6pm Holdings plc - Full-Year Results & Dividend Announcement

On 11 April 2008 6pm Holdings plc published its Preliminary Profits Statement for the period ended 31 December 2007. Since 6pm Holdings plc was incorporated on 28 May 2007 and subsequently acquired 6pm Management Consultancy (UK) Ltd and 6pm Limited in July 2007, the Profits Statement essentially reflects a 5-month period. However, during a stockbrokers’ meeting also held on 11 April, the Company provided pro forma financial highlights for the twelve-month period to 31 December 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 pro forma figures show total revenue for the year amounting to GBP5.9 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 GBP2.1 million reflects a 32.7 per cent rise over the previous year but 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 GBP1.45 million giving an operating profit of GBP0.6 million (2006: GBP0.4 million). Net financing costs increased to GBP0.07 million as the company’s borrowings rose to GBP1 million during the year.

6pm Holdings registered a pre-tax profit of GBP0.54 million in 2007 and after accounting for tax credits, the profit for the period increased to GBP0.65 million, 12.8 per cent higher than the projected profitability at the time of the IPO.

Total assets as at 31 December 2007 amounted to GBP3.8 million with shareholders’ funds of GBP1.9 million.

The Directors declared the payment of a net dividend of GBP100,988 (GBP0.013 per share), equivalent to 45 per cent of the profits generated during the 5-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 GBP0.78, representing a 16.4 per cent gain from last year’s IPO level.

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 21 April 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 GBP1 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.

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