RNS Number:2144M
Capcon Holdings PLC
12 June 2003
Capcon Holdings plc
Interim Report and Accounts 2003
Highlights
*All divisions ahead on like for like basis
*Turnover increased by 61% to #3.34m (2002: #2.07m)
*Divisional profits, before central and development costs and
amortisation, advanced to #473,100 (2002: #386,800)
*Audit & Stocktaking advanced despite harsh economic conditions
*Increased margins from Investigatory Services
*VSA, acquired April 2002, turned around and profitable throughout half
year
*Acquisition of Argen, February 2003, adds high quality investigation
business
*Increased central costs reflect strengthening of senior management to
support planned expansion by acquisition
*Profit before interest tax and amortisation was #202,200 (2002: #211,200)
*Acquisitions have resulted in higher interest charges and amortisation of
goodwill leaving reported pre-tax profits at #31,700 (2002: #154,000)
*Strong cash generation of #210,500 (2002: an outflow of #88,200)
*Interim dividend up by 4.3% to 0.73p (2002: 0.7p)
Ken Dulieu, Chairman, commented
"I am pleased to report that the continuing development of the Group is evident
in the performance of all parts of the business. All our operations are ahead on
a like for like basis in both sales and profits. The purchase of Argen added
another high quality, complementary investigation business and the second half
will benefit from a full contribution from that source in addition to the
traditional increase in second half sales due to increased activity within the
leisure sector."
Enquiries
Cliff Cavender Capcon Holdings plc Tel: 020 7349 5356
Louis Castro Williams de Broe Plc Tel: 020 7588 7511
Chairman's Statement
It is my pleasure to report that the continuing development of Capcon Holdings
plc is reflected in the first half performance of all parts of the business. In
addition, the acquisition of Argen Limited ("Argen"), completed on 19 February
2003, adds another high quality and complementary investigation business to our
expanding group.
Results
Sales for the six months to 31 March 2003 were #3,339,400 (2002: #2,072,700), an
increase of 61.1% on last year. Gross profit for the same period increased by
78.1% to #1,356,500 (2002: #761,600) reflecting organic growth and positive
contributions from Vincent Sherman (Creditor Claims) Limited ("VSA"), which was
acquired in April 2002, and Argen Limited since its acquisition.
Divisional profits before charging central and group development costs and
amortisation were #473,100 (2002: #386,800). At the beginning of the period, the
board and senior management were strengthened to support the Company's planned
development by way of acquisition. This move is reflected in increased central
costs to #270,900 (2002: #175,600). The increase in the balance of
Administrative expenses to #883,400 (2002: #374,800) was attributable to the
newly acquired businesses. Profit before interest, tax and amortisation was
#202,200 (2002: #211,200).
Net interest payable was #47,000 (2002: #6,300), reflecting higher borrowings
resulting from the recent acquisitions. Net debt at 31 March 2003 amounted to
#1,490,400 (2002: #84,200). Amortisation of goodwill in respect of the newly
acquired businesses increased the total charge to #121,500 (2002: #50,900) and
profit before tax reduced to #33,700 (2002: #154,000). The group continues to be
strongly cash generative and in the six months to 31 March 2003, #210,500 was
generated from operating activities compared to an outflow of #88,200 for the
same period last year.
Reflecting our continued confidence that we will grow the business organically
whilst continuing our strategy of expansion through acquisition, the board has
declared an interim dividend of 0.73p per ordinary share (2002: 0.7p), a 4.3%
increase on last year.
Business Review
Sales in the core Audit & Stocktaking division have increased in spite of the
prevailing harsh economic conditions affecting the leisure sector and the
continued consolidation within the sector. The underlying like for like growth
within this division of 1.8% is even greater when taking into account that the
comparable period included sales for five months from a long standing client
that subsequently went into liquidation.
Sales income from the traditional Investigatory Services division provided by
Capcon has been maintained at last year's level and margins have increased. Much
time has been spent integrating the VSA business into the Group in addition to
acquiring Argen. To this end the Capcon Investigatory business has provided
support to both these divisions resulting in an increased added value service to
our entire client base.
VSA, the business acquired on 8 April last year which specialises in the
investigation of fraud in the insurance sector, has continued the trend set last
year of increasing sales, and has been profitable for the first half underlining
an impressive turn around since acquisition. One of Europe's biggest insurers
appointed VSA to its panel of motor investigators and instructions from this
source have been one of the contributors to its higher sales and profits. VSA
has also been appointed to three other significant insurers' panels this year to
date, effectively winning every tender submitted.
Following protracted negotiations, I was delighted to announce the completion of
the Argen Limited acquisition on 19 February 2003. Argen, founded in 1968, is a
well established and highly regarded profitable corporate investigation
business. The purchase has brought immediate benefits to Capcon, both
financially and operationally. The board considers that Argen will further
enhance the reputation of Capcon as a provider of high quality risk management
services whilst increasing the strength of the Group's worldwide investigatory
network.
The board continues its search for suitable businesses for acquisition that can
be easily integrated and will add immediate value for shareholders.
Current Trading and Prospects
All divisions of Capcon are ahead on a like for like basis in both sales and
profits. The second half should benefit from a full contribution from Argen and
the traditional increase in sales during the second half as a result of our link
to the leisure sector, despite the continued harsh economic climate.
Consolidated Profit and Loss Account
for the six months ended 31 March 2003
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
unaudited unaudited 2002 audited
#'000 #'000 #'000
Turnover 3,339.4 2,072.7 4,956.2
Cost of sales (1,982.9) (1,311.1) (3,290.3)
_______ _______ _______
Gross profit 1,356.5 761.6 1,665.9
Administrative expenses (1,275.8) (601.3) (1,522.6)
----------- ---------- -----------
Operating profit before goodwill 202.2 211.2 270.3
amortisation
Goodwill amortisation (121.5) (50.9) (127.0)
----------- ---------- -----------
Operating profit 80.7 160.3 143.3
Interest receivable 1.8 2.0 2.0
Interest payable (48.8) (8.3) (40.6)
_______ _______ _______
Profit on ordinary activities 33.7 154.0 104.7
before taxation
Taxation (24.2) (60.9) (55.4)
Retained Profits for the Year _______ _______ _______
Profit on ordinary activities 9.5 93.1 49.3
after taxation
Dividends (66.6) (50.8) (156.5)
_______ _______ _______
Retained (Loss)/Profit for the (57.1) 42.3 (107.2)
year
Retained Profits for the Year _______ _______ _______
Earnings per share
- Basic 0.1p 1.3p 0.7p
_______ _______ _______
- Diluted 0.1p 1.2p 0.7p
_______ _______ _______
Earnings per share
before goodwill amortisation
- Basic 1.7p 2.0p 2.4p
_______ _______ _______
- Diluted 1.7p 1.9p 2.4p
_______ _______ _______
Consolidated Balance Sheet
as at 31 March 2003
As at As at As at
31 March 2003 31 March 2002 30 September
unaudited unaudited 2002 audited
#'000 #'000 #'000
Fixed assets
Intangible fixed assets 5,765.8 1,883.4 3,128.9
Tangible fixed assets 347.2 124.6 331.0
Investments in associated 13.9 0.0 0.0
undertakings
_______ _______ _______
6,126.9 2,008.0 3,459.9
Current assets
Debtors 1,674.2 1,219.3 1,364.2
Cash at bank and in hand 111.2 74.5 67.1
_______ _______ _______
1,785.4 1,293.8 1,431.3
Creditors
Amounts falling due within one (2,237.0) (572.9) (1,828.8)
year
_______ _______ _______
Net current (liabilities)/assets (451.6) 720.9 (397.5)
_______ _______ _______
Total assets less currrent 5,675.3 2,728.9 3,062.4
liabilities
Creditors
Amounts falling due after more than (1,879.4) 0.0 (94.9)
one year
Provisions for liabilities and (48.0) (28.5) (48.0)
charges
Retained Profits for the Year _______ _______ _______
Net assets 3,747.9 2,700.4 2,919.5
_______ _______ _______
Capital and reserves
Called up share capital 91.3 72.5 74.5
Share premium account 2,251.3 1,357.5 1,474.1
Shares to be issued 341.5 0.0 250.0
Other reserves 950.0 950.0 950.0
Profit and loss account 113.8 320.4 170.9
_______ _______ _______
3,747.9 2,700.4 2,919.5
_______ _______ _______
Consolidated Cashflow Statement
for the six months ended 31 March 2003
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
unaudited unaudited 2002 audited
#'000 #'000 #'000
Net cash inflow/(outflow) from
operating
activities 210.5 (88.2) (87.6)
Returns on investments and
servicing
of finance
Interest received 1.8 2.0 2.0
Interest paid (48.8) (8.3) (40.5)
_______ _______ _______
(47.0) (6.3) (38.5)
Taxation
Tax paid 0.0 0.0 (33.7)
Capital expenditure and financial
investment
Payments to acquire tangible fixed (32.1) (42.1) (63.3)
assets
Sale of tangible fixed assets 8.6 0.0 6.1
_______ _______ _______
(23.5) (42.1) (57.2)
Acquisitions and disposals
Acquisition of business (1,299.2) (100.0) (206.1)
Net cash/(overdrafts) acquired with 195.8 0.0 (201.9)
subsidiary
_______ _______ _______
(1,103.4) (100.0) (408.0)
Equity dividends paid (104.3) 0.0 (52.2)
Retained Profits for the Year _______ _______ _______
Net cash outflow before financing (1,067.7) (236.6) (677.2)
Financing
Issue of new ordinary shares 600.0 55.3 75.0
Costs of new issue (56.0) 0.0 (1.1)
Repayment of loans (58.3) (50.0) (137.9)
New loans issued 600.0 0.0 0.0
Invoice discounting facilities (53.0) 0.0 251.2
Principal payment under finance (47.2) 0.0 (36.5)
leases
_______ _______ _______
985.5 5.3 150.7
_______ _______ _______
Decrease in cash (82.2) (231.3) (526.5)
_______ _______ _______
Notes to the Interim Accounts
for the six months ended 31 March 2003
1. Basis of preparation
The interim results do not constitute statutory accounts within the meaning of
section 240 of the Companies Act 1985. The financial information for the year
ended 30 September 2002 had 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.
The interim financial statements have been prepared on the basis of the
accounting policies set out in the statutory accounts for the year ended 30
September 2002. No significant impact is expected from Financial Reporting
Standards coming into effect in the current year.
The Company 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 2003 31 March 2002 30 September
unaudited unaudited 2002 audited
#'000 #'000 #'000
Earnings attributable to ordinary 9.5 93.1 49.3
shareholders
Goodwill amortisation 121.5 50.9 127.0
_______ _______ _______
Adjusted earnings 131.0 144.0 176.3
_______ _______ _______
Weighted average number of shares 7,527,449 7,246,472 7,344,006
issued
________ _______ _______
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.
Share options outstanding were granted at prices that were anti-dilutive and
consequently there is no difference between the basic and fully diluted earnings
per share for the six months ending 31 March 2003.
3. Interim Dividend
The interim dividend of 0.73p per ordinary share (2002: 0.7p) will be paid on 18
July 2003 to those shareholders on the register at the close of business on 20
June 2003.
4. Intangible fixed assets
#'000
Cost
At 30 September 2002 3,357.7
Additions 3,002.4
Adjustments (244.0)
_______
At 31 March 2003 6,116.1
_______
Depreciation
At 30 September 2002 228.8
Charge for the period 121.5
_______
At 31 March 2003 350.3
_______
Net book value
At 30 September 2002 3,128.9
_______
At 31 March 2003 5,765.8
_______
The goodwill addition represents the goodwill arising on the acquisition of
Argen Limited.
5. Acquisitions
Net book value
#'000
Acquisitions
Tangible fixed assets 31.5
Investments 13.9
Debtors 337.4
Net cash and overdraft 195.8
Liabilities (164.5)
_______
Total assets less liabilities 414.1
Goodwill 3,002.4
_______
3,416.5
_______
Satisfied by:
Shares issued 250.0
Cash 1,100.0
Deferred consideration 200.0
Contingent consideration (shares to be issued) 341.5
Contingent consideration (cash) 1,272.0
Costs 253.0
_______
3,416.5
_______
Contingent consideration is dependent on the future profits of Argen Limited.
The management accounts of Argen Limited for the nine months ended 31 December
2002 and the statutory accounts for the year ended 31 March 2002 showed a profit
after tax of #6,919 and a loss of #210,314 respectively.
6. Reconciliation of operating profit to net cash inflow from operating
activities
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
unaudited unaudited 2002 audited
#'000 #'000 #'000
Group operating profit 80.7 160.3 143.2
Depreciation 46.8 15.4 60.4
Profit on disposal of fixed assets (7.8) 0.0 (6.1)
Goodwill amortisation 121.5 50.9 127.0
Decrease/(increase) in debtors 27.5 (219.7) (203.1)
(Decrease)/increase in creditors (58.2) (95.1) (209.0)
_______ _______ _______
Net cash inflow/(outflow) 210.5 (88.2) (87.6)
_______ _______ _______
7. Reconciliation of net cash flow to movement in net debt
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
unaudited unaudited 2002 audited
#k #k #k
(Decrease) in cash in period (82.2) (231.3) (526.5)
(Inflow)/outflow from change in (441.5) 50.0 (76.8)
debt financing
_______ _______ _______
Movements in net debt resulting from (523.7) (181.3) (603.3)
cash flows
Loans and finance leases acquired 0.0 0.0 (460.5)
with subsidiary
Net (debt)/funds brought (966.7) 97.1 97.1
forward
_______ _______ _______
Net debt carried forward (1,490.4) (84.2) (966.7)
_______ _______ _______
8. Analysis and reconciliation of net cash flow to movement in net debt
Analysis of As at Cash Acquisition Non cash As at
net debt
30 September flow (excluding movements 31 March 2003
2002 audited cash) unaudited
#'000 #'000 #k #'000 #'000
Cash at bank 67.1 44.1 0.0 0.0 111.2
and in
hand
Overdraft (346.5) (126.3) 0.0 0.0 (472.8)
_______ _______ _______ _______ _______
(279.4) (82.2) 0.0 0.0 (361.6)
Debt due (66.7) (141.7) 0.0 (8.3) (216.7)
within one
year
Debt due (14.9) (400.0) 0.0 8.3 (406.6)
after one
year
Invoice (314.8) 53.0 0.0 0.0 (261.8)
discounting
facilities
Finance (157.1) 47.2 0.0 0.0 (109.9)
leases
Directors (133.8) 0.0 0.0 0.0 (133.8)
loan
account
_______ _______ _______ _______ _______
Total (966.7) (523.7) 0.0 0.0 (1,490.4)
_______ _______ _______ _______ _______
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