14th Feb 2005 07:01
Royalblue Group PLC14 February 2005 14th February 2005 royalblue group plc preliminary results for the year ended 31st December 2004 royalblue reports accelerating revenue growth alongside strong investmentprogramme. 2004 2003 ChangeTurnover £60m £56m +7%Operating profit £8.1m £7.6m +7%Pre-tax profit £9.9m £9.2m +8%Dividend per share for year 8.5p 8.0p +6% Highlights for the year ended 31st December 2004: • H2 2004 revenue up 9% on H2 2003 and 10% up on H1 2004.• Recurring revenue up 27% to £37 million now accounting for 62% of total revenue.• Consultancy revenue up 11% between first and second half as market conditions start to improve.• Strong sales across all Fidessa services including new deals with tier 1 banks.• Substantial investment programme continuing in new products and services.• Improving outlook underpinning strong revenue projection in 2005. Commenting on these results, Chris Aspinwall, Chief Executive, said: "2004 has been a year of solid progress for royalblue with our new propositionsdeveloping well and market conditions improving. The improvement in the marketwas reported during the first half of 2004 and continued into the second half.Throughout the business we are seeing increased demand for our products andservices and this has translated into higher revenue in the second half.Recurring revenue has grown 27% to £37m, now accounting for 62% of totalrevenue. These recurring revenues represent annual licence and service fees andare a unique and highly valuable feature of our business model, reflecting theintrinsic worth of our sustained product development programme. We noted in ourinterim results that there were strong signs that our declining consultancy hadreached a turning point. We are therefore pleased to be able to report thatconsultancy revenue has started to improve with the second half up 11% on thefirst half. The business has continued to be cash generative with the year-endbalance standing at £25 million after returning £8 million of cash toshareholders through a special dividend. On the development of the business and its products, Chris Aspinwall added: "The focus on developing our unique opportunities in trading, market data andglobal connectivity has continued. We are leveraging these through our threedelivery mechanisms of Fidessa workstation, hosted Fidessa and enterpriseFidessa. Sales of our hosted Fidessa service have continued strongly this yearwith 22 new signings in Europe and the US. This has included a new DMA (DirectMarket Access) service from within hosted Fidessa allowing our customers toleverage their exchange memberships to offer their customers the ability toexecute directly in the market. We have hit our target for Fidessa workstationdeliveries with an installed base in excess of 1,000 screens and we are seeingencouraging early demand for the execution and multi-broker order managementfunctionality, which is being added shortly. We have expanded our Fidessaconnectivity network, with market data now available for all the main marketsacross Europe and North America and the number of brokers offering remoteexecution services on the Fidessa connectivity network increasing to 20. As market conditions begin to improve and our new propositions gain momentum, weare increasing the level of investment we are undertaking above our normallevels. In particular: • We are enhancing our hosted Fidessa offering by expanding our datacentres in Europe and the US and with the addition of new data centres in Asia. • We are increasing the depth of our data coverage across Europe andNorth America and expanding our communications infrastructure to provide a highcapacity global network. • We have opened a new, larger office in Tokyo to support the growingdemand for our Asian product set and are expanding our offices in New York,Surrey and Paris. • We are planning to open a new office in Canada to support the growingpotential in this region. • We are accelerating the development of the Fidessa workstation toprovide more market data and trading functionality; and, • We have commenced an investment programme to investigate theprovision of support for derivative instruments alongside our current productfor cash equities. We expect that the combined effect of these initiatives will add approximately£2 million to the operating costs during 2005." On the outlook for the business, Chris Aspinwall concluded: "We expect that trading conditions will continue to improve in 2005. Thegeneral improvement in consultancy combined with the continued growth inrecurring revenue should result in revenue growth more than double that achievedin 2004. In parallel, the acceleration of our investment programme as we seek tomaximise the opportunities from our developing range of propositions, isexpected to result in a decrease in the operating margin. We estimate that thedecrease is likely to be around 2 percentage points, but despite this we stillexpect operating profit for 2005 to be ahead of that in 2004. We believe thetiming is right to make these investments and as revenue from the new servicesdevelops, this will provide opportunities for sustained growth in 2006 andbeyond. Overall, we have made sound progress in all areas of the business and areexperiencing the strongest demand that we have seen for several years. We aremeeting this demand by expanding the range of products and services that weoffer and believe that this will continue to provide a firm foundation forfurther long-term growth." Financial Summary 2004 Results Revenue has increased by 7% to £60 million (2003: £56 million), with therecurring revenue up by 27%. The recurring revenue now accounts for 62% of totalrevenue, up from 52% in 2003. Recurring revenue for enterprise and hostedFidessa increased by 37%, now representing 55% of total revenue. Consultancyrevenue improved by 11% between the first and second half but recorded anoverall decline of 20% compared to 2003. Consultancy revenue now represents 33%of total revenue. Maintenance revenue continues to fall as expected as customersconvert to the rental and hosted models and now accounts for 5% of totalrevenue. Revenue from Fidessa workstation more than tripled in its first fullyear of operation, although still representing a small proportion of overallrevenue. Revenue in the UK increased by 7% and in Europe and Asia double-digitgrowth was achieved. Revenue in the US has grown by 11% in dollar terms but wasimpacted by the weakening dollar that left our US performance flat in sterlingterms. Second half revenue increased 9% over the comparable period in 2003indicating improving momentum. Operating profit before exceptional items increased 7% to £8.1 million (2003restated: £7.6 million), achieving an operating margin of 13.6% (2003 restated:13.5%). The results continue to be impacted by volatility in foreign currencyexchange rates with operating profit up 12% to £8.5m at constant currency. InJuly we received the third £0.5 million of loan note repayment from Touchpaper,the help desk business divested in 2001. The loan note had been written off atthe time of the divestment and so the receipt is a gain in the year and istreated as an exceptional item. Net interest income has grown to £1.2 million(2003: £1.1 million), being boosted by the larger cash balances prior to thespecial dividend, and includes £0.3 million (2003: £0.4 million) from interestreceipts on the Touchpaper loan notes. The overall effective tax rate for the year is 22.8% (2003 restated: 20.8%).However, this continues to benefit from items that will not necessarily recur orare unpredictable year to year. Removing these items to obtain comparablenumbers the effective tax rate is 27.0% (2003 restated: 31.6%), being adjustedin the same manner as earnings per share. The tax rate has benefited from R&Dtax credits in the UK, employees' gains on the exercise of share options beingoffset against the group's taxable income and from adjustments in respect ofprior periods. The diluted earnings per share adjusted to exclude exceptionalitems and tax deduction for share options exercised by employees increased by12% to 21.0p (2003 restated: 18.7p). The cash balance decreased in the year to £25 million from £28 million after thereturn of £8 million to shareholders in the form of a special dividend. TheBoard enhanced the dividend policy in 2003 and proposed the payment of a specialdividend, this being approved and paid during 2004. The Board is recommending afinal dividend of 5.8p per share so that the total dividend per share for 2004amounts to 8.5p, an increase of 6% over the total dividend per share for 2003.Subject to shareholder approval, the final dividend will be paid on 6th June2005 to shareholders on the register at the close of business on 6th May 2005,with an ex-dividend date of 4th May 2005. International Financial Reporting Standards (IFRS) All listed companies in the European Union have to report their consolidatedresults under IFRS for accounting periods commencing on or after 1st January2005. This means that the new standards will first affect royalblue's reportingfor the year ending 31st December 2005, commencing with the interim results forthe six months ending 30th June 2005. Comparative 2004 numbers prepared underIFRS will be presented with the 2005 interim and final results. The largest potential impact on royalblue from the change to IFRS is in thetreatment of product development expenditure. IAS 38 Intangible Assetsdetermines that expenditure on research will continue to be expensed to theprofit and loss account as incurred. However, the standard is more prescriptivethan UK GAAP concerning the recognition of intangible assets on the balancesheet from expenditure on product development. This is a sensitive area for thesoftware sector and as yet, no normal practice under IFRS has been establishedfor the sector. The Board will monitor how normal practice evolves in the sectorbefore determining an accounting policy in this area. Progress in this regardwill be reported on with the 2005 interim results, or earlier. The 2004development expenditure that may qualify for recognition as an intangible assetwas £4.9 million. The only other material impact on royalblue from the change to IFRS is thecharging of share incentives to the profit and loss account. IFRS2 Share-basedPayment requires that the fair value for share incentives to employees beestimated and charged to the profit and loss account over the vesting period ofthe incentive. The charge in 2004 under IFRS was £0.3 million. However, thisonly applies to share incentives granted and awarded since November 2002 andtherefore the charge is likely to increase as further grants are made. Operations Introduction Our focus on developing our unique opportunities in trading, market data andglobal connectivity and leveraging these through our three delivery mechanismsof Fidessa workstation, hosted Fidessa and enterprise Fidessa has continued. Thestrong sales of our hosted Fidessa service in 2004, with 22 new signings inEurope and the US, have helped us increase the total number of Fidessa screensthat are used as a primary source of equity trading or information to well inexcess of 6,000. These new hosted systems have ranged from small scale systemssupporting a few traders to the largest global systems such as the one withSociete Generale, which is expected to be worth £5 million over three years. Weare also pleased to have signed another tier 1 bank for hosted Fidessa in the USduring the second half and this deal is the largest single order for US domestichosted Fidessa since we started to provide the service in 2000. In response to growing demand for high performance DMA solutions we havelaunched a new DMA service from within our hosted Fidessa offering. This serviceallows our customers to use their memberships to enable their customers to tradedirectly in the markets. We hope to combine this service with the multi-brokerorder management functionality within the Fidessa workstation and in this wayprovide both the front-end display and the back-end engines for this service. Wehave hit our targets for Fidessa workstation deliveries with an installed basein excess of 1,000 screens across 38 customers with coverage across 21 markets.The early demand for the execution and order management functionality within theFidessa workstation has been encouraging throughout Europe and we expect thatthe total number of workstations in the market will more than double during2005. The Fidessa connectivity network has continued to expand with over 125 buy-sidesconnected and 700 individual connections passing order flow. Market data is nowavailable for all the main markets across Europe and North America with furtherextensions planned for 2005. The number of brokers providing remote executionservices on the Fidessa connectivity network has increased to 20, up from six atthe half year. This rapid growth has been fuelled by the large amount of orderflow available on the Fidessa connectivity network from the existing populationof sell-side and buy-side connections, which has attracted firms offering remoteexecution services to connect. The Fidessa Basket Execution and Management (BEAM) application continues to bewell received and has been successfully deployed at a number of clients in theUS and Europe. Further clients are due to go live shortly with strong focus oncontinental Europe and Japan. Significant functional enhancements related towave trading across European, US and Asian markets have been put in place andthe next major release, due in Q2, will offer basket merging and netting throughthe creation of multi-client trading lists. This continues our developmentstrategy of creating a tightly integrated program management and single ordertrading platform to maximise internal crossing opportunities. royalblue has a strong commitment to quality in all the products and servicesthat it offers. The firm is already independently certified to ISO 9001 andduring 2005 we plan to extend this by undertaking a SAS70 audit in the US. Thisfurther certification will be particularly important to US clients, as it willenable them to satisfy much of their Sarbanes Oxley requirements when using ahosted Fidessa solution without them needing to undertake further audits. Europe In Europe we have seen good continuity in the core business with consultancyimproving across our accounts as well as 15 sales of hosted Fidessa. We havealso been successful in implementing upgrades for our existing hosted Fidessacustomers, particularly in the areas of market data and connectivity. We haveextended the range of European market data that we offer to cover all the majormarkets in Europe along with key index futures and UK equity/index optionsinformation. We have also introduced a new data service to provide core staticdata for all European equities making it much easier for a non-member to starttrading them. During 2004 we introduced a revolutionary new pricing model formarket data where our market data services are priced at a simple carriage feeof 25% of the cost of the underlying data. This means that all our market dataproducts are priced based on the value the customer derives from them ratherthan the large single fee charged by some other vendors. In the workstationmarket this change has had a particular impact as the cost of a simple Fidessaworkstation, carrying only UK data, can work out as low as £60 per month,gradually increasing as more services and market data are taken. We are alsoable to sell our market data services to our existing hosted Fidessa customersas the latest version of our European Trading Platform provides full access toall the market data, news, charting and company research that is available toFidessa workstation customers. This provides an additional service we can offerour existing customers, which enables them to receive a more integrated servicewhilst costing significantly less than separate trading and market datapositions. We have continued to develop our connectivity services and now have 13 brokersprepared to offer execution services across Europe. We have also launched ourfirst remote broking service between Europe and the US. This enables a customerbased in Europe to view level 1 US market data and to route order flow forexecution directly to a US broker. We have extended our support for LondonRetail Service Providers (RSPs) and with 14 RSPs now connected, have the largestRSP network available. Leveraging our market connectivity we have introduced anew hosted DMA service and have already received our first order for thisservice from a tier 1 bank. The DMA market is extremely competitive for ourcustomers and the combination of broad FIX (Financial Information eXchange)connectivity and fast and reliable execution is crucial. Utilising our FidessaV5 technology combined with the Fidessa connectivity network we believe we arenow able to provide one of the most effective DMA services available in Europe. The Fidessa workstation has continued to develop well and exceeded its deliverytarget with over 1,000 workstations in live use. Recognising its marketacceptance, the Fidessa workstation was voted the winner of the 2004 award forBest New Product Development in the annual Inside Market Data industry awards.Going forward we are developing the Fidessa workstation as a comprehensiveaccess point to the growing Fidessa connectivity network. This will enableworkstation users to send and receive order flow to and from any FIX enabledclient or broker and will also provide full order routing and managementfunctionality together with intra-day risk management. We will also continue toextend the services we offer through the Fidessa workstation with the additionof more comprehensive European content to match the depth of coverage wecurrently provide in the UK. These additional services provide us withadditional revenue opportunities, as each service can be charged separately.This enables us to increase the average revenue per workstation as well asincreasing the number of Fidessa workstations in the market. North America Within our North American operation we have continued to make progress withrevenue up 11% in dollar terms and seven new sales of US domestic hostedFidessa. These include one sale to a tier 1 bank for a system to support theirUS OTC (NASDAQ) and listed (NYSE) flows. This is the largest US domestic hostedFidessa deal to date. As a result of recent sales our US hosted Fidessa servicecontinues to grow and we estimate that approximately 8% of NASDAQ volume wasprocessed through Fidessa compared to 5% last year. In a single day hostedFidessa systems executed shares worth $2 billion. To support the continuedgrowth of our services in the US market we have expanded our data centres with anew facility in New Jersey, which has the capacity to handle in excess of 300customers. In the US market we continue to see an evolution of the trading model. Tradingfirms have already adapted to SuperMontage which has resulted in there no longerbeing a best price available on a single exchange and new SEC (SecuritiesExchange Commission) regulations are under review that propose broad changes tothe market structure for US equities trading at all market venues. Theseproposals are likely to result in changes to areas such as the trade-throughrules, which will have a significant effect on the way orders can be handledacross multiple markets. The drive to combine OTC and listed trading onto thesame desk has continued, and to address this requirement we have extended ourFidessa montage product. This product, which allows traders to access a widevariety of liquidity pools whilst fully integrating with internal ordermanagement, now supports trading in listed as well as OTC securities. We arealso seeing signs that this consolidation is extending to the combining of cashand program trading desks. We believe this will generate additionalopportunities for our program trading product, BEAM, which is directlyintegrated into our order management and will be integrated into our executionproducts. Technical changes are also affecting the market with NASDAQ planning to phaseout its SDP (used to receive data from the market). This will force customers tomake changes and creates an opportunity for us to sell US market data directfrom our ticker plant. This opportunity is not just present where a customer isusing hosted Fidessa but is also the first opportunity to sell data services toenterprise customers as well. As a result of the success of our software being used by the Royal Bank ofCanada we have seen increased interest in our integrated Canadian TradingPlatform. This provides all the business flow support and connectivity to theCanadian market in the same way as we do throughout the world. As a result ofthis increased interest we plan to open a Canadian office during 2005 to supportthis initiative. As our customers come under pressure they are increasingly looking todifferentiate themselves and this has resulted in increasing interest insupporting global trading. In addition to the seven US domestic deals we havealso seen new deals signed for hosted Fidessa where customers are also takingthe service in Europe and will pass orders between the two centres. This trendis one that we are ideally positioned to support, being the only vendor withcomprehensive global coverage. In addition, we continue to see strong demand forthe Fidessa connectivity network in the US market, which reduces the cost ofhandling automated order flow. We continue to be committed to providing the best trading platform for the USdomestic market and as we expand our data coverage and connectivity we plan tointroduce our Fidessa workstation technology in the US to progressively broadenour range of offerings in this market. Asia Sentiment in Asia has continued to improve although outside of Japan the moodremains cautious with the majority of interest being focused on execution on thesmaller exchanges. We have met this demand through the introduction of theFidessa workstation in Asia, which is being used by remote brokers in thisregion. These brokers, who are otherwise not FIX enabled, are able to use theFidessa workstation to gain access to the Fidessa connectivity network enablingthem to receive order flow electronically and act as remote brokers in thesemarkets. Currently we have brokers providing execution services for the marketsin Thailand, Indonesia, Philippines and Malaysia and expect further brokers tosign up for the service, thereby, strengthening the Fidessa connectivity networkin the Asia region. The strongest trading markets outside of Japan have been in Australia and Indiaand this has generated demand for connectivity from Fidessa. Our link toAustralia's ASX, went live during 2004 and development work is underway toimplement an interface to the National Stock Exchange of India. In addition, weare also implementing an interface to the Hong Kong Futures and OptionsExchange. It is expected that these will go live during 2005. The Japanese market has continued to improve in 2004 with strong growth intrading volumes. This has created interest in re-evaluating the benefits ofretiring domestic legacy systems, as these older systems have been strugglingunder the increased volumes. We are also seeing a number of foreign banks eitherlooking to return to the Japanese market, increase their level of commitment orform relationships with local brokers to provide execution services. To addressthese opportunities we have upgraded our Fidessa products in the Japanese marketto use our V5 platform, which has been designed to cope with the high tradingvolumes, experienced in the US market. In addition, for firms returning to themarket but without the resources to manage a full enterprise system we areintroducing the hosted Fidessa model in Japan and in January 2005 have openedour first data centre in Tokyo. We believe that the requirement for FIXconnectivity between the buy-side and sell-side will follow the pattern we haveseen in the rest of the world and this will also be required for firms wishingto use remote brokers in the region. The Fidessa connectivity network, operatingthrough our new global communications network, will be well positioned to takeadvantage of this expansion and with connections now developed to local FIXnetworks in Asia we will be able to deliver both domestic and globalconnectivity. We are also anticipating an increase in the level of consultancy in the regionas we provide new and extended services to our customers. These opportunitieswill be serviced from our new offices, which opened at the end of 2004 andprovide the ability to extend our operation in Japan to support the growingrequirements. Branding We have introduced new branding for the Fidessa product suite to coincide withthe introduction of the Fidessa workstation and connectivity products. This isto ensure that our advertising and marketing campaigns are focused arounddeveloping a single brand, which is far more important in the higher volumemarkets we are entering with the Fidessa workstation and Fidessa connectivitynetwork. One impact of this change is that the name "royalblue" will no longerfeature as prominently in our marketing literature although there is no plan tochange the name of the company at this stage. Lava Patent Lawsuit In June 2003 we noted the announcement released by Lava Trading Inc. (Lava) thatit had filed a patent infringement claim in the US against royalblue. The patentrelates to the concept of displaying prices from more than one source (ECN) on asingle screen in the US. In December 2003 Lava filed an amendment to its lawsuitalleging unfair trade practices on the part of royalblue, in particular inrelation to the pricing of products and associated services. In June 2004 we announced that the United States District Court for the SouthernDistrict of New York had made its ruling on the first stage of the patentinfringement case. This first stage, known as a Markman claims constructionhearing, defines the technical terms in the patent, which will be used insubsequent hearings and is instrumental in establishing whether patentinfringement has occurred. The ruling confirmed our definition of all the majorterms and strengthens our position that the case brought by Lava is withoutmerit. In December 2004 we announced that a Stipulated Judgment had been entered intothe record in the United States District Court for the Southern District of NewYork. This formally recorded that, based on the findings of the earlier Markmanhearing, royalblue does not infringe Lava's patent. In both this announcementand the one in June 2004 royalblue noted that it expected Lava to lodge anappeal. Lava has now lodged this appeal. A decision by the Appeals Court islikely to take at least 12 months. Employees On behalf of all royalblue's shareholders the Board would like to extend itssincere thanks to all employees. The high quality of royalblue's reputation andthe ability of royalblue to launch a range of innovative new products andservices throughout the market is testament to their skill and dedication indeveloping royalblue into a global services business. The Board believes that well constructed and executed share incentive schemesare still effective motivation and lock-in tools for employees and management.The existing all employee share option scheme was established at the flotationin 1997 and is approaching the end of its life. We intend to consult withshareholders and representative bodies on both the replacement of this schemeand ideas for a long-term scheme based on demanding performance criteria forsenior management. The Board expects to circulate further details and seekshareholder approval for the new share schemes later in the year when theconsultation is complete and the views of the major shareholders andrepresentative bodies have been obtained. Outlook Looking ahead we expect that trading conditions will continue to improve in2005. The general improvement in consultancy and the continued growth in therecurring revenue should result in revenue growth more than double that achievedin 2004. As highlighted at the half year, the nature of the rapidly changingmarkets means that we may adapt our development programme as opportunities ariseand may decide to increase development resource in specific areas in order tobring certain product to market quickly. This is particularly the case for ourFidessa workstation and Fidessa connectivity network where we believe extensionof these products will result in a significant expansion of our addressablemarket. We believe the timing is now right and that royalblue has the financialstrength to make these investments without slowing down the development of thecore product set. The result of this acceleration of our investment programme isthat we expect to see a decrease in the operating margin within the business ofaround 2 percentage points. Despite this decrease, we still expect operatingprofit in 2005 to be ahead of that in 2004. We believe that as the revenue fromour new services develops this will provide opportunities for sustained growthin 2006 and beyond. Looking further ahead we believe that the strength of the Fidessa propositionswill continue to grow with each service we offer leveraging our other services.We will continue to expand these services either organically or by acquisitionwhere this route provides better value. We believe that the markets we servewill continue to provide us with ample opportunities for expansion and that thiswill provide the basis for long-term growth into the future. enquiries:John Hamer, Chairman Edward Bridges, Financial DynamicsChris Aspinwall, Chief Executive Ben Way, Financial DynamicsAndy Malpass, Finance Director Tel: 020 7831 3113www.fidessa.com Fax: 020 7831 6341Tel: 01483 206300 Fax: 01483 206301 Consolidated Profit and Loss Account for the year ended 31st December 2004 2004 2003 restated Note £'000 £'000 Turnover 3 59,768 56,489 Operating profit 4 8,120 7,643 Exceptional items From sale of operation discontinued in 2001 6 500 500 --------- ---------Profit on ordinary activities before interest 8,620 8,143Net interest receivable 1,239 1,103 --------- ---------Profit on ordinary activities before tax 9,859 9,246Tax on profit on ordinary activities (2,252) (1,920) --------- ---------Profit for the financial year 7,607 7,326Dividends paid and proposed 7 (2,765) (10,519) --------- ---------Retained profits/(losses) for the year 4,842 (3,193) ---------- ---------- Earnings per ordinary 10 pence share 8Basic - adjusted to exclude exceptional items and taxdeduction for share options exercised by employees 21.5p 19.5pDiluted - adjusted to exclude exceptional items andtax deduction for share options exercised byemployees 21.0p 18.7pBasic - total operations 23.9p 23.9pDiluted - total operations 23.4p 22.9p Consolidated Statement of Total Recognised Gains and Losses for the year ended 31st December 2004 2004 2003 restated £'000 £'000Profit for the financial year 7,607 7,326Differences on exchange on re-translation of net assets ofoverseas undertakings (206) (584) ------- -------Total recognised gains and losses 7,401 6,742 ------- ------- Consolidated Balance Sheet at 31st December 2004 2004 2003 restated Note £'000 £'000 £'000 £'000 Fixed assetsTangible fixed assets 6,517 4,945 Current assetsDebtors 16,194 15,930Cash and short-term investments 24,590 28,498 -------- -------- 40,784 44,428Creditors: amounts falling duewithin one year (20,220) (27,456) -------- --------Net current assets 20,564 16,972 -------- --------Total assets less current liabilities 27,081 21,917 Creditors: amounts falling due aftermore than one year (328) (392) ______ ______Net assets 26,753 21,525 ______ ______ Capital and reservesCalled up share capital 3,268 3,268Share premium account 11,610 11,610Profit and loss account 11,875 6,647 ______ ______Total equity shareholders' funds 9 26,753 21,525 ______ ______ Consolidated Cash Flow Statement for the year ended 31st December 2004 2004 2003 restated Note £'000 £'000 £'000 £'000 Net cash inflow from operating activities 10 10,727 11,375 Returns on investments and servicing of financeInterest received 1,235 1,090Interest paid (2) (1)Net cash inflow from returns on investmentsand servicing of finance 1,233 1,089 TaxUnited Kingdom tax paid (1,792) (678)Overseas tax refund/(paid) 44 (1,946)Tax paid (1,748) (2,624) Capital expenditure and financial investmentsPurchase of tangible fixed assets (4,234) (3,027)Purchase of own shares by Share Bonus Trust (309) (345)Sale of tangible fixed assets 11 32Sale of own shares held by Employee Benefit Trust 901 590Repayment of loan notes 500 500Net cash outflow for capital expenditureand financial investments (3,131) (2,250) Equity dividends paid (10,855) (1,651) ______ ______Net cash (outflow)/inflow before use of liquid resources and financing (3,774) 5,939 Management of liquid resourcesCash taken off deposit 553 656FinancingShare options exercised - 156 ______ ______(Decrease)/increase in cash (3,221) 6,751 ------- ------ Notes 1 The results for the years ended 31st December 2004 and 31st December 2003are extracted from the audited accounts of royalblue group plc on which theauditors have issued an unqualified opinion which did not contain a statementunder Section 237 (2) or (3) of the Companies Act 1985. 2 The audited accounts for the year ended 31st December 2003 have beendelivered to the Registrar of Companies. The Annual Report and FinancialStatements for the year ended 31st December 2004 will be mailed to shareholderson 11th March 2005 and will be delivered to the Registrar of Companies followingthe Annual General Meeting which will be held at 10.00 am on Tuesday 26th April2005 at 2 Suffolk Lane, London. Copies will be available to the public at theCompany's registered office, Dukes Court, Duke Street, Woking, Surrey GU21 5BH. 3 Analysis of turnover Turnover is analysed by geographical destination as follows: 2004 2003 £'000 £'000 United Kingdom 25,116 23,482USA and Canada 23,679 23,733Continental Europe 3,603 2,833Rest of World 7,370 6,441 ---------- ---------- 59,768 56,489 ---------- ---------- 4 Operating profit 2004 2003 restated £'000 £'000 Turnover 59,768 56,489 Staff costs - salaries 29,093 28,324Staff costs - social security 2,757 2,662Depreciation 2,469 2,535Auditor's remuneration for the Company 40 33Auditor's remuneration for other companies in the Group 125 106Fees paid to auditor for non-audit related work 45 136Operating lease rentals - property 2,240 2,322Operating lease rentals - plant and machinery 58 74Loss on sale of tangible fixed assets 8 2Exchange losses 340 164Other operating expenses 15,161 13,112Other income (688) (624) ---------- ----------Operating expenses 51,648 48,846 ---------- ----------Operating profit 8,120 7,643 ---------- ---------- 5 Staff numbers The average number of people employed by the group, including executivedirectors, during the year was as follows: 2004 2003 Number Number United Kingdom 288 303USA 162 141Continental Europe 2 1Rest of World 33 33 ----- ----- 485 478 ----- ----- The number of people employed by the group, including executive directors,at the end of the year was as follows: At 31 December At 31 December 2004 2003 Number Number United Kingdom 299 290USA 181 144Continental Europe 3 1Rest of World 36 30 ----- ----- 519 465 ----- ----- 6. Exceptional items In July 2001 the royalblue technologies help desk and rostrvm business wasdivested, the business subsequently changing its name to Touchpaper. As part ofthe transaction Touchpaper issued to royalblue 'B' Loan Notes with a principalamount of £3,802,245 in order to re-finance inter-company facilities and 'A'Loan Notes with a principal amount of £897,755 to provide additional workingcapital. The 'B' Loan Notes are unsecured and repayable first and the 'A' LoanNotes are secured by way of a fixed and floating charge over the assets ofTouchpaper. The value of the unsecured loan notes, as well as the shares andwarrants, received from the divestment will not be recognised in the balancesheet until there is evidence that they will be redeemed or repaid within areasonable period. During the year the third scheduled repayment of theunsecured loan notes occurred and provided an exceptional gain of £500,000. Thefirst and second scheduled repayments of the unsecured loan notes had occurredin 2002 and 2003 respectively providing an exceptional gain of £500,000 in eachof those years. 7 Dividends paid and proposed 2004 2003 £'000 £'000 Increase in final or special dividend for prior year - 9Interim dividend of 2.70p (2003 1.85p) 914 569Final dividend of 5.80p (2003 6.15p) 1,851 1,944Special dividend of nil (2003 25.3p) - 7,997 ------- ------- 2,765 10,519 ------- -------8 Earnings per share Earnings per share have been calculated in accordance with FinancialReporting Standard 14 'Earnings Per Share', by dividing profit attributable toshareholders by the weighted average number of shares in issue during the year.Adjusted basic and diluted earnings per share are presented to provide morecomparable and representative information on the performance of the businessexcluding the exceptional gains. The diluted earnings per share have beencalculated using an average share price of 495p (2003 373p) for the year. 2004 2003 restated £'000 £'000 Profit attributable to shareholders 7,607 7,326Tax deduction for share options exercised by employees (279) (845)Exceptional items after tax - repayment of loan note written off in a previous period (500) (500) ------- -------Adjusted profit attributable to shareholders 6,828 5,981 ------- ------- 2004 2003 Number '000 Number '000 Average number of shares in issue 32,679 31,817Average number of shares held by the employee trusts (909) (1,185) ------- -------Shares used to calculate basic earnings per share 31,770 30,632Dilution due to share options 686 1,375 ------- -------Shares used to calculate diluted earnings per share 32,456 32,007 ------- ------- 9 Reconciliation of movements in shareholders' funds 2004 2003 restated £'000 £'000 Profit for the financial year 7,607 7,326Dividends paid and proposed (2,765) (10,519) --------- ---------Retained profit/(loss) for the year 4,842 (3,193)Other recognised profits/(losses) relating to the year (206) (584)Movement in share capital from exercise of share options - 126Movement in share premium from exercise of share options - 30Movement in ESOP reserve from purchase of shares andexercise of share options 342 66Movement in profit and loss reserve from exercise of share 250 179options ------- -------Net increase/(decrease) in shareholders' funds 5,228 (3,376)Opening shareholders' funds (originally £27,097,000 for thegroup and £16,289,000 for the company before deductingprior year adjustment of £2,196,000) 21,525 24,901 -------- --------Closing shareholders' funds 26,753 21,525 -------- -------- 10 Reconciliation of operating profit to net cash inflow from operatingactivities 2004 2003 restated £'000 £'000 Operating profit 8,120 7,643Depreciation charges 2,469 2,535Loss on sale of tangible fixed assets 8 2Increase in debtors (623) (116)Increase in creditors 753 1,311 ------- -------Net cash inflow from operating activities 10,727 11,375 ------- ------- International Financial Reporting Standards All listed companies in the European Union have to report their consolidatedresults under International Financial Reporting Standards (IFRS) for accountingperiods commencing on or after 1st January 2005. This means that the newstandards will first affect royalblue's reporting for the year ending 31stDecember 2005, commencing with the interim results for the six months ending30th June 2005. Comparative 2004 numbers prepared under IFRS will be presentedwith the 2005 results. Below is presented a provisional reconciliation betweenthe UK GAAP and IFRS results for 2004. Draft Reconciliation of the Consolidated Profit and Loss Account from UK GAAP to IFRS for the year ended 31st December 2004 UK GAAP (extracted Adjustment Provisional from audited for employee Numbers Notes numbers) benefits under IFRS Unaudited Unaudited £'000 £'000 £'000 Turnover 59,768 - 59,768 Costs a (51,648) (343) (51,991) ---------- ---------- ----------Operating profit 8,120 (343) 7,777 Net interest receivable 1,239 - 1,239 Gain from sale of operation discontinued in 2001 500 - 500 ---------- ---------- ----------Profit on ordinary activities before tax 9,859 (343) 9,516 Tax on profit on ordinary activities a (2,252) 40 (2,212) ---------- ---------- ----------Profit for the financial year 7,607 (303) 7,304 ---------- ---------- ---------- Earnings per ordinary 10 pence shareBasic 23.9p 23.0pDiluted 23.4p 22.5p Draft Reconciliation of the Consolidated Balance Sheet from UK GAAP to IFRS at 31st December 2004 UK GAAP (extracted Adjustments from for Adjustments Provisional audited employee Adjustments for for other numbers Notes numbers) benefits reclassifications items under IFRS Unaudited Unaudited Unaudited Unaudited £'000 £'000 £'000 £'000 £'000 Non-current assets Property plant and equipment b 6,517 - (170) - 6,347 Intangible assets b - - 170 - 170 Debtors over one year b - - 898 - 898 Deferred tax a, b - 370 1,623 - 1,993 ---------- ---------- ---------- ---------- ---------- 6,517 370 2,521 - 9,408 Current assets Deferred tax asset b 1,623 - (1,623) - - Debtors over one year b 898 - (898) - - Other debtors 13,673 - - - 13,673 Cash 24,590 - - - 24,590Related Shares:
Fidessa Group