12th Jan 2005 07:00
Capcon Holdings PLC12 January 2005 CAPCON HOLDINGS plc________________________________________________________________________________ Capcon Holdings plc, the AIM listed investigations and risk management company,announces its unaudited consolidated results for the year ended 30 September2004. Highlights • Group sales increased by 4.9% to £7.45m (2003: £7.1m) • Profit before interest and amortisation of goodwill increased by 11.8% to £0.57m (2003: £0.51m) • Net cash flow from operations increased by 13.0% to £0.52m • Successful integration and development of acquisitions • Re-branding under Capcon name to exploit benefits of Group activities • Major new client wins in leisure sector for Capcon Audit & Stocktaking • Improved margins in Capcon Argen - high value and sensitive investigations and screening Ken Dulieu, Chairman, commented: "Trading from the divisions of the business that deliver our volume sales isstrong and our investigation divisions that are less predictable are currentlyvery active in new projects. The recent re-branding and changes in theCommercial Investigations management structure have strengthened the Company andfacilitated a sharper focus of our specialised services. The Directors areconfident that the Company will benefit from these changes in the year ahead. "In addition, the Company expects to take full advantage of the manyopportunities arising from the increasing awareness by corporate entities of thedamage caused by corporate fraud to their businesses." Enquiries Capcon Holdings plc 0845 067 5050Cliff Cavender, Managing DirectorWilliams de Broe 020 7588 7511Frank MoxonThreadneedle Communications 020 7531 2620Graham Herring 07793 839 024 CAPCON HOLDINGS plc CHAIRMAN'S STATEMENT________________________________________________________________________________ Operational review We have completed another year of progress during which we significantlydeveloped and strengthened the Capcon group of companies. We have gained severalnew blue chip clients in both of our main divisions, Audit & Stocktaking andCommercial Investigations, and increased sales and profits during a period ofinternal re-organisation and consolidation. With the successful integration and development of both acquisitions, VSA andArgen, the Board has decided that there are important future benefits inmarketing our services under a common brand. As a consequence, earlier in theyear we embarked on a re-branding initiative that highlights the Group brandname, Capcon, whilst still retaining separate divisional identity andfamiliarity for existing clients. We continue to seek and implement new sales and marketing initiatives which theBoard is confident will have long term benefits for the business. Further, webelieve that the growth of the specialist areas of our business is restrictedonly by the current shortage of specialist management resources within theGroup. Consequently, recruitment of additional experienced, specialist managersis an on going priority for the Board and we are confident that successfulrecruitment in this area will lead to stronger organic growth in the mediumterm. On 1 August 2004, the lease on the premises occupied by Argen terminated and thebusiness re-located. The Board has taken advantage of this move to establishboth Argen and the Group Head Office in a City location that is morecommercially suitable as a centre for the Group's operations whilst creating alogical base for future expansion. Throughout the year the Board has been active in the review and appraisal ofpotential acquisitions that are compatible with our existing business. The Boardhas decided to broaden the search to include potential acquisitions that includeadditional areas of risk management to further improve the Group's offering.Nevertheless, our acquisition criteria still determine that all potentialbusiness acquisitions are generating high quality earnings from associated riskmanagement activities. Financial overview Sales for the year to 30 September 2004 were £7.45 million (2003: £7.10 million)representing a 4.9% increase on last year. The profit for the year, before interest and amortisation of goodwill, was £0.57million (2003: £0.51 million), an increase of 11.8%. Profit before tax andamortisation was £0.43 million, a 13.2% increase on the £0.38 million achievedlast year. Basic earnings per share of 0.9p compares with 1.0p last year, and, excludingamortisation of goodwill, earnings per share have decreased to 3.7p from 3.9plast year. The lower level of earnings per share is the result of a new issue of923,000 shares on 12 March 2004 and the effect of lower utilisation of acquiredtax losses compared with last year. Net cash flow from operations increased by 13.0% to £0.52 million (2003: £0.46million). Total bank borrowings in the year were reduced by £0.12 million to£1.26 million from £1.38 million, representing 30% of net assets. Although theBoard does not consider this level of borrowings to be excessive in relation tothe cash generated by the operations, it is sufficiently high to limit internalinvestment required to create new earnings enhancing services. On 21 December 2004, the Company announced the sale of its 50 per cent interestin Argen GmbH for a total cash consideration of £360,000. The investment wasacquired in February 2003 as a consequence of the acquisition of Argen Limitedand its disposal will generate cash for investment in our core UK business. Thestrong working relationship with Argen GmbH is very much expected to continue inthe future. CAPCON HOLDINGS plc CHAIRMAN'S STATEMENT (CONTINUED)________________________________________________________________________________ Financial overview (continued) Organic growth of the existing core business is expected to continue in thecoming year for all divisions. However, the Board believes it is necessary toretain some of the cash generated by the business to support this growth. Tosatisfy this cash requirement, the Directors have deferred until next year thepayment of their dividend entitlement from last year's final dividend and alsothe current year's interim dividend declared in June. Also, to furtherstrengthen the Company's cash position, the Board is recommending that no finaldividend is declared or paid to shareholders in respect of the year ended 30September 2004, making the interim dividend of 0.75p (2003: 0.73p) paid inAugust 2004 the total dividend for the year (2003: 2.19p). Audit & stocktaking This has been a successful year for gaining new clients and work has beenundertaken for six new major leisure sector brands for the first time. Salesreduced slightly to £3.40 million from £3.49 million in 2003, or 2.5%, but thechange in mix reported at the half year has continued into the second half ofthe year enabling operating margins to be improved. Ongoing attention to costcontrol and efficiency has combined with the favourable mix of work to producean improved profit for the division overall. The lower sales level was largely attributable to a major client suspending ourservices for three months pending resolution of their own internal IT problems.Our services have since been re-instated at the beginning of the new financialyear at the same sales levels enjoyed prior to the interruption of our contract. Our ongoing internal investment in IT infrastructure ensures a constantlyevolving range of flexible solutions for our clients whilst distinguishing ourservices from those of our competitors. We believe that such investment isparamount in demonstrating to existing and new clients the benefits ofoutsourcing using our independent specialist services. We continue to focus our services on the areas of our clients' business where webelieve we can make most impact and this can result in fewer audit visits andlower sales, offset by higher margins reflecting the greater value of servicesprovided. We believe that this approach is important in the development of thisdivision's business and that our flexibility and understanding of the changingneeds of our clients in this highly competitive sector will secure our existingrelationships and lead to further new client gains in the coming year. Commercial investigation services Our three investigations divisions have been re-branded; Capcon Investigations,Capcon Vincent Sherman and Capcon Argen. These divisions are still managed asseparate operations but, increasingly, instructions are being referred betweenthe divisions to ensure that our clients are served by the operation that hasgreatest experience and specialist skill in the particular area of investigationdemanded by them. It is now considered that reporting the financial performance of theseactivities in one consolidated division is more appropriate. Sales for the year for all investigation activities were £4.07 million comparedwith £3.62 million last year, a 12.4% increase which includes the benefit ofCapcon Argen sales for a full year. Operating margins have continued to improveand reflect an increasing proportion of projects undertaken by Capcon Argenwhich specialises in high value business intelligence projects. Fewer projects than expected were completed in the second half of the year bythe Capcon Investigations division that specialises in leisure sector work.However, the Directors are satisfied that this does not indicate any fall indemand for these services in the medium term. CAPCON HOLDINGS plc CHAIRMAN'S STATEMENT (CONTINUED)________________________________________________________________________________ Commercial investigation services (continued) Capcon Vincent Sherman, formerly Vincent Sherman Associates (VSA), thespecialist insurance investigator, increased sales by 4.8% which, together withcontinuing attention to operational efficiencies, improved the operating profitby approximately 20%. The division was re-structured during the second half ofthe year and, as a result of this re-structuring; the year ahead should benefitfrom further cost savings and improved resource management. The Directors areconfident that further new business will be gained this year with new andexisting blue chip insurance clients. Capcon Argen has delivered another strong performance in the year to 30September 2004, being the first full year after its acquisition by the Company.Sales increased by 4.7% on a like for like basis and operating margins wereimproved still further from a traditionally high base. The expectations of theBoard at the time this business was acquired have been fully satisfied. Havingsuccessfully integrated Argen into the Group, our focus in the coming year willbe to enlarge our project resource capability. This will enable us to take fulladvantage of the many opportunities arising from the increasing requirement bycorporate entities to gather specialist business intelligence and therebyprotect their investment and prevent exposure to unnecessary risk and fraud. During the year the Company invested in establishing a separate risk managementbusiness stream, trading under the Capcon Argen name, which specialises inconsultancy services that assist clients worldwide in reducing physical securityrisk. This is regarded as an area of potential growth and is a complementaryservice to Capcon Argen's developing business. Current trading and prospects Trading from the divisions of the business that deliver our volume sales isstrong and our investigation divisions that are less predictable are currentlyvery active in new projects. This level of activity has given us the confidenceto recruit additional specialists to accelerate organic growth. In addition, therecent re-branding and changes in the Commercial Investigations managementstructure have strengthened the Company and facilitated a sharper focus of ourspecialised services. The Directors are confident that the Company will benefitfrom these changes in the year ahead. The Board continues to search for suitable acquisition opportunities in thefield of risk management and, with a broader perspective on the range ofservices that would be compatible, we are confident that an earnings enhancingtransaction is achievable in 2005. K P DulieuChairman 12 January 2005 CAPCON HOLDINGS plc CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 SEPTEMBER 2004________________________________________________________________________________________________________________________ Year ended Year ended 30 September 2004 30 September 2003 Before Before Amortisation Amortisation Amortisation Amortisation of of of of goodwill goodwill Total goodwill goodwill Total £ £ £ £ £ £ Turnover 7,453,445 - 7,453,445 7,095,778 - 7,095,778Cost of sales (4,100,957) (4,100,957) (4,009,213) (4,009,213) ------------ ------------ ------------ ------------ ------------ ------------Gross profit 3,352,488 3,352,488 3,086,565 3,086,565Administrative expenses (2,884,619) (274,429) (3,159,048) (2,656,043) (249,273) (2,905,316) ------------ ------------ ------------ ------------ ------------ ------------Group operating profit 467,869 (274,429) 193,440 430,522 (249,273) 181,249Share of operating profit inassociates 100,178 - 100,178 80,372 - 80,372 ------------ ------------ ------------ ------------ ------------ ------------Total operating profit 568,047 (274,429) 293,618 510,894 (249,273) 261,621Interest receivable 58 58 1,111 1,111Interest payable (137,875) (137,875) (130,071) (130,071) ------------ ------------ ------------ ------------ ------------ ------------Profit on ordinary activitiesbefore taxation 430,230 (274,429) 155,801 381,934 (249,273) 132,661Taxation on profit on ordinaryactivities (69,945) (51,430) ------------ ------------Profit on ordinary activitiesafter taxation 85,856 81,231Dividends (89,465) (201,624) ------------ ------------Loss retained for the year (3,609) (120,393)Retained profit brought forward 50,492 170,885 ------------ ------------Retained profit carried forward 46,883 50,492 ============ ============ Earnings per share - Basic 0.9p 1.0p - Diluted 0.8p 0.9p All results derive from continuing operations. Total Recognised Gains and LossesThere were no recognised gains or losses other than those stated above. CAPCON HOLDINGS plc CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2004 ________________________________________________________________________________ Group 2004 2003 £ £ Fixed Assets Intangible fixed assets 5,020,194 5,010,467Tangible fixed assets 266,075 315,579Investments 119,936 55,631 ______________ ______________ 5,406,205 5,381,677Current AssetsDebtors 1,891,497 1,978,888Cash at bank and in hand 37,207 42,986 ______________ ______________ 1,928,704 2,021,874 Creditors: amounts falling due withinone Year (2,999,392) (3,122,939) ______________ ______________Net Current (Liabilities)/Assets (1,070,688) (1,101,065) ______________ ______________ Total Assets less Current Liabilities 4,335,517 4,280,612 Creditors: amounts falling due after more than one year (100,000) (497,250) Provisions for Liabilities and Charges (21,472) (31,823) ______________ ______________Net Assets 4,214,045 3,751,539 ============== ==============Capital and ReservesCalled up share capital 101,568 92,338Share premium account 2,774,094 2,317,209Other reserves 950,000 950,000Profit and loss account 46,883 50,492Shares to be issued 341,500 341,500 ______________ ______________Equity Shareholders' Funds 4,214,045 3,751,539 ============== ============== CAPCON HOLDINGS plc CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2004________________________________________________________________________________ 2004 2003 Note £ £ £ £ Net cash inflow from operatingactivities 2 523,277 457,739Dividend receivedfrom associate - 109,470 Returns oninvestments andservicing offinance Interest received 58 1,111 Interest paid (137,875) (117,071) ____________ ____________ Net cash outflowfrom returns on (137,817) (115,960)investments andservicing offinance Taxation Tax paid (37,228) (52,861) Capitalexpenditure andfinancialinvestment Payments toacquire tangible (84,097) (159,036)fixed assets Sale of tangiblefixed 33,530 53,445assets ____________ ____________ Net cash outflowfrom (50,567) (105,591)investingactivities Acquisitions anddisposals Acquisition ofsubsidiary (428,658) (1,405,451)undertakings Net cash acquiredwith - 195,750subsidiary ____________ ____________ Net cash outflowfor (428,658) (1,209,701)acquisitions Equity dividends (224,465) (170,960)paid ____________ ____________ Net cash outflowbefore (355,458) (1,087,864)financing Financing Issue of new 466,115 667,000ordinary shares Costs of new - (56,045)issue Repayment of loan (216,630) (164,717)stock New loans - 600,000 Movement ininvoice (77,084) 246,447discountingfacilities Principal paymentunder (63,117) (87,668)finance leases Other loans 71,484 - Other loan (62,779) (71,041)repayments ____________ ____________ Net cash inflowfrom 117,989 1,133,976financing ____________ ____________ (Decrease)/ (237,469) 46,112increase in cash ============ ============ CAPCON HOLDINGS plc NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2004________________________________________________________________________________ 1 EARNINGS PER SHARE Year Ended Year Ended 30 September 2004 30 September 2003 £ £ Earnings attributable to ordinaryshareholders 85,856 81,231 =========== ===========Weighted average number of sharesissued during the year 9,743,191 8,386,963Dilutive effect of share options - 29,089Dilutive effect of shares to be issued 864,556 573,949Diluted weighted average number of ___________ ___________shares in issue during the year 10,607,747 8,990,001 =========== ===========Basic earnings per share 0.9p 1.0p =========== ===========Diluted earnings per share 0.8p 0.9p =========== =========== Adjusted earnings per share: Earnings attributable to ordinary shareholders 85,856 81,231Amortisation of goodwill 274,429 249,273 ___________ ___________ Adjusted earnings attributable to ordinaryshareholders 360,285 330,504 =========== =========== Adjusted basic earnings per share 3.7p 3.9p =========== ===========Diluted earnings per share 3.4p 3.7p =========== =========== The Directors have presented adjusted earnings per share on this basis, as theybelieve it to be a better indicator of underlying business performance. CAPCON HOLDINGS plc NOTES TO THE PRELIMINARY ANNOUNCEMENT (CONTINUED) FOR THE YEAR ENDED 30 SEPTEMBER 2004________________________________________________________________________________ 2 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 2004 2003 £ £ Group operating profit 193,440 181,249Depreciation 96,370 108,665Profit on disposal of fixed assets (2,178) (607)Amortisation 274,429 249,273Decrease/(increase) in debtors 87,391 (277,297)(Decrease)/increase in creditors (126,175) 196,456 ____________ ____________Net cash inflow from operating activities 523,277 457,739 ============ ============ 3 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2004 2003 £ £ (Decrease)/increase in cash in year (237,469) 46,112Outflow/(inflow) from change in debt financing 348,126 (523,021) ____________ ____________Movements in net debt resulting from cash flows 110,657 (476,909)Net debt at 1 October 2003 (1,443,569) (966,660) ____________ ____________Net debt at 30 September 2004 (1,332,912) (1,443,569) ============ ============ 4 The financial information set out in the announcement does not constitute the company's statutory accounts for the year ended 30 September 2004 or 2003. The financial information for the year ended 30 September 2003 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 s237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 30 September 2004 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the annual general meeting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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