RNS Number:0311A
BNS Telecom Group plc
20 March 2006
BNS Telecom Group plc
Interim Results for the six months ended 31 January 2006
BNS Telecom Group plc, one of the UK's leading providers of white labelled
telecoms services to the UK SME and corporate market, is publishing its interim
results for the six months ended 31 January 2006.
* Group turnover up 15% to #11.5 million (2005: #10.0 million).
* Operating profit before goodwill amortisation of #208,000 (2005:
#996,000).
* Profit before tax of #132,000 (2005: #913,000).
* #2.7 million after expenses raised through placing on AIM.
* Modus Telecom, EMC Partnership and BNS Mobile (formerly Telecom Asia)
acquired.
* #1.3 million of net funds at 31 January 2006.
* New white label joint marketing relationships launched with South
East Water Telecom, NUFC Telecom, Norfolk Chamber Telecom and Isle of
Wight Chamber Telecom.
* New joint marketing relationships to be launched in current financial
year with Utility Aid Telecom, Charity Buying Group Telecom, UK
Telecom and Yorkshire Tourist Board Telecom.
* Billing Online Limited acquired for #425,000 on 17 March 2006
Graham Wilson, Chairman, said:
"As anticipated Group profits at the half year are behind last year as we
continued our infrastructure investment programme to service our larger real and
potential customer base. Our fixed line and call operations performed in line
with expectations but sales of hardware and mobile units during Q2 and the early
part of Q3 were disappointing.
"Although we expect the second half to be better than the first half as a result
of the seasonal uplift and the acquisitions completed, the full year outcome
will be materially behind our earlier expectations".
20 March 2006
Enquiries:
BNS Telecom Group plc
Garry Moat, Managing Director Tel: 01661 839 554
David Horrocks, Finance Director
College Hill
Adrian Duffield/Corinna Dorward Tel: 020 7457 2815/2803
Chairman's statement
Strategic Overview
The Board continued to implement the Group's strategy of growing the business
organically by increasing the number of third party joint marketing
relationships and thereby increasing customer numbers, whilst acquiring new
products and services to cross sell to the Group's existing customer base. A
number of new relationships were launched and others initiated. The Group also
made four acquisitions, including one on 17 March 2006. However, our new
customer acquisition performance in the second quarter of the financial year was
disappointing, in particular sales of mobiles and telephone systems hardware
fell short of our expectations.
Financial review
Group turnover increased by 15% to #11.5 million (2005: #10.0 million), due
primarily to #1.6 million generated by Modus Telecom, acquired in August 2005.
Gross profit increased by 9% from #3.5 million to #3.8 million.
Turnover from fixed line access increased 10.5% to #4.2 million (2005: #3.8
million). Growth has been generated by volume increases, with the year on year
average sales price per line remaining constant. Fixed line access margin for
2006 was #0.9 million (22%) up from #0.7 million (19%) in 2005.
Despite the average selling price per minute falling by 12%, turnover from fixed
line calls reduced by only 9% to #4.6m (2005: #5.1 million). Continued
negotiation with network providers has enabled the Group to improve call margins
during the period as call buying prices reduced by an average of 16%. Gross
margin from fixed line calls was #2.3 million at 50%, up from 47% in 2005.
Network services sales volumes are traditionally higher in the second half of
the financial year as a consequence of seasonal business holidays in August and
December of each year.
Hardware sales performance has been particularly disappointing, down 32% to #
0.65 million (2005: #0.95 million), well below the Board's expected performance.
In addition gross margin reduced to #0.3 million (47%) from #0.5 million (53%)
in 2005.
The Group launched its mobile services through Vodafone in August 2005. Initial
uptake by Group customers has been slower than expected but mobile packages have
been relaunched in March 2006 following internal management changes.
The Board continued to invest in the Group's infrastructure, and this increase
in cost base, combined with underperformance in hardware and mobile sales,
adversely affected operating profit. Operating profit before goodwill
amortisation was #208,000 (2005: #996,000). Fully diluted earnings per share
were 0.17p (2004: 1.45p).
The business continued to generate cash before the effect of a one-off industry
wide change to BT invoicing dates. This had a negative #900,000 impact on the
Group's cash position. At 31 January 2006 the Group had net funds of #1.3
million (2005: net debt #2.3 million).
Joint marketing relationships
The Group has continued to target potential joint marketing partners and has
launched four new arrangements in the six months ended 31 January 2006, with
South East Water Telecom, Norfolk Chamber Telecom, Isle of Wight Chamber
Telecom, all based in the South of England, and Newcastle United Telecom.
The Group has expanded geographically as a consequence of the new Southern based
partners. Sales order performance from the new white label brands was lower
than expected in the second quarter as a consequence of delays in establishing
the South Region sales office.
The Board continues to negotiate with a number of potential joint marketing
partners. Since 31 January 2006, agreements have been signed with the following
marketing partners: UK Telecoms, Utility Aid Telecom, Charity Buying Group
Telecom and Yorkshire Tourist Board Telecom.
Acquisitions
BNS completed three acquisitions during the six months ended 31 January 2006 and
another on 17 March 2006.
Modus Telecom
A majority stake (78%) of Modus Telecom was acquired in August 2005 for #103,000
plus the assumption of net liabilities of #423,000. Modus operates voice and
data switches together with a VoIP gateway and the Group is now able to offer
services to customers using VoIP technology. The Group has completed the
installation of an interconnect between Modus and BT and can now carry
international traffic through Modus rather than third party switches. Modus
generated revenues of #1.6 million between the date of acquisition and 31
January 2006, producing gross margin and operating profit of #318,000 and
#79,000, respectively. The business has now been completely integrated into the
Group.
EMC Partnership
The Group acquired 75% of EMC on 9 January 2006 for #112,000, including costs.
EMC is developing white label, prepay mobile phone services including
international calling, targeted content and international money transfer
services, for distribution through existing Group sales channels.
BNS Mobile (formerly Telecom Asia)
The Group acquired the entire share capital of BNS Mobile for #452,000 on 25 January 2006. BNS Mobile has a VoIP based
switching platform which provides carrier grade wireless SMS and MMS services on a bulk scale within the UK and
internationally. The main revenue streams will be generated through worldwide outbound SMS and MMS transport, premium
rate SMS transactions, and content provision and message management. The Group launched a package of SMS-based services
in March 2006 in order to cross sell these services to existing and new fixed line customers.
Billing Online Limited
On 17 March 2006 the Group acquired the entire share capital of Billing Online
Limited and its subsidiary undertakings for an initial consideration of
#425,000. Billing Online is a billing software and VoIP application development
house that generates revenues from hosting telecoms services across its own IP
enabled network. Billing Online will complement the switching facilities
currently owned and operated by both Modus and BNS Mobile, and will allow the
Group increased flexibility with regard to VoIP applications.
Current trading and outlook
The performance of the Group since 31 January 2006 has been disappointing.
However, the management team has moved quickly to address the issues facing the
business. In the short term this will result in the Group materially
underperforming against current market expectations for 2006.
The Board believes that revenues from both the new acquisitions and the new
joint marketing relationships will contribute significantly to earnings in 2007
and beyond.
Graham Wilson
Chairman
BNS Telecom Group plc
Group profit and loss account
Notes Unaudited Unaudited Unaudited
1 August to 1 August to Year ended
31 January 31 January 31 July
2006 2005 2005
#'000 #'000 #'000
Turnover 2 11,495 10,004 19,762
Cost of sales (7,705) (6,539) (12,787)
Gross profit 3,790 3,465 6,975
Administrative expenses (3,602) (2,469) (5,634)
Other operating income 10 - 10
(3,592) (2,469) (5,624)
Operating profit 198 996 1,351
Bank and other interest receivable 42 - 13
Interest payable and similar charges (108) (83) (133)
(66) (83) (120)
Profit on ordinary activities before 132 913 1,231
taxation
Tax on profit on ordinary activities 3 (41) (283) (385)
Profit on ordinary activities after 91 630 846
taxation
Minority interest (12) - -
Profit attributable to the members of 79 630 846
the parent company
Dividends - - -
Retained profit for the period 79 630 846
Actual earnings per share
Basic earnings per share (pence) 4 0.17p 1.45p 1.95p
Diluted earnings per share (pence) 4 0.17p 1.45p 1.94p
Group balance sheet
Notes Unaudited Unaudited Unaudited
As at As at As at
31 January 31 January 31 July
2006 2005 2005
#'000 #'000 #'000
Fixed assets
Tangible assets 3,897 3,186 3,724
Intangible assets 1,054 - -
4,951 3,186 3,724
Current assets
Stocks 218 241 190
Debtors 2,229 4,036 3,037
Cash at bank and in hand 3,626 36 1,642
6,073 4,313 4,869
Creditors: amounts falling due within (6,011) (5,486) (6,465)
one year
Net current assets/(liabilities) 62 (1,173) (1,596)
Total assets less current assets 5,013 2,013 2,128
Creditors: amounts falling due after one (1,363) (1,423) (1,525)
year
Provisions for liabilities and charges (41) (35) (42)
3,609 555 561
Capital and reserves
1 5,012 4,331 4,331
Called up share capital
Share premium account 2,250 - -
Profit and loss account 79 - -
Revaluation reserve - - -
Other reserves (3,769) (3,776) (3,770)
Minority interest 37 - -
Equity shareholders' funds 3,609 555 561
Group statement of cash flows
Notes Unaudited Unaudited Unaudited
1 August to 1 August to Year ended
31 January 31 January 31 July
2006 2005 2005
#'000 #'000 #'000
Net cash inflow/(outflow) from operating 6 (299) 2,166 3,293
activities
Returns on investments and servicing of
finance
Interest received 42 - 13
Interest paid (108) (83) (133)
Net cash outflow from returns on (66) (83) (120)
investments and servicing of finance
Taxation
Corporation tax paid - (140) (66)
Capital expenditure and financial
investment
Payments to acquire tangible fixed assets (325) (1,030) (1,289)
Payments to acquire intangible assets (50) - -
Receipts from sales of tangible fixed 84 - 162
assets
Movement on loan to related company 799 (1,557) (684)
508 (2,587) (1,811)
Acquisitions and disposals
Purchase of subsidiary undertakings (467) - -
Cash and cash equivalents acquired 95 - -
Net cash outflow on acquisitions and (372) - -
disposals
Net cash inflow/( outflow) from capital 136 (2,587) (1,811)
expenditure and financial investment
Equity dividends paid - - -
Net cash inflow/(outflow) before financing (229) (644) 1,296
Financing
Issue of ordinary share capital (net of 2,732 - -
expenses)
New long term bank loan 1,805 800 800
Repayment of long term bank loan (1,834) (42) (103)
Capital element of hire purchase contracts (360) (251) (615)
Net cash inflow/(outflow) from financing 2,343 507 82
Increase/(decrease) in cash in period 7 2,114 (137) 1,378
Notes
1. Basis of preparation and consolidation
The Board approved the interim accounts for the period 1 August 2005 to 31
January 2006 on 19 March 2006. The interim report is not audited and does not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985. The interim accounts have been prepared using accounting policies
consistent with those used in preparing the accounts of BNS Telecom Limited for
the year ended 31 July 2005, together with appropriate additional policies
reflecting changes in the period.
The initial authorised share capital of BNS Telecom Group Limited on
incorporation on 1 August 2005 was 100 shares of #1 each. On 7 October 2005,
each ordinary share was subdivided into 10 ordinary shares of 10p each. The
authorised capital was then increased by #6,499,900 by the creation of
64,999,000 ordinary shares of 10p each.
On incorporation as a limited company on 1 August 2005, 1 ordinary share was
issued at #1. Prior to flotation on 7 October 2005, a further 43,312,490 10p
ordinary shares were issued in a share for share exchange of 100% of the share
capital of BNS Telecom Limited, comprising 82,500 ordinary #1 shares. The fair
value of the consideration received being the shares in BNS Telecom Limited, was
determined by the directors to be #7,000,000. In accordance with Section 131 of
the Companies Act 1985, the excess of the fair value of the consideration
received, net of issue costs, over the nominal value of the shares issued has
been taken to a merger reserve.
This merger has been accounted for using the merger accounting principles set
out in Financial Reporting Standard 6. Accordingly the financial information
for the prior periods has been restated to reflect the position as if the group
had legally existed for the past two financial years.
The consolidated financial information includes the results of the Company and
its subsidiary undertakings from the date of acquisition using the acquisition
method of accounting. Goodwill arising on consolidation, representing the
excess of the fair value of consideration given over the fair value of the
acquired net assets, is capitalised in the consolidated balance sheet and
amortised over its estimated economic life of 20 years.
Subscriber acquisition costs in respect of mobile contracts are deferred in the
balance sheet as an intangible fixed asset and are amortised over the period
expected to benefit from the contract. Included in intangible assets are costs
relating to the acquisition of new customer mobile phone contracts that are
charged against profits over the term of the contract. The balance of uncharged
costs at 31 January 2006 is #50,515 (January 2005 and July 2005: Nil).
2. Group turnover and segmental analysis
Turnover represents the amount derived from the provision of goods and services
stated net of value added tax. Turnover, profit before tax and net assets are
all attributable to one continuing activity, being the supply and maintenance of
telecommunication services and systems to customers in the United Kingdom.
3. Taxation
Tax on profit on ordinary activities for the period 1 August 2005 to 31 January
2006 and the comparative period 1 August 2004 to 31 January 2005 have been
calculated using an effective rate of tax of 31%.
4. Earnings per share
As set out in Note 1 the Group has accounted for the restructuring of the
Group's share capital using the merger accounting principles set out in
Financial Reporting Standard 6. Consequently both basic and diluted earnings
per share have been calculated on the basis that the share capital restructuring
was effective on 1 August 2004.
Unaudited Unaudited Unaudited
1 August to 1 August to Year ended
31 January 31 January 31 July
2006 2005 2005
Basic earnings per share
Profit after tax (#'000) 79 630 846
Number of shares 45,687,299 43,312,500 43,312,500
Basic earnings per share (pence) 0.17p 1.45p 1.95p
Diluted earnings per share
Profit after tax (#'000) 79 630 846
Number of shares 47,239,440 43,715,189 43,715,189
Diluted earnings per share (pence) 0.17p 1.45p 1.94p
5. Acquisitions
On 26 August 2005 BNS Telecom Limited acquired 78% of the issued share capital
of Modus Telecom Limited for total consideration, including costs, of #103,000.
A preliminary assessment of the fair value of the net liabilities acquired gives
rise to goodwill of #526,000.
On 9 January 2006 BNS Telecom Limited acquired 75% of the issued share capital
of EMC Partnership Limited for total consideration, including costs, of
#112,000. A preliminary assessment of the fair value of the net assets acquired
give rise to goodwill of #37,000.
On 30 January 2006 the Company acquired the share capital of Telecom Asia
Limited (renamed BNS Mobile Limited) for total consideration, including costs,
of #452,000, comprising cash of #252,000 and #200,000 in new ordinary shares of
the company being 328,947 shares. A preliminary assessment of the fair value of
the net assets acquired gives rise to goodwill of #452,000.
6. Net cash inflow from operating activities
Unaudited Unaudited Unaudited
1 August to 1 August to Year ended
31 January 31 January 31 July
2006 2005 2005
#'000 #'000 #'000
Operating profit 198 996 1,351
Depreciation of tangible assets 326 217 465
Loss on disposal of tangible fixed assets 15 - 28
Goodwill amortisation 10 - -
(Increase)/decrease in stocks (28) (52) (2)
Decrease/(increase) in debtors 72 1,194 994
(Decrease)/Increase in creditors (892) (189) 457
Net cash inflow/(outflow) from operating (299) 2,166 3,293
activities
7. Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Unaudited
1 August to 1 August to Year ended
31 January 31 January 31 July
2006 2005 2005
#'000 #'000 #'000
Cash flows
Increase/(decrease) in cash 2,114 (137) 1,378
Cash outflow/(inflow) from movement in debt 389 (507) (82)
and lease financing
Changes in net debt resulting from cash 2,503 (644) 1,296
flow
Other non cash changes
New finance leases introduced (140) (247) (963)
Movement in net debt 2,363 (891) 333
Net debt at 1 August (1,095) (1,428) (1,428)
Net funds/(debt)at period end 1,268 (2,319) (1,095)
Analysis of net debt
Unaudited Unaudited Unaudited Unaudited
At 1 August Cash flow Other non At 31
2005 cash changes January 2006
#'000 #'000 #'000 #'000
Cash at bank and in hand 1,642 1,984 - 3,626
Bank overdrafts (508) 130 - (378)
Cash 1,134 2,114 - 3,248
Finance leases and hire (1,180) 360 (140) (960)
purchase contracts
Loans due within one year (176) 29 - (147)
Loans due after one year (873) - - (873)
Net(debt)/funds (1,095) 2,503 (140) 1,268
8. Subsequent Events
On 17 March 2006 BNS Telecom Limited acquired 100% of the issued share capital
of Billing Online Limited for initial consideration of #425,000.
9. Interim report
A copy of the interim report will be distributed to shareholders shortly and
will be available from the company's registered office in the week commencing 3
April 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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