Xansa PLC - Final Results
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RNS Number:1873Z
Xansa PLC
28 June 2007
28 June 2007
Preliminary Results Announcement for
the year ended 30 April 2007
Xansa, the outsourcing and technology company, is pleased to announce its
results for the full year ended 30 April 2007.
Financial Performance
Summary FY 2007 FY 2006 Change
£ million £ million
%
Revenue 379.7 357.3 6.3%
Underlying operating profit* 25.2 23.3 8.2%
Underlying operating margin* 6.6% 6.5% 0.1%
Profit before tax** 16.4 13.3 23.3%
Diluted Adjusted EPS* 5.12p 4.29p 19.3%
* Revenue increased year on year reflecting the return to growth
* Underlying operating margin* increased to 6.6% (2006: 6.5%)
* Profit before tax** increased 23.3% to £16.4 million (2006: £13.3 million)
* Diluted adjusted earnings per share* increased by 19.3% to 5.12 pence
(2006: 4.29 pence)
* Dividend maintained at 3.24p per share
* Before exceptional items and share based payments, but including share of
joint venture losses after tax
** Before exceptional items.
Business Highlights
* Continued growth of public sector - revenues up 56%
* New client wins and expansion in the F&A, HRO and the IT services space
including: the FSA, Threshers, BBC, Co-opertive Financial Services, and
Lloyds TSB
* 100% of contract renewals successfully completed
* Orderbank of £549 million is the highest for four years
* India workforce increased by 29% to 5,038
* NHS Shared Business Services JV continues to make good progress
Bill Alexander, Chairman and Interim Chief Executive, Xansa commented:
'I am pleased to report on a successful year for Xansa in which we delivered
both revenue and profit growth. Our share of public sector business has
continued to grow substantially and we have yet again retained our 100% success
rate of contract renewals. During the year we have also expanded our service
offering into areas such as Human Resource Outsourcing and have won new business
with organisations including the BBC, Threshers, FSA and Transport for London.
We continue to grow our presence in India with over 62% of our people now based
in that country. Our offshore/onshore integrated delivery model continues to be
a key differentiating factor for our business and an important competitive
advantage.
'It has been a year of continuing success in the transition of our business from
an onshore IT outsourcing provider to an integrated onshore/offshore business
services provider and we continue to view our future and our prospects with
confidence.'
Contacts
Bill Alexander, Chairman and Interim Chief Executive, Giles Sanderson, James
Melville-Ross
Xansa Financial Dynamics
Gordon Stuart, Finance Director, Xansa Tel : + 44 (0)20 7831 3113
Tel : + 44 (0)8702 416181
About Xansa
Xansa is a UK-based outsourcing and technology company that specialises in
delivering business services.
With a 45-year history of sustaining long-term relationships and pioneering
better ways of working, Xansa drives real and long-term cost reductions and
improved business performance. Committed to delivering guaranteed business
outcomes through a combination of technology and process expertise, Xansa gives
clients across the private and public sectors the freedom to do more.
Xansa is listed on the London Stock Exchange (XAN.L) with over 8600 people in
the UK and India. Xansa had revenues in 2007 of £379.7 million.
Further information on Xansa can be found at: www.xansa.com
Business and Financial Review
2007 has seen Xansa make significant progress against its key strategic
objectives. After a period of revenue transition and restructuring we can now
report that both revenues and profits have increased. Our record in contract
renewal continues and we have been successful in extending all contracts due for
renewal as well as winning significant new clients. Our orderbank is the
strongest it has been for many years, new services have been added to our
portfolio and our leadership position in existing services has been
consolidated. Our resource base has continued to grow and with over 5,000 staff
now based in India, we have become one of Britain's biggest employers in our
sector in that country.
Our strategy of focusing on growing our business in the UK is delivering
results. We have successfully won new work in our traditional IT Services space
and increasingly we see our clients turning to us for help in other areas of
their business, covering a range of back office business services including
Finance and Accounting and HR administration. This is true in both our
established private sector clients and increasingly in the public sector - a key
investment area for us in recent years. Clients are looking for ways that
technology can automate, streamline and standardise a whole range of their
internal processes. Our skills in technology and process operations form a
powerful combination enabling us to develop expert solutions to meet this
growing need in the marketplace. As we identify the range of technology-enabled
business services that we can deliver and that our clients will require, we
believe we are well placed to continue to extend our reach and develop further
leadership positions in a number of important business services.
Our Clients
We have had another successful year winning new clients, renewing contracts and
extending relationships with existing clients. Doing more for our clients is a
critical philosophy in our business and the long-term relationships we have
built are testament to the value that they see us bringing to their
organisations.
In the UK private sector, activity levels increased despite a highly competitive
market and headcount grew by 5% to service the higher level of demand. We
continued to transition our business towards greater offshore delivery and the
costs of this transition have been fully absorbed within our operating
expenditure. We have also made excellent progress in growing our Indian
operations with almost all of our private sector clients now enjoying the
benefits of our offshore capabilities. However, whilst the provision of
offshore resources has become a requirement to compete in the sector, we see a
distinct competitive advantage from the high level of integration that has been
achieved in our onshore and offshore client delivery model over the past ten
years. No other organisation can match this level of integration which creates
a single and seamless face to our client with very clear accountabilities for
delivery.
We continued our excellent record of contract renewals and, in particular, were
pleased to extend our 12 year relationship with Co-operative Financial Services
(CFS). Our new five year agreement represented a broadening of the partnership
to encompass the Insurance side of the business, in addition to the bank which
we had served before. Our integrated delivery capability will support CFS's
business change agenda which is driving towards its vision of becoming the UK's
most admired Financial Services business.
Our public sector business enjoyed another good year and grew strongly.
Revenues increased by 56% to £119.4 million (2006: £76.4 million) representing
around one third of our total revenues. Growth has been achieved in both central
and local Government and we now work across a number of key Government
departments including the Home Office, Department of Health, Department for
Education & Skills (DfES) and the Cabinet Office.
With the publication of the Varney Report, the Government's strategy of
electronically linking citizens with public services and the leveraging of
shared services centres to bring efficiency to back office administration is
clear. We have focused our investment on these two primary services and have
created leadership positions in each.
* For The Club, a consortium of the Department of Health, DfES and
Cabinet Office, we are building and now operate a standardised web platform to
allow citizens easier access via the internet to information and public
services. An example is www.direct.gov.uk through which users can quickly find
Government information across a range of subjects covering health, transport,
justice, employment, tax, education and the environment. As Government
rationalises its websites, the technology and services we have put in place will
provide an excellent platform that other departments can leverage to reduce cost
and provide a more standardised and user-friendly linkage between the citizen
and the public services
* As leaders in the provision of shared services in Government, we have
made excellent progress with NHS Shared Business Services (NHS SBS), our
pioneering joint venture with the Department of Health. We have grown the
number of NHS Trusts serviced by our business and since the inception of the
joint venture in April 2005, transaction volumes have increased almost four-fold
and the business continues to make good progress towards profitability. We can
now see opportunities to broaden the range of services that the joint venture
can deliver and intend to invest accordingly as such opportunities arise. This
year's accounts reflect the second year of operation of the joint venture and
show a loss after tax of £1.1 million (2006: £2.7 million loss).
Elsewhere in the public sector we were pleased to win a major new contract worth
£85m over 10 years with the BBC to deliver outsourced Finance and Accounting
services. Transfer of the services operation will take place in the first half
of our next financial year. Winning such a high-profile client against strong
competition is testament to the expertise we now have in the Finance and
Accounting outsourcing market. With a client list in this area including the
BBC, NHS and BT, we now service some of the UK's largest and highest-profile
organisations.
The Xansa-led Crystal Alliance, has successfully delivered and is operating
commercial customer billing, customer contact services and the initial phases of
mobile work management for Northern Ireland Water Limited, a Government owned
company. We had in addition completed, on time, the domestic billing
implementation element of this contract but were requested to defer final
implementation pending an independent review of water charging in Northern
Ireland commissioned by the Northern Ireland Assembly. This has had no impact
on the reported results for the year. We expect there to be a degree of ongoing
uncertainty over the form and timing of the introduction of domestic water
charging until the review is completed.
Business Performance
Financial Key Performance Indicators 2007 2006
Revenue £379.7 million £357.3 million
Underlying operating profit * £25.2 million £23.3 million
Underlying operating profit margin 6.6% 6.5%
Profit before tax ** £16.4 million £13.3 million
Diluted adjusted EPS * 5.12p 4.29p
Net debt £10.9 million £17.7 million
* Before share based payments and exceptional items.
** Before exceptional items.
All key financial measures have improved over the last 12 months. Revenue of
£379.7 million was up 6.3% from £357.3 million in 2006 and importantly continued
to show sequential growth for the third successive six month period. This
reflects the impact of new business wins in the year and the full year effect of
new contracts started in the previous year. It also underlines the return to
growth of the business after the dilutive impact of the transition of work from
onshore to offshore. On an ongoing basis we continue to experience a
year-on-year reduction in the revenue derived from services provided to
customers as a result of the increased proportion of work delivered from India
which is now more than offset by new business particularly in the public sector.
Underlying operating margins increased from 6.5% to 6.6% due to the beneficial
impact of the transition of onshore activity to offshore, the effect of a weaker
rupee on our Indian cost base and improved performance in our joint venture with
the Department of Health. Underlying operating profit increased 8.2% to £25.2
million (2006: £23.3 million) and PBT increased over 23.3% to £16.4 million
(2006: £13.3 million). Diluted EPS* increased 19% to 5.12p (2006: 4.29p).
Share-based payments
Share-based payments were £3.8 million (2006: £3.8 million). This charge
represents the amortisation of the fair value of share based payments over their
vesting period. The current year charge represents a true full year effect,
reduced by the impact of share option lapses due to leavers from the scheme.
Net interest payable
Net interest payable was £5.0 million (2006: £6.2 million). Prevailing interest
rates on our UK debt during the period were approximately 7.5% (2006: 6.4%),
Average borrowings increased from £36.7 million in 2006 to £40.3 million in
2007, primarily due to a change in contract payment terms on the renewal of a
number of major contracts. These contracts, which were previously paid in
advance, have reverted to a more normal 'in arrears' payment structure. The
higher UK debt was offset by increasing Indian cash balances. In addition to
this, there was a lower net finance expense arising from our pension schemes
than in the prior year.
Profit before tax
Profit before tax, after share based payments, but before exceptional items
increased to £16.4 million in 2007 (2006:£13.3 million).
Taxation
The tax charge of £3.0 million (2006: £2.8 million) on profit before tax* of
£21.3 million (2006: £19.8 million) results in a tax rate of 14.1% (2006:
14.1%). Profits in our India subsidiary presently benefit from a corporate tax
holiday. This Indian tax holiday expires on a site-by-site basis over the next
two years and as a consequence our tax rate will increase.
* Before share based payments and share of joint venture's loss after tax.
Minority interest
The minority interest of £0.1 million (2006 £0.3 million) represents the 0.7%
residual minority interest in Xansa India Ltd that was not acquired on the
original acquisition of IIS Infotech. In prior periods the minority interest
also included Barclays' interest in the Barclays Xansa Partnership Ltd (BXP).
The structure of this contract changed in June 2006 and there is now no minority
interest in relation to BXP.
EPS
Diluted adjusted earnings per share* of 5.12p (2006: 4.29p) is computed on
underlying profit before tax* of £20.2 million (2006: £17.1 million).
The tax charge applied to these profits is £3.8 million, which excludes a £0.8
million tax credit (2006: £0.5 million credit) arising on the distribution of
shares from the trusts since the related charge is not reflected in adjusted
profit before tax*.
Minority interests of £0.1 million (2006: £0.3 million) are deducted to arrive
at adjusted earnings* of £16.3 million (2006: £13.5 million).
The diluted earnings per share after share-based payments and exceptional items
is 4.18p (2006: 2.32p).
* Before share based payments and exceptional items.
Dividend
The Board intends to propose a final dividend of 2.16p in respect of the current
year. Dividend cover, defined as basic earnings per share divided by the
dividend per share, has improved to 1.6 times (2006: 1.4 times). Subject to
shareholder approval, the final dividend will be paid on 27 September 2007 to
shareholders on the shareholders' register on 6 July 2007.
Consolidated balance sheet
2007 2006
£ million £ million
Non-current assets
Intangible assets 83.5 85.9
Property, plant & equipment 23.5 24.9
Investment in joint venture 7.7 8.8
114.7 119.6
Working Capital
Inventories - 0.2
Receivables 61.9 64.5
Payables (77.5) (80.2)
(15.6) (15.5)
Post retirement benefit liability (34.9) (84.8)
Other provisions (5.2) (9.6)
Net borrowings (10.9) (17.7)
Corporate and deferred tax 6.1 13.9
Net assets 54.2 5.9
The change in non-current assets represents the depreciation charge for the
year, partly offset by capital expenditure. Under IFRS, goodwill is no longer
amortised but rather is subject to annual review for impairment. There was no
impairment in the current year.
Investment in the joint venture of £7.7 million (2006: £8.8 million) represents
our investment in the JV with the Department of Health and comprises the share
of the JV net assets plus the goodwill arising on investment. The reduction
reflects the fact that the JV made a loss in 2007.
Overall working capital reduced by £0.1 million in the year. There were changes
to the terms of certain contracts which altered their cash flow profiles. This
adversely impacted debtor days but better collection across the accounts has
partly mitigated this impact. Debtor days at 27 are eight lower then last year.
The adoption of IAS 19 results in the Group's post retirement benefit liability
being included as a liability in the balance sheet. The net deficit has been
reduced from £84.8 million to £34.9 million. This movement was principally
attributable to a strengthening in equity markets which increased the value of
the pension plan assets, an increase in the levels of contribution above the
annual service charge, an increase in corporate bond yields which are used to
determine the liability discount rate and the revision of assumptions on pension
commutation based on current experience
Other provisions, representing our supply commitment to the JV and liability for
vacant property, reduced as a result of their utilisation in the period.
Corporate and deferred tax reduced over the period due to the reduction in the
post retirement benefit liability.
Cash flow
Underlying operating cash inflow of £24.0 million (2006 £15.3 million),
calculated after capital expenditure but before cash flows relating to
exceptional items, exceeded the outflows of £6.3 million (2005 £3.9 million) in
respect of interest and tax, resulting in operating free cash flow of £17.7
million (2006: £11.4 million).
2007 2006
£ million £ million
Operating free cash flow 17.7 11.4
Dividends paid to Xansa shareholders (8.3) (7.8)
Exceptional items (3.1) (4.1)
Other movements 0.5 (1.4)
Change in net debt 6.8 (1.9)
Net borrowings at start of period (17.7) (15.8)
Net borrowings at end of period (10.9) (17.7)
The current year exceptional items represent the cash outflow in respect of the
Group's vacant properties for which a charge was taken in prior years.
Overall the Group ended the year with net borrowings of £10.9 million (2006
£17.7 million) comprised cash and deposits of £43.9 million (2006 £33.3
million) offset by bank loans and overdrafts of £54.8 million (2006 £51.0
million).
Treasury policy
The Group holds financial instruments for two principal purposes. Firstly, to
finance its operations and secondly to manage interest rate and currency risks
arising from its operations and its sources of finance. The Group finances its
operations by a mixture of cash flow from operations, short-term borrowings and
longer term loans from banks. Derivative financial instruments (principally
forward currency contracts) are used in order to manage these currency risks.
The Group's key financial risks encompass liquidity and refinancing risk,
interest rate movements and currency exchange rate movements. These risks are
managed by the Finance Director under policies approved by the Board, which are
summarised below. These policies have remained unchanged since April 2006. A
Finance Committee of the Board receives reports on the Group's treasury
activities, policies and procedures. The treasury function is not a profit
centre and its activities are subject to internal audit.
Non- financial Key Performance Indicators
Non-financial Key Performance Indicators 2007 2006
Headcount (excluding external contractors) UK 3,586 3,794
India 5,038 3,920
People Poll UK 2.7 2.7
India 2.1 2.2
Headcount, which is a key measure of the level of activity in our business, grew
strongly. Our workforce balance has continued to shift towards India and at the
year end 62% (2006: 56%) of our salaried employees were based in India. Year
end contractor numbers were also lower.
People poll, our annual survey open to all employees, measures the level of
engagement our staff have in our business. The survey enables us to gauge the
views of our employees on a range of issues and to put in place plans to address
their concerns. Results range from 1 (excellent) to 5 (poor) and our aim is to
achieve and maintain a score below 2.5.
Principal risks and uncertainties
Executive management throughout the Group use a common set of tools to identify,
report and manage risk. This process is well-established and reviewed by the
Board on a regular basis. The principal risks and the actions taken to mitigate
against them are set out below.
Xansa has a long and trusted relationship with its major clients. In the last
year 64% of our revenue came from clients that we have worked with for over five
years. We have set a strategic objective to broaden our customer base and as
noted earlier have had a number of notable successes in this endeavour. Our
ongoing account management model seeks to highlight opportunities aimed to
enhance our long-term, value adding relationships with our clients.
Most relationships and contracts we enter into are for the long term and a
number involve the delivery of new applications and services. A critical
success factor is the provision of a robust project control environment to
deliver successful operational and commercial outcomes. We have a well tested
governance framework and project reviews are regularly conducted by independent
reviewers as well as being subject to management oversight.
Attracting and retaining high quality staff in India and in the UK is critical
to our business model. Our recruitment, induction and training programmes aim to
increase employee skills and loyalty and the new opportunities created as a
result of our growing operations provides a rewarding career environment for
staff and ensures attrition does not become unmanageable. Owing to the
competitive nature of the offshore industry in India, we actively manage the
impact of local wage inflation on operating margins through the mix of onshore
and offshore staff, levels of experience and seniority and leveraging our
infrastructure cost base.
Liquidity and refinancing risk
The Group's policy is to ensure that forecast funding requirements can be met
within available committed facilities at a reasonable cost. To do this the
Group seeks to arrange committed funding at a variety of maturity dates from a
range of sources.
During 2007 Xansa renegotiated its banking facilities and now has in place a
revolving credit facility (RCF) of £85 million and a stand-by letter of credit
facility of £15 million. In addition, the RCF element of the facility can be
increased by up to a further £15 million. The facility, which is for a three
year term, was agreed in early April and became operational on the 23 May 2007.
As a consequence, the Group's total indebtedness is shown as a current liability
as the facility in place at the balance sheet date was due to expire within one
year.
Average Group net debt during the period was £40.3 million (2006: 36.7 million).
This represents the net of UK borrowings of £55.4 million (2006: £44.3
million) and sterling equivalent cash balances held in India of £15.1 million
(2006: £7.6 million).
Peak UK borrowings during the year were £71.5 million (2006: £63.0 million),
which represented 89% of available capacity under the then current facility.
Subsequent to the year end Xansa entered into a framework agreement, the
intention of which is to effect the sale and lease back of our property assets
in India. This agreement, which will be executed in phases, is expected to
raise up to £35 million (before expenses and taxes) which will be used to reduce
Group debt. The timing of each phase is dependent on achieving certain
regulatory clearances.
Interest rate movement
Interest rate policy has the objective of minimising net interest expense and
the protection of the Group from material adverse movements in interest rates.
Throughout the year to April 2007, the Group borrowed at floating rates only.
The Group had in place an interest rate cap which was purchased in September
2004 and which expired in May 2007. Interest on borrowings of £20.0 million was
protected against increases in 3-month LIBOR above 5.25% until May 2007.
Surplus cash from operations is invested in short-term bank deposits at market
interest rates. Credit risks on bank deposits are minimised by restricting such
investment activity to banks which are rated A1 or P1, with a maximum investment
limit with any one bank of £20.0 million. Credit risks on derivative financial
instruments are limited by the use of counterparty limits.
Credit Risk
Xansa's customer base predominantly comprises blue-chip companies and public
sector entities. The Directors regularly review the credit worthiness of
significant customers and credit references are obtained for significant new
customers where relevant. The Directors do not consider that the company is
exposed to any significant credit risk.
Currency
Although the Group's client base is largely based in the UK, it has a
significant investment in India. On translation into sterling, movements can
affect the Group balance sheet and income statement. Group policy is to
minimise balance sheet translation exposures, where fiscally efficient, by
financing working capital in local currency. The Group has transactional
currency exposures where sales or purchases by an operating unit are in
currencies other than in that unit's functional currency. Where billing
arrangements are in foreign currency Group policy is that committed
transactional exposures are hedged into the business's functional currency.
These hedging transactions have a term of less than a year and do not qualify
for hedge accounting under IAS 32/39.
Outlook
In a competitive market our first mover advantage in integrated delivery is
serving us well, with our onshore/offshore delivery model creating a compelling
business case for our clients and differentiating us. We have returned to
revenue growth and are confident this can continue. Our order bank at £549
million is the highest it has been for a number of years.
Our key service lines are aligned to the faster growing segments of the market
and we anticipate further contract wins to consolidate our leadership position
in these areas. This will help drive continued progress in underlying margins,
albeit that the recent fluctuations in the rupee exchange rate may impact the
rate of progress.
Our public sector business has continued its rapid progress growing by 56% in
the last year. Although this market has seen some slowdown, we expect activity
levels to pick up towards the end of 2007. Our track record and demonstrable
expertise in providing cost effective solutions mean that we are well placed to
continue our success in this market.
The innovative property deal we announced in May will progressively allow us to
reduce our level of debt. This will enable new investment in innovative
business models such as NHS SBS that will drive future growth.
It has been a year of continuing success in the transition of our business from
an onshore IT outsourcing provider to an integrated onshore/offshore business
services provider and we continue to view our future and our prospects with
confidence.
Consolidated Income Statement
For the year ended 30 April 2007
2007 2006 2006 2006
Before
exceptional Exceptional
items items Total
Notes £ million £ million £ million £ million
Revenue 379.7 357.3 - 357.3
Costs excluding share-based payments (353.4) (331.3) (4.3) (335.6)
Operating profit:
Before share-based payments and
share of joint venture's loss after tax 26.3 26.0 (4.3) 21.7
Share-based payments (3.8) (3.8) - (3.8)
Share of joint venture's loss after tax (1.1) (2.7) - (2.7)
Operating profit 21.4 19.5 (4.3) 15.2
Finance income 1.3 0.5 - 0.5
Finance expense 3 (6.3) (6.7) - (6.7)
Profit (loss) on ordinary activities before 2 16.4 13.3 (4.3) 9.0
taxation
Taxation 4 (3.0) (2.8) 1.4 (1.4)
Profit for the year 13.4 10.5 (2.9) 7.6
Attributable to:
Equity shareholders of the parent 13.3 10.2 (2.9) 7.3
Minority interests 0.1 0.3 - 0.3
13.4 10.5 (2.9) 7.6
Notes 2007 2006
Earnings per share (pence):
- basic 5 4.25p 2.39p
- diluted 5 4.18p 2.32p
Earnings per share before share
based payments and exceptional items (pence):
- basic 5 5.21p 4.42p
- diluted 5 5.12p 4.29p
2006
Pence £ million
per share
2005 Final dividend 2.16 6.8
2006 Interim dividend 1.08 3.4
3.24 10.2
2007
Pence £ million
per share
2006 Final dividend 2.16 6.8
2007 Interim dividend 1.08 3.5
3.24 10.3
2007 final dividend proposed 2.16p
All the results above relate to continuing activities.
Consolidated balance sheet
As at 30 April 2007
2007 2006
Notes £ million £ million
Assets
Non-current assets
Property, plant and equipment 23.5 24.9
Deferred income tax assets 13.5 20.4
Intangible assets 83.5 85.9
Prepayments 1.9 1.6
Investment in joint venture accounted for using
the equity method 7.7 8.8
Other receivables - 0.2
130.1 141.8
Current assets
Inventories - 0.2
Trade and other receivables 49.6 49.1
Amount due from joint venture - 6.5
Prepayments 10.4 7.1
Income tax recoverable 0.6 -
Cash and cash equivalents 43.9 33.3
104.5 96.2
Total Assets 234.6 238.0
Equity and liabilities
Equity attributable to equity holders of the parent
Issued capital 17.4 17.3
Share premium 70.2 68.3
Own shares (16.2) (17.7)
Other reserves 759.4 759.3
Retained earnings (776.7) (821.3)
Minority interest 0.1 -
Total equity attributable to equity holders of the parent 8 54.2 5.9
Non-current liabilities
Trade and other payables 0.9 0.5
Interest bearing loan and borrowings 0.7 38.3
Provisions 2.3 3.9
Post-retirement benefit liability 9 34.9 84.8
38.8 127.5
Current liabilities
Trade and other payables 76.6 79.7
Interest bearing loans and borrowings 54.1 12.7
Income tax payable 8.0 6.5
Provisions 2.9 5.7
141.6 104.6
Total liabilities 180.4 232.1
Total equity and liabilities 234.6 238.0
The financial statements were authorised for issue by the Board on 28 June 2007.
Consolidated statement of recognised income and expense
For the year ended 30 April 2007
2007 2006
£ million £ million
Employee defined benefit obligations:
- actuarial gain (loss) on defined benefit obligations 46.5 13.7
- deferred taxation recognised directly in equity (7.6) 5.0
Employee share option scheme - deferred taxation
recognised in equity - 0.3
Effect of foreign exchange rate changes 0.1 (0.4)
Net income recognised directly in shareholders' equity 39.0 18.6
Profit for the year 13.4 7.6
Total recognized income (expense) for the year 52.4 26.2
Attributable to:
Equity shareholders of the parent 52.3 25.9
Minority interests 0.1 0.3
52.4 26.2
Consolidated cash flow statement
For the year ended 30 April 2007
2007 2006
Notes £ million £ million
Profit before tax 16.4 9.0
Depreciation and amortization 10.1 6.9
Cost of employee share schemes 3.8 3.8
Finance income (1.3) (0.5)
Finance expense 6.3 6.7
Pension contribution (in excess of) less than IAS 19 cost (4.0) 3.6
Share of joint venture's loss after tax 1.1 2.7
Exceptional costs charged to profit and loss account - 4.3
Exceptional costs spent (3.1) (4.1)
Reduction (increase) in receivables 2.5 (8.3)
(Reduction) increase in payables (2.2) 3.9
Cash generated from operations 29.6 28.0
Interest paid (4.8) (3.6)
Tax paid (2.8) (0.8)
Net cash generated from operating activities 22.0 23.6
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment 0.1 0.1
Interest received 1.3 0.5
Investment in joint venture (1.5) (3.9)
Purchases of property, plant and equipment (4.5) (6.5)
Purchases of intangible assets (1.8) (5.9)
Net cash used in investing activities (6.4) (15.7)
Cash flows from financing activities
Proceeds from borrowings 11.7 -
Repayments of amounts borrowed - (0.1)
Cash paid to acquire own shares (1.0) (1.2)
Proceeds from sale of own shares 1.4 2.1
Payment of finance lease liabilities (1.0) (0.6)
Dividends paid to the Company's equity holders (8.3) (7.8)
Net cash generated by (used in) financing activities 2.8 (7.6)
Net increase in cash and cash equivalents 18.4 0.3
Cash and cash equivalents at the beginning of the year 22.4 22.0
Effect of foreign exchange rate changes 0.3 0.1
Cash and cash equivalents at end of period 41.1 22.4
Cash and cash equivalents consist of:
Cash and cash equivalents 43.9 33.3
Bank overdrafts (2.8) (10.9)
41.1 22.4
Notes to the Accounts
1. Basis of preparation
These accounts do not constitute statutory accounts. The results for the year
ended 30 April 2007 and 2006 are extracted from the audited accounts of Xansa
plc. The auditors, Ernst & Young LLP, reported on those accounts in accordance
with section 235 of the Companies Act 1985 and their report was unqualified and
did not contain a statement under section 237 (2) or (3) of the Companies Act
1985. The statutory accounts for the year ended 30 April 2006 have been
delivered to the Registrar of Companies.
These accounts have been prepared on a basis consistent with the accounting
policies set out in the 2006 annual accounts, with the exception that the
requirements of IFRIC 4 'Determining Whether an Arrangement Contains a Lease'
has been adopted. The adoption of IFRIC 4 did not have a significant impact on
the results or financial position of the Group.
The preliminary announcement was approved by the board on 27 June 2007.
2. Profit and expenses
Underlying profit measure
The Directors regard profit before tax and exceptional items as a key
performance indicator. Profits on this basis of measurement increased to £16.4
million in 2007 from £13.3 million in 2006. They reconcile to the total profits
before tax of £16.4 million (2006: £9.0 million) as follows:
2007 2006
£ million £ million
Profit (loss) on ordinary activities before taxation analysed as:
Profit before exceptional items 16.4 13.0
Exceptional items - (4.3)
16.4 9.0
3 Finance expense
2007 2006
£ million £ million
Finance expense (excluding items relating to pension scheme) (5.7) (4.4)
Expected return on pension fund assets 16.3 12.0
Interest on pension fund liabilities (16.9) (14.3)
(6.3) (6.7)
4. Taxation
2007 2006
£ million £ million
UK Corporation tax - current year 3.2 1.1
Adjustments in respect of prior years 0.2 (0.5)
3.4 0.6
Foreign tax 0.3 0.1
Adjustments in respect of prior years - (0.1)
Total current tax 3.7 0.6
Deferred tax :
Origination and reversal of temporary differences 0.4 0.4
Adjustments in respect of prior years (1.1) 0.4
(0.7) 0.8
Tax on profit on ordinary activities 3.0 1.4
5. Earnings per share
2007 2006
£ million £ million
Earnings per share:
- Basic 4.25p 2.39p
- Diluted 4.18p 2.32p
Earnings per share before share-based payments, pension settlements
and curtailments and exceptional items:
- Basic 5.21p 4.42p
- Diluted 5.12p 4.29p
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year. The average number of shares outstanding excludes
those held in trusts controlled by the company, which are treated as cancelled.
Diluted earnings per share is calculated on the same basis as the basic earnings
per share with a further adjustment to the weighted average number of ordinary
shares outstanding to reflect the effect of all dilutive potential ordinary
shares. The Group has three classes of dilutive potential ordinary shares: share
options granted to employees where the exercise price is less than the average
market price of the company's ordinary shares during the year, contingently
exercisable options under Xansa's management incentive plan and free and
matching shares awarded to employees for which the value of the award to be
recognised in the income statement in the future is less than the average market
price of the company's ordinary shares during the year.
2007 2006
number number
Weighted average number of ordinary shares used to calculate
basic earnings per share 312,633,031 305,744,744
Potential dilutive effect of ordinary shares issuable under share
option schemes 245,618 1,178,938
Potential dilutive effect of contingently issuable ordinary shares granted
under Xansa's management incentive plan 338,095 557,116
Potential dilutive effect of free and matching shares 4,944,470 6,884,772
Weighted average number of ordinary shares used for calculating
diluted earnings per share 318,161,214 314,365,570
Earnings per share before share-based payments, pension settlements and
curtailments and exceptional items is calculated using an adjusted earnings
figure calculated as shown below. The number of shares used to calculate the
adjusted earnings per share figures are the same as those used for the
unadjusted figures above.
2007 2006
£ million £ million
Profit for the year attributable to Xansa shareholders 13.3 7.3
Adjustments for:
- Share-based payments 3.8 3.8
- Exceptional items - 4.3
- Tax effect of above adjustments (0.8) (1.9)
Adjusted profit for the year attributable to Xansa shareholders 16.3 13.5
6. Dividends
The following dividends were paid by the Group:
Paid in cash Scrip Total
Elections
£ million £ million £ million
2006:
2005 Final dividend 2.16p 5.7 1.1 6.8
2006 Interim dividend 1.08p 2.1 1.3 3.4
7.8 2.4 10.2
2007:
2006 Final dividend 2.16p 5.6 1.2 6.8
2007 Interim dividend 1.08p 2.7 0.8 3.5
8.3 2.0 10.3
2007 Proposed final dividend 2.16p 6.9
The final proposed dividend for the year ended 30 April 2007 of £6.9 million
(2.16p per share) has not been recognised as a liability as at 30 April 2007.
7. Reconciliation of net increase in cash and cash equivalents to
movement in net funds (debt)
2007 2006
£ million £ million
Net increase in cash and cash equivalents 18.4 0.3
Cash (inflow) outflow from (increase) decrease in debt and lease financing (10.7) 0.7
Change in net funds (debt) resulting from cash flows 7.7 1.0
New finance leases (0.9) (1.9)
Amortisation of issue costs of debt and interest on finance lease creditor (0.3) (0.4)
Effect of foreign exchange rate changes on net cash and debt 0.3 (0.6)
Movement in net (debt) funds 6.8 (1.9)
Opening net (debt) funds (17.7) (15.8)
Closing net (debt) funds (10.9) (17.7)
8. Consolidated statement of changes in equity
2007 2006
£ million £ million
At start of year 5.9 (16.9)
Total recognised income (expense) for the year 52.4 26.2
Issue of shares - scrip dividends 2.0 2.4
Payments to aquire own shares (1.0) (1.2)
Receipts from sale of own shares 1.4 2.1
Share based payment charge 3.8 3.8
Equity dividends paid (10.3) (10.5)
54.2 5.9
9. Post-retirement benefit liability
2007 2006
£ million £ million
Fair value of plan assets 274.0 235.2
Present value of defined benefit obligation (308.9) (320.0)
Deficit (34.9) (84.8)
The material financial assumptions used for estimating the benefit obligations
are set out below.
2007 2006
% per annum % per annum
Rate of increase in salaries 3.8 3.7
Rate of increase in deferred pensions and pensions in payment 3.0 3.0
Discount rate 5.6 5.2
Inflation assumption 3.1 3.0
Assumptions regarding future mortality experience are set based on published
statistics and experience. The calculations as at 30 April 2007 and at 30 April
2006 are based upon the '92 series' mortality tables with a short cohort
projection. These assume that the average life expectancy of a male at age 60 is
86.5 years and of a female is 89.4 years.
10. Foreign currency translation
The exchange rates used for translation were as follows:
2007 2006
£1 = India rupee
Average rate 86.01 78.78
Year-end rate 82.37 82.05
This information is provided by RNS
The company news service from the London Stock Exchange
END
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