TIDMMSS

RNS Number : 4470U

Managed Support Services PLC

22 December 2011

FOR IMMEDIATE RELEASE 22 December 2011

Managed Support Services plc

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011

Managed Support Services plc ("MSS") announces its Interim Results for the six months ended 30 September 2011.

   --           Sale of Compliance Division for GBP3 million 
   --           Sale of Building Services Division for a headline price of GBP6.5 million 
   --           New Investment Policy adopted following disposal of all trading companies 

-- Board maximising cash and reducing costs whilst actively pursuing investment opportunities

Commenting on the results, Simon Beart, Chief Executive said:

"We believe the disposal of the Group's trading activities was well timed given the worsening trading environment and the very poor outlook for the Building Services sector.

The Board is now actively considering alternative proposals for the Group"

FOR FURTHER INFORMATION, PLEASE CONTACT:

 
  Managed Support Services plc: 
          Simon Beart, Chief Executive        07710 444370 
            Piers Wilson, Finance Director     01483 735703 
  Cenkos Securities plc: 
          Nick Wells / Stephen Keys           020 7397 8900 
 

Chief Executive's Review

Summary

The results for the six month period ended 30 September 2011 are primarily of historic interest only, since all the Group's trading activities have now been sold, following completion of the recent sale of the Building Services Division to Initial Rentokil ("Initial").

The profit and loss account for the period treats all trading subsidiaries as discontinued, although completion of the Initial sale took place on 5 December 2011.

The Board is now responsible for maximising the value of the deferred consideration payable under the Initial disposal and thereafter reducing Group costs and liabilities.

Trading

It became apparent during the first quarter of the year that those subsidiaries which were dependent on capital expenditure decisions by customers were going to encounter hostile trading conditions. The Board duly announced in June that material trading losses were being encountered by our small shop fitting subsidiary MSS Interiors, and the larger Installation division of our Building Services operation.

Losses in these units accumulated very rapidly, despite an almost instant reaction to reduce headcount and activity. As losses continued, the decision to close MSS Interiors was ultimately taken and the unit ceased trading in early November, but not before incurring trading losses in the first half of GBP211,000. MSS Interiors was a business acquired by the previous management team for in excess of GBP5 million, despite being a vendor dependent, low value added shop fitting business, with no likely disposal value. However, the unit had generated modest profits until this year.

In respect of the Installation activities, this unit represented the already much reduced residual commitment to the high risk, low margin, Installation service formed around an acquisition made by the previous management. This service was valued by certain customers, and was therefore not closed in 2010, but revenue and profitability remained unpredictable and the business frequently required material working capital funding.

The Installation activity also required capital expenditure commitments by customers. Consistent with our experience at MSS Interiors, the Installations unit witnessed a very rapid downturn in activity from April of this year. Turnover levels were reduced to expectations of less than GBP3 million per annum, having been at over twice that level in prior years.

In addition, the Group experienced a reduction in the discretionary, maintenance related, expenditure by customers. This spend made up approximately 50 per cent. of the revenue within the Group's core Building Services business.

The Building Services recurring revenues held up reasonably well in the half, but profitability was inevitably sensitive to any reduction in the discretionary expenditure element that normally accompanies the planned maintenance revenues.

The core offering of Building Services to our diverse customer base, with a recurring revenue level of approximately GBP10 million contributed reasonable operating profits in the period, before central costs, although still below management's expectations due to the reduction in discretionary spending.

The Group's Health & Safety Division traded well from acquisition and enjoyed a successful and profitable first half up to the point of disposal at the end of August, to Capita Group plc ("Capita").

Strategic Review

In the light of these market conditions and in particular in the context of larger competitors having to cease trading, it became clear to the Board that the Group's target corporate customers were unlikely to place material new business with smaller suppliers, such as MSS. This lack of customer confidence in the supply chain was particularly frustrating given the quality of our offering and the recent, material contract wins with existing major customers.

The Board therefore decided that the preferable strategy was to realise value from the Group's assets rather than continue to compete in favourable markets.

It was initially agreed to dispose of the Group's Compliance Division. In August 2011, the Group received GBP3.1 million following the sale of the Compliance Division to Capita which represented a small profit on the Group's investment in the Division. The Compliance Division had traded very well since acquisition, benefitting from improved internal process, the imposition of management disciplines and the appointment of a professional Managing Director.

It was clearly a disappointment to sell the Compliance Division, which was operating in an attractive sector. However, with insufficient capital to fund the Group's desired buy and build strategy, a profitable disposal represented the correct option.

Immediately following the disposal of the Compliance Division, the Group received unsolicited offers for the Building Services Division and details in respect of the division were circulated to a number of potential acquirers.

The Division was subsequently sold for a headline price of GBP6.5 million, subject to retentions, working capital adjustments and the novation of customer contracts. The price again represented a small profit when compared to the acquisition cost of the two subsidiaries making up almost the whole Division, Status and ECS, which were acquired for a combined net price, including fees of GBP6.1 million.

It is expected that the majority of the deferred Initial consideration will be received in March 2012 with the final balance to be received in June 2012.

Balance sheet

The Group's balance sheet is presented with the net assets of the trading subsidiaries shown as assets held for sale. Completion of the Initial transaction took place in the second half. At year end, it is anticipated that the balance sheet will merely show cash balances and a small level of trade creditors.

In total, the subsidiaries acquired during 2010 were sold for a profit of some GBP700,000. The principal diminution of shareholder value over the last two years therefore, reflects the GBP4.5 million costs of closing the major part of the contracting division during the year ended March 2010 and the funding of losses in that year, during which time the Board was examining the potential for major transactions. The remaining element of cash losses represents the funding of adverse working capital movements and the trading losses from the legacy units.

In respect of the Loan Note Holders, proposals are being made whereby redemption of the Loan Notes reflects the timing of the receipt of the initial and deferred consideration arising from the sale of the Building Services division.

Investment Policy

The shareholders approved an Investing Policy at the General Meeting on 5 December 2011. This policy enables the shares to remain trading on AIM and enables the Board to examine a reasonably wide range of transactions and strategies in order hopefully to recover further shareholder value. The Board is already considering potential acquisitions but such proposals need to be in respect of profitable, cash generative enterprises with competitive positions that are sustainable in a continuing recession.

In the event that no suitable proposal emerges, the Board will ultimately arrange for the residual cash balances to be returned to shareholders in a tax efficient and low cost manner. It should be noted that any distribution of funds can only take place after the Group's tax computations to 31 March 2012 are agreed with HMRC and the warranty periods arising from the disposals have expired at August 2013.

The Board is also mindful that continued running costs need to be reduced. A substantial reduction has already been achieved following the closure of the Woking office and the resignation from the Group of Jamie Reynolds. It is anticipated that further costs savings will be implemented before the financial year end.

Summary

In spite of many, significant new customer wins and the creation of two profitable divisions that were readily sold to two major corporate acquirors, the strategy of creating a substantial building services operator was frustrated by market conditions and the collapse of trading at the Group's legacy subsidiaries. These legacy subsidiaries at one stage made a reasonable contribution to central costs but proved too frail in current markets.

The Board is conscious that shareholders need to see an improvement in shareholder value. Every attempt will be made to identify an attractive opportunity whilst controlling costs.

Simon D. Beart

Chief Executive

 
 CONSOLIDATED INCOME STATEMENT 
 for the period ended 30 September 
  2011 
                                                          Six months              Six months 
                                                               ended                   ended                Year ended 
                                                        30 September            30 September                  31 March 
                                      Note                      2011                    2010                      2011 
                                                             GBP'000                 GBP'000                   GBP'000 
 Continuing operations 
 
 Administrative expenses before 
  items 
  identified below                                             (530)                   (398)                   (1,103) 
                                            ------------------------  ----------------------  ------------------------ 
 
 
 OPERATING (LOSS) BEFORE ITEMS                                 (530)                   (398)                   (1,103) 
 IDENTIFIED BELOW 
 
  Amortisation of intangible assets                                -                       -                     (693) 
  Increase in share based payment 
   reserve                                                      (86)                   (150)                     (236) 
                                            ------------------------  ----------------------  ------------------------ 
 
 OPERATING LOSS                                                (616)                   (548)                   (2,032) 
 
 Financial income                                                  -                       4                         - 
                                            ------------------------  ----------------------  ------------------------ 
 
 LOSS BEFORE TAX                                               (616)                   (544)                   (2,032) 
 
 Income tax                            3                           -                       -                      (24) 
 
 LOSS FOR THE PERIOD FROM 
  CONTINUING 
  OPERATIONS                                                   (616)                   (544)                   (2,056) 
 
 Discontinued operations 
 
 (Loss) / profit for the period 
  from 
  discontinued operations                                      (762)                     173                       674 
 
 Continuing and discontinued 
 operations 
 
 LOSS FOR THE FINANCIAL PERIOD                               (1,378)                   (371)                   (1,382) 
                                            ========================  ======================  ======================== 
 
 
 Basic (loss) / earnings per 
 ordinary 
 share 
 
   Continuing operations               4                      (0.29)                  (0.33)                    (1.10) 
   Discontinued operations             4                      (0.36)                    0.10                      0.36 
 
 Diluted (loss) / earnings per 
  ordinary 
  share                                4 
   Continuing operations               4                      (0.29)                  (0.32)                    (1.08) 
   Discontinued operations                                    (0.36)                    0.10                      0.35 
 
 
 
 
 
 
 CONSOLIDATED STATEMENT OF CHANGES 
  IN EQUITY 
 for the period ended 30 September 
  2011 
 
                                                          Six months              Six months 
                                                               ended                   ended                Year ended 
                                                        30 September            30 September                  31 March 
                                                                2011                    2010                      2011 
                                                             GBP'000                 GBP'000                   GBP'000 
 
 At beginning of period                                        9,342                   7,568                     7,568 
 Loss for the financial period                               (1,378)                   (371)                   (1,382) 
 Issue of share capital                                            -                     446                       446 
 Increase in share premium account                                 -                   2,474                     2,474 
 Increase in share based payments 
  reserve                                                         86                     150                       236 
 
 AT END OF PERIOD                                              8,050                  10,267                     9,342 
                                            ========================  ======================  ======================== 
 
 
 
 Equity comprises share capital, share premium, merger reserve, share based 
  payments reserve, special reserve and retained profit. 
 
 
 CONSOLIDATED BALANCE SHEET 
 as at 30 September 2011 
                                                                       30 September                    30 September               31 March 
                                        Note                                   2011                            2010                   2011 
                                                                            GBP'000                         GBP'000                GBP'000 
 CURRENT ASSETS 
 Trade and other receivables                                                    158                             144                     60 
 Cash and cash equivalents                                                        -                             296                    404 
 Assets held for sale                                                        14,190                          21,827                 20,406 
 
                                                                             14,348                          22,267                 20,870 
                                               ------------------------------------   -----------------------------   -------------------- 
 
 
 TOTAL ASSETS                                                                14,348                          22,267                 20,870 
                                               ====================================   =============================   ==================== 
 
 
 CURRENT LIABILITIES 
 Trade and other payables                                                     (313)                           (615)                  (738) 
 Short term borrowings                                                      (1,224)                         (1,129)                (2,784) 
 Deferred consideration                                                       (275)                           (266)                      - 
 Liabilities held for sale                                                  (3,986)                         (9,990)                (7,506) 
 
                                                                            (5,798)                        (12,000)               (11,028) 
                                               ------------------------------------   -----------------------------   -------------------- 
 
 
 NET CURRENT ASSETS                                                           8,550                          10,267                  9,842 
                                               ------------------------------------   -----------------------------   -------------------- 
 
 
 NON CURRENT LIABILITIES 
 Trade and other payables                5                                    (500)                               -                  (500) 
                                               ------------------------------------   -----------------------------   -------------------- 
 
 
 TOTAL LIABILITIES                                                          (6,298)                        (12,000)               (11,528) 
                                               ====================================   =============================   ==================== 
 
 
 
 NET ASSETS                                                                   8,050                          10,267                  9,342 
                                               ====================================   =============================   ==================== 
 
 
 
 EQUITY 
 Share capital                           9                                    2,098                           2,098                  2,098 
 Share premium account                   9                                    7,373                           7,373                  7,373 
 Special reserve                                                                  -                           4,647                      - 
 Share based payments reserve                                                 1,542                           1,370                  1,456 
 Retained earnings                                                          (2,963)                         (5,228)                (1,610) 
 
 TOTAL EQUITY                                                                 8,050                          10,267                  9,342 
                                               ====================================   =============================   ==================== 
 
 
 
 Simon Beart                                    Piers Wilson 
 Director                                         Director 
 
 
 
 
 
 
  CONSOLIDATED CASH FLOW STATEMENT 
 for the period ended 30 September 
  2011 
                                                                         Six months                     Six months 
                                                                              ended                          ended              Year ended 
                                                                       30 September                   30 September                31 March 
                                            Note                               2011                           2010                    2011 
                                                                            GBP'000                        GBP'000                 GBP'000 
 
 CASH FLOW FROM OPERATING ACTIVITIES 
 Net cash used in operating activities 
  of continuing operations                   7                                (500)                          (472)                 (1,090) 
 Net cash used in operating activities 
  of discontinued operations                 7                              (1,275)                        (1,148)                 (1,701) 
 
 NET CASH USED IN OPERATING ACTIVITIES                                      (1,775)                        (1,620)                 (2,791) 
                                                   --------------------------------   ----------------------------   --------------------- 
 
 
 INVESTING ACTIVITIES 
 Interest received                                                                -                              4                       - 
 Deferred consideration                                                           -                          (200)                   (466) 
 
 Net cash from / (used in) investing 
  activities by continuing operations                                             -                          (196)                   (466) 
 Net cash from / (used in) investing 
  activities by discontinued operations                                       2,949                        (5,218)                 (6,080) 
 
 NET CASH FROM / (USED IN) INVESTING 
  ACTIVITIES                                                                  2,949                        (5,414)                 (6,546) 
                                                   --------------------------------   ----------------------------   --------------------- 
 
 FINANCING ACTIVITIES 
 
 Net proceeds of share issue                                                      -                          2,925                   2,920 
 Proceeds on issue of convertible loan 
  notes                                                                           -                              -                     500 
 
 Net cash from financing activities 
  by continuing operations                                                        -                          2,925                   3,420 
 Net cash (used in) / from financing 
  activities by discontinued operations                                     (1,674)                            911                   2,827 
 
 NET CASH (USED IN) / FROM FINANCING 
  ACTIVITIES                                                                (1,674)                          3,836                   6,247 
                                                   --------------------------------   ----------------------------   --------------------- 
 
 NET DECREASE IN CASH                                                         (500)                        (3,198)                 (3,090) 
 
 CASH AT THE BEGINNING OF PERIOD                                                404                          3,494                   3,494 
 
 CASH AT THE END OF THE PERIOD                                                 (96)                            296                     404 
                                                   ================================   ============================   ===================== 
 
 
 
 
 NOTES TO THE FINANCIAL STATEMENTS 
 30 September 2011 
 
 1        GENERAL INFORMATION AND ACCOUNTING POLICIES 
 
          These interim consolidated financial statements are for the six months 
           ended 30 September 2011. The interim financial report, which has not been 
           audited or reviewed, has been prepared in accordance with International 
           Financial Reporting Standards (IFRS) adopted for use in the European Union. 
 
          The information for the period ended 31 March 2011 does not constitute 
           statutory accounts as defined in section 434 of the Companies Act 2006. 
           A copy of the statutory accounts for that year has been delivered to the 
           Registrar of Companies. The auditors reported on those accounts: their 
           report was unqualified, did not draw attention to any matters by way of 
           emphasis and did not contain a statement under section 498(2) or (3) of 
           the Companies Act 2006. 
 
          The annual financial statements are prepared in accordance with IFRSs 
           as adopted by the European Union. The condensed set of financial statements 
           included in this half-yearly financial report has been prepared in accordance 
           with International Accounting Standard 34 "Interim Financial Reporting", 
           as adopted by the European Union. 
 
          The same accounting policies, presentation and methods of computation 
           are followed in the condensed set of financial statements as applied in 
           the Group's latest audited financial statements, except as described below. 
 
          Adoption of new and revised 
          standards 
 
          The following new standards and amendments to standards are mandatory 
           for the first time for the financial year beginning 1 April 2011. 
 
          IFRS 10, "Consolidated Financial Statements" (effective for fiscal periods 
           beginning on or after 1(st) January 2013). 
 
          IFRS 13, "Fair Value Measurement" (effective for fiscal periods beginning 
           on or after 1(st) January 2013) 
 
          Going concern 
 
          The Directors are satisfied that the Group has sufficient resources to 
           continue in operation for the foreseeable future, a period of not less 
           than 12 months from the date of this report. Accordingly, they continue 
           to adopt the going concern basis in preparing the financial statements. 
 
 
 2        BUSINESS, GEOGRAPHICAL AND SEGMENTAL REPORTING 
 
          The Group's operations were only in the United Kingdom. Following the 
           disposal of the Group's Compliance division, the cessation of operations 
           at its Interior Contractors division and the sale of the Building Services 
           division, the results reported in the Consolidated Income Statement relate 
           solely to the Central division. The Building Services segment, Interior 
           Contracts segment and the Compliance segment are now reported under Discontinued 
           operations. 
 
 3        TAX 
 
          Corporation tax charge for the six month period has been estimated at 
           GBPnil (six months ended 30 September 2010: GBPnil). No deferred tax asset 
           has been recognised in relation to the losses in the period. 
 
 
 
 
 
 
 
 
 
 
 
 NOTES TO THE FINANCIAL STATEMENTS 
 30 September 2011 
 
 4        EARNINGS PER ORDINARY SHARE 
 
          The calculation of basic and diluted loss per share is based on the following 
           data: 
 
                                                                   Six months              Six months 
                                                                        ended                   ended     Year ended 
                                                                 30 September            30 September       31 March 
                                                                         2011                    2010           2011 
                                                                      GBP'000                 GBP'000        GBP'000 
 
          Continuing operations 
 
          Loss for the financial period                                 (616)                   (544)        (2,056) 
                                                         ====================   =====================   ============ 
 
          Number of shares 
          Weighted average number of ordinary 
           shares for the purposes of basic 
           earnings per share                                     209,802,191             165,203,976    187,503,084 
 
          Potentially dilutive ordinary shares                      2,750,000               3,500,000      2,750,000 
 
          Weighted average number of shares 
           for the purposes of diluted earnings 
           per share                                              212,552,191             168,703,976    190,253,084 
                                                         ====================   =====================   ============ 
 
          Basic (loss) / profit per 
          ordinary 
          share (pence) 
 
            Continuing operations                                      (0.29)                  (0.33)         (1.10) 
            Discontinued operations                                    (0.36)                    0.10           0.36 
 
          Diluted (loss) / profit per 
          ordinary 
          share (pence) 
 
            Continuing operations                                      (0.29)                  (0.32)         (1.08) 
            Discontinued operations                                    (0.36)                    0.10           0.35 
 
 5        BORROWINGS 
                                                                   Six months              Six months 
                                                                        ended                   ended     Year ended 
                                                                 30 September            30 September       31 March 
                                                                         2011                    2010           2011 
                                                                      GBP'000                 GBP'000        GBP'000 
 
          Bank loans due for settlement within 
           one year                                                     1,224                   1,129          3,017 
                                                         ====================   =====================   ============ 
 
 
 
 
 
  NOTES TO THE FINANCIAL STATEMENTS 
 30 September 2011 
 
 6        CONVERTIBLE SECURED LOAN NOTES 
 
          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 a 
           conversion price of 5 pence per Ordinary Share. 
 
           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 
            annum paid semi annually in arrears. 
 
 7        NOTES TO THE CASH FLOW STATEMENT 
                                                                   Six months              Six months 
                                                                        ended                   ended     Year ended 
                                                                 30 September            30 September       31 March 
                                                                         2011                    2010           2011 
                                                                      GBP'000                 GBP'000        GBP'000 
 
          Operating loss from continuing 
           activities                                                   (616)                   (548)        (1,339) 
          Adjustments for: 
           Share based payments                                            86                     150            236 
 
          Operating cash flows before movement 
           in working capital                                           (530)                   (398)        (1,103) 
 
          Decrease / (increase) in receivables                            359                   (123)           (39) 
          (Decrease) / increase in payables                             (329)                      49            187 
          Decrease in provisions                                            -                       -          (135) 
 
          Cash utilised by operations                                   (500)                   (472)        (1,090) 
 
          Net cash used in operating activities 
           of continuing operations                                     (500)                   (472)        (1,090) 
          Net cash used in operating activities 
           of discontinued operations                                 (1,275)                 (1,148)        (1,701) 
 
          Net cash flow from operating activities                     (1,775)                 (1,620)        (2,791) 
                                                         ====================   =====================   ============ 
 
 8        DIVIDEND 
 
          No dividend is proposed in respect of the period to 30 September 2011 
           (2010: GBPnil). 
 
 9        SHARE CAPITAL 
 
                                                                 30 September            30 September       31 March 
                                                                         2011                    2010           2011 
                                                                      GBP'000                 GBP'000        GBP'000 
          Authorised 
 
          250,000,000 ordinary shares of 
           1p each (2010: 250,000,000 ordinary 
           shares of 1p each)                                           2,500                   2,500          2,500 
                                                         ====================   =====================   ============ 
 
          Issued and fully paid 
 
          209,802,191 ordinary share of 1p 
           each                                                         2,098                   2,098          2,098 
                                                         ====================   =====================   ============ 
 
 
 
 
 
 
  NOTES TO THE FINANCIAL STATEMENTS 
 30 September 2011 
 
 10       RELATED PARTY TRANSACTIONS 
 
          Apart from the remuneration of the Directors, who are key management personnel 
           of the Group, there have been no other material transactions with the 
           Board. 
 
          EVENTS AFTER THE BALANCE SHEET 
 11        DATE 
 
          On 5th December 2011, the Group disposed of its interests in the Building 
           Services division to Rentokil Initial plc for an initial cash consideration 
           of GBP4,000,000. Additional consideration of up to GBP2,500,000 is payable 
           within six months. 
 
 12       RISKS AND UNCERTAINTIES 
 
          The Board continuously assesses and monitors the key risks of the business. 
           The key risks that could affect the Group's medium term performance and 
           the factors which mitigate these risks have not changed from those set 
           out on pages 9 and 10 of the Group's 2011 Annual Report, a copy of which 
           is available on the Group's website www.managedsupportservicesplc.com. 
           The Chief Executive's Review includes consideration of uncertainties affecting 
           the Group in the remaining six months of the year. 
 
 RESPONSIBILITY STATEMENT 
 
 The Directors confirm that this consolidated interim report has been prepared 
  in accordance with IAS34 'Interim Financial Reporting' and that the Chief 
  Executive's statement includes a fair review of the information required by 
  DTR 4.2.7R (indication of important events during the first six months and 
  description of principal risks and uncertainties for the remaining six months 
  of the year); and of the information required by DTR 4.2.8R (disclosure of 
  related parties' transactions and changes therein). 
 
 
 
 
 
  S D Beart                                               P L S Wilson 
  CHIEF EXECUTIVE                                         GROUP FINANCE DIRECTOR 
 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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