RNS Number:9957R
TripleArc PLC
30 September 2005
30 September 2005
TripleArc Plc
Interim Results for the six months ended 30 June 2005
TripleArc Plc ("TripleArc", the "Company" or the "Group") provides technology
led print procurement solutions to enterprises seeking to reduce costs and
streamline business processes. The Group is able to differentiate its offering
by providing its clients with industry leading technology solutions which
enhance the service proposition and facilitate sustainable cost savings.
SUMMARY
Six months ended Six months ended
30 June 2005 30 June 2004
Turnover #30.07m #24.03m
Gross profit #10.10m #6.03m
Pre exceptional earnings before interest,
tax and amortisation ("EBITA")* #0.69m #2.27m
Adjusted earnings per share ** 0.02p 0.65p
Basic (loss)/earnings per share (1.15p) 0.16p
Cash inflow from operating activities #0.4m #3.33m
* Earnings before amortisation of intangible assets, share option compensation
expense, exceptional costs, interest and tax.
** Based on earnings before amortisation of intangible assets, deferred
financing amortisation, exceptional costs and (2004 only) share option
compensation expense.
* Slowdown in retail sector and decline of business forms market resulted
in slower than expected start to the year
* Contracted revenue increased by 65% over prior period
* #10m of new annualised contracted revenue signed and implemented in past
12 months
* Strategic synergies attained through integration of Stream data
fulfilment business
* 25% increase in revenue creating scale and presence in industry sector
* Investment in contract management infrastructure and business
development, allowing for ramp up in revenue from signed contracts
* Positive operating cash flow
* #1.25m of annualised administrative savings realised to date following
cost review
* Identification of accounting errors post period end will require
restatement of 2004 Statutory Accounts
Commenting on the results, Chris Pople, Chairman stated:
"We were extremely disappointed to announce the need to restate our 2004 results
at a time when we can see genuine positive momentum building. This issue has
been fully investigated and we are confident that the right corrective measures
have been taken and that we now have the appropriate financial controls in
place.
"These interim results reflect a period of substantial infrastructure
improvement, service integration and corporate development within the Group. We
are pleased that turnover for the six months increased by 25% and gross profit
rose by 68%, and continue to believe that the fundamental underlying strengths
and future prospects of the Group remain solid. We are well positioned to
further demonstrate our growth potential."
For further information please contact:
TripleArc Plc 0117 933 1006
Jason Cromack, Chief Executive Officer
Richard Hodgson, Chief Financial Officer
Weber Shandwick Square Mile 020 7067 0700
Terry Garrett/Nick Dibden
TripleArc Plc
Interim Results for the six months ended 30 June 2005
The Board announces the Group's results for the six months ended 30 June 2005.
The period under review included a full six months contribution from Stream, the
data management & fulfilment business that was acquired by TripleArc in December
2004, as part of the Group's ongoing strategy to provide a total communications
support services solution.
As has previously been highlighted, the six months ended 30 June 2005 was a
challenging period for the Group. A decline in the business forms market and a
slow down in demand from the retail sector resulted in a slower than expected
start to 2005. Despite this, the Group is reporting growth in both turnover and
gross profit over the comparable period in 2004. Operating profit for the period
was also impacted by substantial investment in infrastructure. However, this has
increased the Group's capability to manage the larger print management contracts
which are the ongoing focus of the Board's strategy. Encouragingly, contracted
revenues during the first half increased by 65% on the same period in 2004 and
over the past twelve months the Company has secured in excess of #10 million of
additional annual contracted revenue at encouraging margins. There is also a
strong pipeline of contract sales and the Group has identified a number of
opportunities to drive growth from our non contracted customers.
The announcement on 26 September 2005, regarding the restatement of the
Company's accounts for the year ended 31 December 2004 and the downward revision
of the Board's expectations for the full year was extremely disappointing at a
time when the Board can see genuine positive momentum in the business.
FINANCIAL REVIEW
In the six months to 30 June 2005, turnover increased by 25% to #30.1m (June
2004 - #24.0m) and gross profit improved by 68% to #10.1m (June 2004 - #6.0m).
Group EBITA decreased from #2.3m in 2004 to #0.7m in 2005. In addition to the
decline in the business forms market and a slow down in demand from the retail
sector, the main reason for this is that in contracted outsourced solutions,
costs come in more quickly than revenue due to implementation lead times. As the
contracts mature and as the company increases its portfolio, such a ramp up in
cost would not be so keenly felt. In addition, costs have been incurred in
upgrading the Group's infrastructure for future growth.
An operating loss on ordinary activities before interest and taxation of #1.7
million represents a decline of #3 million on the comparable period to 30 June
2004. This consists of a #0.5 million drop in gross profit in AccessPlus due to
the softness in the retail sector and the business forms market; a #1.0 million
increase in overhead in relation to investment in contract management, business
development and infrastructure; the #0.6 million of exceptional costs necessary
to realise the future cost savings; and a #0.8 million increase in amortisation
following the acquisition of Stream.
As announced in the AGM statement on 28 June 2005, a full review of costs has
taken place and so far #1.25 million of annualised savings have been realised.
Further non staff cost savings are anticipated between now and the year end but
these savings will not benefit the profit and loss account until 2006.
Working Capital and Debt
Operating cash generation continues to be positive; however, there was a net
cash outflow over the period of #0.8 million (June 2004 - net cash inflow of
#0.5 million) due to loan repayments (#0.5 million), financing costs (#0.6
million) and restructuring costs (#0.6 million).
Bank loans in the six months to 30 June 2005 fell by #0.5 million. Net debt at
30 June 2005 was #18.4 million, including #1.3 million in respect of the invoice
discounting line acquired with the Stream business. Trade Debtors at 30 June
2005 were #11.7 million (June 2004 - #9.6 million), including the Stream invoice
discounting facility, giving us adequate headroom in these key lines.
The Group has just completed a full facility review with its senior lender,
HSBC. It continues to enjoy an excellent relationship with them and maintains
their full support.
Restatement of 2004 Accounts
Following his appointment as Chief Financial Officer in July 2005, Richard
Hodgson was instructed by the Board to undertake a detailed review of the
Group's financial systems, procedures and budgets.
In completing this review it has been determined that a number of financial
reporting errors arose during the integration of Access Plus and the
implementation of the Group-wide financial reporting system. Approximately #1.0
million of costs were misallocated between the 2004 and the 2005 financial
periods which has resulted in a material overstatement of profitability in the
Company's accounts for the year ended 31 December 2004 (the "2004 Accounts").
The Board concluded that the 2004 Accounts will require restating when the
statutory accounts for the year ending 31 December 2005 are filed and expects
that the restated 2004 EBITA will be #3.5 million (EBITA reported in the 2004
Accounts: #4.5 million).
The restatement of 2004 results is primarily due to cut-off errors resulting
from the implementation of a new accounting system. The majority of these issues
arose during the second half of 2004 and consequently there is no material
impact on the financial position and results of the Group for the six months to
30 June 2004. The Board is confident that this issue has been fully investigated
and that the Group has appropriate financial systems and controls in place.
OPERATIONAL REVIEW
The six months to 30 June 2005 represent a period of substantial Group-wide
infrastructure improvement, service integration and corporate development. The
Group is now focused on delivering IT driven managed solutions to customers
looking to outsource the corporate communication supply chain. Following its
acquisitions in recent years, the Group has built an integrated client offering
incorporating the print management expertise of AccessPlus, the direct marketing
and data management experience of Stream, and the technology proficiency of
TripleArc. The Board believes that this combination presents an exciting and
dynamic proposition to clients.
During the period under review, important investments in new staff (in the areas
of contract management, procurement, managed solutions, and legal and human
resources), IT infrastructure and new property in London and Swindon were
undertaken which should provide the Group with a solid foundation for future
growth and development.
Outsourced Solutions
As previously mentioned, the Group experienced a slower than expected start in
trading in the first half of the year. This was primarily due to a slow down in
the retail sector and some attrition in business forms. The Board has undertaken
a restructuring process to reduce the operating cost base and increase
efficiencies by taking advantage of synergies across the Group. This
restructuring is now substantially complete and will impact positively on the
second half of 2005 and put the Company in a stronger position for 2006.
Whilst some decline in ad hoc revenue from our non-contracted customers has
occurred, major accounts are continuing to perform well, with revenue from the
top 30 print management accounts in H1 2005 up 16% on H1 2004. The performance
in non-contracted customers has now been improved with an increased focus on
print management solutions and added value services.
The sales teams are increasingly taking advantage of cross-selling opportunities.
The addition of Stream into the Group has enabled them to market a more complete
solution to customers and this has already yielded some positive results with
several customers having been won through the increased offering. In the past 12
months, the Group has signed and implemented #10 million of contracted annualised
revenue and has increased its contracted revenue base by 65%. The Board believes
that the indicators validate its strategy of growing long term contracted revenue
across a range of vertical markets with the obvious positive impact on stability
and quality of earnings.
TripleArc Technology
For an outsource solution to be successful, IT is a key component in
streamlining and removing cost from the supply chain. The technology expertise
within the Group provides key support in selling and delivering customer
solutions, and TripleArc's proprietary software gives the Group a competitive
advantage in this area.
Our suppliers are now connected to the Group via TripleArc's Collaborative
Workflow System and we continue to work with our supplier base to ensure best
procurement practice and benefits to the Group and our customers.
As well as seeing technology as key to the overall customer offering, we are
also exploring ways in which the Group can enhance technology revenue streams,
including through strategic partnerships.
BOARD CHANGES
On 5 July, Richard Hodgson joined the Board as Chief Financial Officer. Richard
joined the Group from Iron Mountain Europe where he was Finance Director.
Richard replaced Peter Houston, who was previously Group Finance Director.
David Wong retired from the Board as a non-executive director on 25 July in
order to spend more time on his other business interests. David was a founding
director of TripleArc and was previously Chairman of the Group. The Board would
like to thank him for his guidance and support to the Group since its
foundation.
As previously stated, the Board is actively seeking to appoint an additional
independent non-executive director and hopes to make an announcement to this
effect in due course.
STAFF
Our people are the resource that underpins the Group's strategy and the Board
would like to thank all our staff for the commitment, professionalism and
loyalty that they have shown during six months of tremendous change.
CURRENT TRADING AND OUTLOOK
As a consequence of the overstatement of the 2004 Accounts, current year budgets
were inflated as they were based on inaccurate base data. As a result of this
and difficult summer trading within the data fulfillment division, the Board
adjusted its expectations for 2005 downwards. Pre exceptional EBITA for the full
year is expected to be approximately 50 per cent of the restated 2004
comparable.
The Board believes the foundation for its business strategy remains sound.
Although the Group is currently operating in tough markets, the Board believes
that the provision of contracted outsourced print management solutions offers
considerable potential for growth and it remains the focal point of our
business. The Board anticipates that this strategy will develop organically by
making use of existing resources and opportunities as well as through strategic
partnerships.
With a healthy pipeline of contract sales, the Board believes the Company's
underlying strengths and future growth prospects, built around an integrated
product offering, remain positive.
GROUP PROFIT AND LOSS ACCOUNT
Notes Six Months ended Six Months ended
30 June 2005 30 June 2004
#'000 #'000
(unaudited) (unaudited)
Turnover - continuing operations 2 30,066 24,034
Cost of sales (19,967) (18,009)
-----------------------------------
Gross profit 10,099 6,025
Research and development - (32)
Administrative expenses (9,406) (3,726)
Profit before amortisation of
intangible assets, share option
compensation expense and
exceptional costs 693 2,267
Exceptional costs (612) -
Amortisation of intangible assets (1,766) (942)
Non cash share option
compensation expense - (50)
Operating (loss)/profit on ordinary
activities - continuing operations (1,685) 1,275
Bank interest receivable 53 34
Interest payable (750) (635)
-----------------------------------
(Loss)/profit on ordinary
activities before taxation (2,382) 674
Taxation on profit/(loss)
on ordinary activities 3 - (350)
-----------------------------------
Retained (loss)/profit
for the period (2,382) 324
-----------------------------------
(Loss)/earnings per share Basic
and diluted (pence) 4 (1.15p) 0.16p
Adjusted basic and diluted earnings
per share (pence) before amortisation
of intangible assets, deferred
financing amortisation, exceptional
costs and share option compensation
expense 4 0.02p 0.65p
The Group has no recognised gains or losses in any of the above financial
periods other than those dealt with in the Group profit and loss account.
GROUP BALANCE SHEET
At 30 June 2005 At 30 June 2004
#'000 #'000
(unaudited) (unaudited)
Fixed Assets
Intangible assets and goodwill 41,960 36,750
Tangible assets 2,514 1,607
-----------------------------------
44,474 38,357
Current Assets
Stock 1,087 1,352
Trade Debtors 11,679 7,244
Other Debtors 1,556 1,797
Cash 52 2,000
-----------------------------------
14,374 12,393
Creditors: amounts falling due within one year
Bank Loans < 1 year and overdrafts (3,017) (1,899)
Trade Creditors (8,257) (5,244)
Other Creditors & Deferred Revenue (3,000) (3,257)
-----------------------------------
(14,274) (10,400)
-----------------------------------
Net Current Assets 100 1,993
-----------------------------------
Total Assets less Current Liabilities 44,574 40,350
Creditors: amounts falling due after
more than one year (22,421) (15,515)
Provision for liabilities and charges
Deferred taxation - (68)
-----------------------------------
Net Assets 22,153 24,767
-----------------------------------
Capital and Reserves
Called up share capital 10,350 10,050
Share premium account 20,175 19,533
Stock option reserve 1,029 1,073
Merger reserve (621) (621)
Group interest in shares of TripleArc Plc (150) (150)
Profit and loss account (8,630) (5,118)
-----------------------------------
Equity shareholder funds 22,153 24,767
-----------------------------------
GROUP CASH FLOW STATEMENT
Notes Six Months ended Six Months ended
30 June 2005 30 June 2004
#'000 #'000
(unaudited) (unaudited)
Net cash inflow from
operating activities 5 402 3,331
-----------------------------------
Returns on investment and servicing of finance
Interest paid (695) (635)
Interest received 53 34
-----------------------------------
(642) (601)
Taxation - (547)
Capital expenditure and financial investment
Purchase of tangible fixed assets (333) (33)
Disposal of tangible fixed assets 38 7
-----------------------------------
(295) (26)
Net cash (outflow)/inflow before use
of liquid resources and financing (535) 2,157
Financing
Drawdown of bank loan - 200
Repayments of bank loan (500) (1,797)
Repayment of loan notes (32) (65)
Proceeds from issue of share capital 305 -
-----------------------------------
(227) (1,662)
-----------------------------------
Movement in cash in the period (762) 495
-----------------------------------
Reconciliation of net cash flow to
movement in net debt
Movement in cash (762) 495
Drawdown of bank loan - (200)
Repayment of bank loan 500 1,797
-----------------------------------
Movement in net debt (262) 2,092
-----------------------------------
-----------------------------------
Net debt at 1 January (18,153) (17,485)
-----------------------------------
-----------------------------------
Net debt at period end 5 (18,415) (15,393)
-----------------------------------
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 and practices consistent with those used in
the preparation of the Annual Report and Accounts for the year ended 31 December
2004.
2. TURNOVER
Turnover represents amounts derived from the provision of goods and services
during the period stated net of value added tax. The turnover and pre-tax profit
is attributable to one continuing activity, the provision of print related
marketing services substantially within the United Kingdom.
3. TAXATION
The tax charge is made up as follows:
Six months ending Six months ending
30 June 2005 30 June 2004
#'000 #'000
(unaudited) (unaudited)
Current tax:
UK Corporation tax - 350
Deferred tax - -
-----------------------------------
- 350
-----------------------------------
4. EARNINGS PER SHARE
a) Basic (loss)/earnings per share
At 30 June 2005 At 30 June 2004
#'000 #'000
(unaudited) (unaudited)
(Loss)/profit attributable to ordinary
shareholders (2,382) 324
Basic weighted average number of shares 206,088,880 201,020,671
Dilutive potential shares from share option 1,102,540 2,272,911
-----------------------------------
207,191,420 203,293,582
-----------------------------------
Basic (loss)/earnings per share (pence) (1.15p) 0.16p
(b) Adjusted earnings per share
At 30 June 2005 At 30 June 2004
#'000 #'000
(unaudited) (unaudited)
Profit attributable to ordinary shareholders 51 1,316
Basic weighted average number of shares 206,088,880 201,020,671
Dilutive potential shares from share option 1,102,540 2,272,911
-----------------------------------
207,191,420 203,293,582
-----------------------------------
Basic earnings per share (pence) 0.02p 0.65p
5. CASH FLOW STATEMENT
a) Reconciliation of operating profit to net cash inflow from operating
activities
Six months ended Six months ended
30 June 2005 30 June 2004
#'000 #'000
(unaudited) (unaudited)
Operating (loss)/profit (1,685) 1,275
Depreciation 284 126
Profit on disposal of tangible assets 17 (1)
Amortisation of tangible fixed assets 1,766 942
Non cash share option compensation expense - 50
Decrease/(Increase) in stocks 51 (129)
Decrease in debtors 2,851 2,095
(Decrease) in creditors (2,882) (1,027)
-----------------------------------
Net cash inflow from operating activities 402 3,331
-----------------------------------
b) Analysis of net debt
30 June 2005 30 June 2004
#'000 #'000
Cash at bank 52 2,000
Bank overdraft (1,267) -
Bank loans (17,200) (18,200)
Deferred financing charges - 807
-----------------------------------
(18,415) (15,393)
-----------------------------------
In June 2004 deferred finance costs were netted against debt compared to June
2005 where the balance of #710k is shown in prepayments.
Bank overdraft includes advances in respect of the debtors ledger relating to an
invoice discounting facility in Stream which was acquired in December 2004.
6. APPROVAL
This report was approved by the Board of Directors on 29 September 2005.
7. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
8. FRS 20
The directors have reviewed the impact of FRS 20 'share based payments' and
consider the effect of this new standard on the consolidated profit and loss
account and balance sheet to be immaterial.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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