7th Dec 2006 13:00
Net b2b2 PLC07 December 2006 7 December 2006 Netb2b2 plc Preliminary results for the year ended 30 June 2006 Netb2b2 plc ("Netb2b2" or "the Group"), the digital communications business,today announces its preliminary results for the year ended 30 June 2006. Financial and business highlights: •Turnover increased by 4.5% to £6.6 million (2005: £6.3 million) •Group operating loss before exceptionals of £158,000 (2005: profit of £132,000) •Group loss after tax of £316,000 (2005: profit of £114,000) •Loss per share of 5.4p (2005: profit of 2.3p) •Cash on group balance sheet £121,000 (2005: £571,000) •Strategic Review completed with new focus on Media and Entertainment •Major new clients secured including Royal National Institute of the Blind, Royal Institute for Chartered Surveyors and Ministry of Sound Keith Young, Chairman of Netb2b2, commented: "Following the changes introduced earlier in the summer, current trading isbeginning to improve, boosted by some prestigious recent new contract winssecured by cScape, Blue Sky Hosting and Fernhart New Media. We are confidentthat by focusing more closely on Media and Entertainment, the trading momentumcurrently achieved will enhance the Group's profitability this year, and createa far stronger base going forward." Enquiries, please contact: Andrew Gannon Neil BoomNetb2b2 PLC Gresham PR Ltd.020 7689 8800 020 7404 9000 Chairman's statement This year, parts of the business made progress, particularly in terms of winningprestigious new clients and increased focus, while other parts experienced somefrustrating delays. In short, 2006 can best be characterised as a year oftransition and building for the future. To drive the transition, the directors conducted a Strategic Review of theGroup's entire portfolio of companies. This root and branch examination of allparts of the Group was aimed at identifying the right commercial structure thatcould take best advantage of realistic commercial opportunities in digital mediafor a company of our size. The main conclusion of the Review was that we should focus our offer moresharply on the Media and Entertainment markets. We have the benefit of alreadyworking in these fast-growing markets, serving blue chip clients including ITV,BBC, ITN and Sky, particularly through Fernhart New Media, our most recentlyacquired subsidiary. We have also identified other relevant media businessopportunities in the Media and Entertainment space, including projects relatedto the forthcoming release of VISTA, Microsoft's new Windows operating systemand have recruited a respected person from the gaming industry. Our track record and profile in streaming, interactive media and digitaltelevision gives us a strong platform from which to build further. We areparticularly proud of our client retention and satisfaction rates, which webelieve are higher than industry averages. Moving forward, we see the best opportunities as ones that lever the combinedskills and experience of the Group companies, using our existing experience andincreasingly strong position in digital media to gain new clients. This will besupplemented by combining forces, particularly between our long standing Groupcompanies and Fernhart New Media, to cross-sell our new media offer moresystematically. Another key Group objective for this trading year and beyond isto increase our recurring revenue streams. One of the best ways of achieving arecurring revenue base is by licensing the intellectual property to the client,which is invoiced on an annual basis. We believe much of the new turnover can be delivered without exposing Netb2b2 tothe costs or risks inherent in attempting to make a major acquisition at thisstage. Smaller acquisitions, of either small companies, teams of key people orparticular items of technology, are still part of the board's strategicthinking. One of the most pleasing outcomes of the Review was that it indicated how wecould substantially reduce Group overheads by reducing complexity of structureand leveraging capabilities between the holding and operating companies. Financial and operational review Group turnover improved slightly, rising 4.5% to £6.6 million (2005: £6.3m). TheGroup recorded a full year loss after tax of £316,000 compared with a profit of£114,000 in 2005. This is in the main attributable to a non-recurringexceptional item of £170,000 in respect of pension settlement costs relating toa former subsidiary and other costs of discontinuance, and to unexpected delaysby customers in committing to new contracts as reported to shareholders on 28July 2006. Our cash position at the period end of £121,000 (2005: £571,000) isconsidered satisfactory and our underlying cash flow is expected to improve aswe reduce overheads and increase revenues from new contracts won. It alsoreflects maintained investment in technology and key personnel in order todeliver our goal of achieving greater critical mass in the digital world. Operationally, there were some impressive new business wins across most of thebusinesses and some attractive new services added. cScape, our largestsubsidiary, has recently launched a new Customer Engagement Unit to create ahighly engaging web experience for its clients, which it sees as a core elementin its goal to become a full service provider. In terms of high profile clients, we are particularly pleased that cScapesecured a major new contract to completely revamp the Royal National Instituteof the Blind's ("RNIB") online presence and eCommerce capabilities in a contractvalued at around £438,000. The RNIB site has been relaunched successfully andusers have commented positively on its new look and additional functionality. cScape also secured a contract from youth record label Hed Kandi, part of theMinistry of Sound music group. The contract is for cScape to redevelop its sitein Microsoft's new Office SharePoint Server 2007TM - the first liveimplementation of this product in the world. Fernhart New Media also recorded some impressive new contracts, includinghelping create a new online service for the Royal Institute for CharteredSurveyors (RICS) that enables anyone requiring the services of a charteredsurveyor to find one at the right price and location. ITM Graphics also won avery pleasing contract with Dalton's Weekly. Outlook Following the changes introduced earlier in the summer, current trading isbeginning to improve, boosted by some prestigious recent new contract winssecured by cScape, Blue Sky Hosting and Fernhart New Media. We are confidentthat by focusing more closely on Media and Entertainment, the trading momentumcurrently achieved will enhance the Group's profitability this year and create afar stronger base going forward. Keith YoungChairman7 December 2006 GROUP PROFIT & LOSS ACCOUNT Year ended 30 June 2006 Note Year Year ended ended 30 June 30 June 2006 2005 £000 £000 TURNOVER 6,590 6,303 Cost of sales (1,614) (1,846) ----- -----GROSS PROFIT 4,976 4,457 ----- -----Administrative expenses before exceptional item (5,134) (4,325)Operating exceptional item (20) (18) ----- -----Administrative expenses (5,154) (4,343) ----- -----OPERATING (LOSS)/PROFITBefore exceptional item (158) 132Operating exceptional item (20) (18) ----- -----Total operating (loss)/profit (178) 114 ----- -----Interest payable and similar charges (27) (19)Interest receivable and similar income 1 - ----- -----(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (204) 95 Non-operating exceptional itemCost of discontinuance of business and settlement ofpension liabilities 3 (170) -Surplus arising on discontinued activity 3 58 - ----- ----- (112) - Tax on (loss)/profit on ordinary activities - 19 ----- -----(LOSS)/PROFIT FOR THE FINANCIAL YEAR (316) 114 ===== =====(LOSS)/PROFIT PER SHARE (PENCE) 4 (5.4p) 2.3p ===== ===== All turnover and results arose from continuing operations apart from thenon-operating exceptional items which relate to the closure of discontinuedoperations. 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 2006 30 June 2006 30 June 2005 Note £000 £000 £000 £000 FIXED ASSETSIntangible assets 2,438 1,887Tangible assets 570 416 ----- ----- 3,008 2,303CURRENT ASSETSStocks 141 98Debtors 1,398 1,231Cash at bank 121 571 ----- ----- 1,660 1,900CREDITORS: amounts falling due (2,405) (2,172)within one year ----- ----- NET CURRENT LIABILITIES (745) (272) ----- ----- CREDITORS: amounts falling due (112) -after one year ----- ----- TOTAL ASSETS LESS CURRENT 2,151 2,031LIABILITIES ===== ===== CAPITAL AND RESERVESCalled up share capital 606 523Share premium 553 200Capital redemption reserve 6 6Profit and loss account 986 1,302 ----- -----EQUITY SHAREHOLDERS' FUNDS 2,151 2,031 ===== ===== GROUP CASHFLOW STATEMENTYear ended 30 June 2006 Note Year ended Year ended 30 June 30 June 2006 2005 £000 £000 Net cash (outflow)/inflow from operatingactivities 5 (296) 234 Returns on investments and servicing offinance (26) (19) Capital expenditure (336) (169) Acquisitions (200) - --- ----Net cash (outflow)/inflow before financing (858) 46 Financing 537 (85) --- ---Decrease in cash in the year (321) (39) === ===Reconciliation of net cash flow to movement in netfunds Decrease in cash in the year 6 (321) (39) Decrease/(increase) in debt and leasefinancing (476) 301 --- ---Movement in net funds in the year (797) 262 Net funds/(debt) at start of year 268 6 --- ---Net (debt)/funds at end of year 6 (529) 268 === === 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 2006 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 June2005, 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 Operating (Loss)/Profit 2006 2005 2006 2005 £000 £000 £000 £000 Internet services 3,464 3,316 235 331 Publishing and digital communicationservices 1,945 2,307 46 112 Specialist hosting 668 671 151 204 Media and interactive technology 503 - (16) - Central and other costs 10 9 (574) (515) Exceptional item - - (20) (18) ----- ----- --- --- Group 6,590 6,303 (178) 114 ===== ===== === === (Loss)/Profit Net assets after tax 2006 2005 2006 2005 £000 £000 £000 £000 Internet services 228 330 476 642Publishing and digital communicationservices 30 97 (439) (292) Specialist hosting 149 202 33 24 Media and interactive technology (18) - (1) - Central and other costs (573) (516) 2,082 1,657 Exceptional item (132) (18) - - --- --- ----- ----- Group (316) 95 2,151 2,031 === === ===== ===== 3. EXCEPTIONAL ITEMS A net charge of £170,000 has been made in 2006 in respect of the closure of theTypematters (London) Limited business in the year ended 30 June 2005, whichrelates primarily to the settlement of pension liabilities. A surplus of £58,000arose during the year as a result of the liquidation of a non-trading subsidiaryof the group. 4. (LOSS)/ PROFIT PER ORDINARY SHARE Basic (loss)/ profit per share is calculated by dividing the (loss)/ profitattributable to ordinary shareholders by the weighted average number of ordinaryshares during the year. The diluted (loss)/ profit per share is the same as the actual (loss)/ profitper share. Year ended Year ended 30 June 2006 30 June 2005 Basic earnings attributable to ordinaryshareholders: £000 (316) 114 ========= =========Weighted average number of ordinary shares 5,846,909 4,911,048 ========= =========(Loss) /profit per share: (5.4p) 2.3p ========= ========= 5. RECONCILIATION OF OPERATING (LOSS)/ PROFIT TO NET CASH (OUTFLOW)/ INFLOW FROM OPERATING ACTIVITIES 2006 2005 £000 £000 Operating (loss)/ profit (178) 114Exceptional item (112) -Depreciation 147 140Loss on disposal/write off of tangible fixed assets 74 -(Increase) in stocks (43) (19)(Increase) in debtors (71) (126)(Decrease)Increase in creditors (113) 125 --- ---Net cash (outflow)/inflow from operating activities (296) 234 === === 6. ANALYSIS OF CHANGES IN NET (DEBT)/ FUNDS At 1 July Cash At 30 June 2005 flow 2006 £000 £000 £000Net cashCash at bank and in hand 571 (450) 121Bank overdrafts (270) 129 (141) --- --- --- 301 (321) (20) --- --- ---DebtBank loan (invoice discounting) - (333) (333)Hire purchase agreements (33) (143) (176) --- --- ---Total 268 (797) (529) === === ===7. 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 thegoodwill elements have indefinite economic lives. The board has carried outimpairment reviews on these goodwill elements and has concluded that theircurrent recoverable amounts are in excess of their carrying values. 8. COPIES OF PRELIMINARY STATEMENT Copies of this announcement are available from www.netb2b2.com or the companysecretary at 4th Floor Central House, 142 Central Street, London, EC1V 8AR.Copies of the Annual Report and Accounts of the Company for the year ended 30June 2006 will be sent to shareholders in due course. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Chesterfield Sp