RNS Number:6124T
Gladstone PLC
23 December 2003
GLADSTONE PLC
Gladstone PLC ("Gladstone" or "the Company") and its subsidiaries (together "the
Group")
"A Group profit for the first time in Gladstone's history - a turnaround of #1.2
million before goodwill and exceptionals and #1.9 million after goodwill and
exceptionals."
Key Points:
- Gladstone has made a full year profit after tax for the first time of
#184k (last year loss #1,676k).
- Earnings per share before goodwill and exceptional items has risen to
1.53p (last year loss 1.50p).
- The quality of earnings has improved. Software support contracts and
rentals now represent 37% of turnover (last year 31%).
- Ongoing investment in our core product MRM.plus2 continues to position us
ahead of our competition.
Ben Merrett said:
"It is a delight to be able to report the attainment of Group annual profit for
the first time. Increasing earnings per share by over 3p is a most encouraging
result.
The growth of our software support revenue streams confirms the strength of our
business model. There is much opportunity for the Group to grow within our
private operator market and we are investing accordingly. We continue to
maintain our leadership in the supply of software and services to local
authorities."
Enquiries
Gladstone plc Tel: 01491 201010
Jeremy Stokes, Chairman
Ben Merrett, Chief Executive
23 December 2003
NON-EXECUTIVE CHAIRMAN'S STATEMENT
The Group's first full year profit confirms the turnaround of the MRM division.
Tight control of Gladstone's expenditure further enhanced the final result. The
large losses experienced in the previous financial year have been dramatically
reversed into more predictable levels of profit. Despite the modest growth in
shareholder value over the last 2 years, I still believe that the market
undervalues us.
We continue to look for acquisition opportunities. We have been one of a very
small number of IT stocks who have recently raised cash. This has had the effect
of strengthening our balance sheet. Apart from providing the finance to
stabilise the Group two years ago, over the last year the directors have made
further investments in the Company's equity. They currently own 22.79% of the
Company.
Jeremy Stokes
Non-Executive Chairman
23 December 2003
CHIEF EXECUTIVE OFFICER'S REPORT
OVERVIEW
Given the Group's history of losses, the attainment of profit during this year
is particularly pleasing. We are now generating around twice the combined
results of Membertrack Ltd and Microcache Ltd before they were acquired. The
payment of all material legacy costs referred to in previous statements is now
behind us. Profits and cash generation have been sustained long enough to
engender investor confidence and management time is now firmly focused on
business development. I believe that we have the best products in our market. We
also have significant industry knowledge built over many years and have
developed professional services sensitive to the market's requirements. These
factors should ensure that we will continue to beat our competition in the UK
local authority and privately owned health and leisure sectors.
FINANCIAL RESULTS
Our earnings per share before goodwill and exceptional items have increased to
1.53p (last year loss 1.50p).
Our software support contracts and rentals have grown from 31% to 37% of
turnover.
Group profit of #184k after goodwill and exceptional items represents an
improvement of around #1.9m on last year despite turnover declining from #8.6m
to #7.9m. This decline was due to lower hardware and professional services
revenues.
In the year to 31 August 2002, directors' emoluments reduced from #1,038,056 (14
month period) to #365,074. Directors' emoluments for the year to 31 August 2003
were #195,084.
MARKET SEGMENTS
Our local authority clients are still responding to the Electronic Government
Interoperability Framework, ("EGIF") directive. The current emphasis is to
facilitate bookings made by the public through the internet, functionality that
has been available in our software for some time. In the privately owned sector,
consumers demand for health and leisure facilities across the UK remains strong.
However, it is estimated that new clubs are currently opening at half the rate
seen over the past 5 years. Consolidation amongst UK operators appears
inevitable. In the past, IT systems have often been reviewed when ownership
changes have taken place and this may well present us with an opportunity.
MARKET SOLUTIONS
We now have over 40 clients who have upgraded to our market leading database
platform. We pioneered this central database technology a few years ago and our
competition has struggled to emulate our offering. As low cost broadband
connectivity becomes a reality, private sector operators will be able to
significantly improve their service to members by deploying our product in this
manner. Other operational gains may also result by using this methodology. Our
local authority clients are able to use centrally consolidated data to examine
and report on key utilisation statistics. Pursuing this upgrade path reduces the
number of sites using legacy software and helps us improve the service we
provide to our customers. We are still significantly investing in our core
product, MRM.plus2, to ensure that we retain our market leading position. We
have a strong team of developers, quality assurance staff and system testers. An
offshore capability is available to us in support of this resource when
appropriate. Our bookings software will be the first competitive offering to
facilitate internet payments as well as being chip and pin compliant.
CHIEF EXECUTIVE OFFICER'S REPORT
HISTORIC ISSUES
The cash elements of all the previously reported issues inherited from the
previous board have been settled, including the payment of #170k to the Inland
Revenue relating to PAYE on some of the previous directors' profit on share
options. Our efforts to persuade the Inland Revenue that the Company should not
be liable for this payment failed. Given the high cost of pursuing recovery of
this amount and the uncertainty of outcome, we have decided not to take this
matter any further.
DIVIDEND PAYMENT
The directors have decided not to pay a dividend.
TRADING UPDATE
Our MRM trading division is performing in line with management expectations. We
raised #260k by an equity placing in September 2003 and will continue to use
this cost efficient route to raise funds for expansion when appropriate. We are
continually looking for the right international opportunities and are exploring
the use of overseas distributors. Holmes Place, one of our private sector
clients, recently decided to upgrade to our central database solution and will
be using our software across 5 European countries. We have good reason to be
optimistic about the future.
REORGANISING THE SHAREHOLDER BASE
We currently have over 8,000 shareholders. Approximately 6,000 of these
shareholders have 1,000 or fewer shares with an average current market value of
around #40 if they wish to sell, before dealing costs are taken into account.
Like many other IT companies, significant investor interest was experienced
during the dot-com boom when valuations were far higher than now. The Board
believes that many small shareholders have been deterred from selling their
shares as a result of disproportionately high dealing costs. The Board has also
become increasingly concerned at the expense involved in maintaining such a
large register and maintaining contact with such a large number of small
shareholders. The Board has given considerable thought to this issue and as a
result will be proposing a resolution to reorganise the share capital of the
Company at the next Annual General Meeting. Detailed proposals will be set out
with the Report and Accounts which are proposed to be sent out to all
shareholders at the beginning of February 2004. This proposed reorganisation
will have the effect of consolidating small shareholdings which will then be
sold in the market. Thus small shareholders will realise some value from their
shares without incurring the level of dealing charges that they would otherwise
suffer.
Ben Merrett
Chief Executive Officer
23 December 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 AUGUST 2003
2003 2002
(unaudited) (audited)
Notes # #
Turnover 7,935,138 8,603,805
Cost of sales (1,683,893) (2,291,429)
_________ _________
Gross profit 6,251,245 6,312,376
Administration expenses excluding amortisation
and impairment of goodwill, reorganisation
costs and other exceptional items (5,558,034) (6,815,372)
_________ _________
Operating profit/(loss) before amortisation
of goodwill and exceptional items 693,211 (502,996)
Amortisation of goodwill 3 (444,129) (444,129)
Reorganisation and redundancy costs 3 - (55,000)
Other exceptional items 3 - (479,240)
_________ _________
Operating profit/(loss) 249,082 (1,481,365)
Provision for loss on fixed assets - (141,611)
_________ _________
Profit/(loss) on ordinary activities before interest 249,082 (1,622,976)
Interest receivable 25,039 35,262
Interest payable (90,538) (161,188)
_________ _________
Profit/(loss) on ordinary activities before taxation 183,583 (1,748,902)
Taxation - 72,199
_________ _________
Profit retained/(loss withdrawn) 183,583 (1,676,703)
======== ========
Profit/(loss) per ordinary share (pence) 4
Basic 0.45p (4.53p)
Before goodwill and exceptional items 1.53p (1.50p)
Diluted 0.45p (4.53p)
All of the amounts are in respect of continuing operations.
There are no recognised gains and losses other than those passing through the
profit and loss account.
NOTE OF HISTORIC COST PROFITS AND LOSSES
FOR THE YEAR ENDED 31 AUGUST 2003
2003 2002
(unaudited) (audited)
# #
Reported profit/(loss) on ordinary activities before taxation 183,583 (1,748,902)
Difference between historic cost depreciation charge and
the actual depreciation charge of the year calculated on
the revalued amount 9,258 9,258
_________ _________
Historic profit/(loss) on ordinary activities before taxation 192,841 (1,739,644)
======== ========
Historic profit/(loss) for the year retained after taxation
and dividends 192,841 (1,667,445)
======== ========
CONSOLIDATED BALANCE SHEET
AS AT 31 AUGUST 2003
2003 2002
(unaudited) (audited)
Notes # # # #
Fixed assets
Intangible assets 5 7,106,072 7,929,017
Tangible assets 1,785,594 1,907,725
_________ _________
8,891,666 9,836,742
Current assets
Stocks 102,377 130,121
Debtors 1,989,800 2,241,382
Cash at bank and in hand 941,779 889,679
_________ __________
3,033,956 3,261,182
Creditors: amounts falling due
within one year (1,069,779) (2,020,375)
_________ _________
Net current assets 1,964,177 1,240,807
_________ _________
Total assets less current liabilities 10,855,843 11,077,549
Creditors: amounts falling due
after more than one year (749,375) (1,107,162)
Accruals and deferred income (2,097,992) (2,145,494)
_________ _________
Net assets 8,008,476 7,824,893
======== ========
Capital and reserves
Called up share capital 6 411,170 4,111,700
Share premium account 7 13,353,074 13,353,074
Special reserve 7 4,667,133 4,667,133
Revaluation reserve 7 444,367 453,625
Profit and loss account 7 (14,567,798) (14,760,639)
_________ _________
Equity shareholders' funds 4,307,946 7,824,893
Non-equity shareholders' funds 6 3,700,530 -
_________ _________
Total shareholders' funds 8 8,008,476 7,824,893
======== ========
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 AUGUST 2003
2003 2002
(unaudited) (audited)
Notes # # # #
Net cash inflow/(outflow) from
operating activities 9 689,629 (1,079,405)
Returns on investments
and servicing of finance
Interest received 25,039 35,262
Interest paid (68,949) (90,935)
Finance lease charges (21,589) (70,253)
_________ _________
Net cash outflow from returns
on investments and
servicing of finance (65,499) (125,926)
_________ _________
624,130 (1,205,331)
Taxation (paid)/refunded (1,975) 72,200
Capital expenditure
Purchase of tangible fixed assets (94,692) (142,880)
Receipts from sales of fixed assets - 24,266
Development costs capitalised (21,965) (235,006)
_________ _________
Net cash outflow for
capital expenditure (116,657) (353,620)
_________ _________
Net cash inflow/(outflow) before financing 505,498 (1,486,751)
Financing
Proceeds from issues of shares - 685,283
Finance lease repayments (260,135) (64,279)
Bank loan repayments (188,129) (2,040,000)
_________ _________
Net cash outflow from financing (448,264) (1,418,996)
_________ _________
Increase/(decrease) in cash 10 57,234 (2,905,747)
======== ========
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 AUGUST 2003
1. Basis of preparation
The financial information has been prepared in accordance with applicable
accounting standards in the United Kingdom and under the historical cost
convention, modified to include the revaluation of a freehold property.
The financial information contained in this report does not constitute full
statutory accounts within the meaning of Section 240 of the Companies Act
1985. The figures are extracted from the unaudited full financial
statements for the year ended 31 August 2003 which will be filed with the
Registrar of Companies following formal completion of the audit.
2. Deferred taxation
Deferred tax is provided in full in respect of taxation deferred by timing
differences between the treatment of certain items for taxation and
accounting purposes. The deferred tax balance has not been discounted.
No provision is made for deferred tax on gains recognised on revaluing the
Group's property to its market value unless the Group has a binding
contract, at the balance sheet date, to sell the revalued assets.
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 AUGUST 2003
3. Exceptional administration expenses
The Group's profit and loss account includes the following exceptional
items in administration expenses:
2003 2002
# #
Amounts written off in connection with
acquisition of subsidiaries:
i) Amortisation of goodwill 444,129 444,129
ii) Adjustment to the fair value
of liabilities made in prior years
- project rectification costs - 150,000
________ ________
444,129 594,129
________ ________
iii) Provision for PAYE and NI in connection with exercise
of options by former directors - 168,319
iv) Property lease termination costs - Egham office - 160,921
v) Compensation to director for loss of office - 55,000
________ ________
- 384,240
________ ________
Total 444,129 978,369
======= =======
The other exceptional items of #nil (2002: #479,240) shown on the consolidated
profit and loss account comprises ii), iii), iv).
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 AUGUST 2003
4. Profit/(loss) per ordinary share
The basic profit/(loss) per ordinary share has been calculated using the
profit/(loss) for the year and the weighted average number of ordinary
shares in issue during the period as follows:
2003 2002
# #
Profit/(loss) for the period 183,583 (1,676,703)
======== ========
Number Number
Weighted average of ordinary shares of 1p each 41,116,996 36,977,139
======== ========
Basic profit/(loss) per share (pence) 0.45p (4.53p)
======== ========
The basic profit/(loss) per share before goodwill amortisation and exceptional
items has also been presented since, in the opinion of the directors, this
provides shareholders with a more appropriate measure of the earnings derived
from the Group's businesses. It can be reconciled to basic profit/(loss) per
share as follows:
Basic profit/(loss) per share (pence) 0.45p (4.53p)
Goodwill and exceptional items per share 1.08p 3.03p
________ ________
Profit/(loss) per share before
goodwill amortisation and exceptional items 1.53p (1.50p)
======= =======
The diluted profit/(loss) per ordinary share, as defined in FRS 14, has been
calculated on the following basis:
2003 2002
# #
Profit/(loss) for the period 183,583 (1,676,703)
======== ========
Number Number
Weighted average of ordinary shares
in issue as above 41,116,966 36,977,139
Dilution for share options outstanding - -
_________ _________
Diluted weighted average number
of shares in issue 41,116,966 36,977,139
======== ========
Diluted profit/(loss) per share (pence) 0.45p (4.53p)
======== ========
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 AUGUST 2003
5. Intangible fixed assets
Development
Goodwill costs Total
Group # # #
Cost
At 31 August 2002 17,876,829 711,908 18,588,737
Additions in the year - 21,965 21,965
_________ _________ _________
At 31 August 2003 17,876,829 733,873 18,610,702
_________ _________ _________
Amortisation
At 31 August 2002 10,326,628 333,092 10,659,720
Charge for the year 444,129 400,781 844,910
_________ _________ _________
At 31 August 2003 10,770,757 733,873 11,504,630
_________ _________ _________
Net book values
At 31 August 2003 7,106,072 - 7,106,072
======== ======== ========
At 31 August 2002 7,550,201 378,816 7,929,017
======== ======== ========
Goodwill is amortised over the period which the Directors estimate will
represent its useful economic life. The Directors are of the opinion that the
useful economic life of the goodwill is 20 years from the date of acquisition of
the business.
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 AUGUST 2003
6. Share capital
2003 2002
# #
Authorised
Equity
2,000,000,000 Ordinary shares of 1p each
(2002: 100,000,000 Ordinary shares of 10p each) 20,000,000 10,000,000
========= ========
Non-Equity
41,116,996 Non-voting deferred shares of 9p each 3,700,530 -
========= ========
Allotted, called up and fully paid
Equity
41,116,996 Ordinary shares of 1p each
(2001: 41,116,996 Ordinary shares of 10p each) 411,170 4,111,700
Non-Equity
41,116,996 Non-voting deferred shares of 9p each 3,700,530 -
_________ _________
4,111,700 4,111,700
======== ========
On 21 March 2003 the issued Ordinary shares of 10 pence each were sub-divided
into new Ordinary shares of 1p each and Deferred shares of 9 pence each. The
Deferred shares have no voting rights, no rights to income and negligible rights
as to capital.
The authorised share capital was increased to #20,000,000 on 21 March 2003 by
the creation of an additional 1,000,000,000 new Ordinary shares of 1 pence each.
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 AUGUST 2003
7. Statement of movements on reserves
Share Profit
premium Special Revaluation and loss
account reserve reserve account
# # # #
Balance at
1 September 2002 13,353,074 4,667,133 453,625 (14,760,639)
Transfer from revaluation
reserve to profit and
loss account - - (9,258) 9,258
Retained profit for the year - - - 183,583
_________ _________ _________ ________
At 31 August 2003 13,353,074 4,667,133 444,367 (14,567,798)
======== ======== ======== =======
a) The special reserve arose as a result of the demerger of Ge.world UK and its
subsidiaries during the year ended 31 August 2001 and comprises:
#
Amount transferred from share premium account to eliminate
deficit in the Company's profit and loss account at the date
of the demerger 25,000,000
Transferred to profit and loss account (20,332,867)
_________
4,667,133
========
b) During the year, a High Court approved capital reduction was completed in
respect of two subsidiary companies Gladstone MRM Limited and Membertrack
Limited, involving the cancellation of their existing share premium account.
There has been no impact on the consolidated balance sheet of the Group as a
result of these capital reductions.
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 AUGUST 2003
8. Reconciliation of movements in shareholders' funds
2003 2002
# #
Profit/(loss) for the period 183,583 (1,676,703)
Proceeds from issues of shares - 685,284
_________ _________
Net increase/(decrease) in shareholders' funds 183,583 (991,419)
Opening shareholders' funds at start of the year 7,824,893 8,816,312
_________ _________
Closing shareholders' funds at end of the year 8,008,476 7,824,893
======== ========
9. Reconciliation of operating loss to net cash inflow/(outflow) from
operating activities
2003 2002
# #
Operating profit/(loss) 249,082 (1,481,365)
Depreciation charges 216,823 384,076
Profit on sale of fixed assets - (15,156)
Amortisation of goodwill 444,129 444,129
Development costs amortisation/written off 400,781 106,885
Decrease in stocks 27,744 25,122
Decrease in debtors 251,583 85,772
Decrease in creditors (853,011) (232,208)
Decrease in accruals and deferred income (47,502) (396,660)
_________ _________
Net cash inflow/(outflow) from operating activities 689,629 (1,079,405)
======== =======
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 AUGUST 2003
10. Analysis of changes in net debt
Non-cash
2002 Cash flows changes 2003
# # # #
Cash at bank and in hand 889,679 52,100 - 941,779
Bank overdraft (208,427) 5,134 - (203,293)
_________ _________ _________ _________
681,252 57,234 - 738,486
_________ _________ _________ _________
Bank loans (1,210,000) 188,127 - (1,021,873)
Finance leases (339,695) 260,137 - (79,558)
_________ _________ _________ _________
(1,549,695) 448,264 - (1,101,431)
_________ _________ _________ _________
Total net debt (868,443) 505,498 - (362,945)
======== ======== ======== ========
11. Post balance sheet event
In September 2003, a total of 2,500,000 new Ordinary shares of 1p each were
issued through placings at 11p per share.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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