RNS Number:0306I
Lorien PLC
27 February 2003
Thursday 27 February 2003
Lorien plc
Preliminary results show growth in profits
Lorien plc, the IT resourcing and specialist services group, today announces its
preliminary results for the 52 weeks ended 30 November 2002.
Key points (continuing operations)
* Turnover down 13% to #111.7 million due to difficult market conditions
* Operating profit down only 5% to #2.7 million, due to sharp focus on
managing costs leading to administration expenses falling by 13%
* Profit before tax up 12% to #2.4 million
* Net debt reduced by over 50% to #4.3 million
* Headroom on funding facilities of #6.8 million
* Full settlement of #2.5 million received since the year end in respect
of the disposal of our consulting operations
Bert Morris, Executive Chairman of Lorien, commented:
"This year has been a very difficult one in our markets but we have anticipated
and responded in a timely and effective manner and delivered growth in profit
before taxation for our continuing operations.
"However, the current market downturn has been longer and deeper than any of us
foreshadowed and there is a point where it is no longer possible to deliver
enhanced returns year-on-year. Although the planned share buyback will improve
the Group's capital structure and enhance earnings per share on a like-for-like
operating profit, it will remain a challenge to maintain 2003 performance at the
levels achieved in 2002.
"Following receipt of the deferred consideration of #2.5m from the sale of our
consulting operations, we now have over #9 million of available funding
facilities and, I believe, are better placed than many of our competitors to
deliver improved returns in the longer-term."
For further information, please contact:
Lorien plc
Bert Morris, Executive Chairman 020 7282 2000 (until 12.30pm today)
Christopher Hinton, Group Finance Director 0161 888 2503 (thereafter)
Citigate Dewe Rogerson 020 7638 9571
Patrick Toyne Sewell
Chairman's statement
Overview
During the year under review the slowdown in the technology sector and the
increasing level of political and economic uncertainty have combined to create
the most challenging business environment seen for over a decade.
Although we cannot control these external factors, we can anticipate and respond
to them in a timely and effective manner. In this respect, Lorien has fared
better than most of its competitors, increasing profit before taxation on
continuing operations by 12% to #2.4m.
After accounting for the loss on disposal of our consulting operations (#7.5m),
the Group reported an overall loss before taxation of #5.2m (2001: profit
#2.0m).
Financial Results
The following results for the 52 weeks ended 30 November 2002, exclude the
trading performance and loss on disposal of our Consulting operations and are
compared to the 53 weeks to 30 November 2001:
* Turnover down 13% to #111.7m
* Operating profit down 5% to #2.7m
* Profit before tax up 12% to #2.4m
* Net assets up 12% at #10.0m
* Net debt of #4.3m, a reduction of #4.4m
* Headroom on funding facilities of #6.8m
Trading Summary
Resourcing
During 2002, we have seen an unprecedented slowdown in the technology and
financial services sector. In addition, trading conditions in almost every other
sector have remained very difficult. In this environment, our clients have been
cautious in their investment decisions except where there is certainty on the
return on investment. This has resulted in a substantial decrease in the demand
for our Resourcing services.
To counter this decline we have continued to target new service offerings to
both enhance margins and strengthen client relationships. We have had some
successes in this area and have a strong pipeline of prospects. However, as with
any new business, particularly in a difficult economic environment, there will
be a delay before this investment generates significant levels of returns.
At 30 November 2002, our order book was some 31% below the level at which we
entered the year. This position deteriorated in December 2002 when we witnessed
a further 11% decline. Although I have been pleased to see the position
stabilise in the first two months of 2003, uncertainty continues with forward
visibility restricted by short-term purchasing decisions.
Inevitably, these conditions have had a negative impact on our financial
performance with revenues and gross margin falling to #96.8m (2001: #114.8m) and
#11.3m (2001: #14.4m) respectively. We have continued to manage actively our
cost base to reflect the decreased volumes and returns and, as a consequence,
the reduction in the division's contribution to group overheads was limited to
14%, from #5.7m in 2001 to #4.9m in 2002.
Specialist Services
The technology sector is not alone in seeing a sharp reduction in demand.
Indeed, the length and depth of the downturn in the manufacturing sector has
arguably been worse. Against this backdrop I am delighted to report that our
engineering design business has delivered an outstanding performance,
maintaining its contribution relative to 2001.
In our market research and training businesses, we have combined the operations
under a common brand: Lorien Customer Focus. The business has performed
strongly and secured the renewal of key long-term contracts.
Overall financial performance for the division has been positive with revenues
and gross margin both increasing to #14.9m (2001: #14.3m) and #4.6m (2001:
#3.7m) respectively. Contribution to group overheads increased to #3.2m (2001:
#3.1m).
The Board believes that the Specialist Services division will make an important
contribution to the future of Lorien and a significant investment has been made
in sales and marketing, aimed at widening its customer base.
Administration expenses
We have continued to maintain a sharp focus on managing costs with
administration expenses falling by #4.5m or 24%. Of the decrease, #2.4m was the
result of the disposal of our consulting operations in February 2002 with the
remaining reduction spread across staff costs, depreciation, establishment and
general administration.
Loss on Disposal
In the shareholder circular issued at the time of the disposal of our consulting
operations, we estimated overhead savings following the sale of #1.0m. To date,
we have achieved savings in excess of #0.5m with the balance dependent on the
sub-letting of our Chertsey property. This property is currently being marketed.
Following the year-end, we have received full settlement of the deferred
consideration of #2.5m in respect of the disposal, this has further increased
the Group's available funding.
Personnel
In what has been an extremely difficult year, I would like to express my sincere
appreciation to the Group's staff and management for their loyalty and
commitment. In 2002, we have generated an increased return to shareholders. Our
staff should be very proud of this achievement.
Dividend and Share Buyback
The Board is not recommending a dividend for the year to 30 November 2002 (2001:
nil). We do intend, however, to continue to repurchase the Company's shares in
line with the resolution passed at the Annual General Meeting. We believe the
more efficient capital structure that this process will create should enhance
shareholder value whilst maintaining the strength of the Group's balance sheet.
To retain flexibility in respect of both the share buyback and future dividend
policy we will give consideration to a capital reconstruction to increase the
level of distributable reserves. Any such reconstruction will require the
approval of shareholders and will be conditional upon the court making an order
to confirm it. Further details will be forwarded to shareholders as
appropriate.
Conclusion and Outlook
The current market downturn has been longer and deeper than any of us
foreshadowed. We have taken a range of measures to offset this but, in the face
of such conditions, there is a point where it is no longer possible to deliver
enhanced returns year-on-year.
The share buyback will improve the Group's capital structure and enhance
earnings per share on a like-for-like operating profit. That said, it will
remain a challenge to maintain 2003 performance at the levels achieved in 2002.
However, we now have over #9m of available funding facilities and, I believe,
are better placed than many of our competitors to deliver improved returns in
the longer-term
Bert Morris
Executive Chairman
27 February 2003
Consolidated profit and loss account
for the 52 weeks ended 30 November 2002
52 weeks ended 30 November 2002 53 weeks ended 30 November 2001
(Restated)*
Discontinued Discontinued
Continuing operations Continuing operations
operations (note 4) Total operations (note 4) Total
Note #000 #000 #000 #000 #000 #000
Turnover 111,684 1,904 113,588 129,098 9,930 139,028
Cost of sales (95,764) (1,312) (97,076) (110,979) (6,969) (117,948)
--------- --------- --------- --------- --------- ---------
Gross profit 15,920 592 16,512 18,119 2,961 21,080
Administrative expenses (13,206) (669) (13,875) (15,255) (3,102) (18,357)
--------- --------- --------- --------- --------- ---------
Operating profit/(loss) 2,714 (77) 2,637 2,864 (141) 2,723
====== ======= ======= ========
Loss on disposal of discontinued
operations 4 (7,500) -
--------- ---------
(Loss)/profit on ordinary
activities (4,863) 2,723
before interest and taxation
Interest receivable 13 12
Interest payable and similar
charges (328) (738)
--------- ---------
(Loss)/profit on ordinary
activities before taxation (5,178) 1,997
Tax on (loss)/profit on ordinary
activities 5 (701) (475)
--------- ---------
(Loss)/profit for the financial
period (5,879) 1,522
Dividends paid and proposed - -
--------- ---------
(Loss)/profit retained for the
financial period 11 (5,879) 1,522
======= =======
Basic (loss)/earnings per
ordinary share 6 (32.5)p 8.4p
======= =======
Diluted (loss)/earnings per
ordinary share 6 (32.5)p 8.4p
======= =======
The Group made no acquisitions during the current or previous financial period.
* The results, balance sheet, statement of total recognised gains and losses
and movement in equity shareholders' funds for the 53 weeks ended 30 November
2001 have been restated as a result of the adoption of FRS19 'Deferred Tax'.
Consolidated balance sheet
as at 30 November 2002
Note 30 November 2002 30 November 2001
(Restated)
#000 #000 #000 #000
Fixed assets
Tangible fixed assets 1,051 1,404
Investment in own shares 416 431
Investment in associates 301 305
--------- ---------
1,768 2,140
Current assets
Debtors 7 25,304 31,177
Creditors: amounts falling due within
one year 8 (17,093) (24,418)
------------ ------------
Net current assets 8,211 6,759
---------- ---------
Net assets 9,979 8,899
======= ======
Capital and reserves
Called up share capital 4,756 4,906
Share premium account 29,300 29,300
Capital redemption reserve 150 -
Profit and loss account (24,227) (25,307)
------------- -----------
Equity shareholders' funds 11 9,979 8,899
======= ======
Consolidated cash flow statement
for the 52 weeks ended 30 November 2002
52 weeks ended 53 weeks ended
Note 30 November 2002 30 November 2001
#000 #000
Cash inflow from operating activities 9 5,693 4,079
Dividends received from associate 4 8
Returns on investment and servicing of finance (315) (726)
Taxation (801) -
Capital expenditure (345) (466)
Acquisitions and disposals 612 167
--------- ---------
Cash inflow before financing 4,848 3,062
---------- ---------
Financing
Repurchase of shares (453) -
Reduction in debt 10 (4,555) (2,877)
---------- ---------
Cash outflow from financing (5,008) (2,877)
---------- ---------
(Decrease)/increase in cash in the financial period 10 (160) 185
====== ======
Consolidated statement of total recognised gains and losses
for the 52 weeks ended 30 November 2002
52 weeks ended 53 weeks ended
30 November 2002 30 November 2001
(Restated)
#000 #000
(Loss)/profit retained for the financial period (5,879) 1,522
---------- ---------
Total recognised (losses)/gains relating to the period (5,879) 1,522
Prior period adjustment (see note 2) 405 -
--------- ---------
Total gains and losses recognised since the last
annual report (5,474) 1,522
====== =====
Notes
1 Basis of preparation
The financial statements have been prepared under the historical cost convention
and in accordance with applicable accounting standards and the Companies Act
1985.
The financial information set out above does not constitute the Group's
financial statements for the 52 week period ended 30 November 2002 or the 53
week period ended 30 November 2001. The financial statements for 2001 have been
delivered to the Registrar of Companies, and those for 2002 will be delivered
following the Group'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.
2. Prior period adjustment
The policy for calculating deferred tax has been changed during the period in
order to comply with FRS 19 which requires full provisioning on all timing
differences. In prior periods, the policy adopted was one of partial
provisioning. The comparative figures in the financial statements have been
restated to reflect the new policy as set out below:
53 weeks
ended 30
November
2001
#000
Profit and loss account
Deferred tax credit 50
----------
Increase in profit for the period 50
======
Balance sheet
Debtors 405
-----------
Increase in net assets 405
=======
3. Segmental analysis
There are three separate classes of business, Resourcing, Specialist Services
and Consulting.
52 weeks 53 weeks
ended 30 ended 30
November November
2002 2001
#000 #000
Turnover
Resourcing 96,802 114,795
Specialist Services 14,882 14,303
Consulting - discontinued operations 1,904 9,930
----------- -----------
113,588 139,028
====== =======
Contribution to central costs
Resourcing 4,876 5,741
Specialist Services 3,202 3,060
Consulting - discontinued operations 288 1,069
---------- -----------
8,366 9,870
Central costs (5,729) (7,147)
---------- -----------
Operating profit 2,637 2,723
Loss on disposal of discontinued operations (7,500) -
Net interest payable and similar charges (315) (726)
---------- -----------
(Loss)/profit on ordinary activities before taxation (5,178) 1,997
====== ======
Central costs represent property charges, IT infrastructure costs, finance
function costs, human resources costs, legal and professional fees and indirect
staff costs.
4. Loss on disposal of discontinued operations
On 12 February 2002 the Group completed the disposal of its consulting division.
The results of the consulting division have been classified as discontinued
operations during the current and previous period. The disposal provides for
the receipt of proceeds of #4.5m in consideration for the trade and certain
assets of the consulting division. The loss of #7.5m has been recognised after
associated costs and the write back of goodwill of #6.9m previously written off
to reserves.
#2.0m of the consideration was received in cash on completion and a further
#2.5m was received in February 2003.
5. Taxation
52 weeks 53 weeks
ended 30 ended 30
November November
2002 2001
(Restated)
#000 #000
UK corporation tax at 30% (2001:30%) 815 674
Prior year adjustment - UK 131 (232)
- Overseas - 83
Deferred tax (245) (50)
--------- ---------
701 475
====== =======
6. (Loss)/earnings per share
The FRS 14 (loss)/earnings per share calculations are based on the loss on
ordinary activities after taxation of #5,879,000 (2001: restated profit of
#1,522,000) and on the weighted average number of 18,086,539 ordinary shares in
issue and ranking for dividend payments during the period (2001: 18,182,004
ordinary shares). The 1,381,238 (2001: 1,442,000) shares held by the Employee
Benefit Trusts at 30 November 2002 do not rank for dividend payments and have
therefore been excluded from the calculation.
52 weeks ended 53 weeks ended
30 November 2002 30 November 2001
(Restated)
Loss Per share Earnings Per share
#000 p #000 p
(Loss)/earnings per share (5,879) (32.5) 1,522 8.4
====== ======= ======= =======
The diluted (loss)/earnings per share calculations take into account the
dilutive effect of share options. The calculations of diluted (loss)/earnings
per share are based on 18,086,539 (2001: 18,182,004) ordinary shares.
7. Debtors
2002 2001
(Restated)
#000 #000
Trade debtors 21,317 29,758
Other debtors and prepayments 3,337 1,014
Deferred tax 650 405
---------- ---------
25,304 31,177
====== =======
All debtors are due within one year with the exception of deferred tax which is
due after more than one year.
9. Creditors: amounts falling due within one year
2002 2001
#000 #000
Bank overdrafts (see below) 258 98
Payments on account 808 1,115
Trade creditors 6,024 8,313
Invoice discounting advances 4,003 8,558
Corporation tax 388 268
Other taxes and social security 1,384 1,857
Accruals and deferred income 4,228 4,209
----------- -----------
17,093 24,418
====== ======
The Company is party to a cross guarantee in respect of the bank overdrafts of
subsidiary undertakings. At 30 November 2002 the total overdrafts of the
subsidiary companies amounted to #258,000 (2001: #98,000).
The amounts due to invoice discounters are secured on certain trade debtors of
the Group.
9. Reconciliation of operating profit to operating cash flows
2002 2001
#000 #000
Group operating profit 2,637 2,723
Long term incentive plan charge 519 -
Depreciation charge 557 1,019
Loss on disposal of tangible fixed assets - 350
Decrease/(increase) in debtors 5,970 (1,798)
(Decrease)/increase in creditors (3,990) 1,785
---------- -----------
Net cash inflow from operating activities 5,693 4,079
====== ======
10. Analysis of net debt
At 30 At 30
November 2001 Cash flow November 2002
#000 #000 #000
Overdrafts (98) (160) (258)
Debt due within one year - invoice discounting advances (8,558) 4,555 (4,003)
---------- --------- -----------
Total (8,656) 4,395 (4,261)
====== ====== ======
11. Reconciliation of movements in equity shareholders' funds
2002 2001
(Restated)
#000 #000
(Loss)/profit retained for the financial period (5,879) 1,522
Write back of goodwill previously eliminated against
reserves (note 4) 6,893 -
Charge to profit and loss reserve arising on repurchase of
own shares (453) -
Long term incentive plan charge 519 -
-------- ---------
Net addition to shareholders' funds 1,080 1,522
Opening shareholders' funds (originally #8,494,000
before adding prior year adjustment of #405,000) 8,899 7,377
---------- ----------
Closing shareholders' funds 9,979 8,899
======= ========
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