RNS Number:9611I
Gladstone PLC
20 March 2003
GLADSTONE PLC
INTERIM RESULTS - SIX MONTHS ENDED 28 FEBRUARY 2003
Gladstone, the leading provider of membership services to UK Health and Leisure
facilities, today announces the attainment of profit for the six months interim
results ended February 28th 2003.
Six months to February 2003 Six months to February 2002
Turnover #3.796 million #4.021 million
Operating profit/(loss) on #314k (#851k)
ordinary activities before
amortisation of goodwill and
exceptional items
Profit/ (loss) after tax and #50k (#3.381 million)
goodwill
Cash at bank #681k #234k
Key Points:
The Group has made a profit after tax and amortisation of goodwill for the first
time.
Group cash balances have grown by #447k over the last 12 months.
Recurring revenues. Over 30% of turnover is now derived from contractually
recurring maintenance contracts. A year ago it was 24%. In addition over #1.5m
software revenues are secured over the next 3 years in the form of rental
contracts.
Product development. Our investment in MRM.plus2 continues to position us
ahead of our competition.
Ben Merrett said "It is a delight to be able to report the attainment of profit
at Group level for the first time despite general market uncertainty and
challenging trading conditions. Consistent cash generation has been achieved and
all historic financial issues are behind us. The growth of our software sales
and significant increases in our recurring high margin revenue streams confirms
customer preference for our market leading suite of products. We have a strong
order book with particular success in the local authority market".
Enquiries
Jeremy Stokes, Chairman
Ben Merrett, Chief Executive 01491 20 10 10
CHAIRMAN'S STATEMENT
When the Directors took responsibility for funding the required turnaround at
Gladstone we set a long term goal of increasing shareholder value. The initial
task of making MRM a cash positive division was imperative. Continual
performance improvement has been achieved and the inherent strength of the MRM
division is now apparent. We would like to grow value by repeating this success
and are seeking shareholder authority, at the forthcoming AGM, to expand and
accelerate this process.
Jeremy Stokes
Chairman
March 20 2003
CHIEF EXECUTIVE'S STATEMENT
Group profit
In January 2002 the new Board of Directors committed required funding for the
Group to attain profitability. Our MRM division quickly attained break-even and
this was then improved to a Group break-even position before amortisation of
goodwill. Over the last six months this has been enhanced to a Group Profit
after amortization of goodwill and tax of #50k. The operating profit excluding
goodwill and exceptional items has achieved a comparative improvement of #1.165
million in the results for the first six months of the current financial year.
The Group has achieved profit in challenging market conditions when clients have
been reticent to make investments in technology. However we have continued to
invest in our Mrm.plus2 product and staff to improve our competitive
positioning. The Group remains under tight financial control and generation of
cash remains a priority. There are over #3.3 million of tax losses brought
forward that are available within the MRM trading division for relief against
future profits.
Cash generation
Over the six months ended 28 February 2003 the Group had generated a cash inflow
from its operating activities of #306k compared to an outflow of #1.7 million in
the six months ended 28 February 2002.
Over the last twelve months Group cash has grown by #447k after regular
repayment of debt, financial leases and one-off cash payments of c#600k relating
to historic issues. In mid-March 2003 a demand for #168k in respect of a PAYE
liability arising from the exercise of share options by two former directors was
received from the Inland Revenue. (For details see note 3(b) to 2002 Report and
Accounts.)
Rental software contracts
The Group historically offered its clients the facility to buy our software on a
rental basis rather than the standard perpetual licence. These software
revenues now represent an additional contractually committed order book of
c#1.5m over the next three years. Clients do not own the software and we
anticipate that these contracts will be renewed at the end of the rental period.
If these contracts had been sold as traditional perpetual licences our profits
and growth in cash resources would have been higher.
Market segments
A significant market for us continues to be the government funded local
authority "public" market. Recent contracts awarded include North West
Leicestershire Council, Pembrokeshire County Council, South Bucks District
Council, Durham City Council, Ceredigion County Council, South Ayrshire Council,
Purbeck District Council and Corby Borough Council.
For the "private" health club facilities Gladstone has invested in unique
product functionality to assist these companies in responding to their core
operational challenge to enhance membership retention. With significant change
being experienced by many of these organisations it is not easy to predict when
they will be ready to invest in Gladstone's new software capability. However
during the period we have completed the implementation of a central server
solution for over 50 sites of our MRM. plus2 solution for Six Continents Plc.
DeVere Plc is currently conducting a multi site trial of MRM.plus2 and SOLL
Leisure has implemented the business information tools MRM.datamine and
MRM.analyser. Bannatyne Fitness Limited, LA Fitness Plc and Esporta, to name a
few, are still continuing their roll out campaigns.
Turnover
For the comparative 6 month period we have attained 12% growth in our software
revenues and 17% growth in high margin maintenance revenues from more than 1,000
clients.
At the end of February 2003 our contractually committed, high margin recurring
maintenance and rental revenues represented 36% of turnover.
Charge out rates for our professional services teams have been affected by the
current tough trading conditions and we have also seen a reduction in low margin
third party sales. However overall we have delivered an improvement in net
margin with a marginally reduced turnover of #3.8m.
Our Plc and divisional overheads are dramatically less than 12 months ago and
continual overhead reduction has been achieved during the last 6 months.
Product development
MRM.connect is the companion product to MRM.plus2 that allows members access to
their club, via an Internet browser, to make bookings. Internet payment
capability is being developed to reduce our clients' administration costs.
Designed with usability, security and customisation in mind MRM.connect can
easily be modified to match the look and feel of any existing web site.
MRM.connect has been running live for the last few months with Sona clubs who,
with the help of Gladstone MRM, were able to incorporate the product within
their existing web site. Another five customers are currently working on their
own customisations and will be offering e-bookings to their members over the
next 6 months.
Dividend Payment
The Directors are not recommending the payment of a dividend.
Trading Update
Our order book has increased over the last 6 months and the second half of the
year has traditionally experienced seasonal upside from our local authority
clients.
Ben Merrett
Chief Executive
20 March 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
# # #
Turnover
Continuing operations 3,796,125 4,020,569 8,603,805
Cost of sales (896,275) (1,004,143) (2,291,429)
________ ________ _________
Gross profit 2,899,850 3,016,426 6,312,376
Administrative expenses excluding amortisation
of goodwill and exceptional items (2,586,006) (3,867,256) (6,815,372)
Amortisation of goodwill and exceptional items (note 5) (222,065) (2,318,559) (978,369)
_________ ________ ________
Total administration expenses (1,493,476) (6,185,815) (7,793,741)
_________ ________ ________
Operating profit/(loss)
Continuing operations 91,779 (3,169,389) (1,481,365)
_________ ________ ________
Calculation of operating profit(/loss) from continuing operations
before amortisation of goodwill and
exceptional administrative expenses:
Operating profit/(loss) as above 91,779 (3,169,389) (1,481,365)
Amortisation of goodwill and exceptional expenses 222,065 2,318,559 978,369
________ ________ _________
313,844 (850,830) (502,996)
________ ________ _________
Provision for loss on fixed assets - (131,520) (141,611)
________ ________ ________
Profit/(loss) on ordinary activities before interest 91,779 (3,300,909) 1,622,976
Net interest payable (41,464) (79,762) (125,926)
________ ________ _________
Profit/(loss) on ordinary activities before taxation 50,315 (3,380,671) (1,748,902)
Taxation - - 72,199
________ ________ _________
Profit/(loss) on ordinary activities after taxation 50,315 (3,380,671) (1,676,703)
Dividends - - -
________ ________ _________
Profit/(loss) for the period 50,315 (3,380,671) (1,676,703)
======= ======= ========
Profit/(loss) per ordinary share (pence)
Basic 0.12p (9.74p) (4.53p)
Basic before amortisation of goodwill and exceptional items 0.66p (2.68p) (1.50p)
Diluted 0.12p (9.74p) (4.53p)
======= ======= =======
CONSOLIDATED BALANCE SHEET
28 February 28 February 31 August
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
# # #
Fixed assets
Intangible assets 7,647,772 6,555,470 7,929,017
Tangible assets 1,828,035 1,984,716 1,907,725
_________ _________ _________
9,475,807 8,540,186 9,836,742
_________ _________ _________
Current assets
Stocks 117,893 149,282 130,121
Debtors 1,853,754 2,396,708 2,241,382
Cash at bank and in hand 681,203 234,426 889,679
_________ _________ _________
2,652,850 2,780,416 3,261,182
Creditors: amounts falling due
within one year (1,140,792) (1,720,594) (2,020,375)
_________ _________ _________
Net current assets 1,512,058 1,059,822 1,240,807
_________ _________ _________
Total assets less current liabilities 10,987,865 9,600,008 11,077,549
Creditors: amounts falling due
after more than one year (1,032,857) (1,639,980) (1,107,162)
Accruals and deferred income (2,079,800) (2,181,744) (2,145,494)
_________ _________ _________
Net assets 7,875,208 5,778,284 7,824,893
======== ======== ========
Capital and reserves
Called up share capital 4,111,700 3,769,059 4,111,700
Share premium account 13,353,074 13,353,074 13,353,074
Revaluation reserve 453,625 453,625 453,625
Special Reserve 4,667,133 4,667,133 4,667,133
Merger reserve - 2,148,000 -
Profit and loss account (14,710,324) (18,612,607) (14,760,639)
__________ _________ _________
Shareholders' funds
- equity interests 7,875,208 5,778,284 7,824,893
========= ======== ========
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
# # #
Net cash inflow/(outflow) from
operating activities 305,662 (1,701,316) (1,079,405)
Returns on investments
and servicing of finance
Net interest paid (41,464) (79,762) (125,926)
Taxation (paid)/refunded (1,975) - 72,200
Capital expenditure
Purchase of tangible fixed assets (27,616) (34,416) (142,880)
Receipts from sales of fixed assets 700 6,217 24,266
Development costs capitalised (20,983) (176,844) (235,006)
_________ _________ _________
Net cash outflow from capital expenditure (47,899) (205,043) (353,620)
_________ _________ _________
Net cash outflow before financing 214,324 (1,986,121) (1,486,751)
Financing
Proceeds from issue of shares - 342,642 685,283
Finance lease capital repayments (260,549) (26,452) (64,279)
Bank loan received/(repaid) 46,176 (2,000,000) (2,040,000)
Directors' loans obtained - 317,358 -
_________ _________ _________
Net cash outflow from financing (214,373) (1,366,452) (1,418,996)
_________ _________ _________
Decrease in cash (49) (3,352,573) (2,905,747)
======== ======== ========
NOTES TO THE UNAUDITED INTERIM REPORT
1. The results for the six month periods ended 28 February 2003 and
28 February 2002 are unaudited. They have been prepared using accounting bases
and policies consistent with those used in the preparation of the financial
statements of Gladstone PLC for the year ended 31 August 2002.
2. The comparative figures for the year ended 31 August 2002 are
extracted from the statutory accounts for that period which have been reported
on by the auditors - such report was unqualified and did not contain a statement
under section 237(2) or (3) of The Companies Act 1985 ("The Act"). The
statutory accounts for the year ended 31 August 2002 have been delivered to the
Registrar of Companies.
3. The financial information contained in this report does not
constitute statutory accounts of the Company within the meaning of Section 240
of The Act.
4. Copies of this Interim Report will be sent to all shareholders
and are available at the Company's registered office.
5. Exceptional administrative expenses
Six months Six months 14 months
ended ended ended
28 February 28 February 31 August
2003 2002 2002
# # #
Amounts written off in connection with
acquisition of subsidiaries:
Amortisation of goodwill 222,065 1,750,964 444,129
Adjustment to the estimate of the fair value
of liabilities made in prior years - 150,000 150,000
________ ________ ________
222,065 1,900,964 594,129
________ ________ ________
Other exceptional items:
Provision for PAYE in connection with
exercise of options by former directors
and the related NI on benefit in kind
(see note 3(b) of 2002 Annual Report and Accounts) - 180,000 168,319
Property lease termination costs - Egham office - 160,921 160,921
Compensation to director for loss of office - 76,674 55,000
________ ________ ________
- 417,595 384,240
________ ________ ________
Total 222,065 2,318,559 978,369
======= ======= =======
6. Profit/(loss) per ordinary share
The basic profit/(loss) per ordinary share has been calculated using the profit/
(loss) for the period and the weighted average number of ordinary shares in
issue during the period as follows:
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
# # #
Profit/(loss) for the period - after taxation 50,315 (3,380,671) (1,676,703)
======= ======= ========
Number Number Number
Weighted average number of
ordinary shares of 10p each 41,116,996 34,699,571 36,977,139
======== ======== ========
pps pps pps
Basic profit/(loss) per share (pence) 0.12 (9.74) (4.53)
======= ======= =======
The basic profit/(loss) per share before the amortisation of goodwill and other
exceptional items has also been presented since, in the opinion of the
directors, this provides shareholders with a more appropriate measure of
earnings derived from the group's present business. It can be reconciled to
basic profit/(loss) per share as follows:
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2003 2002 2002
pps pps pps
Basic profit/(loss) (pence per share) 0.12 (9.74) (4.53)
Adjustment for goodwill and administration
and non-administration exceptional
items (pence per share) 0.54 7.06 3.03
________ ________ ________
Profit/(loss) per share before amortisation of
goodwill and exceptional items (pence) 0.66 (2.68) (1.50)
======= ======= =======
The diluted profit/(loss) per ordinary share, as defined in FRS 14,
has been calculated as shown below:
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2003 2002 2002
# # #
Profit/(loss) for the period - after taxation 50,315 (3,380,671) (1,676,703)
======== ======= ========
Number Number Number
Weighted average number
of ordinary shares in issue as above 41,116,996 34,699,571 36,977,139
Dilution for share options exercisable
at a price below the average market value
of the Company's shares during the period - 2,539 -
________ ________ ________
Diluted weighted average number
of shares in issue 41,116,996 34,702,110 36,977,139
======== ======== ========
pps pps pps
Diluted profit/(loss) per share (pence) 0.12 (9.74) (4.53)
======= ======= =======
NOTES TO THE UNAUDITED INTERIM REPORT
7. Intangible fixed assets
Development
Goodwill costs Total
# # #
Cost
At 1 September 2002 17,876,829 711,908 18,588,737
Additions - 20,983 20,983
Write off re fully depreciated costs - (226,207) (226,207)
_________ _________ _________
At 28 February 2003 17,876,829 506,684 18,383,513
_________ _________ _________
Amortisation
At 1 September 2002 10,326,628 333,092 10,659,720
Charge for the period 222,065 80,163 302,228
Write off re fully depreciated costs - (226,207) (226,207)
_________ _________ ________
At 28 February 2003 10,548,693 187,048 10,735,741
_________ _________ ________
Net book values
At 28 February 2003 7,328,136 319,636 7,647,772
======== ======== ========
At 31 August 2002 7,550,201 378,816 7,929,017
======== ======== ========
At 28 February 2002 6,243,370 312,100 6,555,470
======== ======== ========
Goodwill is amortised over the period which the directors estimate will
represent its useful economic life. For the periods up to 28 February 2002, the
useful economic life of the goodwill was estimated to be four years. For the
year ended 31 August 2002, and the subsequent periods, the directors have
reviewed this economic life. The directors are of the opinion now that the
useful economic life of the goodwill is 20 years from the date of acquisition of
the business.
8. Statement of movements on reserves
Share Profit
premium Revaluation Special and loss
account reserve reserve account
# # # #
At 1 September 2002 13,353,074 453,625 4,667,133 (14,760,639)
Retained profit for the period - - - 50,315
_________ ________ ________ ________
At 28 February 2003 13,353,074 453,625 4,667,133 (14,710,324)
======== ======= ======= =======
9. Reconciliation of movements in shareholders' funds
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2003 2002 2002
# # #
Profit/(loss) for the period 50,315 (3,380,671) (1,676,703)
Proceeds from issues of shares - 342,642 685,283
_________ ________ _________
Net increase/(decrease) in shareholders' funds 50,315 (3,038,029) (991,420)
Opening shareholders' funds 7,824,893 8,816,313 8,816,313
_________ ________ _________
Closing shareholders' funds 7,875,208 5,778,284 7,824,893
======== ======== ========
10. Reconciliation of operating loss to net cash outflow
from operating activities
Six months Six months Year
ended ended ended
28 February 31 December 31 August
2003 2002 2002
# # #
Operating profit/(loss) 91,779 (3,169,389) (1,481,365)
Depreciation charges 106,606 317,923 384,076
Profit on sale of fixed assets - (6,217) (15,156)
Development costs written off - - -
Amortisation of development costs 80,163 115,439 106,885
Impairment of goodwill - - -
Amortisation of goodwill 222,065 1,750,964 444,129
Decrease in stocks 12,228 5,961 25,122
Decrease/(increase) in debtors 387,628 (69,553) 85,772
(Decrease)/increase in creditors (529,113) (646,444) (232,208)
Decrease in accruals and deferred income (65,694) - (396,660)
________ ________ ________
Net cash inflow/(outflow) from
operating activities 305,662 (1,701,316) (1,079,405)
======= ======= =======
11. Analysis of changes in net debt
1 September Cash Non-cash 28 February
2002 flows changes 2003
# # # #
Cash at bank
and in hand 889,679 (208,476) - 681,203
Bank overdraft (208,427) 208,427 - -
_________ _________ _________ _________
681,252 (49) - 681,203
Bank loan (1,210,000) (46,176) - (1,256,176)
Finance leases (339,695) 260,549 - (79,146)
_________ _________ _________ _________
(1,549,695) 214,373 - (13,353,322)
_________ _________ _________ _________
Net debt (868,443) 214,324 - (654,119)
======== ======== ======== ========
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