RNS Number:9308N
Computerland UK PLC
23 June 2005
ComputerLand UK PLC
Preliminary results for the year ended 30th April 2005
(ComputerLand provides essential IT services to medium and large organisations)
KEY POINTS
* Turnover up 5% to #59.5m (2004: #56.4m)
* Contracted service revenues up 13% to #12.9m (2004: #11.4m)
* Pre-tax profits* up 11% to #2.13m (2004: #1.92m)
* Earnings per share* up 10% to 15.0p (2004: 13.6p)
* Total dividend up 15% to 5.0p (2004: 4.35p)
* Net cash up #0.4m to #7.9m (2004: #7.5m)
*before goodwill amortisation
Graham Gilbert, Chairman and CEO commented:-
"Our service business has continued to perform well with contracted revenues
increasing by 13%...we expect our service business to continue its record of
growth over the coming year and we remain confident in the future prospects for
our business."
Press enquiries:
ComputerLand UK PLC Tel: 0115 931 8000
Graham Gilbert, Chairman & CEO
Mike Kent, Finance Director
Biddicks Tel: 020 7448 1000
Katie Tzouliadis
Chairman's Statement
I am pleased to report that during the past 12 months our profits, sales and
earnings per share have, once again, reached record levels. This performance has
been achieved against a background of severe price deflation and margin erosion
in our product reselling business. Our service business has continued to perform
well with contracted revenues increasing by 13% compared with the previous year.
In order to further enhance our position in the services market place, we have
invested to increase our capability to identify and win new business. Although
this investment has increased our cost base, we are confident of achieving a
good return in the medium term.
Results
During the year, pre-tax profits* increased 11% to #2.13m (2004: #1.92m) on
sales up 5% to #59.5m (2004: #56.4m). Earnings per share* rose 10% to 15.0p and
operating profit margins* improved to 3.3%. Net cash at the year end stood at a
record #7.9m.
*Before goodwill amortisation
Dividend
Our record performance over the past year has enabled your board to recommend an
increase in the final dividend to 3.3p per share (2004: 3.0p). Taken together
with the interim dividend, the total for the year is 5.0p, an increase of 15%
over the previous year. The final dividend will, subject to shareholder approval
at the forthcoming Annual General Meeting, be paid on 5 September 2005 to
shareholders on the register on 5 August 2005.
Operating overview
Our aim is to offer our clients an integrated IT service. To achieve this
capability we provide a range of services including systems design, managed
product supply, project management, implementation, ongoing support and
disposal. To deliver these services efficiently, our business is organised into
four units. These business units are managed services, hardware maintenance,
project services and managed product supply.
Over the course of the year we have continued to develop our presence and
capabilities in the managed services market place. We have won several new
accounts as well as extending the term of significant existing contracts. In my
interim report I announced that we would be increasing our investment in sales
and bid resources in order to capitalise on the opportunities available in this
exciting market place. I am pleased to report that we have now implemented these
plans.
Our hardware maintenance business has had an excellent year. Our philosophy of
continuous improvement has resulted in record quality levels which have led to a
high level of contract retention. In order to achieve the best possible quality
levels whilst being highly efficient, we make innovative use of mobile computing
technologies combined with satellite vehicle tracking and real time call status
monitoring. During the course of the year we have won a number of new contracts.
Our project services business, which delivers solutions based on software from
the industry's leading vendors, has made progress during the year. At the start
of the year we exited an unprofitable area of the business and we are now
focused on achieving a cost base that is more variable with demand. We believe
that the coming year will see increasing demand for solutions across a range of
technologies including Microsoft Exchange, storage and server-based computing.
Our managed product supply business had a strong year despite difficult market
conditions. We succeeded in growing this area of our business by 7.1% in cash
terms despite price deflation of about 15%. A leading factor in driving this
performance has been our e-procurement portal. This tool mirrors our clients'
own business processes allowing them to procure technology solutions in an
appealing and efficient manner.
People
I would like to thank all our staff for their contribution in achieving these
record results. Their innovation, skill and hard work has been the key factor in
driving the success of our company.
Outlook
During the first few weeks of the new financial year our service business has
continued to perform well, although our product business has started more slowly
than we expected. At this early stage, it is not possible to predict whether the
weakness in our product business will persist throughout the year, however, it
should be noted that we are operating in an environment of continuing price
deflation. We expect our service business to continue its record of growth over
the coming year and the board remains confident in the future prospects for our
business.
Graham Gilbert
Chairman
23 June 2005
Financial Review
ComputerLand's growth record continued during 2005, with advances in all of the
main financial indicators:
* Turnover up 5.4%
* Profit before tax* up 10.9% to #2.1m (2004: #1.9m)
* Earnings per share* up 10.3% to 15.0p (2004: 13.6p)
* Dividends per share up 14.9% to 5.0p (2003: 4.35p)
* Cash up #0.4m to #7.9m
*Before goodwill amortisation
Turnover
Turnover increased by 5.4% year-on-year to #59.5m (2004: #56.4m).
Managed services revenues were ahead of the previous year at #6.2m (2004: #6.0m)
and hardware maintenance turnover advanced 24.1% to #6.7m (2004: #5.4m),
following a full year contribution from the acquisition in January 2004 of the
hardware maintenance division of Information Technology Solutions (Maintenance)
Limited ("ITS"). Revenues from managed services and hardware maintenance now
account for 21.7% of total turnover (2004: 20.2%). These contracted income
streams have increased 13.2% year-on-year and continue to be a focus growth area
for ComputerLand.
At the beginning of the year we withdrew from the deployment of desktop
management software, as the business had become unprofitable. This action
together with lower desktop services activity has led to revenues in project
services declining 30.2% to #3.0m (2004: #4.3m).
Product turnover increased by 7.1% to #43.6m (2004: #40.7m) despite continued
price deflation of IT equipment.
Pre-tax profit
Operating profit before goodwill amortisation advanced 9.0% to #1.96m (2004:
#1.80m). Operating profitability advanced to 3.3% of sales from 3.2% in the
previous year.
Managed services and hardware maintenance performed well in the year, with
hardware maintenance benefiting from a full year contribution from the ITS
acquisition. During the second half we increased our sales resource in managed
services to expand our opportunity generation capability in this growth market.
Revenues are targeted to commence in the latter part of the next financial year.
Profitability in project services was impacted by the revenue decline in desktop
services, however action on costs has mitigated this adverse revenue effect. The
project services business model is currently under review with the objective of
creating a more variable cost base, which in turn will lead to improved
utilisation of our own resource.
Product gross profit margin declined during the year, however gross profit value
remained in line with the previous year due to a higher volume of turnover.
The market in which we operate is competitive and the group continues to
innovate the processes and cost structures within the business in order to
maximise efficiency and competitiveness.
Goodwill amortisation of #0.21m (2004: #0.06m), reflects a full year charge in
respect of the ITS acquisition. Goodwill on this acquisition is amortised over
seven years.
Interest receivable advanced to #0.17m from #0.12m reflecting an increase in
average cash balances during the year and higher interest rates.
Overall pre-tax profit increased to #1.92m from #1.86m in the prior year.
Tax
The tax charge is an effective rate of 28.9% (2004: 29.3%). The tax rate is
lower than the standard rate of Corporation Tax due mainly to the benefit of tax
relief on share option gains.
Earnings per share and dividend
Earnings per share before goodwill amortisation advanced 10.3% to 15.0p (2004:
13.6p). After deducting goodwill amortisation, basic earnings per share advanced
to 13.5p from 13.2p in the prior year.
The board proposes a final dividend of 3.3p per share, giving a full year
dividend of 5.0p which represents a year-on-year increase of 14.9%. The full
year dividend is covered three times, based on earnings per share before
goodwill amortisation.
Cash flow
The group generated a net cash inflow during the year of #0.4m (2004: #1.0m),
giving a year end cash balance of #7.9m (2004: #7.5m).
Operating cash inflow of #2.2m was 89% of EBITDA*. In 2004 the operating cash
inflow of #3.1m, represented 133% of EBITDA*, this high conversion ratio
reflecting favourable short term working capital fluctuations. The average
conversion ratio over the two year period is 110%. Working capital remained
under tight control with stock slightly reducing year-on-year, debtor days
reducing to 32 days of sales (2004: 35 days) and trade creditor days remaining
similar at 60 days (2004: 61 days).
Tax paid of #0.8m represents tax on the 2004 profits of #0.5m, and payment on
account of the 2005 profits of #0.3m, the sum being half of the annual tax
liability.
There was a net purchase of own shares, giving a cash outflow of #0.4m (2004:
cash inflow from sale of #0.2m). The shares are used to satisfy the exercise of
share options. Capital expenditure was #0.4m (2004: #0.6m) and dividends paid
were #0.5m (2004: #0.4m).
*Earnings before interest, taxation, depreciation and amortisation
Financial instruments
The group's financial instruments comprise cash, liquid resources and trade
debtors and creditors. The main risks arising from these financial instruments
are interest rate risk, liquidity risk and foreign currency exchange rate risks.
The policies for managing each of these risks are as follows.
Interest rate risk
The group is cash positive, using the cash from its business operations. The
level of cash varies significantly during the year, reflecting operating
activities. Cash balances are placed on short term deposits with financial
institutions which have been approved by the board. The use of derivative
instruments is not appropriate due to the variable nature of the cash balances.
Liquidity risk
The group's policy is to ensure that cash balances are available for operating
activities and that appropriate funding is in place should the group have a
borrowing requirement. Given that the group is cash positive, committed
borrowing facilities are not considered appropriate, thus the group retains on
demand borrowing facilities totalling #2.7m at 30 April 2005.
Foreign currency exchange risk
The group is not exposed to any significant foreign currency risks as the
majority of its cash flows are in sterling. Transactions of an immaterial nature
are settled at spot rates, however forward currency contracts are used for
transactions of a material nature.
Michael Kent
Finance Director
23 June 2005
Consolidated profit and loss account
For the year ended 30 April 2005
2005 2004
Note #'000 #'000
Turnover 59,456 56,430
Operating costs (57,711) (54,695)
--------------------- -------- ----------- ----------
Operating profit before goodwill amortisation 1,956 1,794
--------------------- -------- ----------- ----------
Goodwill amortisation (211) (59)
--------------------- -------- ----------- ----------
Operating profit 1,745 1,735
--------------------- -------- ----------- ----------
Net interest receivable 171 124
--------------------- -------- ----------- ----------
Profit on ordinary activities before taxation 1,916 1,859
--------------------- -------- ----------- ----------
Taxation on profit on ordinary activities 2 (553) (544)
--------------------- -------- ----------- ----------
Profit on ordinary activities after taxation 1,363 1,315
--------------------- -------- ----------- ----------
Dividends 3 (505) (442)
--------------------- -------- ----------- ----------
Retained profit for the financial year 858 873
--------------------- -------- ----------- ----------
Earnings per share - pence
- before goodwill amortisation 15.0 13.6
--------------------- -------- ----------- ----------
- goodwill amortisation (1.5) (0.4)
--------------------- -------- ----------- ----------
- Basic 4 13.5 13.2
--------------------- -------- ----------- ----------
- Diluted 4 13.4 12.9
--------------------- -------- ----------- ----------
Dividends per share - pence 3 5.0 4.35
--------------------- -------- ----------- ----------
The group has no recognised gains or losses in the year other than those passing
through the profit and loss account.
All operations are continuing in both the current and previous year.
Balance sheets
As at 30 April 2005
2005 2004 2005 2004
------- ------- -------- --------
Group Group Company Company
------- -------- -------- --------
#'000 #'000 #'000 #'000
------- -------- -------- --------
Fixed assets
--------------- ------- ------- -------- -------- --------
Intangible assets 1,264 1,479 1,264 1,479
--------------- ------- ------- -------- -------- --------
Tangible assets 1,208 1,326 1,208 1,326
--------------- ------- ------- -------- -------- --------
Investments - - 965 965
--------------- ------- ------- -------- -------- --------
2,472 2,805 3,437 3,770
------- ------- -------- -------- --------
Current assets
--------------- ------- ------- -------- -------- --------
Stocks 1,475 1,552 1,475 1,552
--------------- ------- ------- -------- -------- --------
Debtors 5,811 6,858 5,811 6,858
--------------- ------- ------- -------- -------- --------
Cash at bank and in hand 7,868 7,475 7,868 7,475
--------------- ------- ------- -------- -------- --------
15,154 15,885 15,154 15,885
------- ------- -------- -------- --------
Creditors: amounts
falling due within one
year (12,842) (14,443) (13,807) (15,408)
------- -------- -------- -------- --------
Net current assets 2,312 1,442 1,347 477
------- ------- -------- -------- --------
Provision for liabilities and
charges (29) (23) (29) (23)
------------------ ------- ------- -------- -------- --------
Net assets 4,755 4,224 4,755 4,224
--------------- ------- ------- -------- -------- --------
Capital and reserves
Called up share capital 204 203 204 203
--------------- ------- ------- -------- -------- --------
Share premium 1,114 1,080 1,114 1,080
--------------- ------- ------- -------- -------- --------
Investment in own shares (232) - (232) -
--------------- ------- ------- -------- -------- --------
Profit and loss account 3,669 2,941 3,669 2,941
--------------- ------- ------- -------- -------- --------
Equity shareholders' 4,755 4,224 4,755 4,224
funds ------- ------- -------- -------- --------
---------------
Approved by the board on 23 June 2005 and signed on its behalf
G M Gilbert M W B Kent
Chief Executive Finance Director
Consolidated cash flow statement
For the year ended 30 April 2005
2005 2005 2004 2004
------ ------- ------- ------- -------
Note #'000 #'000 #'000 #'000
------ ------- ------- ------- -------
Net cash inflow from operating
activities 5 2,175 3,089
--------------------- ----- ------- ------- ------- -------
Returns on investments and
servicing of finance
--------------------
Interest received 174 128
-------------------- ------ ------- ------- ------- -------
Interest paid (3) 171 (4) 124
-------------------- ------ ------- ------- ------- -------
Taxation paid (790) (475)
-------------------- ------ ------- ------- ------- -------
Capital expenditure
-------------------- ------ ------- ------- ------- -------
Purchase of own shares (417) -
-------------------- ------ ------- ------- ------- -------
Sale of own shares 55 181
-------------------- ------ ------- ------- ------- -------
Purchase of tangible fixed assets (360) (574)
-------------------- ------ ------- ------- ------- -------
Proceeds on sale of tangible
fixed - (722) 2 (391)
assets
-------------------- ------ ------- ------- ------- -------
Acquisition of business - (1,003)
undertaking ------ ------- ------- ------- -------
--------------------
Equity dividends paid (476) (355)
-------------------- ------ ------- ------- ------- -------
Net cash inflow before financing 358 989
-------------------- ------ ------- ------- ------- -------
Financing
-------------------- ------ ------- ------- ------- -------
Issue of shares 35 2
-------------------- ------ ------- ------- ------- -------
Increase in cash 393 991
-------------------- ------ ------- ------- ------- -------
Reconciliation of net cash flow to movements in net funds
2005 2004
------- -------
#'000 #'000
------- -------
Increase in cash 393 991
-------------------- ------- -------
Net funds at 1 May 7,475 6,484
-------------------- ------- -------
Net funds at 30 April 7,868 7,475
-------------------- ------- -------
Notes to the financial statements
1. Accounting policies
The preliminary financial information has been prepared on the basis of the
accounting policies set out in the group's statutory accounts for the year ended
30 April 2005, which remained unchanged from the prior year.
2. Taxation on profit on ordinary activities
The charge based on the profit for the year comprises:
------ ------ ------ -------
2005 2005 2004 2004
#'000 #'000 #'000 #'000
------ ------ ------ -------
Current tax
UK corporation tax charge 557 529
Adjustments in respect of prior periods (10) 547 12 541
------ ------
Deferred Tax
Origination and reversal of timing differences 6 3
------ ------ ------ -------
Taxation on profit on ordinary activities 553 544
------ ------ ------ -------
3. Dividend
The directors propose a final dividend of 3.3p per ordinary share (2004: 3.0p)
to be paid on 5 September 2005 to shareholders on the register on 5 August 2005.
This will make a total dividend for the year of 5.0p per ordinary share (2004:
4.35p).
4. Earnings per share
The earnings per ordinary share is based on the profit for the year and the
weighted average number of ordinary shares in issue during the year. The
earnings and the shares used in calculations are as follows:
2005 2005 2005 2004 2004 2004
Profit Weighted EPS Profit Weighted EPS
# average (p) average (p)
shares shares
number number
------------ ------- -------- ------ ------- -------- -----
Total shares
in issue 10,193,758 10,149,320
Shares held
by The
ComputerLand
Employees (89,075) (151,475)
Share Trust
------------ ------- -------- ------ ------- -------- -----
Basic
earnings 1,363,000 10,104,683 13.5 1,315,000 9,997,845 13.2
per share
Number of
shares for
which options
or rights to
subscribe are
outstanding 505,805 526,591
Non dilutive
options/ (174,284) (87,000)
rights
Equivalent
number of
shares at
fair (242,427) (213,054)
value
------------ ------- -------- ------ ------- -------- -----
Diluted
earnings per
share 1,363,000 10,193,777 13.4 1,315,000 10,224,382 12.9
------------ ------- -------- ------ ------- -------- -----
The ComputerLand Employees Share Trust has waived its rights to dividends and
accordingly these shares have been excluded from the weighted average number of
shares used for the earnings per share calculation.
5. Reconciliation of operating profit to net cash inflow from operating activities
2005 2004
#'000 #'000
--------------- --------
Operating profit 1,745 1,735
Amortisation and depreciation 697 587
Loss on disposal of tangible fixed assets 3 -
Decrease in stocks 77 402
Decrease/(increase) in debtors 1,047 (502)
(Decrease)/increase in creditors (1,394) 867
--------------- --------
Net cash inflow from operating activities 2,175 3,089
--------------- --------
6. The announcement set out above does not constitute a full financial
statement of the company's affairs for the year ended 30 April 2005 or 2004. The
company's auditors have reported on the full accounts for the said year and have
accompanied them with an unqualified report. The accounts have yet to be
delivered to the Registrar of Companies.
7. The annual report and accounts will be posted to shareholders and will
be available for members of the public at the company's registered office,
Discovery House, Mere Way, Ruddington Fields, Ruddington, Nottingham, NG11 6JW.
8. The Annual General Meeting will be held on 2 September 2005, at 10am at
the Company's registered office.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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