11th Dec 2006 08:00
IDOX PLC11 December 2006 IDOX plc FINAL RESULTS FOR IMMEDIATE RELEASE 11 December 2006 IDOX plc ("IDOX" or the "Company" or the "Group"), the information and knowledgemanagement company, today announces its final results for the year ended 31October 2006. Highlights: • Turnover down 8% to £13.03m (2005: £14.16m) • Cash up 2% to £4.83m (2005: 4.72m) • Loss before tax £0.52m, including one-off reorganisation costs of £0.30m(2005: profit £0.88m) • £0.75m cost savings implemented with potential to rise to £1.0m • Completed business review and implementing refocused strategy - ENDS - For further information please contact: Martin Brooks, Chairman 0870 333 7101Richard Kellett-Clarke, CFO 0870 333 7101 Notes to editors IDOX plc is an information and knowledge management company, specialising in thedevelopment and delivery of software products, information solutions and peoplefor information management and knowledge sharing, primarily for the publicsector, enabling clients to better manage their information. IDOX Software is one of the leading players in the local government market formanaging paper and electronic records. IDOX Software has several modulesdesigned to capture, manage, store, preserve and deliver information for usewithin an organisation, and for access externally - by the public or otherpartners. Its flagship UKPlanning Managed Services solution delivers the firsttrue end-to-end e-Planning solution to enable Local Authorities to provide theGovernment Planning process online The Information solutions unit consists of a specialist consultancy thatspecialises in advising and devising creative and innovative solutions toproblems associated with records, information, knowledge and content management. It offers in-house and external training for clients using experiencedfacilitators and leading industry practitioners. A community for professionals;via subscription, providing them with a comprehensive database of bibliographicabstracts, and the largest collection of information in the UK, on all aspectsof best practice, governance in the public sector. Our experts identify,summarise and manage a vast resource of information to save member organisationstime and money. The focus for the Recruitment team is to find and place informationprofessionals to deliver knowledge management, information management andrecords management projects - this might be for interim management and projectteams, permanent or temporary posts. IDOX plcChairman's and Chief Executive's StatementFor the year ended 31 October 2006 Chairman's and Chief Executive's Report We ended the 2006 financial year in a much more encouraging way than we began.Trading earlier in the year precipitated a number of actions by seniormanagement following a branch and root review of the entire business and itscost structure. We finished the year with a strong net cash position of £4.83million compared to £4.72 million for the previous year. We intend as promisedto propose the declaration of a maiden dividend payable in 2007. The board has taken the following actions: • Completed the review of all the businesses within the Group • Identified £0.75 million annual cost savings with part implementedin 2006 and the balance of the benefit expected in 2007, with the potential toincrease this to £1.0 million. • Re-organised the business into three clearly defined divisions withfull attribution of all operating costs • Re-affirmed a corporate strategy concentrating on the core IDOXSoftware businesses and the intention to therefore divest non-core businesses,including recruitment, which although excellent in their respective markets willbe better and more swiftly developed with greater cross-selling potential andsynergy by others having this as their primary area of focus • Undertaken specific product and service quality and performanceimprovements, particularly in the Software and Solutions division • Consistent with the terms of my appointment, the Company isinitiating a search for a permanent Chief Executive Officer. Financial Review Consolidated revenues were £13.03 million, 8.0% down on the previous year of£14.16 million. A loss before tax, including one-off reorganisation costs of£0.30 million, of £0.52 million compared with the prior year's profit of £0.88million. Excluding goodwill and the exceptional staff cost the company made a smallprofit of £0.36 million compared to £1.45 million for the previous year. Software and Information Solutions increased annualised recurring revenue to£3.1 million from £2.9 million. At 31 October 2006 the net cash balance of the company increased to £4.83million. (2005 £4.72 million). Markets Throughout the year there was a pronounced slowdown in decision-making andpurchasing by local authorities. This has also been noted publicly by othersystem suppliers in our chosen markets. This appears to have reversed itself inthe last two months. There was also a slowdown in both the learning and consultancy activities of theInformation Solutions business. However there were some indications of recoverytowards the end of the financial year when we completed work on a number oflarge central government contracts. The Recruitment market shifted markedly towards permanent and directappointments in the middle of the year, away from contract recruitment. Towardsthe end of the year we have seen signs of renewed recovery in contract workwhile retaining the same level of permanent assignments. Operational Review Software Solutions The software business has had a frustratingly difficult year as a result of theoverall slowdown of market growth following the formal end of the e-Governmentinitiative. Operational issues in implementing new business, and technicalissues with some new product offerings had to be addressed and were largelyresolved in the second half. It is encouraging to note that the businesscontinues to record strong sales to its existing customers. Greater emphasis isnow being placed on improvements in quality and service to our clients andimproved product releases. During the year the division completed and has received customer acceptance forits e-licensing, e-building control modules, as well as its innovative revenue &benefits system. Information Solutions The local authority and library services and their project teams had anothersuccessful year. The division started the year with strong sales but at much reduced margins insome areas, weaker than expected participation on training courses, and lowutilisation rates for its in-house consultants. This, plus the loss of some keystaff, and less favourable market conditions, resulted in revenues falling underbudget and below the prior year levels at the half-year point. The business has,however, made a good recovery in the second half with some important account "wins" and much improved margins and staff utilisation: ending the year withfull-year revenues broadly flat year-on-year and with margins restored tohistorical levels. The business proposition has now been extended to provide broader consultancyservices for electronic content management as well as the traditional areas ofknowledge and information management. Recruitment The market for information professionals has remained generally strong with goodgrowth in permanent appointments and direct engagement replacing the previousyear's growth in contract recruitment. However, the change in mix causedcombined revenues to decline by 10.4% despite permanent recruitment rising 63.7%above prior year levels. The division's gross margin improved to 40.5% comparedto 32.9% last year. The strong performance in the first half has continued through to the secondhalf along with early signs of an improvement in contract placements as well. Inaddition to strengthening the permanent recruitment team in the first half, thedivision has added its first specialist IT recruiter and is looking to extendits offering in this area in 2007. We have looked closely at consultant productivity and invested in a specialistrecruitment system, which will go live by the end of Q1 and is expected toimprove productivity, and customer care and candidate experience. Personnel The average number of employees was 150 compared to 141 in the previous year.The re-organisation reduced the headcount by 12. Senior Management and Succession I would like to extend the thanks of the board to Nigel Oxbrow, founder of TFPL,which was acquired by IDOX in 2004, who stepped down as an executive director atthe end of October, but who will remain a non-executive director of IDOX wherewe will continue to benefit from his advice. As I mentioned in the interim report, Andrew Fraser resigned in June as ChiefExecutive Officer of IDOX, after seven years with the Group and the Board thankshim for his contribution to the growth of the Group. I have indicated to the board that I am prepared to complete the process ofreorganisation and recovery and re-set the strategic direction of the businessas Interim Chief Executive Officer. Outlook The new trading year has started positively both in terms of orders andrevenues, although it is too early to pronounce this as a trend. Your board believes there are further opportunities in all three divisions forgrowth and improvement in trading performance. The markets for all threedivisions are expected to show long-term growth. The improvements made in allthree divisions are expected to show through during the new trading year. Strategy In 2007 management will concentrate further on strengthening operations, productdelivery and profitability while looking for opportunities in the software andrelated government market place allowing for both organic growth andacquisition. As noted above, the board feels, however, that the Recruitment andrelated assets, while excellent in their respective markets and capable offurther organic growth, will be better supported within another organisationwhich has these activities as its primary focus. We have therefore instructedour advisors to pursue strategic options in order to optimise the value of theseassets to our shareholders. We have recognised the need for a clearly focused strategy emphasising andbuilding upon our local authority relationships. Consistent with this we areactively pursuing consolidation opportunities in this core business activity. Dividend Policy The business has been restructured to permit the payment of a dividend. We willpropose that a dividend of 0.05p per share to be declared and paid toshareholders. Conclusion The board believes that a renewed commercial focus on the local authoritysoftware business is the best way of re-building shareholder value and greatlysimplifying what has been historically a confusing investor story. IDOX has an enviable client retention rate and customer base in localauthorities and is expanding out from the traditional strong position inplanning to be a corporate solution and we are encouraged by our successes todate in bringing a more effective solution to the revenue and benefits field. I would like to thank our staff and former colleagues who have left us for theirskill, dedication and support during this last challenging year. Martin Brooks Chairman and Chief Executive Officer 11 December 2006 This announcement was approved by the Board of Directors on 8 December 2006. IDOX plcConsolidated Profit and Loss AccountFor the year ended 31 October 2006 2006 2005 Note £000 £000Turnover 2 13,031 14,155 External charges (4,473) (5,048) Gross Profit 8,558 9,107 Staff costs (5,931) (5,665) Exceptional staff costs 3 (299) - Other operating charges (2,992) (2,685) Operating (loss)/profit (664) 757 Interest receivable 149 119 (Loss)/profit on ordinary activities before taxation (515) 876 Tax on (loss)/profit on ordinary activities 4 (472) 700 (Loss)/profit for the year transferred (from)/to reserves (987) 1,576 (Loss)/profit per share - basic and diluted (pence) 5 (0.51p) 0.85p 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 2006 2006 2005 restated £000 £000Fixed assetsIntangible assets 4,024 4,602Tangible assets 433 325 4,457 4,927 Current assetsDebtors 3,019 4,132Cash at bank and in hand 4,830 4,722 7,849 8,854Creditors: amounts falling due within one year (3,899) (4,860) Net current assets 3,950 3,994 Total assets less current liabilities 8,407 8,921 Creditors: amounts falling due after more than one year - (410) Net assets 8,407 8,511 Capital and reservesCalled up share capital 1,953 1,873Capital redemption reserve 1,112 1,112Share premium account 820 8,162Other reserves 1,294 1,294ESOP trust (96) (79)Profit and loss account 3,324 (3,851)Shareholders' funds 8,407 8,511 IDOX plc Consolidated Cash Flow Statement For the year ended 31 October 2006 2006 2005 Note £000 £000Net cash inflow from operating activities 6 554 2,126 Returns on investments and servicing of financeInterest received 149 119Net cash inflow from returns on investments and servicing of 149 119finance Capital expenditure and financial investmentPurchase of tangible fixed assets (378) (320)Purchase of investment (ESOP trust) (17) -Net cash outflow from capital expenditure and financial (395) (320)investment AcquisitionsDeferred consideration paid (200) -Net cash outflow from acquisitions (200) - Increase in cash 108 1,925 IDOX plc Reconciliation of Movements in Shareholders' Funds For the year ended 31 October 2006 2006 2005 restated £000 £000(Loss)/profit for the financial year (987) 1,576Additions to ESOP trust (17) -Shares issued 900 -Shares to be issued reclassified to liabilities under FRS 25 - (1,300)Adjustment in estimate of shares to be issued - (100)Net (decrease)/increase in shareholders' funds (104) 176Shareholders' funds at 1 November 2005 8,511 8,335Shareholders' funds at 31 October 2006 8,407 8,511 IDOX plc Notes to the announcement For the year ended 31 October 2006 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 2005 annual report and accounts with the exception of the adoptionof the following applicable accounting standard: • FRS 21 'Events after the balance sheet date' • FRS 22 ' Earnings per share' • FRS 25 'Financial Instruments: Disclosure and Presentation' The adoption of the presentation requirements of FRS 25 in the year has resultedin a change in accounting policy in respect of deferred consideration payable onacquisition of a subsidiary in a prior period. Shares to be issued at 31 October2005 are deemed to be a liability under this standard and have been transferredfrom equity to creditors. This change in accounting policy has had no impact onthe profit and loss account in the current or prior year. The adoption of FRS21 has resulted in the proposed dividend not being disclosed as a liability at31 October 2006. With the exception of the above, these accounting standardshave had no material impact on the current or prior year results or balancesheet positions of the Group. 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 2006 and the consolidated profit andloss account, consolidated cash flow statement and associated notes for the yearended 31 October 2006 have been extracted from the statutory accounts upon whichthe auditors opinion is unqualified and does not include any a 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: 2006 2005 restated £000 £000TurnoverSoftware Solutions 5,204 5,748Information Solutions 3,271 3,322Recruitment 4,556 5,085 13,031 14,155 Operating (loss)/profitSoftware Solutions 286 1,243Information Solutions (436) (37)Recruitment 64 114 (86) 1,320Goodwill amortisation (578) (563) (664) 757 Net assetsSoftware Solutions 1,750 3,821Information Solutions 1,100 (288)Recruitment 1,533 376 4,383 3,909Goodwill 4,024 4,602 8,407 8,511 3 EXCEPTIONAL COSTS Exceptional Staff Costs Exceptional staff costs of £299,000 (2005: £nil) were incurred in the year andrelate to the implementation of the Group's announced policy of restructuringand refocusing the business. 4 TAX ON (LOSS)/profit ON ORDINARY ACTIVITIES The tax charge/(credit) is made up as follows: 2006 2005 £000 £000Current taxUK corporation tax 43 2Total current tax 43 2 Deferred tax - origination and reversal of timing differences 429 (702)Tax on (loss)/profit on ordinary activities 472 (700) Unrelieved trading losses of £616,000 (2005: £1,976,000) which, when calculatedat the standard rate of corporation tax in the United Kingdom of 30%, amounts to£185,000 (2005: £593,000). These remain available to offset against futuretaxable trading profits. During the year ended 31 October 2004 £1,514,000 oftax losses relating to prior periods (years ended 31 October 2001 and 31 October2002) were surrendered in exchange for the research and development tax credit.The tax credits may be subject to claw back by the HMRC but if this occurred 2/3of the tax losses surrendered in respect of that year would be reinstated. Factors affecting the tax charge/(credit) in the period: 2006 2005 £000 £000(Loss)/profit on ordinary activities before taxation (515) 876 (Loss)/profit on ordinary activities multiplied by the standardrate of corporation tax in the UK of 30% (155) 263 Effects of:Prior year adjustment 43 2Expenses not deductible for tax purposes 164 154Depreciation in excess of capital allowances (9) 45Other timing differences 9 (21)Group relief of current year losses (42) -Increase/(decrease) in tax losses 33 (441) 43 2 Provision for deferred tax assetAccelerated capital allowances 75 105Other timing differences 28 19Tax losses carried forward 185 593Provision for deferred tax asset 288 717 There were no unprovided deferred tax assets at 31 October 2006 or 31 October2005. At 1 November 2005 717 15Adjustment for the year (429) 702At 31 October 2006 288 717 5 (loss)/earnings per share The (loss)/earnings per ordinary share is calculated by reference to the (loss)/earnings attributable to ordinary shareholders divided by the weighted averagenumber of shares in issue during each period, as follows: 2006 2005 £000 £000(Loss)/profit for the year (987) 1,576 Weighted average number of shares in issue 192,517,399 185,229,685 Basic and diluted (loss)/earnings per share (0.51p) 0.85p The share options are anti dilutive under FRS 22. Share options that wouldpotentially dilute basic earnings per share but which were not included in thecalculation because they were anti-dilutive for the periods presented. 6 NET CASH inflow FROM OPERATING ACTIVITIES 2006 2005 £000 £000Operating (loss)/profit (664) 757Depreciation 270 242Goodwill amortisation 578 563Decrease/(increase) in debtors 642 (118)(Decrease)/increase in creditors (272) 682Net cash inflow from operating activities 554 2,126 7 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2006 2005 £000 £000Increase in cash in the year, being movement in net funds in the 108 1,925yearNet funds at 1 November 2005 4,722 2,797Net funds at 31 October 2006 4,830 4,722 8 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, Times Square,160 Queen Victoria Street, London, EC4V 4 BF, Tel: 0870 333 7101. Copies of thefull financial statements will be posted to shareholders in the week commencing18 December 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Idox Group