29th Apr 2008 07:01
ServicePower Technologies PLC29 April 2008 29th April 2008 SERVICEPower TECHNOLOGIES PLC ("SERVICEPower" or the "Company") Preliminary Results SERVICEPower (LSE:SVR), the innovative supplier of outsourcing solutions andsoftware to the mobile repair and installations industry, announces itspreliminary results for the period ended 31st December 2007. HIGHLIGHTS Financial • Revenues increased by 27% to £14.10m (2006: £11.10m)• EBITDA trading loss (as defined in the results section below) decreased to £0.20 million (2006: loss of £2.82 million)• Loss before tax decreased to £0.53m (2006: £4.15m)• Cash balance at 31st December 2007 increased to £1.52m (December 2006: £0.26m)• Company achieved first full half year of profitability in H2 2007 Operational • New CEO Mark Duffin joined from Rentokil Initial Plc in November 2007• Restructuring of management and US operations underway• Improved Sales & Marketing operations including new UK and European sales forces• Re-branding and standardisation of product lines• Acquisition of certain assets of KonaWare post year end for $155,000 gives SERVICEPower in-house GPS solution Mark Duffin, CEO, SERVICEPower said, "SERVICEPower has moved into profitabilityduring the six months to December 31st and we are confident that the Companywill continue to maximise the market opportunities going forward. We anticipatethat our future performance will be further enhanced by redirecting our costsand investing in opportunities that deliver a profitable growth from our newlyappointed sales staff in the UK and Europe. The increase in our sales pipelineis evidence of the success of our strategic focus on sales. "Given the many successful initiatives underway at present we are confident ofmaintaining our positive momentum and look forward to continuing growth, bothorganic and through acquisition." For further information, please contact: SERVICEPower Technologies PLC Evolution Securities Limited ICIS LimitedTel: 0161 476 2277 Tel: 020 7071 4300 Tel: 020 7651 8688Mark Duffin, Executive Director Bobbie Hilliam Tom MoriartyBarry Welck, non-executive Chairman Bob Huxford About SERVICEPower SERVICEPower, publicly traded on the London Stock Exchange (LSE:SVR), allowscompanies to locate their employed field resources in the right geography,ensure they have the right mix of skills, and outside this geography create anetwork of independent, authorized service contractors whose costs areefficiently managed by our sophisticated warranty management software. Theschedules and routes for both the employed field resources and the independentservicers are optimised by SERVICEPower's technology to ensure the right balancebetween the cost of operations and ensuring customers receive a superior serviceexperience. Further information on the company can be found at www.servicepower.com Introduction We are pleased to report a strong set of results for the year ended 31 December2007. SERVICEPower's performance over the second half of the year wasconsiderably improved with revenues of £9.01 million secured in the second half,compared to £5.06 million in the first. The Company was also profitable duringthe latter half of the year, finishing 2007 with £1.52 million cash in the bank.Accordingly, the Directors believe that SERVICEPower is now well positionedtoward achieving its potential. Results Total revenues for the year increased by 27% to £14.07 million in 2007, from£11.10 million in 2006. Outsourcing revenue increased by 28% to £8.26 million(2006: £6.45 million) whilst software licence and consultancy revenue increasedby 25% to £5.80 million in 2007 (2006: £4.64 million). A breakdown of theOutsourcing revenue is as follows: 2007 2006 £ million £ millionHosting / SaaS 2.08 1.75Outsourcing US 3.48 2.21Outsourcing UK 2.49 2.22Mobility 0.21 0.27Total 8.26 6.45 A breakdown of software licence and consultancy revenue is as follows: 2007 2006 £ million £ millionLicences 3.49 2.59Implementation / Support 2.31 2.05Total 5.80 4.64 The gross margin for the business rose by 11% to £6.16 million (44% of revenues)in 2007, from £3.69 million (33% of revenues) in 2006. The Company continued to invest in enhancement of functionalities across all ofits product range, investing £1.20 million in 2007 (2006: £1.31 million). The EBITDA trading loss decreased to £0.20 (2006: loss of £2.82 million) beingthe total loss from operations of £0.56 million (2007: £4.17 million), adjustedfor depreciation of £0.090 million (2006: £0.12 million), amortisation of £0.31million (2006: £0.32 million) and exchange gain of £0.04 million (2006: loss of£0.91 million). The total loss before tax decreased to £0.53 million from a lossof £4.15 million in 2006. The loss per share for the year decreased to 0.54p(2006: loss per share of 4.14p). Cash balances increased to £1.52 million at 31st December 2007 from £0.26million at 31st December 2006. The directors do not recommend the payment of adividend at this time. Operational Review In November of this year Mark Duffin was appointed CEO and has set aboutimplementing a thorough restructuring program which has resulted in a number ofnew operational efficiencies. This has included a significant rationalisation ofmanagement as well as the closure of the Louisville operations, such that theCompany now has a single US call centre operating out of the Costa Mesa office.This restructuring program is expected to continue throughout the year. A key objective has been to improve the sales operations to give the Company amore commercial focus and to take advantage of the considerable opportunitieswithin the markets in which SERVICEPower operates. To this end a number of newsales staff have been appointed in the UK and sales operations have beenestablished in Europe. This new focus is already producing results with asignificant number of new prospects since the start of the year. SERVICEPower is currently in the process of appointing an FD. Although noappointment has been made to date, a shortlist of candidates is now beinginterviewed for the position. The successful candidate will be based in the USand the role will include operational management duties for the region,improving the accountability of the US operations. Further to the above, a number of internal operational efficiencies have beenimplemented including improved cost plans and budgets for all departments withaccountability for individual staff members. Changes have also been maderegarding staff remuneration and improved lines of communication have been putinto place. These efficiencies are expected to further support the future focusof the Company although they are likely to lead to exceptional charges beingincurred in 2008. Sales & Marketing Where previously SERVICEPower was technology rather than sales focused, we arenow implementing an aggressive sales and marketing strategy to capitalise on the200 man years of development already invested into our software products. Tothis end, much of the cost savings from the restructuring are being reinvestedinto building a more effective sales force and the targeting of additionalvertical and geographical markets. The various businesses within the Group have been consolidated into one,enabling a more effective promotion of a single business identity. We havestandardised our product packaging and re-branded our product lines resulting inincreased product awareness among potential customers and improvingcommunication between them and our sales staff. There is now a dedicated sales team in the UK & Europe led by Mark Homer, wherepreviously there were none, as well as the seven salespeople in the US.Following a successful pilot project last year, we have hired an additional GPStelesales person targeting ServicePower's extensive network of servicers wherewe have identified significant potential. To support the revitalised and enlarged sales team, we have implemented a newlead management system which will allow the sales organisation to moreaggressively pursue new business opportunities. SERVICEPower will continue to develop and enhance its existing products with aview to increasing functionality. The approach to development has beenconsolidated now such that the Company expects to make one new release per year. The market for SERVICEPower's products and services is currently buoyant,evidenced by the number of new prospects. New Customers During 2007 the Company added over 35 new customers in the US and UK, includingmarket leading companies such as Homeserve, one of the UK's leading providers ofhome emergency policies and repairs, Farmers Insurance, one of the leadingwriters of insurance in the US, Marsh, the world's leading insurance broker,AiM, a US based third-party auto inspection company, and Circuit City, one ofthe largest retailers of consumer electronics products in the US. Since the year end momentum has continued. New contracts include the sale of asoftware licence in the US to Datascan to schedule the work of its 650 vehicleinspectors, and the commencement of a fully funded pilot in another businessdivision of one of the Company's largest US customers. SERVICEPower has alsobeen awarded a software contract by Sector Alarm to schedule engineers withinits domestic intruder alarms business in Norway, Sweden and the UK. An additional contract has been signed with BrandSmart, one of the largestretailers in the US, to deliver the SERVICEPower software solution as a hostedservice, and several contracts have been won for additional services andprojects with a number of existing software customers. The SERVICEOperations (outsourcing, dispatch & claims) business has also had asuccessful start to the year with a number of new customers already signed,including Bosch Tools in Canada and Airwell Fedders North America. Growth Strategy Having proven its worth within the Consumer Electronics market SERVICEPower isnow looking to sell its offering into additional verticals. To this effect ToddBanhidy was recently appointed as Vice President Home Services, and is expert inselling total value service propositions to the retail market. Recent reportspublished in the US estimate the US Home Improvement market to be worthapproximately $755 billion annually, comprised of $585 billion of product demandand $170 billion of installed labor opportunity - a market which ServicePower iswell positioned to address. In addition, SERVICEPower believes there to be a significant market opportunityin offering a complete field service solution to current customers in newgeographies, not solely into the US, as part of a total managed servicesolution. The Board will be further researching these opportunities over thecoming year. The Company has renewed its focus on its outsourcing offerings, where a numberof opportunities have been identified for selling to existing customers as wellas into alternative markets. The Company's outsourcing offerings translate intohigh levels of recurring revenue reducing SERVICEPower's exposure to the riskassociated with large software contracts, whilst increasing visibility andstability. The business is currently reliant on license revenue streams, the timing ofwhich are difficult to predict. As described previously, SERVICEPower is workingto reduce its cost base to a level which is commensurate with its licenserevenues, however this process is ongoing and the Company will continue to incurexceptional restructuring costs until the restructuring exercise is complete.Consequently, the Company's cash balances have reduced since year end and theDirectors are looking to strengthen the Company's balance sheet. Acquisitions With the acquisition of KonaWare assets post year end, SERVICEPower now has themost complete offering within the highly fragmented field-services market. TheCompany now has its own service scheduling product with integrated GPStechnology and full warranty management that the newly enhanced sales team cansell to its customers royalty free. Going forward SERVICEPower will continue toseek further acquisitions where they can be seen to add value, particularly interms of enhancing its total value service offering. Board changes The Company also announces today that David Brisco and Ian MacKinnon arestepping down from the Board with immediate effect and will be leaving theCompany. David and Ian are co-founders of the Company and have overseenSERVICEPower's development to date. The Board would like to thank them fortheir contribution over the years and wish them well in the future. Outlook SERVICEPower has moved into profitability during the six months to December 31stand we are confident that the Company will continue to maximise the marketopportunities going forward. We anticipate that our future performance will befurther enhanced by redirecting our costs and investing in opportunities thatdeliver profitable growth from our newly appointed sales staff in the UK andEurope. The increase in our sales pipeline is evidence of the success of ourstrategic focus on sales. Given the many successful initiatives underway atpresent we are confident of maintaining our positive momentum and look forwardto continuing growth, both organic and through acquisition. Barry Welck, Chairman Mark Duffin, CEO 29th April 2008ServicePower Technologies Plc Consolidated income statement for the year ended 31 December 2007 Note 2007 2006 £'000 £'000 Revenue - software solutions 5,803 4,642 - outsourcing services 8,263 6,452 _________ _________Total revenue 14,066 11,094 Cost of sales (7,905) (7,402) _________ _________ Gross profit 6,161 3,692 _________ _________ Administrative expenses (6,725) (7,863) _________ _________ Profit/(loss) from operations - software solutions 648 (1,576) - outsourcing services (1,212) (2,595) _________ _________Total loss from operations (564) (4,171) Investment revenue 32 23Finance costs - (1) _________ _________ Loss before taxation (532) (4,149) Taxation 70 799 _________ _________ Loss for the year (462) (3,350) _________ _________ Loss per shareBasic and diluted 4 (0.54p) (4.14p) _________ _________ All amounts relate to continuing activities. ServicePower Technologies Plc Consolidated statement of recognised income and expense for the year ended 31December 2007 2007 2006 £'000 £'000 Exchange differences on translation of foreign operations (34) 525 Net (loss)/profit recognised directly in equity (34) 525 Loss for the year (462) (3,350) Total recognised expense for the year (496) (2,825) ServicePower Technologies Plc Consolidated balance sheet at 31 December 2007 2007 2006Assets £'000 £'000Non-current assetsIntangible assets 1,550 1,659Property, plant and equipment 180 158 _________ _________ 1,730 1,817 Current assetsInventories - 13Finance lease receivables 88 -Trade and other receivables 2,955 2,909Cash and cash equivalents 1,520 262 _________ _________ 4,563 3,184 _________ _________Total assets 6,293 5,001 _________ _________ Current liabilitiesTrade creditors and accruals (2,697) (2,306)Deferred revenue (1,430) (1,159)Other creditors (72) (219) _________ _________ (4,199) (3,684) _________ _________Net assets 2,094 1,317 _________ _________ EquityShare capital 8,926 8,108Share premium account 15,206 14,857Share scheme reserve 414 308Exchange translation reserve 343 377Other reserve (3,008) (3,008)Retained earnings (19,787) (19,325) _________ _________Total equity 2,094 1,317 _________ _________ ServicePower Technologies Plc Consolidated cash flow statement for the year ended 31 December 2007 Note 2007 2006 £'000 £'000 Net cash from operating activities 5 415 (1,588) Investing activities Interest received 32 23 Purchases of property, plant and equipment (110) (53) Expenditure on intangible assets (217) (295) _________ _________ Net cash used in investing activities (295) (325) _________ _________ Financing activities Proceeds on issue of shares 1,140 15Capital element of lease paid - (20) ________ _________ Net cash from/(used in) financing activities 1,140 (5) _________ _________ Net increase/(decrease) in cash and cash equivalents 1,260 (1,918) Cash and cash equivalents at beginning of year 262 1,943 Effect of exchange rate changes (2) 237 __________ _________ Cash and cash equivalents at end of year 1,520 262 _________ _________ ServicePower Technologies Plc Notes to the consolidated financial statements for the year ended 31 December2007 _____________________________________________________________________________ 1. Basis of accounting The financial statements of the Group have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as adopted for use in theEuropean Union. In addition to complying with its legal obligation to complywith IFRS as adopted for use in the European Union, the Group has also compliedwith IFRS as issued by the International Accounting Standards Board. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not itself contain sufficient information tocomply with IFRSs. The Company expects to publish full financial statements thatcomply with IFRSs in May 2008. 2. Going Concern During the year ended 31 December 2007 the Group incurred a loss before tax of£0.5m. The Group's directors have prepared projected cash flow information forthe period ending 12 months from the date of approval of these accounts. During the year, the Group has continued to expand its FSS business whichprovides a regular revenue stream and cash funding to the Group. However, thereremains considerable difficulty in accurately forecasting the timing and quantumof cash receipts from the sale of software licences and this indicates theexistence of a material uncertainty which may cast significant doubt about theGroup's ability to continue as a going concern and therefore it may be unable torealise its assets and discharge its liabilities in the normal course ofbusiness. The directors have reviewed the current sales orders and opportunitiesand expenditure forecasts, together with other means of managing the cashoutflows including identifying possible cost savings to enable the Group tooperate within its available resources. It is on this basis that the directorsconsider it appropriate to prepare the Group's accounts on the going concernbasis. The accounts do not include any adjustments which may be necessary if the Groupwas unable to continue to operate. 3. Business and geographical segments For management purposes, the Group is currently organised into two operatingdivisions - software licence sales and outsourcing services. These divisions arethe basis on which the Group reports its primary segment information. Principal activities are as follows: Software licence salesOutsourcing services Segment information about these businesses is presented below. 2007 Software Outsourcing Group Licences Services Total 2007 2007 2007 £'000 £'000 £'000 Revenue from external sales 5,803 8,263 14,066 _________ _________ ________ Profit/(loss) from operations 648 (1,212) (564)Investment income 32 ________Loss before tax (532)Taxation 70 ________Loss after tax (462) ________ 2006 Software Outsourcing Group Licences Services Total 2006 2006 2006 £'000 £'000 £'000 Revenue from external sales 4,642 6,452 11,094 _________ _________ ________ Loss from operations (1,576) (2,595)* (4,171)Investment income 23Finance costs (1) ________Loss before tax (4,149)Taxation 799 ________Loss after tax (3,350) ________ * (2006: includes a loss on the Echostar business of £900,000) 3. Business and geographical segments (continued) 2007 Software Outsourcing Group Licences ServicesOther information 2007 2007 2007 £'000 £'000 £'000Capital additions 73 254 327Depreciation and amortisation (42) (352) (394) Balance sheet AssetsSegment assets 3,352 2,936 6,288 Unallocated corporate assets 5 Consolidated assets 6,293 LiabilitiesSegment liabilities 2,466 1,716 4,182 Unallocated corporate liabilities 17 Consolidated total liabilities 4,199 2006 Software Outsourcing Group Licences Services 2006 2006 2006Other information £'000 £'000 £'000 Capital additions 29 319 348Depreciation and amortisation (50) (394) (444) Balance sheet AssetsSegment assets 2,135 2,826 4,961 Unallocated corporate assets 40 Consolidated assets 5,001 LiabilitiesSegment liabilities 2,074 1,590 3,664 Unallocated corporate liabilities 20 Consolidated total liabilities 3,684 3. Business and geographical segments (continued) Geographical segments The Group's operations are located in the United States of America, the UnitedKingdom and the rest of Europe. The Group's activities are located in all threeareas. The following table provides an analysis of the Group's sales bygeographical market, irrespective of the origin of the services: Sales revenue by geographical market 2007 2006 £'000 £'000 United States of America 10,482 7,961United Kingdom 3,566 3,084Rest of Europe 18 49 14,066 11,094 The following is an analysis of the carrying amount of segment net assets,additions to property, plant and equipment and intangible assets, analysed bythe geographical area in which the assets and liabilities are located: Carrying amount of Additions to property, segment net assets plant and equipment and /(net liabilities) intangible assets 2007 2006 2007 2006 £'000 £'000 £'000 £'000 United States of America 1,213 (805) 265 328United Kingdom 880 2,287 62 20Rest of Europe 11 (165) - - 2,094 1,317 327 348 4. Loss per share The calculation of the basic and diluted loss per share is based on thefollowing data: 2007 2006Earnings £'000 £'000Loss for the purposes of basic and diluted loss per share 462 3,350 Number of shares 2007 2006 Number NumberWeighted average number of ordinary shares for the purpose of basic and diluted loss per share 86,197,159 80,964,778 Loss per share 2007 2006Basic and diluted loss per share 0.54p 4.14p IAS 33 requires presentation of diluted EPS when the Company could be calledupon to issue shares that would decrease net profit or increase net loss pershare. For a loss making company with outstanding share options, net loss pershare would only be increased by the exercise of out-of-the money options. Sinceit is inappropriate to assume that option holders would act irrationally, noadjustment is made for out-of-money share options. For such a company, in themoney options are not dilutive. 5. Notes to the cash flow statement 2007 2006 £'000 £'000 Loss for the year (564) (4,171)Adjustments for:Depreciation of property, plant and equipment 86 123Amortisation of intangible assets 308 321Loss on disposal of property, plant and equipment - 12Share-based payments provision 106 105 Operating cash flows before movements in working capital (64) (3,610)Decrease/(increase) in inventories 13 (13)(Increase)/decrease in receivables (843) 1,423Increase in payables 510 612 Cash generated by operations (384) (1,588)Income taxes received 799 - Net cash from operating activities 415 (1,588) 6. Non statutory information note The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2007 or 2006, but is derivedfrom those accounts. Statutory accounts for 2006 have been delivered to theRegistrar of Companies. The auditors reported on those accounts; their reportwas modified by the inclusion of an added emphasis paragraph which highlightedthe existence of a material uncertainty that cast significant doubt on theCompany's and Group's ability to continue as a going concern. The report didnot contain a statement under s237 (2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 December 2007 will be deliveredfollowing the Company's annual general meeting. The auditors have signed theirreport on the statutory accounts for the year ended 31 December 2007, which ismodified by the inclusion of an added emphasis paragraph which highlights theexistence of a material uncertainty that casts significant doubt on theCompany's and Group's ability to continue as a going concern. Furtherinformation is disclosed in note 2. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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