Financial review - 6pm's maiden results and dividend declaration
New contract awarded for over £1 million
On April 11, 6pm Holdings plc published its preliminary profits statement for the period ended December 31, 2007. Since 6pm Holdings plc was incorporated on May 28, 2007 and subsequently acquired 6pm Management Consultancy (UK) Ltd and 6pm Ltd in July 2007, the profits statement essentially reflects a five-month period. However, during a stockbrokers' meeting also held on April 11, the company provided proforma financial highlights for the 12-month period to December 31, 2007 assuming that the two subsidiaries operated as a group for the full-year. The projections made by the directors for 2007 during the Initial Public Offering in September 2007 were also based on this assumption.
The proforma figures show total revenue for the year amounting to £5.9 million, 8.5 per cent below the 2006 turnover and 5.6 per cent below the figure projected by the directors at the time of the IPO. However, the company's gross profit of £2.1 million reflects a 32.7 per cent rise over the previous year although 9.6 per cent below the projected amount. The directors noted that revenue from its major client, CapGemini, decreased during 2007 as a result of a review of UK government spending. However, 6pm was able to dedicate more time to other business which produced a better margin. In fact the gross profit margin increased from 23.8 per cent in 2006 to 34.5 per cent in 2007.
While CapGemini accounted for 77 per cent of turnover in 2006, the contribution from this client declined to 57 per cent in 2007. Furthermore, the company reported that revenues from CapGemini are down to 28 per cent of turnover in the first quarter of 2008. The dependency on this client was one of the major risk factors highlighted at the time of the IPO.
Administrative expenses increased by 27 per cent over the 2006 levels to £1.45 million giving an operating profit of £0.6 million (2006: £0.4 million). Net financing costs increased to £0.07 million as the company's borrowings rose to £1 million during the year.
6pm Holdings registered a pre-tax profit of £0.54 million in 2007 and after accounting for tax credits, the profit for the period increased to £0.65 million, 12.8 per cent higher than the projected profitability at the time of the IPO. Total assets as at December 31, 2007 amounted to £3.8 million with shareholders' funds of £1.9 million.
The directors declared the payment of a net dividend of £100,988 (£0.013 per share), equivalent to 45 per cent of the profits generated during the five-month period.
At the time of the IPO, 6pm's directors had agreed to adopt a policy that subject to available cash flows, 40 per cent of the company's distributable profits in each year will be paid to shareholders in the form of a dividend.
The share price reacted positively to 6pm's maiden results and dividend declaration and in the days following the announcement, the equity climbed 6.9 per cent to a new record of £0.78, representing a 16.4 per cent gain from last year's IPO level.
6pm is principally engaged in the provision of managed IT services and systems integration that supports enterprise software. The group is focused on servicing clients with pre-installed operating systems, databases and other applications who find it more cost-effective to outsource their IT demands.
This sector is said to be growing at an exponential rate and 6pm is well positioned to cater for these companies' needs. 6pm mainly operates in the UK and its clients range from small companies to very large international companies involved in various industry sectors as well as local and central government. In particular, the group works in partnership with other larger IT service companies and consultancies in the UK such as CapGemini, Sunguard Vivista, Fujitsu GB and British Telecom. 6pm is among the preferred suppliers of a number of these multinationals.
In recent years 6pm has done considerable resourcing work for CapGemini. This work falls within the Aspire contract which is a strategic partnership between CapGemini and Her Majesty's Revenue & Customs (HMRC). The agreement commenced in July 2004 whereby CapGemini, in a joint venture with Fujitsu and BT, took over the running and future development of the former Inland Revenue's IT and Support Services. The initial agreement is based on a 10-year contract and 6pm provides CapGemini with some of their quality IT developers.
Moreover, 6pm recently became a Gold Partner of Business Objects, which is a world-leading business intelligence software company. This significantly enhanced 6pm's value proposition to its customers as an increasing number of companies are seeking to incorporate business intelligence functionality into their operations. A few weeks after it obtained Gold Partner status, 6pm reported that it won its first contract involving the business intelligence software of Business Objects.
Meanwhile on April 21, 6pm announced that it was awarded a contract for the provision of information management skills to a major UK client.
The contract is reportedly in excess of £1 million over a 15-month period. This will continue to help 6pm diversify its revenue base and reduce its dependency on CapGemini as its single largest revenue generator.
•Mr Rizzo is a director at Rizzo, Farrugia & Co (Stockbrokers) Ltd.
• Rizzo, Farrugia & Co. (Stockbrokers) Ltd (RFC) are members of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It contains public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC may have or have had a relationship with or may provide or has provided other services of a corporate nature to companies therein mentioned. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees, accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.
http://www.rfstockbrokers.com
The proforma figures show total revenue for the year amounting to £5.9 million, 8.5 per cent below the 2006 turnover and 5.6 per cent below the figure projected by the directors at the time of the IPO. However, the company's gross profit of £2.1 million reflects a 32.7 per cent rise over the previous year although 9.6 per cent below the projected amount. The directors noted that revenue from its major client, CapGemini, decreased during 2007 as a result of a review of UK government spending. However, 6pm was able to dedicate more time to other business which produced a better margin. In fact the gross profit margin increased from 23.8 per cent in 2006 to 34.5 per cent in 2007.
While CapGemini accounted for 77 per cent of turnover in 2006, the contribution from this client declined to 57 per cent in 2007. Furthermore, the company reported that revenues from CapGemini are down to 28 per cent of turnover in the first quarter of 2008. The dependency on this client was one of the major risk factors highlighted at the time of the IPO.
Administrative expenses increased by 27 per cent over the 2006 levels to £1.45 million giving an operating profit of £0.6 million (2006: £0.4 million). Net financing costs increased to £0.07 million as the company's borrowings rose to £1 million during the year.
6pm Holdings registered a pre-tax profit of £0.54 million in 2007 and after accounting for tax credits, the profit for the period increased to £0.65 million, 12.8 per cent higher than the projected profitability at the time of the IPO. Total assets as at December 31, 2007 amounted to £3.8 million with shareholders' funds of £1.9 million.
The directors declared the payment of a net dividend of £100,988 (£0.013 per share), equivalent to 45 per cent of the profits generated during the five-month period.
At the time of the IPO, 6pm's directors had agreed to adopt a policy that subject to available cash flows, 40 per cent of the company's distributable profits in each year will be paid to shareholders in the form of a dividend.
The share price reacted positively to 6pm's maiden results and dividend declaration and in the days following the announcement, the equity climbed 6.9 per cent to a new record of £0.78, representing a 16.4 per cent gain from last year's IPO level.
6pm is principally engaged in the provision of managed IT services and systems integration that supports enterprise software. The group is focused on servicing clients with pre-installed operating systems, databases and other applications who find it more cost-effective to outsource their IT demands.
This sector is said to be growing at an exponential rate and 6pm is well positioned to cater for these companies' needs. 6pm mainly operates in the UK and its clients range from small companies to very large international companies involved in various industry sectors as well as local and central government. In particular, the group works in partnership with other larger IT service companies and consultancies in the UK such as CapGemini, Sunguard Vivista, Fujitsu GB and British Telecom. 6pm is among the preferred suppliers of a number of these multinationals.
In recent years 6pm has done considerable resourcing work for CapGemini. This work falls within the Aspire contract which is a strategic partnership between CapGemini and Her Majesty's Revenue & Customs (HMRC). The agreement commenced in July 2004 whereby CapGemini, in a joint venture with Fujitsu and BT, took over the running and future development of the former Inland Revenue's IT and Support Services. The initial agreement is based on a 10-year contract and 6pm provides CapGemini with some of their quality IT developers.
Moreover, 6pm recently became a Gold Partner of Business Objects, which is a world-leading business intelligence software company. This significantly enhanced 6pm's value proposition to its customers as an increasing number of companies are seeking to incorporate business intelligence functionality into their operations. A few weeks after it obtained Gold Partner status, 6pm reported that it won its first contract involving the business intelligence software of Business Objects.
Meanwhile on April 21, 6pm announced that it was awarded a contract for the provision of information management skills to a major UK client.
The contract is reportedly in excess of £1 million over a 15-month period. This will continue to help 6pm diversify its revenue base and reduce its dependency on CapGemini as its single largest revenue generator.
•Mr Rizzo is a director at Rizzo, Farrugia & Co (Stockbrokers) Ltd.
• Rizzo, Farrugia & Co. (Stockbrokers) Ltd (RFC) are members of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It contains public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC may have or have had a relationship with or may provide or has provided other services of a corporate nature to companies therein mentioned. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees, accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.
http://www.rfstockbrokers.com