Final Results

1st Oct 2008 07:00



Press Release

1 October 2008

Ascribe plc

("Ascribe" or "the Group")

Final Results

Ascribe plc (AIM:ASP), the health IT Group, today announces its final results for the year ended 30 June 2008.

Highlights

 

—	Revenues up 14% to £17.4m (2007: £15.3m), including over 10% organic growth
—	Recurring maintenance revenue at 59% (2007: 63%)
—	Adjusted operating profit¹ up 20% to £4.2m (2007: £3.5m)
—	Operating profit up 28% to £4.0m (2007: £3.2m)
—	Increased operating margin of 23% (2007: 21%)
—	Profit before tax up 28% to £3.8m (2007: £3.0m)
—	Profit after tax up by 23% to £2.9m (2007: £2.4m)
—	Operating cash is 81% (2007: 135%) of operating profit
—	Basic earnings per share up 20% to 2.49p (2007: 2.08p)
—	Successful bid to supply the UK National Health Service’s National Programme for IT ASCC (‘Additional Supply Capability and Capacity’) Framework Agreement
—	Acquisition of Scorpio Information Systems Limited (22 October 2007)
—	Acquisition of WCI Consulting Ltd’s healthcare division (26 September 2008)

 

¹ before the impairment / amortisation of goodwill or acquired intangible assets and the charge for share based payments

Stephen Critchlow, Executive Chairman of Ascribe plc commented: "This has been a landmark year for Ascribe and I am delighted with the growth and development of the Group. Having secured the ASCC agreement to provide IT services to the NHS's National Programme, we have witnessed a significant rise in direct orders from the UK during the second half of the year, leading to a strong order pipeline as we move into the new financial year. We have further progressed our acquisition strategy to include: Scorpio Information Systems, which has been effectively integrated in the Group and is performing strongly; and WCI Consulting's healthcare division, which will assist delivery of the growing demand for Ascribe's integrated solutions. We continue to receive positive feedback from our customers as we satisfy their ever-broadening needs and we are confident that the Group will continue to meet management expectations in 2008/2009."

-ENDS-

For further information please contact:

Ascribe plc
Stephen Critchlow, Executive Chairman	Tel: +44 870 53 45 45
Jeremy Lee, Group Finance Director	www.ascribe.com

Cenkos
Ivonne Cantu	Tel: +44 20 7397 8900
	www.cenkos.com

Media enquiries:

Abchurch
Stephanie Cuthbert / Justin Heath / Simone Alves	Tel: +44 20 7398 7718
[email protected]	www.abchurch-group.com

  Executive Chairman's Report

I am pleased to report another year of good progress in the Group's development.  The careful work to integrate the Group has paid off and despite a slow start to the year, we have achieved excellent growth and an improved margin.  The move to local level procurement decisions within the NHS this year has led to a marked increase in the orders received.  There is emerging clarity in the procurement policy of the UK market which is endorsing Ascribe's strategy of delivering clinician-focused solutions that benefit patients and healthcare providers.  This has attracted rising levels of interest in the UK and abroad, leading to an increase in sales for the year and good momentum for new orders moving into the new financial year. 

Further progress in the integration of the Group's product development resources, combined with a focus on providing strategic solutions to the problems that face hospital trusts in meeting their objectives, have propelled the Group from being a best of breed departmental health IT provider to becoming a leading supplier to a high proportion of UK health agencies.  I am also pleased to report further progress in our Australasian operations where we are stimulating new orders for the Group's solutions not previously sold in those markets. 

Ascribe has consolidated its development teams across the world and is working to develop common software modules that are interchangeable across our range of healthcare systems.  These systems will enable us to deliver solutions to market at an increased rate, support a significant increase in licensed users and ease system integration with existing third party solutions.

On 19 August 2008 the Board of Ascribe announced that it was in preliminary discussions in relation to a potential management buyout by Ascribe's executive directors. These discussions are ongoing however they may or may not lead to an offer being made for the entire issued share capital of the Company and shareholders should be aware that there is no certainty that an offer will be forthcoming.

A Successful Year

Ascribe's strategy of combining organic growth with earnings enhancing acquisitions has continued to fuel our growth this year. Revenue has increased by 14% to £17.4m (2007: £15.3m) whilst like-for-like organic sales have grown by over 10%. 

Operating profit before the impairment/amortisation of goodwill or acquired intangible assets and the charge for share based payments has increased 20% to £4.2m (2007: £3.5m) yielding an operating margin of 23% (2007: 21%).  Basic earnings per share for the year increased by 20% to 2.49p from 2.08p in 2007.

The Group delivered a high rate of cash conversion with operating cash representing 81% of this year's record operating profit. The strong revenue performance in the second half of the year has increased working capital at year end.

Strategy

Ascribe has established itself as a provider of robust healthcare systems that provide interoperable benefits to clinicians and patients.  The Group has worked at a local level to provide local solutions to local problems with local IT managers and healthcare providers.  We have never sought to impose our systems or require that existing systems and procedures be scrapped; rather we have developed software architectures that integrate with existing processes. Our products are designed to the highest quality to meet local needs as well as delivering national requirements coming from the Government's agency for Health IT - Connecting for Health (CfH).

Market

Ascribe's markets extend from the UK to Asia, Australia and New Zealand, with each market offering its own unique challenges and opportunities.  The Group is working to grow its presence and market share in these regions.  We have seen double digit growth in both our UK and overseas businesses and Ascribe is well positioned as a respected supplier, able to deliver robust and proven solutions that meet customer requirements within an agreed timeframe and to a high standard of clinical professionalism. 

Our investment in the organisation's infrastructure means that we are now capable of expanding our sales and raising our profile to a far greater degree on the national and international stage.

Management and Staff

I once again wish to commend the management team and all staff on their achievements during the last 12 months. A year of excellent organic growth and record profitability, together with the efficient integration Scorpio Information Systems Limited is the result of a lot of hard work delivered to a co-ordinated plan. 

The Group has continued to evolve to the benefit of patients, clinicians, customers, shareholders and staff, whilst reinforcing the mission, vision and values that differentiate Ascribe from its competitors.  The Group is now capable of addressing the wider opportunity ahead of us that is beginning to materialise.

Dividend

Until the outcome of the buyout discussions (see above) is known, the Board has taken the decision to suspend the payment of dividends.  Should the Board decide to maintain the Group's listing and independence, they would anticipate recommencing dividend payments and any future dividends would include any previously foregone dividend payment.  The 2007 dividend was 0.17p per share. 

Current Trading and Outlook

We have continued to expand the capacity of the Group by maximising our operational synergies, moving products to our more efficient web based platform and further staff recruitment.  This puts us in a position to take full advantage of the markets in which we are now trading. 

The feedback we are getting from our customers about our new products and integrated offerings means we are confident about management expectations for 2008/9. Many of our customers have extended their contracts with us this year giving us further confidence about our long term maintenance income which remains at around 60% of our turnover. 

We have continued to grow by acquisition - on 25 September 2008, the company acquired the trade and assets of the healthcare division of WCI Consulting Limited for a maximum consideration of £950,000. Ascribe will benefit from the expertise of over 30 trained members of staff joining from WCI Healthcare, who will help to deliver integrated IT solutions from the Group's growing sales pipeline

Stephen Critchlow

Executive Chairman

  Chief Operating Officer's Review

Ascribe's business model is to supply Health IT solutions directly to trusts at local level in the UK and selected overseas markets.

Integration and Consolidation

We have concentrated heavily on the continued integration of the business and, in line with this, only one acquisition, Scorpio Information Systems Limited ("Scorpio"), was made during the year.  This acquisition has further demonstrated our ability to identify and successfully integrate new businesses into the Group. Scorpio has taken advantage of being a part of the larger Ascribe group with sales of its endoscopy system in the eight months since acquisition increasing to record levels.  We look forward to building the Group with further acquisitions in the coming years. 

To allow the business to work more effectively and unify our UK operations, we have closed our Trafford office and moved staff from this site to our headquarters in Bolton.  Our team in Nairobi has grown this year and we have now moved to a larger and more suitable office.  We have also moved office in Sydney as the Group continues to grow in Australia.

With new IT systems in support and finance installed last year, we have been better able to monitor our activities and are pleased to report we have achieved ISO 9001 accreditation across the Group during the year.

Customer service remains a high priority and an extensive survey was carried out in April. While we are not complacent and there is always room for improvement, it was encouraging to see that we received high scores for understanding our customers' needs and for being an innovative and progressive organisation.  Plans are in place to further improve customer satisfaction.

Appointed supplier under Additional Services Capacity and Capability Contract ("ASCC")

In April 2008, Ascribe secured a major framework agreement to provide a range of IT products and services to the NHS.  The Group now holds framework contracts for a wide range of its systems.  The ASCC framework contracts are for a four year duration. 

They will provide NHS organisations and other NHS-funded establishments with a faster and easier route to procure IT systems and services from suppliers who have demonstrated experience in the health sector.  ASCC can be used to support both Connecting for Health related work and wider IT-related projects.

Operating Divisions

With the addition of Scorpio we have added another operating division for Clinical Departmental Systems. This, together with the creation of the Enterprise division referred to below, compliments Ascribe's other four market-facing divisions: 

	Pharmacy.
	Electronic Patient Records.
	Mental Health & Community Care.
	Primary & Unscheduled Care.

Over the last twelve months these divisions have seen their sales increase in three broad areas: 

	Existing customers looking for additional licenses and increased functionality.
	New customers looking for robust and available IT solutions that can be easily integrated with their existing systems and processes.
	A growing number of healthcare providers looking to Ascribe to deliver combinations of our products across multiple departments on an ongoing basis, to provide a single cohesive and integrated patient-centric solution.

Pharmacy

Ascribe's Pharmacy Division has continued to install our new Web Pharmacy software solution in the UK and overseas.  The upgrade not only increases the scalability of our solution, it also supports additional and complementary pharmacy and reporting systems, such as Ascribe's Electronic Prescribing and Medicines Management solutions. We now have 16 live sites with this solution.

We have transferred the sales of electronic prescribing to our newly formed Enterprise division which will allow us to focus on the significant leads we have in this area. 

Primary and Unscheduled Care

Sales of Symphony, Ascribe's emergency care application, have increased significantly since the beginning of 2008, following a quiet first half. The first installation in Australia went live at Barwon Health in March and this has generated a great deal of interest in the region.  New sales have also been made in England, Scotland and Wales.

Ascribe also has a range of solutions for the primary care market which address new opportunities that may develop from the new polyclinic initiative.

Mental Health and Community Care (MH&CC)

The growth in this division comes mainly from providing additional functionality and license expansions for existing customers.  A strong performance in the second half in both the UK and Australia has resulted in the division exceeding expectations.

Electronic Patient Record (EPR)

The EPR division has seen continued demand for new functionality from our customers. The UK Government's 18 week wait initiative (a maximum 18 week referral to treatment time for patients needing elective care) has led to new orders as has our ability to provide "Choose and Book" functionality.

Chris Dickson

Chief Operating Officer

  Financial Review

The Group has reported another year of record sales and profitability in 2008. The financial position remains strong, with the Group having net cash of £1.2m at 30 June 2008.

International Financial Reporting Standards

These results have been prepared for the first time under International Financial Reporting Standards ("IFRS"), the principal effects of which are to reduce amortisation charges for acquired intangible assets and to increase the deferred tax charge. 

Trading Results

Revenue grew 14% to £17.4m for the year ended 30 June 2008 (2007: £15.3m) whilst like-for-like organic sales growth has increased by over 10%.  Revenue generated from recurring maintenance contracts is a significant and visible component of the Group's revenue, comprising 59% of sales during the year (2007: 63%).  The remaining sales, of new software solutions, are generated from new and existing customers.  The Group has won further market share in the health markets in which it operates, both in the UK and overseas.  Furthermore, cross-selling opportunities have continued to drive account development sales with existing customers.

The successful penetration of the Group's Accident & Emergency solution into the Australasian market has continued the momentum in our overseas sales.  The proportion of the Group's sales being generated outside the UK and Republic of Ireland grew in 2008 to 16.5% (2007: 14.4%) at £2.9m (2007: £2.2m). 

Gross margins have improved during the year.  The operating margin has grown to 23% (2007: 21%).  The Board remains committed to the continued and targeted investment in research and development expenditure, which for 2008 amounted to £3.4m (2007: £2.6m).

As in previous years, the Board measures operating profit before the impact of charges relating to acquisitions.  Operating profit before the impairment/ amortisation of goodwill or acquired intangible assets and share based payments was £4.2m compared to £3.5m in the previous year.  Operating profit grew 28% to £4.0m (2007: £3.2m).

Interest

The Group has a seasonal cash flow and although it is in a net cash position at year end over the course of the full year the Group pays more interest than it earns. Net interest payable for the year was £0.2m (2007: £0.2m). The Group has a bank loan which expires in June 2011 and an offsetting overdraft facility, both with the Royal Bank of Scotland plc ("RBS"). Interest is paid at 1.5% over the bank's base rate.

Amortisation of Acquired Intangible Assets and Goodwill Impairment

A charge of £0.1m (2007: £nil) for the amortisation of acquired intangible assets has been made in the year, whilst there was no impairment charge for goodwill (2007: £0.2m).

Under IFRS goodwill arising on consolidation is held, unamortised, in the balance sheet and is subject to an annual impairment review.

Taxation

The tax charge for the year of £0.9m (2007: £0.6m) represents an effective rate of tax of 23.9% (2007: 20.2%) on profit before tax.  The effective rate of corporation tax remains low due to the Group's ability to utilise the UK tax credits arising from investment in research and development and one of its subsidiary's ability to amortise acquired goodwill.

Earnings per share

Basic earnings per share increased 20% to 2.49p (2007: 2.08p). The fully diluted earnings per share also increased, by 23% to 2.43p (2007: 1.97p).

Funding and bank facilities

The Group's net funds position at 30 June 2008 was £1.2m (2007: £0.8m).

The facilities with RBS include a term loan facility amounting to £3.1m at 30 June 2008 (2007: £3.4m) which will be repaid by 30 June 2011 and an overdraft facility of £1.6m (2007: £1.6m). 

Acquisitions

During the year Ascribe successfully completed its eighth acquisition. On 22 October 2007, Ascribe acquired 100% of the share capital of Scorpio Information Systems Limited for a total consideration of £1.31m.  The company based in Hythe, Southampton, is a provider of clinical information management systems and has a strong presence in the UK endoscopy market.  The consideration was satisfied on completion by £0.88m cash and £0.43m by the issue of 1.04 million new ordinary shares in Ascribe plc.

On 25 September 2008 Ascribe acquired the trade and assets of the healthcare division of WCI Consulting Limited for a maximum consideration of £950,000.

Further acquisitions are constantly being considered where they are earnings enhancing and represent good value for the Group's stakeholders. 

Jeremy Lee

Group Finance Director

  Consolidated Income Statement 

for the year ended 30 June 2008

	Note	2008 £'000	2007 £'000
Revenue		17,389	15,313
Cost of sales		(1,531)	(1,544)
Gross profit		15,858	13,769
Amortisation of capitalised development expenditure		(398)	(195)
Other research and development costs		(2,103)	(1,841)
Research and development costs		(2,501)	(2,036)
Amortisation of acquired intangible assets		(79)	-
Impairment of goodwill		-	(210)
Charge in relation to share-based payments		(57)	(98)
Other administrative expenses		(9,181)	(8,258)
Administrative expenses		(9,317)	(8,566)
Operating profit		4,040	3,167
Finance income		62	38
Finance costs		(274)	(225)
Profit before income tax		3,828	2,980
Income tax expense		(914)	(602)
Profit for the year		2,914	2,378
Basic earning per share - pence	2	2.49	2.08
Diluted earnings per share - pence	2	2.43	1.97

All items dealt with in arriving at the operating profit above relate to its continuing operations.

  Consolidated Statement of Recognised Income and Expense 

for the year ended 30 June 2008

	2008 £'000	2007 £'000
Currency translation differences	(9)	(12)
Net expense recognised directly in equity	(9)	(12)
Profit for the year	2,914	2,378
Total income recognised for the year	2,905	2,366

  Consolidated Balance Sheet 

at 30 June 2008 

	Note	2008 £'000	2007 £'000
Non-current assets
Property, plant and equipment		698	507
Goodwill		16,626	17,426
Intangible fixed assets		2,125	714
Total non-current assets		19,449	18,647
Current assets
Trade and other receivables	3	5,668	3,063
Cash and cash equivalents		4,333	4,190
Total current assets		10,001	7,253
Total assets		29,450	25,900
Current liabilities
Trade and other payables	4	(9,827)	(8,458)
Current income tax liabilities		(420)	(255)
Borrowings		(949)	(700)
Provisions for other liabilities and charges		-	(1,000)
Total current liabilities		(11,196)	(10,413)
Non-current liabilities
Borrowings		(2,159)	(2,724)
Deferred income tax liabilities		(819)	(215)
Provisions for other liabilities and charges		-	(500)
Total non-current liabilities		(2,978)	(3,439)
Total liabilities		(14,174)	(13,852)
NET ASSETS		15,276	12,048
Capital and Reserves
Share capital	5	1,176	1,143
Shares to be issued	5	-	650
Share premium	5	4,111	4,077
Merger reserve	5	6,751	5,704
Retained earnings	5	3,238	474
TOTAL EQUITY		15,276	12,048

  Consolidated Cash Flow Statement 

for the year ended 30 June 2008 

	Note	2008 £'000	2007 £'000
Cash flows from operating activities
Profit before income tax		3,828	2,980
Depreciation		233	168
Amortisation of acquired intangible assets		79	-
Amortisation of capitalised development expenditure		398	195
Impairment of goodwill		-	210
Charge for share based payments		57	98
Loss on sale of tangible fixed assets		2	4
Net finance costs		212	187
(Increase) / decrease in receivables		(2,587)	49
Increase in payables		1,069	396
Cash generated from operations		3,291	4,287
Interest paid		(274)	(225)
Income tax paid		(392)	(594)
Net cash generated by operating activities		2,625	3,468
Cash flows from investing activities
Purchase of property, plant and equipment		(426)	(385)
Capitalised development costs		(1,279)	(788)
Acquisition of subsidiary, including expenses		(966)	(38)
Payment of deferred consideration		(10)	(850)
Cash acquired with acquisition of subsidiary		615	-
Interest received		62	38
Net cash used in investing activities		(2,004)	(2,023)
Cash flows from financing activities
Proceeds from borrowings		450	1,431
Repayment of borrowings		(766)	(557)
Proceeds from the issue of equity share capital		36	-
Dividends paid to company's shareholders		(198)	(148)
Net cash (used in) / generated from financing activities		(478)	726
Increase in cash and cash equivalents		143	2,171
Net cash and cash equivalents at start of period		4,190	2,031
Exchange gains and losses on cash and bank overdrafts		-	(12)
Net cash and cash equivalents at end of period		4,333	4,190

  Notes to the Group Financial Statements

for the year end 30 June 2008

1. Basis of Reporting

This preliminary announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRIC interpretations as adopted by the EU and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The preliminary announcement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. This announcement has been agreed with the company's auditors for release.

This preliminary announcement contains information extracted from the audited financial statements of the group for the year ended 30 June 2008. The statutory accounts for the year ended 30 June 2008 will be sent to the shareholders shortly.

The information for the year ended 30 June 2007 has been amended for the adoption of IFRS. The statutory accounts for the year ended 30 June 2007, which have been delivered to the Registrar of Companies, included an audited report which was unqualified and which did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.

  2. Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. Diluted earning per share is the weighted average number of ordinary shares in issue adjusted for the potential ordinary share dilution from share options and shares to be issued. Adjusted basic earning per share is calculated by adding back the impairment/amortisation of goodwill or acquired intangible assets and the charge for share based payments to more accurately reflect the Group's underlying earnings.

	2008 Basic	2008 Adjusted	2008 Diluted	2007 Basic	2007 Adjusted	2007 Diluted
Profit after taxation (£'000)	2,914	2,914	2,914	2,378	2,378	2,378
Share based payments (£'000)	-	57	-	-	98	-
Intangible fixed asset Amortisation (£'000)	-	79	-	-	210	-
Profit attributable to ordinary shareholders (£'000)	2,914	3,050	2,914	2,378	2,686	2,378
Number of shares (thousands)	117,066	117,066	119,857	114,250	114,250	120,487
Earnings per share (pence)	2.49	2.61	2.43	2.08	2.35	1.97
Basic weighted average no. of shares (thousands)	-	-	117,066	-	-	114,250
Dilutions arising from share options (thousands)	-	-	2,791	-	-	4,227
Dilution from shares to be issued (thousands)	-	-	-	-	-	2,010
Diluted weighted average no. of shares (thousands)	-	-	119,857	-	-	120,487

  3. Trade and Other Receivables

	2008 £'000	2007 £'000
Trade receivables	4,154	2,345
Less: provision for doubtful debts	(108)	(337)
Trade receivables - net	4,046	2,008
Amounts recoverable on contracts	-	92
Other debtors	40	12
Prepayments	476	494
Accrued income	1,106	457
	5,668	3,063

4. Trade and Other Payables

	2008 £'000	2007 £'000
Trade payables	882	1,246
Other taxes and social security payable	1,290	906
Other creditors	267	181
Accruals	655	497
Deferred income	6,580	5,628
Deferred consideration	153	-
	9,827	8,458

  5. Statement of Changes in Shareholders Equity

	Share Capital £’000	Shares to be Issued £’000	Share Premium £’000	Merger Reserve £’000	Retained Earnings £’000	Total Equity £’000
As at 1 July 2006	1,142	-	4,062	5,680	(1,842)	9,042
Profit for the year	-	-	-	-	2,378	2,378
Charge for share based payments	-	-	-	-	98	98
Exchange differences	-	-	-	-	(12)	(12)
Shares to be issued	1	650	-	24	-	675
Issue of new shares	-	-	15	-	-	15
Dividends	-	-	-	-	(148)	(148)
As at 1 July 2007	1,143	650	4,077	5,704	474	12,048
Profit for the year	-	-	-	-	2,914	2,914
Charge for share based payments	-	-	-	-	57	57
Exchange differences	-	-	-	-	(9)	(9)
Issue of new shares	33	(650)	34	1,047	-	464
Dividends	-	-	-	-	(198)	(198)
As at 30 June 2008	1,176	-	4,111	6,751	3,238	15,276

 

-ENDS-

ENDFR ILFSDAAIIVIT

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