22nd Mar 2006 07:01
Company Health Group PLC22 March 2006 Embargoed until: 07.00, Wednesday 22 March 2006 COMPANY HEALTH GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Company Health Group plc (AIM: CHT.L), an established provider of occupationalhealth services to corporates and testing services to life assurance providers,today announces preliminary results for the year ended 31 December 2005. Highlights •These results relate to only eight months of trading as a healthcare services provider but contain a full eighteen months of costs, including those associated with Reversus plc and the reversal process •Reversus plc acquired DTC Group Ltd (DTCG), a health care services provider •DTCG has two subsidiaries, Diagnostic Technologies & Company Health •Reversus changes name to Company Health Group plc •Financial year end changed to 31 December 2005 •Company Health Group acquired Milligan & Hill Ltd (M&H), a leading Physiotherapy, Ergonomic and Sports Injury practice based in the City of London •Capital restructuring approved enabling the distribution of dividends in the future as Company Health Group profits permit •Issue of 9.6 million new ordinary shares priced at 7.5 pence per share to satisfy the earn-out consideration for acquisition of DTC Group Outlook Ralph Gough, Chairman and Chief Executive, added: "Group sales continue toincrease and I am confident that the current year will show a significantimprovement on the levels attained in 2005 with profits expanding in line withthe growth in revenues. Any acquisitions made during 2006 will of course furtherenhance this growth. The Group is actively pursuing an acquisition strategy to achieve both anextension of geographic coverage in the occupational health market as well asbroadening skills in areas such as rehabilitation and disability assessment andas a result strengthening the vertical integration of its services." For further information please contact: Ralph Gough, Chairman and Chief Executive Simon Hudson / Claire MellyCompany Health Group Tavistock CommunicationsTel: 020 7553 8820 Tel: 020 7920 3150 Chairman's Statement I am delighted to report to shareholders our final results for the year ended 31December 2005. These are the first full set of results since Reversus plc'sacquisition of DTC Group Ltd, a healthcare services business, at the end ofApril 2005. Following the acquisition Reversus was renamed Company Health Group plc and ourfinancial year-end was changed to 31 December 2005. Consequently the results weare announcing today contain a full eighteen months of costs, including thoseassociated with Reversus and the reversal process itself, but only eight monthsof trading as a healthcare services provider. We have made significant progress in the eight months to 31 December 2005 andthe directors are particularly pleased with the operating performance of oursubsidiary companies. We have an increasingly strong operational and financialplatform upon which we can build and our intention is to combine organic growthwith a proactive acquisition policy in order to take advantage of the currentdynamics in the healthcare services market in the UK and to produce attractivereturns for shareholders. FINANCIAL OVERVIEW The Group had total turnover of £2.7 million (year ended 30 June 2004 - £nil).Gross profit was £1.3 million. Profit on ordinary activities before taxation was£54,997 (year ended 30 June 2004 - loss of £173,870). Retained profit was£30,748 (year ended 30 June 2004 - loss of £173,870), which equates to a basicprofit per share of 0.15 pence (year ended 30 June 2004 - loss per share of 0.25pence). Note 2 contains a more detailed breakdown of the contribution of thethree operating subsidiaries in terms of turnover and profit. Net Assets rose to £3.8 million compared to £0.6 million in June 2004. Cash atbank as at 31 December was £723,740 (30 June 2004 - £604,137). Followingapproval by shareholders in November 2005 the reduction of capital, cancellationof the share premium account and cancellation of the capital redemption reservehas been implemented. I am also pleased to announce that the DTC Group's audited annual report showsearnings before deduction of interest and taxation of £401,396, however asindicated above only part of these earnings are included in the 2005 CompanyHealth Group plc results. Pursuant therefore to the earn out agreement relatingto the acquisition of the DTC Group we are issuing 9,586,974 new ordinary sharespriced at 7.5 pence per share in Company Health Group plc to the vendors of DTC. DIVIDEND Given the current stage in the Company's development and the desire to grow thebusiness both organically and by acquisition the Board are not recommending adividend. However the Board will keep this under regular review, subject to theperformance of the Company and profits available for distribution. OPERATING REVIEW Your Group operates in three distinct sectors in the healthcare market:occupational ergonomic and physiotherapy services and medical evidencecollection for the life insurance industry. All these areas of businessdeveloped during the period with new contact wins, extensions and repeatbusiness. We also made our first acquisition in August 2005. OCCUPATIONAL HEALTH Company Health Ltd (CHL) our occupational health business is an established andwell-recognised provider. Historically, occupational health has been largelyrestricted to health and safety in the workplace and was generally provided byon-site medically trained personnel and was most applicable to heavy industry.However, the market has increasingly shifted its focus and there is now greaterconcern about wider employee health issues, including the provision ofpreventative healthcare. This approach is now encouraged through occupationalhealth schemes which has the advantage of reducing absenteeism and improvingmorale amongst the workforce. The occupational health market is influenced not only by Government initiativesboth legislative and educative but also by company risk and claims managementprogrammes driven by insurers requirements, higher liability insurance costs andthe cost to industry of sickness absence (estimated to be some £12.2 billion in2004 - source CBI/AXA). Recent Government initiatives including the "Securing Health Together" programmehave been designed to reduce sickness absence and illness associated with theworkplace by creating integrated vocational rehabilitation schemes. The recentPublic Health White Paper "Choosing Health" reinforces the Governmentscommitment to rehabilitation and health in the workplace. Recently there has been a clear trend by many corporations to outsource non-corebusiness and this is presenting new opportunities for CHL by increasing the sizeof the occupational health market. CHL now provides occupational health servicesto over 250 corporate and other clients. The services offered include: sicknessabsence management, rehabilitation programmes, pre-employment screening, healthsurveillance/statutory health assessments, wellness screening, health policydevelopment, stress management, helpline services, employee assistanceprogrammes and vaccination programmes. PHYSIOTHERAPY, ERGONOMICS AND SPORTS INJURY In August 2005, we completed the acquisition of the entire issued share capitalof Milligan & Hill Ltd (M&H) for a maximum consideration of £1,050,000(including a performance related earn out of £700,000) to be satisfied by amixture of cash and shares. The cash element is being funded by a combination ofthe Company's existing cash resources and acquisition finance provided by HSBCBank plc. M&H is located in the City of London and provides a range of services eitherfrom its clinic or as in-house services. These services include physiotherapy;ergonomics; podiatry; and sports massage. The proximity of M&H to the UK'sfinancial centre has enabled it to develop its client base among prominentblue-chip companies. As well as broadening the range of services we offer theacquisition also expanded our geographical reach to central London, an area towhich we previously had little exposure. COLLECTION OF MEDICAL INFORMATION FOR THE LIFE ASSURANCE MARKET The third part of our business is providing medical examination services to thelife assurance industry. This is delivered through our wholly-owned subsidiary,Diagnostic Technologies Corporation Ltd (DTCL). DTCL has grown significantlysince it was first established in 1993 to provide a specialised body fluidtesting service. Initially, the company focused its marketing effort on the lifeand health insurance industry, which often requires an independent medicalexamination in order to ascertain the risk of a particular applicant. In 1998,DTC acquired a business specialising in the collection of medical evidence usingindependent GPs. Subsequently, due to increases in fees requested by GPs, DTCLestablished its own paramedical examination service in mid-2004. This serviceutilises nurses to provide a more cost-effective service and has grownsignificantly over the last year. Overall, DTCL now arranges medical examinations and pathology testing onapplicants for life insurance cover on behalf of some 50 major life assurancecompanies in the UK and Eire. CaseTrackTM, our online medical examinationmanagement service, works by providing passwords and access codes to any numberof specified individuals to log on to the web and instruct and monitor thestatus and progress of all outstanding cases. High security and speed ofdelivery are key differentiators of this service and it is now regarded by manyto be the marketleading service for the industry. During the reported period this was evidenced when DTCL consolidated itsposition and signed new contracts with two large UK life assurance providers:Legal & General Assurance Society Limited; and the life assurance division ofone of the UK's leading high-street banks, supplying them both with medicalexaminations, pathology testing services and access to CaseTrackTM. Althoughthere has been a significant increase in turnover and profit this year, the fullbenefit of these and other significant contracts will be fully seen in 2006 andsubsequent financial years. CURRENT TRADING AND OUTLOOK Group sales continue to increase and I am confident that the current year willshow a significant improvement on the levels attained in 2005 with profitsexpanding in line with the growth in revenues. Any acquisitions made during 2006will of course further enhance this growth. The Group is actively pursuing anacquisition strategy to achieve both an extension of geographic coverage in theoccupational health market as well as broadening skills in areas such asrehabilitation and disability assessment and as a result strengthening thevertical integration of its services. I look forward to the future with confidence and I would like to take thisopportunity to thank existing shareholders for their support, welcome newshareholders and to thank all our employees for their hard work and dedicationduring the reported period. RALPH GOUGHChairman21 March 2006 Consolidated Profit and Loss Account for the period ended 31 December 2005 Period ended Year ended 31 December 30 June 2005 2004 £ £----------------------------------------------------------------------- TURNOVER 2,685,980 -Cost of sales (1,400,759) ------------------------------------------------------------------------ Gross profit 1,285,221 -Operating expenses (1,123,396) (174,579)----------------------------------------------------------------------- Operating profit/(loss) before goodwill amortisation 161,825 (174,579)Goodwill amortisation (104,871) ------------------------------------------------------------------------ Operating profit/(loss) 56,954 (174,579)Disposal of subsidiary - (15,725)Interest receivable 23,316 16,434Interest payable (25,273) ------------------------------------------------------------------------ Profit/(loss) on ordinary activities before taxation 54,997 (173,870)Taxation on profit on ordinary activities (24,249) ------------------------------------------------------------------------ Retained profit/(loss) on ordinary activities after taxation 30,748 (173,870)======================================================================== Basic earnings per share 0.15p (0.25p)======================================================================== Diluted earnings per share 0.12p (0.25p)======================================================================== The results during the period to 31 December 2005 were derived from acquisitions. In the year to 30 June 2004 there was a loss relatingto the discontinued activities of a subsidiary amounting to £15,725. The Group has no recognised gains or losses other than the profit for thefinancial period. Consolidated Balance Sheetat 31 December 2005 at 31 December at 30 June 2005 2004 £ £ £ £---------------------------------------------------------------------------------------- FIXED ASSETSIntangible assets 3,893,451 -Tangible assets 154,083 ----------------------------------------------------------------------------------------- 4,047,534 - CURRENT ASSETSStocks 44,418 -Debtors 756,478 5,678Cash at bank and in hand 723,740 604,138---------------------------------------------------------------------------------------- 1,524,636 609,816CREDITORS, AMOUNTS FALLING DUE WITHIN ONE YEAR (1,520,781) (38,470)----------------------------------------------------------------------------------------NET CURRENT ASSETS 3,855 571,346----------------------------------------------------------------------------------------TOTAL ASSETS LESS CURRENT LIABILITIES 4,051,389 571,346CREDITORS, AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (273,195) ----------------------------------------------------------------------------------------- 3,778,194 571,346----------------------------------------------------------------------------------------CAPITAL AND RESERVESCalled up share capital 371,272 1,804,018Share premium account 1,944,216 10,938,957Shares to be issued 932,773 -Capital redemption reserve - 8,788Profit and loss account 529,933 (12,180,417)----------------------------------------------------------------------------------------EQUITY SHAREHOLDERS' FUNDS 3,778,194 571,346======================================================================================== These financial statements were approved by the Board on 21 March 2006 andsigned on their behalf by: RE GOUGHGA GONZALEZ Directors Balance Sheetat 31 December 2005 at 31 December at 30 June 2005 2004 £ £ £ £----------------------------------------------------------------------------------------FIXED ASSETSTangible assets 747 -Investments 4,073,996 ----------------------------------------------------------------------------------------- 4,074,743 - CURRENT ASSETSDebtors 105,078 5,679Cash at bank and in hand 319,722 604,137---------------------------------------------------------------------------------------- 424,800 609,816 CREDITORS, AMOUNTS FALLING DUE WITHIN ONE YEAR (456,886) (38,470)---------------------------------------------------------------------------------------- NET CURRENT (LIABILITIES)/ASSETS (32,086) 571,346---------------------------------------------------------------------------------------- TOTAL ASSETS LESS CURRENT LIABILITIES 4,042,657 571,346 CREDITORS, AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (237,000) ----------------------------------------------------------------------------------------- 3,805,657 571,346---------------------------------------------------------------------------------------- CAPITAL AND RESERVESCalled up share capital 371,272 1,804,018Share premium account 1,944,216 10,938,957Shares to be issued 932,773 -Capital redemption reserve - 8,788Profit and loss account 557,396 (12,180,417)----------------------------------------------------------------------------------------EQUITY SHAREHOLDERS' FUNDS 3,805,657 571,346======================================================================================== These financial statements were approved by the Board on 21 March 2006 andsigned on their behalf by: RE GOUGH DirectorsGA GONZALEZ Consolidated Cash Flow Statementfor the period ended 31 December 2005 Period ended Year ended 31 December 30 June 2005 2004 £ £ £ £ CASH OUTFLOW FROM OPERATING ACTIVITIES (53,951) (141,020)RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest received 23,316 16,429Interest paid (21,802) -Interest element of finance leases (3,471) ----------------------------------------------------------------------------------------- Net cash inflow/(outflow) from returns oninvestments and servicing of finance (1,957) 16,429 TAXATION - 11,076 CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPurchase of tangible fixed assets (27,023) ----------------------------------------------------------------------------------------- Net cash outflow from capital expenditure and financial investment (27,023) - ACQUISITIONS AND DISPOSALSAcquisition of subsidiary undertakings (578,860) -Net debt acquired with subsidiary undertakings (184,448) -Disposal of subsidiary undertaking - 708,354---------------------------------------------------------------------------------------- Net cash inflow/(outflow) from acquisitions and disposals (763,308) 708,354---------------------------------------------------------------------------------------- NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING (846,239) 594,839FINANCINGNet increase in invoice discounting facility 24,917 -Secured bank loan received 375,000 -Repayment of secured loans (30,000) -Capital element of finance lease payments (11,977) ----------------------------------------------------------------------------------------- Net cash inflow from financing 357,940 ----------------------------------------------------------------------------------------- INCREASE/(DECREASE) IN CASH IN THE PERIOD (488,299) 594,839======================================================================================== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBTIncrease/(decrease) in cash in the period (488,299) 594,839Capital element of finance leases 11,977 -Cash outflow from decrease in debt (369,917) ----------------------------------------------------------------------------------------- Change in net debt from cash flows (846,239) 594,839Debt acquired (295,452) ----------------------------------------------------------------------------------------- Movement in net debt in the period (1,141,691) 594,839Net debt at 1 July 2004 604,138 9,299----------------------------------------------------------------------------------------Net debt at 31 December 2005 (537,553) 604,138======================================================================================== Notes to the Accountsfor the period ended 31 December 2005 1. PRINCIPAL ACCOUNTING POLICIES (A) BASIS OF PREPARATIONThe financial statements have been prepared under the historical cost conventionand in accordance with applicable UK accounting standards. (B) BASIS OF CONSOLIDATIONThe consolidated financial statements include the financial statements of theCompany and its subsidiaries made up to 31 December 2005. The acquisition methodof accounting has been adopted. Under this method, the results of subsidiaryundertakings acquired or disposed of in the period are included in theconsolidated profit and loss account from the date of acquisition and up to thedate of disposal. (C) TURNOVERTurnover represents the value of goods and services supplied by the Group in theUK during the financial period, excluding value added tax. (D) FOREIGN CURRENCYTransactions throughout the period were translated at the rate ruling at thetransaction date. Liabilities and current assets at the period end weretranslated at the rates ruling on the balance sheet date. The difference wastaken to the profit and loss account. (E) DEFERRED TAX Deferred tax is provided in full on timing differences which result in anobligation at the balance sheet date to pay more tax, or a right to pay lesstax, at rates that are expected to crystallise based on current tax rates andlaw. Timing differences arise from the inclusion of items in income and expenditurein taxation computations in periods different from those in which they areincluded in the financial statements. Deferred tax assets are recognised to theextent that they are regarded as more likely than not to be recoverable. Deferred tax assets and liabilitiesare not discounted. (F) FIXED ASSETS AND DEPRECIATIONTangible fixed assets are stated at cost less accumulated depreciation.Depreciation is being provided so as to write off the assets over theirestimated useful lives as follows: Computers, office equipment fixtures and fittings - between 10% straight line and 25% per annum on a reducing balance basis of costLeasehold improvements - over 10 years (G) LEASED ASSETSLeased assets are included in the balance sheet at cost less depreciation inaccordance with the Group's normal accounting policies. The present value offuture lease rentals is shown as a liability. The interest element of rentalobligations is charged to the profit and loss account over the period of thelease in proportion to the balance of capital repayments outstanding. (H) GOODWILLGoodwill arising from the acquisition of subsidiary undertakings, representingexcess of purchase consideration over the fair value of net assets acquired, hasbeen capitalised and amortised over its useful economic life of 20 years' prorated for portions of years. (I) INTANGIBLE FIXED ASSETSIntangible fixed assets are stated at cost less amounts amortised. These assetsare amortised on a straight line basis over their useful economic lives of 20years, pro rated for portions of years. Development costs relate to directly attributable costs incurred in thedevelopment of the paramedical examination business. These costs are amortisedat a rate of £1 per completed paramedical examination case. (J) INVESTMENTSLong-term investments are stated at cost less provision against diminution invalue in the investment. (K) STOCKS AND WORK IN PROGRESSStocks comprise saliva collection kits and are stated at the lower of cost andnet realisable value. Work in progress relates to medical examination cases notcompleted at the year-end and are valued at their minimum value, being thecancellation fee applicable. (L) PENSIONSTwo of the Group's subsidiary undertakings contribute to individuals' personalpension schemes and the pension charge represents the amount payable by thecompanies to the schemes in respect of the period 2. SEGMENTAL INFORMATIONPeriod ended 31 December Turnover Operating Net2005 profit assets £ £ £-------------------------------------------------------------------------------Insurance medicals and related services 1,004,071 211,000 358,366 Occupational health services 1,301,646 159,952 289,830 Physiotherapy and ergonomic services 380,263 84,174 266,551------------------------------------------------------------------------------- 2,685,980 455,126 914,747central (costs)/unallocated assets (398,172) 2,863,447------------------------------------------------------------------------------- 2,685,980 56,954 3,778,194------------------------------------------------------------------------------- 3. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2005 2004 £ £-------------------------------------------------------------------------------Profit on ordinary activities beforetaxation is stated after charging:Amortisation of intangible assets 104,871 -Depreciation - owned 21,408 -Depreciation -leased 7,008 -Auditors' remuneration - audit fees 22,500 8,000- non-audit fees 2,728 22,465Operating lease costs - property 37,381 -- office equipment 13,746 -------------------------------------------------------------------------------- 4. EARNINGS PER SHARE The calculation of basic earnings per share is based on the profit for theperiod of £30,748 (2004 - loss of £173,870) divided by the weighted average ofordinary shares in issue for the period ended 31 December 2005 of 20,685,409(2004 - 72,160,707). The calculation of diluted earnings per share is based on the profit for theperiod of £30,748 (2004 - loss of £173,870) divided by the diluted weightedaverage of ordinary shares at the period ended 31 December 2005 of 26,249,370(2004 - 72,160,707). 5. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS FUNDS 2005 2004 --------------- --------------- Group Company Group Group £ £ £ £-------------------------------------------------------------------------------Opening equity shareholder's fund 571,346 571,346 745,216 745,216Profit/(loss) for the financial period 30,748 58,211 (173,870) (173,870)Issue of shares 2,243,327 2,243,327 - -Shares to be issued 932,773 932,773 - -------------------------------------------------------------------------------- 3,778,194 3,805,657 571,346 571,346=============================================================================== 6. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW/(OUTFLOW) FROMOPERATING ACTIVITIES 2005 2004 £ £-------------------------------------------------------------------------------Operating profit/(loss) 56,954 (174,579)Depreciation 28,416 -Amortisation of intangibles 104,871 -(Increase)/decrease in stocks 9,685 -(Increase)/decrease in debtors (134,315) 104,205Increase/(decrease) in creditors (119,562) (70,646)------------------------------------------------------------------------------- (53,951) (141,020)=============================================================================== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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