1Spatial Holdings Regulatory News (SPA)

21 Nov 2005 07:02

Z Group PLC21 November 2005 21 November 2005 Z GROUP PLC Interim Results for the Six Months to 31 August 2005 Continued Revenue and Profit Growth Z GROUP PLC ("Z GROUP" or the "Group") the marketing-led technology servicescompany founded in 2002, announces its first set of results since admission toAIM last June. The Group develops and markets software services, sold both over the Internetand through retail outlets, including: ONSPEED: which increases the speed of Internet connectivity for web ande-mail; Net2Roam: which allows individuals and SMEs to obtain local dial-up accessnumbers worldwide at rates below normal international rates; Onbidder: a software download that enhances users' prospects of successduring eBay auctions. The Group confirms that the launch date for OnShare, a software service enablingsecure networking between PCs, will be in the first quarter of 2006. Highlights • Group sales up 210% to £2.6 million (H1 2004: £0.8 million) • Gross margin up to 79% (H1 2004: 75%) • Pre-tax profit of £405,000 (H1 2004: £95,000) • Earnings per share 1.7p (H1 2004: 0.51p) • Cash at bank £4.7 million Jamie True, Joint CEO, commented: "Over the past six months, Z GROUP has successfully increased sales volumesthrough both Internet and retail channels and has expanded its internationalsales network." Jack Bekhor, Joint CEO, added: "We continue to devote substantial resource to extending our portfolio ofsoftware services. We apply our proven sales strategy, namely the combination ofROI driven direct marketing with strong retail distribution, to the roll out ofnew services, including OnShare which we believe will add significant impetus tothe business." Enquiries: Z GROUP PLC 08700 111 173Jack Bekhor/Jamie True, Joint Chief Executive OfficersHolborn PR 020 7929 5599David Bick/Mike FelthamPanmure Gordon & Co 020 7459 3600Aubrey Powell/Jonathan Retter Z GROUP PLC Interim Results for the Six Months to 31 August 2005 Report from the Joint Chief Executives The six months under review was a period of major development, including thesuccessful placing and admission to AIM on 21 June raising net proceeds of £2.55million. During the period the Group experienced strong consumer demand for itsservices and developed both new services and the infrastructure necessary toexpand sales into new geographical markets. Financial Summary During the six month period turnover increased to £2.6 million (H1 2004: £0.8million). Costs have risen broadly in line with expectations; although the Group hasexperienced increased marketing spend, principally with the launch of ONSPEEDinto new markets (including emerging markets such as India). Pre-tax profit for the six month period was £405,000 (H1 2004: £0.8 million). Cash balances have increased to £4.7 million following the placing in June. Trade debtors were £575,000 at the end of the period compared to £43,000 at thestart of the six month period. The increase was driven by sales of the retailversion of ONSPEED via distributors in the UK and Germany which represent£315,000 of the trade debtors. The remainder is comprised of smallerdistribution deals with no other individual debtor in excess of £40,000. Creditors have increased to £1,266,000 at the end of the period compared to£962,000 at the start of the six month period. The increase is primarily drivenby an increase in deferred revenue from £144,000 to £238,000 - a result ofincreased sales and additionally the accrual for the £123,000 tax charge in theperiod. Operations The last six months have seen a continued focus on boosting sales of the Group'smain software service, ONSPEED, and developing new products for launch in thenear future. ONSPEED ONSPEED is a software service using a 9-patented proprietary compressiontechnology that speeds up Internet connections by up to 5 times. The ONSPEEDuser base is primarily comprised of dial-up users who do not want to subscribeto a broadband service but still wish to enjoy broadband connectivity speeds forconsiderably less money. ONSPEED also targets broadband users who need a speedenhancement and pocket PC users who need fast, wireless connectivity. Z GROUPestimates that around 50% of UK online users remain with narrowband rather thanbroadband and taking Europe as a whole it is estimated that there are over 40million potential ONSPEED customers. ONSPEED sales were boosted during the period through the launch of the serviceas a packaged CD product with distribution agreements in place covering highstreet stores in the UK and Ireland and certain European territories, notablyGermany, Austria, Switzerland, and France. Net2Roam and NetAway Net2Roam and NetAway are prepaid services which provide users with affordableand easy Internet access when travelling abroad. The key advantage of theservices is that they do not require the customer to dial back internationallyto a home Internet Service Provider, thereby saving time and money. The Group's primary short term focus for Net2Roam and NetAway has been oncustomer retention whilst other services are developed, however the Groupbelieves that there is potential to expand this revenue stream. Further Developments Onbidder The Group announced the launch of a new software service called Onbidder on 26September 2005. The service is a software download that enhances users'prospects of being successful during eBay auctions. The service is currentlybeing marketed to the Group's existing customer base with the longer term goalof converting a percentage of eBay's 157 million worldwide users. OnShare OnShare is a revolutionary mass market software service aimed at providing usergroups with the ability to chat and share files (e.g. digital photos, media, andvideo) and folders from their computer with other OnShare users. The softwareuses a security level of 4,096 bit encryption which has been approved by theDTI. The OnShare technology is owned and developed by the Group with twopatents applied for. The initial potential target market for OnShare is the 150 million instantmessaging and file-share audience in the UK and the United States. An estimated36 million Americans shared files online in 2004. OnShare will adopt similarviral marketing techniques as used by Skype and Hotmail. During the development of the OnShare product this year we have identified anumber of significant enhancements which has resulted in its delayed launch.Consequently, we are even more excited about the commercial prospects of thisproduct. The service is currently undergoing its last stage of development withcommercial launch planned for early 2006. ONSPEED Mobile ONSPEED Mobile will deliver up to 8 times speed increase in mobile phone surfingand significantly reduce GPRS and 3G data charges. The current market size for Java enabled handsets is estimated at 500m and 60%of phone handsets sold in 2005 supported Java. We believe that ONSPEED Mobilewill be the first accelerator product available to the mass market. The Group expects the ONSPEED Mobile service to address this market and iscurrently in the final stages of development with launch expected in early 2006. Board Changes Z GROUP announces that with effect from today, Michael Hawkes has, for personalreasons, resigned as a Director of the Group. The Directors wish him well forthe future and thank him for his valuable contribution. A recruitment processis underway to find a replacement Finance Director and in the interim, the rolewill be covered by the Group's financial controller. The Directors remain committed to the recruitment of a Non-Executive Directorwho also will take responsibility for chairing the Audit Committee. Theselection process is underway and an announcement will be made in due course. Outlook The Group has made some very good progress in the first half. Our extendeddevelopment of the OnShare product has delayed its launch and will have animpact on our trading expectations for this year. Nevertheless, we expect toreport strong growth for the year as a whole. We also look forward to the launchof OnShare and our ONSPEED Mobile service in early 2006 which will add furtherimpetus to our growth. Jack BekhorJames TrueJoint Chief Executive Officers21 November 2005 Consolidated Profit and Loss Account for the six months ended 31st August 2005 Unaudited six months Unaudited six Audited 11 months to 31st August 2005 months to 31st to 28th February August 2004 2005 £000's £000's £000's Turnover 2,572 834 2,800Cost of sales (550) (212) (518) ------------------- ------------------ ------------------Gross profit 2,022 622 2,282Administration expenses (1,655) (528) (1,701) ------------------- ------------------ ------------------Operating profit 367 94 581Interest receivable and similar income 38 1 4 ------------------- ------------------ ------------------Profit on ordinary activities before taxation 405 95 585Taxation (109) (19) (114) ------------------- ------------------ ------------------Profit on ordinary activities after taxation 296 76 471Minority interests 15 9 18 ------------------- ------------------ ------------------Profit for the financial period 311 85 489 Basic earnings per share 1.75p 0.51p 2.93p Diluted earnings per share 1.74p 0.51p 2.93p Consolidated Balance Sheet at 31st August 2005 Unaudited at 31st Unaudited at 31st Audited at 28th August 2005 August 2004 February 2005 £000's £000's £000's Fixed AssetsIntangible assets 542 88 291Tangible assets 166 119 174 ------------------- ------------------ ------------------ 708 207 465Current AssetsDebtors 872 112 121Cash at bank 4,676 668 2,549 ------------------- ------------------ ------------------ 5,548 780 2,670Creditors: Amounts falling due within one year (1,252) (528) (962) ------------------- ------------------ ------------------Net current assets 4,296 252 1,708 ------------------- ------------------ ------------------Total assets less current liabilities 5,004 459 2,173Creditors: Amounts falling due after one year (30) - (34) ------------------- ------------------ ------------------Net assets 4,974 459 2,139 Capital and ReservesCalled up share capital 974 4 5Share premium account 2,399 658 1,895Merger reserve 1,066 - -Profit and loss account 519 (243) 208 ------------------- ------------------ ------------------Equity shareholders' funds 4,958 419 2,108Minority interests 16 40 31 4,974 459 2,139 Consolidated Cash Flow Statement for the six months ended 31st August 2005 Unaudited 6 Unaudited 6 Audited 11 months to months to months to 31st August 31st August 28th 2005 2004 February 2005 £000's £000's £000's Net Cash (outflow) / inflow from operating activities (169) 217 998 Returns on investments and servicing of financeInterest received 38 1 4 ------------ ------------ ----------Net cash inflow for returns on investments and 38 1 4servicing of finance ------------ ------------ ----------Taxation - - - Capital expenditure and financial investmentPurchase of tangible fixed assets (22) (123) (62)Purchase of intangible fixed assets (254) (89) (294) ------------ ------------ ----------Net cash outflow for capital expenditure and financial (276) (212) (356)investment ------------ ------------ ---------- Cash (outflow) / inflow before use of liquid resources (407) 6 646and financing FinancingCapital element of finance lease payments (4) - (4)Issue of share capital 2,538 49 1,287 ------------ ------------ ----------Net cash inflow from use of liquid resources and 2,534 49 1,283financing ------------ ------------ ----------Increase in cash in period 2,127 55 1,929 ------------ ------------ ---------- Reconciliation of net cash flow to movement in net funds Unaudited six Unaudited six Audited 11 months to months to months to 31st August 31st August 28th February 2005 2004 2005 £000's £000's £000's Increase in cash in period 2,127 55 1,929Cash outflow from decrease in lease financing 4 - 4New finance lease - - (47) ------------ ------------ ------------Movement in funds in period 2,131 55 1,886Opening Net funds 2,506 613 620 ------------ ------------ ------------Closing net funds 4,637 668 2,506 ------------ ------------ ------------ Reconciliation of operating profit to operating cashflow Unaudited six Unaudited six Audited 11 months to 31st months to months to August 2005 31st August 28th 2004 February 2005 £000's £000's £000's Operating profit 367 94 581Depreciation 30 26 42Amortisation 2 1 3(Increase)/decrease in debtors (751) (85) (56)(decrease)/increase in creditors 183 181 428 ------------ ------------ -----------Net cashflow from operating activities (169) 217 998 ------------ ------------ ----------- Notes to the Accounts 1. Basis of preparation The financial information contained in this interim report has been preparedunder the historical cost convention, in accordance with applicable accountingstandards and on the basis of the accounting policies set out in the statutoryfinancial statements of Net2Roam Limited ("Net2Roam") for the period ended 28February 2005.The financial information set out in this report is unaudited anddoes not constitute statutory accounts as defined in section 240 of theCompanies Act 1985. The Company was incorporated on 20 April 2005 as Z Group Investments plc andpassed a resolution to change its name to Z GROUP PLC ("Z GROUP") on 15 June2005. On 15 June 2005, Z GROUP entered into a share for share exchange agreement withthe shareholders of Net2Roam whereby Z GROUP acquired the entire issued sharecapital of Net2Roam, the consideration being satisfied by the allotment ofordinary shares in Z GROUP to the shareholders of Net2Roam. This acquisition has therefore been accounted for as a merger as permitted byFinancial Reporting Standard 6 as if the group (as currently constituted) hadbeen in place throughout the whole of the period covered by this interim report.As such, the unaudited results for the period ended 31 August 2005 have beenpresented as though Net2Roam had always been part of Z GROUP even though Z GROUPitself was only incorporated on 20 April 2005. The unaudited results for the period ended 31 August 2004 and the auditedresults for the period ended 28 February 2005 represent the consolidated resultsof Net2Roam, an appropriate like-for-like comparison when judging the unauditedresults of Z GROUP for the period ended 31 August 2005. 2. Earnings per share The calculation of basic earnings per share is based upon the profit after taxdivided by the weighted average number of shares in issue during the period. The calculation of fully diluted earnings per share is based upon the profitafter tax divided by the weighted average number of shares in issue during theperiod after taking into account the dilutive effect of share options. Profit Weighted averageBasic earnings per share £'000s number of shares EPS (pence)Period ended 31 August 2005 311,000 17,779,752 1.75Period ended 31 August 2004 85,000 16,692,795* 0.51Period ended 28 February 2005 489,000 16,692,795* 2.93 Profit Weighted averageDiluted earnings per share £'000s number of shares EPS (pence)Period ended 31 August 2005 311,000 17,922,659 1.74Period ended 31 August 2004 85,000 16,692,795* 0.51Period ended 28 February 2005 489,000 16,692,795* 2.93 * Representing the number of ordinary shares in issue at the time of the placingand admission to AIM. 3. The interim report will be available on the company website 'www.zgroupplc.com' and upon application to Z GROUP PLC, The Glassmill, 1Battersea Bridge Road, Battersea, London SW11 3BZ. The interim results were approved by the Board of Directors on 18 November2005 This information is provided by RNS The company news service from the London Stock Exchange