RNS Number:2078J
Tenon Group PLC
26 March 2003
Tenon Group PLC
("Tenon")
Preliminary Results for the year ended 31 December 2002
Tenon, the professional services group, today announces preliminary results for
the year ended 31 December 2002.
- Turnover of #92.0 million (2001: #55.4 million)
- Pre-tax profit of #4.3 million, before goodwill amortisation and
impairment and exceptional items (2001: #0.7 million)
- Goodwill amortisation of #9.9 million; further exceptional
goodwill write down of #106.0 million following a full impairment review; other
net exceptional charges, associated mainly with restructuring, of #2.3 million,
resulting in an overall loss before tax of #113.9 million
- Preliminary stage of a Business Review has identified
opportunities for cost savings and scope to improve business practices
- Restructuring of Tenon Corporate Finance into integral and
cohesive division. Advanced discussions are taking place concerning the future
of certain elements of Tenon Livingstone Guarantee
- Andy Raynor has been appointed chief executive and Bill Davidson
appointed as executive director
- Strategy remains to build Tenon into a leading professional
services business with strong management focus
Andy Raynor, chief executive, commented:
"Tenon's performance in 2002 was extremely disappointing. However, we have
moved rapidly in our review process and have started to put in place changes
that are necessary to improve both the Group's operating efficiencies and
profitability. Our focus is on delivering strong financial performance and
shareholder value."
26 March 2003
ENQUIRIES:
Tenon Group PLC Tel: 020 7499 1666
Andy Raynor - chief executive
College Hill Tel: 020 7457 2020
Kate Pope
Chairman's Statement
The past year has been characterised by significant uncertainties in the economy
and our marketplace and these have contributed to the disappointing performance
of the Group.
With fourteen businesses acquired over a period of thirteen months in 2000 and
2001, the subsequent integration process has taken longer than expected. This,
coupled with under- performance in some areas of the business, gave cause for
concern. It was therefore announced on 11 February 2003 that a fundamental
review of the business was underway with significant management action being
taken to ensure that we can build an effective and profitable business.
Business review
The preliminary stage of the review has now been completed by the new management
team and initial findings have identified opportunities for cost savings and
scope to improve business practices. We will continue this review process to
target further profitability improvement across our core business areas.
The majority of our acquisitions have been of outstanding quality. For those
that have not been so successful, or where we believe that the reasonable
prospect for turnaround is too protracted, we are taking action to re-structure
and re-focus our teams. This action has included a reduction in staffing
levels. We have also identified certain non-core and under-performing business
areas from which we will be exiting.
There has been rapid management change at all levels, with the core objective of
exploiting the operational structure of our divisions to increase accountability
and profitability. We have also taken the decision to relocate our senior
executives and their support team closer to the business operations and to close
our Dover Street head office.
The introduction of profit-driven incentive structures for our top performing
client service executives is already showing benefits and we will continue to
focus on the improvement of communication to and within our management and
client service teams.
We believe that these restructuring initiatives are essential in building upon
our profitable core business. At the heart of this business lies our dedication
to provide excellent financial, taxation and strategic advice to entrepreneurial
businesses, predominantly owner-managed. Our principal service lines comprise
Business Services, Specialist Taxation, Financial Services, Corporate Recovery
and Corporate Finance.
The business is managed through these service lines, in order to maximise the
consistency of delivery and profitability of services and their
cross-fertilisation with other lines. Each service operates appropriate line
management responsibilities.
Financial review
2002 was a profitable year for Tenon before exceptional costs, goodwill
impairment and amortisation. We achieved turnover of #92.0 million (2001: #55.4
million) and operating profit of #6.2 million (2001: #0.3 million) before
goodwill amortisation and impairment and exceptional costs. Pre-tax profit
before goodwill amortisation and impairment and exceptional costs was #4.3
million (2001: #0.7 million). After goodwill amortisation of #9.9 million, an
exceptional goodwill write down of #106.0 million and other net exceptional
charges, associated mainly with restructuring of #2.3 million, the loss before
tax was #113.9 million. Earnings per share before goodwill write down and
amortisation and exceptional costs were 1.75 pence, (basic loss per share of
74.39 pence).
As we advised in our February trading update, the second half of 2002 was not
profitable. During the latter part of the year, we began a programme of profit
improvement in the business and incurred net exceptional costs of #2.3 million.
We also performed a full review of the carrying value of goodwill of our
acquired businesses and this has resulted in the recording of an impairment
charge of #106.0 million. Goodwill carried forward amounts to #66.8 million.
Our bank facilities are provided by Lloyds TSB Bank plc and total #45.0 million.
We have restructured these facilities to meet the needs of the business.
We are giving consideration to a proposal to alter our accounting reference date
so that our financial year end may fit more suitably with the activity patterns
of our businesses.
Tenon Corporate Finance
We remain focused on our corporate finance business and Tenon Corporate Finance
is being restructured into an integrated and cohesive division of the Group. We
are in advanced discussions concerning the future of certain elements of Tenon
Livingstone Guarantee. We expect to make a further announcement shortly.
Board appointments
The Board is delighted to announce that following a very active initial period
as Group managing director Andy Raynor has been appointed chief executive with
immediate effect. The Board of Tenon is also pleased to announce the
appointment of Bill Davidson (55) to the Board as an executive director. Mr
Davidson is Head of the Business Services division, the Group's largest service
line and was previously chairman of Scott Oswald acquired in 2001. Further
executive and non-executive appointments will be made.
Southwind Limited
On 12 February 2003, Southwind Limited made an initial investment into Tenon and
subsequently increased their holding to 17.3%. We welcome them as a significant
shareholder.
Summary
Since the year-end, the actions taken to restructure our business have enjoyed
the full support of the wider Tenon management team. These actions include a
robust redefinition of management lines and accountabilities and a re-emphasised
focus on the provision of outstanding levels of advice and service to our
clients.
Our philosophy for the future is straightforward. To provide excellent service
levels to our clients; to provide and encourage leadership in the business from
and through the senior team; to focus on profitable operations and
opportunities; to match reward to performance and to enhance true value for all
our shareholders.
I have every confidence that Tenon will build successfully on the foundations
now in place.
Neil Johnson
Chairman
26 March 2003
Consolidated profit and loss account for the year ended 31 December 2002
Before
goodwill
impairment,
amortisation Goodwill
impairment Unaudited Re-stated
and
Exceptional and Total Total
exceptional
items items amortisation 2002 2001
Notes #'000 #'000 #'000 #'000 #'000
Turnover 2 91,954 - - 91,954 55,350
Movement in WIP (511) - - (511) 597
Other operating income 4,113 - - 4,113 3,703
External charges: direct expenses 3 (4,163) (746) - (4,909) (1,203)
Staff costs and similar charges 3 (59,445) (896) - (60,341) (39,372)
Depreciation (2,223) - - (2,223) (1,608)
Goodwill impairment - - (106,000) (106,000) -
Goodwill amortisation - - (9,865) (9,865) (5,380)
Goodwill impairment and
amortisation - - (115,865) (115,865) (5,380)
Other operating charges 3 (23,551) (935) - (24,486) (17,205)
Operating profit/(loss) 6,174 (2,577) (115,865) (112,268) (5,118)
Profit on disposal of fixed assets 3 - 250 - 250 -
Profit/(loss) before interest and
taxation 6,174 (2,327) (115,865) (112,018) (5,118)
Interest receivable and similar 1,071 - - 1,071 1,682
income
Interest payable and similar (2,952) - - (2,952) (1,266)
charges
Profit/(loss) on ordinary
activities
before taxation 4,293 (2,327) (115,865) (113,899) (4,702)
Tax on profit/(loss) on ordinary
activities (1,588) 773 - (815) (354)
Retained profit/(loss) for the 5 2,705 (1,554) (115,865) (114,714) (5,056)
year
Earning/(loss) per 10p share 4
Basic (74.39) (4.60)
Diluted (74.39) (4.60)
Adjusted basic 1.75 0.30
Adjusted diluted 1.75 0.29
Consolidated balance sheet at 31 December 2002
Unaudited
2002 2001
Notes #'000 #'000
Fixed assets
Intangible assets 66,841 183,731
Tangible assets 7,751 5,592
Investments 512 517
75,104 189,840
Current assets
Work in progress 4,738 4,994
Debtors 31,952 27,815
Investments 16,349 31,723
Cash at bank and in hand 1,687 5,238
54,726 69,770
Creditors: amounts falling due within one year (44,283) (52,685)
Net current assets 10,443 17,085
Total assets less current liabilities 85,547 206,925
Creditors: amounts falling due after more than
one year (19,129) (25,691)
Provisions for liabilities and charges (1,537) (1,698)
Net assets 64,881 179,536
Capital and reserves
Called up share capital 15,519 15,275
Share premium account 80,128 79,962
Merger reserve 32,204 84,716
Shares to be issued - 2,003
Investment revaluation reserve 60 25
Profit and loss account (63,030) (2,445)
Equity shareholders' funds 5 64,881 179,536
Consolidated cash flow statement for the year ended 31 December 2002
Unaudited
2002 2001
Notes #'000 #'000
Net cash inflow/(outflow) from operating activities 6 2,275 (2,716)
Returns on investments and servicing of finance
Interest received 1,812 766
Interest paid (2,505) (1,233)
Interest paid on finance leases (120) (10)
Net cash outflow from returns on investments and
servicing of finance (813) (477)
Taxation (462) (300)
Capital expenditure and financial investment
Purchase of tangible fixed assets (5,581) (1,908)
Proceeds from sale of tangible fixed assets 2,802 399
Purchase of fixed asset investments (86) (23)
Disposal of fixed asset investments 103 -
Net cash outflow from capital expenditure and financial
investment (2,762) (1,532)
Acquisitions
Purchase of subsidiary undertakings (633) (39,009)
Repayment of former partners' current accounts (186) (15,052)
Payment of deferred consideration on purchase of
subsidiary undertakings (1,140) -
Funds placed on loan stock deposit on acquisitions (658) (25,384)
Net funds acquired with subsidiary undertakings - 2,028
Net cash outflow from acquisitions (2,617) (77,417)
Cash outflow before liquid resources and financing (4,379) (82,442)
Management of liquid resources 7
Decrease in quoted investments - 21,577
Decrease/(increase) in bank deposits 1,278 (722)
Net cash inflow from management of liquid resources 1,278 20,855
Financing
Issue of ordinary share capital for cash 7 41,618
Expenses of share issues - (1,747)
Loan received 5,400 28,000
Repayment of loans (3,884) (3,422)
Capital element of finance lease repayments (695) (253)
Net cash inflow from financing 828 64,196
(Decrease)/increase in cash in the year 7 (2,273) 2,609
Notes to the preliminary results for the year ended 31 December 2002
1 Results and accounting policies
The preliminary results have been prepared under the historical cost convention,
in accordance with applicable Accounting Standards in the United Kingdom and
with the company's accounting policies as set out in the financial statements
for the year ended 31 December 2001. The preliminary results were approved by
the Board on 25 March 2003 and are unaudited.
The comparative figures for the year ended 31 December 2001 have been re-stated
in order to show turnover, other operating income, other operating charges and
interest payable on the same basis as the current year.
The financial information contained in this unaudited preliminary results
statement does not constitute accounts as defined by Section 240 of the
Companies Act 1985. The financial information for the year ended 31 December
2001 is derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. The auditors reported on those
accounts; their report was unqualified and did not contain a statement under
either Section 237 (2) or Section 237 (3) of the Companies Act 1985. The
statutory accounts for the year ended 31 December 2002 will be finalised based
on the information in this preliminary announcement and will be delivered to the
Registrar of Companies following the company's AGM.
2 Turnover
Turnover is attributable to the principal activity of the group and arises
substantially in the United Kingdom.
The business analysis of turnover is as follows:
Re-stated
2002 2001
#'000 #'000
Business Services and related taxation 48,179 32,474
Tax Specialisms 5,664 869
Financial Services 7,788 6,791
Corporate Finance 10,085 2,647
Corporate Recovery and Insolvency Services 15,863 8,611
Other activities, including Outsourcing,
Technology and Forensic Services 4,375 3,958
91,954 55,350
The directors believe that the revised categorisation of turnover better
reflects the ongoing business of the group and the structure of operational
management.
Principal revisions relate to the analysis of tax specialisms and forensic
services that were previously included within comparative figures for the
renamed category of Business Services and related taxation.
3 Exceptional items
As a consequence of the economic and trading environment and a revised
assessment of the prospects of certain of the acquired businesses, the group has
recorded an exceptional charge of #106.0 million in order to write down
goodwill.
The group recorded an exceptional profit of #250,000 on the sale and leaseback
of a property at one of its offices.
The group recorded other significant exceptional operating costs during the
year, totalling #2.6 million as follows:
Staff
costs and Other
External similar operating 2002 2001
charges charges charges Total Total
#'000 #'000 #'000 #'000 #'000
Costs in connection with
aborted disposals and acquisitions - - 182 182 -
Reorganisation and rationalisation
costs of ongoing businesses 746 896 447 2,089 -
Costs associated with terminating
onerous engagement - - 306 306 -
746 896 935 2,577 -
In order to assist in understanding the group's results for the year, and in
view of the unusual materiality of exceptional items to the current year's
results, the directors believe that it is appropriate to show separately the
operating profit of the group before goodwill impairment, amortisation and
exceptional items on the face of the profit and loss account as additional
information.
4 Earnings/(loss) per share
Basic earnings/(loss) per 10p ordinary share is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the year. For diluted earnings per share, the
weighted average number of ordinary shares in issue is adjusted to assume
conversion of all dilutive potential shares.
2002 2001
Weighted Weighted
average average
number Earnings/ number Earnings/
Earnings/ of shares (loss) per Earnings/ of shares (loss) per
(loss) number Share (loss) number share
#'000 '000 p #'000 '000 p
Basic and diluted loss per share (114,714) 154,215 (74.39) (5,056) 109,822 (4.60)
Impairment and amortisation
of goodwill 115,865 - 75.13 5,380 -
4.90
Post tax exceptional items 1,554 - 1.01 - - -
Adjusted earnings per share 2,705 154,215 1.75 324 109,822 0.30
Dilutive share options - - - - 875 -
Dilutive consideration shares - - - 1,671 (0.01)
-
Adjusted diluted earnings per share 2,705 154,215 1.75 324 112,368 0.29
Adjusted earnings per share have been shown in order to demonstrate the
performance of the group before goodwill impairment, amortisation and
exceptional items. None of the dilutive share options give rise to a dilution
in the loss per share.
5 Reconciliation of movements in consolidated equity shareholders' funds
2002 2001
Group Group
#'000 #'000
Loss for the year (114,714) (5,056)
New shares issued 2,027 109,524
Expenses of share issues - (1,747)
Deferred shares consideration (2,003) 2,003
Movement in fair value of contingent consideration - (105)
Movement in revaluation reserve 35 15
Net movement in equity shareholders' funds (114,655) 104,634
Opening equity shareholders' funds 179,536 74,902
Closing equity shareholders' funds 64,881 179,536
6 Net cash inflow/(outflow) from operating activities
2002
2001
#'000 #'000
Operating loss (112,268) (5,141)
Depreciation of tangible fixed assets 2,223 1,608
Profit on disposal of fixed assets (180) (185)
Impairment of intangible assets 106,000 -
Amortisation of intangible assets 9,865 5,380
Decrease/(increase) in work in progress 323 (1,027)
(Increase)/decrease in debtors (5,603) 3,890
Increase/(decrease) in creditors 2,076 (7,093)
Decrease in provisions (161) (148)
Net cash inflow/(outflow) from operating activities 2,275 (2,716)
7 Analysis and reconciliation of movement in net debt
1 January 31 December
2002 Cash flow Acquisitions Other 2002
#'000 #'000 #'000 #'000 #'000
Cash balances
Cash at bank and in hand 5,238 (3,551) - - 1,687
Less: bank deposits (1,278) 1,278 - - -
Net cash balances 3,960 (2,273) - - 1,687
Liquid resources
Bank deposits 1,278 (1,278) - - -
1,278 (1,278) - - -
Other net debt
Loan stock deposit 31,723 (15,449) - - 16,274
Loan stock (31,773) 15,449 50 (16,274)
-
Bank loans due within one year (3,141) (1,516) - (7,012) (11,669)
Bank and other loans due after one (25,239) - - 6,870 (18,369)
year
Finance leases due within one year (394) 695 (35) (1,001) (735)
Finance leases due after one year (452) - (44) (264) (760)
(29,276) (821) (29) (1,407) (31,533)
Net debt (24,038) (4,372) (29) (1,407) (29,846)
This information is provided by RNS
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END
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