Atlantic Lithium Regulatory News (ALL)

6 February 2012

Allocate Software plc

("Allocate" or the "Company")

Interim results for the six months ended 30 November 2011

Allocate Software plc (AIM: ALL), the leading provider of workforce and compliance optimisation solutions, today announces its results for the six months ended 30 November 2011.

Financial Highlights

§ Revenue in the period was £16.0m, (H1 2010: £15.9m)

- Underlying organic revenue growth, excluding acquisitions in the current year and the major Australian Healthcare contract secured in the prior year, was 15%

- Recurring revenue increased by 42% to £7.5m, (H1 2010: £5.3m) and to 47% of total revenue (H1 2010: 33%)

- Licence revenue closed at £5.4m, (H1 2010: £7.7m)

- Healthcare revenue closed at £12.1m, (H1 2010: £12.6m)

§ EBITDA* was £1.6m, (H1 2010: £3.8m)

§ Diluted adjusted EPS** was 1.8p, (H1 2010: 4.1p)

§ Operating cash flows were (£0.6m) (H1 2010: £2.9m)

§ Gross cash balance was £4.0m (H1 2010: £7.4m). Net cash balance was zero (H1 2010: £5.4m) reflecting £7.2m spent on acquisitions

* EBITDA refers to earnings before interest, tax, depreciation, amortisation, share based payments and, in 2011, written off acquisition and related costs and impairment charges.

** Diluted adjusted EPS excludes amortisation of intangible assets, written off acquisition and related costs, impairment charges and share-based payments, adjusted for taxation.

Business Highlights

§ HealthRoster gained 11 new NHS Trust customers in the period, making 143 Trusts with HealthRoster in total. This is close to the 12 new NHS Trusts secured in the same period of 2010.

§ 143 Trusts represents 45% of 316 Acute, Mental Health and Primary Care Trusts in England and Wales which we estimate now remain following the recent NHS restructuring.

§ Total Healthcare customers worldwide now number 462, including 297 NHS Trusts and 51 customers of Time Care in Sweden

§ In addition, Allocate won three HealthRoster contract extensions in the period, bringing to 11 the total number of Trusts which have now extended their agreements. This represents a cumulative success rate of 100% of Trusts extending agreements that were available for extension.

§ The table below illustrates the Company's estimate of the impact of the NHS restructuring on the number of NHS Trusts. Please note that the apparent reduction in the number of Trusts with HealthRoster does not automatically mean a reduction in income, because HealthRoster is licenced on a per head basis as opposed to a per Trust basis.

§ The Company has taken an impairment charge to the Income Statement of £3.9m in respect of Dynamic Change, reflecting the loss of PCT customers following Government healthcare reforms. However, we have maintained the positive trend in new business established in the second half of last year by being awarded four new customer contracts in this period.

§ Time Care in Sweden continues to trade well and to meet management's expectations, securing six new customer wins in the period.

§ The Maritime business secured an important new agreement with McDermott, the leading US based engineering, offshore oil and gas company.

§ Subsequent to the period end, in December the Defence business secured a major contract with the Australian Defence Force. The agreement is a multi-year, multimillion GBP license extension to its current license that will extend the deployment of DefenceSuite to all personnel in the Australian Army.

Ian Bowles, Chief Executive Officer of Allocate commented on the period:

"As I stated in the trading update I am pleased with the momentum and performance of Allocate so far this year, and believe the underlying results demonstrate both points.

"Whilst total revenue reported in this period is flat over the same period of last year, I said when we announced H1 results last year, that we had the benefit of securing a major contract in the first half, but that I did not expect a similarly sized agreement could be secured in the first half of this year. Underlying organic growth, excluding the large license contract of circa £3m in 2010 is 15%.

"Our UK Healthcare business is performing at a level that is satisfactory given the continuing debate about restructuring changes in the NHS. We expect this year to secure a similar number of HealthRoster agreements to those contracted last year and the recently acquired Zircadian business is performing in line with our expectation. With the government decision to abolish Primary Care Trusts in the summer of 2010, we have experienced an impact on the Dynamic Change business, with 37% of the Dynamic Change customer base being PCT's. As a result we have taken an impairment charge in this period, in line with IAS 36 requirements. Nevertheless, in spite of these customer losses, we have undertaken a number of initiatives to revitalize this part of the business and to leverage Allocate's strength in Acute Trusts. These initiatives are progressing well, momentum is building and I am confident that this business will continue to recover.

"Securing the multi-million pound, long term agreement with the Australian Defence Force in December is of significant importance to our full year revenues. This, combined with our confidence in the levels of business that we are seeing in our markets, enables us to look forward to a successful full year outcome."

Allocate has today launched its new website which can be found at: www.allocatesoftware.com 

Enquiries:

Interim results for the six months ended 30 November 2011

Interim Statement

§ Revenue in the period was £16.0m (2010: £15.9m), an increase over the prior year of 1%. However, the revenue figure for 2010 includes the initial benefit of the large healthcare agreement that we secured in the period, an amount in excess of £3m. Excluding the impact of this agreement and current year acquisitions, organic revenue growth would have been 15%.

The key drivers of revenue in the period were:

§ Allocate's recurring revenues of £7.5m being 47% of total revenues for the period (2010: 35%). The principal components of recurring revenue are subscription revenues of £2.5m and support and maintenance revenues of £5.0m. This significant increase is a reflection of high customer renewal rates of support and maintenance as well as growth in the Company's subscription lines of business that now include both Dynamic Change and Zircadian. Additionally, the rising proportion of recurring revenue as a percentage of total revenue reflects the evolution of the Company's business model to one with increasing transparency of future revenue streams.

§ Licence revenue was £5.4m (2010: £7.7m), while services and support revenue grew by 29% to £10.6m (2010: £8.2m).

§ Healthcare revenue in the period was £12.1m (2010: £12.6m), reflecting the impact of the large Australian Healthcare contract closed in H1 last year. Isolating the effect of that agreement and also the impact of the RosterOn and Zircadian acquisitions, Healthcare revenue has grown by 14%.

§ Defence revenue grew by 50% to £2.4m (2010: £1.6m). Growth has been driven principally by progress on the recently awarded NATO APMS contract. This increase in revenue does not include any effect of the major Australian Defence contract awarded after the period end, which is referred to elsewhere in this statement.

§ Maritime revenue remained flat at £1.0m (2010: £1.0m). The revenue for the current year includes the McDermott agreement which is the third major agreement the Company has concluded in the offshore division of the Maritime Sector.

Costs and EBITDA

Total costs included in EBITDA rose by 20% to £14.4m (2010: £12.1m), driven principally by additional costs associated with the acquisitions of RosterOn and Zircadian as indicated in the table below.

EBITDA for the period was £1.6m (2010: £3.8m). The resulting EBITDA margin was 10.0% (2010: 24.0%), again reflecting the impact of the large Australia Healthcare contract booked in the prior year.

Diluted adjusted EPS (excluding impairment charges, acquisition and related costs, amortisation of intangibles and share-based payments) was 1.8p (2010: 4.1p).

Operating cash flows during the period were outflows of (£0.6m), (2010: inflows of £2.9m), reflecting firstly the fact that the 2010 cash flow benefited from the large Australian Healthcare contract and secondly, because there is now a movement in the seasonality of the cash flow of renewals, which over time have become more heavily weighted towards the second half of the financial year. In addition, net cash balances at the period end were zero (2010: £5.4m), reflecting the cash payments of £7.2m, £5.2m from internal cash resources and £2m from increased borrowings, that were made during the period for the acquisitions of RosterOn and Zircadian. As part of the consideration of the Zircadian acquisition, total debt has increased from £2m to £4m.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the basis of preparation set out in Note 2 of the Interim Report.

Markets

Healthcare

The major milestones in Healthcare this period have been the acquisitions of RosterOn in Australia in July 2011 and Zircadian in the UK in August 2011.

§ RosterOn is a leading provider of rostering, labour management, and time & attendance software in Australia. It was founded in 2002 and is based outside Melbourne, Victoria. It gives Allocate a much stronger presence and supports its ambitious growth plans for the Australian healthcare market. RosterOn has developed an interpretation engine specifically for Australian Awards - complex rules for wage fixing arrangements relating to minimum pay, minimum number of breaks per hour, minimum level of overtime compensation and pay related activities (e.g. working through a break). The agreement was structured with upfront consideration of A$2.6 million payable in cash with further consideration of A$0.4 million payable in cash and in full upon the retention of the key directors of RosterOn for 18 months from completion.

§ Zircadian is a leading UK supplier of software to plan the rotas of junior doctors and consultants in the NHS. The business uses a SaaS delivery model and most contracts are multiple year agreements. Its products are used by 142 healthcare organisations in the UK using functionality that is complementary to Allocate's existing nurse rostering software, HealthRoster. Zircadian has been acquired for a total consideration of up to £7.0 million. The total consideration includes a deferred payment of £1.0 million contingent on financial targets and £0.5 million contingent on key staff retentions. Zircadian had net cash of approximately £1.0 million at the time of acquisition.

11 NHS Trusts became new HealthRoster customers in this period bringing the total number to 143. In addition, three Trusts extended their HealthRoster agreements, bringing the cumulative number of Trusts extending agreements to 11, representing a 100% rate of closing of extensions with Trusts whose agreements were in a position to be extended. Allocate now has a customer base of 297 NHS Trusts across the UK.

Our Malaysian operation also secured its third new HealthRoster customer, the Brunei Ministry of Health.

In Europe, Time Care continues to trade well. The business is performing in line with management's expectations and in the period signed agreements with six new customers including not only healthcare institutions but also local authorities who have responsibility for care in the community.

The performance of Dynamic Change has continued to be below management's expectations in this period. This is primarily due to the continued negative impact of the restructuring of PCTs, proposed and begun by the government in the summer of 2011. A significant proportion of Dynamic Change's customers were commissioning PCTs, some 37%, many of whom have declined to renew their subscriptions because they no longer exist as organizations and their replacements have yet to be established. However, over the last 12 months, the Company has seen some improvement in the number of new customers being contracted, but not sufficient to offset those not renewing. As a result, management have revised downwards their forecasts for both revenue and profits from Dynamic Change and in accordance with the provisions of IAS36, they have impaired the assets of the business. This has resulted in a write down of intangible assets and goodwill through an impairment charge of £3.9m to the Income Statement. Further details of this can be seen in Note 4 of the Interim Report.

Defence

§ Post period end, the Company concluded an agreement with the Australia Department of Defence Chief Information Office Group to provide 20,700 MAPS Defence Suite licences to the Australian Army and 10,000 licences for the Vice Chief of Defence Force in order to enable the management of non-Defence personnel under Australian Defence Force ('ADF') control. This agreement is very important because it marks the complete requirement of licencing for the Australian Army and Navy and it is a clear demonstration of the ADF commitment to MAPS Defence Suite as a core platform for the management of Naval and Land forces capability. The agreement reflects a significant upfront licence component which is expected to be recognized as revenue in the second half of the current financial year, plus a multi-year annual support and maintenance stream. This extension follows the same structure as the existing agreement.

§ Significant progress has been made with the implementation of the NATO APMS implementation.

Maritime

§ An important contract with McDermott Int. was secured. McDermott Int. are one of the largest global Offshore Oil & Gas Engineering, Procurement and Construction (EPC) companies, so their decision to select the Allocate Workforce Planning System is a real endorsement of the comprehensive functionality the product provides and an endorsement of the commitment that Allocate has to the EPC industry.

Development

The principal development efforts in this period have again been focussed on the Columbus project which was designed to re-write the technology platform on which our applications are developed and is now completed.

The four key prerequisites of Columbus were to deliver; database independency, localisation (language support) hosting and SaaS capabilities, whilst at the same time delivering improved performance, scalability and enhanced functionality. We are pleased to report that the first product to be built on the new platform is HealthRoster V10 and this generation of application has already been successfully deployed at a UK NHS Trust and is in live operation.

Investment in Development continues to be a key priority for the Company. R&D expenses in the period were £3.3m, or 20.6% total revenue.

Outlook

The continued organic growth and momentum across the enlarged group makes for a confident outlook for the rest of the year. The broad geographical customer base that Allocate now has enables us to maintain this confidence in our current outlook, notwithstanding the prevailing economic environment.

As always we would like to thank all of our people and welcome new members of the team from Rosteron and Zircadian. Everyone has continued to contribute significant efforts to our achievements across the business and we also gratefully acknowledge the continuing support of our customers and partners, who work with us in such close cooperation.

Terry Osborne

Executive Chairman

Ian Bowles

Chief Executive Officer

Condensed Consolidated Income Statement

1 Earnings before interest, tax, depreciation, amortisation, share based payments, acquisition & related costs and impairment charges

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Cash Flow Statement

Notes to the Interim Financial Information

1. Legal status and activities

The principal activities of the group are the sale and support of workforce optimisation solutions, and the provision of related IT services to major government, industrial and commercial customers.

The company is a public limited liability company, incorporated and domiciled in England and Wales. The address of its registered office is 180 Piccadilly, London, W1J 9ER.

The company has its listing on the Alternative Investment Market ("AIM") of the London Stock Exchange.

2. Basis of preparation

These unaudited interim condensed consolidated financial statements are for the six month period ended 30 November 2011. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the group for the year ended 31 May 2011, which were prepared under IFRS as adopted by the European Union (EU).

The accounting policies adopted in this report are consistent with those of the annual financial statements for the year ended 31 May 2011 as described in those financial statements.

The interim financial statements have not been audited, nor have they been reviewed under ISRE 2410 of the Auditing Practices Board. The financial information presented does not constitute statutory accounts as defined by section 434 of the Companies Act 2006. The group's statutory accounts for the year ended 31 May 2011 have been filed with the Registrar of Companies. The auditors, Grant Thornton UK LLP reported on these accounts and their report was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

3. Earnings per share

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 payments and amortisation of intangibles. 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:

The weighted average number of shares is the same as above.

4. Impairment review

IAS 36 'Impairment of assets' requires the Group to test goodwill arising on acquisitions annually for impairment. In addition, where there are indicators of impairment of other assets, the Group is required to perform an impairment test on these assets.

During the period the goodwill arising from the Dynamic Change acquisition was tested for impairment, and in light of the performance of this part of the business (which is detailed in the Interim Review section of this document) the intangible assets arising from this acquisition were also tested.

The results of these tests have led to the following impairment charges being recorded in the half year financial statements:

5. Acquisitions of RosterOn Pty Limited and Zircadian Holdings Limited

RosterOn Pty Ltd

On 4 July 2011 the Group acquired 100% of the share capital of RosterOn Pty Ltd, an Australian based provider of workforce management software with a focus on the Australian healthcare market. Consideration totalled £2,464,000 (A$3,740,000) with £1,713,000 (A$3,340,000) paid in cash during the period including a payment for the net asset value of the company of £484,000 (A$740,000). The net assets acquired included cash of £586,000 (A$889,000). A further £267,000 (A$400,000) deferred consideration is payable 18 months after the acquisition contingent on key staff retentions.

For accounting purposes IFRS 3 'Business Combinations' requires the £267,000 (A$400,000) deferred consideration to be treated as remuneration and not consideration. Consequently this will not form part of the cost of acquisition and instead will be expensed to the Income Statement on a straight line basis over the 18 month period between the date of acquisition and the payment date. This charge is included within the 'Acquisition & related costs' line of the Income Statement.

The Group has completed its initial assessment of the fair values of the assets acquired as part of the business combination resulting in the recognition of goodwill of £862,000 and an intangible asset of £1,054,000 in relation to the software product acquired. The useful life of the intangible asset has been assessed as 5 years and this asset will therefore be amortised over 5 years.

Zircadian Holdings Limited

On 12 August 2011, the group acquired 100% of the share capital of Zircadian Holdings Limited, a UK based Software as a Service provider of software used to plan rotas of junior doctors and consultants in the NHS. Total consideration is £6,955,000, all payable in cash. £5,955,000 was paid during the period including £500,000 of deferred consideration transferred to an escrow account which is contingent on key staff retentions for a period of 6 months post acquisition. A further deferred consideration payment of up to £1,000,000 may be payable, contingent on financial targets being met. This acquisition was funded in part through a renewal of the Group's revolving facility for a further two years and an increase in this by £2,000,000 to £4,000,000.

Similar to the RosterOn acquisition, the portion of the deferred consideration contingent on key staff retentions will not form part of the cost of acquisition and will instead be expensed through the Income Statement over the 6 month period between the date of acquisition and the payment date. This charge is included within the 'Acquisition & related costs' line of the Income Statement.

The Group has completed its initial assessment of the fair values of the assets acquired as part of the business combination resulting in the recognition of goodwill of £3,959,000 and an intangible asset of £3,941,000 in relation to the software products acquired. The useful life of the intangible asset has been assessed as 5 years and this asset will therefore be amortised over 5 years.