RNS Number:3808U
Charteris PLC
04 April 2007
Charteris plc Interim Report 2007
Charteris plc, the business and IT consultancy, announces its interim results
for the six months to 31 January 2007.
HIGHLIGHTS
* Trading for the first half in line with management's expectations, with
total revenue at #8.9m (1H06: #10.7m)
* Planned investment in our three specialised service lines (Infrastructure
Optimisation, Intelligent Integration and Customer Centricity) led to
key sales in all three areas in the second quarter
* Utilisation increased in the second quarter, but not quickly enough to
offset the slower sales in established markets last summer
* Significant recruitment programme underway to meet expected upturn in
activity
* Loss before taxation, goodwill amortisation and share options charge was
#128k (1H06: profit on the same basis #562k)
* Gross cash balance #1.1m at 31 January 2007 (#1.3m at 31 July 2006)
Commenting on the results, David Mann, Chairman, said:
'The recent key sales and improvements in utilisation are encouraging signs that
Charteris' new strategy is proving successful. We believe that the Company
remains on track to meet our expectations for the year.'
Press enquiries:
David Pickering/Isobel Chester, Charteris plc Tel: 020 7600 9199
Zoe Biddick, Biddicks Tel: 020 7448 1000
Michael Shaw, Oriel Securities Limited Tel: 020 7710 7600
CHAIRMAN'S STATEMENT
RESULTS
In the six months ended 31 January 2007, Charteris made good progress with the
development of its business in the new directions set out in the last Annual
Report. In the second quarter, the Company secured key sales in all three of the
specialised service lines, which had been identified in the earlier strategic
review as offering significant potential for growth: Infrastructure
Optimisation, Intelligent Integration and Customer Centricity. The common theme
is that Charteris has developed specialised business and IT consultancy services
to enable organisations to respond in a much more agile way to changes in their
markets. These services are now being used by leading organisations in the early
stages of some potentially major programmes.
Results for the first half of the current financial year (1H07) were in line
with our expectations at the time of the last Annual Report. Turnover reduced by
17% to #8.9 million (1H06: #10.7 million), primarily because trading in the
first quarter had been affected by slower sales in our established markets last
summer. The new programmes and other sales led to increased utilisation in the
second quarter but the profit generated then was insufficient to offset the loss
in the first quarter. In 1H07 as a whole there was a loss (before tax, goodwill
amortisation and the new non-cash charge for share options) of #128k (1H06:
profit on the same basis #562k). The loss before tax was #305k (1H06: profit of
#382k). Gross cash balances at 31 January 2007 were #1.1 million (compared with
#1.3 million at 31 July 2006).
BUSINESS OVERVIEW
Having initiated a number of strategic changes in the second half of the last
financial year, much of the emphasis during this year is on the implementation
of these changes throughout the business. In recent months we have achieved
significant new sales in our service lines. These new sales do not yet span all
of our business areas and this is reflected in the variable progress across the
Practices at this stage.
The process is most advanced in Retail Manufacturing and Services. Although its
revenues were lower than in 1H06, we are now seeing very tangible benefits from
the investment, with new project wins which offer the potential for significant
future growth. Revenues of the Northern Practice have grown with a balance of
established business and strategic initiatives. Revenues in Government and Legal
have also grown with good established business that is likely to remain very
important in these sectors. Revenues in Financial Services and Media were down
as a result of slow sales of both established and new business; we are in the
process of strengthening this business development team.
The improved sales situation led us to increase recruitment targets
significantly towards the end of the first half. The resulting recruitment
programme will incur higher than normal associated costs in the second half but
these are taken into account in our expectations for the year.
BUSINESS HIGHLIGHTS
Northern
In the Northern Practice we continue to enjoy an excellent preferred supplier
relationship with a leading Financial Services provider. We have built on our
position as experts in Credit Risk and our engagement now spans the breadth of
our capability. Our programme management, business analysis and application
development teams are working closely with our clients to shape a number of
innovative business solutions. The year has also seen our engagement extend
beyond Credit Risk; in Vehicle Asset Management we are providing project
management and project office support and in Investment and Insurance we
continue to provide specialist Microsoft skills.
As a part of the Infrastructure Optimisation service line, the Practice has
worked actively with Microsoft to promote solutions based on their major new
releases of Exchange, Vista and Office (EVO) products. Our team engaged prior to
the release of the product set and this led to new business related to the
deployment of the Office 2007 System for a leading global retail bank and
Exchange 2007 for Midlothian Council.
We are seeing high levels of activity in the EVO market and have built a strong
pipeline of opportunities in both the financial services and public sector
markets.
Government and Legal
The Government Practice made good progress in the secure, central and local
government markets. Particularly strong growth was experienced in the secure
government sector with major account relationships deepening and drawing
increasingly on our skills in business change, programme management and
commercial management. The first half saw the successful delivery of the first
phase of the Cabinet Office's SCOPE programme, which will enhance the sharing of
information between key members of the UK intelligence and security community.
Charteris was engaged to work alongside the client and the government
departments, providing advice at senior level on the overall programme,
technical architecture and service rollout.
Towards the end of the period the Practice also delivered the latest in a
succession of solutions in local government. This was a major new system for
Ealing Council, which provides a sound platform for continuing improvement in
social care services for children and adults. This latest phase implemented the
Integrated Children's System, a key enabler in delivering the Government's Every
Child Matters agenda.
Now with one of the strongest team of IT expert witnesses in the UK, we have
experienced considerable growth in demand from the legal sector. We have
continued to act in a number of high-profile, multi-million pound cases where IT
issues play a significant role. The period has also seen the expansion of our
services to encompass Early Neutral Evaluation, Mediation, Arbitration and
Expert Determination.
Financial Services and Media
In the Financial Services and Media Practice, the centre of business activity
has been on key account relationships in investment banking, insurance and
broadcast media. Building further on our established relationship with Macquarie
Bank, we were appointed to support Macquarie's recent acquisition, East London
Bus Group, formerly part of Stagecoach. This project utilises our Intelligent
Integration capabilities to transform their back office processes by
implementing and migrating to a new Finance and Human Resources platform.
The Practice has continued to expand its relationship with ITV, working on a
number of new projects. These new assignments have added business consulting
services to the existing development work. Three of the projects have used
elements of Charteris' new Customer Centric framework for business change. The
fourth, Auto-Slotting of Commercials, has built on Charteris' development
framework by adding the newly developed Charteris Requirements Management
approach.
Retail, Manufacturing and Services
The Retail, Manufacturing and Services Practice has made considerable progress
through the half. Important new business has been won as a result of our focus
on Customer Centricity in multi-channel retailing. This includes several new
relationships with well-known High Street retailers and further growth in our
relationship with Tesco, where we are now working at the heart of one of the
industry's largest e-commerce initiatives. Our Intelligent Integration service
line is also driving new opportunities in the definition of agile enterprise
business systems.
We have recently been appointed as the e-commerce development partner and
programme manager for Europe's leading specialist video and computer game
retailer Game. This builds upon an initial scoping and high level design
consultancy assignment which was successfully completed in February.
We have a contract with Debenhams.com, a leading multi-channel retailer, to
assist in the re-engineering of their Direct fulfilment operation. We are
working closely with the business to detail its requirements and also providing
support at key stages in the programme of change.
For Microsoft we continue to work on some of their flagship projects, such as
the Government Gateway, which utilise a range of leading edge Microsoft
products. We have also completed our first consultancy assignment for
Microsoft's Dynamics consulting business.
For a multinational security services provider we were awarded the first phase
of a change programme to help re-engineer its core business processes to drive
greater business efficiency and enable agile growth. Following the successful
completion of this work we commenced the detailed design phase in preparation
for an ERP implementation.
OUTLOOK
While Charteris will continue to provide its established, broadly-based
services, the directors believe that the new specialised services offer much
greater opportunities for growth. Accordingly, for over a year now, the Company
has been investing in a wide-ranging change programme, which has encompassed
several new appointments in the practice management and sales teams, and
investment in the recruitment and development of professional staff, as well as
consolidation of the specialised service propositions. These changes have
already achieved substantial benefits in some sectors and the aim is to ensure
that the Company as a whole is well positioned to exploit business opportunities
in the new strategic directions as soon as possible.
The directors recognise that the change programme represents an interruption to
growth for investors, but believe that the recent key sales and improvements in
utilisation are encouraging signs that the strategy is proving successful. We
believe that the Company remains on track to meet our expectations for the year.
David Mann
Chairman
3 April 2007
Charteris plc Interim Accounts 2007
Consolidated profit and loss account
6 mths 6 mths 12 mths
ended 31 ended 31 ended 31
Jan 2007 Jan 2006 Jul 2006
(Unaudited) (Unaudited) (Audited)
(Restated) (Restated)
#000 #000 #000
Turnover 8,874 10,662 20,089
------------------------------------
Other external charges 1,493 2,439 4,219
Staff costs 6,514 6,640 13,188
Depreciation 120 121 243
Goodwill amortisation 154 155 310
Administrative expenses 896 930 1,827
------------------------------------
9,177 10,285 19,787
------------------------------------
Operating (loss)/profit
before goodwill amortisation
and share options charge (126) 557 666
Goodwill amortisation (154) (155) (310)
Share options charge (23) (25) (54)
------------------------------------
Operating (loss)/profit (303) 377 302
Interest receivable 18 30 53
Interest payable and similar
charges (20) (25) (50)
------------------------------------
(Loss)/profit on ordinary
activities before taxation,
goodwill amortisation and
share options charge (128) 562 669
Goodwill amortisation (154) (155) (310)
Share options charge (23) (25) (54)
------------------------------------
(Loss)/profit on ordinary
activities before taxation (305) 382 305
Taxation 31 (172) (191)
(Loss)/profit on ordinary
activities after taxation
and for the financial period (274) 210 114
(Loss)/earnings per share
Basic (0.67)p 0.52p 0.28p
Diluted (0.67)p 0.51p 0.28p
A dividend of #203,000 (0.5p per ordinary share) was declared and paid in the
six months to 31 January 2007 in respect of the financial year ended 31 July
2006.
Turnover and operating (loss)/profit all derive from continuing operations.
Consolidated balance sheet
31 Jan 2007 31 Jan 2006 31 July
(Unaudited) (Unaudited) 2006
(Restated) (Audited)
(Restated)
#000 #000 #000
Fixed assets
Intangible assets 4,866 5,213 5,020
Tangible assets 2,475 2,595 2,525
Investments 1 1 1
-------------------------------------
7,342 7,809 7,546
Current assets
Debtors 3,857 4,094 3,986
Cash at bank and in hand 1,083 1,774 1,280
-------------------------------------
4,940 5,868 5,266
Creditors : amounts falling due within
one year (3,774) (4,469) (3,763)
-------------------------------------
Net current assets 1,166 1,399 1,503
Total assets less current liabilities 8,508 9,208 9,049
Creditors : amounts falling due after
more than one year (497) (683) (591)
Provisions for liabilities (30) (23) (23)
-------------------------------------
Net assets 7,981 8,502 8,435
=====================================
Capital and reserves
Called up share capital 430 430 430
Share premium account 2,544 2,544 2,544
Merger reserve 3,573 3,573 3,573
Other reserves 26 26 26
Profit and loss account 1,602 2,123 2,056
ESOP reserve (194) (194) (194)
-------------------------------------
Equity shareholders' funds 7,981 8,502 8,435
=====================================
Consolidated cash flow statement
6 mths 6 mths 12 mths
ended 31 ended 31 ended 31
Jan 2007 Jan 2006 Jul 2006
(Unaudited) (Unaudited) (Audited)
#000 #000 #000
Net cash flow from operating
activities 167 49 39
Returns on investment and servicing
of finance
Interest received 18 30 53
Interest paid (20) (25) (49)
----------------------------------
Net cash inflow from returns on
investment and servicing of finance (2) 5 4
Taxation - - (343)
Capital expenditure
Purchase of tangible fixed assets (70) (78) (130)
Equity dividends paid (203) (203) (203)
----------------------------------
Cash outflow before use of liquid
resources and financing (108) (227) (633)
Management of liquid resources
Increase in term bank deposit (11) (450) -
Financing
Repayment of mortgage loan (89) (84) (172)
Decrease in cash in period (208) (761) (805)
----------------------------------
Reconciliation of net cash flow to
movement in net funds
Decrease in cash in period (208) (761) (805)
Cash outflow from change in mortgage debt 89 84 172
Cash outflow from change in liquid
resources 11 450 -
----------------------------------
Change in net funds resulting from
cash flows (108) (227) (633)
Amortisation of loan arrangement fees - - (1)
----------------------------------
Movement in net funds in period (108) (227) (634)
Opening net funds 509 1,143 1,143
----------------------------------
Closing net funds 401 916 509
==================================
Notes
1. ACCOUNTING POLICIES
The financial information contained in this interim report does not constitute
statutory accounts. The interim results, which have not been audited, have been
prepared using accounting policies consistent with those used in the preparation
of the Annual Report and Accounts for the Year ended 31 July 2006, except as
noted below. Those accounts have been filed with the Registrar of Companies and
received an unqualified audit report which did not contain a statement under
section 237 (2) or (3) of the Companies Act 1985.
The group has adopted Financial Reporting Standard 20 "Share-based payment" (FRS
20) for the preparation of this financial information and the comparative
numbers have been restated where applicable. In accordance with FRS 20, the fair
value of share options has been calculated as at the date of grant using the
Black-Scholes options pricing model. It is expensed on a straight line basis
over the vesting period based on the Directors' estimate of options that are
likely to vest. The adoption of this standard has resulted in a profit and loss
account charge in the period of #23,000 (6 months to 31 January 2006:#25,000;
year to 31 July 2006: #54,000). The resultant deferred tax asset arising has
increased shareholders' funds at 31 January 2007 by #22,000 (31 January 2006:
#13,000; 31 July 2006: #18,000).
2. TAXATION
Taxation for the 6 months to 31 January 2007 is based on the effective rate of
taxation which is estimated to apply to the year ending 31 July 2007.
3. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH FLOW FROM OPERATING
ACTIVITIES
6 mths ended 6 mths 12 mths
31 Jan 2007 ended 31 ended 31 Jul
(Unaudited) Jan 2006 2006
(Unaudited) (Audited)
(Restated) (Restated)
#000 #000 #000
Operating (loss)/profit (303) 377 302
Share options charge 23 25 54
Depreciation and amortisation 274 276 553
Increase/(decrease) in provisions 7 (15) (15)
Decrease in debtors 160 394 516
Increase/(decrease) in creditors 6 (1,008) (1,371)
----------------------------------------
Net cash flow from operating
activities 167 49 39
----------------------------------------
4. RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS
6 mths 6 mths 12 mths
ended 31 ended 31 ended 31
Jan 2007 Jan 2006 Jul 2006
(Unaudited) (Unaudited) (Audited)
(Restated) (Restated)
#000 #000 #000
Opening equity shareholders funds
(as previously stated) 8,417 8,462 8,462
Prior period adjustment 18 8 8
--------------------------------------
Opening equity shareholders funds
(as restated) 8,435 8,470 8,470
(Loss)/profit for the financial
period (274) 210 114
Share options charge 23 25 54
Dividends paid (203) (203) (203)
--------------------------------------
Closing equity shareholders' funds 7,981 8,502 8,435
--------------------------------------
5. (LOSS)/EARNINGS PER SHARE
Basic (loss)/earnings per share have been calculated by dividing the (loss)/
profit on ordinary activities after taxation in the period by 40,697,317 shares
(31 January 2006: 40,697,317 shares) being the weighted average number of shares
in issue after excluding those shares owned by the employee benefit trust. The
diluted earnings per share calculation has been based on a fair value of 15.5p
per share (31 January 2006: 38.6p per share). The weighted average number of
dilutive shares is 40,726,195 (31 January 2006: 41,225,393).
6 mths 6 mths 12 mths
ended 31 ended 31 ended 31
Jan 2007 Jan 2006 Jul 2006
(Unaudited) (Unaudited) (Audited)
(Restated) (Restated)
Basic before amortisation of
goodwill and share options charge (0.25)p 0.95p 1.15p
Diluted before amortisation of
goodwill and share options charge (0.25)p 0.93p 1.13p
6. INTERIM FINANCIAL STATEMENTS
The interim financial statements were approved by the directors on 3 April 2007.
The Interim Report will be sent to shareholders by the end of April and will be
available free of charge from the Company's registered office and the website
www.charteris.com.
7. FULL YEAR FINANCIAL STATEMENTS
We expect to announce our full year results in October 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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