TIDMCAE
RNS Number : 5815P
Charteris PLC
26 October 2012
FOR RELEASE AT 7.00am 26 October 2012
CHARTERIS PLC
("Charteris" or "the Company" or "the Group")
FINAL RESULTS ANNOUNCEMENT
Charteris plc, the business and IT consultancy, announces its
final audited results for the year ended 31 July 2012.
Key points
-- Revenue of GBP9.6m (2011: GBP12.5m)
-- Loss before taxation and exceptional items was GBP386k (2011: GBP806k loss)
-- Improved underlying trading before exceptional items in
second half, compared with that reported at the half-year stage
-- Diluted loss per share before exceptional items of 0.88p (2011: 1.67p loss)
-- Net debt at 31 July 2012 of GBP83,000 (Net funds at 31 July
2011 GBP692,000 following disposal of property assets and repayment
of bank loan).
Commenting on the results, Cliff Preddy, Chairman, said:
"Charteris achieved a break-even performance over the second
half period on the back of revenue growth compared with the
immediately preceding six-month period, reversing the trend of the
preceding six halves. This was a creditable step along the way
towards our ultimate goal of stable, profitable, year-on-year
growth.
The general stabilisation and improvements in trading
performance in the last financial year provide grounds for cautious
optimism that further improvement can be delivered this financial
year."
The Company will also post its Notice of AGM to Shareholders at
the same time. The AGM will take place at 10:00am on Friday, 30
November 2012 at the offices of Baker Tilly, 9th Floor, 25
Farringdon Street, London. Copies of the Company's report and
financial statements will be sent to shareholders shortly and will
be available at the registered office of the Company and on the
Company's website www.charteris.com
Press enquiries:
Charteris plc
Allan Barr, Chief Executive Tel: 020 7600 9199
Patrick Carter, Finance Director
Beaumont Cornish (Nominated Adviser and
Broker) Tel: 020 7628 3396
Roland Cornish and James Biddle
CHAIRMAN'S STATEMENT
Overview
In the interim report for the six-month period ended 31 January
2012 ("H1") we referred to signs of increased willingness to invest
by private sector clients and potential clients of Charteris
leading to a stronger weighted pipeline of potential sales. This
was despite the unrelenting challenge of little or no economic
growth that has persisted throughout the financial year ended 31
July 2012 ("FY12"). Many of our sales opportunities converted into
contracts during the six-month period ended 31 July 2012 ("H2") and
this supported progress towards our short-term objective of
reliable month-on-month profitable trading.
I am pleased to report that Charteris achieved a break-even
performance over the second half period (H2) on the back of revenue
growth compared with the immediately preceding six-month period
(H1), reversing the trend of the preceding six halves. Given the
challenges faced by the Group, this was a creditable step along the
way towards our ultimate goal of stable, profitable, year-on-year
growth, supported by a stronger balance sheet. However, whilst we
are pleased with this progress we will not be satisfied until our
continuous efforts on performance improvement lead to the
achievement of the Group's full potential, with consistent delivery
of acceptable profit margins.
Results
Revenue for the year ended 31 July 2012 was GBP9.6m (2011:
GBP12.5m). (Revenue in H1 and H2 was GBP4.7m and GBP4.9m
respectively). Loss before taxation and exceptional items was
GBP0.4m (2011: loss GBP0.8m). Loss before taxation was GBP0.4m
(loss GBP0.4m in H1, break-even in H2) (2011: loss GBP3.5m). Loss
per share was 0.96p (2011: loss 8.2p). Net debt on 31 July 2012 was
GBP0.1m (31 July 2011: net funds GBP0.7m including GBP0.5m of VAT
received on the sale of a freehold property in July 2011 which was
paid to HMRC in August 2011(FY12)).
Business Overview
Charteris is a leading provider of business transformation and
IT consultancy services to the SME and enterprise markets,
primarily through a combination of ensuring the effective
implementation of IT systems and business process
re-engineering.
Business Consulting
Charteris provides business and IT consulting services that help
our clients improve customer service, reduce operational costs, and
manage the successful delivery of organisational change programmes
and projects. Our consultants also provide expert advice during due
diligence exercises, and mediation and expert witness services
where problems have arisen during the execution of other parties'
technology supply contracts.
Demand for our programme and project management services held up
well and we continue to be particularly active in the area of
homeland security. Our IT Expert offering has maintained a
reasonable level of professional fees in a market where we have
seen a reduction in the absolute levels of litigation, undertaking
IT strategy and due diligence studies as well as its traditional
advisory role on IT disputes between third parties . However,
whilst we continued to gain new and extension sales with high
profile retailers and several local and regional authorities, our
business change consulting activities in the commercial and local
government sectors were impacted by delays in contract
confirmation, and commissioned work being at a smaller scale than
originally anticipated.
Microsoft Technologies
The Company is a leading Microsoft "full stack" systems
integrator for the UK mid-market, delivering rapid business change
using the full range of Microsoft's technology and platforms,
including Enterprise Resource Planning ("ERP") and Customer
Relationship Management ("CRM") applications software products
(Microsoft Dynamics AX and CRM).
Demand for our services linked to Microsoft technologies was
encouraging and annual revenue exceeded that expected at the start
of the year. Our capability to project manage and deliver
integrated solutions incorporating the full range of Microsoft's
business products and services proved to be attractive and a number
of new clients awarded us contracts, particularly in the third
quarter of the year. Selective recruitment took place in this area
of the business.
Charteris also benefited from a strong level of repeat key
account revenues for consulting services from our Microsoft
specialists- from clients in retail banking, financial services,
local government and support services. These services spanned the
full range of infrastructure, business collaboration and
productivity, and the use of application platforms (both
on-premises and in the Cloud).
The decision taken towards the end of FY11 to bring our
Microsoft Dynamics activities under common leadership with our
other Microsoft activities produced positive results as synergies
between the sales processes were realised, particularly in respect
to cross selling of the wider Microsoft stack. Improved client
satisfaction in existing accounts has resulted in greater extension
business and a growth in the list of excellent delivery case
studies. This has supported a refreshed marketing and sales
approach in securing a number of new projects to execute for
clients in the business services, leisure and charities
sectors.
Our ties with Microsoft continue to be strong, and highly valued
and appreciated by Charteris. For much of FY12 we were UK Microsoft
Country Partner of the Year. We are also a Smart Teaming Partner
with Multiple Partner Competencies, and this is supported by a
Microsoft Premier Agreement.
Outlook
There are few signs that the overall economy will achieve
anything but minimal growth anytime soon and sales cycles are
likely to remain protracted. Hence our fortunes in the financial
year ending 31 July 2013 ("FY13") will be largely dependent on our
ability to concentrate our efforts on clients and sectors likely to
lead to better opportunities than elsewhere and also on our ability
to win and maintain accounts against what will inevitably be fierce
competition, by differentiating ourselves from that competition.
The H2 recovery was the result of the efforts and flexibility of
Charteris management and staff, and their commitment to helping our
clients improve their business performance using appropriate
technology. It is the Charteris reputation for quality delivery
that helps differentiate us in our chosen markets and which
attracts new clients and earns the loyalty of existing clients.
Our sales pipeline contains the ingredients to support
profitable trading in the current year. However we should not
forget that the nature of our business is such that we never have
the luxury of complete visibility of future revenues beyond a few
months on average. We shall remain diligent and alert to the risks
in all of the sectors in which we operate. The general
stabilisation and improvements in trading performance in FY12
provide grounds for cautious optimism that further improvement can
be delivered in FY13.
Cliff Preddy
Non-Executive Chairman
25 October 2012
CHIEF EXECUTIVE'S STATEMENT
Operating Review
A simplification of the business organisation of Charteris
around our respective Microsoft Technologies and Business
Consulting capabilities was launched during the second half of
FY11. This has been well received by clients and business partners
in our chosen markets and has helped align the Charteris team and
management to clearer individual and common objectives. The
resulting significant cost savings also underpinned our determined
efforts to establish a stable basis for future growth.
FY12 has been largely about execution as a greater sense of
stability has enabled strong concentration on finding prospects for
new business, converting them into contracts and then delivering
client satisfaction. Whilst the markets for our services remained
highly competitive and it took longer to return to break-even for
the business than we wished, significant progress was made in the
year with a much better performance recorded in H2 than for some
considerable time.
This improvement helped us sustain continued operations, but
also featured some welcome, albeit modest, growth in H2 over H1.
The Charteris underlying fundamentals of a high quality client
base, and high quality project delivery from consultants who take
professionalism seriously, are illustrated in the sections
below.
The concerted efforts to reduce debt and improve liquidity that
were initiated in FY11 were reinforced by the sale of the freehold
office building in Northleach in December 2011. Taken together with
the move into smaller rented premises in High Holborn, London in
December 2011, this also completed the rationalisation of the
Group's office locations from four to two (London and Edinburgh).
The directors consider that the new configuration of offices meets
the future needs of the business more effectively.
Business Consulting
We continue to be engaged in some of the most significant
long-term IT programmes in the field of homeland security, largely
providing programme management services. These services have also
proved to be in demand by our clients in the Retail and Outsourcing
sectors.
Whilst overall volumes of business from clients for our methods
based business change consulting services were lower, we have
successfully extended our client base in the Local and Regional
Government (LRG) and Retail sectors. In LRG, the daunting challenge
for officials is that of balancing the competing demands for
improvement in front-line services with budget reductions imposed
by central government. We support councils in their adoption of
best practice approaches to re-orientating processes and
deliverables towards specific citizen needs that have been tried,
tested and honed by earlier client implementations. During the
second half we also helped a high-profile, high street and
mail-order retail business embark on a significant change programme
that is targeted at improved customer satisfaction whilst also
improving financial performance.
Our IT Expert consultancy has worked alongside law firms on a
number of cases concerned with litigation or possible litigation
following disputes concerning the supply of IT products and
services, and there were signs of increased activity for us towards
the year end. The skills and experience of our experts have also
been utilised on a number of IT strategy exercises for clients,
most notably in the Financial Services sector.
The market for our business consulting services was especially
tough during the year, but we have maintained our core strengths
and a cadre of excellent IT, change management, and project
management professionals. There were signs early in FY13 that
demand for our services is increasing. It will be our intention to
meet any excess demand through our highly selective group of
associate consultants, almost all of whom have already worked with
us or for us.
Microsoft Technologies
Charteris is one of a small number of leading, UK-based,
Microsoft partners who have the "full-stack" capability to deliver
solutions that build on the complete range of core Microsoft
technologies, rather than specialising in one particular line of
technology. This enables us to offer a comprehensive business
partnership to clients in addition to point solutions. With
Microsoft's support, we have broadened and deepened the Charteris
client base for Cloud developments, custom development on-premise,
knowledge sharing and information storage applications, unified
communications systems and infrastructure projects. We also secured
some key new clients for Dynamics AX projects on which developments
are currently underway.
Charteris continues to provide services to a major bank on
projects that underpin their wholesale banking credit risk
modelling and capital reporting processes. We have helped a major
Financial Services organisation and a payroll services provider in
their preparations for pension auto-enrolment following a
legislative change and this has heavily drawn on our .Net
development capability.
Examples of other solutions based on Microsoft technology that
we have provided through the year include infrastructure support to
clients in the legal, finance and local government sectors;
business productivity support to clients in the charitable, energy
& utilities, finance, local government and business services
sectors; and projects using the key Microsoft application platforms
to clients in the business services, charitable and government
sectors.
In the world of Microsoft-based ERP and CRM systems, we
continued with Dynamics AX developments and support for a
mail-order clothing retailer, a global supplier of fire suppression
systems and an international supplier of industrial gases. We were
also delighted to welcome new clients for Dynamics AX 2012
solutions with widespread business activities across exhibitions
and conferences, recruitment services, international car auctions,
and the supply of swimming pools. Charteris was also selected by a
number of our new clients to implement Microsoft CRM 2011; most
notably in the not-for-profit and IT services sectors. Our
investment in post implementation support to our clients has also
started to show results both in terms of client retention and as a
differentiator from our competition, leading directly to new "pure"
support clients, i.e. where we did not originally implement AX for
that client.
Our operations linked to Microsoft technologies have a strongly
differentiated sales offering in a market segment where the
potential is large and growing.
Charteris Team
Whilst there was less need for staff to adjust to structural
change in FY12, compared with FY11, significant challenges faced
the Company. These could only have been met with the help and
support of the talented team we have the privilege to work with and
their straightforward and enthusiastic commitment. Our clients also
recognise these qualities and they are rewarded in the repeat
business that is so important to Charteris in achieving its goal of
delivering profitable growth.
Allan Barr
Chief Executive
25 October 2012
FINANCE DIRECTOR'S REPORT
Financial Review
The Group recorded an improved trading performance in the six
month period ended 31 July 2012, but incurred a loss before tax for
the year of GBP0.42m (2011: loss of GBP3.5m). Further explanation
of the key financial elements of the Group's performance is
provided below.
Trading
The year saw a decline in overall Group revenues of 23%, largely
as a result of lower activity in Business Consulting. However, it
was pleasing to note that revenues in H2 were 5% higher than in
H1.
The business continued to take action to try to align its costs
with forecast revenues and, in particular, there was some further
adjustment in team size within Business Consulting. This, together
with the cost benefits of the major restructuring in FY11, meant
that annual staff costs were 29% lower in FY12. After taking
account of exceptional impairments of goodwill and property values
in FY11, underlying other administrative expenses were 25% lower.
This significant reduction in the break-even point of the business
helped underpin the performance improvement.
Key Performance Indicators
The key performance indicators used by the Group are utilisation
of professional staff and average fee rates. As a professional
services business, where staffing (whether by employees or
associates) is the principal cost, it is vital to ensure that a
strong match is achieved between available resource and workload.
This is primarily handled by the close monitoring of the
utilisation of consultants and taking action accordingly whilst
ensuring that short term demands for specialised services that
cannot be met by existing employees are delivered through the use
of associates. Average fee rates in some parts of the business came
under additional pressure as a result of intense competition, both
on-shore and off-shore.
Borrowings and Banking Facilities
The Group meets its day-to-day working capital requirements by
means of an invoice discounting facility of up to GBP1.25m (2011:
GBP1.5m). This currently bears interest at 3% (2011: 4%) above the
NatWest Bank Plc base rate and is secured against a fixed and
floating charge over the assets of the Company and its
subsidiaries.
Cash Flow
There was a cash outflow from operating activities of GBP0.6m
(2011: GBP0.8m). After financing and investing activities the
overall cash outflow was GBP0.8m (2011: GBP0.2m). This reflects the
subscription for new shares by certain founding directors, payment
of GBP0.5m of VAT to HMRC at the beginning of FY12 that related to
the sale of Charteris House at the end of FY11, and the
amalgamation of all of our southern premises into new, smaller
offices in central London including the disposal of surplus
premises.
Net debt on 31 July 2012 was GBP0.1m (31 July 2011: net funds
GBP0.7m) comprising cash of GBP0.4m (2011: GBP1.1m) offset by
drawdown against the Company's invoice discounting facility of
GBP0.5m (2011: GBP0.4m).
The Group's trade receivable days at year end was 36 days (2011:
37 days). This satisfactory profile results from sustained efforts
on the accuracy and timeliness of the month-end invoicing cycle and
credit control.
Capital expenditure was GBP0.1m (2011: GBP0.1m), reflecting
essential IT asset renewals and the fitting out of new offices.
Going Concern
The Board regularly reviews the adequacy of financial resources
available and considers the options to increase the availability of
working capital if and when required. Particularly in the current
economic conditions, the nature of the Group's business is such
that there is inherent uncertainty over the commencement of
projects and the timing of cash flows arising from clients
thereafter and the availability of alternative or additional
finance should this be required (see note 2). However, taking into
consideration actions that could be taken in response to reasonable
cash flow sensitivities the Directors believe that the Group will
continue to operate within its agreed facilities.
Patrick Carter
Finance Director
25 October 2012
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 JULY 2012
Notes 2012 2011
Continuing operations GBP'000 GBP'000
Revenue 9,569 12,512
_____ _____
Other external charges (2,079) (2,389)
Staff costs (6,368) (9,016)
Other administrative expenses (1,510) (4,428)
______ ______
(9,957) (15,833)
Operating loss before exceptional items (356) (671)
Redundancy costs (32) (235)
Impairment of goodwill - (2,100)
Impairment and loss on disposal of property,
plant and equipment - (315)
--------
Operating loss (388) (3,321)
Finance costs (30) (135)
Loss before taxation and exceptional
items (386) (806)
Redundancy costs (32) (235)
--------------------------------------------- ----- -------- --------
Impairment of goodwill - (2,100)
--------------------------------------------- ----- -------- --------
Impairment and loss on disposal of property,
plant and equipment - (315)
--------------------------------------------- ----- -------- --------
Loss before taxation (418) (3,456)
Taxation - 128
_____ _____
Loss for the financial year attributable
to owners of the parent (418) (3,328)
_____ _____
Loss per share
Basic and diluted 4 (0.96)p (8.12)p
No dividend was proposed in respect of the financial years ended
31 July 2011 or 2012.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2012 2011
GBP'000 GBP'000
Loss for the financial year (418) (3,328)
Deferred tax being income recognised
directly in equity - (4)
Total comprehensive income for
the year attributable to owners
of the parent (418) (3,332)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 JULY 2012
2012 2011
Notes GBP'000 GBP'000
Non-current assets
Goodwill 3,979 3,979
Other intangible assets 9 78
Property, plant and equipment 110 27
Deferred tax asset 1 34
4,099 4,118
Current assets
Trade and other receivables 2,084 2,348
Bank balances and cash in hand 374 1,076
2,458 3,424
Non-current assets classified as held
for sale - 210
______ ______
Total assets 6,557 7,752
Current liabilities
Invoice discounting facility (457) (384)
Trade and other payables (1,905) (2,864)
Provisions - (58)
(2,362) (3,306)
Total assets less current liabilities 4,195 4,446
Non-current liabilities
Deferred tax liability (1) (34)
Net assets 4,194 4,412
Equity
Called up share capital 503 434
Share premium account 2,742 2,606
Merger reserve 2,573 2,573
ESOP reserve (194) (194)
Other reserve 26 26
Retained earnings (1,456) (1,033)
Total equity attributable to owners
of the parent 5 4,194 4,412
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2012
2012 2011
GBP'000 GBP'000
Loss before taxation (418) (3,456)
Adjustments for:
Depreciation and impairment of property,
plant and equipment 39 349
Amortisation of intangible assets 69 61
Good will impairment - 2,100
Share-based payments (5) 2
Net interest expense 30 104
Loan Finance costs - 31
______ ______
Operating cash flows before movements
in working capital (285) (809)
Decrease in receivables 264 1,610
Decrease in payables (502) (1,494)
______ ______
Cash used by operations (523) (693)
Net corporation taxes repaid - 18
Interest paid (30) (104)
Net cash outflow from operating activities (553) (779)
Investing activities
Disposal of property, plant and equipment 216 2,575
VAT payable on disposal of property,
plant and equipment (515) 515
Purchase of property, plant and equipment (128) (80)
Acquisition of SIG Consulting Limited
(earn out) - (60)
Net cash from investing activities (427) 2,950
Financing activities
Issue of shares 205 -
Repayment of borrowings - (2,343)
Net cash from financing activities 205 (2,343)
Decrease in cash and cash equivalents (775) (172)
Cash and cash equivalents at the beginning
of the year 692 864
Cash and cash equivalents at the end
of the year (83) 692
NOTES:
1. BASIS OF PREPARATION
The financial information in this announcement does not
constitute statutory financial statements as defined in
section 434 of the Companies Act 2006. The statutory accounts
for the year ended 31 July 2012 form the basis for the
financial information presented by the directors in this
final results announcement and will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting. The audit report on these financial statements
contained an Emphasis of Matter paragraph as follows:
"In informing our opinion on the financial statements,
which is not modified, we have considered the adequacy
of the disclosure made in note 2 which indicates continued
uncertainty over the level of demand for the Group's services
and the timing of the settlement of outstanding receivables
on major projects. In response to this uncertainty, the
directors have considered the actions they would take in
response to a fall in the anticipated level of revenues
and/or timing of settlement of receivable balances. On
this basis, the directors believe that the Group will continue
to operate within the agreed banking facilities.
These conditions, along with other matters as set forth
in note 2 indicate the existence of a material uncertainty
which may cast significant doubt about the group's ability
to continue as a going concern.
The financial statements do not include any adjustments
that would result if the Company were unable to continue
as a going concern."
Copies of the Company's report and financial statements
will be sent to shareholders shortly and will be available
at the registered office of the Company and on the Company's
website www.charteris.com.
2. SIGNIFICANT ACCOUNTING POLICIES - GOING CONCERN
The Company meets its day-to-day working capital requirements
through a GBP1.25m invoice discounting facility that is
subject to a rolling 3 month notice period, bears interest
at 3.0% over the NatWest Bank Plc base rate and is secured
against a fixed and floating charge over the assets of
the Company and its subsidiaries. The finance available
under this facility is determined by the level and ageing
profile of debtors at any point in time and therefore it
is subject to fluctuations in the timing of both invoicing
and settlement.
The Directors have prepared projected cash flow information
for the next twelve months taking account of projected
revenues and the Company's weighted pipeline of sales opportunities.
The Directors have taken into consideration actions they
could take in response to reasonable cash flow sensitivities
arising from adverse movements in trading performance and/or
timing of settlement of receivables including obtaining
new finance facilities. On this basis, the Directors believe
that the Group will continue to operate within the agreed
facilities.
Whilst the Directors believe the going concern basis is
appropriate, the nature of the Group's business is such
that in the current economic conditions there is inherent
uncertainty over the commencement of major projects, timing
of cash flows arising from clients thereafter and the availability
of alternative finance should this be required. Formally,
these circumstances represent a material uncertainty that
casts significant doubt upon the Company's ability to continue
as a going concern and therefore it may be unable to realise
its assets and discharge its liabilities in the normal
course of business. Nevertheless, after making enquiries
and considering the uncertainties described above, the
Directors have a reasonable expectation that the Company
has adequate resources to continue in operational existence
for the foreseeable future. For these reasons, they continue
to adopt the going concern basis of accounting in preparing
the annual financial statements.
3. DIVIDEND
The Directors do not recommend that a dividend is paid
(2011: GBPnil)
4. LOSS PER SHARE
The calculations of loss per share are based on the following
profits and numbers of shares.
2012 2011
GBP'000 GBP'000
Loss after tax for the financial year
before exceptional items (386) (678)
Redundancy costs (32) (235)
Impairment and loss on disposal of fixed
assets - (315)
Impairment of goodwill - (2,100)
Loss after tax for the financial year (418) (3,328)
2012 2011
No. of No. of
shares shares
Weighted average number of shares '000 '000
For basic earnings per share 43,725 40,964
Dilutive effect of share options 1,597 1,788
For diluted earnings per share 45,322 42,752
The weighted average number of shares for the purposes of basic
and diluted earnings per share excludes those owned by the Group's
employee benefit trust.
Loss per share 2012 2011
Basic and diluted (0.96)p (8.12)p
Basic and diluted before exceptional
items (0.88)p (1.66)p
5. STATEMENT OF CHANGES IN EQUITY
2012 2011
GBP'000 GBP'000
1 August 2011 4,412 7,702
Loss for the year (418) (3,328)
Deferred tax - (4)
Share based payments (5) 2
Issue of new shares 205 40
_____ _____
31 July 2012 4,194 4,412
6. This final results announcement was approved by the Board on
25 October 2012. Copies of this announcement will be available on
the Company's website: www.charteris.com.
7. The AGM will take place at 10:00am on Friday, 30 November
2012 at the offices of Baker Tilly, 9th Floor, 25 Farringdon
Street, London.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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