BILL.L Regulatory News (BILL)

30 Sep 2005 08:29

Billing Services Group Limited30 September 2005 30 September 2005 Billing Services Group Limited Interim Results Billing Services Group Limited ("BSG," the "Group" or the "Company"), one of theworld's leading providers of data clearing and financial settlements solutionsto the telecommunications industry, today announces its interim results for thesix months ended 30 June 2005. Financial Highlights •EBITDA increased by 26.1% to $ 17.1 million (2004: $13.6 million) •Turnover increased by 8.9% to $74.5 million (2004: $68.4 million) •Entered into new credit facilities with Goldman Sachs Credit Partners, L.P. totaling $150 million •Repaid approximately $68 million of senior and subordinated indebtedness The comparable revenue and EBITDA figures for the six months ended June 30, 2004shown above are for BCI Acquisition, LLC, the holding company of the Group'soperating subsidiaries at that time. In the Directors' opinions, these amountsare not materially different to those that would have been recorded in theconsolidated accounts of Billing Services Group LLC (the ultimate holdingcompany at that time prior to the incorporation of Billing Services GroupLimited and its flotation on AIM), had that entity prepared consolidatedaccounts. Chairman and Chief Executive's Statement We are delighted to issue our first set of financial results since BSG'sadmission to AIM on 15 June 2005. The results demonstrate the vitality andopportunities in our data clearing and financial settlements business and ourability to operate within disciplined expectations. The financial results presented in this interim statement primarily representthe period prior to the flotation of BSG. During this period, the Groupcontinued to expand the number of call records processed and the revenues of theGroup. This was principally based on the increased call volumes established as aresult of a new contract with a large "1+" customer. The level of overheadswithin the business continued to be reduced, resulting in a 26.1% increase inEBITDA. During the period, certain affiliates of Billing Services Group, LLC(the holding company of the Group prior to the incorporation of BSG Limited andthe flotation on AIM) entered into new credit facilities with Goldman SachsCredit Partners, L.P. totaling $150 million. The flotation on AIM allowed the original private equity investors of the Groupto exit their investment whilst giving the Group access to capital to continueits expansion in Europe and other markets. This was put into effect after theperiod end when the Group acquired EDS Interoperator Services GmbH for totalconsideration of 155 million euros, such price being subject to adjustment incertain circumstances. This was financed by an underwritten equity issuetotaling £56.2 million and an underwritten debt facility totaling 115 millioneuros. We are pleased to announce that in September, we signed a strategic allianceagreement with China Mobile's ARCH (Advanced Roaming Clearing House) supportingthe cooperation and co-development of international roaming solutions for ChinaMobile and other potential customers. Five potential joint programs have beenidentified, and we expect work will commence in the fourth quarter of 2005. Finally, we established the "Click and Buy" joint venture with WebpayInternational in August, to provide content payment/micro-payment solutions tothe US market. Webpay's "Click and Buy" has over 5 million subscribers globallyand 3,500 content merchants. In addition to a 49 percent participation in allmerchant revenues collected, we will provide LEC billing and credit cardprocessing services for the joint venture. The joint venture already has over50,000 subscribers in the United States. T-Mobile Framework Agreement The Company is delighted to announce that EDS IOS, now renamed "BSG ClearingSolutions", has signed a new three-year Frame Contract for roaming services withT-Mobile International AG & Co. KG ("T-Mobile") in Bonn on 29 September 2005.T-Mobile has been a customer of EDS IOS for over ten years and the new agreementis a significant endorsement for the business and one of the completionconditions mentioned in the acquisition announcement on 29 July 2005. Furtherdetails will be released in due course. Current Trading and Prospects At the time of the Company's announcement of its acquisition of EDS IOS on 29July 2005, the Company stated that: "Current trading in BSG's existing core US wireline business remains strong andis currently ahead of management's expectations at the time of BSG's admissionto trading on AIM. EDS IOS's most recent management accounts show that EDS IOSis trading in line with its management's expectations." Patrick J. Haynes, III, Chief Executive Officer of the Company, stated, "I amvery pleased to report that the above continues to be the case in bothbusinesses." Mr. Haynes continued, "Our results during the first half of 2005reflect a sound business model and an aggressive agenda to expand the scope andgeographic breadth of our service offerings. The acquisition of the EDS IOSbusiness gives us an immediate worldwide presence in several attractive andrapidly growing markets, including Europe and Asia. We are well positioned toexecute our long-term strategic objectives, and I am confident in our ability tomeet financial expectations for 2005. Given the size and global breadth of thebusiness, we may consider a move to the Official List of the London StockExchange during 2006 to further enable us to meet these objectives." - end - For further information: Billing Services Group Limited Patrick J. Haynes, III, Chief Executive OfficerTelephone: (847) 832-0077 Norman M. Phipps, Chief Financial OfficerTelephone: (847) 832-0077 Evolution Securities Limited Michael Brennan/Stuart AndrewsTelephone: + 44 (0)20 7071 4300 Financial Review of the Six Months Ended 30 June 2005 It should be noted that results for the six months ended 30 June 2005 includethe results of BSG's predecessor company, Billing Services Group, LLC, which wasthe ultimate holding company for all business units before the formation ofBilling Services Group Limited on 15 June 2005. Certain Terms Revenues. BSG's revenues are derived primarily from the provision of dataclearing, financial settlement and information management services to directdial long distance resellers and operator services providers, commonly referredto as "local exchange carrier billing" or "LEC billing." Revenues are alsoderived from enhanced billing services provided to companies that offerintelligent Internet/telephone switching services, voice mail and other Internetservices and non-regulated telecommunications equipment and services. LECbilling fees charged by BSG include processing and customer service inquiryfees. Processing fees are assessed to customers either as a fee charged for eachtelephone call record (or message), or other transaction processed or as apercentage of the customer's revenue that is submitted by BSG to local telephonecompanies for billing and collection. Customer service inquiry fees are assessedto customers either as a fee charged for each message processed by BSG or as afee charged for each billing inquiry made by end users. Revenue also includescharges assessed by BSG to cover the fees of local telephone companies forbilling and collection services ("LEC fees"). Cost of Services and Gross Profit. Cost of services primarily includes LEC fees.Such fees are assessed for each record submitted and for each bill rendered toend-user customers. BSG charges its customers a negotiated fee for LEC services.Accordingly, gross profit is generally a function of processing fees charged permessage and any differential between the LEC fees charged by BSG and the relatedLEC cost of service. SG&A. Selling, general and administrative expenses are comprised of all selling,marketing, customer service, facilities and administrative costs (includingpayroll and related expenses) incurred in direct support of operations. Depreciation and Amortization. Depreciation expense applies to certain softwaredevelopment, furniture and fixtures, telecommunications and computer equipment.Amortization expense relates to definite-lived intangible assets recorded thatare amortized in accordance with SFAS No. 142 "Goodwill and Other IntangibleAssets" under US GAAP. These assets consist primarily of LEC contracts, customercontracts, and trademarks, all of which are amortized over their respectiveuseful lives. Amortization expense also includes deferred financing fees, whichare amortized over the term of the related loans. Comparison of Results for Six Months Ended 30 June 2005 to Six Months Ended 30June 2004 Total Revenue. Total revenue of $74.5 million for the six months ended 30 June2005 increased $6.1 million, or 8.9%, compared to same period in 2004. Theincrease in revenue was primarily related to a new contract with a large "1+"customer, whose billing arrangements commenced in September 2004. Call Record Volume. Call record volume for the six months ended 30 June 2005increased 12.1 million records, or 4.7%, compared to the same period in 2004.This increase in call record volume was primarily due to an increase in "1+"messages processed for the new customer addition in September 2004. Rates Per Record. Average rates per record increased period-over-period for our"1+" product offering, rising from $0.151 per message to $0.167, or 10.5%. Thisincrease was primarily attributable to LEC rate increases that are passedthrough to BSG's customers. The Group's "0+/-" rates per record increasedperiod-to-period, from $0.428 to $0.450, or 5.1%, primarily due to traffic mix.The enhanced product offering also experienced average rate per recordincreases, rising from $1.01 per message to $1.17, or 15.8%. This increaseprimarily resulted from better traffic mix, in that BSG's revenue is generallybased on a percentage of the underlying transaction. Operating Expenses. Selling, general and administrative expenses during the sixmonths ended 30 June 2005 decreased $4.1 million, or 24.1%, compared to the sameperiod in 2004. The decrease was largely attributable to the closure of theNorthridge, CA operation in the second half of 2004, a reduction in the cost ofoutsourced call center services resulting from favorable contract renegotiationsand personnel reductions in the Company's San Antonio operation. Depreciation and Amortization Expense. Depreciation and amortization expense forthe six months ended 30 June 2005 increased $1.9 million, or 31.3%, compared tothe same period in 2004. The increase was primarily due to the $2.7 millionwrite-off of deferred financing costs related to the previously outstandingsenior and subordinated debt. The write-off occurred when the debt was repaid inApril 2005. Offsetting the write-off of the deferred financing costs was a $0.8million decline in amortization relating to customer contracts. Goodwill was notamortized in either period in accordance with SFAS No. 142. De-leveraging and Compliance. In April 2005, BSG received $140 million inproceeds from new first and second lien term loans underwritten by Goldman SachsCredit Partners, L.P. Funds received from the new loans were used to repay $68.4million of previously outstanding senior and subordinated debt and to make a$71.2 million dividend distribution. BSG made $2.6 million of principal paymentsrelated to its new debt during the second quarter of 2005 and was in compliancewith all covenants of the new credit agreement. Liquidity and Capital Resources Changes in Working Capital. BSG's cash balance at 30 June 2005 was $57.2million, compared to $76.3 million at December 31, 2004. The decrease in theCompany's cash balance was primarily attributable to a reduction in payablesrelated to customers of $ 19.4 million during the six-month period ended 30 June2005. Fluctuations in daily cash balances are normal due to the variability ofcustomer receivables that are collected and processed on a daily basis. Money isreceived daily from LECs but most of such funds are ordinarily disbursed tocustomers only once each week. Capital Expenditures. During the six months ended 30 June 2005, BSG incurredcapital expenditures of $4.1 million, of which $3.2 million related to ongoingsoftware development and the balance related to purchases of telecommunicationsand computer equipment. For the six months ended 30 June 2005, capitalexpenditures included $0.5 million of capitalized interest expense. Cash Flow for the Six Months Ended 30 June 2005 Cash flow from operating activities. Net cash used in operating activities was$12.6 million for the six months ended 30 June 2005. Net cash used in operatingactivities was principally attributable to a $19.4 million decrease in payablesrelated to customers and a $5.6 million increase in deferred finance costs,offset by net income of $2.7 million and $8.2 million of depreciation andamortization expense. Cash flow from investing activities. Cash used in investing activities was $5.8million for the six months ended 30 June 2005. BSG purchased $4.1 million ofcapital equipment (including capitalized interest expense of $0.5 million andongoing capitalization of software development costs) and increased its advancefunding to customers by $1.7 million. Cash flow from financing activities. Cash used in financing activities was $0.8million for the six months ended 30 June 2005. The activities principallyreflect proceeds of $140.0 million received from the issuance of new first andsecond lien term loans which were used to repay $68.4 million of outstandingsenior and subordinated debt as well as a $71.3 million dividend distribution.Additionally, BSG made $2.6 million of principal payments under its newborrowing arrangements in June 2005. Principal Notes to Financial Statements: 1. The interim results for the period ended 30 June 2005 areunaudited and do not constitute statutory accounts within the meaning of (S)240of the Companies Act 1985. They have been prepared in accordance with accountingpolicies adopted in the admission document issued in relation to the admissionof Billing Services Group Limited to the AIM market on 15 June 2005. 2. Substantially all of the value attributed to intangibleassets and goodwill arose in connection with the purchase of the Group'sprincipal US operating companies in December 2003. The intangible assets arebeing written off over the useful life of the related assets, approximatingeleven years on average. In accordance with SFAS No. 142, goodwill is notamortized over any prescribed time period, but is adjusted only to reflect anydeemed impairment in fair market value. 3. The Group considers the write-off of approximately $532,000of organization costs associated with the formation of BSG to be a one-offexceptional item. Such costs consisted principally of professional fees relatedto formation and structuring of Billing Services Group Limited. 4. Basic earnings per share have been calculated based on thenet income for the period of $2.7 million divided by average common sharesoutstanding of 179.8 million. A copy of this interim statement is being sent to all shareholders and copiesare available from BSG's Nominated Advisor at the the address below: Billing Services Group Limitedc/o Evolution Securities Limited100 Wood StreetLondon EC2V 7ANUnited Kingdom Billing Services Group Limited Consolidated Balance Sheets ASSETS (Unaudited) June 30, Predecessor 2005 December 31,2004 Current assets: Cash and cash equivalents $ $ 57,155,630 76,312,618 Accounts receivable: Trade accounts and notes receivable, net 21,434,181 24,569,727 Purchased receivables 28,302,412 26,647,238 Other receivables 54,893 188,213 ----------- ------------- Total accounts receivable 49,791,486 51,405,178 Income tax receivable 536,611 536,611 Deferred taxes current 1,417,226 1,254,731 Other current assets 973,900 515,873 ----------- ------------- Total current assets 109,874,853 130,025,011 Property and equipment 19,442,629 15,819,080 Accumulated depreciation (5,255,147) (4,128,162) ----------- ------------- Property and equipment, net 14,187,482 11,690,918 Other assets: Capitalized interest costs related to software development 1,375,955 900,000 Deferred finance costs-RBC, net of accumulated amortization of $3,881,682 and $911,965 at June 30, 2005 and December 31, 2004, respectively - 2,969,717 Deferred finance costs-GS_MLCP, net of accumulated amortization of $214,493 and $0 at June 30, 2005 and December 31, 2004, respectively 5,354,959 - Intangible assets, net of accumulated amortization of $12,479,111 and $8,675,110 at June 30, 2005 and December 31, 2004, respectively 73,520,889 77,324,890 Goodwill 36,619,576 36,619,576 Other assets 731,660 635,316 ----------- ------------- Total other assets 117,603,039 118,449,499 ----------- ------------- Total Assets $ 241,665,374 $ 260,165,428 =========== ============= LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY (Unaudited) Predecessor June 30, 2005 December 31, 2004 Current liabilities:Trade accounts payable $ 13,697,848 $ 14,536,857 Deposits and otherpayables related tocustomers 89,949,211 108,264,325Accrued liabilities 6,066,679 5,825,720Accrued interest 30,667 11,997Current portion ofcustomer cure liability 317,701 317,701Accrued sales taxesrelated to customers 11,432,792 11,627,898First lien term notepayable 10,000,000 -Second lien term notepayable 400,000 -Term B note payable - 15,000,000Term C note payable - 250,000Note payable 82,500 90,000 ---------- ------------Total current liabilities 131,977,398 155,924,498 Non-current liabilitiesDeposits and otherpayables related tocustomers 7,523,613 8,654,536Accrued sales taxesrelated to customers 170,249 170,249First lien term notepayable 87,500,000 -Second lien term notepayable 39,500,000 -Term C note payable - 24,500,000Senior subordinated debt - 28,658,675Long-term note payable - 37,500Customer cure liability 618,476 618,476Deferred taxes, noncurrent 2,405,972 2,555,672Other long-termliabilities 106,608 197,987 ---------- ------------Total non-currentliabilities 137,824,918 65,393,095 Stockholders' (deficit) equity:Common stock: 350,000,000shares authorized;182,604,483 sharesauthorized and outstanding (28,068,843) 33,040,306 Accumulated earnings,beginning of period - 294,365Net (loss) income (65,276) 5,513,164 ---------- ------------Accumulated (deficit)earnings, end of periodNet(loss)income (65,276) 5,807,529 Accumulated othercomprehensive loss (2,823) - ---------- ------------ Total stockholders'(deficit) equity (28,136,942) 38,847,835 ---------- ------------ Total Liabilities andStockholders' (Deficit)Equity $ 241,665,374 $260,165,428 ========== ============ Billing Services Group Limited Consolidated Statements of Operations (Unaudited) Predecessor Company Five and Two Weeks One-Half Months Six Months June 15 to January 1 to ended June 30, June 30, 2005 June 14, 2005 2005 ----------- ------------ ---------- Operatingrevenues $ 5,935,338 $ 68,555,799 $ 74,491,137 Cost ofservices 3,416,224 40,920,775 44,336,999 ----------- ------------ ---------- Gross profit 2,519,114 27,635,024 30,154,138 Gross margin 42.4% 40.3% 40.5% Operatingexpenses 1,184,578 11,841,939 13,026,517 ----------- ------------ ---------- EBITDA 1,334,536 15,793,085 17,127,621 ----------- ------------ ---------- Other (expense) income:Interestincome 104,518 1,122,952 1,227,470Interestexpense (450,813) (4,125,334) (4,576,147)Prepaymentpenalties - (580,176) (580,176)Depreciation (95,034) (1,031,951) (1,126,985)Amortization (409,473) (6,656,198) (7,065,671)Organizationalcosts (531,564) - (531,564)Other, net (17,446) (232,321) (249,767) ----------- ------------ ---------- Total other(expenses)income, net (1,399,812) (11,503,028) (12,902,840) ----------- ------------ ---------- Income fromoperationsbeforeprovisions forincome taxes (65,276) 4,290,057 4,224,781 Income taxexpense - (1,490,413) (1,490,413) Net income $ (65,276) $ 2,799,644 $ 2,734,368 =========== ============ ========== Other comprehensive loss Foreigncurrencytranslationadjustments (2,823) - (2,823) ----------- ------------ ---------- Othercomprehensiveloss (2,823) - (2,823) =========== ============ ========== Net income perCommon Share: $ (0.00) $ 0.02 $ 0.02 =========== ============ ========== Weightedaverage sharesoutstanding 182,604,483 179,579,700 179,830,373 Billing Services Group Limited Consolidated Statement of Cash Flows (Unaudited) Six Months Ended June 30 2005 -------------Operating ActivitiesNet income $ 2,734,368Adjustments to reconcile net income to netcash provided by (used in) operatingactivities: Depreciation 1,126,985Amortization 7,065,671Changes in operating assets and liabilities: Decrease in receivables 3,268,866 (Increase) in deferred finance costs (5,569,452) (Increase) in other current assets (480,351) (Increase) in other assets (151,480) (Decrease) in accounts payable (839,009) (Decrease) in accounts payable related to (19,446,037) customers Increase in accrued liabilities 240,959 (Decrease) in accrued sales taxes related to (195,106) customers Increase in accrued interest 18,670 (Decrease) in provision for deferred taxes (312,195) (Decrease) in other liabilities (91,379) ----- ----------- ----- Net cash usedin operatingactivities (12,629,490) Investing Activities Purchase ofproperty andequipment andsoftwaredevelopment,including$475,955 ofcapitalizedinterest in2005 (4,099,504)Net advanceson purchasedreceivablesfrom billingcustomers (1,655,174) ----------- Net cash usedin investingactivities (5,754,678) Financing Activities Proceeds fromissuance ofcommon stock,net 1,584,534Dividenddistribution (64,186,722)Accumulatedearningsdistribution (7,114,134)Proceeds fromissuance offirst andsecond lienterm loans 140,000,000Payments onterm loans andseniorsubordinateddebt (68,408,675)Payments onfirst andsecond lienterm loans (2,600,000)Payments onnote payable (45,000) ----------- Net cash usedin financingactivities (769,997) Effect ofexchange ratechanges oncash (2,823) ----------- Net decreasein cash andcashequivalents (19,156,988) Cash and cashequivalents,beginning ofperiod 76,312,618 ----------- Cash and cashequivalents,end of period $ 57,155,630 =========== This information is provided by RNS The company news service from the London Stock Exchange END This information is provided by RNS The company news service from the London Stock Exchange