RNS Number:8978U
Cedar Group PLC
29 November 2000
CEDAR GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000
Cedar Group plc, the software and services group, today announced interim
results in line with management expectations. Cedar has built a portfolio of
open systems, best of breed products and a global distribution network that
enables it to exploit the growing opportunity in the enterprise systems
market.
Highlights
* Turnover increased by 105% to #23.9m (1999 : #11.7m)
* licence revenues up by 175% to #11.7m
* consultancy and services revenues up by 126% to #8.4m
* maintenance revenues up by 16% to #3.3m
* Pre-tax profits for the period, before amortisation, were #0.6m (1999: #
0.3m).
* Acquisition strategy has delivered critical mass
* acquisition of US-based ESG for #50.9m cash doubles headcount
* acquisition of Applied Knowledge Solutions (AKS) for up to #7m extends
product offering.
* Significant contract wins including ASP deal with Shell and AKS contract
with The Post Office.
* Cedar selected as supplier to Siemens' worldwide archiving project.
* Current trading in line with market expectations.
Mike Harrison, Managing Director of Cedar, commented:
"We are very pleased to report a doubling of turnover and continued
profitability in addition to a heavy investment programme. The completion of
the ESG acquisition last month fundamentally repositions Cedar and gives the
company the requisite critical mass to compete on a global scale. The second
half has started well for both existing and acquired businesses, and we expect
the full year to meet market expectations."
Enquiries:
Cedar Tel: 01932 584 000
Mike Harrison, Managing Director
Mike Hosie, Finance Director
Financial Dynamics Tel: 020 7831 3113
Giles Sanderson / Ben Atwell
Financial Review
The Group's results were in line with management expectations, and at the
half-year produced a pre-tax profit of #0.6m before amortisation (I H 2000 : #
0.1m).
Although revenue grew 105%, the Group invests heavily in the first half of a
year to ensure adequate resource to meet the full year business plan. In the
first six months of the year headcount increased by 120 at a cost of #3.5m,
and expenditure of #1.1m was incurred in respect of the development of e-Cedar
(ASP business) and the commercialisation of the AKS proposition.
This business profile is consistent with previous years and is a feature of a
people-based business with high growth rates.
Turnover I H 2001 I H 2000
#m #m
Total turnover 23.9 11.7 up 105%
Licence sales 11.7 4.2 up 175%
Consultancy and services 8.4 3.7 up 126%
Maintenance 3.3 2.8 up 18%
Other 0.5 0.9
Sales continue to be well balanced with licence sales contributing 49% of
total sales, consistent with the previous year, whilst consultancy and service
revenues account for 35% of all sales, an increase of 3% over the previous
year. Maintenance revenues accounted for 14% of sales in the first six months.
Gross Margin was maintained at a similar level to the previous year at 73% (I
H 2000 : 74%).
Operating Costs for the six months increased by 32% to #17.3m compared to the
previous six months reflecting the increased investment for future growth.
Amortisation charge for the six months of #1.4m relates primarily to the
write-off of goodwill arising upon acquisition. The increase results from the
acquisitions of Orbis Limited, Cipher Systems Limited and Applied Knowledge
Solutions.
Tax has been provided on profits at a rate of 30% compared to 39% last
financial year.
Earnings per share are 0.6p (I H 2000 : 0.1p) before amortisation and (1.6)p
(I H 2000 : profit 0.1p) after amortisation.
Cashflow & Balance Sheet
The balance sheet position at 30 September is improved over the year end, from
Cedar's acquisition programme and an institutional placing which raised #40.2m
in April. In the six months, operating cash is a net outflow of #13.8m. The
main factors are EBITDA (positive #1.2m) offset by increases in trade debtors
(#2.5m) and in accrued revenue (#3.7m) together with a reduction in accruals
for the acquisition of SBA and Ansaback in March (#4.4m). At 30 September
Cedar had cash balances of #5.6m.
After the balance sheet date there have been significant changes to further
strengthen Cedar's liquidity. The acquisition of ESG for #50.9m and rights
issue raising #63.5m net of expenses has been augmented by a committed bank
facility of #20m for working capital and bolt-on acquisitions.
There are a number of underlying causes for an increase in trade debtors and
accrued revenue, especially the high growth rates in the business; the
distorting effect of heavy seasonality; and the high proportion of licence
sales in revenue. Commercial practice in the UK is different from the US
market where it is customary to pay in advance for software, and subsequently
delayed payment is used as a method of project control by customers. Despite
these long cycles, Cedar has a good record of ultimate collection and has
never needed to write back revenues as a result of faulty software, and no
material bad debts have been experienced.
Revenue Recognition
Revenue from licence sales is recognised on binding customer commitment,
provided that the delivery has occurred, the price is determinable, and
installation is assured due to the warranted nature of the software. Cedar is
bringing its UK business in line with its US business with respect to channel
revenues, which represent approximately 5% of the company's turnover. This
means that channel partners will pay Cedar on receipt of software in future
rather than when channel partners sell the software on. This amendment to its
commercial terms will be effective before March 2001. Revenue from
installation and training services is booked as the work is delivered, with
losses provided on fixed fee contracts. Maintenance revenue is deferred and
recognised over the term of the maintenance contract. This revenue recognition
policy is fully in line with UK GAAP, and Cedar believes it is a appropriate
policy.
Operational Review
Revenue by Region
Revenue continues to be derived primarily from the UK although strong growth
is now being seen from the US where revenue grew by 136% over the same period
last year.
Geographic Segments Revenue as a % of total Group Revenue
I H 2001 I H 2000 Growth
United Kingdom 91.7% 92.9% 102%
Rest of World 8.3% 7.1% 136%
Revenue from Acquisitions
In the first half revenue of #0.6m was generated from acquisitions made in the
period.
The good balance between organic revenue and revenue growth from acquisition
continues.
Revenue from acquisitions made in
past 12 months to 30 September 2000 (excludes ESG) 29%
Revenue from original operations (organic) 71%
The proportion of revenue from original operations is achieved within the
context of an organic growth in excess of that of the market generally.
Contract Wins
The Group continues to compete successfully in the UK where customers such as
Hampshire Constabulary and the Metropolitan Police extend its presence in the
public sector. Implementation of the solution to the Metropolitan Police is
already underway using ESG skills and resources combined with Cedar and Orbis
product offering. In the commercial market, the Application Service Provider
(ASP) division has made significant progress in the oil and gas industry
through the provision of eFinancials to Twister (a joint venture between Shell
and Chase Manhattan Bank), and more recently a contract with e(2)TECH (a joint
venture company between Shell and Baker Hughes). Other contracts in the
commercial sector include Powergen, and Ampco (an international gas production
company) who have selected Cedar's products as the basis of their future
enterprise systems.
In the United States good progress has also been made. New customers include
e2i (previously Entercom), Tri-Delta, Boston Federal Savings Bank and the
Christian Children's Fund. In addition to these the first major US customer
for eContent (Data Migration) has been signed with the Automobile Club of
Southern California, one of the AAA insurance companies who operate in this
rapidly developing market following its recent deregulation.
Key Partners
During the period, Cedar has developed relationships with key partners with
complementary skills and products. Through the acquisition of ESG Cedar has
gained a valuable new relationship with Peoplesoft. Additionally, the Company
continues to develop its successful relationship with Anite plc with the
establishment of a new service to the tour operator market. Cedar is also
making good progress in North America where the relationship with Recognition
Systems plc extends its capability in the growing CRM market.
Acquisitions
Cedar acquired Applied Knowledge Solutions in June from British Gas
Technologies for up to #7m to develop the Company's Knowledge Management
offering. A professional practice has been established to develop a commercial
proposition for the knowledge management market based upon enterprise portals
and intranets. Since acquiring this business, Cedar has won an initial
contract with the Post Office for a pilot knowledge management system.
In August, Cedar acquired Cipher Systems Limited, the Canadian services
company. Cipher's business is focused on delivery capability around Customer
Relationship Management (CRM) and Enterprise Resource Management (ERM) into
Canada and the west coast of the United States.
In September, Cedar acquired Orbis Limited for up to #4.8m. Orbis provides
additional software implementation skills in addition to an Oracle-based Human
Resources and Rostering product. This is being sold into the UK Police Force
and Public Services market where Cedar already has a large customer base.
ESG Acquisition
In October, Cedar acquired US-based ESG, the global enterprise implementions
company, for #50.9m. The acquisition established a significant presence in the
US for Cedar and presents substantial cross-selling opportunities. The
integration of ESG continues with evidence of a successful early integration
becoming apparent:
June
Current
Pre-Acquisition
Consultant utilisation 62-65% 68%
Average charge out rate $155 $155
Backlog of contracted revenue $43m #55m
Weighted average pipeline $57m #53m
Revenue visibility $100m $108m
Attrition rates 25.5% 14.5%
The global implementation capability of ESG has contributed directly to
Siemens AG's selection of Cedar as a supplier in the implementation of a
worldwide archiving solution. Cedar had previously succeeded in selling and
implementing BusinessFlow, its document management and business process
software, to Siemens Power and Energy in Washington State and was able to
demonstrate a worldwide implementation capability following the acquisition of
ESG. This is an important demonstration of how Cedar's strategy of combining
best of breed products with global implementation capabilities is likely to be
of increasing interest to multi-national enterprises.
Current Trading & Future Prospects
It is Cedar's objective to be a leading supplier of new generation enterprise
systems. Its offering will comprise software products and infrastructure,
modern knowledge and content systems, world-class implementation services and
business consultancy.
Enterprise computing is a global and growing opportunity, and Cedar is now a
global player. Over the past three years, the Company has been developing in
line with the market. It has acquired a portfolio of open systems products
that compete well within their markets and where there is no dominant
competitor.
We are very pleased to report a doubling of turnover and continued
profitability in addition to a heavy investment programme. The completion of
the ESG acquisition last month fundamentally repositions Cedar and gives the
company the requisite critical mass to compete on a global scale. The second
half has started well for both existing and acquired businesses, and we expect
the full year to meet market expectations.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 September 2000
Six months ended 30 September 2000 Six months Year
Amortisation ended ended
Results before of goodwill Consolidated
& profit & loss 30 31 March
amortisation + intangibles September
(Unaudited) 1999 2000
(Unaudited) (Unaudited)
(Unaudited) (Audited)
#'000 #'000 #'000 #'000 #'000
Note
Turnover
Existing 23,367 - 23,367 11,688 32,300
operations
Acquisitions 551 - 551 - 4,014
Continuing 2 23,918 - 23,918 11,688 36,314
operations
Cost of (6,386) - (6,386) (2,291) (8,041)
sales
Gross profit 17,532 - 17,532 8,697 27,913
Other (17,293) - (17,293) (8,243) (20,791)
operating
expenses
NIC payable - - - - (536)
on
unapproved
options
Amortisation - (1,448) (1,448) (284) (961)
of goodwill
&
intangibles
Total (17,293) (1,448) (18,741) (8,527) (22,288)
operating
expenses
Operating 239 (1,448) (1,209) 170 5,625
profit/
(loss) -
continuing
operations
Investment 505 - 505 142 173
income
Interest (148) - (148) (257) (969)
payable and
similar
charges
Profit/ 596 (1,448) (852) 55 4,829
(loss) on
ordinary
activities
before
taxation
Tax on 3 (173) - (173) (15) (2,248)
profit/
(loss) on
ordinary
activities
Profit/ 423 (1,448) (1,025) 40 2,581
(loss) on
ordinary
activities
after
taxation
Dividends - - - - -
paid and
proposed
Retained 423 (1,448) (1,025) 40 2,581
profit for
the period
Earnings per 4 0.6p (2.2)p (1.6)p 0.1p 5.5p
ordinary
share
Diluted 4 0.6p (2.1)p (1.5)p 0.1p 5.2p
earnings 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 2000
30 30 31 March
September September
2000 1999 2000
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Fixed assets Note
Intangible assets 64,729 13,363 47,746
Tangible assets 3,952 1,438 3,571
Investments 7,041 3,868 1,321
75,722 18,669 52,638
Current assets
Debtors: falling due within 43,502 21,661 30,162
one year
Debtors: falling due after 1,780 - 2,642
one year
Cash at bank and in hand 5,597 185 3,920
50,879 21,846 36,724
Creditors: Amounts falling
due (21,121) (11,760) (26,207)
within one year
Borrowings - (9,590) -
Net current assets 29,758 496 10,517
Total assets less current 105,480 19,165 63,155
liabilities
Creditors: Amounts falling - (916) -
due after more than one year
Provisions for liabilities (20,737) (3,822) (18,528)
and charges
Net assets 84,743 14,427 44,627
Capital and reserves
Called-up share capital 7 3,288 1,676 3,115
Share premium reserve 7 73,958 3,311 32,806
Other reserves 7,368 1,811 8,537
Equity shareholders' funds 7 84,614 6,798 44,458
Equity minority interest 7 129 - 169
Total capital employed 7 84,743 6,798 44,627
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2000
Six months Six months Year to
to to
30 30 31 March
September September
2000 1999 2000
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Note
Net cash outflow from 5 (13,780) (3,587) 856
operating activities
Returns on investments and 357 (98) (796)
servicing of finance
Taxation (1,429) (205) (871)
Capital expenditure and (7,114) (2,500) (2,307)
financial investment
Acquisitions (5,400) (2,443) (28,169)
Equity dividends paid - (553) (542)
Cash outflow before use of (27,366) (9,386) (31,829)
liquid resources
and financing
Management of liquid (4,003) 2,527 2,526
resources
Financing 41,325 4,553 30,043
Increase/(decrease) in cash 9,956 (2,306) 740
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the six months ended 30 September 2000
Six months Six months Year to
to to
30 30 31 March
September September
2000 1999 2000
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Note
Increase/(decrease in) cash 9,956 (2,306) 740
in the period
Cash inflow from increase in - (2,000) -
debt financing
Change in net debt resulting 9,956 (4,306) 740
from cash flows
Net debt at the start of the (4,359) (5,099) (5,099)
period
Net cash/(debt) at the end 6 5,597 (9,045) (4,359)
of the period
NOTES TO THE INTERIM STATEMENT
for the six months ended 30 September 2000
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 2000.
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 2000 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 months Six months Year to
to to
30 30 31 March
September September
2000 1999 2000
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Classes of business
Software products and
services:
Licences 11,691 4,246 18,104
Consultancy and training 8,434 3,730 10,844
Maintenance 3,308 2,793 6,066
Other 485 919 1,300
23,918 11,688 36,314
Geographical segments
United Kingdom 21,945 10,853 33,294
Rest of World 1,973 835 3,020
23,918 11,688 36,314
3. TAX ON PROFIT ON ORDINARY ACTIVITIES
Six months Six months Year to
to to
30 September 30 September 31 March
2000 1999 2000
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Corporation tax at 30% 173 (14) 2,217
Deferred taxation - 29 31
173 15 2,248
4. EARNINGS PER SHARE
The calculations of earnings per share are based on the following profits and
number of shares:
Six months Six months Year to
to to
30 30 31 March
September September
2000 1999 2000
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Profit on ordinary activities 423 324 3,542
after taxation before amortisation
Amortisation of intangible (1,448) (284) (961)
assets and goodwill
(Loss)/profit on ordinary (1,025) 40 2,581
activities after taxation
Weighted average number of shares:
Six months to Six months to Year to
30 September 30 September
2000 1999 31
March
Number of Number of 2000
Shares Shares
Number
of
Shares
For basic 65,634,589 35,891,175 47,198,161
earnings per
share
Exercise of 4,970,349 1,383,100 2,730,948
share options
For diluted 70,604,938 37,274,275 49,929,109
earnings per
share
5. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO OPERATING CASH FLOWS
Six months Six months Year to
to to
30 30 31 March
September September
2000 1999 2000
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Operating (loss)/profit (1,209) 170 5,625
Depreciation 949 225 584
Amortisation of goodwill and 1,448 284 961
intangibles
Profit on disposal of fixed (2) (4) (7)
assets
Increase in debtors (10,988) (4,041) (10,606)
(Decrease)/increase in - - 536
provisions
(Decrease)/increase in (3,978) (221) 3,763
creditors
Net cash (outflow)/inflow (13,780) (3,587) 856
from operating activities
6. ANALYSIS OF NET DEBT
At 1 April Cash At 30
September
2000 flow 2000
(Audited) (Unaudited) (Unaudited)
#'000 #'000 #'000
Cash at bank and in 3,920 1,677 5,597
hand
Overdrafts (8,279) 8,279 -
Net debt (4,359) 9,956 5,597
7. OTHER RESERVES
Goodwill Profit Unissued Total Share
and
write-off loss share capital other premium Minority
reserve account account reserves account interest
#'000 #'000 #'000 #'000 #'000 #'000
At 1 April (3,602) 9,852 2,287 8,537 32,806 169
2000
Currency - (144) - (144) - -
translation
Share issue - - - - 41,152 -
Minority - - - - - (40)
interest
released
Loss for - (1,025) - (1,025) - -
the period
At 30 (3,602) 8,683 2,287 7,368 73,958 129
September
2000
8. SUBSEQUENT EVENTS
On 9 October 2000 the Company issued 10,964,126 ordinary shares in a rights
issue, raising #63.5 million net of expenses.
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