In the six months to 30 June 2006
revenues are €16.814 million an increase of 7% compared with 2005. Operating
profit (before goodwill impairment provision) is €0.162 million compared to
€0.618 million in 2005. Ongoing pricing pressures have negatively impacted
margins.
After tax and interest there is a
loss of €0.110 million and the adjusted loss per share is (0.19) cent per share
compared to adjusted earnings of 0.45 cent in 2005.
Operating review
Managed Services
This division offers a
comprehensive portfolio of card and print based products and services. Card
services has three main market areas: Telco, Membership and Retail. Print
services offer a range of litho, digital print and fulfilment services.
Financial information
2006
2005
€’000
€’000
Revenue
11,601
10,926
Operating profit
136
657
Net operating assets *
7,896
7,007
*net
operating assets includes property, plant and equipment, inventories, trade and
other receivables and payables and excludes corporate tax and net debt.
In
Managed Services, sterling revenues have increased by 6%, comprised of a 15%
increase in card services revenues to £6.493 million and a 21% decrease in
marketing materials third party print revenues to £1.478 million.
The Group previously reported on an
apparent problem with a specialised product in Managed Services. A resolution
of this matter has been substantially agreed. Although the final costs cannot
be fully determined at this point the results include a provision of €102,000.
There is continuing downward price
pressure across all products and services. The sectoral decline in plastic card
based electronic top-up for the UK Telco market is being replaced by the
emerging gift card market, which is building more slowly than originally
expected. Margins in the newer product areas are lower than historic levels in
card services and revenues are more seasonal with an increasing emphasis on the
second half of the year.
Excluding the impact of the
provision referred to above operating profit in Cards is 9% behind last year.
In Print there has been a very significant decrease with the results
approximately £0.25 million behind last year.
Prospects in Managed Services are
mixed. There have been a number of encouraging signs in the cards business with
new contracts having been won and the sales outlook becoming stronger. However,
the revenue prospects in marketing materials are less encouraging and operating
losses have increased in spite of the cost savings from the reorganisation in
2004. A further review of our print activities and associated cost base is in
progress and a process has commenced to refocus the print activities and
concentrate on more profitable customers and products. This will involve a
number of redundancies and a related cost estimated at €250,000 with expected
annualised cost savings in excess of this. The Group has invested in new
capability to both reduce production costs through improved efficiency and
productivity and to develop new products and services to increase revenue and
replace declining products.
Books
& Journals
This
business comprises the printing of academic books and journals in the United Kingdom.
Financial
information
2006
2005
€’000
€’000
Revenue
5,213
4,752
Operating
profit
651
649
Net
operating assets *
8,077
6,957
*net operating assets includes property, plant and
equipment, inventories, trade and other receivables and payables and excludes
corporate tax and net debt.
In Books & Journals,
sterling revenue is 10% ahead of last year and operating profit is in line with
2005. Increased revenues from litho print books and journals contributed 3.4%
of this and digital print made a small contribution to revenue. Low margin
paper sales contributed 4.5% to the increased revenue.
Book and journal volumes
are continuing to increase but margins are being reduced by the ongoing price
decreases. The upgrading of capability in previous years gives the business the
opportunity to introduce new products to its portfolio and increase its sales
in an increasingly competitive environment and to react to downward pricing
pressures.
Net interest expense
Net interest
expense for the first half of 2006 is higher than 2005 mainly as a result of
higher borrowings due to capital expenditure.
Cash flow and net debt
The table
below summarises the cash flow for the period.
Half year
Half year
Year
2006
2005
2005
€’000
€’000
€’000
Operating
profit *
162
618
1,367
Exceptional
operating costs
-
(109)
(291)
Depreciation
991
848
1,885
Net
working assets including pension
(1,113)
(643)
(654)
Operating cash flow
40
714
2,307
Net interest
(323)
(257)
(561)
Tax
paid
(18)
(73)
(91)
Capital
expenditure net (including leased assets)
(1,193)
(2,836)
(4,977)
(1,494)
(2,452)
(3,322)
Opening net debt
(4,649)
(1,278)
(1,278)
Currency
69
(157)
(49)
Closing
net debt
(6,074)
(3,887)
(4,649)
* Operating profit from continuing activities before
impairment provision
Capital expenditure in the period was €1.2 million
of which €1.1 million is in Managed Services and €0.1 million is in Books &
Journals.
The increase in working capital reflects sales and trading trends in the first half of 2006. In July 2006 working capital in the operations decreased by €0.8 million and Group net debt at 31 July 2006 was €5.3 million.
At 30 June 2006 the net debt was as follows:
Centre
€’000
Managed
Services
€’000
Books &
Journals
€’000
Group
€’000
Cash
5,349
164
47
5,560
Cash flow finance
-
(1,003)
(1,258)
(2,261)
Term debt
-
(3,653)
(679)
(4,332)
Asset finance
-
(2,376)
(2,665)
(5,041)
5,349
(6,868)
(4,555)
(6,074)
Trading Outlook
Both
Managed Services and Books & Journals are targeting a strong revenue
performance in the second half of the year but falling prices and reduced
margins will continue to be an issue for both businesses.
Consolidated income statement
Half year ended
Half year ended
Year ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
Notes
€’000
€’000
€’000
Continuing operations
Revenue
3
16,814
15,678
32,847
Cost
of sales
(13,285)
(11,887)
(24,951)
Gross
profit
3,529
3,791
7,896
Selling
and distribution costs
(1,309)
(1,212)
(2,273)
Administration
expenses
(2,058)
(1,961)
(4,256)
Operating
profit before exceptional operating costs and impairment provision
3
162
618
1,367
Impairment
provision
4
-
(7,430)
(7,455)
Operating profit/(loss)
162
(6,812)
(6,088)
Finance costs
5
(454)
(395)
(874)
Finance income
5
131
140
315
Loss
before tax
(161)
(7,067)
(6,647)
Taxation
6
51
(107)
(226)
Loss
for the period attributable to equity shareholders
(110)
(7,174)
(6,873)
Loss
per share
-Basic and diluted (cent)
7
(0.19)
(12.71)
(12.18)
Adjusted
(loss)/earnings per share *
-Basic and diluted (cent)
7
(0.19)
0.45
1.03
*before goodwill impairment provision
Consolidated
balance sheet
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Non-current assets
Property,
plant and equipment
12,126
11,131
12,043
Goodwill
-
-
-
12,126
11,131
12,043
Current assets
Inventories
1,538
1,405
1,663
Trade
and other receivables
8,716
7,812
8,073
Cash
and cash equivalents
5,560
6,703
7,048
15,814
15,920
16,784
Total assets
27,940
27,051
28,827
Current liabilities
Trade
and other payables
6,804
7,034
7,403
Borrowings
4,735
3,665
4,137
Current
tax liabilities
706
811
743
12,245
11,510
12,283
Non-current liabilities
Borrowings
6,899
6,925
7,560
Deferred
tax
676
586
720
Retirement
benefit obligations
321
200
331
7,896
7,711
8,611
Total liabilities
20,141
19,221
20,894
Net assets
7,799
7,830
7,933
Equity
Ordinary
share capital
5,644
5,644
5,644
Share
premium
5,950
5,950
5,950
Other
reserves
282
394
312
Accumulated
deficit
(4,077)
(4,158)
(3,973)
Total equity
7,799
7,830
7,933
Consolidated statement of recognised income and expense
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Actuarial gain/(loss) on defined
benefit pension plan
(net of tax)
6
-
(116)
Exchange movement
(30)
513
431
Net (expense)/income recognised
directly within equity
(24)
513
315
Loss for the period
(110)
(7,174)
(6,873)
Total recognised expense relating
to the period
(134)
(6,661)
(6,558)
Reconciliation of movements in group equity
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Total recognised expense relating
to the period
(134)
(6,661)
(6,558)
Opening group equity
7,933
14,491
14,491
Closing group equity
7,799
7,830
7,933
Consolidated cash flow statement
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Operating activities
Cash
generated from operations (note 8(a))
40
714
2,307
Taxation
paid
(18)
(73)
(91)
Net cash inflow from operating activities
22
641
2,216
Investing activities
Purchase
of property, plant and equipment
(455)
(1,102)
(769)
Proceeds
from sale of property, plant and equipment
-
-
45
Interest
received
131
138
314
Net cash outflow from investing activities
(324)
(964)
(410)
Financing activities
Proceeds
from borrowings
678
743
820
Repayments
of borrowings
(592)
(612)
(1,188)
Capital
element of finance lease rental payments
(775)
(388)
(963)
Interest
paid
(278)
(299)
(629)
Finance
lease interest
(176)
(96)
(246)
Net cash outflow from financing activities
(1,143)
(652)
(2,206)
Net decrease in cash and bank overdrafts
(1,445)
(975)
(400)
Cash
and bank overdrafts at beginning of period
7,048
7,257
7,257
Effect
of exchange rate changes
(43)
261
191
Cash and bank overdrafts at end of period
5,560
6,543
7,048
Cash
and bank overdrafts comprise:
Cash
and cash equivalents
5,560
6,703
7,048
Bank
overdrafts
-
(160)
-
5,560
6,543
7,048
Notes
to the financial statements
1.Basis of preparation
The financial information
included in the interim report has been prepared on the basis of the
recognition and measurement requirements of International Financial Reporting
Standards (IFRS) and interpretations of the International Financial Reporting
Interpretation Committee (IFRIC).
The transition date for
implementation of IFRS by the Group was 1 January 2004. Further details of the
accounting policies adopted by the Group on the implementation of IFRS, and of
the impact on the reported results and balance sheet of the Group of the
transition to IFRS, are set out in the 2005 Annual and Interim Reports, which
are available on the Group website.
The financial information
set out in the interim statement is un-audited and does not constitute
statutory accounts. The statutory accounts for the year ended 31 December 2005,
which received an unqualified audit opinion have been filed with the Registrar
of Companies.
2.Exchange rates
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Average rate for the period (income
statement and cash flow)
£ Sterling
0.6871
0.6861
0.6839
Period-end rate (balance sheet)
£ Sterling
0.6921
0.6742
0.6853
3.Analysis of revenue and operating results by business
segment
Half year ended
30 June 2006
Half year ended
30 June 2005
Year ended
31 Dec 2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
€’000
€’000
€’000
Revenue
Result #
Revenue
Result #
Revenue
Result #
Managed Services
11,601
136
10,926
657
22,629
1,385
Books & Journals
5,213
651
4,752
649
10,218
1,376
Centre
(625)
(688)
(1,394)
16,814
162
15,678
618
32,847
1,367
# The
operating result is operating profit before goodwill impairment provision.
4.Impairment provision
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Managed Services
-
(6,252)
(6,292)
Books & Journals
-
(1,178)
(1,163)
-
(7,430)
(7,455)
A review of the carrying
value of the two business divisions was carried out during 2005 in accordance
with international financial reporting standards. This review took account of
the prevailing market conditions and trading performance and the outlook for
the markets in which the businesses operate. Arising from this review an
impairment provision was made in respect of goodwill, which wrote the total
carrying value of goodwill down to zero in the Group accounts.
5.Net finance costs
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Interest income
131
140
315
Interest expense
(454)
(395)
(874)
(323)
(255)
(559)
Interest income and interest
expense are inclusive of the net pensions financing credit and debit.
6.Taxation
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Current tax
Irish tax
-
-
-
Overseas tax
14
(113)
(177)
Adjustments in respect of previous periods
-
-
105
(113)
(72)
Deferred tax
Timing differences
37
6
(154)
51
(107)
(226)
7.(Loss)/earnings per share
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Loss for the period attributable to
equity shareholders
(110)
(7,174)
(6,873)
Impairment provision
-
7,430
7,455
Adjusted (loss)/profit for the
period attributable to equity shareholders
(110)
256
582
Basic and
diluted (loss)/earnings per share
Loss per share (cent)
(0.19)
(12.71)
(12.18)
Impairment provision
-
13.16
13.21
Adjusted (loss)/earnings per share
(cent)
(0.19)
0.45
1.03
Weighted average number of shares
(‘000)
56,439
56,439
56,439
8.Cash flow statement
(a) Cash generated from operations
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Loss before taxation
(161)
(7,067)
(6,647)
Adjustments for:
Net finance costs
323
255
559
Impairment of goodwill
-
7,430
7,455
Depreciation
991
848
1,885
Exceptional operating costs non
cash movement
-
(109)
(291)
Movement in post employment
obligations
(4)
2
2
Decrease/(increase) in inventories
108
(186)
(424)
(Increase)/decrease in trade and
other receivables
(639)
244
(226)
Decrease in trade and other
payables
(578)
(703)
(6)
40
714
2,307
(b)
Reconciliation of netdecrease in cash and cash equivalents
to movement in net debt
Half year
ended
Half year
ended
Year
ended
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Decrease in cash and
cash equivalents
(1,445)
(975)
(400)
Financing
New borrowings
(678)
(743)
(820)
Repayment of borrowings
592
612
1,188
Lease repayments
775
388
963
(756)
257
1,331
New finance leases
(738)
(1,734)
(4,253)
Effect of exchange rate
changes
69
(157)
(49)
Movement in net debt in
the period
(1,425)
(2,609)
(3,371)
Net debt at beginning of
period
(4,649)
(1,278)
(1,278)
Net debt at end of
period
(6,074)
(3,887)
(4,649)
(c) Analysis of net debt
30 June
30 June
31 Dec
2006
2005
2005
Unaudited
Unaudited
Audited
€’000
€’000
€’000
Cash and cash equivalents including
overdrafts
5,560
6,543
7,048
Cash flow finance
(2,261)
(1,552)
(1,601)
Term debt and other loans
(4,332)
(5,630)
(4,966)
Obligations
under finance leases
(5,041)
(3,248)
(5,130)
(6,074)
(3,887)
(4,649)
9.Interim report
This interim report was
approved by the Board of Directors on 27 September 2006.
The interim report will
be included on the Company’s website (www.oakhillplc.ie)
and copies are available from the Company’s registered office at 2A Sandymount
Green, Sandymount, Dublin
4.