26th Sep 2006 07:00
26th September 2006 ServicePower Technologies Plc ("ServicePower" or the "Company") Interim report for the six months ended 30 June 2006 ServicePower Technologies plc (LSE: SVR) provides outsourcing solutions andsoftware to the mobile repair and installations industry.KEY POINTSFinance:Total Revenue up 85% to ‚£6.3M (June 2005: ‚£3.4M)Hosting & outsourcing revenue up 150% to ‚£3.8M (June 2005: ‚£1.5M)SERVICEPower software revenue up 31% to ‚£2.5M (June 2005: ‚£1.9M)SERVICEPower software business traded profitably for second successive sixmonth periodRevenue expected from existing contracts for 2006 in excess of ‚£10.9 millionHalf-year loss reduced to ‚£894k (June 2005: ‚£1,078k)EBITDA loss reduced to ‚£690k (June 2005: ‚£989k)Net Assets increased to ‚£3,232k (June 2005: ‚£2,478k)Cash balance at 30th June ‚£459kENQUIRIES:David Brisco, Chief Executive Officer Tel: 0161 476 2277ServicePower Technologies PLCTom Price Tel: 020 7071 4300Evolution Securities LimitedTom Moriarty Tel: 020 7651 8688 / 07769 937626CHAIRMAN'S STATEMENTIntroductionI am pleased to report in the first six months of 2006 the Directors havecontinued to make great progress in our strategy to move the Company away frombeing dependent on a few high value software licence sales. It is now a morerounded software business with significant and growing revenues coming frommonthly transactions and services revenues.The revenue for the first six months of 2006 increased 85% to ‚£6.3 million(June 2005: ‚£3.4 million) and the loss reduced to ‚£894k (June 2005: ‚£1,078k).The loss includes ‚£586k of losses related to the investment in the EchoStarsatellite dish installation opportunity. Following this investment it is theintention of the Company to now focus on the full integration of EchoStar andprofitable development of the existing businesses.It is encouraging that the software business operated profitably for the secondsuccessive six month period and, with revenues growing rapidly from our hostingand outsourcing business, this is expected to be trading profitably in 2007. Inaddition, as at September 2006, based on existing contracts, the Company hasgood visibility of over ‚£10.9 million in revenue in 2006. This comprises ‚£7.4million from hosting and outsourcing and ‚£3.5 million from Software sales.The Directors believe that the Company's cash position will improve during thesecond six months as software licence sales in the first half year delivercash. Accordingly, the Directors believe the Company has sufficient cash tosustain its current operations.Results and DividendThe results for the period are a clear reflection of the progress that has beenmade in terms of the development and growth of the business. Total salesrevenue increased 85% to ‚£6.3M (June 2005: ‚£3.4M) and the loss before and aftertaxation decreased to ‚£894k (June 2005: loss ‚£1,078k).In terms of revenue breakdown, software licence revenue increased to ‚£1,429k(June 2005: ‚£1,167k). The software business as a whole achieved a profit of ‚£474k (June 2005: loss ‚£349k). Hosting & outsourcing revenue increased 150% to ‚£3.8M (June 2005: ‚£1.5M). The total gross margin fell 11% to 39% (June 2005:50%) due to the increasing proportion of revenues derived from outsourcing andhosting services. The Directors continue to invest in the outsourcing andhosting business, resulting in it making a loss of ‚£1,385k (June 2005: loss ‚£751k), of which ‚£586k relates to setting up the EchoStar satellite dishinstallation business. Administration costs have risen to ‚£3,383k (June 2005: ‚£2,825k) principally due to the EchoStar overheads amounting to ‚£402k. The totalloss of ‚£894k includes non-cash items such as amortisation and depreciation of‚£204k resulting in an improved EDITDA loss of ‚£690k (June 2005: ‚£989k).The increase in trade receivables to ‚£4,113k (June 2005: ‚£2,865k) reflects the85% increase in revenue.The loss per share for the period was 1.10p (June 2005: 1.54p). As at 30th Junethe Company had a cash balance of ‚£459k (June 2005: ‚£699k). The Directors donot recommend the payment of a dividend.Operations ReviewHosting and Outsourcing BusinessThe hosting and outsourcing business was set up to provide IT solutions forcompanies using independent service engineers.Hosting: the solution includes a web-based job despatching and electronicinvoicing solution that can be accessed on a pay-as-you-go basis;Outsourcing: alternatively ServicePower will offer an outsourcing servicesolution by taking responsibility for a service job and ensuring it iscompleted by one of the independent service companies registered on ournetwork.In the six months to June the revenue from these businesses grew 150% to ‚£3.8million (June 2005: ‚£1.5 million). The revenue growth has come from increasingvolumes from existing contracts and new contract wins. In addition the Companylaunched a GPS tracking solution in November 2005 and sales to two Fortune 250companies contributed ‚£1.2 million revenue to June. The solution is now livewith both companies and monitors the movement of more than 2,500 vehiclesacross the USA.In Europe the Directors have continued to build upon the work done in 2005 togrow the outsourcing business. New contracts have been signed in themanufacturing, retail and insurance sectors since the start of the year, plusthere are several pilot contracts starting in the autumn.In November 2005 the Company raised ‚£1.8 million to invest in a new revenuestream; namely EchoStar satellite dish installation services. Based inKnoxville, Tennessee we are processing over 600 orders per week and theDirectors expect this contract to move into profitability in the second half of2006.In 2005 the Directors launched the Field Service in a Box (FSB) mobile phonesolution. The application enables engineers to receive job details, drivingdirections and GPS tracking via a mobile phone. The rollout of the GECommercial & Industrial (GEC&I) electronic despatch program will be completedin the next few months and then the FSB solution will be targeted at more than100,000 independent servicers registered on our network.SERVICEPower Software BusinessRevenue increased 31% to ‚£2.5 million (June 2005: ‚£1.9 million). The newcontracts won mean this business is now operating profitably for the secondsuccessive six month period. The insurance industry is proving to be aprofitable market with a ‚£1.1 million licence sale announced in April andanother prestigious insurance company went live in June. In addition theCompany recently announced a new range of functionality tailored for thismarket, including support for insurance processes in the aftermath ofcatastrophes.We continue to receive an increasing number of good sales leads but the timingof signed contracts remains unpredictable.OutlookThe outlook for the Company is positive. In previous years our fixed costs andhigh investment levels resulted in losses which required external funding,however with revenue growing by more than 35% for each of the last fivehalf-year periods we have this year been able to fund our growing businessusing internally generated revenues. That this growth is continuing isencouraging. Whilst further growth is required to achieve profitabilitythroughout the company, the board has confidence in the new business model. Wetherefore look forward to the future with confidence.Barry WelckChairman26th September 2006ServicePower Technologies plcConsolidated income statement for the six months ended 30 June 2006 Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 Note ‚£'000 ‚£'000 ‚£'000 Revenue - software solutions 3 2,504 1,914 4,296 - outsourcing services 3,827 1,530 3,641 _________ _________ _________ Total revenue 6,331 3,444 7,937 Cost of sales (3,859) (1,719) (4,756) _________ _________ _________ Gross profit 2,472 1,725 3,181 _________ _________ _________ Administrative expenses (3,383) (2,825) (4,827) _________ _________ _________ Profit/(loss) from operations - 474 (349) 67software solutions - outsourcing services (1,385) (751) (1,713) _________ _________ _________ Total loss from operations (911) (1,100) (1,646) Investment revenue 17 22 36 Finance costs - - (1) _________ _________ _________ Loss before taxation (894) (1,078) (1,611) Taxation 4 - - - _________ _________ _________ Loss for the period from continued operations attributable to equity holders (894) (1,078) (1,611) _________ _________ _________ Pence Pence Pence Loss per share Basic and diluted 5 (1.10p) (1.54p) (2.14p) _________ _________ _________All amounts relate to continuing activities.ServicePower Technologies plcConsolidated statement of recognised income and expense for the six monthsended 30 June 2006 Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 ‚£'000 ‚£'000 ‚£'000 Exchange differences on translation of 104 (113) (161)foreign operations _________ _________ _________ Net gain/(loss) recognised directly in 104 (113) (161)equity Loss for the period/year (894) (1,078) (1,611) _________ _________ _________ Total recognised income and expense for (790) (1,191) (1,772)the period/year _________ _________ _________ServicePower Technologies plcConsolidated balance sheet at 30 June 2006 Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 Assets ‚£'000 ‚£'000 ‚£'000 Non current assets Property, plant and equipment 237 269 261 Intangible assets 1,827 1,637 1,896 Investments - 250 - _________ _________ _________ 2,064 2,156 2,157 Current assets Trade and other receivables 4,113 2,865 3,639 Cash and cash equivalents 459 699 1,943 _________ _________ _________ 4,572 3,564 5,582 _________ _________ _________ Total assets 6,636 5,720 7,739 _________ _________ _________ Current liabilities Trade and other payables (3,404) (3,190) (3,739) _________ _________ _________ Non-current liabilities Long term other payables - (52) - _________ _________ _________ Total liabilities (3,404) (3,242) (3,739) _________ _________ _________ Net assets 3,232 2,478 4,000 _________ _________ _________ Equity Share capital 8,095 7,430 8,073 Share premium account 14,855 13,707 14,855 Share scheme reserve 203 30 203 Exchange translation reserve (44) (100) (148) Other reserve (3,008) (3,008) (3,008) Retained earnings (16,869) (15,581) (15,975) _________ _________ _________ Total Equity 3,232 2,478 4,000 _________ _________ _________The interim statements were approved by the Board of Directors and authorisedfor issue on 26th September 2006.They were signed on its behalf by:D BriscoDirectorServicePower Technologies plcConsolidated cash flow statement for the six months ended 30 June 2006 Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 ‚£'000 ‚£'000 ‚£'000 Net cash flows from operating activities (1,281) (1,771) (2,312) Investing activities Interest received 17 22 36 Purchases of property, plant and equipment (31) (19) (63) Expenditure on intangible assets (197) (348) (632) Proceeds of sale of available-for-sale - - 250investments _________ _________ _________ Net cash used in investing activities (211) (345) (409) _________ _________ _________ Financing activities Proceeds on issue of shares 21 19 1,974 Issue costs - - (60) Capital element of lease paid - (20) (78) Capital element of lease repaid - - (1) _________ ________ _________ Net cash from/(used in) financing 21 (1) 1,835activities __________ _________ _________ Net decrease in cash and cash equivalents (1,471) (2,117) (886) Cash and cash equivalents at beginning of 1,943 2,788 2,788period Effect of exchange rate changes (13) 28 41 __________ __________ _________ Cash and cash equivalents at end of period 459 699 1,943 _________ _________ _________ServicePowerTechnologies plcNotes to the interim financial statements1 Basis of preparationThe interim report has been prepared on the basis of the accounting policiesset out in the group's financial statements for the year ended 31 December2005. The financial information set out in this document does not constitutestatutory financial statements within the meaning of section 240 of theCompanies Act 1985. A copy of the statutory accounts for that year has beendelivered to the Registrar of Companies. The auditors' report on those accountswas not qualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985.2 Accounting policiesThe same accounting policies and methods of computation are followed in theinterim financial report as applied in the group's financial statements for theyear ended 31 December 2005 and published by the Group on 23 March 2006.3 Business segmentsPrincipal activities are as followsSoftware solutionsOutsourcing servicesSegment information about these businesses is presented belowSix months unaudited Software Outsourcing Groupended 30 June 2006 solutions services total 2006 2006 2006 ‚£'000 ‚£'000 ‚£'000 Revenue from external 2,504 3,827 6,331sales _________ _________ _________ Profit/(loss) from 474 (1,385) (911)operations Investment income 17 Finance costs - _________ Loss before and after tax (894) _________ Six months unaudited Software Outsourcing Groupended 30 June 2005 solutions services total 2005 2005 2005 ‚£'000 ‚£'000 ‚£'000 Revenue from external 1,914 1,530 3,444sales _________ _________ _________ Loss from operations (349) (751) (1,100) Investment income 22 Finance costs - _________ Loss before and after tax (1,078) _________ Twelve months audited Software Outsourcing Groupended 31 December 2005 solutions services total 2005 2005 2005 ‚£'000 ‚£'000 ‚£'000 Revenue from external 4,296 3,641 7,937sales _________ _________ _________ Profit/(loss) from 67 (1,713) (1,646)operations Investment income 36 Finance costs (1) _________ Loss before and after tax (1,611) _________4 Taxation on loss from ordinary activitiesNo tax charge arises during the period due to the utilisation of taxablelosses.5 Loss per shareThe calculation of the basic and diluted earnings per share is based on thefollowing data:Earnings Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 ‚£'000 ‚£'000 ‚£'000 Loss for the purpose of basic and diluted 894 1,078 1,611loss per share _________ _________ _________ Number of shares Number Number Number Weighted average number of ordinary shares for the purpose of basic and diluted loss per 80,936,166 70,181,557 75,117,779share _________ _________ _________ Loss per share Pence Pence Pence Basic and diluted loss per share 1.10p 1.54p 2.14p _________ _________ _________6 Notes to the cash flow statement Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 ‚£'000 ‚£'000 ‚£'000 Loss from continuing operations (911) (1,100) (1,646) Adjustments for: Amortisation of intangible assets 162 - 110 Depreciation of property plant and 42 89 114equipment Increase in share-based payments - 63 117provision ____________ ____________ ____________ Operating cash flows before movement in 204 152 341working capital Increase in receivables (525) (1,703) (2,334) (Decrease)/increase in payables (49) 880 1,327 ____________ ____________ ____________ Cash consumed by operations (574) (823) (1,007) ____________ ____________ ____________ Net cash from operating activities (1,281) (1,771) (2,312) ____________ ____________ ____________Cash and cash equivalents (which are presented as a single class of assets onthe face of the balance sheet) comprise cash at bank and other short-termhighly liquid investments with a maturity date of three months or less.7 Analysis of consolidated equity Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 ‚£'000 ‚£'000 ‚£'000 Called-up share capital At beginning of period/year 8,073 7,413 7,413 Shares issued during the period/year 22 17 660 ____________ ____________ ____________ At end of period/year 8,095 7,430 8,073 ____________ ____________ ____________Share premium account At beginning of period/year 14,855 13,602 13,602 Shares issued during the period/year - - 1,253 ____________ ____________ ____________ At end of period/year 14,855 13,602 14,855 ____________ ____________ ____________Exchange translation reserve At beginning of period/year (148) 13 13 Exchange differences on translation of overseas operations in the period/year 104 (113) (161) ____________ ____________ ____________ At end of period/year (44) (100) (148) ____________ ____________ ____________ ENDSERVICEPOWER TECHNOLOGIES PLCRelated Shares:
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