TIDMMSS
RNS Number : 9207J
Managed Support Services PLC
07 July 2011
FOR IMMEDIATE RELEASE
7 July 2011
Managed Support Services plc
PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 31 MARCH
2011
Managed Support Services plc ("MSS") announces its preliminary
results for the year ended 31 March 2011
KEY HIGHLIGHTS
-- Two acquisitions successfully completed
-- Group turnover increased from GBP15.3 million to GBP26.6
million
-- Return to normalised operating profit*
-- Activity levels recovering in second quarter after slow
start
* Normalised operating profit is stated before restructuring
costs, amortisation of intangible assets, Share Based Payments and
acquisition related costs. Statutory loss for the period was
GBP1.38m.
Commenting on the results, Simon Beart, Chief Executive
said:
"We have now assembled a nationwide capacity to deliver Building
Services and Environmental Compliance to our growing customer base.
We expect further new business gains in due course as the Group
continues to gain recognition and profile in its markets."
FOR FURTHER INFORMATION, PLEASE CONTACT:
Managed Support Services plc:
Simon Beart, Chief Executive 07710 444370
Piers Wilson, Finance Director 01483 735703
Cenkos Securities plc:
Stephen Keys 020 7397 8900
Camilla Hume
Buchanan Communications:
Richard Darby 020 7466 5000
Nicola Cronk
Notes to editors
Managed Support Services plc is a leading supplier of
Environmental Compliance and technical Building Services. The Group
provides a broad range of Environmental Compliance services and
HVAC building maintenance services for commercial properties. MSS
operates in a range of diverse markets with customers managing or
owning commercial property, hotels and retail buildings. Further
information is obtainable from www.mssplc.com.
CHIEF EXECUTIVE'S REVIEW
Overview
The year to March 2011 was our first full year of trading as a
specialist Building Services provider. The Group now operates on a
national basis. We specialise in providing complex, engineering
based solutions for our customers, as well as the provision of
planned and reactive maintenance, primarily for Heating,
Ventilation and Air Conditioning ("HVAC") systems.
We believe customers understand and value our specialist focus
on engineered solutions including the ability to manage large,
capital projects. Where customers also wish for "soft" services
such as cleaning or guarding, we provide these needs through
partnership arrangements thereby giving our customers choice and
access to best in class provision.
The substantial increase in turnover to GBP26.6 million from
GBP15.3 million reflects previous acquisitions and the increased
scale of the Group. Gross margin has also recovered substantially
from the prior year. This improvement illustrates the benefits of
margin management, improved sales mix and operational gearing.
Trading
Following last year's operating losses and low levels of
turnover, it is a pleasure to be reporting an operating trading
profit before exceptional items and other non trading costs of
approximately GBP0.8 million for the year. The improvement in gross
margin is obviously gratifying, reflecting growing efficiencies and
the contribution of the higher margin Compliance units. This
operating return represents only 2.9 per cent. on sales. The Board
clearly has ambitions to improve this figure considerably.
During the year we completed the integrations of the separately
acquired trading units of Status Building Services and
Environmental Control Services ("ECS"), which together with the
original maintenance activities within the Group, are now operating
as one national unit, MSS Building Services. The integration
process required the closure of surplus administration office space
and considerable management simplification.
We also completed the acquisition of Data Sound Limited in April
2010, which now forms the core of our Health and Safety and
Compliance offering, based in our Central London offices.
Finally, at the end of the year we upgraded our core IT systems
from the previous, packaged solution to a much improved proprietary
solution which offers superior management of the service elements
of the business as well as improved day to day flexibility to
control the complex, daily demands of a nationwide maintenance
business.
In the context of achieving so much in the year, it was
therefore disappointing to discover that there had been a
significant, although temporary, failure to control certain
contracts in the core maintenance unit. This led to cost
recoverability issues and ultimately write offs. In normal
circumstances these costs would have been recoverable. Further
details are provided in the Financial Commentary.
The Group's UK Managing Director was not capable of meeting the
challenge of integrating the enlarged Group and, as previously
disclosed, he was dismissed. Thereafter, the Board moved swiftly to
impose greatly improved internal controls. Within a very short
period of time operational control was re-established.
The Board is pleased to report that not only are the improved
KPIs and metrics clearly understood across the Group, but our
proprietary IT platform, Nucleus is now delivering operational and
reporting efficiencies and continues to impress with its
functionality.
Nucleus is maintained by our offshore development office in
India, modifications or extensions can therefore be delivered
swiftly, at very modest cost. Nucleus is a lower cost and more
functional solution than the third party packages available.
Group activities
The Group's Building Services offering focuses primarily on the
provision of planned and preventative maintenance and complex
engineering solutions. These services in the South are delivered by
our London Regional management team based in the former ECS office
in Wembley. This unit represents the consolidation of three former
trading entities.
London Regional services the maintenance and complex engineering
needs of several large, owner occupiers as well as a broad customer
base of Managing Agents who maintain commercial real estate on
behalf of their clients. The relevant customer properties are
concentrated primarily within the M25. The location of the Wembley
site is therefore ideal for management control and engineering
efficiency.
Our engineering and HVAC services for the balance of the UK are
managed from our Manchester office. Our Manchester office primarily
serves the needs of our major Corporate customers. The expansion of
our Manchester presence has been driven by the desire to support
our major Corporate customers who have a concentration in and
around Manchester and the North West. To deliver high levels of
service it is important to offer proximity for customers.
Our Health & Safety and Compliance division enjoyed a robust
trading year, although the development of our Water Services
business has only picked up reasonable traction since the year end.
The combination of these services, together with the ability to
offer Fire & Electrical compliance means that we have a strong
Compliance offering for our maintenance customers. Our core
Compliance offering remains the provision of Health & Safety
monitoring for a diversified customer base. Customer risks and
legal exposures are managed by our team of Consultants and during
the year we will be rolling out our in house software solution
under the brand name Compleye.
The core compliance unit was acquired in April 2010 and now
trades as MSS Heath & Safety Limited. This unit now enjoys the
benefits of a corporate structure, accurate and timely financial
reporting and experienced leadership. Our Health & Safety
Consultants are a key asset and with improved customer interface,
we expect the customer base to grow during the current year.
Board
Euan McAlpine, who has been a non executive director since
September 2008, has decided not to apply for re-election at the
General Meeting in August due to increasing commitments with his
other directorships. We would like to thank Euan for his important
and valuable contribution to the Group and we have benefited much
from his relevant sector experience. The Board is currently seeking
a replacement non executive director.
Group strategy
We believe that MSS has now established the key elements of a
competitive and attractive Building Maintenance and Compliance
services platform. It was therefore pleasing to announce a
significant contract extension recently with Co-op Financial
Services for their Leek campus with an annual contract value close
to GBP1m.
We have a material commitment to new business sales to drive the
expansion of our activities and as a result of our increasing
recognition in the market, we now enjoy a promising bid pipeline.
It seems reasonable to expect further new business wins over
time.
It is our strategy to focus on sales led, organic growth, whilst
continuing to improve the efficiency of the cost base. To the
extent that the Group is able to win incremental business, net of
the usual market churn, operational gearing will benefit net
returns.
In terms of cash flow, following the issue of the Loan Notes in
March, we will continue to invest in our supply chain, if necessary
at the expense of the conversion rate of operating profit to cash
flow. Our supplier base is critical to customer service levels.
With regard to funding future growth, our facilities with Lloyds,
which have recently been renewed, are ideally structured to manage
the working capital needs arising from turnover growth.
Prospects
Last year saw many achievements at MSS including the creation of
a nationwide brand and service capability, major Corporate customer
gains and the integration of several acquisitions. The short term
management failings were clearly a disappointment and a painful
episode, but management redress was rapid and more importantly,
effective.
Market conditions in the first quarter of our new financial year
were very difficult. The well publicised travails of the
construction sector during the last few months had a material
impact on our capital project related units.
This will adversely impact our first half performance, however,
we believe we are now seeing the prospect of activity levels
recovering and there are further considerable benefits to emerge
from the new operating structure. Our intention is to build sales
and to finish the year with a satisfactory run rate of activity in
what we hope will become slightly less demanding markets.
Simon Beart
Chief Executive
FINANCIAL COMMENTARY
Results
This year's results reflect the positive contribution made by
the two businesses acquired during the year, the continued
rationalisation of the cost base and the investment in our core IT
platform to deliver future sustainable organic growth.
Revenue for the year was GBP26.6m an increase of GBP11.3m from
the prior year figure of GBP15.3m. As noted above, this increase
was primarily due to a full year contribution from acquisitions
made in the previous year, notably Status Building Services, and
the two acquisitions made this year, Data Sound and ECS. The value
of the contracted revenue book, adjusted for acquisitions, has
remained fairly stable during the year, with strong organic sales
growth offset by higher than usual contract losses in the Status
contract book as this business was rationalised and integrated into
the Group.
The Group achieved a gross margin of 32 per cent. for the full
year, compared to 24 per cent. last year and 32 per cent. for the
first six months of the year. As noted in the interim results, this
improvement from the prior year is largely as a result of a better
mix of revenue. However, as the mix changes and with the continued
difficult market conditions, it is expected that the Group's
blended gross margin going forward will be in the region of 30 per
cent.
The Group's adjusted operating profit (before restructuring
costs, amortisation of intangible assets, share based payment
charges and costs associated with acquisitions) was GBP0.8m. The
statutory operating loss was GBP1.4m.
As described in the CEO's review, the non recurring
restructuring costs during the year relate primarily to the one off
costs incurred as a result of the mid year failure to control the
recoverability of costs arising from maintenance contracts. As a
result of this management failure, a total of GBP0.5m was written
off as non recoverable during the year. By year end a significant
system upgrade had been implemented so that WIP is now monitored
daily and reported to the Board weekly. Full provision is made
against all WIP over 60 days. In addition, an amount of GBP0.3m has
been recognised in exceptional costs for redundancy and integration
costs incurred in the year. These costs are shown as restructuring
of activities in the Consolidated Income Statement.
The costs associated with acquisitions are now reported through
the income statement, rather than as a cost of acquisition in the
balance sheet, following the implementation of IFRS 3 (2008). The
amounts in this year relate to corporate finance fees, legal fees
and external due diligence fees incurred on the acquisitions of
Data Sound and ECS.
Balance sheet
The Group ended the year with net debt of GBP2.7m, comprising
GBP3.0m of short term borrowings from Lloyds Bank, GBP0.5m of Loan
Notes and GBP0.8m of cash. The cash balance was higher than usual
as the proceeds of the Loan Note were received on the last day of
the financial year.
Core working capital, being the difference between trade debtors
and trade creditors, increased during the year from GBP0.4m to
GBP2.2m. This was partly as a result of acquisitions, but primarily
due to an increase in Group debtor days from 48 to 55 and a
decrease in group creditor days from 71 to 60. There have, however,
been no material bad debts in the period. Creditor days have fallen
significantly as we have made a conscious effort to speed up
supplier payments to ensure supplier support. This process will
continue in the current year with a target to reduce creditor days
to less than 50.
Total Work in Progress at year end was GBP0.5m. This can be
analysed as to GBP0.4m in relation to the maintenance business and
GBP0.1m for the installation units. The maintenance related WIP
arises due to the normal delay between performing work on site, and
the processing of the relevant paperwork before the customer
invoice can be raised. The current WIP balance represents
approximately one week's worth of maintenance related revenue.
Cash flow
Operating cash outflow before restructuring cash costs was
GBP1.7m compared to GBP1.8m last year. The operating cash outflow
this year, is due almost entirely to the movement in working
capital described above and a small reduction in provisions.
Capital expenditure in the year was GBP457,000, partly funded by
a depreciation charge of GBP323,000. The largest spend was
approximately GBP350,000 which was invested in IT equipment and the
development of the Nucleus IT platform. This investment will
improve the management of contracts and enable better utilisation
and productivity of mobile engineers.
Acquisitions and deferred consideration
The Group made two acquisitions in the year with total net cash
consideration of GBP6.3m. At year end the remaining deferred
consideration in respect of these acquisitions was GBP350,000
payable in the year to 31 March 2012. The deferred consideration
due at the end of the previous year being GBP1.27m was paid in full
in the year.
The two acquisitions in the year resulted in the recognition at
year end of additional intangible assets (customer relationships)
of GBP2.6m and additional goodwill of GBP4m. The intangible asset
is being amortised over a period of six years.
The acquisition of Data Sound was funded from existing cash
balances, the acquisition of ECS was funded from the proceeds of a
share placing undertaken at the time of the acquisition to raise
approximately GBP2.9 million.
Bank facilities
The Group has recently renewed its working capital facility with
Lloyds Banking Group, for a further year, with a maximum facility
size of GBP3.5m. Interest is paid monthly at 2.5 per cent. over
base rate.
Going concern
In determining that the Group's results can be presented on a
going concern basis, the Directors have considered all relevant
factors including forecast cash flows, borrowing facilities which
have been recently renewed and risks related to its business
activities. The Group Budget indicates operating profits and
positive operating cash flow in the period to 31 March 2012 and the
Group maintains and regularly reviews detailed daily/monthly cash
flow forecasts for the following three months.
Having considered all these factors the Directors are satisfied
that the Group has sufficient resources to enable it to continue to
trade for at least twelve months from the date of signing the
financial statements. Accordingly, these financial statements have
been prepared on a going concern basis.
Tax
No taxation charge or deferred tax asset has been provided in
the year in respect of trading during the period. The tax charge
arising during the year represents a tax adjustment in relation to
trading in a prior period. During the year the Group reached
agreement with HMRC for the business of ECS to be transferred to
MSS Building Services, to enable the use of carry forward tax
losses in the company. No deferred tax asset has been recognised as
at 31 March 2011.
Piers Wilson
Group Finance Director
Consolidated Income Statement
for the year ended 31 March 2011
Year ended Year ended
Note 31 March 2011 31 March 2010
GBP'000 GBP'000
Revenue 26,582 15,318
Cost of sales (18,167) (11,598)
-------------- --------------
GROSS PROFIT 8,415 3,720
Administrative expenses before items
identified below (7,642) (5,400)
-------------- --------------
OPERATING PROFIT / (LOSS) BEFORE ITEMS 773 (1,680)
IDENTIFIED BELOW
Restructuring of activities (786) (573)
Closure costs of MSS Projects Limited - (1,229)
Non cash amortisation of intangible
assets (693) (136)
Impairment of goodwill - (1,000)
Non cash increase in Share Based
Payment reserve (236) (334)
Costs associated with acquisitions (348) -
-------------- --------------
OPERATING LOSS (1,290) (4,952)
Financial income 5 54
Financial expenses (71) (3)
-------------- --------------
LOSS BEFORE TAX (1,356) (4,901)
Income tax (26) 50
-------------- --------------
LOSS FOR THE PERIOD (1,382) (4,851)
============== ==============
Attributable to:
Owners of the Company (1,377) (4,851)
Non-controlling interests (5) -
============== ==============
BASIC LOSS PER SHARE (pence) 1 (0.74) (2.94)
DILUTED LOSS PER SHARE (pence) 1 (0.74) (2.94)
All results are derived from
continuing operations
There are no recognised gains or losses in either
period other than the loss for that period and therefore
no consolidated statement of comprehensive income
is presented.
Consolidated statement of changes in equity
for the year ended 31 March 2011
Year ended
31 March Year end 31
2011 March 2010
GBP'000 GBP'000
At beginning of period 7,568 12,060
Loss for the financial period (1,382) (4,851)
Issue of share capital 446 -
Increase in share
premium account 2,474 -
Increase in share based payment reserve 236 334
Minority interest - 25
AT END OF PERIOD 9,342 7,568
----------- -------------
Company statement of changes in equity
for the year ended 31 March 2011
Year ended
31 March Year end 31
2011 March 2010
GBP'000 GBP'000
At beginning of period 11,538 13,330
Loss for the financial period (1,634) (2,126)
Issue of share capital 446 -
Increase in share
premium account 2,474 -
Increase in share based payment reserve 236 334
AT END OF PERIOD 13,060 11,538
------------ -------------
Consolidated Balance Sheet
as at 31 March 2011
Year ended Year ended
Note 31 March 2011 31 March 2010
GBP'000 GBP'000
NON CURRENT ASSETS
Goodwill 8,000 4,000
Other intangible assets 4,145 2,165
Property, plant and equipment 804 495
12,949 6,660
-------------- --------------
CURRENT ASSETS
Work in progress 3 499 205
Trade and other receivables 4 6,594 3,885
Cash and cash equivalents 815 4,135
Assets held for sale - 180
7,908 8,405
-------------- --------------
TOTAL ASSETS 20,857 15,065
============== ==============
CURRENT LIABILITIES
Trade and other payables 5 (7,641) (6,847)
Short term borrowings (3,017) (177)
Current tax liability (234) (117)
Obligations under finance leases (66) (68)
Provisions for liabilities (46) (190)
(11,004) (7,399)
-------------- --------------
NET CURRENT (LIABILITIES) / ASSETS (3,096) 1,006
-------------- --------------
NON CURRENT LIABILITIES
Convertible loan notes 5 (500) -
Obligations under finance leases (11) (22)
Provisions for liabilities - (76)
-------------- --------------
(511) (98)
-------------- --------------
TOTAL LIABILITIES (11,515) (7,497)
============== ==============
NET ASSETS 9,342 7,568
============== ==============
EQUITY
Share capital 2,098 1,652
Share premium account 7,373 4,899
Special reserve - 4,647
Share based payments reserve 1,456 1,220
Retained earnings (1,605) (4,875)
-------------- --------------
Equity attributable to owners of the
Company 9,322 7,543
Non-controlling interests 20 25
TOTAL EQUITY 9,342 7,568
============== ==============
Company Balance Sheet
as at 31 March 2011
Year ended Year ended
31 March 2011 31 March 2010
GBP'000 GBP'000
NON CURRENT ASSETS
Investments in subsidiaries 475 475
475 475
-------------- --------------
CURRENT ASSETS
Trade and other receivables 13,309 8,612
Cash and cash equivalents 405 3,494
13,714 12,106
-------------- --------------
TOTAL ASSETS 14,189 12,581
============== ==============
CURRENT LIABILITIES
Trade and other payables (624) (903)
Provisions for liabilities (5) (140)
-------------- --------------
(629) (1,043)
-------------- --------------
NET CURRENT ASSETS 13,085 11,063
-------------- --------------
NON CURRENT LIABILITIES
Convertible loan notes (500) -
(500) -
-------------- --------------
TOTAL LIABILITIES (1,129) (1,043)
============== ==============
NET ASSETS 13,060 11,538
============== ==============
EQUITY
Share capital 2,098 1,652
Share premium account 7,373 4,899
Special reserve - 4,647
Share based payments reserve 1,456 1,220
Retained earnings 2,133 (880)
-------------- --------------
TOTAL EQUITY 13,060 11,538
============== ==============
Consolidated cash flow statement
for the year ended 31 March 2011
Year ended Year ended
31 March 31 March
Note 2011 2010
GBP'000 GBP'000
NET CASH USED IN OPERATING ACTIVITIES (1,710) (1,774)
BEFORE PAYMENT OF RESTRUCTURING COSTS 7
Restructuring and cash closure costs (786) (2,137)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (2,496) (3,911)
INVESTING ACTIVITIES
Interest received 5 54
Proceeds from sale of assets held for
sale 150 -
Proceeds on disposal of property, plant
and equipment 792 9
Purchases of property, plant and equipment (457) (270)
Acquisition of businesses
Cash paid (7,972) (4,216)
Cash acquired 1,677 710
Deferred consideration payments (1,266) (234)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (7,071) (3,947)
----------- -----------
FINANCING ACTIVITIES
Increase in short term borrowings 2,840 (11)
Repayment of obligations under finance
leases (13) (21)
Proceeds on issue of convertible loan
notes 500 -
Net proceeds of share issue in subsidiary - 25
Net proceeds of share issue 2,920 -
----------- -----------
NET CASH FROM / (USED IN) FINANCING
ACTIVITIES 6,247 (7)
----------- -----------
NET DECREASE IN CASH (3,320) (7,865)
CASH AT THE BEGINNING OF PERIOD 4,135 12,000
CASH AT THE END OF THE PERIOD 815 4,135
=========== ===========
Company cash flow statement
for the year ended 31 March 2011
Year ended Year ended
31 March 31 March
2011 2010
GBP'000 GBP'000
NET CASH USED IN OPERATING ACTIVITIES (6,573) (9,408)
INVESTING ACTIVITIES
Interest received 530 113
Proceeds from sale of investments - 2,500
Purchases of businesses (466) (234)
Investment in subsidiary - (475)
----------- -----------
NET CASH FROM INVESTING ACTIVITIES 64 1,904
----------- -----------
FINANCING ACTIVITIES
Net proceeds of convertible loan
stock issue 500 -
Net proceeds of share issue 2,920 -
----------- -----------
NET CASH FROM FINANCING ACTIVITIES 3,420 -
----------- -----------
NET DECREASE IN CASH (3,089) (7,504)
CASH AT THE BEGINNING OF PERIOD 3,494 10,998
CASH AT THE END OF THE PERIOD 405 3,494
=========== ===========
1. LOSS PER SHARE
The calculation of basic and diluted loss per
share is based on the following data:
2011 2010
GBP'000 GBP'000
Loss
Loss for the purposes of basic and diluted
earnings per share (1,382) (4,851)
============ ============
Number of shares
Weighted average number of shares for the
purposes of basic earnings per share 187,503,084 165,203,976
Potentially dilutive ordinary
shares 2,750,000 -
Weighted average number of shares for the
purposes of diluted earnings per share 190,253,084 165,203,976
============ ============
Loss per share
Basic loss per share (p) (0.74) (2.94)
============ ============
Diluted loss per share
(p) (0.74) (2.94)
============ ============
ADJUSTED PROFIT / (LOSS) PER SHARE
Loss as above (1,382) (4,851)
Restructuring of activities 786 573
Amortisation of intangible
assets 693 136
Increase in share based payment
reserve 236 334
Closure costs of MSS Projects - 1,229
Impairment of goodwill - 1,000
Costs associated with acquisitions 348 -
Tax effect of items above at 28%
(2010: 28%) - -
681 (1,579)
============ ============
Adjusted basic profit / (loss)
per share 0.36 (0.96)
============ ============
Adjusted diluted profit / (loss)
per share 0.36 (0.96)
============ ============
2. ACQUISITION OF SUBSIDIARIES
MSS Health and Safety Limited
(previously Data Sound Limited)
On 15 April 2010, the Group acquired 100% of the issued share capital
of MSS Health and Safety Limited, gaining control, for a cash consideration
of GBP2,942,000. This transaction has been accounted for by the purchase
method of accounting. The acquisition was made for the long term
interests of the Group.
Final
fair value Total final
Book value adjustments fair value
GBP'000 GBP'000 GBP'000
Net assets acquired
Plant, property and equipment 80 (72) 8
Trade and other receivables 605 (73) 532
Cash and cash equivalents 60 - 60
Trade and other payables (329) (181) (510)
Deferred Income (403) (500) (903)
13 (826) (813)
============ ============ ============
Goodwill 2,500
Intangible assets 1,255
Gross consideration 2,942
============
Satisfied by:
Cash 2,942
============
Directly attributable costs of GBP181,600 have been expensed
to the Income statement.
Net cash outflow arising on
acquisition
Cash consideration 2,942
Less cash and cash equivalents
acquired (60)
Net consideration 2,882
============
The goodwill arising on the acquisition of MSS Health and Safety
Limited is attributable to the anticipated profitability of the distribution
of the Group's services in the new markets and the anticipated future
operating synergies from the combination. The intangible asset represents
acquired customer relationships.
MSS Health and Safety Limited contributed GBP2,339,000 to revenue
and a profit of GBP576,000 (before Group management charges) to loss
before tax for the period between the date of acquisition and the
balance sheet date.
If the acquisition of MSS Health and Safety Limited had been completed
on the first day of the financial year, Group revenues and Group
loss attributable to equity holders of the parent would have been
the same as those included in the Group's result.
2. ACQUISITION OF SUBSIDIARIES (continued)
Environmental Control Services
Limited
On 30 September 2010, the Group acquired 100% of the issued share
capital of Environmental Control Services Limited, gaining control,
for a net cash consideration of GBP3,413,000. This transaction has
been accounted for by the purchase method of accounting. The acquisition
was made for the long term interests of the Group.
Provisional Total
fair value provisional
Book value adjustments fair value
GBP'000 GBP'000 GBP'000
Net assets acquired
Plant, property and equipment 835 109 944
Trade and other receivables 2,163 (233) 1,930
Cash and cash equivalents 1,617 - 1,617
Trade and other payables (1,470) (466) (1,936)
------------
3,145 (590) 2,555
=========== ============ ============
Goodwill 1,500
Intangible assets 1,325
Gross consideration 5,380
============
Satisfied by:
Cash 5,030
Deferred consideration 350
5,380
============
Directly attributable costs of GBP166,023 have been expensed
to the Income statement.
Net cash outflow arising on
acquisition
Cash consideration 5,030
Less cash and cash equivalents
acquired (1,617)
Net consideration 3,413
============
The goodwill arising on the acquisition of Environmental Control
Services Limited is attributable to the anticipated profitability
of the distribution of the Group's services in the new markets and
the anticipated future operating synergies from the combination.
The intangible asset represents acquired customer relationships.
Environmental Control Services Limited contributed GBP4,297,000 to
revenue and a profit of GBP465,000 (before Group management charges)
to loss before tax for the period between the date of acquisition
and the balance sheet date.
3. WORK IN PROGRESS
Year ended Year ended
31 March 31 March
2011 2010
GBP'000 GBP'000
Work in progress
Maintenance contracts 394 205
Installation projects 105 -
----------------- -----------------
Maintenance contracts 499 205
================= =================
The Maintenance contract WIP of GBP394,000 is stated at cost
and arises due to the normal delay between performing work on
site and the processing of the relevant paperwork prior to customer
invoicing. The WIP arising on installations is the net figure,
across all installation contracts, of the costs incurred in advance
of billing (GBP357,000) and invoices raised in advance of incurring
relevant costs (GBP252,000).
4. TRADE AND OTHER RECEIVABLES
Group Company
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
Amounts receivable for
the sale of goods 5,974 3,612 - -
Allowance for doubtful
debts (336) (296) - -
-------- ---------- -------- --------
5,638 3,316 - -
Amounts due from Group
undertakings - - 13,249 8,591
Other debtors 158 113 30 6
Prepayments 798 454 30 15
Corporation tax - 2 - -
-------- ---------- -------- --------
6,594 3,885 13,309 8,612
======== ========== ======== ========
The average credit period taken on sale of goods is 56 days
(2010: 48 days). The provision for estimated irrecoverable amounts
from the sale of goods was GBP336,000 (2010: GBP296,000). In
determining the recoverability of trade receivables, the Group
considers any change in the credit quality of the trade receivable
from the date credit was initially granted up to the reporting
date. The Group has no significant concentration of credit risk,
with exposure spread over a large number of counterparties and
customers. Accordingly, the Directors believe that there is
no further credit risk provision required in excess of the allowance
for doubtful receivables.
Group
2011 2010
Movement in the allowance for doubtful
debts GBP'000 GBP'000
Balance at the beginning
of the period 296 338
Acquired provision 50 57
Amount (released) /
provided for in period (2) 89
Amounts written off as
uncollectable (8) (188)
Balance at the period end 336 296
======== ===============
5. TRADE AND OTHER PAYABLES
Group Company
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
Trade creditors 3,396 2,967 118 116
Amounts owed to group undertakings - - 275 -
Social security and other taxes 653 215 - -
Deferred consideration 350 1,266 - 466
Other creditors 1,074 597 136 16
Deferred income 1,044 522 - -
Convertible loan notes 500 - 500 -
Accruals 1,124 1,280 95 305
--------- --------- -------- --------
8,141 6,847 1,124 903
========= ========= ======== ========
Split as:
Non current liabilities 500 - 500 -
Current liabilities 7,641 6,847 624 903
--------- --------- -------- --------
8,141 6,847 1,124 903
========= ========= ======== ========
Trade creditors and accruals principally comprise amounts outstanding
for trade purchases and ongoing costs. The average credit period
taken for trade purchases is 60 days (2010: 71 days)
Convertible Loan Notes were issued on 31 March 2011 with a total
nominal value of GBP500,000. The Convertible Loan Notes are convertible
by the Note holder into new Managed Support Services plc ordinary
shares at the conversion price of 5 pence per ordinary share.
The maximum number of new ordinary shares to be issued if all
Loan Notes are converted is 10 million, equivalent to approximately
5 per cent. of the currently issued outstanding ordinary share
capital.
If conversion does not take place before 31 January 2015, the
Convertible Loan Notes will be redeemed at par by the Company.
The notes yield 7 per cent. per annum, paid semi annually in arrears.
6. SHARE CAPITAL
31 March 31 March
2011 2010
GBP'000 GBP'000
Issued and fully paid
209,802,191 ordinary shares
of 1p each (2010: 165,203,976) 2,098 1,652
============= =============
On 29 September 2010, 44,285,715 shares were placed at 7p per
share, in addition a further, 312,500 shares were placed at 8p
per share, in both cases in relation to the acquisition of Environmental
Control Services Limited.
7. NOTES TO THE CASH FLOW STATEMENT
Group Company
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
Operating loss from continuing
activities (1,290) (4,952) (2,164) (2,239)
Adjustments for:
Depreciation of property, plant
and equipment 323 101 - -
Amortisation of intangible assets 693 136 - -
Impairment of Goodwill - 1,000 - -
Impairment of investments - - - 2,000
Share based payments 236 334 236 334
Profit on disposal of investments - - - (1,463)
(Profit)/loss on disposal of
property, plant and equipment (15) 11 - -
-------- -------- -------- --------
Operating cash flows before movement
in working capital (53) (3,370) (1,928) (1,368)
Decrease / (increase) in work in
progress (244) 267 - -
Decrease / (Increase) in receivables (361) 1,908 (4,697) (7,352)
(Decrease) / increase in payables (1,433) (2,323) 187 (306)
Decrease in provisions (220) (506) (135) (382)
-------- -------- -------- --------
Cash utilised by operations (2,311) (4,024) (6,573) (9,408)
Income taxes (paid) / received (114) 116 - -
Interest paid (71) (3) - -
-------- -------- -------- --------
Net cash flow from operating
activities (2,496) (3,911) (6,573) (9,408)
Restructuring costs paid in period 786 2,137 - -
-------- -------- -------- --------
Net cash flow from operating
activities before payment of
restructuring costs (1,710) (1,774) (6,573) (9,408)
======== ======== ======== ========
8. The accounting policies adopted in the preparation of this
audited preliminary announcement are consistent with those set out
in the audited Group financial statements for the year ended 31
March 2011.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 March 2011 or
2010, but is derived from those accounts. Statutory accounts for
2010 have been delivered to the Registrar of Companies and those
for 2011 will be delivered following the company's Annual General
Meeting. The auditors have reported on those accounts; their
reports were unqualified, did not draw attention to any matters by
way of emphasis without qualifying their report and did not contain
statements under s498(2) or (3) Companies Act 2006.
It is intended to post the Annual Report to shareholders in
early July 2011, copies of this report will be available from the
Company Secretary at One Crown Square, Church Street East, Woking,
Surrey GU21 6HR and from the Company's website www.mssplc.com.
This announcement was approved by the Directors on 6 July
2011.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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