Atlantic Lithium Regulatory News (ALL)

RNS Number : 4819Q

Allocate Software PLC

04 August 2010

 

 

 

 

4 August 2010

Allocate Software plc

("Allocate" or the "Company")

 

Allocate Reports Record Results for the Year Ended 31 May 2010

 

Allocate Software plc (AIM: ALL), the leading provider of workforce and compliance optimisation solutions, today announces its results for the year ended 31 May 2010.

 

Financial Highlights

 

§ Revenue increased by 39% to £22.0m (2009: £15.8m)

 

- Licence revenue increased by 22% to £9.3m (2009: £7.6m)

- Services and support revenue increased by 56% to £12.5m (2009: £8.0m)

- Healthcare revenue increased by 33% to £14.8m (2009: £11.1m)

§ Trading profit* increased by 38% to £3.49m (2009: £2.53m)

§ Trading profit* margin remains broadly consistent with the prior year at 15.9% (2009: 16.0%)

§ Diluted adjusted EPS** increased by 20% to 6.44p (2009: 5.36p)

§ Operating cash flows increased significantly to £4.9m (2009: £1.8m)

§ Net cash balances at the year-end of £2.9m

 

* Trading profit defined as profit before amortisation of intangible assets, share-based payments, interest and tax.

** Excludes amortisation of intangible assets, share-based payments and tax.

 

Business Highlights

§ Successful acquisitions of Time Care in Sweden in December 2009 and of Dynamic Change in the UK in May 2010

§ The Healthcare customer base now includes 353 NHS Trusts in the UK, including therein, 121 NHS Trusts who are customers of Dynamic Change

§ Total Healthcare customers worldwide now number 417, including 58 customers of Time Care in Sweden

§ Healthroster gained 40 new NHS Trust customers, making 119 Trusts with Healthroster in total at the year-end (which represents 29% of the 411 total number of Acute, Mental Health and Primary Care Trusts in England and Wales)

§ Selected as preferred supplier by the State Government of New South Wales, Australia to supply its Healthroster software across the entire state public health system, covering more than 90,000 staff. This contract has a potential total value of A$10 million (approximately £5.5m at current exchange rates) and will start to be delivered during the 2011 financial year

§ Signed a significant new contract with the Royal Australian Army to supply Allocate's Defence Suite

§ Our partner strategy has produced positive results with our partners PwC and CSC supporting the company in closing two major deals this year

 

Ian Bowles, Chief Executive Officer of Allocate, commented:

 

"The 2010 financial year was another outstanding year for Allocate, the fourth consecutive year of record results. We continued to strengthen our position in the UK Healthcare market with the acquisition of Dynamic Change and we now have a significant presence in Europe with the acquisition of Time Care in Sweden. In both Maritime and Defence we grew the business year-on-year and in Defence we secured a major order from the Royal Australian Army for £2m of licence revenue. I remain confident in our prospects and I expect 2011 to be a year of further progress."

 

Enquiries:

 

Allocate Software Ian Bowles - Chief Executive Officer Chris Gale - Chief Financial Officer	Tel: +44 (0) 20 7355 5555
Numis Securities Nominated adviser - Michael Meade / Richard Thomas Corporate Broking - James Black	Tel: +44 (0) 20 7260 1000
Hansard Communications Justine James Kirsty Corcoran	Tel: +44 (0) 20 7245 1100 Tel: +44 (0) 7525 324 431

 

CHAIRMAN'S STATEMENT

 

The 2010 financial year has been another year of considerable success for Allocate. We have grown our revenues and profits in all of our core markets and we continue to execute well against our strategy.

 

As is clear from our results, Allocate has evolved over the last four years. In the 2007 financial year, we reported revenue of £8.3m, a trading profit of £1.0m and diluted adjusted EPS of 2.29p. In 2010 we have reported revenue of £22.0m, a trading profit of £3.5m and diluted adjusted EPS of 6.44p. This represents a compound growth in revenue of 39% per annum over the period, 50% in trading profits and 40% in diluted adjusted EPS.

 

In 2006, we were a business focussed mainly on the Defence and Maritime markets, having relatively little overseas presence, little Healthcare market penetration and using an operating model which was based upon a small number of large licence transactions followed by bespoke, complex, services projects.

 

We are now a business well established in three distinct customer markets, Healthcare, Defence and Maritime, of which Healthcare in 2010 represented some 67% of our revenue. Our customer numbers have grown from less than 100 in 2007 to over 600 in 2010. We are now a business with significant and growing overseas customers and operations and have established a financial model that is accelerating the proportion of repeat revenues from our broad and growing customer base.

 

Allied with continued disciplined management practices, this breadth of business operations provides Allocate with not only a wide range of future opportunities, but also with a cushion should a single market or territory face economic challenges in the future.

I was also pleased to welcome Chris Gale to the position of CFO this year. Chris' appointment comes at a time when Allocate has begun its international expansion, following the recent acquisition of Time Care. Chris brings a wealth of experience transacting deals in Europe and North America and he has held a number of senior financial roles in international public companies within the IT industry.

Our results for the 2010 financial year were excellent and the outlook for the 2011 financial year is for further progress. Whilst management has established firm foundations for continuing growth across its three vertical markets, Allocate's largest market remains the NHS in the UK.

 

We note the recently issued government White Paper on the NHS and continue to seek further clarity over the government's plans as they are published. However, based on the information made available to date, whilst a number of questions remain open with respect to the structure of the procurement authorities within the NHS, we believe that demand for our products will continue as they represent compelling value, particularly when finances are tight. We will seek to work with whichever new organisations are granted responsibility for procurement in the NHS, as and when such changes are implemented, and we remain confident of continuing to expand our business.

 

During the year we have made two successful acquisitions, of Time Care and Dynamic Change, and we continue to seek further investment opportunities to further enhance shareholder value. Despite the global economic climate, the Directors believe the Company is well positioned for another successful year. 

I would like to thank our customers and partners for their business, their commitment to the Allocate products and their engagement with the Allocate vision. Finally, I would like to recognise and thank the Company's employees for another year of hard work and dedication in support of the Company's success.

 

 

Terry Osborne

CHAIRMAN

4 August 2010

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

Results

Revenue in the financial year was £22.0m (2009: £15.8m), an increase over last year of 39%. Trading profit for the year, before adjustments for share-based payments and amortisation of intangible assets, was £3.49m (2009: £2.53m), an increase over last year of 38%. The resulting trading profit margin was 15.9% (2009: 16.05%), consistent with the previous year. Diluted adjusted EPS (excluding amortisation of intangibles, share-based payments and the deferred tax adjustment) increased by 20% to 6.44p (2009: 5.36p).

 

Licence revenue grew by 22% to £9.3m (2009: £7.6m), while Services and support revenue grew by 56% to £12.5m (2009: £8.0m). By sector, Healthcare revenue in the period increased by 33% to £14.8m (2009: £11.1m), reflecting not only the Company's continued partnership with the NHS but also the impact of the Time Care and Dynamic Change acquisitions. Defence revenues grew by 50% to £4.5m (2009: £3.0m), principally due to the large order from the Royal Australian Army. Maritime revenues grew by 12% to £1.8m (2009: £1.6m).

 

Organic revenues (excluding the acquisitions of Time Care and Dynamic Change) grew by 21% to £19.1m (2009: £15.8m) during the year.

 

Selling and operational expenses in the financial year increased from £10.7m to £14.8m. This planned increase reflects continued investments in all of our functional lines of business as well as the impact of the acquisitions of Time Care and Dynamic Change.

 

Administrative expenses in the financial year were £3.7m (2009: £2.5m), the planned increase reflecting additional costs arising as a result principally of the acquisitions of Time Care and Dynamic Change.

 

Operating cash flows during the financial year were £4.9m (2009: £1.8m), reflecting a significant growth in profits over last year in addition to improved management of working capital.

 

Net cash balances at the year-end were £2.9m (2009: £3.7m). This reflects:

 

§ £3.3m cash expended to part fund the acquisitions of Time Care and Dynamic Change.

§ A new £2.0m facility taken on to part fund the acquisition of Dynamic Change.

§ An increase in debtors of £2.8m reflecting increased sales activity in the year.

§ An increase in trade, other payables and deferred revenue of £5.9m, reflecting new support contracts and consultancy services pre-paid by customers.

 

Principal accomplishments

 

Financial year 2010 has been another record year for Allocate. Compound growth per annum over the past four years has been:

 

Revenue 39%

Trading profit 50%

Diluted, adjusted EPS 40%

 

In addition to the Company's record financial results, a number of major achievements were also accomplished during the past year.

 

§ We achieved significant success in all three of our vertical markets during 2010 growing our Healthcare revenue by 33%, Defence revenue by 50% and Maritime revenue by 12%.

 

§ Allocate now has a customer base of 353 NHS Trusts across the UK. This demonstrates the continuing recognition by our customers of the value of our products and services.

 

§ 40 NHS Trusts became new Healthroster customers this year. In addition, 20 NHS Trusts became new customers for our Bank Staff Management Solution (BSMS Trinity).

 

§ The Company reported on 31 May 2010 that it had been selected as the preferred supplier by the State Government of New South Wales, Australia for a major contract worth up to a potential value of A$10m (approximately £5.5m at current exchange rates) which will start to be delivered during the 2011 financial year.

§ The Company also reported that it had won a significant Defence deal for the Royal Australian Army valued at £2m of licence revenue.

§ The acquisition of Time Care in Sweden in December 2009 establishes a further foundation for our strategy of international growth. Time Care is a well established, growing and profitable business that has made great strides in the Swedish healthcare market and currently has 58 Swedish hospitals as customers.

 

§ The acquisition of Dynamic Change in May 2010 further strengthens our strategic position as it brings Allocate into the compliance and regulatory market, a market closely allied to our core market of workforce optimisation. In addition, this acquisition makes available a new Software-as-a-Service ("SaaS") delivery model to Allocate's large customer base.

 

Acquisitions

 

We are satisfied with our two major acquisitions during the year, Time Care and Dynamic Change. Additionally, we are pleased with the positive results we continue to see from the prior year acquisitions of Key ITS and Baum Hart Partners.

 

Time Care is a leading Swedish-based provider of workforce management software, with a strong focus on the healthcare market. The acquisition of Time Care has provided Allocate with a strong geographic footprint in the Nordic region, particularly in Sweden, where Time Care has customer relationships with some 58 hospitals and 110 of Sweden's 290 municipalities. As a result of this acquisition, Allocate is now one of the leading providers of workforce management software for the healthcare sector in Europe.

 

Dynamic Change, a UK-based software-as-a-service ("SaaS") provider of regulatory compliance, corporate governance, risk and performance management for the UK healthcare market was acquired in May 2010. Dynamic Change has developed its SaaS software platform that is used by its customers to monitor and manage regulatory compliance, corporate governance, business objectives, risks and controls, performance indicators and financial targets. Dynamic Change generates over 98% of revenues from the healthcare sector with approximately 70% of revenues contractually recurring from subscriptions. Dynamic Change currently has 121 NHS Trusts as customers.

Both acquisitions continue to grow their business and the task of integrating the companies into Allocate is proceeding in line with management plans.

 

Strategy

 

This year's very strong results validate the strategy that the Board adopted in 2007.

 

It is our belief that this strategy remains appropriate for the next phase of our growth. Looking forward we will continue to focus on the key elements of the strategy that have proven so successful during the last few years.

 

Focus on customer success

 

The success of our customers is critical to our success and future plans.

 

We believe it is important that each of our customers achieve demonstrable financial return from the deployment of our applications, justifying their investment and allowing them to be a reference for prospective customers facing similar challenges. Our growing and influential UK and overseas customer base helped us achieve significant international success during the year, supporting our efforts to win new business in New Zealand and Australia. In addition, 40 NHS Trusts independently selected Healthroster after competitive public tenders during this financial year.

 

Our strong and independent User Group attracted over 180 NHS professionals, as well as representatives from the private healthcare sector, to this year's annual meeting providing fresh input to the development of product enhancements and future product direction.

 

Retention and attraction of the best talent

 

The domain expertise and operational experience of various members of the team provide a significant competitive advantage to Allocate when engaging with customers and prospects alike. It is therefore important for our continued growth that we retain and recruit the very best talent available to us.

 

As well as record financial results for four consecutive years, we have seen growth in our headcount with the result that today the Allocate team consists of over 245 professionals supporting customers across five continents.

 

Healthcare: Developing a broader applications portfolio

 

During the 2010 financial year we launched two additional applications, Doctor Rostering and e-Expenses which deliver additional value to our customers.

 

All four of our acquisitions in the last two years have supported our strategy of offering a broader set of applications to our Healthcare customers. However, it remains significant that a material proportion of our NHS customer base, some two thirds, have purchased only one of our products and therefore our existing customers remain an avenue of significant growth potential. The Dynamic Change acquisition also brought a new SaaS delivery methodology to our offerings which will over time enable us to deliver applications more cost effectively for customers who do not wish to install and support applications within their own infrastructure. This is a critical consideration given the financial challenges being faced by Healthcare organisations around the world.

 

During the current financial year we will launch additional complementary applications developed in conjunction with our Healthcare customers.

 

Focus on multiple growth opportunities

 

§ Maximise penetration of existing vertical markets

§ Maximising customer value by delivery of multiple applications

§ International expansion in Healthcare

§ Appropriately judged acquisitions to support the strategy

§ Consideration of additional vertical market sectors

 

We have significant opportunities for growth in all three of our current vertical market sectors. In particular, there is a considerable cross sell opportunity within our Healthcare customer base as we expand the applications portfolio. Additionally, by broadening our applications portfolio we can deliver more significant value to each customer and deepen the account relationship. As an example over 115 NHS Trusts now have more than one of our applications. As noted above, this provides a significant market opportunity for further product sales.

 

Interestingly, elements of applications developed for Healthcare have applicability in other verticals; as an example, our Healthcare Rostering application has recently been ported in to the Maritime Suite.

 

The international expansion of our Healthcare business is proceeding well and as of today we have Healthcare customers in New Zealand, Australia, Malaysia, Sweden and America.

 

Importantly, the Company reported on 31 May 2010 that it had been selected as the preferred supplier by the State Government of New South Wales, Australia to implement a State-wide rostering project. The agreement is to provide our software to roster the 90,000 nurses and other healthcare professionals throughout the State of New South Wales. As a result, during the current fiscal year we will look to increase our investment in Asia Pacific and specifically Australia as we develop additional business in the region.

 

Markets

 

We will continue to focus on our three chosen markets of Healthcare, Defence and Maritime. However we will continue to investigate additional market segments that may further strengthen the long term growth prospects of the business.

 

Healthcare

 

Healthcare is our largest and fastest growing market sector, accounting for 67% of total revenues in 2010.

 

The recent Government White Paper, 'Liberating the NHS', outlines planned reforms across the NHS, our domestic healthcare market and offers additional opportunities to assist in the delivery of the benefits anticipated by the reforms. The creation of new structures, the requirement for the provision of aggregated and detailed data analysis fits with the vision we have been pursuing; that of providing a broader portfolio of complementary applications.

 

Our e-Rostering and temporary staff applications (Healthroster and BSMS) are delivering referenceable results that show reductions in Healthcare costs and an improvement in both standards of care and patients outcomes. These are the key focal points of the White Paper and will remain at the heart of our commercial offering to our Healthcare customers. We anticipate that they will underpin prospects for further expansion in the years ahead. In addition, the Governance application acquired with Dynamic Change broadens our applications portfolio and offers further growth opportunities when considered in relation to the systems alignment, focus on patient outcomes and continued quality focus that is envisaged in the 'Liberating the NHS' document. We will continue to seek to expand our Healthcare portfolio into adjacent areas.

 

In the UK we have a substantial customer base, which extends to 353 NHS Trusts, and one private group. Worldwide we have 417 Healthcare customers.

 

It is our belief that we will continue to grow our markets within the NHS, as well as the private and international Healthcare sectors for our Health Suite applications. The acquisition of Dynamic Change broadens our application portfolio and affords a significant, opportunity for the cross sell of both Allocate's and Dynamic Change's applications into the respective customer bases.

 

At 31 May 2010, Healthroster was installed in 119 NHS Trusts in England and Wales. This is more than triple the number of customers we had two years ago (2008: 38) and it represents 29% of the total number of Acute, Mental Health and Primary Care Trusts in England and Wales. In addition, Healthroster is installed in four international Healthcare organisations. BSMS, our temporary staffing solution which empowers NHS Trusts by automating the planning of bank and agency staff and reporting across hospitals, is now installed in 187 NHS Trusts.

 

Defence

 

The Defence sector is our heritage and continues to be a focus for the Company. During the year there were several significant developments in the use of MAPS Defence Suite by our British and overseas customers. Defence revenues were £4.5m, representing 20% of revenues in 2010.

 

Most significantly building on our work with the Royal Australian Navy, Allocate has been contracted to deliver Defence Suite capabilities across the entire Royal Australian Army. The Royal Australian Army agreement represents the biggest single contract award for our Defence applications.

 

Our longstanding relationship with the British Army continues to contribute to the overall success of the business and during the fiscal year the Royal Navy began using part of our applications suite. The Royal Fleet Auxiliary successfully migrated to the latest version of the Defence Suite and deployed a new application based on development work in our Healthcare vertical.

 

In Europe, NATO has successfully deployed versions of the Allocate Defence Suite now operating in the J1 Human Resources Branch; the J5 Force Generation cell, and the newly formed and mission critical Special Forces HQ. Recent enhancements to the NATO Special Forces installation have seen the application deployed in-theatre to Afghanistan.

 

Maritime

 

Our Maritime activities continue to contribute to the overall success of the Company, and at £1.8m, they represented 8% of the total revenue in 2010. 

 

The world's largest family entertainment company has gone live with its shore side deployment of the maritime application. We are actively engaged with this customer to deploy the application ship side on its fleet of cruise liners.

 

The new Onboard product is being shipped this month to CMA-CGM, who will be the first large scale users. It will be installed on their container fleet of some 100 vessels and will integrate with their existing MAPS Maritime Suite for crew scheduling.

 

Maersk Oil Qatar AS ("MOQ") is expected to go live with our MAPS Maritime Suite early this current financial year. MOQ selected MAPS Maritime Suite to manage its offshore personnel across all production operations including platforms, drilling rigs, offshore accommodation vessels and storage vessels. The solution will improve effectiveness, streamline tasks and integrate personnel data to optimise performance of offshore operations ensuring compliance with health and safety policies. MAPS Maritime Suite will replace MOQ's multiple sources of personnel movement information with a single integrated system for both shore side and offshore operations for the scheduling of personnel. It will allow managers to have a consolidated, real-time accurate view of personnel on board, accommodation and lifeboat availability on any offshore location.

 

Partnerships

 

Our partner strategy has delivered success with our major partners, PwC and CSC cooperating with the Company on two major contracts during the fiscal year. Both partners were independently chosen as the Systems Integrator of choice to support the deployment of our applications by the Department of Health in New South Wales and the Royal Australian Army respectively.

 

We anticipate that these partnerships will continue to deliver significant benefits to the Company over the coming years, helping us accelerate the broader deployment of our applications and assisting us to enter new geographical territories.

 

We will continue to seek strategic additional strategic partnerships that will enable us to deliver incremental value to our customers.

 

Development

 

To sustain our market leading position and to help ensure future growth prospects we continue to invest in the future. We embarked upon a project two years ago code named project "Columbus". The project will see the complete redevelopment of our core applications from the ground up, delivering improved performance and enhanced functionality.

 

The design architecture will also become the platform for all future applications development. Additionally, it will allow us to merge the applications we acquired with the purchase of Time Care with Healthroster to increase still further the functional advantage delivered to Healthcare customers around the world. Co-operative sharing of work with the Swedish development team has already begun.

 

The first application to be delivered on the new architecture will be Healthroster. An early alpha version of the application was recently demonstrated at the user group conference to tumultuous applause from the users.

 

Our Defence suite will be the second application to benefit from the new architecture with development work due to start during the current fiscal year.

 

Outlook

 

As we begin the new financial year, which will be my fourth year as CEO of Allocate Software, I am confident of our prospects. The breadth of the Company's markets now provide a wide range of opportunities as well as reducing the Company's historical dependence on a small number of high value transactions. Our growing customer base will be fertile territory for us as we cross-sell our new applications, both those developed within Allocate and those acquired.

 

We have experienced revenue growth of 39% CAGR for the last four years with trading profit growth of over 50% on the same basis during a period of sustained economic uncertainty. The opportunity for increasing sales in our Healthcare business and the continued engagement in the Defence and Maritime market sectors will combine to maintain our progress.

 

We will continue to win new customers, broaden our relationships with existing customers and invest in our growth markets and applications whilst producing results that will grow shareholder value.

 

Ian Bowles

CHIEF EXECUTIVE OFFICER

4 August 2010

 

ALLOCATE SOFTWARE PLC

CONSOLIDATED INCOME STATEMENT FOR THE YEAR TO 31 MAY 2010

 

				Year to 31 May 2010	Year to 31 May 2009
				£'000	£'000
			Note
Revenue			4	21,964	15,774
Selling and operational expenses				(14,795)	(10,702)
Gross profit				7,169	5,072
Administrative expenses				(3,680)	(2,541)
Profit before amortisation, share-based payment, interest and tax				3,489	2,531
Amortisation of intangible assets				(2,091)	(678)
Share-based payment				(80)	(97)
Total administrative expenses				(5,851)	(3,316)
Operating profit				1,318	1,756
Finance income				24	80
Finance charges				(17)	(6)
Net finance income				7	74
Profit for the period before taxation				1,325	1,830
Tax on profit for the period			7	(75)	1,217
Profit for the period				1,250	3,047
Earnings per share			5
Basic (pence per share)				2.41p	6.82p
Diluted (pence per share)				2.31p	6.48p

 

Consolidated statement of comprehensive income for the year ended 31 May 2010
				Year to 31 May	Year to 31 May
				2010	2009
				£'000	£'000
Profit per the income statement				1,250	3,047
Exchange differences on translation of foreign operations				69	21
Share based payment deferred tax excess recognised directly in equity				-	84
Total comprehensive income attributable to the owners of the company				1,319	3,152

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF THE FINANCIAL POSITION AT 31 MAY 2010

 

			31 May 2010	31 May 2009
			£'000	£'000
Non-current assets
Intangible assets			18,977	2,723
Goodwill			4,779	-
Other financial assets			61	-
Property, plant and equipment			770	673
Deferred tax asset			1,527	1,386
Total non-current assets			26,114	4,782
Current assets
Trade and other receivables			9,211	5,939
Cash and cash equivalents			5,042	3,664
Total current assets			14,253	9,603
Total assets			40,367	14,385
Equity and liabilities
Equity
Share capital			3,060	2,235
Share premium account			7,380	6,493
Shares to be issued			-	213
Share-based payment reserve			408	328
Foreign exchange reserve			153	84
Retained earnings			5,858	(1,885)
Total equity			16,859	7,468
Non-current liabilities
Borrowings			2,172	180
Contingent consideration			2,750	-
Deferred tax liability			4,781	-
Total non-current liabilities			9,703	180
Current liabilities
Trade and other payables			12,555	6,690
Contingent consideration			1,250	-
Corporation tax			-	47
Total current liabilities			13,805	6,737
Total liabilities			23,508	6,917
Total equity and liabilities			40,367	14,385

The financial statements were approved by the board of directors on 3 August 2010.

 

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MAY 2010

 

 

	Share capital	Share premium	Shares to be issued	Share-based payment reserve	Foreign exchange reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 June 2008	2,235	6,493	159	314	63	(5,099)	4,165
Equity settled share options	-	-	-	97	-	-	97
Options transfer on exercise	-	-	-	(83)	-	83	-
Total transactions with owners	-	-	-	14	-	83	97
Result for the period	-	-	-	-	-	3,047	3,047
Other comprehensive income:
Exchange differences on retranslation of foreign operations	-	-	-	-	21	-	21
Deferred consideration	-	-	54	-	-	-	54
Share based payment deferred tax excess recognised directly in equity	-	-	-	-	-	84	84
At 31 May 2009	2,235	6,493	213	328	84	(1,885)	7,468
Equity settled share options	62	234	-	80	-	-	376
New shares issued	763	7,642	-	-	-	-	8,405
Cancelled against retained earnings reserve	-	(6,493)	-	-	-	6,493	-
Total transactions with owners	825	1,383	-	80	-	6,493	8,781
Share issue costs	-	(496)	-	-	-	-	(496)
Deferred consideration	-	-	(213)	-	-	-	(213)
Comprehensive income:
Result for the period	-	-	-	-	-	1,250	1,250
Exchange differences on retranslation of foreign operations	-	-	-	-	69	-	69
At 31 May 2010	3,060	7,380	-	408	153	5,858	16,859

 

ALLOCATE SOFTWARE PLC

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MAY 2010

 

			Year to	Year to
			31 May	31 May
			2010	2009
			£'000	£'000
Cash flow from operating activities
Profit for the period			1,250	3,047
Adjustments for:
Finance charges			(7)	(74)
Income tax			72	85
Deferred tax			3	(1,302)
Depreciation			260	169
Amortisation			2,091	678
Share-based payment			80	97
Increase in trade and other receivables			(769)	(3,271)
Increase in trade and other payables			1,892	2,381
Net cash generated from operations			4,872	1,810
Interest expense			(17)	(6)
Income tax expense			(75)	(85)
Net cash generated by operating activities			4,780	1,719
Cash flows from investing activities
Interest received			24	80
Payments for intangible assets			-	(2,136)
Investment to acquire subsidiary (note 6)			(13,444)	-
Payments for property, plant and equipment			(218)	(318)
Net cash used in investing activities			(13,638)	(2,374)
Cash flows from financing activities
Repayment of borrowings			(6)	(16)
Proceeds from loan			2,000	-
Proceeds from the issue of equity shares			8,700	-
Issue costs			(496)	-
Net cash generated by / (used in) financing activities			10,198	(16)
Net increase/(decrease) in cash and cash equivalents			1,340	(671)
Foreign exchange differences			38	18
Cash and cash equivalents at the start of the period			3,664	4,317
Cash and cash equivalents at the end of the period			5,042	3,664

 

ALLOCATE SOFTWARE PLC

NOTES TO THE INTERIM FINANCIAL INFORMATION

 

 

1. Publication of Non-Statutory Accounts

 

The financial information, which compromises the consolidated income statement, consolidated statement of the financial position, consolidated statement of changes in equity, consolidated cash flow statement and related notes, does not constitute full accounts within the meaning of s435 of the Companies Act 2006.

 

The auditors have reported on the group's statutory accounts for the year ended 31 May 2010 under s495 of the Companies Act 2006. The auditor's reports does not contain statements under s498(2) or s498(3) of the Companies Act 2006 and is unqualified. The statutory accounts for the year ended 31 May 2010 will be filed with the Registrar of Companies, sent to shareholders and published on the Company's website at www.allocatesoftware.com in due course.

 

The auditors have reported on the group's statutory accounts for the year ended 31 May 2009 under s495 of the Companies Act 2006. The auditor's reports does not contain statements under s498(2) or s498(3) of the Companies Act 2006 and is unqualified. The statutory accounts for the year ended 31 May 2009 have been delivered to the Registrar of Companies.

 

2. Basis of Preparation

The Group's accounting policies are consistent with those applied in the year to 31 May 2009, amended to reflect any new Standards. The key amendments to Standards and interpretations which are mandatory for the year ended 31 May 2010 are:

IAS 1 Presentation of Financial Statements (revised 2007)

IFRS 8 Operating Segments (effective 1 January 2009).

 

3. Segmental Reporting

Management has determined the operating segments based on the revenue streams within the reports reviewed by the strategic decision maker comprising the board of Directors. Licences represents revenue from the sale of non-cancellable licence agreements. Services represents revenue from the provision of installation, consulting, training and product support.

 

2010	Licences	Services	Other	Total
	£'000	£'000	£'000	£'000
Revenue	9,313	12,487	164	21,964
Operational costs	(859)	(5,402)	(125)	(6,386)
Sub-total				15,578
Selling and marketing costs				(5,445)
Research and development costs				(2,964)
Gross profit				7,169
General and administration (*)				(5,851)
Operating profit				1,318

 

 

 

2009	Licences	Services	Other	Total
	£'000	£'000	£'000	£'000
Revenue	7,599	7,984	191	15,774
Operational costs	(74)	(4,212)	(136)	(4,422)
Sub-total				11,352
Selling and marketing costs				(4,307)
Research and development costs				(1,973)
Gross profit				5,072
General and administration (*)				(3,316)
Operating profit				1,756

 

Under IFRS 8 there is a requirement to show operating profit and total assets for the operating segments, however, attributable expenses and total assets cannot be allocated on a reasonable basis and, as a result, the analysis is limited to the group revenue which is then reconciled to the operating profit.

 

(*) includes amortisation of intangible assets and share-based payment charges.

 

Revenues from external customers in the group's domicile, the United Kingdom, as well as its major markets, the European Union and the USA, have been identified on the basis of the customer's geographical location. Non-current assets are allocated based on their physical location.

 

Revenue arises from customers in the following locations:

 

	2010	2009
	£'000	£'000
UK	14,204	13,457
Europe	3,525	1,137
USA	1,264	543
Rest of World	2,971	637
	21,964	15,774

 

In addition to the requirements of IFRS 8, the directors present a schedule of revenue analysed by vertical business sector:

 

	2010	2009
	£'000	£'000
Healthcare	14,751	11,073
Defence	4,539	3,007
Maritime	1,828	1,555
Other	846	139
	21,964	15,774

 

During 2010 and 2009, no single external customer contributed 10% or more to the group's revenues.

 

The internal reporting of the group's performance does not require that statement of financial position information is gathered on the basis of the business streams 'Licenses', 'Services' and 'Other' reported above. This information is therefore not accessible and, as a result, the segmental analysis does not include statement of financial position details. However, the group operates within discrete geographical markets and the non-current assets of the group are split between these locations:

 

Non-current assets by location	USA	Europe	UK	R o W	Total
2010	£'000	£'000	£'000	£'000	£'000
Intangible assets	-	7,572	11,405	-	18,977
Goodwill	-	2,121	2,658	-	4,779
Financial assets	-	61	-	-	61
Property, plant and equipment	8	111	640	11	770
Deferred tax assets	-	129	1,398	-	1,527
Total non-current assets	8	9,994	16,101	11	26,114

 

Non-current assets by location	USA	Europe	UK	R o W	Total
2009	£'000	£'000	£'000	£'000	£'000
Intangible assets	-	-	2,723	-	2,723
Property, plant and equipment	6	-	666	1	673
Deferred tax assets	-	-	1,386	-	1,386
Total non-current assets	6	-	4,775	1	4,782

 

4. Income Tax Expense

 

	2010	2009
	£'000	£'000
Current tax:
Corporation tax on profit for the year	(37)	85
Overseas tax	109	-
Total current tax	72	85
Deferred tax:
Origination and reversal of timing differences : current period prior year adjustments	170 (167)	497 (1,799)
Total deferred tax	3	(1,302)
Tax on profit for the period	75	(1,217)

 

The tax assessed for the period differs from the standard rate of corporation tax as applied in the respective trading domains where the group operates. The differences are explained below:

	2010	2009
	£'000	£'000
Profit for the period before tax	1,325	1,830
Profit for period multiplied by the respective standard rate of corporation tax applicable in each domain 28% (2009: 30%).	370	512
Effects of:
Deferred tax (credit) / charge current year	-	432
Adjustment to tax in respect of prior periods	(220)	(1,744)
Expenses not deductible for tax purposes	75	73
IFRS 2 charge add back	22	27
Schedule 23 deductions	(230)	-
Capital allowances in excess of depreciation	-	3
Tax losses (utilised) / arising during the year	-	(479)
Research and development enhanced relief	(366)	(140)
Difference in tax rates	(11)	-
Disallowable amortisation	435	99
Tax on profit for the period	75	(1,217)

 

Tax losses carried forward in the UK total £3,873,000 - tax effect is £1,085,000 (2009: £4,246,000 - tax effect is £1,189,000).

 

5. Earnings per Ordinary Share

	31 May	31 May
	2010	2009
	£'000	£'000
Profit for the year	1,250	3,047
Earnings per share
Basic (pence per share)	2.41p	6.82p
Diluted (pence per share)	2.31p	6.48p
Weighted average number of shares	Number of shares	Number of shares
Shares in issue at opening	44,702,625	44,702,625
Shares issued during the period	16,492,689	-
Shares at closing	61,195,314	44,702,625
Weighted average shares for basic earnings per share	51,768,106	44,702,625
Effect of dilutive potential ordinary shares	2,452,967	2,348,181
Weighted average shares for diluted earnings per share	54,221,073	47,050,806

 

Adjusted earnings per ordinary share

 

An adjusted earnings per share has been calculated in addition to the post tax earnings per share which eliminates the effects of share-based payment, amortisation of intangibles and the deferred tax adjustment. It has been calculated to allow shareholders to gain a clearer understanding of the trading performance of the group. The basis of the calculation of the basic and adjusted profit per share is set out below:

 

 

	2010	2009
	£'000	£'000
Profit for the year attributable to shareholders	1,250	3,047
Amortisation of intangibles	2,091	678
Share-based payment	80	97
Deferred tax adjustment	-	(1,302)
Adjusted profit for the year attributable to shareholders	3,421	2,520
Basic adjusted earnings per share (post tax)	6.61p	5.64p
Diluted adjusted earnings per share (post tax)	6.31p	5.36p

 

6. Business Combinations

On 15 December 2009, the Company completed the acquisition of Time Care AB ("Time Care"), a Swedish-based provider of workforce optimisation software for a net consideration of SEK 100 million (approximately £8.7 million). To fund the acquisition, the Company raised £8.3 million (£8.0 million net of expenses) through a cash placing of 15.1m new ordinary shares at 55.0 pence per share, with the balance being satisfied from the Company's existing cash resources.

 

The net assets acquired and the resultant fair value adjustments are shown below:

			Book value	Provisional fair value adjustment	Fair value
			£'000	£'000	£'000
Cash with subsidiary			4,110		4,110
Intangibles - identified at acquisition				8,850	8,850
Non-current financial asset			58		58
Property, plant and equipment			112		112
Receivables			2,122		2,122
Trade payables and other payables			(2,387)		(2,387)
Deferred tax liability				(2,478)	(2,478)
Net assets			4,015	6,372	10,387
Goodwill on this acquisition			-	2,478	2,478
Consideration					12,865
Less cash acquired					(4,110)
Net consideration					8,755
Net consideration satisfied by:
Cash					8,171
Professional fees paid					584
					8,755

 

In the period since acquisition, Time Care AB contributed £324,000 to post-tax profits of the group. Had Time Care AB been acquired on 1 June 2009, annualised revenue of the group for 2010 would have been greater by approximately £5,760,000 (including £2,650,000 already reflected in the consolidated reported results) and profit after tax of the group for 2010 would have been greater by approximately £700,000 (including £324,000 already reflected in the consolidated reported results).

 

On 5 May 2010, the company acquired Dynamic Change Limited, a UK-based software-as-a-service ("SaaS") provider of regulatory compliance, corporate governance, risk and performance management for the UK healthcare market, for up to £9.0 million over three years. The initial consideration of £4.9 million in cash and £100,000 in shares of the company was funded by the issue of 156,250 new ordinary shares at 64 pence per share, a £2 million cash loan and the balance from the company's existing cash resources.

 

Deferred, contingent consideration of up to £4.0 million in cash is payable based on the financial performance of Dynamic Change for the 12 month periods ending 31 March 2011, 31 March 2012 and 31 March 2013 (the "Contingent Consideration"). No Contingent Consideration will be payable unless Dynamic Change achieves at least 15 per cent. compound annual growth in run-rate subscription revenues over run-rate subscription revenues as at 31 March 2010. Full payment of the Contingent Consideration will only be made if Dynamic Change achieves at least 25 per cent. compound annual growth in run-rate subscription revenues in the three year period to 31 March 2013.

 

£1.25 million of the Contingent Consideration is attributable to the financial performance of Dynamic Change in respect of the 12 month period to 31 March 2011 and £1.75 million is attributable to the financial performance of Dynamic Change in respect of the 12 month period to 31 March 2012. If the full payment of £1.25 million of the Contingent Consideration attributable to the performance in respect of the 12 month period to 31 March 2011 is not made, it remains available to be paid in respect of the financial performance for the subsequent 12 month period to 31 March 2012 (but not thereafter). £1.0 million of the Contingent Consideration is attributable to the financial performance of Dynamic Change in respect of the 12 month period to 31 March 2013.

 

The net assets acquired and the resultant fair value adjustments are shown below:

			Book value	Provisional fair value adjustment	Fair value
			£'000	£'000	£'000
Cash with subsidiary			1,148		1,148
Intangibles - identified at acquisition				9,494	9,494
Property, plant and equipment			20		20
Receivables			639		639
Trade payables and other payables			(1,464)		(1,464)
Deferred tax liability				(2,658)	(2,658)
Net assets			343	6,836	7,179
Goodwill on this acquisition			-	2,658	2,658
Consideration					9,837
Less cash acquired					(1,148)
Net consideration					8,689
Net consideration satisfied by:
Cash paid					4,095
Shares issued					100
Contingent cash payable					4,000
Professional fees paid					494
					8,689

 

In the period since acquisition, Dynamic Change Limited contributed £30,000 to post-tax profits of the group. Had Dynamic Change Limited been acquired on 1 June 2009, annualised revenue of the group for 2010 would have been greater by approximately £3,100,000 (including £250,000 already reflected in the consolidated reported results) and profit after tax of the group for 2010 would have been greater by approximately £350,000 (including £30,000 already reflected in the consolidated reported results).

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