Altitude Group Regulatory News (ALT)

20 Mar 2006 07:02

Dowlis Corporate Solutions plc20 March 2006 Date: 20 March 2006 On behalf of: Dowlis Corporate Solutions plc ("Dowlis" or "theCompany") Embargoed until: 0700hrs Dowlis Corporate Solutions plc Preliminary Results 2005 Dowlis Corporate Solutions plc, the marketing, information and logisticssolutions business, today announced its preliminary results for the period 30July 2004 to 31 December 2005. The key highlights are: • Merger of Corporate Solutions and Dowlis in September 2004 • Acquisition of Aviation Gifts for £237,000 in May 2005 and set up of Dowlis Communications in February 2005 • Flotation on AIM in November 2005 and raising of £4.0m net of expenses • Turnover in the 12 months to December 2005 was £20.4m • Normalised profit before tax, goodwill amortisation and one off exceptional items for the 12 months to December 2005 was £1.2m • Normalised basic earnings per share, before tax, goodwill amortisation and one-off exceptional items for the 12 months to December 2005 were 3.24p per share • Net funds of £1.5m at year end Post Balance Sheet Events • Acquisition of Envoy catalogue for £200,000 in January 2006 • Acquisition of Ross Promotional Products Limited for £825,000 in February 2006 also providing Group with a Scottish base Commenting on the Group's inaugural set of results as a Group and as an AIMlisted company, Colin Cooke, Chairman, said: "These are the inaugural set of preliminary results for the Dowlis group whichfollows its successful flotation on AIM in November 2005. Significant progresshas been made towards our goal of developing a profitable group that has a clearfocus on delivering marketing solutions that utilise our systems, processes andlink with a wide supply network. "Current trading for the early part of the year has been encouraging, and we arealready beginning to leverage the benefits of the two new businesses. We lookforward to the coming year with confidence and will continue to build the Grouporganically and through synergistic acquisition." Enquiries: Dowlis Corporate Solutions plc www.dowlis.comMartin Varley (Chief Executive) 0870 224 6677David Gray (Finance Director) 07775 848 252 Redleaf CommunicationsEmma Kane/Miranda Good 020 7955 1410 Corporate Synergy PLCRhodri Cruwys 020 7448 4400 Zeus CapitalAlex Clarkson 0161 831 1512 • Publication quality photographs are available via Redleaf. Chairman's Statement It gives me great pleasure to present the inaugural set of preliminary resultsfor the Dowlis group which follows its successful flotation on AIM in November2005. Turnover and profits This report covers the period from incorporation on 30 July 2004 to 31 December2005. However, I am concentrating in this report on the 12 months to 31 December2005 which is the first full year of trading for the Group. Turnover in the 12months to 31 December 2005 was £20.4m and normalised profit before tax, goodwillamortisation and one-off exceptional items was £1.2m. The one-off exceptional items relate to the reorganisation of the Dowlisbusiness and the centralising of our warehouse facility in new premises inManchester, which had a total cost of £206,000 and £240,000, being those costsof listing on AIM that under the requirements of FRS25 are not eligible to bededucted from the share premium account. Basic earnings per share, beforegoodwill amortisation and one-off costs for the 12 months to 31 December 2005,were 3.24p per share and, after goodwill amortisation and one-off costs, 1.13pper share. No dividend will be paid this year as stated in the Admissiondocument. Cash resources and investment The successful admission to AIM raised £4.0m net of expenses and, followingreceipt of these funds, short term debt and loans were repaid. At the year end,the Group had £1.5m cash in hand. Post balance sheet events At the time of the Group's admission to AIM it stated its intention ofincreasing revenues through the sales channels of Trade Only(TM)and informationservices by attracting additional suppliers and distributors through the websiteand establishing additional UK Promotional Products sales offices. Since theyear end, we have acquired two businesses: In January we acquired the Envoycatalogue at a total cost of £200,000 - Envoy provides product information andselling resources to UK based promotional merchandise companies. Then inFebruary we acquired Ross Promotional Products Limited for a total considerationof £825,000. This acquisition provides a Scottish facility from which to servethe Group's increasing client base in Scotland. Board and employees The dedication and effort that has been demonstrated by our talented team overthe past 18 months has been exemplary. It is a result of this that significantprogress has been made towards our goal of developing a profitable group thathas a clear focus on delivering marketing solutions that utilise our systems,processes and link with a wide supply network. Outlook Current trading for the early part of the year has been encouraging, and we arealready beginning to leverage the benefits of the two new businesses. We lookforward to the coming year with confidence and will continue to build the Grouporganically and through acquisition. Colin CookeChairman20 March 2006 Chief Executive Review The last 18 months have seen a complete transformation of the businesses thatmake up the Dowlis Group. In September 2004 Corporate Solutions, which wasformed just two years earlier, merged with Dowlis, a company that had been inthe promotional merchandise business for 30 years. After a short period ofconsolidation, we acquired two businesses and then in November 2005 successfullyfloated on AIM. Today, the Dowlis Group specialises in providing corporate solutions acrossthree key areas: • Marketing Solutions Promotional Products - Dowlis is the UK's second largest distributor ofpromotional products, personalised to support clients' wider marketing campaigns Dowlis Communications - Manchester based design and marketing including printand brochure production, media planning and buying • Information Solutions Portal - bespoke, industry specific website that contains detailed informationon over 2,000 products - revenue is generated from suppliers wishing to befeatured on the site, at exhibitions and from advertising contributions incatalogues Technology - the Group's offering is underpinned by its propriety software whichhas been designed in-house to provide users with innovative solutions to day today requirements associated with promotional products and provides the Groupwith a competitive advantage over others in the industry • Logistics Solutions The Group is a supplier to independent distributors and partners of a wide rangeof products that are sourced, stocked and personalised in house using the latesttechnology This structure enables the Group to provide services direct to large corporateentities and to the SME market via distributors, and also to generate revenue byproviding product information to distributors from suppliers, enabling them tocommunicate and transact with each other more effectively. The progress the team has made in such a short time is very encouraging. As withmany smaller companies the process of listing on AIM distracts much of thesenior resource needed to implement new ideas and grow the business, and I amdelighted that we are now through that process. We are continually looking atways to innovate additional solutions for customers, identify new markets andopportunities, and take time and cost out of our process through the adoption ofbest practice and the use of technology where practical. Marketing Solutions Promotional Products As a distributor of promotional merchandise we source products from around theworld which are personalised in accordance with the client's brand and designguidelines in support of their wider marketing campaigns. Since the merger of Dowlis and Corporate Solutions and due to our wider serviceoffering with increased creative resources, we have gained several new largecorporate accounts. Customers include the AA, Airbus, GlaxoSmithKline, Legal &General and 3. In May 2005, we acquired the Aviation Gifts business whichspecialises in the supply of accurate and manufacturer approved models to majorairlines throughout Europe and the Middle East which in turn has provided theopportunity to supply other products of the Group to these customers. Theaddition of Ross Promotional Products gives the Group a base from which to serveour increasing client base in Scotland. In the summer of 2005, we consolidated our warehouse and distribution facilityinto a new purpose built premises in Manchester and closed the ageing warehousepremises at Byfleet, Birmingham and the original Manchester warehouse. We haveinvested heavily in the latest technology and systems to improve efficienciesand lower distribution costs. This gives us the extra capacity needed to drivethe business forward offering even higher levels of service and responsivenessto our growing customer base. Dowlis Communications This was established in 2005 and provides a range of services which cover allaspects of design and marketing, including print and brochure production, mediaplanning and buying. This will provide the platform for additional services thatcan be added to the marketing services aspect of the business. We are always cautious about building into our plans 'cross selling' benefits,preferring to discount talk of easily achieved extra business from clients. Weare, therefore, pleased that the business has recently won the first Point ofSale order from one of the Group's major clients. Information Solutions Trade Only(TM) - publishing This division produces the main catalogue used by the Group and manages therelationships with suppliers that pay to be included in the publication. Due tospace constraints, suppliers cannot include all of their products in thecatalogue and, in order to gain exposure for the rest of their range throughdistributors, they enter these into our fast growing portal that is growing inuse by around 20% per month. The addition of the Envoy catalogue will provide further momentum to the Groupstrategy of being a useful link between suppliers and distributors. TheCatalogue features promotional merchandise for corporate customers and issupported by over 60 suppliers with approximately 50,000 catalogues distributedthrough 45 regionally separated distributors. The Envoy catalogue group willbenefit from adopting our leading technology for the efficient management ofproduct databases and order processing software as well as the Virtual Sampletechnology, over which the Group has exclusive rights in the UK market. Visitor numbers at the Roadshow, which was held at five locations in January ofthis year, were up 15% compared to 2005. The events continue to attract muchattention from suppliers not currently members of the Trade Onlycatalogue.In addition to the Roadshow, a new, one day 'National' show has been planned forSeptember 2006. Logistics Solutions Trade Only(TM) - Product Supply This business sources, personalises and supplies promotional products toindependent distributors who then sell them on to their customers. Of theestimated 2,000 UK distributors we receive orders from over 600, a figure thatis growing each week. Sales of catalogues to distributors is some 30% ahead of the same period lastyear reflecting the more comprehensive nature of the catalogue and the wideracceptance by distributors of this publication. We have seen a general increasein the number of catalogues purchased by distributors and a substantial increasein the number of distributors that use our web technology to promote products totheir own customers. Conclusion We have started the new financial year with confidence and our businesses are ina healthy position with many good opportunities to explore. Our recent modestsize acquisitions are performing in line with expectations and we look forwardto the coming year with a clear strategy and sufficient new ideas to enjoy asuccessful year. Martin VarleyChief Executive20 March 2006 Group Finance Director's Review This is the first Annual Report for the Group since the Company's incorporationin July 2004, and also the first set of results published as a quoted company.As a result, these accounts cover the period from 30 July 2004 to 31 December2005 and the profit and loss statement covers that period although, as there wasno trading until the merger in September 2004, the trading is for the 15 monthperiod. Also shown are the results for the 12 months ended 31 December 2005which we believe are more relevant to our shareholders and will form the basisof the comparisons in the future. Having established the Group with the merger,the most significant event of the period was the admission to AIM and raising£4.0m net of expenses. Trading results Turnover for the 15 months to 31 December was £26.2m and for the 12 months tothe same date £20.4m. Operating profit before exceptional items and goodwillamortisation was £1.582m for the 15 months and £1.345m for 12 months. We havebegun to see an improvement in the operating margins both at the gross level,due to an increasing contribution from Trade OnlyTM, and after administrationcosts. We have built a cost base to support higher volumes and expect to seecontinued improvement in this regard. The two principal businesses are Marketing Solutions and Information andLogistics Solutions, which can supply some products to Promotional Products,hence the internal sales, but which will continue to sell to the large number ofsmaller distributors in the sector. The split between the two main saleschannels was: 12 months 15 monthsTurnover £m £mMarketing Solutions 19.1 24.8Information and Logistics Solutions 1.9 2.2Less internal sales (0.6) (0.8)Total 20.4 26.2 12 months 15 monthsOperating profit before one-off items and goodwill amortisation £m £mMarketing Solutions 1.1 1.4Information and Logistics Solutions 0.2 0.2Total 1.3 1.6 Non-operating exceptional items A total of £206,000 arises from the move to the new central warehouse facilityin Manchester and reorganisation costs. We closed the Byfleet warehouse inSeptember and the Birmingham facility in November, although have retained anoffice there which specialises in corporate clothing, and moved out of the oldManchester premises. In addition, we incurred several one-off costs inreorganising the Promotional Products sales function and central administration. We incurred total costs of £489,000 in connection with the AIM listing processand related placing of new shares. In accordance with the requirements of FRS25,the costs incurred have been deducted from equity to the extent that theyrelated to the issues of the new shares and the balance of £240,000 has beencharged to profit. These costs have been shown separately as non-operatingexceptional items. Interest cost Until 7 November 2005, the Group was a net borrower. The merger was completedwith the creation of loan notes to the owners of the Dowlis business. This loanof £1.2m along with short term bank debt was repaid out of the proceeds of theflotation and left the Group with surplus funds. At the 31 December 2005 theGroup had a surplus of £1.5m. Taxation The charge for the 15 months includes an adjustment to create the deferred taxreserve, effectively a prior year adjustment. The charge for the 12 months isclose to the prevailing tax rate of 30% before goodwill amortisation. Taxcharges in future years should follow this pattern. Earnings per share Normalised earnings per share before goodwill amortisation and non-operatingexceptional items for the 12 months to 31 December 2005 are 3.24p - based on aweighted average number of shares of 26,884,005. The diluted earnings per sharein the 12 months on a normalised basis are 3.24p based on the addition of 34,758shares being the dilutive effect of shares under option. These figures shouldnot be regarded as being representative for the future because of the impact onthe weighting following the share issue and the benefit of the cash received inthe profit and loss, all of which happened late in the period. Cash flow and investment The cash flow is shown for the full period from incorporation to 31 December2005 and includes the impact of the merger and AIM listing. The net cash inflow from operating activities and non-operating exceptionalitems was £930,000. The total capital expenditure was £660,000 and relatesprimarily to the new warehouse facility and IT development of the Trade Onlysoftware. Acquisitions are primarily the costs associated with the merger plusthe acquisition of Aviation Gifts. The AIM listing raised £4.5m before expenses of £0.5m. We then repaid the loannotes totalling £1.2m and short term debt. At the year end, we had surplus cashof £1.5m. Since the year end we have put in place an overdraft facility for £1mand acquired the Envoy catalogue business and Ross Promotional Products Limitedfor a combined sum of £1.025m, part of which was satisfied by the issue of357,894 new shares to the value of £170,000. Financial instruments and foreign exchange risk Until the flotation, the main financial instrument the Group held was its bankloan and loan debt, both now repaid. Other financial instruments such as tradedebtors and trade creditors arise directly from operations. The Group has nooverseas assets or liabilities apart from trade related purchases and anycurrency rate movements have had no material impact. Carrying values The Directors have carried out a review of the carrying values of the intangibleand tangible assets. We have concluded that as each of those businesses acquiredare performing at or above the level when acquired no change to the carryingvalues is necessary. The balance of fixed assets is relatively new and again noprovisions are required. Accounting policies and Corporate Governance As an AIM listed company we are not required to adopt international accountingstandards until 2007 or to comply with the combined code in respect of CorporateGovernance. However, we have looked at the international accounting standards,and do not believe that the impact of conversion will be significant. Under IFRSwe will no longer amortise goodwill and we will need to apply the new rules onshare option recording and disclosures. As regards corporate governance we do support the principles of corporategovernance and have sought to comply where practicable, using the guidance forAIM companies established by the Quoted Companies Alliance. David GrayFinance Director20 March 2006 Consolidated profit and loss account for the period from 30 July 2004 to 31 December 2005 Year ended Period ended Notes 31 31 December December 2005 2005 proforma £000 £000 Turnover 1 20,398 26,225 Cost of sales (13,573) (17,709) Gross profit 6,825 8,516 Administrative expenses (5,664) (7,162) Operating profit 1,161 1,354 Non-operating exceptional items 2 (446) (446) Operating profit before exceptional item and 1,345 1,582goodwill amortisation Non-operating exceptional items:- Fundamental restructuring of acquired operations 2 (206) (206)- Costs of listing 2 (240) (240) (446) (446) Goodwill amortisation (184) (228) Profit on ordinary activities before finance 715 908charges Interest receivable 17 22Interest payable and similar charges (130) (170) Profit on ordinary activities before taxation 602 760 Taxation 3 (298) (380) Profit for the financial year / period 304 380 All activities relate to acquisitions in thecurrent period Earnings per shareBasic 4 1.13p 1.43pDiluted 4 1.13p 1.43p The company has prepared the proforma results for the twelve months ended 31December for information purposes only. There are no recognised gains and losses in the period, other than thosementioned above Consolidated balance sheet as at 31 December 2005 £000 £000Fixed assetsIntangible assets 1,669Tangible assets 815 2,484 Current assets Stocks 1,245Debtors 4,918Cash at bank and in hand 1,537 7,700Creditors: amounts falling due within one year (4,596) Net current assets 3,104 Total assets less current liabilities 5,588 Creditors: amounts falling due after more than one year (15)Provisions for liabilities and charges (77) Net assets 5,496 Capital and reserves Called up share capital 150Share premium account 4,966Profit and loss account 380 Equity shareholders' funds 5,496 Consolidated cash flow statement for the period 30 July 2004 to 31 December 2005 Notes £000 £000Net cash inflow from operating activities 5 930Returns on investment and servicing of finance 5 (148)Taxation (96)Capital expenditurePurchase of tangible fixed assets (660)Sale of tangible fixed assets 14Net cash outflow for capital expenditure (646)Acquisitions and disposals 5 (1,003) Cash outflow before financing (963) FinancingProceeds from issue of share capital 4,500Expenses of share issue taken to share premium (165)Repayment of loan notes (1,200)Repayment of bank loans (110)Repayment of loans acquired (490)Repayment of capital elements of hire purchase contracts (35)Net cash inflow from financing 2,500 Increase in cash in period 5 1,537 Reconciliation of net cash flow to movement in net debt for the period 30 July 2004 to 31 December 2005 Notes £000Increase in cash in period 1,537Repayment of bank loans 110Repayment of trading loans 490Repayment of loan notes 1,200Repayment of capital elements of hire purchase contracts 35Change in net debt/funds resulting from cash flows 5 3,372 Bank loans acquired with subsidiary (110)Trading loans acquired with subsidiary (490)Loans notes issued during acquisition (1,200)Hire purchase creditors acquired with subsidiaries (68)Net debt at 30 July 2004 - Net funds at 31st December 2005 1,504 Notes to the accounts for the period ended 31 December 2005 1 Turnover and segmental information The turnover, profit before tax and operating assets relate to one principalactivity, the manufacture and sale of advertising and business gifts, which iswholly undertaken in the United Kingdom. Turnover, analysed by destination is all to United Kingdom customers. 2 Exceptional items These costs arise from the move to the new central warehouse facility inManchester from the now closed facilities at Byfleet, Birmingham and theprevious Manchester premises. In addition several one-off costs were incurredreorganising the promotional products sales functions and centraladministration. The total cost for these matters was £206,000, all in the 12months period to 31 December 2005. In addition the company incurred costs of£240,000 in respect of the listing and placing that under the requirements ofFRS25 are not eligible to be deducted from share premium as they did not solelyrelate to the raising of equity finance. The total costs of the listing andplacing amounted to £489,000 (see Chairman's Statement). 3 Taxation Period ended 31 December 2005 £000Analysis of charge Current taxationUK corporation tax on profits for the period 303Deferred taxOrigination and reversal of timing differences 77Tax on profit on ordinary activities 380 4 Earnings per share Year ended Period ended 31 December 31 December 2005 2005 £000 £000Basic and diluted earnings 304 380Adjustment for amortisation of goodwill 184 228Adjusted loss for earnings before amortisation of goodwill 488 608Adjustment for exceptional items 446 446Tax on exceptional items (62) (62)Adjusted loss for earnings before amortisation of goodwill and exceptional 872 992items Earnings per shareBasic 1.13p 1.43pBefore goodwill amortisation 1.82p 2.29pBefore goodwill amortisation and exceptional items 3.24p 3.74pDiluted 1.13p 1.43p Earnings per share is calculated by dividing the profit after tax by26,518,018 for the 15 months to 31 December 2005, being the weighted averagenumber of shares in issue during the period. The earnings per share beforeamortisation of goodwill uses the profit after tax, adjusted to exclude theeffect of the amortisation of goodwill divided by the weighted average number ofshares. The profit before amortisation of goodwill and exceptional items usesthe profit after tax, adjusted to exclude the effect of amortisation of goodwilland exceptional items net of tax divided by the weighted average number ofshares. The calculation for the 12 months is the same except that the weightedaverage number of shares in the year was 26,884,005. The diluted earnings pershare uses the profit after tax divided by the weighted average number of sharesplus 28,006 shares representing the dilutive effect of the weighted averagenumber of shares under option during the period (34,758 shares for the 12months). The calculation for the period ended 31 December 2005 has been based on the 15month period since the merger of the businesses, prior to that the companies didnot trade and had one ordinary £1 share. 5 Notes to accompany Group cash flow statement (a) Reconciliation of operating profit to operating cash flows Period ended 31 December 2005 £000Operating profit 1,354Depreciation 152Amortisation 228Loss on sale of fixed assets 39Increase in stocks (188)Increase in debtors (480)Increase in creditors and provisions 153Exceptional Items (328) Net cash inflow from operating activities 930 (b) Analysis of cash flows for items netted in cash flow statement Period ended 31 December 2005 £000Returns on investment and servicing of financeInterest paid on loans and overdrafts (167)Interest received 22Interest paid on hire purchase arrangements (3) Cash outflow for returns on investment and servicing of finance (148) Acquisitions and disposalsPayments for intangible assets (120)Costs paid to acquire subsidiaries (128)Net overdrafts acquired with subsidiaries (541)Deferred consideration paid (214) Net cash outflow from acquisitions (1,003) (c) Analysis of net debt 30 July Non cash 31 December 2004 Cash flow movements 2005 £000 £000 £000 £000Cash at bank - 1,537 - 1,537 - 1,537 - 1,537 Bank loans acquired with subsidiaries - 110 (110) -Trading loans acquired with - 490 (490) -subsidiariesLoan notes issued - 1,200 (1,200) -Hire purchase - 35 (68) (33) - 1,835 (1,868) (33)Total - 3,372 (1,868) 1,504 (d) Cash flows relating to exceptional items The net cash inflow from operating activities included cash outflows of £328,000in respect of the exceptional items detailed in note 2. 6 This statement which has been agreed with the auditors was approved by theBoard on 20 March 2006. It is not the Group's statutory accounts. Thestatutory accounts for the year ended 31 December 2005 have not yet beenapproved, audited or filed. Copies of the 2005 Annual Report, which will beposted to shareholders in April 2006, may be obtained from the date of posting,from the registered office of the company, Canada Road, Byfleet, Surrey, KT147HQ. This is the first set of results for the Group. There are no comparativefigures. 7 Accounting Policies.The accounting policies adopted by the Group in preparation of the accounts areconsistent with the accounting policies disclosed in the Admission Document This information is provided by RNS The company news service from the London Stock Exchange