OFFICE2OFFICE PLC 
By
2 April 2014
office2office plc
Preliminary Results
office2office plc (o2o, the Company or the Group), a leading provider of office supplies and business solutions, announces its preliminary results for its financial year ended 31 December 2013.
Operational highlights
§ Managed Procurement outperformed the market, holding revenue against 9% market decline
§ Business Critical Services now represents 37% of Group revenue and 47% of Group EBITA pre central costs
§ Overhead reduction programme started in second half 2013 and is continuing
Financial performance
§ Group revenue up 2% to £231.9m (2012: £227.0m*)
§ Flat underlying profit before tax ** of £4.2m (2012: £4.2m*)
§ Profit before tax £1.8m (2012: £1.6m loss*) reflecting lower non-recurring charges £0.8m (2012: £4.0m)
§ Group generated net cash from operating activities of £10.1m(2012: £4.2m)
§ Net debt significantly reduced by 25% to £21.8m (2012: £29.0m), reflecting a similar reduction in the level of average daily net debt throughout the period
§ Basic earnings per share of 3.6p (2012: 3.9p loss*) and underlying earnings per share of 8.7p (2012: 8.5p*)
§ Recommend no final dividend be paid (2012: 3.6p) allowing efficiency and diversification initiatives to be undertaken
*Restated
** Profit / loss before tax, non-recurring costs of £0.8m (2012: £4.0m), £nil share option charges (2012: £0.5m) and amortisation of intangibles of £1.5m (2012: £1.2m) (refer to the Consolidated Income Statement and note 4 on non-recurring costs/(credits)).
Outlook
· Trading to date in line with expectations and costs reducing
· Review of how best to re-model our logistics platform to fit changes in the office supplies market almost complete, with implementation to follow through the rest of 2014
· Pipeline of sales opportunities across the Group
· Remain of view that underlying profit in 2014 is likely to fall short of 2013
Jim Cohen, Chairman of o2o, said,
"In a challenging market for office supplies, Managed Procurement has grown its market share again whilst we have increased the proportion of Group revenues from our growing Business Critical Services activities and delivered improved cash generation resulting in a significant reduction in net debt.
"Trading to date is satisfactory, it is in line with expectations and our operating costs are reducing. However, we are concerned that the office supplies market as a whole will not improve in 2014, so we remain of the view that underlying profit in 2014 is likely to fall short of 2013."
Further enquiries:
office2office
Simon Moate, Chief Executive 01603 691102
Hugh Cawley, Group Finance Director
MHP Communications
Reg Hoare/ Katie Hunt / Jade Neal 020 3128 8793/8794
Chairman's Statement
Results
We expected the office supplies market to show some improvement in 2013 as the UK economy came out of recession and that this would benefit our Managed Procurement activity. During the first half of 2013, however, it became clear that the market was not improving. Customers' buying habits have also changed over the last two years, with a focus on lower cost products, buying little and often and other changes targeted at reducing their direct costs. The Board expects this to be a permanent shift in buying behaviour. This has increased our cost to serve and impacted our net margins, though our Managed Procurement activity continued to out-perform the market which declined by 9% year on year. It remains the larger part of the Group, accounting for 63.5% of Group revenue and 52.8% of Group EBITA before central costs.
By contrast our Business Critical Services activities operate in growing segments of the market. Banner Managed Communication, the largest of these activities, saw a general recovery in marketing budgets in its segment, with increased spend towards the end of 2013 on digital channels in particular. Business Critical Services now represent some 36.5% of Group revenue and 47.2% of Group EBITA before central costs.
Our underlying profit before tax for 2013 was £4.2m. For reasons detailed in the Strategic Report and Significant Accounting Policies, we are making prior year adjustments that restate 2012's underlying profit before tax from £6.5m to £4.2m. This flattening of Group performance over a two year period does no more than confirm the urgency of the need for the recovery programme we started in the second half of 2013.
We significantly reduced net debt in 2013 by £7.2m to £21.8m at 31 December 2013 (2012: £29.0m), owing to an increase in operating cash flow to £13.0m (2012: £6.5m).
These results are reported in more detail in the Chief Executive's Review and the Strategic Report which follow.
Strategy and change
We believe our market strategy remains sound. Business Critical Services has performed satisfactorily since we committed to diversification in 2008 and we are focused on growing it organically to become the larger part of the Group. Managed Procurement's task is to retain its position in the contract office supplies market, protecting margin as it does so and, whenever possible, building further profitable market share, which it has shown can still be done. We have a satisfactory pipeline of sales opportunities across the Group.
The changes we have to make, which we started in the second half of 2013, re-model the way we support our markets and we need to use our free cash flow to do this. Re-modelling will also enable us to re-finance the Group in advance of our current term loans, which currently stand at £12.5m, maturing in June 2015. We are working closely with our bank, The Royal Bank of Scotland, in this regard.
Our programme to reduce overheads, both centrally and in our operating activities, will run through much of 2014. The next step is to change the way we handle the logistics side of our business to give us a platform that fits the changed office supplies market and takes into consideration the fact that the leases on our three main sites are due for renewal this year. We shall shortly complete our review of the options for implementation during the rest of 2014. The recovery programme should reach its full annualised rate of benefit from early 2015.
In short, our focus is on doing all we can to improve performance and strengthen the business.
Dividend
At the half year, we advised shareholders that we could not recommend an interim dividend. This was a particular disappointment as we had shareholders who had been loyal to us since we listed in 2004.
The Board remains of the view that, in current circumstances, investing free cash in our recovery programme and where possible in strengthening our Business Critical Services, is in the best long term interest of shareholders. We, therefore, do not recommend a final dividend for 2013 and do not expect to re-instate the dividend during 2014.
Chairman
As reported in November 2013, David Callear decided to stand down as Chairman because of his wife's terminal illness. David has been with the business since before it listed, has made a significant contribution to it, remains very committed to it and is familiar with the industry so we are grateful that he has felt able to continue as a non-executive Director.
Outlook
Trading to date is satisfactory, it is in line with expectations and our operating costs are reducing. However, we are concerned that the office supplies market as a whole will not improve in 2014, so we remain of the view that underlying profit in 2014 is likely to fall short of 2013.
Annual General Meeting (AGM)
The AGM will be held at the Company's head office, St Crispins, Duke Street, Norwich on 29 May 2014 at 11.00 am. Notice of the AGM will be circulated separately, together with the proxy forms, for use at the AGM.
J L Cohen
Chairman
2 April 2014
Chief Executive's Review
Results: performance
Group revenue was some 2% up year on year at £231.9m (2012: £227.0m). Underlying profit before tax at £4.2m was similar to 2012 (£4.2m restated), with underlying earnings per share at 8.7 pence per share as against 2012's 8.5 pence per share.
Results: cash/net debt
Group net debt at 31 December 2013 was £21.8m, a reduction of £7.2m on 2012, reflecting a similar reduction in the level of average daily net debt throughout the period. These reductions reflect a number of measures: the lower dividend payment of £1.3m (2012: £4.1m); lower exceptional costs with the Group's 2013 restructuring programme starting in the second half; and operational improvements, in particular a focus on overdue debtors and on stock, which was significantly reduced over the year while maintaining product availability. The focus on cash generation and reducing debt remain key management imperatives.
Managed Procurement
Our Managed Procurement activity encompasses both our contract business, Banner Business Services, which services large corporate and public sector customers, and Truline, which services the independent dealer channel through our contract with the Advantia group. In 2013 revenue was flat year on year at £147.3m, representing 63.5% of Group revenue (2012: £147.5m) and 52.8% of Group EBITA before central costs (2012: 62.3%).
Banner Business Services (BBS)
BBS revenues increased slightly year on year, markedly outperforming the overall office products market, which is calculated to have declined by 9%. This outperformance was aided by the new contract with The Royal Bank of Scotland (RBS) and the retention of existing business with the NHS, although profitability was affected by the mix of business and continuing pressure on gross margins. We implemented the RBS contract in February 2013 with no loss of service to the customer. The contract has traded in line with expectations from the start and we have become one of RBS's preferred suppliers.
In the latter part of the year, we were formally notified of an extension to our Government Office Supplies Contract (GOSC) for a minimum of 6 months as well as an extension to the wider public sector supply framework for 12 months.
Throughout the year we continued to secure new business, using the BBS "Managed Procurement Model" as a core part of our offering. The model is an open-book approach, allowing the customer visibility of the product net margin earned by BBS, after taking into consideration all costs to service the contract. The customer can assess the cost to serve and can change ordering patterns to manage his costs.
Truline
Truline maintained a consistently high service level to the Advantia dealer network; new dealers have since signed up and the pipeline is looking strong for 2014. In an industry sector where service levels are often compromised, our last mile delivery service is proving to be a significant competitive advantage.
Taken together, our Managed Procurement activity remains a substantial business and a leader in the office products market. We have confidence that the changes to optimise our operations as mentioned in the Chairman's Statement will underpin future profitability.
Business Critical Services
Revenues in Business Critical Services grew 6% year on year, as the full year impact of contract wins in 2012 came through in 2013. In 2013, revenue was £84.6m which represented 36.5% of the total Group revenue (2012: £79.5m and 35.0%) and 47.2% of Group EBITA before central costs (2012: 37.7%).
Banner Managed Communication (BMC)
BMC is the largest business in the Business Critical activities of the Group. It has grown substantially over recent years, has invested in infrastructure, and has market opportunities to grow further organically, while enhancing its profitability. In 2013, with revenues of £79.2m (2012: £75.7m) it retained all its major contracts and won and launched important new accounts which will benefit 2014 including Care UK, Bourne Leisure and Harvey & Thompson Group.
The provision of marketing services continues to grow, with a general recovery in budgets and an increased spend on digital marketing channels in particular towards the end of 2013. We are also seeing a continuing trend to outsource to companies which are best placed to provide a professional and targeted service. In 2013, BMC was voted amongst the top 100 outsourcing firms globally in an IAOP poll, reflecting its success in executing multichannel marketing campaigns for its clients.
BMC's ability to measure accurately the return on client marketing investment has helped its clients focus their spend and, together with its increased sales in technical applications to support their marketing communications, meant that some 15% of revenue in 2013 derived from services other than traditional print management.
BMC was also, for the first time, asked to act for an established client in the USA, an exciting marketplace with clear potential for further growth. In 2014, we hope to continue expansion outside the UK through opportunities provided by existing clients.
Banner Document Services (BDS)
BDS, our secure document destruction service operating Closed LoopTM, the fully auditable recycling solution for customers, delivered continued growth during the year, with sales revenue increasing to over £5m (2012: £3.8m). Banner Records Management which provides an on-site and off-site digital solution for document storage and retrieval was launched during the year and is expected to deliver growth in 2014 as we make customers aware of this additional, complementary service offering.
Private/public sector mix
In 2013, private sector corporate customers provided 70% of Group revenue compared to 66.8% in 2012.
Operating Costs
Logistics and distribution are significant costs for the Group, but delivering excellent service remains an important strategic differentiator. In 2013, despite the change in customer buying habits to 'little and often', as outlined in the Chairman's Statement, we were able to maintain our overall service costs at the 10% targeted level. These efficiency gains were delivered through greater productivity levels across all logistics activities, most notably in warehouse line picking and last mile distribution. Addressing and adapting to these continuing changes remains a challenge today and is the imperative driving our re-modelling programme.
In the second half of 2013, we started a programme to reduce our central support costs. This is continuing and will yield its main benefit from the second half of 2014.
Chief Operating Officer
In March 2014, Steve McKeever resigned as Chief Operating Officer to take up a leadership role in the IT industry. We thank him for his considerable contribution to the Group and wish him well in his new role.
Employees
The Group is essentially a people not an asset business. Our staff deliver outstanding service to our customers and it is because of them that we are still outperforming our peers in the office supplies industry. The Board recognises that 2014 will be a further challenging year and wants to thank them in advance for their continuing commitment and diligence.
S R Moate
Chief Executive
2 April 2014
Strategic Report
Principal activities
The principal activity of the Company is that of a holding company. The Group's principal activities are delivering managed procurement of office supplies and business critical services.
Development and performance during the year
The Chairman's Statement and Chief Executive's Review provide an overview of the underlying performance and development of the Group in 2013.
Results: accounting treatment
During 2013, we reviewedcertain accounting treatments relative to best practice, to provide greater transparency of the Group's financial performance and to improve our financial reporting.
We have changed the timing of the recognition of advance supplier rebates for contributions to catalogue production and for other purchasing agreements, which have grown in significance in the recent past. For these, the Board has determined that our policy will now be to recognise the advance rebate within the catalogue distribution or purchasing period with which it is associated. Our approach to software recognition has been revised such that both licence and maintenance revenues are now being recognised over the contracted term of the licence. We have also determined that customer rebate recognition should align more closely with the relevant reporting period. Deficiencies were found, too, in the contract cost estimation models used by Banner Managed Communication which had led to an under recognition of cost of sales. These and a pensions adjustment driven by a change in accounting standards have required us to make prior year adjustments to 2012 and earlier years, which are explained in full in the Significant Accounting Policies note in the accounts.
These adjustments affect comparison between 2013 and 2012, and indicate that the financial position in 2013 was, in relative terms, stronger than at first appeared, though this does not detract from the need for change, as already covered in the Chairman's Statement and Chief Executive's Review.
Revenue and profit
Total revenue was £231.9m (2012 restated: £227.0m). Underlying profit before tax was £4.2m (2012 restated: £4.2m) before non-recurring costs of £0.8m (2012: £4.0m), amortisation of intangibles relating to acquisitions of £1.5m (2012: £1.2m) and share option charges of £nil (2012: £0.5m). Operating profit before such costs was £6.5m (2012 restated: £6.3m) and operating profit after such costs was £4.2m (2012 restated: £0.5m). Profit before tax, after such costs, was £1.8m (2012 restated: a loss of £1.6m) and profit after tax was £1.3m (2012 restated: a loss of £1.4m). The underlying profit margin was 1.8%(2012 restated: 1.8%).
Non-recurring costs are those significant items that by virtue of their size or incidence are separately disclosed to enable a better understanding of the Group's operating performance. In 2013, £0.6m (2012: £0.7m) related to compensation payments and £0.2m (2012: £0.9m) to operational efficiency improvements. In 2012, of other non-recurring costs, £1.9m related principally to the maintenance of customer service levels in the early stages of the Advantia contract and the remainder were items to reshape the business in line with its diversification strategy. A full analysis of the non-recurring costs is set out in note 4 to the financial statements.
Cash flow, net debt and financing
TheGroup generated net cash from operating activities of £10.1m(2012: £4.2m). At 31 December 2013, net debt was £21.8m, a decrease of £7.2m from £29.0m at the start of the year.
Net debt of £21.8m is supported by borrowing facilities committed until June 2015.We have agreed with RBS to amend the committed facilities to allow headroom for more rapid execution of our reorganisation programme. The facilities comprise a term loan of £12.5m repayable over 5 years with the next instalment of £1.5m due in December 2014; a revolving credit facility of £2.0m; overdraft facilities of £1.0m; a stock facility of £3.0m and an invoice discounting arrangement of up to £27.0m.Financial covenants are applied to those committed facilities and the Group has continued to comply with the set covenants.
Tax
The Group's effective tax rate in 2013 was 27.6% (2012 restated: 12.7%). The low effective rate in 2012 is primarily attributable to expenses not deductible for tax purposes and the impact of adjustments in respect of prior year estimates. The Group has a further £1,965,000 (2012: £1,965,000) of non-trading losses where no tax asset is recognised as there is currently no expectation that these non-trading losses can be offset against future profit streams.
The amount of corporation tax paid during the year was £0.3m (2012: £0.3m).
The effective tax rate in the near future is anticipated to be marginally above the standard rate of UK corporation tax.
Shareholders' return
Basic and diluted earnings per share were 3.6p (2012 restated: loss of 3.9p) with underlying earnings per share of 8.7p (2012: 8.5p). There is no dividend paid or payable in respect of 2013. The total dividend paid in respect of 2012 was not covered by earnings, although it was covered 1.2 times by underlying earnings. Shareholders' equity at the end of the year was £14.5m(2012 restated: £15.6m).
The middle market quotation of the Company's Ordinary shares at the end of the financial year was 31.0 p with a market capitalisation of £11.3m(including shares held by the employee benefit trust).
Key performance indicators (KPIs)
Overall measurement of the financial performance of the operating segments, Managed Procurement and Business Critical Services, is based on adjusted earnings before interest, taxation and amortisation (EBITA). Details can be found in note 1 to the financial statements.
The individual KPIs which o2o uses to measure business performance are gross margin, distribution costs, administration costs and underlying profit, all expressed as a proportion of revenue, underlying earnings per share and net debt.
2013 | 2012* | |||||
Gross margin % | 25.2% | 25.2% | ||||
Gross margin percentage is gross profit expressed as a percentage of revenue. It is the measure of sales profitability after related direct purchase costs and is a measure comparable with other companies. Slightly lower margins in Managed Procurement, owing to the dilutive impact of business won on an ex-works basis, have been mitigated by the higher margins in Business Critical Services. | ||||||
Distribution cost % | 10.1% | 9.8% | ||||
This represents the cost associated with distribution (in 2012, before £2.9m of non-recurring costs) expressed as a percentage of revenue. Changes in customer ordering habits have offset distribution efficiencies achieved in 2013. | ||||||
Administration cost % | 12.7% | 13.0% | ||||
This is the cost associated with administration (before £0.8m of non-recurring costs (2012: £1.1m), amortisation £1.5m (2012: £1.2m), and share option charges £nil (2012: £0.5m)) expressed as a percentage of revenue. Efficiencies and a small increase in revenue are reflected here. | ||||||
Underlying profit % | 1.8% | 1.8% | ||||
This measures underlying profit (before non-recurring costs, amortisation and share option charges) as a percentage of revenue. The stabilisation of underlying profit is a recurring theme here. | ||||||
Underlying earnings per share | 8.7p | 8.5p | ||||
Underlying eps is the profit on ordinary activities after tax (before the after tax effect of non-recurring costs, amortisation and share option charges) divided by the weighted average number of Ordinary shares in issue during the year. | ||||||
Net debt | £21.8m | £29.0m | ||||
Net debt is calculated by subtracting cash and cash equivalents from the long and short term borrowings. Net debt decreased by £7.2m largely as a result of the focus on working capital management and debt reduction. | ||||||
* restated
Change of auditors
We decided that 2013 was an appropriate time to consider a change of auditors. PricewaterhouseCoopers had given many years of committed service but we consider it good practice to refresh professional advisors after a period. During a formal tender process, we included each of the four largest audit firms and selected KPMG LLP.
Business model and strategy
The Chairman's Statement and Chief Executive's Review summarise our business models, their rationale and effectiveness and set out the changes in strategy required by market pressures and by our performance over 2012 and the first half of 2013.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are set out below:
· Loss of a large customer
The Group has a number of large customers and is, therefore, potentially vulnerable to the loss of any one of these. Our GOSC contract is the largest that will be tendered during 2014 for award by the end of 2014 with a start in the first half of 2015. Contingency plans are formulated and quantified before any large re-tenders are submitted to seek to enable the business to respond rapidly, with minimal disruption, to a large contract loss. This, coupled with a strategy of diversifying the customer base and widening the business portfolio at the same time as maintaining a high level of service, is designed to help mitigate the exposure.
· Reduction in gross margins
Continued pressure on gross margins is inevitable in a highly competitive market place. Our risk management seeks ways to mitigate margin reductions, by working with customers and suppliers to reduce cost while maintaining service standards and product quality. Cost increases result mainly from adverse movements in the cost of production or foreign exchange. The Group also benchmarks suppliers, validates proposed cost increases against raw material market indices, re-engineers product and reviews the logistics process. We also work with our customers to review their purchasing behaviour and required service levels.
· Interruption of operations or IT services
The business is built around a proven service with reliance on our warehouses and IT infrastructure. A severe disruption in either of these areas could have a significant impact on the Group. In order to mitigate these risks we maintain appropriate disaster recovery plans and insurance cover.
· Competitors
The Group operates in a highly competitive market. The risk exists, therefore, that contracts are awarded simply on the basis of lowest price, irrespective of the overall value package. Our strategy is to deliver a wide range of first rate, added-value services at competitive prices. Recent contract wins and retentions help demonstrate that this approach is valued by our customers across the Group.
· Economic backdrop
The Group is inevitably affected to some degree by economic slowdown and changes in exchange rates and the potential that lower levels of activity lead to reduced demand for some of the goods and services provided by the Group. This was particularly evident with the reduction in public sector sales volumes as a consequence of Government austerity measures. In addition, economic circumstances affect suppliers. However, the Group has limited exposure to the failure of any single supplier since, for the majority of products purchased, alternative sourcing or product options are normally available.
The Group's committed borrowing facilities afford some protection against increased funding requirements should they arise. In addition, the widespread nature of our customers help to mitigate risks in the wider economy.
· Financial risk management
The Group's activities expose it to a variety of financial risks, which include market risk (comprising currency risk, commodity price risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.
· Working capital management
The risk from limited availability of further capital could constrain the growth of the business. The Group mitigates this risk by regular monitoring of cash flow and funding requirements to ensure sufficient undrawn facilities are in place to service its operating activities.
Human rights
Those activities which are directly controlled by the Group are substantially in developed countries with strong human rights legislation with which the Group fully complies. However, the Group does source products and services globally and takes active steps to uphold ethical and responsible behaviour in its dealings and those of its suppliers.
Gender
Set out below is an analysis of the number of employees by gender at the end of 2013:
Male | Female | Total | |
Board of Directors (including non-executives) | 6 | 0 | 6 |
Senior managers | 21 | 9 | 30 |
Employees | 626 | 263 | 889 |
Total | 653 | 272 | 925 |
% of total workforce | 71% | 29% |
On behalf of the Board,
H C L Cawley
Group Finance Director
2 April 2014
Consolidated Income Statement
for the year ended 31 December 2013
2013 | 2012* | |||
£000 | £000 | |||
| Revenue | 231,887 | 227,045 | ||
| Cost of sales | (173,427) | (169,725) | ||
| Gross profit | 58,460 | 57,320 | ||
| Distribution costs | (23,367) | (25,310) | ||
| Administrative expenses | (31,863) | (32,335) | ||
| Other operating income | 925 | 832 | ||
| Operating profit | 4,155 | 507 | ||
Finance costs | (2,332) | (2,138) | ||
Profit/(loss) before income tax | 1,823 | (1,631) | ||
Analysed as: | ||||
Underlying profit before income tax # | 4,192 | 4,156 | ||
Share option expense | (48) | (541) | ||
Non-recurring costs | (834) | (4,002) | ||
Amortisation of intangibles | (1,487) | (1,244) | ||
Profit/(loss) before income tax | 1,823 | (1,631) | ||
Income tax (expense)/credit | (503) | 207 | ||
Profit/(loss) for the year | 1,320 | (1,424) | ||
Earnings per Ordinary share attributable to owners of the Company | ||||
Basic | 3.6p | (3.9)p | ||
Diluted | 3.6p | (3.9)p | ||
* Restated, see Significant Accounting Policies.
# Profit before income tax, non-recurring costs, amortisation of intangibles and share option expense.
Consolidated Statement of Comprehensive Income for the year ended 31 December 2013 | 2013 | 2012* | ||||
£000 | £000 | |||||
Profit/(loss) for the year | 1,320 | (1,424) | ||||
Other comprehensive income: | ||||||
Items that will never be reclassified to profit or loss: | ||||||
Remeasurements of the defined benefit liability | (1,147) | (494) | ||||
Tax on items that will never be reclassified to profit or loss | 206 | 99 | ||||
Items that are or may be reclassified subsequently to profit or loss: | ||||||
Currency translation differences | 25 | (43) | ||||
Total comprehensive income for the year | 404 | (1,862) | ||||
* Restated, see Significant Accounting Policies. | ||||||
Consolidated Balance Sheet for the year ended 31 December 2013 | ||||||
31 December 2013 | 31 December 2012* | |||||
£000 | £000 | |||||
Assets | ||||||
Non-current assets | ||||||
Intangible assets | 57,561 | 57,878 | ||||
Property, plant and equipment | 2,232 | 3,225 | ||||
Deferred income tax assets | 1,135 | 1,039 | ||||
60,928 | 62,142 | |||||
Current assets | ||||||
Inventories | 8,637 | 9,045 | ||||
Trade and other receivables | 34,985 | 37,839 | ||||
Current income tax asset | 550 | 1,148 | ||||
Cash and cash equivalents | 1,906 | 1,725 | ||||
46,078 | 49,757 | |||||
Total assets | 107,006 | 111,899 | ||||
Equity | ||||||
Capital and reserves attributable to the owners of the Company | ||||||
Ordinary shares | 363 | 363 | ||||
Share premium account | 5,009 | 5,009 | ||||
Other reserves | 66 | 41 | ||||
Retained earnings | 9,092 | 10,222 | ||||
Total equity | 14,530 | 15,635 | ||||
Non-current liabilities | ||||||
Borrowings | 10,943 | 12,322 | ||||
Deferred income tax liabilities | 830 | 991 | ||||
Retirement benefit liability | 1,646 | 777 | ||||
Provisions | 432 | 495 | ||||
13,851 | 14,585 | |||||
Current liabilities | ||||||
Trade and other payables | 65,741 | 63,123 | ||||
Borrowings | 12,733 | 18,435 | ||||
Provisions | 151 | 121 | ||||
78,625 | 81,679 | |||||
Total liabilities | 92,476 | 96,264 | ||||
Total equity and liabilities | 107,006 | 111,899 | ||||
* Restated, see Significant Accounting Policies.
The financial statements comprising the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and Company balance sheets, the consolidated and Company statements of changes in equity, the consolidated and Company cash flow statements, the significant accounting policies and information and the notes to the financial statements were approved for issue by the Board of Directors on 2 April 2014.
J L Cohen
Chairman
2 April 2014
Registered number 04083206
Consolidated Statement of Changes in Equity
for the year ended 31 December 2013
Ordinary shares | Share premium account | Other reserves | Retained earnings | Total equity | |
£000 | £000 | £000 | £000 | £000 | |
Balance at 1 January 2013 as previously reported | 363 | 5,009 | 41 | 14,127 | 19,540 |
Effect of prior year adjustments | - | - | - | (3,905) | (3,905) |
Balance at 1 January 2013 as restated | 363 | 5,009 | 41 | 10,222 | 15,635 |
Profit for the year | - | - | - | 1,320 | 1,320 |
Other comprehensive income | - | - | 25 | (941) | (916) |
Total comprehensive income for the year ended 31 December 2013 | - | - | 25 | 379 | 404 |
Employee share options: | |||||
- value of employee services | - | - | - | 161 | 161 |
- deferred tax on share options | - | - | - | (368) | (368) |
Dividends: | |||||
- Ordinary shares | - | - | - | (1,302) | (1,302) |
- | - | 25 | (1,130) | (1,105) | |
Balance at 31 December 2013 | 363 | 5,009 | 66 | 9,092 | 14,530 |
Ordinary shares | Share premium account | Other reserves | Retained earnings* | Total equity* | |
£000 | £000 | £000 | £000 | £000 | |
Balance at 1 January 2012 as previously reported | 363 | 5,009 | 84 | 17,386 | 22,842 |
Effect of prior year adjustments | - | - | - | (1,758) | (1,758) |
Balance at 1 January 2012 as restated | 363 | 5,009 | 84 | 15,628 | 21,084 |
Loss for the year | - | - | - | (1,424) | (1,424) |
Other comprehensive income | - | - | (43) | (395) | (438) |
Total comprehensive income for the year ended 31 December 2012 | - | - | (43) | (1,819) | (1,862) |
Employee share options: | |||||
- value of employee services | - | - | - | 476 | 476 |
- deferred tax on share options | - | - | - | 50 | 50 |
Dividends: | |||||
- Ordinary shares | - | - | - | (4,113) | (4,113) |
- | - | (43) | (5,406) | (5,449) | |
Balance at 31 December 2012 | 363 | 5,009 | 41 | 10,222 | 15,635 |
* Restated, see Significant Accounting Policies.
Share premium account
The share premium account represents the difference between the nominal value of the shares issued and the amount received for them. This is a non-distributable reserve.
Other reserves
Other reserves relate to foreign exchange translation differences on the net assets of overseas subsidiaries. This is a non-distributable reserve.
Consolidated Statement of Cash Flow
for the year ended 31 December 2013
2013 | 2012 | |||
£000 | £000 | |||
Cash flows from operating activities | ||||
Cash generated from operations | 12,966 | 6,536 | ||
Interest paid | (2,522) | (2,130) | ||
Income tax paid | (324) | (255) | ||
Net cash generated from operating activities | 10,120 | 4,151 | ||
Cash flows from investing activities | ||||
Purchase of property, plant and equipment | (307) | (1,140) | ||
Capitalised software | (1,170) | (451) | ||
Proceeds from disposal of trading activities | - | 358 | ||
Net cash (used in)/generated from investing activities | (1,477) | (1,233) | ||
Cash flows from financing activities | ||||
Finance lease principal payments | (143) | (551) | ||
Repayment of borrowings | (5,000) | (2,500) | ||
Dividends paid to Company's shareholders | (1,302) | (4,113) | ||
Net cash used in financing activities | (6,445) | (7,164) | ||
Net increase/(decrease) incash, cash equivalents and bank overdrafts | 2,198 | (4,246) | ||
Cash, cash equivalents and bank overdrafts at 1 January | (11,744) | (7,498) | ||
Cash, cash equivalents and bank overdrafts at 31 December | (9,546) | (11,744) | ||
Net debt at 31 December comprises:
2013 | 2012 | |||
£000 | £000 | |||
Cash, cash equivalents and bank overdrafts | (9,546) | (11,744) | ||
Finance leases | (89) | (232) | ||
Bank loans | (12,135) | (17,056) | ||
Net debt at 31 December | (21,770) | (29,032) | ||
Significant Accounting Policies
for the year ended 31 December 2013
GENERAL INFORMATION
office2office plc (the Company) and its subsidiaries (the Group) provide managed procurement and business critical services. The Group operates in the United Kingdom and Republic of Ireland.
The Company is a public limited company, which is listed on the London Stock Exchange and is incorporated and domiciled in the United Kingdom. The address of its registered office is St Crispins, Duke Street, Norwich, NR3 1PD.
BASIS OF ACCOUNTING
Basis of preparation
The financial information set out above does not constitute the Group's statutory financial statements for the years ended 31 December 2013 or 2012. Statutory consolidated financial statements for the Group for the year ended 31 December 2012, prepared in accordance with adopted IFRS, have been delivered to the Registrar of Companies. The auditors have reported on the 2012 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of any emphasis without qualifying their opinion and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. As noted below, there have been a number of prior period adjustments which have impacted the 2012 financial statements.
The financial information for the year ended 31 December 2013 has been prepared by the Directors based upon the results and position that are reflected in the consolidated financial statements of the Group.
The consolidated financial statements of office2office plc and its subsidiaries have been prepared in accordance with International Financial Reporting Standards as adopted by the EU as relevant to the financial statements of office2office plc.
CHANGES IN ACCOUNTING POLICIES AND RESTATEMENT
The Group has adopted the following changes in accounting policies and restatements:
· Amendments to IAS 1 - Presentation of Items of Other Comprehensive Income (see (a))
· IAS 19 - Employee Benefits (2011) (see (b))
· Amendment to the revenue accounting policy - Sale of software (see (c))
· Amendment to the treatment relating to supplier rebates and contributions for catalogue production (see (d))
· Amendment to the treatment relating to customer rebate recognition (see (e))
· Amendment to the prior year accruals for goods received not invoiced (see f))
· IFRS 13 - Fair Value Measurement (see (g))
(a) Presentation of items of other comprehensive income
As a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its statement of comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has also been re-presented accordingly.
The adoption of the amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.
(b) Defined benefit plans
As a result of the modifications to IAS 19, the Group can no longer use the corridor approach to account for actuarial gains and losses arising on its defined benefit pension scheme liability which are now recognised immediately within other comprehensive income. The Group will immediately recognise all past service costs; and replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability.
Further details of the effect of the change are set out in note (h) below.
(c) Sale of software
During the period the Group reassessed the appropriateness of its accounting policy in respect of the sale of software licences and related maintenance services. Previously, where collection of payments was deemed likely, then both licence and maintenance revenues were recognised on initial delivery of the software. Under the new policy, both licence and maintenance revenues will be recognised over the contracted term of the licence, better reflecting industry practice.
Further details of the effect of the change are set out in note (h) below.
(d) Supplier rebates and contributions for catalogue production
Supplier contract rebates, being payments received from suppliers as part of purchasing agreements, and contributions for catalogue production are treated as deductions in cost of sales and other operating income, respectively. In the past they have been recognised upon receipt of payment when there has been no future liability or commitment towards future purchases, or purchases at uneconomic pricing. The Group has taken the decision to defer the recognition of these payments and amortise them over, respectively, the life of the supplier contract or the catalogue distribution period. The Group believes this change provides more appropriate recognition of its obligations and underlying financial performance.
Further details of the effect of the change are set out in note (h) below.
(e) Customer rebate recognition
Customer rebates are not recognised where the probability of payment is considered remote. Management have reconsidered the method by which they assess the likelihood of payment, following a number of payments being identified where the rebate provided was insufficient, which has resulted in additional rebates being recognised. The Group has revised its approach so as to better assess any liabilities due under such rebate agreements.
Further details of the effect of the change are set out in note (h) below.
(f) Remeasurement of prior year accrual relating to goods received not invoiced
Following a review of invoices posted in 2013 relating to 2012, it was established that the goods received not invoiced accrual of £8,251,000 had been understated by £594,000. The prior year balances have been restated to correct this error. There is no impact on the financial statements for the year ended 31 December 2013.
Further details of the effect of the change are set out in note (h) below.
(g) Fair value measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7, 'Financial Instruments: Disclosures'.
IFRS 13 is applied prospectively and has had no material impact on the accounts in the current year.
(h) Summary of quantitative impact
The following tables summarise the impacts resulting from the above changes in accounting policies on the Group's financial position, profit and comprehensive income. Adjustments have been reflected in the restated Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity and earnings per share for the year ended 31 December 2012 for these amounts. There is no effect on the Consolidated Statement of Cash Flows.
Condensed consolidated statement of financial position
1 January 2012 | Effect of changes in accounting policy and restatement | |||||||||||||||
As previously reported | Defined benefit plan | Sale of software | Supplier rebates | Catalogue contributions | Customer rebates | Goods received not invoiced | As restated | |||||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||||
| Retirement benefit asset/(liability) | 105 | (727) | - | - | - | - | - | (622) | ||||||||
| Deferred income tax asset/(liability) | (129) | 182 | - | - | - | - | - | 53 | ||||||||
Trade and other payables | (48,362) | - | (260) | (1,259) | - | (128) | - | (50,009) | ||||||||
Current income tax asset | 98 | - | 69 | 334 | - | 31 | - | 532 | ||||||||
| Others | 71,130 | - | - | - | - | - | - | 71,130 | ||||||||
| Net assets | 22,842 | (545) | (191) | (925) | - | (97) | - | 21,084 | ||||||||
| Retained earnings | 17,386 | (545) | (191) | (925) | - | (97) | - | 15,628 | ||||||||
| Others | 5,456 | - | - | - | - | - | - | 5,456 | ||||||||
| Total equity | 22,842 | (545) | (191) | (925) | - | (97) | - | 21,084 | ||||||||
31 December 2012 | Effect of changes in accounting policy and restatement | |||||||||||||||
As previously reported | Defined benefit plan | Sale of software | Supplier rebates | Catalogue contributions | Customer rebates | Goods received not invoiced | As restated | |||||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||||
| Retirement benefit asset/(liability) | 490 | (1,267) | - | - | - | - | - | (777) | ||||||||
| Deferred income tax asset/(liability) | (244) | 292 | - | - | - | - | - | 48 | ||||||||
Trade and other payables | (59,200) | - | (364) | (2,037) | (670) | (258) | (594) | (63,123) | ||||||||
Current income tax asset | 155 | - | 95 | 518 | 171 | 63 | 146 | 1,148 | ||||||||
| Others | 78,339 | - | - | - | - | - | - | 78,339 | ||||||||
| Net assets | 19,540 | (975) | (269) | (1,519) | (499) | (195) | (448) | 15,635 | ||||||||
| Retained earnings | 14,127 | (975) | (269) | (1,519) | (499) | (195) | (448) | 10,222 | ||||||||
| Others | 5,413 | - | - | - | - | - | - | 5,413 | ||||||||
| Total equity | 19,540 | (975) | (269) | (1,519) | (499) | (195) | (448) | 15,635 | ||||||||
31 December 2013 | Effect of changes in accounting policy and restatement | |||||||||||||||
Defined benefit plan | Sale of software | Supplier rebates | Catalogue contributions | Customer rebates | Goods received not invoiced | Total | ||||||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | ||||||||||
| Retirement benefit asset/(liability) | (2,393) | - | - | - | - | - | (2,393) | |||||||||
| Deferred income tax asset/(liability) | 532 | - | - | - | - | - | 532 | |||||||||
Trade and other payables | - | (364) | (1,812) | (592) | (258) | (594) | (3,620) | |||||||||
Current income tax asset | - | 95 | 479 | 145 | 63 | 146 | 928 | |||||||||
| Net assets | (1,861) | (269) | (1,333) | (447) | (195) | (448) | (4,553) | |||||||||
| Retained earnings | (1,861) | (269) | (1,333) | (447) | (195) | (448) | (4,553) | |||||||||
Condensed consolidated statement of profit or loss and other comprehensive income
For the twelve months ended 31 December 2012 | Effect of changes in accounting policy and restatement | |||||||||||||||
As previously reported | Defined benefit plan | Sale of software | Supplier rebates | Catalogue contributions | Customer rebates | Goods received not invoiced | As restated | |||||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||||
| Revenue | 227,279 | - | (104) | - | - | (130) | - | 227,045 | ||||||||
| Cost of sales | (167,683) | - | - | (778) | (670) | - | (594) | (169,725) | ||||||||
| Administrative expenses | (31,457) | (46) | - | - | - | - | - | (31,503) | ||||||||
Income tax (expense)/credit | (363) | 11 | 26 | 191 | 164 | 32 | 146 | 207 | ||||||||
Others | (27,448) | - | - | - | - | - | - | (27,448) | ||||||||
| Profit for the period | 328 | (35) | (78) | (587) | (506) | (98) | (448) | (1,424) | ||||||||
| Remeasurements of the defined benefit liability | - | (494) | - | - | - | - | - | (494) | ||||||||
| Tax on items that will never be reclassified to profit or loss | - | 99 | - | - | - | - | - | 99 | ||||||||
| Others | (43) | - | - | - | - | - | - | (43) | ||||||||
| Other comprehensive income for the period | (43) | (395) | - | - | - | - | - | (438) | ||||||||
| Total comprehensive income for the period | 285 | (430) | (78) | (587) | (506) | (98) | (448) | (1,862) | ||||||||
For the twelve months ended 31 December 2013 | Effect of changes in accounting policy and restatement | ||||||||||||
Defined benefit plan | Sale of software | Supplier rebates | Catalogue contributions | Customer rebates | Goods received not invoiced | Total | |||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||
| Revenue | - | - | - | - | - | - | |||||||
| Cost of sales | - | - | 225 | - | - | - | 225 | ||||||
| Administrative expenses | (29) | - | - | - | - | - | (29) | ||||||
Other operating income | - | - | - | 78 | 78 | ||||||||
Income tax expense | 7 | - | (48) | (17) | - | - | (58) | ||||||
| Overall (decrease)/increase in profit for the period | (22) | - | 177 | 61 | - | - | 216 | ||||||
| Other comprehensive income: | |||||||||||||
| Remeasurements of the defined benefit liability | (1,097) | - | - | - | - | - | (1,097) | ||||||
| Tax on items that will never be reclassified to profit or loss | 233 | - | - | - | - | - | 233 | ||||||
| Overall decrease in other comprehensive income for the period, net of tax | (864) | - | - | - | - | - | (864) | ||||||
| Overall impact on total comprehensive income for the period | (886) | - | 177 | 61 | - | - | (648) | ||||||
Going concern
The Directors, in their detailed consideration of going concern, have reviewed the Group's future cash forecasts and revenue projections, which they believe are based on prudent market data and past experience, and believe, based on those forecasts and projections, that it is appropriate to prepare the financial statements of the Company and the Group on a going concern basis.
In arriving at this conclusion the Directors considered the Group's financing arrangements, which comprise a term loan of £12.5 million, revolving credit facility of £3m and £30 million of asset backed bank facilities committed to June 2015.
During the year the Group generated £7m from both trading and a large series of sustainable detailed actions. This focus on cash continues and we anticipate continuing to generate cash in the future. One of the main applications of cash during the year was repayment of £4m of bank debt. The next repayment is currently scheduled for December 2014 when £1.5m is due to be repaid. The balance of the term loan is then scheduled to be repaid in June 2015.
The Company has started discussions with its Lender, well ahead of the expiry date, regarding the refinancing of these facilities. Both the Company and its Lender are committed to the refinancing of both the term loan and the other facilities on suitable terms and no matters have been drawn to the Company's attention to suggest that a refinancing will not be forthcoming on acceptable terms. The related facilities, including certain covenants, have been amended favourably for the Group subsequent to the year end.
In contemplation of revised debt facilities the company has prepared detailed cash flow forecasts to the end of 2016. Sales volumes, the impact of ongoing restructuring and trading continuing to follow current trends, are key assumptions in these forecasts and relevant sensitivities have been applied.
The existing bank facilities are subject to just two basic financial covenants set by the Lender. At the date of this report the Group has complied in all respects with the terms of its borrowing agreements, including its financial covenants, and forecasts to continue to do so.
Consequently, the Directors have a reasonable expectation that the Company and the Group will continue to comply with the covenants in their facilities and they have adequate resources to meet their liabilities as they fall due for a period of at least 12 months from the date of approval of the financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
use of non-gaap profit measures
The Directors believe that the use of underlying profit before income tax provides a clearer understanding of the performance of the Group. This measure is used for internal performance analysis. Underlying profit is not defined by IFRS and therefore may not be directly comparable with other companies' adjusted profit measures. It is not intended to be a substitute for, or superior to, IFRS measurements of profit.
Underlying profit is calculated as follows:
2013 | 2012* | ||
£000 | £000 | ||
Profit before income tax | 1,823 | (1,631) | |
Add: | |||
Share option charges | 48 | 541 | |
Non-recurring costs (note 4) | 834 | 4,002 | |
Amortisation of intangibles | 1,487 | 1,244 | |
Underlying profit before income tax | 4,192 | 4,156 |
* Restated, see Significant Accounting Policies.
Notes to the Financial Statements
for the year ended 31 December 2013
1. SEGMENTAL INFORMATION
IFRS 8, 'Operating Segments', requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The operating segments are identified on the basis of internal reports regularly reviewed by the Executive Board of Directors, the Executive Board of Directors being the chief operating decision-maker, in order to allocate resources to the segments and to assess their respective performance.
The Board considers the business from a service perspective. The Group is organised into two business segments:
· Managed Procurement; and
· Business Critical Services
The trading brands of each reportable segment (Banner Business Services and Truline in respect of Managed Procurement and Banner Managed Communication and Banner Document Services in respect of Business Critical Services), do not qualify as reportable segments as decisions about the allocation of resources and the assessment of performance are not made at this level.
The Board assesses the performance of the operating segments based on a measure of adjusted earnings before interest, taxation and amortisation (EBITA). This measurement basis excludes the effects of non-recurring expenditure from the operating segments, such as restructuring costs. An analysis of intangible assets and amortisation, although not included in the performance measure for the segments, have been included to aid the reader. Other information provided to the Board, except as noted below, is measured in a manner consistent with that in the financial statements.
Managed Procurement | Business Critical Services | Total | |||
£000 | £000 | £000 | |||
| Year ended 31 December 2013 | |||||
| Revenue | 147,256 | 84,631 | 231,887 | ||
| Gross margin % | 24.5% | 26.4% | 25.2% | ||
| Adjusted EBITA | 8,379 | 7,476 | 15,855 | ||
| Year ended 31 December 2012* | |||||
| Revenue | 147,530 | 79,515 | 227,045 | ||
| Gross margin % | 25.2% | 25.3% | 25.2% | ||
| Adjusted EBITA | 9,917 | 6,005 | 15,922 | ||
| Total assets | |||||
| 31 December 2013 | 51,495 | 55,218 | 106,713 | ||
| 31 December 2012* | 54,689 | 56,860 | 111,549 | ||
| Additions to property, plant and equipment | |||||
| 31 December 2013 | 101 | 206 | 307 | ||
| 31 December 2012 | 633 | 565 | 1,198 | ||
| Depreciation | |||||
| 31 December 2013 | (711) | (215) | (926) | ||
| 31 December 2012 | (736) | (324) | (1,060) | ||
| Additions to intangible assets | |||||
| 31 December 2013 | 161 | 1,009 | 1,170 | ||
| 31 December 2012 | 134 | 317 | 451 | ||
Intangible assets | |||||
| 31 December 2013 | 20,370 | 37,191 | 57,561 | ||
| 31 December 2012 | 20,389 | 37,489 | 57,878 | ||
Amortisation | |||||
| 31 December 2013 | (265) | (1,222) | (1,487) | ||
| 31 December 2012 | (218) | (1,026) | (1,244) |
A reconciliation of total adjusted EBITA to profit before income tax is provided as follows:
2013 | 2012* | ||
£000 | £000 | ||
| Adjusted EBITA for reportable segments | 15,855 | 15,922 | |
| Central costs | (9,331) | (9,628) | |
| Finance costs | (2,332) | (2,138) | |
| Underlying profit before income tax | 4,192 | 4,156 | |
| Share option expense | (48) | (541) | |
| Non-recurring costs | (834) | (4,002) | |
| Amortisation | (1,487) | (1,244) | |
| Profit before income tax | 1,823 | (1,631) |
Reportable segments' assets are reconciled to total assets as follows:
2013 | 2012* | |||
£000 | £000 | |||
| Total segment assets | 106,713 | 111,549 | ||
| Unallocated: | ||||
| Short leasehold land and buildings - head office | 293 | 350 | ||
| Total assets per balance sheet | 107,006 | 111,899 |
Revenue generated by geographical segment:
|
2013 £000 |
2012* £000 | |||
| United Kingdom | 230,598 | 225,788 | ||
| Republic of Ireland | 1,289 | 1,257 | ||
| Total | 231,887 | 227,045 | ||
* Restated, see Significant Accounting Policies.
Of the revenues generated in the United Kingdom £225,034,000 (2012: £222,554,000) are generated from customers in the United Kingdom and the total of revenues from customers from other countries is £5,564,000 (2012: £3,234,000). All of the revenues in respect of the Republic of Ireland are generated from customers in the Republic of Ireland. Of the total assets in the United Kingdom and Republic of Ireland £59,793,000 (2012: £61,103,000) and £nil (2012: £nil) respectively relate to non-current assets (other than deferred tax assets).
Expenditure on property, plant and equipment of £307,000 (2012: £1,198,000) was incurred in the United Kingdom. Expenditure on intangible fixed assets of £1,170,000 (2012: £451,000) was incurred in the United Kingdom. No amounts in respect of expenditure on property, plant and equipment or intangible fixed assets were incurred in the Republic of Ireland.
No single customer generates more than 10% of total revenues.
2. CASH GENERATED FROM/(USED IN) OPERATIONS
2013 | 2012* | ||||||
| £000 | £000 | ||||||
| Profit before income tax | 1,823 | (1,631) | |||||
| Adjustments for: | |||||||
| Amortisation of intangible assets | 1,487 | 1,244 | |||||
| Depreciation of property, plant and equipment | 926 | 1,060 | |||||
Loss/(profit) on disposal of property, plant and equipment | 374 | (14) | |||||
Finance costs | 2,332 | 2,138 | |||||
Share option expense | 161 | 476 | |||||
Decrease/(increase) in inventories | 408 | (71) | |||||
Decrease/(increase) in trade and other receivables | 2,854 | (8,874) | |||||
Increase in trade and other payables and provisions | 2,601 | 12,208 | |||||
Cash generated from operations | 12,966 | 6,536 | |||||
* Restated, see Significant Accounting Policies.
3. EARNINGS PER SHARE
(a) Basic
Basic earnings per share is calculated by dividing profit attributable to owners of the Company by the weighted average number of Ordinary shares in issue during the year excluding Ordinary shares held by the EBT.
2013 | 2012* | |||
Profit/(loss) attributable to owners of the Company (£000) | 1,320 | (1,424) | ||
Weighted average number of Ordinary shares in issue ('000) | 36,171 | 36,081 | ||
Basic earnings per share (pence) | 3.6 | (3.9) |
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary shares outstanding to assume conversion of all dilutive potential Ordinary shares. The Company has one category of dilutive potential Ordinary shares, being share options. For share options, a calculation is undertaken to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
2013 | 2012* | |||
Profit/(loss) attributable to owners of the Company (£000) | 1,320 | (1,424) | ||
Weighted average number of Ordinary shares in issue ('000) | 36,171 | 36,081 | ||
Adjusted for share options ('000) | - | 89 | ||
Weighted average number of Ordinary shares for diluted earnings per share ('000) | 36,171 | 36,170 | ||
Diluted earnings per share (pence) | 3.6 | (3.9) |
(c) Underlying earnings per share
Underlying earnings per share is calculated by dividing profit on ordinary activities after tax (before the after tax effect of non-recurring costs, amortisation and share option expense) by the weighted average number of Ordinary shares in issue during the year excluding Ordinary shares held by the EBT.
2013 | 2012* | |||
Profit/(loss) attributable to owners of the Company (£000) | 1,320 | (1,424) | ||
Amortisation (net of tax) | 1,141 | 939 | ||
Share option expense | 48 | 541 | ||
Non-recurring costs (net of tax) | 640 | 3,022 | ||
Underlying profit attributable to owners of the Company (£000) | 3,149 | 3,078 | ||
Weighted average number of Ordinary shares in issue ('000) | 36,171 | 36,081 | ||
Underlying earnings per share (pence per share) | 8.7 | 8.5 |
(d) Underlying diluted earnings per share
Underlying diluted earnings per share is calculated by dividing profit on ordinary activities after tax (before the after tax effect of non-recurring costs, amortisation and share option expense) by the diluted weighted average number of Ordinary shares during the year excluding Ordinary shares held by the EBT.
2013 | 2012* | |||
Profit/(loss) attributable to owners of the Company (£000) | 1,320 | (1,424) | ||
Amortisation (net of tax) | 1,141 | 939 | ||
Share option expense | 48 | 541 | ||
Non-recurring costs (net of tax) | 640 | 3,022 | ||
Underlying profit attributable to owners of the Company (£000) | 3,149 | 3,078 | ||
Weighted average number of Ordinary shares in issue ('000) | 36,171 | 36,081 | ||
Adjusted for share options ('000) | - | 89 | ||
Weighted average number of Ordinary shares for diluted earnings per share ('000) | 36,171 | 36,170 | ||
Underlying diluted earnings per share (pence) | 8.7 | 8.5 |
* Restated, see Significant Accounting Policies.
4. NON-RECURRING COSTS / (CREDITS)
The amounts recognised as non-recurring costs/(credits) are as follows:
2013 | 2012 | ||
£000 | £000 | ||
| Compensation payments | 589 | 678 | |
Business closure costs | - | 659 | |
Gain on disposal of trading activity | - | (75) | |
Business review costs | 245 | 881 | |
Contract implementation and business start up costs | - | 1,859 | |
834 | 4,002 |
Compensation payments relate to amounts paid to ex-employees of Group companies. Business closure costs and gain on disposal relates to the closure of non-core activities. Business review costs relate to costs incurred by the Group in relation to management's commitment to improve operational efficiency. Contract implementation and business start up costs relate to costs incurred with setting up the Truline business.
5. DIVIDENDS
2013 | 2012 | |||
£000 | £000 | |||
Amounts recognised as distributions in the year in respect of: | ||||
Ordinary shares - final dividend 2012 - 3.6p per share | (1,302) | - | ||
Ordinary shares - interim dividend 2012 - 3.6p per share | - | (1,302) | ||
Ordinary shares - final dividend 2011 - 7.8p per share | - | (2,811) | ||
(1,302) | (4,113) |
The Directors have not proposed a dividend for 2013.
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