12th Jul 2005 07:01
Glotel PLC12 July 2005 Embargoed until 07.00 12th July 2005 Glotel Plc Preliminary Results for the year ended 31st March 2005 Highlights • Trading conditions continued to improve and the Group achieved increased sales and profits in all divisions. • Group sales increased by 32% to £119.5m. • Overseas sales now represent 64% of total (2004: 54%); new subsidiaries have been incorporated in India and New Zealand. • USA sales increased by 46% and International sales by 76%. • Profit before tax improved to £2.6m (2004: £0.8m). • The client base is expanding and penetration into major accounts has improved significantly. • The current year has started well and the Group's outlook is positive. Les Clark, Chairman, commented: "The telecommunications and technology markets are continuing to grow and globalopportunities for Glotel are abundant. We expect the shift towards overseasbusiness to continue". "We are pleased with the progress that we are making and the current year hasstarted well. The run rate of sales and profits from our existing income streamsis encouraging and we should continue to grow from this established base. Glotelis now in a position to steadily increase shareholder returns". - ends - For further information, please contact: Glotel Plc Weber Shandwick Square MileLes Clark, Chairman Nick OborneAndy Baker, Chief ExecutiveAlan Saffer, Group Finance Director 020 7067 0700020 7484 3000www.glotel.com Embargoed until 07.00 12th July 2005 Glotel Plc Preliminary Results for the year ended 31st March 2005 Chairman's and Chief Executive's Statement We are pleased to report that trading conditions have continued to improve andwe achieved increased sales and profits in all divisions. Sales for the yearwere 32% higher reflecting greater demand as a result of increased clientconfidence and a widening client base. Our strategy of investing and expandingour overseas business has continued and overseas sales now represent 64% oftotal sales (2004: 54%) and domestic sales 36% (2004: 46%). Profit before tax has increased substantially to £2.6m (2004: £0.8m) reflectingthe operational gearing opportunity of managing our costs on a higher level ofgross profit. With an improving market for our services, we have balanced theinvestment needs of the business with the need to increase returns. This isconstantly under review and the improvement in the return of pre-tax profit tosales has continued into the second half of the year. Results Sales for the year were £119.5m (2004: £90.5m), a 32% increase. The gross profitpercentage was 0.1% lower at 18.7% (2004: 18.8%) but this was due to the sale ofGlotel Accounting Systems in 2004 which carried a higher gross profitpercentage. Excluding this sale, the impact of the higher margin on overseassales has resulted in a clear improvement in Group margin percentage in thesecond half of the year. The profit before tax was £2.6m (2004: £0.8m) after charging £0.3m ofexceptional operating costs in respect of moving our USA finance function fromBoston to Chicago. Before exceptional costs, our underlying pre-tax return onsales was 2.4% compared to 0.9% last year. The basic earnings per share for the period was 4.9p (2004: 1.3p). The Board isnot recommending the payment of a final dividend (2004: nil). Our net cash position at 31st March 2005 was £0.2m (2004: £4.7m) reflecting theneed for increased working capital on higher sales. We maintain lines of creditin all of the major currencies in which we operate and have recently increasedthe credit available to the Group to £17.8m, which we believe is sufficient tosupport our current growth plans. Operational All sectors of our business have grown throughout the period; the major areas ofgrowth were the USA, with sales 46% higher than last year, and our Internationalbusiness, 76% higher. Both of these markets have a strong focus on thetelecommunications industry and this sector now accounts for 63% (2004: 56%) ofour Group gross profit. The remaining 37% comprises other corporate clients 19% (2004: 22%), public sector 12% (2004: 13%) and the consulting market 6% (2004: 9%). USA Our USA business made major progress in the year with sales increasing by 46% to£50.3m. The operating profit for the year before exceptional costs was £2.7m, amajor improvement on £0.6m achieved in 2004. We incurred exceptional costs in the year of £0.3m due to the relocation of ourfinance function from Boston to Chicago. We have consolidated all of our USAcorporate activities into Chicago and the movement of this function was acritical part of that process. Our client base is expanding and our penetration into major accounts hasimproved significantly. In addition, we had a major account win with alarge telecommunications client, which is exclusive to Glotel. The project is for the supply of 100 engineers to support and maintain cellular base stations. We manage the project and all engineers are billed to the client on a time basis. This assignment commenced in December 2004 and will continue to contribute to the Group throughout 2005. Our progress into solutions work is continuing and we have successfullycompleted a number of small projects, which have been billed on achievement ofmilestones. The building of infrastructure for wireless cellular projects continues in theUSA and is still a core focus for Glotel. In the USA, telecommunications clientsnow represent 73% (2004: 69%) of gross profit. We currently have 13 officelocations from which we are continuing to develop local IT markets and tosupport our national accounts. UK Sales in the UK grew 8% to £43.6m (2004: £40.4m) and although market conditionshave improved the market is still fiercely competitive with continuing pressureon margins. Operating profit before exceptional and central costs was £0.7m(2004: £0.6m) In the commercial market, our delivery to service level agreements for ourpreferred supplier clients is ahead of our competitors. The challenge goingforward is to achieve more realistic margins for this level of service. The progress that we have made in the central and local government market overthe last few years has continued and this sector now represents 35% of the UKgross profit compared with 30% in 2004, and 20% in 2003. There are still majoropportunities in this area and we have significantly increased our sales andrecruiting teams to develop this market. We will continue our expansion tosupply consultants directly via the Catalyst scheme and also to a number ofprofessional support companies who are involved in government contracts. International Our International division comprising Australia, mainland Europe and the rest ofthe World had an exceptional year with sales increasing by 76% to £25.6m. Mostof this increase was from Australia, which improved sales from £5.5m to £13.3mdue to developing a major account and a broader client base. We incorporated an Indian subsidiary, Glotel Pty Private Ltd, in September 2004to supply our consultants and engineers to client projects in India. Progresshas been rapid and we achieved sales of £0.6m in our first 6 months of tradingto 31 March 2005. Our Argentinean subsidiary Glotel SRL completed its firstyear's trading with sales of £1.1m. We also incorporated a subsidiary in NewZealand in January 2005 and sales in its first quarter to 31 March 2005 were£0.2m. Our other international teams in Europe, Middle East and Africa continuedto improve their position with sales rising 28% to £10.4m. Employees and Shareholders Our employees are our major asset and once again we would like to thank them allfor their hard work and enthusiasm and also to extend a warm welcome to thosewho joined Glotel during the last year. The Board would also like to thank shareholders for their continued support. OutlookWe are pleased with the progress that we are making and the current year hasstarted well. The run rate of sales and profits from our existing income streamsis encouraging and we should continue to grow from this established base. We are building a global company and with the current geographical split ofsales we now have firm foundations and a global footprint. Thetelecommunications and technology markets are continuing to grow and globalopportunities for Glotel are abundant. The opportunity within the USA wirelesssector continues, as investments in infrastructure projects are continuing. Wealso intend to build on the Australian success by focusing more attention on theAsia Pacific market. We therefore expect the shift towards overseas business tocontinue. Having increased our sales and delivery teams we will invest more slowly in thecurrent year to safeguard the gains that we have made in profitability. Glotelis now stronger and in a position to steadily increase shareholder returns. Les Clark Andy BakerChairman Chief Executive 12th July 2005 For further information, please contact:Glotel Plc Weber Shandwick Square MileLes Clark, Chairman Nick OborneAndy Baker, Chief ExecutiveAlan Saffer, Group Finance Director 020 7067 0700020 7484 3000www.glotel.com GLOTEL PlcConsolidated profit and loss account (unaudited)For the year ended 31 March 2005 Year ended Year ended Note 31 March 2005 31 March 2004 £'000 £'000 Turnover - Continuing operations 119,496 89,269- Discontinued operations - 1,230---------------------------------------------------------------------------------------- 119,496 90,499 Cost of Sales- Continuing operations (97,167) (72,794)- Discontinued operations - (700)---------------------------------------------------------------------------------------- (97,167) (73,494) Gross profit- Continuing operations 22,329 16,475- Discontinued operations - 530---------------------------------------------------------------------------------------- 22,329 17,005 Administrative expenses- Continuing operations (19,655) (16,024)- Discontinued operations - (518)---------------------------------------------------------------------------------------- (19,655) (16,542) ------------------------------------------------------------------------------------------|Operating profit before operating ||exceptional items ||- Continuing operations 2,928 704 ||- Discontinued operations - 12 || -----------------------------|| 2,928 716 || ||Operating exceptional items 2 (254) (253)|------------------------------------------------------------------------------------------ Operating profit 2,674 463 Profit on part disposal of subsidiary - discontinued operations - 187 Net interest (payable)/receivable (103) 104----------------------------------------------------------------------------------------Profit on ordinary activities before taxation 2,571 754 Tax on profit on ordinary activities (766) (275) ----------------------------------------------------------------------------------------Profit on ordinary activities after taxation and retained profit for the year 1,805 479---------------------------------------------------------------------------------------- Basic earnings per share 3 4.9p 1.3p----------------------------------------------------------------------------------------Diluted earnings per share 3 4.7p 1.2p---------------------------------------------------------------------------------------- There is no difference between the profit as disclosed in the profit and lossaccount and that on an unmodified historical cost basis. GLOTEL PlcConsolidated statement of total recognised gains and losses (unaudited)For the year ended 31 March 2005 Year ended Year ended 31 March 2005 31 March 2004 £'000 £'000-------------------------------------------------------------------------------------------------Profit for the financial year 1,805 479 Currency translation difference on foreign currency investments (137) (920)-------------------------------------------------------------------------------------------------Total recognised gains and losses relating to the financial year 1,668 (441)------------------------------------------------------------------------------------------------- GLOTEL PlcConsolidated balance sheet (unaudited) As at 31 March 2005 As at As at 31 March 2004 31 March 2005 (Re-stated)* £'000 £'000----------------------------------------------------------------------------------Fixed assetsTangible assets 995 743 Current assetsDebtors 26,785 20,607Cash at bank and in hand 3,961 4,683---------------------------------------------------------------------------------- 30,746 25,290 Creditors - amounts falling due within one year (13,913) (9,857) ----------------------------------------------------------------------------------Net current assets 16,833 15,433---------------------------------------------------------------------------------- Total assets less current liabilities 17,828 16,176 Provisions for liabilities and charges (58) (303)----------------------------------------------------------------------------------Net assets 17,770 15,873---------------------------------------------------------------------------------- Capital and reserves Called up share capital 1,912 1,895Share premium account 15,969 15,880Other reserves 100 100Profit and loss account (211) (2,002)----------------------------------------------------------------------------------Equity shareholders' funds 17,770 15,873---------------------------------------------------------------------------------- * Re-stated as a result of the adoption of UITF 38 (Accounting for ESOPTrusts). See Note 1, below. GLOTEL PlcConsolidated cash flow statement (unaudited)For the year ended 31 March 2005 Year ended Year ended 31 March 2005 31 March 2004 £'000 £'000----------------------------------------------------------------------------------Net cash outflow from operating activities (2,884) (3,800) Returns on investment and servicing of financeInterest received 48 87Interest paid (151) - ---------------------------------------------------------------------------------- Net cash (outflow)/inflow from returns on investment and servicing of finance (103) 87 TaxationCorporate taxes paid (27) (32)Corporate taxes refunded - 621 ---------------------------------------------------------------------------------- Net cash (outflow)/inflow from taxation (27) 589 Capital expenditurePurchase of tangible fixed assets (1,766) (406)Sale of tangible fixed assets 14 159---------------------------------------------------------------------------------- Net cash outflow from capital expenditure (1,752) (247) Acquisitions and disposalsSale of subsidiary undertaking - 120Net cash disposed of with subsidiary - (102)---------------------------------------------------------------------------------- Net cash inflow for acquisitions and disposals - 18 ---------------------------------------------------------------------------------- Net cash outflow before financing (4,766) (3,353) FinancingExercise of share options (EST shares used) 123 57Issue of ordinary share capital on exercise of share options 106 ----------------------------------------------------------------------------------- Net cash inflow from financing 229 57---------------------------------------------------------------------------------- Decrease in cash in the year (4,537) (3,296) Translation gain/(loss) 92 (235) Net funds at beginning of year 4,683 8,214---------------------------------------------------------------------------------- Net funds at end of year** 238 4,683----------------------------------------------------------------------------------** comprises cash of £3,961,000 (2004: £4,683,000) and debt of £3,723,000 (2004:£nil) GLOTEL PlcReconciliation of operating profit to net cash flow from operating activities(unaudited)For the year ended 31 March 2005 Year ended Year ended 31 March 2005 31 March 2004 £'000 £'000----------------------------------------------------------------------------------Operating profit 2,674 463Depreciation charges 485 644Profit on sale of fixed assets - (79)Increase in debtors (6,185) (6,830)Increase in creditors 387 2,319Decrease in provisions for liabilities and charges (245) (317)----------------------------------------------------------------------------------Net cash outflow from operating activities (2,884) (3,800)---------------------------------------------------------------------------------- GLOTEL PlcPreliminary results for the year ended 31 March 2005Turnover and segmental information (unaudited) Turnover represents the invoiced amount of services provided net of value addedtaxation. The Group operates in one principal area of activity, that being theprovision of consultants (predominantly in telecommunications and networking) ona contract basis. The geographical split of the results of the Group is as follows: Turnover Operating profit/(loss) Profit/(loss) before tax Year ended Year ended Year ended Year ended Year ended Year ended 31 March 31 March 31 March 31 March 31 March 31 March 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000---------------------------------------------------------------------------------------------------United KingdomGlotel UK 43,599 40,355 735 490 681 495Glotel International * 7,258 5,302 174 397 174 397Other - discontinued operations - 1,230 - 12 - 199**---------------------------------------------------------------------------------------------------Total United Kingdom 50,857 46,887 909 899 855 1,091Glotel North America 50,318 34,379 2,397 498 1,948 177Glotel South America * 1,062 940 88 58 88 58Glotel Continental Europe* 3,218 2,837 113 (172) 33 (241)Glotel Asia-Pacific * 14,041 5,456 556 111 478 74--------------------------------------------------------------------------------------------------- 119,496 90,499 4,063 1,394 3,402 1,159 Central Activities - - (1,389) (931) (831) (405)---------------------------------------------------------------------------------------------------Glotel Group 119,496 90,499 2,674 463 2,571 754 * Total Glotel International 25,579 14,535 931 394 773 288---------------------------------------------------------------------------------------------------The turnover figures above represent sales to third parties by geographical origin. ** Includes profit on disposal of 85% of Glotel Accounting Systems Plc, on 22 March 2004, of £187,000. GLOTEL PlcPreliminary results for the year ended 31 March 2005Notes to the accounts (unaudited) 1. BASIS OF PREPARATIONThe financial information set out in this preliminary statement has beenprepared under the historical cost convention and in accordance with applicableaccounting standards. The financial information set out in this preliminary statement has beenprepared in accordance with the accounting policies set out in the Annual Reportand Financial Statements for the year ended 31 March 2004 with the exception ofthe adoption of Urgent Issues Task Force Abstract 38 (UITF 38) "Accounting forESOP Trusts" as described below. The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 March 2005 or 31 March 2004,within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 31 March 2004 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts. Their report was unqualified and did not contain a statement under either Section 237 (2) or Section 237 (3) of the Companies Act 1985. The statutory accounts for the year ended 31 March 2005 willbe finalised on the basis of the financial information presented by the Directorsin this Preliminary Announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Change in accounting policyThe Group has adopted UITF 38 in the year ended 31 March 2005, which requiresthat a company's own shares held through an ESOP trust be shown as a deductionfrom shareholders' funds. Previously these shares were recorded at cost less anyamortisation charged to date and shown as a fixed asset investment. The comparative figures have been restated to reflect the adoption of UITF 38.The aggregate impact on the previously reported figures is to reduce totalequity shareholders' funds at 31 March 2004 by £584,000. The adoption of UITF 38had no effect on the profit and loss account of any year. International Financial Reporting StandardsThe Council of the European Union announced in June 2002 that listed companiesin Europe would be required to adopt International Financial Reporting Standards(IFRS) for accounting periods beginning on or after 1 January 2005. The adoptionof IFRS will apply to the Group for the first time for the year ending 31 March2006. The Group is carrying out an ongoing project to consider the impact ofadoption and will first issue results under IFRS for the six-month period to 30September 2005. 2. OPERATING EXCEPTIONAL ITEMS Operating exceptional items relate to the restructuring and other related costs.Specifically, the operating exceptional item incurred in the year ended 31 March2005 relates to the relocation of the USA finance and support function fromBoston to Chicago: Year ended Year ended 31 March 2005 31 March 2004 £'000 £'000 Restructuring and other related costs 254 253------------------------------------------------------------------------------------- 254 253------------------------------------------------------------------------------------- 3. EARNINGS PER SHAREThe calculation of earnings per Ordinary Share is based on a profit attributableto members of the Company of £1,805,000 (2004: £479,000) and on 37,161,677Ordinary Shares (2004: 36,567,869), being the weighted average number ofOrdinary Shares in issue during the year, after excluding the shares owned bythe Group's Employee Share Trust. The diluted earnings per Ordinary Share is based on the same profit of£1,805,000 (2004: £479,000) and on 38,746,263 Ordinary Shares (2004:38,505,557). 4. GENERALCopies of the 2005 Report and Accounts will be sent to shareholders in duecourse. Copies will be available from The Company Secretary, Glotel Plc, 7thFloor, The Communications Building, 48 Leicester Square, London, WC2H 7LT This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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