Interim Results

Dowlis Corporate Solutions plc 27 September 2007 Date: 27 September 2007 On behalf of: Dowlis Corporate Solutions plc ('Dowlis', 'the Company' or 'the Group') Embargoed until: 0700hrs Dowlis Corporate Solutions plc Unaudited Interim Results Dowlis Corporate Solutions plc (AIM: DWL), the marketing, information and logistics solutions business, today announced its interim results for the six months ended 30 June 2007. The key highlights are: • Turnover of £10.4m (2006: £9.4m), an increase of 11.1% on 2006 interim period • Pre-tax profits of £0.48m against loss of £0.28m in the same period last year • Earnings per share at 0.74p (2006: loss of 0.57p) • Acquisitions made in 2006 performing strongly and each producing increased profits • Launch of PromoServe in USA • Successful launch of Dowlis.com online business • Craig Slater appointed as CEO Commenting on the results, Colin Cooke, Chairman, said: 'I am pleased with the performance of our divisions and the progress made in the past year. The results from our Promotional Marketing division are much improved reflecting the considerable work done by the team to refocus this business. The Trade Only division has shown strong revenue growth and we look forward to continuing to develop this division further. 'We are delighted to welcome Craig Slater to his new role as Chief Executive. He brings with him a wealth of experience and we are confident that he will make a substantial contribution to the Group.' Enquiries: Dowlis Corporate Solutions plc www.dowlis.com Martin Varley /Barrett Bedrossian 0870 224 6677 Redleaf Communications Emma Kane/Sanna Lehtinen/Susan Quigley 020 7822 0200 Daniel Stewart & Company plc Lindsay Mair / Tom Jenkins 020 7776 6550 Zeus Capital Alex Clarkson 0161 831 1512 • Publication quality photographs are available via Redleaf. CHAIRMAN'S STATEMENT Review of Operations Promotional Marketing (Under IFRS) Half year Half year Full year 2007 2006 2006 £000's £000's £000's Turnover 8,597 8,283 16,272 Operating Profit (before exceptional items) 363 72 683 Operating Profit/(Loss) (after exceptional items) 363 (528) (2) This division provides Promotional Merchandise to corporate customers whose aggregate UK spend is estimated at over £1 billion. All products are personalised in line with the customer's brand or wider marketing message, the majority of orders are required for particular events or promotions and therefore customer service is seen as a key differentiator. Key clients of this division include HBOS, Daimler Chrysler and O2. Ross Promotional This company was acquired 18 months ago and continues to perform strongly, with sales this year some 20% ahead of 2006. The business collects orders primarily by phone from regular clients and has achieved solid returns from an increased investment in catalogue mailings to customers and defined prospects. We expect the full year to show good progress in this business with strong cash generation. DCS Manchester This business continues to build on the successes of 2006 and revenues are ahead of the same period last year. One of the key trends in the industry is the shift towards online sales and this is being addressed. Based on our research, we have spent the last six months developing an online business that launched earlier this month, backed up by highly experienced customer service staff at the Manchester facility. DCS Byfleet Last year, Dowlis in Byfleet put in place both a new structure and Managing Director. We have started to see some benefits from this, with new account wins and improved levels of service to key clients. Distinctive Ideas Acquired 11 months ago, Distinctive Ideas is performing well and is fully integrated into the Group. At the end of June, profits were 20% ahead of the same period last year and the customer base has been strengthened. Overview This segment of the Group is exploring ways to serve customers in more economical ways, and we are confident that the combination of a highly motivated management team, combined with the online strategy will deliver solid results over the next 18 months. We continue to explore other acquisition opportunities based on our model of acquiring a majority shareholding, with the balance purchased through 'put' and 'call' options at agreed earnings enhancing multiples in future years. We believe that keeping management teams highly incentivised and focused is a key element to future growth and profitability. Information and Exhibitions (under IFRS) Half year Half year Full year 2007 2006 2006 £000's £000's £000's Turnover 1,818 1,093 2,586 Operating profit before exceptional items 117 241 608 Operating Profit/(Loss) 117 241 578 This business supplies products and services to distributors of Promotional Products. The division has three key areas: Product Supply Supplying products to distributors through AdProducts based in Manchester. This business holds stock of fast moving products and personalises them in house with the latest technology such as laser engraving, pad printing and fully automatic multi colour screen print. Formed four years ago, this business has sales that are 22% ahead of the same period last year. Trade Only This is the umbrella business for our various information, publishing and exhibition services that we provide to both distributors and suppliers. Our 'Spectrum' catalogue has performed in line with expectations and the 2008 edition will show revenue increases again. Our second catalogue is 'Envoy' which is a publication purchased 15 months ago; the 2007 edition was published in March this year and has been well received with revenue growing over 2006. The www.tradeonly.co.uk site continues to grow in popularity. New functions have been added and it now has registered users from an estimated 75% of promotional product distributors in the UK. Users access the site to research products, find suppliers, view prices and make virtual samples. In addition, they can order samples and request detailed quotations from suppliers without ever needing to leave the site. The exhibitions part of the business had been modest prior to this year. However, we launched a two-day show during March 2007 at which more than 190 companies exhibited their products and services to the distributors. I am pleased to report that the level of rebooking for the 2008 event is in line with expectations at 76% of saleable space and ahead of the final space sold for the 2007 event. Industry Software (ISL) This business became part of the Group last summer. The company has developed PromoServe as the leading software for the promotional products industry, for the management of customer relationships, order processing and accounting. ISL has six times more installs than the number two in the market place in the UK and we are now seeing results from the reseller we have appointed for the Benelux countries. I am particularly pleased to announce our first customer in the USA for this product, where one of the fastest growing distributors and the 26th fastest growing company in the USA has recently agreed an initial three year term to use PromoServe for all of their clients. This is a major development for the Group, with the USA having around 30,000 distributors of Promotional Products supplying US$18 billion of products to end customers. The services we provide to suppliers and distributors of promotional products enable small and medium size businesses to operate with resources normally only available to much larger companies. By using our services, distributors are able to market their business, source products and suppliers, take orders online and manage their complete accounting functions at a fraction of the cost associated with having to purchase a franchise. Overall, this division's sales are ahead of last year, although a heavy investment in establishing new events has limited profit growth this year. Board Changes Following the successful establishment of the Group and development of its strategy, Martin Varley will now concentrate on driving growth in the Group's offerings to distributors and will continue to identify earnings enhancing developments across the Group. I am therefore delighted to welcome Craig Slater to the Company in his new role of Chief Executive Officer, an appointment that he takes up on 1st October. Craig has industry specific business experience that will be of tremendous value to the Company in the next phase of our development, and I am sure that his knowledge of the promotional products sector gained from his time with 4imprint as Chief Operating Officer will prove invaluable to the Dowlis Corporate Solutions Group. Having previously worked together at 4imprint Group, Martin and Craig intend to work closely to continue the growth of the Group both through the profitable development of existing businesses as well as through further acquisitions. Outlook We enter the last quarter of the year with renewed confidence, and many opportunities to deliver value to shareholders. We will explore more of the excellent business potential that exists in both of our divisions in coming months. We are confident that the initiatives in place across the Group will provide profit growth in future periods and I am pleased to report improved cash generation since the half year. Colin Cooke Chairman 27 September 2007 Dowlis Corporate Solutions plc Consolidated Income Statement (Unaudited) For the Period Ended 30 June 2007 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 restated restated £000's £000's £000's Revenue Continuing 10,415 8,216 16,125 Acquisitions 2,733 - 1,160 10,415 9,376 18,858 Operating profit Before exceptional operating charges 480 313 1,291 Exceptional operating charges - (600) (715) 480 (287) 576 Analysed between: Continuing 480 (581) (86) Acquisitions - 294 662 Interest payable and similar charges (22) (2) (16) Interest receivable 6 10 26 Profit/(Loss) on ordinary activities before 464 (279) 586 taxation Analysed between: Before exceptional operating charges 464 321 1,301 Exceptional operating charges - (600) (715) Taxation (180) 64 41 Profit/(Loss) for the period 284 (215) 627 Attributable to: Equity holders of the parent 284 (215) 627 Earnings per ordinary share p p p Basic 0.74 (0.57) 1.65 Diluted 0.74 (0.57) 1.65 Dowlis Corporate Solutions plc Consolidated Balance Sheet (Unaudited) As at 30 June 2007 30 June 30 June 31 December 2007 2006 2006 £000's £000's £000's ASSETS Non-current assets Goodwill 2,954 2,450 2,935 Intangible assets 324 - 256 Property, plant and equipment 997 834 926 4,275 3,284 4,117 Current Assets Inventories 1,718 1,295 1,684 Trade and other receivables 6,286 4,744 5,215 Current taxation recoverable 131 25 366 Cash and cash equivalents - 374 - 8,135 6,438 7,265 Total Assets 12,410 9,722 11,382 LIABILITIES Current Liabilities Borrowings 516 18 201 Trade and other payables 4,072 3,889 3,699 Current tax liabilities 834 281 765 5,422 4,188 4,665 Non Current Liabilities Borrowings 22 6 35 Provisions 147 - 147 Deferred tax liabilities 83 77 83 252 83 265 Total Liabilities 5,674 4,271 4,930 Net Assets 6,736 5,451 6,452 EQUITY Called up share capital - equity 153 151 153 Share premium account 5,293 5,135 5,293 Retained earnings 1,290 165 1,006 Total equity and reserves 6,736 5,451 6,452 Dowlis Corporate Solutions plc Consolidated Cash Flow Statement (Unaudited) For the Period Ended 30 June 2007 6 months 6 months year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000's £000's £000's Cash flows from operating activities 94 (419) (130) Cash flows from investing activities Acquisition of subsidiaries net of cash acquired (114) (655) (1,206) Purchase of intangibles (109) - - Purchase of Property, Plant & Equipment (156) (103) (716) Disposal of Property, Plant & Equipment - 15 15 Capital element of hire purchase contracts (30) (9) (19) Interest received 6 10 26 Net cash outflow from investing activities (403) (742) (1,900) Cash flows from financing activities Issue of share capital 330 Interest paid (20) (2) (14) Interest element on hire purchase contracts (2) - (2) Net cash outflow from financing activities (22) (2) 314 (Decrease) in cash in the period (331) (1,163) (1,716) Reconciliation of operating profit to net cash outflow/inflow from operating activities Operating profit/(loss) 480 (287) 576 Depreciation of Property, Plant & Equipment 85 84 242 Amortisation of intangibles 41 - 41 (Profit)/Loss on disposal of Property, Plant & - (15) 148 Equipment Decrease/(Increase) in inventories (34) (27) (395) Decrease/(Increase) in receivables (1,071) 557 129 Increase/(Decrease) in payables 429 (563) (740) Taxation (paid)/recovered 164 (168) (131) 94 (419) (130) Dowlis Corporate Solutions plc Consolidated statement of changes in equity Share Profit Share Premium and Loss Total Capital Account Account Equity £000's £000's £000's £000's Balance at 31 December 2005 150 4,966 380 5,496 Changes in Equity for first half of 2006 Loss for the period (215) (215) Shares issued 1 169 170 Balance at 30 June 2006 151 5,135 165 5,451 Share Profit Share Premium and Loss Total Capital Account Account Equity £000's £000's £000's £000's Balance at 31 December 2005 150 4,966 380 5,496 Changes in Equity for 2006 Profit for the year 626 626 Shares issued 3 327 330 Balance at 31 December 2006 153 5,293 1,006 6,452 Share Profit Share Premium and Loss Total Capital Account Account Equity £000's £000's £000's £000's Balance at 31 December 2006 153 5,293 1,006 6,452 Changes in Equity for first half of 2007 Profit for the period 284 284 Shares issued Balance at 30 June 2007 153 5,293 1,290 6,736 Dowlis Corporate Solutions plc Adoption of International Financial Reporting Standards For the Period Ended 30 June 2007 As at As at As at 31 December 30 June 01 January 2006 2006 2006 £000's £000's £000's Net assets and equity under UK GAAP 6,167 5,361 5,496 Adjustments (after taxation) IFRS 3 - Business Combinations 285 90 - Net assets and equity under IFRS 6,452 5,451 5,496 Year 6 months ended ended 31 December 30 June 2006 2006 £000's £000's Net income under UK GAAP 301 (369) Adjustments (before taxation) IFRS 3 - Business Combinations 285 90 586 (279) a) IFRS 3 - Business Combinations Goodwill used to be capitalised and amortised over its useful economic life. Under IFRS 3 - Business Combinations, goodwill which is considered to have an indefinite life, is subject to an annual impairment review. The goodwill amortised under UK GAAP has been reversed. Dowlis Corporate Solutions plc Earnings per share (Unaudited) For the Period Ended 30 June 2007 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000's £000's £000's Basic and diluted earnings 284 (215) 627 Adjustment for exceptional items - 600 715 Tax on exceptional items - (97) (214) Adjusted profit before exceptional items 284 288 1,128 p p p Basic 0.74 (0.57) 1.65 Diluted 0.74 (0.57) 1.65 Adjusted EPS 0.74 0.76 2.97 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2007 1. Basis of preparation From 1 January 2007, Dowlis Corporate Solutions plc is required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) endorsed by the European Union. The reconciliations and descriptions of the effect of the transition from UK GAAP to IFRS on the Group's equity and its income statement are provided in this interim report. The last consolidated financial statements under UK GAAP were for the year ended 31 December 2006 and the date of transition to IFRS was therefore 1 January 2006. As this is the first time the Group is reporting under IFRS there are a number of areas where judgement and estimates may have been used in order to reach the final numerical outcome. The Group has applied the recognition and measurement requirements of IFRS that will be applicable to its first IFRS financial statements. It is expected that the full financial effect of reporting under IFRS will be applied and reported in the Group's first IFRS financial statements for the year ended 31 December 2007. 2. Basis of Consolidation The interim financial statements incorporate the financial statements of the Group and its subsidiaries made up to 30 June 2007. On acquisition the assets (including identifiable intangible assets, excluding goodwill) and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. 3. Impact of IFRS on Significant Accounting Policies The interim financial statements of the Group prepared in accordance with IFRS are unaudited and do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. The Group's statutory financial statements for the year ended 31 December 2006, prepared under UK GAAP, have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 237(2) of the Companies Act 1985. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in this report. The financial statements have been prepared under the historical cost basis. The principal accounting policies considered under IFRS and their resulting treatment are set out below. i) Goodwill Goodwill arising on acquisitions before the date of transition to IFRS of 1 January 2006 has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to this date has not been reinstated. The application of IFRS 3 Business Combinations requires Goodwill to have an indefinite value and not be amortised. Instead it should be tested for impairment annually and adjusted accordingly. Therefore, the Goodwill amortised since 1 January 2006 (being the transition date) has been reversed leading to a write back of £285,000 for the year ending 31 December 2006. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTD FOR THE PERIOD ENDED 30 JUNE 2007 In June 2007 the Group purchased the assets of Poyle Promotions for a total consideration of £114,000. Under IFRS 3 this cost has been capitalised as Goodwill and will be subject to an annual impairment review. Additionally, Goodwill has been adjusted down by £95,000 being unpaid deferred consideration in relation to Aviation Gifts, an acquisition made in May 2005. ii) Intangible Assets In February 2007 the Group paid £30,000 for the Intellectual Property Rights of Advertising Products Group Limited. Under IAS 38 this payment has been included within Intangible Assets. In applying IAS 38 to development expenditure the standard requires write off unless a project is technically, commercially and financially viable. The Group's treatment of software development cost is consistent with this standard therefore no adjustment is required. iii) Share Based Payments The Group had already adopted FRS 20 for the first time last year which directly reflects the new standard IFRS 2. There were no adjustments made to the income statement due to the immaterial nature involved though full details of share option agreements in place were disclosed in the notes to the financial statements for the year ending 31 December 2006. Although there were no further issues made in the period to 30 June 2007 an announcement in early May 2007 stated the intention to issue new management options which were eventually granted on 26 July 2007. iv) Leases The majority of leases within the Group are operating leases where the risk and reward remains with the lessor. Included within operating leases are the Group's properties all of which are short term with rentals payable charged to the Income Statement on a straight line basis over the term of the relevant lease. Assets held under finance lease and hire purchase contracts are recognised as assets of the Group at their fair value, or, if lower, at the net present value of the minimum lease payments. The adoption of IAS 17 by the Group has not led to any adjustments being made between UK GAAP and IFRS. v) Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business. Sales of goods are recognised when goods are delivered and title has passed. Other revenues including fixed fee maintenance contracts are spread evenly over the term of the contract or agreement. The adoption of IAS 18 by the Group has not led to any adjustments being made between UK GAAP and IFRS. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2007 CONTD vi) Employee Benefits Under IFRS an accrual is required for holidays earned but not taken. As the Group's holiday year is coterminous with the financial year no adjustment would be required at year end though one may be required for interim purposes if material. The adoption of IAS 19 by the Group has not led to a material adjustment being made between UK GAAP and IFRS. vii) Deferred Tax Under IFRS a full provision of deferred tax liabilities is required except where it arises from disallowable amortisation of goodwill. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. The adoption of IAS 12 by the Group has not led to an adjustment being made between UK GAAP and IFRS. 4. Exceptional items Exceptional items are material items in the Income Statement which derive from events or transactions that fall within the ordinary activities of the Group and which individually or, if of a similar type, in aggregate need to be disclosed by virtue of their size or incidence if the financial statements are to give a true and fair view. This information is provided by RNS The company news service from the London Stock Exchange

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