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Half-Year Results

30th May 2013 07:00

RNS Number : 8446F

Electronic Data Processing PLC

30 May 2013

Electronic Data Processing PLC (EDP)

Half-year results - 6 months to 31 March 2013

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

Financial Highlights

·; Turnover £2.93 million (2012: £2.89 million)

·; Adjusted operating profit improved 7% to £431,000 (2012: £403,000) giving an operating margin of 14.7% (2012: 14.0%)

·; Hosting revenues now represent 44% of total revenues (2012: 41%)

·; Contracted recurring revenues maintained at £2.2 million representing 76% of total revenues

·; Continued R&D investment of £469,000 in first half (2012: £426,000)

·; Sale of surplus freehold property in Bellshill, Scotland completed generating £440,000 cash and saving annual property costs of £35,000

·; Strong, debt-free balance sheet with cash balances of £5.9 million

·; Special interim dividend of 5p per share returns £627,000 to shareholders

Michael Heller, Chairman of EDP, said:

"We have a robust business model, with strong recurring revenues and a carefully managed cost base. Whilst the economy remains uncertain our customers will remain cautious. However, with our product and financial strength we are well placed for the future."

-Ends-

For further information please contact:

Julian Wassell	James Storey	Toby Mountford
Chief Executive	Finance Director	Citigate Dewe Rogerson
0114 262 2010	0114 2622010	020 7638 9571 / 07710 356611

www.edp.co.uk

Chairman's Statement

Turnover for the six months to 31 March 2013 was £2.93 million compared with £2.89 million in the corresponding period last year.

Our adjusted operating profit, before non-cash IFRS charges, increased by 7% to £431,000 (2012: £403,000). Accordingly our operating margin improved to 14.7% from 14.0%. Statutory pre-tax profit for the 6 months was up 17% at £424,000 (2012: £363,000). Interest income was £50,000 (2012: £36,000). Net non-cash IFRS charges were £57,000 (2012: £76,000).

Whilst trading conditions during the period under review have remained challenging, we have continued to sign new users for our main products, Quantum VS and Vecta. The economic back-drop has created a very mixed picture for businesses in the sectors we address, with some experiencing growth, whilst others continue to face difficulties.

Our customers continue to recognise the benefits that can be derived from having their software delivered through the "cloud". Our strategy over recent years has been to increase the proportion of our business delivered through our hosting centre in Milton Keynes and this now represents 44% of turnover (2012: 41%).

Contracted recurring revenues, which relate to annual software licences and hosting fees, amounted to £2.23 million (2012: £2.20 million) and represented 76% of turnover during the period (2012: 76%).

R&D expenditure during the period was £469,000 (2012: £426,000) as we continue to enhance the functionality of our key software products.

We completed the sale of our surplus freehold office building in Bellshill, Scotland for £440,000 net of costs in December 2012. The carrying value of the property had previously been adjusted at 30 September 2012 to reflect the net sales proceeds, and accordingly, the disposal resulted in neither a profit nor a loss in the period under review. The sale generates annual property cost savings of approximately £35,000. As previously reported, we have accepted an offer, subject to contract, on our surplus property in Milton Keynes. This property is carried in the Group balance sheet at £1.42 million, which represents the expected net sale proceeds. This matter is proceeding and we expect to report further progress to shareholders in due course.

Group net assets were £6.25 million at 31 March 2013 compared with £6.27 million at 30 September 2012. The principal movements being a profit after tax of £326,000, dividends of £251,000 and a reduction of £103,000 in the position of the Group's defined benefit pension scheme due to amended actuarial assumptions.

At 31 March 2013 Group cash balances were £5.9 million (2012: £5.2 million). Our policy is to use these cash balances for acquisitions should suitable opportunities arise.

In the meantime we have decided, in view of our relatively large cash balances, to pay a special interim dividend of 5p per share (2012: 0.713p interim dividend). We will review future dividends according to the opportunities that arise and our overall cash position at the time. The special interim dividend will return £627,000 to shareholders and will be paid on 1 August 2013 to those shareholders on the register on 5 July 2013. The shares will be ex-dividend on 3 July 2013.

We have a robust business model, with strong recurring revenues and a carefully managed cost base. Whilst the economy remains uncertain our customers will remain cautious. However, with our product and financial strength we are well placed for the future.

Sir Michael Heller 29 May 2013

Chairman

Principal Risks and Uncertainties

The Group operates in a changing economic and technological environment that presents risks, many of which are driven by factors that we cannot control or predict. The key risks and uncertainties facing the Group are as follows:

Wider economic factors

As with most other businesses in the UK, the Group's operations can be adversely affected by a significant downturn in the economy. Restricted availability of finance for businesses and a stagnant or recessionary economy could have an adverse effect on the prospects for EDP, as potential customers, particularly in the builders and timber merchants sectors, may scale back their IT plans in response to funding difficulties and/or reduced prospects for their businesses. We seek to mitigate these risks by ensuring that a significant proportion of the Group's revenues are derived from long-term contracts with our customers, by ensuring that our products appeal to businesses operating in a range of business sectors and by generally seeking payment for our recurring licence fees annually in advance.

Competitive environment

The Group operates in a competitive environment. New entrants to our marketplace and actions taken by existing competitors could have an impact on our levels of business activity and product pricing in the market generally. We endeavour to provide excellent customer support together with high quality products at a competitive price in order to develop and protect strong customer relationships.

Key personnel

In common with all people-based businesses, the success of the Group will, to a significant extent, be dependent on the experience of the Board and senior management, the loss of one or more of whom could have a material adverse effect on the Group. The retention of the services of EDP's key employees cannot be guaranteed. Accordingly we are continually focused on the need to recruit, retain, reward and motivate staff with the appropriate skills.

Technological advances

The markets in which the Group operates are characterised by evolving technology, market practices and industry standards. Competitors could develop superior products or more cost-effective techniques which could render the Group's products uncompetitive or less acceptable to the market. We have an ongoing commitment to research and development which allows us to identify and adapt to any technological and market changes that do occur thereby ensuring that our products continue to meet the demands of our customers.

Systems and networks

The Group's business operations rely significantly on the efficient and uninterrupted operation of its information technology systems and networks. Any damage or interruption, however caused, could have a material adverse effect on the delivery of the Group's products and services.

The Group's computer network may be vulnerable to unauthorised access, viruses and other disruptive problems. A party that is able to override security measures could misappropriate proprietary information or cause disruption to the Group's operations. The Group continually reviews and tests security of internal systems and networks and has developed recovery plans in the event of systems disruption. Where reliance is placed upon externally provided systems and networks the Group undertakes regular performance ability reviews and ensures that contracts provide for an appropriate level of service maintenance.

Responsibility Statement of the Directors in Respect of the Half-Yearly Financial Report

We confirm that, to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;

• the half-yearly management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

J M Storey

Secretary

29 May 2013

The Directors who served throughout the period are:

Sir Michael Heller	Chairman (Non-Executive)
J.H. Wassell	Chief Executive
P.A. Davey	Sales Director
P.J. Davies	Application Software Products Director
A.R. Heller	Non-Executive Director
C.R. Spicer	Network Services Director
J.M. Storey	Finance Director

Condensed Consolidated Income Statement
For the six months ended 31 March 2013

	Unaudited six months to 31 March 2013	Unaudited six months to 31 March 2012	Audited full year to 30 September 2012



	£'000	£'000	£'000

Revenue	2,931	2,886	5,805



Gross profit	2,724	2,657	5,334

Administrative expenses	(2,350)	(2,330)	(4,646)

Operating profit	374	327	688

Write-down of property values	-	-	(849)

Finance income	50	36	78

Profit/(loss) before tax	424	363	(83)

Income tax (expense)/credit	(98)	(93)	26

Profit/(loss) for the period attributable
to equity holders of the parent	326	270	(57)


Earnings/(loss) per share
- Basic	2.60p	2.15p	(0.45)p

- Diluted	2.58p	2.15p	(0.45)p

Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 March 2013

	Unaudited six months to 31 March 2013	Unaudited six months to 31 March 2012	Audited full year to 30 September 2012
	£'000	£'000	£'000

Profit/(loss) for the period	326	270	(57)

Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit pension scheme	(134)	(111)	(844)
Income tax on other comprehensive income	31	36	212

Other comprehensive income for the period, net of tax	(103)	(75)	(632)

Total comprehensive income for the period attributable
to equity holders of the parent	223	195	(689)

Condensed Consolidated Balance Sheet
at 31 March 2013

	Unaudited at 31 March 2013	Unaudited at 31 March 2012	Audited at 30 September 2012
	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	1,773	4,365	1,708
Deferred tax asset	322	94	258
Intangible assets	336	381	356
	2,431	4,840	2,322
Current assets
Inventories	91	93	79
Trade and other receivables	1,540	1,579	1,551
Cash and cash equivalents	5,905	5,197	5,648
Assets held for sale	1,423	-	1,863
	8,959	6,869	9,141

Total assets	11,390	11,709	11,463


Current liabilities
Deferred income	(1,983)	(2,046)	(2,403)
Income tax payable	(283)	(250)	(182)
Trade and other payables	(1,393)	(1,427)	(1,311)
	(3,659)	(3,723)	(3,896)

Non-current liabilities
Deferred income	(86)	(110)	(107)
Employee benefits	(1,299)	(357)	(1,120)
Deferred tax liability	(92)	(280)	(70)
	(1,477)	(747)	(1,297)

Total liabilities	(5,136)	(4,470)	(5,193)


Net assets	6,254	7,239	6,270

Equity
Share capital	689	689	689
Share premium	119	119	119
Capital redemption reserve	625	625	625
Treasury shares	(627)	(627)	(627)
Retained earnings	5,448	6,433	5,464
Total equity attributable to equity holders
of the parent	6,254	7,239	6,270

Condensed Consolidated Cash Flow Statement
for the six months ended 31 March 2013

	Unaudited six months to 31 March 2013	Unaudited six months to 31 March 2012	Audited full year to 30 September 2012


	£'000	£'000	£'000

Cash flows from operating activities
Profit/(loss) for the period	326	270	(57)
Adjustments for:
Depreciation	94	108	211
Amortisation	79	85	160
Net loss/(profit) on disposal of property, plant and equipment	2	(7)	(7)
Write-down of property values	-	-	849
Transfer of inventory from/(to) property, plant and equipment	6	4	(2)
Defined benefit pension charge net of employer contributions	45	25	48
Finance income	(50)	(36)	(78)
Income tax expense/(credit)	98	93	(26)
Change in inventories	(12)	(8)	6
Change in receivables	11	(52)	(25)
Change in payables	(169)	(13)	129
Change in deferred income	(441)	(391)	(37)
Equity settled share-based payment transactions	4	4	8

Cash (used in)/received from operations	(7)	82	1,179
Interest received	50	23	66
Income taxes received/(paid)	-	1	(146)
Net cash from operating activities	43	106	1,099

Cash flows from investing activities
Purchase of property, plant and equipment	(167)	(33)	(202)
Purchase of intangible assets	-	-	(3)
Development expenditure	(59)	(39)	(86)
Net proceeds from sale of property, plant and equipment	440	14	31
Net cash generated by/(used in) investing activities	214	(58)	(260)

Cash flows from financing activities
Dividends paid	-	-	(340)
Net cash used in financing activities	-	-	(340)


Net increase in cash and cash equivalents	257	48	499
Cash and cash equivalents at beginning of period	5,648	5,149	5,149
Cash and cash equivalents at end of period	5,905	5,197	5,648

Condensed Consolidated Statement of Changes in Equity
for the six months ended 31 March 2013

	Share capital	Share premium	Capital redemption reserve	Treasury shares	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000

At 1 October 2012 (audited)	689	119	625	(627)	5,464	6,270

Profit for the period	-	-	-	-	326	326
Other comprehensive income:
- actuarial loss on defined benefit pension scheme
net of tax	-	-	-	-	(103)	(103)
Total comprehensive income	-	-	-	-	223	223

Transactions with owners:
- share-based payment transactions	-	-	-	-	12	12
- dividends approved	-	-	-	-	(251)	(251)
Total transactions with owners	-	-	-	-	(239)	(239)


At 31 March 2013 (unaudited)	689	119	625	(627)	5,448	6,254

Condensed Consolidated Statement of Changes in Equity (contd.)
for the six months ended 31 March 2013

	Share capital	Share premium	Capital redemption reserve	Treasury shares	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000

At 1 October 2011 (audited)	689	119	625	(627)	6,485	7,291

Profit for the period	-	-	-	-	270	270
Other comprehensive income:
- actuarial loss on defined benefit pension scheme
net of tax	-	-	-	-	(75)	(75)
Total comprehensive income	-	-	-	-	195	195

Transactions with owners:
- share-based payment transactions	-	-	-	-	4	4
- dividends approved	-	-	-	-	(251)	(251)
Total transactions with owners	-	-	-	-	(247)	(247)


At 31 March 2012 (unaudited)	689	119	625	(627)	6,433	7,239

Notes

1		Interim financial information
		Electronic Data Processing PLC is a public limited company listed on the London Stock Exchange and incorporated and domiciled in England.

		The condensed consolidated interim financial information was approved for issue on 29 May 2013.

		The condensed financial information is not the Company's statutory accounts. The interim financial information for the six month periods ended 31 March 2012 and 31 March 2013 has not been audited. The comparative figures for the financial year ended 30 September 2012 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delievered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

2		Basis of preparation
		The unaudited condensed consolidated interim financial information for the six months ended 31 March 2013 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting' as adopted by the EU. The half-yearly condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 30 September 2012, which have been prepared in accordance with IFRSs as adopted by the EU.

3		Accounting policies
		The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2012, as described in those financial statements.

		The following amendments to existing standards were effective during the period to 31 March 2013 but had no material impact on this consolidated financial information:

		- IAS 1 (amended) 'Presentation of Financial Statements'; and
		- IAS 12 (amended) 'Income Taxes'.

		The following new standards and amendments to existing standards are not yet effective and have not been early adopted by the Group:

		- IAS 19 (amended) 'Employee Benefits';
		- IAS 27 (amended) 'Separate Financial Statements';
		- IAS 28 'Investments in Associates and Joint Ventures';
		- IAS 32 (amended) 'Financial Instruments: Presentation';
		- IFRS 1 (amended) 'First Time Adoption of International Financial Reporting Standards';
		- IFRS 7 (amended) 'Financial Instruments: Disclosures';
		- IFRS 9 'Financial Instruments';
		- IFRS 10 'Consolidated Financial Statements';
		- IFRS 11 'Joint Arrangements';
		- IFRS 12 'Disclosure of Interests in Other Entities';
		- IFRS 13 'Fair Value Measurement'; and
		- amendments to various standards resulting from Annual Improvements 2009-2011 Cycle.

4		Significant judgements, assumptions and risks
		In preparing these interim results the main areas of significant judgements and estimates made by management in applying the Group's accounting policies are the same as those that applied to the accounts for the year ended 30 September 2012, namely employee benefits, software intellectual property rights and freehold property valuation. These estimates and associated assumptions are based on historical experience and other reasonable factors which form the basis of determining the reported values of assets and liabilities.

		In the six months to 31 March 2013 the only area identified above in which estimates have been changed in such a way that they have materially affected the half yearly financial information is employee benefits. Following a review of the key actuarial assumptions with the Group's defined benefit pension scheme actuary, including mortality rates and inflation, the overall deficit on the scheme has increased over the period.

5	Segment information
	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.


				Unaudited six months to 31 March 2013		Unaudited six months to 31 March 2012
				Software		Software
				£'000		£'000

	Revenue - external customers			2,931		2,886

	Profit
	Adjusted operating profit			431		403
	Segment non-cash net IFRS charges			(12)		(51)
	Interest revenue			50		36

	Segment profit before tax			469		388
	Defined benefit pension scheme charge net of employer contributions			(45)		(25)

	Consolidated profit before tax			424		363


6	Adjusted operating profit
			Unaudited six months to 31 March 2013		Unaudited six months to 31 March 2012



			£'000		£'000

	Operating profit		374		327
	Adjustments for non-cash items:
	Amortisation of intangible assets under IFRS		75		79
	Capitalised development costs		(59)		(39)
	Defined benefit pension scheme charge under IFRS		45		25
	Other (credits)/charges under IFRS		(4)		11

	Adjusted operating profit		431		403

7	Taxation
	The taxation charge is derived from the Directors' best estimate of the annual tax rate applied to the result for the period.


8	Earnings per share
	Basic earnings per share is calculated by dividing the profit after tax of £326,000 (2012: £270,000) by 12,530,976 (2012: 12,530,976) being the weighted average number of shares in issue during the period. Basic earnings per share is 2.60p (2012: 2.15p).



	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, 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 £326,000 (2012: £270,000) by 12,620,066 (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 2.58p (2012: 2.15p).



9	Dividends
	The 2012 final dividend of 2.0p per share was approved by shareholders during the period to 31 March 2013 and a liability of £251,000 has been recognised in this half-yearly report.


	The Directors announce a special interim dividend of 5.0p per share (2012: interim dividend of 0.713p per share) payable on 1 August 2013 to shareholders who are on the register at 5 July 2013. This special interim dividend, amounting to £627,000 (2012: interim dividend £89,000), has not been recognised as a liability in this half-yearly report.

10	Assets held for sale				£'000

	At 1 October 2012				1,863

	Disposal of freehold property in period				(440)

	At 31 March 2013				1,423

	During the period the Group disposed of one of its surplus freehold properties. This asset had been written down to its fair value less the estimated costs of disposal in 2012 and consequently there was neither a gain nor a loss on disposal during the period.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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