31st Oct 2005 07:01
Net b2b2 PLC31 October 2005 Netb2b2 plc ("Netb2b2" or "the Group") PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2005 Netb2b2 PLC, the AIM-quoted business aggregator focusing on the digitalcommunications sector, announces its unaudited preliminary results for the yearended 30 June 2005. Highlights •Turnover increased to £6.3 million (2004: £5.3 million) •Profit before exceptionals, interest and tax increased to £132,000 (2004: £1,000) •Profit per share 2.3p (Restated 2004: loss 0.6p) •New contract wins for cScape •Blue Sky's first full year of benefit from acquisition of Esna Hosting Since the period end •Acquisition of Fernhart New Media - consultancy that designs, builds and maintains web sites and interactive television services for businesses Keith Young, Chairman Netb2b2 plc, commented: "The year ended 30 June 2005 sawNetb2b2 reaping the benefits of the operational changes and investments made inall our divisional companies during the previous year. I am delighted that wemoved ahead on all our key financial indicators with organic growth in turnover,profit and earnings per share. This is a good indication that we have asuccessful strategy in place and importantly all the divisional businesses arenow positioned for further growth with particular scope for increasedscalability in cScape and Blue Sky. "Given our continued improved financial and business performance we are evenmore focused on suitable acquisitions which will bring synergy with our existingoperations and which will provide the opportunity of building upon the progresswe have achieved to date." For further information please visit www.netb2b2.com or contact: Keith Young / Geoffrey Griggs John West / Claire MellyNetb2b2 PLC Tavistock CommunicationsTel: 020 7878 1008 Tel: 020 7920 3150 CHAIRMAN'S STATEMENT The year ended 30 June 2005 saw Netb2b2 reaping the benefits of the operationalchanges and investments made in all our divisional companies during the previousyear. I am delighted that we moved ahead on all our key financial indicatorswith organic growth in turnover, profit and earnings per share. This is a goodindication that we have a successful strategy in place and importantly all thedivisional businesses are now positioned for further growth with particularscope for increased scalability in cScape and Blue Sky. Stability and growth in the operating businesses, strong operational managementin each division and a healthy financial position has meant that seniormanagement has had more time to devote to significant acquisitions, the first ofwhich Fernhart Media, we announced we had completed in September 2005. Financial Results Summary The Group's overall financial performance for the year is summarised below: 2005 2004 £000 £000 Turnover for group 6,303 5,265 Operating profit before exceptional item 132 1Exceptional item (18) -Net interest paid (19) (24) _______ _______Group profit/(loss) for the year before tax 95 (23)Taxation 19 - _______ _______ Group profit/(loss) for the year after tax 114 (23) ======= ======= Overall the Group's financial performance was very encouraging, with significantimprovement in turnover and operating profit, which enabled us to achieve a posttax profit of £114,000 (2004: loss £23,000). For the reported year the businesshad three main areas of activity: internet services (cScape and NetPen),publishing and digital communication services (ITM) and specialist hosting (BlueSky). As can be seen from Note 2, year on year turnover growth came across all ouroperations, with the biggest contribution coming in internet services. Thiscontinues the trend reported previously and shows that cScape is indeed goingfrom strength to strength. Profit before tax also increased in all three areas -showing that organic growth is now starting to translate into profitabilityfollowing the changes we made in the year to 30 June 2004. This is reflected in the figures with an increase in earnings per share to 2.3pper share (Restated 2004: 0.6p). Net assets also grew to £2.03 million (2004:£1.7 million) and cash at bank as at 30 June 2005 stood at £571,000 (2004:£478,000). The directors are not recommending the payment of a final dividend for the yearended 30 June 2005, as we feel it is important to re-invest in our operationsand keep cash available for acquisition activity. We will however continue toreview this on an ongoing basis. Operational Review As highlighted above all divisions performed well and achieved increases inturnover and profit. Margins remain stable and new business wins over thereported period have been numerous across the Group. cScape Strategic Internet Services ("cScape") Our consultancy business, cScape, led by Rob Killick should be congratulated.The team has turned in an impressive performance this year and the directorsconsider this has justified the investment we made in the sales and marketingfunction. They maintain a very high retention rate for existing clients whilstadding new ones. cScape has a growing portfolio of significant clientsincluding CIPD, CILIP and Carbon Trust with multi-year relationships andcontracts giving us comfort in terms of earnings visibility for this subsidiary. cScape added clients in both the commercial and public sectors with notable winsincluding: Barclays Bank plc along with several local authorities includingTower Hamlets and Lewisham Council. The company's status as a Microsoft Goldpartner, the development of further .Net tools based capabilities such asBizTalk and Commerce Server to complement the original CMS focus and theaddition of a design practice have enabled the company to continue to address awider market with a deeper proposition ranging from business consulting throughto implementation services. This shift has given cScape access to the clients'boardrooms where it can advise on a company's overall IT strategy and its linkto business to complement the traditional IT functional focus. This fulfilmentacross the whole decision making chain leads to bigger contracts and highermargins. Blue Sky Hosting ("Blue Sky") Blue Sky, a key UK IBM business partner and a leading provider of ApplicationHosting, enjoyed its first full year of benefit from the acquisition of EsnaHosting. Having focused on maintaining and retaining its client baseimmediately after the acquisition of ESNA during the first six months of thereported period it extended its focus to include heavier marketing for newbusiness which bore fruit in the form of contract wins with clients such as:Sanctuary Housing, Riverford, Magirus, Greater Manchester Police and BromleyCouncil. Overall client churn was low and hosting provides high and stable margins. Witha strong and stable client base the next stage is to add a managed servicesbusiness, which can leverage the hosting capabilities of Blue Sky. We arecurrently exploring a number of acquisition opportunities, which would enable usto achieve this. ITM Graphics ("ITM") ITM, the Group's publishing and digital communication services subsidiary,managed a small year on year increase in both revenue and profit before tax,which was pleasing given that the market in which it operates has continued tobe challenging. As more publications take pre-press in-house ITM will continueto concentrate on broadening the range of services it offers and we expect tosee continued reasonable profit performance in this business. NetPen UK Limited ("NetPen") NetPen continues to progress and although it has yet to win its first client, wehave worked hard on expanding our partner networks, defining the serviceoffering and marketing to corporates. Accordingly we now have developedrelationships outside of just Hewlett Packard with notable links to Nokia andAnoto. Market opportunities look particularly promising in the airline sector,NHS and supporting the mobile professional market. Advisory Committee We announced in February 2005 that we had formed an advisory committee, whichconsists of three eminent businessmen Sir William Proby, Dr James Bellini andDavid Montgomery. Each has a distinguished business career and their experiencespans a number of key sectors for the Group including; professional bodies,NGOs, local government and public sector and media. The formation of theadvisory committee has been of great benefit to the Group as it has given usaccess to an additional pool of experience and advice, complementary to thatoffered by the Board. On behalf of shareholders I would like to welcome them toNetb2b2 and thank them for their contribution. Post period end activity Acquisition of Fernhart New Media Limited ("Fernhart") We announced in September 2005, after the end of the reported period, that wehad completed the acquisition of Fernhart for a total consideration of up to£2.5 million. This comprised an initial consideration of £125,000 in cash; theissue of 706,880 new ordinary 10p shares at a price of 53.05p per share,amounting to £375,000; and a deferred consideration comprising the allotment ofOrdinary Shares of up to a value of £2 million depending on the performance ofFernhart in each of the three years ending 30 June 2008. Fernhart offers consultancy that designs, builds and maintains web sites andinteractive television ("DiTV") services for businesses. The companyspecialises in a number of sectors including broadcast media, financialservices, gaming, insurance, property, public services and institutions. Itsexperienced DiTV business has delivered full transactional systems, completeuser interfaces and consultancy services for a number of high profile clients.Companies which Fernhart has supplied services to include: BBC, ITV plc, BSKYBplc, BACC, Sporting Index, Royal Institution of Chartered Surveyors, Royal YachtAssociation, Atlas International, PR Shots and Iberian International. Fernhartalso holds licences for a range of betting games that it is developing for theburgeoning gambling sector and plans to develop these games for both the web andInteractive TV. We were delighted that Fernhart recently announced that it was launching a newinternet based racing information and gambling portal to be calledOneStopRacing.com. This portal will provide comprehensive horse racing andbetting information with links to leading bookmakers and betting exchanges. Theservice will be free to customers who will be able to analyse racing data usinga range of criteria, view bookmakers odds and receive free tips from racingexperts. Fernhart has already signed affiliate agreements with a number ofpartners including Victor Chandler, Sporting Index and Profitable Play (JackpotJoy) and reached an agreement for the provision of a OneStop branded bettinginterface enabling bets to be placed with a wide range of bookmakers. Current Trading and Outlook The acquisition of Fernhart has moved the Group onto a different level and is,we believe, a sign of things to come. Early indications are that Fernhart isbenefiting from group synergies, particularly cScape's Microsoft Goldcertification along with leveraging new opportunities off the back of Blue Sky'shosting capabilities. Across the whole Group we can offer clients a higherlevel of expertise and we are increasingly targeting bigger corporate clients.The interactive media market and in particular the on-line gambling market inwhich Fernhart operates is experiencing real growth and we hope as a Group tocapitalise on this. Outside of that we remain strong within the public and local government sectorsand our businesses (particularly cScape, Blue Sky and Fernhart) are allperforming well in the first months of trading this year. ITM is still facing achallenging market, but despite churn is maintaining a steady level of turnoverand acceptable profitability and NetPen which is still in its infancy has yet tocontribute to the overall profitability of the Group. Given our continued improved financial and business performance we are even morefocused on suitable acquisitions which will bring synergy with our existingoperations and which will provide the opportunity of building upon the progresswe have achieved to date. Keith Young31 October 2005Chairman GROUP PROFIT & LOSS ACCOUNTYear ended 30 June 2005 Year Year ended ended 30 June 30 June 2005 2004 Note £000 £000 TURNOVER 2 6,303 5,265 Cost of sales (1,846) (1,493) -------- -------- GROSS PROFIT 4,457 3,772 -------- --------Administrative expenses pre exceptional item (4,325) (3,771)Exceptional item 3 (18) - -------- -------- Administrative expenses (4,343) (3,771) -------- -------- OPERATING PROFIT Pre exceptional item 132 1Exceptional item (18) - -------- --------Post exceptional item 2 114 1 -------- -------- Interest payable and similar charges (19) (24) -------- --------PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORETAXATION 2 95 (23) Tax on profit/(loss) on ordinary activities 4 19 - -------- --------PROFIT/(LOSS) FOR THE FINANCIAL YEAR 114 (23) ======== ========PROFIT/(LOSS) PER SHARE (PENCE) 5 2.3p (0.6p) ======== ======== All turnover and results arose from continuing operations. No separate statement of Total Recognised Gains and Losses has been presented asall such gains and losses have been dealt with in the profit and loss account. GROUP BALANCE SHEETAs at 30 June 2005 30 June 2005 30 June 2004 £000 £000 £000 £000 FIXED ASSETSIntangible assets 1,887 1,887Tangible assets 416 387 -------- -------- 2,303 2,274CURRENT ASSETSStocks 98 79Debtors 1,231 1,105Cash at bank 571 478 -------- -------- 1,900 1,662CREDITORS: amounts falling duewithin one year (2,172) (2,234) -------- -------- NET CURRENT LIABILITIES (272) (572) -------- --------TOTAL ASSETS LESS CURRENT LIABILITIES 2,031 1,702 ======== ========CAPITAL AND RESERVESCalled up share capital 523 2,873Share premium 200 11,035Capital redemption reserve 6 -Profit and loss account 1,302 (12,206) -------- --------EQUITY SHAREHOLDERS' FUNDS 2,031 1,702 ======== ======== GROUP CASHFLOW STATEMENTYear ended 30 June 2005 Note Year ended Year ended 30 June 30 June 2005 2004 £000 £000 Net cash inflow/(outflow) from operating 6 234 (551)activities Returns on investments and servicing of (19) (24)finance Capital expenditure (169) (103) Acquisitions - (376) -------- --------Net cash inflow/(outflow) before financing 46 (1,054) Financing (85) 1,573 -------- --------(Decrease)/increase in cash in the year (39) 519 ======== ========Reconciliation of net cash flow to movementin net funds (Decrease)/increase in cash in the year (39) 519 Decrease/ (increase) in debt and lease 301 (36)financing -------- --------Movement in net funds in the year 262 483 Net funds/(debt) at start of year 6 (477) -------- --------Net funds at end of year 7 268 6 ======== ======== Notes: 1. FINANCIAL INFORMATION The unaudited financial information set out above does not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985. Statutoryaccounts for the year ended 30 June 2005 will be finalised based on theinformation in this preliminary announcement and will be delivered to theRegistrar of Companies in due course. The accounts for the year ended 30 June2004, which received an unqualified auditor's report, have been filed with theRegistrar of Companies. 2. SEGMENTAL INFORMATION The Group operates in the UK and the whole of its turnover is in the UK market. Turnover Profit before interest and tax 2005 2004 2005 2004 £000 £000 £000 £000 Internet services 3,316 2,505 331 232 Publishing and digital 2,307 2,273 112 114communication services Specialist hosting 671 447 204 125 Central costs 9 40 (515) (470) Exceptional item - - (18) - ______ ______ ______ ______Group 6,303 5,265 114 1 ====== ====== ====== ====== Profit/ (loss) before tax Net assets 2005 2004 2005 2004 £000 £000 £000 £000 Internet services 330 232 642 293 Publishing and digital 97 94 (292) (431)communication services Specialist hosting 202 125 24 (36) Central costs (516) (474) 1,657 1,876 Exceptional item (18) - - - ______ ______ ______ ______Group 95 (23) 2,031 1,702 ====== ====== ====== ====== 3. EXCEPTIONAL ITEM The exceptional item relates to the costs of the capital reorganisation asapproved by shareholders on 28 February 2005. 4. TAXATION 2005 2004 £000 £000Current tax:UK corporation tax on profits of the period 1 -Adjustments in respect of previous periods (20) - --------- -----------Total Current tax (19) - --------- -----------Deferred taxation:Origination and reversal of timing differences - - --------- -----------Total deferred tax - - --------- -----------Tax on profit/(loss) on ordinary activities (19) - ========= =========== Factors affecting tax charge for period The tax assessed for the period is lower (2004 higher) than the standard rate ofcorporation tax in the UK (30%). The differences are explained below: 2005 2004 £000 £000Profit/(loss) on ordinary activities before 95 (23)tax ------------ ---------------Profit/(loss) on ordinary activities multipliedby the standard Rate of corporation tax in theUK of 30% (2004: 30%) 29 (7) Effects of:Expenses not deductible for tax purposes 8 9Depreciation in excess of capital allowances/(capital allowances in excess of depreciation) 2 (23)Tax losses not utilised - 21Tax losses utilised (38) -Adjustment to tax charge in respect of previous (20) -periods ----------- ----------- (19) - =========== =========== Deferred tax asset The Group has deferred tax assets, not included in the financial statements asrecovery is not certain, calculated at a corporation tax rate of 30%, asfollows: 2005 2004 £000 £000Depreciation in excess of capital allowances 48 45Unrelieved trade losses 737 724 ------------- ------------ 785 769 ============= ============ 5. PROFIT/(LOSS) PER ORDINARY SHARE Basic profit/(loss) per share is calculated by dividing the profit/ (loss)attributable to ordinary shareholders by the weighted average number of ordinaryshares during the year. The 2004 figures have been restated to take account ofthe 100 for 1 share consolidation that took place during the year. The diluted profit/ (loss) per share is the same as the actual profit (loss) pershare. Year ended Year ended 30 June 2005 30 June 2004 £000 £000 Basic earnings attributable to ordinary 114 (23)shareholders: =========== ==========Weighted average number of ordinary shares 4,911,048 3,774,617 =========== ==========Profit/(loss) per share: 2.3p (0.6p) =========== ========== 6. RECONCILIATION OF OPERATING PROFIT/(LOSS) TO NET CASH INFLOW/(OUTLOW) FROM OPERATING ACTIVITIES 2005 2004 £000 £000 Operating profit 114 1Depreciation charges 140 196(Increase)decrease in stocks (19) 5Increase in debtors (126) (171)Increase(decrease) in creditors 125 (582) -------- -------Net cash inflow/(outflow) from operating activities 234 (551) ======== ======= 7. ANALYSIS OF CHANGES IN NET (DEBT)/FUNDS At 1 July Cash At 30 June 2004 flow 2005 £000 £000 £000Net cash:Cash at bank and in hand 478 93 571Bank overdrafts (138) (132) (270) ----- ------ ------ 340 (39) 301 ----- ------ ------Debt:Bank loan (invoice discounting) (290) 290 -Hire purchase agreements (44) 11 (33) ----- ------ ------Total 6 262 268 ----- ------ ------ 8. ACCOUNTING FOR GOODWILL The board has assessed each subsidiary with reference to its durability, abilityto sustain future long term profitability and assessed ability to maintainmarket position. Based on this assessment the board is of the opinion that thethree goodwill elements have indefinite economic lives. The board has carriedout impairment reviews on these goodwill elements and has concluded that theircurrent recoverable amounts are in excess of their carrying values. 9. COPIES OF PRELIMINARY STATEMENT Copies of this announcement are available from www.netb2b2.com or the companysecretary at 20-26 Brunswick Place, London N1 6DZ. Copies of the Annual Reportand Accounts of the Company for the year ended 30 June 2005 will be sent toshareholders in due course. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Chesterfield Sp