RNS Number:3891J
Charteris PLC
31 March 2003
CHARTERIS PLC
INTERIM ANNOUNCEMENT
Charteris plc, the business and IT consultancy, announces its interim results
for the 6 months to 31st January 2003.
HIGHLIGHTS
* In a difficult market revenue reduced by 12% to #7.7M
* Profit before tax, goodwill and exceptionals of #72,000 (2002 #684,000)
* Cash balances remain strong at #3.9M (31st July 2002 - #4.9M)
* Effective action taken on the reduction of the cost base to align with
* Continued strong commitment to sales and service resulted in major
deliveries to the financial services sector and good progress in the Retail
and Public Sectors
Commenting on the results, David Mann, Chairman, said:
"In a market for business consulting services that has been under a great deal
of pressure, the company's objective has been to strike the right balance
between cutting costs to improve short-term performance and preserving the
strengths that will underpin its future growth in better conditions.
Whilst operating margins should show some improvement in the remainder of the
year, it is unlikely that target margins will be achieved while the current
market conditions persist. Charteris remains financially robust with tremendous
assets in the quality of its people, broad client base and market reputation."
CHAIRMAN'S STATEMENT
Results
In the six months ended 31 January 2003, revenue decreased by 12% to #7.7
million (compared with #8.7 million in the six months ended 31 January 2002).
The achievement of these revenues has required considerable effort and
determination from the team in addressing a market for business consulting
services that has been under a great deal of pressure. Many existing and
potential clients have been tending to cut or delay expenditure and the effects
have been more acute with some major assignments coming to a conclusion last
autumn.
In steering a course through this challenging situation, the board's objective
has been to strike the right balance between cutting costs to improve short-term
profitability and preserving strengths that are important for the future. As
announced at the AGM in November, the number of staff was reduced by 11 at the
beginning of that month; the associated exceptional costs were #243,000. The
profit for the period before tax, exceptional costs and the amortisation of
goodwill was #72,000 (2002: #684,000) in line with the expectations stated at
the AGM. The loss on ordinary activities before taxation was #259,000 (2002: a
profit of #591,000).
The Company has a strong financial position with total cash balances at 31
January 2003 of #3.9 million (31 July 2002: #4.9 million) and cash balances net
of bank borrowings of #2.6 million (31 July 2002: #3.5 million).
At the beginning of the period, an important commitment was made to establishing
three practices within the Company (Finance & Media; Retail, Manufacturing,
Distribution & Technology; and Public Sector, Utilities, Energy & Legal) with
increased focus and specialisation in these different markets. In the past the
largest proportion of revenues has come from the Finance sector, especially
Retail Banking, and it was in this area particularly that major assignments
culminated successfully in the autumn. Our objective has been to work through
the current challenges in the Finance market while giving additional emphasis to
building up business in other sectors.
Good progress is being made with the implementation of this strategy, as
illustrated in the following sections of this report.
Finance & Media
Our skills in Programme and Project management continued to be major drivers
within the Practice as evidenced by our completion of two major programmes in
Retail banking during the first half.
We saw the successful completion of a two-year, post-takeover, integration
programme within one of the high-street banks. This covered all customer
channels, product processing systems, and regulatory reporting and MIS systems.
Our programme managers were deployed within business projects and in application
development and in running the programme office for all IT development
activities.
The Practice has also made good progress in developing offerings for its target
sectors. Our services in support of outsourcing have been designed from hard
won, direct experience of what it takes to make major outsourcing a success -
from strategy through contract negotiation and ongoing service management. This
is proving very timely, with considerable market interest in using offshore
suppliers and in tackling more complex business process and transformational
outsourcing.
Changes in the financial services market driven by the economic slowdown and
shift in business priorities have led to increased scrutiny of the value and
effectiveness of CRM initiatives. This change has generated further demand for
our practical experience of CRM delivery. We have worked with a number of
leading organisations in the review and re-positioning of major programmes.
With the combination of these services alongside the well established business
and technical skills, we have been able to develop further business with
Barclays, RBS and Nationwide and new business with Premium Credit.
Premium Credit Ltd (PCL), leading provider of personal and corporate finance for
large annual insurance premiums and other payments, commissioned Charteris to
undertake an independent study of the way in which IT supports its sales
activities. We have advised on the structure and organisation of the IT team,
and provided interim management to support the process of change.
Retail, Manufacturing, Distribution & Technology
We have experienced good growth in the Retail and Technology sectors.
Many retailers are facing the combined challenges of expanding their product
base whilst developing new channels to market. The use of internet technologies
in new and innovative ways has become a critical factor in their success. During
the half we have been working in three major retail programmes designed to
deliver major business change initiatives. This work has drawn on a broad range
of our skill from business change management consultancy to technically-focused
project management.
Efficiency and cost reduction continue to be major themes for both retailers and
manufacturers alike with a strong focus on improvement in the supply chain. Our
Supply Chain Collaboration services and value-for-money reviews respond to these
needs. We are currently working with a major High Street retailer on their new
Collaborative Product Development initiative which builds on our strengths
gained with other leading retailers in this growth area.
We have expanded our activities with KCI International, a global manufacturer of
critical medical care products. Building on the Charteris IT strategy review we
are currently working at the heart of a major transformation programme to select
and implement their new ERP solution across 14 countries.
Our Microsoft .NET skills have been in considerable demand supporting the growth
in commitment to the new technologies from businesses in all our sectors.
Our relationship with Microsoft has continued to grow, with Charteris technical
consultants and project managers working alongside Microsoft to deliver major
.NET projects to some of their largest clients such as the UK Government
For Inchcape/Autocascade Charteris developed and delivered a real-time
collaborative car fleet remarketing system, supporting multiple sales channels.
This on-line auction and sale system is one of the most sophisticated yet
developed using Microsoft's innovative .NET web services technology
Public Sector, Utilities, Energy & Legal
In the Public Sector we have seen good growth in e-Government activity. Demand
continues to increase in both Government agencies and local authorities for
support in the effective application of internet-based technologies to meet the
Government's 2005 target for making public services available on-line.
Building on our experience of the Government Gateway, we have developed further
our capability to help agencies and local authorities modernise by making best
practical use of internet technology. We continue to provide programme
management and technical assurance services to Criminal Justice IT and have now
begun to work with the National Health Service.
Charteris continues to provide strategy and policy guidance at the highest
levels. The strategic work we did in 2000 has enabled the Isle of Man to
establish a strong position in the delivery of e-business. This year, we were
engaged to undertake a thorough review and refresh of the island's e-Commerce
strategy. We are also preparing a policy for dealing with the issue of social
exclusion caused by the digital divide.
During the half year we have developed our position with organisations involved
in national security and law enforcement. As many members of the Charteris team
have long track records in this sector we are well placed to respond.
We continue to experience good demand for our expert witness services in cases
relating to information technology. In the continuing harsh economic conditions,
litigation activity has remained high. We have been instructed on 11 cases in
the period, by leading law firms including Barlow Lyde & Gilbert, DLA, Herbert
Smith, and Masons.
Outlook
At the time of the AGM in November, in view of the sales pipeline and reduction
in costs, the directors saw good prospects for the Company to achieve a
reasonable operating margin in the second half of the year. Unfortunately,
although the list of prospects has continued to grow since then, several
specific ones have not moved ahead on the timescale or in the manner expected by
the end of the period. The year 2003 has brought little by way of refreshed
confidence or impetus to commit to capital expenditure - if anything, in view of
the economic and political situation around the world, it has been to the
contrary. We now expect revenue in the second half of the year to be less than
in the first half.
In February the board decided with regret that it was necessary to reduce the
size of the team by a further six people and there will be associated
exceptional costs of #177k in the second half of the year. Overhead expenditure
has been cut, but the commitment to a significant investment in business
development activities has been maintained. With a cautious assessment of
current prospects, the directors believe that operating margins should show some
improvement in the remainder of the year, although it is unlikely that target
margins will be achieved while the current market conditions persist.
Looking ahead, it seems that conditions are likely to remain difficult well into
the next financial year and we shall be setting budgets accordingly. We see pent
up demand in some areas, but in general there is a very limited propensity to
commit to major initiatives until the economic and political situation improves.
In the meantime there is often a 'make do and mend' approach, which in itself
can lead to good opportunities for us as a smaller, more nimble company. During
this phase we shall stay close to all our major customers and lay the
foundations for building substantial new business streams, whilst achieving
reasonable operating profits.
Charteris has the strengths to deal with the challenges. We remain a financially
robust company with tremendous assets in the quality of our people, our broad
client base and market reputation. We are confident that these will provide good
returns for shareholders when the leading organisations, which know us, start to
invest with more confidence in relevant major programmes.
Press enquiries:
David Pickering, Chief Executive Tel: 020 7600 9199
Zoe Biddick / James Benjamin, Biddicks Tel: 020 7448 1000
Consolidated profit and loss
6 mths ended 31 6 mths ended 31 12 mths ended
Jan 2003 Jan 2002 31 Jul 2002
(Unaudited) (Unaudited) (Audited)
#000s #000s #000s
---------- ---------- ----------
Turnover 7,702 8,725 19,087
---------- ---------- ----------
Other operating income - (34) (40)
Other external charges 2,765 1,188 4,312
Staff costs
- exceptional 243 - -
- other 4,238 6,006 11,692
Depreciation 67 82 168
Goodwill amortisation 88 93 170
Administrative expenses 592 821 1,235
---------- ---------- ----------
7,993 8,156 17,537
---------- ---------- ----------
Operating profit before goodwill 40 662 1,720
amortisation and exceptional staff
costs
Goodwill amortisation (88) (93) (170)
Exceptional staff costs (243) - -
---------- ---------- ----------
Operating (loss)/profit (291) 569 1,550
Interest receivable 68 69 134
Interest payable and similar (36) (47) (96)
charges
---------- ---------- ----------
Profit on ordinary activities 72 684 1,758
before taxation, goodwill
amortisation and exceptional staff
costs
Goodwill amortisation (88) (93) (170)
Exceptional staff costs (243) - -
---------- ---------- ----------
(Loss)/profit on ordinary (259) 591 1,588
activities before taxation
Taxation 50 (222) (551)
---------- ---------- ----------
(Loss)/profit on ordinary (209) 369 1,037
activities after taxation
Dividends proposed - - (161)
---------- ---------- ----------
(Loss)/profit for the period (209) 369 876
---------- ---------- ----------
(Loss)/earnings per share
Basic (0.52)p 1.05p 2.89p
Diluted (0.52)p 0.90p 2.50p
Basic before goodwill amortisation 0.13p 1.32p 3.37p
and exceptional staff costs
Diluted before goodwill 0.12p 1.13p 2.91p
amortisation and exceptional staff
costs
---------- ---------- ----------
Turnover and operating (loss)/profit all derive from continuing operations
No separate Statement of Total Recognised Gains and Losses has been presented as
all such gains and losses have been dealt within the Profit and Loss account.
Consolidated balance sheet
31 Jan 2003 31 Jan 2002 31 Jul 2002
(Unaudited) (Unaudited) (Audited)
#000s #000s #000s
---------- ---------- ----------
Fixed assets
Intangible assets 3,217 3,711 3,305
Tangible assets 2,633 2,664 2,732
Investments 53 56 57
---------- ---------- ----------
5,903 6,431 6,094
Current assets
Debtors 1,995 2,565 3,667
Cash at bank and in hand 3,904 4,471 4,909
---------- ---------- ----------
5,899 7,036 8,576
Creditors: Amounts falling due within (2,457) (3,952) (5,076)
one year
---------- ---------- ----------
Net current assets 3,442 3,084 3,500
---------- ---------- ----------
Total assets less current 9,345 9,515 9,594
liabilities
Creditors: Amounts falling due after (1,183) (1,341) (1,261)
more than one year
Provisions for liabilities and (47) (94) (26)
charges
---------- ---------- ----------
Net assets 8,115 8,080 8,307
---------- ---------- ----------
Capital and reserves
Called up share capital 418 365 412
Share premium account 2,540 2,537 2,540
Merger reserve 3,284 3,612 3,284
Other reserves 19 10 8
Profit and loss account 1,854 1,556 2,063
---------- ---------- ----------
Equity shareholders' funds 8,115 8,080 8,307
---------- ---------- ----------
Consolidated cash flow
6 mths ended 31 6 mths ended 31 12 mths ended
Jan 2003 Jan 2002 31 Jul 2002
(Unaudited) (Unaudited) (Audited)
#000s #000s #000s
---------- ---------- ----------
Net cash flow from operating (565) 814 1,982
activities ---------- ---------- ----------
Returns on investment and
servicing of finance
Interest paid (36) (47) (94)
Interest received 68 69 134
---------- ---------- ----------
Net cash flow from returns on
investment
and servicing of finance 32 22 40
---------- ---------- ----------
Taxation (301) (113) (687)
---------- ---------- ----------
Capital expenditure and financial
investment
Purchase of tangible fixed (32) (95) (249)
assets
Sale of tangible fixed assets 74 - -
---------- ---------- ----------
Net cash flow from capital
expenditure
and financial investment 42 (95) (249)
---------- ---------- ----------
Acquisitions
Purchase of subsidiary - 80 77
undertaking ---------- ---------- ----------
Net cash flow for acquisitions - 80 77
---------- ---------- ----------
Equity dividends paid (161) - -
---------- ---------- ----------
Cash (outflow)/inflow before use
of liquid
resources and financing (953) 708 1,163
---------- ---------- ----------
Management of liquid resources
Decrease/(increase) in term bank 746 (1,996) (2,758)
deposit
---------- ---------- ----------
Financing
Proceeds of share issue 22 2 69
Repayment of mortgage loan (74) (46) (130)
---------- ---------- ----------
Net cash outflow from financing (52) (44) (61)
---------- ---------- ----------
Decrease in cash in period (259) (1,332) (1,656)
---------- ---------- ----------
Reconciliation of net cash flow to
movement in net funds
Decrease in cash in period (259) (1,332) (1,656)
Cash outflow from change in 74 46 130
mortgage debt
Cash (inflow)/outflow from change (746) 1,996 2,758
in liquid resources ---------- ---------- ----------
Change in net funds resulting from (931) 710 1,232
cash flows
Amortisation of loan arrangement - - (2)
fees ---------- ---------- ----------
Movement in net funds in period (931) 710 1,230
Opening net funds 3,503 2,273 2,273
---------- ---------- ----------
Closing net funds 2,572 2,983 3,503
---------- ---------- ----------
Notes
1. ACCOUNTING POLICIES
The financial information contained in this interim report does not constitute
statutory accounts. The interim results, which have not been audited, have been
prepared using accounting policies consistent with those used in the preparation
of the Annual Report and Accounts for the Year ended 31 July 2002. Those
accounts have been filed with the Registrar of Companies and received an
unqualified audit report which did not contain a statement under section 237 (2)
or (3) of the Companies Act 1985.
2. TAXATION
Taxation for the 6 months to 31 January 2003 is based on the effective rate of
taxation which is estimated to apply to the year ending 31 July 2003.
3. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH FLOW FROM
OPERATING ACTIVITIES
6 mths ended 31 6 mths ended 31 12 mths ended
Jan 2003 Jan 2002 31 Jul 2002
(Unaudited) (Unaudited) (Audited)
#000s #000s #000s
Operating (loss)/profit (291) 569 1,550
Depreciation and amortisation 155 175 338
charges
Profit on disposal of tangible (10) - -
fixed assets
Increase/(decrease) in 21 (25) (93)
provisions
Decrease/(increase) in debtors 1,721 711 (360)
(Decrease)/increase in creditors (2,161) (616) 547
------------ ----------- ----------
Net cash flow from operating (565) 814 1,982
activities ------------ ----------- ----------
4. RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS
#000s
Loss for the period (209)
Reserve arising on exercise of share options 17
----------
Net reduction in equity shareholder' funds (192)
Equity shareholders' funds at 1 August 2002 8,307
----------
Equity shareholders' funds at 31 January 2003 8,115
----------
5. EARNINGS PER SHARE
Basic earnings per share have been calculated by dividing the (loss) / profit on
ordinary activities after taxation in the period by 40,271,782 shares (31
January 2002 34,983,521 shares) being the weighted average number of shares in
issue after excluding those shares owned by the employee benefit trust. The
diluted earnings per share calculation has been based on a fair value of 50.3p
per share (31 January 2002 84p per share). The weighted average number of
dilutive shares is 41,429,758 (31 January 2002 40,878,210).
6. INTERIM FINANCIAL STATEMENTS
The interim financial statements were approved by the directors on 28 March
2003. The Interim Report will be sent to shareholders by the 17th April and will
be available free of charge from the Company's registered office from the day of
despatch.
7. FULL YEAR FINANCIAL STATEMENTS
We expect to announce our full year results in October 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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