RNS Number:3606I
Xpertise Group PLC
06 March 2003
FOR RELEASE 7.00 AM 6 MARCH 2003
Xpertise Group PLC ("Xpertise" or "Company")
One of the UK's leading IT Training companies
Preliminary Results for the year ended 2 JANUARY 2003
MAIN POINTS
* Acquisition of Power Education successfully completed
* Good progress made in integrating Power Education and reducing duplicated
costs
* UK IT training market continues to consolidate
* Operating profit at core business before allocation of group overhead
costs was #209,000 (2001: #146,000)
* Loss on ordinary activities before tax of #1,148,000 (2001: loss of
#1,571,000)
* UK Market for IT training remains challenging
For further information:
Bob Bradley (Chief Executive) 0161 929 2200
Ian Johnson (Finance Director) 0161 929 2200
Amanda Sheehy (Beattie Financial) 020 7398 3300
Xpertise Group PLC
Preliminary Results for the year ended 2 JANUARY 2003
CHAIRMAN'S STATEMENT
Introduction
As a result of the acquisition of Power Education, the financial year has been
extended to 2 January 2003 in order that the accounts now put before you provide
information on the enlarged group and also reflect the fund-raising which took
place at the time of the acquisition.
Results
Although conditions in the UK IT market remained difficult throughout 2002,
turnover in the continuing core business of Xpertise Training remained virtually
constant at #4.0 million (2001: #4.1 million) and furthermore, operating profit
improved from #146,000 to #209,000.
The Training Solutions division, which was launched in April 2002, delivered
turnover of #264,000 and incurred an operating loss of #261,000 in the
establishment of this division. This loss was significantly below the amount
that was originally planned in this division's first year of trading.
On 27 July 2002, the acquisition was completed of certain key assets and
goodwill of John Bryce Training UK Ltd ("JBT"). This business contributed
turnover of #321,000 equivalent to an annual run rate of approximately #1.2
million, and an operating loss of #270,000 (before exceptional items and
goodwill amortisation).
After central overhead costs, the group operating loss before goodwill
amortisation and exceptional items was #769,000 (2001: loss of #226,000). After
charging goodwill amortisation of #177,000 (2001: #202,000), exceptional items
relating to business integration costs of #195,000 (2001: #152,000) and net
interest charges of #7,000 (2001: #61,000), the loss before tax for the year was
#1,148,000 (2001: loss of #1,571,000).
Dividend
No dividend is proposed.
Business Review
Xpertise Training
Orders taken and turnover delivered were broadly in line with last year at #4.25
million and #4.0 million respectively before the contribution from the JBT
acquisition. Given the overall decline in the IT training market in 2002, these
results were acceptable and provide a base from which to grow.
In 2002 the business concentrated on implementing the plans established at the
start of the year: scalable systems were implemented for the core booking and
customer relationship management processes; the sales and marketing model was
strengthened; and the course portfolio was reviewed and revised with new
products particularly in the areas of Unix, XML/Java generic language training
and project management.
Training Solutions
In April 2002, the Training Solutions business was launched. This business
focuses on winning major contracts for the design, development and delivery of
client specific programmes to enable their staff to realise increased value from
their investment in systems. These programmes are delivered using a blend of
instructor-led classroom training and technology-based support. Such contracts
should enable the group to establish and enhance long-term relationships with
customers.
In its first period of trading, Training Solutions delivered turnover of
#264,000 and incurred an operating loss of #261,000 in establishing the
division.
Acquisition of Power Education and associated fund raising
On 2 January 2003, the group completed the acquisition of Power Education
(comprising Power Education Limited and the trade and certain assets and
liabilities of Sphinx Training) from Lynx plc for total consideration of #2.6
million, satisfied by the issue of 65,828,571 new ordinary shares in the company
together with #0.8 million in cash. As a result, Lynx plc owns 30% of the
company's issued ordinary shares.
At the same time as the acquisition, the company raised #2.2 million by the
issue of 80 million new ordinary shares. The cash was applied to settle the
cash consideration and the expenses of the acquisition and to provide additional
working capital for the enlarged group.
Power Education is an experienced provider of technical IT training on database
technologies, Unix and Microsoft operating systems and networking and
communications products. It operates from training centres in London,
Manchester, Leeds and the Thames Valley and is an accredited training
organisation for Microsoft, Oracle, IBM, Citrix, Lotus, Novell and SCO. The
customers of Power Education include financial organisations such as Legal &
General Assurance, Cornhill Insurance Plc, Lloyds of London; other commercial
organisations such as Dell Computer Corporation Ltd, IBM UK Ltd,
PricewaterhouseCoopers; and public sector organisations such as the Ministry of
Defence, Leeds City Council and Surrey County Council.
The underlying rationale for the acquisition was to increase the scale of
operations, geographic coverage and curriculum breadth of the group, secure
market leadership in specific areas of accredited training and enable the
enlarged group to compete with the largest players in our market for corporate
training business. The enlarged group now operates from training centres in
London, Manchester, Leeds, Newcastle, the Thames Valley and the Midlands
providing approximately 500 delegate places in 50 classrooms.
The business objective of the enlarged group is to increase revenues by cross
selling the combined portfolio of courses and locations to existing customers
and by winning new customers for whom size, a broad portfolio of courses and
nationwide teaching facilities are important. As a consequence of the enlarged
scale of operations, gross margins should be improved through increased course
fill rates and trainer and classroom utilisation whilst operating costs will be
reduced by the elimination of duplicated overheads.
We have already made good progress in integrating the businesses of Xpertise
Training and Power Education. Annualised cost savings have been achieved of
approximately #1.0 million through combining training centres in London and
Manchester and reducing staff costs in these locations and in other duplicated
areas such as management, finance and marketing.
Additionally, the sales teams have been integrated such that customers have one
point of contact for all products and services. A new enlarged course
prospectus has been compiled and has been issued to existing and prospective
customers. Operational booking and course administration systems are also in
the process of being combined.
Board Changes
Following the completion of the acquisition of Power Education on 2 January
2003, I was appointed Chairman and Mark Hatton, who was previously responsible
for the Power Education business, was appointed as a non-executive director.
Following my appointment, Mike McGoun became Deputy Chairman.
Peter Waller retired from the Board on 2 January 2003. I would like to thank
Peter for his service to the group over the past two years.
Employees
I would like to thank all our employees for their valuable contribution during
the year. The integration of Xpertise Training and Power Education presents
challenges and opportunities to staff and they have responded with commitment
and enthusiasm.
Business Development
During 2002 the group addressed the issue of scale and geographic coverage by
the acquisition of Power Education.
The overall strategy of the group remains unchanged - to expand its share of the
market for corporate IT training and to compete at the highest level in this
market.
We will continue to examine opportunities to pursue this strategy, both through
internal and organic business development and through acquisitions, to deliver
enhanced earnings and value for shareholders.
Outlook
Good progress has been made in integrating the recently acquired business of
Power Education and in realising economies of scale.
However, conditions in the UK market for IT training continue to be challenging.
Orders received in the opening two months reflect this and were below levels
expected. Consequently, we are taking steps to reduce further the group's cost
base, whilst at the same time preserving its capability to deliver quality
customer service.
The UK IT training industry continues to show signs of consolidation and we
believe that we have the resources to enable us to take advantage of these
changes.
Richard Last
Chairman
6 March 2003
XPERTISE GROUP PLC
Consolidated Profit and Loss Account
For the year ended 2 January 2003
Year ended 2 January 2003 Year ended 31
December 2001
Continuing Acquisitions Total Total
activities
#000 #000 #000 #000
Turnover 4,281 321 4,602 5,276
Cost of sales (1,950) (215) (2,165) (2,279)
------------ ------------ ------------ ------------
Gross profit 2,331 106 2,437 2,997
Administrative expenses (including goodwill charge
and exceptional items) (3,004) (574) (3,578) (3,577)
------------ ------------ ------------ ------------
Operating (loss) / profit before goodwill charge
and exceptional items (499) (270) (769) (226)
Amortisation of goodwill (174) (3) (177) (202)
Exceptional items - (195) (195) (152)
------------ ------------ ------------ ------------
Operating loss (673) (468) (1,141) (580)
Loss on sale of subsidiaries - (930)
------------ ------------
Loss before interest (1,141) (1,510)
Interest receivable 21 11
Interest payable (28) (72)
------------ ------------
Loss on ordinary activities before taxation (1,148) (1,571)
Tax credit / (charge) on loss on ordinary
activities 4 (5)
----------- ------------
Loss on ordinary activities after taxation (1,144) (1,576)
Dividends - -
------------ ------------
Loss for the financial year (1,144) (1,576)
Accumulated deficit at beginning of year (5,747) (4,171)
------------ ------------
Accumulated deficit at end of year (6,891) (5,747)
------------ ------------
Earnings/(loss) per share
- basic and diluted (1.55p) (4.83p)
- excluding goodwill charge and exceptional items (1.05p) (0.90p)
------------ ------------
All recognised gains and losses are included in the profit and loss account.
XPERTISE GROUP PLC
Consolidated balance sheet
At 2 January 2003
2 January 2003 31 December 2001
#000 #000 #000 #000
Fixed assets
Intangible assets 5,986 2,932
Tangible assets 716 367
----------- -----------
6,702 3,299
Current assets
Stocks 210 74
Debtors- due within one year 1,892 538
Cash at bank and in hand 1,305 1,260
----------- -----------
3,407 1,872
Creditors: amounts falling due
within one year 4,398 1,881
----------- -----------
Net current liabilities (991) (9)
----------- -----------
Total assets less current
liabilities 5,711 3,290
Creditors: amounts falling due
after more than one year (67) (321)
----------- -----------
Net assets 5,644 2,969
----------- -----------
Capital and reserves
Called up share capital 3,310 3,163
Share premium account 8,008 5,553
Merger reserve 1,217 -
Profit and loss account (6,891) (5,747)
----------- -----------
Shareholders' funds 5,644 2,969
----------- -----------
All items under capital and reserves are equity.
These financial statements were approved by the Board on 6 March 2003.
XPERTISE GROUP PLC
Consolidated cash flow statement
For the year ended 2 January 2003
Year ended Year ended 31
December 2001
2 January 2003
#000 #000
Net cash (outflow)/inflow from operating activities (420) 171
Returns on investments and servicing of finance (7) (61)
Taxation 4 (20)
Capital expenditure (163) (127)
Acquisitions and disposals (1,103) 371
---------------- ----------------
Net cash (outflow)/inflow before financing (1,689) 334
Financing 1,734 512
---------------- ----------------
Increase in cash 45 846
---------------- ----------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Year ended Year ended 31
December 2001
2 January 2003
#000 #000
Increase in cash in the year 45 846
Net cash outflow from movement in finance lease obligations 23 36
Loans acquired with subsidiaries (300) -
Loans repaid 252 502
---------------- ----------------
Change in net funds 20 1,384
Net funds/(debt) at 1 January 2002 664 (720)
---------------- ----------------
Net funds at 2 January 2003 684 664
---------------- ----------------
XPERTISE GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
1. The financial information set out above does not constitute the company's
statutory accounts for the years ended 2 January 2003 or 31 December 2001
but is derived from those accounts. Statutory accounts for the year ended
31 December 2001 have been delivered to the Registrar of Companies and those
for the year ended 2 January 2003 will be delivered to the Registrar of
Companies following the company's annual general meeting. The auditors have
reported on those accounts; their reports were unqualified and did not
contain statements under s237 (2) or (3) Companies Act 1985.
2. The Annual Report will be posted to shareholders on or about 11 March 2003
and copies will be available from the Company Secretary, Pacific Road,
Atlantic Office Park, Altrincham, Cheshire, WA14 5BJ.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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