22nd Jun 2006 07:02
Symphony Telecom Holdings PLC22 June 2006 SYMPHONY TELECOM HOLDINGS PLC Preliminary Results For the year ended 31 March 2006 Symphony Telecom Holdings plcRegistered in England No. 5405982Registered office: Telford House, Corner Hall, Hemel Hempstead, HP3 9HN Symphony Telecom Holdings plc (AIM: SMY) Preliminary Results for the year ended 31 March 2006 "Recommended Offer by Redstone for Symphony" Symphony Telecom Holdings plc (the "Company" or "Group") is a leadingindependent UK distributor of telecommunications products and services to theSME market. HIGHLIGHTS • Announced today: Recommended cash offer by AIM-listed Redstone plc ("Redstone") valuing the business at £17.3m. • Successful integration of Anglia Telecom Centres Limited ("Anglia Telecom"). • Pro-forma(1) turnover up 26% to £64.9m. • Renewal of both O2 and Vodafone Service Provider licences. • New initiatives announced today - o new mobile service provider initiative launched in April 2006. o Broadband initiative to SMEs launched in May 2006. o VoIP offer to SMEs to launch later this year. Martin Turner, Chief Executive Officer, commented: "This has been a year of change with the acquisition of Anglia Telecom in Apriland the IPO in September. Turnover has grown significantly to £61.3m generatingoperating profits (excluding intangible asset amortisation and exceptionalitems) of over £2m. The recommended offer by Redstone for the Company represents a 33% premium overthe placing price on flotation. Consolidation within the telecoms sector iscontinuing and the Directors are confident that the Company is well positionedto make further progress within the enlarged Redstone group." 22 June 2006 Enquiries: Symphony Telecom Holdings plc 01442 283 314Martin Turner, Chief Executive OfficerIan Brewer, Finance Director Hansard Communications 020 7 245 1100Adam ReynoldsKris McGuire Chairman's Statement It was announced today that the boards of Symphony and Redstone have reachedagreement on the terms of a recommended offer for the entire issued and to beissued ordinary share capital of the Company. The acquisition of the Company should allow the Symphony group to expand furtheras part of the enlarged Redstone group. The Directors consider that althoughSymphony has a successful future as an independent company, the offer is suchthat Symphony shareholders should have the opportunity to crystallise theirinvestment at a premium of 33 per cent. over the placing price of the Symphonyshares at flotation. Group Performance For the year ended 31 March 2006, turnover increased to £61.3m (2005: £21.0m),largely due to the acquisitions during the year which contributed £39.6m. Operating profit, before exceptional items of £0.4m (2005: £nil) and intangibleasset amortisation of £2.0m (2005: £0.0m), was £2.1m (2005: £1.3m). Theexceptional items relate to restructuring, integration and other one-off costs.The operating loss for the year was £0.3m (2005: profit £1.3m). After non-operating exceptional items and net interest payable of £0.7m (2005:£0.0m) the loss before tax was £0.9m (2005: £1.3m profit) and the loss per share4.0p (2005: 6.2p earnings per share). No dividend has been proposed (2005:£nil). Mobile Services Division The Mobile Services Division operates as a mobile service provider to SMEs andas a distributor for the UK and Dutch mobile networks. Mobile Distribution The Mobile Distribution operation, trading as Anglia Telecom, acts as anaggregator that sits between mobile network operators and small dealers andretail outlets. Since its acquisition on 29 April 2005, Anglia Telecom in the UK has generatedsales of £33.6m for the Group. For the full year the operation achievedsignificant organic growth (including Anglia's pre-acquisition results), withgross connections up from 61,800 to 74,200 and turnover up 39% to £36.7m (2005:£26.4m). This growth has been achieved through the use of aggressive short-termpromotions and incentives as well as the expansion of the dealer network. Grossmargin on a similar pro forma basis was 10% for the full year (2005: 13%), thereduction largely due to the introduction of the lower-margin Three networkduring the year and consequential impact on product mix. During the year the group also acquired IMS PLUS Beheer B.V. ("IMS"), a Dutchmobile distribution business, which contributed a loss of £0.2m on turnover of£1.5m. Despite its small size IMS has shown steady growth and is expected toachieve a break even position within the next six months. The future success ofthis business will determine the timing and extent of the Company's plans toroll out its business model into other European countries. Mobile Service Provision Following a strategic review, over the past six months the Mobile ServiceProvision operation has been reorganised to focus on growth through its indirectdistribution channels, including the acquired Anglia dealer channel which haspreformed exceptionally well since acquisition. The Directors believe this to bethe most cost efficient and effective way to grow its mobile service provisionbusiness in the future. Both the Vodafone and O2 service provision licences wereextended during the year, ensuring Symphony continues to benefit from being oneof a small number of service providers with dual licences. As a result of the review the division has increased its indirect sales and backoffice staff, reduced direct sales costs and created a unified mobile sales teamacross both mobile distribution and mobile service provision channels.Additionally, and in conjunction with the mobile network operators, the divisionundertook an exercise to cleanse the subscriber base of low quality connections,resulting in approximately 2,500 disconnections. Notwithstanding these changes,annual turnover rose 8% to £6.9m (2005: £6.4m) with 12,374 active subscribers atyear end (2005: 12,400). Based on the successful Anglia Telecom model, and by adopting an indirect salesstrategy as the primary route to market, the Company intends to significantlygrow its service provision operation over the next twelve months. A series ofnew product offerings were launched into the market in April 2006. Initialresults are encouraging. Fixed Line and Data Division The Fixed Line and Data Division, trading as Symphony Telecom, resells fixedline voice, line rental and data products from BT and other alternative carriersto SME customers. Turnover for the year increased to £19.4m (2005: £14.4m),which includes £4.5m generated from the customer base acquired with Anglia. Theorganic growth was largely due to increased sales of wholesale line rentalservices into the existing customer base and the launch of two new jointventures. Despite competitive market conditions, gross margins increased to 39% (2005:38%). The Company protects its margins by using its buying power to negotiateimprovements in wholesale costs from its suppliers, and by offering tailoredpricing plans and product bundles. The integration of Anglia's fixed lineservices was completed on 31 October 2005 which has reduced operating costsgoing forward through the elimination of duplicate costs. Demand and customer interest continues to grow for advanced data services(including business broadband) and business VoIP (Voice over Internet Protocol)solutions. In May 2006, the Company launched a free broadband offering as partof a bundle of complementary telecom services, and a comprehensive business VoIPsolution is scheduled to launch in the summer of 2006. Following a strategic review, the fixed line operation in Ireland is beingdiscontinued. The operation generated revenue of £0.2m and an operating loss of£40,000 during the year. Corporate developments On 29 April 2005 the Company acquired Symphony Telecom Limited and itssubsidiaries as part of an internal reorganisation within its parent group,Eckoh Technologies plc ("Eckoh"). On the same day the Company also completed theacquisition of Anglia Telecom Centres Limited from TTG Europe plc for a cashconsideration of £9.7m, including acquisition expenses. The Company hasconsolidated the results of Symphony Telecom Limited using merger accountingprinciples. On 15 September 2005 the Company's shares were admitted to AIM and 10,997,561ordinary shares were placed for cash, raising £4.5m, before expenses. As at 31March 2006, Eckoh held 64.64% of the issued ordinary share capital of theCompany. On 30 November 2005 the Company exercised its option to acquire IMS-PLUS BeheerB.V. ("IMS"), a Holland-based mobile distribution business, from Eckoh for £nilconsideration. IMS has distribution contracts with four Dutch mobile networkoperators, KPN, Orange, Telfort and Vodafone Libertel, and operates via anational network of mobile phone dealers. The directors believe the acquisitionwill enable the Group to develop its European offering. Current trading and outlook The Directors are encouraged by the take up of the recently launched mobileservice provision product, which is being rolled out across the Company's mobiledealer network. This should generate a significant increase in new customers andassociated mobile connections over the next twelve months. Due to the Company'saccounting policy of writing off customer acquisition costs as incurred, thefinancial benefit arising from the investment in the mobile customer base mayfall into future financial periods. The Company has also recently launched a new broadband initiative as part of acomplementary package of fixed line products and services. Although at an earlystage, the Directors will continue to introduce innovative and attractiveproduct bundles to simplify customer purchasing decisions, which provide valuefor money and strengthen our supplier relationships. As highlighted in the AIM Admission Document, the Directors believe that thedemand for traditional fixed line products and services will decline over time.Consequently, mobile and data activities will continue to be expanded and arange of business class VoIP services are expected to be launched in the summerin partnership with a number of data infrastructure owners and operators. Theseservices will enable customers to make voice calls over data networks atsignificantly lower cost, and also eliminate the need for customerpremises-based telephone switches and dedicated voice infrastructures. TheDirectors believe this will be an area of significant growth and opportunity forthe Company in the future. Current trading is in line with the Directors expectations, who remain confidentin the Company's future prospects. Martin Smith Chairman 22 June 2006 Group profit and loss accountfor the year ended 31 March 2006 Note Year ended Year ended 31 March 2006 31 March 2005 £'000 £'000Turnover 2 61,324 20,967 ------- -------Continuing operations 21,746 20,967Acquisitions 39,578 - ------- -------Cost of sales (49,055) (14,191) ------- -------Gross profit 12,269 6,776 ------- -------Net operating expenses before intangibleasset amortisation and exceptional items (10,208) (5,482)Amortisation of intangible assets (1,961) (25)Exceptional items (358) - ------- -------Total operating expenses (12,527) (5,507) ------- -------Operating profit/(loss) before intangibleasset amortisation and exceptional items 2,061 1,294 ------- -------Continuing operations (153) 1,294Acquisitions 2,214 - ------- -------Operating (loss)/profit (258) 1,269 ------- -------Continuing operations (474) 1,269Acquisitions 216 - ------- -------Additional proceeds from disposal ofoperation in a prior year 108 -Costs of group reorganisation (80) -Net interest (payable)/receivable andsimilar items (658) 15 ------- -------(Loss)/profit on ordinary activities beforetaxation 2 (888) 1,284 Taxation (138) (8) ------- -------(Loss)/profit on ordinary activities aftertaxation (1,026) 1,276 Minority interests (25) (38) ------- -------(Loss)/retained profit for the year (1,051) 1,238 ------- -------Basic and diluted (loss)/earnings perordinary share 3 (4.0p) 6.2p There is no difference between the (loss)/profit on ordinary activities beforetaxation and the (loss)/retained profit for the years stated above and theirhistorical cost equivalents. Statement of total recognised gains and lossesfor the year ended 31 March 2006 Year ended Year ended 31 March 2006 31 March 2005 £'000 £'000(Loss)/profit for the year (1,051) 1,238Exchange adjustments offset in reserves (19) 12 -------- --------Total recognised (losses)/gains for the year (1,070) 1,250 -------- -------- Group balance sheetas at 31 March2006 31 March 2006 31 March 2005 Note £'000 £'000Fixed assetsIntangible fixed assets 8,460 475Tangible fixed assets 465 237 ------- ------- 8,925 712Current assetsStock 437 -Debtors 7,776 5,678Cash at bank and in hand 4,461 2,468 ------- ------- 12,674 8,146 Creditors: amounts falling due within one year (10,983) (6,989) ------- -------Net current assets 1,691 1,157 ------- -------Total assets less current liabilities 10,616 1,869 Creditors: amounts falling due after more thanone year (6,150) - Provisions for liabilities and charges (24) (1) ------- -------Net assets 4,442 1,868 ------- ------- Capital and reserves 4Called up share capital 10,270 -Share premium account 3,349 -Other reserves (9,950) 50Profit and loss account 421 1,491 ------- -------Total equity shareholders' funds 5 4,090 1,541Minority interests 352 327 ------- -------Capital employed 4,442 1,868 ------- ------- Group cash flow statementfor the year ended 31 March 2006 Note Year ended Year ended 31 March 2006 31 March 2005 £'000 £'000Net cash inflow from operating activities 6 1,110 2,174 Returns on investments and servicing offinanceInterest received 92 15Interest paid (314) -Issue costs of bank loan (298) - ------- ------- (520) 15 ------- -------Taxation (362) (7) Capital expenditure and financial investmentPurchase of tangible fixed assets (365) (206)Proceeds on disposal of tangible fixedassets 12 - ------- ------- (353) (206) ------- ------- Acquisitions and disposals Purchase of subsidiary undertakings 7 (9,722) (250)Net cash acquired with subsidiaryundertakings 7 796 -Contingent consideration paid in respect ofprior year acquisition (50) -Costs of group restructuring (80) -Additional proceeds from disposal ofoperation in a prior year 108 - ------- ------- (8,948) (250) ------- -------Cash (outflow)/inflow before use offinancing (9,073) 1,726 FinancingIssue of shares 4,559 -Expenses of share issues (940) -Loans raised 8 13,500 -Loans repaid (6,000)Net movement in finance leases 8 (7) - ------- ------- 11,112 - ------- ------- ------- -------Increase in cash in the year 2,039 1,726 ------- ------- Notes to the preliminary results 1. Basis of preparation The preliminary results for the year ended 31 March 2006 have been preparedusing accounting policies consistent with those set out in the Company'sApplication for Admission and Trading on AIM document. These statements do notconstitute statutory accounts within the meaning of section 240 of the CompaniesAct 1985. The statements have been extracted from the audited consolidatedfinancial statements of the Company for the year ended 31 March 2006 which havenot yet been filed with the Registrar of Companies. The auditors' report onthose accounts was unqualified and did not contain any statement under section237 of the Companies Act 1985. The balances as at 31 March 2005 and the results for the year then ended havebeen extracted from the Accountants' Report in the Company's Application forAdmission to Trading on AIM document which was based on statutory accounts ofthe relevant subsidiary companies for the year ended 31 March 2005 which havebeen filed with the Registrar of Companies. The auditors' reports on thoseaccounts were unqualified and did not contain any statement under section 237 ofthe Companies Act 1985. The preliminary results for the year ended 31 March 2006 will be posted on theCompany's web site, www.symphony.com. 2. Segmental information Turnover (Loss)/profit before taxation Year ended Year ended Year ended Year ended 31 March 31 March 31 March 31 March 2006 2005 2006 2005 £'000 £'000 £'000 £'000---------------------------- ------- ------- -------- -------Business analysisFixed line and mobileservice provision 26,236 20,967 1,741 1,294Mobile distribution 35,088 - 1,099 -Central costs - - (779) -Exceptional items - - (358) -Intangible assetamortisation - - (1,961) (25)Net interest(payable)/receivable - - (658) 15Additional proceeds fromdisposal of operation in aprior year - - 108 -Costs of grouprestructuring - - (80) ----------------------------- ------- ------- -------- ------- Total 61,324 20,967 (888) 1,284---------------------------- ------- ------- -------- ------- The Group's operations consist of directly-billed telecommunications services tocustomers under the 'Symphony' and other associated brands and the distributionof mobile products on behalf of mobile network operators. Segmental informationis provided on that basis. Turnover between segments is immaterial. There are nomaterial foreign entities or material foreign customers and therefore nosegmental information by geographical area is presented. Central costs comprise corporate costs, the cost of central support functionsand head office costs. These costs are not apportioned across the businesssegments. Costs of group restructuring comprise advisory costs incurred inrelation to setting up the Symphony Telecom Holdings plc group. 3. (Loss)/earnings per ordinary share of 2p each Year ended Year ended 31 March 31 March 2006 2005 £'000 £'000Profit for the year before the following: 1,268 1,263Intangible asset amortisation (1,961) (25)Exceptional items (358) - -------- --------(Loss)/profit for the year (1,051) 1,238 -------- --------Weighted average number of shares in the year:Basic 26,034,300 20,000,000Basic earnings per share before the following: 4.9p 6.3pIntangible asset amortisation (7.5p) (0.1p)Exceptional items (1.4p) - -------- --------Basic and diluted (loss)/earnings per share (4.0p) 6.2p -------- -------- No dilution of loss per share arises due to losses in the year. There were noshare options in issue during the prior year. 4. Share capital and reserves Ordinary share Share premium Other reserves Profit and loss capital account account £'000 £'000 £'000 £'000 At 1 April 2005 - - 50 1,491Loss for theyear - - - (1,051)Foreign exchangeadjustments - - - (19)Shares issuedfor cash 270 3,349 - -Shares issuedon grouprestructuring 10,000 - (10,000) - ------- ------- ------- -------At 31 March2006 10,270 3,349 (9,950) 421 ------- ------- ------- ------- 5. Reconciliation of movement in shareholders' funds Year ended Year ended 31 March 2005 31 March £'000 2006 £'000Opening shareholders' funds 1,541 291(Loss)/profit for the year (1,051) 1,238Shares issued for cash 3,619 -Exchange adjustments offset in reserves (19) 12 -------- --------Closing shareholders' funds 4,090 1,541 -------- -------- 6. Net cash inflow from operating activities Year ended Year ended 31 March 2005 31 March £'000 2006 £'000Operating (loss)/profit (258) 1,269Depreciation of tangible fixed assets 235 157Amortisation of intangible fixed assets 1,961 25Profit on disposal of tangible fixed assets (4) -Decrease in stock 130 21Increase in debtors (1,458) (636)Increase in creditors/provisions 504 1,338 -------- -------- 1,110 2,174 -------- -------- 7. Acquisitions Anglia Telecom Centres Limited On 29 April 2005 the Company acquired the entire issued share capital of AngliaTelecom Centres Limited ("Anglia") for a total consideration of £9,699,000. Fromthe date of acquisition Anglia contributed £38.1m to turnover, operating profitof £2.3m (after integration costs of £0.1m) and £2.1m profit to the loss for theyear. £'000Book value of net assets acquired 223Fair value adjustments (348) -------Provisional fair value of net liabilities (125)Goodwill 9,824 -------Cost of acquisition 9,699 -------Comprising:Cash 9,426Acquisition costs 273 ------- 9,699 ------- In its last financial year to 31 March 2005, Anglia made a profit after tax of£0.9m. For the period since that date to the date of acquisition, Angliagenerated turnover of £3.6m and recorded operating profits of £0.1m and a profitafter tax of £0.1m. IMS Plus Beheer B.V. On 30 November 2005 the Company exercised an option to acquire the entire issuedshare capital of IMS PLUS Beheer B.V. ("IMS") from Eckoh Technologies plc, for£nil consideration. Acquisition costs of £23,000 were incurred. Due to theCompany having exercised control over IMS since 31 May 2005, the results of IMSare included in the Company's consolidated results from that date. From the dateof acquisition IMS contributed £1.5m to turnover, operating losses of £0.2m and£0.2m to the loss for the year. £'000 -------Book value of net liabilities acquired (93)Fair value adjustments 44 -------Provisional fair value of net liabilities (49)Goodwill 72 -------Cost of acquisition 23 -------Comprising:Acquisition costs 23 ------- 23 ------- Symphony Telecom Limited On 29 April 2005 the Company acquired Symphony Telecom Limited from EckohTechnologies plc ("Eckoh") as part of a reorganisation of the Eckoh group.Consideration of £10m was satisfied through the issue of ordinary shares in theCompany. The Group has consolidated Symphony Telecom Limited using mergeraccounting principles. 8. Reconciliation of movement in net funds/(debt) At Cash flow Non-cash items At 1 April £'000 £'000 31 March 2006 2005 £'000 £'000Bank overdraft (46) 46 - -Cash at bank and in hand 2,468 1,993 - 4,461 Net cash 2,422 2,039 - 4,461 ------- ------- ------- -------Loan from Eckoh Technologies (342) (4,040) (279) (4,661)plcLoan from bank - (3,500) (25) (3,525)Capitalised loan expenses - 298 (132) 166Finance leases - 7 (30) (23) ------- ------- ------- -------Net funds/(debt) 2,080 (5,196) (466) (3,582) ------- ------- ------- ------- The non-cash items relate to accrued interest, amortisation of loan issue costsand new finance leases. (1) Includes Anglia for the two years ended 31 March 2006 as if it were part ofthe Group for that period This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CTP.LEckoh Technologies