AVESCO GROUP PLC INTERIMREPORT AND ACCOUNTS 2011
www.avesco.com
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EBITDA for the threemonths ended 31March 2011 was down 4% on the comparable period last year at £4.7m(threemonths ended 31March 2010: £4.9m) but up 12% for the sixmonths ended 31March 2011 at £9.2m(sixmonths endedMarch 2010: £8.3m).
After a net investment of £4.2m(threemonths ended 31March 2010: £2.8m) in equipment and fixed assets plus working capital outflows of £2.4m(threemonths ended 31March 2010: inflows of £0.6m), the net debt rose slightly over the quarter from£16.3mat 31 December 2010, to £18.7mat 31March 2011, resulting in the Group’s gearing (being net debt divided by total equity) increasing to 51% from44%.
BANKING FACILITY In anticipation of a busy 2012, we have renegotiated and increased our banking facilities with HSBC, the Group’smain bankers. Our loan facility with HSBC has been extended until 2015. Total facilities with HSBC are now £32mand the cost of borrowing has been reduced. These new facilities should provide the Group with the additional capital required to take advantage of the opportunities that lie before us.
US LITIGATION The Group has an economic interest in the outcome of litigation brought in the USA by a company in the Complete Communications Corporation Limited (“Complete”) group. In July 2010, the jury reached a unanimous verdict in favour of Complete. If the judgement sumis paid in full, the Group’s share after costs would be approximately $60m(in the region of £1.40 per Avesco Group ordinary share based on the current issued share capital). The defendants have appealed the Court’s decision and it is anticipated that the appeal process will take around two years. Although the extended timeline of this process is a little frustrating, we are comfortable that the legal argument on which this case will be determined remains favourable to us.
STRATEGY, CURRENT TRADING AND OUTLOOK Our long-termstrategy has been to create a balanced international business, building on areas where we canmake a difference and provide a better service to our clients. The Group has significant unrealised potential which has been created by developing the trust of our customers through delivering a top class, professional service to themformore than 25 years – we are not complacent – but I believe that this is an asset of considerable value.
We continue to grow and see future opportunities. In recent years, our emphasis has predominantly been on organic growth and start ups, both of which take time to develop as opposed to themore instant results of acquisitions. However, by following a steadier route, we have been able to build the structures in the way that we want, writing off the cost against the profits of the day.We are now entering a period where these operations are starting to contribute to profits. Creative Technology, our largest business, now has a significant and growing operation inmainland Europe. In Asia, we are reaching profitability in a region of enormous growth potential. There are other examples of growth and advancement across the Group, where we have successfully built upon our existing businesses and skills.
The Board is determined and focused not only upon ensuring that this forward development continues but also that it becomes visible and recognised.
The cornerstone of the Avesco Group is the extraordinary skill and dedication of our staff, developed overmany years. I amproud of themand grateful for their achievements. As we look forward to the remainder of 2011, we are confident that, as we address new challenges and create fresh opportunities, we shall continue tomake further progress.
Moving closer on the horizon is 2012, a year that continues to hold exceptional promise for the Avesco Group.
Richard Murray Chairman 16 June 2011
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