21st Jun 2005 07:00
Capcon Holdings PLC21 June 2005 Capcon Holdings plcInterim Report 2005 Interim results for the six months ended 31 March 2005 Capcon Holdings plc, the AIM listed investigations and risk management group,announces unaudited interim results for the six months ended 31 March 2005. Highlights • Successful completion of sale of Argen GmbH for total cash consideration of £360,000, a substantial book profit - ongoing relationship maintained • Established new specialist surveillance division - recruitment of leading industry executive in insurance investigations sector • Completed re-structuring of Capcon Vincent Sherman and reduced cost base • Successful new business wins and improved margin levels in Audit and Stocktaking division • Recruitment of high calibre managers in Capcon Argen to increase internal capacity • Reduction of bank debt during period of internal investment • Net cash inflow from operations of £125,300 Ken Dulieu, Chairman, commented: "The Audit & Stocktaking division has had a busy start to the second half of theyear and internal profit forecasts are being achieved. The action taken inCapcon Vincent Sherman is beginning to show in improved profit performance, andthe second half of the year should be more profitable for the CommercialInvestigations division overall if project activity returns to the levelexperienced earlier this year. As a result of this and due to the processesthat we have put in place, we view the next six months with optimism. "The Board continues to search for suitable business acquisitions and is alsoreviewing alternative strategies for developing the Group." For further information, contact: Capcon Holdings plcCliff Cavender, Managing DirectorTel: 020 7349 5356 Insinger de BeaufortLouis CastroTel: 020 7190 7000 Threadneedle CommunicationsGraham Herring(07793 839 024)020 7531 2620 Chairman's Statement The six months to 31 March 2005 has been a productive period during which timethe Directors have made many internal changes that are expected to strengthenthe Group for the future. As already documented, trading has been disappointingin the Commercial Investigations division, however this is partly due to thetiming of projects undertaken and does not signify a weakening in demand for ourcore services. Furthermore, costs that have been incurred in the development ofnew business are forecast to produce a return in the medium term. Results Turnover for the six months to 31 March 2005 was £3,431,100 (2004: £3,723,100),a reduction of 7.8% on last year. As most of this reduction was attributable tothe Investigations division, the overall gross margin level reduced from 45.5%to 41.1% reflecting the change in mix of business during the period. Profit before interest and amortisation was £160,800 (2004: £306,000) aftercrediting the profit on disposal of Argen GmbH of £224,400. The results for theperiod include an impairment charge of £978,000 against the carrying value ofGoodwill in addition to the amortisation charge for the period of £144,300(2004: £137,200). Higher average borrowings, together with higher interest ratesover the period increased interest charges to £64,800 from £54,600. A loss before tax of £1,026,300 compares with a profit before tax of £114,200for the first half of last year. Earnings per share before goodwill amortisationof 1.3p compares with 2.1p per share for the same period last year. On 21 December 2004 the Group announced the sale of its 50% interest in ArgenGmbH for a total cash consideration of £360,000 which has strengthened thebalance sheet and facilitated the on going reduction in bank borrowings. The Group's operations continue to be cash generative and net debt at 31 March2005 was £1,051,500, a reduction of £26,700 since the same date last year. Thenet cash inflow from operations since 30 September 2004 was £125,300. The Directors are continuing their cautious policy with regard to dividendpayments for the time being and no interim dividend is being declared in respectof the six months to 31 March 2005 (2004: 0.75p). Business Review The Audit & Stocktaking division continues to successfully win new business.However, following the trend set last year, the mix of work undertaken hasresulted in improved margins at the expense of a small reduction in sales to£1,616,200 (2004: £1,701,900). This change in mix with its favourable effect onmargins is being encouraged when there is an opportunity to introduce ourclients to an alternative approach to the audit. This entails introducingprocesses to highlight action that the client should take which ultimatelyresults in a reduction of cash and stock losses for the client. The divisionshowed a small increase in operating profit compared with last year. The Commercial Investigations division has been subjected to a management reviewin all areas: Following the departure last year of the Managing Director of Capcon VincentSherman, the insurance fraud investigator, there has been a major re-structuringof the division and a rationalisation of administrative and operational staffresources. The division has incurred some significant and excessive employmentrelated costs during these changes and sales have also been temporarilyaffected. However, we continue to enjoy good relationships with all of our majorclients and we are confident that our new structure places this division in avery strong position to grow in the coming year. Additionally, new majorinsurance clients have been gained and we are confident that this division willreturn to profit in the second half of the year having suffered a loss as aconsequence of the re-structuring. At the beginning of the year we established a new specialist surveillancedivision to complement the range of existing services provided by Capcon VincentSherman. The executive responsible for developing and building this new businessstream brings to the Group considerable experience and expertise from hisprevious position as managing director of our largest competitor in theinsurance investigations sector. A net cost of £65,800 has been charged to theprofit and loss account in the first half of the year in respect of setting upthis new business. Capcon Argen gained several new blue chip clients during a period of manychanges and, at times, high business activity. Following a decision tostrengthen the internal resource capability and thereby creating greatercapacity for future growth, Capcon Argen has recruited additional professionallyqualified project managers with considerable previous commercial experience. Inthe current year, the cost of employing these high calibre managers is asignificant charge against the division's profit, but new business generatedsubsequently is expected to show a high return on this people investment in themedium term. Although this division had an extremely busy period at the end of the firstquarter when several high value projects were undertaken, fewer projects werecompleted in the second quarter. The timing of new project instructions,combined with the higher staff cost base, has resulted in a lower operatingprofit for Capcon Argen than last year. However, the division is now in astronger position to take advantage of the expected increase in demand for itsspecialised services in the future. Current Trading and Prospects The Audit & Stocktaking division has had a busy start to the second half of theyear and internal profit forecasts are being achieved. The action taken inCapcon Vincent Sherman is beginning to show in improved profit performance, andthe second half of the year should be more profitable for the CommercialInvestigations division overall provided project activity returns to the levelexperienced earlier this year. As a result of this and due to the processesthat we have put in place, we view the next six months with optimism. The Board continues to search for suitable businesses acquisitions and is alsoreviewing alternative strategies for developing the Group. K P DulieuChairman 21 June 2005 Capcon Holdings plcInterim Report 2005 Consolidated Profit and Loss AccountFor the six months ended 31 March 2005 Six months Six months Year ended ended ended 31 March 2005 31 March 2004 30 September unaudited unaudited 2004 audited £'000 £'000 £'000 Turnover 3,431.1 3,723.1 7,453.4 Cost of sales (2,020.0) (2,028.0) (4,101.0) _______ _______ _______ Gross profit 1,411.1 1,695.1 3,352.4 Administrative expenses (2,630.3) (1,576.3) (3,159.0) Operating (loss)/profit before goodwill (96.9) 256.0 467.8amortisationGoodwill amortisation (1,122.3) (137.2) (274.4) Group operating (loss)/profit (1,219.2) 118.8 193.4 Share of operating profit in associates 33.3 50.0 100.2 _______ _______ _______ Total operating (loss)/profit (1,185.9) 168.8 293.6 Profit on disposal of investment in associates 224.4 - - _______ _______ _______ (Loss)/profit on ordinary activities before (961.5) 168.8 293.6interest and taxation Interest receivable 0.2 - 0.1Interest payable (65.0) (54.6) (137.9) _______ _______ _______ (Loss)/profit on ordinary activities before (1,026.3) 114.2 155.8taxation Taxation 38.5 (75.4) (69.9) _______ _______ _______(Loss)/profit on ordinary activities after (987.8) 38.8 85.9taxation Dividends - (76.2) (89.5) _______ _______ _______Retained loss for the year (987.8) (37.4) (3.6) _______ _______ _______ Earnings per share- Basic (9.7p) 0.5p 0.9p _______ _______ _______- Diluted (9.0p) 0.4p 0.8p _______ _______ _______ Earnings per share before goodwill amortisation- Basic 1.3p 2.1p 3.7p _______ _______ _______- Diluted 1.2p 1.9p 3.4p _______ _______ _______ Capcon Holdings plcInterim Report 2005 Consolidated Balance SheetAs at 31 March 2005 As at As at As at 31 March 31 March 30 September 2005 2004 2004 unaudited unaudited audited £'000 £'000 £'000 Fixed assetsIntangible fixed assets 3,923.1 4,873.3 5,020.2 Tangible fixed assets 326.7 297.7 266.1Investments 0.1 79.6 119.9 _______ _______ _______ 4,249.9 5,250.6 5,406.2 Current assetsDebtors 1,801.9 2,156.9 1,891.5 Cash at bank and in hand 13.8 13.8 37.2 _______ _______ _______ 1,815.7 2,170.7 1,928.7 CreditorsAmounts falling due within one year (2,627.1) (2,821.9) (2,999.4) _______ _______ _______Net current liabilities (811.4) (651.2) (1,070.7) _______ _______ _______Total assets less current liabilities 3,438.5 4,599.4 4,335.5 CreditorsAmounts falling due after more than one year (242.6) (397.3) (100.0) Provisions for liabilities and charges (21.4) (31.8) (21.4) _______ _______ _______Net assets 3,174.5 4,170.3 4,214.1 _______ _______ _______ Capital and reservesCalled up share capital 101.6 101.6 101.6Share premium account 2,774.1 2,764.1 2,774.1 Other reserves 950.0 950.0 950.0Profit and loss account (940.9) 13.1 46.9 Shares to be issued 289.7 341.5 341.5 _______ _______ _______ 3,174.5 4,170.3 4,214.1 _______ _______ _______ Capcon Holdings plcInterim Report 2005 Consolidated Cash Flow StatementFor the six months ended 31 March 2005 Six months Six months Year ended ended ended 31 March 31 March 30 September 2005 2004 2004 unaudited unaudited audited £'000 £'000 £'000 Net cash inflow/(outflow) from operatingActivities 125.3 171.6 523.3 Dividend received from associate 118.2 - - Returns on investments and servicingof financeInterest received 0.2 - 0.1Interest paid (62.1) (54.6) (137.9) _______ _______ _______ (61.9) (54.6) (137.8) TaxationTax paid (23.7) (37.3) (37.2) Capital expenditure and financialInvestmentPayments to acquire tangible fixed assets (70.9) (30.3) (84.1)Sale of tangible fixed assets - - 33.5 _______ _______ _______ (70.9) (30.3) (50.6) Acquisitions and disposalsAcquisition of subsidiary undertakings (89.5) (140.1) (428.7)Disposal of investment in associates 332.9 - - _______ _______ _______ 243.4 (140.1) (428.7) Equity dividends paid - - (224.5) _______ _______ _______Net cash inflow/(outflow) before financing 330.4 (90.7) (355.5) FinancingIssue of new ordinary shares - 466.1 466.1Costs of new issue - (10.0) -Repayment of loans (100.1) (108.3) (216.6)New loans issued 150.0 - -Invoice discounting facilities (189.9) (79.1) (77.1)Principal payment under finance leases (8.3) (34.9) (63.1)Other loans 20.0 - 71.5Other loan repayments (2.4) (50.0) (62.8) _______ _______ _______ (130.7) 183.8 118.0 _______ _______ _______Increase / (decrease) in cash 199.7 93.1 (237.5) _______ _______ _______ Capcon Holdings plcInterim Report 2005 Notes to the Interim AccountsFor the six months ended 31 March 2005 1. Basis of preparation The interim results for the six months ended 31 March 2005 and 31 March 2004 donot constitute statutory accounts within the meaning of section 240 of theCompanies Act 1985 and have been neither audited nor reviewed by the Group'sauditors . The financial information for the year ended 30 September 2004 hasbeen extracted from the statutory accounts for that year which have been filedwith the Registrar of Companies and which contain an unqualified audit reportand did not contain a statement under section 237(2) of the Companies Act 1985. The interim accounts have been prepared on the basis of the accounting policiesset out in the statutory accounts for the year ended 30 September 2004. The Group had no recognised gains or losses other than the results shown in theConsolidated Profit and Loss Account. Copies of this statement are being sent to shareholders and are available fromthe registered office of the Company. 2. Earnings per share Six months Six months Year ended ended ended 31 March 2005 31 March 2004 30 September unaudited unaudited 2004 audited £'000 £'000 £'000 Earnings attributable to ordinary shareholders (987.8) 38.8 85.9Goodwill amortisation 1,122.3 137.2 274.4 _______ _______ _______Adjusted earnings 134.5 176.0 360.3 _______ _______ _______ Weighted average number of shares in issue 10,156,776 8,422,366 9,743,191 Dilutive effect of share options - - -Dilutive effect of shares to be issued 852,194 750,409 864,556 _______ _______ _______Diluted weighted average number of shares in 11,008,970 9,172,775 10,607,747issue ________ _______ _______ Earnings per share have been calculated using the weighted average number ofshares in issue during the relevant financial periods. The diluted earnings pershare takes account of shares to be issued. 3. Reconciliation of operating (loss)/profit to net cash inflow from operating activities Six months Six months Year ended ended ended 31 March 31 March 2004 30 September 2005 unaudited 2004 unaudited audited £'000 £'000 £'000 Group operating (loss)/profit (1,219.2) 118.8 193.4Depreciation 56.4 48.1 96.4Profit on disposal of fixed assets 0.0 0.0 (2.2)Goodwill amortisation 1,122.3 137.2 274.4Decrease/(increase) in debtors 89.6 (178.0) 87.4Increase/(decrease) in creditors 76.2 45.5 (126.1) _______ _______ _______Net cash inflow 125.3 171.6 523.3 _______ _______ _______ 4. Reconciliation of net cash flow to movement in net debt Six months Six months Year ended ended ended 31 March 31 March 30 September 2005 2004 2004 unaudited unaudited audited £'000 £'000 £'000 Increase / (decrease) in cash in period 199.7 93.1 (237.4)Outflow from change in debt financing 81.7 272.3 348.1 _______ _______ _______Movements in net debt resulting from cash 281.4 365.4 110.7flows Net debt brought forward (1,332.9) (1,443.6) (1,443.6) _______ _______ _______Net debt carried forward (1,051.5) (1,078.2) (1,332.9) _______ _______ _______ 5. Reconciliation of net cash flow to movement in net debt Analysis of net debt As at Cash Non cash As at 30 September 2004 flow movements 31 March 2005 audited unaudited £'000 £'000 £'000 £'000 Cash at bank and in hand 37.2 (23.4) 0.0 13.8Overdraft (508.0) 223.1 0.0 (284.9) _______ _______ _______ _______ (470.8) 199.7 0.0 (271.1) Debt due within one year (200.1) 100.1 (100.0) (200.0)Debt due after one year (100.0) (150.0) 100.0 (150.0)Invoice discounting facilities (484.2) 189.9 0.0 (294.3)Finance leases (6.3) 8.3 (46.1) (44.1)Other loans (71.5) (17.6) (2.9) (74.4) _______ _______ _______ _______Total (1,332.9) 330.4 (49.0) (1,051.5) _______ _______ _______ _______ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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