RNS Number:7989N
Lorien PLC
22 July 2003
22 July 2003
Lorien plc
Interim announcement for the six months to 31 May 2003
Chairman's statement
Overview
At the time we announced our results for the year ended 30 November 2002, I
stated that the slowdown in the technology sector and the increasing level of
political and economic uncertainty had combined to create the most challenging
business environment for over a decade.
Although the political position has improved somewhat in the intervening period,
the economic environment both globally and in Europe remains uncertain. These
conditions have undoubtedly had an impact on most businesses particularly in the
IT sector which is witnessing a recession within a recession. Inevitably, the
performance of our IT Resourcing business has not been immune to these
conditions.
Our Specialist Services businesses have, however, delivered a very robust
performance supporting the Board's view that we have a balanced portfolio of
businesses which spreads the risk and should improve returns over time.
For the six months to 31 May 2003, turnover and profit before taxation on
continuing operations decreased to #44.5m (2002: #58.5m) and #0.2m (2002: #1.3m)
respectively. Profit before taxation for the current period comprised a loss
before taxation of #0.1m in the first quarter and a profit before taxation of
#0.3m in the second quarter.
Underlying earnings per share fell to 0.4p in 2003 compared to 5.0p in 2002.
Net assets at 31 May 2003 stood at #9.5m compared with #10.0m at 30 November
2002.
Cash inflow for the six months was #0.2m (2002: cash outflow #0.5m) after
repaying invoice discounting borrowings of #2.9m (2002: #5.2m).
Trading Summary
Resourcing
In our Resourcing business the results reflect the reduction in activity levels,
contractor pay rates and margins seen throughout last year. Despite the
year-on-year decline, I am pleased to report that the stability we had seen in
the first two months of 2003 has continued with activity levels constant for the
period.
The Board recognises we are much more likely to see the challenging business
environment for Resourcing continue than to see an imminent recovery. The
combination of a reduction in demand and excess in the supply side continues to
exert significant pressure on rates and margins. To combat these trends the
Board has launched a series of initiatives aimed at remaining competitive on
cost whilst differentiating ourselves on quality and service in higher-value
offerings. We have invested #0.3m in the development of such services in the
past six months.
Overall performance for Resourcing shows revenues and gross margin down to
#37.0m (2002: #51.2m) and #4.1m (2002: #5.9m). Contribution to Central costs
fell from #2.6m in 2002 to #1.3m in 2003 (including investment costs).
Specialist Services
Our Specialist Services division operates in different markets and with a
different business profile to the Resourcing business. Although neither market
research nor engineering design have seen increased demand in the period, strong
partnership relationships with our customers have enabled the businesses to
improve performance relative to 2002.
As I mentioned in February, a material investment has been made aiming at
widening the division's customer base. This has resulted in the development of a
strong pipeline of new prospects. The management team are working to convert
these prospects into new business and the Board considers it should not be long
before we see the benefits of this investment.
Overall performance for Specialist Services was positive showing revenues and
gross margin both increasing to #7.5m (#7.3m) and #2.4m (#2.2m) respectively.
Contribution to central costs increased to #1.6m from #1.5m in 2002.
Administrative expenses
We continue to differentiate between direct administrative costs (those which
are wholly attributable to specific business units) and indirect (Central)
administrative costs (property, depreciation, IT infrastructure, finance, human
resources, legal and professional services and administration).
Administrative expenses have decreased in the six months to 31 May 2003 to #6.4m
(direct: #3.8m; central: #2.6m) from #7.2m (direct: #4.2m; central #3.0m) in
2002. As a proportion of revenues this represents an increase to 14.4% from 11.9
% in 2002. The ratio increased as a result of reducing revenues with limited
opportunity to further eliminate costs.
Balance Sheet
The Group's net asset base at 31 May 2003 decreased to #9.5m. The decrease
comprises the profit for the period of #0.1m, offset by charges to reserves of
#0.2m in respect of the purchase of own shares for cancellation and #0.3m in
respect of shares to be issued under the Long-Term Incentive Plan.
Cash Flow
In the six months to 31 May 2003 cash inflow was #0.2m (2002: cash outflow of
#0.5m) after reducing invoice discounting borrowings by #2.9m (2002: #5.2m) and
repurchasing shares for cancellation for #0.2m (2002: #nil). Total bank and
invoice discounting borrowings at 31 May 2003 were significantly reduced to
#1.4m compared to #4.3m at 30 November 2002. This reduction is in part the
result of reduced activity levels and in part the result of the receipt of #2.5m
of deferred consideration from the sale of our consulting operations.
Personnel
2003 has seen the continuation of a very difficult market for the Company. Our
employees have responded admirably to this challenge and I would like to express
my sincere appreciation to them.
Dividend
The Board is not recommending an interim dividend for the six months to 31 May
2003 (2002: Nil).
Conclusion and Outlook
In February, I concluded that there is a point where cost control can no longer
deliver enhanced returns year-on-year and that it would remain a challenge to
maintain 2003 performance at the levels achieved in 2002. The views we
expressed have proved to be accurate.
The immediate challenge for us is to enhance our market share in the sectors in
which we operate. The actions we have taken to re-focus our Resourcing business
and widen the customer base in Specialist Services are aimed to achieve this.
These initiatives are taking longer as a consequence of the challenging
conditions in which we operate. However, we have prospects in both divisions
which I view as encouraging.
Bert Morris
Executive Chairman
22 July 2003
For further information, please contact:
Lorien plc
Bert Morris, Executive Chairman 020 7282 2000 (until 10.30am today)
Christopher Hinton, Group Finance Director 0161 888 2503 (thereafter)
Citigate Dewe Rogerson 020 7638 9571
Patrick Toyne Sewell
Lorien plc
Consolidated profit and loss account
for the 6 months ended 31 May 2003
Note 6 months 6 months Year
ended ended ended
31 May 31 May 30 November
2003 2002 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Turnover
Continuing operations 44,503 58,545 111,684
Discontinued operations - 1,904 1,904
2 44,503 60,449 113,588
Cost of sales (37,999) (51,835) (97,076)
Gross profit 6,504 8,614 16,512
Administrative expenses (6,372) (7,247) (13,875)
Operating profit/(loss)
Continuing operations 132 1,475 2,714
Discontinued operations - (108) (77)
132 1,367 2,637
Loss on disposal of discontinued operations 3 - (7,500) (7,500)
Profit/(loss) on ordinary activities before
interest 132 (6,133) (4,863)
and taxation
Net interest receivable/(payable) and similar 72 (213) (315)
income/(charges)
Profit/(loss) on ordinary activities before 2 204 (6,346) (5,178)
taxation
Taxation 4 (138) (346) (701)
Profit/(loss) on ordinary activities after 66 (6,692) (5,879)
taxation
Dividends 5 - - -
Retained profit/(deficit) for the period 66 (6,692) (5,879)
Earnings/(loss) per ordinary share 6 0.4 p (36.8) p (32.5) p
===== ====== ======
Diluted earnings/(loss) per ordinary share 6 0.4 p (36.8) p (32.5) p
===== ====== ======
Lorien plc
Consolidated balance sheet
as at 31 May 2003
Note 31 May 31 May 30 November
2003 2002 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Fixed assets
Tangible assets 1,534 1,076 1,051
Investment in own shares 407 431 416
Investments in associates 301 305 301
2,242 1,812 1,768
Current assets
Debtors 19,984 25,585 25,304
Creditors: amounts falling due within one year (12,415) (18,298) (17,093)
Net current assets 7,569 7,287 8,211
Creditors: amounts falling after one year (276) - -
Net assets 9,535 9,099 9,979
===== ===== =====
Capital and reserves
Called up share capital 4,656 4,906 4,756
Share premium account 29,300 29,300 29,300
Capital redemption reserve 250 - 150
Profit and loss account 7 (24,671) (25,107) (24,227)
9,535 9,099 9,979
===== ===== =====
Lorien plc
Consolidated cash flow statement
for the 6 months ended 31 May 2003
Note 6 months 6 months Year
ended ended ended
31 May 31 May 30 November
2003 2002 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Net cash inflow from operating activities 8 1,541 4,029 5,693
Dividends received from associates and joint - - 4
ventures
Returns on investments and servicing of finance 72 (211) (315)
Taxation (482) - (801)
Capital expenditure (84) (62) (345)
Acquisitions and disposals 2,236 997 612
Cash inflow before financing 3,283 4,753 4,848
Financing
Repurchase of shares (200) - (453)
Decrease in debt (2,851) (5,221) (4,555)
Increase/(decrease) in cash in the period 232 (468) (160)
===== ==== ====
Lorien plc
Notes
1. Basis of preparation
The interim financial statements have been prepared on the basis of accounting
policies set out in the Group's Annual Report and Financial Statements for the
year to 30 November 2002.
The interim financial statements have not been audited and the financial
statements do not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985.
The comparative figures for the year to 30 November 2002 are not the company's
statutory accounts for that financial period, but have been extracted from the
statutory accounts. The statutory accounts have been reported on by the
company's auditors and delivered to the registrar of companies. The report of
the auditors was unqualified and did not contain a Statement under section 237
(2) or (3) of the Companies Act 1985.
2. Segmental analysis
6 months ended 6 months ended Year ended
31 May 2003 31 May 2002 30 November 2002
#000 #000 #000
Turnover
Resourcing 37,031 51,236 96,802
Specialist Services 7,472 7,309 14,882
Consulting - discontinued operations - 1,904 1,904
44,503 60,449 113,588
Contribution to Central costs
Resourcing 1,246 2,569 4,876
Specialist Services 1,517 1,500 3,202
Consulting - discontinued operations - 256 288
2,763 4,325 8,366
Central costs (2,631) (2,958) (5,729)
Operating profit 132 1,367 2,637
Exceptional items - (7,500) (7,500)
Net interest receivable/(payable) and
similar income/(charges) 72 (213) (315)
Profit/(loss) on ordinary activities before
taxation
204 (6,346) (5,178)
====== ====== ======
Central costs represent property charges, depreciation, IT infrastructure costs,
finance function costs, human resources costs, legal and professional service
fees and indirect staff costs.
3. Loss on disposal of discontinued operations
On 12 February 2002 the Group completed the disposal of its Consulting division.
The disposal provided for the receipt of proceeds of #4.5m in consideration
for the trade and certain assets of the Consulting division. The loss of #7.5m
in previous periods has been recognised after advisors' costs and the write back
of goodwill of #6.9m previously written off to reserves.
#2.0m of the consideration was received in cash on completion and #2.5m was
received on 12 February 2003.
4. Taxation
6 months 6 months Year
ended ended ended
31 May 2003 31 May 2002 30 November 2002
#000 #000 #000
UK corporation tax at 30% (2002: 30%) - 346 815
Prior year adjustment - - 131
Deferred tax 138 - (245)
138 346 701
====== ====== ======
5. Dividends
No interim dividend is proposed for the period (30 November 2002 and 31 May
2002: #nil).
6. Earnings/(loss) per ordinary share
The earnings/(loss) per share calculation is based on the profit on ordinary
activities after taxation of #66,000 (30 November 2002: loss of #5,879,000; 31
May 2002: loss of #6,692,000) and on the weighted average number of shares in
issue, and ranking for dividend, during the final period of 17,228,350 (30
November 2002: 18,086,539; 31 May 2002: 18,182,004). The 1,791,130 shares held
by the Employee Benefits Trusts at 31 May 2003 (30 November 2002: 1,381,238 and
31 May 2002: 1,442,000) do not rank for dividend payments and have therefore
been excluded from the calculations. The diluted earnings/(loss) per share
calculations take into account the dilutive effect of share options. The
calculations of diluted earnings/(loss) per share are also based on 17,228,350
shares.
7. Profit and loss account
#000
At beginning of financial period (24,227)
Profit for the financial period 66
Purchase and cancellation of ordinary shares (200)
Long-term incentive plan (310)
At end of financial period (24,671)
=====
During the current period the Employee Benefit Trust purchased 445,000 ordinary
shares from the market place at a cost of #223,000. These shares are to be used
to meet awards which have already vested in employees and directors of the group
under the Long-term Incentive Plan ("L-TIP"). On the basis that the directors
believe the shares will be issued under the L-TIP, their value has been written
down to #nil and a charge has been reflected in the profit and loss account. An
adjustment to the profit and loss account has been made to the extent a charge
had been made in the previous period for the related awards in line with UITF
17.
8. Reconciliation of operating profit to operating cash flows
6 months ended 6 months ended Year ended
31 May 31 May 30 November
2003 2002 2002
#000 #000 #000
Group operating profit 132 1,367 2,637
Long term incentive plan charge (310) - 519
Depreciation charge 252 323 557
Decrease in debtors 2,680 5,485 5,970
Decrease in creditors (1,213) (3,146) (3,990)
Net cash inflow from operating activities 1,541 4,029 5,693
==== ==== ====
== == ==
9. Analysis of net debt
At
30 November Cash flow Other non cash At 31 May
2002 changes 2003
#000 #000 #000 #000
Overdrafts (258) 232 - (26)
Debt due within one year
- invoice discounting advances (4,003) 2,664 - (1,339)
- finance leases - 187 (372) (185)
Debt due after one year - finance leases - - (276) (276)
Total (4,261) 3,083 (648) (1,826)
====== ====== ====== ======
10. Interim statement
Copies of the interim statement have been sent to Shareholders and further
copies are available from the Company Secretary, Lorien plc, Oak House, Park
Lane, Leeds, LS3 1EL.
Independent Review Report by KPMG Audit Plc to Lorien plc
Introduction
We have been engaged by the company to review the financial information set out
on pages 3 to 8 and 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.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we have reached.
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 they
are to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be 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 is substantially less
in scope than an audit performed in accordance with 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 6 months ended
31 May 2003.
KPMG Audit Plc
Chartered Accountants
Leeds
This information is provided by RNS
The company news service from the London Stock Exchange
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