relates to the closure of the Technology
Management Group Limited premises.
c. Contingent consideration represents the estimated additional consideration to be paid relating to the acquisition of
Technology Management Group Limited.
8 Non-current provisions
Contingent
consideration Total
�'000 �'000
At 1 June 2007 475 475
Transfer to current provisions (475) (475)
- -
At 31 May 2008
Contingent consideration represents the estimated additional consideration to be paid relating to the acquisition of
Technology Management Group Limited.
9 The financial information set out in this Preliminary announcement does not constitute statutory accounts as defined in section 240
of the Companies Act 1985. Results for the year ended 31 May 2008 are abridged from the 2008 Annual Report and Accounts, which received an
unqualified auditor's report and will be filed with the Registrar of Companies.
10 The Annual Report will be posted to shareholders in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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