RNS Number:0444X
InTechnology PLC
11 June 2002
InTechnology plc
Preliminary results for the year ended 31 March 2002
11 June 2002
InTechnology plc ("InTechnology", "the Company" or "the Group"), the UK's
leading provider of data storage solutions, announces preliminary results for
the year ended 31 March 2002.
Financial highlights
• Turnover £158.1 million
• Gross profit £22.3 million
• Earnings before interest, tax, amortisation and impairment was £0.8
million loss, generated by SSS trading profit of £8.8 million
• Investment in staff and resources strengthens InTechnology's position
for the future
• After its first full year of trading, the Online Data Services
division now has £22.0 million of contracts, generating £7.0 million
of recurring revenues per annum
• Under FRS 11, a charge of £73.5 million relating to impairment of
goodwill arising on prior year acquisitions has been accounted for.
Going forward, this translates to a 50% reduction in annual
amortisation charges to around £4 million
• Cash reserves remain strong at £23.3 million. Net cash inflow from
operating activities was £4.0 million
Operational highlights
• Sales, technical and support services strengthened to allow
InTechnology to gain full benefit from its early advantage in this
growing marketplace
• VBAK sales to a number of corporates including Heritage Lottery Fund,
Teather & Greenwood Holdings plc, Porsche Cars Great Britain Limited,
IMG (UK) Limited, Railtrack plc, ArztPartner AG and Antenne Bayern
• Contracts signed for VBAK Plus, the online storage service
InTechnology launched in late autumn to accommodate businesses with
larger data volumes, include Newsplayer Group plc and Metromedia Fiber
Network UK Limited
• First contracts signed in Germany
• Formally recognised as IBM's leading storage partner
• New partnership signed with Hewlett Packard
• Exclusive partnership agreement signed with Sun Microsystems
• DSL based service developed for the small to medium enterprise market
Recent events
• Pilot scheme with the DTI converted into a contract for VBAK systems
in 5 DTI locations in London and providing an entry into the public
sector
• New CEO, Charles Cameron, appointed to take over the day-to-day
running of the Group and strategy implementation (effective
1st July 2002)
• Peter Wilkinson becomes Executive Chairman to focus on strategic and
technological development. Lord Parkinson becomes non-Executive
President, remaining Chair of the Board and Audit Committee.
(Both effective 1st July 2002).
Commenting on the results, Peter Wilkinson, CEO of InTechnology said:
"I am very positive about the results having come in on forecast with a small
loss before exceptionals. Our Storage Solutions Services division continues to
deliver strong profits and our Online Data Services division is now a
well-established and proven business having secured £22 million of contracts.
This division will pass through breakeven towards the end of the year and the
future looks very bright indeed."
For further Information:
InTechnology plc
Peter Wilkinson / Steve Pearce 020 7786 3400
Beattie Financial
Ann Marie Wilkinson / Richard Sunderland 020 7398 3300
Chairman's Statement
I am pleased to report that in the past year, InTechnology plc has achieved
creditable sales in difficult market conditions, including meeting our revenue
targets in our flagship Online Data Services ('ODS') division. Following
further investment in technical infrastructure, the Group is now in a position
to exploit the burgeoning European market for online data services and data
storage solutions. We obtained our first ODS customers in Germany during the
year and are optimistic about the growth prospects of the business.
Turnover in the year ended 31 March 2002 was £158.1 million, compared with
£122.4 million in the period last year, giving a gross profit of £22.3 million
(2001: £15.5 million). Investment in new technical staff and resources increased
salaries and other costs to £19.5 million, which reduced EBITDA to £2.8 million
(2001: £5.3 million). Earnings before interest, tax, goodwill amortisation and
impairment ('EBITA') were reduced to £0.8 million loss (2001: £3.8 million
profit). The Storage Solutions and Services ('SSS') division increased EBITA to
£8.8 million, (2001: £7.0 million), increasing both gross and net margins,
whilst the ODS division had £9.6 million loss (2001: £3.1 million loss).
As with many technology companies, reported profits have been impacted by the
write-down of goodwill associated with acquisitions in accordance with FRS 11.
As a result, there is an exceptional impairment charge of £73.5 million which
together with goodwill amortisation and writing off an investment in a small
loss making associated undertaking gave a net loss before tax of £82.5 million
(2001: £1.4 million), with cash reserves at £23.3 million (2001: £26.8 million).
Net cash inflow from operating activities was £4.0 million (2001: £2.9
million), of which SSS generated £8.4 million (2001: £1.7 million).
The Board's strategy is firstly to leverage the customer base and resources of
the established SSS division and to develop online data services yielding high
margin recurring revenues. Secondly, through strategic partnerships and a
dedicated sales force, to broaden our customer base and to move into new areas
of customer opportunity. We are succeeding in both these objectives.
Despite difficult trading conditions, the SSS division has made steady progress
through the continued support of our strong network of resellers. Our
partnerships with major hardware vendors, IBM, Compaq and Sun, and with leading
software vendors, mean that we are supplying best of breed components for all
our clients' solutions.
The new partnership with Hewlett Packard has benefits for high-end solutions
business through their XP technology.
The ODS division has achieved significant growth and now has signed £22.0
million of contracts. We have won new contracts for both VBAK and VBAK Plus,
our automated, secure back up and archiving services with a number of large
corporates including Heritage Lottery Fund, Newsplayer Group plc, Teather &
Greenwood Holdings plc, Porsche Cars Great Britain Limited, IMG (UK) Limited and
Railtrack plc.
Expansion in this area of the market is driven partly by the new urgency for
disaster recovery provision, of which secure data backup is a key part, and also
by increasing corporate requirements, under pressure from shareholders, insurers
and industry bodies, to provide for the security and integrity of business data.
Early sales of our new VBAK Plus service, which backs-up higher data volumes of
between 1 and 10 terabytes, have been encouraging. In addition, we have seen
growing numbers of contracts for the Advanced Infrastructure Provision service,
which caters for clients seeking to outsource their infrastructure to our data
centres.
Our German subsidiary, InTechnology AG, based in Munich is now well established
and has made significant early progress with the VBAK service. A number of
contracts have been signed and we have high expectations for this operation and
for wider penetration of the European market in the future.
We have also grown revenues from consultancy and training services. These have
been generated by InTechnology's highly skilled technical storage specialists,
whose expertise and authority underpins the work of both the SSS and ODS
divisions of the Group. Data storage expertise is highly valued in the IT
industry and this value added service is one of InTechnology's major commercial
strengths.
I would also like to welcome Charles Cameron to the Board. As detailed in a
separate announcement this morning, he joins InTechnology as CEO where he will
be responsible for the day-to-day running of the Group and strategy
implementation. This will enable Peter Wilkinson, who becomes Executive
Chairman, to focus on InTechnology's technological and strategic development.
In turn, I will become non-Executive President of the Group and will continue to
chair the Board of Directors. All appointments become effective on 1st July
2002.
I am constantly impressed by the skills, energy and enthusiasm of all the
InTechnology staff and, on behalf of the Board, would like to thank them for
their commitment to the Group. The Group also owes a great deal to the vision
and entrepreneurial skills of Peter Wilkinson, our CEO, and to his dedicated
management team.
I look forward to the year ahead and to continuing the progress of the past
year.
The Rt. Hon. Lord Parkinson
Non-Executive Chairman
10 June 2002
Chief Executive's Report
I am delighted with the Group's performance over the last year and in particular
the growth achieved by our Online Data Services division. This was achieved in
a difficult and unpredictable year for our markets and sets a precedent for the
future.
The past year has brought into sharp focus the rapidly growing requirement in
the corporate world for secure data backup, data recovery provision and data
storage - areas in which InTechnology is an unrivalled technical authority and
leading player in the UK.
Our energies throughout the year have been focused on aligning our sales,
technical and support services with the needs of this rapidly growing
marketplace to ensure that we derive full benefit from our early advantage.
Storage Solutions and Services ('SSS')
During the year, InTechnology achieved sales in SSS of £154.0 million (2001:
£120.3 million), including software sales of £13.4 million (2001: £6.7 million)
and consultancy and services sales of £6.3 million (2001: £3.3 million).
The supply of data storage solutions to end-user customers through
InTechnology's channel partners has proved to be a robust business that has
performed well, despite the difficult market conditions of the past year.
Most enterprises that we have spoken to are expecting their storage capacity to
double every year and I therefore anticipate a continued trend of strong growth
in sales by this division.
We were pleased to see InTechnology's authority in this market place being
recognised this year by a number of endorsements from our key vendor partners.
We were formally recognised as the leading IBM Storage Partner by being awarded
the "EMEA Storage Partner of the Year" and "Northern Region Value-Added
Distributor of the Year". InTechnology was also selected to be IBM's only Total
Storage Training Partner in the UK.
Partnerships with Compaq and Hewlett Packard strengthened throughout the year
and we are extremely excited about the merger between these parties, which will
considerably increase our potential market size. We anticipate considerable
further development in this area.
Sun Microsystems, an existing vendor partner, announced an exclusive
distribution agreement with InTechnology and VERITAS software.
The storage market continues to increase in sophistication with market
acceptance of complex technologies such as SAN (Storage Area Network), NAS
(Network Attached Storage) and storage management tools. The levels of expertise
we have place us in a unique position in this market.
Software
We have now set up a specialist team to handle this growing and profitable area
of business and new partnerships were developed with software providers
including Computer Associates, CNT, Datacore, Emulex and Falconstor.
Consultancy and training
Throughout the year, we have invested in and expanded our team of highly
specialised technical consultants, in order to generate a revenue stream from
services to clients, as well as supporting data storage solutions.
E-commerce
We have begun to utilise our website as a further means of business generation.
It is being developed as a powerful marketing and communications tool and in the
past year we have introduced a new e-commerce facility that encourages reseller
partners to purchase rapidly and easily online.
Online Data Services ('ODS')
We are extremely pleased with the performance of our ODS division, which, after
its first full trading year now has signed £22.0 million of contracts,
generating £7.0 million of recurring revenues per annum.
Our aim now is to maximize these recurring revenues by continuing to grow our
client base in this market. As such, major investments have been made in
technical staff and infrastructure to expand this division and facilitate
business growth.
Additional data centre space has been acquired in London and re-fitted to the
highest security specification for clients to store data offsite. Operations
are available 24 hours a day, 365 days a year at both the Harrogate and London
data centres.
VBAK
Over the last year, clients from both the public and private sector have signed
contracts for VBAK, InTechnology's service which automatically backs-up,
encrypts and securely transmits data via a private leased line to our data
centre. As the problems associated with traditional manual back-up become
increasingly apparent, there is growing acceptance that VBAK is a faster,
superior and more cost effective service and demand continues to increase across
a wide variety of sectors and industries. VBAK sales are also being assisted by
the implementation of disaster recovery strategies, as well as increasing
pressures for data protection.
VBAK Plus
In order to accommodate larger data volumes, VBAK Plus was launched in late
autumn. It provides a data backup service for enterprises with 1 - 10 terabytes
of data and has achieved contracts with Newsplayer Group plc and Metromedia
Fiber Network UK Limited. It offers higher recurring revenues in return for our
investment in high bandwidth communications and data centre space.
Advanced Infrastructure Provision ('AIP')
We are experiencing growth in this area of business from clients seeking to
outsource their infrastructure to our data centres. InTechnology is Europe's
first advanced infrastructure provider, offering its reseller partners a managed
infrastructure of networked data centres to allow them to deliver value-added
services to their customers.
For example, Hamilton Rentals plc, the UK's leading IT hardware rental company,
is working in conjunction with InTechnology to offer short term hosting
capability, branded Rental On-line. This new service gives businesses the
opportunity to offer e-commerce without facing the high initial costs of funding
a dedicated IT resource and infrastructure. Hosted by InTechnology, Rental
On-line offers a quality service that will build customer confidence in new
e-commerce sites.
New Products
In our quest to innovate and deliver cutting edge solutions to customers and to
explore new markets for growth, our development team is nearing completion on a
new version of VBAK that utilises DSL (Digital Subscriber Line) technology and
is aimed at the small to medium enterprise market. This is a large sector that
we believe would be extremely receptive to a cost effective and secure service.
We are also achieving early sales interest in Managed Storage Services ('MSS'),
which allows customers to outsource their data storage management to
InTechnology, either on a SAN on the client site or at our data centre.
Europe
Having established a footprint in Germany, our aim now is to expand our online
data services across Europe. There are an estimated 2 million IT networks in
the European marketplace and it is our objective to supply services to at least
5% of these networks. With our first contracts now signed in Germany and a
healthy pipeline of business building we look forward to making significant
progress.
Outlook
We believe our continued growth, our ongoing product innovation and development
and our dominant position in the market for data storage and online data
services put InTechnology in a strong position for the future.
With the investment that has been made in the past year and the encouraging
sales performance, the Board plans for continued SSS profit growth and increased
ODS recurring revenue streams which will move the Group into overall
profitability.
Staff
Once again, I would like to record my thanks to our workforce for their
contribution in the past year. For our sales people particularly it has been a
difficult time and the achievement of sales targets is testimony to their
enterprise and energy.
Peter Wilkinson
Chief Executive Officer
10 June 2002
Consolidated profit & loss account
For the year ended 31 March 2002
Year ended Period ended
31 March 2002 31 March 2001
Note £'000 £'000
Turnover 1,2 158,108 122,398
Cost of sales (135,853) (106,873)
Gross profit 22,255 15,525
Administrative expenses (104,574) (17,179)
EBITDA 2,848 5,259
Depreciation (3,679) (1,437)
Amortisation of goodwill (7,995) (5,476)
Exceptional goodwill impairment charge 3 (73,493) -
Group operating loss 2 (82,319) (1,654)
Share of operating loss of associate (353) (106)
Total operating loss (82,672) (1,760)
Net interest receivable 178 358
Loss on ordinary activities before taxation (82,494) (1,402)
Tax on loss on ordinary activities (678) (1,412)
Loss sustained for the year (83,172) (2,814)
Loss per share (pence) 4
Basic (60.23) (3.33)
Diluted (53.65) (3.04)
Adjusted (loss)/earnings per share (pence) 4
Basic (0.96) 3.15
Diluted (0.86) 2.87
EBITDA comprises earnings before interest, taxation, depreciation, goodwill
impairment and amortisation.
There is no difference between the loss on ordinary activities before tax and
the loss sustained for the year ended 31 March 2002 and their historical cost
equivalents.
Consolidated statement of total recognised gains and losses
For the year ended 31 March 2002
Year ended Period ended
31 March 2002 31 March 2001
£'000 £'000
Loss sustained for the year (83,172) (2,814)
Exchange adjustments offset in reserves (16) -
Total recognised losses relating to the year (83,188) (2,814)
Prior year adjustment (see note 5) 239 -
Total recognised losses since last annual report (82,949) (2,814)
Consolidated balance sheet
As at 31 March 2002
2002 2001
Restated
Note £'000 £'000
Fixed assets
Intangible assets 72,944 154,432
Tangible assets 11,811 8,541
Investment in associate - 353
84,755 163,326
Current assets
Stock 11,448 9,213
Debtors 40,720 38,712
Cash at bank and in hand 23,319 26,809
75,487 74,734
Creditors - amounts falling due
within one year (48,584) (42,628)
Net current assets 26,903 32,106
Total assets less current liabilities 111,658 195,432
Creditors - amounts falling due
after more than one year (7,169) (7,799)
104,489 187,633
Capital and reserves
Called up share capital - equity 5 1,381 1,380
- non-equity 5 480 480
Share premium account 5 188,391 188,348
Profit and loss account 5 (85,763) (2,575)
Shareholders' funds
(including non-equity interests) 5 104,489 187,633
Shareholders' funds comprise:
Equity interests 102,249 185,393
Non-equity interests 2,240 2,240
104,489 187,633
Consolidated cash flow statement
For the year ended 31 March 2002
Year ended Period ended
31 March 2002 31 March 2001
Note £'000 £'000
Net cash inflow from operating activities 6 4,047 2,923
Returns on investments and servicing of finance
Interest received 786 886
Interest element of finance lease payments (3) -
Interest paid (605) (528)
Net cash inflow from returns on
investments and servicing of finance 178 358
Taxation (1,490) (1,376)
Capital expenditure and financial investment
Purchase of tangible fixed assets (5,308) (2,987)
Sale of tangible fixed assets 117 15
Net cash outflow from capital expenditure and
financial investment (5,191) (2,972)
Acquisitions
Purchase of subsidiary undertakings (including costs) - (10,332)
Net cash at bank acquired with purchase
of subsidiary undertakings - 4,473
Investment in associated undertaking - (384)
Net cash outflow for acquisitions - (6,243)
Net cash outflow before financing (2,456) (7,310)
Management of liquid resources
Decrease/(increase) in short term deposits
with financial institutions 5,000 (15,000)
Financing
Issue of ordinary share capital 44 36,470
Expenses of share issue - (1,592)
Repayment of secured loans (1,021) (759)
Capital element of finance lease payments (57) -
Net cash (outflow)/inflow from financing (1,034) 34,119
Increase in cash in the year 7 1,510 11,809
Notes to the preliminary announcement
For the year ended 31 March 2002
2. Basis of preparation
This preliminary announcement, which has been prepared on a basis consistent
with the prior year with the exception of the adoption of FRS 19, does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The announcement has been agreed with the Group's auditors,
PricewaterhouseCoopers, for release.
Prior year financial information is prepared for the period from incorporation
of InTechnology plc on 26 January 2000 to 31 March 2001. However, InTechnology
did not trade until the acquisition of STORM and Vdata on 24 July 2000 and the
results of these businesses are consolidated from that date.
The information for the period ended 31 March 2001 is an extract from the
statutory accounts to that date which have been delivered to the Registrar of
Companies and on which the auditors gave an unqualified opinion. The statutory
accounts for the year ended 31 March 2002 will be delivered to the Registrar
following the Group's annual general meeting.
2. Segmental information
Turnover Turnover (Loss)/profit before tax
Before goodwill After goodwill
amortisation and amortisation and
impairment charge impairment charge
Year Period Year Period Year Period
ended ended ended ended ended ended
31 March 31 March 31 March 31 March 31 March 31 March
2002 2001 2002 2001 2002 2001
£'000 £'000 £'000 £'000 £'000 £'000
Business analysis
SSS 154,013 120,348 8,823 6,978 7,123 5,813
ODS 4,095 2,050 (9,654) (3,156) (89,442) (7,467)
158,108 122,398 (831) 3,822 (82,319) (1,654)
Share of operating loss
of associate (353) (106) (353) (106)
Net interest receivable 178 358 178 358
Total (1,006) 4,074 (82,494) (1,402)
3. Exceptional goodwill impairment charge
The Board has conducted an impairment review of the carrying value of goodwill
arising on acquisition of HOLF Technologies Limited and VData Limited in
accordance with FRS 11. The exceptional goodwill impairment arises in respect
of VData Limited. The Directors have concluded that the carrying value of the
assets, including goodwill, exceed their value in use by £73,493,000.
4. (Loss)/earnings per share
Basic loss per share is calculated by dividing the loss attributable to ordinary
shareholders of £83,172,000, (2001: £2,814,000), by the weighted average number
of ordinary shares in issue during the financial period of 138,089,272, (2001:
84,459,355).
The adjusted loss per share is based on the loss after taxation after adding
back amortisation of goodwill of £7,995,000, (2001: £5,476,000), exceptional
goodwill impairment charge of £73,493,000, (2001: £nil), and share of operating
loss of the Group's associate, eGreenhouse Limited (which ceased trading in the
year) of £353,000, (2001: £nil).
For diluted loss per share, the weighted average number of ordinary shares in
issue is adjusted to assume conversion of all dilutive potential ordinary
shares.
The weighted average number of shares in issue during the period may be
reconciled to the number used in the diluted earnings per share calculation as
follows:
Year ended Period ended
31 March 31 March
2002 2001
Weighted average number of shares Number Number
In issue during the period 138,089,272 84,459,355
Issuable on conversion of
outstanding options 16,943,946 8,203,386
Used in diluted earnings per share calculation 155,033,218 92,662,741
5. Shareholders' funds
Ordinary Deferred Share premium Profit & Total
share shares account loss account shareholders'
capital funds
£'000 £'000 £'000 £'000 £'000
At 1 April 2001 as previously 1,380 480 188,348 (2,814) 187,394
reported
Prior year adjustment - FRS 19 - - - 239 239
At 1 April 2001 as restated 1,380 480 188,348 (2,575) 187,633
Issue of shares:
- in respect of employee
share options 1 - 43 - 44
Loss sustained for the year - - - (83,172) (83,172)
Exchange adjustments - - - (16) (16)
At 31 March 2002 1,381 480 188,391 (85,763) 104,489
Prior year adjustment
The prior year adjustment reflects the adoption of FRS 19, Deferred Taxation,
with effect from 1 April 2001. FRS 19 requires deferred tax assets to be
recognised to the extent that they are expected to be recoverable. Prior to 1
April 2001, the Group's accounting policy for deferred tax was in accordance
with SSAP 15, which required deferred tax assets to be recognised only to the
extent that they were expected to be recoverable without replacement by an
equivalent asset. The recognition of deferred tax assets has been accounted for
by way of a prior year adjustment, creating deferred tax assets of £239,000 at 1
April 2001. The implementation of FRS 19 has resulted in a reduction of £9,000
(2001: reduction of £nil) in loss after tax.
6. Reconciliation of operating loss to net cash inflow from operating activities
Group Group
2002 2001
£'000 £'000
Operating loss (82,319) (1,654)
Depreciation of tangible fixed assets 3,679 1,437
Goodwill amortisation 7,995 5,476
Exceptional goodwill impairment 73,493 -
Loss/(profit) on sale of tangible fixed assets 31 (8)
Increase in stocks (2,235) (180)
Increase in debtors (2,017) (10,173)
Increase in creditors 5,420 8,025
Net cash inflow from operating activities 4,047 2,923
7. Reconciliation of movement in net funds
Year ended Period ended
31 March 2002 31 March 2001
£'000 £'000
Increase in cash in the year 1,510 11,809
Net cash outflow from decrease in finance leases 57 -
(Decrease)/increase in short term deposits (5,000) 15,000
Cash outflow from repayment of debt 1,021 759
Change in net funds resulting from cash flows (2,412) 27,568
Inception of new finance leases (1,749) -
Other non-cash changes in secured loans (47) -
Borrowings acquired on purchase of subsidiary undertakings - (9,670)
Movement in net funds in the year (4,208) 17,898
Net funds at start of year 17,898 -
Net funds at end of year 13,690 17,898
8. Analysis of net funds
At 1 April Cashflow Other non-cash At 31 March
2001 changes 2002
£'000 £'000 £'000 £'000
Cash at bank and in hand 11,809 1,510 - 13,319
Short term deposits 15,000 (5,000) - 10,000
Finance leases - 57 (1,749) (1,692)
Debt due after more than one year (7,799) - 2,061 (5,738)
Debt due within one year (1,112) 1,021 (2,108) (2,199)
17,898 (2,412) (1,796) 13,690
This information is provided by RNS
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