Mortice : Half Yearly Result 2015

9396b30e-7fd3-456c-b511-ef27a6c73b77.pdf

22 December 2015

Mortice Limited

("Mortice", the "Company" or the "Group")

Results for the Half Year-ended 30 September 2015

Mortice Limited (AIM: MORT), the AIM listed security and facilities management company, announces its unaudited results for the half year ended 30 September 2015.

Financial results highlights:

• Revenues grew by 19% to $51m (HY 2014: $42.9m)

  • Security services revenue increased 12% to $34.5m (HY 2014: $30.7m)

    • Accounting for 68% of group revenues

  • Facilities Management services revenue grew 36% to $16.5m (HY 2014: $12.1m).

• EBITDA decreased by 40% $1.28m (HY 2014 $2.14m)

• Profit before taxation fell by 76% to $0.31 m (HY 2014: $1.31m) reflecting:

  • $750k of non-recurring items due to acquisition related expenses and $100K non-operational historical expenses of O&G.

  • A focus on further sales and marketing opportunities

  • The Company's acquisition

    
    

    Operational highlights:

• 150 new clients added during the period including Delhivery, Cairn India, Deutsche Bank, Mercedes Benz R&D Center, SPML, Vedanta, Minacs, Royal Enfield, American Embassy School, Samsung India Pvt Ltd and PVR Limited

• Addition of 56 staff

• More than 85 % of income came from repeat business

• Operating through Delhi , Mumbai & Bangalore

• In Facility Management the Company increased its scope in Industrial cleaning through JSPL and Vedanta

• Acquisition of the entire issued share capital of UK based property service company Office & General Limited for a total consideration of up to £6.3m in cash and shares

  
  

  Post-period end highlights:

• Acquisition of 51% stake of Frontline Security Pte. Ltd. ("Frontline Security"), a company incorporated in Singapore for a maximum consideration of £1.89m in cash

Major Manjit Rajain, Executive Chairman of Mortice Limited, said:

"Having grown its client base and geographic reach during the period the Company is well-placed to grow. The investment and acquisition that were made are expected to enhance performance during the second half as the Company takes advantage of its increased scale and enhanced operations base. With a strong pipeline of sales and high levels of repeat business from existing clients the Company looks forward to updating the market with further developments during the second half."

Enquiries:

Mortice Limited	www.morticegroup.com
Manjit Rajain, Executive Chairman	Tel: [phone]
Allenby Capital Limited AIM Nominated Adviser and Broker
Nick Naylor/David Hart/Alex Brearley	Tel: [phone]
Walbrook PR	Tel: [phone] or [e-mail]
Nick Rome	Mob: [phone]
Sam Allen	Mob: [phone]

Chairman's Statement Overview

The Company continued to make strong progress, with organic growth driving sales, while its acquisition strategy which contributed to the 56 new staff added during the period, broadened its geographic reach and helped establish solid foundations for further growth.

While profitability during the period was impacted by the investment in the Company's new business line, the expenses associated with a focus on further sales and marketing opportunities and the commencement of the Company's acquisition strategy, the Company will benefit from increased efficiency though automation via enterprise resource planning implementation and the establishment of operations in new territories.

The acquisition strategy commenced with the £6.3m purchase of UK-based property services company Office & General Group Limited ("O&G Group"). Given the timing of completion, there is less than a month of O&G Group's financial results consolidated within the Group's results for the period. The Board believe that O&G Group will commence contributing to The Group's sales more materially during the second half. O&G Group has certain legacy costs associated with depreciation and amortization, which though only notional in nature, have impacted profit levels achieved during the period. As such, non-recurring costs associated with the transaction totaled around

$750,000 and in addition O&G has incurred a non - operational historical cost of approx. $100,000.

The post period addition of a 51% stake in Singapore-based provider of security services and products company Frontline Security Pte. Ltd. ("Frontline Security") for £1.89m further enhanced the Company's geographic reach and enables it to take advantage of wider global trends.

The Company's continued focus on both organic and acquisitive growth has started yielding results. The completion of two acquisitions in two different countries has increased operational capability by gaining improved knowledge, process, and relationship and management bandwidth.

The Company's traditional India-based guarding and facilities management arms continued to trade strongly with business optimism continuing to grow and foundations in place to continue building on the momentum achieved last year.

As such, the Company was able to add 150 new clients during the period including Delhivery, Cairn India, Deutsche Bank, Mercedes Benz R&D Center, SPML, Vedanta, Minacs, Royal Enfield, American Embassy School, Samsung India Pvt Ltd and PVR Limited.

India continues to be the fastest growing economy in its local region and the expected GDP growth for the next year is likely to be more than 7.5%. The Government's increased focus on infrastructure and reforms will further accelerate the growth, though reforms are a little slower than initially expected. The strong political stability will provide high impetus to growth. Furthermore, a slowdown of the Chinese economy will make India a very active investment destination, which should help to further enhance the Company's growth opportunities.

Results

Revenues grew by 19% to $51m (H1 2014: $42.9m) during the period while profits before taxation fell to $0.31 (HY 2014: $1.31m) reflecting the Company's acquisition and investment during the period. As a result of the investment made, cash balances at the period end were $1.9m ($0.53m as at 31 March 2015).

The Company's cost base grew during the period, reflecting the focus on further sales and marketing opportunities. While the acquisition of O&G also impacted financial performance these actions have helped the Company create a platform for continued growth.

The majority of revenues (68%) came from the Security Services division with the Company winning a number of new clients across the board. This division also benefited from the creation of a new business line, catering to E Commerce business of India operating through Delhi, Mumbai & Bangalore which recorded an average operating margin of 30 % in the First phase.

Additionally revenues from existing customers also grew as new sites were added and the Company continued to benefit from high levels of repeat business which accounted for more than 85% of revenues.

The security and facility management business continues to be fragmented but it has started showing signs of maturing. Clients are more informed now and they are able to appreciate the services provided by established service providers. This trend is helping to differentiate the premium service providers and as such the Company is benefiting from the fact that a growing number of premium businesses are opting to utilise Peregrine and Tenon.

The Company's proactive security surveillance business Soteria now has five clients including large corporates as well as a Government contract. It continues to progress towards being cash positive. This state of the art technology will be the future of security industry will supplement the services offered by man guarding with greater reliability and at a lesser cost.

The Company is still building critical mass in its facilities management division which is continuing to be competitive and gain volume. While this division also benefited from increasing its scope in Industrial cleaning through JSPL and Vedanta, there is still a slight momentary pressure on earnings.

Outlook

Having grown its client base and geographic reach during the period the Company is well-placed to grow. The investments that were made are expected to enhance performance during the second half as the Company takes advantage of its increased scale and enhanced operations base. With a strong pipeline of sales and high levels of repeat business from existing clients the Company looks forward to updating the market with further developments during the second half.

Manjit Rajain Chairman

22 December 2015

The unaudited interim financial statements will be available on the Company's website: www.morticegroup.com.

Uunaudited condensed consolidated statement of financial position

(All amounts in United States Dollars, unless otherwise stated)

As at	As at	As at
30 September 2015 (Unaudited)		30 September 2014 (Unaudited)		31 March 2015 (Audited)
Assets
Non-current
Goodwill	14,396,982		823,945	811,079
Other intangible assets	369,911	47,284	266,710
Property, plant and equipment	3,223,707		1,802,531		2,014,050
Long-term financial assets	924,672	1,237,282		-
Deferred tax assets	1,900,718		1,632,863		19,01,826
Other non-current assets	214,966	189,472	2,12,508
Non-current assets	21,030,956		5,733,377		62,72,563
Current
Short-term financial assets	-	-	1,066,390
Inventories	3,273,451		244,921	195,526
Trade and other receivables	30,076,751		22,750,281		241,27,503
Current tax assets	2,281,008		1,747,917		2,156,476
Cash and cash equivalents	1,899,289		763,258	539,204
Current assets	37,530,499		25,506,377		28,085,099
Total assets	58,561,455		31,239,754		33,291,272
Equity and liabilities
Equity
Share capital	14,097,313		9,555,312		9,555,312
Reserves	327,331	497,657	9,63,209
Equity attributable to owners of the parent	14,424,644		10,052,969		105,18,521
Non-controlling interests	30,764	25,984	29,121
Total equity	14,455,408		10,078,953		10,547,642
Liabilities
Non-current
Employee benefit obligations	1,082,252		1,186,711		1,381,446
Borrowings	8,572,062		394,277	364,179
Other liabilities	757,000	-	-
Non-current liabilities	10,411,314		1,508,988		1,745,625
Current
Trade and other payables	25,866,325		13,078,853		13,901,054
Borrowings	7,828,408		6,500,960		7,096,951
Current liabilities	33,694,733		19,579,813		20,998,005
Total liabilities	44,106,047		21,160,801		22,743,630
Total equity and liabilities	58,561,455		31,239,754		33,291,272

The annexed notes form an integral part of and should be read in conjunction with these condensed consolidated financial statements.