15th Dec 2005 12:33
Electronic Data Processing PLC15 December 2005 15 December 2005 Electronic Data Processing PLC (EDP) Preliminary results for the year ended 30 September 2005 EDP is the largest IT solution provider to the UK independent Builders andTimber Merchants market place and a leading supplier to the wholesaledistribution industry. Financial Highlights: • Pre-tax profit £431,000 (2004: £1.0 million). • Profit before exceptional items and goodwill amortisation £638,000(2004: £1.2 million) after R & D expenditure of £1.6 million (2004: £1.7million). • Turnover £7.0 million (2004: £8.3 million). • Cash balances of £5.3 million (2004: £6.3 million) after paying 2004special dividend of £1.2 million. • Final dividend of 1.663p per share (2004: 1.663p). • Freehold property portfolio independently valued at £11.3 millioncompared with carrying value of £8.9 million. Business Highlights: • New contracts won for application hosting services. • Increased licence sales for Business Intelligence product. • Upturn in orders expected for system integration and documenttransmission product. Michael Heller, Chairman of EDP, said: "I anticipate a further tough year ahead as the economy tightens generally.However, businesses are seeking to cut operating costs through IT and, inparticular through electronic trading, where with our next generation softwareproducts, we are well placed to take advantage of these opportunities and wherewe are now seeing some increase in demand." For further information please contact: Richard Jowitt Julian WassellChief Executive Financial Director0114 2622001 0114 2622007 www.edp.fastfreenet.com Chairman's Statement Group pre-tax profit for the year to 30th September 2005, before exceptionalitems and goodwill amortisation, was £638,000 (2004 £1.2 million) on turnover of£7.0 million (2004 £8.3 million). Exceptional items amounting to £66,000represent re-organisation costs and the final goodwill amortisation charge inrespect of our acquisitions of Disys & BCT amounted to £141,000. These results reflect in part our planned exit from the supply of computerhardware and associated engineering services, as the Group becomes exclusively asupplier of software products, application hosting services, consultancy andimplementation services. At the same time, we are seeing significantconsolidation in the wholesale distribution markets the Group has traditionallyaddressed. Our next generation Quantum VS software products have been designedto permit the Group to sell into new markets. Whilst the year has again been a difficult one for the IT sector with low levelsof new business opportunities, we have achieved some favourable results withincreased sales of licences of our Business Intelligence and Decision Supportsoftware product, Quantum VS myViewpoint. We have also continued to expand ourapplication hosting services operations where significant new orders have beentaken. Recurring revenue from these contracts will begin to flow in the currentfinancial year. The continuing reduction in the cost of broadbandtelecommunication services makes application hosting even more attractive. Contracted recurring revenue in the year represented 70% of sales. The processof managing down the Group cost base is ongoing and during the 2006 calendaryear we expect to complete our re-organisation. Numbers employed by the Grouphave fallen from 141 in 2004 to 119 as at 30th September 2005. Research & Development expenditure amounted to £1.6 million (2004 £1.7 million)all of which has been written off to Profit & Loss. The Group balance sheet remains strong at £13.0 million representing net assetsper share of 53.2p as at 30th September 2005 of which £5.3 million was cash.The property portfolio was professionally valued during the year at £11.3million, which compares with the net book value of £8.9 million. The Group continues to seek to acquire similar software product publishers andsolution providing businesses. Your Directors propose to pay a final dividend of 1.663p per share. The finaldividend will be paid on 6th April 2006 to shareholders on the register at 10thMarch 2006. The shares will be ex-dividend on 8th March 2006. I anticipate a further tough year ahead as the economy tightens generally.However, businesses are seeking to cut operating costs through IT and, inparticular through electronic trading, where with our next generation softwareproducts, we are well placed to take advantage of these opportunities and wherewe are now seeing some increase in demand. Michael Heller Chairman 15th December 2005 Chief Executive's Statement As anticipated consolidation in the markets addressed by the Group hascontinued. This is particularly the case in the independent builders merchantssector where new business opportunities have been at very low levels. We have,however, seen some increased activity in the demand for electronic trading whereour Quantum VS XML Highway software product is employed. We expect thisincreased activity to continue. The pressing need is to reducebusiness-operating costs. This modus operandi is now increasingly demanded bylarge supply organisations, right across their operations. Operational Review Quantum VS myViewpoint is our Business Intelligence and Decision SupportSolution where we have achieved considerable success with over 400 licences nowshipped and installed. No senior business executive or decision maker need bewithout the detailed business knowledge he or she requires, on demand, to assistin business performance management, measurement and decision-making. The 1.0.9product release was shipped to clients in the summer and a further enhancedversion will be available early in the New Year. The product launch in Americais planned for March of 2006 and we are currently trialling with severalorganisations, including IBM U2. Certain major implementations of Quantum VS XML Highway, our system integrationand electronic business document transmission product set, have beensuccessfully completed and we are seeing increased activity in this sector ofthe market. We expect this increased activity to translate into further ordersas major suppliers are demanding that their distribution customers trade withthem electronically, enabling XML based purchase orders and sales invoices to betransmitted, software application to software application, eliminating the humancost of data entry. As this method of trading becomes more commonplace weexpect to see a further upturn in orders for Quantum VS XML Highway. During the year under review significant new contracts were won for ourapplication hosting services and these are in the implementation phase. It isbecoming clear that clients are happy to outsource. The cost of broadbandtelecommunications lines has reduced and we expect to see further growth in thecurrent financial year in this area of our activities. In November, after a long and extensive development programme, the Group fullycompleted authorisation accreditation with Barclaycard Business for credit anddebit card transaction processing. This development includes the Payment CardIndustry's anti fraud measures. As a result, the Group is one of only nineteenEuropean organisations compliant with the Payment Card Industry Data SecurityStandards endorsed by Visa and MasterCard. This service will be launched in theUK in the New Year and will include the processing of Corporate Purchasing Cardtransactions, which is growing rapidly as a business transaction paymentmechanism. Client Support Services Multi-vendor computer based solutions are becoming the norm and are increasingclient IT operational complexity. Supporting these complex solutions demandsthe capabilities of our talented specialists whose goal is to ensure that ourclients' systems operate, day in and day out. Our support teams provide ahighly professional service and I wish to take this opportunity to thank themall for their dedicated efforts. Financial Review Pre-tax profit was £431,000 compared with £1.0 million in the prior year. Profitbefore exceptional items and goodwill amortisation amounted to £638,000 comparedwith £1.2 million. Exceptional items consist of reorganisation costs incurredduring the year of £66,000. The goodwill charge of £141,000 relates to theacquisitions of Disys and BCT in 2000. This goodwill has now been completelywritten off. The result for the year is after R & D expenditure of £1.6million, all of which has been written off to Profit and Loss Account. Wecontinue to actively manage down the Group cost base as we move to becoming adeliverer of computer software and associated services. Operating cash flows were strong during the year at £815,000. Cash balancesfell by £1.0 million during the year. However, this followed the payment of the£1.2 million special dividend in April 2005. Despite the reduced levels ofcash, interest received increased to £278,000 from £246,000 in the prior year. During the year the Group's freehold properties were professionally valued on an"existing use" basis at £11.3 million. In accordance with Financial ReportingStandard 15, the Group has, in recent years, followed a policy of not revaluingits freehold property assets. This policy has continued during the year underreview, as the properties remain operational in their nature and also in orderto avoid the ongoing costs of regular professional valuations. At 30 September2005 the net book value of these properties, incorporated in the Group balancesheet, amounted to £8.9 million. The Group balance sheet remains strong with net assets amounting to £13 millionof which cash balances comprise £5.3 million. Net assets per share amounted to53.2p at 30 September 2005. A final dividend of 1.663p per share is proposedwhich, together with the interim dividend of 0.713p, gives a total dividend forthe year of 2.376p. Outlook Trading conditions in the IT sector remain tough and the completion of there-orientation of the Group's activities in calendar year 2006 are designed toensure it has product superiority and competitiveness in the years ahead. Change is occurring at a speed we have not experienced before as new underlyingtechnologies mature earlier and become adopted in much shorter timescales. Thisrequires that those organisations wishing to remain competitive must move to theleading edge to take advantage of new business opportunities. Finally, I want to thank all our members of staff for their continued anddedicated hard work in the provision of high quality software products andprofessional services meeting the IT demands of our clients. Richard J Jowitt Chief Executive 15th December, 2005 Consolidated Profit and Loss Accountfor the year ended 30 September 2005 2005 2004 £'000 £'000 Turnover - continuing operations 6,971 8,319 Operating costs - ongoing 6,752 7,498 - exceptional charges (note 6) 66 124 (6,818) (7,622) Operating profit - continuing operations 153 697 Profit on disposal of property - 89 Interest receivable 278 246 Profit on ordinary activities before taxation 431 1,032 Tax on profit on ordinary activities (185) (396) Profit on ordinary activities after taxation 246 636 Dividends paid and proposed (580) (1,800) Retained loss for the financial year (334) (1,164) Earnings per share - basic and diluted 1.01p 2.61p Earnings per share before exceptionalitems and goodwill amortisation 1.78p 3.36p Dividends per share 2.38p 7.38p Net assets per share 53.2p 54.5p Consolidated Balance Sheetat 30 September 2005 2005 2004 £'000 £'000 £'000 £'000Fixed assets Intangible assets 105 269 Tangible assets 9,759 10,068 9,864 10,337Current assets Stock 246 308 Debtors 2,013 2,512 Investments 3 17 Cash at bank and in hand 5,269 6,320 7,531 9,157Creditors: amounts falling due within one year (1,723) (3,462) Net current assets 5,808 5,695 Total assets lesscurrent liabilities 15,672 16,032 Provisions for liabilities and charges (150) (87) Deferred income (2,536) (2,641) Net assets 12,986 13,304 Capital and reserves Called up share capital 1,222 1,220 Share premium account 87 77 Revaluation reserve 912 922 Capital redemption reserve 88 88 Profit and loss account 10,677 10,997 Equity shareholders' funds 12,986 13,304 Consolidated Cash Flow Statementfor the year ended 30 September 2005 2005 2004 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 815 1,435 Returns on investments and servicing of finance Interest received 254 246 Taxation Corporation tax (paid) / received (158) 3 Capital expenditure and financial investment Purchase of tangible fixed assets (249) (814) Purchase of intangible fixed assets (10) (7) Sale of tangible fixed assets 67 310 Sale of investments 14 6 (178) (505) Equity dividends paid (1,800) (580) Net cash (outflow) / inflow before use of liquid (1,067) 599resources and financing Management of liquid resources Decrease / (increase) in short-term deposits 429 (425) Financing Issue of ordinary share capital 12 - (Decrease) / increase in cash in the year (626) 174 Statement of Total Recognised Gains and Lossesfor the year ended 30 September 2005 2005 2004 £'000 £'000 Profit for the financial year 246 636 Currency translation differences on foreign currency net investments 4 (18) Total recognised gains and losses for the year 250 618 Notes (1) The results to 30 September 2005 have been prepared in accordance withthe accounting policies to be adopted in the full financial statements, and arethe same as those policies used in the preparation of the accounts for the yearended 30 September 2004. The Group's accounting policy for turnover and revenuerecognition is as follows: Turnover represents the sales of goods and services at invoiced value lessamounts relating to future periods and excluding value added tax andtransactions between Group Companies. Turnover is recognised when there are nosignificant vendor obligations remaining and the collection of the resultingreceivable is considered probable. Turnover from the sale of initial licences for software products is recognisedupon delivery of the product to customers. Recurring licence fees are recognisedevenly over the period to which they relate. Turnover from the provision ofprofessional services, including training, implementation and consultancy, isrecognised when the services have been performed and invoiced. Computerequipment sales are recognised on delivery to customers. Equipment maintenancecharges are recognised evenly over the period to which they relate. (2) The financial information set out above does not constitute theCompany's statutory accounts for the years ended 30 September 2005 or 2004.Statutory accounts for 30 September 2004 have been delivered to the Registrar ofCompanies, and those for 2005 will be delivered following the Company's annualgeneral meeting. The auditor has reported on those accounts; its reports wereunqualified and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985. (3) In the opinion of the Directors, the Group has only one class oftrade. For further information, the following analysis of turnover is given: 2005 2004 £'000 £'000Software licences, professional services& application hosting services 5,320 6,173 Computer equipment, engineering maintenance& network services 1,651 2,146 6,971 8,319 (4) Earnings per share is calculated by dividing the profit for the yearafter taxation of £246,000 (2004: £636,000) by 24,411,650 (2004: 24,402,362)being the weighted average number of shares in issue during the year. Basic anddiluted earnings per share are both 1.01p (2004: 2.61p). Earnings per share before exceptional items and goodwill amortisation iscalculated by dividing the profit for the year after tax, but excluding theeffect of exceptional items and goodwill amortisation, of £433,000 (2004:£821,000) by 24,411,650 (2004: 24,402,362) being the weighted average number ofshares in issue during the year, and is reconciled to basic earnings per shareas follows: 2005 2004 Basic earnings per share 1.01p 2.61p Exceptional items 0.27p 0.14pTax effect of exceptional items (0.08p) (0.04p)Goodwill amortisation 0.58p 0.65p Adjusted earnings per share 1.78p 3.36p (5) Goodwill amortisation of £141,000 (2004: £160,000) has been charged tothe profit and loss account during the year. This relates to goodwill arisingfrom the acquisitions of Disys Associates Limited and BCT Software SolutionsLimited. (6) Operating costs includes the following exceptional charges: 2005 2004 £'000 £'000 Reorganisation costs 66 124 (7) Reconciliation of operating profit to net cash inflow from operatingactivities 2005 2004 £'000 £'000 Operating profit 153 697 Depreciation and amortisation 665 640 Changes in working capital and other non-cash items (3) 98 Cash inflow from operating activities 815 1,435 (8) Reconciliation of net cash flow to movement in net funds 2005 2004 £'000 £'000 (Decrease) / increase in cash in the year (626) 174 Cash (inflow from) / outflow to short-term deposits (429) 425 Change in net funds from cash flows (1,055) 599 Exchange differences 4 (5) Movement in net funds (1,051) 594 Net funds at 1 October 6,320 5,726 Net funds at 30 September 5,269 6,320 (9) This preliminary announcement was approved by the Board of Directorson 15 December 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Electronic Data Processing