RNS Number:9345R
AT Communications Group Plc
09 April 2008
ATCG.L
AT Communications Group plc
("ATC," the "Company" or the "Group")
Preliminary results for the year ended 31 December 2007
ATC reports strong operating performance and a positive outlook
AT Communications Group plc is an award-winning supplier of Information and
Communication Technology ("ICT") solutions and today announces preliminary
results for the year to 31 December 2007. These are reported under International
Financial Reporting Standards ("IFRS"), with 2006 comparisons restated
accordingly.
Financial highlights:
* Group revenue up 63% to �88.4 m (2006: �54.1 m) with 11% underlying
organic growth.
* Operating profit before amortisation, non-recurring expenses and share
based payments increased by 43% to �7.7m (2006: �5.4m).
* Pre-tax profit, before amortisation, non-recurring expenses and share based
payments up 35% to �6.2m (2006: �4.6m).
* Strong cash generation in the 4th quarter resulting in a reduction of
net debt to �15.0m at 31 December 2007 compared to �18.0m at 31 December
2006.
* Adjusted EPS increased to 8.1p (2006: 7.4p).
* Recommended final dividend of 1.0p.
Operational highlights:
* Completed debt and equity refinancing of the Group with �6.8m of new
equity finance raised and a new five year committed loan facility secured
in January 2008. Injected �10.3m in the working capital of the business.
* 2006 acquisitions fully integrated with the Group reorganised into three
operating divisions providing complete non-competing market coverage.
* Success of this strategy evidenced by period contract wins with BT,
Cable & Wireless, Dixons, HMV and Somerfield.
* Contracted and recurring revenues increased to approximately 70% (2006:
60%).
* Contracts post period end include Amazon plc and the significant new
business wins with De La Rue as well as Avaya, reflecting ATC's success of
targeting larger business and associated higher margins.
* Board strengthened with the appointment of Ian Crawley as Group Finance
Director and Andrew Parsliffe as Commercial Director. Fred Hallsworth
joining the Group as Non-Executive Director post period end.
Commenting on results, Alex Tupman, Chief Executive, said:
"We have achieved tremendous progress during 2007, which has transformed our
business. We now have the structures, scale, financing and management in place
to continue to grow our business successfully in 2008 and beyond. Contract wins
both during the period and after with companies including De La Rue and Avaya
reflect the success of our end-to-end capability and will underpin our future
growth as we secure larger and higher margin business. We are very confident of
future prospects and I look forward to updating shareholders with further news
in due course."
Enquiries:
AT Communications Group plc 08700 558 080
Alex Tupman, Chief Executive
Ian Crawley, Finance Director
www.atcommunications.co.uk
Cenkos Securities plc 020 7397 8924
Stephen Keys
www.cenkos.com
Biddicks 020 7448 1000
Shane Dolan
www.biddicks.co.uk
Notes to Editors
About AT Communications Group plc
ATC is one of the UK's largest independent business communications groups and is
listed on the London Stock Exchange (AIM). The Group offers a comprehensive
portfolio of voice, data, mobile and video solutions, specialising in IP
technology, alongside managed services, e-commerce, design consultancy,
installation and maintenance. ATC operates under three divisions to ensure total
market coverage. Each division operates independently but shares resources to
ensure best practice at divisional level without duplication of effort.
www.atcommunications.co.uk
ATC Solutions:
A leading business systems integrator, ATC Solutions is accredited at the
highest level with leading ICT manufacturers and continues to craft
best-of-breed solutions, supported by in-house service capabilities to SME and
corporate customers directly. ATC Solutions' customer base now totals over
10,000 and includes the majority of the Times 500 companies. www.atc.co.uk
Rocom:
Rocom has over twenty years of experience in the communications market and
focuses on resellers and dealers as well as retail channels for online services.
It is the only UK distributor with the ability to distribute IP-based Customer
Premises Equipment, Hosted IP Communications, and in-house Network Services to
assist channels and their customers in managing the transition to IP-based
solutions. www.rocom.co.uk
Servassure:
A fully independent third party service provider to channel partners in the UK
ICT market - including ATC Solutions and Rocom. Servassure was formed in January
2007 to provide traditional and IP-based carrier and engineering services with a
100% channel focus. Servassure targets and supplies large channels including
network operators such as BT and Colt and systems integrators such as Siemens
who require a more customised level of service and support than a traditional,
smaller channel. www.servassure.co.uk
AT Communications Group plc
Chairman's statement
I am pleased to report an excellent set of results for 2007 with turnover and
profits increasing significantly and the recommendation of a final dividend
payment. This has been achieved despite the challenges faced during the period
of integrating four acquisitions made in the previous 13 months as well as the
restructuring of the business into three market focused operating divisions.
Post restructuring, the Group now consists of a leading ICT solutions integrator
and service provider focused on mid tier corporates (ATC Solutions), a leading
ICT equipment and service distributor focused on the SME market via indirect
channels (Rocom), and an independent network and engineering services company
(Servassure), focused on providing services to other telecommunications
companies as well as the other two Group divisions. The Group thus addresses the
entire business market through a combination of direct and indirect channels.
I believe that ATC now possesses the critical mass, best-of-breed industry
partners, and in-house service capabilities to lead the UK industry for next
generation ICT solutions through both direct and indirect routes to market.
I am also very pleased to report that the business has started the new financial
year well with recent contract wins across all three business divisions
including contracts secured with large global companies such as
De La Rue and Avaya. These wins in particular highlight the successes of
restructuring and investment in sales in order to secure more complex and higher
margin business. On an annualised basis, over 70% of the Group's turnover is now
contracted and recurring.
Post period end, we refinanced the business by way of a �24m loan facility with
HBOS secured during difficult market conditions. I believe this achievement is
testimony to the underlying strength and quality of ATC's business and
management team.
Looking forward, our debt position is being aggressively addressed, our
recurring revenue streams continue to grow and our new business pipeline is
healthy. We are focused on capitalising on our new divisional structure and we
are driving the business via a strengthened and streamlined sales capability
which we anticipate will generate strong growth. As a result, the Board is very
confident of future prospects.
I would like to take this opportunity to thank all our staff for their
exceptionally hard work during the period under review. As a result of their
efforts our business has evolved and become stronger.
Gerry Spencer
Non-Executive Chairman
9 April 2008
AT Communications Group plc
Chief Executive's statement
OVERVIEW
2007 was another exciting and successful year for ATC. The Group delivered on
its strategic aims, which were to complete the assimilation of the acquisitions
made in the previous 13 months and restructure the business into three
market-focused operating divisions whilst maintaining double-digit organic
growth.
ATC now possesses the critical mass, best-of-breed industry partners, and
in-house service creation capabilities to lead the UK industry for next
generation ICT solutions through both direct and indirect routes to market.
IFRS
This is the first year for which the Group is required to report under IFRS, the
main effects of which are to alter the treatment of goodwill and intangibles and
related amortisation / impairment, and the treatment of share based payments.
Prior period accounts have been restated under IFRS and reconciliations between
UK GAAP and IFRS are shown in note 8.
RESULTS
Revenue & profit
In the twelve months to 31 December 2007, the Group's revenue increased by 63%
to �88.4m (2006: �54.1m). This increase reflects the inclusion of both the
acquisitions made during 2006 for a full year. Nevertheless, the underlying
organic growth based on unaudited proforma figures for 2006 was 11% and
continues the trend of double-digit organic growth that the Group has achieved
now for three years. This was achieved despite the significant restructuring and
refinancing activities that were undertaken during the year.
Gross profit increased by 47% to �35.7m (2006: �24.2m) again principally due to
the acquisitions as noted above. Gross margin held up well at 40% (2006: 45%)
despite the inclusion of the lower margin businesses acquired in 2006.
Operating profit, before amortisation of intangible assets, non-recurring costs
and share based payments increased 43% from �5.4m to �7.7m.
Underlying EBITDA increased by 40% to �8.3m (2006: �5.9m)
The following table sets out the trading and operating performance of the
Group's three trading divisions.
Revenue Underlying EBITDA
2007 2006 2006 2007 2006
(Proforma)
�'m �'m �'m �'m �'m
ATC Solutions 41.4 29.4 40.5 4.5 3.1
Rocom 41.5 18.0 31.3 2.9 0.9
Servassure 18.5 13.4 14.0 3.3 2.2
Group/Adjustments (13.0) (6.7) (6.6) (2.4) (0.3)
Group Total 88.4 54.1 79.2 8.3 5.9
1) 2006 proforma figures are unaudited and have been calculated to provide a like
for like comparison. They assume a full year contribution from the acquisitions
made during 2006.
2) Underlying EBITDA is profit before interest, tax, depreciation, amortisation,
one-off items and share based payments and is reconciled to the financial
statements as follows:
2007 2006
�'000 �'000
Operating profit per financial statements 4,218 4,483
Amortisation of goodwill and intangible assets 1,296 568
Non-recurring costs 1,892 308
Share based payments 284 61
Depreciation 628 526
Underlying EBITDA 8,318 5,946
Non-recurring costs are principally costs incurred during 2007 as a direct or
indirect result of the acquisitions made during 2006 and the restructuring of
the Group that followed. They include �1.3m of bank and professional fees
resulting from the earlier than planned requirement to refinance the debt taken
on to finance the acquisitions made during 2006; �300k of consultants and
interim management costs; and �135k of redundancy costs.
Interest
The net interest cost for the Group for the year increased to �1.5m (2006:
�0.8m), due to higher average net debt levels resulting mainly from the
financing of the Rocom acquisition in August 2006.
Profit before tax
Group profit before tax for the year declined to �2.8m (2006: �3.7m), due
principally to increased amortisation as well as significant non-recurring costs
as noted above.
Taxation
The taxation charge was �362k for the year, (2006: �404k) reflecting the use of
losses from prior year as well as credits from over payments made in prior
years.
Earnings per share
Adjusted diluted EPS increased to 8.1p (2006: 7.4p). Basic and diluted earnings
per share for the year were 3.5p compared with 5.8p in 2006.
Dividend and dividend policy
The Group paid its first dividend during the year which resulted in a payment of
�662k based on 1p per share. We said that we would operate a progressive
dividend policy whilst balancing the cash needs of the business. In line with
this policy, the Board has recommended a final dividend of 1p at a cost of �771k
based on the increased shareholder base. This 16% increase in dividend payout
notwithstanding the level of debt carried by the Group is a reflection of the
Board's confidence that the Group will have a robust cash flow in 2008.
Cash flow
The Group's net cash position improved by �3.0m during the year with net debt
reduced to �15.0m (2006: �18.0m). There was a cash outflow from operating
activities of �5.9m principally due to a net increase in working capital of
�10.3m. This increase mainly reflects the increased working capital requirements
of the combined Group and a growing business but we believe that there is scope
for improving working capital efficiency as we go forward. Set against these
outflows were the completion of the sale and leaseback of the Wetherby freehold
acquired as part of the Rocom acquisition which realised �3.5m along with a net
�6.8m inflow from the share placings during the year.
Debt
Since the year end the Group has refinanced its debt and strengthened its
balance sheet. The new facility with HBOS comprises a term loan of �16.5m
amortising over five years and a committed revolving credit facility for �7.5m.
DIVISIONS
The Group invested heavily in its sales capability during the period and as part
of the restructuring process our direct solutions division was realigned in
order to focus on larger higher margin business. We also invested in Servassure
recruiting an additional 40 engineers to strengthen our servicing ability, which
was a key factor in winning the Avaya account.
ATC Solutions
ATC Solutions underwent considerable restructuring during the period. In line
with our stated strategy and in order to address the significant higher margin
and longer term contracted opportunities that exist via servicing global multi
sited businesses, we closed down our SME sales operations and recruited 37
experienced sales staff to address this Tier 1 market. We now have the ability
to offer global clients high end integrated communication solutions which
encompass auditing and professional services, fixed line telephony, convergence
solutions, mobility as well as peripherals.
I am delighted to add that multi-million pound contract wins with Somerfield,
FADS, HMV and Relate during the period and with De La Rue and OCG Buying
Solutions post period end, all demonstrate the success of this strategy, which
will underpin the Company's accelerating growth.
ATC has been particularly successful at marketing its strengthened capabilities
with recent high profile ICT seminars held at Wembley Stadium for the telecoms
industry as well as with the International Business Development Group, which
provides access to senior Chief Information Officers both here in the UK and
internationally.
Going forward, we will continue to focus on larger, higher margin business and
on disruptive market-led propositions, including managed services and hosted
VoIP as well as new-wave technology such as fixed mobile convergence, a
significant new growth area for the Group.
Servassure
Servassure was created to provide its customer base with a 'white label'
engineering, installation and maintenance service. Following significant
recruitment during the period, including 40 additional Engineers, Servassure now
has a national work force of over 200 engineers and technical support staff who
are trained and accredited to service over 95% of installed vendor products.
This enables the delivery of a complete suite of engineering and technical
services and is a key component of the Group's integrated strategy and was
central to winning significant contracts during the period with Somerfield and
BT as well as Avaya, post period end.
During the period, Servassure created a focussed BT team of 20 personnel who
increased revenues with BT from �3m in 2006 to over �10m in 2007 providing
engineering and technical services to over 3,000 BT customer sites. In addition,
the team added new product revenues to the existing Third Party Maintenance
service, including Stores and Logistics, Service Deliver Management and a 24
hour Network Operations Centre to monitor the data network of a major county
council.
In January this year, Servassure held a seminar at Kempton Races which attracted
30 new Systems Integrators and other large Carriers, 20 of whom have already
signed up to Servassure's white labelled service generating a pipeline of
business opportunity outside of BT of over �10m.
Going forward, we will not only build on our strong relationship with BT but
also on this new activity, which is generating significant traction in the
market and a healthy pipeline of new business.
Rocom
During the period, Rocom has transformed itself into a comprehensive,
channel-only supplier of ICT products and services. Rocom's direct sales teams
now forms part of ATC Solutions, thus removing any channel conflict, and now
supports approximately 3,000 resellers spanning traditional telecoms dealers,
data VARs, network resellers, high street retailers and the increasingly
prominent online trading community. Key retail customers include Amazon, PC
World, Staples, Maplin Electonics and e-Buyer.
In support of this transition, during 2007 Rocom further strengthened its
reseller support proposition and launched its Total Distribution programme - a
suite of 10 reseller support options specifically designed to deliver the
channel's most complete and compelling support infrastructure. These additional
services have been engineered to provide a one-stop-shop convenience to Rocom's
reseller base while simultaneously presenting its resellers the opportunity to
both accelerate sales and develop new revenue streams.
New brand contracts won during the period included Nortel, which is globally
regarded as one of the leading system brands in the SME sector. Significant
successes have also been achieved with Siemens Enterprise for which Rocom
operates a dedicated business unit, managing 3,000 customers on their behalf.
During the period Rocom's Managing Director, Richard Carter, was awarded Channel
Personality of the Year, a significant industry accolade against competition
from industry leaders from Microsoft, IBM and Cisco.
New contract wins
The strength of our business post restructuring and its ability to target higher
margin business is evidenced by the series of high profile contract wins that
were announced during the period and post period end.
During the year, our ATC Solutions and Servassure divisions won a multi-million
pound, two-year IP voice and data managed service contract to provide services
to Somerfield. The contract covers the entire Somerfield estate across 886 UK
sites, which includes 873 Somerfield stores, 11 depot locations, and
Somerfield's headquarters in Bristol.
Our Rocom division won a string of multi-million pound contracts over the
period, including a �2m contract with Dixons Stores Group International, a �9m
contract with BT (together with Servassure) and �5m of reseller contracts from
Cable & Wireless. This momentum has been sustained into the new financial year,
with the extension for an additional two years of Rocom's existing relationship
with Amazon, the leading online retailer, announced in February.
Also following the period end, Rocom won a contract with Avaya to distribute
their portfolio of SMB systems throughout the UK. Rocom will utilise its link
with Servassure to supply an integrated service providing distribution,
installation and maintenance services. This is expected to generate additional
revenues to the Group of at least �7m over the next two years.
In addition to the contract wins with HMV and Relate announced in September, ATC
Solutions has recently been awarded a landmark contract with De La Rue for a
full range of consultancy, design, installation and maintenance services for
their international voice and data requirements. This, in tandem with the
significant contract with Avaya represents a quantum leap for the Group as it
shows our capability to service global, multi-sited companies, which in turn
will deliver additional revenue and profit for the Group.
PRODUCTS
The Group divides its product and service offering into five broad product
areas, the income from which is shown in the following table:
2007 Actual 2006 Pro forma 2006 % Increase
�000 �000 �000
Hardware 11.0 4.3 10.2 8%
Peripherals 30.2 11.9 27.8 8%
Systems Integration and Engineering 19.4 17.5 18.9 3%
Maintenance 10.6 7.8 8.0 32%
Network Services 17.2 12.6 14.3 20%
Hardware - the distribution of ICT systems to indirect channel customers.
Peripherals - the supply of small items (< �200 each), including headsets and
conference phones to a broad range of customers via both the indirect channel as
well as direct to corporates.
Systems Integration and Engineering - the design, project management and
installation of ICT Solutions and the provision of engineering services.
Maintenance - ongoing-support contracts for installed ICT systems.
Network services - the supply of fixed line and mobile voice and data services.
The table above demonstrates that our substantive growth is being delivered in
the contracted and recurring revenue areas of maintenance services and network
services. This has been underpinned with a substantial increase in our third
party maintenance business with BT, which has increased year on year by over 50%
and significant network services contract wins during the period, including
Somerfield and HMV.
MANAGEMENT TEAM
During the period we made a number of Board appointments, which have
strengthened our management team considerably. In June, Ian Crawley was
appointed Finance Director. He has nearly 20 years of senior finance and
telecoms experience, having held positions with BT, Cable & Wireless and Shell,
amongst others. As Chief Financial Officer at BT's Openworld division, he played
a key role in transforming the business into one of the UK's leading internet
service providers.
We also appointed Andrew Parsliffe as Commercial Director. He has 30 years of
senior finance and commercial experience within multi sector FTSE 100 and 250
companies, including Scottish and Southern Energy Plc where he spent seven years
as Group Financial Controller.
Following the period end, we appointed Fred Hallsworth as a non-executive
director. Fred has been involved in corporate finance and advisory work for
Technology, Media and Communications and life sciences companies for the last 20
years and has over 30 years' experience of assisting companies with their
fundraising, merger and acquisition, initial public offering and associated
transactions.
These appointments strengthen the Board and provide a broad skill set, which
will drive the growth of our business during 2008 and beyond.
OUTLOOK
We have achieved tremendous progress during 2007, which I believe has
transformed our business. We believe we now have the structures, scale,
financing and management in place to grow our business dramatically in 2008 and
beyond. This has already been demonstrated by the success we have had with
significant contract wins to date and we are very confident about our future
prospects.
Alex Tupman
Chief Executive
9 April 2008
AT Communications Group plc
Consolidated income statement
Year ended 31 December 2007
Note 2007 2006
�'000 �'000
Revenue 88,434 54,150
Cost of sales (52,773) (29,939)
Gross profit 35,661 24,211
Selling, General & Administrative expenses (29,551) (19,420)
Non-recurring restructuring costs (1,892) (308)
Underlying EBITDA* 8,318 5,946
Depreciation (628) (526)
Underlying operating profit 7,690 5,420
Share based payments (284) (61)
Non -recurring restructuring costs (1,892) (308)
Amortisation of Goodwill &
Intangible Assets (1,296) (568)
Operating profit 4,218 4,483
Investment revenues 20 6
Finance costs (1,486) (806)
Profit before income tax 2,752 3,683
Income tax expense 2 (362) (404)
Profit for the year attributable
to equity shareholders 2,390 3,279
Earnings per share
Basic 3 3.5p 5.8p
Diluted 3 3.5p 5.8p
Diluted adjusted 3 8.1p 7.4p
*Earnings before interest, tax, depreciation, amortisation of intangible assets
and share based payment charges.
AT Communications Group plc
Consolidated statement of changes in equity
Year ended 31 December 2007
Share Share Capital Hedging Retained Total
capital premium redemption reserve earnings equity
account reserve
Note �'000 �'000 �'000 �'000 �'000 �'000
Equity at 1 January 2006 530 11,557 6 - (617) 11,476
Profit for the year - - - - 3,279 3,279
Share-based payments - - - - 61 61
Total recognised income
and expense 530 11,557 6 - 2,723 14,816
Issue of share capital 79 3,686 - - - 3,765
Cost of shares issued - (120) - - - (120)
Balance at 31 December
2006 609 15,123 6 - 2,723 18,461
Profit for the year - - - - 2,390 2,390
Share-based payments - - - - 284 284
Gain on interest rate
hedges - - - 27 - 27
Total recognised income
and expense 609 15,123 6 27 5,397 21,162
Dividends 4 - - - - (662) (662)
Issue of share capital 162 6,909 - - - 7,071
Cost of shares issued - (261) - - - (261)
Balance at 31 December
2007 771 21,771 6 27 4,735 27,310
AT Communications Group plc
Consolidated balance sheet
31 December 2007
Note 2007 2006
�'000 �'000
Non-current assets
Goodwill 6 27,182 26,975
Other intangible assets 6 7,030 8,326
Property, plant and equipment 1,153 1,232
Deferred tax asset 525 409
35,890 36,942
Current assets
Inventories 9,401 7,282
Trade and other receivables 23,390 17,924
Cash and cash equivalents 2,922 3,052
Derivative financial instruments 27 -
Assets held for sale - 3,500
35,740 31,758
Total assets 71,630 68,700
Current liabilities
Trade and other payables 23,057 25,690
Current income tax liabilities 1,228 833
Obligations under finance leases 41 97
Borrowings 6,508 2,920
30,834 29,540
Net current assets 4,906 2,218
Non-current liabilities
Borrowings 11,370 18,115
Deferred income tax liabilities 2,109 2,498
Obligations under finance leases 7 86
13,486 20,699
Total liabilities 44,320 50,239
Net assets 27,310 18,461
Equity
Share capital 771 609
Share premium account 21,771 15,123
Capital redemption reserve 6 6
Hedging reserves 27 -
Retained earnings 4,735 2,723
Total equity 27,310 18,461
AT Communications Group plc
Consolidated cash flow statement
Year ended 31 December 2007
Note 2007 2006
�'000 �'000
Net cash from operating activities 7 (5,787) 3,702
Investing activities
Interest received 20 6
Proceeds of Property held for resale 3,500 -
Proceeds on disposal of property, plant
and equipment 25 -
Purchases of property, plant and equipment (574) (544)
Acquisitions of subsidiaries (207) (23,450)
Net cash used in investing activities 2,764 (23,988)
Financing activities
Dividends paid (662) -
Repayments of borrowings (6,680) -
Repayments of obligations under
finance leases (135) (30)
Proceeds on issue of shares 6,809 3,380
New loans raised 458 19,343
Net cash from financing activities (210) 22,693
Net (decrease)/increase in cash and
cash equivalents (3,233) 2,407
Cash/(overdrafts) and cash equivalents at
beginning of year 2,956 549
Cash/(overdrafts) and cash equivalents at
end of year (277) 2,956
AT Communications Group plc
Notes to the preliminary results
1. Financial information
The financial information set out in this announcement does not constitute the
Group's statutory accounts for the years ended 31 December 2007 and 2006.
The accounts have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted for use by the European Union and
therefore comply with Article 4 of the EU IAS Regulation. The financial
statements have been prepared in accordance with IFRS for the first time with a
transition date of 1 January 2006. The disclosures required by IFRS1 concerning
the transition from UK GAAP to IFRS are given in note 8.
Whilst the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
IFRS, it does not include sufficient information to comply with IFRS. The Group
expects to publish full financial statements which comply with IFRS in May 2008.
The financial information has been prepared under the same accounting policies
as presented in the Group's interim announcement for the period ended 30 June
2007 and can be viewed on the Group's website at www.atcommunications.co.uk.
The comparative financial information for the year ended 31 December 2006 is
derived from the statutory accounts for the year ended 31 December 2006 as
adjusted for the conversion from UK GAAP to IFRS. The statutory accounts for the
year ended 31 December 2006 have been delivered to the Registrar of Companies.
The auditors have reported on the UK GAAP 2006 accounts; their report was
unqualified and did not contain a statement under section 237 (2) or (3) of the
Companies Act 1985. The auditors have yet to sign their report on the 2007
accounts. The statutory accounts for the year ended 31 December 2007 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 company's Annual General Meeting. The financial
information set out in this announcement was approved by the Board of Directors
on 9 April 2008.
2. Income tax expense
2007 2006
�'000 �'000
Current tax 1,288 592
Previous period over provisions (421) -
Deferred tax (505) (188)
Tax charge 362 404
Corporation tax is calculated at 30% (2006: 30%) of the estimated assessable
profit for the year. The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the 30% tax rate as follows:
2007 2006
�'000 �'000
Profit before tax 2,752 3,683
Tax at the UK corporation tax rate of 30%
(2006: 30%) 826 1,105
Tax effect of expenses that are not deductible in
determining taxable profit 193 110
Tax effect of depreciation that is not deductible
in determining taxable profit 60 60
Tax effect of depreciation in excess of capital
allowances 23 24
Other timing differences 436 31
Tax effect of utilisation of tax losses not
previously recognised (250) (738)
Over provision in previous years (421) -
Movement in deferred tax (505) (188)
Tax charge 362 404
3. Earnings per share
The calculation of the basic, diluted and diluted adjusted earnings per share is
based on the following data:
2007 2006
�'000 �'000
Earnings
Earnings for the purposes of basic earnings per
share being net profit attributable to equity
holders of the parent 2,390 3,279
Effect of dilutive potential ordinary shares: - -
Earnings for the purposes of diluted earnings per share 2,390 3,279
Amortisation of goodwill & intangible assets 1,296 568
Non -recurring expenses 1,892 308
Earnings for the purposes of diluted underlying
earnings per share 5,578 4,155
Number of shares
Weighted average number of ordinary shares for the
purposes of basic earnings per share 69,231,218 56,231,313
Effect of dilutive potential ordinary shares:
Share options 27,898 197,177
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 69,259,116 56,428,490
Earnings per share
Basic 3.5p 5.8p
Diluted 3.5p 5.8p
Diluted adjusted 8.1p 7.4p
4. Dividends
The dividends paid in 2007 of �662,000 (2006 - �nil) amounted to 1 pence per
share (2006 - �nil per share). A dividend in respect of the year ended 31
December 2007 of 1 pence per share, amounting to a total dividend of �771,000 is
to be proposed at the annual general meeting. These financial statements do not
reflect this dividend payable.
5. Business combinations
There were no acquisitions made during 2007. However, the fair value
calculations related to the acquisitions made during 2006 have been restated to
show the separate identification of intangible assets as part of the transition
from UK GAAP to IFRS as well as revised estimates based on additional
information reviewed during 2007. Fair value adjustments have been made to the
book value of the assets and liabilities in acquired companies to adjust, where
applicable, the carrying value of certain assets and liabilities.
a) Britannia Telecom Group Limited ("Britannia")
On 26 May 2006 the Company completed the acquisition of Britannia. The acquired
assets and liabilities of Britannia were:
Book Fair value Fair value
Value adjustments
�'000 �'000 �'000
Trade names and marks - 655 655
Customer lists / contracts - 2,579 2,579
Property, plant & equipment 113 - 113
Deferred tax asset - 15 15
Inventory 7 - 7
Trade & other receivables 530 (50) 480
Trade and other payables (3,204) - (3,204)
Deferred tax liability - (970) (970)
------------ ------------ -------------
Net (liabilities) / assets acquired (2,554) 2,229 (325)
Goodwill 4,375
-------------
Consideration 4,050
========
Satisfied by:
Cash 3,472
Shares issued 265
Loan notes 98
Acquisition costs 215
The material fair value adjustments to the net assets of Britannia were
calculated as follows:
(i) Trade debtors have been written down to their recoverable value plus the
related deferred tax adjustment.
(ii) Intangible assets in the form of the trade name and marks of Britannia, as
well as its existing customer contract base, are recognised based on the
Directors' assessment of their value taking into consideration the future cash
flows that are expected to be derived from them. A corresponding deferred tax
liability has been recognised.
b) Rocom Limited ("Rocom")
On 16 August 2006 the Company completed the acquisition of Rocom. The acquired
assets and liabilities of Rocom were:
Book Fair value Fair value
Value adjustments
�'000 �'000 �'000
Trade names and marks - 1,596 1,596
Customer lists / contracts - 4,064 4,064
Property, plant & equipment 645 (288) 357
Deferred tax asset - 86 86
Inventory 3,845 - 3,845
Trade & other receivables 6,142 - 6,142
Asset held for resale 3,500 - 3,500
Cash at bank 622 - 622
Trade and other payables (7,659) - (7,659)
Deferred tax liability - (1,698) (1,698)
------------- ------------- -------------
Net assets acquired 7,095 3,760 10,855
Goodwill 7,534
-------------
Consideration 18,389
========
Satisfied by:
Cash 17,611
Acquisition costs 778
The material fair value adjustments to the net assets of Rocom were calculated
as follows:
(i) Adjustments to depreciation to bring into line with Group policies plus the
related deferred tax adjustment.
(ii) Intangible assets in the form of the trade name and marks of Rocom, as well
as its existing customer contract base, are recognised based on the Directors'
assessment of their value taking into consideration the future cash flows that
are expected to be derived from them. A corresponding deferred tax liability as
been recognised.
(iii) Acquisition costs have been revised upwards by �207,000 compared to the
calculation provided in the 2006 financial statements which was based on a
preliminary assessment.
6. Goodwill and other intangible assets
Tradenames Customer Total Goodwill
and marks lists / intangible
contracts assets
�'000 �'000 �'000 �'000
Cost
At 1 January 2006 - - - 15,284
Recognised on acquisition of subsidiaries 2,251 6,643 8,894 11,702
Adjustment in respect of 2005 acquisitions - - - 444
At 1 January 2007 2,251 6,643 8,894 27,430
Adjustment in respect of 2006 acquisitions - - - 207
At 31 December 2007 2,251 6,643 8,894 27,637
Accumulated amortisation and impairment
At 1 January 2006 - - - (455)
Amortisation for the year (91) (477) (568) -
At 1 January 2007 (91) (477) (568) (455)
Amortisation for the year (189) (1,107) (1,296) -
At 31 December 2007 (280) (1,584) (1,864) (455)
Carrying amount
At 31 December 2007 1,971 5,059 7,030 27,182
At 31 December 2006 2,160 6,166 8,326 26,975
Goodwill and intangible assets acquired in a business combination are allocated,
at acquisition, to the cash generating units (CGUs) that are expected to benefit
from that business combination as follows:
2007 2006
�'000 �'000
Rocom 10,236 10,599
ATC Solutions 13,295 14,021
Servassure 10,681 10,681
34,212 35,301
The Group tests goodwill and intangible assets annually for impairment, or more
frequently if there are indications that they might be impaired.
The recoverable amounts of the CGUs are determined from value in use
calculations. The key assumptions for the value in use calculations are those
regarding the discount rates, growth rates and expected changes to selling
prices and direct costs during the period. Management estimates discount rates
using post-tax rates that reflect current market assessments of the time value
of money and the risks specific to the CGUs and the rates used were between 16%
and 19%. The growth rates are based on the directors' growth forecasts and the
rates used were 10% per annum for five years followed by 3% in perpetuity
thereafter. The directors believe that the rate of 10% is justified based on
past performance and the Group's positioning in the market which it is believed
will allow it to grow faster than general market growth by increasing its market
share. Changes in selling prices and direct costs are based on past practices
and expectations of future changes in the market.
The amortisation periods used for Tradenames and marks are 6 years with respect
to the Britannia acquisition and 20 years for the Rocom acquisition. The
amortisation period used for customer lists and contracts is six years.
Therefore the remaining amortisation periods are 4 years and 5 months for
Britannia Tradenames and customer lists and contracts; 4 years and 8 months for
the Rocom customer lists and contracts; and 18 years and 8 months for the Rocom
Tradenames.
7. Notes to the cash flow statement
2007 2006
�'000 �'000
Profit before tax 2,752 3,683
Adjustments for:
Investment revenues (20) (6)
Other gains and losses
Finance costs 1,486 806
Depreciation of property, plant and equipment 628 526
Amortisation of intangible assets 1,296 568
Share-based payment expense 284 61
6,426 5,638
Operating cash flows before movements in working capital
Increase in inventories (2,119) (1,971)
Decrease/(increase) in receivables (5,504) (5,599)
Increase/(decrease) in payables (2,633) 6,781
Cash generated by operations (3,830) 4,849
Income taxes paid (471) (287)
Interest paid (1,486) (860)
Net cash from operating activities (5,787) 3,702
8. Explanation of transition to IFRS
As stated in the Basis of Preparation, these are the Group's first full
consolidated financial statements prepared in accordance with IFRS.
An explanation of how the transition from UK GAAP to IFRS has affected the
Group's financial position, financial performance and cash flows is set out
below.
IFRS 1 permits companies adopting IFRS for the first time to take certain
exemptions from the full requirements of IFRS in the transition period. These
financial statements have been prepared on the basis of taking the following
exemptions:
* Business combinations made prior to 1 January 2006, the Group's date of
transition to IFRS, have not been restated to comply with IFRS 3 "Business
Combinations". Goodwill arising from these business combinations of �15,273,000
(being �14,829,000 as accounted for at 1 January 2006 and an adjustment to the
fair value calculation of �444,000 made in 2006) has not been restated other
than as set out in note (d) below.
Reconciliation of equity at 1 January 2006
UK
GAAP a b c d e f IFRS
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Non-current assets
Goodwill 14,829 - - - - - - 14,829
Property, plant
and equipment 913 - - - - - - 913
Deferred tax assets 10 - - - - - 167 177
--------- --------- --------- --------- --------- --------- --------- ---------
Total non-current
assets 15,752 - - - - - 167 15,919
--------- --------- --------- --------- --------- --------- --------- ---------
Current assets
Inventories 1,458 - - - - - - 1,458
Trade and other
receivables 6,212 - - - - - - 6,212
Cash and
cash equivalents 971 - - - - - - 971
--------- --------- --------- --------- --------- --------- --------- ---------
Total current
assets 8,641 - - - - - - 8,641
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Total assets 24,393 - - - - - 167 24,560
--------- --------- --------- --------- --------- --------- --------- ---------
Current liabilities
Trade and
other payables 4,907 - - - - - - 4,907
Short-term
borrowings 805 - - - - - - 805
Current tax
payable 269 - - - - - - 269
Short-term
provisions 4,733 - - - - - - 4,733
--------- --------- --------- --------- --------- --------- --------- ---------
Total current
liabilities 10,714 - - - - - - 10,714
--------- --------- --------- --------- --------- --------- --------- ---------
Non-current
liabilities
Long-term
borrowings 1,770 - - - - - - 1,770
Long-term
provisions 600 - - - - - - 600
--------- --------- --------- --------- --------- --------- --------- ---------
Total non-current
liabilities 2,370 - - - - - - 2,370
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Total liabilities 13,084 - - - - - - 13,084
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Net assets 11,309 - - - - - 167 11,476
======== ======= ======= ====== ====== ====== ====== ======
Equity
Share capital 530 - - - - - - 530
Share premium
account 11,557 - - - - - - 11,557
Capital
redemption reserve 6 - - - - - - 6
Profit and loss
account (784) - - - - - 167 (617)
--------- --------- --------- --------- --------- --------- --------- ---------
Total equity 11,309 - - - - - 167 11,476
======== ======= ======= ====== ====== ====== ====== ======
Reconciliation of equity at 1 January 2007
UK
GAAP a b c d e f IFRS
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Non-current assets
Goodwill 31,904 - 1,398 (6,226) - (101) - 26,975
Other intangible
assets - - - 8,894 (568) - - 8,326
Property, plant
and equipment 1,232 - - - - - - 1,232
Deferred tax assets 123 - - - - 101 185 409
--------- --------- --------- --------- --------- --------- --------- ---------
Total non-current
assets 33,259 - 1,398 2,668 (568) - 185 36,942
--------- --------- --------- --------- --------- --------- --------- ---------
Current assets
Inventories 7,282 - - - - - - 7,282
Trade and
other receivables 18,268 - - - - - - 18,268
Cash and
cash equivalents 3,052 - - - - - - 3,052
Non-current
assets classified
as held for sale 3,500 - - - - - - 3,500
--------- --------- --------- --------- --------- --------- --------- ---------
Total current
assets 32,102 - - - - - - 32,102
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Total assets 65,361 - 1,398 2,668 (568) - 185 69,044
--------- --------- --------- --------- --------- --------- --------- ---------
Current liabilities
Trade and
other payables 19,312 - - - - - - 19,312
Short-term
borrowings 193 - - - - - - 193
Current portion of
long-term borrowings 3,168 - - - - - - 3,168
Current tax payable 833 - - - - - - 833
Short-term 6,378 - - - - - - 6,378
provisions
--------- --------- --------- --------- --------- --------- --------- ---------
Total current
liabilities 29,884 - - - - - - 29,884
--------- --------- --------- --------- --------- --------- --------- ---------
Non-current
liabilities
Long-term
borrowings 18,201 - - - - - - 18,201
Deferred tax - - - 2,668 (170) - - 2,498
Long-term
provisions - - - - - - - -
--------- --------- --------- --------- --------- --------- --------- ---------
Total non-current
liabilities 18,201 - - 2,668 (170) - - 20,699
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Total
liabilities 48,085 - - 2,668 (170) - - 50,583
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Net assets 17,276 1,398 - (398) - 185 18,461
======== ======== ======== ======== ======== ======== ======== ========
Equity
Share capital 609 - - - - - - 609
Share premium
account 15,123 - - - - - - 15,123
Capital redemption
reserve 6 - - - - - - 6
Profit and
loss account 1,538 - 1,398 - (398) - 185 2,723
--------- --------- --------- --------- --------- --------- --------- ---------
Total equity 17,276 - 1,398 - (398) - 185 18,461
======== ======== ======== ======== ======== ======== ======== ========
Reconciliation of profit for the year to 31 December 2006
UK
GAAP a b c d e f IFRS
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Continuing operations
Revenue 54,150 - - - - - - 54,150
Cost of sales (29,939) - - - - - - (29,939)
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit 24,211 - - - - - - 24,211
Administrative
costs (20,642) 84 1,398 - (568) - - (19,728)
--------- --------- --------- --------- --------- --------- --------- ---------
Operating profit 3,569 84 1,398 - (568) - - 4,483
Interest received 6 - - - - - - 6
Finance costs (806) - - - - - - (806)
--------- --------- --------- --------- --------- --------- --------- ---------
Profit before tax 2,769 84 1,398 - (568) - - 3,683
Income tax expense (592) - - - 170 - 18 (404)
--------- --------- --------- --------- --------- --------- --------- ---------
Profit for the
period from
continuing
operations 2,177 84 1,398 - (398) - 18 3,279
======== ======== ======== ======== ======== ======== ======== ========
Notes to the reconciliations
a) Under UK GAAP, the Group applied FRS 20, "Share Based Payment" for the first
time in December 2006. However, under IFRS 2, the equivalent international
standard, a retrospective adjustment was required in the income statement for
the year to 31 December 2006 of �84,000. There is no impact on retained earnings
as at 1 January 2006. There is no deferred tax provision as the intrinsic value
of the options is negligible.
b) Goodwill recognised by the Group on acquisition prior to 31 December 2005
under UK GAAP was amortised over a period of 20 years. Under IFRS goodwill is
not amortised, but tested annually for impairment. The goodwill amortisation
charged in 2006 in accordance with UK GAAP - �1,398,000 has been written back.
c) The Group acquired the Britannia Group of companies on 26 May 2006.
Application of IFRS 3 to this business combination resulted in the
identification of a number of intangible assets other than goodwill, including
trade names & marks, and customer contracts. Under UK GAAP these intangible
assets were subsumed within goodwill. Under IFRS these have been recognised
separately in the balance sheet at their fair value at the date of the
combination - �3,234,000, together with an associated deferred tax liability of
�970,000.
The Group acquired Rocom Limited on 16 August 2006. Application of IFRS 3 to
this business combination resulted in the identification of a number of
intangible assets other than goodwill, including trade names & marks, and
customer contracts. Under UK GAAP these intangible assets were subsumed within
goodwill Under IFRS these have been recognised separately in the balance sheet
at their fair value at the date of the combination - �5,660,000, together with
an associated deferred tax liability of �1,698,000.
The result of these adjustments is to decrease goodwill at 31 December 2006 by
�6,226,000; to increase the carrying value of other intangible assets by
�8,894,000; and to increase the deferred tax liability by �2,668,000.
d) Goodwill recognised by the Group on the acquisitions of the Britannia
Group and Rocom Limited under UK GAAP was amortised over a period of 20 years.
Under IFRS goodwill is not amortised, but tested annually for impairment. The
goodwill amortisation charge recognised in accordance with UK GAAP in 2006 has
been written back. However, intangible assets other than goodwill identified on
these business combinations in accordance with IFRS as described above are
amortised in accordance with the Group's accounting policies resulting in an
amortisation charge of �568,000 an associated release of associated deferred tax
liability of �170,000.
e) At the time of the business combinations of the Britannia Group and Rocom
Limited a number of fair value adjustments were made, for which no deferred tax
was recognised under UK GAAP. Under IAS 12, deferred tax arising on the
difference between the carrying value of the asset and its tax base is
recognised in the financial statements of the Group. The effect of these
adjustments is to increase the deferred tax asset as at 31 December 2006 by
�101,000, with a corresponding reduction in goodwill.
f) Under FRS 19 deferred tax was recognised only on timing differences that were
expected to reverse. In contrast IAS 12 "Income Taxes" generally requires the
recognition of deferred tax on all temporary differences. Therefore the restated
position at 1 January 2006 creates a deferred tax asset of �167,000 and at 1
January 2007 a deferred tax asset of �185,000. The effect of this adjustment is
to create a deferred tax credit in the income statement of �18,000.
Explanation of material adjustments to the cash flow statement
The definition of cash is narrower under UK GAAP than under IAS 7 "Cash Flow
Statements". Under IFRS highly liquid investments, readily convertible to a
known amount of cash and with an insignificant risk of changes in value, are
regarded as cash equivalents. The cash flow statement in the last UK GAAP
financial statements reported movements in cash. The cash flow statement in
these IFRS consolidated interim financial statements reports movements in cash
and cash equivalents.
Application of IFRS has resulted in reclassification of certain items in the
cash flow statement as follows:
(i) under UK GAAP, payments to acquire property, plant and equipment were
classified as part of 'Capital expenditure and financial investment'. Under
IFRS, payments to acquire property, plant and equipment have been classified as
part of 'Investing activities'.
(ii) income taxes of �287,000 paid during 2006 are classified as operating cash
flows under IFRS, but were included in a separate category of tax cash flows
under previous GAAP.
There are no other material differences between the cash flow statement
presented under IFRS and the cash flow statement presented under UK GAAP.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BCGDSXGGGGII
Grafico Azioni AT Communications (LSE:ATCG)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni AT Communications (LSE:ATCG)
Storico
Da Giu 2023 a Giu 2024
