14th Dec 2007 07:00
Electronic Data Processing PLC14 December 2007 Electronic Data Processing PLC (EDP) Preliminary results for the year ended 30 September 2007 EDP is a leading IT solution provider to the UK wholesale distribution industry. Highlights: • Turnover up 5% at £6.6 million (2006: £6.3 million). • Operating profit up 147% at £411,000 (2006: £166,000). • Pre-tax profit up 57% at £700,000 (2006: £446,000 excluding profit on sale of property). • Increased number of hosting customers. Now 16% of revenues (2006: 11%). • Continued R&D expenditure of £1.3 million in year. • Contracted recurring revenues represent 69% of total. • Integration of Vecta acquisition successfully completed during the year and on track to be earnings enhancing in 2007/8. • Cash balances of £6.0 million. Strong operating cash flows. • Final dividend of 2.0p per share (2006: 1.9p). Overall dividend up 3.8%. Michael Heller, Chairman of EDP, said: "The market sector that the Group addresses remains very competitive. However,we are seeing increased demand for our software products and hosting serviceswhich, in turn, will translate into increased professional services revenues.Accordingly I look forward to the coming year with confidence." For further information please contact: Julian Wassell Toby MountfordActing Chief Executive Citigate Dewe Rogerson0114 2622007 020 7638 9571www.edp.co.uk 07710 356611 Chairman's Statement I am pleased to report a 5% increase in Group revenue for the year to 30September 2007 to £6.6 million (2006: £6.3 million). Group pre-tax profit was£700,000 compared with £446,000 (excluding £420,000 profit on the disposal ofour East Grinstead property last year). These results reflect increased demand for our Quantum VS and Vecta softwareproducts, set against the continued impact of our planned exit from the computermaintenance business which now accounts for less than 5% of Group revenue. Ourcost base has been actively managed to reflect this exit and the number ofemployees in the Group has fallen to 102 at the end of the financial year from111 at the start. We are continuing to see growth in our application hosting operation with morecustomers electing to outsource their IT facilities on long-term contracts withthe Group. We currently host 56 customers and the revenue from this source nowaccounts for 16% of our turnover (2006: 11%). Contracted recurring revenues, which relate mainly to annual software licencesand hosting fees, account for 69% of total revenues. Our investment in Research& Development has been maintained and £1.3 million has been charged in theIncome Statement during the year. This has largely been focussed on thecontinued development of our distribution software applications together withtheir integration with our Quantum VS software products. In October 2006 we acquired the business and assets of Vecta SoftwareCorporation Limited, a leading provider of complementary Sales Intelligencesolutions. I am pleased to report that the acquisition of Vecta has been broadlyearnings neutral, in line with our expectations, and that we expect it to beearnings enhancing in 2007/8. Vecta is discussed in more detail in theOperating and Financial review. The Group continues to seek further compatibleacquisition opportunities. The Group balance sheet remains strong with net assets of £13.9 million as at 30September 2007. The Group continues to be very cash generative from operations.Cash balances were £6.0 million compared with £6.4 million at 30 September2006 which in part reflects the £919,000 cost of acquiring Vecta. A substantialpart of the Group's balance sheet is represented by our freehold properties.The Board is currently reviewing the use of these properties with two of thembeing marketed for sale or to let. The Board is proposing to pay a final dividend of 2.0p per share which, togetherwith the interim dividend, would make a total for the year of 2.713p (2006:2.613p), an increase of 3.8%. If approved by shareholders, the final dividendwill be paid on 7 April 2008 to those shareholders on the register at 7 March2008. The shares will be ex-dividend on 5 March 2008. On behalf of shareholders I would like to thank all our members of staff fortheir input over the year particularly following the very sudden death ofRichard Jowitt on 23 May. The market sector that the Group addresses remains very competitive. However,we are seeing increased demand for our software products and hosting serviceswhich, in turn, will translate into increased professional services revenues.Accordingly I look forward to the coming year with confidence. Michael HellerChairman 13 December 2007 Operating and Financial Review The increase in turnover and operating profit during the year is very welcomeafter a number of years of consolidation. Whilst we have seen continuedreductions, as expected, in certain traditional revenues such as hardware andmaintenance, this has been more than offset by increased software sales,particularly of the new Vecta product. The Group's cost base continues to beactively managed to reflect the changing requirements of the business. I would very much like to thank all our members of staff for their hard work anddedication over the last 12 months. Their efforts are essential to thesuccessful delivery of our software products and services and the continueddevelopment of the Group in the future. Operational Review Existing operations Competition in the marketplace for our four core distribution softwareapplications: Merchant, Charisma, Esprit and The Business Programme, remainsrobust. However, the continued development of these products ensures that theyprovide the additional functionality that our customers require. New releasesof the applications are delivered to underpin our software recurring revenuestreams. Our customers are increasingly keen to obtain greater benefits from the use oftheir existing EDP distribution applications by integrating our other softwareproducts: Quantum VS Financials; QVS2, our e-business and catalogue managementproduct; and Quantum Highway, our XML-based system integration tool. The integration of these products with the EDP back-office applications has beenone of the main areas of focus for our development teams over the last year.There has been a satisfactory increase in the number of customer demonstrationsthat we are currently involved in with the Quantum VS products. Demand for our application hosting service, which operates out of our MiltonKeynes location, has remained strong. This revenue stream now represents 16% ofGroup revenues, up from 11% last year. Where our customers elect to takeadvantage of this facility and outsource their IT requirements, they are able toeffectively free themselves from the day-to-day issues involved in managingincreasingly complex IT solutions. The Group's recurring revenue stream isstrengthened through the long-term contracts associated with hosting, typicallybetween 3 and 5 years. We are in the process of upgrading the infrastructure supporting the hostingcentre to allow us to accommodate increased customer numbers. Vecta acquisition As we reported last year, on 16 October 2006 we acquired the business and assetsof Vecta Software Corporation Limited, a leading provider of Sales Intelligencesolutions used by more than 200 companies. The Vecta business has been fullyintegrated into the Group and now operates out of our Milton Keynes location.The product utilises the Microsoft SQL database and is therefore readily adoptedwithin the marketplace. Over the past year, as part of a deliberate strategy, we have continued to offersoftware support to all existing users of the Vecta product, whether or not theyhave re-contracted with the Group. By the year end a total of 73 Vectacustomers had entered into new agreements with the Group and we expect to seeadditional existing users of the product renewing their licences and supportcontracts with us for the first time over the coming year. As a result wecontinue to expect the run-rate of sales to existing users to steadily increase. The reported turnover of £504,000 relates only to newly signed software licencesand related professional services. Of this £169,000 arose in the first half and£335,000 in the second half. The Vecta OnDemand service was introduced during the year as planned wherebycustomers are able to outsource delivery of the product using our applicationhosting facility. In November 2007 we have also taken on additional sales resource in order todevelop new business opportunities for both our Quantum VS product set and ourVecta product which we believe will contribute to revenue in the second half ofthe year. Financial Review Group pre-tax profit for the year was £700,000 which is after an amortisationcharge of £50,000 associated with the acquisition of the Vecta business.Accordingly profit before tax and this amortisation charge was £750,000 for theyear which compares with profit before tax (excluding profit on the disposal ofour East Grinstead property of £420,000) last year of £446,000. Operating profit at £411,000 compares with £166,000 last year. Our operatingmargin has improved to 6.2% from 2.6% and our strategy is to see this improvedfurther. Interest income for the year was £289,000 compared with £280,000. Whilstunderlying cash flow was strong, overall cash balances fell due to the cost ofacquiring Vecta. However, the effect of this has been more than offset byhigher interest rates. The tax charge for the year amounted to £222,000, an effective tax rate of31.7%. This is higher than the current rate of UK Corporation Tax reflectingdisallowable depreciation on certain buildings. Last year's tax charge at£29,000 (3.3%) was unusually low. This was due to a tax credit of £98,000relating to prior periods, and a very low tax charge on the profit on disposalof property caused by indexation. Earnings per share (EPS) amounted to 1.95p. Last year's basic EPS was 3.42p,however this included profit on disposal of property and one-off tax credits.Adjusting for these items gives a normalised EPS last year of 1.16p. The level of Group recurring revenue, a principal key performance indicator,remained strong in relation to the Group's costs. Contracted recurring revenueat £4.54 million represented 69% of total Group revenue and compares with £4.61million last year. Our planned exit from hardware maintenance reduced recurringrevenue by £150,000 whereas recurring revenues from software licences andhosting increased by £80,000. Cash balances were £5.96 million at 30 September 2007 compared with £6.44million at 30 September 2006. Including professional costs the Vectaacquisition accounted for £919,000. Cash inflows from operating activities werestrong at £713,000 (2006: £231,000). Other significant cash movements weredividend payments of £639,000 and the deferred receipt of £200,000 relating tothe disposal of a property in the previous financial year. Group net assets have increased to £13.9 million from £13.1 million at 30September 2006. This is largely due to the recognition under IAS 19 (EmployeeBenefits) of a surplus on the Group's defined benefit pension scheme of £823,000less an associated deferred tax liability of £230,000. At 30 September 2006 theposition was a scheme deficit of £579,000 together with a deferred tax asset of£174,000. The Vecta acquisition resulted in an increase in intangible assets of £868,000at 30 September 2007. Net assets per share were 56.7p at 30 September 2007 compared with 53.5p. Afinal dividend of 2.0p per share is proposed which, together with the interimdividend of 0.713p, gives a total dividend for the year of 2.713p per share, anincrease of 3.8%. Outlook The Group has a strong portfolio of software products which has beencomplemented during the year by the introduction of Vecta. The current year hasstarted well and, although we continue to face significant competition in ourmarketplace, we are well positioned to take advantage of new businessopportunities. Julian WassellActing Chief Executive 13 December 2007 Consolidated Income Statementfor the year ended 30 September 2007 2007 2006 £'000 £'000 Revenue 6,618 6,325 Gross profit 6,089 5,762 Administrative expenses (5,678) (5,596) Operating profit 411 166 Profit on sale of property - 420Finance revenue 289 280 Profit before tax 700 866 Income tax expense (222) (29) Profit for the period attributable to equity holdersof the parent 478 837 Earnings per share - basic and diluted 1.95p 3.42p Dividends per share 2.713p 2.613p Net assets per share 56.7p 53.5p Consolidated Statement of Recognised Income and Expensefor the year ended 30 September 2007 2007 2006 £'000 £'000 Actuarial gains/(losses) on defined benefit pension scheme 1,352 (364)Tax on items recognised directly in equity (391) 109Foreign exchange translation difference (5) (1) Net income/(expense) recognised directly in equity 956 (256)Profit for the period 478 837 Total recognised income and expense attributable to equityholders of the parent 1,434 581 Consolidated Balance Sheetat 30 September 2007 2007 2006 £'000 £'000 Non-current assetsProperty, plant and equipment 6,480 6,648Investment property 660 668Deferred tax asset 15 205Employee benefits 823 -Intangible assets 924 71 8,902 7,592Current assetsAssets held for sale 1,082 1,082Inventories 162 210Trade and other receivables 2,436 2,276Cash and cash equivalents 5,963 6,439 9,643 10,007Current liabilitiesDeferred income (2,528) (2,347)Income tax payable (154) (19)Trade and other payables (1,333) (1,444) (4,015) (3,810) Net current assets 5,628 6,197 Total assets less current liabilities 14,530 13,789 Non-current liabilitiesDeferred income (242) (22)Employee benefits - (579)Deferred tax liability (375) (106) (617) (707) Net assets 13,913 13,082 EquityIssued capital 1,226 1,222Share premium 119 87Capital redemption reserve 88 88Translation reserve (3) 2Retained earnings 12,483 11,683 Total equity attributable to equity holders of the parent 13,913 13,082 Consolidated Cash Flow Statementfor the year ended 30 September 2007 2007 2006 £'000 £'000 Cash flows from operating activities Profit for the period 478 837 Adjustments for: Depreciation 292 370 Amortisation 88 34 Net loss/(profit) on disposal of property, plant and 9 (416) equipment Pension charge 140 117 Pension fund payments (190) (297) Finance revenue (289) (280) Income tax expense 222 29 Change in inventories 48 36 Change in receivables (287) (141) Change in payables (199) 109 Change in deferred income 401 (167) Cash received from operations 713 231 Interest received 285 272 Income taxes (paid)/received (19) 41 Net cash from operating activities 979 544 Cash flows from investing activities Acquisition of business (919) - Purchase of property,plant and equipment (115) (96) Purchase of intangible assets (23) - Proceeds from sale of property, plant and equipment 210 1,302 Net cash (used in)/generated from investing activities (847) 1,206 Cash flows from financing activities Sale of own shares 36 - Dividends paid (639) (580) Net cash used in financing activities (603) (580) Net (decrease)/increase in cash and cash equivalents (471) 1,170 Cash and cash equivalents at beginning of period 6,439 5,269 Effect of exchange rate fluctuations on cash held (5) - Cash and cash equivalents at end of period 5,963 6,439 Notes The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 30 September 2007 or 30 September 2006but is derived from those accounts. Statutory accounts for 2006 have been delivered to the Registrar of Companies,and those for 2007 will be delivered following the Company's Annual GeneralMeeting. The auditors have reported on those accounts; their report wasunqualified and did not contain a statement under section 237 (2) or (3) of theCompanies Act 1985. Earnings per share Earnings per share is calculated by dividing the profit for the periodattributable to equity holders of the parent of £478,000 (2006: £837,000) by24,460,800 (2006: 24,432,362), being the weighted average number of shares inissue during the year. Basic and diluted earnings per share are both 1.95p(2006: 3.42p). Reconciliation of movement in equity and reserves Issued Share Capital Translation Retained Total capital premium redemption reserve earnings reserve £'000 £'000 £'000 £'000 £'000 £'000 At 1 October 2006 1,222 87 88 2 11,683 13,082 Arising on shares 4 32 - - - 36issued during the year Total recognised income - - - (5) 1,439 1,434and expense Dividends paid - - - - (639) (639) At 30 September 2007 1,226 119 88 (3) 12,483 13,913 Acquisition On 16 October 2006 the Group acquired the business and certain assets of VectaSoftware Corporation Limited for £900,000 cash and costs of £19,000. Thebusiness is a provider of Sales Intelligence solutions. For the period to 30September 2007, the business contributed £504,000 to Group turnover and made aprofit of £59,000. If the acquisition had taken place on 1 October 2006,management estimates that the impact on Group results would not have beensignificantly different. The acquisition had the following effect on the Group's assets and liabilitieson acquisition date: Values recognised on acquisition £'000 Property, plant and equipment 20Intangible assets 918Trade and other receivables 69Trade and other payables (88) Net identifiable assets and 919liabilities Consideration paid, satisfied in cash 919 Pre-acquisition carrying amounts were determined based on applicable IFRSimmediately before the acquisition. The book values of assets and liabilitiesrecognised on acquisition are their estimated fair values. No fair valueadjustments to the pre-acquisition carrying amounts were required. Intangibleassets identified above relate to software intellectual property rights. This preliminary announcement was approved by the Board of Directors on 13December 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Electronic Data Processing