During the six months to 31st December 2000, group turnover increased by over 400% to GBP6,418,033 including some three months post acquisition contribution from Membertrack and two weeks contribution from DLG Software Services Limited. This compares with GBP1,201,601 for the equivalent period last year.
Earnings Before Interest, Tax, Depreciation and Amortisation of goodwill (EBITDA) were a loss of GBP(1,254,151) compared with a profit of GBP5,569 last year.
Earnings per share before amortisation of goodwill were (5.04p) compared with (0.32p) last time. The directors do not recommend the payment of an interim dividend.
The group’s net assets at 31st December 2000 were GBP35.6 million (equivalent to GBP1.05 per share) and cash resources amounted to GBP9.8 million (equivalent to 29p per share).
Gladstone has made significant progress in each of its two operating divisions,
Ge.world has achieved consistent and rapid growth since its formation in 1996. During the six months to 31st December 2000, the comany’s turnover on an annualised basis increased by 123% over the equivalent period last year to £6,947,200 and operating profit rose by 65% to £399,658. The order book now stands at over £15 million.
New sales offices have been opened in Paris, Boston and Chicago. Ge.world is consistently winning business with key accounts against more generalist competitors because of its specialist e.learning expertise. Tangible reinforcement of its growing standing in the marketplace is the recent signing of important new contracts with Oracle’s Worldwide Product Translation Group, Digital Think, Mindleaders and Talent Point. In addition a multi-year, multi-million dollar agreement has been signed with SkillSoft under the terms of which Ge.world will localise a minimum of 195 training courses each year.
The acquisition of DLG for £4.1 million was completed in December. DLG enjoys an excellent reputation as a leading supplier of software engineering, testing and training services to the software localisation industry. The acquisition both broadens the range of services Ge.world can offer and increases its customer base.
The acquisition of Membertrack for GBP 8.5 million has strengthened Ge.MRM’s position as market leader in the the UK leisure sector and enhanced its commercial standing in the wider European market. It has also created opportunities for cost savings through the elimination of duplication and through economies of scale.
Arrangements have been put in place to close Membertrack’s St Albans office and to relocate staff to the group’s existing premises in Wallingford and Egham. This move is expected to generate substantial savings and improvements in efficiency. Despite the challenges posed by integrating the two main businesses and changing the business model, good progress continues to be made in developing relationships with our major customers. The initial contract to supply Boots Wellbeing sites was announced in October and the directors expect several significant new customer contracts to be signed in the second half of the year.
Fit Club was acquired in December GBP 400,000 and has brought to the group an excellent web development team and the infrastructure for a health and fitness web portal.
The Gladstone group has been created through the nine acquisitions that have been made over a fifteen month period at a total cost of some GBP 37 million. These companies have been formed into two operating businesses which share certain characteristics – strong and imaginative management, good customer base, leading position in a fast growing market. Whilst there are increasing elements of synergy developing across the group, particularly as Ge.MRM’s customers develop internationally, Ge.world and Ge.MRM are different businesses, with different origins, which are at different stages of development. Each of them in its own right has the potential to become a highly profitable and fast growing multi-national business and to deliver considerable value to shareholders.
Ge.world is a service based business, until very recently formed around a single successful company started by its current management in 1996. The corporate mission, culture, ISO 9002 based work practices, product and service range and sales and marketing strategies are well understood and established. As a consequence Ge.world is rapidly expanding internationally delivering strong growth in both revenues and profitability.
Ge.MRM has been formed around seven acquisitions of predominantly product based businesses and is currently being forged into one integrated business based on a revised business model – software licences and professional services delivered over multi-year agreements. This process is being led by a new management team. It involves rationalisation and reorganisation, the establishment of a new culture, resolution of quality issues in customer support, development of a best of breed product and service range and the building of an infrastructure capable of supporting customers on an international basis. The necessary investment and redevelopment programme began last summer and will be completed by the end of 2001. The board expects that the cost of this programme will be in line with budgets previously announced to shareholders.
The board believes that Gladstone’s true value has not yet been recognised by the market, particularly the underlying value of the Ge.world business. This factor combined with the differences in management focus described above has led the board to conclude that significant upside in shareholder value could be achieved by demerging Ge.world from the rest of the group and obtaining a separate UK listing for it. The company is working with its advisors towards this end and subject to the appropriate advice and approvals, the matter will be put to shareholders during the next few months.
The demerged and re-branded specialist localisation business is expected to benefit greatly from its heightened profile. Currently specialising in the e.learning market, Ge.world will broaden its reach to include the localisation of other forms of content for distribution over the internet such as software and publishing. The internet is changing the way everyone does business, opening up a global market, instantly accessible to any business, anywhere. According to Forrester Research by 2005 less than 35% of internet users will be able to speak English. The market for localising content for global delivery over the internet consequently represents a massive opportunity.
