RNS Number:7841L
Arlington Group PLC
02 June 2003
ARLINGTON GROUP PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31 MARCH 2003
Chairman's Statement
INTRODUCTION
In my Chairman's Statement for year ended 31st March 2002, I predicted
continuing turbulent times in the Company's preferred investment sectors. The
inexorable deterioration in the trading environment and value of quoted stocks
in the small company sector, concomitant with no visible broad based improvement
in either the IPO or trade sale opportunities has further depressed the
valuation criteria for unquoted companies. This is most pronounced for early
stage companies and investments that still require secondary or further funding.
Arlington continues to seek investment and trading opportunities in both public
and private businesses where the Board believes fundamental value can be
captured to maximise the opportunities arising from these low valuations.
I am pleased to report upon the financial results for the Group for the year
ended 31st March 2003. Notwithstanding market and trading conditions, the Group
has achieved an audited after tax profit for the full year to 31st March 2003 of
#301,000 while rebuilding its net cash resources which, at the financial
year-end, were in excess of #22 million.
The Directors do not recommend the payment of a dividend. Dividend policy will
be reviewed if and when distributable reserves are available and the possibility
of special dividends will also be considered if significant profits are realised
from the sale of investments.
OPERATIONAL REVIEW
Although the current overall market environment is only providing limited
liquidity to shareholders in the small company sector, some investments that are
currently being held in the Company's portfolio, both listed and unlisted, have
still made sound progress in these difficult times as highlighted below.
LISTED INVESTMENTS
Eckoh Technologies Plc ("Eckoh") (7%* equity interest)
Eckoh announced its preliminary full year results for the year ended 31st March
2003 on 29th May 2003. These demonstrated an increase in turnover from
continuing operations of approximately 20% year on year, the achievement of an
operating profit during the second half of the financial year and the signing of
a strategically important relationship on the speech solutions side with BT in
November 2002.
Becoming one of Europe's leaders within the hosted speech solutions market over
the next two years continues to be one of Eckoh's principal aims, whilst
continuing to look to support, develop and maximise all opportunities that
arise within the Interactive Voice Recognition (IVR), Network Service and Mobile
Wholesale operations. Eckoh now operates one of the largest speech-enabled call
processing platforms in Europe capable of handling over 500,000 calls per hour.
On top of the strategically important BT contract, Eckoh has also announced
several substantial new contract wins with William Hill, Centrica, Hasbro,
Wyevale Garden Centres and Phoneworld.
Other significant achievements include the signing of an agreement with Energis
in April 2003 to take immediate ownership of a significant number of Energis'
lucrative "business telephony" customer contracts, the servicing of which
will require only a modest increase in overhead at Eckoh. Also significant was
the joint venture signed between Eckoh and Auctionworld in February 2003 under
the brandname "Phoneworld" to provide an exclusive and dedicated channel for
Eckoh's Mobile Wholesale division. Phoneworld has also agreed to adopt Eckoh's
Speech Solutions automated order and transaction processing product which is
driven by speech recognition.
Eckoh also announced that it is to participate in the re-launch of L!VE TV on
Sky this summer in partnership with L!VE TV Library Sales. L!VE TV will be
broadcast 24 hours a day, seven days a week and will bring back to the screen
hit programmes such as The Weather in Norwegian, Lie Detector, Agony as well as
the L!VE TV docu-soap, Canary Wharf. L!VE TV, which came off air in 1999, was
the most successful advertising vehicle for its consumer IVR services, driving
nearly #2m of turnover annually. Through this new agreement Eckoh will be the
exclusive provider of all editorial and advertised telephone and SMS based
services to the channel.
Eckoh continues to hold #12m of cash on its Balance Sheet and is completely debt
free. Acquisitions will be sought in areas where management believe that
additional shareholder value can be created and where expansion can be achieved.
Eckoh intends to use this solid financial platform as the basis of its future
growth over the coming year. Eckoh has also stated its intention in due course
to transfer its listing from London's Official List to AIM, a move which
Arlington supports as it will reduce future corporate costs while improving
flexibility in dealing with any future potential acquisitions.
* Since the balance sheet date, Arlington has reduced its holding in Eckoh from
13% to 6.69% in line with its stated investment strategy.
XKO Group Plc ("XKO") (8% equity interest)
XKO has continued with its ongoing strategy of using its market strength to
build market share through acquisition alongside its constant efforts to grow
operations organically. As described in Arlington's previous interim statement,
XKO acquired Enterprise Resource Planning (ERP) providers Aran and ISL during
the second half of 2002. In April 2003, XKO announced that it had also
successfully acquired Control Limited, a competing mid-range ERP provider, for
#1.2m in cash all of which was paid at completion. This new acquisition will
provide XKO with additional contracted revenues, an installed customer base for
cross selling opportunities and an extended product range which will all help
improve the overall service offering being delivered to XKO's customers.
XKO has a strong market position in the mid range ERP market with a
large installed base of some 950 customers generating significant recurring
annual revenues of approximately #15m. XKO is the owner and developer of a
number of applications for these customers with particularly strong market
shares in products for the distribution industries and larger scale SMEs.
Control also operates in these markets and competes directly with XKO.
XKO has also announced that its full year results for the 12 month period ending
March 31st 2003, which are due to be released in mid-June, should be in line
with market expectations. XKO has indicated that it intends to pay out a final
dividend to shareholders of 0.5p which, when added to the interim dividend
already paid, will represent an increase of 40% over last year.
UNLISTED INVESTMENTS
Cemtron Limited ("Cemtron") (100% equity interest)
The year under review has seen Cemtron build further upon the turnaround work
that started back in September 2001 when Arlington acquired the company.
During the period under review, the company acquired, from its former landlord,
the freehold interest in its current factory site and surrounding 6.5 acres at
Dalgety Bay in Fife which, in turn, has both provided security of tenure in
Dalgety Bay with its ready access to a highly trained pool of labour and secured
the company's ability to expand its business significantly.
Cemtron has maintained its level of investment in state-of-the-art manufacturing
equipment and has acquired, and is in the process of commissioning, a third
production line which will allow the company to offer increased flexibility to
its ever-broadening base of customers, thereby further enhancing its position as
a leading mid-volume Contracts Electronics Manufacturer (CEM) in the UK and
Scotland.
On a cautionary note, while showing some early indications of recovery, the
global CEM sector still remains extremely fragile. Against this background, I am
pleased to report Cemtron has been able to expand its client base, spread its
industry exposure and reduce certain aspects of excessively high customer
concentration and contribute a modest profit for the full year.
Cemtron is expected to continue its organic development, and, with the continued
commitment of its dedicated management team, it is budgeted to make a
significant contribution to Arlington's performance in the current financial
year.
DIVESTMENTS
Sentinel Business Services Group Limited ("SBSG")
As announced on 25th March 2003, Arlington secured the repayment of #4.56m of
outstanding loans due to it by SBSG through the sale out of receivership of
Sentinel Secure Holdings Limited, SBSG's principal subsidiary, to
Recall Limited.
FUTURE PROSPECTS AND OUTLOOK
At the time of writing, the Board continues to investigate proposals as well as
seek new investment opportunities into which the Company is able to deploy its
cash resources. The future looks promising, as many companies and management
teams are finally refocusing on and beginning to accept the reality of the lower
values being placed on their assets in today's marketplace. Arlington's strategy
of preserving cash now provides the Company with the opportunity to benefit from
investing at more attractive valuations than have been available for some time.
The Board will seek to maximise its returns from the remainder of the portfolio
in order to free up and generate additional cash for future reinvestment. It
will comfort shareholders to know that the management team continues to hold
more than 52% of the ordinary equity of the Company and therefore have their
interests aligned to all of its other shareholders.
CONCLUSION
Based on the progress to date, the Board is cautiously optimistic for the future
and I look forward to reporting further progress to members in the Company's
report on the half-year to 30th September 2003.
The Directors and I would like to thank everyone who has worked so hard in
supporting the success of the Group during the last few months and wish to
express our gratitude for their continuing commitment for the future.
NICHOLAS BARHAM
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Group Company
Notes Year to Year to
31 March 2003 31 March 2002
#'000 #'000
Turnover - acquired 2 9,345 -
activities
- continuing 5,011 370
activities ----------- -----------
14,356 370
Cost of sales - normal (12,828) (4,782)
- exceptional - (5,084)
----------- -----------
Gross profit/ 1,528 (9,496)
(loss)
Administrative - normal (2,007) (1,444)
expenses
- amortisation 142 -
of goodwill ------ ----------- --- -----------
Operating - acquired 393 -
profit/(loss) activities
- continuing (730) (10,940)
activities ------ ----------- --- -----------
(337) (10,940)
Interest receivable and similar 728 1,149
income
Interest payable and similar (34) (2)
charges ----------- -----------
Profit/(loss) on ordinary 357 (9,793)
activities before taxation
Tax on profit/(loss) on ordinary 3 (56) 699)
activities ----------- -----------
Retained profit/(loss) for the 301 (9,094)
year =========== ===========
Earnings/(loss)
per share
Basic 4 0.46p (13.80)p
Diluted 4 0.46p (13.80)p
=========== ===========
All recognised gains and losses are included in the profit and loss account.
The Company did not produce consolidated accounts for the year ended 31 March
2002 (see note 2 to the accounts)
BALANCE SHEETS
Group Company Company
at 31 at 31 at 31
March 2003 March 2003 March 2002
#'000 #'000 #'000
Fixed assets
Intangible assets (568) - -
Tangible assets 1,704 50 73
Investments - - -
-------- -------- --------
Current assets 1,136 50 73
-------- -------- --------
Stock 519 - -
Debtors 2,617 945 891
Investments 3,116 3,116 3,872
Cash at bank and in hand 22,813 22,731 21,085
-------- -------- --------
29,065 26,792 25,848
Creditors: amounts falling due within (3,796) (1,277) (213)
one year -------- -------- --------
Net current assets 25,269 25,515 25,635
-------- -------- --------
Total assets less current 26,405 25,565 25,708
liabilities
Creditors: amounts fall due after one (352) - -
year
Provisions for liabilities and (44) - -
charges -------- -------- --------
Net assets 26,009 25,565 25,708
======== ======== ========
Capital and reserves
Called up share capital 329 329 329
Share premium account 30,558 30,558 30,558
Profit and loss account (4,878) (5,322) (5,179)
-------- -------- --------
Equity shareholders' funds 26,009 25,565 25,708
======== ======== ========
CONSOLIDATED CASH FLOW STATEMENT
Group Company
Year to Year to
31 March 2002 31 March 2002
#'000 #'000 #'000 #'000
Net cash inflow/(outflow) 967 (3,241)
from operating
activities
Returns on investments and
servicing of finance
Interest paid (98) (2)
Interest received 791 1,149
-------- --------
Net cash inflow from 693 1,147
returns on investments and
servicing of finance
Taxation 719 (440)
Capital expenditure and
financial investment
Payments to acquire (937) (65)
tangible fixed assets -------- --------
Net cash outflow from (937) (65)
capital expenditure and
financial investment
Acquisitions and
disposals
Net overdraft acquired (39) -
with subsidiary -------- --------
Net cash outflow from (39) -
acquisitions and
disposals
Management of liquid
resources
Decrease/(increase) in - 17,200
short term deposits -------- --------
Net cash inflow from - 17,200
management of liquid
resources
Financing
Loan received in year 510 -
Loans repaid in year (1500) -
Capital repayment of (35) -
finance leases -------- --------
Net cash inflow from 325 -
financing -------- --------
Increase in cash in the 1,728 14,601
year ======== ========
RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES
Year to Year to
31 March 2003 31 March 2002
#'000 #'000
Operating loss (337) (10,940)
Depreciation 413 32
Amortisation of goodwill (142) -
Grant released (16) -
Increase in stock (2) -
Decrease in investments 225 7,396
(Increase)/decrease in debtors (522) 235
Increase in creditors 1,348 36
-------- --------
967 (3,241)
======== ========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Year to Year to
31 March 31 March
2003 2002
#'000 #'000
Increase in cash in the year 1,728 14,601
Cash inflow from increase in liquid resources - (17,200)
Cash inflow from increase in debt (325) -
-------- --------
Change in net funds resulting from cashflows 1,403 (2,599)
Loans and finance leases acquired with subsidiary (220) -
-------- --------
Movement in funds in the year 1,183 (2,599)
Net funds at beginning of the year 21,085 23,684
-------- --------
Net funds at end of year 22,268 21,085
======== ========
ANALYSIS OF NET FUNDS
At 31 March Cash flow Acquisitions At 31 March
2002 (excluding cash 2003
and overdraft)
#'000 #'000 #'000 #'000
Cash at bank and in 21,085 1,728 - 22,813
hand -------- -------- -------- --------
21,085 1,728 - 22,813
Debt due after one - (233) (111) (344)
year
Debt due within one - (127) (32) (159)
year
Finance leases - 35 (77) (42)
-------- -------- -------- --------
21,085 1,403 (220) 22,268
======== ======== ======== ========
ACQUIRED ACTIVITIES
Cashflows relating to acquired activities were as follows:
Year to 31
March 2003
#'000
Net cash inflow from operating activities 659
Net cash outflow from returns on investments and servicing of 29
finance
Net cash outflow from capital expenditure (931)
Net cash inflow from financing 278
========
NOTES TO THE ACCOUNTS
1 REPORT AND ACCOUNTS
The financial information contained in the Preliminary Results does not
constitute accounts within the meaning of section 240 of the Companies Act 1985.
The information for the years ended 31 March 2003 and 31 March 2002 is extracted
from the audited accounts for the year ended 31 March 2003, upon which the
Auditors have expressed an unqualified opinion, will be filed with the Registrar
of Companies shortly.
2 CONSOLIDATION
During the year ended 31 March 2002 the Company acquired 100% of the ordinary
share capital of Cemtron Holdings Limited and its subsidiary, Cemtron Limited a
company incorporated in Scotland, as part of the receivership of ICM
(Australia). The intention was to hold this as an investment for resale. In the
opinion of the Directors the company now exercises significant influence over
the activities of Cemtron. Given the change in circumstances the Directors
consider that it is appropriate to account for this interest as a subsidiary
with effect from 1 April 2002.
Accordingly consolidated accounts have been presented for the year ended 31
March 2003. The Company had no subsidiaries during the prior year ended 31 March
2002.
3 TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES
UK Corporation tax on profit/(loss) for the year
2003 2002
#'000 #'000
UK Corporation tax at 30% (2002: 30%) 56 (719)
Adjustment in respect of previous years:
Corporation tax - 20
-------- --------
56 (699)
======== ========
4 EARNINGS/(LOSS) PER SHARE
Basic earnings/(loss) per share is calculated on profit attributable to
shareholders of #301,000(2002: loss #9,094,000) divided by the weighted
average number of the ordinary shares in issue during the year of 65,919,277
(2002: 65,919,277).
There is no difference between the basis of calculation of basic and diluted
earnings per share.
5 ANNUAL REPORT AND ACCOUNTS
Copies of the Report and Accounts will be sent to shareholders on 2 June 2003
and will be available from the Secretary at the company's registered office,
Oakfield House, Oakfield Grove, Clifton, Bristol BS8 2BN.
This information is provided by RNS
The company news service from the London Stock Exchange
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