RNS Number:8103N
Capcon Holdings PLC
21 June 2005
Capcon Holdings plc
Interim Report 2005
Interim results for the six months ended 31 March 2005
Capcon Holdings plc, the AIM listed investigations and risk management group,
announces unaudited interim results for the six months ended 31 March 2005.
Highlights
* Successful completion of sale of Argen GmbH for total cash consideration
of #360,000, a substantial book profit - ongoing relationship maintained
* Established new specialist surveillance division - recruitment of leading
industry executive in insurance investigations sector
* Completed re-structuring of Capcon Vincent Sherman and reduced cost base
* Successful new business wins and improved margin levels in Audit and
Stocktaking division
* Recruitment of high calibre managers in Capcon Argen to increase internal
capacity
* Reduction of bank debt during period of internal investment
* Net cash inflow from operations of #125,300
Ken Dulieu, Chairman, commented:
"The Audit & Stocktaking division has had a busy start to the second half of the
year and internal profit forecasts are being achieved. The action taken in
Capcon Vincent Sherman is beginning to show in improved profit performance, and
the second half of the year should be more profitable for the Commercial
Investigations division overall if project activity returns to the level
experienced earlier this year. As a result of this and due to the processes
that we have put in place, we view the next six months with optimism.
"The Board continues to search for suitable business acquisitions and is also
reviewing alternative strategies for developing the Group."
For further information, contact:
Capcon Holdings plc
Cliff Cavender, Managing Director
Tel: 020 7349 5356
Insinger de Beaufort
Louis Castro
Tel: 020 7190 7000
Threadneedle Communications
Graham Herring
(07793 839 024)
020 7531 2620
Chairman's Statement
The six months to 31 March 2005 has been a productive period during which time
the Directors have made many internal changes that are expected to strengthen
the Group for the future. As already documented, trading has been disappointing
in the Commercial Investigations division, however this is partly due to the
timing of projects undertaken and does not signify a weakening in demand for our
core services. Furthermore, costs that have been incurred in the development of
new business are forecast to produce a return in the medium term.
Results
Turnover for the six months to 31 March 2005 was #3,431,100 (2004: #3,723,100),
a reduction of 7.8% on last year. As most of this reduction was attributable to
the Investigations division, the overall gross margin level reduced from 45.5%
to 41.1% reflecting the change in mix of business during the period.
Profit before interest and amortisation was #160,800 (2004: #306,000) after
crediting the profit on disposal of Argen GmbH of #224,400. The results for the
period include an impairment charge of #978,000 against the carrying value of
Goodwill in addition to the amortisation charge for the period of #144,300
(2004: #137,200). Higher average borrowings, together with higher interest rates
over the period increased interest charges to #64,800 from #54,600.
A loss before tax of #1,026,300 compares with a profit before tax of #114,200
for the first half of last year. Earnings per share before goodwill amortisation
of 1.3p compares with 2.1p per share for the same period last year.
On 21 December 2004 the Group announced the sale of its 50% interest in Argen
GmbH for a total cash consideration of #360,000 which has strengthened the
balance sheet and facilitated the on going reduction in bank borrowings.
The Group's operations continue to be cash generative and net debt at 31 March
2005 was #1,051,500, a reduction of #26,700 since the same date last year. The
net cash inflow from operations since 30 September 2004 was #125,300.
The Directors are continuing their cautious policy with regard to dividend
payments for the time being and no interim dividend is being declared in respect
of the six months to 31 March 2005 (2004: 0.75p).
Business Review
The Audit & Stocktaking division continues to successfully win new business.
However, following the trend set last year, the mix of work undertaken has
resulted in improved margins at the expense of a small reduction in sales to
#1,616,200 (2004: #1,701,900). This change in mix with its favourable effect on
margins is being encouraged when there is an opportunity to introduce our
clients to an alternative approach to the audit. This entails introducing
processes to highlight action that the client should take which ultimately
results in a reduction of cash and stock losses for the client. The division
showed a small increase in operating profit compared with last year.
The Commercial Investigations division has been subjected to a management review
in all areas:
Following the departure last year of the Managing Director of Capcon Vincent
Sherman, the insurance fraud investigator, there has been a major re-structuring
of the division and a rationalisation of administrative and operational staff
resources. The division has incurred some significant and excessive employment
related costs during these changes and sales have also been temporarily
affected. However, we continue to enjoy good relationships with all of our major
clients and we are confident that our new structure places this division in a
very strong position to grow in the coming year. Additionally, new major
insurance clients have been gained and we are confident that this division will
return to profit in the second half of the year having suffered a loss as a
consequence of the re-structuring.
At the beginning of the year we established a new specialist surveillance
division to complement the range of existing services provided by Capcon Vincent
Sherman. The executive responsible for developing and building this new business
stream brings to the Group considerable experience and expertise from his
previous position as managing director of our largest competitor in the
insurance investigations sector. A net cost of #65,800 has been charged to the
profit and loss account in the first half of the year in respect of setting up
this new business.
Capcon Argen gained several new blue chip clients during a period of many
changes and, at times, high business activity. Following a decision to
strengthen the internal resource capability and thereby creating greater
capacity for future growth, Capcon Argen has recruited additional professionally
qualified project managers with considerable previous commercial experience. In
the current year, the cost of employing these high calibre managers is a
significant charge against the division's profit, but new business generated
subsequently is expected to show a high return on this people investment in the
medium term.
Although this division had an extremely busy period at the end of the first
quarter when several high value projects were undertaken, fewer projects were
completed in the second quarter. The timing of new project instructions,
combined with the higher staff cost base, has resulted in a lower operating
profit for Capcon Argen than last year. However, the division is now in a
stronger position to take advantage of the expected increase in demand for its
specialised services in the future.
Current Trading and Prospects
The Audit & Stocktaking division has had a busy start to the second half of the
year and internal profit forecasts are being achieved. The action taken in
Capcon Vincent Sherman is beginning to show in improved profit performance, and
the second half of the year should be more profitable for the Commercial
Investigations division overall provided project activity returns to the level
experienced earlier this year. As a result of this and due to the processes
that we have put in place, we view the next six months with optimism.
The Board continues to search for suitable businesses acquisitions and is also
reviewing alternative strategies for developing the Group.
K P Dulieu
Chairman
21 June 2005
Capcon Holdings plc
Interim Report 2005
Consolidated Profit and Loss Account
For the six months ended 31 March 2005
Six months Six months Year
ended ended ended
31 March 2005 31 March 2004 30 September
unaudited unaudited 2004
audited
#'000 #'000 #'000
Turnover 3,431.1 3,723.1 7,453.4
Cost of sales (2,020.0) (2,028.0) (4,101.0)
_______ _______ _______
Gross profit 1,411.1 1,695.1 3,352.4
Administrative expenses (2,630.3) (1,576.3) (3,159.0)
Operating (loss)/profit before goodwill (96.9) 256.0 467.8
amortisation
Goodwill amortisation (1,122.3) (137.2) (274.4)
Group operating (loss)/profit (1,219.2) 118.8 193.4
Share of operating profit in associates 33.3 50.0 100.2
_______ _______ _______
Total operating (loss)/profit (1,185.9) 168.8 293.6
Profit on disposal of investment in associates 224.4 - -
_______ _______ _______
(Loss)/profit on ordinary activities before (961.5) 168.8 293.6
interest and taxation
Interest receivable 0.2 - 0.1
Interest payable (65.0) (54.6) (137.9)
_______ _______ _______
(Loss)/profit on ordinary activities before (1,026.3) 114.2 155.8
taxation
Taxation 38.5 (75.4) (69.9)
_______ _______ _______
(Loss)/profit on ordinary activities after (987.8) 38.8 85.9
taxation
Dividends - (76.2) (89.5)
_______ _______ _______
Retained loss for the year (987.8) (37.4) (3.6)
_______ _______ _______
Earnings per share
- Basic (9.7p) 0.5p 0.9p
_______ _______ _______
- Diluted (9.0p) 0.4p 0.8p
_______ _______ _______
Earnings per share before goodwill amortisation
- Basic 1.3p 2.1p 3.7p
_______ _______ _______
- Diluted 1.2p 1.9p 3.4p
_______ _______ _______
Capcon Holdings plc
Interim Report 2005
Consolidated Balance Sheet
As at 31 March 2005
As at As at As at
31 March 31 March 30 September
2005 2004 2004
unaudited unaudited audited
#'000 #'000 #'000
Fixed assets
Intangible fixed assets 3,923.1 4,873.3 5,020.2
Tangible fixed assets 326.7 297.7 266.1
Investments 0.1 79.6 119.9
_______ _______ _______
4,249.9 5,250.6 5,406.2
Current assets
Debtors 1,801.9 2,156.9 1,891.5
Cash at bank and in hand 13.8 13.8 37.2
_______ _______ _______
1,815.7 2,170.7 1,928.7
Creditors
Amounts falling due within one year (2,627.1) (2,821.9) (2,999.4)
_______ _______ _______
Net current liabilities (811.4) (651.2) (1,070.7)
_______ _______ _______
Total assets less current liabilities 3,438.5 4,599.4 4,335.5
Creditors
Amounts falling due after more than one year (242.6) (397.3) (100.0)
Provisions for liabilities and charges (21.4) (31.8) (21.4)
_______ _______ _______
Net assets 3,174.5 4,170.3 4,214.1
_______ _______ _______
Capital and reserves
Called up share capital 101.6 101.6 101.6
Share premium account 2,774.1 2,764.1 2,774.1
Other reserves 950.0 950.0 950.0
Profit and loss account (940.9) 13.1 46.9
Shares to be issued 289.7 341.5 341.5
_______ _______ _______
3,174.5 4,170.3 4,214.1
_______ _______ _______
Capcon Holdings plc
Interim Report 2005
Consolidated Cash Flow Statement
For the six months ended 31 March 2005
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2005 2004 2004
unaudited unaudited audited
#'000 #'000 #'000
Net cash inflow/(outflow) from operating
Activities 125.3 171.6 523.3
Dividend received from associate 118.2 - -
Returns on investments and servicing
of finance
Interest received 0.2 - 0.1
Interest paid (62.1) (54.6) (137.9)
_______ _______ _______
(61.9) (54.6) (137.8)
Taxation
Tax paid (23.7) (37.3) (37.2)
Capital expenditure and financial
Investment
Payments to acquire tangible fixed assets (70.9) (30.3) (84.1)
Sale of tangible fixed assets - - 33.5
_______ _______ _______
(70.9) (30.3) (50.6)
Acquisitions and disposals
Acquisition of subsidiary undertakings (89.5) (140.1) (428.7)
Disposal of investment in associates 332.9 - -
_______ _______ _______
243.4 (140.1) (428.7)
Equity dividends paid - - (224.5)
_______ _______ _______
Net cash inflow/(outflow) before financing 330.4 (90.7) (355.5)
Financing
Issue of new ordinary shares - 466.1 466.1
Costs of new issue - (10.0) -
Repayment of loans (100.1) (108.3) (216.6)
New loans issued 150.0 - -
Invoice discounting facilities (189.9) (79.1) (77.1)
Principal payment under finance leases (8.3) (34.9) (63.1)
Other loans 20.0 - 71.5
Other loan repayments (2.4) (50.0) (62.8)
_______ _______ _______
(130.7) 183.8 118.0
_______ _______ _______
Increase / (decrease) in cash 199.7 93.1 (237.5)
_______ _______ _______
Capcon Holdings plc
Interim Report 2005
Notes to the Interim Accounts
For the six months ended 31 March 2005
1. Basis of preparation
The interim results for the six months ended 31 March 2005 and 31 March 2004 do
not constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985 and have been neither audited nor reviewed by the Group's
auditors . The financial information for the year ended 30 September 2004 has
been extracted from the statutory accounts for that year which have been filed
with the Registrar of Companies and which contain an unqualified audit report
and did not contain a statement under section 237(2) of the Companies Act 1985.
The interim accounts have been prepared on the basis of the accounting policies
set out in the statutory accounts for the year ended 30 September 2004.
The Group had no recognised gains or losses other than the results shown in the
Consolidated Profit and Loss Account.
Copies of this statement are being sent to shareholders and are available from
the registered office of the Company.
2. Earnings per share
Six months Six months Year
ended ended ended
31 March 2005 31 March 2004 30 September
unaudited unaudited 2004
audited
#'000 #'000 #'000
Earnings attributable to ordinary shareholders (987.8) 38.8 85.9
Goodwill amortisation 1,122.3 137.2 274.4
_______ _______ _______
Adjusted earnings 134.5 176.0 360.3
_______ _______ _______
Weighted average number of shares in issue 10,156,776 8,422,366 9,743,191
Dilutive effect of share options - - -
Dilutive effect of shares to be issued 852,194 750,409 864,556
_______ _______ _______
Diluted weighted average number of shares in 11,008,970 9,172,775 10,607,747
issue
________ _______ _______
Earnings per share have been calculated using the weighted average number of
shares in issue during the relevant financial periods. The diluted earnings per
share takes account of shares to be issued.
3. Reconciliation of operating (loss)/profit to net cash inflow from
operating activities
Six months Six months Year
ended ended ended
31 March 31 March 2004 30 September
2005 unaudited 2004
unaudited audited
#'000 #'000 #'000
Group operating (loss)/profit (1,219.2) 118.8 193.4
Depreciation 56.4 48.1 96.4
Profit on disposal of fixed assets 0.0 0.0 (2.2)
Goodwill amortisation 1,122.3 137.2 274.4
Decrease/(increase) in debtors 89.6 (178.0) 87.4
Increase/(decrease) in creditors 76.2 45.5 (126.1)
_______ _______ _______
Net cash inflow 125.3 171.6 523.3
_______ _______ _______
4. Reconciliation of net cash flow to movement in net debt
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2005 2004 2004
unaudited unaudited audited
#'000 #'000 #'000
Increase / (decrease) in cash in period 199.7 93.1 (237.4)
Outflow from change in debt financing 81.7 272.3 348.1
_______ _______ _______
Movements in net debt resulting from cash 281.4 365.4 110.7
flows
Net debt brought forward (1,332.9) (1,443.6) (1,443.6)
_______ _______ _______
Net debt carried forward (1,051.5) (1,078.2) (1,332.9)
_______ _______ _______
5. Reconciliation of net cash flow to movement in net debt
Analysis of net debt As at Cash Non cash As at
30 September 2004 flow movements 31 March 2005
audited unaudited
#'000 #'000 #'000 #'000
Cash at bank and in hand 37.2 (23.4) 0.0 13.8
Overdraft (508.0) 223.1 0.0 (284.9)
_______ _______ _______ _______
(470.8) 199.7 0.0 (271.1)
Debt due within one year (200.1) 100.1 (100.0) (200.0)
Debt due after one year (100.0) (150.0) 100.0 (150.0)
Invoice discounting facilities (484.2) 189.9 0.0 (294.3)
Finance leases (6.3) 8.3 (46.1) (44.1)
Other loans (71.5) (17.6) (2.9) (74.4)
_______ _______ _______ _______
Total (1,332.9) 330.4 (49.0) (1,051.5)
_______ _______ _______ _______
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