11th May 2005 07:00
2 ergo Group plc11 May 2005 Embargoed until 7am 11 May 2005 2ergo Group plc ("2ergo" or the "Group") Interim Results for the six months ending 28 February 2005 2ergo Group plc, which facilitates communication and interaction betweencompanies and their customers or staff using Mobile Internet, SMS, MMS, Web andVoice applications, is pleased to announce interim results for the six monthsended 28 February 2005. Interim 2005 Interim 2004 % change £'000 £'000Turnover 8,893 4,452 +100Operating profit 518 219 +137Pre-tax profit 540 212 +155Adjusted pre-tax profit (1) 737 401 +84Basic earnings per share 1.53p 0.6p +155Adjusted earnings per share (1) 2.08p 1.21p +72(1) - figures stated pre amortisation • Significantly exceeded market expectations for adjusted pre-tax profit of £737,000 • Turnover increased 100% to £8.9m • 5th consecutive year of triple-digit growth • Successful validation of US operations • Transactional activity across the Multiserve Platform increased by 82% Barry Sharples, Joint Managing Director of 2ergo, commented: "We are delightedto report on 2ergo's progress over the last six months and to demonstrate to themarket how the results of the hard work and investment since flotation over 12months ago are now benefiting the growth of the business going forward. "In particular, the benefits of operational gearing are starting to showthrough; the final stages of the implementation of 2ergo's infrastructure toserve the global market is very close to being completed. This will enable us tosupport the continued growth in demand for converged communication servicesaround the world and in such a fast moving market we are delighted the Group hasachieved stability, whilst looking forward to delivering significant resultsover the years to come. "We believe we can continue our aggressive organic growth and we are now readyto consider strategic acquisitions that will benefit from 2ergo's core servicesand which will generically grow the diverse usage of the Multiserve Platform atthe same time as increasing the Group's global footprint." -ends- For further information, please contact: 2ergo Group plc +44 (0)1706 221777Neale Graham, Joint Managing DirectorBarry Sharples, Joint Managing DirectorJill Collighan, Finance Director Tavistock Communications +44(0)20 7920 3150Christian Taylor-Wilkinson or Paul Dulieu Embargoed until 7am 11 May 2005 2ergo Group plc ("2ergo" or the "Group") Interim Results for the six months ending 28 February 2005 2ergo is pleased to report another period of strong operational and financialgrowth, seeing a significant increase in transactions across its proprietaryMultiserve Platform, which lies at the heart of the Group's infrastructure andmultidisciplinary services. Yet again, both top and bottom line triple digitgrowth has been achieved. Financial Review Since commencing trading in 1999, the Group has achieved turnover growth of atleast 100% per annum. This trend has continued into 2005, with turnover for thesix months to 28 February 2005 of £8.9 million being double that achieved in thesame period in 2004 (£4.45 million). This growth in revenues comes as a resultof an 82% increase in transactions across the Multiserve Platform from both newand existing clients, as more companies embrace communication technology as away of interacting with, and supplying services to, their staff and customers. The Board is pleased to announce that the first revenues from the Group's USoperations have been generated in the period, validating all aspects of theGroup's US product and service portfolio. The Group believes it is now in aposition to move from its validation phase into full-scale operation in the USover the next twelve months, and is pleased that the controlled, cautiousapproach into the US market has proven to be a successful strategy. Gross profit in the period has grown to over £2.0 million (2004: £1.2 million),with the margin achieved for the six months being 22.9%. This margin is in linewith the 22.5% achieved in second half of the 2004 financial year as the Grouphas maintained the mix of its products and services during the period. Operating expenses in 2005 have risen by £0.56 million. Of this increase, staffcosts account for £0.33 million. Average headcount in the six months to 29February 2004 was 24, by 2005 this had risen to 40. This investment in staffcosts has been made to facilitate growth in the Group; the increase in revenuesand profitability achieved in the period support this investment decision. Since31 August 2004, headcount has increased by only four, demonstrating that theGroup now has sufficient staff to support the levels of activity achieved in theperiod without the need to grow headcount at the rate seen in the past. From anoperational gearing perspective, future revenues should contribute more to thebottom line as staff costs as a percentage of turnover should now begin to fallin the UK. Pre-tax profit for the six months was £0.54 million, an increase of 155% overthe £0.21 million achieved in 2004. Adjusted (pre-amortisation) pre-tax profithas grown to £0.74 million, significantly exceeding market expectations. Basicearnings per share increased by 155% to 1.53p (2004: 0.6p). The Group continues to be cash generative, having a strong balance sheet, withshareholders' funds at 28 February 2005 standing at £4.3 million. Operational Review The Group's core operations have continued to perform in line with management expectations, with several new client applications being launched during the period. Client loyalty has continued to be strong with over 96% of 2ergo's clients renewing their contracts during the period with many also expanding their current usage. In addition, a significant number of new clients have taken up the Group's services in the six months. During the period the Group has remained extremely profitable. As predicted, itis starting to see the real benefit of operational gearing from the extensivedevelopment work undertaken in recent years as transaction volumes build withoutthe requirement to re-engineer or expand technical resource to accommodate thecontinued upturn in transaction volumes. Development has continued on Version 4 of the Multiserve Platform, which isscheduled to be released this month. As no further work is needed within theforeseeable future to satisfy anticipated future capacity requirements, Version4 has concentrated on utilising best practice engineering methods to design anddeploy an Oracle database architecture providing increased performance,scalability and integrity. These increased complexities of the MultiservePlatform provide a further key differentiator and barrier to entry in themarketplace. The Group is also currently in the process of assessing thecommerciality of licensing the Platform to third parties around the world. Following the recent AGM on 7 April 2005, the Group announced that it hadconducted a share buy-back of 718,182 ordinary shares, of 1p each, from MichaelKilgannon, which are to be held in treasury. The shares were purchased at aprice of 110p per share, which the Board believes represents excellent value forshareholders. Placing these shares into treasury means they can be used tofacilitate future transactions without diluting existing shareholdings. TheBoard also expects the buy-back to improve future earnings per share. The Groupholds a further option on the remaining 1,781,818 shares Mr Kilgannon still ownsat a price of 110p per share. US Operations M-invent, the Group's US trading company, has achieved successful validation ofits products and services. Building relationships with organisations such asHearst Communications, Clear Channel and the New York Post, the company now hasnumerous retail partnerships as well as technical integration into the USnetworks. Over this period M-invent has also continued to attract a significant number ofregistered consumer members to its mobile content lifestyle service "Zobmob",which is proving to be a real hit with American teenagers. The Group plans tocontinue its controlled roll out in the US over the next twelve months, leadingto a significant contribution to the Group's revenue in 2006/7. The Board is extremely encouraged by the speed in which the American market hasmatured over the past 6 months, even though US operators are still adopting a'walled garden' approach to their user base. However, this is relaxing over timeand reflects the progression of the European market. In addition, the level ofacceptance the American public are showing towards the mobile content andservices sector is pleasing. The US will remain a key focus area for the Groupand 2ergo has already started to receive interest from the US in its UKapplication services and solutions. Market Overview Communications convergence across the fixed-line and mobile telecommunicationsand IT landscapes is having a major impact on both business and consumer life.It is changing the way people interact and communicate. This change isconvincing many organisations to define and deploy new ways to conduct business- to optimise business processes, improve customer or consumer experience,leverage market differentiation and above all, drive performance improvement. As a result, the communications convergence market and, in particular, themobile sector will continue to experience dramatic growth around the world, withindustry forecasts predicting healthy increases in transaction volumes. The mobile entertainment market is continuing to broaden. Several new sector opportunities emerged during the period, the most significant being Mobile Gaming. The Group considers this to present significant revenue opportunities and will increasingly focus on this sector as it emerges, working closely withboth key gaming industry partners and clients to develop specialist services. Following the early success of mobile applications to support B2Ccommunications, organisations are increasingly adopting mobile solutions tosupport both internal and B2B processes. Increasingly, businesses are seekingnew ways to utilise technology to deliver mass communications and provide asimplified approach to data capture. The recent relaxation in European legislation regarding m-commerce also presentsnew market opportunities for 2ergo. The customer is no longer restricted to onlypurchasing content and services to reside on the mobile device. We are enteringa new phase in mobile commerce, creating new channels to market for manybusinesses. Now, the mobile device can be used by business people and consumersalike to purchase many different types of products and services. Outlook The Group remains confident of its positioning as it takes advantage of aconverging market, and in particular, the mobile communication sector's dramaticevolution. It looks forward to benefiting from the increasing rewards that areexpected, and have been predicted. The Board feels this view is supported by thecurrent dynamic levels of growth enjoyed by the Group. The Group's success to date is based on differentiating its services through itsholistic approach and continued desire and ability to innovate. A key factor ofthis approach has been the sharing of knowledge across telecommunications, ITand business facets - to drive value from the appropriate use of technologies.This has recently evolved into the formation of a consulting practice, aimed atguiding clients through the myriad of choices they have to make, to ensure theydeploy the right solution to maximise achievement of business goals. In addition to maintaining the Group's traditional organic growth, a number ofselect acquisitions have been identified both in Europe and the US, and theGroup expects to make announcements during the year regarding theseopportunities. New business pipeline remains healthy and the Group fosters and benefits fromstrong client loyalty. Once again, 2ergo has enjoyed strong growth to date, andexpects this trend to continue throughout the remainder of this year. -ends- 2ergo Group plc Consolidated Profit and Loss AccountFor the six months ended 28 February 2005 Notes Unaudited Unaudited Audited 6 months to 6 months to Year to 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000------------------------------------------------------------------------------- Turnover 8,893 4,452 11,171 Cost of sales (6,859) (3,280) (8,489)-------------------------------------------------------------------------------Gross profit 2,034 1,172 2,682 Operating expenses (1,516) (953) (2,285) Profit on sale of database - - 222------------------------------------------------------------------------------- Operating profit 518 219 619 Finance charges (net) 22 (7) 26------------------------------------------------------------------------------- Profit on ordinary activities before taxation 540 212 645 Tax on profit on ordinary activities 2 (119) (51) (40)------------------------------------------------------------------------------- Retained profit for the period 421 161 605 ------------------------------------------------------------------------------- Earnings per ordinary share: Basic 3 1.53p 0.6p 2.22p Diluted 3 1.46p 0.6p 2.19p 2ergo Group plc Consolidated Balance SheetAs at 28 February 2005 Unaudited Unaudited Audited 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000------------------------------------------------------------------------------- Fixed assets Intangible assets 1,010 949 1,208Tangible assets 181 61 129------------------------------------------------------------------------------- 1,191 1,010 1,337------------------------------------------------------------------------------- Current assets Stock 54 - 298Debtors 3,380 1,696 2,399Cash at bank and in hand 2,249 468 1,992------------------------------------------------------------------------------- 5,683 2,164 4,689 Creditors: amounts falling due within one year (2,540) (2,113) (2,111)-------------------------------------------------------------------------------Net current assets 3,143 51 2,578------------------------------------------------------------------------------- Total assets less current liabilities 4,334 1,061 3,915 Provisions for liabilities and charges (17) (13) (18)-------------------------------------------------------------------------------Net assets 4,317 1,048 3,897------------------------------------------------------------------------------- Capital and reservesCalled up share capital 290 265 290Share premium account 2,380 - 2,380Merger reserve 1,512 1,512 1,512Other reserve (657) (657) (657)Profit and loss account 792 (72) 372-------------------------------------------------------------------------------Equity shareholders' funds 4,317 1,048 3,897------------------------------------------------------------------------------- 2ergo Group plc Consolidated Cash Flow StatementFor the six months ended 28 February 2005 Unaudited Unaudited Audited 6 months to 6 months to Year to 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000------------------------------------------------------------------------------- Net cash inflow/(outflow) fromoperating activities 296 473 (26)------------------------------------------------------------------------------- Returns on investments and servicing of financeInterest received/(paid) (net) 22 (7) 22-------------------------------------------------------------------------------Taxation - 166 166------------------------------------------------------------------------------- Capital expenditure and financial investmentPayments to acquire tangible fixed assets (20) (9) (49)Payments to acquire intangible fixed assets - (490) (965)------------------------------------------------------------------------------- (20) (499) (1,014)-------------------------------------------------------------------------------Net cash inflow/(outflow) before financing 298 133 (852)------------------------------------------------------------------------------- Financing Repayment of loans - - (250)Proceeds from share issue - - 3,000Exercise of share options - - 375Expenses of share issue - - (595)Capital element of finance lease payments (41) - (21)------------------------------------------------------------------------------- (41) - 2,509------------------------------------------------------------------------------- -------------------------------------------------------------------------------Increase in cash 257 133 1,657------------------------------------------------------------------------------- 2ergo Group plc Notes to the Interim Statement 1. Basis of Preparation The interim financial statements have been prepared on the basis of theaccounting policies set out in the financial statements of 2ergo Group plc forthe year ended 31 August 2004. The financial information contained in these statements does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. Theaccounts for the year ended 31 August 2004 received an unqualified audit reportand have been filed with the Registrar of Companies. 2. TaxationThe tax charge accrued in these interim financial statements reflects anestimated tax rate of 22% for the period to 28 February 2005, which is theanticipated effective composite rate for the current financial year. 3. Earnings per shareBasic earnings per share have been calculated by dividing the profit aftertaxation in the period by 27,600,100 shares (2004:25,171,379 shares), being theweighted average number of shares in issue. The diluted earnings per share havebeen calculated on a weighted average number of shares of 28,831,332 (2004:27,556,318). 4. Reconciliation of operating profit to net cash inflow from operatingactivities Unaudited Unaudited Audited 6 months to 6 months to Year to 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000 Operating profit 518 219 619Depreciation charge 28 11 28Amortisation charge 197 189 325Decrease in stock 243 - -Increase in debtors (981) (681) (1,758)Increase in creditors 291 735 982Profit on sale of database - - (222) -------------------------------------------Net cash inflow from operating activities 296 473 (26) ------------------------------------------- 5. Analysis and reconciliation of net funds 1 September Cash Other 28 February 2004 Flow movements 2005 £'000 £'000 £'000 £'000 Cash at bank and in hand 1,992 257 - 2,249Hire purchase: due within 1 year (10) 41 (59) (28) ------------------------------------------- 1,982 298 (59) 2,221 ------------------------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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