30th Mar 2007 07:59
Net b2b2 PLC30 March 2007 30 March 2007 Netb2b2 plc Interim results for the six months ended 31 December 2006 Netb2b2 plc ("Netb2b2" or "the Group"), the digital communications business,today announces its interim results for the six months ended 31 December 2006. Financial and business highlights: •Turnover increased by 1.3% to £3.2 million (2005: £3.1 million) •Group operating loss of £168,000 (2005: loss of £134,000) •Group loss after tax of £186,000 (2005: loss of £140,000) •Loss per share of 3.07p (2005: loss of 2.48p) •Cash on group balance sheet £270,000 (2005: £390,000) •New client contracts wins including from ITN •Commenced implementation of a Group cost saving programme Keith Young, Chairman of Netb2b2, commented: "The next six months and beyond will see Netb2b2 continue to implementstructural changes and the reduction of administrative overheads. We would alsoseek to divest non-core operations where growth possibilities are less visible,and once further changes have been achieved, to also rename the Group. As aboard we are looking forward to returning the business to a much sounderfooting, and to ensure that shareholders, staff and customers are all able tobenefit from these major reforms." Enquiries, please contact: Andrew Gannon Neil BoomManaging Director Gresham PR Ltd.Netb2b2 PLC 020 7404 9000020 7689 8800 Azhic BasirovSmith & Williamson020 7131 4000 Chairman's statement In the first six months to 31 December 2006, the Group began to implement anumber of substantial reforms that resulted from last year's root and branchStrategic Review. As shareholders are aware from last year's annual report, the board hasrepositioned the business to focus more strongly on certain fast-growth nichesin the digital media and entertainment market. Strategically, our goal is toextract more value from established relationships with blue chip clients thatinclude ITV, BBC, ITN and Sky as well as to continue to broaden our customerbase through more effective sales and marketing. We are still exploring bolt-on,small scale acquisitions, but only ones that would be immediately earningsenhancing. We are pleased that there has been some encouraging progress within the Group,in particular from Fernhart New Media and BlueSky. As we go forward, we are confident that we have the products and services thatare at the forefront of digital media. However, as these interim resultsindicate, there is clearly more work to be done, including a need to delivergreater cost synergies than have been achieved in the six months under review. Savings have been difficult to achieve against a backdrop facing all companiesthat serve the digital market place, which is a severe technical skillsshortage, particularly in central London where most of our businesses operate.The shortage of skilled new media personnel has produced sharply rising labourcosts and some turnover in staff. This is now being addressed by the Group by anincreased reliance on more flexible consultants. As well as concentrating on improving profit margins by sharing more overheads,the board has recognised a particular need to improve the quality and output ofour sales and marketing functions. Accordingly, we are intending to recruitskilled sales and marketing staff who will work at Group level and represent theentire portfolio of client products and services. To support the restructuring strategy, the executive directors will be takingmore direct operational responsibility. The directors' focus will be very muchon top and bottom line growth, supporting the core businesses in their effortsand in reducing fixed costs where there is unnecessary duplication. Financial and operational review We are disappointed that restructuring measures taken earlier have yet totranslate into an improved financial performance. Consequently, Group turnoverhas improved only fractionally, up by 1.3% to £3.2 million (2005: £3.1m) whileproblems with one major project led to a slightly larger half year loss aftertax of £168,000 compared with an interim loss of £134,000 in 2005. Theseproblems are likely to continue to depress profitability over the next fewmonths. In view of the losses sustained, cash flow has been tight and has beenmanaged by selective deferral of creditors. We intend to accelerate cost savingsand to increase turnover through more efficient sales and marketing. Due to thecontract problem referred to above we are reporting a loss per share of 3.07p(2005: loss of 2.48p). We are pleased that the performances of Fernhart New Media and BlueSky havecontinued to justify our confidence in these growing businesses. Of particularnote was Fernhart's creation of new online services for ITN using therecently-launched Microsoft Vista platform. Something very pleasing about thisproject is that we can demonstrate Group synergies, because BlueSky were alsocontracted to host the services and video content. Our largest Group company cScape had a chequered six months, encountering amajor problem on one project. Steps have been taken to minimise the impact ofthis problem, and to address the balance of its workforce, with a decision toincrease flexibility through the use of more freelance programming and IT staff.Fortunately, despite this setback, cScape continued to win other major mandatesincluding a significant new Web design contract to redevelop the website for HedKandi, part of the Ministry of Sound music group. This contract was something ofa technical milestone, making cScape the first new media company to implementMicrosoft's new Office SharePoint Server 2007TM. We believe the significance ofthis contract is over and above its contract value. cScape are holders ofMicrosoft Gold Certified Partner status; going forward we intend the Group tobenefit more from this accreditation. Outlook The next six months and beyond will see Netb2b2 continue to implement structuralchanges and the reduction of administrative overheads. We would also seek todivest non-core operations where growth possibilities are less visible, and oncefurther changes have been achieved, to also rename the Group. As a board we arelooking forward to returning the business to a much sounder footing, and toensure that shareholders, staff and customers are all able to benefit from thesemajor reforms. Keith YoungChairman of Netb2b230 March 2007 GROUP PROFIT AND LOSS ACCOUNT Six months ended 31 December 2006 Note Six Months Six Months Year Ended Ended Ended 31.12.2006 31.12.2005 30.06.2006 Unaudited Unaudited Audited £000's £000's £000's TURNOVER 3 3,194 3,154 6,590Cost of sales (870) (730) (1,614)GROSS PROFIT 2,324 2,424 4,976 -------- -------- --------Administrative expenses preexceptional item (2,492) (2,418) (5,134)Exceptional Item - (140) (20) -------- -------- -------- Administrative expenses (2,492) (2,558) (5,154) OPERATING PROFIT/(LOSS) -------- -------- --------Pre exceptional item (168) 6 (158)Exceptional item - (140) (20) -------- -------- --------Total operating loss 3 (168) (134) (178) Interest receivable and similarincome 1 - 1Interest payable and similar (19) (6) (27)charges LOSS ON ORDINARY ACTIVITIESBEFORE TAXATION (186) (140) (204) Non-operating exceptional item - - (112) Tax on loss on ordinary 5 - - -activities LOSS FOR THE FINANCIAL PERIOD (186) (140) (316) LOSS PER SHARE (PENCE) 6 (3.07p) (2.48p) (5.4p) GROUP BALANCE SHHET 31 December 2006 Six Months Six Months Year Ended Ended Ended 31.12.2006 31.12.2005 30.06.06 Unaudited Unaudited Audited £000's £000's £000's FIXED ASSETSIntangible assets 2,436 2,436 2,438Tangible assets 563 549 570 ----- ----- ----- 2,999 2,985 3,008CURRENT ASSETSStocks 175 112 141Debtors 1,439 1,328 1,398Cash at bank 270 390 121 ----- ----- ----- 1,884 1,830 1,660CREDITORS: amounts falling duewithin one yearBank loans and overdraft (169) (125) (141)Trade and other creditors (2,664) (2,413) (2,264) ------- ------- ------- (2,833) (2,538) (2,405) NET CURRENT LIABILITIES (949) (708) (745) ------- ------- ------- CREDITORS: amounts falling due (84) - (112)After one year ------- ------- ------ TOTAL ASSETS LESS LIABILITIES 1,966 2,277 2,151 ======= ====== ===== CAPITAL AND RESERVESCalled up share capital 606 596 606Share premium 553 513 553Capital redemption reserve 6 6 6Profit and loss account 801 1,162 986 ----- ----- -----EQUITY SHAREHOLDERS' FUNDS 1,966 2,277 2,151 ===== ===== ===== GROUP CASH FLOW STATEMENT Six months ended 31 December 2006 Note Six Months Six Months Year Ended Ended Ended 31.12.2006 31.12.2005 30.06.2006 Unaudited Unaudited Audited £000's £000's £000's Net cash inflow/(outflow) fromoperating activities 7 196 119 (296) Returns on investments andservicing of finance 8 (18) (8) (26) Taxation - - - Capital expenditure 8 (72) (170) (139) Acquisitions 8 - (551) (200) Net cash inflow/(outflow) beforefinancing 106 (610) (661) Financing 8 15 574 340 ------ ------ ----- Increase/(decrease) in cash inthe period 121 (36) (321) ====== ======= ====== Reconciliation of net cash flowto movement in net funds Increase/(decrease) in cash inthe period 9 121 (36) 321 (Increase) in debt and leasefinancing 9 (19) (186) (476) ----- ------ ------Movement in net funds in the 9 102 (222) (797)period Net debt at start of period 9 (529) 268 268 ------ ----- -----Net funds/(debt) at end of 9 (427) 46 (529)period ====== ===== ====== NOTES TO THE ACCOUNTS Six months ended 31 December 2006 1. FINANCIAL INFORMATION The financial information is for the six months ended 31 December 2006 and isneither audited nor reviewed as defined by APB Bulletin 1999/4. The balancesheet and profit and loss account do not constitute statutory statements withinthe meaning of section 240 Companies Act 1985. The results for the year ended 30June 2006 have been extracted from the financial statements of the group onwhich an unqualified report from the auditors has been received and which havebeen filed with the registrar of Companies. 2. BASIS OF PREPERATION The interim financial information has been prepared on the basis of theaccounting policies adopted for the audited accounts for the year ended 30 June2006 under the historical cost convention and in accordance with applicableaccounting standards. 3. SEGMENTAL INFORMATION The Group operates in the UK and the whole of its turnover and profit relate tocontinuing activities and to the UK market. Six months Six months Year Ended Ended Ended 31.12.2006 31.12.2005 30.06.2006 Unaudited Unaudited Audited £000's £000's £000'sTurnover Internet services 1,619 1,707 3,464 Publishing and Digital CommunicationServices 843 874 1,945 Specialist Hosting 403 341 668 --- --- ---Media and interactive technology 329 232 503 Central Costs - - 10 ------ ------ -----Group 3,194 3,154 6,590 ------ ------ -----Profit/(loss) before interest and tax Internet services 34 142 235 Publishing and Digital CommunicationServices (4) 33 46 Specialist Hosting 86 64 151 Media and interactive technology 10 30 (16) Central and other costs (294) (263) (574) Exceptional costs - (140) (20) ----- ------ -----Group (168) (134) (178) ----- ------ ----- 4. 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 thethree goodwill elements have indefinite economic lives. The board has carriedout impairment reviews on these goodwill elements and have concluded that theircurrent recoverable amounts are in excess of their carrying values. 5. TAXATION No liability to UK Corporation tax arose on ordinary activities for the periodowing to trade losses brought forward from previous periods. 6. LOSS PER ORDINARY SHARE Basic loss per share is calculated by dividing the loss attributable to ordinaryshareholders by the weighted average number of ordinary shares during the year.The diluted loss per share is the same as the actual loss per share. Six Months Six Months Year Ended Ended Ended 31.12.2006 31.12.2005 30.06.2006 Unaudited Unaudited Audited £000's £000's £000's Basic earnings attributable toordinary shareholders: (186) (140) (316) Weighted average number ofordinary shares 6,061,569 5,644,999 5,846,909 Loss per share: (3.07p) (2.48p) (5.4p) 7. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATINGACTIVITIES Six Months Six Months Year Ended Ended ended 31.12.2006 31.12.2005 30.06.2006 Unaudited Unaudited Audited £000's £000's £000's Operating loss (168) (134) (178)Exceptional item - - (112)Depreciation charges 86 38 147Loss on disposal/write off ofintangible fixed assets - - 74Increase in stocks (33) (14) (43)Increase in debtors (41) (95) (71)Increase/(decrease) in creditors 352 324 (113) ---- ---- -----Net cash inflow/ (outflow) fromoperating activities 196 119 (296) ==== ===== ===== 8. ANALYSIS OF CASH FLOWS Six Months Six Months Year Ended Ended Ended 31.12.2006 31.12.2005 30.06.2006 Unaudited Unaudited Audited £000's £000's £000'sReturns on investments and servicingof financeInterest received 1 - 1Interest paid (12) (6) (15)Interest element of hire purchasepayments (7) (2) (12) ---- ---- ----- Net cash outflow for returns oninvestments and servicing offinance (18) (8) (26) ===== ==== ==== Capital expenditureSale of tangible fixed assets - - 5Purchase of tangible fixed assets (72) (170) (144) ----- ----- -----Net cash outflow for capitalexpenditure (72) (170) (139) ===== ===== ===== AcquisitionsPurchase of subsidiary undertaking - (551) (172)Bank overdraft acquired withsubsidiary undertaking - - (28) ----- ----- -----Net cash outflow for acquisitions - (551) (200) ===== ====== ====== FinancingIssue of ordinary share capital - 386 61Bank loans (invoice discounting) 43 - 333Capital element of hire purchasepayments (28) 188 (54) ------ ----- ----Net cash inflow from financing 15 574 340 ====== ===== ==== 9. ANALYSIS OF CHANGES IN NET (DEBT)/ FUNDS At 1 July 2006 Cash flow At 31 December 2006Net cash: £000's £000's £000's Cash at bank and in hand 121 149 270Bank overdrafts (141) (28) (169) ------- ------ ------- (20) 121 101 ======= ====== =======Debt:Bank Loan (invoice discounting) (333) (43) (376)Hire purchase agreements (176) 24 (151) ------ ---- -----Total (529) 102 (427) ====== ==== ===== At 31 December At 31 December At 1 July 2006 2005 2006 £000's £000's £000'sAnalysed in balance sheetCash at bank and in hand 270 390 121Bank overdrafts & loans (536) (125) (461)Bank overdrafts & loans dueafter 1 year (9) - (13)Hire purchase payments duewithin 1 year (77) (219) (77)Hire purchase payments due after1 year (75) - (99) ----- ----- ---- (427) 46 (529) ====== ===== ===== 10. COPIES OF THE INTERIM REPORT Copies of the interim report are available from www.netb2b2.com or the companysecretary at Netb2b2 Plc, Central House, 142 Central Street, London, EC1V 8AR. 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