Final Results

17 December 2013

Electronic Data Processing PLC (EDP)

Preliminary results for the year ended 30 September 2013

EDP is an IT solution provider to the UK wholesale distribution industry and a supplier of Sales Intelligence software solutions more widely.

Highlights:

· Overall turnover steady at £5.83 million (2012: £5.81 million)

· Sales of core software and services up 3%

· Contracted recurring revenues remain strong representing 77% of total revenue (2012: 76%)

· Hosting revenues continue to increase further and now represent 48% of total revenues (2012: 43%) demonstrating the success of our strategy to grow the hosting/cloud side of the business

· Adjusted operating profit £835,000 (2012: £820,000), gives an operating margin of 14.3% (2012: 14.1%)

· Pre-tax profit up 3.6% to £794,000 (2012: £766,000 excluding reduction in property valuation)

· Sale of surplus freehold property in Bellshill, Glasgow completed in December 2012 for £440,000 cash net of disposal costs

· Continuing commitment to R&D expenditure of £940,000 in the year (2012: £914,000)

· Strong debt-free balance sheet; cash balances of £5.67 million at 30 September 2013 (2012: £5.65 million) will be used to further develop the business

· 5p special interim dividend returned £626,000 to shareholders during the year

· Final dividend maintained at 2.0p per share, making 7.0p for the full year (2012: 2.713p)

Sir Michael Heller, Chairman of EDP, said:

"Whilst there are signs of increased confidence in the markets we address, this remains patchy and many businesses still retain a degree of caution when assessing significant IT expenditure decisions. However, with our attractive product offering and financial strength we are well placed for the future."

For further information please contact:

www.edp.co.uk

Chairman's Statement

Turnover for the year to 30 September 2013 remained steady at £5.83 million compared with £5.81 million the previous year. Sales of our core software and services increased by 3%.

Adjusted operating profit was £835,000 (2012: £820,000) representing an operating margin of 14.3% (2012: 14.1%). This underlying cash-based measure of our performance excludes non-cash IFRS charges and credits.

Pre-tax profit for the year on a statutory basis was £794,000. This compares with a loss in the previous year of £83,000 after the write-down of property values of £849,000.

We have seen some recent improvement in business confidence. However, this remains fragile and businesses in the sectors we address continue to face a mixed picture.

Our hosting revenues have continued to grow and now represent almost half of our total revenues. Contracted recurring revenues, which include annual software licence fees and hosting charges, amounted to 77% of total revenue compared with 76% in the previous year. Total R&D expenditure was £940,000 (2012: £914,000) which is principally focussed on the continued enhancement of our latest software products - Quantum VS and Vecta.

We reported last year that we had accepted offers on two of our freehold properties which were surplus to requirements. We completed the sale of one of these properties in December 2012 for £440,000 cash net of disposal costs. The carrying value of the property had been adjusted to reflect the expected net proceeds at 30 September 2012 and accordingly the sale resulted in neither a profit nor a loss.

The agreed sale of the other property is still proceeding, albeit more slowly than we would like, whilst the purchaser is engaged in a detailed planning process. This property is included in the Group balance sheet at £1.42 million which represents the expected net sale proceeds. We will report any further progress in due course.

We have one further surplus freehold property which is currently being marketed for sale and which is included in the Group balance sheet at £307,000.

Year-end cash balances were £5.67 million (2012: £5.65 million). In view of our relatively large cash balances, we paid a special interim dividend of 5p per share in August in lieu of the usual interim dividend of 0.713p. We continue to look at opportunities to acquire similar software producing businesses. However, we will review future dividends according to the opportunities that arise and our overall cash position at the time.

Net assets at 30 September 2013 reduced marginally to £6.1 million from £6.3 million reflecting the impact of the special interim dividend discussed above.

The Board is proposing to maintain the final dividend at 2.0p per share giving a total for the year of 7.0p (2012: 2.713p). If approved by shareholders, the final dividend will be paid on 7 April 2014 to those shareholders on the register at 7 March 2014. The shares will be ex-dividend on 5 March 2014.

As always I would like to thank all our members of staff and my colleagues on the Board for their contribution during the year.

Whilst there are signs of increased confidence in the markets we address, this remains patchy and many businesses still retain a degree of caution when assessing significant IT expenditure decisions. However, with our attractive product offering and financial strength we are well placed for the future.

Sir Michael Heller

Chairman

16 December 2013

Chief Executive's statement

Overall turnover for the year to 30 September 2013 was £5.83 million. Core revenues from the sale of software and services increased by 3% to £5.62 million. This was partly offset by a reduction in hardware and related maintenance revenue of approximately £130,000.

These results reflect the success of our strategy in growing the hosting/cloud computing side of the business. As customers now require much lower investment in their own on-site computer equipment, this has had the expected effect of reducing the amount of relatively low margin computer hardware that we sell.

Whilst we have seen some improvement in business confidence, with a resultant increase in sales activity levels, price competition remains keen in our market place.

Business Model

Our business model revolves around supplying our software products under long-term contracts either in the form of traditional on-site licences arrangements or cloud-based, hosted service level agreements. These long-term agreements provide us with good visibility of revenues from our existing customers for up to 5 years. Recurring revenues contracted under such agreements represent 77% of our total revenues in the year under review.

The business is structured such that, broadly-speaking, these recurring revenues cover our day-to-day cash operating costs including product R&D which increased to £940,000 from £914,000 during the year.

The remainder of our revenues are derived from our initial software licence fees, hosting joining fees and the provision of professional services and consultancy. In addition, we supply a small amount of computer hardware and maintenance to certain customers.

The trend towards stronger on-going revenues and away from the more traditional upfront licence fees, as we see more of our revenues derived from the Cloud/SaaS model, has continued at a moderate pace during the year. This has the impact of reducing the amount we receive up-front but strengthens our on-going revenues over the longer-term.

One of our principal strengths is our lack of dependence on any single customer. Our largest customer represents 5% of turnover and our 10 largest represent 30%.

Our business model is robust; we manage our cost base prudently, and monitor working capital carefully. The impact of bad debts during the year has continued to be low.

Strategy

We deliver software solutions that offer clear business benefits, assisting our customers to generate sales growth or to create efficiencies and drive down costs in their business.

Our strategy over recent years has been to increase the number of customers who receive their software through the Cloud, and we have been doing so for 13 years from our hosting centre in Milton Keynes, thereby strengthening our commitment to our customers and vice versa.

We have two main product groups - software applications for distributors and merchants, where Quantum VS is our latest product; and Vecta, our market-leading Sales Intelligence product.

The products are complimentary with many of our customers using both. Whilst Quantum focusses on a number of discrete sectors within distribution, Vecta has a wider target market across a broader range of verticals.

Quantum VS provides the core of our customers' business processes and as such it is a more "sticky" product once implemented. The product and market are characterised by long relationships with customers but also lengthy sales cycles which typically, and in common with other suppliers of similar applications, can be over 12 months.

Vecta balances this with much shorter sales cycles, sometimes measured in weeks, and shorter implementation times. However, customer churn can be greater as the product is less "sticky".

Quantum VS

Quantum VS is a graphical software application focussed on a number of vertical markets within the distribution sector including:

· builders and timber merchants

· suppliers of fixings and fastenings

· industrial and security products

· electrical wholesalers

· food distributors

Our strategy has been and remains to develop a single software application which provides:

· primarily, a clear upgrade path for our existing customers by bringing into this single product the key functionality from our established distribution applications - Merchant, Charisma, Esprit and The Business Programme;

· a software application to exploit new business opportunities in the markets we address, using a system architecture which provides agility and allows integration of customer-developed applications and third-party products which fulfil specific requirements which are non-core to Quantum VS; and

· a platform for continued enhancements in functionality.

As part of our continued drive to enhance the capability of Quantum VS we have recently released a new WMS (Warehouse Management System) module which will allow users to introduce significant efficiencies within their warehousing operations.

Following consultation with our customers we are also introducing purchasing management and forecasting capabilities into Quantum VS. This will allow users to address one of the major issues facing their businesses by allowing them to address inventory management, reduce stock levels, improve customer service and free up working capital.

The roll-out of Quantum VS among our existing customers has continued during the year in line with our expectations and we currently have a three month lead time for new implementations. We are working with our customers to manage the migration to Quantum at a pace that suits them.

Vecta

Vecta is a powerful Sales Intelligence software tool which assists businesses to drive sales.

Vecta is delivered solely through the browser which enables it to be used on a wide variety of devices, whether desk-top or mobile.

More recently our strategy has been to extend Vecta's CRM capabilities, further broadening its appeal. Our aim is to provide a single software product that will fulfil all the CRM and sales intelligence requirements of a broad range of businesses without the need for a separate third-party CRM solution.

We have also released Vecta in multi-language format during the year. This is significant because whilst in many cases management will use English for business purposes, other users may prefer or need to use their native language. Accordingly the language used can be set at the individual user level so that, for example, senior management or head office staff may use Vecta in English whilst sales and customer service staff use Vecta in their native language.

These new features have enabled us to implement Vecta at a number of substantial European businesses.

Hosting/cloud computing

The number of hosted customers has increased to 172 at 30 September 2013 from 136 a year earlier. Hosting now represents 48% of our revenues and the attached graph illustrates the increasing proportion of our revenues which are hosted over the last 8 years:

http://www.rns-pdf.londonstockexchange.com/rns/6806V_-2013-12-16.pdf

The concept of remote computing through the cloud has been widely accepted by business. The fact that we offer the facility from our own purpose built hosting centre means that our customers have a single IT provider looking after their software, hardware and operating system requirements - the traditional one-stop-shop.

Financial Review

Turnover for the year was £5.83 million compared with £5.81 million in the previous year. The proportion of revenues which are recurring increased slightly to 77% from 76%.

Adjusted operating profit, which is the measure used to monitor the business on a day-to-day basis, increased to £835,000 from £820,000 giving an improved operating margin of 14.3% compared with 14.1%

Adjusted operating profit is calculated after adding back a net charge of £126,000 (2012: £132,000) relating to a number of non-cash items which arise under IFRS; principally amortisation of intangible assets, defined benefit pension scheme charges and the capitalisation and amortisation of development costs.

Our statutory profit before tax of £794,000 compares to a loss of £83,000 last year. The previous year's result included a write-down in property values of £849,000. Excluding these property related items, pre-tax profits in the prior period would have been £766,000 and accordingly on this basis, statutory pre-tax profit has increased by 3.6%.

Our total R&D expenditure increased to £940,000 (2012: £914,000) of which £118,000 was capitalised as required by IAS 38. The remainder has been expensed in the income statement.

Interest income was £85,000 compared with £78,000 last year.

The tax charge for the year was £207,000 (2012: £26,000 credit). This gave an effective tax rate of 26% on a pre-tax profit of £794,000, which is higher than the standard rate of UK corporation tax due to the impact of a reduction in the rate used to calculate our net deferred tax asset.

Earnings per share amounted to 4.68p (4.63p on a fully diluted basis) compared to a loss per share of 0.45p last year. However, adjusting for the write-down in property values referred to above gave an underlying EPS of 4.66p last year.

Our cash balances at 30 September 2013 were £5.67 million (2012: £5.65 million). Operating cash flows were £890,000 compared with £1.179 million reflecting a change in some billing profiles. In addition we received £440,000 from the sale of our freehold property in December 2012 and £98,000 in interest on our cash deposits. In addition to the regular 2012 final dividend of £251,000 paid during the year, we paid a special interim dividend amounting to £626,000, thereby returning £877,000 to shareholders. Other significant cash outflows were £173,000 corporation tax and £235,000 of capital expenditure.

The position on the Group's defined benefit pension scheme improved by £76,000 (£27,000 net of deferred tax). The Group balance sheet reflects a gross liability in respect of this scheme of £1.044 million (£835,000 net of deferred tax). We reported last year that we were reviewing the future direction of this scheme and we are currently in the process of consulting with members regarding the closure of the scheme to future accrual. We expect to report further progress to shareholders in due course.

Net assets reduced slightly to £6.15 million from £6.27 million reflecting, inter alia, the special interim dividend referred to above. Net assets per share amounted to 49.1p (2012: 50.0p).

Property

In December 2012 we completed the sale of our surplus freehold property in Bellshill, Scotland for £440,000 net of costs. This disposal has generated annual cost savings of £35,000.

We now have three freehold properties including our hosting centre in Milton Keynes. The other two properties are not required for operational purposes.

We reported last year that we had accepted an offer on the larger of these two properties which is reflected in the Group balance sheet at its expected net sale proceeds of £1.42 million and categorised as an asset held for sale. The sale involves a planning application for change of use and this process is still underway. The disposal will generate cost savings of around £70,000 a year. We will update shareholders on these transactions in due course.

The remaining property is included in fixed assets at a value of £307,000.

Outlook

Trading conditions since the year end have been consistent with those experienced during the year under review, although there have been more recent signs of an increase in confidence. We expect business sentiment to remain one of cautious optimism for the time being and for price competition to remain keen. We have an extremely robust business model and considerable financial strength which will enable us to take advantage of those opportunities which do arise.

Finally, I would like to thank all of my colleagues throughout the business for their hard work and commitment during the year.

Julian Wassell

Chief Executive

16 December 2013

Notes

1. Financial Information

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2012 or 2013 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The financial information has been prepared on a basis consistent with that presented in the 30 September 2012 financial statements.

2. Accounting Policies

Basis of preparation

The financial statements have been prepared in accordance with adopted IFRS and under the historical cost basis except as described elsewhere in note 2.

Basis of consolidation

The consolidated financial information incorporates the accounts of Electronic Data Processing PLC and all its subsidiaries. Such accounts are all made up to 30 September 2013.

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial information of subsidiaries is included in the consolidated financial information from the date that control commences until the date that control passes. Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial information.

Revenue

The Group's revenues derive from a number of sources which are described below. All revenue excludes value added tax and any sales between Group companies. Revenue relating to future periods is deferred. Revenue is recognised to the extent that it is probable the economic benefits will flow to the Group and the revenue can be reliably measured.

The Group's software revenues are broken down into initial licence fees, upfront hosting charges and recurring software usage charges. Initial licence fees are recognised as revenue in full on delivery of the software following receipt of a non-cancellable contract as the Group considers that at this point all of the significant risks and rewards of ownership of the licence have been transferred to the customer. Upfront hosting charges are recognised as revenue on provision of access to the Group's servers following receipt of a signed non-cancellable contract. Recurring software usage charges and periodic hosting service charges are recognised evenly over the period to which they relate.

Other software related revenues are mainly from the provision of professional services including implementation, training and consultancy. This revenue is recognised when the services have been performed. Sales of computer equipment are recognised on delivery to customers and equipment maintenance charges are recognised evenly over the period to which they relate.

Property, plant and equipment

Property, plant and equipment is stated at cost or deemed cost less accumulated depreciation and impairment losses. Land is not depreciated. The Directors assess the residual values and useful economic lives of the properties on an annual basis. Depreciation is provided so as to write off the cost, or deemed cost, less the estimated residual value of each asset in equal instalments over its estimated useful life from the time it becomes operational, at the following rates:

Assets held for sale

A non-current asset is classified as held for sale if, at the balance sheet date, its carrying value will be recovered principally through sale rather than through continuing use, it is available for immediate sale and that sale is highly probable within one year. On initial classification as held for sale, non-current assets are measured at the lower of previous carrying amount and fair value less costs to sell, with any adjustments taken to the income statement. The same applies to gains and losses subsequent to re-measurement.

Employee benefits - pensions

The Group operates both defined contribution and defined benefit pension schemes. The premiums relating to defined contribution schemes are charged to the income statement in the period in which they accrue.

The Group's net obligation in respect of its defined benefit pension scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of the scheme assets are deducted. The calculation is performed by a qualified actuary using the projected unit credit method.

Actuarial gains and losses occur when the actual returns on scheme assets differ from those previously expected by the actuary. All actuarial gains and losses as at 1 October 2004, being the date of transition to IFRS, were recognised in full. The Group recognises actuarial gains and losses arising subsequent to 1 October 2004 directly into equity through other comprehensive income in the period they occur. All other movements in the pension asset or liability are recognised in the income statement for the relevant period.

3. Segmental Analysis

The Group has identified its reportable segment based on the financial reports that internally are provided to the Group's chief operating decision maker (CODM). In line with its management structure, the Executive Directors collectively make the key operating decisions and review internal monthly management accounts and budgets as part of this process. Accordingly, the Executive Directors collectively are considered to be the CODM. The information reported regularly to the CODM presents the Group as a single segment supplying software and related services to customers operating in similar markets. The Group's software products share a common sales, development and implementation resource. Consequently the Group has determined that there is one operating segment and therefore one reportable segment, Software.

Segment performance is measured based on segment profit before tax excluding IAS 19 defined benefit pension scheme adjustments and profits or losses on property disposals or revaluations.

4. Earnings per share

Earnings per share is calculated by dividing the profit for the period attributable to equity holders of the parent of £587,000 (2012: loss of £57,000) by 12,530,976 (2012: 12,530,976), being the weighted average number of shares in issue during the year.

Basic earnings per share is 4.68p (2012: loss of 0.45p).

For diluted earnings per share, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company has one class of dilutive potential ordinary share which is share options granted to employees under its Enterprise Management Incentive Share Option plan. These shares have been included in the diluted earnings per share calculation.

Diluted earnings per share is calculated by dividing the profit after tax of £587,000 (2012: loss of £57,000) by 12,666,864 (2012: 12,530,976), being the weighted average number of shares in issue adjusted for the effects of all dilutive potential ordinary shares.

Diluted earnings per share is 4.63p (2012: loss of 0.45p).

5. Dividends paid and proposed

6. Assets held for sale

The balance at 30 September 2013 represents the expected net sales proceeds of the Group's vacant property at Milton Keynes and on which an offer to purchase has been accepted from a third party.

7. Share Capital

Each holder of an ordinary share is entitled to one vote for each share held at all meetings of shareholders and will be entitled to any dividends declared by the Board of Directors with the exception of treasury shares which do not carry any voting or dividend rights.

Treasury shares

This preliminary announcement was approved by the Board of Directors on 16 December 2013.