RNS Number:9935P
Horizon Technology Group PLC
13 March 2008
Horizon Technology Group plc
Dublin: HOR.I London: HOR.L ADR: HZNTY
Preliminary results for the year to 31 December 2007
Profit after tax up 6.2%
Dublin & London | 13 March, 2008: Horizon Technology Group plc, a leading
system integrator and distributor of information technology products in the UK
and Ireland, today announces its preliminary results for the year to 31 December
2007.
2007 2006 Change
2007 Financial Highlights Euro 000 Euro 000
(Excluding discontinued operations)
Revenue 288,213 257,895 12%
Gross profit 53,200 43,042 24%
Gross margin % 18.5% 16. 7%
EBITDA1 10,651 10,021 6%
EBITDA1 as a % of revenue 3.7% 3. 9%
Profit after tax 5,892 5,549 6%
Profit after tax as a % of revenue 2.0% 2.2%
Net cash/(debt) 4,135 (6,979)
Return on invested capital2 28.5% 22.4% +610Bps
Diluted adjusted EPS (Euro cent)3 9.39 cent 9.16 cent 3%
1 Before material items
2 EBITDA divided by shareholders' funds plus debt less cash
3 Adjusted for unwinding of discount factor, amortisation/reduction of
intangible assets and material items
2007 Operational Performance
2007 was a year of further progress for Horizon against each of its growth
objectives:
O Horizon continued to focus on increasing the higher margin services
orientation to its business.
O Horizon has broadened its range of global IT vendors and is now
established as the number one channel outsourcing partner in the UK for Sun
Microsystems, Juniper, F5, Nortel (data products), Tandberg, EMC and Oracle.
O Horizon has rapidly become the number one channel development partner
for EMC and Oracle in the UK following the establishment of these businesses in
the second half of 2006.
O Horizon continues to enhance its relationship with IBM through the
extension of its partnership into the Irish market.
O Horizon received three awards from IBM including the global
International Beacon Award for its contribution to IBM business growth in 2007.
O Successfully established a new corporate governance consulting division
and secured early customer wins.
2007 Financial Performance
The group invested considerable resources in building a services capability and
infrastructure to support revenue growth in 2008 and beyond, particularly in its
EMC, IBM and Oracle business units in the UK. This investment, combined with the
cancellation or deferral of a few key orders from the financial services and
government sectors, resulted in a lower growth rate in profitability during
2007. Some of the deferred orders have since been received, others are still
expected early in 2008 and none have been cancelled.
For the sixth consecutive year, Horizon has delivered earnings growth in 2007,
albeit at a slower pace than in the recent past:
O Revenue growth of 12% year-on-year.
O 82% of revenue emanates from the UK.
O Gross profit growth of 24% year-on-year.
O EBITDA growth of 6% year-on-year.
O Diluted adjusted EPS growth is 3%.
O Strong cash conversion - cash inflow from operations was Euro12.6m or 118%
of EBITDA.
O Return on invested capital up from 22.4% to 28.5%, an increase of 610
basis points.
O Strong balance sheet - net cash of Euro4 million against net debt of Euro7
million at the end of 2006.
Outlook
Taking global market conditions and the weakness of sterling into account, the
directors are confident of the group's growth prospects in 2008.
Gary Coburn, Horizon's Chief Executive Officer commented:
"Horizon continues to develop as a valued and capable outsourcing partner for
major global IT vendors. During 2007, we strengthened our position with existing
partners and made significant progress with new partners such as Oracle, EMC and
IBM. In addition, we continued to deliver both acquisition and organic growth
during 2007 - both of which remain a focus for growth into 2008. Despite a
challenging second half in 2007, Horizon has very strong businesses with key
market positions, providing significant benefits to customers while ensuring
resilient profitability, strong cash flow and superior returns to shareholders."
Cathal O'Caoimh, Horizon's Chief Financial Officer, added:
"Strong financial focus on working capital management and cash flow has driven a
significant improvement in the group's balance sheet. Cash flow from operations
was Euro12.6m, 118% of EBITDA and return on invested capital increased 610 basis
points to 28.5%. Horizon ended 2007 with net cash of Euro4 million against net debt
of Euro7 million at the end of 2006. Horizon is well positioned to deliver earnings
growth and shareholder value in 2008 and beyond."
For further information please contact:
Horizon Technology Group plc
Gary Coburn, Chief Executive Officer
Cathal O'Caoimh, Chief Financial Officer 353 1 620 4900
K Capital Source
Mark Kenny/Jonathan Neilan 353 1 631 5500
ABOUT HORIZON
Horizon Technology Group plc is a leading technical integrator and distributor
of information technology products in the UK and Ireland. For more information
about Horizon Technology Group plc, visit www.horizon.ie.
CHAIRMAN'S STATEMENT
For the sixth consecutive year Horizon has delivered earnings growth in 2007,
albeit at a slower pace than in the recent past. The company generated
significant free cash flow and increased the return on invested capital.
During the year, the group invested considerable resources in building a
services capability and infrastructure to support revenue growth in 2008 and
beyond, particularly in its EMC, IBM and Oracle business units. This investment,
combined with the cancellation or deferral of a few key orders from the
financial services and government sectors in December, resulted in a lower
growth rate in profitability during 2007. Nevertheless, EBITDA grew 6% and
diluted adjusted EPS increased by 3%.
Although some of the deferred orders have since been received and others are
still expected early in 2008, the extent of the impact on the 2007 outcome was
exacerbated because the group's revenue has become increasingly weighted towards
the end of each quarter.
Horizon continues to deliver on its objective of focussing on higher margin,
service rich, enterprise solutions businesses resulting in gross margin increase
from 16.7% to 18.5% between 2006 and 2007. The business with the fastest growth
in EBITDA over the last two years was the Irish based enterprise applications
and services (EAS) operation. While this business only accounts for a small
portion of group revenues, it contributes 31.5% of group EBITDA, a significant
increase on just 19% two years ago.
The group's UK operations now generate 82% of revenues - because of the size of
the potential market, it is likely to drive the group's future revenue growth.
The focus on higher margin businesses yielded significant improvement in EBITDA
margin within the Irish operation from 10.5% in 2006 to 12.8% in 2007, resulting
in 8% growth in EBITDA despite a fall in Irish revenue.
The group continued its focus on cost control and efficiency gains during this
period, maintaining very high consultant utilisation rates. The increase in
services revenue and the group's investment in new partnerships have a direct
impact on headcount and cost structure. Average headcount was 349 in 2007, up
from 266 the previous year. The growth is principally in revenue generating
technical consultants and sales personnel and includes the full impact of
acquisitions completed in 2006.
In addition to the increased focus on higher margin businesses, Horizon
continued to deliver on a number of other strategic objectives during 2007:
O Driving earnings growth in each of the businesses acquired in 2006 - the
three successful acquisitions, EquIP, EPC and WBT, have been fully integrated
into Horizon's operations and contributed very positively to profitability in
2007.
O Investment and development of new partnerships - the group's new
developments with Oracle and EMC have produced consistent improvements in
performance during 2007.
O Building market share with new vendor partners - the group's market
share with IBM, EMC, Oracle and Tandberg have all grown significantly during
2007.
O Maintaining and enhancing market share with key vendors - Horizon is now
the number one channel partner in the UK for each of Sun Microsystems, Juniper,
F5, Nortel (data products), Tandberg, EMC and Oracle.
O Horizon has rapidly become the number one channel development partner
for EMC in the UK following the establishment of this business in the second
half of 2006.
O Successfully established a new corporate governance consulting division
and secured early customer wins.
Horizon remains active in identifying potential acquisition opportunities in the
services and software sectors in Ireland and in the enterprise infrastructure
sector in the UK. While many acquisition opportunities exist, the group remains
focused on completing transactions, which offer a compelling fit with Horizon's
existing business and are accretive to Horizon's earnings within the first 12
months of acquisition.
The group's cash flow and financial position strengthened during 2007. Net cash
of Euro4 million at the year-end represents a significant improvement on net debt
of Euro7 million at 31 December 2006. Cash flow generated from continuing
operations amounted to Euro12.6 million or 118% of EBITDA in the period. The
group's focus on effective working capital management delivered a significant
reduction in working capital days from 25 days in 2006 to 10 days in 2007, As a
result, the group drove return on invested capital up from 22.4% to 28.5%, an
increase of 610 basis points.
Horizon has a strong balance sheet and substantial unused credit facilities
which provide significant financial capacity for accretive and value enhancing
acquisitions and developments in 2008 and beyond.
MARKET REVIEW
During 2007, the enterprise solutions markets in both the UK and Ireland showed
solid revenue growth with increased outsourcing by organisations, driven by the
desire to remain focused on their core business and to retain flexibility in
their workforce. As a result, the Irish market for consulting services has
experienced an increase in demand with market revenues increasing in
double-digit percentages. The UK and Irish enterprise infrastructure markets are
growing, albeit in single digit percentages. There is also continuing
growth-based investment particularly for project services. The intense
competition within the market continues - both between IT vendors and within the
channel.
Late in 2007, certain sectors of the market showed signs of a slow-down as
organisations began to react to a potential deterioration in global economic
growth rates. In this regard, the financial services sector actively cut back on
expenditure late in 2007 reflecting the specific issues facing that sector.
Other sectors remained buoyant, particularly Irish government departments.
STRATEGY
Horizon's objective and strategy remain constant - to deliver shareholder value
through the development of the business as a technical integrator and
distributor of information technology products in the UK and Ireland. The
group's focus is to generate long-term growth in shareholder value by investing
resources judiciously to capitalise upon future growth opportunities while
maintaining a strong financial position. The board continues to periodically
review all options available to pro actively maximise shareholder value.
Geographically, Horizon will continue to focus on supplying a wide range of IT
services and products within the Irish market and, in the UK, focus on the
provision of enterprise solutions in partnership with system integrators and
leading global IT vendors.
Looking to 2008, continued growth in earnings will be delivered by:
O An increasing services orientation within Horizon's business;
O Maintaining high market share with existing key vendors;
O Profitably building market share with new vendor partners;
O Select acquisition opportunities; and
O Capitalising on Horizon's operational gearing.
The group will continue to monitor the IT markets in the UK and Ireland to
identify new opportunities to deliver profitable growth through either bolt-on
acquisition or organic development, while continuing to develop existing
businesses to enhance profitability and cash flow. The group will continue to
develop its strong market positions, to strengthen relationships with customers
and vendors and to invest resources in the on-going development of a highly
motivated team of professionals dedicated to the continued success of the
business.
OUTLOOK
Horizon has very robust businesses with key market positions that generate
strong cash flow and can deliver a superior performance going forward. Horizon's
growth prospects are underpinned by rigorous cost control, the group's ability
to leverage growth in earnings from greater utilisation of operational capacity
and continued focus on higher margin services rich segments of the IT market.
Horizon will maintain its focus on delivering organic and acquisitive growth in
2008. Horizon's organic revenue growth will be influenced by the broader market
growth rate, the extent to which major IT vendors outsource to their channel and
the pace of organic development. As global IT vendors focus on their own
internal core competencies and cost controls, they are increasingly outsourcing
technical services, marketing and supply chain functions to channel partners.
Horizon is uniquely positioned to address these market trends.
Like many companies, the directors note that a global economic slowdown could
have an impact on market conditions. Specific sectors of the market were
impacted at the end of 2007 and the directors expect that these same sectors
could be challenged in 2008. However, to date there is no evidence that the
market has been or will be impacted. While international market conditions
remain uncertain and notwithstanding the weakness of sterling, the directors
remain confident of the group's prospects in 2008.
TRADING REVIEW
Over the last two years, Horizon has shifted its business to become exclusively
focused on the higher margin, services rich enterprise solutions market.
Following the disposal of the group's volume distribution business, together
with the completion of a series of acquisitions and organic developments during
2006 and 2007, the group continues to enhance the margins within its business.
Following this shift in the focus of the business, the group's gross margin has
expanded from 16.7% in 2006 to 18.5% in 2007.
2007 was Horizon's sixth consecutive year of growth in EBITDA and diluted
adjusted earnings per share. While growth slowed during 2007, the group is
profitable, cash generative and has significant financial capacity to support
further acquisition and organic growth opportunities.
The group operates through two primary geographic divisions - Ireland and the
UK. Horizon supplies a wide range of IT services and products within the Irish
market and, in the UK, focuses on the provision of enterprise solutions in
partnership with system integrators and leading global IT vendors. The UK now
represents 82% of the group's revenue stream and 47% of the group's EBITDA.
UNITED KINGDOM
In the United Kingdom, the group focuses exclusively on the provision of
enterprise infrastructure and services. It assists customers, usually via a
system integrator, in implementing IT strategies through the provision of IT
infrastructure, development and consulting services. Its customer base is
predominantly comprised of blue-chip companies and government departments. It
has a current full time equivalent staff count of 191 employees.
UNITED KINGDOM 31 Dec 2007 31 Dec 2006
Euro'000 Euro'000
Revenue 236,485 198,395
EBITDA 5,905 5,481
Percentage margin 2.5% 2.8%
The group's UK revenue, at Euro236 million increased 19% on 2006 levels. This
growth in revenue is mostly organic and principally reflects the group's
recently established partnerships with EMC, Oracle, IBM and Tandberg in the UK
market.
As part of the group's focus on the development of a services revenue base, it
has invested considerable resources in building a services capability and
infrastructure to support revenue growth in future years, particularly in its
EMC, IBM and Oracle business units. These investments reduce short term earnings
but will deliver incremental growth in 2008 and beyond.
Horizon UK focuses on the enterprise segment of the IT market, specialising in
the provision of high-end and mid-range infrastructure and services. Horizon's
objective is to become the leading channel partner to its key vendors and has
achieved substantial revenue growth, out-performing the market by focusing on
the continuing development of relationships with key system integrators.
During 2007, Horizon enjoyed a number of new project wins across various
industry sectors in the UK, such as:
O Horizon Data Management delivered a significant data storage project in
the healthcare sector, in partnership with System Integrator, Softcat, to
provide patient record information to remote clinics;
O Horizon Clarity worked in partnership with UKN in implementing a 3,700
seat thin client virtual desktop project for the UK government's Rural Payments
Agency;
O Horizon Data Management worked in partnership with Ioko to design and
implement a major multi-vendor storage solution for the BUPA Hospitals' Spire
transition project; and
O Horizon Enterprise Systems was selected as the partner to provide and
implement the IBM infrastructure for the data centre in Services Birmingham, a
joint venture partnership between Birmingham City Council and Capita Group plc.
Horizon is now established as the number one channel outsourcing partner in the
UK for Sun Microsystems, Juniper, F5, Nortel (data products), Tandberg, EMC and
Oracle. Of particular note is that Horizon has rapidly become the number one
channel development partner for EMC in the UK following the establishment of
this business in the second half of 2006 - a performance of which the group is
very proud.
The group's UK business, Horizon UK, has six operating units:
O Horizon Clarity - Horizon Clarity is Sun Microsystems' largest partner
in the UK, providing data-centre technology to the UK's largest corporates in
partnership with system integrators. Horizon continued to develop this position
through 2007 winning a number of mid-range infrastructure projects in
partnership with global system integrators and managed services providers.
O Horizon EquIP - Horizon EquIP is a networking and security technology
business providing products and services from Juniper Networks, F5 Networks and
Nortel Networks, among others. Horizon EquIP is now firmly established as the
number one channel outsourcing partner for Juniper, Nortel (data products) and
F5 in the UK market.
O Horizon Enterprise Systems - This business was established in 2006 to
focus on providing UK system integrators and their customers with a wide range
of IBM specific enterprise infrastructure products and services. This business
reported a strong performance for 2007 and Horizon received three awards from
IBM including the global International Beacon Award for its contribution to IBM
business growth in 2007.
O Horizon Data Management - The group's data management business in the UK
continues to grow rapidly and Horizon has now become the number one channel
development partner for EMC in the UK. This business, which was only established
in the second half of 2006 generated a positive contribution in 2007.
O Horizon Software - Late in 2006, Oracle selected Horizon UK as its
channel development partner in the UK, tasking Horizon with the on-going
development of the existing Oracle channel with a primary focus on partners
selling to enterprise customers. This business, which was only established in
the second half of 2006 generated a positive contribution in 2007.
O Horizon Solutions - This business unit was introduced in early 2007 and
is now Tandberg's main channel development partner in the UK. In partnership
with specialist reselling partners, it provides Tandberg's market-leading IP
video-conferencing solution to a range of corporate and government customers in
the UK. Again, it contributed positively to group earnings in 2007.
IRELAND
In Ireland, the group operates in the enterprise solutions market and assists
customers in implementing IT strategies through the provision of IT
infrastructure, applications software development, implementation consulting and
support services. Its customer base is predominantly comprised of blue-chip
companies and government departments. The division includes the Irish enterprise
application and services (EAS) business and the Irish enterprise infrastructure
and services (EIS) businesses. It has a current full time equivalent staff count
of 158 employees.
IRELAND 31 Dec 2007 31 Dec 2006
Euro'000 Euro'000
Revenue 53,014 59,974
EBITDA 6,781 6,283
Percentage margin 12.8% 10.5%
The group's Irish revenue, at Euro53 million declined 11.6% on 2006 levels
reflecting a change in mix towards higher-margin services businesses. EBITDA, at
Euro6.8 million, increased by 7.9% compared to 2006 while EBITDA margin increased
from 10.5% to 12.8%
Horizon's Irish enterprise applications and services operation (EAS) delivered
good growth in earnings in 2007. The consulting business has continued to build
on its market-leading position by delivering growth in each of the service
divisions in which it operates:
O Business Intelligence - Client Solutions is the leading business
intelligence provider in the Irish market building data warehouse facilities for
Ireland's largest corporates. Sectors that have been particularly strong during
2007 include financial services and government departments.
O Application Development - This division continues to meet the software
development needs of some of Ireland's largest enterprises. The core services
provided include turnkey solution delivery from analysis to design to post
implementation support, technical consultancy services and project management
consultancy services. Horizon also offers a suite of application lifecycle
management tools that enable customers to meet compliance requirements and to
streamline their own internal software development processes. Some successful
solution deployments during 2007 include projects in Irish Life and Permanent,
the Gift Voucher Shop and O2.
O Enterprise Resource Planning - This division is the only Irish
indigenous mySAP-consulting partner and provides the full mySAP solution in the
Irish market, including software license, implementation consulting and ongoing
support services. Demand for SAP project services continued to experience growth
in 2007 and Horizon successfully completed a number of significant projects
during the year.
O Business Service Management (BSM) - This division continues to develop
satisfactorily in partnership with BMC and its products, including Remedy. It
provides a complete range of BMC Software services including sales, consulting,
implementation and support to existing and new BMC Software customers. BSM is a
fast-growing segment of the IT market and continues to represent an exciting
growth opportunity for the group.
O Corporate Governance - The group established a new corporate governance
consulting division. Although still at a developmental stage, this new division
has secured early customer wins including the Electricity Supply Board and
Eircom.
O Learning Management Solutions - Since its acquisition in August 2006,
WBT has performed ahead of expectation with new contract wins in both the US and
Europe. WBT Systems helps organisations implement advanced learning and
performance enhancement solutions. WBT has over one million licensed users
across the globe and has built a strong revenue stream of services into its
enterprise customer base.
During 2007, Horizon successfully won a number of new consulting projects in
Ireland, such as:
O Gift Voucher Shop (GVS) - Building on the successful development project
in GVS, Horizon developed the Corporate (B2B) Website, enabling e-business
transactions to be completed on the internet.
O Bord Gais - Following a competitive tendering process Horizon won the
contract to deliver a significant data warehousing solution.
O UCC - Horizon won, also by open tender, a significant data warehousing
project in the University.
In Ireland, Horizon Open Systems, the group's enterprise infrastructure and
services business (EIS) is a channel partner of Sun Microsystems which
specialises in the provision of infrastructure and professional services to
blue-chip enterprises, government departments and global systems integrators.
While overall revenue in the Irish EIS operation declined in 2007, an increased
services orientation within the business delivered growth in earnings.
Horizon Open Systems works with a range of blue-chip companies and Government
departments within the Irish market including O2, Vodafone, Irish Life and
Pensions, Bank of Ireland and AIB Bank and Revenue Commissioners, the Department
of the Environment and the Department of Justice as well as newer entrants such
as Newbay and Jinny.
During 2007, Horizon Enterprise Systems expanded its IBM partnership into
Ireland where it specialises in the provision of IBM enterprise products and
services to the Irish corporate and government markets. The partnership with IBM
continues to perform in line with the group's expectations and builds on a very
successful partnership in the UK.
FINANCIAL REVIEW
Key performance indicators for 2007, reported under International Financial
Reporting Standards, are outlined in the table below:
2007 2006 Change
2007 Financial Highlights Euro 000 Euro 000
(Excluding discontinued operations)
Revenue 288,213 257,895 12%
Gross profit 53,200 43,042 24%
Gross margin % 18.5% 16.7%
EBITDA1 10,651 10,021 6%
EBITDA as a % of revenue 3.7% 3.9%
Profit after tax 5,892 5,549 6%
Profit after tax as a % of revenue 2.0% 2.2%
Return on invested capital2 28.5% 22.4% +610Bps
Net cash/(debt) 4,135 (6,979)
Interest cover3 7.2x 7.5x
Diluted adjusted EPS (Euro cent)4 9.39 cent 9.16 cent 3%
1 Before material items
2 EBITDA divided by Shareholder's funds plus debt less cash
3 Interest cover calculated on operating profit adjusted for tax, amortisation
of intangibles and depreciation.
4 Diluted adjusted EPS represents earnings based on 79,764,000 shares over
profit after tax adjusted for unwinding of discount factor, amortisation/
reduction of intangible assets and material items.
Revenue and gross profit
Group revenue increased 12% in 2007 compared to 2006, which represents both
organic revenue growth and the full year impact of the acquisitions completed in
2006. The fastest rates of revenue growth occurred in the UK EIS business and
the Irish application consulting operation. While revenue grew 12%, absolute
gross profit grew 24% as a result of the expansion of gross margin from 16.7% to
18.5%, reflecting the group's shift towards services and margin-rich activities.
Earnings and taxation
Horizon continued to deliver earnings growth in 2007 albeit at a lower pace than
has been the case for the last five years. EBITDA grew 6% reflecting the
weakness in the broader economic environment and the consequent deferral or
cancellation of orders at the end of the year. Profit after taxation grew 6% and
diluted adjusted EPS increased 3% to 9.39cent.
The taxation charge for the year was particularly low at Euro136,000, an effective
tax rate of 2%, primarily due to the utilisation of tax losses not previously
recognised. At the balance sheet date, the group has unused tax losses against
which no deferred tax asset has been recognised of Euro28.5 million (2006:
Euro33.4million) available for offset against future profits. These losses, which
may be carried forward indefinitely, will provide the group with reduced tax
charges in future periods.
The group continued its focus on cost control, efficiency and productivity
during the year. Average headcount increased 31% from 266 to 349 as a result of
the acquisitions completed in 2006 and the organic development of new revenue
sources both in the UK EIS operation and the Irish application consulting
business. Cost per employee reduced by 1%.
Cash flow, liquidity and funding
The group's cash flow and financial position was strengthened further in 2007,
particularly as a result of the Euro12.6 million net cash inflow from continuing
operating activities. As a result, the group had net cash of Euro4.1million at 31
December 2007 compared to net debt of Euro7.0 million at 31 December 2006. At the
end of 2007, net cash of Euro4.1million comprised cash balances of Euro11.0 million
(2006: Euro8.4 million) partially offset by borrowings of Euro6.9 million (2006: Euro15.4
million).
A constant focus on the working capital employed in the business drove return on
invested capital up from 22.4% to 28.5%, an increase of 610 basis points.
Likewise, cash flow generated from operations amounted to 118% of EBITDA.
Total equity increased to Euro41.4 million at the end of 2007 (2006: Euro37.8
million), demonstrating the further strengthening of the group's financial
position.
The following table compares the working capital cycle at 31 December 2007 with
the previous year:
WORKING CAPITAL CYCLE 2007 2006
Days Days
Inventory days 19 32
Debtors' days 79 75
Creditors' days 88 82
Working capital cycle 10 25
Following a relentless drive to improve the return on invested capital, the
group reduced its working capital cycle by 15 days to 10 days, principally by
reducing inventory days from 32 to 19 days. Horizon's revenue has become
increasingly weighted towards the end of each quarter, which pushes up the
absolute value of both debtors and creditors at the year-end date. Nevertheless,
the debtor-credit imbalance has widened in the group's favour from 7 days to 9
days.
Net finance cost, inclusive of the notional interest charge on property
provisions, reduced from Euro1.5 million in 2006 to Euro1.4 million in 2007. In line
with normal seasonal working capital patterns and as the Group's working capital
was lowered over the course of the year, the group's finance cost was cut
significantly, particularly in the final quarter of 2007.
Horizon has significant financial capacity with unused credit facilities, in
respect of which all conditions precedent had been met at 31 December 2007, of
Euro35 million.
Material items
During 2007, the group's bad debt provision was increased by Euro831,000 to reflect
exposure to a significant UK customer whose business went into administration.
Horizon aims to minimise financial loss arising from credit risk by insuring
debtors' balances where such insurance is available and the cost is not
excessive when compared to the risks covered. Uninsured credit is only provided
to customers who demonstrate an appropriate payment history, satisfy
creditworthiness procedures and remain within specific credit limits. This
customer met these criteria for a period of nearly six years before it went into
administration. This is the first material bad debt that the group has incurred
in the past seven years, reflecting the robust credit risk policies adopted by
the group.
Acquisitions and disposal
During 2007, the group issued 788,647 new ordinary shares as deferred
consideration in respect of the acquisition of WBT Systems Limited, paid
Euro2,326,000 as the final payment for the acquisition of EquIP Limited and as the
first earn-out for Enterprise Process Consulting Group Limited and received
Euro2,232,000 as the final consideration for the sale of Clarity Computer
(Distribution) Limited.
Share premium reduction
During the year, the group obtained shareholder and High Court approval to
reduce its share premium account by Euro59,000,000, the amount necessary to
eliminate historical losses and restore the profit and loss account to a nil
position. This change makes it possible for the group to return capital to
shareholders.
Post balance sheet events
There have been no significant events between the balance sheet date and the
date of this announcement.
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
Total Total
Year ended Year ended
31 Dec 2007 31 Dec 2006
Euro'000 Euro'000
REVENUE 288,213 257,895
Cost of sales (235,013) (214,853)
________ ________
GROSS PROFIT 53,200 43,042
Other income 985 895
Staff costs (30,599) (23,604)
Other operating charges (12,935) (10,312)
________ ________
EBITDA 10,651 10,021
Depreciation (1,128) (801)
Amortisation/reduction of intangible assets (1,274) (1,099)
Integration costs - (410)
LTIP - (165)
Increase in bad debt provision (831) -
________ ________
OPERATING PROFIT FROM CONTINUING OPERATIONS 7,418 7,546
Finance costs (net) (1,390)
(1,497)
________ ________
PROFIT FROM CONTINUING OPERATIONS BEFORE TAXATION 6,028 6,049
Income tax expense (136) (500)
________ ________
PROFIT FROM CONTINUING OPERATIONS 5,892 5,549
DISCONTINUED OPERATIONS
Loss from discontinued operations (183) (1,493)
________ ________
PROFIT RETAINED FOR THE FINANCIAL YEAR (all attributable 5,709 4,056
to the equity holders of the parent)
________ ________
EARNINGS PER SHARE (cent): (all for profit attributable
to the ordinary equity holders of the parent)
Basic 7.20 5.23
Basic continuing 7.43 7.15
Basic continuing adjusted* 9.45 9.24
Diluted 7.16 5.18
Diluted continuing 7.39 7.09
Diluted continuing adjusted * 9.39 9.16
*Adjusted for unwinding of discount factor, amortisation/reduction of intangible
assets and material items.
CONSOLIDATED BALANCE SHEET
at 31 December 2007
2007 2006
Euro'000 Euro'000
NON-CURRENT ASSETS
Property, plant and equipment 3,474 2,637
Intangible assets 24,243 26,453
Deferred income tax assets 958 1,093
__________ __________
28,675 30,183
__________ __________
CURRENT ASSETS
Inventories 13,421 20,516
Trade and other receivables 73,529 64,135
Cash and cash equivalents 11,007 8,435
__________ __________
97,957 93,086
__________ __________
TOTAL ASSETS 126,632 123,269
__________ __________
CURRENT LIABILITIES
Trade and other payables 73,274 62,566
Income tax payables 1,189 1,899
Financial liabilities 6,095 13,999
Provisions 796 727
__________ __________
81,354 79,191
__________ __________
NON-CURRENT LIABILITIES
Trade and other payables 149 1,239
Financial liabilities 777 1,415
Deferred tax liabilities 1,827 1,692
Provisions 1,077 1,951
__________ __________
3,830 6,297
__________ __________
TOTAL LIABILITIES 85,184 85,488
__________ __________
NET ASSETS 41,448 37,781
__________ __________
CAPITAL AND RESERVES
Issued share capital 5,762 5,696
Share premium 19,755 79,021
Shares to be issued - 670
Other reserves (2,357) 121
Retained earnings/(losses) 33,565 (32,412)
Cost of shares of the company held in an ESOP (15,277) (15,315)
__________ __________
TOTAL EQUITY 41,448 37,781
__________ __________
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2007
2007 2006
Euro'000 Euro'000
OPERATING ACTIVITIES
Profit from continuing activities before tax 6,028 6,049
Finance costs (net) 1,390 1,497
__________ __________
Operating profit from continuing activities 7,418 7,546
Movement of provisions for liabilities (797) (894)
Depreciation, amortisation/reduction of intangible assets 2,402 1,900
Share based payments expenses 374 567
Decrease/(increase) in working capital 4,799 (3,921)
__________ __________
14,196 5,198
Interest paid (1,303) (1,235)
Interest element of finance lease payments (3) (7)
Income tax paid (365) (862)
Interest received 76 47
__________ __________
NET CASH INFLOW FROM CONTINUING OPERATING ACTIVITIES 12,601 3,141
Net cash outflow from discontinued operations (1) (3,497)
__________ __________
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 12,600 (356)
__________ __________
INVESTING ACTIVITIES
Payments to acquire property, plant and equipment-continuing (2,025) (1,042)
operations
Payments to acquire property, plant and equipment-discontinued - (53)
operations
Proceeds from disposal of property, plant and equipment 49 60
Payments to acquire intangible assets (97) (96)
Purchase of subsidiary undertaking net of cash acquired (2,326) (12,537)
Sale of subsidiary undertaking net of cash disposed 2,232 8,852
Refund of deposits pledged as security 109 108
__________ __________
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (2,058) (4,708)
__________ __________
FINANCING ACTIVITIES
Issue of shares and exercise of share options 69 8,681
Expenses on issue of ordinary share capital and capital reduction (7) (406)
Repurchase of share options - (839)
Capital element of finance lease rental payments (37) (15)
(Decrease)/increase in short term and long term borrowings (558) 1,928
_________ _________
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES (533) 9,349
_________ _________
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,009 4,285
Currency translation differences relating to cash and cash 501 (64)
equivalents
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (5,170) (9,391)
__________ __________
CASH AND CASH EQUIVALENTS AT END OF YEAR 5,340 (5,170)
___________ ___________
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2007
Shares Retained Cost of
Share to be Share earnings/ Other shares
capital issued premium (losses) reserves held by Total
ESOP
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Euro'000
At 1 January 2006 5,169 - 71,426 (36,280) (215) (15,468) 24,632
Changes in equity for 2006:
Translation of overseas - - - - 336 - 336
subsidiaries (net)
_____ _____ _____ _____ _____ _______ _____
Total expense recognised directly - - - - 336 - 336
in equity
Profit for the year - - - 4,056 - - 4,056
_____ _____ _____ _____ _____ _______ _____
Total recognised income and - - - 4,056 336 - 4,392
expense for 2006
Shares to be issued for - 670 - - - - 670
acquisition
Share issue 516 - 7,963 - - - 8,479
Expenses on issue of shares - - (406) - - - (406)
Exercise of options 11 - 38 - - 153 202
Cash settlement of share options - - - (674) - - (674)
Share based payment - - - 402 - - 402
Tax on share based payments taken - - - 84 - - 84
directly to reserves
_____ _____ _____ _____ _____ _______ _____
At 1 January 2007 5,696 670 79,021 (32,412) 121 (15,315) 37,781
Changes in equity for 2007:
Translation of overseas - - - - (2,478) - (2,478)
subsidiaries (net)
_____ _____ _____ _____ _____ _______ _____
Total expense recognised directly - - - - (2,478) - (2,478)
in equity
Profit for the year - - - 5,709 - - 5,709
_____ _____ _____ _____ _____ _______ _____
Total recognised income and - - - 5,709 (2,478) - 3,231
expense for 2007
Shares to be issued for - (670) - - - - (670)
acquisitions
Share Issue 55 - 615 - - - 670
Expenses on issue of shares - - (7) - - - (7)
Exercise of options 11 - 20 - - 38 69
Capital reduction - - (59,894) 59,894 - - -
Share based payment - - - 374 - - 374
_____ _____ _____ _____ _____ _______ _____
At 31 December 2007 5,762 - 19,755 33,565 (2,357) (15,277) 41,448
_____ _____ _____ _____ _____ _______ _____
2007 2006
Euro'000 Euro'000
Cost of shares of the company held
in an ESOP
Share capital (212) (216)
Share premium (15,065) (15,099)
_______ _____
(15,277) (15,315)
_______ _____
SUPPLEMENTARY INFORMATION
1. SEGMENT INFORMATION
The group's primary segment reporting format is geographical as
the group's risks and rates of return are affected predominantly by the
geographical areas in which it operates. Secondary segment information is
reported by business segment.
The operating businesses are organised and managed separately
according to the two geographical areas within which the group's assets are
located - the United Kingdom and Ireland. The group's two business segments are
its Enterprise Infrastructure and Services (EIS) operation and its Enterprise
Applications and Services (EAS) business. EIS focuses on the provision of
enterprise infrastructure and services and assists customers, usually via a
system integrator, in implementing IT strategies, while EAS operates in the
enterprise solutions market and assists customers in implementing IT strategies
through the provision of IT infrastructure, applications software development,
implementation consulting and support services.
Transfer prices between business segments are on an arm's length
basis in a manner similar to transactions with third parties.
Year ended 31 December 2007
Continuing Operations Discontinued Total
Operations Operations
Ireland UK Unallocated/ Total Ireland
Other
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Revenue
Sales to external 52,721 235,492 - 288,213 - 288,213
customers
Inter-segment sales 293 993 (1,286) - - -
__________ __________ __________ __________ __________ __________
Segment revenue 53,014 236,485 (1,286) 288,213 - 288,213
__________ __________ __________ __________ __________ __________
Result
EBITDA 6,781 5,905 (2,035) 10,651 - 10,651
Depreciation (228) (779) (121) (1,128) - (1,128)
Amortisation/reduction (480) (751) (43) (1,274) - (1,274)
of intangible assets
Material items - (831) - (831) - (831)
__________ __________ __________ __________ __________ __________
Segment result 6,073 3,544 (2,199) 7,418 - 7,418
__________ __________ __________
Net finance costs (1,390) - (1,390)
Loss on disposal - (183) (183)
__________ __________ __________
Profit before tax 6,028 (183) 5,845
Income tax expense (136) - (136)
__________ __________ __________
Profit after tax 5,892 (183) 5,709
__________ __________ __________
Continuing Operations Discontinued Total
Operations Operations
Unallocated/
Ireland UK Other Total Ireland
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Assets and liabilities
Segment assets 20,055 103,963 2,614 126,632 - 126,632
Segment liabilities 16,977 66,310 1,897 85,184 - 85,184
Other segment
information
Capital expenditure
Property, plant and 170 1,847 8 2,025 - 2,025
equipment
Intangible assets - 107 51 158 - 158
Year ended 31 December 2006
Continuing Operations Discontinued Total
Operations Operations
Ireland UK Unallocated/ Total Ireland
Other
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Revenue
Sales to external 59,633 198,262 - 257,895 84,748 342,643
customers
Inter-segment sales 341 133 (474) - - -
__________ __________ __________ __________ __________ __________
Segment revenue 59,974 198,395 (474) 257,895 84,748 342,643
__________ __________ __________ __________ __________ __________
Result
EBITDA 6,283 5,481 (1,743) 10,021 521 10,542
Depreciation (200) (489) (112) (801) (105) (906)
Amortisation/reduction (252) (743) (104) (1,099) (51) (1,150)
of intangible assets
Material items - (410) (165) (575) - (575)
__________ __________ __________ __________ __________ __________
Segment result 5,831 3,839 (2,124) 7,546 365 7,911
__________ __________ __________
Net finance costs (1,497) (676) (2,173)
Loss on disposal - (1,268) (1,268)
__________ __________ __________
Profit before tax 6,049 (1,579) 4,470
Income tax expense (500) 86 (414)
__________ __________ __________
Profit after tax 5,549 (1,493) 4,056
__________ __________ __________
Continuing Operations Discontinued Total
Operations Operations
Unallocated/
Ireland UK Other Total Ireland
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Assets and liabilities
Segment assets 28,205 89,962 5,102 123,269 - 123,269
Segment liabilities 22,845 59,557 3,086 85,488 - 85,488
Other segment information
Capital expenditure
Property, plant and 243 1,035 6 1,284 53 1,337
equipment
Intangible assets 3,112 13,972 16 17,100 32 17,132
Business segments
The following tables present revenue, expenditure and certain asset information
regarding the group's business segments for the years ended 31 December 2007 and
2006.
Year ended 31 December 2007
Continuing Operations Discontinued Total
Operations Operations
EIS EAS Unallocated/ Total Distribution
Other
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Revenue
Sales to external 266,021 22,192 - 288,213 - 288,213
customers
Inter-segment sales 1,008 278 (1,286) - - -
__________ __________ __________ __________ __________ __________
Segment revenue 267,029 22,470 (1,286) 288,213 - 288,213
__________ __________ __________ __________ __________ __________
Other segment information
Segment assets 110,552 13,467 2,613 126,632 - 126,632
Capital expenditure
Property, plant and 1,853 164 8 2,025 - 2,025
equipment
Intangible assets 107 - 51 158 - 158
Year ended 31 December 2006
Continuing Operations Discontinued Total
Operations Operations
EIS EAS Unallocated/ Total Distribution
Other
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Revenue
Sales to external 237,309 20,586 - 257,895 84,748 342,643
customers
Inter-segment sales 185 289 (474) - - -
__________ __________ __________ __________ __________ __________
Segment revenue 237,494 20,875 (474) 257,895 84,748 342,643
__________ __________ __________ __________ __________ __________
Other segment information
Segment assets 101,531 16,636 5,102 123,269 - 123,269
Capital expenditure
Property, plant and 1,078 200 6 1,284 53 1,337
equipment
Intangible assets 13,976 3,108 16 17,100 32 17,132
2. EARNINGS PER ORDINARY SHARE
2007 2006
The computation of basic and diluted earnings Euro'000 Euro'000
per share is set out below:
Numerator
Profit after tax 5,709 4,056
Discontinued operations net of tax 183 1,493
__________ __________
Profit from continuing activities 5,892 5,549
Material items (net of tax) 582 431
Unwinding of discount factor 160 302
Amortisation of intangibles 855 884
__________ __________
Profit after tax adjusted * 7,489 7,166
__________ __________
Denominator
Weighted average number of shares in issue for the year 79,251 77,591
('000)(1) (2)
Dilutive potential ordinary shares:
Employee share options ('000) 513 667
__________ __________
Diluted weighted average number of ordinary shares (' 79,764 78,258
000) (2) (3)
__________ __________
Earnings per share
Basic (cent) 7.20 5.23
Basic continuing (cent) 7.43 7.15
Basic continuing adjusted (cent)* 9.45 9.24
Diluted (cent) 7.16 5.18
Diluted continuing 7.39 7.09
Diluted continuing adjusted (cent)* 9.39 9.16
Earnings per share
Basic Discontinued (cent) (0.23) (1.92)
Diluted Discontinued (cent) (0.23) (1.92)
*Adjusted for unwinding of discount factor, amortisation/
reduction of intangible assets and material items.
(1) Weighted average number of ordinary shares for 2006 includes shares
to be issued after the year end.
(2) Own shares held in an ESOP are deducted when computing basic,
diluted and adjusted EPS.
(3) For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares, namely share options.
3. BASIS OF PREPARATION
The financial information presented in this report has been prepared in
accordance with the group's accounting policies under International Financial
Reporting Standards (IFRS).
The group's accounting policies under IFRS are based on the
International Financial Reporting Standards and Interpretations issued by the
International Accounting Standards Board (IASB) and on International Accounting
Standards (IAS) and Standing Interpretations approved by the predecessor
International Accounting Standards Committee that have been subsequently
authorised by the IASB and remain in effect.
The accounting policies adopted are consistent with those of the
previous financial year except in relation to the adoption of new and amended
IFRS and IFRIC interpretations during the year. Adoption of these revised
standards and interpretations did not have any effect on the financial
performance or position of the group in the current or prior periods.
4. STATUTORY ACCOUNTS AND BOARD APPROVAL
The board of directors approved the preliminary announcement for the year to 31
December 2007 on 11 March 2008. The financial information set out above does
not constitute statutory accounts for the year ending 31 December 2007 or year
ending 31 December 2006. The full accounts for the year ended 31 December 2006
prepared in accordance with International Financial Reporting Standards (IFRS),
and containing an unqualified audit report, have been filed with the Irish
Companies Registration Office.
The statutory accounts for 2007 will be finalised on the basis of
the financial information presented by the directors in the preliminary
announcement, and together with the auditors report thereon, will be delivered
to the Registrar of Companies following the company's Annual General Meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MGGMFRZNGRZM
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