RNS Number:9890O
CRC Group PLC
26 August 2003
CRC Group PLC ("CRC" or the "Group")
Interim Results for the period ended 30 June 2003
Highlights
*Operating margin maintained 8.0% (H1 2002: 8.2%)
*Good cash generation; operating cashflow #3.4m (H1 2002: #4.7m)
*Restructuring in Communications; minimised impact of changes to Nokia
contract
*Relationship with Nokia maintained
*Continued strong progress in IT and Home Gateway
*New business and accreditations secured
*Acquisition of ADP successfully completed in July
CHAIRMAN'S STATEMENT
CRC delivered a solid performance in the first half of 2003 given the very
difficult conditions prevailing in the Communications market that were explained
in our June trading update. In spite of significantly lower sales (#36m compared
to #58m last year) the operating profit margins were maintained at 8.0% (H1
2002: 8.2%) and cash generated from operations was a robust #3.4m. These results
reflect CRC's swift adjustment to the new realities of that market, and to our
continued success in the Home Gateway and IT markets (which together grew by 15%
versus the prior year). While the major focus of the group was on delivering
current performance, we were also pleased to accomplish the acquisition of ADP
Technical Services Limited, which extends our technology base in the IT market,
and to win several new customers for the Group including Carphone Warehouse and
ntl:.
Financial Results
Sales were #35.8m (H1 2002: #58.2m). Operating profit before goodwill
amortisation and exceptionals was #2.9m (H1 2002: #4.8m) yielding operating
margins of 8.0% (H1 2002: 8.2%). Goodwill amortisation was #0.4m (H1 2002:
#0.4m) and exceptional items related to the restructuring of the group's
communications activities were #0.5m (H1 2002: #nil). Profit before tax was
#2.0m (H1 2002: #4.3m). Earnings per share (pre-amortisation of goodwill and
exceptionals) were 8.35p (H1 2002: 13.27p). Basic Earnings per Share were 5.41p
(H1 2002: 11.61p). Operating cashflow remained strong at #3.4m (H1 2002: #4.7m).
At the beginning of the period, repayment of the loan extended to A Novo and
associated interest was received in full. In the middle of August 2003 the Group
had 1,026 employees, down from 1,175 at 31 December 2002.
Dividend
As previously announced, the interim dividend for the year ending 31 December
2003 will be maintained at 2.5p (2002: 2.5p). It is the board's intention to
maintain the dividend for the year as a whole at 7.0p (2002: 7.0p), inclusive of
the interim dividend.
Nokia update
As previously announced, during the first half of 2003, Nokia, a major customer
of CRC's Communications business, decided to reduce the scope of work performed
by CRC. We reacted quickly to these changes, re-structuring the company's
Communications activities including announcing the closure of the Rugby plant in
the UK. Subsequent to these difficult changes we were pleased that Nokia took
the initiative to publicly reaffirm its full support to the CRC Group with
regard to the UK & European After Market Services we provide for their mobile
communications business.
Business Review
Communications Market
During the first half of 2003, CRC's mobile phone repair business was adversely
affected by the reduction in hand set repair volumes due to the increasing
reliability of Nokia hand sets. In addition, Nokia chose to change the scope of
its service management contract that CRC operates on its behalf as a further
consequence of this reliability improvement. In particular, it is anticipated
that Nokia will carry out spare parts fulfilment directly and adopt a different
approach to warranty claim management. All terms have now been agreed and
finalised and these factors were taken into consideration in planning the
re-structuring of CRC's Communications activities. However, no other constituent
parts of the contract have been lost.
Against this difficult backdrop, CRC has made some substantial achievements
during the first half. It was confirmed as one of only three Nokia factory
repair centres in the UK, a move which confirms Nokia's sentiments that its
partnership with CRC is key in achieving its future business objectives. The
Communications business was also expanded into a new channel with the addition
to its customer base of Carphone Warehouse, a strategically important new retail
customer. In addition, it expanded its coverage of hand set manufacturers by
securing the accreditation to repair Sagem hand sets in the UK and with HTC for
Personal Digital Assistants (PDA) in Poland.
Home Gateway Market
We have seen strong sales growth in the Home Gateway market. In particular,
significant progress was made in delivering increased volumes of screened and
repaired set top boxes to support Telewest, a leading cable-TV operator. CRC
also started to screen and repair a substantial number of set top boxes for
ntl:, the other main UK cable-TV operator, thus confirming our leadership
position in cable set top box screening and repair in the UK. In addition, we
have experienced substantially improved volumes of cable modem repair.
IT Market
We have achieved strong performance in the IT market due to significant progress
in improving the Group's productivity at its Thame workshop. In addition, new
business was secured from NCR for a new retail point of sale system, which
represents an expansion of CRC's product base, and from Logicom for a variety of
computer peripherals. In July, CRC acquired ADP Technical Services Ltd which
will enable the company to compete in the growing market for the repair of
mobile computing products such as laptops and Personal Digital Assistants. This
acquisition will introduce new clients including Toshiba, NEC and HP to CRC and
new accreditations including HP, HTC and Toshiba.
Outlook
The uncertainties surrounding both the communications market in general, and the
scope of service activities with Nokia in particular, have reduced
substantially. Repair volumes appear to be stabilising and the restructuring and
productivity programs we have introduced in the first six months will continue
to benefit the group in the second half and beyond. We remain cautious, but
firmly believe that CRC is well placed to remain a leader in this market, and to
exploit new opportunities as they arise.
We anticipate continued progress in the Home Gateway and IT markets in the
second half of 2003, both in terms of the expanded range of activities secured
in the first half and from the continuing growth opportunities offered in these
sectors.
CRC will remain vigilant and pro-active in managing the profitability and
cashflow of its existing business while we continue to prudently seek
opportunities to further develop the Group. We will look for further organic
growth and outsourcing of customer activities; and for value enhancing
acquisitions extending our geographical, customer, and product capabilities.
David Ryan
Chairman
22 August 2003
GROUP PROFIT & LOSS ACCOUNT
Unaudited Unaudited Audited
six six twelve months
months to months to to
30-Jun-03 30-Jun-02 31-Dec-02
#'000 #'000 #'000
Turnover 35,775 58,184 109,601
-------- -------- ---------
Operating Profit Before 2,866 4,780 9,423
Exceptionals &
Amortisation of
Goodwill
Goodwill (398) (398) (795)
Exceptional Items (458) - (947)
-------- -------- ---------
Operating Profit 2,010 4,382 7,681
Net Interest Payable (4) (73) (122)
-------- -------- ---------
Profit on Ordinary 2,006 4,309 7,559
Activities Before Tax
Tax (702) (1,519) (2,500)
-------- -------- ---------
Profit on Ordinary 1,304 2,790 5,059
Activities After Tax
Equity Dividends (603) (601) (1,686)
-------- -------- ---------
Retained Profit for the 701 2,189 3,373
Period -------- -------- ---------
Basic Earnings per 5.41p 11.61p 21.05p
Share
Diluted Earnings per 5.40p 11.43p 20.75p
Share
Adjusted Earnings per 8.35p 13.27p 28.05p
Share
Equity Dividend per 2.50p 2.50p 7.00p
Share
GROUP BALANCE SHEET
Unaudited at Unaudited at Audited at
30-Jun-03 30-Jun-02 31-Dec-02
#'000 #'000 #'000
Fixed Assets
Intangible Assets 12,432 13,225 12,829
Tangible assets 3,902 3,790 3,821
Investments 78 84 78
-------- -------- --------
16,412 17,099 16,728
-------- -------- --------
Current Assets
Stocks 3,053 4,801 4,196
Debtors 14,520 20,390 13,970
Short Term Loan - - 3,565
Cash at Bank 3,602 3,045 359
-------- -------- --------
21,175 28,236 22,090
-------- -------- --------
Creditors
Borrowings (600) (973) (600)
Other Creditors (12,450) (21,203) (14,077)
-------- -------- --------
Amounts Falling Due (13,050) (22,176) (14,677)
Within One Year -------- -------- --------
Net Current Assets 8,125 6,060 7,413
-------- -------- --------
Total Assets Less 24,537 23,159 24,141
Current
Liabilities
Amounts Falling Due (1,186) (1,765) (1,491)
after more than One
Year
-------- -------- --------
Net Assets 23,351 21,394 22,650
-------- -------- --------
Capital and
reserves
Called Up Share 482 481 482
Capital
Share Premium 10,245 10,174 10,245
Account
Merger Reserve 3,547 3,547 3,547
Capital Redemption 1,196 1,196 1,196
Profit & Loss 7,881 5,996 7,180
Account
-------- -------- --------
Shareholders Funds 23,351 21,394 22,650
-------- -------- --------
GROUP CASHFLOW
Unaudited Unaudited Audited
six six twelve months
months to months to to
30-Jun-03 30-Jun-02 31-Dec-02
#'000 #'000 #'000
Net cashflow from 3,384 4,714 9,343
operating activities
Returns on investments
and servicing of
finance
Interest Paid (4) (73) (122)
Taxation
Tax Paid (1,438) (1,269) (3,042)
Capital expenditure and
financial investment
Purchase of Tangible (839) (1,441) (2,105)
Fixed Assets
Purchase of Subsidiary - (500) (500)
Undertaking
Short Term Loan to 3,565 - (3,565)
A-Novo --------- -------- --------
3,565 (500) (4,065)
--------- -------- --------
Equity Dividends Paid (1,085) (842) (1,442)
--------- -------- --------
Cash Inflow before 3,583 589 (1,433)
Financing
Financing
Issue of Share Capital - - 72
Repayment of Loans (302) (465) (1,147)
Hire Purchase (38) (90) (144)
Agreements
Receipts from - 475 475
Borrowings
--------- -------- --------
Net Cash Outflow from (340) (80) (744)
Financing --------- -------- --------
--------- -------- --------
Increase/(Decrease) in 3,243 509 (2,177)
Cash --------- -------- --------
Statement of Recognised Gains & Losses
Unaudited Unaudited Audited
six months to six months to twelve months to
30-Jun-03 30-Jun-02 31-Dec-02
#'000 #'000 #'000
Profit for the 1,304 2,790 5,059
Financial Period
Prior Year - 228 228
Adjustment
Total Gains & Losses 1,304 3,018 5,287
Recognised since the
last financial
statements.
Notes to the Interim Statement
1. *Preparation of the Interim Financial Information
The financial information for each of the 6 month periods ended 30 June 2003
and 30 June 2002 is unaudited and does not constitute statutory accounts
within the meaning of the Companies Act 1985.
The financial information for the year ended 31 December 2002 has been
extracted from the Group's statutory accounts for that year which contained
an unqualified audit report and which have been filed with the Registrar of
Companies.
The accounting policies remain unchanged from those set out in the Group's
statutory accounts for the year ended 31 December 2002.
2. *Earnings Per Share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue for each period.
The calculation of diluted earnings per share is based on the basic earnings
per share, adjusted to allow for the issue of shares on the assumed
conversion of all dilutive options.
An adjusted earnings per share has also been presented, based on earnings
before the amortisation of goodwill and exceptional items.
3. *Dividend
The interim dividend of 2.50p per share in respect of the year ending 31
December 2003 payable to the holders of the ordinary shares on the register on 5
September 2003 will be paid on 22 September 2003.
Unaudited Unaudited Audited
six six twelve
months to months to months to
30-Jun-03 30-Jun-02 31-Dec-02
#'000 #'000 #'000
4. Operating Cashflow
Operating Profit 2,010 4,382 7,681
Depreciation 758 1,183 1,816
Amortisation of Goodwill 398 398 795
Change in Stocks 1,143 (750) (145)
Change in Debtors (50) (2,434) 3,960
Change in Creditors (875) 1,935 (4,764)
--------- --------- --------
3,384 4,714 9,343
--------- --------- --------
Unaudited Unaudited Audited
six six twelve
months to months to months to
30-Jun-03 30-Jun-02 31-Dec-02
#'000 #'000 #'000
5. Reconciliation of Net
Cashflow
Movements in Net Funds
Increase in Cash in Period 3,243 509 (2,177)
Repayment of Loans 302 465 670
Capital Element of Finance 38 90 144
Leases
and Hire Purchase Agreements
--------- --------- --------
3,583 1,064 (1,363)
New Loans - (475) -
--------- --------- --------
Movement in Net Debt 3,583 589 (1,363)
Net debt as at 1 January 2003 (1,802) (439) (439)
--------- --------- --------
Net funds as at 30 June 2003 1,781 150 (1,802)
--------- --------- --------
6. Copies of the Interim Statement
Copies of the interim statement will be sent to shareholders. Further copies
will be available from the company's registered office at 20 Thame Park Business
Centre, Wenman Road, Thame, Oxfordshire, OX9 3XA for one month from the date of
this announcement.
INDEPENDENT REVIEW REPORT TO CRC Group Plc
INTRODUCTION
We have been instructed by the company to review the financial information for
the six months ended 30 June 2003, which comprises the Group Profit and Loss
Account, Group Balance Sheet, Group Cashflow Statement, Statement of Recognised
Gains and Losses and the related Notes 1 to 6. We have read the other
information contained in the interim report which comprises only the highlights
and the Chairman's Statement and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information. Our
responsibilities do not extend to any other information.
This report is made solely to the company, in accordance with guidance contained
in APB Bulletin 1999/4 "Review of Interim Financial Information". Our review
work has been undertaken so that we might state to the company those matters we
are required to state to it in a review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company, for our review work, for this report, or for the
conclusion we have formed.
DIRECTORS' RESPONSIBILITIES
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report and ensuring that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, 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 Board
for use in the United Kingdom. A review consists principally of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data and, based thereon, assessing whether the
accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as test of controls
and verification of assets, liabilities and transactions. It is substantially
less in scope than an audit performed in accordance with United Kingdom auditing
standards 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 that
should be made to the financial information as presented for the six months
ended 30 June 2003.
GRANT THORNTON
CHARTERED ACCOUNTANTS
Oxford
22 August 2003
This information is provided by RNS
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