RNS Number:7945P
Axon Group PLC
16 September 2003
For immediate release 16 September 2003
Axon Group plc
("Axon")
Significant revenues and profits growth
Strong pipeline of new business transformation programmes
Confident of meeting full year expectations
Axon Group plc, the business transformation consultancy that services $1bn+
corporations that have SAP as their strategic platform, today announced interim
results for the six months ended 30 June 2003.
Key points for the six months include:
* Turnover up 15.3% to #24.6m (H1 2002: #21.3m)
* Profit before tax up 66.6% to #2.0m (H1 2002: #1.2m)
* Pre-tax profits before reorganisation costs and goodwill amortisation
up 33.1% to #2.7m (H1 2002: #2.0m) *
* Strong pipeline of new business transformation programmes including
preferred bidder status on major overseas project
* Strong balance sheet with cash and bank deposits of #14.5m (H1 2002:
#11.5m)
* Adjusted diluted earnings per share up 36.4% to 3.4p (H1 2002: 2.5p)
* Dividend per share increased to 1.0p (H1 2002: 0.5p)
Mark Hunter, Chief Executive, said "Our market is flat and competitive and will
remain so for the foreseeable future. We have demonstrated that by executing
our strategy, we can deliver growth in these conditions. We are confident of
meeting market expectations for 2003 and look forward to 2004 with enthusiasm."
* Excluding goodwill amortisation and reorganisation costs of #0.4m and #0.3m
respectively (H1 2002: #0.4m and #0.4m respectively) and related tax effect in
relation to the adjusted profit after taxation
For further information, please contact:
Axon Group plc 01784 480 800
Mark Hunter, Chief Executive Officer
Grandfield 020 7417 4170
Matthew Jervois, Geoff Callow
Chairman and Chief Executive statement
For the six-month period up to 30 June 2003, turnover has increased 15.3% to
#24.6m (H1 2002: #21.3m), pre-tax profits before reorganisation costs and
goodwill amortisation have increased 33.1% to #2.7m (H1 2002: #2.0m), and
adjusted diluted earnings per share were up to 3.4p per share (H1 2002: 2.5p).
Adjusted earnings exclude goodwill amortisation and reorganisation costs of
#0.4m and #0.3m respectively (H1 2002: #0.4m and #0.4m respectively) and related
tax effect in relation to the adjusted profit after taxation. Unadjusted
earnings per share were 2.4p (H1 2002: 1.4p). Operating profit increased to
#1.8m (H1 2002: #1.0m).
Whilst the market for business and technology consultancy has remained
challenging and competitive, our first half performance shows that the execution
of our strategy is delivering results. We continued to deliver against the
large contracts that we secured in the UK during 2002 and also began working
with several new clients. We have commenced early stage work on several new
significant business transformation programmes in Europe and the Middle East,
including one overseas client for which we are the preferred bidder for delivery
of the entire programme.
During the period, consultant utilisation was over 70% and total gross margin
increased to #7.0m (H1 2002: #6.5m). However, in relative terms, gross margin
fell to 28.4% (H1 2002: 30.6%) due to a 1% increase in National Insurance
contributions, increased use of contractors and the growth of our commercial
team.
We finished the first half with a total headcount of 378, which is up 17.4% from
the 322 employees we had as at 30 June 2002. We anticipate that we will sustain
this level of recruitment.
Our balance sheet is strong and the group had a healthy cash and bank deposit
balance at the end of the period of #14.5m (H1 2002: #11.5m).
I am pleased to announce the strengthening of the Finance team through the
appointment of Matthew Davison as Group Financial Controller in August 2003.
Matthew was previously CFO of Ster-Century Cinemas, the $100m turnover European
cinema group that was sold in July 2003. Matthew is 30 years old.
It is proposed that the Company pay an interim dividend of 1.0p per share (H1
2002: 0.5p), to be paid on 21 November 2003 to shareholders on the register as
at 24 October 2003.
During the last three years, Axon has evolved into a business transformation
consultancy that can deliver major programmes of change for large organisations.
We are now realising the benefits of this strategy, and we are confident of
meeting market expectations for 2003. We look forward to further progress
during 2004.
Mark Hunter
Chairman and Chief Executive
16 September 2003
Operational and Financial Review
Axon delivers business transformation programmes for large organisations that
run SAP. Our aim is to be the partner of choice in this market and provide all
of the services required to deliver a major transformation programme.
The first six months of this year have seen continued progress in the execution
of this strategy, as well as evidence of its success. Our top ten clients all
turn over in excess of $1bn; we were the most successful company by far in the
most recent SAP Partner awards; and our revenue and profits are growing.
The market is challenging
Whilst there is real demand for the services we offer, the market is tough. In
recent years, over capacity in the marketplace has led to increased competition
and pressure on margins. In the same period, contract sizes have grown with
prospects becoming more knowledgeable and capable in the procurement of
services. All this has led to more challenging, thorough and costly sales
cycles, and to contracts which require us to share some of the risk inherent in
the delivery of major projects.
We are winning business in this market
Our integrated business transformation proposition and our focus on the needs of
large organisations have enabled us to succeed in this market. The quality and
track record of our people and our methodology have enabled us both to convince
prospects of our ability, and to confidently write contracts in which we bear
some delivery risk. This combination of proposition and capability is winning
us business and we have commenced early stage work on significant business
transformation programmes both in Europe and the Middle East, including one
overseas client for which we are the preferred bidder for delivery of the entire
programme.
The depth and breadth of our proposition have grown
Our success in the market means we are delivering some very substantial
programmes. As a result, the revenue contribution of our top five clients has
grown to 75% in H1 2003 from 56% in H1 2002. We have also continued to broaden
our proposition enabling us to address a wider range of client demands for
business improvement. This is well illustrated by the diversity of some of our
recent client wins such as at BP, the Department of Work and Pensions and
Innogy.
Our engagements are led by Business Consulting
All of our top ten clients now use our Business Consulting practice to assist in
the translation of business needs into programmes of work which improve
performance. As a result and as we expected, revenues from Business Consulting
have grown to #5.1m (H1 2002: #3.5m) and the outlook continues to be positive.
Large programmes have driven growth in Solutions Implementation
After two years of flat or reducing revenues, our Solutions Implementation
practice has delivered growth and revenues reached #12.7m (H1 2002: 12.6m).
We anticipate further growth in Solutions Implementation in H2 to be driven by a
number of significant new programmes.
Applications Management has returned to growth
Applications Management suffered from the impact of contract delays in 2002.
I am pleased to report that these contracts have now been signed, and that
Applications Management revenues grew to #6.8m (H1 2002: #5.2m).
During H1 2003, we further strengthened our 7*24 hour support proposition by
creating an offshore facility in Dubai Internet City.
The expected revenue ratio of Business Consulting to Solutions Implementation to
Applications Management is 1:3:2. Business Consulting therefore performed
slightly better than anticipated in this respect.
Service based sectors are driving growth
The sectors in which we are seeing the greatest demand for our services include
utilities, transport and the public sector. The large majority of our new
business wins are with large services organisations, as we anticipated at the
beginning of the year.
Greatest demand is for UK projects
We have seen decreasing demand for major multinational delivery programmes.
Most of the major programmes of work that our prospects are seeking to embark
upon are national, and the large majority are UK based.
Our international revenues have grown slightly to #6.4m (H1 2002: #6.2m).
We anticipate increased international growth in H2 2003 as a consequence of the
strength of our pipeline in the Middle East.
Overheads are under control
Overheads fell to #4.7m (H1 2002: #4.8m) which is an excellent performance
considering the underlying revenue growth in the business.
Reorganisation costs fell to #0.3m (H1 2002: #0.4m) which reflects the progress
that we have made in aligning the structure of the business with the demands of
the marketplace. We expect reorganisation costs to be negligible in H2 2003.
Our balance sheet is strong
Large business transformation contracts generally result in fluctuating cash
flow and increased levels of work-in-progress. Therefore, we are pleased with
our performance in cash and debtor management as cash and bank deposits in the
business grew to #14.5m (H1 2002: #11.5m) whilst net debtors remained broadly
level at #14.5m (H1 2002: #14.9m), and debtor days decreased from 75 as at 30
June 2002 to 57 as at 30 June 2003.
Our people have delivered an outstanding performance
The continuous evolution of our business to service changing client demands and
remain competitive is not without its challenges. The results that we are
reporting are delivered through the talent, focus and responsiveness of our
people, and I am very grateful for their continued commitment.
The execution of our strategy is delivering results
Our investment in restructuring our business to provide a full business
transformation proposition is paying off. We do not expect market conditions to
change significantly for the foreseeable future and delivering growth will
require us to continue to win in a competitive market. Our continued focus on
changing client needs and excellent delivery have enabled us to return Axon to
growth. We believe that we will meet market expectations for 2003, and we look
forward to 2004 with enthusiasm.
Mark Hunter
Chairman and Chief Executive
16 September 2003
Independent review report to Axon Group plc
Introduction
We have been instructed by Axon Group plc to review the financial information
for the six months ended 30 June 2003 which comprises the profit and loss
account, the balance sheet, the cash flow statement and related notes 1 to 7
together with the reconciliation of movement in shareholders' funds. We have
read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent 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 conclusions 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 in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be 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 the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group 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 tests 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.
Deloitte & Touche LLP
Chartered Accountants
Reading
16 September 2003
Consolidated profit and loss account
Audited
Unaudited Six Unaudited Six Year to
Months to 30 Months to 30 31 Dec
June2003 June2002 2002
Note
#'000 #'000 #'000
Turnover 24,616 21,348 43,112
Cost of sales (17,623) (14,808) (30,247)
--------- --------- ----------
Gross profit 6,993 6,540 12,865
Administration expenses (4,689) (4,846) (9,447)
Reorganisation costs (267) (417) (799)
Goodwill amortisation (366) (366) (732)
--------- --------- ----------
Total administrative expenses (5,322) (5,629) (10,978)
Other operating income 90 87 175
--------- --------- ---------
Operating profit 1,761 998 2,062
Net interest receivable 275 224 418
--------- --------- ----------
Profit on ordinary
activities before taxation 2,036 1,222 2,480
Tax on profit on
ordinary activities 2 (790) (519) (1,049)
--------- --------- ----------
Profit on ordinary
activities after
taxation 1,246 703 1,431
Proposed dividend (520) (260) (1,040)
--------- --------- ----------
Retained profit for the period 726 443 391
Earnings per share (p) 3 2.4 1.4 2.8
Adjusted earnings per
share (p) 3 3.5 2.6 5.2
Diluted earnings per
share (p) 3 2.4 1.3 2.7
Adjusted diluted
earnings per share (p) 3 3.4 2.5 5.1
Dividend per share (p) 7 1.0 0.5 2.0
Consolidated balance sheet
Audited
Unaudited Unaudited 31 December
30 June 2003 30 June 2002 2002
#'000 #'000 #'000
Fixed assets
Intangible assets 6,058 6,629 6,424
Tangible assets 1,784 2,075 1,718
Investments - - -
---------- --------- ---------
7,842 8,704 8,142
---------- --------- ---------
Current assets
Debtors : amounts falling
due within one year 14,505 14,919 12,418
Short term investments -
bank deposits 12,378 6,351 14,522
Cash at bank and in hand 2,146 5,130 966
---------- --------- ---------
29,029 26,400 27,906
---------- --------- ---------
Creditors : amounts falling
due within one year (8,647) (7,571) (8,555)
---------- --------- ---------
Net current assets 20,382 18,829 19,351
---------- --------- ---------
Total assets less current
liabilities 28,224 27,533 27,493
---------- --------- ---------
Creditors : amounts falling
due after more than one
year (275) (266) (270)
---------- --------- ---------
Net assets 27,949 27,267 27,223
---------- --------- ---------
Share capital 520 520 520
Share premium account 15,550 15,539 15,550
Merger reserve 51 51 51
Profit and loss account 11,828 11,157 11,102
---------- --------- ---------
Equity shareholders'funds 27,949 27,267 27,223
---------- --------- ---------
Reconciliation of movement Unaudited Six Unaudited Six Audited Year
in shareholders' funds Months to 30 June Months to 30 June to 31 Dec
2003 2002 2002
#'000 #'000 #'000
Profit for the period 1,246 703 1,431
Dividends (520) (260) (1,040)
Issue of new shares - 69 80
Other recognised losses - - (3)
---------- --------- ---------
Net addition to
shareholders' funds 726 512 468
Opening shareholders'
funds 27,223 26,755 26,755
---------- --------- ---------
Closing shareholders'
funds 27,949 27,267 27,223
---------- --------- ---------
Consolidated cashflow
statement
Audited
Unaudited Six Unaudited Six Year to
Months to 30 Months to 30 31 December
June 2003 June 2002 2002
Note #'000 #'000 #'000
Net cash inflow from
operating activities 4 882 128 5,676
Returns on investments and
servicing of finance
Interest received 282 312 534
Interest paid (7) (88) (116)
-------- -------- ---------
Net cash inflow from
returns on investments
and servicing of finance 275 224 418
-------- -------- ---------
Taxation
UK corporation tax paid (636) (512) (1,360)
Capital expenditure and
financial investment
Payments to acquire
tangible fixed assets (605) (553) (781)
Proceeds on fixed asset
disposal - - 23
-------- -------- ---------
Net cash outflow from
capital expenditure
and financial investment (605) (553) (758)
-------- -------- ---------
Acquisitions and
disposals
Purchase of subsidiary
investments - - (165)
Net cash acquired with
subsidiaries - - 47
-------- -------- ---------
- - (118)
Equity dividends paid (780) (519) (780)
-------- -------- ---------
Cash (outflow)/inflow
before use of liquid
resources and financing (864) (1,232) 3,078
Management of liquid
resources
Short-term deposits repaid
/(payments into short-term
deposits) 2,144 6,035 (1,714)
-------- -------- --------
Financing
Issue of new shares - 69 80
Repayment of key employee
deposits (unsecured) (100) (152) (299)
Redemption of loan notes - (5,815) (5,982)
-------- -------- ---------
Net cash outflow from
financing (100) (5,898) (6,201)
-------- -------- ---------
Increase / (decrease) in
cash 6 1,180 (1,095) (4,837)
-------- -------- ---------
Notes to the financial statements
1 The interim results have been prepared in accordance with applicable
United Kingdom Accounting Standards under the historical cost convention and are
in accordance with the Company's accounting policies as set out in the annual
report and accounts for the year ended 31 December 2002. The results for the
year ended 31 December 2002 are not statutory accounts. A copy of the statutory
accounts for that year have been delivered to the Registrar of Companies. The
auditors report on those accounts was not qualified.
2 The interim tax charge reflects an estimate of the likely effective
tax rate for the full year applied to the interim profit on ordinary activities.
3 Earnings per share has been calculated in accordance with Financial
Reporting Standard 14, by dividing the consolidated profit after tax
attributable to ordinary shareholders by the weighted average number of 1p
ordinary shares outstanding during the period.
Diluted earnings per share has also been calculated on the same basis as above
except that the weighted average number of ordinary shares that would be issued
on the conversion of all of the dilutive potential ordinary shares into ordinary
shares has been added to the denominator. There are no changes to the profit
(numerator) as a result of the dilutive calculation.
Adjusted earnings per share information has been provided to enable a comparison
on a like-for-like basis with that reported since the Company's flotation.
The earnings per share information has been calculated as follows:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2003 30 June 2002 31 December
2002
Profit attributable to ordinary
shareholders (#'000) 1,246 703 1,431
---------- ----------- -----------
Weighted average number
of 1p ordinary shares in issue 52,014,998 51,966,825 51,991,241
Effect of dilutive potential
ordinary shares (employee share
options) 556,952 2,272,949 1,262,200
---------- ----------- -----------
Weighted average number of 1p ordinary
shares in issue plus assumed
conversions 52,571,950 54,239,774 53,253,441
The adjusted earnings per share and diluted earnings per share calculation is
based on the earnings per share information above except that the profits are
adjusted for goodwill amortisation and the after tax effect of reorganisation
costs.
Audited
Unaudited Unaudited Year to
Six months to Six months to 31 December
30 June 2003 30 June 2002 2002
Earnings per share (p) 2.4 1.4 2.8
Adjusted earnings per share (p) 3.5 2.6 5.2
Diluted earnings per share (p) 2.4 1.3 2.7
Adjusted diluted earnings per share (p) 3.4 2.5 5.1
The adjustments to the results of the Group in arriving at the adjusted earnings
per share amounts can be summarised as follows:
Audited
Unaudited Unaudited Year to
Six months to Six months to 31 December
30 June 2003 30 June 2002 2001
#'000 #'000 #'000
Operating profit 1,761 998 2,062
Reorganisation costs 267 417 799
Goodwill amortisation 366 366 732
----------- ---------- -----------
Adjusted operating profit 2,394 1,781 3,593
Net interest 275 224 418
----------- ---------- -----------
Adjusted profit on ordinary
activities before tax 2,669 2,005 4,011
Tax on profit on ordinary
activities (790) (519) (1,049)
Tax effect of reorganisation
costs (80) (125) (239)
----------- ---------- -----------
Adjusted profit on ordinary
activities after tax 1,799 1,361 2,723
----------- ---------- -----------
4. Reconciliation of operating profit to net cash inflow from operating
activities
Audited
Unaudited Unaudited Year to
Six Six 31
months to months to December
30 June 2003 30 June 2002 2002
#'000 #'000 #'000
Operating profit 1,761 998 2,062
Depreciation charge 539 512 1,074
Amortisation charge 366 366 732
Loss on disposal of fixed assets - - 2
Other non cash movement - - (53)
(Increase)/decrease in debtors (2,014) (665) 1,904
Increase/(decrease) in creditors 230 (1,083) (45)
---------- ---------- --------
Net cash inflow from operating
activities 882 128 5,676
---------- ---------- --------
5. Reconciliation of net cash flow to movement in net funds
Unaudited Unaudited Audited
Six months Six months Year to
to to 31 December
30 June 2003 30 June 2002 2002
#'000 #'000 #'000
Increase/(decrease) in cash in the
period 1,180 (1,095) (4,837)
Repayment of key employee deposits 100 152 299
Cash flow from liquid resources (2,144) - 1,714
Non cash items - - 53
Cash outflow from repayment of loan - - 5,982
notes
---------- ----------- -----------
(864) (943) 3,211
Net funds at beginning of period 15,287 12,076 12,076
---------- ----------- -----------
Net funds at end of period 14,423 11,133 15,287
---------- ----------- -----------
6. Analysis of changes in net funds
As at 1 January Cash flow As at 30 June
2003 2003
#'000 #'000 #'000
Short term investments 14,522 (2,144) 12,378
Cash at bank 966 1,180 2,146
---------- --------- ----------
15,488 (964) 14,524
Key employee deposits (201) 100 (101)
---------- --------- ----------
Net cash 15,287 (864) 14,423
7. An interim dividend of 1.0p per share will be paid on 21 November 2003 to
those shareholders on the register at the close of business on 24 October 2003.
The interim results were approved by the directors of the Company on 16
September 2003. Further copies of the statement can be obtained by writing to
the Company Secretary, Axon Group plc, AxonCentre, Church Road, Egham, Surrey,
TW20 9QB, by calling the FT Free Annual Reports Club service on 020 8770 0770 or
by visiting the Axon web site at www.axonglobal.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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