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EXPANSYS PLC
("Expansys" or the "Company" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2012
EXPANSYS plc (AIM: XPS), a leading global provider of end-to-end eCommerce and telecommunications services in the consumer electronics and wireless sectors, announces interim results for the six months ended 31 October 2012.
Financial Headlines
- Turnover £45.6m (H1 2011: £46.6m)
- Adjusted profit before tax £0.4m (H1 2011: £1.6m)*
- Exceptional charges of £2.3m (H1 2011: £0.1m)
- Loss before tax £2.1m (H1 2011: profit of £0.8m)
- Cash £2.3m (31 October 2011: £4.0m)
* Adjusted profit is after exceptional items, foreign exchange and other non-cash items
Trading Headlines
o DSNS has performed in line with expectations
o New international mobile network operator contracts won by PJ Media
o Growth in turnover from global websites (EXPANSYS.COM) of 21%
o Growth in turnover from the retail business in Asia of 93%
o Key major account contracts won in the retail business
o Growth in US retail business has slowed
o Significant reduction in performance from the European division. A restructuring is underway which will reduce costs significantly, although this is negatively impacting the current financial year
Bob Wigley, Chairman of EXPANSYS, commented:
The first half of the year has been more challenging than expected, chiefly as a result of a worsening performance in Europe as we restructure the business to an appropriate scale in line with the market opportunity and difficult economic climate. We continue to experience headwinds in the retail business, but believe the realignment of our cost base will have a positive impact and bring the business increased profitability in the short to medium term. Our DSNS business continues to win new customers, but the predicted network terms changes are having an effect upon profitability. We continue to make good progress within our PJ Media multi-channel solution business and have signed several key strategic contract wins that will benefit the Group moving forward.
The Group has spent a large amount of time this year restructuring underperforming areas of the business, and while not complete, we are already seeing operational improvements that are necessary to support the many strategic opportunities we have. However, due to the underperformance of the retail business chiefly in Europe, we expect full year performance to be below current market expectations.
Enquiries:
EXPANSYS plc Anthony Catterson, CEO Chris Ogle, CFO Via M: Communications
N+1 Singer Jonny Franklin-Adams or Jenny Wyllie Tel. +44 (0) 20 7496 3000 jonny.franklin-adams@n1singer.com / jenny.wyllie@n1singer.com
M:Communications Ben Simons or Matthew Neal Tel +44 (0)20 7920 2340/2368 simons@mcomgroup.com / neal@mcomgroup.com
Investor relations website: www.EXPANSYS.plc.uk
| |
CHAIRMAN'S STATEMENT
Expansys announces its results for the six months ended 31 October 2012.
This period has been a difficult period for the Company and we have incurred some significant one off exceptional costs.
Financial Review
Total turnover for the Group in the period was £45.6 million representing a decrease of 2% compared to the same period last year (H1 2011: £46.6 million).
The profit before tax as adjusted for the share-based payment, foreign exchange and exceptional items was £0.4 million (2011: £1.6 million). Share based payments totalled £0.2 million and exceptional items totalled £2.3 million with more details below.
The loss before tax for the period was £2.1 million (H1 2011: profit of £1.6 million).
Cash at the end of October 2012 was £2.3 million (H1 2011: £4.0 million). Cash has reduced primarily due to the exceptional costs incurred outlined below. We have also made necessary investments in infrastructure to support the retail division at a cost of £0.4 million, as well as investing working capital in growing the DSNS business in the USA.
Exceptional Items
During this period we have taken two significant exceptional charges to the income statement.
In the Annual report for FY 12 we reported that DSNS was among a number of distributors that had received a clawback claim from a UK mobile network operator. We have been in continuous discussions with the operator and continue to believe that there is no valid legal basis for the claim. However, we have decided to make a provision due to the protracted on-going negotiations.
The second charge relates to our substantial restructuring of the European division. In the Annual Report for FY 12 we said that while the Eurozone offers strong growth opportunities we are also aware of the challenges and the need to focus on the cost base. From November 1st we have outsourced the European warehouse and distribution facility, as well as the multi-lingual customer services function. This is expected to produce savings of up to £1 million per annum, as well as delivering a necessary improvement to our customer experience in the medium term, but we expect to incur one-off reorganisation costs of circa £0.9 million that have been treated as an exceptional cost.
Markets
EXPANSYS.com
Revenues from EXPANSYS.com websites grew by 21% in the first half of the year. We continue to see good growth in our website revenue in Asia and the USA, and during this period the growth was 84% and 54% respectively when compared to the first six months of last year. Overall the growth in the wider retail business, which includes all sales channels was 1% to £34.7 million (H1 2011: £34.5m). Growth would have been more robust, but was held back as a result of the decline in revenues from our European business.
We have also been encouraged by the signing of a major partner contract in Asia, and continue to believe this offers a strategic opportunity for the Group going forward.
DSNS
DSNS UK has performed in line with our expectations, and as previously communicated, profits have been impacted by the change in terms from networks and therefore the profit is reduced when compared to the previous first half. We continue to believe that despite the short term impact of the term changes, the medium to long term prospects for the market remain good.
We are taking appropriate steps to roll out the DSNS model to other suitable markets.
PJ Media
During the period PJ Media announced two new contracts with network operators; one to build and support a new webstore for a major mobile network operator in Asia and the other to provide a top up service for a major network operator in the UK. The two contracts demonstrate PJ Media's ability to provide a broad range of services to a number of different network operators, and the team continue to explore the large number of opportunities available globally.
Current trading and outlook
The first half of the year has been more challenging than expected. There have been some very encouraging developments in our Asian business, with new strategic contract wins that will improve results in the medium term. Profits for the Group are traditionally weighted to the second half of the year and therefore we expect an improvement in performance in the second half. However, the Board now believes that the profit for the current year will be lower than current market estimates.
The Board are confident that the intended future size and shape of the Group will allow us to maximise the numerous strategic opportunities available. We are actively looking at supporting our strategy through a new sales structure and evolved distribution solution for the Group, which we believe will give us a more robust business model moving forward.
Bob Wigley
Chairman
13 December 2011
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the 6 months ended 31 October 2012
6 months ended | 6 months ended | ||
31 October 2012 | 31 October 2011 | ||
Note | £000 | £000 | |
Revenue | 45,643 | 46,585 | |
Cost of sales | (36,375) | (37,096) | |
Gross profit | 9,268 | 9,489 | |
Distribution costs | (1,910) | (1,677) | |
Exceptional administrative items | 2 | (2,313) | (74) |
Amortisation of acquired intangibles | (6) | (487) | |
Share-based payments expense | (172) | (235) | |
Foreign exchange | (22) | 25 | |
Other administrative expenses | (6,987) | (6,250) | |
Administrative expenses | (9,500) | (7,021) | |
Operating (loss) / profit | (2,142) | 791 | |
Finance costs | (5) | (6) | |
(Loss) / profit before taxation | 3 | (2,147) | 785 |
Income tax credit / (charge) | 547 | (413) | |
(Loss) / profit for the half year | (1,600) | 372 | |
Attributable to owners of the parent | (1,628) | 367 | |
Attributable to non-controlling interests | 28 | 5 | |
Currency translation differences | (56) | (142) | |
Total comprehensive (expense) / income for the half year | (1,656) | 230 | |
Attributable to owners of the parent | (1,684) | 225 | |
Attributable to non-controlling interests | 28 | 5 | |
Earnings per share (pence) | |||
Basic (loss) / earnings per share for the half year | 4 | (0.14p) | 0.03p |
Diluted (loss) / earnings per share for the half year | 4 | (0.14p) | 0.03p |
Adjusted basic earnings per share for the half year * | 4 | 0.08p | 0.10p |
Adjusted diluted earnings per share for the half year * | 4 | 0.08p | 0.10p |
* The Directors believe that reporting adjusted measures provides a more useful comparison of business performance and reflects the way in which the business is controlled. The method of calculating adjusted earnings is detailed in note 3.
GROUP STATEMENT OF FINANCIAL POSITION
As at | As at | As at | ||
31 October 2012 | 30 April 2012 | 31 October 2011 | ||
£000 | £000 | £000 | ||
ASSETS | ||||
Non current assets | ||||
Plant and equipment | 714 | 457 | 659 | |
Intangible assets | 50,762 | 50,680 | 50,887 | |
Deferred income tax assets | 339 | 340 | 1,456 | |
51,815 | 51,477 | 53,002 | ||
Current assets | ||||
Inventories | 3,393 | 4,738 | 4,112 | |
Trade and other receivables | 11,200 | 8,670 | 9,939 | |
Cash and short term deposits | 2,270 | 5,485 | 4,010 | |
16,863 | 18,893 | 18,061 | ||
Total assets | 68,678 | 70,370 | 71,063 | |
LIABILITIES | ||||
Current liabilities | ||||
Trade and other payables | (11,721) | (12,420) | (14,253) | |
Financial liabilities | (30) | (45) | (56) | |
Income tax payable | (168) | (730) | (805) | |
Government grants | (50) | (62) | (8) | |
Provisions | (2,279) | (1,199) | (55) | |
Deferred income tax liabilities | - | - | (55) | |
(14,248) | (14,456) | (15,232) | ||
Non current liabilities | ||||
Financial liabilities | - | (11) | (45) | |
Deferred income tax liabilities | (8) | (8) | - | |
(8) | (19) | (45) | ||
Total liabilities | (14,256) | (14,475) | (15,277) | |
Net assets | 54,422 | 55,895 | 55,786 | |
Capital and reserves | ||||
Equity share capital | 2,896 | 2,893 | 2,893 | |
Equity share premium | 37,582 | 37,574 | 37,562 | |
Merger reserve | 24,417 | 24,417 | 24,417 | |
Currency translation | 518 | 574 | 828 | |
Retained (losses) / earnings | (11,081) | (9,625) | (9,959) | |
Equity attributable to equity holders of the parent company | 54,332 | 55,833 | 55,741 | |
Non-controlling interests | 90 | 62 | 45
| |
Total equity | 54,422 | 55,895 | 55,786 |
GROUP STATEMENT OF CHANGES IN EQUITY
For the 6 months ended 31 October 2012
Equity share capital £000
| Equity share premium £000 |
Merger reserve £000 | Currency translation reserve £000 |
Retained earnings £000 | Non-controlling interests £000 |
Total equity £000 | |
At 1 May 2012 | 2,893 | 37,574 | 24,417 | 574 | (9,625) | 62 | 55,895 |
Loss for the period | - | - | - | - | (1,628) | 28 | (1,600) |
Exchange differences* | (56) | (56) | |||||
Total comprehensive loss for the period | - | - | - | (56) | (1,628) | 28 | (1,656) |
Equity share issue | 3 | 8 | - | - | - | - | 11 |
Share-based payment | - | - | - | - | 172 | - | 172 |
Total contributions by and distribution to owners of the Company | 3 | 8 | - | - | 172 | - | 183 |
At 31 October 2012 | 2.896 | 37,582 | 24,417 | 518 | (11,081) | 90 | 54,422 |
Equity share capital £000
| Equity share premium £000 |
Merger reserve £000 | Currency translation reserve £000 |
Retained earnings £000 | Non-controlling interests £000 |
Total equity £000 | |
At 1 May 2011 | 2,890 | 37,552 | 24,417 | 970 | (10,561) | 40 | 55,308 |
Profit for the period | - | - | - | - | 367 | 5 | 372 |
Exchange differences* | - | - | - | (142) | - | - | (142) |
Total comprehensive income for the period | - | - | - | (142) | 367 | 5 | 230 |
Equity share issue | 3 | - | - | - | - | - | 3 |
Share based payment | - | 10 | - | - | 235 | - | 245 |
Total contributions by and distribution to owners of the Company | 3 | 10 | - | - | 235 | - | 248 |
At 31 October 2011 | 2,893 | 37,562 | 24,417 | 828 | (9,959) | 45 | 55,786 |
*Exchange differences relate to the retranslation of net assets of subsidiary undertakings.
GROUP CASH FLOW STATEMENT
For the 6 months ended 31 October 2012
6 months ended | 6 months ended | ||
31 October 2012 | 31 October 2011 | ||
Note | £000 | £000 | |
Cash flows from operating activities | |||
(Loss) / profit before income tax | (2,147) | 785 | |
Depreciation | 121 | 138 | |
Amortisation | 214 | 604 | |
Equity-settled share-based payment expense | 182 | 245 | |
Foreign exchange | 22 | (25) | |
Net finance costs | (3) | 6 | |
Decrease / (increase) in inventories | 1,342 | 309 | |
(Increase) / decrease in trade and other receivables | (2,541) | (3,864) | |
Increase / (decrease) in trade and other payables | (541) | 1,318 | |
Increase in / (release of) provisions | 991 | ||
Cash used in operations | (2,360) | (484) | |
Interest received / paid | 3 | (6) | |
Income tax paid | (82) | (49) | |
Net cash used in operating activities | (2,439) | (539) | |
Purchase of property, plant and equipment | (402) | (117) | |
Purchase of intangible assets | (318) | (360) | |
Net cash used in investing activities | (720) | (477) | |
Capital repayment of borrowings | (23) | (27) | |
Capital repayment of finance leases and hire purchase contracts | (4) | (11) | |
Net cash used in financing activities | (27) | (38) | |
Decrease in cash and cash equivalents | (3,186) | (1,054) | |
Cash and cash equivalents as at 1 May | 5,485 | 5,060 | |
Effects of exchange rate changes | (29) | 4 | |
Cash and cash equivalents as at 31 October | 2,270 | 4,010 |
NOTES
1. Basis of preparation and accounting policies
The financial information comprises the unaudited results for the six months ended 31 October 2012 and 31 October 2011.
The condensed consolidated financial statements for the six months ended 31 October 2012 should be read in conjunction with the annual financial statements for the year ended 30 April 2012 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The Auditors' Report on those statements was unqualified and did not contain any statements under section 498 of the Companies Act 2006.
The Group's principal accounting policies used in preparing this information are as stated in the financial statements for the year ended 30 April 2012, which have been filed with the Registrar of Companies, and are available on our website www.EXPANSYS.com .
2. Exceptional items
6 months ended | 6 months ended | |
31 October 2012 | 31 October 2011 | |
£000 | £000 | |
Administrative expenses | ||
Provision for disputes with customers/trading partners | 1,300 | - |
Costs in relation to office relocation and redundancies | 893 | 74 |
Aborted acquisition costs | 87 | - |
Other | 33 | - |
Total exceptional costs | 2,313 | 74 |
3. Adjusted measures
The Directors believe that reporting adjusted measures provides a more useful comparison of business performance and reflects the way in which the business is controlled.
The tables below illustrate how the key adjusted measures are calculated.
6 months ended | 6 months ended | |
31 October 2012 | 31 October 2011 | |
£000 | £000 | |
(Loss) / profit before tax for the half year (as reported) | (2,147) | 785 |
Add back: | ||
Amortisation of acquired intangibles | 6 | 487 |
Exceptional items | 2,313 | 74 |
Foreign exchange | 22 | (25) |
Share-based payments expense | 172 | 235 |
Adjusted profit before tax for the half year | 366 | 1,556 |
6 months ended | 6 months ended | ||
31 October 2012 | 31 October 2011 | ||
£000 | £000 | ||
(Loss) / profit for the half year attributable to equity holders of the parent company (as reported) | (1,628) | 367 | |
Add back: | |||
Amortisation of acquired intangibles | 6 | 487 | |
| Exceptional items | 2,313 | 74 |
| Foreign exchange | 22 | (25) |
| Share-based payments expense | 172 | 235 |
| |||
| Adjusted profit for the half year attributable to equity holders of the parent company | 885 | 1,138 |
Calculations for adjusted earnings per share use adjusted profit for the half year attributable to equity holders of the parent company (shown above) and are detailed in note 4.
4. Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing earnings/(loss) for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share for the year amounts are calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
6 months ended | 6 months ended | |
31 October 2012 | 31 October 2011 | |
£000 | £000 | |
(Loss) / profit for the period | (1,600) | 372 |
Less earnings attributable to non-controlling interests | (28) | (5) |
(Loss) / profit attributable to equity holders of the parent | (1,628) | 367 |
6 months ended | 6 months ended | |
31 October 2012 | 31 October 2011 | |
'000 | '000 | |
Basic weighted average number of shares | 1,157,707 | 1,156,722 |
Dilutive potential ordinary shares: | ||
Employee and consultant options | 4,396 | 11,082 |
Diluted weighted average number of shares | 1,162,103 | 1,167,804 |
Where ordinary shares are issued at a discount to the market price, the weighted average number of shares should reflect that the discount is effectively a bonus given to shareholders for no consideration. The weighted average number of shares in the current year and prior year reflect this.
The amounts for earnings per share are as follows:
6 months ended | 6 months ended | |
31 October 2012 | 31 October 2011 | |
Basic (loss) / earnings per share | (0.14p) | 0.03p |
Diluted (loss) / profit per share | (0.14p) | 0.03p |
Adjusted earnings per ordinary share
The Directors believe that reporting adjusted measures provides a more useful comparison of business performance and reflects the way in which the business is controlled.
To this end, basic and diluted earnings per share are also presented on this basis below.
Adjusted profit for the half year attributable to equity holders of the parent is calculated in note 3 above, and is as follows:
6 months ended | 6 months ended | |
31 October 2012 | 31 October 2011 | |
£000 | £000 | |
Adjusted profit attributable to equity holders of the parent | 885 | 1,138 |
The amounts for adjusted earnings per share using this adjusted profit for the half year attributable to equity holders of the parent are as follows:
6 months ended | 6 months ended | |
31 October 2012 | 31 October 2011 | |
Adjusted basic earnings per share | 0.08p | 0.10p |
Adjusted diluted earnings per share | 0.08p | 0.10p |
5. Approval by the Board of Directors and Audit Committee
The interim statement was approved by the Board of Directors and the Audit Committee on 12 December 2012 and is neither audited nor reviewed by the Group's auditors.
The Directors of EXPANSYS plc are listed in the EXPANSYS plc Annual Report for 30 April 2012. A list of current directors is maintained on the EXPANSYS plc website www.EXPANSYS.com .