TIDMCAE
RNS Number : 4608E
Charteris PLC
07 April 2011
Charteris plc
("Charteris" or the "Company")
Interim Report
for the six months ended 31 January 2011
Charteris plc, the business and IT consultancy, announces its
interim results for the six months to 31 January 2011.
KEY POINTS
.. Revenue of GBP6.6m (H1 2010: GBP7.8m)
.. Loss before taxation and exceptional items was GBP498k (H1
2010: GBP449k loss)
.. Diluted Loss per Share of 1.73p (H1 2010: 0.93p loss)
.. Weighted pipeline of future sales opportunities holding up
well
.. Recovery plan includes reductions in cost base, and a
reorganisation around core specialist capabilities
Commenting on the results Cliff Preddy, Chairman, said:
"A recovery plan was initiated in response to weaker than
expected trading in the second quarter. Actions already taken
should yield progressive improvement in performance during the
remainder of the financial year and the directors accordingly
anticipate that the Company will return to profitable trading in
the second half."
Enquiries:
Cliff Preddy/Patrick Carter, Charteris Tel: 020 7600 9199
plc
Michael Shaw/Emma Griffin, Oriel Tel: 020 7710 7600
Securities Limited (Nominated Adviser)
Charteris plc Interim Report 2011
As anticipated in the last Charteris annual report, the
improvement in trading in the final quarter of the financial year
ended 31 July 2010, which had led to a break-even performance
before exceptional costs, broadly held up in the first quarter of
the current financial year. However, trading conditions have
remained challenging and the tendency for clients to proceed
cautiously continued, leading to delayed sales. This, and to a
lesser extent inclement weather conditions preventing consultants
reaching client sites, resulted in lower than expected revenues in
the second quarter and a loss in the six month period ended 31
January 2011.
A recovery plan was initiated with the objective of restoring
the Company to a positive trading position in the second half. This
includes significant cost saving initiatives which will further
reduce central overheads and operating costs. This has been enabled
by a reorganisation of the business around the Company's core
specialist capabilities which better aligns marketing, sales and
consulting resources.
FINANCIAL SUMMARY
Revenue declined 15% to GBP6.6m (H1 2010: GBP7.8m).
Staff costs were 17% lower than the comparative period last
year. The resulting loss before taxation, share-based payments, and
exceptional items associated with cost reduction measures taken
during the period, was GBP498k (H1 2010: GBP449k loss), although
the benefits of further cost reduction actions have not yet fully
worked through.
Diluted loss per share without adjustments was 1.73p (H1 2010:
0.93p).
Banking loans and facilities were refinanced in November 2010 as
set out in the FY 10 Annual Report. Cash and cash equivalents were
negative GBP142k at 31 January 2011 (31 July 2010: positive
GBP864k; 31 January 2010: positive GBP812k).
BUSINESS OVERVIEW
Charteris provides business and IT consultancy services that
drive and support change programmes that are centred on customers
and internal users of services. It also provides such services for
the effective application of Microsoft technologies. The Company
has particular market sector expertise in both the public sector
and commercial sector (including manufacturing and supply chain,
multi-channel retail, and support services).
The three Charteris primary service areas are:
-- Business Consulting: where the Company helps clients align
systems, processes and people to deliver products and services to
external and internal customers. These activities are supported by
the depth of experience in the Charteris team of organisational
change consultancy and major programme management, and by the
Company's investment in its Customer (Citizen) Centric Business
Change (CCBC) techniques.
-- Advanced Microsoft Consulting: where expertise is supplied in
the range of products that make up the Microsoft Cloud Computing
platforms and "full-stack" technologies to enable rapid business
change to be effected.
-- Microsoft Dynamics: where Charteris helps clients maximise
business efficiency, operational flexibility and productivity by
designing and building Enterprise Resource Planning (ERP) and
Customer Relationship Management (CRM) business systems that are
based upon the Microsoft Dynamics range of application software
products.
Operationally, these primary service areas performed as follows
in the period under review:
Business Consulting
In the public sector Charteris continued to provide advisory and
programme management services to some of the most significant
long-term programmes in the field of homeland security.
A number of CCBC engagements in Local and Regional Government
were successfully executed in response to the requirement, in times
of exceptionally tight budgetary constraints, to make cost control
with efficient service delivery a high priority. Towards the end of
the period we secured important new projects at Wiltshire Council
in connection with service reviews for Older People and Supporting
People, and for Disabled Children and Adults. A key contributor to
a growth in revenues from local and regional authorities was a
series of projects performed for the South West Regional
Improvement and Efficiency Partnership.
In the commercial sector improving demand was experienced for
CCBC assignments. For example, retail and change management
expertise was applied in a strategic review of the on-line
operations of a value retailer, and a contract was recently won to
provide customer service improvement advice to a major airline.
Demand for programme management services also held up well, with
example activities including helping the initiation of several new
projects in on-line retailing for a leading high street retailer
and important contributions to pension administration
programmes.
Overall, Business Consulting contributed a solid and balanced
performance, in terms of both financial contribution and maintained
strength of sales pipeline.
Advanced Microsoft Consulting
Charteris is recognised by Microsoft as one of a small number of
leading UK based partners in the application of their "full-stack"
technologies. Expertise provided for clients during the period
included: business collaboration and integration, infrastructure
optimisation, and custom development of systems that run both in
"the Cloud" and on-premises.
The Company's involvement with a major bank to enhance systems
that underpin their wholesale banking credit risk management and
reporting processes continued through the period and has been
extended into the second half. Also in the commercial sector,
assignments were undertaken that involved a migration to a
cloud-based infrastructure for an organisation providing
psychometric testing services, and a re-platforming of the core
systems of a pension services provider.
For clients in the public sector in Scotland an infrastructure
consolidation project was undertaken for a large local council, and
a cloud-based collaboration platform was implemented for another
body.
Some delays in sales held back the financial contribution from
this service area, but more recently order backlog has been
building.
Microsoft Dynamics
Charteris is recognised by Microsoft as a key partner and is a
member of the President's Club 2010/2011 for Microsoft Dynamics
which comprises the top 5% partners in this field globally.
Additionally, in October 2010, Charteris became one of the first UK
organisations to achieve the new Gold certification for ERP.
In the commercial sector, following the successful delivery of a
significant Dynamics AX solution for the sales, purchasing, finance
and manufacturing functions of AB Agri, a leading animal feeds
manufacturer, the Company is now engaged in post-acceptance support
activities. Good progress has been made with the supply of a
Dynamics AX system to replace payroll and human resources systems
for Southern Cross, the UK's largest care homes provider. Other
Dynamics AX projects included a migration for a professional body
from existing core business systems based upon different
applications software packages, and an ERP solution for a mail
order clothing retailer.
Following an extended period when this service area made a
strong financial contribution, delays in closures to new sales has
affected performance in the period. However, strong market growth
for services of this nature is predicted by external market
research organisations, the Company's medium and long-term weighted
pipeline for solutions based on this technology is expanding, and
consequently confidence in the potential for this service area
remains high.
MANAGEMENT AND BOARD COMPOSITION
As previously announced David Pickering stepped down as Chief
Executive on 31 January 2011, and retired as a director on 31 March
2011. The Board wishes David well in the next stage of his
career.
Also as previously announced, Allan Barr was appointed as Chief
Operating Officer, with effect from 1 February 2011, to take over
the day to day management of the Company and delivery of the
recovery plan. The Board is now pleased to announce Allan's
appointment as a director of the Company, and Chief Executive, with
immediate effect.
GOING CONCERN
As disclosed in the FY 10 Annual Report, the Group renegotiated
its banking facilities in November 2010, repaying GBP350,000 of its
loan with NatWest Bank plc, with a further instalment of GBP100,000
due at the end of July 2011. In addition the Group refinanced the
previous GBP1.5m overdraft facility with a GBP1.5m invoice
discounting facility, which is working well. Net debt at 31 January
2011 has risen to GBP2.1m (31 July 2010: GBP1.4m; 31 January 2010:
GBP1.5m).
The recent reorganisation and greater focus of the business is
already showing signs of making a positive difference to the
quality of the sales pipeline and internal confidence, with staff
at all levels being more actively engaged in business
development.
In parallel, the Company has taken a number of actions to
reinforce its financial position. These include measures to remove
further cost: both long-term (sustainable cost savings through
restructuring of central management functions) and short-term
(savings to allow the strengthening pipeline time to mature into
sales).
In February, following the expiry of the lease for the Scotland
office, the Company took the opportunity to relocate to the heart
of Edinburgh, which results in a significant reduction in the costs
associated with this location going forward. Having undertaken a
review of the Group's other office locations, it has been concluded
that neither the London nor Northleach offices meet the future
needs of the business. These properties have been put on the market
with the intention of relocating to more suitable rented premises
in due course. This is expected to release funds that can be
reinvested in the business.
The nature of the Company's business is such that there is an
inherent uncertainty over the commencement of projects and the
timing of cash flows arising from clients thereafter. However, the
directors believe that the Group will continue to operate within
its agreed facilities.
STAFF
The Board wish to thank staff for their dedication, flexibility
and support in helping the Company through this difficult period,
and for continuing to provide the very high level of service on
which the Company's reputation rests.
OUTLOOK
The Company's activities in the public sector have remained in
demand against the backdrop of significant overall budget
reductions. In the commercial sector, whilst there has been clear
demand for our services, we have been vulnerable to delays in
client commitments. The weighted pipeline of future sales
opportunities across all sectors has been holding up well and
expanding. With the continuing difficult economic environment and
potential pressures in the public sector, the challenge remains
conversion of opportunities into revenue backlog. This is the
primary concentration of the practices in the new organisation.
Actions already taken should lead to a steadily reducing cost
base over the coming months. Sustained revenues should consequently
yield progressive improvement in trading performance during the
remainder of the financial year and the directors therefore
anticipate that the Company will return to profitable trading in
the second half.
The underlying fundamentals at Charteris remain strong with an
excellent client and partner base, and a high quality team of
consulting professionals and managers.
Cliff Preddy
Chairman
6 April 2011
CONSOLIDATED INCOME STATEMENT
6 mths ended 6 mths ended Year ended
31 Jan 2011 31 Jan 2010 31 Jul 2010
(Unaudited) (Unaudited) (Audited)
Notes GBP000 GBP000 GBP000
============================= ===== ============ ============ ============
Continuing operations
============================= ===== ============ ============ ============
Revenue 6,633 7,760 15,423
============================= ===== ============ ============ ============
_____ _____ _____
============================= ===== ============ ============ ============
Other external charges (1,108) (1,169) (2,872)
============================= ===== ============ ============ ============
Staff costs (5,068) (6,082) (11,423)
============================= ===== ============ ============ ============
Administrative expenses (1,127) (1,008) (2,099)
============================= ===== ============ ============ ============
______ ______ ______
============================= ===== ============ ============ ============
(7,303) (8,259) (16,394)
============================= ===== ============ ============ ============
Operating loss before
exceptional items (458) (419) (783)
============================= ===== ============ ============ ============
Redundancy costs (192) (61) (188)
============================= ===== ============ ============ ============
Share--based payment charge (20) (19) -
============================= ===== ============ ============ ============
Operating loss (670) (499) (971)
============================= ===== ============ ============ ============
Finance costs (40) (30) (57)
============================= ===== ============ ============ ============
Loss before taxation and
exceptional items (498) (449) (840)
============================= ===== ============ ============ ============
Redundancy costs (192) (61) (188)
============================= ===== ============ ============ ============
Share-based payment charge (20) (19) -
----------------------------- ----- ------------ ------------ ------------
Loss before taxation (710) (529) (1,028)
============================= ===== ============ ============ ============
Taxation - 150 10
============================= ===== ============ ============ ============
_____ _____ _____
============================= ===== ============ ============ ============
Loss for the financial period
attributable to owners of
the parent (710) (379) (1,018)
============================= ===== ============ ============ ============
_____ _____ _____
============================= ===== ============ ============ ============
Loss per share
============================= ===== ============ ============ ============
Basic 2 (1.73)p (0.93)p (2.49)p
============================= ===== ============ ============ ============
Diluted 2 (1.73)p (0.93)p (2.49)p
============================= ===== ============ ============ ============
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
12 mths
6 mths ended 6 mths ended ended 31
31 Jan 2011 31 Jan 2010 Jul 2010
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
Loss for the financial period (710) (379) (1,018)
Deferred tax recognised directly
in equity - 25 5
Total comprehensive income for
the period attributable to owners
of the parent (710) (354) (1,013)
CONSOLIDATED BALANCE SHEET
31 Jan 2011 31 Jan 2010 31 July
(Unaudited) (Unaudited) 2010 (Audited)
GBP000 GBP000 GBP000
Non-current assets
Goodwill 6,079 6,179 6,079
Other intangible assets 109 60 77
Property, plant and equipment 3,115 3,171 3,143
Deferred tax asset 29 33 29
9,332 9,443 9,328
Current assets
Trade and other receivables 2,866 3,571 3,958
Current tax credit 16 230 16
Cash and cash equivalents 564 946 864
3,446 4,747 4,838
______ ______ ______
Total assets 12,778 14,190 14,166
Current liabilities
Overdraft - (134) -
Invoice discounting facility (706) - -
Trade and other payables (2,900) (3,003) (3,868)
Borrowings (282) (91) (185)
Provisions (52) (8) (33)
Deferred consideration (40) - (100)
(3,980) (3,236) (4,186)
Total assets less current
liabilities 8,798 10,954 9,980
Non-current liabilities
Borrowings (1,634) (2,219) (2,126)
Deferred tax liability (152) (130) (152)
Deferred consideration - (200) -
Provisions - (25) -
(1,786) (2,574) (2,278)
Net assets 7,012 8,380 7,702
Equity attributable to owners
of the parent
Called up share capital 432 432 432
Share premium account 2,568 2,568 2,568
Merger reserve 2,573 2,573 2,573
ESOP reserve (194) (194) (194)
Other reserve 26 26 26
Retained earnings 1,607 2,975 2,297
Total equity 7,012 8,380 7,702
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to the equity owners of the parent
Share Share Merger Other Retained ESOP
capital premium reserve reserve earnings Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
31 July 2009
(audited) 432 2,568 2,573 26 3,392 (194) 8,797
Comprehensive
income
Loss for the
period - - - - (379) - (379)
Deferred tax - - - - 25 - 25
_____ _____ _____ _____ _____ _____ _____
Total
comprehensive
income for the
period - - - - (354) - (354)
Transactions
with Owners
Share-based
payment
charge - - - - 19 - 19
Dividends - - - - (82) - (82)
_____ _____ _____ _____ _____ _____ _____
Total
transactions
with Owners - - - - (63) - (63)
_____ _____ _____ _____ _____ _____ _____
31 January 2009
(unaudited) 432 2,568 2,573 26 2,975 (194) 8,380
Comprehensive
income
Loss for the
period - - - - (639) - (639)
Deferred tax - - - - (20) - (20)
_____ _____ _____ _____ _____ _____ _____
Total
comprehensive
income for the
period - - - - (659) - (659)
Transactions
with Owners
Share-based
payment
charge - - - - (19) - (19)
_____ _____ _____ _____ _____ _____ _____
Total
transactions
with Owners - - - - (19) - (19)
_____ _____ _____ _____ _____ _____ _____
31 July 2010
(audited) 432 2,568 2,573 26 2,297 (194) 7,702
Comprehensive
income
Loss for the
period - - - - (710) - (710)
Deferred tax - - - - - - -
_____ _____ _____ _____ _____ _____ _____
Total
comprehensive
income for the
period - - - - (710) - (710)
Transactions
with Owners
Share-based
payment
charge - - - - 20 - 20
_____ _____ _____ _____ _____ _____ _____
Total
transactions
with Owners - - - - 20 - 20
31 January 2011
(unaudited) 432 2,568 2,573 26 1,607 (194) 7,012
CONSOLIDATED CASH FLOW STATEMENT
6 mths 6 mths
ended 31 ended 31 Year ended
Jan 2011 Jan 2010 31 Jul 2010
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
Loss before taxation (710) (529) (1,028)
Adjustments for:
Depreciation of property,
plant and equipment 35 49 88
Amortisation of intangible
assets 26 14 12
Share-based payments 20 19 -
Net interest expense 40 30 55
______ ______ ______
Operating cash flows before
movements in working capital (589) (417) (873)
Decrease in receivables 1,091 1,188 801
Decrease in payables (947) (1,335) (473)
______ ______ ______
Cash outflow from operations (445) (564) (545)
Income taxes repaid - - 83
Interest paid (40) (30) (55)
______ ______
Net cash outflow from operating
activities (485) (594) (517)
______ ______
Investing activities
Purchase of property, plant and
equipment and other intangible
assets (63) (75) (101)
Acquisition of SIG Consulting
Limited (Earn Out) (61) - -
Cash used in investing
activities (124) (75) (101)
Financing activities
Dividends paid - (82) (82)
Drawdown of loan (net of fees) - 24 25
Repayment of borrowings (397) - -
Net cash outflow from financing
activities (397) (58) (57)
Net decrease in cash and cash
equivalents (1,006) (727) (675)
Cash and cash equivalents at
the beginning of the period 864 1,539 1,539
Cash and cash equivalents at
the end of the period (142) 812 864
Consisting of:
Cash at bank 564 946 864
Overdraft - (134) -
Invoice discounting facility (706) - -
(142) 812 864
Notes
1. ACCOUNTING POLICIES
The consolidated financial information contained in this interim
report does not constitute statutory financial statements. The
interim results, which have not been audited, have been prepared
using accounting policies which are consistent with International
Financial Reporting Standards as adopted by the European Union
("IFRS"). The financial statements for the year ended 31 July 2010
have been filed with the Registrar of Companies and received an
unqualified audit report which did not contain a statement under
sections 498(2) or (3) of the Companies Act 2006.
Measurement convention
The financial information is prepared on the historical cost
basis except that the following assets and liabilities are stated
at their fair value: financial assets classified as fair value
through profit or loss or as available-for-sale.
Basis of consolidation
The purchase method of accounting has been used to account for
the acquisition of subsidiaries by the group. The costs of an
acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at
the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
initially measured at fair value at the acquisition date
irrespective of the extent of any minority interest.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on
transactions between group companies are eliminated on
consolidation. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred.
Principal activity
The principal activity of the group is to provide consultancy
services which help clients improve business performance and create
new business opportunities through the effective application of
information technology.
2. LOSS PER SHARE
The calculations of loss per share are based on the following
losses and numbers of shares.
Year ended
6 mths ended 6 mths ended 31 Jul
31 Jan 2011 31 Jan 2010 2010
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Loss after tax for the financial
year before exceptional charges (498) (299) (830)
Redundancy costs (192) (61) (188)
Share-based payment charges (20) (19) -
Loss after tax for the financial
year (710) (379) (1,018)
The weighted average number of shares for the purposes of basic
earnings per share, excluding those owned by the Group's employee
benefit trust, are:
12 mths
6 mths ended 6 mths ended ended
31 Jan 2011 31 Jan 2010 31 Jul 2010
(Unaudited) (Unaudited) (Audited)
Weighted average number No. of shares No. of shares No. of shares
of shares '000 '000 '000
For basic earnings per
share 40,944 40,857 40,857
Potentially dilutive effect
of share options 2,237 2,979 2,367
For diluted earnings per
share 43,181 43,836 43,224
Basic (1.73)p (0.93)p (2.49)p
Basic before exceptional
charges (1.22)p (0.73)p (2.03)p
Diluted (1.73)p (0.93)p (2.49)p
Diluted before exceptional
charges (1.22)p (0.73)p (2.03)p
The loss attributable to ordinary shareholders and weighted
average number of ordinary shares for the purposes of calculating
the diluted loss per share are identical to those used for basic
loss per ordinary share. This is because the exercise of share
options and other benefits would have the effect of reducing loss
per share and is therefore not dilutive under the terms of IAS33
Earnings per share.
3. INTERIM FINANCIAL INFORMATION
The interim financial information was approved by the directors
on 6 April 2011. The Company expects to announce its full year
results in November 2011.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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