RNS Number:1088L
Advance Visual Communications PLC
4 October 2001
Embargoed until 7.00 am 4 October 2001
Advance Visual Communications plc
Preliminary Results for the year ended 30 June 2001
Highlights
* Successful completion of move from Ofex to AIM, raising #5 million of
new funds
* Delivered on IPO strategy to establish pan-European presence. Company
now operational in five key European cities including Europe's three
largest IT services markets, namely the UK, Germany and France, as well as
Switzerland.
* Revenues for the 12 month period increased by 49% to #2,053,783.(2000: #
1,381,807)
* Strong track record for repeat business, with 54% of revenues generated
from existing clients and 46% from new clients
* Losses for the period increased to #2,616,194 (2000: #1,240,372)
reflecting expansion and investment in core business
* In anticipation of deteriorating market conditions, group has instigated
wide ranging cost reduction initiatives, providing annualised savings of #
1.3m, including savings of #800,000 completed in July and August 2001
* Appointment of new head of sales with 15 years of international
experience in institutional sales within the IT and telecomms industry
Commenting on the results, Chairman, Barclay Douglas said:
"The long-term prospects for the Internet Professional Services and Wireless
industry remain good. However, the current lack of visibility over the next
twelve months will prove to be a testing challenge."
- ends -
For further information
Massoud Amiri, Chief Executive, Advance Visual 0207 830 9740
David Rydell/Billy Clegg Bell Pottinger Financial 0207 861 3867
Chairman's Statement
Preliminary results for the year ended 30 June 2001
In November last year, Advance successfully moved from Ofex onto the AIM
market of The London Stock Exchange, raising #5 million at 10p per share.
After deducting the cost of the flotation and settling outstanding debts, the
company was left with #3.8 million to pursue an expansion strategy aimed at
creating a pan-European business.
The Board has delivered on its strategy to establish that pan-European
presence. In the period under review, we have acquired Webmania in Paris and
Click Online in Berlin. In August 2001, we acquired xoo in London. The total
aggregate consideration for these businesses amounted to #440,000. All these
acquisitions were share based, requiring little cash, and the resultant
cumulative dilution of our share capital was less than 8%. As well as
satisfying our requirement to have five sales offices covering our centralised
production model, the acquisitions firmly established Advance in Europe's
three largest IT Services markets, namely the UK, Germany and France, in
addition to our existing presence in Switzerland. At present there are no
immediate plans for further expansion as the company focuses on driving sales
in its five main sales offices. Consequently, the recent decision to open a
Zurich office has been reversed without incurring any significant costs.
Revenues for the 12 months ending 30 June 2001 were #2,053,783. This is a 49%
(annualised) increase over the equivalent 12 months period when sales reached
#1,381,807. Some 56% of revenue in the period under review came from the
Bradford office, 42% came from Geneva, with the remainder coming from the
newly integrated Paris and Berlin offices. Naturally, the 12 months
performance of the new acquisitions were not fully reflected whereas they will
be more significant contributors to Advance's revenues in the current year.
Additionally, 63% of revenues were derived from Internet Projects, which is
double the 32% in the previous nine-month period. The portion of Internet
services revenues for the second half of the financial year was even higher,
at 70%. Digital Video, Multimedia and Events revenues have remained steady.
Advance has established a strong track record for repeat business. In the year
under review, 54% of revenues were generated by existing clients and 46% by
new clients. We also have a current base of 129 clients throughout all of our
operations (clients whom we have done work for in the past 6 months).
Losses for the year were #2,616,194 compared with a loss of #1,240,372 for the
12 months ending 30 June 2000. More than #200,000 of the 2001 loss was
associated with the software division that was closed in December. Other
elements of the loss are associated with the legal, financial and operational
costs related to the company's rapid European expansion. Otherwise, the
increased cost base is mainly associated with increases in staff: an average
of 85 employees this year, compared with 45 in the previous period. However,
management has achieved rapid expansion, both in terms of revenues and sales
offices, while actually decreasing headcount since the IPO.
Immediately after the IPO, anticipating deteriorating market conditions, your
Board instigated cost cutting initiatives. In December and January, two under
performing divisions were closed and headcount was reduced by 19, or 21% of
the workforce. Over #500,000 of annualised cost savings was achieved. The full
effects of these cost cuts are not reflected in these numbers as the cuts were
achieved half way through the period. Since the year-end, a further major cost
cutting initiative has been undertaken. In July and August, headcount was
reduced by 25 (approximately 30% of our workforce) across all offices. We also
cut external services including telemarketing, industry PR and reduced our
marketing budget. Annualised savings are expected to exceed #800,000.
Consequently, our production centres in Sophia Antipolis (internet and
wireless) and Bradford (digital video and multimedia) have been downsized.
Only key technical skills have been maintained, and the remainder will be
outsourced. The extent of the increased efficiency is best demonstrated by the
fact that at the time of IPO we had 91 staff and 2 sales offices whereas
shortly we will have under 70 staff sustaining 5 sales offices.
To counter the difficult trading environment, management is furthering its
proactive sales activities. A new Head of Sales with more than 15 years of
international experience in institutional sales within the IT and Telecomm
industry has been recruited to assist local offices with their sales
activities. Management are also developing Advance's Alliance and Partnership
efforts, which we believe will improve our profitability with limited cost
exposure. Additionally, Advance has packaged a new Generic Content Management
software, which is a web site content management tool for non-technical staff.
The Company is currently in talks with a number of new clients interested in
licensing this product. This is an example whereby, due to its centralised
production facility, Advance could identify a common demand from different
clients in different countries and successfully repackage its replicated
solution into a potentially lucrative product.
The information technology business environment remains weak. Sales cycles
have increased from three months a year ago to over five months presently and
the recent tragic events in America might weaken technology spending even
further. Advance currently has #400,000 of work in progress and over #1.25
million in pipeline proposals but there is little visibility as to the timing
and proportion of conversions into sales. Although our cash position at 30
September 2001 was #1.68m, it is difficult at this stage to determine whether
the company has sufficient cash to continue trading for the next twelve
months. In this uncertain climate, your Board has initiated a review that is
exploring a range of other strategic options including fund raising.
The long-term prospects for the Internet Professional Services and Wireless
industry remain good. However, the current lack of visibility over the next
twelve months will prove to be a testing challenge.
Barclay Douglas
Chairman of the Board
4 October 2001
Advance Visual Communications PLC
Consolidated Profit and Loss Account
12 months 9 months
ended ended
Note
30 June 30 June
2001 2000
# #
Turnover
Continuing operations 2,015,176 1,227,003
Acquisitions 38,607 -
2,053,783 1,227,003
Operating loss
Continuing operations (2,569,035) (964,506)
Acquisitions (86,279) -
(2,655,314) (964,506)
Net interest receivable/(payable) 77,302 (26,221)
Loss on ordinary activities before taxation (2,578,012) (990,727)
Tax on loss on ordinary activities (38,182) (8,397)
Loss on ordinary activities after taxation for the
financial year/period transferred from reserves (2,616,194) (999,124)
Basic loss per ordinary share 2 (2.0)p (1.6)p
Diluted loss per ordinary share 2 (2.2)p (1.6)p
Consolidated Balance Sheet
as at 30 June 2001 As at As at
30 June 30 June
2001 2000
# #
Fixed assets
as restated
Intangible 2,102,457 1,841,196
Tangible 431,668 482,216
2,534,125 2,323,412
Current assets
Stocks 176,452 66,926
Debtors 404,635 526,375
Cash at bank and in hand 2,287,166 -
2,868,253 593,301
Creditors: amounts falling due within one
year (693,188) (783,384)
Net current assets/(liabilities) 2,175,065 (190,083)
Total assets less current liabilities 4,709,190 2,133,329
Creditors: amounts falling due after more than one (39,408) (195,035)
year
Net Assets 4,669,782 1,938,294
Capital and reserves
Called up share capital 1,566,255 832,870
Share premium account 6,634,893 2,198,593
Merger reserve 1,562,799 1,328,184
Other reserves (25,721) 30,897
Profit and loss account (5,068,444) (2,452,250)
Equity shareholders funds 3 4,669,782 1,938,294
Consolidated Cash Flow Statement 12 months 9 months
ended ended
30 June 2001 30 June
Note 2000
#
#
Net cash outflow from operating activities 4 (2,506,448) (901,009)
Returns on investments and servicing of finance
Interest received / (paid) 94,520 (13,615)
Interest element of finance lease rentals (17,218) (12,606)
Net cash inflow/(outflow) from returns on
investments and servicing of finance 77,302 (26,221)
Purchase of tangible fixed assets (186,442) (130,181)
Disposal of tangible fixed assets 38,044 27,066
Net cash outflow from capital expenditure
and financial investment (148,398) (103,115)
Acquisitions and disposals
Purchase of subsidiary undertaking (36,049) (35,450)
Purchase of business - (70,000)
Net cash acquired with subsidiary/business 16,455 17,485
Net cash outflow from acquisitions and
disposals (19,594) (87,965)
Net cash outflow before financing (2,597,138) (1,118,310)
Financing
Capital element of finance lease rentals (127,546) (78,246)
Repayment of long term loans (69,000) (92,550)
Issue of ordinary share capital 5,758,346 1,455,667
Expenses paid in connection with issue of
shares (664,048) -
Warrant instrument - 31,348
Net cash inflow from financing 4,897,752 1,316,219
Increase in cash 2,300,614 197,909
12 months 9 months
ended ended
Statement of Total Recognised Gains and Losses
30 June 2001 30 June
2000
#
#
Loss for the financial period (2,616,194) (999,124)
Currency translation differences (25,270) (451)
Total recognised gains and losses relating to the (2,641,464) (999,575)
year/period
Notes on the Preliminary Results
1. The financial information set out above does not constitute
full accounts within the meaning of Section 240 of the Companies Act
1985. Full accounts for the year ended 30 June 2001 will be posted to
shareholders as soon as possible. The full accounts for the year ended
30 June 2001 have yet to be signed. The auditors have reported on the
audited accounts for the 9 months ended 30 June 2000; their report was
unqualified and did not contain any statements under section 237 (2)
and (3) of the Companies Act 1985.
2. The calculation of earnings per share is based on the loss attributable to
shareholders and the weighted average number of ordinary shares in issue
of 133,465,550 (2000: 62,085,858). The calculation of diluted earnings per
share is based on the loss attributable to shareholders and the adjusted
weighted average number of ordinary shares of 121,600,550 (2000:
62,085,858).
3. Reconciliation of movements in
12 months ended 9 months ended
shareholders' funds
30 June 2001 30 June 2000
#
#
Loss for the financial period (2,616,194) (999,124)
Issue of warrants - 103,500
Issue of shares 6,040,500 2,917,491
Expenses paid in connection (664,048) -
with issue of shares
Shares to be issued - (150,000)
Exchange rate movement (25,270) (451)
Transfer to profit/loss of (3,500) -
lapsed warrant instrument
Net addition to shareholders 2,731,488 1,871,416
funds
Opening shareholders funds 1,938,294 66,878
Closing shareholders funds 4,669,782 1,938,294
12 months ended 9 months ended
4. Reconciliation of operating
loss to net cash outflow from 30 June 2001 30 June 2000
operating activities
# #
Operating loss (2,655,314) (964,506)
Depreciation 185,051 93,010
Amortisation of intangible 101,430 32,694
assets
Loss on disposal of tangible 25,556 16,834
fixed assets
Provision against investment 25,000 -
Increase in stock (109,526) (21,926)
Decrease/(increase) in debtors 125,531 (202,260)
(Decrease)/increase in (152,558) 145,145
creditors
Non cash movements (51,618) -
Net cash outflow from operating (2,506,448) (901,009)
activities
5. The Registered Office of the Company is The Dyehouse, Dyehouse Drive, West
26, Bradford, BD19 4TY. Copies of the Annual Report and Accounts may be
obtained from the Company Secretary at this address.
6. This announcement has been prepared on the basis of the accounting policies
as stated in the previous years financial statements.
The group adopted Financial Reporting Standards, which became
applicable during the year, the effects of which are as follows:
FRS 18: The standard has been adopted during the year, however this
has had no effect on the reported figures.
In addition, these financial statements have been prepared on the
going concern basis.
The directors have prepared budgeted cashflows which, assume a low level
of growth, and which indicate the company may not have sufficient
financial resource for the foreseeable future. As a result the
directors have initiated a strategic review of the group and are
considering a range of options including fund raising from various
sources. If such funding is not available then adjustments will be
required to the carrying value of assets and liabilities as set out in
these financial statements.
7. The #1,328,184 share premium movement recorded in the prior year relating
to the acquisition of Voxel SA has been reclassified under Section 131 of
the Companies Act as a merger reserve rather than as a share premium.
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