12th Sep 2007 07:02
Servoca PLC12 September 2007 SERVOCA Plc (formerly Multi Group Plc) Preliminary announcement of the unaudited resultsfor the year ended 31 March 2007 Salient points • Turnover £11.2m • Gross Profit £2.7m • Loss After £7.0m Exceptionals • Share Consolidation 1 for 100 • Dream Group and Windsor Recruitment Acquired Bob Morton, Chairman, commented: "Following the reverse acquisition on 7 June 2007 and the £4 million (beforeexpenses) raised by way of a placing, Servoca now has a stable and well financedplatform, a strong board and the prospects for growth both by organicinitiatives and by pursuit of carefully selected bolt on and strategicacquisitions." "The new Board view the future with confidence." For further enquiries: Servoca PlcDarren Browne, CEO 020 7747 3030 Threadneedle CommunicationsTrevor Bass / Alex White 020 7936 9666 JMFinn Capital MarketsGeoff Nash / Ed Frisby 020 7600 1658 Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA Plc Chairman's Statement For the year ended 31 March 2007 Introduction The year ended 31 March 2007 was the second year of significant losses. The twoyears ended 31 March 2007 were both substantially impacted upon by theunderperformance of acquisitions made during 2005 and the acquisition andsubsequent disposal of Global Medics Limited during 2006. Multi Group Plc, which changed its name to Servoca Plc on 7 June 2007, nowincorporates the business of Dream Group Limited. The board has beenrestructured and the integration process of Multi Group and Dream is complete. Financial review During the year ended 31 March 2007, the Group reported turnover of £11.2million on which it achieved gross profit of £2.7 million. Of this, £7.1 millionrelates to turnover of continuing businesses, on which it achieved gross profitof £1.7 million. Comparison with previous years is not considered meaningfulgiven the various acquisitions and disposals of businesses within the Groupduring this time. The operating loss, prior to an impairment charge of £4.2 million against thecarrying value of goodwill in the Group's trading subsidiaries and a £0.8million provision for business restructuring, was £1.9 million during theperiod. In aggregate, the Group has reported a loss for the year ended 31 March2007 of £7.0 million. Board changes Following the reverse acquisition of the Group by Dream on 7 June 2007, OliverCooke stepped down as Executive Chairman and Darren Browne was appointed as theChief Executive Officer to restructure the Group and lead its futuredevelopment. Miles Davis and Tony Rogers also joined the board as ExecutiveDirectors. Janet Barn stepped down from the main board and became the managing director ofthe Group's Medical division. David Marks stepped down as a Non-Executive Director. Bob Morton and John Foley, who have a wealth of successful business and publiccompany experience, joined the board as Non-Executive Chairman and Non-ExecutiveDirector respectively. Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcChairman's Statement (continued)For the year ended 31 March 2007 Post balance sheet events On 7 June 2007, the Company simplified its share structure by consolidatingevery one hundred ordinary shares of 0.1p each into one ordinary share of 10peach. Following this consolidation, 5,447,048 ordinary shares with a nominalvalue of 10p each were in issue. On the same date, the Company raised £4 million, before expenses, through aplacing of 16,000,000 ordinary shares of 10p each at an issue price of 25p pershare. On the same date, the Company acquired 99.97% of the issued share capital ofDream Group Limited for a total consideration of £4.46 million, satisfied infull by the issue of 17,839,944 ordinary shares of 10p each were issued at 25pper share. On 31 July 2007, the Company acquired, as a going concern, the business, tradeand assets of a business trading as Windsor Recruitment ("Windsor") from theadministrators Vantis Group Limited. Windsor provides recruitment services inrespect of qualified nurses, care assistants and social work professionals. The Company paid an initial cash consideration of £1.37m, of which £1.16mrelates to the debtor book, with the remaining £0.21 million paid in respect ofthe business, trade and other assets acquired. Performance related deferredconsideration will be payable in cash for each of the two 12 month periodsfollowing the acquisition and is capped at £0.30 million. Accounting reference date change The board have decided that following the publication of these results theaccounting reference date should be changed to 30 September. This will ensurethat future results from 1 October 2007 will more accurately reflect thecomposition and focus of the new enlarged Group. International Financial Reporting Standards Servoca will adopt International Financial Reporting Standards for the firsttime for its six month accounting period commencing on 1 April 2007 and theconversion process to the new accounting standards is currently underway. Under IFRS 3 "Business Combinations", the recent acquisition of Dream GroupLimited is deemed to constitute a reverse acquisition and, as such, thefinancial statements of the Group going forward will be a continuation ofDream's financial statements. This will result in the goodwill arising on the acquisition being that generatedon the consolidation of the existing Group companies. It is currentlyanticipated that this goodwill will be significantly greater than the carryingvalue at 31 March 2007, as assessed by the directors in the preparation of thesefinancial statements. It is therefore expected that a further goodwillimpairment charge will be required in the six month accounting period to 30September 2007 to reflect the appropriate carrying value accordingly. Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcChairman's Statement (continued)For the year ended 31 March 2007 Summary and prospects Following the reverse acquisition and the £4 million (before expenses) raised byway of a placing, Servoca now has a stable and well financed platform, a strongboard and excellent growth prospects, both by organic initiatives and by thepursuit of carefully selected bolt on and strategic acquisitions. The new Board view the future with confidence. Bob MortonChairman12 September 2007 Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcChief Executive Officer's StatementFor the year ended 31 March 2007 Overview Following the reverse takeover and change in Multi Group's name to Servoca Plcon 7 June 2007, we were faced with two challenges, the first to deal with legacyissues from the old Multi business and the second to implement our strategy forthe future of the new businesses that make up the enlarged Servoca Plc. I am pleased to report that this statement marks the completion of the firsttask, in which we have comprehensively dealt with all legacy issues and are nowin an excellent position to move forward. Following the raising of £4 million(before expenses) on 7 June 2007 by way of a placing, the Group is now in astrong financial position. The Board has been substantially strengthened by the appointment of Bob Morton(Non-Executive Chairman) and John Foley (Non- Executive Director) both of whomare invaluable to the new strategy of the Group and their combined experiencewill help the Company execute its plans. Servoca is now focused on two distinct divisions, Resourcing and SecurityServices. Strategy and delivery Resourcing The new combined Group now has a significant foothold within the UK Resourcingsector. Within Medical and Care we now have four trading brands Berry, TLP,Dream and Windsor and these brands supply a broad spectrum of skills providingallied health professionals, nurses, domiciliary care, social workers and otherassociated specialisations. With this platform in place we look forward toadding other specialist Medical and Care organisations to our portfolio, tofurther enhance our offering to the UK Health sector. Although this sector hasbeen challenging in recent years, I am pleased to report that the specificsectors and geographical locations that our companies are trading in areencouraging with many opportunities. The second area of resourcing that Servoca trade within is the Education sectorand through our brand Dream Education we continue to grow our market presenceboth in the UK and abroad. Dream Education provides long term qualified teachersmostly within secondary schools and we are actively looking to grow organicallyand by acquisition into other specialist areas of education recruitment. Our third division within resourcing provides staff to the Criminal JusticeSector - Local and National Government and the Private Sector generally, butalso, more specifically, to police constabularies. Through our newly createdbrand Servoca Dream I am pleased to report that we are now trading with the vastmajority of the 43 constabularies in England and Wales and have a number ofclients in other parts of the UK and overseas. We consider this area to havesignificant organic growth potential and we are currently investing significanttime and resource to maximise our potential in this exciting market. Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcChief Executive Officer's Statement (continued)For the year ended 31 March 2007 Strategy and delivery (continued) Resourcing (Continued) Within the resourcing sector we expect organic growth from all existingcompanies and seek to make a number of other strategic acquisitions throughoutthe coming year. Security Services With the creation of the enlarged Servoca, we acquired a criminal justiceoutsourcing division that was housed within Dream Group Limited. The Divisionhas enjoyed particular success in the areas of criminal justice training, crimetraining, the outsourcing of cold case reviews, business process outsourcing andthe provision of highly experienced teams into sensitive areas. Most recently wehave been able to extend our reach to include a forensic offering to the UKPolice Service and we are now planning to grow our forensic service offering tothe criminal justice sector within the UK and abroad. This division will begrown independently of the resourcing division, and we are now negotiating toacquire additional companies with whom we have synergy. The Group will maintainits current aggressive internal investment program which will enable Servoca tomaximise the organic growth within this fast growing sector. Servoca intend to build this division to become a significant provider of highend specialist security services to this sector. We are in the process ofrecruiting additional senior management in order to assist us in achieving ourchallenging goals. Outlook To shape and deliver the future of the Group we rely upon the people that workwithin our organisation. At Servoca we are extremely fortunate to haveexceptionally committed people who work tirelessly on behalf of our customers todeliver real innovation and customer satisfaction. The Board looks forward with confidence to executing its plans and deliveringincreased shareholder value over the coming years. Darren BrowneChief Executive Officer12 September 2007 Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcConsolidated profit and loss accountFor the year ended 31 March 2007 Year ended Year ended Year ended 15 months 31 March 31 March 31 March ended 31 2007 2007 2007 March 2006 Continuing Discontinued Operations Operations Total Total Note £'000 £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) (audited) Turnover 7,089 4,142 11,231 15,979Cost of sales 5,357 3,184 8,541 11,957 Gross profit 1,732 958 2,690 4,022Other operating expenses 8,522 1,075 9,597 13,526Operating loss before goodwillimpairment and provision forbusiness restructuring (1,797) (117) (1,914) (1,628)Goodwill impairment (note 4) (4,183) - (4,183) (7,876)Provision for businessrestructuring 3 (810) - (810) - Operating loss (6,790) (117) (6,907) (9,504) Profit on disposal of operation 6 2 - 2 -Loss on ordinary activitiesbefore interest (6,788) (117) (6,905) (9,504) Interest receivable and similarincome 3 146Interest payable and similarcharges (115) (121)Loss on ordinary activitiesbefore taxation (7,017) (9,479) Taxation (1) (5) Loss on ordinary activities aftertaxation (7,018) (9,484) Minority interests (15) (23) Loss for the financial year (7,033) (9,507)Loss per share: Pence PenceFrom continuing and discontinuedoperations- Basic and diluted 2 (1.28) (2.75) From continuing operations- Basic and diluted 2 (1.26) (2.60) Recognised gains and losses for the current and preceding period are whollyrepresented by the above consolidated profit and loss account. Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcConsolidated balance sheetAt 31 March 2007 31 March 31 March 31 March 31 March 2007 2007 2006 2006 Note £'000 £'000 £'000 £'000 (unaudited) (unaudited) (audited) (audited)Fixed assetsIntangible assets 4 514 6,277Tangible assets 126 285 640 6,562Current assetsDebtors 1,054 2,778Cash at bank and in hand 55 530 1,109 3,308 Creditors: amounts falling due within one year (2,063) (5,836) Net current liabilities (954) (2,528) Total assets less current liabilities (314) 4,034 Creditors: amounts falling due after more thanone year (4) (2,600) Provisions for liabilities (823) (37) (827) (2,637) Minority interests - (55) Net (liabilities)/assets (1,141) 1,342 Capital and reservesCalled up share capital 545 585Share premium account 6,512 5,682Capital redemption reserve 6,036 2,276Merger reserve 96 800Profit and loss account (14,330) (8,001) Shareholders' (deficit)/funds 5 (1,141) 1,342 Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcConsolidated cash flow statementFor the year ended 31 March 2007 Year ended 31 15 months March ended 31 2007 March 2006 £'000 £'000 (unaudited) (audited)Reconciliation of operating loss to net cash outflow from operatingactivitiesOperating loss (6,907) (9,504)Depreciation and amortisation charges 435 389Loss on disposal of fixed assets 64 2Goodwill impairment (note 4) 4,183 7,876Decrease/(increase) in debtors 470 (87)Increase in creditors 469 350Increase in provisions 786 2 Net cash outflow from operating activities (500) (972) Cash flow statementNet cash outflow from operating activities (500) (972)Returns on investments and servicing of finance (112) 25Taxation paid (256) (176)Capital expenditure and financial investment (133) (136)Acquisitions and disposals 703 (5,887) Cash outflow before financing (298) (7,146)Financing 247 1,651 Decrease in cash in the year/period (51) (5,495) Reconciliation of net cash flow to movement in net debtDecrease in cash in the year/period (51) (5,495)Cash outflow from decrease in debt and lease financing 3 - Change in net debt resulting from cash flows (48) (5,495)Debt waived/converted on disposal of subsidiary undertaking 4,100 -Reduction in and non-cash settlement of debt 1,140 (5,240)Inception of finance leases (10) - Movement in net debt in the year/period 5,182 (10,735)Net (debt)/funds at start of the year/period (5,727) 5,008 Net debt at end of the year/period (545) (5,727) Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcNotes forming part of the financial statementsFor the year ended 31 March 2007 1 Basis of preparation The preliminary financial information incorporates the unaudited results ofServoca Plc and all its subsidiary undertakings for the year ended 31 March2007. The financial information set out in the announcement does not constitute theGroup's statutory accounts for the year ended 31 March 2007 or for the periodended 31 March 2006. The financial information for the fifteen months ended 31March 2006 is derived from the statutory accounts for that period which havebeen delivered to the Registrar of Companies. The auditors reported on thoseaccounts; their report was unqualified and did not contain a statement unders237(2) or (3) Companies Act 1985, but included reference to uncertainty overgoing concern which the auditors drew attention to by way of emphasis withoutqualifying their report. The statutory accounts for the year ended 31 March 2007will be finalised on the basis of the financial information presented by thedirectors in this preliminary announcement and will be delivered to theRegistrar of Companies following the Company's annual general meeting. The preliminary financial information has been prepared under the accountingpolicies set out in the financial statements for the period ended 31 March 2006,except for the following: Share based payments In preparing these financial statements the Group has adopted for the first timeFRS 20 "Share-based payment". Where share options are awarded to employees, the fair value of the options atthe date of the grant is charged to the profit and loss account over the vestingperiod. Non-market conditions are taken into account by adjusting the number ofequity instruments expected to vest at each balance sheet date so that,ultimately, the cumulative amount of recognised over the vesting period is basedon the number of options that eventually vest. Market vesting conditions arefactored into the fair value of the options granted. As long as all othervesting conditions are satisfied, a charge is made irrespective of whether themarket vesting conditions are satisfied. The cumulative expense is not adjustedfor failure to achieve a market vesting condition. Where the terms and conditions of options are modified before they vest, theincrease in the fair value of the options, measured immediately before and afterthe modification, is also charged to the profit and loss account over theremaining vesting period. Where an equity instrument is granted to a person other than an employee, theprofit and loss account is charged with the fair value of goods and servicesreceived. The directors have calculated the cumulative charge required under FRS 20 andconsider this amount to be immaterial to these financial statements and thus noadjustment has been made. Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcNotes forming part of the financial statementsFor the year ended 31 March 2007 2 Loss per share The calculation of loss per share for the year ended 31 March 2007 is based on aweighted average number of shares in issue during the year of: Dilutive effect of share options and shares to be issued Basic Diluted 31 March 2007 550,896,601 - 550,896,60131 March 2006 345,698,375 - 345,698,375 The loan notes, convertible redeemable preference shares and part of thedeferred consideration payable have been excluded from the diluted loss pershare calculations for the periods ended 31 March 2006 and 31 March 2007 as theyare anti-dilutive. The above same number of shares are used in both the basic and diluted loss pershare calculations below. Year ended 31 March 2007 (unaudited) Continuing Discontinued operations operations Total Loss used for basic and dilutedcalculation (£'000) (6,916) (117) (7,033)Basic and diluted loss per share (pence) (1.26) (0.02) (1.28) Continuing Discontinued operations operations Total15 months to 31 March 2006 (audited) Loss used for basic and dilutedcalculation (£'000) (8,941) (566) (9,507)Basic and diluted loss per share (pence) (2.60) (0.15) (2.75) 3 Business restructuring As announced by the Company in February 2007, the Board has embarked on adetailed strategic review of the business and implementation of a significantrestructuring and cost cutting exercise. As part of this procedure, there hasbeen a provision made in the year of £810,000 for restructuring costs, which islargely made up of salaries, termination costs and provisions for vacantproperty costs. Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcNotes forming part of the financial statements (continued)For the year ended 31 March 2007 4 Intangible assets Goodwill £'000 (unaudited) CostAt 1 April 2006 14,367Determination of deferred consideration (490)Additions 66Disposal of subsidiary undertaking (note 6) (8,784) At 31 March 2007 5,159 Amortisation and impairmentAt 1 April 2006 8,090Charge for the year 288Impairment 4,183Eliminated on disposal of subsidiary undertaking (note 6) (7,916) At 31 March 2007 4,645 Net book valueAt 31 March 2007 514 At 31 March 2006 6,277 Additions to goodwill in the year are analysed further as follows: £'000 Adjustment to cost of acquisition of Global Medics Limited 72Acquisition of minority interest in 1st 4 Locums Limited (see below) (6) At 31 March 2007 66 Under the terms of the original purchase agreement, the Company had the optionto acquire the remaining 10% of the issued share capital of 1st 4 Locums Limitedon an agreed valuation basis at any time until October 2008. This option wasexercised on 26 January 2007 for a total consideration of £50,000, incurringcosts of £14,000. The consideration was satisfied by the issue of 5,000,000ordinary shares of 0.1p each at a price of 1p each. The fair value of the assetsacquired was £70,000. Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcNotes forming part of the financial statements (continued)For the year ended 31 March 2007 4 Intangible assets (continued) At 31 March 2007, the directors conducted an impairment review of the carryingvalue of the goodwill associated with the acquisitions of Berry RecruitmentHoldings Limited and 1st 4 Locums Limited. In doing so, they calculated thevalue in use of each acquisition by calculating the present value of theexpected future cash flows of each of these income-generating units. Givencurrent market uncertainties and recent personnel changes within these entities,the cash flows were risk-adjusted by between 10% and 75%, before applying arisk-free discount rate. The reviews indicated that a significant impairment to the carrying value of thegoodwill in the Group's balance sheet was required. Accordingly, a chargetotaling £4,183,000 has been made to the profit and loss account for the yearended 31 March 2007. 5 Reconciliation of movements in shareholders' funds / (deficit) Year 15 months ended ended 31 March 31 March 2006 2007 £'000 £'000 (unaudited) (audited) Loss for the year/period (7,033) (9,507)Conversion of loan notes and preference shares 3,600 -Ordinary shares issued, net of expenses 950 6,547 Net movement in shareholders' funds (2,483) (2,960)Opening shareholders' funds / (deficit) 1,342 4,302 Closing shareholders' (deficit) / funds (1,141) 1,342 Preliminary announcement of the unaudited results for the year ended 31 March2007 SERVOCA PlcNotes forming part of the financial statements (continued)For the year ended 31 March 2007 6 Discontinued operations On 14 November 2006, the Group disposed of 100% of the issued share capitalGlobal Medics Limited for a total consideration of £1,020,000, satisfied by aninitial cash payment of £350,000, a deferred cash payment of £170,000 (receivedon 31 May 2007) and the waiver of the deferred consideration of £500,000. The details of the disposal are as follows: £'000 £'000 (unaudited) (audited) Cash proceeds 350Deferred cash 170Waiver of deferred consideration 500 1,020Net assets disposed of:Tangible fixed assets 91Debtors 1,424Cash 4Bank overdraft and invoice discounting facility (583)Creditors (926) (10) 1,010 Cost of disposal (140)Unamortised goodwill (868) Profit on disposal 2 The net inflow of cash during the year in respect of the sale of Global MedicsLimited was £210,000, being the initial cash consideration of £350,000, less the£140,000 of costs incurred. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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