Latest Results
Preliminary Results for the year ended 30 June 2008
Cashbox (AIM:CBOX), the independent Automated Teller Machine ("ATM") installer and operator, announces its preliminary results for the year ended 30 June 2008.
| Year ended 30 June 2008 |
Year ended 30 June 2007 |
|
| Machines installed at period end | 2,045 | 1,442 |
| Turnover £000 | 4,675 | 4,380 |
| Gross Profit £000 | 1,768 | 1,161 |
| Gross Margin % | 38 | 27 |
| EBITDA *† £000 | (2,000) | (3,510) |
| Loss on ordinary activities before exceptionals* £000 | (3,003) | (4,056) |
| Loss on ordinary activities after exceptionals £000 | (3,003) | (6,741) |
| Loss per share before exceptionals*(pence) | (3.4) | (6.3) |
| Loss per share after exceptionals (pence) | (3.4) | (10.5) |
| Net debt £000 | 5,016 | 2,204 |
* There were no exceptional items for the year ended 30 June 2008. Exceptional items for the year ended 30 June 2007 were £2,000,000 and £685,000 relating to litigation settlement costs and lease termination costs respectively.
† EBITDA is defined as Earnings before interest, tax, depreciation and amortisation, share based payments and exceptional items, (see note 11).
Highlights
- Installed estate increased from 1,442 to 2,045 at 30 June 2008
- Transaction revenues 12% higher
- Gross profit up 52% from last year at £1.8m
- Successfully completed two acquisitions in July and October 2008, adding 892 sites to the Cashbox estate
- Raised £1.5m of new equity and £1.5m in a convertible loan post year end to provide further working capital, as well as funding for acquisition and integration purposes
- Settlement reached with Royal Bank of Scotland relating to Hanco litigation and in September 2008, replacing the £1.8m debt with a convertible with five year term
CHAIRMAN'S STATEMENT
Improved operational performance has been key in achieving the reported results. However the development of a coherent strategy is vital to ensure full realisation of shareholder value. Your Board, in its last report, conveyed its intention to pursue opportunities to grow the business by acquisition. To this end the Board has devoted time and effort to achieve a position of leadership in the consolidation that the industry is experiencing. Current market conditions have made the furthering of this objective even more appropriate. The identification of possible acquisitions, which occurred in the second half of the year have resulted in positive outcomes since the year end. The significant increase in ATM numbers achieved both by organic growth and acquisition have increased the estate size to 2,045 at 30 June 2008, with over 2,500 active sites at 30 November 2008. Your Board believes that the estate size is such that profitability will now be achieved within an acceptable time scale.
2008 results
Sales for the year ended 30 June 2008 were £4,675,000 (2007: £4,380,000) resulting in an operating loss of £2,484,000 (2007: £5,932,000) and a loss before tax of £3,003,000 (2007: £6,741,000). During the year, the business has continued to roll out ATMs into both independent and managed sites. The Cashbox team has also focused on streamlining the operational aspects of the business by putting in place the necessary systems to run and maintain a fast growing estate. A new distributor agreement was signed in February 2008 with Triton, one of the market leaders in off-site ATM provision. The agreement is in addition to the existing distribution agreements with NCR Easypoint (formerly Tidel). The placement merchant (self-filled) model continues to be the prime focus for Cashbox and has seen the total estate grow by 42%, and now accounts for more than half the ATMs deployed. The business has also begun identifying and rolling out a fully managed service to selected high transacting sites where it is financially viable to offer this service. This is an area that is likely to expand with increase in demand, and our ability to provide this service will put the business in a position to offer an enviable ‘one-stop' ATM solution for a variety of merchant requirements. We are also now trialling free to use ATMs in a number of locations.
Funding
In December 2007 Cashbox secured £1 million in funding from MBC Investments Ltd. to be provided in two tranches. The first tranche was a convertible unsecured loan, for the sum of £583,788. The second was a non-convertible unsecured loan of £416,212 which was made available for draw down from 31 March 2008. Both tranches of the loan were due to mature on 31 March 2009. On 14 March 2008, the Company received notice from MBC Investments that the holder's intention was to convert the convertible loan note issued into shares under the terms of the loan at the first available occasion being 31 March 2008. The new loans were arranged in conjunction with a rescheduling of the Company's Bank of Scotland facility, whereby the initial £8m facility was reduced to £6m and the draw down period extended from March 2008 to December 2008. The debt repayment originally agreed to start March 2008 was rescheduled to commence December 2009.
Hanco litigation
In October 2007 we were able to agree a full and final settlement with Hanco in respect of the long standing litigation between the two companies. In the settlement it was agreed Cashbox ATM Systems Limited would pay an additional £1.8m, on top of the £200,000 already paid in July 2007. As previously announced to the market and shareholders, Cashbox ATM Systems Limited has the benefit of a joint and several indemnity from Carl Thomas and Anthony Sharp in connection with this litigation, which the Directors intend to enforce to recover the £2m. However both Mr Thomas and Mr Sharp have refused to contribute and Mr Sharp declared himself bankrupt on 14 May 2008.
This brought to an end the litigation which has been a drain on management time and was continuing to incur substantial legal bills. The Board did not believe that continuing the litigation was in the best interests of shareholders.
Post balance sheet events
During the period from the 7th July 2008 to 8th October 2008, the company was able to complete four transactions, effectively acquiring all of the sites and ATMs of MyATM, a non-Link member IAD, and Cash4All a Link member IAD. This added another 892 sites to the Cashbox estate. Although predominantly independent contracts, the acquisitions also included 144 sites within Mitchells & Butlers, one of the UK's largest managed pub estates. The company has successfully raised monies in this difficult market to provide further working capital, as well as funds for acquisition and integration costs. I was unable to participate in these placings, the company being in a closed period. However, I have been able to express my support for the business by funding a £100K loan to the business, which, subject to Board approval, I am willing to convert when legally allowed to do so.
2008/2009
It is my clear intention to ensure that your Board's priority is the creation of value for shareholders. The foundation for the achievement of this has now been laid. The optimisation of the benefits of the enlarged estate will be management's priority and I am confident of their ability to deliver this.
With positive cash flow and profitability now realisable I believe that the disappointments of the past are now behind us.
I wish to express my appreciation to all staff who have contributed during this period of change.
Robin Saunders
Chairman
31 December 2008
CHIEF EXECUTIVE'S STATEMENT
In my last report, I commented upon the need to remain focused upon the cornerstones of our business, namely:
- The continuing acquisition of key client contracts with high volume estates
- The rapid conversion and installation of profitable sites within these estates
- The provision of outstanding service and support levels to drive transaction volumes; and
- The utilisation of a robust and flexible platform technology and reporting system to ensure the maximum level of uptime for all ATMs.
I am pleased to say that we have made considerable progress, with measurable successes, in every area of implementation. From 1st July 2007 to 30th June 2008, we successfully negotiated and signed up 871 sites which were suitable for installation. Two approaches were adopted to fulfil this opportunity, namely the purchase of new ATMs utilising the Bank of Scotland draw down and the redeployment of existing ATMs from low transacting locations. The former increased our overall estate size from 1,442 to 2,045 in the period, whilst the second increased our return on ATM investment.
This has involved entering new markets such as transportation hubs and cinemas, as well as greater penetration in the leisure and convenience store sectors. Our relationships with communication partners, has culminated in a new direct agreement with BT, signed in April 2008. This enables us to reduce waiting times for telephone line installation which, coupled with improved ATM stock management and ordering, has enabled us to reduce average installation times [period from approved deal to installed ATM] from 51 days in Q1 to just 28 days in Q4. Although the estate has increased significantly in size, engineering headcount has remained constant throughout the period.
We are rightly proud of the service we provide, planned and co-ordinated by our Account Management team, and this dedicated and professional approach has lead to our corporate clients collectively increasing their installed ATM base with Cashbox by 25% over the past twelve months. We have also experienced increased estates in 72% of our corporate clients, 6% of corporate clients declining by only one site each, and 22% of corporate clients remaining at a constant size.
Further investment in training was undertaken, especially for field service engineers, relating to new ATM types, software and upgrade parts. This is a crucial element of our service offering – the ATM has to be working to meet the business and operational requirements of our clients.
Over 90% of the new sites installed in the period were placement self-fill machines, where we retain a higher percentage of the convenience fee. This has enabled us to maintain the higher gross profit margins experienced last year, without having to resort to raising the convenience fee, which has been maintained at £1.75 across the majority of the estate.
Transaction volumes continue to grow in a difficult economic environment. The re-deployment of ATMs from low transacting sites to new sites supports average transaction levels which are depressed by the addition of new sites throughout any given month. We will continue to re-deploy at the current rate, on a monthly basis throughout the coming year, to ensure that average transactions are maintained, with possible future growth. As we increase our installed base, a greater proportion of our efforts will shift from the acquisition and installation of net new sites to redeployment of existing ATMs to higher transacting sites.
During the course of the past year, at the request of clients, we have extended our offering to include a fully managed service and free to use ATMs. Both of these offerings were successfully launched with a limited rollout, and are being closely monitored and refined, before we commit to a larger scale promotion and rollout. High volume sites have traditionally required a fully managed offering and the potential for this market is well recognised. However, we believe that the current economic climate is creating a new sector in the free to use market, where a free to use ATM is justified not solely by transaction volumes and location, but is greatly influenced by our clients seeking to support their value offering to their own customers. Initial reports are encouraging and we look forward to increasing our presence in these areas. Free to use ATMs still generate income for Cashbox via the interchange fee. This is where the customer's bank pays Cashbox a fee for allowing their customer to withdraw cash free of charge from an independently deployed ATM. Although the interchange fee is smaller than the convenience fee, the increased volume of transactions stimulated by no transaction fees means that this is still potentially profitable business for Cashbox.
Bank of Scotland continues to be a very supportive financing partner in the rollout of ATMs. In an environment where many capital intensive businesses are feeling the effects of the high cost of borrowing, we are fortunate to have a partner who has not only supported the existing business model but also supported the acquisition of small existing estates, such as the July 2008 purchase of 144 ATMs situated within Mitchells & Butlers plc, one of the largest managed pub companies in the UK. The acquisition of already installed estates is intelligent business for Cashbox, as transaction volumes are of a known quantity, the ATMs have already ramped up performance, and we do not have to bear the cost of site acquisition, initial survey and installation. Our Engineers, Sales Support team and Technology group provided further proof of our outstanding levels of service by decommissioning and re-uploading these ATMs to the LINK network within the same month of signing, despite not being able to work within opening hours.
The Board believe that there are more opportunities of this nature, and stand by their re-structuring of the Board in January 2008, which was enacted to increase our ability to react quickly and creatively to such market opportunities.
The Board and Executive Management are mindful that the business has not yet attained profitability and continually evolve roles, processes and operating systems, leveraging technology where possible, to ensure that operating costs are kept to a minimum. Significant cost savings have been made in the areas of administration costs, professional fees and occupancy costs, whilst being aware of our need to invest for growth. One example of this has been the increase in our headcount average from 44 in 2006 to 2007 to 50 in 2007 to 2008 at an increase of only 1% to total employee costs.
Our goal has always been to create a stable platform, one which empowers the business to deliver sustainable, profitable growth. The changes to the structure of the organisation in 2006/2007 enabled that platform to be built in 2007/2008 and we go forward with a significantly larger estate which generates larger and growing revenues, with a stable and robust organisational structure and workforce, all of which operates on a substantially reduced cost base.
Looking forward to 2008/2009, we will continue to allow the outstanding quality of our service, the flexibility of our offerings, and the complete ownership of all aspects of our post-sales support to be the differentiators in driving our business success. We will continue to focus upon delivering organic growth, whilst remaining responsive to acquisition opportunities in a market with considerable consolidation potential.
In conclusion, I am very encouraged by the mature, resilient and professional manner in which the Company and its staff have dealt with considerable re-structuring in a changing economic climate. I look forward to the next twelve months with confidence and optimism about returning real value to our shareholders.
Ciaran Morton
Chief Executive Officer
31 December 2008
CHIEF FINANCIAL OFFICER'S REVIEW
This is the first annual report of the Group produced in accordance with International Financial Reporting Standards ("IFRS"). The transition date for the adoption of IFRS is 1 July 2006. All comparative data in this report has been restated accordingly. This Review should be read in conjunction with the Consolidated Financial information starting on page 8.
Operationally the business has grown during the year utilising the Bank of Scotland debt facility to finance machine purchases and increase the deployment of ATMs. During the year the estate grew by 603 machines. The proportion of machines operating under the placement model, where Cashbox retains ownership of the machine, continued to increase and at 30 June 2008 was 51%, up from 34% at June 2007. Transaction volumes grew during the year with the second half higher than the first half, and both periods were up on the comparable and preceding periods for the year ended 30 June 2007.
Turnover for the year was £4.7m, 7% higher than last year, with transaction revenues 12% higher and lower sales of ATMs and sundry items. The increased number of placement machines where a greater portion of the transaction revenues are retained by Cashbox meant that gross margin continued to increase albeit more slowly in the second half. The Gross margin achieved in 2008 was 38%, 11 percentage points higher than 2007. With higher revenues and improving gross margins, gross profits for 2008 were up significantly on the prior year, at £1.8m compared to £1.2m, an increase of £0.6m or 52%.
Management maintained the tight control on costs introduced after their appointment and administration expenses for the year were £4.3m, compared with £5.1m last year before exceptional items. The largest single item of expenditure was employee costs which were up only 1% despite an increase of 6 people in the average headcount from 44 to 50, as roles were redefined and the average salaries fell. Vehicle and fuel costs were 3% higher with fuel costs in particular rising. Depreciation was the only other cost to have increased, as would be anticipated with the increased number of owned machines in the estate. Excluding depreciation and share option costs (which are both non cash items) administration costs were £3.6m, £1.0m or 22% lower than prior year with occupancy costs, professional fees and other administration costs all falling despite pressure from suppliers trying to raise prices.
Earnings before interest, tax, depreciation and amortisation, EBITDA, (as defined in note 15) was a loss of £1.8m, an improvement of £1.5m before exceptional items compared to the same period last year, with increased gross profits and reduced costs driving this encouraging result.
The operating loss for the year was £2.5m, £1.4m better than last year excluding last years exceptional item and £3.4m better when including the settlement of the Hanco litigation.
Finance income, principally interest on the Bank of England account, of £46,000 was slightly up on last year. Finance costs for the year amounted to £565,000, which included costs of the facility with Bank of Scotland of £469,000, reflecting the increased levels of borrowing during the year compared to £138,000 in 2007. This was mainly interest on the finance leases with GCVF which were terminated in June 2007 with additional costs of £685,000.
The loss for the year attributable to the equity holders was £3.0m compared to a £4.1m loss last year before exceptional items, with the improvement due to reduced operating losses being partially offset by higher interest costs. After exceptional items, the loss for the year ended June 2008 was £3.7m better than the £6.7m loss in 2007 as the Hanco litigation settlement costs were recorded in the year ended 30 June 2007 as well as the costs of exiting the finance lease arrangements. The loss for the year of £3.0m gave rise to cash used in operations of £2.3m with non cash cost items and net interest costs reducing the loss by £1.2m and outflows in working capital of £0.5m. This is slightly lower than the cash used in operations last year when the higher losses were offset by the working capital movements, principally due to the Hanco liability of £2.0m recorded as a post balance sheet adjusting item at June 2007.
Net cash used in investing activities was £1.6m compared to £0.7m as, having resolved the financing difficulties of last year, the Group was able to accelerate the purchase and deployment of ATMs into the estate. The purchasing of the ATMs was financed through the use of the banking facilities, and £2.4m was drawn down on the Bank of Scotland loan facility with a total of £4.7m drawn at 30 June 2008, leaving £1.3m undrawn. The total proceeds from borrowings was £3.4m with the balance of £1.0m being from MBC Investments, with £0.6m as a convertible loan note and £0.4m as a non convertible loan note issued in December 2007. The convertible loan note was converted at the end of March 2008 in accordance with the terms of the note while the non-convertible loan note is due for repayment in March 2009. In addition to the borrowings, the Company raised £0.5m in new equity in April 2008. Cash generated from financing activities for 2008 was £3.9m compared to £4.2m last year. At 30 June 2008 this additional funding amounts to £2.8m of new debt and new equity of £1.1m (being the placing and the conversion of the convertible loan note).
Despite the improvements in the financial performance, Cashbox is still loss making and therefore requires further operating cash-flow. As part of the loan agreement with Bank of Scotland, financial covenants are in place to ensure that the banks position is protected if these losses continue. Consequently the Board regularly looks at the necessary steps to ensure these covenants are met and discuss the situation in good time with the Bank. Plans made during the second half of the financial year were well advanced and the Bank had indicated that as long as any shortfall was remedied within an agreed timeframe then no action would be taken. While finalising the annual report, the Company was technically in breach of the net worth covenant at 30 June 2008, and while Bank of Scotland had indicated no action was being taken because of the funds being raised from shareholders, that continued waiver of covenants was not unconditional and consequently under the specific guidance included in IFRS, all of the liabilities shown to Bank of Scotland are shown payable "within one year" despite this is not when amounts will actually be paid.
The net decrease in cash for the year was £0.3m, compared to a net increase in cash of £0.9m in 2007 as 2008 was a year of investment following the changes in financial arrangements made at the end of June 2007.
Post balance sheet events
In the period following the year end the investment in the business has continued. In July 2008, the Company acquired 144 machines already placed with Mitchells and Butlers' pubs as part of a transaction financed using the Bank of Scotland facility. At the Extraordinary General Meeting on 29 July 2008 shareholders approved the resolutions proposed to increase the authorised share capital and allow the issuing of up to a further 320,000,000 ordinary shares without further approval from shareholders to give the Board greater flexibility in raising funds and participating in further opportunities in the consolidating market.
The Board utilised this facility and has raised a further £1,547,000 new equity with placings in July, September and October 2008 together with a £1,500,000 convertible in December 2008 to provide additional working capital. In a series of transactions, Cashbox acquired the majority of the owned and leased ATMs of Cash4All Limited together with the underlying site agreements for a total consideration of £1,672,340 being £872,340 cash payable to the four lease providers and £800,000 being £250,000 cash and £650,000 in equity to the mezzanine debt holders.
As part of the additional financing raised by the Company, on 31 December 2008, agreement was reached with Bank of Scotland for certain covenants which were due to be tested for the first time for the year ended 30 June 2009 to be reset based on revised financial projections.
David Auger
Chief Financial Officer
31 December 2008
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2008
| Notes | Year ended 30-6-08 |
Year ended 30-6-07 |
|||
| £'000 | £'000 | ||||
| Revenue | 2 | 4,675 | 4,380 | ||
| Cost of sales | (2,907) | (3,219) | |||
| Gross profit | 1,768 | 1,161 | |||
| Administrative expenses | (4,252) | (5,093) | |||
| Exceptional items: | |||||
| Litigation settlement costs | 3 | - | (2,000) | ||
| Total administrative expenses | (4,252) | (7,093) | |||
| Operating loss | (2,484) | (5,932) | |||
| Finance income | 46 | 37 | |||
| Finance costs | 5 | (565) | (161) | ||
| Exceptional finance charges | 3 | - | (685) | ||
| (519) | (809) | ||||
| Loss for the period attributable to the equity holders of the parent | (3,003) | (6,741) | |||
| Loss per ordinary share (pence) | 6 | ||||
| Basic | (3.4) | (10.5) | |||
| Diluted | (3.4) | (10.5) | |||
| Loss for the year, excluding exceptional costs, attributable to the equity holders of the parent company | (3,003) | (4,056) | |||
| All amounts relate to continuing activities. | |||||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
| Notes | Year ended 30-6-08 |
Year ended 30-6-07 |
||
| £'000 | £'000 | |||
| Opening shareholders' deficit | (3,520) | (180) | ||
| Loss for the financial period being total income and expenditure recognised in the period | (3,003) | (6,741) | ||
| Share based payments | 133 | 138 | ||
| Issue of shares for cash including premium net of costs | 459 | 3,263 | ||
| Issue of shares including premium on conversion of convertible loan stock | 583 | - | ||
| Movement in shareholders' funds | (1,828) | (3,340) | ||
| Closing shareholders' deficit | 10 | (5,348) | (3,520) | |
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2008
| Notes | 30-6-08 | 30-6-07 | |||
| £'000 | £'000 | ||||
| ASSETS | |||||
| Non current assets | |||||
| Intangible assets | 53 | 13 | |||
| Property, plant and equipment | 2,081 | 1,077 | |||
| 2,134 | 1,090 | ||||
| Current assets | |||||
| Inventories | 165 | 110 | |||
| Trade and other receivables | 7 | 657 | 850 | ||
| Cash at bank and in hand | 1,112 | 1,452 | |||
| 1,934 | 2,412 | ||||
| TOTAL ASSETS | 4,068 | 3,502 | |||
| LIABILITIES AND EQUITY | |||||
| Current liabilities | |||||
| Trade and other payables | 4,159 | 4,715 | |||
| Borrowings | 8 | 5,254 | 2 | ||
| 9,413 | 4,717 | ||||
| Net current liabilities | |||||
| Borrowings | 8 | 3 | 2,305 | ||
| TOTAL LIABILITIES | 9,416 | 7,022 | |||
| Capital and reserves attributable to equity holders | |||||
| Share capital | 1,044 | 832 | |||
| Share premium account | 7,755 | 6,925 | |||
| Merger reserve | 2,180 | 2,180 | |||
| Equity reserve | - | - | |||
| Profit and loss account | (16,327) | (13,457) | |||
| SHAREHOLDERS' DEFICIT | 10 | (5,348) | (3,520) | ||
| TOTAL EQUITY AND LIABILITIES | 4,068 | 3,502 | |||
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2008
| Notes | Year ended 30-6-08 |
Year ended 30-6-07 |
||
| £'000 | £'000 | |||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| Cash used in operations | 11 | (2,302) | (2,440) | |
| Interest paid | (350) | (150) | ||
| Net cash used in operating activities | (2,652) | (2,590) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||
| Purchase of property plant and equipment | (1,495) | (687) | ||
| Purchase of intangible fixed assets | (60) | (6) | ||
| Net cash used in investing activities | (1,555) | (693) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||
| Proceeds of issue of ordinary shares for cash | 476 | 584 | ||
| Proceeds from borrowings | 3,393 | 5,600 | ||
| Repayments of borrowings | - | (130) | ||
| Capital repayments on finance leases | (2) | (1,388) | ||
| Lease termination costs paid | 3 | - | (467) | |
| Net cash generated from financing activities | 3,867 | 4,199 | ||
| Net (decrease) / increase in cash | (340) | 916 | ||
| Cash and cash equivalents at the beginning of the period | 1,452 | 536 | ||
| Cash and cash equivalents at the end of the period | 1,112 | 1,452 | ||
NOTES
The notes are available in the PDF download.
