RNS Number:1373C
Cedar Group PLC
8 December 1999
CHAIRMAN'S STATEMENT
Interim results for the six months ended 30th September 1999
- Turnover up by 61% to #11.7m (1998: #7.2m)
- Licence revenues up 83%
- Consultancy Services revenues up 82%
- Maintenance revenues up 19%
- Pre-tax profits, before amortisation, of #339,000 (1998: loss of
#828,000)
- 98% take up of November rights issue which raised #26.7m for the
Group to facilitate growth
- Establishment of e-Cedar, an e-Sourcing Application Service
Provider ("ASP") Service
Mike Harrison, Managing Director of Cedar Group commented:
"I believe that we are witnessing a very exciting phase in Cedar
Group's development. The money raised via our recent rights issue has
allowed the Group to complete strategic acquisitions, in particular
within the significant North American market place, as well as to
accelerate our ambitions to grow rapidly in key markets. We have
enhanced and strengthened our skill and customer base with these
acquisitions and will move into the new millennium with a balanced
customer portfolio supported by an increased emphasis on service and
consultancy, producing higher quality earnings.
I am particularly excited about the establishment of e-Cedar which is
an Applications Service Provider, offering customers access to
enterprise-level applications without the set-up and maintenance costs
associated with an in-house system installation. This type of service
offering is the future and Cedar is well placed to take maximum
advantage."
Press enquiries:
Mike Harrison, Managing Director
Mike Hosie, Finance Director
Cedar Group Plc 01932 584 000
Russell Cook
Teather & Greenwood Ltd 0171 426 9000
Shane Dolan
Biddick Associates 0171 377 6677
The first six months of the financial year have seen further
development of the Group, positioning it to start exploiting fully the
poorly served Customer Relationship Management (CRM) and Enterprise
Computing market.
The strong upward trend of the business across all areas of activity
has continued with turnover for the six month period increasing by 61%
to #11.7m (1998; #7.2m). Licence revenue increased by 83% compared to
the same period last year. There was also a strong contribution from
consultancy and services, which grew by 82% in the period. The
Group's maintenance revenues continue to grow steadily, showing an
increase of 19%. Pre tax profits, before amortisation, for the period
were #339,000 (1998: loss of #828,000), even after a significant
planned increase in the Group's cost base as we invest in exciting new
areas of activity.
The Group now has a portfolio of software and service products with
which it can provide solutions to the increasing needs of medium and
large scale organisations who are seeking to solve enterprise-wide
business problems. The Professional Services businesses have been
consolidated into a single team, organised to provide industry aligned
skills. This allows the Group to add considerable value by providing
solutions through business level consultancy and strong project
management, in addition to standard installation and training.
There is growing evidence that the business model adopted (whereby
initial licence sales are increasingly matched with services revenue)
has been under developed. A longer term relationship with our
customers can be secured, building a valuable and sustainable source
of profit through our consulting activities, which identify and
support the cross selling of other licence opportunities, leading in
turn to an attractive maintenance annuity.
As was stated at the time of the preliminary announcement of results
to 31 March 1999, the Group has made significant investment through
the recruitment of additional staff to develop further revenue
generating activities and the development of new products and
consultancy services appropriate for the commercial market. In
addition, since an increasing proportion of the Group's revenues will
be generated from new customer groups and new geographic markets, such
as North America, the skills and infrastructure needed to provide an
acceptable level of customer service had to be enhanced. The increase
in average staff numbers to 258 from 214 over the period and the
investment in infrastructure and new products has resulted in the
planned increase in costs and as a consequence a pre-tax profit,
before amortisation, of #339,000.
The successful November rights issue that raised #26.7m has put the
Group on a sound financial footing. It has allowed the settlement of
deferred consideration associated with earlier acquisitions and the
accelerated acquisition of PMPL Limited and Cedar US Inc. It has also
allowed the acquisition of Firman Jack Limited and the Financial
Management System (FMS) division of PPSL Limited. These acquisitions
bring with them important new skills to the consultancy group and have
added more customers within the Local Authority market where Cedar
Group now holds a dominant position. The balance of the funds raised
will be used to facilitate growth in the Group's selected strategic
markets as well as to support the continuing expansion into projects
of a more commercial nature.
An important development over the remainder of this financial year
will be the establishment of an e-Sourcing business. Based on the
Application Service Provider (ASP) business model, this service will
offer customers access to enterprise-level applications without the
set-up and maintenance costs associated with an in-house system
installation. The Group will initially deliver the Cedar Financials
software over secure networks using Internet based technology.
This important initiative has been endorsed by a partnership with
Compaq and MCI Worldcom that will provide the processing technology
platform and the secure managed communications networks over which the
service will be delivered.
The anticipated dramatic growth in this new market has been well
publicised by a variety of independent commentators. The Group
believes that it is well positioned to respond to this opportunity.
Indeed, Cedar has had a customer, The United Kingdom Atomic Energy
Authority using this method of application delivery for over three
years.
Our strategy to provide software solutions and services to enable our
customers to solve enterprise-wide business problems continues to gain
broad acceptance. The Group expects to further balance its customer
portfolio and is experiencing growth in all sectors. The Group is
achieving an increasing emphasis on service and consultancy producing
longer term, more sustainable revenue.
Following the November acquisition of Cedar US, we now have a firm
platform from which to develop a leading position in the important
North American market. This will be based upon the core Cedar
Financials Applications, as well as the opportunity to commence
marketing our Data-Warehousing and Businessflow propositions into a
new and significant market.
An experienced CEO has been appointed who has already built a strong
Executive team that is winning business against North American
competition with Cedar Financials, Cedar Track and Businessflow. In
addition, one of the reasons for the accelerated acquisition of PMPL
was the earlier entry in to the US market for Data Migration and
Warehousing, where the market for Financial Services is shortly to be
de-regulated with the resulting competition creating a significant
opportunity. To ensure that the Group is well positioned to
capitalise upon this rapidly developing market, a senior industry
professional has been recruited to build the Data Warehousing business
with dedicated support from the founder of PMPL.
North America represents a new and significant market that the Group
is well prepared to exploit with its core Cedar Financials products,
Data Warehousing and Businessflow solutions.
Following the recent successful rights issue the Board has reviewed
the Group's dividend policy. The Group has a number of exciting
opportunities for the longer term development of the business
utilising the funds which the rights issue has provided. In the light
of these opportunities and in seeking to achieve the greatest possible
return for shareholders in the longer term, the Board have decided
that it will not declare an interim dividend and it will recommend to
shareholders that dividend payments be suspended during this important
growth phase for the business.
BRIAN WILSON
Chairman
7 December 1999
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 September 1999
SIX MONTHS ENDED 30
SEPTEMBER 1999 Six months Year
ended ended
RESULTS BEFORE AMORTISATION CONSOLIDATED 30 September 31 March
AMORTISATION * OF GOODWILL PROFIT 1998 1999
& & LOSS (Unaudited) (Audited)
INTANGIBLES
(UNAUDITED) (UNAUDITED) (UNAUDITED)
#'000 #'000 #'000 #'000 #'000
Nt
TURNOVER - 2 11,688 - 11,688 7,249 23,046
continuing
operations
Cost of sales (2,991) - (2,991) (2,249) (6,216)
-------- ---------- ---------- ------------ -------
GROSS PROFIT 8,697 - 8,697 5,000 16,830
Other operating(8,243) (8,243) (5,920) (13,591)
expenses before -
amortisation
Amortisation of
goodwill & - (284) (284) (143) (356)
intangibles
------ ---------- ---------- ------------ -------
Total operating
expenses (8,243) (284) (8,527) (6,063) (13,947)
------ ---------- ---------- ------------ -------
OPERATING
PROFIT/(LOSS) - 454 (284) 170 (1,063) 2,883
continuing
operations
Investment income 142 - 142 171 162
Interest payable (257) - (257) (79) (238)
and similar
charges
------ ---------- ---------- ------------ -------
PROFIT/(LOSS) ON 339 (284) 55 (971) 2,807
ORDINARY
ACTIVITIES BEFORE
TAXATION
Tax on 3 (15) - (15) 193 (932)
profit/(loss) on
ordinary
activities
------ ---------- ---------- ------------ ---------------
PROFIT/(LOSS) ON
ORDINARY 324 (284) 40 (778) 1,875
ACTIVITIES AFTER
TAXATION
Dividends paid - - - (268) (813)
and proposed
------ ---------- ---------- ------------ --------------
RETAINED PROFIT
FOR THE PERIOD 324 (284) 40 (1,046) 1,062
============ ========== ========== ============ =======
Earnings per 4 0.9p (0.8)p 0.1p (2.3)p 5.6p
ordinary share
====== ========== ========== ============ =============
Diluted earnings4 0.9p (0.8)p 0.1p (2.3)p 5.5p
per share
* Results before amortisation include all depreciation and
amortisation charges on assets other than purchased intellectual
property rights and goodwill.
CONSOLIDATED BALANCE SHEET
as at 30 September 1999
30 September 30 September 31 March
1999 1998 1999
(Unaudited (Audited (Unaudited)
#'000 #'000 #'000
FIXED ASSETS Nt.
Intangible assets 13,363 6,678 11,102
Tangible assets 1,438 1,991 1,135
Investments 3,868 993 1,825
--------- --------- -------
- -- --
18,669 9,662 14,062
CURRENT ASSETS
Debtors: falling due within one 21,661 12,226 19,808
year
Debtors: falling due after one year - 200 67
Cash at bank and in hand 185 4 6
--------- --------- -------
- -- --
21,846 12,430 19,881
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR (11,760) (9,031) (13,832)
BORROWINGS (9,590) (1,763) (5,105)
--------- --------- -------
- -- --
NET CURRENT ASSETS 496 1,636 944
--------- --------- -------
- -- --
TOTAL ASSETS LESS CURRENT 19,165 11,298 15,006
LIABILITIES
CREDITORS: AMOUNTS FALLING DUE (916) - (916)
AFTER MORE THAN ONE YEAR
PROVISIONS FOR LIABILITIES AND (3,822) (4,500) (4,843)
CHARGES
--------- --------- -------
- -- --
NET ASSETS 14,427 6,798 9,247
========= ========= =======
CAPITAL AND RESERVES
Called-up share capital 7 1,813 1,676 1,694
Share premium reserve 7 6,318 3,311 3,884
Other reserves 6,296 1,811 3,669
--------- --------- -------
- - --
EQUITY SHAREHOLDERS' FUNDS 7 14,427 6,798 9,247
========= ========= =======
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 1999
Six Months Six months Year to
To 30 to 30 31
September September March
1999 1998 1999
(Unaudited) (Audited) (Unaudited)
#'000 #'000 #'000
Nt
NET CASH OUTFLOW FROM OPERATING 5 (3,587) (2,404) (4,313)
ACTIVITIES
Returns on investments and (98) 29 (139)
servicing of finance
Taxation (205) 259 (253)
Capital expenditure and financial (2,500) (1,757) (1,960)
investment
Acquisitions (2,443) 65 (212)
Equity dividends paid (553) (533) (804)
--------- --------- ---------
- -- --
CASH OUTFLOW BEFORE USE OF LIQUID (9,386) (4,341) (7,681)
RESOURCES
AND FINANCING
Management of liquid resources 2,527 - -
Financing 4,553 26 26
--------- --------- ---------
- -- --
DECREASE IN CASH (2,306) (4,315) (7,655)
========= ========= =========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the six months ended 30 September 1999
Six Months Six Year to
To 30 months to
30
September September 31 March
1999 1998 1999
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Nt
Decrease in cash in the period (2,306) (4,315) (7,655)
Cash inflow from increase in debt (2,000) - -
financing
---------- --------- ---------
-- -- --
Change in net debt resulting from (4,306) (4,315) (7,655)
cash flows
Net (debt)/cash at the start of the (5,099) 2,556 2,556
period
---------- --------- ---------
-- -- --
NET DEBT AT THE END OF THE PERIOD 6 (9,405) (1,759) (5,099)
========== ========= =========
1. BASIS OF PREPARATION
The interim statement has been prepared on the basis of the accounting
policies set out in the Company's statutory accounts for the year
ended 31 March 1999.
The financial information presented in this interim statement does not
constitute full financial information within the meaning of section
240 of the Companies Act 1985.
The comparative figures for the financial year ended 31 March 1999
have been extracted from the Company's statutory accounts for that
financial year. Those accounts have been reported on by the Company's
auditors and delivered to the Registrar of Companies. The report of
the auditors was unqualified and did not contain a statement under
section 237(2) or (3) of the Companies Act 1985.
Copies of this statement of interim results are being sent to all
shareholders within seven days. Further copies are available from the
Company's Registered Office: Cedar Group Plc, Cedar House, 78
Portsmouth Road, Cobham, Surrey KT11 1HY.
2. TURNOVER
Turnover from continuing activities can be analysed as follows:
Six Six Year
months to months to to 31
30 30
September September March
1999 1998 1999
(Unaudited) (Unaudited)(Audited
#'000 #'000 #'000
CLASSES OF BUSINESS
Software products and services:
Licences 4,246 2,316 9,900
Consultancy and training 3,730 2,055 4,920
Maintenance 2,793 2,338 4,728
Other 919 540 3,498
--------- --------- --------
-- -- --
11,688 7,249 23,046
========= ========= ========
GEOGRAPHICAL SEGMENTS
United Kingdom 10,853 7,071 17,390
Rest of World 835 178 5,656
--------- --------- --------
-- -- --
11,688 7,249 23,046
========= ========= ========
3. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES
Six months Six months Year
to 30 to 30 to 31
September September March
1999 1998 1999
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Corporation tax at 30% (31%) (14) (193) 589
Deferred taxation 29 - 343
---------- ---------- ----------
-- -- --
15 (193) 932
========== ========== ==========
4. EARNINGS PER SHARE
The calculations of earnings per share are based on the following
profits and number of shares:
Six Six Year
months to months to to 31
30 30
September September March
1999 1998 1999
(Unaudited) Unaudited) (Audited)
#'000 #'000 #'000
Profit/(loss) on ordinary 324 (635) 2,231
activities after taxation before
amortisation
Amortisation of intangible assets (284) (143) (356)
and goodwill
--------- --------- --------
-- - --
Profit on ordinary activities after 40 (778) 1,875
taxation
========= ========= ========
Weighted average number of shares:
Six months Six Year
to 30 months to to 31
September 30 March
1999 September 1999
number of 1998 Number
shares Number of of
Shares Shares
For basic earnings per share 35,891,175 33,421,817 33,506,373
Exercise of share options 1,383,100 649,699 585,352
---------- --------- --------
- - -
For diluted earnings per share 37,274,275 34,071,516 34,091,725
========== ========= ========
5. RECONCILIATION OF OPERATING PROFIT/(LOSS) TO OPERATING CASH FLOWS
Six months Six months Year
to 30 to 30 to 31
September September March
1999 1998 1999
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Operating profit/(loss) 170 (1,063) 2,883
Depreciation 225 285 671
Amortisation of goodwill and 284 143 356
intangibles
Profit on disposal of fixed assets (4) - (39)
Increase in debtors (4,041) (1,518) (9,934)
(Decrease)/increase in creditors (221) (251) 1,750
---------- ---------- ----------
- - --
Net cash outflow from operating (3,587) (2,404) (4,313)
activities
========== ========== ==========
6. ANALYSIS OF NET DEBT
At 1 Cash At 30
April
1999 Flow September
1999
(Audited) (Unaudited) (Unaudited)
#'000 #'000 #'000
Cash at bank and in hand 6 179 185
Overdafts (5,105) (2,485) (7,590)
Unsecured loan stock - (2,000) (2,000)
--------- --------- ------------
-- - --
Net debt (5,099) (4,306) (9,405)
========= ========= ============
7. CAPITAL AND RESERVES
Unissued
Called- Share share Profit Goodwil
up share premium capital and loss l write-
capital account account account off Total
reserve
#'000 #'000 #'000 #'000 #'000 #'000
At 1 April 1999 1,694 3,884 - 7,271 (3,602) 9,247
New shares issued 119 2,434 - - - 2,553
Deferred - - 2,587 - - 2,587
consideration
Profit for the - - - 40 - 40
period
-------- ------- -------- -------- ------- -------
- -- -- -- -- --
AT 30 SEPTEMBER 1,813 6,318 2,587 7,311 (3,602) 14,427
1999
======== ======= ======== ======== ======= =======
The unissued share capital account represents the expected value of
the deferred consideration relating to the acquisition of Firman Jack
Limited.
8. SUBSEQUENT EVENT
On 15 November 1999 the Company issued 25,376,467 ordinary shares in a
rights issue raising #26.7 million net of expenses.
END
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