RNS Number:6698I
Transcomm PLC
13 March 2003
FOR IMMEDIATE RELEASE 13 MARCH 2003
TRANSCOMM PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
Transcomm plc ("Transcomm"), the wireless data network services group, announces
its audited preliminary results for the year ended 31 December 2002.
KEY POINTS:
* Profitability and cash generation at an operating level for the full year;
* The results for the year were:
Turnover #13.8m (2001 : #15.7m)
Operating Profit* # 0.8m (2001 : Loss #(4.3)m)
EBITDA** # 1.7m (2001 : Loss #(3.6)m)
Earnings per share* 0.72p (2001 : Loss (4.23)p)
*Before exceptional costs and amortisation of goodwill.
**Before exceptional costs
* Subscriber growth of 14.5% (2001: 19.3%)
* Cash generated from operating activities #1.3m (2001: #(1.0)m)
* Operating exceptional items of #0.4m (2001: #nil)
* New business secured with Securicor and Sainsbury's
* Investment in network upgrade of #1.1m in 2003
On future prospects, Chairman, Rod Matthews MBE stated:
"Continued focus on those market sectors that require high levels of wireless
data integrity together with enhanced cash generation and a stronger balance
sheet, places us in a strong position to further build on the successes of 2002.
The implementation of our network upgrade will enable us to reduce our cost base
further whilst achieving even higher standards of network integrity. These
initiatives will further improve operating efficiencies and provide a platform
from which both organic and non organic growth and development can be achieved."
FOR FURTHER INFORMATION, PLEASE CONTACT:
Transcomm: 0208 9909090
www.transcomm.uk.com
Rod Matthews, Chairman
Andrew Carver, Chief Executive
Russell Backhouse, Finance Director
ISSUED BY:
Marshall Robinson Roe: 020 7489 2033
Richard Robinson
Chairman's Statement
Introduction
I am very pleased to announce our results for the year ended 31 December 2002,
which reflect the benefits of the strategic review of our business undertaken
during 2001 and the resulting actions.
The strategic review concluded that we needed to:
* rationalise our business by disposing of non-performing entities;
* clarify our strategy to ensure complimentary activities to our
partners;
* increase our focus in market segments where our key strengths could be
exploited.
The Board anticipated that implementing these changes would lead to Transcomm
trading profitably by December 2001. This was achieved, and through 2002 the
Company has continued to deliver operating profits despite an increase in
competitive pricing pressure and the continued caution affecting the telecoms
sector.
Having made this progress it was appropriate to make a number of management
changes, and in particular to appoint a new Chief Executive Officer, so that we
could energetically deliver the more sales and marketing and customer orientated
strategy adopted.
In August 2002 Andrew Carver was appointed to steward the business through a new
phase of growth and development. After a period of handover, and the departure
of Andrew Fitton and Richard Pullin earlier this year, our management changes
are now complete. I wish to thank them both for their contribution to the
Company.
It is testimony to the major turnaround achieved that we have been able to
absorb the costs of these management changes, whilst delivering the first
profitable year in the history of the Company.
We now have an excellent foundation on which to build, and a management team
well matched to meet our needs. We intend to further refine our sales focus to
those market sectors where the high service levels and reliability of our
wireless data solutions are most closely aligned to our customers' requirements.
Our offerings and knowledge of our customer needs will be increasingly
complemented by our chosen partners' products, expertise and relationships.
The changes in the Company represent a major transformation from its historical
loss-making position.
Results
Our business has achieved profitability at the operating level for the full year
and for the first time in recent history the Group has been able to report
positive earnings per share.
Group revenue for the year ended 31 December 2002 was #13.83m, (2001: #15.67m).
Group revenues reflect #1.03m in relation to retention monies secured following
the successful implementation of the field service application to General
Domestic Appliances.
After operating expenses totalling #6.77m (2001: #10.25m), an operating profit
before operating exceptional items of #0.43m (2001: #(5.06m)) resulted.
Part of the Group's office space continues to remain vacant and provision has
been made in respect of costs to reflect the obligations associated with this
unused accommodation. In addition, provision has been made to reflect the doubt
surrounding the Group's ability to recover a leasing receivable, which had been
outstanding for some considerable time. These provisions, together with the
appointment costs relating to Andrew Carver have been reflected as operating
exceptional items totalling #0.36m, further details of which are shown in note
2.
After operating exceptional items, an operating profit for the year of #0.08m
results, a significant improvement to the operating loss of #(5.06)m reported
for 2001. After financing charges, the Group reported retained earnings of
#0.03m (2001: #(11.09)m) and adjusted earnings per share of 0.72p (2001: (4.23)
p).
As anticipated, the cash generation in the business improved during the latter
part of the year, once the cash outflows associated with the reorganisation
totalling #1.28m had been discharged.
Operations
During the course of the year the business has continued to develop its reseller
channels and reinforce its market position as a leading provider of business
critical, wireless data services. The Group's core network service revenue
streams accounted for #11.34m of turnover (2001: #10.71m) representing growth of
core network services of 6%.
The advent of low cost GPRS data services offered over voice-based, mobile phone
networks has introduced some uncertainty and severe price-based competition into
the market. However, it is already clear that the lack of service level
agreements and the variable performance of GPRS services inhibit their ability
to compete with Transcomm in many of our core sectors.
During the year the business secured new contracts with Securicor and TNT
Hagermayer. New business was won through reseller channels with Sainsbury's,
Woolworths and New Look. Significant additions were also made to the network by
existing resellers, Isotrak in the logistics sector and Schlumberger Sema for
pay & display machines. For the year, network service revenues derived through
our reseller channels totalled #2.59m a growth of 40% over 2001.
As we reported in January, the Group lost a significant contract with United
Parcel Services at the end of 2002, which resulted in a reported churn figure of
the year of 11.7% (2001:11.5%). Whilst this loss, largely driven by our
inability to offer an international solution, will impact revenues during 2003,
our churn result continues to fair significantly better than that of the mobile
phone operators. Without this loss reported churn would have been at a rate of
less than 0.7% per month.
Connections to our network grew by 15% during the year (2001: 19%), with data
volumes per unit rising steadily as dependency on our services increases. With
ever changing customer needs, new methods by which our customers connect to our
network via Internet gateways and the security of those connections have been
introduced.
2003 Plans
The foundation is now in place to allow the Board to focus on further enhancing
cash generation during 2003 in order to substantially reduce Transcomms
borrowing requirements by the end of the year. With network integrity continuing
to remain a high priority for the Group, we have committed to upgrading our
network platform during the course of 2003, and the Group is now in a position
to afford this and thus to deliver further on-going reductions in operating
expenditure. For our customers, this commitment will help us to provide a
greater level of network integrity and significantly reduce the time to recovery
in the event of network failure.
The recent restructuring of our organisation and tighter sales focus in the
latter half of 2002 has strengthened our position in markets requiring the
unique benefits of our service and reduced our dependency on those areas subject
to greater price pressures. During 2003 the fruits of these changes should
become apparent.
We will further refine our overhead base whilst continuing to align our
resources to support greater penetration of existing markets and the
exploitation of specific market segments that will benefit from our unique
capabilities. The emergency services sector remains a key area of focus. We are
working, in conjunction with our partners, with a number of police forces, on
contracts which will contribute significantly to our business's earnings this
year and for several years to come. We have also identified new market
opportunities in sectors that include financial transactions, mobile payment and
pay-and-display machine managementwhere we are already seeing early signs of
success.
Prospects
Continued focus on those market sectors that require high levels of wireless
data integrity together with enhanced cash generation and a stronger balance
sheet, place us in a strong position to further build on the successes of 2002.
The implementation of our network upgrade will enable us to reduce our cost base
further whilst achieving even higher standards of network integrity. These
initiatives will further improve operating efficiencies and provide a platform
from which both organic and non-organic growth and development can be achieved.
R A Matthews MBE
Chairman 13 March 2003
Consolidated Profit and Loss Account
For the year ended 31 December 2002
Note Year ended Year ended
31 December 31 December
2002 2001
# #
Group turnover
- Continuing operations 1.1 13,827,297 15,669,742
EBITDA before exceptional items
- Continuing operations 1.2 1,724,773 (3,568,308)
1,724,773 (3,568,308)
Depreciation (940,519) (775,154)
Amortisation of capitalised goodwill (349,350) (711,691)
Operating profit/(loss) before operating exceptional 434,904 (5,055,153)
items
Operating exceptional items 2 (359,679) -
Total operating profit/(loss) - continuing operations 75,225 (5,055,153)
Exceptional write down of goodwill - continuing operations - (3,562,134)
Exceptional costs of fundamental reorganisation
- continuing operations - (2,510,423)
75,225 (11,127,710)
Net interest (41,904) 41,788
Profit/(loss) on ordinary activities before taxation 33,321 (11,085,922)
Taxation - -
Retained profit/(loss) for the financial year 33,321 (11,085,922)
Earnings per share 3 Pence Pence
- Basic profit/(loss) per share 0.03 (10.90)
- Adjusted basic profit/(loss) per share 0.72 (4.23)
- Diluted profit/(loss) per share 0.03 (10.15)
There were no recognised gains or losses other than the profit/(losses) for the
periods shown above.
Consolidated Balance Sheet
At 31 December 2002
Note 31 December 2002 31 December 2001
# # # #
Fixed assets
Intangible fixed assets 2,620,123 2,969,473
Tangible fixed assets 4,547,483 5,107,202
7,167,606 8,076,675
Current assets
Stocks 524,272 834,757
Debtors 4,510,997 5,036,030
Cash at bank and in hand 93,466 470,593
5,128,735 6,341,380
Creditors: Amounts falling due
within one year (4,686,549) (5,755,317)
Net current assets 442,186 586,063
Total assets less current
liabilities 7,609,792 8,662,738
Creditors: Amounts falling due
after more than one year (34,970) (86,625)
Provisions for liabilities and
charges 4 (235,274) (1,392,633)
Net assets 7,339,548 7,183,480
Capital and reserves
Called up share capital 5,141,004 5,104,363
Share premium account 5 17,059,625 16,973,519
Merger reserve 5 4,412,191 4,412,191
Profit and loss account 5 (19,273,272) (19,306,593)
Equity shareholders' funds 7,339,548 7,183,480
Consolidated Cash Flow Statement
For the year ended 31 December 2002
Note Year ended Year ended
31 December 2002 31 December 2001
# # # #
Net cash inflow/(outflow) from
operating activities 7(ii) 1,281,458 (999,654)
Servicing Finance
Interest received 31,399 95,568
Interest paid (46,553) (2,802)
Loan stock interest paid (4,088) (9,900)
Interest element of finance
lease rentals (13,955) (34,680)
Other interest paid (8,707) (6,398)
(41,904) 41,788
Tax paid - -
Capital expenditure
Purchase of tangible fixed (451,193) (1,002,888)
assets
Sale of tangible fixed assets 80,962 22,256
(370,231) (980,632)
Acquisitions and disposals
Exceptional costs of
reorganisation (1,275,349) (1,092,644)
(1,275,349) (1,092,644)
Financing
Issue of share capital - 16,150
Costs of issue of share capital - (40,143)
Redemption of loan notes (44,000) (172,000)
Hire purchase and finance lease
obligations (112,923) (203,298)
(156,923) (399,291)
Decrease in cash (562,949) (3,430,433)
Reconciliation's of Movements in Shareholders' Funds
For the year ended 31 December 2002
Group Company
Note 31 December 31 December 31 December 31 December
2002 2001 2002 2001
# # # #
Retained profit/(loss)
for the financial year 33,321 (11,085,922) (697,434) (11,713,123)
New share capital 122,747 251,972 122,747 251,972
subscribed
Net addition/(reduction)
to shareholders' funds 156,068 (10,833,950) (574,687) (11,461,151)
Opening shareholders' 7,183,480 18,017,430 12,166,539 23,627,690
funds
Closing shareholders' 7,339,548 7,183,480 11,591,852 12,166,539
funds
Notes to the Financial Statements
Statement of Accounting Policies
Basis of accounting
The Consolidated financial statements have been prepared in accordance with
applicable accounting standards and conform with generally accepted accounting
principles in the United Kingdom ("UK GAAP").
During the financial year the Group has adopted Financial Reporting Standard 18
"Accounting Policies" and Financial Reporting Standard 19, "Deferred tax",
issued by the Accounting Standards Board. As a result, deferred tax is now
stated on a full liability basis. There was no impact of adopting FRS 19.
Adoption of this Financial Reporting Standard has not required any re-statement
of prior year comparatives.
1 Segmental analysis
1.1 Turnover
During the year, the Group operated substantially one class of business, the
supply of wireless data services and products.
Year ended Year ended
31 December 2002 31 December 2001
# #
Continuing Operations
Wireless data services and
products 13,827,297 15,669,742
1.2 Operating profit/(loss) after operating exceptional items
Year ended Year ended
31 December 2002 31 December 2001
# #
Group turnover - continuing operations
Wireless data services & products 13,827,297 15,669,742
Cost of sales
Wireless data services & products (6,617,552) (10,476,337)
Gross profit 7,209,745 5,193,405
Sales and marketing (1,683,053) (2,681,084)
Administration (5,451,467) (7,567,474)
Operating profit/(loss) after operating 75,225 (5,055,153)
exceptional items
2 Operating exceptional items
Operating exceptional costs incurred during the year relate to the following:
Year ended
31 December 2002
#
Management recruitment costs 82,474
Provision for onerous contract 159,215
Vacant property provision 117,990
359,679
Management recruitment costs relate to the recruitment fees associated with the
appointment of A Carver as Chief Executive of the Group.
The provision for onerous contract relates to the write down of a leasing
receivable which the Group had failed to recover during the year.
A further provision for rent and associated costs has been made in respect of
part of the Group's vacant property at West Drayton.
3 Earnings per share
Weighted average number of shares in issue during the year and used to
calculate:
Year ended Year ended
31 December 2002 31 December 2001
Number Number
Basic and adjusted basic earnings
per share 102,735,759 101,750,746
Dilutive effect of share options 4,208,017 7,507,415
Diluted earnings per share 106,943,776 109,258,161
Year ended Pence per Year ended Pence per
31 December share 31 December share
2002 2001
# #
Basic earnings per share 33,321 0.03 (11,085,922) (10.90)
Goodwill amortisation and
impairment 349,350 0.34 4,273,825 4.20
Operating Exceptional items 359,679 0.35 2,510,423 2.47
Adjusted basic earnings per 742,350 0.72 (4,301,674) (4.23)
share
3 Earnings per share - continued
Earnings for basic earnings per share represents the net profit attributable to
ordinary shareholders, being the profit on ordinary activities after taxation,
and has also been used to calculate diluted earnings per share. Adjusted basic
earnings per share has been presented in order to highlight the underlying
performance of the Group.
4 Provisions for Liabilities and Charges
Reorganisation Deferred
Provision Taxation
# #
At 1 January 2002 1,392,633 -
Additions - onerous contracts 117,990
Amounts used and written back (1,275,349) -
At 31 December 2002 235,274 -
At 31 December 2002, part of the Group's office premises remained vacant
following the reorganisation during 2001. As such an additional provision of
#117,990 has been made to reflect the rental and associated costs of this
onerous contract.
At 31 December 2002, tax losses available to the Group exceeded #89m. On the
basis of the profitability of the Group achieved during 2002 it is not expected
that these losses will be relieved in the short term and as such the
recoverability of the resultant deferred tax asset remains relatively uncertain.
As such it is not considered appropriate to recognise a deferred tax asset at
31 December 2002.
5 Reserves
Group Share Profit
Premium Merger and loss
Account Reserve account
# # #
At 1 January 2002 16,973,519 4,412,191 (19,306,593)
Premium on shares issued during
the year 86,106 - -
Retained profit for the year - - 33,321
At 31 December 2002 17,059,625 4,412,191 (19,273,272)
On 12 February 2002, 732,822 Ordinary shares of 5p were issued as part of a
supply agreement with Communication Network Interface, Inc. dated 7 March 2001
at a premium of 11.75p per share. The issue of shares represents part payment
in respect of a deposit for the supply of hand held devices.
6 Capital Commitments
At 31 December 2002, the Group had entered in to a commitment with Ericsson AB
for the upgrade of its Mobitex network operating platform. The agreement
provides for this upgrade to be undertaken during 2003 for a sum of $1.9m
(approx #1.1m) payable over three years commencing July 2003. No provision has
been made in the financial statements for the Group or the Company at the 31
December 2002 in respect of this agreement.
7 Notes to the Cash Flow Statement
(i) Reconciliation to Net Funds
31 December 2002 31 December 2001
# #
Decrease in cash in the year (562,949) (3,430,433)
Decrease in debt and lease financing 156,923 375,298
Change in net debt from cash flows and movement in debt
in the year (406,026) (3,055,135)
Net funds at 31 December 2001 222,654 3,277,789
Net (debt)/funds at 31 December 2002 (183,372) 222,654
(ii) Net Cash Outflow From Operating Activities 31 December 2002 31 December 2001
# #
Operating profit/(loss) before exceptional items 434,904 (5,055,153)
Depreciation and amortisation 1,289,869 1,486,845
(Profit)/loss of sale of tangible fixed assets (10,568) 20,941
Decrease in stocks 310,485 1,708,615
Decrease in debtors 295,762 846,173
(Decrease) in creditors (1,038,994) (7,075)
Net cash inflow/(outflow) from operating activities 1,281,458 (999,654)
(iii) Analysis of Net Funds
31 December Cash Flow 31
2001 December 2002
# # #
Cash at bank and in hand 470,593 (377,127) 93,466
Bank overdraft - (185,822) (185,822)
(562,949)
Loan notes due within one year (44,000) 44,000 -
Finance leases (203,939) 112,923 (91,016)
222,654 (406,026) (183,372)
8 Subsequent Events
On 10 January and 31 January 2003 respectively, A Fitton and R Pullin resigned
as directors of both the parent company and subsidiary undertakings. According
to the terms of their service contracts #nil and #120,750 are to be paid
respectively to these directors.
9 Annual Report
The annual report will be posted to shareholders on 14 March 2003 and copies
will be available from: The Company Secretary, Transcomm plc, Heathrow
Boulevard, 280 Bath Road, West Drayton, Middlesex UB7 0DQ.
10 Annual General Meeting
The Annual General Meeting of Transcomm plc will be held at 280 Bath Road, West
Drayton, Middlesex, UB7 0DQ on 15 April 2003.
END
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