Interim Results
Telme Group PLC
12 December 2001
TelMe Group plc
Interim Results for the Six Months Ended 30 September 2001
Highlights
* Group turnover increased by 5% despite a downturn in the economy
and the impact of the events of 11 September which badly affected the Group's
Corporate Travel and Online Services divisions in the final month of the half
year.
* Operating losses before goodwill and exceptional charges reduced
to £0.2m for the first half (2000: £0.7m).
* Cash of £0.5m was generated from operations. Cash balances at 30
November 2001 were £1.6m
* The Group announced in November 2001 the proposed disposal of its
Travel Interests for £4m in cash, together with a further possible £1m
deferred and dependent on performance criteria. This transaction is expected
to be completed during December 2001, subject to receiving shareholder
approval.
* Non-cash exceptional charges of £1.8m were taken in the period
principally to write-down the goodwill in the Group's Travel Interests
resulting in retained losses after exceptional items of £2.4m.
Commenting on the results, John Walker-Haworth, Chairman said:
'In my statement at the Group's Annual General Meeting in July 2001, I
indicated that a challenging budget had been set to achieve profitability
(that is operating profit before writing off goodwill) and that early
indications were encouraging. In the first half the operating results before
exceptional charges were marginally better than budget.
Having reviewed prospects for the second half of the year and the outcome for
the full year, however, it is now clear that the continuing effects of the
events of 11 September and the slowdown in the economy, cause us to moderate
our expectations for the second half of the year and so for the year as a
whole.
On the assumption that the sale of the Travel Interests is completed, the
Group's activities will benefit from a concentration of focus in the growing
and attractive CRM market, and the Group will have additional financial
resources to exploit the opportunities in this market.'
For further information, please contact:
TelMe.com plc
Richard Law, Finance Director 01244 657333
Weber Shandwick Square Mile
Richard Hews 0207 950 2000
Trish Featherstone
CHAIRMAN'S HALF YEAR STATEMENT
OVERVIEW
The Group's trading performance in the half year to 30 September was
influenced by a slowdown in general economic activity, which affected the
placing of new orders and meant that the rate of turnover increase achieved in
the previous full year of 20% was not attainable. Despite this, the Group's
three divisions all experienced growth. Group turnover was up by 5%, compared
to the same period last year, and operating results before exceptional charges
were marginally ahead of budget.
The travel related businesses of the Corporate Travel and Online Services
divisions made good progress in the half year but were badly affected in the
final month by the terrorist attacks of 11 September, which resulted in a
significant reduction in daily gross turnover.
In order to concentrate on its core Customer Relationship Management ('CRM')
activity and remove the exposure of the Group to the uncertainty facing the
travel industry, the Group announced in November the proposed disposal of its
Travel Interests for £4 million in cash, together with a further possible £1
million deferred and dependent on performance criteria. This disposal is
expected to be completed during December 2001, subject to receiving
shareholder approval.
The operating loss, before goodwill amortisation and exceptional charges, for
the first half was £0.2 million (2000: £0.7 million). Exceptional non-cash
charges of £1.8 million have been made to recognise impairment of goodwill in
the Group's Corporate Travel and Online Services Divisions. After goodwill
amortisation and exceptional charges the retained loss of the Group was £2.4
million.
In the six months to September 2001 the Group generated a cash inflow from
operations of £0.5 million. The cash balance at 30 November 2001 was £1.6
million.
CRM DIVISION
The renewal of annual software contracts remained strong during the period and
turnover increased slightly when compared to the first half of last year.
This division, which derives a substantial proportion of its revenue from high
value service contracts, however, experienced a slowdown in the closing of new
orders during the half year as a result of some companies cutting back on new
services expenditure they felt able to defer.
The cost of operational sales and support resource which had been added to
exploit the promising market of a year ago, when taken together with the
slowdown in the rate of sales growth, resulted in an operating loss in the
half year of £0.2 million (2000: £0.3 million profit). Action to realign
resource in line with current market conditions has been taken and the
prospects for the second half are positive.
ONLINE SERVICES DIVISION
The Online Services division performed ahead of last year with sales 4% higher
and incurred reduced operating costs. Adjusting for exceptional marketing
launch costs of £0.5 million incurred in the first half of last year, the
like-for-like operating loss before exceptional charges reduced from £0.7
million to £0.4 million.
CORPORATE TRAVEL DIVISION
The Corporate Travel division performed ahead of target to produce turnover up
by 14% in the half year. Operating profit before exceptional charges
increased from £0.2 million to £0.3 million as a result of increased turnover
and commissions receivable from airlines associated with meeting sales
targets.
REDUCTION OF CAPITAL
The reduction of capital to simplify the capital structure of the business,
which was approved by shareholders at the AGM in July, is expected to be
finalised in the second half of the year.
PROSPECTS
In my statement at the Group's Annual General Meeting in July 2001, I
indicated that a challenging budget had been set to achieve profitability
(that is operating profit before writing off goodwill) and that early
indications were encouraging. In the first half the operating results before
exceptional charges were marginally better than budget.
Having reviewed prospects for the second half of the year and the outcome for
the full year, however, it is now clear that the continuing effects of the
events of 11 September and the slowdown in the economy, cause us to moderate
our expectations for the second half of the year and so for the year as a
whole.
On the assumption that the sale of the Travel Interests is completed, the
Group's activities will benefit from a concentration of focus in the growing
and attractive CRM market, and the Group will have additional financial
resources to exploit the opportunities in this market.
John Walker-Haworth
Chairman
11 December 2001
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 September 2001
Continuing Exceptional Continuing
Operations items Operations
before after
exceptional Note 4 exceptional
items items
Unaudited Unaudited Unaudited Unaudited Audited
6 Months to 6 Months to 6 Months to 6 Months Year to
to
30 September 30 30 September 30 31 March
September September
2001 2001 2001 2000 2001
£'000 £'000 £'000 £'000 £'000
Note
Gross sales 3
Customer 5,231 - 5,231 5,207 11,081
Relationship
Management
Online 4,593 - 4,593 3,484 7,240
Services
Corporate 26,034 - 26,034 25,534 52,876
Travel
---------- ---------- ---------- ---------- ----------
35,858 - 35,858 34,225 71,197
---------- ---------- ---------- ---------- ----------
Turnover 3
Customer 5,231 - 5,231 5,207 11,081
Relationship
Management
Online 1,120 - 1,120 1,076 2,133
Services
Corporate 2,517 - 2,517 2,142 4,875
Travel
---------- ---------- ---------- ---------- ----------
8,868 - 8,868 8,425 18,089
Cost of sales (1,710) - (1,710) (1,840) (3,693)
---------- ---------- ---------- ---------- ----------
Gross profit 7,158 - 7,158 6,585 14,396
Other
operating
expenses
(excluding
goodwill (7,397) (1,846) (9,243) (7,309) (15,827)
amortisation)
Goodwill 5 (335) - (335) (319) (654)
amortisation
---------- ---------- ---------- ---------- ----------
Operating
(loss) /
profit
Customer (216) - (216) 343 655
Relationship
Management
Online (369) (178) (547) (1,234) (2,115)
Services
Corporate 283 (1,586) (1,303) 159 333
Travel
Central costs (272) (82) (354) (311) (958)
---------- ---------- ---------- ---------- ----------
6 (574) (1,846) (2,420) (1,043) (2,085)
Interest 9 18 2
receivable
less payable
---------- ---------- ----------
Loss on
ordinary
activities
before
taxation (2,411) (1,025) (2,083)
Taxation 1 - -
---------- ---------- ----------
Loss on
ordinary
activities
after
taxation (2,410) (1,025) (2,083)
Dividend - - -
---------- ---------- ----------
Amount (2,410) (1,025) (2,083)
transferred
from reserves
---------- ---------- ----------
Loss per 2.5p 7 (3.0) (1.4) (2.8)
ordinary
share (pence)
---------- ---------- ----------
Loss per 2.5p
ordinary
share (pence)
-
diluted 7 (3.0) (1.4) (2.8)
Adjusted loss ---------- ---------- ----------
per 2.5p
ordinary
share
(pence) - ---------- ---------- ----------
before
goodwill
amortisation
and operating 7 (0.3) (1.0) (1.1)
exceptional
items
---------- ---------- ----------
CONSOLIDATED BALANCE SHEET
As at 30 September 2001
Unaudited Unaudited Audited
Note 30 30 31 March
September September
2001 2000 2001
£'000 £'000 £'000
Fixed assets
Intangible assets 9,422 12,017 11,602
Tangible assets 1,783 2,150 1,848
---------- ---------- ----------
11,205 14,167 13,450
---------- ---------- ----------
Current assets
Stocks 1 1 1
Debtors 7,970 7,855 7,744
Cash and short term deposits 1,593 2,983 1,786
---------- ---------- ----------
9,564 10,839 9,531
Creditors : amounts falling due within (7,780) (8,465) (7,534)
one year
---------- ---------- ----------
Net current assets 1,784 2,374 1,997
---------- ---------- ----------
Total assets less current liabilities 12,989 16,541 15,447
Creditors : amounts due in more than (310) (393) (358)
one year
---------- ---------- ----------
12,679 16,148 15,089
---------- ---------- ----------
Capital and reserves
Called up share capital 1,991 1,959 1,991
Share premium account 31,219 34,443 31,219
Merger reserve 11,526 7,757 11,526
Shares not yet issued - 578 -
Profit and loss account (32,057) (28,589) (29,647)
---------- ---------- ----------
12,679 16,148 15,089
---------- ---------- ----------
CONSOLIDATED CASHFLOW STATEMENT
For the six months ended 30 September 2001
Note Unaudited Unaudited Audited
6 Months 6 Months Year to
to to
30 30 31 March
September September
2001 2000 2001
£'000 £'000 £'000
Net cash inflow/(outflow) from operating ---------- ---------- ----------
activities 6(a) 466 (1,002) (673)
---------- ---------- ----------
Returns on investments and servicing of
finance
Interest received 24 93 151
Interest paid (14) (72) (140)
Interest element of finance lease rental - (3) (4)
payments
---------- ---------- ----------
10 18 7
---------- ---------- ----------
Taxation
Corporation tax paid - (8) (6)
---------- ---------- ----------
Capital expenditure and financial
investment
Payments to acquire tangible fixed (264) (243) (520)
assets
Receipts from the sale of tangible fixed 38 3 43
assets
---------- ---------- ----------
(226) (240) (477)
---------- ---------- ----------
Acquisitions and disposals
Acquisition of subsidiary undertakings - (22) (22)
---------- ---------- ----------
Cash inflow/(outflow) before use of ---------- ---------- ----------
liquid
resources and financing 250 (1,254) (1,171)
---------- ---------- ----------
Management of liquid resources
Cash withdrawn from short term deposits (4) 18 13
---------- ---------- ----------
Financing
Repayment of capital element of finance
leases
and loans (61) (69) (132)
---------- ---------- ----------
Increase/(decrease) in cash 6(b) 185 (1,305) (1,290)
---------- ---------- ----------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The interim financial statements are prepared on the basis of the accounting
policies set out in the annual report and accounts for the year ended 31
March 2001 except for the adoption of FRS 19 which requires deferred tax to
be recognised as a liability or asset if transactions or events that give
the entity an obligation to pay more tax in the future or a right to pay
less tax in the future have occurred by the balance sheet date. Previously,
deferred tax was provided using the partial provision method under SSAP 15.
There has been no impact of adopting FRS 19. Note that under FRS 19,
deferred tax assets are recognised to the extent that, on the basis of all
available evidence, it can be regarded as more likely than not that there
will be suitable taxable profits from which the reversal of the underlying
timing differences can be deducted.
2. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the full preceding year is based on the
statutory accounts for the financial year ended 31 March 2001. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
3. GROSS SALES
Gross sales represents the value of goods and services invoiced to customers
exclusive of value added tax. This additional disclosure is included to
illustrate the impact on the value of amounts invoiced to customers of
bought in services from airlines and other operators which are charged on to
customers by the Corporate Travel and Online Services divisions. Turnover
for the Corporate Travel and Online Services divisions represents commission
relating to bought in services invoiced out to customers.
4. EXCEPTIONAL COSTS
Included in other operating expenses are exceptional costs which can be
analysed as follows:
Unaudited Unaudited Audited
6 Months 6 Months Year to
30 30 31 March
September September
2001 2000 2001
£'000 £'000 £'000
Impairment of the Prenton site 50 -
arising through closure 149
Write-off of assets no longer used at - - 131
the Prenton site
Provision for redundancy and other
closure costs at the
Prenton site 32 - 69
Costs of aborted acquisition - - 250
Impairment of goodwill on travel 1,764 - -
related businesses
---------- ---------- ----------
1,846 - 599
---------- ---------- ----------
5. GOODWILL AMORTISATION
Unaudited Unaudited Audited
6 Months 6 Months Year to
to to
30 30 31 March
September September
2001 2000 2001
£'000 £'000 £'000
Customer Relationship Management (224) (208) (433)
Online Services (21) (21) (42)
Corporate Travel (90) (90) (179)
---------- ---------- ----------
(335) (319) (654)
---------- ---------- ----------
NOTES TO THE INTERIM FINANCIAL STATEMENTS continued
6. OPERATING LOSS
a) Reconciliation of operating loss to operating cash flows
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
2001 2000 2001
£'000 £'000 £'000
Operating loss (2,420) (1,043) (2,085)
Depreciation 240 271 662
Amortisation of intangible fixed assets 80 80 160
Provision against tangible fixed assets 50 - 149
Goodwill amortisation 335 319 654
Impairment of goodwill 1,764 - -
(Profit)/loss on disposal of fixed 1 (3) (4)
assets
Increase in debtors (226) (1,106) (997)
Increase in creditors 642 480 788
---------- ---------- ----------
466 (1,002) (673)
---------- ---------- ----------
b) Reconciliation of net cashflow to movement in net funds
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
2001 2000 2001
£'000 £'000 £'000
At the beginning of the period 939 2,110 2,110
Decrease in debt 61 69 132
Increase/(decrease) in cash 185 (1,305) (1,290)
Movement in short term deposits with 4 (18) (13)
banks
---------- ---------- ----------
At the end of the period 1,189 856 939
---------- ---------- ----------
c) Analysis of net funds
At 31 March Cashflow At 30
September
2001 Six Months 2001
£'000 £'000 £'000
Cash 1,593 (198) 1,395
Bank overdraft (476) 383 (93)
---------- ---------- ----------
1,117 185 1,302
Short term deposits 193 4 197
---------- ---------- ----------
1,310 189 1,499
Finance leases (19) 19 -
Loans (352) 42 (310)
---------- ---------- ----------
939 250 1,189
---------- ---------- ----------
NOTES TO THE INTERIM FINANCIAL STATEMENTS continued
7. EARNINGS PER SHARE
Earnings per share has been calculated in accordance with Financial Reporting
Standard 14 by reference to the following;
Unaudited 6 Months Unaudited 6 Months Audited Year to
to 30 September to 30 September 31 March
2001 2000 2001
Pence £'000 Pence £'000 Pence £'000
Loss after (3.0) (2,410) (1.4) (1,025) (2.8) (2,083)
taxation
Add operating 2.3 1,846 - - 0.8 599
exceptional
items
Add goodwill 0.4 335 0.4 319 0.9 654
amortisation
--------- --------- --------- --------- --------- ---------
Adjusted loss (0.3) (229) (1.0) (706) (1.1) (830)
after taxation
--------- --------- --------- --------- --------- ---------
Weighted average
number of shares 79,665,527 72,360,140 75,710,981
in issue
Diluted weighted
average number
of shares in
issue - - -
--------- --------- ---------
79,665,527 72,360,140 75,710,981
--------- --------- ---------
INDEPENDENT REVIEW REPORT TO TELME GROUP PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2001 which comprises the Consolidated Profit
and Loss Account, Consolidated Balance Sheet, the Consolidated Cash Flow
Statement and the related notes 1 to 7. We have read the other information
contained in the interim report and considered whether it contains any
apparent misstatements or material inconsistencies with the financial
information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the
Listing Rules of the Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed
in accordance with United Kingdom Auditing Standards and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an
audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2001.
Ernst & Young LLP
Manchester
11 December 2001
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