29th Jun 2007 07:00
Capcon Holdings PLC29 June 2007 Capcon Holdings plcInterim Report 2007 Interim results for the six months ended 31 March 2007 Capcon Holdings plc, the AIM listed investigations and risk management group,announces its unaudited interim results for the six months ended 31 March 2007. Main Points • Turnover of £2.0m (2006: £2.8m, including £0.5m from discontinued operations) • Pre tax loss £87,600 (2006: Loss £726,700) • Profit before tax, interest, amortisation £52,900 (2006: Loss of £554,400) • Net cash inflow from operations of £65,600 (2006: £140,600) • Operating profits generated by both divisions and central costs reduced • New clients gained Capcon Chairman, Ken Dulieu, said: "Good progress has been made in restoring profitability to the core business andthe Board will continue to focus on a strategy that builds on the strengths ofthe traditional Capcon business" For further information, contact: Capcon Holdings plcPaul Jackson 020 7417 0417 Insinger de BeaufortNandita Sahgal 0207 190 7000 Chairman's Statement The six months to 31 March 2007 has been a period of recovery for both maindivisions of Capcon following a year of considerable change and rationalisationin the Group. Good progress has been made in restoring profitability to the corebusiness and the Board will continue to focus on a strategy that builds on thestrengths of the traditional Capcon business. The legal proceedings with the vendors of Argen Limited continue to inhibit thedevelopment of the Group pending the outcome of the dispute. Results Turnover for the six months to 31 March 2007 was £2,023,200, a 28.0% reductionon the previous year's level of £2,811,200, although 64% of this decrease wasattributable to discontinued operations. The overall gross margin fell from39.1% to 38.8% due to the shift in the proportion of the contribution favouringthe lower margin Audit & Stocktaking division of the Group since therestructuring and disposal of certain commercial investigation activities. The Group made a profit before tax, interest, amortisation and impairment of£52,900, a significant turnaround compared with the loss before tax, interest,amortisation and impairment of £554,400 for the same period last year. The lossbefore tax of £87,600 compares with £726,700 for the first six months of lastyear and, as last year, there is no tax charge for the period. The amortisationcharge of £50,900 is £47,700 less than the charge for the same period last yearas a result of the Directors' decision to further impair the value of goodwillat the end of the last financial year. No further impairment is considerednecessary at this time. The loss per share before goodwill amortisation and goodwill impairment of 0.4pcompares with a loss per share before amortisation and goodwill impairment of6.2p for the same period last year. The Group generated a net cash inflow from operations of £65,600 (2006:£140,600) and net debt at 31 March 2007 was £1,488,600, £374,500 higher than thesame date last year mainly as a result of the issue of £675,000 (nominal)unsecured loan stock in the second half of last financial year partly offset byreduced funding from invoice discounting. The Directors are unable to recommend the payment of a dividend, as last year,for the time being. Funding The legal proceedings with the vendors of Argen Limited are continuing and theDirectors believe that it is unlikely that the issues will be resolved in thisfinancial year. The difference between the Company's position and the Argenvendors' demands in these proceedings is substantial and, for this reason, theDirectors believe that the present action must be continued in order to achievean outcome that is fair for all shareholders. It, therefore, remains the casethat there is an uncertainty with regard to the amount of the Company's finalliability, if any. Business Review Sales in the Audit & Stocktaking division of £1,472,700 were marginally lowerthan the same period last year (2006: £1,501,300). Several new clients have beengained which are expected to ultimately replace the lost business reported inthe 2006 Report and Accounts, which was due to a client being acquired and ourservices being absorbed into the acquirers existing in-house resource. Thebenefit of the new software introduced and internal restructuring last year isnow reflected in the level of gross margin achieved in the first six months ofthis year which has been restored to historic levels. As a consequence,operating profit for the division shows a significant increase on the sameperiod last year. The commercial investigation activities this year exclude discontinued servicesprovided to the insurance sector which were transferred to certain employees whonow pay a licence fee to Capcon. Sales for commercial investigation serviceswere £548,600 compared with £1,310,000 for the same period last year although£503,900 of the reduction is due to discontinued operations. The sales forCapcon Argen were significantly lower than last year as a result of theresignation of the managing director and other management changes previouslyreported that had a disruptive effect on the business. However, the opportunitywas taken to restructure the division and reduce operating costs significantlyand the first six months of this year have benefited from these changes. Despitethe significant reduction in the overall sales level for the CommercialInvestigations division, the first six months shows an operating profit comparedwith a significant loss last year. Renewed marketing initiatives, particularly in the Commercial Investigationsdivision, are having a favourable effect on gaining new clients and goodprogress is being made in replacing the Capcon Argen business that was lost lastyear. The Central overhead cost base has been significantly reduced in the past yearand action has been taken to further reduce costs in the second half of thisyear, in particular, certain accounting and administrative activities are to beoutsourced and offices relocated. Current trading and prospects Having disposed of the loss making insurance based services, the Group is nowable to focus on rebuilding the commercial investigations business from a morecost efficient and streamlined platform. The market for our investigationservices is considerable and the new management team have successfully gainednew business and new clients during a difficult and uncertain period in Capcon'sdevelopment. The management of the Audit & Stocktaking division is working hardto turn round the lack of sales growth in this division and is gaining newclients. The restored gross profit levels in the Audit & Stocktaking divisionare expected to be maintained and both divisions, having recovered from aturbulent period, are now achieving their internal forecasts. The Directors will continue to focus on the core activities where it is believedthat recovery to higher levels of profitability is achievable in the mediumterm. K P DulieuChairman 29 June 2007 Capcon Holdings plcInterim Report 2007 Consolidated profit and loss account for the six months ended 31 March 2007 Unaudited Six Unaudited Audited months Six months Year ended ended ended 31 March 31 March 30 September 2007 2006 2006 Note £'000 £'000 £'000 TurnoverContinuing operations 2,023.2 2,307.3 4,493.8Discontinued operations - 503.9 757.8 Group turnover 2,023.2 2,811.2 5,251.6Cost of sales (1,238.8) (1,712.0) (3,261.9) _______ _______ ______ Gross profit 784.4 1,099.2 1,989.7 Administrative expenses (782.4) (1,752.2) (4,773.2) Operating profit/(loss)Continuing operations 2.0 (306.3) (2,222.0)Discontinued operations - (346.7) (561.5) Group operating profit/(loss) 2.0 (653.0) (2,783.5) Total operating profit/(loss) before amortisation 52.9 (554.4) (1,039.5)and impairment of goodwillAmortisation of goodwill and impairment (50.9) (98.6) (1,744.0) Profit/(loss) on ordinary activitiesbefore interest and other income 2.0 (653.0) (2,783.5) Interest receivable - 0.2 0.5Interest payable and similar charges (89.6) (73.9) (191.2) _______ _______ _______Loss on ordinary activitiesbefore taxation (87.6) (726.7) (2,974.2)Taxation on loss from ordinary activities _______ _______ _______ Loss on ordinary activitiesafter taxation (87.6) (726.7) (2,952.8) _______ _______ _______ Loss per share Basic 3 (0.9p) (7.2p) (29.1p)Fully diluted (0.9p) (7.2p) (29.1p) Capcon Holdings plcInterim Report 2007 Consolidated balance sheet as at 31 March 2007 Unaudited Unaudited Audited as at as at as at 31 March 31 March 30 September 2007 2006 2006 £'000 £'000 £'000 Fixed assetsIntangible assets 1,374.4 3,070.6 1,425.3Tangible assets 84.4 217.6 119.0 _______ _______ _______ 1,458.8 3,288.2 1,544.3 Current assetsDebtors 873.6 1,480.3 1,065.6Cash at bank and in hand 0.5 1.9 1.7 _______ _______ _______ 874.1 1,482.2 1,067.3Creditors:Amounts falling due within one year (3042.9) (3,395.4) (3,246.0) _______ _______ _______ Net current liabilities (2,168.8) (1,913.2) (2,178.7) _______ _______ _______ Total assets less current liabilities (710.0) 1,375.0 (634.4) CreditorsAmounts falling due after more than one (654.4) (108.1) (642.4)year Provision for liabilities and charges - (21.4) - _______ _______ _______ (1,364.4) 1,245.5 (1,276.8) _______ _______ _______ Capital and reservesCalled up share capital 101.6 101.6 101.6Share premium account 2,774.1 2,774.1 2774.1Merger reserve 950.0 950.0 950.0Profit and loss account (5,190.1) (2876.4) (5,102.5)Shares to be issued - 296.2 - _______ _______ _______ Shareholders' (deficit)/funds (1,364.4) 1,245.5 (1,276.8) _______ _______ _______ Capcon Holdings plcInterim Report 2007 Consolidated cash flow statement for the six months ended 31 March 2007 Unaudited Unaudited Audited Six months Six months Year ended ended ended 31 March 31 March 30 September 2007 2006 2006 Note £'000 £'000 £'000 Net cash inflow/(outflow) fromoperating activities 4 65.6 140.6 (107.5) Returns on investments andservicing of financeInterest received - 0.2 0.5Interest paid (38.2) (55.0) (122.2) _______ _______ _______Net cash outflow from returns oninvestment and servicing of finance (38.2) (54.8) (121.7) TaxationTax paid - (4.0) (4.0) Capital expenditure and financial investmentPurchase of tangible fixed assets (1.0) (17.3) (47.3)Sale of tangible fixed assets - 0.8 18.0 _______ _______ _______Net cash outflow from capital expenditureand financial investment (1.0) (16.5) (29.3) _______ _______ _______ Cash inflow/(outflow) before financing 26.4 65.3 (262.5) FinancingIssue of loans - 75.0 675.0Costs incurred on issue of loan stock - - (63.5)Repayment of loans (3.6) (103.3) (206.6)Movement in invoice discounting facilities (69.2) (7.7) (122.6)Capital element of finance lease payments (7.9) (8.3) (5.4) _______ _______ _______ Cash (outflow)/inflow from financing (80.7) (44.3) 276.9 _______ _______ _______ (Decrease)/increase in cash in the period (54.3) 21.0 14.4 _______ _______ _______ Notes to the interim accounts For the six months ended 31 March 2007 1. Basis of preparation The interim results for the six months ended 31 March 2007 and 31 March 2006 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 2006 hasbeen extracted from the statutory accounts for the 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 2006. 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. Going Concern Timing of deferred consideration payments The Group acquired Argen Limited ("Argen") in February 2003. In addition toinitial consideration of £1.35million, the purchase agreement provided for amaximum contingent consideration of £1.92million - £1.57million by way of cashand £0.35million by way of shares. This contingent consideration was payabledependent upon the profit of Argen for the years ended 31 December 2003 and 31December 2004 ("the earn-out period") exceeding specified targets. Under the terms of the agreement, the contingent consideration was due to bepaid by April 2005 and £500,000 has been paid to date. The amount of anyfurther liability to pay contingent consideration has been a matter of disputebetween the Company and the vendors for some time. The Directors had beenengaged in discussions and negotiations with the vendors of Argen with a view toreaching a final settlement as to the amount (if any) due but proceedings havenow been issued by the vendors seeking to enforce the Company's obligationsunder the agreement that the vendors allege have not been performed by theCompany. Such proceedings are being vigorously defended by the Company andnotice has been served by the Company upon the vendors rescinding the agreementand claiming the repayment of all amounts paid by the Company to the vendors todate. Whilst settlement of the claims made by the vendors is not in contemplation atthis time, any settlement of the claims made by the vendors that the directorsmay be advised to agree, will not be agreed without first endeavouring to ensurethat the Company has the funds available to meet its obligations as they falldue. The cash flow forecasts prepared by the directors make no allowance for anysuch payment. Additionally, in view of the uncertainty surrounding any amountsthat might be payable and, in turn, the timing of any such payments, thedirectors have not entered into any negotiations to secure the additionalfinancing that would be required to fund any immediate payment requirement. As a consequence of the matter set out above, the Company may be unable to meetits financial obligations as they fall due and may thus be unable to continue asa going concern if the amount of deferred consideration found to be due (if any)is determined to be at the level currently provided in the financial statementsand a demand for the immediate payment of this sum is enforced. The financial statements do not include any adjustments that would result if theCompany was unable to continue as a going concern. 3. Earnings per share Unaudited Unaudited Audited Six months Six months Year ended ended ended 31 March 31 March 30 September 2007 2006 2006 £'000 £'000 £'000 Reconciliation of earningsLoss used for calculation of basic and diluted EPS (87.6) (726.7) (2,952.8)Amortisation and impairment of goodwill 50.9 98.6 1,744.0 _______ _______ _______ Loss used for calculation of adjusted basic and diluted EPS (36.7) (628.1) (1,208.8) _______ _______ _______ Reconciliation of denominatorShares used for calculation of basic and adjusted basic EPS 10,156,776 10,156,776 10,156,776Exercise of options - - -Shares to be issued - - - __________ __________ __________ Shares used in calculation of diluted and adjusted diluted 10,156,776 10,156,776 10,156,776EPS _________ ___________ __________ Loss per share before amortisationand impairment of goodwill Basic (0.4p) (6.2p) (11.9p)Fully diluted (0.4p) (6.2p) (11.9p) _______ _______ _______ 4. Reconciliation of operating profit/(loss) to net cash inflow/(outflow)from operating activities Unaudited Unaudited Audited Six months Six months Year ended ended ended 31 March 31 March 30 September 2007 2006 2006 £'000 £'000 £'000 Group operating profit/(loss) 2.0 (653.0) (2,783.5)Amortisation and impairment of goodwill 50.9 98.6 1,744.0Depreciation 35.6 48.8 124.0Loss/(profit) on disposal of fixed assets - 29.4 55.1Decrease in debtors 192.0 215.8 630.5(Decrease)/Increase in creditors (214.9) 401.0 122.4 _______ _______ _______ Net cash inflow/(outflow) from operating 65.6 140.6 (107.5)activities _______ _______ _______ 5. Analysis of net debt Audited Unaudited At At 1 October Cash Other non- 31 March 2006 flow cash changes 2007 £'000 £'000 £'000 £'000 Cash at bank and in hand 1.7 (1.2) - 0.5Overdrafts (284.6) (53.1) - (337.7) Cash (282.9) (54.3) - (337.2) Debt due after one year (70.9) 3.6 (30.6) (97.9)Debt due within one year (626.8) - (16.5) (643.3)Finance leases (31.9) 7.9 - (24.0)Invoice discounting facilities (364.6) 69.2 - (295.4)Other loans (86.5) - (4.3) (90.8) Financing (1,180.7) 80.7 (51.4) (1,151.4) Total (1,463.6) 26.4 (51.4) (1,488.6) _______ _______ _______ _______ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MTR.L