RNS Number : 5804B
Office2office PLC
19 August 2008
HALF YEARLY RESULTS 2008
office2office plc ("o2o", the "Company" or the "Group"), a leading business supplies,
managed services and integrated supply chain
company, announces its unaudited results for the six months ended 30 June 2008.
Highlights:
* Revenue at £84.0m (2007: £88.5m)
* Profit before tax of £5.6m (2007: £5.4m)
* Underlying profit before tax of £5.6m (2007: £6.1m)
* Loss of revenue and margin after withdrawal from the MoD supply arrangement mitigated by
gains through acquisition and benefits of
restructuring
* Basic earnings per share at 11.2p (2007: 10.4p) - up 7.7%
* Interim dividend increased to 3.5p per share (2007: 3.2p) - up 9.4%
* Two complementary acquisitions completed - underpinning the Group's new activities
* Net indebtedness of £30.9m (2007: net cash £8.0m), resulting principally from the
acquisitions, leading to a gearing ratio of 1.7 (2007:
n/a)
David Callear, Chairman, said: "Over the half year, the loss of revenue and margin after
our withdrawal from the MoD supply arrangement
and the generally more challenging economic conditions were balanced by the positive impact of
our business restructuring and the recent
acquisitions of AccessPlus (through its parent company, TripleArc plc) and Accord Office
Supplies Ltd.
"The management structure is being re-organised to drive growth into complementary areas
and to increase shareholder value. The Board
intends to explore further suitable acquisition opportunities as they arise, which would incur
only moderate levels of additional
indebtedness.
"Our initiatives are having a positive effect on the business. At the same time, like
others, we are faced with more uncertain economic
circumstances than we have seen for a number of years."
For further information, please contact:
office2office plc Today only: +44 (0)1653
618 016
Simon Moate, Chief Executive Thereafter: +44 (0)1603 695 756
Mark Cunningham, Group Finance Director www.office2office.co.uk
Rawlings Financial PR Limited Tel: +44 (0)1653 618 016
Catriona Valentine
www.rawlingsfinancial.co.uk
Sally Annakin
CHAIRMAN'S STATEMENT
I am pleased to report the results for the six months to 30 June 2008, which are in line
with our expectations and show an increased net
profit before tax.
Over the half year, the loss of revenue and margin after our withdrawal from the MoD
supply arrangement and the generally more
challenging economic conditions were balanced by the positive impact of our business
restructuring and the recent acquisitions of AccessPlus
(through its parent company, TripleArc plc) and Accord Office Supplies Ltd ("Accord").
Following the acquisitions we are re-organising the management structure into three areas
of activity - Managed Procurement, Mid-Market
and Business Services - in a move to enable growth into complementary areas and to increase
shareholder value. The acquisitions of
AccessPlus and Accord, which operate in complementary sectors to Banner Business Supplies
Limited ("Banner"), underpin the Group's new
Business Services and Mid-Market activities.
RESULTS
Revenue at £84.0m (2007: £88.5m) reflected trading levels that were consistent over the
six months with 2007 other than sales to the MoD
which have been negligible in the period (2007: approximately £12m). This shortfall was
compensated by the revenues, post acquisition, of
the acquired companies which amounted to £6.9m (2007: nil).
Anticipated increases in product costs caused gross margins to slip slightly to 30.6%
(2007: 31.0%). These downward pressures are
ongoing, although we aim to continue to mitigate the impact through active management of costs
and, where appropriate, passing on increases
to our customers.
Despite a fall in underlying profit before tax to £5.6m (2007: £6.1m), profit before tax
was £5.6m (2007: £5.4m) with the initial
benefits of the restructuring offsetting the lost MoD contribution. Profit after tax was
£4.0m (2007: £3.7m). Basic earnings per share
increased by 7.7% to 11.2p (2007: 10.4p).
Net cash of £2.0m (2007: £5.5m generated) was absorbed by operations principally from
working capital movements associated with the
acquisitions. Following these acquisitions, net indebtedness was £30.9m (2007: net cash
£8.0m), resulting in a gearing ratio of 1.7 (2007:
n/a).
DIVIDENDS
The Board has declared an increased interim dividend of 3.5p (2007: 3.2p) per share,
amounting to £1.3m (2007: £1.2m). This will be
payable on 14 November 2008 to shareholders on the share register at close of business on 10
October 2008.
REVIEW OF OPERATIONS
Managed Procurement
Managed Procurement is based on Banner, our large contract office supply business, which
currently generates the bulk of Group revenue.
Mid-Market
In June 2008 we acquired Accord. Our existing mid-market businesses, Alpha Office Supplies
and first2office, are in the process of being
integrated with Accord, under a single sales management.
Business Services
In May 2008 we acquired AccessPlus. It provides business process outsourcing to companies
looking to reduce the costs of their print
marketing and communication. AccessPlus is the core of our new Business Services activity.
PRINCIPAL RISKS AND UNCERTAINTIES
A full review of the Group's principal risks and uncertainties is included in the Annual
Report 2007. These remain unchanged with the
additional consideration that the Group has yet to realise the full benefits of the
acquisitions of AccessPlus and Accord.
BOARD CHANGES
I welcome Chris Batterham to the Board as non-executive Director and Chairman of the Audit
Committee. Chris is a Chartered Accountant
with significant experience as a finance director in the business services sector. He joined
the Board on 30 June 2008, following the
resignation of Peter Bertram on 24 April 2008.
OUTLOOK
We remain focused on organic growth, the full integration of our recent acquisitions and
improving efficiency. The management structure
is being re-organised to drive growth into complementary areas and to increase shareholder
value. The Board intends to explore further
suitable acquisition opportunities as they arise, which would incur only moderate levels of
additional indebtedness.
Our initiatives are having a positive effect on the business. At the same time, like
others, we are faced with more uncertain economic
circumstances than we have seen for a number of years.
D J Callear
Chairman
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2008
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended 31 Dec 07
30 Jun 30 Jun 07
08
Note £000 £000 £000
Revenue 84,002 88,475 167,862
Cost of sales (58,314) (61,007) (114,276)
Gross profit 25,688 27,468 53,586
Distribution costs (9,690) (11,133) (22,082)
Administrative expenses (10,083) (10,700) (22,386)
Operating profit 5,915 5,635 9,118
Finance income 181 201 512
Finance costs (452) (393) (627)
Finance costs - net (271) (192) (115)
Profit before income tax 5,644 5,443 9,003
Analysed as:
Underlying profit before income tax * 5,644 6,057 11,599
Share option income/(charges) 78 (117) (243)
Amortisation (78) (20) (20)
Exceptional and non-recurring costs - (477) (2,333)
Profit before income tax 5,644 5,443 9,003
Income tax expense (1,655) (1,708) (2,733)
Profit for the period 3,989 3,735 6,270
Earnings per Ordinary share:
Basic 6 11.2p 10.4p 17.4p
Diluted 6 11.1p 10.3p 17.3p
* Profit before income tax, exceptional and non-recurring costs, share option
income/(charges) and amortisation.
All amounts relate to continuing operations and include acquisitions during the period.
During the period a final dividend of 6.8p per Ordinary share was paid in respect of the
year ended 31 December 2007. Subsequent to the
period end, the Directors declared an interim dividend of 3.5p per Ordinary share which will
be accounted for as an appropriation from
retained earnings for the year to 31 December 2008.
UNAUDITED CONSOLIDATED BALANCE SHEET
as at 30 June 2008
Unaudited Unaudited* Audited*
30 Jun 08 ž 31 Dec
30 Jun 07 07
Note £000 £000 £000
Assets
Non-current assets
Property, plant and equipment 7 3,163 2,199 1,740
Intangible assets 7 54,174 13,545 13,607
Deferred income tax asset 1,492 1,574 1,316
58,829 17,318 16,663
Current assets
Inventories 9,470 8,418 6,513
Trade and other receivables 32,655 20,410 20,052
Cash and cash equivalents - 8,664 6,963
42,125 37,492 33,528
Total assets 100,954 54,810 50,191
Equity
Capital and reserves attributable to
equity holders of the Company
Ordinary shares 363 363 363
Share premium account 5,009 5,009 5,009
Other reserves 100 (12) 46
Retained earnings 13,035 10,446 11,489
Total equity 18,507 15,806 16,907
Non-current liabilities
Bank overdrafts and loans 8 25,000 - -
Obligations under finance leases 410 520 410
Provisions 602 453 602
Retirement benefit liability 9 1,098 1,224 1,133
27,110 2,197 2,145
Current liabilities
Trade and other payables 48,024 35,165 30,242
Bank overdrafts and loans 8 5,116 - -
Obligations under finance leases 389 155 177
Current income tax liabilities 1,808 1,487 720
55,337 36,807 31,139
Total liabilities 82,447 39,004 33,284
Total equity and liabilities 100,954 54,810 50,191
The half yearly financial report was approved by the Board of Directors on 18 August
2008.
* Restatement to reflect the presentation of the balance sheet showing total assets and
total equity and liabilities.
ž Restatement to reflect the presentation of property dilapidation provisions on the
termination of leases as provisions
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2008
Share premium
Ordinary account Other reserves
Retained earnings Total equity
Shares
Note £000 £000 £000
£000 £000
Balance at 1 January 2007 363 5,009 (11)
9,472 14,833
Currency translation - - (1)
- (1)
differences
Net income recognised directly
- - (1)
- (1)
in equity
Profit for the period - - -
3,735 3,735
Total recognised income for
the period ended 30 June 2007 - - (1)
3,735 3,734
Employee share options:
- value of employee services - - -
98 98
- deferred tax on share - - -
(22) (22)
options
- proceeds from share options - -
2 2
Purchase of shares by employee
benefit trust - - -
(508) (508)
Deferred tax charged directly
to equity upon change of
United Kingdom corporation tax
rate - - -
(24) (24)
Dividends and other
appropriations:
- Ordinary shares 11 - - -
(2,307) (2,307)
- - (1)
974 973
Balance at 30 June 2007 363 5,009 (12)
10,446 15,806
Share premium
Ordinary account Other reserves
Retained earnings Total equity
Shares
Note £000 £000 £000
£000 £000
Balance at 1 January 2008 363 5,009 46
11,489 16,907
Currency translation - - 54
- 54
differences
Net income recognised directly
in equity - - 54
- 54
Profit for the period - - -
3,989 3,989
Total recognised income for
the period ended 30 June 2008 - - 54
3,989 4,043
Employee share options:
- value of employee services - - -
(77) (77)
- deferred tax on share - - -
24 24
options
- proceeds from share options - - -
37 37
Dividends and other
appropriations:
- Ordinary shares 11 - - -
(2,427) (2,427)
- - 54
1,546 1,600
Balance at 30 June 2008 363 5,009 100
13,035 18,507
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2008
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended 31 Dec
30 Jun 08 30 Jun 07 07
Note £000 £000 £000
Cash flows from operating activities
Cash (used in)/generated from 10 (891) 6,988 8,394
operations
Interest received 181 201 512
Interest paid (436) (372) (595)
Interest element of finance lease (16) (21) (32)
repayments
Income tax paid (793) (1,326) (2,857)
Net cash (used in)/generated from (1,955) 5,470 5,422
operating activities
Cash flows from investing activities
Purchase of property, plant and (58) (218) (184)
equipment
Acquisition of subsidiaries, including 12 (19,949) - -
overdrafts
Net cash used in investing activities (20,007) (218) (184)
Cash flows from financing activities
Finance lease principal payments (77) (63) (151)
Increase in borrowings 25,000 - -
Repayment of borrowings (12,613) - -
Purchase of shares by employee benefit - (508) (958)
trust
Dividends paid to Company's 11 (2,427) (2,307) (3,456)
shareholders
Net cash generated from/(used in) 9,883 (2,878) (4,565)
financing activities
Net (decrease)/increase in cash and (12,079) 2,374 673
cash equivalents
Cash and cash equivalents at 1 January 6,963 6,290 6,290
Cash and cash equivalents at period end (5,116) 8,664 6,963
NOTES TO THE INTERIM FINANCIAL INFORMATION
for the six months ended 30 June 2008
1. GENERAL INFORMATION
The Company is a limited liability company incorporated and domiciled in the United
Kingdom. The address of its registered office is St
Crispins, Duke Street, Norwich, NR3 1PD.
The Company is listed on the London Stock Exchange.
The condensed consolidated interim financial information was approved for issue on 18
August 2008.
The condensed consolidated interim financial information does not comprise statutory
accounts within the meaning of section 240 of the
Companies Act 1985. Statutory accounts for the year ended 31 December 2007 were approved by
the Board of Directors on 27 February 2008 and
delivered to the Registrar of Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 237 of the Companies Act 1985.
The condensed consolidated interim financial information has been reviewed, not audited.
2. BASIS OF PREPARATION
This condensed consolidated interim financial information for the six months ended 30 June
2008 has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34,
'Interim financial reporting' as adopted by the
European Union. The condensed consolidated interim financial information should be read in
conjunction with the annual report and accounts
for the year ended 31 December 2007, which have been prepared in accordance with International
Financial Reporting Standards (IFRSs) as
adopted by the European Union.
3. ACCOUNTING POLICIES
The accounting policies applied are consistent with those of the annual report and
accounts for the year ended 31 December 2007, as
described in those annual report and accounts.
The following new standards, amendments to standards or interpretations are mandatory for
the first time for the financial year ending
31 December 2008:
* IFRIC 12, 'Service Concession Arrangements'. IFRIC 12 applies to contractual
arrangements whereby a private sector operator
participates in the development, financing, operation and maintenance of infrastructure for
public sector services, for example, under
Private Finance Initiative contracts. This is not relevant to the Group as it does not enter
into such contracts.
* IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and
their interaction' (effective from 1 January
2008). IFRIC 14 provides guidance on assessing the limit in IAS 19, 'Employee benefits' on the
amount of the defined benefit plan surplus
that can be recognised as an asset. It also explains how the pension asset or liability may be
affected by a statutory or contractual
minimum funding requirement. The Group has applied IFRIC 14 from 1 January 2008. It has not
had any impact on the Group or Company's
financial statements.
The following new standards, amendments to standards and interpretations have been issued,
but are not effective for the financial year
beginning 1 January 2008 and have not been adopted early:
* IFRS 8, 'Operating segments', effective for annual reports beginning on or after 1
January 2009. IFRS 8 replaces IAS 14, 'Segment
reporting', and requires a 'management approach' under which segment information is presented
on the same basis as that used for internal
reporting purposes. The expected impact is still being assessed in detail, but it appears
likely that the number of reporting segments will
increase.
* IAS 23, 'Borrowing costs' as revised. This standard is effective for accounting
periods beginning on or after 1 January 2009. The
main change from the previous version is the removal of the option of immediately recognising
as an expense, borrowing costs that relate to
assets that take a substantial period of time to get ready for use or sale. The impact of IAS
23 is dependent upon the extent of qualifying
expenditure from 1 January 2009 onwards and hence cannot be quantified at the moment.
* IFRS 2, 'Share-based payment' as revised. This standard is effective for accounting
periods beginning on or after 1 January 2009.Management is assessing the impact of changes to vesting conditions and cancellations on the
Group's SAYE schemes.
* IFRS 3, 'Business combinations' as revised and consequential amendments to IAS 27,
'Consolidated and separate financial statements',
IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures'. These are
effective prospectively to business combinations
for which the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after 1 July 2009.Management is assessing the impact of the new requirements regarding acquisition accounting
and consolidation on the Group. The Group does
not have any joint ventures or associates.
* IAS 1, 'Presentation of financial statements' as revised. This standard is effective
for accounting periods beginning on or after 1
January 2009. Management anticipate being able to address the new disclosure requirements of
this standard.
* IAS 32, 'Financial instruments: presentation' as revised. Consequential amendments to
IAS 1, 'Presentation of financial statements',
effective for accounting periods beginning on or after 1 January 2009. This is not relevant to
the Group, as the Group does not have any
puttable instruments.
* IFRIC 13, 'Customer loyalty programmes', effective for accounting periods beginning on
or after 1 July 2008. This is not relevant to
the Group as it does not operate, or have plans to operate any such loyalty schemes.
4. SEGMENTAL REPORTING
As the Group was in the process of re-organising its management and reporting structure at
30 June 2008, the Board does not feel it
appropriate to report segmental performance in this interim financial information. Segmental
reporting will be addressed in the 2008 annual
report and accounts.
5. SEASONALITY
The activities of the Group are not subject to significant seasonality.
6. EARNINGS PER SHARE
(a) Basic
Basic earnings per share is calculated by dividing profit attributable to equity holders
of the Company by the weighted average number
of Ordinary shares in issue during the year excluding Ordinary shares held by the employee
benefit trust.
Six Six
months months Year
ended ended ended
30 Jun 30 Jun 31 Dec
08 07 07
Profit attributable to equity holders of the 3,989 3,735 6,270
Company (£000)
Weighted average number of Ordinary shares in 35,688 36,034 35,975
issue (thousands)
Basic earnings per share (pence per share) 11.2 10.4 17.4
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of
Ordinary shares outstanding to assume conversion of
all dilutive potential Ordinary shares. The Company has one category of dilutive potential
Ordinary shares, being share options. For share
options, a calculation is undertaken to determine the number of shares that could have been
acquired at fair value (determined as the
average market share price of the Company's shares during the period) based on the monetary
value of the subscription rights attached to
outstanding share options. The number of shares calculated as above is compared with the
number of shares that would have been issued
assuming the exercise of the share options.
Six Six
months months Year
ended ended ended
30 Jun 30 Jun 31 Dec
08 07 07
Profit attributable to equity holders of the 3,989 3,735 6,270
Company (£000)
Weighted average number of Ordinary shares in 35,688 36,034 35,975
issue (thousands)
Adjusted for share options (thousands) 163 376 253
Weighted average number of Ordinary shares for 35,851 36,410 36,228
diluted earnings per share (thousands)
Diluted earnings per share (pence per share) 11.1 10.3 17.3
7. CAPITAL EXPENDITURE
In the six months to 30 June 2008, the Group acquired intangible assets in relation to its
acquisitions of TripleArc plc and Accord
Office Supplies Ltd of £40,645,000.
Property, plant and equipment Intangible assets
£000 £000
Six months ended 30 June 2007
Opening net book amount as at 2,330 13,565
1 January 2007
Additions 218 -
Depreciation and amortisation (349) (20)
Closing net book amount as at 2,199 13,545
30 June 2007
Six months ended 30 June 2008
Opening net book amount as at 1,740 13,607
1 January 2008
Acquisition of subsidiaries 1,661 40,645
(note 12)
Additions 90 -
Depreciation and amortisation (328) (78)
Closing net book amount as at 3,163 54,174
30 June 2008
Included within acquisitions of subsidiaries, and as referred to in note 12, amounts of
£11,830,000 and £3,819,000 have been recognised
in respect of intangible fixed assets relating to customer relationships on TripleArc plc and
Accord Office Supplies Ltd respectively.
8. BORROWINGS AND LOANS
30 Jun 08 30 Jun 07 31 Dec 07
£000 £000 £000
Non-current (25,000) - -
Current (5,116) - -
(30,116) - -
£000 £000
Six months ended 30 June 2007
Opening amount as at 1 January 2007 -
Closing amount as at 30 June 2007 -
Six months ended 30 June 2008
Opening amount as at 1 January 2008 -
Acquisition of subsidiaries (note 12) (14,427)
Increase in borrowings (15,689)
Closing amount as at 30 June 2008 (30,116)
In addition to short-term borrowing facilities, the Group arranged a loan on the 16 April
2008 of £25m for the purpose of funding the
Group's acquisition strategy. The loan is repayable in instalments over five years, with
interest charged at a floating rate linked to
LIBOR.
The Group has the following undrawn borrowing facilities:
30 Jun 08 30 Jun 07 31 Dec 07
£000 £000 £000
Within one year (9,884) (15,000) (15,000)
The Group has sufficient headroom to enable it to conform to covenants on its existing
borrowings. The Group has sufficient working
capital and undrawn financing facilities to service its operating activities and finance
further suitable acquisition opportunities should
they arise.
9. RETIREMENT BENEFIT LIABILITY
The Group is a contributing employer to a closed defined benefit pension scheme. The
expenses charged to the income statement in the
period were £125,000 (2007: £84,000) and the contributions paid were £160,000 (2007:
£170,000).
The latest full actuarial valuation was carried out on the 31 July 2007 and updated to 30
June 2008 by a qualified independent actuary.The pension disclosures have been determined on the basis of the results of this valuation.
The amounts recognised in the balance sheet are determined as follows:
30 Jun 08 30 Jun 07 31 Dec
07
£000 £000 £000
Present value of fund obligations (12,370) (9,272) (10,413)
Fair value of plan assets 7,939 8,352 8,542
(4,431) (920) (1,871)
Unrecognised actuarial losses/(gains) 3,333 (304) 738
Liability in the balance sheet (1,098) (1,224) (1,133)
The amounts recognised in the income statement are as follows:
30 Jun 08 30 Jun 07 31 Dec
07
£000 £000 £000
Current service cost (139) (118) (235)
Interest cost (289) (247) (497)
Expected return on plan assets 303 281 568
Expenses recognised in income statement as (125) (84) (164)
administrative expenses
The principal actuarial assumptions were as follows:
30 Jun 08 30 Jun 07 31 Dec
07
% pa % pa % pa
Discount rate 5.5 5.1 5.5
Expected rate of return on plan assets 7.0 7.3 7.0
Future salary increases 3.2 2.9 3.2
Future pension increases 3.2 2.9 3.2
Inflation 3.6 3.1 3.2
The changes in the present value of fund obligations were mainly due to an increase in the
assumed rate of inflation.
10. CASH USED IN / GENERATED FROM OPERATIONS
Six Six Year
months months ended
ended ended 31 Dec
30 Jun 30 Jun 07
08 07
£000 £000 £000
Profit before income tax 5,644 5,443 9,003
Adjustments for:
Amortisation 78 20 20
Depreciation charge 328 349 774
Interest received (181) (201) (512)
Interest and similar charges paid 452 393 627
Share option (income)/expense (77) 98 232
Proceeds from exercise of share options 37 - 2
(Increase)/decrease in inventories (1,788) (436) 1,469
Increase in trade and other receivables (1,399) (1,906) (1,548)
(Decrease)/increase in trade payables and (3,985) 3,228 (1,673)
provisions
Total net cash (outflow)/inflow from operations (891) 6,988 8,394
11. DIVIDENDS
Six Six Year
months months ended
ended ended 31 Dec
30 Jun 30 Jun 07
08 07
£000 £000 £000
Amounts recognised as a distribution in the
period in respect of:
Ordinary shares - final dividend 2006 - 6.4p per - (2,307) (2,307)
share
Ordinary shares - interim dividend 2007 - 3.2p - - (1,149)
per share
Ordinary shares - final dividend 2007 - 6.8p per (2,427) - -
share
(2,427) (2,307) (3,456)
The Directors have declared, post 30 June 2008, an interim dividend of 3.5p per Ordinary
share, payable on 14 November 2008 to
shareholders on the register at the close of business on 10 October 2008. This dividend has
not been included as a liability as at 30 June
2008.
12. ACQUISITIONS
On 15 May 2008 the Group gained control of the entire equity share capital of TripleArc
plc for a consideration of £13.8m, including
costs. TripleArc plc is the parent company of the AccessPlus group. AccessPlus provides
business process outsourcing to companies looking to
reduce the costs of their print marketing and communication.
The acquisition of TripleArc plc has been accounted for using the acquisition method of
accounting.
The fair values of assets and liabilities acquired were as follows:
Book value of acquisition Fair value adjustment Provisional
fair value
£000 £000
£000
Net liabilities assumed:
Property, plant and equipment 1,516 -
1,516
Customer relationships - 11,830
11,830
Deferred tax asset 107 -
107
Inventories 889 -
889
Trade and other receivables 10,174 (912)
9,262
Trade and other payables (16,942) (774)
(17,716)
Corporation tax liability (116) -
(116)
Bank overdraft (1,000) -
(1,000)
Bank loans (12,613) -
(12,613)
Obligations under finance (195) -
(195)
leases
Net liabilities assumed
(8,036)
Satisfied by:
Cash consideration
12,492
Directly attributable costs
1,277
13,769
Provisional goodwill arising
21,805
Net cash outflow arising in period under review on acquisition:
Cash consideration
(12,492)
Directly attributable costs
(613)
Bank overdraft
(1,000)
(14,105)
The fair value adjustments relate to the alignment of accounting policies to those of the
Group and the recognition of an intangible
asset in connection with customer relationships.
In accordance with the requirements of IFRS3 'Business Combinations' the above fair value
adjustments are provisional and will be
finalised within 12 months from the acquisition date.
The goodwill arising on the acquisitions is attributable to cost synergies arising from
the combination.
On 2 June 2008 the Group acquired 100% of the equity share capital of Accord Office
Supplies Ltd for a consideration of £6.0m, including
costs. Accord Office Supplies Ltd is an office products dealer based in the south-west of
England, which supplies the mid-market corporate
sector.
The acquisition of Accord Office Supplies Ltd has been accounted for using the acquisition
method of accounting.
The combined fair values of assets and liabilities acquired were as follows:
Book value of acquisition Fair value adjustment Provisional
fair value
£000 £000
£000
Net liabilities assumed:
Property, plant and equipment 155 (10)
145
Customer relationships - 3,819
3,819
Inventories 280 -
280
Trade and other receivables 1,962 (20)
1,942
Trade and other payables (2,406) -
(2,406)
Corporation tax liability (65) -
(65)
Bank overdraft (814) -
(814)
Obligations under finance (62) -
(62)
leases
Net liabilities assumed
2,839
Satisfied by:
Cash consideration
5,000
Directly attributable costs
30
Contingent consideration
1,000
6,030
Provisional goodwill arising
3,191
Net cash outflow arising in period under review on acquisition:
Cash consideration
(5,000)
Directly attributable costs
(30)
Bank overdraft
(814)
(5,844)
The fair value adjustments relate to the alignment of accounting policies to those of the
Group and the recognition of an intangible
asset in connection with customer relationships.
In accordance with the requirements of IFRS3 'Business Combinations' the above fair value
adjustments are provisional and will be
finalised within 12 months from the acquisition date.
The £1.0m contingent consideration is due to be paid in March 2009 and is dependent on
compliance with the acquisition contract
warranties for Accord Office Supplies Ltd. This has been included in the cost of the business
combination as the Directors consider the
payment of this amount probable.
The goodwill arising on the acquisitions is attributable to cost synergies arising from
the combination.
The amount of revenue and profit before tax of the two acquisitions since the acquisition
dates that are included in the Group's results
for the period ended 30 June 2008 was £6,019,000 and £126,000 in respect of TripleArc plc
and £872,000 and £98,000 in respect of Accord
Office Supplies Ltd.
If both the acquisitions had occurred on 1 January 2008, consolidated revenue would have
been £102,958,000 and the consolidated profit
before exceptional costs, fair value adjustments and tax for the six months ended 30 June 2008
would have been £3,110,000 (exceptional costs
being £2,238,000 and fair value adjustments of £1,716,000).
If only the acquisition of TripleArc plc had taken place and had occurred on 1 January
2008, consolidated revenue would have been
£97,124,000 and the consolidated profit before exceptional costs, fair value adjustments and
tax for the six months ended 30 June 2008 would
have been £1,183,000 (exceptional costs being £2,134,000 and fair value adjustments of
£1,686,000).
If only the acquisition of Accord Office Supplies Ltd had taken place and had occurred on
1 January 2008, consolidated revenue would
have been £82,945,000 and the consolidated profit before exceptional costs, fair value
adjustments and tax for the six months ended 30 June
2008 would have been £5,631,000 (exceptional costs being £104,000 and fair value adjustments
of £30,000).
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that the condensed consolidated interim financial information has
been prepared in accordance with IAS 34 as
adopted by the European Union and that the Chairman's Statement includes a fair review of the
information required by Disclosure and
Transparency Rules 4.2.7 and 4.2.8.
The Directors of office2office plc are listed in the office2office Annual Report and
Accounts for the year ended 31 December 2007. Since
then the following changes in appointment have been made: Mr P M Bertram retired on 24 April
2008, and Mr C M Batterham was appointed on 30
June 2008. A list of current Directors is maintained on the office2office plc website:
www.office2office.co.uk.
By order of the Board
S R Moate M A Cunningham
Chief Executive Group Finance Director
18 August 2008
Forward-looking statements
Certain statements in this half yearly report are forward-looking. Although the Group
believes that the expectations reflected in these
forward-looking statements are reasonable, it can give no assurance that these expectations
will prove to have been correct. As these
statements involve risks and uncertainties, actual results may differ materially from those
expressed or implied by these forward-looking
statements. The Group undertakes no obligation to update any forward-looking statements
whether as a result of new information, future
events or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FKFKBFBKDCFD
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