RNS Number:1273T
Capcon Holdings PLC
11 December 2003
CAPCON HOLDINGS plc
________________________________________________________________________________
Capcon Holdings plc, the only UK listed investigations and risk management
company, announces unaudited consolidated results for the year ended 30
September 2003.
Highlights
* Group sales increased by 43.2% to #7.1m (2002: #4.96m) including Argen
contribution
* Integration of Argen business, following acquisition in February,
which provides high level blue chip and international client base
* Encouraging performance in Audit and Stocktaking in difficult economic
conditions
- awarded Gold standard for ISO 9001: 2000 reflecting the high quality of
the business
* Continued increase in sales and improved operating margins at VSA
- appointed to panel of motor investigators by one of Europe's largest
insurers
* Profit before interest, tax and amortisation increased by 88.9% to
#0.51m (2002: #0.27m)
* Adjusted earnings per share increased 62.5% from 2.4p to 3.9p per
share
* Final dividend of 1.46p per share making a total of 2.19p (2002:
2.1p), a 4.3% increase
Ken Dulieu, Chairman, commented:
"We are delighted to report an excellent performance for the year with
significant contributions from each part of the Group. With a stronger
management team in place and having successfully turned around VSA and
integrated Argen we are well positioned to exploit further organic growth
opportunities from within the business. Our search for suitable compatible
businesses continues and the Board is confident there will be opportunities to
acquire additional businesses in the area of risk management in the coming
year."
Enquiries
Capcon Holdings plc 020 7349 5356
Cliff Cavender, Managing Director
Williams de Broe 020 7588 7511
Louis Castro
Threadneedle Communications 07793 839 024
Graham Herring 020 7232 5366
CAPCON HOLDINGS plc
CHAIRMAN'S STATEMENT
________________________________________________________________________________
Strategic review
It is with pleasure that I am able to report an excellent performance for your
Company covering a year of many challenges. The continuing difficult economic
conditions have not detracted your Board from achieving our expected financial
results and we have integrated an exciting new acquisition, Argen Limited,
whilst continuing to build the core business.
The acquisition of Argen Limited was completed on 19 February 2003 during a
period when the Audit & Stocktaking division was faced with severe market
conditions and Vincent Sherman Associates, the loss making business acquired
last year, was being successfully turned around. The focus of management effort
has, therefore, been to ensure rapid integration of Argen whilst maintaining
growth of the core business. We are now well positioned to exploit further
organic growth opportunities from within the business.
During the year, the Board reviewed a number of other potential acquisitions
which were not progressed due to their failure to meet our strict acquisition
criteria of businesses with a strong blue chip client base, that are leading
companies in their particular niche within the risk management industry and have
the ability to generate good margins. Our search for suitable compatible
businesses continues and the Board is confident that there will be more
opportunities to acquire such companies in our field of activity in the coming
year.
A review of the strategy for marketing our services is currently being
undertaken. The Board considers that there are many opportunities for further
development of our increasing range of services at all levels within the target
blue chip client market in which we are constantly increasing our profile.
Financial overview
Sales for the year to 30 September 2003 were #7.10 million (2002: #4.96 million)
including Argen which contributed sales of #1.24 million during the period since
its acquisition. This represents a 43.2% increase overall, of which 25.0% is
attributable to Argen.
The profit for the year, before interest and amortisation of goodwill, was #0.51
million (2002: #0.27 million). Profit before tax and amortisation was #0.38
million compared with #0.23 million last year.
Basic earnings per share of 1.0p compares with 0.7p last year, and excluding
amortisation of goodwill, earnings per share have increased by 62.5% to 3.9p
from 2.4p last year.
Total bank borrowings in the year increased from #0.83 million to #1.38 million,
representing 37% of net assets. The increase in gearing is a direct consequence
of the acquisition of Argen Limited completed on 19 February 2003, when market
conditions adversely affected our ability to issue new shares. The Board does
not consider the present level of borrowings to be excessive in relation to the
cash generated by the operations. However, the opportunity for the company to
invest in additional services which the Board believe would be potentially
earnings enhancing will be limited if this level of borrowing is maintained.
The Board is confident that organic growth will continue in the coming year and
is proposing a final dividend of 1.46p per ordinary share making a total for the
year of 2.19p per ordinary share (2001: 2.1p). The Board's commitment to invest
in new business streams during a period of higher bank borrowings has led the
directors to decide to defer payment of their dividend entitlement until the end
of the financial year. The dividend will be proposed at the Annual General
Meeting on 25 February 2004 and will be payable to shareholders, other than
directors, on the register at the close of business on 26 March 2004 and will be
paid on 23 April 2004.
CAPCON HOLDINGS plc
CHAIRMAN'S STATEMENT (CONTINUED)
________________________________________________________________________________
Divisional performance
Audit & stocktaking
Sales increased to #3.49 million from #3.42 million in 2002, or 2.0%. We
consider this performance to be a tremendous achievement considering the harsh
economic conditions that have severely affected the traditional leisure sector
within which this division operates.
Operating margins have improved, despite pressure on pricing, due to better cost
control and operating efficiency. A re-organisation at the beginning of the year
has led to a stronger internal administrative structure and IT support for the
audit operations in the field which is essential for maintaining our high level
of customer service. I am delighted to report that this division was awarded a
Gold standard by the National Security Inspectorate at the end of the year,
acknowledging the high quality standards that we have achieved under ISO 9001.
New business has been won that replaces the revenues lost through a long
standing client going into liquidation last year, and new blue chip clients
continue to support our belief that the market for outsourcing our services is
still strong. New marketing initiatives in the second half of this year have
generated interest from existing clients who we are introducing to alternative
added value services that can assist them in improving operating margins.
Since the year end we have successfully developed new client relationships and
current activity leads us to view the growth prospects for this division in the
coming year with optimism.
Commercial investigation services
Sales of the traditional Capcon investigation services this year of #0.59
million have remained at the same level as last year even though resources from
this division have been diverted during the year to activities which support
other parts of the company and the new acquisitions in particular.
Several new clients have been introduced in the year and the profile of work
undertaken has been based on a wider spread of clients with less dependency on a
few major projects as in previous years.
Last year I reported that we had spent much time in the City raising the
Company's profile in the financial services sector. Since then, we have acquired
Argen Limited which has enabled us to build on last year's initiative by
offering screening and fraud prevention and investigation services from a
company that already has a long track record in the financial services sector.
The expectation for the coming year of steady growth with an increasing trend
towards security based consultancy will ensure that there will also be further
opportunities for referral of work into other divisions.
VSA
VSA, the specialist insurance fraud investigator acquired in April 2002,
continued last year's trend of increasing sales. Sales for the year to 30
September 2003 of #1.78 million compare with #0.80 million for the 25 weeks to
30 September 2002. The VSA business was acquired with a loss making office in
Ireland which, after a thorough business review, was closed in March 2003. If
sales income from Ireland is excluded, the increase in the core VSA sales on an
annualised basis is 12%.
Improving operating margins resulting from higher productivity and efficiency
from the operatives in the field has ensured that the turn around from last year
has developed into a trend of increasing profit.
Earlier in the year, one of Europe's biggest insurers appointed VSA to its panel
of motor investigators, and subsequently three other significant insurers also
appointed VSA to their panels. VSA's excellent record for winning tenders is
cause for considerable optimism that this division will continue to show strong
sales growth in the current year and, together with the maintenance of higher
operating margins, is expected to lead to further profit improvement.
CAPCON HOLDINGS plc
CHAIRMAN'S STATEMENT (CONTINUED)
________________________________________________________________________________
Argen
On 19 February 2003, the Company acquired the entire issued share capital of
Argen Limited for an initial consideration of #1.35 million increasing to a
potential maximum consideration of #3.27 million depending on profit performance
over a two year period.
For over twenty years Argen has been providing investigative services at the
highest level in blue chip organisations worldwide. Since acquisition, sales
have shown consistent improvement on the levels achieved in the year before
acquisition and the Board are confident that there are opportunities for further
growth in this part of the Company. Many of the services offered by Argen are
expected to be in greater demand as a consequence of increasing public awareness
of the risk of fraud and malpractice in the workplace, made more prominent by
the extensive exposure of major fraud cases in recent years.
Sales since acquisition to 30 September 2003 were #1.24 million and a good
contribution to the Company's profit has been made even after allowing for the
time and cost of Directors and other internal staff in acquiring and integrating
the business.
Overall, the Board is delighted with the initial contribution from this high
quality acquisition and there is considerable optimism that we will fulfil the
expectations for the performance of this business that we had prior to its
acquisition.
Current trading and prospects
Having successfully turned around VSA, integrated Argen and grown the core
business, the Board is looking for further compatible business streams in order
to broaden the company's range of risk management services. The ability to offer
an increased service across the Group is helping us to win new clients in other
business sectors.
Heightened awareness of risk management issues and increased compliance and
regulation in the financial services industry is expected to present
opportunities to Capcon. In addition, recent marketing activity has already led
to introductions to new major potential clients and combined with a full year's
contribution from Argen gives the Board confidence of achieving our expectations
for the current year.
K P Dulieu
Chairman
11 December 2003
CAPCON HOLDINGS plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 2003
Year ended Year ended
30 September 2003 30 September 2002
Before Amortisation Total Before Amortisation Total
Amortisation of Amortisation of
of goodwill of goodwill
goodwill goodwill
# # # # # #
TURNOVER
Continuing 5,860,324 - 5,860,324 4,160,851 - 4,160,851
operations
Acquisitions 1,235,454 1,235,454 795,345 795,345
------- -------- -------- ------- -------- -------
Group 7,095,778 7,095,778 4,956,196 4,956,196
turnover
Cost of (4,009,213) (4,009,213) (3,290,345) - (3,290,345)
sales
------- -------- -------- ------- -------- -------
GROSS PROFIT 3,086,565 3,086,565 1,665,851 1,665,851
Administrative (2,656,043) (249,273) (2,905,316) (1,395,624) (127,000) (1,522,624)
expenses
OPERATING
PROFIT
Continuing 355,160 (158,093) 197,067 311,026 (101,806) 209,220
operations
Acquisitions 75,362 (91,180) (15,818) (40,799) (25,194) (65,993)
------- -------- -------- ------- -------- -------
Group 430,522 (249,273) 181,249 270,227 (127,000) 143,227
operating
profit
Share of 80,372 - 80,372 - - -
operating
profit in
associates
------- -------- -------- ------- -------- -------
Total 510,894 (249,273) 261,621 270,227 (127,000) 143,227
operating
profit
Interest 1,111 1,111 2,020 2,020
receivable
Interest (130,071) (130,071) (40,575) (40,575)
payable
------- -------- ------- -------- -------- -------
PROFIT ON 381,934 (249,273) 132,661 231,672 (127,000) 104,672
ORDINARY
ACTIVITIES
BEFORE
TAXATION
TAXATION ON (51,430) (55,356)
PROFIT ON
ORDINARY
ACTIVITIES
-------- -------
PROFIT ON 81,231 49,316
ORDINARY
ACTIVITIES
AFTER
TAXATION
DIVIDENDS (201,624) (156,505)
-------- -------
LOSS RETAINED (120,393) (107,189)
FOR THE YEAR
RETAINED 170,885 278,074
PROFIT BROUGHT
FORWARD
-------- -------
RETAINED 50,492 170,885
PROFIT CARRIED
FORWARD
======== =======
Total Recognised Gains and Losses
There were no recognised gains or losses other than those stated above.
CAPCON HOLDINGS plc
BALANCE SHEETS
AS AT 30 SEPTEMBER 2003
Group
2003 2002
# #
Fixed Assets
Intangible fixed assets 5,010,467 3,128,921
Tangible fixed assets 315,579 331,040
Investments 55,631 -
______________ ______________
5,381,677 3,459,961
Current Assets
Debtors 1,978,888 1,364,207
Cash at bank and in hand 42,986 67,056
______________ ______________
2,021,874 1,431,263
Creditors: amounts falling due
within one Year (3,122,939) (1,828,848)
______________ ______________
Net Current Liabilities Assets (1,101,065) (397,585)
______________ ______________
Total Assets less Current 4,280,612 3,062,376
Liabilities
Creditors: amounts falling due after
more than one year (497,250) (94,875)
Provisions for Liabilities and (31,823) (48,024)
Charges
______________ ______________
Net Assets 3,751,539 2,919,477
=============== ===============
Capital and Reserves
Called up share capital 92,338 74,526
Share premium account 2,317,209 1,474,066
Other reserves 950,000 950,000
Profit and loss account 50,492 170,885
Shares to be issued 341,500 250,000
______________ ______________
Shareholders' Funds 3,751,539 2,919,477
=============== ===============
CAPCON HOLDINGS plc
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2003
2003 2002
# # # #
Net cash inflow/ 457,739 (87,558)
(outflow) from
operating activities
Dividend received from 109,470 -
associate
Returns on investments
and servicing of
finance
Interest received 1,111 2,020
Interest paid (117,071) (40,575)
_______ _______
Net cash outflow from (115,960) (38,555)
returns on investments
and servicing of
finance
Taxation
Tax paid (52,861) (33,664)
Capital expenditure and
financial investment
Payments to acquire (159,036) (63,293)
tangible fixed assets
Sale of tangible fixed 53,445 6,100
assets
_______ _________
Net cash outflow from (105,591) (57,193)
investing activities
Acquisitions and
disposals
Acquisition of (1,405,451) (206,142)
subsidiary
undertakings
Net cash/(overdraft) 195,750 (201,899)
acquired with
subsidiary
________ ________
Net cash outflow for (1,209,701) (408,041)
acquisitions
Equity dividends paid (170,960) (52,169)
__________ __________
Net cash outflow before (1,087,864) (677,180)
financing
Financing
Issue of new ordinary 667,000 75,023
shares
Costs of new issue (56,045) (1,126)
Repayment of loan (164,717) -
stock
New loans issued 600,000 (137,853)
Movement in invoice 246,447 251,186
discounting
facilities
Principal payment under (87,668) (36,557)
finance leases
Other loan repayments (71,041) -
____________ ____________
Net cash inflow from 1,133,976 150,673
financing
__________ __________
Increase/(decrease) in 46,112 (526,507)
cash
============= ============
CAPCON HOLDINGS plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2003
1 EARNINGS PER SHARE
Year Ended Year Ended
30 September 2003 30 September 2002
# #
Earnings attributable to ordinary 81,231 49,316
shareholders
Amortisation of goodwill 249,273 127,000
--------- ---------
Adjusted earnings attributable to 330,504 176,316
ordinary shareholders
=========== ===========
Weighted average number of shares 8,393,718 7,344,006
issued during the year
============ ============
Basic earnings per share 1.0p 0.7p
======== ========
Adjusted earnings per share 3.9p 2.4p
======== ========
CAPCON HOLDINGS plc
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2003
2 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
2003 2002
# #
Group operating profit 181,249 143,227
Depreciation 108,665 60,382
Profit on disposal of fixed assets (607) (6,100)
Amortisation 249,273 127,000
(Increase) in debtors (277,297) (203,068)
Increase/(decrease) in creditors 196,456 (208,999)
___________ ___________
Net cash inflow/(outflow) from operating 457,739 (87,558)
activities
============== ==============
3 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2003 2002
# #
Increase/(decrease) in cash in year 46,112 (526,507)
Inflow from change in debt financing (523,021) (76,776)
___________ ___________
Movements in net debt resulting from cash flows (476,909) (603,283)
Loans and finance leases acquired with 0 (460,474)
subsidiary
Net (debt)/funds at 1 October 2002 (966,660) 97,097
___________ ___________
Net debt at 30 September 2003 (1,443,569) (966,660)
============= =============
4 The financial information set out in the announcement does not
constitute the company's statutory accounts for the year ended 30 September 2003
or 2002. The financial information for the year ended 30 September 2002 is
derived from the statutory accounts for that year which have been delivered to
the Registrar of Companies. The auditors reported on those accounts; their
report was unqualified and did not contain a statement under s237(2) or (3)
Companies Act 1985. The statutory accounts for the year ended 30 September 2003
will be finalised on the basis of the financial information presented by the
directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the annual general meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
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