13th Sep 2006 07:02
System C Healthcare plc13 September 2006 System C Healthcare plc Preliminary Results for Year Ended 31 May 2006 System C Healthcare plc ("System C"), a leading independent provider of ITimplementation solutions for the UK healthcare sector, announces its results forthe year ended 31 May 2006. Summary Financial Highlights Audited Audited 2006 2005Turnover £16.1m £18.2mProfit before tax and exceptional items £1.1m £3.5mProfit before tax £0.7m £2.5mProfit after tax £1.1m £2.1mNet cash inflow before financing £0.9m £3.4mEarnings per share - basic 1.30p 3.48pNet assets £15.2m £5.5m Operating Highlights • Placing and admission to AIM in June 2005 raises £8.4m net proceeds for the business• Product Division - revenues grow by 17 per cent in the year• Services Division - Delays in National Programme for IT impacted significantly on Services Division revenue in the year. Division restructured to focus on diversification of customer base• £1.1m profit before exceptional items and taxation• Net cash inflow for the year of £0.9m before financing• Successful operational delivery of our major contracts. We have signed a contract with Fujitsu, so now have contracts with 3 of the 4 Local Service Provider partners ('LSPs') in 4 out of 5 regional clusters in the National Programme for IT ('NPfIT' or 'National Programme')• Cost base reduced by over £2.0m (annualised savings) during the year• Recent contract wins with CSC, Fujitsu, Nuffield, Connecting for Health and NHS trusts with a total contract value of over £12m over a 3 year period Commenting on the results Jim Horsburgh, the Chairman said: "This has truly been a year of challenges and opportunities for System C. WhilstI am both disappointed and frustrated by the problems and delays within ourmarket, I am proud of our achievements and feel that our market position isstronger than ever, and that we will continue to make a significant contributionto improving UK healthcare IT." Enquiries: System C Healthcare plcJim Horsburgh, Chairman 01622 691 616Dr Ian Denley, Chief Executive MaitlandEmma Burdett 020 7379 5151Brian Hudspith A presentation will be made today, Wednesday 13 September at 09.30am at theoffices of Collins Stewart (9th Floor, 88 Wood Street, London EC2V 7QR) toanalysts and investors. A copy of this presentation is available from the SystemC System C web site from 10.30 am. Chairman's Statement System C is an independent British company specialising in the provision ofclinical information systems and services to the healthcare sector. Theseservices include data migration, data cleansing and the implementation ofelectronic patient record (EPR) systems and patient administration systems (PAS). We are facilitators - taking software and using our highly skilled andexperienced staff to install it successfully in the hospital workplace.Healthcare IT is a significant market offering a wide range of opportunities forgrowth. Within the UK, the National Programme for IT is at an early stage andthere remain a large number of acute, community and mental health Trusts stillrequiring patient administration and clinical systems. We began the year with our flotation on AIM, with our business plan underpinnedby significant Government investment in healthcare information technology - inparticular the National Programme for IT (NPfIT) which is being delivered by theDepartment of Health Agency, NHS Connecting for Health. We raised net proceedsof £8.4m to facilitate growth in the business by both organically expanding theproducts and services we provide, as well as by acquisition. Although market conditions have been difficult within the National Programme, wehave achieved many facets of our corporate strategy during the year, including:consolidating our position as a leading professional services company in thehealthcare IT sector; the continued development of our product range and newproduct sales; growth in our long-term order book; and expanding anddiversifying our client base - we now have contracts with 4 out of the 5 Englishregions, have worked with over a 130 NHS Trusts, and have secured work with anumber of private healthcare providers. Moving forward into 2006/07, well publicised delays in the roll-out of electronic patient record systems in the secondary care sector have created abacklog of NHS Trusts requiring systems, and this is our main area of expertise.We remain confident of significant volumes of work within the National Programmewhen current contractual discussions between Connecting for Health and its majorsub-contractors are concluded. However, the timing of such new work could alsohave a significant impact on our results for the year. To mitigate such effects,we will continue to broaden our client base, and to further enhance our productrange, to address a number of public and private sector opportunities both inthe UK and overseas. Results Turnover was £16.1m (2005: £18.2m) with profit before exceptionals and tax of£1.1m (2005: £3.5m). In the previous year (ended 31 May 2005), we saw a substantial increase in thelevel of services delivered in partnership with our key LSP customers, and as aresult our revenues trebled in comparison with 2004. This reflected the rapidgrowth in the National Programme in its first full working year, as it movedfrom contract close to the delivery phase. Accordingly, we recruited heavily tomeet the demand from our LSP partners. In the financial year ended 31 May 2006, the delays in the National Programmeresulted in a decline in revenues within our Services Division. As our costswere relatively fixed, the shortfall in time and material revenues impacteddirectly on our profitability. As the scale of the delays within the National Programme became clear we focusedon a number of initiatives to mitigate against this decline in demand, anddeliver profitability in difficult market conditions. We introduced a new rangeof fixed price services into our major LSP partners. We focused on thedevelopment and deployment of our products and we restructured our ServicesDivision into specialist teams. By the year end, we had reduced our non-corecost base significantly to reflect market conditions. In recent months, thecompany has also achieved a number of significant milestones and we are pleasedto report several contract wins with a total contract value of over £12m (asoutlined in the CEO's report). To conclude, we have begun our new financial year with a strong balance sheetwith resources for future growth, as well as a leaner business with considerableflexibility to adapt to opportunities and changes in market conditions. Dividends The Board recommended and paid an ordinary dividend for the six months ending 30Nov 2005 of 0.11p per share. The Board has proposed a final dividend for theyear ended 31 May 2006 of 0.22p per share. Board Changes During the year there were two changes to the Board of Directors. Andrew Collwas appointed as Finance Director on 16 February 2006. Andrew was previously theChief Operating Officer of the Education Division of Enterprise plc and prior tothat held senior finance posts with Cable & Wireless plc, and trained as aChartered Accountant with PricewaterhouseCoopers. We are very pleased to welcomeAndrew to the Board of Directors. Jeremy Morgan, of Barclays Ventures, left the Board on 2 June 2005, shortlyprior to our AIM flotation. I want to thank him for his tremendous support andwish him well for the future. Outlook We believe that System C continues to be well placed within our markets as wehave a strong track record for delivery within the National Programme, asdemonstrated through the contracts we have signed recently including that withFujitsu. We also believe that the steps taken by System C to expand anddiversify its client base and product offering puts us in a strong position toreact positively to changes in the marketplace both inside and outside theprogramme. In recent months, however, the rate of roll out of patient administration andclinical systems within the National Programme has again slowed considerably dueto product and deployment difficulties amongst some of the major contractors tothe programme. As a result, System C is operating in challenging conditions in its core Englishmarket, and performance in the year to date has been disappointing. However, webelieve that urgent steps are being taken to resolve the difficulties within theNational Programme, and following their resolution we are confident System C iswell positioned to secure further significant sales opportunities that arelikely to convert into revenues towards the second half of the year and beyond.Whilst the Directors' believe that market expectations remain achievable,significant risk remains around the timing of the resolution of the difficultiesin the National Programme. The rate and volume at which deployments re-commencewill be a crucial factor in determining our performance in the current financialyear. Meanwhile, we continue to focus on building the long term order book, expandingthe client base, as well as protecting our strong cash position. We are ensuringwe retain flexibility in our business to support long term opportunities, andwill be placing increasing focus on the creation of new products for both the UKand international healthcare markets. Chief Executive's Review The year ended 31 May 2006 was a year of challenges and opportunities for SystemC. The Services Division faced difficult market conditions, and we focused onadapting to these by both expanding our customer base within the NationalProgramme, and through new initiatives such as bidding for Diagnostic andElective Treatment opportunities. We achieved a number of key successes in the form of our AIM flotation, enhancedproduct development (System C Product revenues grew by 17 per cent in the year),and successful deployment of PAS and Clinical systems. We have successfullydelivered fixed price projects to our LSP partners, contributing significantlyto the successful deployment of PAS and clinical systems. In the products division we focused on the development and deployment of MedWay(our Patient Administration System which was updated to ensure compliance withthe Connecting for Health 'Choose & Book' system that facilitates patientchoice) as well as other products such as the HealthData Suite which has beensuccessfully deployed to a number of NHS Trusts in the year. We restructured our Services Division into specialist teams to enable greaterfocus on the expansion of our customer base. As a result, we are currentlyinvolved in bidding for activities related to the provision of Diagnostic andElective treatment centres, as well as procurements from hospitals outside theNational Programme for PAS and Clinical systems. By the year end, we had reduced our non-core cost base significantly to reflectmarket conditions. We have always kept tight control of our cash position, andthe Company generated a net cash inflow before financing of £0.9m. This,combined with the proceeds raised from the flotation, enabled us to end the yearwith a strong balance sheet with a net cash position of £8.0m. We are also very pleased that, for the second year running, System C has beenvoted one of the 'Sunday Times Top 100 Small Companies' to work for. Our focus is always on developing excellent relationships with our customers,and delivering against our client commitments. We believe we have achieved thisas reflected in the wide range of positive feedback from our customers, asillustrated below: "System C has been developing and deploying clinical systems into the NHS forover a decade. Their experience is invaluable and CSC are very pleased to beextending our relationship." Bill Thomson, CSC Limited's Operations Director onthe NHS Programme. We will continue to concentrate on our core strengths: delivery of high qualityproducts and services to clients, development of our people, expansion of ourclient base, and ability to recognise and consequently adapt to marketconditions. Contract Wins In recent months, the company has achieved a number of significant milestonesand we are pleased to report the following successes with a total contract valueof over £12m over a 3 year period: • The renewal of our 3 year contract with CSC Corporation for the provision of professional services in the North West and Midlands cluster.• A year contract with Fujitsu for the provision of professional services on its LSP contract with the Southern Cluster.• A contract with Connecting for Health for the provision of domain experts to support the design of future software releases for the Southern Cluster• A contract with the Nuffield Group of private hospitals for training and deployment services to support a software upgrade for its chain of thirty nine hospitals.• Member of private consortium that has secured preferred bidder status on several regions of large NHS public procurement programme outside NpFIT.• A major upgrade of the company's Medway suite of products at University Hospital Aintree.• A number of contracts for the deployment of a range of third party clinical systems. Markets The National Programme for IT, which is being delivered by the Department ofHealth agency, Connecting for Health, has committed £6.3 billion to deliver anintegrated IT infrastructure in the English NHS by 2010. The National Programmeis being implemented by four LSPs who are responsible for system deployment andintegration in five regional 'clusters'. In the year ended 31 May 2006, there was a scaling back of activity within theNational Programme. The timing of further deployments required in order todeliver the programme is dependent on the outcome of current LSP negotiations.System C looks forward to a potential increase in the volume of deployments oncethese negotiations are concluded. NHS IT spend outside the National Programme is projected to grow from thecurrent level of approximately £1.2 billion per annum. System C will seek togenerate further opportunities from this demand by providing IT solutions andservices to the many individual NHS hospitals and Trusts directly. We now haveover 130 customer relationships with hospitals and Trusts and we will build onthis further in the coming year. Operating Review System C is ideally structured to address two separate areas of market demand: 1 Services Division - where the Company delivers to either LSP customers or on behalf of other organisations whose end customer is either the NHS or other clinical organisations, and2 Products Division - where the company contracts directly to provide products and associated deliverables directly to NHS hospitals and Trusts. Both are supported by our central development and support capability, whichprovides our people working on client sites with both logistical and technicalsupport. Services Division 2006 2005Turnover £12.6m £15.2mGross profit £7.2m £8.9mOperating profit before exceptional items £4.7m £6.9m Services Division revenue in the year ended 31 May 2006 was £12.6m and relatesmainly to services delivered to LSPs. We have seen a decline in demand forservices from the National Programme from the prior financial year as outlinedin the Chairman's Statement. In November 2005, we proactively began to provideservices under fixed-price contracts with the LSPs to accelerate deployments. Operating profit within the Services Division fell to £4.7m, principally as aresult of reduced revenues. Divisional operating profit is stated before takinginto account the Development and Shared Services expenditures, whose costs arereported separately. During the year, System C Services specialists were involved in multipleprojects on behalf of its LSP customers with staff playing vital roles in thesuccessful completion of many of the "go-lives" during the period. Products Division 2006 2005Turnover £3.5m £3.0mGross profit £0.8m £0.6mOperating profit before exceptional items £0.5m £0.4m We generated revenue growth of £0.5m in the Products Division in the year ended31 May 2006. The System C product capability has benefited from the continuedinvestment during the last few years. Our MedWay Electronic Patient Recordsystem was upgraded to connect to the NHS Connecting for Health central 'Chooseand Book' system, which allows general practitioners to book hospitalappointments for their patients online. We implemented the first 'Choose andBook' upgrade in March 2006 and others are expected to follow. A significant number of new NHS Hospital Trust customers have been secured forproducts such as the HealthData Suite, with renewable licence fee agreements.Growth also came from additional contracts to provide data migration and systemsinterfacing. Development and Shared Services Division 2006 2005Operating loss before exceptional items £(4.7)m £(3.8)m Our Development and Shared Services Division enables us to effectively developand deliver products and services into the healthcare IT sector. Included withinthis category are costs associated with the general development of products aswell as central corporate costs. The growth in the cost base year on year is principally due to an increase inemployee numbers, as well as general overhead costs including insurance andcosts associated with being a listed company. As noted above, we reduced thecost base of the Company in the final quarter to reflect market conditions. Strategy We continue to concentrate on our core areas of expertise: the provision of ITsolutions to the healthcare sector. We are actively securing opportunities in areas both within and outside theNational Programme, including the provision of services to support Diagnosticand Elective Treatment Centres, the private healthcare sector, NHS Trusts directand overseas opportunities. Our strategy is to grow the business profitability by further developing ourproducts and services and expanding our customer base. In addition, we will lookto invest the funds we raised at flotation to grow the business eitherorganically or through suitable targeted acquisitions. Financial Review 2006 2005 Audited AuditedTurnover £16.1m £18.2mGross profit £8.0m £9.5mProfit before exceptionals and tax £1.1m £3.5mExceptional admin. expenses £(0.4)m £(1.0)mProfit before tax £0.7m £2.5mTax £0.4m £(0.4)mProfit after tax £1.1m £2.1mEPS 1.30p 3.48p Overview Revenues of £16.1m in the year ended 31 May 2006 fell by £2.1m from the prioryear, reflecting both a reduction in our Services Division revenues, and growthof 17% in our Product Division revenues. Services Division revenue of £12.6m was £2.7m below the prior year, due todelays in the National Programme as discussed in the Chairman's Statement andChief Executive's Review. Turnover in our Products Division grew to £3.5m (2005: £3.0m) as a result ofsales of our HealthData Suite and our MedWay Electronic Patient Record system,as well as contracts to provide data migration and systems interfacing. Thisgrowth is in line with our stated strategy of expanding our Products Divisionand building up a base of recurring product revenue for the future. The total gross margin in the year ended 31 May 2006 showed a marginal fall fromthe prior year. This was principally driven by a reduction in the day ratesachieved with the Services Division and was partially offset by an increase ingross margin in the Products Division. Operating Costs 2006 2005Cost of sales £8.1m £8.7m(direct operating costs)Administration expenses £7.4m £6.0m(indirect operating costs)Total operating costs £15.5m £14.7mbefore exceptional items Total operating costs in the year increased by £0.8m compared to the prior year.We began the year with a high employee base required to meet the demand, at thattime, for services from our LSP partners. As the level of demand from our LSPpartners began to diminish in the six months to November 2005, we reduced ourcost base in the last quarter of the year mainly through redundancies and otherheadcount related costs. Exceptional Items 2006 2005Flotation costs £0.2m -Redundancy costs £0.2m -UITF 17 charge - £0.8mUITF 25 charge - £0.2m --------- --------- £0.4m £1.0m The overall level of profitability has been impacted by exceptional items inboth the current and preceding financial years. Exceptional charges in 2006relate to flotation costs that can not be offset against the share premiumaccount as well as redundancy costs. In 2005 the exceptional items related principally to share options, with the'UITF 17' charge reflecting the difference between an estimate of market valueand the exercise price of options issued (or repriced) during the year. The'UITF 25' charge relates to a provision made for estimated Employer's NationalInsurance Contributions due when share options are exercised. Interest 2006 2005Net interest on customer contract assets £0.1m -Net bank interest £0.4m - --------- ---------Net interest receivable £0.5m - Interest receivable from customer contracts relates mainly to our long-termcontracts where an element of the charge includes a recovery for finance costs.Offsetting this income is the interest on financing loans taken out to fund thecontract assets. The interest payable on the financing loans for such contractshas reduced as we have repaid loan capital in accordance with the terms of theseloans. Net bank interest has improved by £0.4m principally due to interest incomegenerated on both the net proceeds raised at flotation, and cash generated fromoperating activities. Taxation A tax credit has been recognised in the profit and loss account in 2006, due tothe availability of research and development tax credits and Schedule 23 taxcredits. At the year end, the Company had £1.2m of tax value losses recognisedon the balance sheet as a deferred tax asset to offset against futureCorporation Tax liabilities (2005: £0.7m). Dividends Interim dividends of £0.11p per share were declared and paid during the year.The Board proposes a final dividend of 0.22p per share. Cash Flow We started the year with net debt of £1.2m raised £8.4m from the flotation,generated surplus cash of £0.9m and paid £0.1m in dividend. As a result we endedthe year with total net cash of £8.0m At the year end financing loans outstanding amounted to £1.5m (100 per cent ofwhich is scheduled for repayment within the next two years), leaving a net cashposition of £8.0m at the year end. Balance Sheet 2006 2005Fixed assets £1.1m £2.0mTrade debtors £2.6m £3.4mOther debtors £1.7m £1.3mDebtors - accrued income £4.4m £3.6mCreditors and provisions £(2.6)m £(3.6)mNet cash £8.0m £(1.2)m --------- ---------Net assets £15.2m £5.5m Note: the balance sheet table above is simplified for the purposes ofhighlighting key areas; please refer to the financial statements for a fullanalysis. The company has a strong balance sheet with net assets of over £15.2m. Trade debtors have decreased, principally due to a change in the invoicingcycle, with a corresponding increase in accrued income. Other debtors include adeferred tax asset of £1.2m in respect of unutilised losses brought forward. At the year end, we had £4.4 million of accrued income (2005: £3.6 million).This comprises:• Services Division income generated in May 2006 and invoiced after the year end. In the prior year Services Division income for May 2005 was invoiced within the month, with any adjustments with the clients made in the subsequent month. This has since been invoiced and fully paid.• Accrued revenue recognised in relation to revenue from long-term contracts which have not yet been invoiced. Revenue is only recognised once product modules are installed, tested and the milestones are achieved and signed off by the customer. Revenue accrued reflects the value of work delivered and is then invoiced as a monthly payment over the life of the contract. Creditors and other provisions have reduced from the prior year principally dueto a reduction in the VAT creditor and a reduced UITF 25 provision. International Financial Reporting Standards ('IFRS') As announced on our admission to AIM, the Company will prepare financialstatements under IFRS for the year ended 31 May 2007, which is a year earlierthan is required under the AIM rules. We have reviewed the impact of IFRS in respect of the Company and identified thekey areas of impact as follows: • Capitalisation of development costs• Valuation of share based payments• Segmental reporting of trading performance and financial position System C will report its first set of results under the principles of IFRS inits interim results for the six months ending 30 November 2006. Profit and Loss Account for the year ended31 May 2006 Notes Year ended Year ended 31 May 31 May 2006 2005 £ £ --------- ---------Turnover 2 16,080,264 18,228,185Cost of sales 2 (8,086,450) (8,757,318) --------- ---------Gross profit 2 7,993,814 9,470,867 Administration expenses - normal 2 (7,451,187) (5,978,204)Administration expenses - exceptional items 3 (381,645) (986,004) --------- ---------Administration expenses - total (7,832,832) (6,964,208) --------- --------- Operating profit 160,982 2,506,659 Interest receivable and similar income 4 713,348 351,830Interest payable and similar charges 5 (169,046) (326,914) --------- ---------Profit on ordinary activities before taxation 705,284 2,531,575 Tax credit/(charge) on profit on ordinaryactivities 6 422,533 (421,882)Profit for the financial year 1,127,817 2,109,693 Dividends and appropriations 7 (107,585) (66,742) --------- ---------Retained profit for the financial year 15 1,020,232 2,042,951 --------- --------- RestatedEarnings per 1p ordinary share Pence Pence- basic 8 1.30 3.48 --------- ---------- diluted 8 1.28 3.08 --------- --------- The results above relate entirely to continuing operations. The Company has no recognised gains and losses other than the results above andtherefore no separate statement of total recognised gains and losses has beenpresented. There is no difference between the profit on ordinary activitiesbefore taxation and the results for the years stated above and their historicalcost equivalents. Balance Sheet as at 31 May 2006 Notes Year ended Year ended 31 May 31 May 2006 2005 £ £ --------- ---------Tangible assets 1,089,275 2,017,883 --------- ---------Current assetsDebtors 9 8,686,467 8,318,821Cash at bank and in hand 10 9,547,985 1,223,242 --------- --------- 18,234,452 9,542,063Creditors - Amounts falling due within one year 11 (3,508,800) (4,314,872) ---------- ---------Net current assets 14,725,652 5,227,191 ---------- --------- Total assets less current liabilities 15,814,927 7,245,074 Creditors - Amounts falling due after morethan one year 12 (528,122) (1,520,488)Provisions for liabilities and charges 13 (81,407) (233,895) --------- --------- (609,529) (1,754,383) ---------- ---------Net assets 15,205,398 5,490,691 ---------- ---------Capital and reservesCalled up share capital 892,765 3,821,683Share premium account 15 9,731,885 -Special reserve 15 - 1,308,496Capital redemption reserve 15 3,127,023 134Own shares held in trust 15 (1,235,381) -Profit and loss account 15 2,689,106 360,378 ---------- ---------Total shareholders' funds 15,205,398 5,490,691 ---------- --------- Represented by:Equity shareholders' funds 15,205,398 1,909,093Non-equity shareholders' funds - 3,581,598 ---------- ---------Total shareholders' funds 15,205,398 5,490,691 ---------- ---------The financial statements which comprise the profit and loss account, balancesheet, the cash flow statement and related notes were approved by the Board ofDirectors on 6 September 2006. Cash Flow Statement for the year ended 31 May 2006 Notes Year ended Year ended 31 May 31 May 2006 2005 £ £ --------- ---------Net cash inflow from operating activities 16 359,842 4,210,687Returns on investments and servicing offinanceInterest received 716,010 341,345Interest paid (169,046) (326,914)Dividends paid to non-equity preferenceshareholders (123) - --------- ---------Net cash inflow from returns on investmentsand servicing of finance 546,841 14,431 Taxation (1,357) 105,638 Capital expenditure and financial investmentPurchase of tangible fixed assets (54,299) (890,728) --------- ---------Net cash outflow for capital expenditure andfinancial investment (54,299) (890,728) --------- ---------Net cash inflow before financing 851,027 3,440,028 FinancingProceeds from issue of equity share capital 11,175,825 138,362Share issue costs (1,354,461) -Redemption of non-equity share capital (71,000) -Payment to acquire own shares held in trust (1,235,381) -Dividends paid (95,342) -Net repayment of financing loans (933,163) (912,502) --------- ---------Net cash inflow/(outflow) from financing 7,486,478 (774,140) --------- ---------Increase in net cash 8,337,505 2,665,888 --------- --------- Notes to the Financial Statements 1. Basis of Preparation and Financial Statements The Board of Directors approved these preliminary audited results on 6 September2006. The financial information set out above is abridged and does not constitute theCompany's statutory financial statements for the years ended 31 May 2006 or 31May 2005. Statutory financial statements for the year ended 31 May 2005 havebeen reported on by the Company's auditors and delivered to the Registrar ofCompanies. The statutory financial statements for the year ended 31 May 2006 will be postedno later than 12 October 2006 to shareholders and once approved will bedelivered to the Registrar of Companies following the Annual General Meeting on6 November 2006. The report of the auditor for the year ended 31 May 2005 wasunqualified. Copies of the Annual Report and Financial Statements for the year ended 31 May2006 will be available in due course from the Company Secretary, System CHealthcare plc, Brenchley House, Week Street, Maidstone ME14 1RF. 2. Segmental Reporting The Company's sole activity is the design, development and implementation ofcomputer hardware and software. The Directors consider it appropriate to analysethe results and financial position of the Company as given below: Year ended 31 May 2006 Year ended 31 May 2005 Development Development and Shared and Shared Products Services Services Total Products Services Services Total £ £ £ £ £ £ £ £ --------- --------- --------- --------- --------- --------- --------- ---------Turnover 3,470,423 12,609,841 - 16,080,264 2,966,764 15,261,421 - 18,228,185Cost of sales (2,659,286) (5,427,164) - (8,086,450) (2,330,372) (6,426,946) - (8,757,318)Gross profit 811,137 7,182,677 - 7,993,814 636,392 8,834,475 - 9,470,867Administrationexpenses - beforeexceptional items (324,190) (2,440,257) (4,686,740) (7,451,187) (272,981) (1,918,823) (3,786,400) (5,978,204)Administrationexpenses- exceptional - - (381,645) (381,645) - - (986,004) (986,004)Operatingprofit/(loss) 486,947 4,742,420 (5,068,385) 160,982 363,411 6,915,652 (4,772,404) 2,506,659Net interest 147,731 - 396,571 544,302 72,316 (62,666) 15,266 24,916Profit/(loss)before tax 634,678 4,742,420 (4,671,814) 705,284 435,727 6,852,986 (4,757,138) 2,531,575 Net assets 2,675,791 1,998,344 10,531,263 15,205,398 2,044,603 2,504,230 941,858 5,490,691 The Products segment relates to business where the Company contracts directlywith local NHS trusts and other clinical organisations. The Services segment relates to the business where the Company is subcontractedto perform work on behalf of other organisations where the end customer is alsoeither the NHS or other clinical organisations. Development and Shared Services relates to the Company's central research anddevelopment activities and support services provided to the Products and Servicesegments. There is no difference between the geographical origin and destination ofturnover, all of which arises in the United Kingdom. 3. Exceptional Items Year ended Year ended 31 May 31 May 2006 2005 £ £ --------- ---------Flotation costs 190,632 -Redundancy costs 191,013 -UITF 17 charge - 806,645UITF 25 charge - 179,359 --------- --------- 381,645 986,004 The charges above relate to bonuses paid upon the flotation as well asredundancy costs. The UITF 17 and UITF 25 charges in the previous year arise on the re-pricing ofcertain share options on 10 November 2004, together with the issue of additionalshare options during the year ended 31 May 2005. 4. Interest receivable and similar income Year ended Year ended 31 May 31 May 2006 2005 £ £Bank interest receivable 398,560 20,458Other interest receivable 314,788 331,372 --------- --------- 713,348 351,830 5. Interest payable and similar charges Year ended Year ended 31 May 31 May 2006 2005 £ £Interest payable on bank loans and overdrafts 1,989 67,858Interest on financing loans (Note 14) 167,057 259,056 --------- --------- 169,046 326,914 6. Tax (credit)/charge on profit on ordinary activities (a) Analysis of tax (credit)/charge in the year Year ended Year ended 31 May 31 May 2006 2005 £ £Current taxUnited Kingdom corporation tax at 30%/19% on profit for the year - 3,887Adjustments in respect of previous years (3,439) -Total current tax (credit)/charge (Note 8b) (3,439) 3,887 Deferred taxOrigination and reversal of timing differences (419,094) 417,995Total deferred tax (credit)/charge (Note 8c) (419,094) 417,995 --------- ---------Tax (credit)/charge on profit on ordinary activities (422,533) 421,882 (b) Factors affecting the current tax (credit)/charge in the year The tax for the year differs from the standard rate of corporation tax in the UK(30 per cent for the year ended 31 May 2006 and 19 per cent for the year ended31 May 2005). The differences are explained below: Year ended Year ended 31 May 31 May 2006 2005 £ £Profit on ordinary activities before tax 705,284 2,531,575Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% 211,585 759,473Effects of: Expenses not deductible for tax purposes 65,414 35,797 Tax benefit of research and development expenditure (200,172) - Tax effect of share options issued (250,229) - Differences between capital allowances and depreciation 161,587 51,543 Unutilised/(Utilised) losses 246,216 (1,084,135) Other timing differences (234,401) 243,280 Net difference between standard rate of tax and small company rate - (2,071) Adjustments in respect of prior years (3,439) - --------- --------- Current tax (credit)/charge for the year (Note 8a) (3,439) 3,887 c) Components of Deferred Tax Charge Year ended Year ended 31 May 31 May 2006 2005 £ £Net (recognition)/utilisation of tax losses (491,908) 712,818Other timing differences 234,401 (243,280)Differences between capital allowances and depreciation (161,587) (51,543) --------- ---------Total Deferred tax charge (419,094) 417,995 The company had unutilised tax losses at the end of each year which would beavailable to offset future taxable profits as set out in Note 14. 7. Dividends and appropriations Year ended Year ended 31 May 31 May 2006 2005 £ ££1 preference shares - 75% £1 convertible participating preference shares 12,243 66,735£1 ordinary equity shares 95,342 - --------- --------- 107,585 66,742 On the 17 January 2006 the Directors declared an interim dividend of 0.11 penceper ordinary share, however the Trustees of the System C Healthcare plc EmployeeBenefit Trust waived the rights of the Trust in respect of such dividends. 8. Earnings per share The calculation of the basic earnings per ordinary share ("EPS") is based on theprofit attributable to ordinary shareholders for the financial year of£1,127,817 (2005: profit of £2,109,686) and the weighted average number ofordinary shares in issue during the year of 86,520,460 (2005: 60,568,411). Theprofit attributable to ordinary shareholders has only been adjusted fordividends relating to the redeemable preference shares as any dividends orappropriations in respect of the convertible participating preference shares donot require adjustment as these shares were converted into equity sharesimmediately prior to the admission to AIM. (As restated) Year ended 31 May 2006 Year ended 31 May 2005 Earnings Earnings Earnings per share Earnings per share £ pence £ penceBasic 1,127,817 1.30 2,109,686 3.48Diluted 1,127,817 1.28 2,109,686 3.08 The following table shows a reconciliation of the weighted average number ofshares used for calculating the basic and diluted earnings per share. (As restated) Year ended Year ended 31 May 31 May 2006 2005 Number of Number of shares sharesUsed for calculating basic EPS 86,520,460 60,568,411Dilution due to share options 1,474,710 7,890,523 --------- ---------Used for calculating diluted EPS 87,995,170 68,458,934 9. Debtors 31 May 31 May 2006 2005 £ £Amounts falling due within one year:Trade debtors 2,648,250 3,399,174Other debtors 17,693 28,705Prepayments and accrued income 4,789,425 4,078,937Deferred tax asset (Note 17) 1,231,099 812,005 --------- --------- 8,686,467 8,318,821 Prepayments and accrued income as at 31 May 2006 include £4,390,633 in respectof revenue that has been recognised by the Company but which had not beeninvoiced to the customer as at the year end (2005: £3,592,329). Of this amount,£1,503,328 is due in more than one year (2005: £1,923,372). 10. Cash 31 May 31 May 2006 2005 £ £Cash at bank and in hand 9,547,985 1,223,242 11. Creditors - Amounts due within one year 31 May 31 May 2006 2005 £ £Bank overdrafts - 12,762Financing loans (Note 14) 992,366 933,163Trade creditors 360,007 736,030Other taxation and social security 790,318 1,311,804Proposed dividends - 166,923Corporation tax - 4,796Accruals and deferred income 1,366,109 1,149,394 --------- --------- 3,508,800 4,314,872 12. Creditors - Amounts due after more than one year 31 May 31 May 2006 2005 £ £Financing loans 528,122 1,520,488 Maturity profile of financing loans 31 May 31 May 2006 2005 £ £Due within one year 992,366 933,163Between one and two years 528,122 992,366Between two and five years - 528,122 --------- --------- 1,520,488 2,453,651 The financing loans represent the outstanding amounts owing in respect of grossborrowings of £4.5 million obtained in order to finance certain of the Company'scontracts. 13. Provisions for liabilities and charges Property UITF 25 dilapidations provision Total £ £ £At 31 May 2005 54,536 179,359 233,895Provision utilised in the year - (137,893) (137,893)Charged/(credited) in the year 17,989 (32,584) (14,595) ------- ------- --------At 31 May 2006 72,525 8,882 81,407 14. Deferred tax 31 May 31 May 2006 2005 £ £Balance at start of year 812,005 1,230,000Credited/(charged) to the profit and loss account 419,094 (417,995)Balance at end of year 1,231,099 812,005Deferred tax recognised comprises:Accelerated capital allowances 51,456 (110,131)Unutilised tax losses 1,168,964 677,056Short term timing differences - 241,994Other 10,679 3,086 --------- ---------Deferred tax asset 1,231,099 812,005 15. Share premium account and reserves Share Capital Own Profit and premium redemption Special shares held loss account reserve reserve in trust account £ £ £ £ £ ------- ------- -------- ------- --------As at 1 June 2005 - 134 1,308,496 - 360,378Retained profit for the year - - - - 1,020,232Credit arising on the conversion of theCompany's £1 convertible participatingpreference shares - 3,126,889 - - -Premium arising on settlement of accrued dividend 179,596 - - - -Premium on 1p ordinary shares issued 10,906,750 - - - -Share issue costs (1,354,461) - - - -Release of special reserve - - (1,308,496) - 1,308,496Employee benefits trust - - - (1,235,381) - ------- ------- -------- ------- --------As at 31 May 2006 9,731,885 3,127,023 - (1,235,381) 2,689,106 Capital reduction and transfer of special reserve The Company was able to reduce the amount credited to the special reserveequivalent to any increase in its paid up share capital or its share premiumaccount arising from new consideration. Accordingly, the Company transferred£1,308,496 from the special reserve to profit and loss reserve following theplacing and admission of its ordinary shares to AIM. Own shares held in trust The System C Healthcare plc Employee Benefit Trust (the "Trust") holds 2,287,741ordinary shares of 1p each with a cost of £1,235,381 and a market value as at 31May 2006 of £537,619. The Trust acquired these shares at 54p each on the placingand admission of the Company's ordinary shares to AIM. The Trust used the funds loaned to it by System C Healthcare plc to meet theobligations under the various share option schemes that the Company operates.Share options are granted to the employees at the discretion of the Company andshares are awarded to employees by the Trust in accordance with the wishes ofSystem C Healthcare plc. The loan provided to the Trust will be repaid from theproceeds payable by employees to exercise share options that have been grantedto them. 16. Reconciliation of operating profit to net cash inflow from operatingactivities Year ended Year ended 31 May 31 May 2006 2005 £ £Operating profit 160,982 2,506,659Depreciation 976,640 892,135Loss on disposal of tangible fixed assets 854 17,498Exceptional charge on share options (Note 4) - 986,004Dilapidations provision 17,989 54,536Decrease in UITF 25 provision (170,477) -Decrease in stocks - 7,902Decrease/(increase) in debtors 38,424 (2,177,636)(Decrease)/increase in creditors (664,570) 1,923,589 --------- ---------Net cash inflow from operating activities 359,842 4,210,687 17. Reconciliation of cash inflow to movement in funds / (net debt) Year ended Year ended 31 May 31 May 2006 2005 £ £Increase in cash in the year 8,337,505 2,665,888Cash outflow from net repayment of financing loans 933,163 912,502 --------- ---------Change in net funds resulting from cash flows 9,270,668 3,578,390Net debt at start of year (1,243,171) (4,821,561) --------- ---------Net funds/(debt) at end of year 8,027,497 (1,243,171) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Sysgroup