Cloudcoco Regulatory News (CLCO)

20 Jun 2005 07:00

Glen Group PLC20 June 2005 Issued on behalf of Glen Group plc20th June 2005 GLEN GROUP plc Results for the half year ended 31st March 2005 Edinburgh based, Glen Group plc, the AIM listed IT and communicationsintegration business today announces its results for the half year ended 31stMarch 2005 Highlights • First results since admission to AIM in December 2004, reflecting costs of admission and increased sales and support team • Product and service mix changing with margins increasing • Appointment of Head of Sales in May 2005 • Group set to expand Broadband voice services ("VoIP") and announces raising of additional funds to pursue such activities The Chairman of Glen Group, Eric Hagman, commented: "I joined the Board of Glen just prior to its AIM Admission, and I am impressedwith the progress that has been made over a very short period. The foundationsof the business have been laid, and your Board is optimistic that there is amarket for a single source supplier, a "one-stop-shop" that can deliver a rangeof business focused IT and communications services and, importantly, ensure thatthey all work together as they should." Full statement attached Enquiries: Glen Group plcGraham J Duncan, Chief Executive 0845 119 2100gjduncan@glencommunications.co.uk Walters AssociatesAlex Walters 07771 713608alex@waltersassociates.uk.com CHAIRMAN'S STATEMENT REVIEW Glen Group plc ("Glen") was incorporated on 14th October last year and itacquired Glen Communications Limited ("Communications"), our operating companywith effect from 15th November 2004. Our shares were admitted to AIM on 1stDecember 2004. Glen came to the market at a very early stage and it remains a small company.The operating entity, Communications, was a start-up when it commenced tradingin February 2002 and an admission to AIM was obtained in order to providecapital to grow the business, both organically and by acquisition. Your Boardintends to develop the company initially by organic growth and will seeksuitable acquisitions when we feel the time is right. We shall also act onappropriate potential acquisitions on an opportunistic basis, provided we cansee a path to creating shareholder value. The founder and Chief Executive ofGlen is Graham J Duncan, who was the Executive Chairman and founder of theAtlantic Telecom Group PLC business which, over an 18 year period, grew from astart up to a significant listed company employing over 1,200 people in fourEuropean countries. The half year ended 31st March 2005 reflects an increase in the expenses of thebusiness resulting from the enhanced requirements of running an entity admittedto AIM and an increase in payroll and other costs as we expand our sales andsupport team. As a majority of new staff was not in place until March 2005, theturnover has yet to benefit from the increased sales activity. Building abusiness from a modest base takes time and the growth strategy adopted by theBoard is likely to result in losses until sufficient gross profit is generatedby the increased sales team. We intend, over time, materially to expand oursales and sales support teams as we move south across the UK. We are nowoperational in the North of England, as well as Scotland where we are based, andwe will commence the next phase of our sales roll-out once we are comfortablethat the existing teams are delivering what we expect from them. We areencouraged by progress to date. RESULTS The results for the period are as anticipated and our cash flow is in line withexpectations. Turnover for the half-year was £182,421 compared to £181,746 for the equivalentperiod to 31st March 2004. Although the turnover over the two periods remainedflat, which was expected as we did not have the benefit of an increased salespresence until very late in the period, the underlying product and services mixis different as we have expanded our IT business and downscaled our pre-paidphone card business which is no longer a core activity. This, coupled withincreasing margins in our mobile activities, has resulted in a significantincrease in our gross margin from 37.7% in the half year to 31st March 2004 to48.0% in the period under review. In the first half, our mobile business wasachieved with just one sales person and much of our IT business derives from asingle individual account manager. The loss for the period was £225,053, whichcompares against £68,227 for the equivalent half year period. We estimate thatthe one-off and ongoing costs of the admission to AIM, the increased costs ofour Board as a public company and the costs of maintaining the listing, willimpact our cash flow by approximately £375,000 over the first year followingAdmission, much of which has already been expended. At 31st March 2005, we hadnet cash of £238,888. The acquisition of Communications by Glen qualified for merger accounting andthe Board has adopted this prudent approach which aggregates the results of Glenand Communications without creating any acquisition goodwill. STRATEGY AND OUTLOOK Our strategy continues to be to develop the breadth and range of IT andcommunications services that we can deliver to small and medium sized businessesand those working from home, using appropriate technologies, many of which arefocussed on Internet Protocol ("IP"). We believe that customers expect to beable to buy converged products and services managed by a single organisation andwe are working to deliver innovation in our customer products and packaging toallow us to achieve that capability. Providing a service that "joins up" thevarious technologies is our clear objective. Glen sits at the customer end of the market and is therefore developing a salesand sales support organisation, backed up by skills in targeting our marketingefforts. Since Admission to AIM, we have started to build our sales andmarketing structures. Following the half year end, we have recruited anexperienced Head of Sales, based in Sheffield, and currently have a sales teamof seven. We have also doubled the size of our dedicated marketing team. In general terms, we manage the customer relationship and use whatever networkswe believe are most suitable for the customer solution that we propose. Ourportfolio covers a wide variety of products and services from complex IT systemsto a single telephone line. Increasingly, we find customers want mobilesolutions and we have developed significant expertise in this area. We werepleased to have been appointed a Business Partner to one of the major UK mobilenetworks during the half-year to add to the relationships which we have with theother mobile network providers. We are also interested in developing our sales and marketing structure tosupport specialist software products and related services. During the period, wewere appointed resellers for a customer relationship management softwareproduct, which we have also successfully deployed internally; and sales agentsfor a software product designed to trace, and measure accurately, ingredients infood processing and manufacturing. This is a highly topical subject, aslegislation requires the food industry to maintain full "traceability". We havealso completed programming work for an intermediate mortgage lending companywith a broker network of over 8,000 independent financial advisors. We areworking with this company to develop a range of value added services that can bepackaged and offered to their network. Not the least of these services is Voiceover IP ("VoIP"), or broadband voice, which allows voice traffic to be carriedover a broadband connection. We intend, over time, to develop the capabilitiesof our sales organisation in further specialised areas. Broadband voice is one of a number of services that we are seeking to host,using a third party data centre, and we now have a small number of live VoIPcustomers whose voice services are hosted in this way. These customers have beenobtained ahead of a commercial service launch and following a successfuldeployment of VoIP services in-house. Our view is that VoIP will be a radicaltechnology in the telecommunications world, and your Board has decided to placegreater emphasis in this area as many analysts believe that as much as 30% to40% of traditional telecommunications traffic could migrate to VoIP over thenext few years. We believe that this makes the opportunity a significant one.VoIP allows calls that stay on a broadband network to be delivered anywhere inthe world free of charge. We have concluded arrangements with an independenttelecommunications operator to carry, at competitive rates, conventional callsthat need to be terminated or originated on the public switched telephonenetwork. The pricing that we have secured allows us to offer, for example,interconnected UK calls at just 1.2 pence per minute daytime plus VAT. Webelieve that this makes us one of the most competitive providers in the UKfocused on the small and medium sized business markets and those that work fromhome. We have made a great deal of progress since December 2004 and we now intend toexpand our activity in the area of broadband voice where, as stated above, wesee early mover advantage. I am announcing today that we have raised a further£300,000, before costs, by the issue of 10,000,000 ordinary shares of 1 pennyeach issued at 3.00 pence per share.. These shares represent 16.67% of ourenlarged share capital. The shares have been placed with clients of SeymourPierce Ellis Limited, our brokers, and application has been made for the newshares to be admitted to AIM with dealings expected to commence on 21st June2005. The net proceeds will be utilised to market the business, continue tobuild our sales and sales support organisation and develop our VoIP services,among other things. I joined the Board of Glen just prior to its AIM Admission, and I am impressedwith the progress that has been made over a very short period. The foundationsof the business have been laid, and your Board is optimistic that there is amarket for a single source supplier, a "one-stop-shop" that can deliver a rangeof business focused IT and communications services and, importantly, ensure thatthey all work together as they should. Eric M HagmanCHAIRMAN20th June 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the six months ended 31st March 2005 6 months to 6 months to 12 months to 31st March 31st March 30th September 2005 2004 2004 £ £ £ TURNOVER 182,421 181,746 373,848Continuing operationsCost of sales (94,939) (113,167) (243,870) ---------- ---------- ----------Gross profit 87,482 68,579 129,978Other operating charges (311,422) (136,857) (333,994) ---------- ---------- ----------LOSS ON ORDINARY ACTIVITIES BEFOREINTEREST (223,940) (68,278) (204,016)Net interest (1,113) 51 (1,033) ---------- ---------- ----------LOSS ON ORDINARY ACTIVITIES BEFORETAXATION (225,053) (68,227) (205,049)Tax on loss on ordinary - - -activities ---------- ---------- ----------RETAINED LOSS FOR THE PERIOD (225,053) (68,227) (205,049) ========== ========== ==========Loss per share (0.45)p (0.14)p (0.41)p ========== ========== ========== There have been no recognised gains or losses attributable to the shareholders other than the loss for the current financial period and accordingly no statement of total recognised gains and losses is shown CONSOLIDATED BALANCE SHEET as at 31st March 2005 31st March 30th September 2004 2005 £ £FIXED ASSETSIntangible assets 18,977 18,977Tangible assets 36,704 11,529 ---------- ---------- 55,681 30,506CURRENT ASSETSStocks 4,873 8,236Debtors: amounts falling due 96,232 62,860within one yearCash at bank 274,842 26 ---------- ---------- CREDITORSAmounts falling due within one year (214,393) (143,788) ---------- ----------NET CURRENT ASSETS / (LIABILITIES) 161,554 (72,666) ---------- ----------TOTAL ASSETS LESS CURRENT LIABILITIES 217,235 (42,160)CREDITORSAmounts falling due after more than oneyear (65,000) (101,730) ---------- ---------- 152,235 (143,890) ========== ==========CAPITAL AND RESERVESCalled up share capital 500,000 2Share premium account 771,180 -Merger reserve (101,914) -Other reserves - 648,086Profit and loss account (1,017,031) (791,978) ---------- ---------- 152,235 (143,890) ========== ========== CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31st March 2005 6 months 6 months 12 months to to to 30th 31st March 31st March September 2005 2004 2004 £ £ £RECONCILIATION OF OPERATING LOSS TONET CASH OUTFLOW FROM OPERATINGACTIVITIESOperating loss from continuingactivities (223,940) (68,278) (204,016)Depreciation 6,332 2,830 6,497Decrease in stock 3,363 1,452 447Increase in debtors (28,623) (18,928) (14,504)Increase in creditors 41,643 4,000 41,456 ---------- ---------- ---------- Net cash outflow from continuingoperating activities (201,225) (78,924) (170,120) RETURNS ON INVESTMENTS ANDSERVICING OF FINANCEInterest received 5,157 51 110Interest paid (6,270) - (1,143) ---------- ---------- ----------Net cash (outflow)/ inflow fromreturns on (1,113) 51 (1,033)investments and servicing of finance CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENTPurchase of tangible fixed assets (31,507) (1,942) (8,175)Sale of tangible fixed assets - - 698 ---------- ---------- ---------- (31,507) (1,942) (7,477)Net cash outflow from capitalexpenditureand financial investment FINANCINGIssue of shares 750,000 - 55,678Receipt of bank finance - - 100,000Repayment of borrowing (10,000) - (5,000)Receipt from/(repayment of)shareholders loans 7,270 76,531 (23,528)Expenses paid in connection withshare issue (228,820) - - ---------- ---------- ----------Net cash inflow/(outflow) fromfinancing 518,450 76,531 127,150 ---------- ---------- ----------INCREASE / (DECREASE) IN CASH 284,605 (4,284) (51,480) ========== ========== ========== NOTE TO THE CONSOLIDATED CASH FLOW STATEMENT ANALYSIS OF NET FUNDS / (DEBT) At 30th September Cash Flows At 31st March 2004 £ 2005 £ £ Cash 26 274,816 274,842Bank overdraft (45,743) 9,789 (35,954) ---------- ---------- ---------- (45,717) 284,605 238,888 ---------- ---------- ----------Debt (127,730) 2,730 (125,000) ---------- ---------- ----------Net (debt)/funds (173,447) 287,335 113,888 ========== ========== ========== NOTES TO THE INTERIM REPORT 1. Preparation of Interim Report The interim financial information for the six months ended 31st March 2005 wasapproved by the directors on 20th June 2005. The results shown in this statementare pro-forma, incorporating the results of Glen Communications Limited("Communications") for the period from 1st October to 14th November 2004 and theconsolidated results of Glen Group plc ("Glen") and its subsidiaries ("Group")for the period from 15th November 2004 to 31st March 2005. The comparativefigures for the six months ended 31st March 2004 are the actual unauditedresults of Communications for that period and the comparatives for the 12 monthsto 30th September 2004 are extracted from the audited financial statements ofCommunications. The balance sheet as at 31st March 2005 is the consolidatedbalance sheet of Group. The comparative consolidated balance sheet at 30thSeptember 2004 is pro-forma and is derived from the audited balance sheet ofCommunications with the capital structure adjusted to that of Glen withsubscriber shares only at the date of incorporation. The merger of Communications and Glen qualified for merger accounting whichaggregates the results of Glen and Communications without creating anyacquisition goodwill. As a result the negative balance on the profit and lossaccount shown in the consolidated balance sheets at both 31st March 2005 and30th September 2004 represents the aggregation of accumulated losses since bothcompanies were incorporated. In the case of Communications, £293,277 of thecombined balance arises from periods prior to the commencement of trading as acommunications company in February 2002. The interim financial information has been prepared in accordance with relevantaccounting standards applied on a consistent basis using accounting policies setout in the 2004 financial statements of Communications and the Placing andAdmission to AIM document dated 25th November 2004 in respect of Glen. Inaddition to those policies the Group has applied a policy on goodwill as notedbelow. The interim financial information is unaudited but has been reviewed bythe auditors and their report is set out on page 9. 2. Goodwill Positive goodwill arising on acquisitions is capitalised, classified as anIntangible Asset on the Balance Sheet and amortised on a straight line basisover its useful economic life, which is estimated at 10 years. It is reviewedfor impairment at the end of its first full financial year following theacquisition and in other periods if events or changes in circumstances indicatethat the carrying value may not be recoverable. If a subsidiary is subsequentlysold, any goodwill arising on acquisition that has not been amortised throughthe Profit and Loss Account is taken into account in determining the profit orloss on sale. 3. Financial information The financial information set out on pages 4-8 does not constitute fullfinancial statements for the purposes of section 240 of the Companies Act 1985.Comparative figures for the year ended 30th September 2004 are extracted fromthe full financial statements of Communications, which have been delivered tothe Registrar of Companies. The report of the auditors on those financialstatements was unqualified and did not contain a statement under section 237 ofthe Companies Act 1985. 4. Loss per share The loss per share is based on the loss attributable to the OrdinaryShareholders of £225,053 (30th September 2004 - loss of £205,049) and on thepro-forma weighted average number of Ordinary Shares in issue during the periodof 50,000,000 (30th September 2004 - 50,000,000 on a proforma basis). 5. Dividend In view of the deficit on reserves the directors cannot recommend a dividend andthe loss for the period has therefore been transferred to reserves. Copies of this interim report are being sent to shareholders and can be obtainedfrom the company's head office at Unit 32/7, Hardengreen Industrial Estate,Dalkeith, Midlothian. EH22 3NX REVIEW REPORT BY THE AUDITORS TO THE MEMBERS OF GLEN GROUP plc Introduction We have been instructed by the company to review the financial information forthe six months ended 31st March 2005 which comprise the principal accountingpolicies, the profit and loss account, the balance sheet, the cash flowstatement and the related notes. We have read the other information contained inthe interim report which comprises only the Chairman's Statement and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. Our responsibilities do not extend to any otherinformation. This report is made solely to the company, in accordance with guidance containedin APB Bulletin 1999/4 "Review of Interim Financial Information". Our reviewwork has been undertaken so that we might state to the company those matters weare required to state to it in a review report and for no other purpose. To thefullest extent permitted by law, we do not accept or assume responsibility toanyone other than the company, for our review work, for this report, or for theconclusion we have formed. Directors' Responsibilities The interim report including the financial information contained therein is theresponsibility of, and has been approved by, the directors. The directors areresponsible for preparing the interim report and ensuring that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review Work Performed We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists primarily of making enquiriesof group management and applying analytical procedures to the financialinformation and underlying financial data and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with UnitedKingdom auditing standards and therefore provides a lower level of assurancethan an audit. Accordingly, we do not express an audit opinion on the financialinformation. Review Conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31st March 2005. GRANT THORNTON UK LLPCHARTERED ACCOUNTANTS Edinburgh20th June 2005 This information is provided by RNS The company news service from the London Stock Exchange