Embargoed Release: 07:00hrs Monday 13 June 2005
Matrix Communications Group plc
("Matrix" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 APRIL 2005
Matrix Communications Group Plc, the supplier of high performance IT network
solutions to the public and private sectors in the UK, is pleased to present
its unaudited results for the six month period ended 30 April 2005.
Highlights
* Turnover up over 500% to �22.5m (2004 - �3.7m)
* Gross Profit up 400% to �8.0m (2004 - �1.6m)
* Operating profit, excluding an amortisation charge of �0.6m for the period,
up 210% to �1.9m (2004 - �0.6m)
* EBITDA up over 200% to �2.2m (2004 - �0.7m)
* Secured a significant global contract for the provision of the Groups'
unique leading edge content filtering software with a global mobile
wireless operator
* Raised �7.5m before expenses from the issue of new equity
* Successfully completed a further 3 acquisitions
* Benefited from the implementation of a new divisional structure and
corporate branding
Ian Smith, CEO, commented:
"I am very pleased to report on what has been yet another period of significant
progress for the Group. As well as completing three more key and value
enhancing acquisitions we have been successful in completing the final stages
of our initial goal to create the UK's leading integrated high performance
technology Group. In doing so we have established ourselves as the defacto
route to market for leading edge technologies - whether that be as a
distributor through our partner sales division or as an end user facing
integrator. The key to this is that having implemented our divisional structure
and having made further progress on the integration of our acquisitions we
believe that we have overcome the initial hurdles we faced as a new entrant
into our market space. Looking forward we can now expect to reap the rewards of
the achievements we have made over the past year and a half as we capture the
additional cost savings available to us and begin the next stage of our
development which will be focussed on aggressive organic growth both here in
the UK and on a wider basis as we begin to penetrate overseas markets. Looking
towards our intended overseas expansion I am particularly excited about the
prospects for our newly formed mobile division, Fujin Technology, and very much
looking forward to reporting on our progress in the future."
Further Information:
Ian Smith, CEO
Matrix Communications Group Plc: 0870 737 5000
Andrew Tan
Hansard Communications Plc: 020 7245 1100
CHAIRMAN'S STATEMENT
Introduction
During the six months to 30 April 2005, the Group focussed its efforts on
finalising its divisional structure and has begun to leverage its established
position as a provider of leading edge high performance IT network solutions.
Results and Financial Review
It is with great pleasure that we present our unaudited interim results for the
six months ended 30 April 2005. This period is the fourth reporting period
since Matrix joined the Group as a start-up in March 2003. In line with our
previous reports we have continued to make substantial progress through the
period.
Group turnover increased to �22.5m (2004 - �3.7m) and the profit before tax to
�1.15m (2004 - �0.63m). The profit before tax includes a charge of �0.59m for
amortisation of goodwill arising from acquisitions (2004 - �0.03m). Earnings
per share increased from 1.47p per share in 2004 to 2.03p per share in this
period, representing an increase of 38%.
The results are absolutely in line with the Group's expectations for the first
half of the year. As the effect of cost savings already implemented, coupled
with additional cost savings realised through the consolidation of our offices
from 8 to 4, plus a substantial contribution from Fujin in the second half is
seen, we can all look forward to a greater level of profitability.
Many new customers were added across the Group during the period and we are
beginning to see the real benefit of having multiple disciplines within the
Group as the uptake in cross selling is increased. While there have been many
customer wins the Group has adopted a position of officially now only
announcing wins that are in excess of �1m due to the number of customer wins
below this level. Of course we will still make the lesser value customer wins
available via short releases and case studies on our website.
While it seems all of our peers are suffering with margin pressure we are very
pleased with the continued level of GP across our distribution and integration
divisions at 32% and 47% respectively. As Fujin commences its contribution to
the Group our expectation is that the GP from this division will be between 35%
and 40%.
Earnouts
During the period, two of the earlier acquisitions, namely Bedrock and Decorum
successfully completed their earnouts with the former exceeding sales and
profit targets by over 50% and 150% respectively and the latter by over 20% and
40% respectively. Completion of the earnouts has allowed the changes necessary
to achieve full and effective integration within the division to be made
providing the Group with the opportunity to capture further operational cost
savings.
The overperformance of the subsidiaries in the achievement of their earnouts
has also given the Board comfort in the carrying value of goodwill in the
balance sheet.
Trading divisions
Following the award of a global contract from a wireless operator to provide a
content filtering service across its UK and overseas subsidiaries, it was
decided to establish a third division to the existing integration and partner
sales divisions, namely Fujin Technology. Under the direction of Peter
Drinkwater, this division will seek to exploit further the many opportunities
both at home and overseas in the mobile market for security services. David
Grant will now manage the Integration Division.
Acquisitions
On 31 January 2005, �7.5m less expenses was raised from the placing of
3,750,000 new ordinary 10p shares at 200p per share with institutional
investors for planned acquisitions.
During the six month period three further acquisitions were completed, namely
Network Partners Ltd, Equip Technology Ltd and the operating subsidiaries of
Harrier Group Plc.
Since acquisition, Network Partners, Equip Technology and Norwood Adam Systems,
have performed above the levels required to achieve the deferred consideration
payable to them and the Board has therefore decided to release the vendors from
the specific performance targets in order to allow full integration (and the
resultant cost savings) to be achieved in the following months.
Customer views
In a period when a number of our peers have reported challenging IT service
environments, we have delivered exceptional year on year organic growth. This
growth can be seen at a turnover level and is also reflected in our retained
profits. Indeed the profit growth has enabled us to substantially invest into
our sales and engineering teams with the belief that this will further
accelerate our position over the next 12 months.
The company believes that this growth is the best testament of the Group's
differentiated product strategy and the real value that we bring to our
customer base. By focussing on leading edge technologies we have been able to
retain our differentiated position and thereby avoid the margin pressure
identified elsewhere. Equally this field of specialisation is the area of our
industry that is demonstrating the highest growth potential, with Cisco's own
advanced technology group showing 66% year on year growth. This area of Cisco's
product portfolio is identical to the areas of expertise that we bring to our
customers. Clear areas of growth for the Group will come from additional VoIP
and Network security sales with perhaps the greatest opportunity deriving from
the work conducted within the newly created Fujin Technology business division.
Indeed this division now has a clear objective of taking its own unique skills
into the International arena and establishing sales opportunities overseas.
Summary and Outlook
Our first half of FY05 has seen much activity not least of all;
� 3 acquisitions
� Implementation of divisional structure and branding
� Cost saving initiatives
� Emphasis on sales with the creation of a number of new sales and engineering
roles
� Identification and planned launch of exciting new technologies in H2 FY05
Our view is that the market place will continue to see consolidation and the
Group intends to continue its participation in the appropriate circumstances.
The recent deals with Xpert/Redstone, Kingston/Omnetica and Prime/2E2 are
evidence of such. The traditional Cisco partners are seeing ever increasing
pressure on their margins and in an attempt to deal with this margin pressure
these entities will have to regard merger/acquisition as the only way to
financially engineer their way to sustainability and profit. We also expect
that Telecom companies will seek to recoup their sunk cost in network
infrastructure by exploiting value added services in Local Area Networks, as
evidenced in the recent deal between BT and Skynet. Consequently we expect that
further consolidation activity will become more expensive in the short term.
In the meantime the Board is confident that the payback for the effort invested
in the first 6 months will be delivered in the second half when all
acquisitions will be contributing for the full period and we look forward to
reporting positively for our fifth period as the enlarged Matrix Group.
Alan Watkins
Chairman
Matrix Communications Group Plc
Consolidated Profit and Loss Account for six months ended 30 April 2005
Six months Six months Year to 31
to 30 April to 30 April October
2005 2004 2004
(unaudited) (unaudited) (audited)
� � �
Turnover 22,527,049 3,696,999 11,134,827
Cost of sales (14,520,328) (2,056,548) (6,322,870)
Gross profit 8,006,721 1,640,451 4,811,957
Administrative expenses (6,717,011) (1,024,760) (3,590,594)
Operating profit 1,289,710 615,691 1,221,363
Profit on disposal of subsidiary - 19,684 -
Profit before interest and 1,289,710 635,375 1,221,363
taxation
Interest receivable 29,037 - 13,084
Interest payable (169,413) (1,397) (22,024)
Profit on ordinary activities 1,149,334 633,978 1,212,423
before taxation
Corporation tax (482,082) (190,194) (153,414)
Profit after taxation 667,252 443,784 1,059,009
Minority interest 0 (84,398) 85,910
Profit for the financial period 667,252 359,386 1,144,919
Earnings per share (pence) 2.03 1.47 3.94
Matrix Communications Group Plc
Consolidated Balance Sheet as at 30April 2005
As at As at As at 31
October
30 April 200 30 April 2004
5 2004
(audited)
(unaudited) (unaudited)
� � �
Fixed Assets
Tangible assets 1,610,625 35,749 689,047
Intangible assets 33,263,750 2,282,779 10,857,547
34,874,375 2,318,528 11,546,594
Current assets
Stocks 1,956,137 324,417 464,785
Debtors 15,953,829 2,851,047 4,399,867
Cash at bank and in hand 1,034,573 1,897,578 312,680
18,944,539 5,073,042 5,177,332
Creditors: amounts falling due (28,547,619) (2,854,254) (6,994,884)
within one year
Net current (liabilities) / assets (9,603,080) 2,218,788 (1,817,552)
Total assets less current 25,271,295 4,537,316 9,729,042
liabilities
Creditors: amounts falling due (6,000,000) - -
after one year
Minority interest - (64,485) -
Net assets 19,271,295 4,472,831 9,729,042
Capital and reserves
Called up equity share capital 3,539,720 2,759,274 2,855,068
Share premium account 12,824,915 3,727,190 4,752,074
Shares to be issued 3,467,508 - 3,350,000
Profit and loss account (560,848) (2,013,633) (1,228,100)
19,271,295 4,472,831 9,729,042
Matrix Communications Group Plc
Group Cash Flow Statement for the period ended 30 April 2005
Six months Six months Year to 31
to 30 April to 30 April October
2005 2004 2004
(unaudited) (unaudited) (audited)
� � �
Net cash (outflow) / inflow from (563,917) 40,001 (696,564)
operating activities
Returns on investments and
servicing of finance
Interest paid (169,413) (1,397) (16,007)
Interest received 29,037 - 13,083
Interest element of finance leases - - (8,543)
Net cash outflow from returns on (140,376) (1,397) (11,467)
investments and servicing of
finance
Taxation 5,392 - (33,538)
Capital expenditure and financial
investment
Payments to acquire tangible fixed (515,447) (33,230) (182,527)
assets
Receipts from sale of fixed assets 49,270 - -
Net cash outflow from capital (466,177) (33,230) (182,527)
expenditure
Acquisitions and disposals
Payments to acquire investments in (11,797,447) (741,274) (2,703,433)
subsidiary undertakings
Cash in subsidiaries at 3,400,604 147,413 887,300
acquisition
Receipts from sale of business - - 7,500
Net cash outflow from acquisitions (8,396,843) (593,861) (1,808,633)
and disposals
Net cash outflow before financing (9,561,921) (588,487) (2,732,729)
Financing
Bank loans advanced 7,000,000 - -
Other loans repaid (3,753,099) - -
Issue of equity share capital 375,000 267,857 267,857
Share premium on issue of equity 7,125,000 2,057,143 1,939,471
shares
Capital element of finance leases (32,000) - (33,695)
Net cash inflow from financing 10,714,901 2,325,000 2,173,633
Increase/ (decrease) in cash 1,152,980 1,736,513 (559,096)
Matrix Communications Group Plc
Group Cash Flow Statement for the period ended 30 April 2005
Reconciliation of operating results to net cash (outflow) / inflow from
operating activities
Six months Six months Year to 31
to 30 April to 30 April October
2005 2004 2004
(unaudited) (unaudited) (audited)
� � �
Operating Profit 1,289,710 635,375 1,221,363
Depreciation & amortisation 897,734 59,008 633,031
Profit / (loss) on disposal of 3,920 - (23,185)
fixed assets
(Increase) / decrease in stocks (344,608) (48,790) 188,320
Increase in debtors (9,299,460) (2,687,730) (1,035,529)
Increase / (decrease) in creditors 6,888,787 2,082,138 (1,680,564)
Net cash (outflow) / inflow from (563,917) 40,001 (696,564)
operating activities
Reconciliation of net cash flow to movement in net debt
Six months Six months Year to 31
to 30 April to 30 April October
2005 2004 2004
(unaudited) (unaudited) (audited)
� � �
Increase / (decrease) in cash in 1,152,980 1,736,513 (559,096)
the period
Loans advanced (7,000,000) - -
Cash outflow in respect of finance 32,000 - 33,695
leases
Change in net debt resulting from (5,815,020) 1,736,513 (525,401)
cashflow
New finance leases - - (91,100)
Change in net debt (5,815,020) 1,736,513 (616,501)
Net funds at the start of the (455,436) 161,065 161,065
period
Net funds at the end of the period (6,270,456) 1,897,578 (455,436)
Analysis of changes in net funds
At 1 Cash flows At 30 April
November 2005
2004
� � �
Cash:
Cash at bank and in hand 312,680 721,893 1,034,573
Bank overdraft (710,711) 431,087 (279,624)
(398,031) 1,152,980 754,949
Debt:
Debt due < 1 year - (1,000,000) (1,000,000)
Debt due > 1 year - (6,000,000) (6,000,000)
Finance leases (57,405) 32,000 (25,405)
(57,405) (6,968,000) (7,025,405)
Total (455,436) (5,815,020) (6,270,456)
1. Major non-cash transactions
During the period 3,096,519 ordinary 10 pence shares were issued to satisfy
deferred consideration payable following the acquisition of certain
subsidiaries
2. Earnings per share have been calculated on the net basis on ordinary
activities after taxation of �667,252 (2004 : �359,386) using the weighted
average number of ordinary shares in issue of 32,833,698 (2004 :
24,483,643).
3. The interim accounts were approved by the Board of Directors on the 10 June
2005.
4. The interim report has been prepared using accounting policies consistent
with those set out in the statutory accounts of the company for the year
ended 31 October 2004 within the group companies.
Additional policies are:
Basis of Consolidation
The consolidated Profit & Loss Account and Balance Sheet include the financial
statements of the Company and it's subsidiaries made up to 30 April 2005. The
results of subsidiaries are included in the Profit & Loss Account from the date
of acquisition.
On acquisition the subsidiaries net assets are recorded at fair value.
Goodwill
Goodwill arising on consolidation represents the excess of fair value of
consideration given over the fair value of identifiable net assets acquired.
Goodwill is capitalised and amortised over its useful economic life.
5. The interim financial information for the two half year periods is
unaudited and does not constitute statutory accounts within the meaning of
Section 240 of the Companies Act 1985. The results for the year ended 31
October 2004 have been extracted from the statutory accounts of the company
on which an unqualified auditors' report has been received and which have
been delivered to the Registrar of Companies.
END
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