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Interim Results

25 Sep 2006 07:03

Calyx Group PLC25 September 2006 For immediate release 25 September 2006 Calyx Group plc ("Calyx", "the Group" or "the Company") Interim Results for the six months ended 30 June 2006 Calyx Group plc, one of the largest single source providers of Networked ITServices in both the United Kingdom and Ireland, today publishes its InterimResults for the six months to 30 June 2006. Highlights: • Turnover up 61% to €29.3 million (2005: €18.2 million) • Gross margin up 3.8 percentage points to 39.6% (2005: 35.8%) • Operating profit before goodwill amortisation and exceptional items up 134% to €3.1 million (2005: €1.3 million) • Profit before goodwill amortisation, exceptional items and tax up 169% to €2.6 million (2005: 1.0 million) • Profit after tax up 85% to €1.2 million (2005: €0.6 million) • Basic earnings per share up 42% to 2.82c (2005: 1.98c) • Adjusted earnings per share (excluding goodwill amortisation and exceptional items) up 64% to 4.87c (2005: 2.97c) • During the period the Group made two acquisitions - Entropy on 1 March 2006 and the Matrix Companies on 13 June 2006 • On 13 June 2006, a placing of 25 million shares at 70p per share raised £17.5 million and a new £25 million eight year loan was drawn down • Admitted to trading on the Irish Stock Exchange's IEX Market as well as the AIM Market from 13 June 2006 • Board strengthened by new appointments during and after the end of the period Commenting on the strong six months Maurice Healy, Calyx Chief Executive Officersaid, "I am extremely pleased with these excellent results and by the development ofthe Group during the period. The acquisition of the Matrix Companies in mid Junehas firmly established Calyx as a force in the UK Networked IT Services marketand these businesses are performing well under Calyx ownership." For further information please contact Calyx Group plcMaurice Healy Chief Executive Officer +353 1 8835555Peter Jenkins Chief Financial Officer +353 1 8835555 Buchanan CommunicationsTim Thompson/James Strong +44 (0)207 7466 5000 About Calyx Calyx is a major single-source provider of Networked IT solutions withoperations across the UK and Ireland. In the UK it operates from Hook, Rainford,East Grinstead, Swindon and Richmond and in Ireland it operates from Dublin,Cork and Limerick. Calyx is listed on both the AIM market in London and the IEXin Dublin. Since listing on AIM in March 2005, Calyx has made 5 acquisitions andraised more than £45 million of equity and debt finance. Overview During the period, Calyx has continued its strong growth both organically andthrough acquisition. Margins have improved, driven by new products and services,many of which derive from the development of our, now fully operational, NetworkOperating Centre ("NOC") in Dublin. The acquisition of the Matrix Companies inJune not only provides the Group with a significant platform for supplying theUK market, it also enhances the product and service offering of the Group. Not only are customers' networked IT needs increasing and converging, but thecomplexity of their requirements is also increasing. The Group with its fullproduct offering is well placed to take advantage of this expanding market forconverged services. The Group provides a flexible range of service offerings,but it is increasingly finding that customers want to outsource more of theirnetwork operations to a trusted partner. As the trusted partner Calyx providestheir customers with a fully managed, end to end solution in data, voice,security, systems integration, IP and carrier services. Financial results The turnover of the Group for the six months to 30 June 2006 was €29.3 million,compared to €18.2 million in the first six months of 2005 and €38.4 million inthe full year 2005. Excluding acquisitions, the turnover of the Group for thesix months to 30 June 2006 was €23.1 million. Operating profit before goodwill amortisation and exceptional items for the sixmonths to 30 June 2006 was €3.1 million compared to €1.3 million for the sameperiod last year and €3.8 million in the full year 2005. Excluding acquisitions,the operating profit before goodwill amortisation and exceptional items of theGroup for the six months to 30 June 2006 was €2.3 million. The results for theperiod were adversely impacted by the performance of ITS Technology Services,the UK based IT infrastructure services business, which was acquired in October2005. This business experienced some disruption as it was rebranded andintegrated into the Group. Profit before goodwill amortisation, exceptional items and tax for the sixmonths to 30 June 2006 was €2.6 million compared to €1.0 million in the firstsix months of 2005 and €3.0 million in the full year 2005. A tax charge of €0.5million has been included in these accounts relating to the profit beforegoodwill amortisation, exceptional items and tax. This is based on the expectedoverall effective tax rate of the Group for the full year 2006 of 20%. Had thetax charge been based on the results for the six months to 30 June 2006, itwould have been lower due to the higher proportion of profits arising in theRepublic of Ireland (where tax rates are lower than the United Kingdom). Adjusted earnings per share (excluding goodwill amortisation and exceptionalitems) for the six months to 30 June 2006 were 4.87c compared to 2.97c the firstsix months of 2005 and 7.17c for the full year 2005. Exceptional costs of €0.3 million were incurred principally on rebranding andrelaunching the ITS Technology Services business based in Swindon. The goodwillamortisation charge in the period was €0.7 million, of which €0.2 millionrelates to the two acquisitions made during the period. Profit after tax for the six months to 30 June 2006 was €1.2 million compared to€0.6 million for the first six months of 2005 and €1.4 million for the full year2005. Earnings per share (on an FRS3 basis) were 2.82c compared to 1.98c thefirst six months of 2005 and 4.00c for the full year 2005. Acquisitions On 1 March 2006, the Group acquired Entropy Limited ("Entropy"), the Dublinbased IT security specialist, for a total consideration of up to €4.95 millionto be satisfied by cash of €3.72 million and the issue of Calyx shares with amarket value of €1.23 million. On 13 June 2006, the Group acquired the Matrix Companies (which comprised of MXCIntegration Limited, Network Partners Holdings Limited and their subsidiaries)for a total consideration of up to £40.5 million. Of this, £33.5 million waspaid in cash and £2.0 million of Calyx Group plc shares were issued oncompletion. In addition, payments of up to £3.0 million and £2.0 million arepayable based on earn outs in the periods June to December 2006 and January toMay 2007 respectively. The shares in Calyx Group plc held by Fujin Technologyplc are locked in for a period of one year from 13 June 2006 and thereafter theyare subject to an orderly market agreement. The Group is continuing to review corporate and strategic developments in itscore UK and Irish markets and will consider further acquisition opportunities inthese markets where appropriate. Network Operating Centres (NOC's) A detailed review of the comparative capabilities of the Dublin and EastGrinstead NOC's has now been completed. As a result of this, we have decided toextend the East Grinstead NOC to cover the full range of services from WAN todesktop and the Dublin NOC will mirror the East Grinstead set up. This projectwill start in November and be completed by next February. Financing and working capital management To finance the acquisition of the Matrix Companies on 13 June 2006 the Groupplaced 25 million shares at 70p raising £17.5 million of new equity capital. Inaddition, the Group increased its senior debt facilities by drawing down a new£25 million eight year debt facility. As at 30 June 2006 the Group had cash (netof overdrafts) of €8.7 million, virtually all of which is held in sterling.Bank loans as at 30 June 2006 amounted to €46.1 million of which €36.1 millionrelates to the new £25 million sterling loan. Other loans amounting to €10.0mare euro denominated loans, as are the Group's finance leases of €1.3 million. Net cash inflow from operating activities in the six months to 30 June 2006 was€2.8 million compared to an outflow of €0.5 million in both the six months to 30June 2005 and the full year 2005. This reflects increased profits and tightercontrol of working capital where the outflow was €0.8 million in the six monthsto 30 June 2006, compared to an outflow of €2.2 million in the six months to 30June 2005 and an outflow of €4.6 million in the full year 2005. The balance sheet at the 30 June 2006 includes the full net assets of the MatrixCompanies whereas the profit and loss account for the six months to 30 June 2006only includes the results of the Matrix Companies for 17 days. Board and management changes Following the acquisition of the Matrix Companies, Ian Smith, Chief Executive ofFujin Technology plc, (previously Matrix Communications Group plc, the vendor ofthe Matrix Companies) became a non-executive director of the Group. TonyWeaver, who was Chief Operating Officer of Matrix Communications Group plcbusiness, is now Managing Director of the Matrix Companies. The Board has been further strengthened by the appointment of two additionalindependent non-executive directors, Gary Kennedy and Nicholas Koumarianos on 29June 2006 and by the appointment of Peter Jenkins as Chief Financial Officer on21 August 2006. Current trading and outlook The Board continues to be encouraged by the progress being made in the existingbusinesses and is very pleased with the way that the Matrix Companies areperforming under Calyx ownership. Calyx Group plc Consolidated Profit & Loss Account For six months ended 30 June 2006 Six months to 30 June 2006 (Unaudited) Six months to Year to Before goodwill Goodwill Exceptional Total 30 June 2005 31 December 2005 amortisation and amortisation items (Unaudited) (Audited) exceptional items Notes •'000 •'000 •'000 •'000 •'000 •'000 Group turnover 2 29,350 0 0 29,350 18,250 38,410Existing operations 23,133 23,133 18,250 38,410Acquisitions 6,217 6,217 Cost of sales (17,735) (17,735) (11,717) (23,554) Gross profit 11,615 11,615 6,533 14,856 Administrative 3 (8,548) (259) (8,807) (5,249) (11,640)expenses Goodwill amortisation (681) (681) (298) (667) Group operating 2 3,067 (681) (259) 2,127 986 2,549profitExisting operations 2.258 (481) (259) 1,518 986 2,549Acquisitions 809 (200) 609 Interest receivable 50 50 42 73 Interest payable (526) (526) (386) (879) Profit on ordinary 2,591 (681) (259) 1,651 642 1,743activities before tax Tax on loss on 4 (544) 78 (466) (298)ordinary activities Retained profit for 8 2,047 (681) (181) 1,185 642 1,445the period Basic diluted 6 2.82c 1.98c 4.00cearnings per share(pence) Adjusted earnings per 6 4.87c 2.97c 7.17cshare (pence) All of the results presented above derive from continuing operations. Administrative expenses include a charge relating to share options of €15,000. Calyx Group plc Consolidated Balance Sheet At 30 June 2006 Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000 NotesFixed AssetsTangible assets 7,219 2,433 3,076Intangible assets 79,233 10,692 16,402 86,452 13,125 19,478Current assetsStocks 3,143 1,694 2,134Debtors 28,487 7,158 9,751Cash at bank and in hand 11,603 5,927 6,462 43,233 14,779 18,347 Creditors: amounts falling due within (43,247) (12,597) (15,642)one year Net current liabilities (14) 2,182 2,705 Total assets less current liabilities 86,438 15,307 22,183 Creditors: amounts falling due after (45,472) (4,623) (9,944)more than one year Net assets 40,966 10,684 12,239 Capital and reservesCalled up equity share capital 6,737 3,818 3,859Share premium account 33,531 8,000 8,524Merger reserve (2,499) (2,499) (2,499)Share option reserve 46 18 31Profit and loss account 2,941 1,347 2,147Shares to be issued 210 177 Equity shareholders' funds 8 40,966 10,684 12,239 Calyx Group plc Consolidated Cash Flow statement For six months ended 30 June 2006 Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000 NotesNet cash inflow from operating activities 9 2,847 (480) (527) Returns on investment an servicing offinanceInterest paid (401) (386) (667)Interest received 50 42 (40)Interest element of finance leases paid 73 Net cash outflow from returns on (351) (344) (634)investments and servicing of finance Tax paid (334) 23 (28) Capital expenditure and financialinvestmentPurchase of tangible fixed assets (832) (752) (1,570)Proceeds from the disposal of fixed 7 29assetsPurchase of intangible fixed assets (22) (165) (61) Net cash outflow from capital expenditure (854) (910) (1,602)and financial investment Acquisitions and disposalsPurchase of subsidiary undertakings (54,087) (3,628)Disposal of financial instruments 101Cash in subsidiaries at acquisitions 1,011Deferred consideration on prior year (1,278) (646) (487)acquisitions Net cash outflow from acquisitions and (54,354) (646) (4,014)disposals Net cash outflow before use of liquid (53,046) (2,357) (6,805)resources and financing FinancingNew loans 36,128 4,300Issue of equity share capital 23,764 9,136 9,150Loan notes paid (1,773) (1,773)Capital element of finance leases 10 (607) (199) (330)Net cash inflow from financing 59,285 7,164 11,347 Increase in cash 11 6,239 4,807 4,542 Calyx Group plc Notes to the Interim Financial information For six months ended 30 June 2006 1. Basis of preparation This interim Financial Information has been prepared under the historical costconvention and is in accordance with the Group's accounting policies as set outin the Group's financial statements for the year ended 31 December 2005. TheInterim Statement which has been prepared on a going concern basis was approvedby the Board on 22 September 2006 and the Interim Financial Information isunaudited. This Interim Financial Information does not constitute statutoryaccounts as defined in the Irish Companies (Amendment) Act 1986. The Financial information for the year ended 31 December 2005 is derived fromthe statutory accounts which have been delivered to the Irish CompaniesRegistration Office and on which the auditors gave an unqualified opinion. 2. Geographical analysis Six months to 30 June 2006 (Unaudited) Republic of Ireland United Kingdom Total •'000 •'000 •'000 Sales 22,127 7,223 29,350Operating profit before goodwill amortisation and 2,618 449 3,067exceptional items Six months to 30 June 2005 (Unaudited) Sales 18,250 0 18,250 Operating profit before goodwill amortisation and 1,309 0 1,309exceptional items Year to 31 December 2005 (Audited) Sales 37,505 905 38,410 Operating profit before goodwill amortisation and 3,327 458 3,785exceptional items 3. Exceptional items In the six months to 30th June 2006 costs of €247,000 were incurred onrebranding and relaunching the ITS Technology Services business based in Swindonand a loss of €12,000 was incurred on the disposal of fixed assets. 4. Tax Provision for taxation is based upon forecast taxable profits for the year atthe anticipated effective tax rate for the year of 20%. Had the tax charge beenbased on the taxable profits for the six months to 30 June 2006, it would havebeen lower due to the higher proportion of profits arising in the Republic ofIreland (where the tax rate is lower) in the first half of the year compared tothe forecast for the full year. 5. Dividends No interim dividend is proposed. 6. Earnings per share Basic earnings per share have been calculated by dividing the profitattributable to members of the parent company - €1,184,605 (six months ended 30June 2005: €641,530, Year ended 31 December 2005: €1,444,704) by the weightedaverage number of ordinary shares in issue during the period 42,070,256 (sixmonths ended 30 June 2005: 32,457,640, Year ended 31 December 2005: 36,017,872). Adjusted earnings per share figures exclude goodwill amortisation andexceptional items in earnings. 7. Acquisitions On 1st March 2006, the Group acquired Entropy Limited. €2.98 million was paidin cash and shares with a market value of €1.02 million were issued to thevendor. In addition up to €0.74 million in cash and shares with a market valueof €0.21 million are payable should certain performance targets be met. Thiscash is included in creditors at 30th June 2006. On 13th June 2006, the Group acquired the integration businesses of MatrixCommunications Group plc. £33.5 million was paid in cash and shares with amarket value of £2.0 million were issued to the vendor. In addition up to £5.0million in cash is payable should certain performance targets be met. This isincluded in creditors at 30th June 2006. Other deferred consideration amounting to €150,000 is included in creditors at30th June 2006. 8. Reconciliation of movements in Group equity shareholder's funds Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000 Profit for the period 1,185 642 1,445 New equity share capital issued 2,878 1,318 1,358Premium on new share capital issued 25,007 8,000 8,524Preference shares redeemed (39) (39)Currency translation differences (391) (2)Share options charge 15 18 31Increase in shares to be issued 33 177 Net addition to shareholders' equity 28,727 9,939 11,494funds Opening shareholders' equity funds 12,239 745 745Closing shareholders' equity funds 40,966 10,684 12,239 9. Reconciliation of operating profit / (loss) to net cash inflow fromoperating activities Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000 Operating Profit 2,127 986 2,549 Amortisation of goodwill 681 298 667Depreciation 544 376 817Loss / (profit) on disposal of fixed 12 (1) (26)assets and financial assetsDecrease / (Increase) in stocks 183 (126) (309)Decrease / (Increase) in debtors (5,623) (486) (836)Increase / (Decrease) in creditors 4,593 (1,552) (3,440)Share option charge 15 18 31Foreign exchange gain / (loss) on net debt 315 (2)Other 7 22Net cash inflow / (outflow) from operating 2,847 (480) (527)activities 10. Reconciliation of net cash flow to movement in net debt Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000 Increase in cash in the period 6,239 4,851 4,542 Loans advanced (36,128) (4,300)Loan notes paid 1,773 1,773Capital element of finance leases 607 199 330 Change in net debt resulting from cash flow (29,282) 6,823 2,345 New finance leases (1,527) (44) (76) Change in net debt (30,809) 6,779 2,269 Net debt at the start of the period (7,877) (10,146) (10,146) Net debt at the end of the period (38,686) (3,367) (7,877) 11. Analysis of changes in net funds At 31 December 2005 Cash flow Other At June 30 2006 (Audited) (Unaudited) •'000 •'000 •'000 •'000Cash:Cash at bank and in hand 6,462 5,141 11,603Bank overdrafts (3,976) 1,098 (2,878) 2,486 6,239 0 8,725 DebtBank loans (10,006) (36,128) (46,134)Finance Leases (357) 607 (1,527) (1,277) (10,363) (35,521) (1,527) (47,411) (7,877) (29,282) (1,527) (38,686) Independent Review Report to Calyx Group plc Introduction We have been instructed by the group to review the financial information for thesix months ended 30 June 2006 set out on pages 4 to 9 and we have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. Our report has been prepared in accordance with the terms of our engagement toassist the group in meeting the requirements of the rules of the London StockExchange for companies trading securities on the Alternative Investment Marketand for no other purpose. No person is entitled to rely on this report unlesssuch a person is a person entitled to rely upon this report by virtue of and forthe purpose of our terms of engagement or has been expressly authorised to do soby our prior written consent. Save as above, we do not accept responsibility forthis report to any other person or for any other purpose and we hereby expresslydisclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the rules of theLondon Stock Exchange for companies trading securities on the AlternativeInvestment Market which require that the half-yearly report be presented andprepared in a form consistent with that which will be adopted in the group'sannual accounts having regard to the accounting standards applicable to suchannual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board. A review consists principally of makingenquiries of 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 AuditingStandards and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. 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 30 June 2006. BDO Simpson Xavier 25 September 2006Registered Auditors This information is provided by RNS The company news service from the London Stock Exchange
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