10th Dec 2007 07:01
IDOX PLC10 December 2007 IDOX plc 10 December 2007 IDOX plc Final Results IDOX plc ("IDOX" or the "Company" or the "Group"), the supplier of softwaresolutions and services to the UK public sector, today announces its finalresults for the year ended 31 October 2007. Highlights: • Turnover up 58% to £20.6m (2006: £13.0m) • Cash balances up 85% to £8.9m (2006: £4.8m) • Profit before tax of £1.1m (2006: loss £0.5m) • Acquisition of CAPS Solutions for £21.1m • Annualised recurring cost savings in excess of £2.5m • Significant new contract wins and strong sales outlook - ENDS - For further information please contact: Martin Brooks, Chairman 0870 333 7101Richard Kellett-Clarke, CEO 0870 333 7101 Notes to editors IDOX plc is a supplier of software solutions and services principally to the UKpublic sector and the leading applications provider to local government for corefunctions relating to land, people and property through its UNI-form and IDOXproduct range. Some 70% of UK local authorities are customers. The Company gives public-sector organisations the tools to manage informationand knowledge, documents and content, business processes and workflow as well asconnecting directly with the citizen via the web. It also supplies decision support content and additional specialist services viathe IDOX Information Service. Under the TFPL brand the company is transforming approaches to knowledge andcontent management via consultancy and training as well as providing thesespecialist skills to customers through its recruitment division. IDOX plc Chairman's Statement For the year ended 31 October 2007 I am very pleased to report that the Group has been revitalised in the last yearin refocusing the business on our core software market which has generated astrong improvement in our underlying trading performance and strengthening ofour balance sheet. This trading improvement has been reinforced by the pivotal acquisition of CAPSSolutions Ltd (CAPS) in June 2007 which has already been integrated ahead ofschedule, and with greater than anticipated recurring cost savings. The recentcombined sales pipeline has grown healthily and the immediate new businessoutlook is encouraging. Looking to the future: we continue to believe that there are significantopportunities to grow our business both organically and through furtheracquisitions in our chosen markets of government and local authorities. We likethe combination of long-term customer relationships which yield high recurringrevenues with the related opportunities to achieve additional sales. The Group now has over 300 local authority customers and we are well positionedto build on this. We have recently secured large complex contracts as the keysub-contractor under the lead supplier to the Scottish Government and directlyto Cambridge City Council and Bromsgrove Council. The local authority software and services supplier market is already in theprocess of consolidating, and we are actively looking for targets that wouldbring us additional scale, capabilities and synergies. We are also closelymonitoring certain opportunities internationally. We are well positioned to take advantage of future opportunities presentingthemselves within the local authority software and services market, despite thewider economic uncertainties of the moment. We are determined to make this asustainable improvement and further work on emphasising customer service iscurrently being undertaken with additional resources now dedicated to underpinthis. Richard Kellett-Clarke has now been appointed to the role of Chief ExecutiveOfficer after working as Group Finance Director and also Chief Operating Officerduring the essential recovery and reorganisation phase of IDOX last year. Wewill be seeking candidates for the position of Group Finance Director. I wouldalso like to thank Steve Ainsworth who stood down as Chief Executive Officer oncompletion of the rapid integration of CAPS. It is our vision to become a significantly sized group recognised as a leadinghigh quality supplier of government related software and services in the UK andthereafter internationally. It goes without saying, particularly after such asuccessful and transforming year, that none of this would have been achievedwithout our loyal customers who are always happy to engage with us, responsivesuppliers, wise advisors and a dedicated team of colleagues at IDOX. We are looking forward to further opportunities in 2008. Martin BrooksChairman10 December 2007 IDOX plcChief Executive Officer's ReportFor the year ended 31 October 2007 Financial Review Consolidated revenues grew 58% year-on-year with the inclusion of the first fivemonths trading of CAPS. As a result of this acquisition the mix of revenuesmoved decisively towards the provision of software and services to the localauthority market which accounted for 64% of total revenue. Across the Group, the combined gross margin improved to 74% compared with 66%last year. Earnings before Interest Tax Depreciation and Amortisation (EBITDA)grew to £2.9m compared to £0.2m in the previous year. The consolidated EBITDAmargin was 14% this year against 1% last year. A continued strong focus on the control of cash and working capital resulted inthe Group delivering a net cash position of £0.9m compared to a forecast netdebt position at the time of the CAPS acquisition of £3.9m. The combined business ended the year with a headcount of 256. Markets The focus of the Group is now firmly directed towards the delivery of solutionsand services to enable local authorities to improve productivity and provide abetter citizen facing experience. This is being achieved by delivering improvedweb based access and interactivity thereby delivering information and servicesto the public. The government and local authorities remain committed to investing in solutionsand the Group sees continued steady demand for its products and services in theyear ahead. Operational Review Software The software division has undergone significant change this year in large partas a result of the CAPS acquisition and the refocus by IDOX onto its product andservice offerings. Excluding the impact of the CAPS merger, the softwarebusiness had returned to growth and improved profitability with revenues growing15% over the same period last year. This growth in revenue has been sustained atthe same level in the second half, in spite of the inevitable disruption causedby the integration of CAPS. It achieved its forecast revenue numbers for thefive months to October 2007. The combined software business returned a gross margin of 85% in line with lastyear and management's expectations. The software business ended the year on a high note closing its largest ordermonth in the history of the business and started the new year working on anumber of signature contracts such as • Cambridge City Council - a Corporate and Revenues & Benefits solution, £0.5m; • Bromsgrove City Council - a Corporate solution, £1.1m; and • The Scottish Government as a sub contractor to Phase 1 of the upgrade to Scotland's planning system, £0.6m. The Group's Revenues and Benefits product, launched in 2005 and with two livecustomers in 2006, achieved its first significant milestone with ten clientcontracts. The product has demonstrated to early adopters the benefits of itsbrowser based design, its speedy deployment, easily adaptable workflowcapability and ability to deliver productivity and service delivery benefits. Following the CAPS acquisition, the business has been able to fit together thecomplementary strands of both IDOX and CAPS technology and has developed anintegrated roadmap for future development. This will deliver benefits to ourcustomers by providing them with a more integrated, open and adaptable systemcapable of further enhancement and delivering further gains on the investmentthey have already made. 2007 saw the continued extension of our managed service offering with theintroduction of a managed service capability for the CAPS Uniform platform. Thecombined business in 2008 will be able to deliver a fully resilient, integratedmanaged services solution for those local authorities wanting to offer sharedservices and public private partnerships that deliver operational efficiencies. The combined entity successfully completed its integration ahead of schedule andis on track over a full financial year to deliver cost savings in excess of£2.5m. The focus to date has been on back office costs with the intention toimprove the sales management and invest in customer support and improvements indelivery and consulting services. Information Solutions Divisional revenues were flat during the year despite improvements in theconsulting business. This was largely due to the cancellation of the 2007 EBICconference. Excluding this, the remaining revenues grew 5% on last year mainlyin the consulting and training area. The EBIC conference was cancelled this year whilst the format and focus wasre-engineered. It will be relaunched in 2008 with a new format and a programmethat ensures it continues to be the conference that demonstrates thoughtleadership in the changing world of knowledge and information management incorporates and government. The overall attributable margin increased compared to the previous year due toan improved mix in the quality of consultancy contracts. The consultancy business has started to do more work in the local governmentarena with the growing interest in Electronic Records Management Systems. We arebeginning to develop relationships with larger integrators to deliver specialistdesign services, training and service packages to meet current demand. Recruitment The recruitment division had a poor year with revenues declining by 9% over theprevious year although margins were maintained. This was particularlydisappointing given the relative buoyancy of the recruitment market in 2007, butwas partly due to the business being under announcement of sale. Also ourinvestment in IT recruitment and related advertising did not deliver theexpected growth in sales. Second half divisional revenues have shown a period of recovery and ended theyear 3% up when compared to the second half last year. This compares to thefirst half of the year when recruitment revenues were 29% of the first half ofthe previous year. Permanent recruitment revenues year-on-year were down by 12% due to the timingof the conclusion of year end assignments and a softening in the market. Thismay indicate the start of a trend back to greater emphasis on non permanentcontract revenues in the business. Outlook Whilst the general economic outlook may be uncertain, IDOX's core softwaredivision continues to invest and develop its technology with governmentcontinuing to encourage this. The Group ended the financial year with a strongpipeline of closed business and is continuing to develop integrated solutionsand consultancy services which will deliver productivity and efficiency savingto local authorities. This should ensure continued demand and opportunity forgrowth for the foreseeable future. Dividend We propose to increase the dividend to 0.1p (2006 0.05p) per share. This will beproposed at the Annual General Meeting scheduled to take place on the 28February 2008 and, subject to shareholders' approval, paid on the 6 April 2008. Conclusion The acquisition of CAPS in the summer significantly changed the face of IDOX andcoincided with a strong improvement in the performance of IDOX's core publicsector software business. The executive team would like to thank the staff fortheir hard work overall and dedication to the swift integration of CAPS. Withour renewed focus on the continued delivery of quality services we look forwardto assisting our customers in further improving the way they work and deliveressential services to the public. Richard Kellett-ClarkeChief Executive Officer10 December 2007 IDOX plc Consolidated Profit and Loss Account For the year ended 31 October 2007 Note 2007 2007 2006 2006 £000 £000 £000 £000Turnover - Existing operations 13,360 13,031 - Acquisitions 7,265 - 2 20,625 13,031External charges - Existing operations (4,600) (4,473) - Acquisitions (835) - (5,435) (4,473)Gross profit - Existing operations 8,760 8,558 - Acquisitions 6,430 - 15,190 8,558Staff costs - Existing operations (5,819) (5,931) - Acquisitions (2,820) - (8,639) (5,931) Exceptional staff costs 3 - (299) Other operating charges - Existing operations (2,433) (2,992) - Acquisitions (3,017) - (5,450) (2,992)Operating profit/(loss) - Existing operations 508 (664) - Acquisitions 593 - 1,101 (664) Net interest 18 149 Profit/(loss) on ordinary activities 1,119 (515)before taxation Tax on profit/(loss) on ordinary 4 (218) (472)activities Profit/(loss) for the period transferred 901 (987)to/(from) reserves Basic and diluted profit/(loss) per 5 0.34p (0.51p)share (pence) All operations are attributable to continuing operations. There are norecognised gains or losses other than those set out above. IDOX plc Consolidated Balance Sheet At 31 October 2007 2007 2006 £000 £000Fixed assetsIntangible assets 23,248 4,024Tangible assets 513 433 23,761 4,457 Current assetsDebtors 7,614 3,019Cash at bank and in hand 8,927 4,830 16,541 7,849Creditors: amounts falling due within one year (13,787) (3,899) Net current assets 2,754 3,950 Total assets less current liabilities 26,515 8,407 Creditors: amounts falling due after more than one year (6,611) - Net assets 19,904 8,407 Capital and reservesCalled up share capital 3,420 1,953Capital redemption reserve 1,112 1,112Share premium account 9,706 820Other reserves 1,294 1,294Share option reserve 359 -ESOP trust (104) (96)Profit and loss account 4,117 3,324Shareholders' funds 19,904 8,407 IDOX plc Consolidated Cash Flow Statement For the year ended 31 October 2007 2007 2006 Note £000 £000 Net cash (outflow)/inflow from operating activities 6 (108) 554 Returns on investments and servicing of financeInterest received 336 149Interest paid (318) -Debt issue costs (425) -Net cash (outflow)/inflow from returns on investments and (407) 149servicing of finance Capital expenditure and financial investmentPurchase of tangible fixed assets (320) (378) Net cash outflow from capital expenditure and financial (320) (378)investment AcquisitionsCash consideration paid 8 (21,969) -Cash acquired with business 8 8,874 -Deferred consideration paid (210) (200)Net cash outflow from acquisitions (13,305) (200) Equity dividends paid (108) -Net cash outflow before financing (14,248) (125) FinancingNew bank loans 8,000 -Issue of shares 11,000 -Share issue costs paid (647) -ESOP shares acquired (8) (17)Net cash inflow/(outflow) from financing 18,345 (17) Increase in cash 7 4,097 108 IDOX plc Reconciliation of Movements in Shareholders' Funds For the year ended 31 October 2007 2007 2006 £000 £000 Profit/(loss) for the financial year 901 (987)Dividends paid (108) -Additions to ESOP trust (8) (17)Shares issued 11,000 900Share issue costs (647) -Share option reserve 359 -Net increase/(decrease) in shareholders' funds 11,497 (104)Shareholders' funds at 1 November 2006 8,407 8,511Shareholders' funds at 31 October 2007 19,904 8,407 IDOX plc Notes to the announcement For the year ended 31 October 2007 1 BASIS OF PREPARATION The preliminary announcement has been prepared in accordance with applicableUnited Kingdom accounting standards and under the historical cost convention. The principal accounting policies have remained unchanged from those set out inthe Group's 2006 annual report and accounts with the exception of the adoptionof FRS 20 'Share Based Payments'. This has resulted in a charge to the currentperiod results of £359,000. There was no impact on the results for priorperiods as a result of adopting FRS 20. The financial information set out in this announcement does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Theconsolidated balance sheet at 31 October 2007 and the consolidated profit andloss account, consolidated cash flow statement and associated notes for the yearended 31 October 2007 have been extracted from the statutory accounts upon whichthe auditors opinion is unqualified and does not include any statement undersection 237 of the Companies Act 1985. Those financial statements have not yet been delivered to the Registrar ofCompanies. 2 SEGMENTAL ANALYSIS Turnover, operating profit and net assets by class of business are set outbelow: 2007 2006 £000 £000TurnoverSoftware 13,222 5,204Information Solutions 3,269 3,271Recruitment 4,134 4,556 20,625 13,031 Operating profit/(loss)Software 2,359 286Information Solutions 190 (436)Recruitment (9) 64 2,540 (86)Goodwill amortisation (1,439) (578) 1,101 (664) Net assetsSoftware 18,358 2,478Information Solutions 933 2,952Recruitment 613 2,977 19,904 8,407 3 EXCEPTIONAL STAFF COSTS Exceptional staff costs of £Nil (2006: £299,000) were incurred in the year andrelate to the implementation of the Group's announced policy of restructuringand refocusing the business. 4 TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES The tax charge is made up as follows: 2007 2006 £000 £000 Corporation taxCharge in respect of current year 523 43Adjustments in respect of prior period 58 - 581 43Deferred taxOrigination and reversal of timing differences - current year 103 429Adjustments in respect of prior year (466) - (363) 429 Tax on profit on ordinary activities 218 472 Unrelieved trading losses of £796,250 (2006: £616,000) which, when calculated atthe standard rate of corporation tax in the United Kingdom of 28% (2006: 30%),amounts to £222,950 (2006: £185,000). These remain available to offset againstfuture taxable trading profits. During the year ended 31 October 2007 £624,000of tax losses surrendered in exchange for the research and development taxcredits in respect of the year ended 31 October 2003 were reinstated. Factors affecting the tax charge in the period: 2007 2006 £000 £000 Profit/(loss) on ordinary activities before taxation 1,119 (515) Profit/(loss) on ordinary activities multiplied by the standardrate of corporation tax in the UK of 30% (2006: 30%) 336 (155) Effects of:Prior year adjustment 59 43Expenses not deductible for tax purposes 301 164Capital allowances in excess of depreciation 43 (9)Other timing differences 190 9Differences in tax rate (7) -Marginal relief (5) -Group relief of current year losses - (42)(Decrease)/Increase in tax losses (336) 33 581 43 5 EARNINGS/(LOSS) PER SHARE The earnings/(loss) per ordinary share is calculated by reference to theearnings/(loss) attributable to ordinary shareholders divided by the weightedaverage number of shares in issue during each period, as follows: 2007 2006 £000 £000 Profit/(loss) for the year 901 (987) Basic earnings per shareWeighted average number of shares in issue 267,538,092 192,517,399 Basic earnings/(loss) per share 0.34p (0.51p) Diluted earnings per shareWeighted average number of shares in issue used inbasic earnings per share calculation 267,538,092 192,517,399 Dilutive share options 564,869 - Weighted average number of shares in issue used in 268,102,961 192,517,399dilutive earnings per share calculation Diluted earnings/(loss) per share 0.34p (0.51p) Share options that would potentially dilute basic earnings per share but whichwere not included in either the current or prior year calculation because theywere anti-dilutive. 6 NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 2007 2006 £000 £000 Operating profit/(loss) 1,101 (664)Depreciation 342 270Goodwill amortisation 1,439 578Debt issue costs amortisation 36 -(Decrease)/increase in debtors (160) 642(Decrease) in creditors (3,225) (272)FRS 20 non-cash flow charge 359 -Net cash (outflow)/inflow from operating activities (108) 554 7 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2007 2006 £000 £000Increase in cash in the year 4,097 108Cash inflow from increase in debt (8,000) -Change in net debt resulting from cash flows (3,903) -Net funds at 1 November 2006 4,830 4,722Net funds at 31 October 2007 927 4,830 8 ACQUISITIONS On 7 June 2007 the group acquired the entire share capital of CAPS SolutionsLimited for a consideration of £21.14m, satisfied in cash. Goodwill arising onthe acquisition of CAPS Solutions Limited has been capitalised. The purchase ofCAPS Solutions Limited has been accounted for by the acquisition method ofaccounting. The assets and liabilities of CAPS Solutions Limited acquired were as follows: Book value Fair value and Fair value other adjustments (provisional) £000 £000 £000Fixed assetsTangible 235 (133) 102 Current assetsDebtors 4,072 - 4,072Bank and cash 8,874 - 8,874 Total assets 13,181 (133) 13,048 CreditorsTrade creditors (878) - (878)Other creditors (522) - (522)Accruals (10,242) (100) (10,342)Preference shares debt (500) 500 -Total liabilities (12,142) 400 (11,742) Net assets 1,039 267 1,306 Purchased goodwill capitalised 20,663 21,969 £000 Satisfied by:Cash to vendor 21,140Costs of acquisition 829Total cash paid 21,969 Fair value adjustments were made in relation to accounting policy adjustments tobring the depreciation policy for computer equipment and fixtures and fittingsin line with the group policy. A further adjustment was made to reflectadditional accruals identified as relating to the pre acquisition period. Inrespect of the preference shares debt, the Group acquired all of the sharecapital of CAPS Solutions Limited, including the preference shares. As such,the adjustment removes this inter-company balance as part of the consolidationprocess. The profit after taxation of CAPS Solutions Limited for the period from 1January 2007, the beginning of the subsidiary's financial year, to the date ofacquisition was £151,000. The profit after taxation for the year ended 31December 2006 was £943,000. The provisional status of the fair value adjustments is in relation to debtorsand creditors. Given that the acquisition took place in June 2007, the Group isstill establishing the appropriateness of the fair values of these balances. Further details on the profit of CAPS Solutions Limited are provided below: Period from 1 January to 7 June 2007 £000 Turnover 6,510 Operating profit 209 Profit before taxation 209Taxation 58 Profit for the period 151 There were no material recognised gains and losses in the period to the date ofacquisition other than the profit for the period. The subsidiary undertaking acquired during the year made the followingcontribution to, and utilisation of, group cash flow. 2007 £000 Net cash (outflow) from operating activities (1,308) (Decrease) in cash (1,308) Analysis of net outflow of cash in respect of the purchase of the subsidiaryundertaking(s): 2007 £000 Cash at bank and in hand acquired 8,874Cash consideration paid (21,969) (13,095) 9 POST BALANCE SHEET EVENTS On 16 November 2007, Steve Ainsworth stepped down as Chief Executive Officer ofthe Group. Richard Kellett-Clarke Group Finance Director and Chief OperatingOfficer took over as Chief Executive Officer with immediate effect and MartinBrooks continues as Chairman. The Company will be seeking candidates to succeedRichard Kellett-Clarke as Group Finance Director. As part of the resignation, Steve Ainsworth received compensation for loss ofoffice of £120,000. 10 FURTHER COPIES Copies of this announcement and the full annual report and accounts areavailable, free of charge, for a period of one month from the Company'sNominated Adviser and Broker Noble & Company Limited, 120 Old Broad Street,London, EC2N 1AR, Tel: 020 7763 2200 or from IDOX plc, 2nd floor, 160 QueenVictoria Street, London, EC4V 4 BF, Tel: 0870 333 7101. Copies of the fullfinancial statements will be posted to shareholders in the week commencing 17December 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Idox Group