14th Dec 2006 07:01
Electronic Data Processing PLC14 December 2006 14 December 2006 Electronic Data Processing PLC (EDP) Preliminary results for the year ended 30 September 2006 EDP is the largest IT solution provider to the UK independent Builders andTimber Merchants market place and a leading supplier to the wholesaledistribution industry. Highlights: • Pre-tax profit £866,000 (2005: £431,000) including £420,000 profit on sale of property. • Turnover £6.3 million (2005: £6.9 million). • Increased licence sales for Business Intelligence product. • Increased number of hosting customers. • Recurring revenues represent 73% of total. • Continued R&D expenditure of £1.5 million in year. • Cash balances of £6.4 million (2005: £5.3 million). • Final dividend of 1.9 per share (2005: 1.663p). Overall dividend up 10%. • Acquisition of Vecta, a leading provider of sales intelligence solutions, completed post year end. Michael Heller, Chairman of EDP, said: "Although I anticipate trading will remain difficult in the coming year, theGroup is well positioned to take advantage of the new business opportunities inthe sectors addressed by our software products. As this will translate intoimproving software licence and professional services fee revenue, I look forwardto the next two years with confidence." For further information please contact: Richard Jowitt Julian WassellChief Executive Financial Director0114 2622001 0114 2622007 www.edp.fastfreenet.com Chairman's Statement This is the first year in which the Group Accounts have been compiled under thenew International Financial Reporting Standards (IFRS) and I am pleased toreport Group pre-tax profit for the year to 30th September 2006 was £866,000(2005: £431,000) on revenue of £6.3 million (2005: £6.9 million). This includesa profit of £420,000 on the disposal of our East Grinstead property. These results continue to reflect, in part, our planned exit from the supply ofcomputer equipment and associated engineering services market, and thecontinuing tough trading conditions in the IT sectors we address. The Groupcost base will continue to be managed down as we finally exit these markets andfocus our activities exclusively on software and services. Numbers employed bythe Group have fallen from 127 in 2005 to 111 as at 30th September 2006. Contracted Group recurring revenue accounts for 73% of revenue and ourfar-reaching Quantum VS product development programme is beginning to bear fruitwith further licence sales to existing and new customers. Research &Development expenditure amounted to £1.5 million in the year, all of which hasbeen charged in the Income Statement. The Group balance sheet is strong at £13 million as at 30th September 2006 ofwhich cash was £6.4 million. Last year I reported that the Group's propertyportfolio had been professionally valued during that year on an existing usebasis, and having subsequently disposed of one property, the valuation of theremaining properties in 2005 was £9.94 million. Shortly after the year-end the Group acquired the business and assets of VectaSoftware Corporation Limited, a leading provider of Sales Intelligencesolutions, for £900,000 cash, which complements the Group's own activities inthe Business Intelligence market. We expect the Vecta acquisition to beearnings enhancing in 2007/8. This acquisition is discussed further in the ChiefExecutive's Statement. The Group continues to seek further compatibleacquisition opportunities. We are seeing the signs of a greater take up in the use of the Internet forbusiness transaction processing, which we expect to gain further momentum in thecoming year as the Internet revolution continues. Work on the Quantum VSproduct set will see all our extensive portfolio of software products beingbrought into a single leading edge component based technology, delivering apowerful integrated suite of advanced application solutions. This transitionwill be completed in 2008. The Group application hosting services operations continue to grow with furthersignificant contracts being taken, principally from existing customers. We havenow doubled the number of hosted customers to forty-seven. We anticipate furthersignificant contract wins in the coming year as customers outsource theincreased complexity of IT application business transaction processing tospecialists. Your Directors propose to pay a final dividend of 1.9p per share, which togetherwith the interim dividend is an increase for the year of 10%. The finaldividend will be paid on 6th April 2007 to shareholders on the register at 9thMarch 2007. The shares will be ex-dividend on 7th March 2007. Although I anticipate trading will remain difficult in the coming year, theGroup is well positioned to take advantage of the new business opportunities inthe sectors addressed by our software products. As this will translate intoimproving software licence and professional services fee revenue, I look forwardto the next two years with confidence. Michael HellerChairman 13 December 2006 Chief Executive's Statement Although 2006 was another tough trading year generally we have made significantprogress in the production of our next generation distribution solution softwaretechnology. This will see our four distribution application product setsbrought into a single Services Oriented Architecture (SOA) technology, employingthe Jboss Enterprise Service Bus (ESB) and will deliver a leading-edge reusablecomponent based solutions product set. The technology move to SOA and the Jboss ESB has been a major project, whichwill have taken almost four years to deliver and is designed to ensure Groupapplication competitiveness for the next twenty to twenty-five years. Thisgives the Group a significant lead over its principal competitors. Operational Review Completion of the first out Quantum VS distribution application is scheduled forthe end of quarter one 2007, which after our extensive Qualification &Certification programme will ship to our Engineering First Test customer sites.The choice of the SOA/ESB technology platform was a high-risk decision, taken inNovember 2003 after three years and twenty-four man-years of pure researcheffort and has proven to be correct. This will see all our distributionapplications transitioned into this leading edge reusable component basedtechnology by the end of 2008. During the year we gained a significant number of new hosted customers, risingfrom twenty-three at September 2005 to forty-seven at 30th September 2006, ascustomers have decided to outsource the burden of managing ever more complex ITinstallations. In the coming year we expect more customers to take this path ashigher performance telecommunication bandwidth at much reduced costs makes adecision to select this method of operation easy. As customer implementationsare completed our recurring revenues will increase. Sales of licences of our Quantum VS myViewpoint Business Intelligence productset have been robust. In January 2007 we will release Quantum VS myViewpointAnywhere. This enhanced version of the Quantum VS myViewpoint product permitsreal-time access to powerful, personalised business intelligence via theInternet browser. We were delighted to acquire the business and assets of Vecta SoftwareCorporation Limited shortly after the year-end. Vecta is a leading salesintelligence software product set employed by more than 200 companies, many ofwhich are household names. We are working diligently to integrate the Vectaoperations into the Group and I wish to welcome our new Vecta colleagues. Thenext release of the Vecta product set is in its Qualification & Certificationcycle and we anticipate it will achieve its General Customer Availability Statusin late January 2007. Our goal is to upgrade all our Vecta customers to thisimportant new release in the next twelve months. In addition, this new productrelease is the platform for the Vecta Pocket product set, enabling the transferof powerful sales intelligence to any handheld personal digital assistant devicesupporting the Microsoft Mobile operating system. The completion of the product set and the introduction of the Vecta OnDemandhosted service is expected to make a positive contribution to earnings in the2007/8 financial year. There is already an exchange of ideas ongoing in our two Intelligence productmanagement groups, which will further strengthen the two product sets in futurereleases, with myViewpoint targeted at the Multi Value database market place andVecta targeted at the Microsoft SQL database market place. Customer Support Services Once again I want to thank our customer support teams for their dedicatedefforts in the help that they provide to our customers when the need arises.Dealing with complex IT installations requires their unique skills and knowledgeof individual sites, computer equipment, operating systems and applicationsoftware products. Our talented customer support teams provide an excellentservice in minimising customer disruption when problems do inevitably arise. Financial Review This is the first year in which the Group's results have been prepared under theInternational Financial Reporting Standards. The most significant impact ofthis change has been the recognition of a liability in respect of the Group'sDefined Benefit Pension Scheme and a change in the timing of the recognition ofdividends payable. These matters, together with other adjustments requiredunder IFRS were explained at length in the Group's interim statement. Group pre-tax profit for the year was £866,000 which includes the profit on thesale of one of the Group's properties of £420,000. This compares with a profitof £431,000 last year. The tax charge for the year amounted to £29,000, an effective tax rate of 3%.This tax charge is mainly affected by a low level of chargeable gain, for taxpurposes, on the property disposal and a tax credit of £98,000 relating to priorperiods. We expect the tax charge to revert to a normal level in the currentfinancial year. The level of Group recurring revenue, your Directors' principal key performanceindicator, remained strong in relation to the Group's costs. During the yearunder review recurring revenue represented 73% of total revenue. Cash balances increased by £1.17 million during the year. Cash inflows fromoperating activities were strong at £544,000. Other significant cash movementswere dividend payments of £580,000 and the receipt of £1.3 million in relationto the property disposal. The balance of the sale proceeds, amounting to£200,000, are due not later than 20th July 2007. Group net assets under IFRS have remained at £13.1 million at 30 September 2006.The principal movements during the year being post-tax profit for the periodof £837,000, dividends paid of £580,000 and a charge against reserves of£255,000 relating to the Group's defined benefit pension scheme. The Group balance sheet remains strong with cash balances of £6.4 million. Netassets per share were 53.5p as at 30th September 2006. A final dividend of 1.9pper share is proposed, which, together with the interim dividend of 0.713p,gives a total dividend for the year of 2.613p per share, an increase of 10%. Outlook The Group has a comprehensive applications product portfolio where the productsets are engineered as 'out-of-box, load & go solutions' addressing specific ITneeds. In the sectors we now address the take-up of Internet based trading has beenslow, but the cultural revolution the Internet has made to all our lives isbecoming such that it can no longer be ignored by any business. We anticipatedemand for our Internet products, already integrated with our back-officedistribution applications, will increase as the need to transact business overthe Internet becomes the norm, generating both initial and annual licence feerevenues as implementations are completed. Your Group is well positioned to take advantage of all the new businessopportunities as they arise. Finally, I want to thank all members of staff for their hard work in thedelivery of our leading edge software solutions, professional services andspecialist support services, fulfilling our customers IT needs and wants. Richard J JowittChief Executive 13 December 2006 Consolidated Income Statementfor the year ended 30 September 2006 2006 2005 £'000 £'000 Revenue 6,325 6,964 Gross profit 5,762 6,338 Administrative expenses (5,596) (6,185) Operating profit 166 153 Profit on sale of property 420 -Finance revenue 280 278 Profit before tax 866 431 Income tax expense (29) (143) Profit for the period attributable to equity holdersof the parent 837 288 Earnings per share - basic and diluted 3.42p 1.18p Dividends per share 2.613p 2.376p Net assets per share 53.5p 53.5p Consolidated Statement of Recognised Income and Expensefor the year ended 30 September 2006 2006 2005 £'000 £'000 Actuarial (losses)/gains on defined benefit pension scheme (364) 807Tax on items recognised directly in equity 109 (242)Foreign exchange translation difference (1) 3 Net (expense)/income recognised directly in equity (256) 568Profit for the period 837 288 Total recognised income and expense attributable to equity holders of the parent 581 856 Consolidated Balance Sheetat 30 September 2006 2006 2005 £'000 £'000 Non-current assetsProperty, plant and equipment 6,648 9,083Investment property 668 676Deferred tax asset 205 155Intangible assets 71 105 7,592 10,019Current assetsAssets held for sale 1,082 -Inventories 210 246Trade and other receivables 2,276 1,927Income tax receivable - 76Cash and cash equivalents 6,439 5,269 10,007 7,518Current liabilitiesDeferred income (2,347) (2,511)Income tax payable (19) (40)Trade and other payables (1,444) (1,335) (3,810) (3,886) Net current assets 6,197 3,632 Total assets less current liabilities 13,789 13,651 Non-current liabilitiesDeferred income (22) (25)Employee benefits (579) (395)Deferred tax liability (106) (150) (707) (570) Net assets 13,082 13,081 EquityIssued capital 1,222 1,222Share premium 87 87Capital redemption reserve 88 88Translation reserve 2 3Retained earnings 11,683 11,681 Total equity attributable to equity holders of the parent 13,082 13,081 Consolidated Cash Flow Statementfor the year ended 30 September 2006 2006 2005 £'000 £'000 Cash flows from operating activitiesProfit for the period 837 288Adjustments for:Depreciation 370 491Amortisation 34 33Net profit on disposal of property, plant and equipment (416) -Pension charge 117 280Pension fund payments (297) (126)Finance revenue (280) (278)Income tax expense 29 143Change in inventories 36 62Change in receivables (141) 455Change in payables 109 (414)Change in deferred income (167) (105) Cash received from operations 231 829Interest received 272 254Income taxes received/(paid) 41 (158) Net cash from operating activities 544 925 Cash flows from investing activitiesPurchase of property, plant and equipment (96) (249)Purchase of intangible assets - (10)Proceeds from sale of property, plant and equipment 1,302 67 Net cash generated from/(used in) investing activities 1,206 (192) Cash flows from financing activitiesSale of own shares - 12Dividends paid (580) (1,800) Net cash used in financing activities (580) (1,788) Net increase/(decrease) in cash and cash equivalents 1,170 (1,055) Cash and cash equivalents at beginning of period 5,269 6,320 Effect of exchange rate fluctuations on cash held - 4 Cash and cash equivalents at end of period 6,439 5,269 Notes The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 30 September 2006 or 30 September 2005but is derived from those accounts. Statutory accounts for 2005 have been delivered to the Registrar of Companies,and those for 2006 will be delivered following the Company's Annual GeneralMeeting. The auditors have reported on those accounts; their report wasunqualified and did not contain a statement under section 237 (2) or (3) of theCompanies Act 1985. The Group previously prepared its primary financial statements under UKgenerally accepted accounting principles ("UK GAAP"). From 2006 the Group isrequired to prepare its consolidated financial statements in accordance withInternational Financial Reporting Standards ("IFRS") as adopted by the EuropeanUnion. These results represent the first annual financial statements the Group hasprepared in accordance with its accounting policies under IFRS and thecomparatives for 2005 have been restated. The basis of transition to IFRS and areconciliation between results previously reported under UK GAAP and thecomparative information presented here was previously published in the Group'sInterim Statement dated 16 June 2006. Earnings per share Earnings per share is calculated by dividing the profit for the periodattributable to equity holders of the parent of £837,000 (2005: £288,000) by24,432,362 (2005: 24,411,650), being the weighted average number of shares inissue during the year. Basic and diluted earnings per share are both 3.42p(2005: 1.18p). Reconciliation of movement in equity and reserves Issued Share Capital Translation Retained Total capital premium redemption reserve earnings reserve £'000 £'000 £'000 £'000 £'000 £'000 At 1 October 2005 1,222 87 88 3 11,681 13,081 Total recognised income and expense - - - (1) 582 581 Dividends paid - - - - (580) (580) At 30 September 2006 1,222 87 88 2 11,683 13,082 This preliminary announcement was approved by the Board of Directors on 13December 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Electronic Data Processing