Interim Results
13 Juillet 2000 - 9:00AM
UK Regulatory
RNS Number:7905N
Skillsgroup PLC
13 July 2000
Skillsgroup plc
Interim results for the six months ended 31st May 2000
Skillsgroup plc today announces interim results for the six months
ended 31st May 2000.
Highlights
* Operating profits for core continuing businesses up 26% to
#5.9m (1999: #4.7m)
* Core continuing businesses, QA Training and Pontis, continue to
perform well despite challenging external conditions
* Pre-tax profits before goodwill of #1.5 million reflect #1.4m
investment in internet projects and #3.1m losses from Acuma
* Acuma disposal being pursued vigorously
* Interim dividend raised by 5.9% to 1.8p (1999: 1.7p)
* Successful implementation of first phase of qaglobal project,
addressing the fast-growing web-based learning applications
market; launch due in September
Commenting on the results, David Southworth, Executive Chairman,
said:
"The last six months have been an intense period of activity as we
have developed our new, web-based, learning solutions business,
qaglobal, which we expect to launch on 1 September. The market for
web-based learning solutions is going to be one of the fastest
growing areas of information technology applications and will be
fuelled by the enormous number of web-based initiatives currently
being explored by major corporations.
Against a background of external market uncertainty we have
achieved significant internal change, a clear repositioning of the
Group and we have cash resources to fund the implementation of our
strategy. I believe that by the end of November, I will be able to
pass to my successors a business that is clearly focussed in
higher margin, growth sectors, with excellent market opportunities
and the resources needed to exploit them."
For further information, please contact:
Skillsgroup plc www.skillsgroup.co.uk
David Southworth, Executive Chairman
Colin Gibson, Finance Director
On 13th July: 020 7253 2252
Thereafter: 01625 591200
Ludgate Communications
Reg Hoare/Edward Macquisten
020 7253 2253
Skillsgroup plc
Interim Results for the six months ended 31 May 2000
Introduction
I am pleased to announce that operating profits (before internet
project spending and goodwill amortisation) for Skillsgroup's core
continuing businesses rose 26% to #5.9m (1999: #4.7m). This
reflects further strong progress in QA Training and Pontis
Consulting against a background of a difficult trading environment
in the first half of the year. Overall, pre-tax profits before
goodwill were #1.5 million (1999: #7.0 million) as a result of a
#5.3 million swing from profit to loss in the non-core Acuma
business and the Group's #1.4 million investment to date in
internet projects. The dividend has been raised by 5.9% to 1.8p
(1999: 1.7p).
Strategic Developments
The first six months of 2000 have seen a series of significant
strategic developments for the Group which will have a profound
and positive impact on the future prospects for Skillsgroup's core
training and consulting business.
It has become clear as the market has changed, that our multi-
brand strategy has lacked sufficient focus. We believe that the
opportunities for the Group's training and consultancy businesses
are excellent and intend to focus the Group's full resources
clearly on achieving their success.
As a result, the Board decided to dispose of our staffing
business, QA Myriad and our enterprise solutions business, Acuma.
The disposal of QA Myriad was completed on 27 June for #31.2
million in cash and the disposal of Acuma is being pursued
vigorously with the aim of completing over the coming months.
As previously announced, the last six months have seen an intense
period of activity as we have developed our new, web-based,
learning solutions business, qaglobal, which we expect to launch
on 1 September. The #5.3 million acquisition in June of Direct
Media Technology and its learning management software product ITM
was a critical step forward in the development of qaglobal's
solutions offering. The market for web-based learning solutions
is going to be one of the fastest growing areas of information
technology applications and will be fuelled by the enormous number
of web-based initiatives currently being explored by major
corporations.
Along with the launch of the qaglobal business and the further
development of the ITM system, there are a number of co-ordinated
developments in QA Training's market offerings. We believe that
our Group is now in a strong position to exploit the new market
opportunities and can be a leading catalyst for fundamental change
in IT learning methodology initially in the UK and later, through
partnerships, overseas. As announced at the Group's Annual General
Meeting, Pontis is now being developed around three areas - its
traditional strategic integration/migration business, e-business
capability and a skills development consultancy - to link up
increasingly over time with qaglobal.
Our executive team is making substantial progress towards our
strategic objectives. As already indicated, I believe that in
order to signify the end of this major transformation period for
Skillsgroup, it would be appropriate for a new Chief Executive to
take the Group forward from this point and we now have a shortlist
of candidates for this appointment. We are also progressing the
appointment of a new Chairman.
Divisional Performance
The first half of 2000 was a particularly difficult time for the
industry and as recently highlighted by many of our peers, the
second quarter has not provided the pace of post millennium
recovery in IT project work previously expected. This situation
has clearly had an impact on our results, particularly in the
Acuma business. Our core businesses, QA Training and Pontis
Consulting continue to perform well despite challenging external
conditions. As previously announced, our half year results are
also reduced by #1.4 million of costs related to various web-based
initiatives as part of a series of such projects estimated to cost
#8 to 10 million in total which will impact 2000 and the early
part of 2001.
QA
Before web-based project spending and goodwill amortisation, QA
Training's operating profit rose 31% to #4.6 million (1999: #3.5
million) on turnover of #19.5 million (1999: #17.9 million)
reflecting its market-leading position and high levels of
operating efficiency at a time when some of its competitors are
finding life more difficult. Course fill-rates and the
utilisation of both lecturing staff and training rooms are high
with the results of 1999's restructuring and integration processes
showing real benefit.
Pontis
Pontis Consulting recorded an operating profit before goodwill
amortisation up 8% at #1.3 million (1999: #1.2 million) on
turnover of #6.1 million (1999: #5.0 million). Consistent with
general market conditions, a number of projects expected to start
in the second quarter have been deferred into the second half, but
the level of activity is on an upward trend. Consultant
utilisation is at high levels, justifying decisions made last
autumn both to reduce the number of contract staff and to hold
back on permanent recruitment until the upturn was more visible.
Non-core Operations
In common with its competitors, Acuma experienced a very tough
first half with turnover of #26.3 million (1999: #41.7 million)
and an operating loss of #3.1 million (1999: #2.2 million profit)
before web-based project spending. Very slow demand for project
work coupled with downward pressure on hardware margins have been
the principal factors. Profitability in run-rate terms should
return in the course of the second half.
QA Myriad, the sale of which was completed in June, traded
steadily in the half year on volumes reduced by millennium
factors, producing operating profit of #1.3 million (1999: #1.6
million) on turnover of #26.1 million (1999: #31.8 million).
Internet Project Expenditure
Total web-based project spending was #1.4 million in the half year
with the majority (#0.9 million) being in QA Training on the
development, marketing and implementation of e-Dynamix, its market-
leading e-commerce system and on early steps in the conversion of
selected classroom courses for web-delivery. Our qaglobal project
has now completed the stages of identifying and qualifying the
market opportunity and of developing a business plan. Three
members of the new team are already with us, with recruitment in
hand for a further three posts.
The second half of the financial year will see us building on
these initial investments with the bulk of the spending being on
further development of QA's web-based courses and capabilities, a
marketing drive on e-Dynamix, building the infrastructure for
qaglobal as it moves to launch and the recruitment, marketing and
development work needed to achieve the new path set out for
Pontis.
Financials
Goodwill amortisation of #2.0 million reflects the acquisitions
completed in 1999. The interest charge of #0.6 million is
consistent with average borrowings which did not fluctuate
significantly between November and May.
The operating cashflow of #9.6 million (1999: #5.1 million) has
been very positive with both QA Training and Acuma achieving
significant reductions in debtors over the period.
Net borrowings at 31 May were #19.8 million but since that date
the net effect of the issue of #4 million of loan notes in
connection with the DMT acquisition and the net receipt of #28.5
million in cash (after clearing borrowings) on completion of the
QA Myriad disposal have been to produce a current net cash
position of just under #5 million.
Dividends
We have elected to increase the interim dividend to 1.8 pence
(1999: 1.7 pence) to reflect a balance between our growth
prospects and this year's revenue investment. The dividend will
be payable on 3 October 2000 to shareholders on the register on 25
August 2000.
Prospects
Against a background of external market uncertainty we have
achieved significant internal change and a clear repositioning of
the Group. Our core businesses continue to perform well. We have
cash resources to fund the implementation of our strategy and we
are finding and recruiting new people excited by the challenge. I
believe that by the end of November, I will be able to pass to my
successors a business that is clearly focused in higher margin,
growth sectors, with excellent market opportunities and the
resources needed to exploit them.
David Southworth
Chairman
SKILLSGROUP plc
Unaudited Consolidated Results
For the half year ended 31 May 2000
Turnover Profit
Half Half Half Half
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
31 May 31 May 30 Nov 31 May 31 May30 Nov
2000 1999 1999 2000 1999 1999
#m #m #m #m #m #m
Turnover/Operating Profit
Continuing Operations
Core 25.6 22.9 55.0 3.1 3.6 6.8
To be discontinued 26.3 41.7 80.5 (4.0) 1.3 1.8
_____ _____ _____ _____ _____ _____
51.9 64.6 135.5 (0.9) 4.9 8.6
Discontinued Operations 26.1 31.8 63.2 1.0 0.9 2.4
_____ _____ _____ _____ _____ _____
Turnover/
Operating Profit 78.0 96.4 198.7 0.1 5.8 11.0
Net Interest (payable)/
receivable (0.6) 0.6 0.4
_____ _____ _____
(Loss)/profit before
taxation (0.5) 6.4 11.4
Taxation (0.5) (1.9) (2.1)
_____ _____ _____
(Loss)/profit after
taxation (1.0) 4.5 9.3
Dividends (1.6) (1.4) (5.0)
_____ _____ _____
Retained (Loss)/profit (2.6) 3.1 4.3
_____ _____ _____
Dividend per share 1.8p 1.7p 5.0p
Basic (loss)/earnings
per share (1.1p) 5.3p 10.8p
Fully diluted (loss)/
earnings per share (1.1p) 5.3p 10.7p
Adjusted earnings per
share* 0.1p 6.5p 11.5p
Adjusted fully diluted
earnings per share* 0.1p 6.5p 11.4p
* Adjusted to exclude discontinued operations, exceptional items
and goodwill amortisation.
SKILLSGROUP plc
Unaudited Consolidated Balance Sheet
at 31 May 2000
At 31 May At 31 May At 30 Nov
2000 1999 1999
# million # million # million
Fixed Assets
Intangible assets 76.5 67.6 78.5
Tangible assets 16.7 18.0 17.6
_____ _____ _____
93.2 85.6 96.1
Current assets
Stock 0.9 2.1 0.9
Debtors 42.2 49.0 48.3
Cash at bank and in hand 1.0 6.8 3.6
_____ _____ _____
44.1 57.9 52.8
Creditors - amounts falling due
within one year
Borrowings (14.8) (11.0) (17.9)
Other creditors (42.9) (43.7) (47.6)
_____ _____ _____
(57.7) (54.7) (65.5)
Net Current (liabilities)/assets (13.6) 3.2 (12.7)
_____ _____ _____
Total assets less current
liabilities 79.6 88.8 83.4
Creditors - amounts falling due
after more than one year
Borrowings (6.0) (12.3) (6.1)
Other creditors (1.2) (1.2) (1.2)
Provisions for liabilities and
charges (1.5) (3.3) (1.5)
_____ _____ _____
Net assets 70.9 72.0 74.6
_____ _____ _____
Capital and reserves
Called up share capital 8.8 8.7 8.8
Deferred share capital 3.5 3.6 4.6
Share premium 44.5 44.4 44.5
Other reserves 1.5 1.3 1.5
Profit and loss account 12.6 14.0 15.2
_____ _____ _____
70.9 72.0 74.6
_____ _____ _____
SKILLSGROUP plc
Unaudited Consolidated Cash Flow Statement
for the half year ended 31 May 2000
Half Year Half Year Year
Ended Ended Ended
31 May 31 May 30 Nov
2000 1999 1999
# million # million # million
Reconciliation of operating
profit to net
cash flow from operating
activities
Operating profit 0.1 5.8 11.0
Goodwill amortisation 2.0 0.6 2.4
Depreciation 2.4 1.8 3.7
(Loss)/profit on fixed asset
disposals 0.1 - (0.2)
(Increase)/decrease in stock - (0.3) 1.0
Decrease/(increase) in debtors 6.1 (3.4) (1.6)
(Decrease)/increase in creditors (1.0) 1.1 0.4
Decrease in provisions (0.1) (0.5) (0.5)
_____ _____ _____
Net cash inflow from operating
activities 9.6 5.1 16.2
Returns on investment and servicing
of finance
Interest, net (0.6) 0.6 0.9
Taxation (2.2) (0.8) (3.5)
Capital expenditure and financial
investment
Purchase of fixed assets (1.6) (1.7) (3.4)
Disposal of fixed assets - - 0.4
Acquisitions and disposals
Acquisition of businesses
Total impact on net cash/
(borrowings) (1.1) (51.6) (61.2)
Increase in borrowings
(excluding overdrafts) - 19.0 22.5
_____ _____ _____
Cashflow from acquisitions
(including net cash acquired) (1.1) (32.6) (38.7)
Disposal of businesses - - 0.2
(1.1) (32.6) (38.5)
Equity dividends paid (3.5) (2.9) (4.4)
_____ _____ _____
Net cash inflow/(outflow) before
financing 0.6 (32.3) (32.3)
Financing
Issue of ordinary share capital - 0.5 0.6
Repayment of borrowings (11.5) - -
Capital element of finance
lease payments (0.3) - (0.3)
_____ _____ _____
Decrease in cash in the period (11.2) (31.8) (32.0)
_____ _____ _____
Notes
1 The interim financial statements have been prepared on the basis
of the accounting policies set out in the Group's 1999 statutory
accounts. The interim financial statements which have been
approved by the directors are unaudited and do not constitute
full financial statements within the meaning of Section 240 of
the Companies Act 1985.
2 The comparative figures for the year ended 30 November 1999 do
not constitute full financial statements and have been abridged
from the full Group accounts for the year ended on that date, on
which the auditors gave an unqualified report. The 1999
accounts have been delivered to the Registrar of Companies.
3 Segmental Analysis
Turnover
2000 1999 1999
Half Year Half Year Year
Ended Ended Ended
# million 31 May 31 May 30 Nov
______________________________________
Continuing Operations
Core
QA Training 19.5 17.9 41.7
Pontis Consulting 6.1 5.0 13.3
______________________________________
25.6 22.9 55.0
To be discontinued
Acuma Solutions 26.3 41.7 80.5
______________________________________
51.9 64.6 135.5
Discontinued operations
QA Myriad 26.1 31.8 63.2
______________________________________
Before central costs 78.0 96.4 198.7
Central costs - - -
______________________________________
After central costs 78.0 96.4 198.7
======================================
2000 Half Year Ended 31 May
Operating Profit
Before After
Internet internet
project project
spending spending
and Internet and
goodwill project Goodwill goodwill
# million amortisation spending amortisation amortisation
Continuing Operations
Core
QA Training 4.6 (0.9) (0.9) 2.8
Pontis Consulting 1.3 - (0.8) 0.5
__________________________________________
5.9 (0.9) (1.7) 3.3
To be discontinued
Acuma Solutions (3.1) (0.3) (0.3) (3.7)
__________________________________________
2.8 (1.2) (2.0) (0.4)
Discontinued operations
QA Myriad 1.3 - - 1.3
__________________________________________
Before central costs 4.1 (1.2) (2.0) 0.9
Central costs (0.6) (0.2) - (0.8)
__________________________________________
After central costs 3.5 (1.4) (2.0) 0.1
==========================================
Operating Profit 1999
Half year ended Year Ended
# million 31 May November
______________________
Continuing Operations
Core
QA Training 3.2 5.7
Pontis Consulting 0.9 1.7
______________________
4.1 7.4
To be discontinued
Acuma Solutions 2.2 2.9
______________________
6.3 10.3
Discontinued operations
QA Myriad 1.6 3.3
______________________
Before central costs 7.9 13.6
Central costs (2.1) (2.6)
______________________
After central costs 5.8 11.0
______________________
The operating profits by business for the comparative half year
ended 31 May 1999 and for the year ended 30 November 1999 are
stated after goodwill amortisation respectively of #0.6 million
(analysed #0.3 million to QA Training and #0.3 million to Pontis
Consulting) and #2.4 million (analysed #1.1 million to QA
Training , #1.2 million to Pontis Consulting and #0.1 million to
Acuma Solutions). In addition, the same figures include
exceptional costs respectively of #1.5 million (part of central
costs) and #2.7 million (analysed #0.8 million to QA Training,
#0.3 million to Pontis Consulting, #0.2 million to Acuma
Solutions and #1.4 million to central costs).
4 At an extraordinary general meeting held on 27 June 2000, the
shareholders of the Company approved, by ordinary resolution,
the disposal of QA Myriad Limited and its subsidiary undertaking
to Hays Personnel Services (Holdings) Limited, a subsidiary of
Hays plc, for a cash consideration of #31.2 million. This
consideration was paid in full on completion. The exceptional
profit on disposal is estimated at #11.0 million.
5 The calculation of basic earnings per share is based on a loss
after tax of #1.0 million (May 1999: profit of #4.5 million) and
87,614,188 shares (1999: 84,434,631 shares) being the weighted
average number of shares in issue during the current period.
Adjusted earnings per share is given for continuing operations
and is based on profit after tax adjusted for discontinued
operations, exceptional items and goodwill amortisation. The
effect of excluding the after tax result of operations to be
discontinued and the after tax effect of internet project
spending would be to increase adjusted earnings per share by 3.6
pence.
6 A copy of this statement has been sent to all shareholders and
is available from the Company's registered office.
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