REG-Glen Group PLC Interim Results - Part 1
Released: 30/05/2008
com:20080530:Rnsd5611V
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RNS Number : 5611V
Glen Group PLC
30 May 2008
30 May 2008
Glen Group plc
Interim Results for the six months ended 31 March 2008
Glen Group plc, the Edinburgh based provider of integrated telecommunication
solutions, today announces interim results for the six months ended 31 March
2008
Key points:
* Successful sale of the businesses operated by Eclectic Group Ltd ("Eclectic")
and I G Software Limited ("inGroup") for a net cash consideration of £2.72m
* Elimination of all group debt
* Turnover from the continuing business of £725,695 compares to £415,921 in the
equivalent period last year. Half year turnover,including turnover from the
discontinued businesses Eclectic and inGroup, of £2,393,186.
* Operating loss excluding discontinued operations reduced from £738,264 in the
half year to 31 March 2007to £428,983 for this half year.
* Changing mix of services has resulted in materially better gross margins.
This half year margins of 49.0% were achieved compared to 41.1% in the
equivalent period last year, and 23.3% for the whole of 2007.
* Restructuring of Board to focus on pursuing a telecom-centric strategy.
Eric Hagman CBE, Chairman of Glen Group, commented:
"Going forward, we now have a strong balance sheet, capital to rebuild the group
and a strategy which maximises the skill set of the management team. Although
the sale has materially reduced the size of the business, we now have an income
stream that is largely of a recurring nature and we will take a measured
approach to acquisitions, concentrating on telecom-centric businesses which have
recurring revenues."
Enquiries:
Glen Group plc
Graham J Duncan, Chief Executive Officer Tel: 0845 119 2100
Pelham PR
Alex Walters
Tel: 0203 170 7435
Seymour Pierce
Jonathan Wright Tel: 0207 107
8000
GLEN GROUP PLC
CHAIRMAN'S STATEMENT
For the half year, the Group has incurred an operating loss excluding
discontinued operations of £428,983 (2007 half year: £738,264). Not all of the
cost reductions implemented last year and in the first half of this year have
yet materialised, but the improved trend is evident. The changed mix of services
and increased turnover has also delivered a materially better gross profit with
the half year yielding £355,866 compared to £170,844 in the equivalent period
last year. The half year is better than the gross profit for the whole of 2007.
The improvement has been helped by a better margin percentage with this half
year at 49.0% compared to the equivalent period last year at 41.1%. We are also
now starting to see a downward trend in our overheads.
In the first half, we completed the transformation of the Group into a
telecom-centric business. We exited the project IT services sector by selling
the two main businesses that operated in this field; we have made major changes
to our operating structure, restructured the Board; and have repaid our debt,
which amounted to over £800,000, from the net sale proceeds of £2.72m in respect
of the assets and the business of the IT project companies, Eclectic Group
Limited ("Eclectic") and I G Software Limited ("inGroup") as at 31 December
2007.
The financial results, and their presentation for the half year, reflect the
operational changes that have been made to the Group. The results of the
businesses sold are again presented as divorced from the operating results for
the retained businesses with the former included in a single line on the income
statement under discontinued operations. Taken together, Eclectic and inGroup
have incurred further operating losses up to the date of their sale. I believe
that this disposal was timely and concluded at a fair price, given a weakening
market for project based IT services.
As announced on 9 May 2008, I am stepping down from the Board at the end of this
month. The size of the retained businesses means that my input will, inevitably,
be diluted and, as announced to shareholders on 9 May 2008, Graham J Duncan, the
current CEO, will become non-executive Chairman effective 1 June 2008, with Alan
Bonner who is currently the MD of Pinnacle Group, our continuing telecom-centric
business, taking over Graham's role as Group CEO. As also announced on 9 May
2008, Graham will retain a key responsibility within the Group for AIM matters,
finance, and mergers and acquisitions.
Going forward, we now have a strong balance sheet, capital to rebuild the group
and a strategy which maximises the skill set of the management team. Although
the sale has materially reduced the size of the business, we now have an income
stream that is largely of a recurring nature and we will take a measured
approach to acquisitions, concentrating on telecom-centric businesses which have
recurring revenues.
Eric M Hagman CBE
CHAIRMAN
30 May 2008
GLEN GROUP PLC
BUSINESS REVIEW
The half year has seen the sale of our IT project businesses, the elimination of
all group debt and a material reduction in our head count, mainly as a result of
the sale of the Eclectic and inGroup business which became effective on 31
December 2007.
The results of Eclectic and inGroup up to the date of sale are presented as
discontinued operations in the income statement and shown as a single line item.
This gives readers a better understanding of the operating results of the
continuing businesses.
1) Turnover
Turnover of the continuing businesses for the half year was £725,695 compared to
£415,921 in the equivalent period last year, a rise of nearly 75%, due to the
acquisition of Pinnacle Group Limited in June 2007 and a turnover reduction in
the other SME focussed businesses as effort was moved from IT services to
telecom-centric services. The half-year turnover also compares favourably with
turnover for the whole of the previous year which was £1,014,870.
Had the turnover from Eclectic and inGroup for the period up to 31 December 2007
been included, the half year turnover would have been £2,393,186. The difference
from the published turnover of £725,695 is netted against relevant costs and
shown as discontinued operations.
2) Gross Margins
The overall gross profit of the continuing businesses for the half year was
£355,866 (2007 first half: £170,844 and 2007 full year: £236,959). Our gross
margins have materially improved with the changing mix of services. For the half
year we returned a gross margin percentage of 49.0% which compares against the
half year last year of 41.1% and against just 23.3% for the whole of 2007. The
maintenance of our margins is an important objective and monitoring margin on a
monthly basis is a key performance indicator of the Board.
3) Exceptional Costs
Other than the amortisation of intangibles, which is a requirement of IFRS
accounting and which has impacted the half year results by £81,711, the half
year has been free of exceptional costs resulting from the continuing business.
4) Operating Loss
In the half year we have incurred an operating loss of £428,983 excluding
discontinued operations (2006 half year: £738,264). Our half year operating loss
includes amortisation of intangible assets of £81,711,as required under IFRS.
The overheads of the business, compared against the full year, are now beginning
to reduce and we expect further reductions to come through in the second half,
given the many changes that we have made to the business.
5) Financing
The sale of Eclectic and inGroup was structured as a sale of the assets and
undertakings of the two companies (including a transfer of the employees to the
purchaser), and not a sale of the share capital of these entities. This had
several advantages, not the least of which was speed, but it has left us with
the legacy of the businesses to wind down. From a practical point of view, we
have taken steps to in-gather all the receivables of the businesses at 31
December 2007 (the effective sale date) and pay down all the creditors.
We received two payments from the purchaser: one of £2.25m in early January 2008
and the balance of a net £0.47m during March 2008. The total, £2.72m, has been
applied to pay the costs of the transaction; pay an agreed bonus of £0.25m to
certain members of the management team of Eclectic, as approved by shareholders
on 4 January 2008 as a related party transaction; and pay down all group debt,
approximating to £0.8m. We expected the receivables of the businesses to broadly
match the payables and this has proved to be correct. As at 31 March 2008, the
group had £1,092,107 of net cash in hand and group trade and other receivables
stood at £727,275 of which £393,960 remained on the balance sheets of Eclectic
and inGroup. We are actively seeking to recover the Eclectic and inGroup debt,
in some cases in conjunction with the purchaser.
Although this transaction has materially reduced the size of our business, it
has left the Group with net cash and no debt which, in the opinion of the
directors, gives us some strength in the current economic climate.
We have made significant changes to the business in the first half and it is our
intention to organically grow the telecom-centric business going forward, as
this business is underpinned by recurring revenues which are more stable than
the project based revenues of the businesses that we have recently sold. We do
not rule out acquisitions in the telecom space provided that we can acquire at
acceptable prices and see a way of extracting costs from the acquired business
to the advantage of our shareholders.
Graham J Duncan MA CA
CHIEF EXECUTIVE
30 May 2008
GLEN GROUP PLC
CONSOLIDATED INTERIM INCOME STATEMENT - UNAUDITED
For the six months ended 31 March 2008
6 months to 6 months to 12 months to
31 March 31 March 30 September
2008 2007 2007
Note £ £ £
Revenue 2 725,695 415,921 1,014,870
Cost of sales (369,829) (245,077) (777,911)
Gross profit 355,866 170,844 236,959
Administrative expenses (703,138) (662,230) (1,445,020)
Operating loss before amortisation, impairment of goodwill
and exceptional cost (347,272) (491,386) (1,208,061)
Amortisation of intangibles (81,711) (10,000) (65,741)
Impairment of goodwill - - (994,111)
Exceptional cost of fundamental reorganisation - (236,878) (305,415)
Operating loss (428,983) (738,264) (2,573,328)
Interest receivable 1,628 500 2,771
Interest payable (3,333) (5,599) (12,600)
Finance costs (1,705) (5,099) (9,829)
Loss before tax 3 (430,688) (743,363) (2,583,157)
Taxation - - (439)
Loss for the period from continuing operations (430,688) (743,363) (2,583,596)
Discontinued operations
(Loss) / profit for the period from discontinued operations 3 (433,040) 145,620 (421,781)
Loss for the period 3 (863,728) (597,743) (3,005,377)
Loss per share
- basic and fully diluted - continuing 4 (0.03) p (0.19) p (0.46)
- basic and fully diluted - discontinued 4 (0.04) p 0.03 p (0.07)
- basic and fully diluted - total 4 (0.07) p (0.16) p (0.53)
GLEN GROUP PLC
CONSOLIDATED INTERIM BALANCE SHEET - UNAUDITED
As at 31 March 2008
31 March 31 March 30 September
2008 2007 2007
Note £ £ £
Assets
Non-current assets
Goodwill - 3,564,504 -
Intangible assets 669,657 90,000 751,368
Property, plant and equipment 83,524 139,072 105,132
Total non-current assets 753,181 3,793,576 856,500
Current assets
Inventories 3,344 46,475 22,524
Trade and other receivables 727,275 1,703,122 1,729,599
Cash and cash equivalents 1,116,749 111,022 157,361
Total current assets 1,847,368 1,860,619 1,909,484
Assets included in disposal groups - - 2,749,005
Total assets 2,600,549 5,654,195 5,514,989
Liabilities
Short term borrowings (27,042) (658,925) (587,308)
Trade and other payables (357,096) (543,912) (1,234,194)
Other taxes and social security costs (31,144) (187,606) (442,776)
Accruals and other payables (232,193) (948,064) (384,987)
Total current liabilities (647,475) (2,338,507) (2,649,265)
Non current liabilities
Long term borrowings (16,233) (85,235) (65,155)
Total liabilities (663,708) (2,423,742) (2,714,420)
Net assets 1,936,841 3,230,453 2,800,569
Equity attributable to equity holders of the parent
Share capital 4,807,680 4,115,089 4,807,680
Share premium account 3,207,593 1,262,434 3,207,593
Other reserve 16,544 29,635 16,544
Fair value adjustment (1,064,130) (417,221) (1,064,130)
Profit and loss reserve 5 (5,030,846) (1,759,484) (4,167,118)
Total equity 1,936,841 3,230,453 2,800,569
GLEN GROUP PLC
CONSOLIDATED INTERIM CASH FLOW STATEMENT - UNAUDITED
For the six months ended 31 March 2008
6 months to 6 months to 12 months to
31 March 31 March 30 September
2008 2007 2007
£ £ £
Cash flows from operating activities
Operating loss (including discontinued operations) (859,204) (565,350) (2,491,961)
Adjustments for:
Depreciation 39,312 54,744 93,778
Amortisation 81,711 - 65,741
Impairment of goodwill - - 994,110
Release of negative goodwill - - (9,557)
Other non-cash items - 9,607 (3,484)
Payment of corporation tax - - (8,712)
Decrease / (increase) in inventories 19,180 (19,723) 11,228
Decrease / (increase) in trade and other receivables 1,002,324 (131,651) 331,844
(Decrease) / increase in trade payables,
accruals and other creditors (1,458,591) 324,942 70,872
Net cash flow from operating activities (1,175,268) (327,431) (946,141)
Cash flows from investing activities
Purchase of property, plant and equipment (11,550) (71,149) (135,220)
Sale of property, plant and equipment 58,464 - -
Disposal of subsidiary company 2,684,387
Acquisition of subsidiaries, net of cash acquired - (1,762) 25,292
Net cash used in investing activities 2,731,301 (72,911) (109,928)
Cash flows from financing activities
Interest paid less interest received (4,525) (32,393) (62,195)
Issue of shares - 500,000 1,380,000
Receipt of bank finance - 15,000 -
Repayment of borrowing (98,603) (22,019) (28,716)
Repayment of former director's loan - (25,000) -
Former subsidiary director's loan notes less repayments - - (50,000)
Receipt from finance leases less repayment (11,341) 13,223 34,695
Expenses paid in connection with share issue - (47,625) (91,625)
Net cash used in financing activities (114,469) 401,186 1,182,159
Net increase in cash 1,441,564 844 126,090
Cash and cash equivalents at beginning of period (349,457) (475,547) (475,547)
Cash and cash equivalents at end of period 1,092,107 (474,703) (349,457)
GLEN GROUP PLC
CONSOLIDATED INTERIM CASH FLOW STATEMENT - UNAUDITED (CONTINUED)
For the six months ended 31 March 2008
6 months to 6 months to 12 months to
31 March 31 March 30 September
2008 2007 2007
£ £ £
Analysis of changes in net debt
Cash and cash equivalents comprise:
Cash and cash equivalents 1,116,749 111,022 157,361
Bank overdrafts (24,642) (585,725) (506,818)
1,092,107 (474,703) (349,457)
GLEN GROUP PLC
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY - UNAUDITED
For the six months ended 31 March 2008
Share Share Shares to Other Fair Retained
capital premium be issued reserve value earnings Total
At 1 October 2006 3,276,831 860,817 787,500 20,028 (417,221) (1,161,741) 3,366,214
Loss for the year - - - - - (3,005,377) (3,005,377)
Recognised directly in equity
Share issue 1,530,849 - - - (646,909) - 883,940
Shares to be issued as part
of acquisition - - (787,500) - - - (787,500)
Premium on share issue - 2,438,401 - - - - 2,438,401
Share based payments - - - 8,272 - - 8,272
Lapse of share options - - - (11,756) - - (11,756)
Expenses incurred on
share issue - (91,625) - - - - (91,625)
Net change directly in equity 1,530,849 2,346,776 (787,500) (3,484) (646,909) - 2,439,732
Total movements 1,530,849 2,346,776 (787,500) (3,484) (646,909) (3,005,377) (565,645)
Equity at 30 September 2007 4,807,680 3,207,593 - 16,544 (1,064,130) (4,167,118) 2,800,569
At 1 October 2007 4,807,680 3,207,593 - 16,544 (1,064,130) (4,167,118) 2,800,569
Loss for the period - - - - - (863,728) (863,728)
Equity at 31 March 2008 4,807,680 3,207,593 - 16,544 (1,064,130) (5,030,846) 1,936,841
GLEN GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 31 March 2008
1 Basis of preparation
This interim financial information has been prepared in accordance with the Company's accounting policies as disclosed in the financial statements for the
year ended 30 September 2007. The interim statements were approved by the Board of Directors on 30 May 2008.
2 Analysis of revenue
6 months to 6 months to 12 months to
31 March 31 March 30 September
2008 2007 2007
£ £ £
By business sector
Mobile services 117,993 149,011 221,939
IT 83,773 266,910 423,503
Other communication services 523,929 - 369,428
Continuing operations 725,695 415,921 1,014,870
IT - discontinued operations 1,667,491 2,508,898 5,670,935
Total revenue 2,393,186 2,924,819 6,685,805
By destination
United Kingdom 2,393,186 2,924,819 6,685,805
Total revenue 2,393,186 2,924,819 6,685,805
By origin
Glen Communications - continuing operations 142,581 415,921 638,077
Pinnacle -continuing operations 583,114 - 376,793
Eclectic and IG - discontinued operations 1,667,491 2,508,898 5,670,935
Total revenue 2,393,186 2,924,819 6,685,805
GLEN GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 31 March 2008
3 Analysis of losses
6 months to 6 months to 12 months to
31 March 31 March 30 September
2008 2007 2007
£ £ £
By business sector
Mobile services
Loss from operations before exceptional items (30,859) (497,702) (578,964)
Reorganisation costs - - (278,843)
Impairment of goodwill - - (935,314)
Loss from operations after exceptional items (30,859) (497,702) (1,793,121)
IT
Loss from operations before exceptional items (19,815) (11,947) (124,927)
Reorganisation costs - - (12,184)
Amortisation (10,000) (10,000) (20,000)
Impairment of goodwill - - (58,796)
Loss from operations after exceptional items (29,815) (21,947) (215,907)