RNS Number:2639P
Cedar PLC
28 December 2001
CEDAR plc
INTERIM RESULTS
for the six months ended 30 September 2001
SUMMARY
* Turnover increased by 277% to #50.8m (2000 #18.4m restated)
* Exceptional costs incurred due to restructuring the business and
provisions against goodwill and investments #16.2m (2000: #nil)
* Net debt at 30 September #31.7m (2000: #5.6m net funds)
* Loss for the period #53.6m (2000: #5.8m restated)
* Cost base reduced in line with reduced revenue expectation
* Significant contract wins over the last three months include New York
State Comptroller (Cedar's largest ever), California State University, BAT
and Regus
* Indicative offer received for the Group, which may or may not lead to an
offer to the shareholders and which the directors believe is likely to be
5p, a substantial discount to the current market price.
CHAIRMAN'S STATEMENT
This has been a difficult period for the Group culminating in the requirement
for the business to be restructured and for additional sources of funding to
be sought.
Financials
Overall group revenues have increased substantially to #50.8m in the six
months to 30 September 2001 (2000: #18.4m restated), largely through the
acquisition of Enterprise Solutions Group ('ESG') in October 2000.
Despite this growth in revenue and management's confidence in the early part
of 2001, in common with many companies in the IT sector, Cedar has
experienced difficult trading conditions in its two main markets, the USA and
the UK. These conditions include lengthening decision cycles and a shift from
licence sales to upgrade licences and managed services.
In addition to a general slowdown in sales over this period to 30 September
2001, the Group also experienced a number of specific adverse changes to the
business that it had in hand at 31 March 2001.
With specific regard to licence sales that were expected to contribute high
margins to the UK, #10m of the business in hand has been lost as a result of
customers experiencing financial difficulties or customer cancellations. A
further #9m has been deferred by customers. In addition, recognition of a
substantial proportion of revenue associated with #14m of business in hand has
been deferred in line with Cedar's decision to recognise revenues in
accordance with US GAAP (Generally Accepted Accounting Principles) or because
the underlying contractual arrangements have been altered in order to produce
a more beneficial long term effect for the Group.
The acquisition and subsequent integration of ESG was a significant task made
more so by coinciding with a slowdown in the US market. As a result, there
was a lower level of productivity and a lower level of cross selling of
software products into the ESG customer base than had been anticipated.
The decline in trading performance has resulted in a post-tax loss for the six
month period ending 30 September 2001 of #53.6m (2000: #5.8m loss restated).
Operating losses before exceptional items and amortisation of goodwill were #
33.8m (2000: #4.7m loss restated).
Exceptional items of #16.2m comprise a charge for re-structuring to address
the issues highlighted above, for exceptional professional and advisory fees
related to the re-structuring of the businesses, for provisions against the
carrying value of goodwill, for losses from provisions against investment in
early stage software companies and for losses in market value of shares held
to hedge the liability to National Insurance Contributions.
The reduction in the Balance Sheet reflects the losses sustained for the
period, with shareholders funds at #53.2m (2000: #80.0m restated). Net debt
at 30 September 2001 was #31.7m (2000: #5.6m net funds).
Operational Review and Re-structuring
Once the likely impact of the deteriorating market conditions was determined,
management implemented a plan to restructure the business, re-aligning the
cost base with the more conservative view of likely revenue and implementing
controls and processes within the Group that would ensure future resource
requirements are matched to monthly forecast revenues.
I have agreed to act as Interim Executive Chairman during the current period
of restructuring whilst the Group considers the possibility of new
appointments to strengthen the Board.
Actions already taken have reduced the anticipated costs to 31 March 2002 by #
11m and total cost reductions of #28m are expected over the 12 months to
September 2002.
These actions reduce costs in line with historically achieved revenues and
future additions to the cost base will be contingent upon achieving an
increase in sales orders. In addition, the use of contractors to supply
services will reduce the fixed cost element ensuring that the Group can more
quickly respond to changes in market conditions.
New revenue and resource management systems and controls are being implemented
to strengthen sales order forecasting and to ensure forecast revenue
determines future resource requirements and therefore cost.
Despite Cedar's current situation and in difficult market conditions, it
continues to win important and sizeable contracts.
In the UK, new implementations of the Group's e-Financials software are being
undertaken by the Central Science Laboratory, Serious Fraud Office, Scottish
Power and Churchill Insurance. Other contracts include the implementation of
Peoplesoft Human Resources (HR) Application for BAT and a managed services
contract for Regus, whereby the Group will manage an increasing amount of the
customer's information technology requirements for a minimum of 3 years. The
contract is worth a minimum of #1.5m.
The Group's international businesses have won new orders with a number of
enterprise customers including United Nations, UBS Warburg , Mahindra British
Telecom, Singapore Telecom and Commercial Bank of Dubai.
In North America, the Group continues to develop its relationship with
Peoplesoft and has recently announced its largest ever contract win with New
York State Comptrollers, for an initial $16.5m estimated to complete over 18
months; additional contracts for California State University in Long Beach and
San Jose; and a contract win of $8m for the implementation of Peoplesoft HR in
the State of Maryland. In addition to Peoplesoft, the Group is extending its
relationship with SAP and has won contracts to implement SAP applications with
State of Utah, Tarrant County and Collier County.
The Group has had some success in selling its own software into North America
with an e-Financials sale to Christian Childrens Fund and Goodwill Industries.
OUTLOOK
Generally the Group continues to have success in the Public, Health, Education
and Financial Services sectors, all of which remain relatively buoyant in
these market conditions.
The Group currently has a contracted order book of #56.2m that is expected to
be recognised as revenue over the next 18 months and a growing pipeline of
forecast sales, including a number of prospective contracts that the Group
believes would be signed in the event that it can clarify its current funding
position.
During this unsettling time, the Group values the loyalty of the customer base
that it has built over the years and also values the continued loyalty and
commitment of its employees.
At 30 September 2001, the Group had net debt of #31.7 million. Since the
period end this has increased to #38.3 million. The Group has no committed
banking facilities and the overdraft is repayable on demand. As a result, at
present, the Group is entirely dependent upon the continued support of its
bank.
The directors recognise that the Group currently does not have sufficient
working capital for its present requirements, that is for at least 12 months
from the date of these interim accounts.
The directors are currently in discussion with a number of interested parties
as a result of which additional financing could become available. One of
these parties has submitted an indicative offer for the Company to the
directors which may or may not lead to a full formal offer being made.
The directors believe that the price per share payable pursuant to any such
offer would be at a level substantially below the Company's current share
price. The directors currently believe the offer is likely to be 5p.
Further information on any subsequent developments will be provided to
shareholders as soon as practicable.
The directors believe that the bank will continue to provide support until
completion of these discussions. However, in the event that these discussions
do not reach a successful conclusion and the outcome is not agreed by
shareholders within a reasonable timeframe, then the directors believe it
unlikely that the Company will be able to secure sufficient new facilities to
meet its commitments as they fall due and, as a result, would be insolvent.
Consequently, the directors would instigate formal insolvency proceedings.
The Group has invested in order to take advantage of the changing needs of the
enterprise computing market. It believes it has managed to secure a market
position that it can capitalise upon given appropriate support and funding.
John Stanley
Chairman
CONSOLIDATED PROFIT & LOSS ACCOUNT
for the six months ended 30 September 2001
Six months ended 30 September 2001 Six months Year
Results Amortisation Consolidated Ended Ended
before of goodwill & profit & 30 31
amortisation* intangibles loss September March
2000 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
As restated
#'000 #'000 #'000 #'000 #'000
Note
Turnover
Continuing 3 50,776 - 50,776 18,357 73,260
operations
Cost of sales (36,944) - (36,944) (9,013) (42,111)
Gross profit 13,832 - 13,832 9,344 31,149
Other operating (54,230) (12,484) (66,714) (15,501) (55,655)
expenses
Operating loss (40,398) (12,484) (52,882) (6,157) (24,506)
The operating
loss may be
analysed as:
Continuing (33,810) (2,861) (36,671) (6,157) (22,230)
operations
before
exceptional
items
Exceptional 4 (6,588) (9,623) (16,211) - (2,276)
items
Continuing (40,398) (12,484) (52,882) (6,157) (24,506)
operations
Share of - - - - (126)
associate's
operating loss
Interest 149 - 149 505 672
receivable
Interest payable (997) - (997) (148) (483)
and similar
charges
Loss on ordinary (41,246) (12,484) (53,730) (5,800) (24,443)
activities
before taxation
Tax on loss on 5 126 - 126 - 374
ordinary
activities
Loss on ordinary (41,120) (12,484) (53,604) (5,800) (24,069)
activities after
taxation
Minority - - - - 129
interests
Loss for the (41,120) (12,484) (53,604) (5,800) (23,940)
period
Loss per 6 (53.5)p (16.3)p (69.8)p (8.8)p (33.8)p
ordinary 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 2001
30 30 31
September September March
2001 2000 2001
(Unaudited) (Unaudited) (Audited)
As restated
#'000 #'000 #'000
Fixed assets Note
Intangible assets 88,967 64,729 108,677
Tangible assets 8,262 3,952 8,001
Investments 2,200 7,041 4,632
99,429 75,722 121,310
Current assets
Debtors: falling due within one year 38,412 39,721 44,251
Cash at bank and in hand 1,969 5,597 3,679
40,381 45,318 47,930
Creditors: Amounts falling due within (74,197) (20,335) (43,250)
one year
Net current (liabilities)/assets (33,816) 24,983 4,680
Total assets less current liabilities 65,613 100,705 125,990
Provisions for liabilities and charges (12,456) (20,737) (18,474)
Net assets 53,157 79,968 107,516
Capital and reserves
Called-up share capital 3,840 3,288 3,839
Share premium account 9 136,954 73,958 136,929
Unissued share capital 9 - 2,287 685
Profit and loss account 9 (87,637) 306 (33,937)
Equity shareholders' funds 53,157 79,839 107,516
Equity minority interest - 129 -
Total capital employed 53,157 79,968 107,516
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2001
Six months Six months Year
to to to
30 30 31
September September March
2001 2000 2001
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Note
Net cash outflow from operating 7 (24,746) (13,953) (22,666)
activities
Returns on investments and servicing of (848) 357 189
finance
Taxation 1,645 (1,256) (3,317)
Capital expenditure and financial (2,788) (7,114) (11,174)
investment
Acquisitions (1,202) (5,400) (62,540)
Cash outflow before use of liquid (27,939) (27,366) (99,508)
resources and financing
Management of liquid resources - (4,003) (4,002)
Financing 26 41,325 103,931
(Decrease)/increase in cash (27,913) 9,956 421
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the six months ended 30 September 2001
Six months Six months Year
to to to
30 30 31
September September March
2001 2000 2001
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Note
(Decrease)/increase in cash in the (27,913) 9,956 421
period
Foreign exchange (19) - 130
Change in net (debt)/cash resulting from (27,932) 9,956 551
cash flows
Net debt at the start of the period (3,808) (4,359) (4,359)
Net (debt)/funds at the end of the 8 (31,740) 5,597 (3,808)
period
NOTES TO THE INTERIM STATEMENT
for the six months ended 30 September 2001
1. GOING CONCERN
At 30 September 2001, the Group had net debt of #31.7 million. Since the
period end this has increased to #38.3 million. The Group has no committed
banking facilities and the overdraft is repayable on demand. As a result, at
present, The Group is entirely dependent upon the continued support of its
bank.
The directors recognise that the Group currently does not have sufficient
working capital for its present requirements, that is for at least 12 months
from the date of these interim accounts.
The directors are currently in discussion with a number of interested parties
as a result of which additional financing could become available. One of
these parties has submitted an indicative offer for the Company to the
directors which may or may not lead to a full formal offer being made.
The directors believe that the price per share payable pursuant to any such
offer would be at a level substantially below the Company's current share
price. The directors currently believe the offer is likely to be 5p.
Further information on any subsequent developments will be provided to
shareholders as soon as practicable if the discussions proceed.
The directors believe that the bank will continue to provide support until
completion of these discussions. However, in the event that these discussions
do not reach a successful conclusion and the outcome is not agreed by
shareholders within a reasonable timeframe, then the directors believe it
unlikely that the Company will be able to secure sufficient new facilities to
meet its commitments as they fall due and, as a result, would be insolvent.
Consequently, the directors would instigate formal insolvency proceedings.
On the basis of their discussions with these interested parties and its
bankers, the directors believe it is appropriate to adopt the going concern
basis. The financial statements do not include any of the adjustments which
might be necessary if the business were to cease trading.
2. 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 2001.
The Group policy for revenue was changed during the year to 31 March 2001 to
follow the revenue recognition principles of US GAAP. The effect of the change
in the accounting policy on the results was to defer recognition of licence
revenues and associated direct costs into future accounting periods. The
precise effect cannot be quantified due to changes in commercial practice on
both reseller and end user sales. The comparative figures for the six months
ended 30 September 2000 have been restated, in line with this change.
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 2001 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
shortly. Further copies are available from the Company's Registered Office:
Cedar Plc, Cedar House, 78 Portsmouth Road, Cobham, Surrey KT11 1HY.
3. TURNOVER
Turnover from continuing activities can be analysed as follows:
Six months to Six months to Year to
30 September 30 September 31 March
2001 2000 2001
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Classes of business
Software products and services:
Licences 4,015 6,130 11,536
Consultancy and training 41,633 8,434 53,266
Maintenance 4,217 3,308 7,347
Other 911 485 1,111
50,776 18,357 73,260
Six months to Six months to Year to
30 September 30 September 31 March
2001 2000 2001
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Geographical segments
United Kingdom 18,951 16,384 39,685
North America 24,860 - 23,726
Rest of World 6,965 1,973 9,849
50,776 18,357 73,260
4. EXCEPTIONAL ITEMS
Within operating expenses are the following exceptional items:
Six months to Six months to Year to
30 September 30 September 31 March
2001 2000 2001
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Restructuring costs 2,942 - -
Professional fees 725 - -
Impairment of goodwill 9,623 - -
Write down of investments 2,204 - -
Write down in value of own shares 717 - 2,812
Write back of NI provision - - (536)
16,211 - 2,276
5. TAX ON LOSS ON ORDINARY ACTIVITIES
Six months to Six months to Year to
30 September 30 September 31 March
2001 2000 2001
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Corporation tax at 30% - - (1,726)
Adjustment in respect of prior year - - 1,726
Overseas taxation (126) - -
Deferred taxation - - (374)
(126) - (374)
6. LOSS PER SHARE
The calculations of earnings per share are based on the following losses and
number of shares:
Six months Six months Year
to to to
30 30 31
September September March
2001 2000 2001
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Loss on ordinary activities after taxation (41,120) (4,525) (19,631)
before amortisation
Amortisation of intangible assets and (12,484) (1,448) (4,309)
goodwill
Loss on ordinary activities after taxation (53,604) (5,973) (23,940)
Weighted average number of shares:
Six months to Six months to Year to
30 September 30 September 31 March
2001 2000 2001
Number of Shares Number of Shares Number of Shares
For basic earnings per share 76,815,006 65,634,589 70,809,685
7. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOW
Six months to Six months to Year to
30 September 30 September 31 March
2001 2000 2001
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Operating loss (52,882) (6,157) (24,506)
Depreciation 1,659 949 2,634
Amortisation of goodwill and intangibles 2,861 1,448 4,300
Provision against own shares 717 - 2,812
Write off loans and investments 2,204 - -
Impairment of goodwill 9,623 - -
Loss/(profit) on disposal of fixed 32 (2) 49
assets
Decrease/(increase) in debtors 2,823 (5,427) (3,785)
Increase/(decrease) in provisions 749 - (536)
Increase/(decrease) in creditors 7,468 (4,764) (3,634)
Net cash outflow from operating (24,746) (13,953) (22,666)
activities
8. ANALYSIS OF NET DEBT
At 1 April Cash At 30 September
2001 flow 2001
(Audited) (Unaudited) (Unaudited)
#'000 #'000 #'000
Cash at bank and in hand 3,679 (1,710) 1,969
Overdrafts (7,487) (26,222) (33,709)
Net debt (3,808) (27,932) (31,740)
9. OTHER RESERVES
Unissued Profit and Share
Share capital loss premium
account account account
#'000 #'000 #'000
At 1 April 2001 685 (33,937) 136,929
Currency translation - (96) -
Share issue - - 25
Transfer to provisions (685) - -
Loss for the period - (53,604) -
At 30 September 2001 - (87,637) 136,954
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