RNS Number:6814Z
Capcon Holdings PLC
14 June 2004
Capcon Holdings plc
Interim Report 2004
Interim results for the six months ended 31 March 2004
Capcon Holdings plc, the AIM listed investigations and risk management group,
announces unaudited interim results for the six months ended 31 March 2004.
Highlights
*Profit before interest, tax & goodwill amortisation increased by 51.3% to
#306,000 (2003: #202,200)
*Profit before tax and goodwill amortisation increased by 62.0%
*Earnings per share before goodwill amortisation increased by 23.5% to
2.1p
*Borrowings reduced by #365k during six months to 31 March 2004
*Continuing strong cash flow
*Interim dividend of 0.75p per share (2002: 0.73p) a 2.7% increase
*Acquisitions successfully integrated
*Improved margins and profitability in Audit & Stocktaking division
*Strong performance from Argen business winning new contracts from blue
chip and high net-worth client base
*Increased sales and profits in VSA together with investment in new IT
systems
Ken Dulieu, Chairman, commented:
"I am delighted to report that the Group continues to perform well with interim
figures in line with expectations. Our acquisitions have integrated well and we
believe that we are in a stronger position to take advantage of the perceived
increase in the market of our risk management services."
"The second half has started well and the completion of another earnings
enhancing acquisition remains a high priority in the second half, though this
must satisfy our strict investment criteria."
For further information, contact:
Capcon Holdings plc 020 7349 5356
Cliff Cavender, Managing Director
Williams de Broe 020 7588 7511
Frank Moxon
Threadneedle Communications 07793 839 024
Graham Herring 020 7232 5366
Chairman's Statement
I am pleased to report that the performance achieved by the Group during the six
months to 31 March 2004 is in line with the Board's expectations at the
beginning of the financial year. Our acquisitions have integrated well and the
Directors believe that the enlarged Group is in a stronger position to take
advantage of the perceived increase in the market for our risk management
services.
Results
Turnover for the six months to 31 March 2004 was #3,723,100 (2003: #3,339,400),
an increase of 11.5% on last year. Gross profit for the same period increased by
25.0% to #1,695,100 (2003: #1,356,500) reflecting an improving performance from
Vincent Sherman Associates ("VSA"), the insurance investigator acquired in 2002,
and a full six month contribution from Argen Limited ("Argen") the high margin
investigations business acquired in February 2003.
The increase in administrative expenses to #1,576,300 (2003: #1,291,800) is
mainly due to the inclusion of a full six months of expenses for Argen Limited.
The share of profit contributed by our associated company acquired with Argen
last year increased from #16,000 in 2003 to #50,000 this year reflecting the
inclusion of profit for the full six months.
Profit before interest and amortisation increased by 51.3% to #306,000 (2003:
#202,200). Amortisation of goodwill increased by #15,700 to #137,200 (2003:
#121,500) and higher average borrowings over the period increased interest
charges to #54,600 from #48,800.
Profit before tax of #114,200 compares with #33,700 for the first half of last
year. Earnings per share before goodwill amortisation were 2.1p, a 23.5%
increase on the same period last year.
On 12 March 2004, the Board authorised the issue of 923,000 new shares, being
less than 10% of issued share capital, at 50.5 pence per ordinary share. The
placing raised #466,100, which is being used for working capital purposes.
The Group's operations continue to be cash generative and net debt at 31 March
2004 was #1,078,200, a reduction of #412,200 since the same date last year
(2003: #1,490,400).
Confidence in the Group's continuing ability to generate cash enables the
Directors to declare an interim dividend of 0.75p per ordinary share (2003:
0.73p), an increase of 2.7% on last year.
Business Review
Sales in the Audit & Stocktaking division have remained at the same level as
last year. However, due to a change of mix in business, our margins have
improved and this has resulted in an overall increase in profitability in this
division of some 4%. A review of the services that the Group is now capable of
providing to its traditional client base in the leisure sector has identified
opportunities for us to work alongside our clients with a common aim of
improving margins by minimising cash and stock losses. This is being achieved by
focusing our services on the areas of our clients' business that can have most
impact for them, thus reducing the number of stock audit visits that we carry
out but increasing our fees and, therefore margins, to reflect the greater value
of our service.
The Capcon Investigatory division, specialising in providing fraud investigation
services in the leisure sector, has provided valuable support to the integration
of the acquired businesses and provision of services previously outsourced by
them. Additionally, some client instructions are referred from this division to
specialist managers in Argen or VSA, allowing the Investigatory division to
focus on its traditional leisure sector services.
VSA, our specialist insurance investigations division acquired in April 2002,
has continued to increase sales and profit. Instructions received from our two
largest insurance clients have increased significantly and the higher level of
business overall has created opportunities to improve the efficiency of the
field operations and, therefore, gross margins. We expect this improving
performance to continue into the second half of the year and we are confident
that the more effective field operations, together with recent investment in new
IT systems, are able to support an increasing level of business without erosion
of margin levels.
Our most recent acquisition, Argen Limited, acquired in February 2003, has
performed strongly in the first half of the year as we continue to receive
instructions for high value assignments from multi-national organisations. High
gross margins reflect the sensitive and valuable nature of the projects handled
and we believe that increasing awareness of the damage that serious fraud can
inflict on the corporate sector will result in further growth of Argen's
investigation and screening services. Our security based risk management
services are being developed through a new trading subsidiary company and a
marketing relaunch of these services is being undertaken by a recently recruited
industry specialist with considerable past experience and track record.
During the first half of this year the Board has reviewed several potential
acquisition opportunities. However, we have maintained our policy of not
compromising our strict criteria for acquisition and terminated discussions on a
number of these initially attractive businesses. Ongoing discussions with other
compatible businesses are expected to continue in the coming months.
Current Trading and Prospects
The second half of the year has started well and all divisions continue to trade
at a satisfactory level giving the Directors confidence in achieving the
expected outcome for the full year.
The completion of another successful acquisition remains a high priority for the
Board in the second half, but only if it is believed to enhance our future
earnings.
K.P.Dulieu
Chairman
Consolidated Profit and Loss Account
For the six months ended 31 March 2004
Six months ended Six months ended Year ended
31 March 2004 31 March 2003 30 September 2003
unaudited unaudited audited
#'000 #'000 #'000
Turnover 3,723.1 3,339.4 7,095.8
Cost of sales (2,028.0) (1,982.9) (4,009.2)
_______ _______ _______
Gross profit 1,695.1 1,356.5 3,086.6
Administrative expenses (1,576.3) (1,291.8) (2,905.4)
-------- -------- --------
Operating profit before
goodwill amortisation 256.0 186.2 430.5
Goodwill amortisation (137.2) (121.5) (249.3)
-------- -------- --------
Group operating profit 118.8 64.7 181.2
Share of operating
profit in associates 50.0 16.0 80.4
_______ _______ _______
Total operating profit 168.8 80.7 261.6
Interest receivable - 1.8 1.1
Interest payable (54.6) (48.8) (130.0)
_______ _______ _______
Profit on ordinary
activities before
taxation 114.2 33.7 132.7
Taxation (75.4) (24.2) (51.5)
_______ _______ _______
Profit on ordinary
activities after taxation 38.8 9.5 81.2
Dividends (76.2) (66.6) (201.6)
_______ _______ _______
Retained loss
for the period (37.4) (57.1) (120.4)
_______ _______ _______
Earnings per share
- Basic 0.5p 0.1p 1.0p
_______ _______ _______
- Diluted 0.4p 0.1p 0.9p
_______ _______ _______
Earnings per share before
goodwill amortisation
- Basic 2.1p 1.7p 3.9p
_______ _______ _______
- Diluted 1.9p 1.7p 3.7p
_______ _______ _______
Consolidated Balance Sheet
As at 31 March 2004
As at As at As at
31 March 2004 31 March 2003 30 September 2003
unaudited unaudited audited
#'000 #'000 #'000
Fixed assets
Intangible fixed assets 4,873.3 5,765.8 5,010.5
Tangible fixed assets 297.7 347.2 315.6
Investments 79.6 13.9 55.6
_______ _______ _______
5,250.6 6,126.9 5,381.7
Current assets
Debtors 2,156.9 1,674.2 1,978.9
Cash at bank and in hand 13.8 111.2 43.0
_______ _______ _______
2,170.7 1,785.4 2,021.9
Creditors
Amounts falling due
within one year (2,821.9) (2,237.0) (3,123.0)
_______ _______ _______
Net current liabilities (651.2) (451.6) (1,101.1)
_______ _______ _______
Total assets
less current liabilities 4,599.4 5,675.3 4,280.6
Creditors
Amounts falling due
after more than one year (397.3) (1,879.4) (497.3)
Provisions for liabilities
and charges (31.8) (48.0) (31.8)
_______ _______ _______
Net assets 4,170.3 3,747.9 3,751.5
_______ _______ _______
Capital and reserves
Called up share capital 101.6 91.3 92.3
Share premium account 2,764.1 2,251.3 2,317.2
Other reserves 950.0 950.0 950.0
Profit and loss account 13.1 113.8 50.5
Shares to be issued 341.5 341.5 341.5
_______ _______ _______
4,170.3 3,747.9 3,751.5
_______ _______ _______
Consolidated Cash Flow Statement
For the six months ended 31 March 2004
Six months ended Six months ended Year ended
31 March 2004 31 March 2003 30 September 2003
unaudited unaudited audited
#'000 #'000 #'000
Net cash inflow from
operating Activities 171.6 210.5 457.8
Dividend received
from associate - - 109.5
Returns on investments and
servicing of finance
Interest received - 1.8 1.1
Interest paid (54.6) (48.8) (117.1)
_______ _______ _______
(54.6) (47.0) (116.0)
Taxation
Tax paid (37.3) - (52.9)
Capital expenditure and
financial Investment
Payments to acquire
tangible fixed assets (30.3) (32.1) (159.0)
Sale of tangible fixed - 8.6 53.4
assets
_______ _______ _______
(30.3) (23.5) (105.6)
Acquisitions and disposals
Acquisition of subsidiary (140.1) (1,299.2) (1,405.5)
undertakings
Net cash acquired
with subsidiary - 195.8 195.8
_______ _______ _______
(140.1) (1,103.4) (1,209.7)
Equity dividends paid - (104.3) (170.9)
_______ _______ _______
Net cash outflow
before financing (90.7) (1,067.7) (1,087.8)
Financing
Issue of new ordinary shares 466.1 600.0 667.0
Costs of new issue (10.0) (56.0) (56.0)
Repayment of loans (108.3) (58.3) (164.7)
New loans issued - 600.0 600.0
Invoice discounting
facilities (79.1) (53.0) 246.4
Principal payment under
finance leases (34.9) (47.2) (87.7)
Other loan
repayments (50.0) - (71.0)
_______ _______ _______
183.8 985.5 1,134.0
_______ _______ _______
Increase / (decrease)
in cash 93.1 (82.2) 46.2
_______ _______ _______
Notes to the Interim Accounts
For the six months ended 31 March 2004
1. Basis of preparation
The interim results for the six months ended 31 March 2004 and 31 March 2003 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 2003 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 2003.
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 ended Six months ended Year ended
31 March 2004 31 March 2003 30 September 2003
unaudited unaudited audited
#'000 #'000 #'000
Earnings attributable
to ordinary shareholders 38.8 9.5 81.2
Goodwill amortisation 137.2 121.5 249.3
_______ _______ _______
Adjusted earnings 176.0 131.0 330.5
_______ _______ _______
Weighted average number
of shares issued 8,422,366 7,527,449 8,386,963
Dilutive effect of
share options - - 29,089
Dilutive effect of
shares to be issued 750,409 - 573,949
_______ _______ _______
Diluted weighted average
number of shares issued 9,172,775 7,527,449 8,990,001
________ _______ _______
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 outstanding share options and the effect of shares to be
issued.
3. Interim dividend
The interim dividend of 0.75p per ordinary share (2003: 0.73p) will be paid on
13 August 2004 to those shareholders on the register at the close of business on
16 July 2004.
4. Reconciliation of operating profit to net cash inflow from operating
activities
Six months ended Six months ended Year ended
31 March 2004 31 March 2003 30 September 2003
unaudited unaudited audited
#'000 #'000 #'000
Group operating profit 118.8 64.7 181.2
Depreciation 48.1 46.8 108.7
Profit on disposal of
fixed assets - (7.8) (0.6)
Goodwill amortisation 137.2 121.5 249.3
(Increase)/decrease in debtors (178.0) 27.5 (277.3)
Increase/(decrease) in creditors 45.5 (42.2) 196.5
_______ _______ _______
Net cash inflow 171.6 210.5 457.8
_______ _______ _______
5. Reconciliation of net cash flow to movement in net debt
Six months ended Six months ended Year ended
31 March 2004 31 March 2003 30 September 2003
unaudited unaudited audited
#'000 #'000 #'000
Increase / (decrease) in
cash in period 93.1 (82.2) 46.1
Outflow / (inflow)
from change in debt 272.3 (441.5) (523.0)
financing
_______ _______ _______
Movements in net debt
resulting from cash flows 365.4 (523.7) (476.9)
Loans and finance leases - - -
acquired with subsidiary
Net debt brought forward (1,443.6) (966.7) (966.7)
_______ _______ _______
Net debt carried forward (1,078.2) (1,490.4) (1,443.6)
_______ _______ _______
6. Reconciliation of net cash flow to movement in net debt
Analysis of net debt
As at Cash As at
30 September 2003 audited flow 31 March 2003 unaudited
#'000 #'000 #'000
Cash at bank and in hand 43.0 (29.2) 13.8
Overdraft (276.3) 122.3 (154.0)
_______ _______ _______
(233.3) 93.1 (140.2)
Debt due within one year (216.8) 8.3 (208.5)
Debt due after one year (300.0) 100.0 (200.0)
Invoice discounting facilities (561.3) 79.1 (482.2)
Finance leases (69.4) 34.9 (34.5)
Other loans (62.8) 50.0 (12.8)
_______ _______ _______
Total (1,443.6) 365.4 (1,078.2)
_______ _______ _______
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