RNS Number:4933A
Project Telecom PLC
29 August 2002
Press Release
Thursday, 29 August 2002
Project Telecom plc
Interim results for the 6 months ended 30 June 2002
Financial highlights (figures in #millions)
Six months ended 30 June 2002 2001 Growth Year ended
as restated 31.12.01
Turnover 185 158 +17% 330
Operating profit (pre-exceptionals/post goodwill) 5.7 3.4 +67% 8.9
Pre-tax profit (pre-exceptionals/post goodwill) 6.2 3.9 +61% 9.8
Exceptional items 0.2 0.5 - 0.1
Earnings per ordinary share (pence) (pre-exceptionals/post 1.65 1.04 +59% 2.77
goodwill)
Dividend (pence) 0.30 0.25 +20% 0.65
* During the first half of 2002 Project Telecom has continued to grow and
delivered another good set of results, despite challenging market conditions.
This was achieved by continuing to make the expansion of the Corporate Services
division its number one priority.
* Corporate Services increased turnover by 54% to #54.9m, with operating
profit post goodwill more than doubling to #5.1m. The division continued to
expand organically and has made two acquisitions growing the customer base and
extending geographic reach. At 30 June 2002, total customers had increased since
the end of 2001 by 27,000 to 165,000.
* Retail Services turnover grew by 6% to #130m but operating profit fell by
48% to #0.7m.
* In the light of continuing margin pressure and difficult trading
conditions experienced in the prepay market, the board has decided that the
strategic objectives of the Group will be best served by withdrawing from the
distribution of prepay services and closing the Retail Services division. It is
expected that the closure of the division will result in exceptional costs of
less than #1 million. No closure costs have been borne in the first half.
* The progress made in 2001 by Network Services, established to focus on
non-mobile services, is continuing and the division is now profitable. It has a
clear mandate to develop its service offering, concentrating on a range of fixed
line voice and data services and expanding its sales resource.
Chief Executive, Tim Radford said: "We have ambitious growth plans which will
be focused on achieving strong growth within our Corporate Services division."
"The second half has started well and we are confident that 2002 will be a year
of further progress."
For further information contact:
Tim Radford
Chief Executive, Project Telecom
Tel: 07831 642911
Richard Cunningham
Finance Director, Project Telecom
Tel: 07785 707070
Simon Bloomfield
Partner, Bankside Consultants
Tel: 020 7444 4177
Mobile: 07771 758517
Interim Report
Chairman's Statement
Introduction
The first half of 2002 has seen Project Telecom make further progress on the
delivery of its strategy. Despite challenging market conditions, the Group has
continued to grow and has delivered another set of good results.
The Group has made the expansion of the Corporate Services division its number
one priority and the results reflect the excellent progress that has been made.
However, in light of continuing margin pressure and difficult trading conditions
experienced in the prepay market, coupled with management's focus on expanding
the Corporate Services division, the board has decided that the strategic
objectives of the Group will be best served by closing the Retail Services
division. It is expected that the closure of the division will result in
exceptional costs of less than #1 million. No closure costs have been borne in
the half year results.
The result of these actions will be to focus the Group on the development of its
Corporate Services business, significantly reduce the risk profile of the Group,
improving both the visibility and quality of earnings.
Results and dividend
Turnover for the 6 months to 30 June 2002 grew by 17% to #185 million (2001-
#158 million) and operating profits, after amortisation of goodwill and before
exceptional items, rose 67% to #5.7 million (2001 - #3.4 million).
Pre-tax profits after goodwill amortisation and before exceptional items rose
61% to #6.2 million (2001 - #3.9 million). On a similar basis earnings per share
rose 59% to 1.65p per share (2001 - 1.04p per share as restated).
At 30 June 2002 the Group had net funds of #21.2m (2001- #7.7m).
In recognition of these results the board has declared an interim dividend of
0.3p per share (2001 - 0.25p per share) which will be paid on 31 October 2002 to
shareholders on the register at the close of business on 4 October 2002.
Trading and Financial Review
Corporate Services
Turnover rose by 54% to #54.9 million (2001 - #35.6 million) and operating
profits, after goodwill amortisation, more than doubled to #5.1 million (2001 -
#2.2 million).
Corporate Services has made excellent progress during the first half and has
continued to expand both organically and through acquisition.
At 30 June 2002 the corporate customer base had grown to over 165,000, an
increase of 27,000 on the number at the year end. We expect to achieve further
strong organic growth as the Group develops its sales and distribution strategy.
On 9 April 2002 the Group announced the acquisition of TW Telecom Limited. The
business, based in Manchester, supplies telecommunication services to corporate
customers in the North West and provides an ideal platform from which to expand
into this area. The acquisition has now been successfully integrated into the
business.
On 31 July 2002 the Group announced the acquisition of Ternhill Communications
Limited, a business focused mobile communications dealership based in
Shrewsbury. This acquisition is consistent with our strategy of extending our
geographic reach.
The Group expects sales through indirect sales channels to make a significant
contribution to the future growth of the business and Chris Tombs, the director
currently responsible for Retail Services, will take responsibility for this
part of the business.
Retail Services
Turnover for the Retail Services division grew by 6% to #130 million (2001 -
#123 million) but operating profit fell by 48% to #0.7 million (2001 - #1.3
million).
Retail Services has continued to operate in an extremely competitive market
place, with constant pressure on margins. The decision to close this division
has been taken after a detailed review of the business and its market and after
close consultation with our main trading partners.
Network Services
The progress made during 2001 in establishing and developing a Network Services
business to focus on the sale of non-mobile related services into our corporate
customer base has continued. This division is now profitable and has a clear
mandate to grow its service offering, which has been focused predominantly on
developing a range of fixed line voice and data services and expanding the sales
resource.
It is our belief that penetration of value added services is key to reducing
customer churn and improving operating profitability and we expect further
progress to be made during the second half of the year.
Our People
Once again I would like to thank all our staff who have worked hard to produce
another set of excellent results.
Unfortunately the closure of Retail Services will inevitably mean that a number
of redundancies will be made. However, we are ensuring that wherever possible
affected members of staff are given the opportunity to transfer internally
within the Group.
Outlook
We believe that our decision to focus on our core business and to concentrate on
the growth of our customer base and build the Project Telecom brand in the
corporate market is the right one. We will continue to look for further growth
opportunities and to broaden the range of products and services that we can
deliver.
We look forward to the future with confidence and expect further progress to be
made during the second half.
Philip Rogerson
Chairman
27 August 2002
INDEPENDENT REVIEW REPORT TO PROJECT TELECOM PLC
Introduction
We have been instructed by the company to review the financial information for
the six months to 30 June 2002 which comprises the profit and loss account, the
balance sheet, the cash flow statement and related notes 1 to 13. We have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months to
30 June 2002.
Deloitte & Touche
Chartered Accountants
Nottingham
27 August 2002
CONSOLIDATED PROFIT & LOSS ACCOUNT
6 MONTHS TO 30 JUNE 2002
6 months 6 months Year to
to 30 June to 30 June 2001 31 December 2001
Note 2002 as restated
(see note 5)
#000 #000 #000
TURNOVER: 2
Continuing operations 182,743 158,259 329,865
Acquisitions 2,011 - -
_________ __________ __________
184,754 158,259 329,865
Cost of sales (165,667) (143,575) (296,189)
_________ __________ __________
Gross profit 19,087 14,684 33,676
Administrative expenses:
Other (11,510) (10,307) (21,842)
Exceptional items 3 172 457 78
Amortisation of goodwill (1,834) (939) (2,923)
_________ __________ __________
(13,172) (10,789) (24,687)
_________ __________ __________
OPERATING PROFIT:
Continuing operations 5,953 3,895 8,989
Acquisitions (38) - -
_________ __________ __________
5,915 3,895 8,989
Interest payable and similar charges (85) (127) (214)
Interest receivable and similar income 556 547 1,102
_________ __________ __________
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2 6,386 4,315 9,877
Tax on profit on ordinary activities (2,617) (1,734) (3,789)
_________ __________ __________
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 3,769 2,581 6,088
Dividend 6 (677) (544) (1,421)
_________ __________ __________
RETAINED PROFIT FOR THE PERIOD 3,092 2,037 4,667
======== ========= =========
Basic earnings per ordinary share 4 1.71p 1.19p 2.79p
Diluted earnings per ordinary share 4 1.65p 1.13p 2.67p
Earnings per ordinary share before
exceptional items 4 2.49p 1.47p 4.11p
and amortisation of goodwill
Earnings per ordinary share before
exceptional items 4 1.65p 1.04p 2.77p
There are no recognised gains or losses or movements on shareholders' funds
other than the results for the period and prior periods and the issue of shares.
CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2002
At 30 June 2002 At 30 June 2001 At 31 December
as restated 2001
#000 #000 #000
FIXED ASSETS
Intangible assets 14,854 13,500 14,606
Tangible assets 10,981 9,910 9,663
________ ________ ________
25,835 23,410 24,269
________ ________ ________
CURRENT ASSETS
Stock 15,639 15,105 11,164
Debtors: amounts falling due within one year 36,822 35,128 34,436
Debtors: amounts falling due after more than one year 6,713 3,260 4,618
Cash at bank and in hand 23,799 10,770 31,650
________ ________ ________
82,973 64,263 81,868
CREDITORS: amounts falling due within one year (74,910) (58,954) (74,763)
________ ________ ________
NET CURRENT ASSETS 8,063 5,309 7,105
________ ________ ________
TOTAL ASSETS LESS CURRENT LIABILITIES 33,898 28,719 31,374
CREDITORS: amounts falling due after more than one year (1,968) (2,548) (2,184)
PROVISION FOR LIABILITIES AND CHARGES (530) (618) (957)
________ ________ ________
NET ASSETS 31,400 25,553 28,233
======== ======== ========
CAPITAL AND RESERVES
Called up share capital 554 544 546
Share premium account 17,651 17,599 17,622
Other reserves 38 - -
Profit and loss account 13,157 7,410 10,065
________ ________ ________
TOTAL EQUITY SHAREHOLDERS' FUNDS 31,400 25,553 28,233
======== ======== ========
CONSOLIDATED CASH FLOW STATEMENT
6 MONTHS TO 30 JUNE 2002
6 months to 6 months to Year
to
30 June 2002 30 June 2001 31
December
2001
Note #000 #000
#000
Net cash (outflow) / inflow from operating 9 (1,049) 6,900
35,513
activities
Returns on investments and servicing of finance
Interest received 556 501
1,102
Interest paid (58) (82)
(132)
Interest element of finance lease rental payments (27) (45)
(82)
________ ________
________
Net cash inflow from returns on investments and 471 374
888
servicing of finance
________ ________
________
Taxation
Corporation tax paid (1,946) (658)
(3,134)
________ ________
________
Tax paid (1,946) (658)
(3,134)
________ ________
________
Capital expenditure
Payments to acquire tangible fixed assets (2,333) (1,827)
(2,769)
Receipts from sales of tangible fixed assets 27 15
44
________ ________
________
Net cash outflow from capital expenditure (2,306) (1,812)
(2,725)
________ ________
________
Acquisitions
Purchase of subsidiary undertaking (2,252) -
-
Net cash acquired with subsidiary 259 -
-
Adjustment to purchase price of previously acquired 86 -
-
business undertaking
Purchase of business undertaking - (13,852)
(17,842)
________ ________
________
(1,907) (13,852)
(17,842)
________ ________
________
Equity dividends paid (886) (609)
(1,159)
________ ________
________
Net cash (outflow)/inflow before financing (7,623) (9,657)
11,544
________ ________
________
Financing
Issue of shares 75 -
16
Repayment of loans (53) (46)
(131)
Capital element of finance lease rentals (250) (277)
(529)
________ ________
________
Net cash (outflow) from financing (228) (323)
(644)
________ ________
________
(Decrease) / increase in cash 10 (7,851) (9,980)
10,900
======== ========
========
NOTES TO FINANCIAL INFORMATION
6 MONTHS TO 30 JUNE 2002
1. On 9 April 2002, the Group acquired T W Telecom Limited for a cash
consideration and costs of #2,252,000. The resulting goodwill is being
amortised over its estimated useful economic life which the directors consider
to be 5 years.
2. Segmental Analysis
6 months to 30 6 months to 30 Year to 31 December
June 2002 June 2001 2001
as restated
#000 #000 #000
Turnover:
Corporate services:
Continuing operations 52,865 35,567 87,706
Acquisitions 2,011 - -
Retail services:
Discontinued operations 129,878 122,692 242,159
________ ________ ________
184,754 158,259 329,865
======== ======== ========
Profit before tax:
Corporate services operating profit:
Continuing operations 6,953 3,111 9,263
Acquisitions (38) - -
Retail services operating profit 662 1,266 2,571
________ ________ ________
Operating profit before exceptional items and
amortisation of goodwill 7,577 4,377 11,834
Amortisation of goodwill (1,834) (939) (2,923)
Exceptional items 172 457 78
________ ________ ________
Operating profit 5,915 3,895 8,989
Net interest receivable 471 420 888
________ ________ ________
Group profit before tax 6,386 4,315 9,877
======== ======== ========
Net assets:
Corporate services 8,272 4,131 5,328
Retail services 5,600 4,285 5,324
Group 17,528 17,137 17,581
________ ________ ________
Group net assets 31,400 25,553 28,233
======== ======== ========
All turnover and profits originate from activities within the United Kingdom.
3. Exceptional Items
6 months to 30 6 months to 30 Year to 31 December
June 2002 June 2001 2001
#000 #000 #000
NIC on unapproved share options 172 457 78
________ ________ ________
172 457 78
The company has provided for the National Insurance Contribution liability
arising on unapproved share options outstanding at 30 June 2002. The liability
has been calculated based on the closing mid-market price of an ordinary share
in the capital of the company at 30 June 2002 of 66.5p (30 June 2001 : 47p; 31
December 2001 : 78p) and is reflected in the credit of #172,000 to the profit
and loss account.
4. Earnings Per Share
a. Basic earnings per share is calculated by dividing profits after
tax of #3,769,000 by the weighted average number of ordinary shares in issue
during the period. The weighted average number of ordinary shares in issue was
220,420,229 (6 months to 30 June 2001 : 217,570,229; year to 31 December 2001 :
217,836,713).
b. Diluted earnings per share is calculated by adjusting the weighted
average number of ordinary shares in issue on the assumption of conversion of
all dilutive potential ordinary shares. Dilutive potential ordinary shares
comprise the difference between the number of shares subject to share options
and the number of shares that would have been issued at estimated average fair
values in each period. The resulting adjusted average number of ordinary shares
was 228,809,181 (6 months to 30 June 2001 : 228,460,440; year to 31 December
2001 : 228,160,377).
c. Both earnings before amortisation of goodwill and exceptional items and
earnings post amortisation of goodwill and pre-exceptional items are presented
in addition to the basic earnings per share calculated in accordance with FRS 3
and FRS 14 since, in the opinion of the directors, they present a better
like-for-like comparison of the earnings of the Group between the relevant
periods.
Basic earnings per share may be reconciled to earnings per share before
amortisation of goodwill and exceptional items and earnings per share post
amortisation of goodwill and pre-exceptional items as follows:
6 months to 30 6 months to 30 Year to 31 December
June 2002 June 2001 2001
as restated
p p p
Earnings per share before amortisation of goodwill and 2.49 1.47 4.11
exceptional items
Amortisation of goodwill (0.84) (0.43) (1.34)
________ ________ ________
Earnings per share post amortisation of goodwill and 1.65 1.04 2.77
pre-exceptional items
Exceptional items 0.08 0.21 0.03
Tax related to exceptional items (0.02) (0.06) (0.01)
________ ________ ________
Basic earning per share - FRS 3 basis 1.71 1.19 2.79
======= ======= ========
5. Tax on Profit on Ordinary Activities
FRS 19 was adopted for the year ended 31 December 2001. The adoption of FRS 19
has required a change in the method of accounting for deferred tax. As a result
the comparative figure for the tax on profit on ordinary activities for the 6
months to 30 June 2001 has been restated from the previously reported amount of
#1,899,000 to #1,734,000. The impact of adopting FRS 19 on the year to 31
December 2001 results is a reduction in the tax charge of #478,000 and the
impact on the 6 months to 30 June 2002 is a reduction in the tax charge of
#82,000.
6. Dividends
6 months to 30 6 months to 30 Year to 31 December
June 2002 June 2001 2001
#000 #000 #000
Interim Proposed - 0.3p per ordinary share 665 544 547
(6 months to 30 June 2001 - 0.25p;
year to 31 December 2001 - 0.25p)
Final Paid - - 874
(year to 31 December 2001 - 0.4p)
Under provision from prior year 12 - -
________ ________ ________
677 544 1,421
======== ======== ========
The interim dividend will be paid on 31 October 2002 to shareholders on the
register at the close of business on 4 October 2002.
7. Accounting policies are as stated in the last annual financial
statements.
8. Movement on reserves
#38,000 has been transferred from the share premium account to other reserves.
This relates to the transfer of share premium held by a subsidiary.
9. Reconciliation of Operating Profit to Net Cash (Outflow)/Inflow from
Operating Activities
6 months to 30 6 months to 30 Year to 31 December
June 2002 June 2001 2001
#000 #000 #000
Operating profit 5,915 3,895 8,989
Depreciation 1,189 1,146 2,374
Amortisation of goodwill 1,834 939 2,923
Loss on sale of fixed assets 48 32 317
(Increase) / decrease in stocks (4,400) 2,880 6,821
(Increase) in debtors (3,310) (7,212) (6,607)
(Decrease) / increase in creditors (1,898) 5,677 20,813
(Decrease) in provision (427) (457) (117)
________ ________ ________
(1,049) 6,900 35,513
======== ======== ========
10. Analysis of Changes in Net Funds
At Cash Acquisition Other non-cash At
1 January 2002 flow excluding changes 30 June 2002
cash
#000 #000 #000 #000 #000
Cash at bank and in hand 31,650 (7,851) - - 23,799
Hire purchase (751) 250 (72) - (573)
Debt due within one year:
Loans (224) 53 - (53) (224)
Debt due after one year:
Loan (1,883) - - 53 (1,830)
_______ _______ _______ _______ _______
28,792 (7,548) (72) - 21,172
======= ======= ======= ======= =======
11. The figures for the year ended 31 December 2001 are extracted from the
audited accounts for that period, on which the auditors to the Group have issued
an unqualified audit report which did not contain a statement under section 237
(2) or (3) of Companies Act 1985, and which have been delivered to the Registrar
of Companies.
12. The directors approved this Interim Report on 27 August 2002.
13. Post Balance Sheet Events
On 31 July 2002, the Group acquired Ternhill Communications Limited for a cash
consideration of #350,000 plus allotment of shares to the value of #150,000.
The Board has decided that the strategic objectives of the Group will be best
served by closing the Retail Services division.
This information is provided by RNS
The company news service from the London Stock Exchange
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