Last checked at 3 Mar 2016 07:00
3 March 2016
MICROGEN plc ("Microgen")
Audited Preliminary Results for the Year Ended
31 December 2015
Microgen reports its audited preliminary results for the year ended 31 December 2015.
Summary
Group
· Revenue growth of 7% to £32.0 million (2014: £29.8 million). Group adjusted operating profit increased to £7.6 million (2014: £7.4 million).
· Adjusted earnings per share increased by 28% to 9.2 pence (2014: 7.2 pence). Basic earnings per share increased to 6.0 pence (2014: 5.5 pence).
· Proposed final dividend of 2.8 pence per share (2014: 2.2 pence) representing a full year dividend of 4.2 pence (2014: 3.3 pence), an increase of 27%.
· Strong balance sheet with cash of £18.6 million (2014: £40.9 million) and net funds of £5.4 million (2014: £24.6 million) following corporate cash outflows of £25.3 million in 2015 (including returns to shareholders of £22.4 million and net acquisition consideration of £2.9 million).
· Statutory operating profit of £5.3 million (2014: £6.2 million) after net non-underlying costs of £2.3 million (2014: £1.2 million) primarily in respect of the Financial Systems business including the Fleet freehold property disposal.
Aptitude Software
· Successful execution of strategy set out in 2013 Strategic Review with the largest ever number of new contracts signed in the year. Further major North American telco contracted in February 2016.
· Revenue increased by 9% to £16.7 million (2014: £15.4 million). Operating profit increased by 38% to £1.7 million (2014: £1.2 million).
· On-going recurring revenue base at 31 December 2015 increased by 20% to £9.0 million since 31 December 2014 (£7.5 million).
· New contracts provide good visibility for 2016 due to annual licensing model.
Financial Systems
· Successful execution of strategy set out in 2013 Strategic Review with three roll-up acquisitions now completed in the Trust & Fund Administration ("T&FA") market.
· Revenue increased by 6% to £15.2 million (2014: £14.4 million). Adjusted operating profit £7.2 million (2014: £7.5 million) reflecting the phasing of the acquisition integration.
· T&FA revenues increased by 38% to £6.5 million (2014: £4.7 million) benefitting from acquisitions and the continued success of the Microgen 5Series product.
· T&FA revenues represented 43% of Financial Systems' overall revenue (2014: 33%) and 47% in the second half reflecting the benefit of acquisitions.
Contacts
Philip Wood, Group Finance Director 020-7496-8100
Darius Alexander, FTI Consulting 020-3727-1063
* Throughout this statement adjusted operating profit and margin excludes non-underlying operating items, unless stated to the contrary. Further detail in respect of the non-underlying operating items can be found within note 2 of this statement.
MICROGEN plc ("Microgen" or "Group")
Audited Preliminary Results for the Year ended 31 December 2015
Chairman's Statement
The Group reports another year of resilient financial performance, in line with the Board's expectations, along with good progress in execution of the strategic plans of the Group's two operating businesses as set out in the Strategic Review issued in October 2013.
The Aptitude Software business, benefitting from the increase in investment initiated in 2013, signed a record number of key software contracts with new and existing clients in 2015. The business has secured these contracts within both Europe and North America across its key markets of financial services and telecommunications. In addition, Aptitude Software has in 2016 already signed a contract with a major new North American telco for the Aptitude Revenue Recognition Engine. With revenue growth stimulated by the 2013 investment, the resulting 38% increase in operating profit reported for 2015 is in line with the anticipated return on the 2013 investment programme.
Similarly, in accordance with the strategic objectives set out in the 2013 Strategic Review, the Financial Systems business has continued its focus on the Trust & Fund Administration ("T&FA") market within the wealth management sector. The business completed two further acquisitions in 2015 and continues to experience good demand for Microgen 5Series, its leading T&FA product. As a result of this progress 43% of Financial Systems' overall revenues in 2015 were derived from the T&FA sector (2014: 33%) with second half revenue of 47% reflecting the benefit of the acquisitions. As anticipated, and consistent with the defined strategy, the business maintained its stable position within the payments market whilst the Applications Management operations declined in line with management expectations.
In early 2015 the Group returned approximately £20 million to shareholders via the B/C Share Scheme. This completed the programme initiated in October 2008, during which Microgen returned approximately £70 million, equivalent to 190% of the market capitalisation at the time of initiation. Pursuant to the above return to shareholders, the Board has assessed the prospects of the Group and, in view of the resilience of the Group's financial performance, considered that the total cost of the dividend should be maintained at the level prior to the B/C Share Scheme and accompanying share consolidation. The directors therefore propose the payment of a final dividend of 2.8 pence per share (2014: 2.2 pence), making a total of 4.2 pence per share for the year (2014: 3.3 pence), an increase of 27% per share. The proposed final dividend will be paid on 3 June 2016, subject to shareholder approval, to shareholders on the register at 29 April 2016.
In line with previous announcements Martyn Ratcliffe will be retiring from the Board on 4 March 2016. Ivan Martin, who joined the Board in January 2016, will assume the role of Non-Executive Chairman. Tom Crawford and Simon Baines, the Managing Directors of the two operating divisions also joined the Board in January 2016. The Non-Executive Directors provide continuity through these developments and the changes in their responsibilities were announced in January 2016.
In conclusion, as all organisations should, Microgen continues to evolve. The past 18 years have comprised three distinct phases, starting with the transformation from a microfiche and printing business in a precarious financial position through a disposal and acquisition strategy into the current operating businesses providing market-leading financial software applications with a consistently resilient financial performance. The global financial crisis stimulated the 2008 Strategic Review which resulted in a change in the Group's capital allocation policy, a programme that has since returned 190% of the October 2008 market capitalisation to shareholders, whilst maintaining a very strong balance sheet throughout. As market confidence returned, the 2013 Strategic Review concluded that shareholder interests would be best served by an increase in investment in the two operating businesses and the results in 2015 reflect the success of the execution of those strategies. With a return to growth, good forward visibility, strong operating margins, a well-covered dividend yield, a robust balance sheet and an excellent management team, Microgen is well positioned as the Group enters its next evolutionary phase.
Martyn Ratcliffe
Chairman
Aptitude Software Report
The Aptitude Software business provides an enterprise level Application Platform to deliver solutions, typically where customers require very rapid processing of very high volume complex, business event-driven transactions. The capabilities of the Aptitude technology platform have been applied to the development of a number of specialised finance applications including the Aptitude Accounting Hub, Aptitude Allocation Engine and Aptitude Revenue Recognition Engine. The Aptitude technology platform and the Aptitude-based finance applications continue to be developed at the Aptitude Technology Centre in Wroclaw, Poland. The business generates revenue from this software through a combination of licence fees (primarily annual recurring licences), software maintenance/support and professional services.
Revenue increased during the year ended 31 December 2015 by 9% to £16.7 million (2014: £15.4 million). With the growth in revenue stimulated by the increased investment following the 2013 Strategic Review, the profitability increase also reflects the defined strategy with operating profit in 2015 increasing by 38% to £1.7 million (2014: £1.2 million).
The Board's strategic objective of increasing software revenue is the leading performance metric for the Aptitude business. Aptitude's reported software revenue in 2015 was £9.0 million (2014: £8.8 million) with the benefit of recent new wins compensating for the end-of-life of the legacy OST-BR product in 2014, a transition that is now complete. The on-going recurring revenue base increased during the year by 20% to £9.0 million (31 December 2014: £7.5 million) the benefit from which should be seen in 2016. (Software revenue includes annual and initial licence fees, software maintenance and support. Aptitude's software revenue in 2015 includes £0.5 million of initial licence fees and £0.3 million in 2014).
Services revenue has grown by 17% to £7.7 million in 2015 (2014: £6.6 million). The Aptitude Software business enters 2016 with good visibility over its services revenue for the year benefitting from software system implementations at a number of existing clients and demand for services correlating with the new contract wins in 2015. Whilst the growth of services revenue is not a strategic objective the provision of key consultancy skills to our user base helps the continued growth and development of the customer base. There is some concentration of resources upon a small number of customers providing potential for some volatility of Aptitude's services revenue as projects progress through their life-cycle.
During the course of 2015 the business signed eight software contracts with new and existing customers, a record number for the Aptitude Software business. These contracts are with clients in both North America and Europe across the key markets of financial services and telecommunications. Particularly pleasing is the growth in the relationship with two existing major international telecommunications clients who have contracted for additional software following their initial contract. In addition, in February 2016, the business signed a contract with another major new North American telco. A number of clients are now licenced to use the Aptitude Revenue Recognition Engine application, an Aptitude-based finance application which addresses the new IFRS 15 accounting requirement which is effective for accounting periods beginning on 1 January 2018. The strength of the functionality and performance of the application, together with its endorsement by these leading telecommunications companies, provides encouragement that further success will be achieved in opportunities being progressed for this application. In addition to the Aptitude Revenue Recognition Engine, new software contracts for the Aptitude Accounting Hub and Aptitude Allocation Engine applications have been entered into in 2015 as well as the Aptitude technology platform itself which is licenced to customers alongside the finance applications. This strong performance affirms the success of the 2013 Strategic Review and the execution of the associated investment programme.
Research and development expenditure in the year was £4.3 million (2014: £4.3 million) with the proportion of investment focussed on the Aptitude-based applications increasing. All research and development costs are expensed as incurred. The Aptitude-based finance applications continue to benefit from the investment in the Aptitude technology platform allowing both rapid development of the applications and very high processing performance and integrity in the applications themselves. New functionality has been added to the Aptitude technology platform in 2015, including a SAP Hana interface and Hadoop capability. Additionally, the business continues to monitor a number of potential market opportunities which may benefit in due course from the development of Aptitude-based finance applications.
In summary, the business is progressing well with its strategy to accelerate its growth by focussing and leveraging the existing expertise in high volume transaction sectors by providing Aptitude-based finance engines and specialist applications to meet new accounting standards, regulations or business areas poorly served by ERP systems. Operating performance was in line with management expectations and the strong sales performance in 2015 secured a record number of new software contracts which provide the Aptitude business with good visibility for the current year, reinforced by the major new telco customer win at the start of 2016.
Tom Crawford
Managing Director, Aptitude Software
Financial Systems Report
The Financial Systems business has a well-established customer base with an increasing focus on the Trust & Fund Administration ("T&FA") sector. Revenues are generated through a combination of software licence fees (primarily annual recurring licences), software maintenance/support and professional services.
Revenue for the year ended 31 December 2015 increased by 6% to £15.2 million (2014: £14.4 million). Recurring revenue accounts for 83% (2014: 81%) of total revenue, with 25% being generated by the top 5 clients (2014: 24%).
The 2013 Strategic Review set out the strategy of the business to increase the proportion of revenue derived from T&FA and adjacent sectors through both organic growth and add-on acquisitions, while maximising value from the business' other revenue streams. Revenue from the T&FA products has increased by 38% to £6.5 million (2014: £4.7 million) benefitting from the three acquisitions completed since December 2014 and the continued success of the Microgen 5Series product. As a result of this progress 43% of Financial Systems' overall revenues in 2015 were derived from the T&FA sector (2014: 33%) with a second half run-rate of 47%, on track with the defined strategy.
The functional strength of the Microgen 5Series product has resulted in nine new customers being contracted in 2015 including implementations in the developing Asian and more established Channel Islands markets. Progress has continued in 2016 with a number of new contracts signed already in the year. The credentials of Microgen 5Series have been strengthened further following a major US bank going live in December 2015 with one of the largest deployments of the product.
The three acquisitions, contributing £1.4 million revenue in 2015, have provided the Financial Systems business with an increased client and recurring revenue base within T&FA. A number of the acquired clients have either committed to convert to Microgen 5Series or are in discussions to do so. All three acquisitions have been successfully integrated with Financial Systems retaining an office in Jersey, an important market for its T&FA products. Further add-on acquisitions continue to be evaluated within T&FA and adjacent markets, although the Board remains prudent and, as always, there can be no certainty that any acquisitions will be completed.
Revenue from the payment software product remains very stable and in line with prior years at £1.3 million whilst the Application Management business reported revenue in line with management expectations at £7.4 million (2014: £8.4 million). The Application Management business comprises a number of software solutions focussed principally on financial services. Consistent with the maturity of the solutions provided by the business it is expected that revenues will continue to reduce in line with recent periods, but continue to contribute for an extended future period due to the high levels of recurring revenue and strong margins.
The business reported strong adjusted operating profit reflecting the timing of the acquisitions and subsequent integration programme in line with expectations of £7.2 million (2014: £7.5 million) representing an adjusted operating margin of 48% (2014: 52%). Operating profit on a statutory basis was £5.0 million (2014: £7.1 million) which includes net non-underlying operating costs in 2015 of £2.2 million (2014: £0.4 million). This includes a one-off property cost in respect of the Fleet freehold property where employees are to be relocated to a smaller leasehold office in the Fleet area with an anticipated overhead cost reduction of approximately £0.2 million per annum. The closure of the Financial Systems' Cape Town support office was completed in 2015 as planned for which a cost of £0.2 million was provided for in 2014. (Further detail in respect of non-underlying items is provided in the Finance Director's Report).
In summary, the Financial Systems business performed in line with expectations during 2015 and the business enters 2016 with high levels of recurring revenue and a strong pipeline for the Microgen 5Series product. Furthermore, the business strengthened its presence within the T&FA market in line with the defined strategy, through the add-on acquisitions, the benefits of which will be recognised in the current year.
Simon Baines
Managing Director, Financial Systems
Group Financial Performance and Finance Director's Report
Throughout this statement adjusted operating profit and margin excludes non-underlying operating items, unless stated to the contrary.
Revenue for the year ended 31 December 2015 was £32.0 million (2014: £29.8 million) producing an adjusted operating profit of £7.6 million (2014: £7.4 million). Operating profit on a statutory basis was £5.3 million (2014: £6.2 million) pursuant to net non-underlying costs of £2.3 million (2014: £1.2 million). Group overhead costs were £1.3 million (2014: £1.3 million). The Group reported a profit for the year attributable to shareholders of £3.7 million (2014: £4.1 million). In accordance with IFRS, the Board has continued to determine that all internal research and development costs are expensed as incurred and therefore the Group has no capitalisation of development expenditure. The overall group expenditure on research, development and support activities in 2015 was £6.8 million (2014: £6.5 million) with the increase principally attributable to the acquisitions within the Financial Systems business. Headcount at 31 December 2015 was 266 including contractors and associates (31 December 2014: 257).
Net non-underlying operating costs in 2015 were £2.3 million (2014: £1.2 million) including a £1.6 million loss in respect of Financial Systems' Fleet freehold property for which a £2.4 million sale was agreed in November 2015 with completion scheduled for the first half of 2016. Other non-underlying operating items relating to the Financial Systems business total £0.6 million and include £0.4 million in respect of amortisation of acquired intangible assets with a further £0.4 million related to acquisition and associated restructuring costs, offset by the receipt of a £0.2 million settlement from a client pursuant to a breach of software licence. In addition, there is a £0.1 million share option charge arising from the shareholder approved grants in 2013 (2014: £0.8 million).
The total tax charge for the year is £1.2 million (2014: £1.7 million). After adjusting for the effect of non-underlying and other items, the Group's tax charge represents 21.5% of the Group's adjusted profit before tax (2014: 22.5%) which is the tax rate used for calculating the adjusted earnings per share. Adjusted earnings per share for the year ended 31 December 2015 was 9.2 pence (2014: 7.2 pence) benefitting from the share consolidation in the year. Basic earnings per share for the year was 6.0 pence (2014: 5.5 pence)
The Group has a strong balance sheet with net assets at 31 December 2015 of £38.6 million (2014: £56.5 million), including cash at 31 December 2015 of £18.6 million (2014: £40.9 million), and net funds at 31 December 2015 of £5.4 million (2014: £24.6 million). The reduction in cash reflects the corporate cash outflows in 2015 of £25.3 million (comprising £22.4 million returned to shareholders by way of dividends & the B/C Share Scheme, together with net consideration related to acquisitions of £2.9 million). The loan outstanding, secured solely on the Financial Systems business, at 31 December 2015 was £13.3 million (2014: £16.3 million). Trade and other receivables outstanding at 31 December 2015 have increased to £4.7 million (2014: £3.2 million) due to a combination of the effects of contracts signed towards the end of the year and the acquisitions. The same factors have resulted in deferred income increasing by 12% to £17.0 million at 31 December 2015 (2014: £15.2 million).
Continuing to be a focus of the Group, cash conversion (measured by cash generated from operations as a percentage of operating profit adjusted for the non-underlying items with no cash effect) was 102% in the year (2014: 142%).
Philip Wood
Group Finance Director
Group Income Statement
for the year ended 31 December 2015
|
| Year Ended 31 Dec 2015
| Year Ended 31 Dec 2014
| ||||
| Notes | Before non-underlying items | Non-underlying items |
Total | Beforenon-underlying items | Non-underlying items |
Total |
|
| £000 | £000 | £000 | £000 | £000 | £000 |
Revenue | 1 | 31,958 | - | 31,958 | 29,814 | - | 29,814 |
Operating costs | 1, 2 | (24,369) | (2,316) | (26,685) | (22,435) | (1,218) | (23,653) |
Operating profit |
| 7,589 | (2,316) | 5,273 | 7,379 | (1,218) | 6,161 |
Finance income |
| 104 | - | 104 | 196 | - | 196 |
Finance cost |
| (492) | - | (492) | (591) | - | (591) |
Net finance cost |
| (388) | - | (388) | (395) | - | (395) |
Profit before income tax |
| 7,201 | (2,316) | 4,885 | 6,984 | (1,218) | 5,766 |
Income tax expense | 3 | (1,459) | 308 | (1,151) | (1,394) | (259) | (1,653) |
Profit for the year |
| 5,742 | (2,008) | 3,734 | 5,590 | (1,477) | 4,113 |
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Earnings per share |
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Basic | 4 |
|
| 6.0p |
|
| 5.5p |
Diluted | 4 |
|
| 5.6p |
|
| 5.1p |
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group statement of comprehensive income
For the year ended 31 December 2015
| Year ended 31 Dec 2015 | Year ended 31 Dec 2014 |
| £000 | £000 |
Profit for the year | 3,734 | 4,113 |
Other comprehensive income |
|
|
Items that will or may be reclassified to profit or loss: |
|
|
Fair value gain/(loss) on hedged financial instruments | 230 | (474) |
Currency translation loss | (6) | (139) |
Other comprehensive income/(expense) for the year, net of tax | 224 | (613) |
Total comprehensive income for the year | 3,958 | 3,500 |
Group Balance Sheet
For the year ended 31 December 2015
|
| As at 31 Dec 2015 | As at 31 Dec 2014 |
| Notes | £000 | £000 |
ASSETS |
|
|
|
Non-current assets |
|
|
|
Property, plant and equipment |
| 928 | 4,863 |
Goodwill |
| 41,774 | 41,774 |
Intangible assets |
| 5,934 | 1,290 |
Deferred income tax assets |
| 561 | 771 |
|
| 49,197 | 48,698 |
Current assets |
|
|
|
Trade and other receivables | 6 | 4,653 | 3,155 |
Financial assets - derivative financial instruments |
| 11 | - |
Cash and cash equivalents |
| 18,600 | 40,896 |
|
| 23,264 | 44,051 |
Assets classified as held for sale |
| 2,350 | - |
Total current assets |
| 25,614 | 44,051 |
Total assets |
| 74,811 | 92,749 |
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LIABILITIES |
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Current liabilities |
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Financial liabilities |
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|
|
- borrowings | 8 | (3,000) | (3,000) |
- derivative financial instruments |
| (208) | (427) |
Trade and other payables | 7 | (20,977) | (18,812) |
Current income tax liabilities |
| (448) | (499) |
Provisions for other liabilities and charges | 9 | (35) | (15) |
|
| (24,668) | (22,753) |
Net current assets |
| 946 | 21,298 |
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Non-current liabilities |
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Financial liabilities - borrowings | 8 | (10,250) | (13,250) |
Provisions for other liabilities and charges | 9 | (240) | (261) |
Deferred income tax liabilities |
| (1,082) | - |
|
| (11,572) | (13,511) |
NET ASSETS |
| 38,571 | 56,485 |
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SHAREHOLDERS' EQUITY |
|
|
|
Share capital | 10 | 3,796 | 3,730 |
Share premium account |
| 4,484 | 12,049 |
Capital redemption reserve |
| 12,372 | 1,558 |
Other reserves |
| 33,998 | 36,547 |
(Accumulated losses)/retained earnings |
| (16,121) | 2,553 |
Foreign currency translation reserve |
| 42 | 48 |
TOTAL EQUITY |
| 38,571 | 56,485 |
Group Statement of changes in shareholders' equity
for the Year Ended 31 December 2015
|
|
Share capital £000
|
Share premium £000
|
Accumulated Losses £000
|
Foreign currency translation reserve £000
|
Capital redemption reserve £000
|
Other reserves£000
|
Total Equity £000
|
At 1 January 2015 |
| 3,730 | 12,049 | 2,553 | 48 | 1,558 | 36,547 | 56,485 |
Profit for the year |
| - | - | 3,734 | - | - | - | 3,734 |
Cash flow hedges - net fair value losses in the year |
| - | - | - | - | - | 230 | 230 |
Exchange rate adjustments |
| - | - | - | (6) | - | - | (6) |
Total comprehensive income for the year |
| - | - | 3,734
| (6)
| - | 230
| 3,958
|
Shares issued under share option schemes |
| 66 | 470 | - | - | - | - | 536 |
Issue and redemption of B shares |
| - | (8,035) | - | - | 10,814 | (2,779) | - |
Share options - value of employee service |
| - | - | 110 | - | - | - | 110 |
Return of value to shareholders |
| - | - | (20,145) | - | - | - | (20,145) |
Sale of fractional shares |
| - | - | 1 | - | - | - | 1 |
Expenses relating to Return of Value |
| - | - | (175) | - | - | - | (175) |
Deferred tax on financial instruments |
| - | - | (44) | - | - | - | (44) |
Deferred tax on share options |
| - | - | (117) | - | - | - | (117) |
Corporation tax on share options |
| - | - | 51 | - | - | - | 51 |
Dividends to equity holders of the company |
| - | - | (2,089) | - | - | - | (2,089) |
Total Contributions by and distributions to owners of the company recognised directly in equity income
|
| 66 | (7,565) | (22,408) | - | 10,814 | (2,779) | (21,872) |
At 31 December 2015 |
| 3,796 | 4,484 | (16,121) | 42 | 12,372 | 33,998 | 38,571 |
Group Cash Flow Statement
for the Year Ended 31 December 2015
|
| Year ended | Year ended |
|
| 31 Dec 2015 | 31 Dec 2014 |
| Notes | £000 | £000 |
Cash flows from operating activities |
|
|
|
Cash generated from operations | 11 | 7,495 | 9,960 |
Interest paid |
| (492) | (591) |
Income tax paid |
| (1,189) | (1,454) |
Net cash flows generated from operating activities |
| 5,814 | 7,915 |
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Cash flows from investing activities |
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|
Sale of property, plant and equipment |
| 13 | - |
Purchase of property, plant and equipment |
| (524) | (612) |
Acquisition of subsidiaries, net of cash acquired |
| (2,863) | (1,230) |
Interest received |
| 108 | 169 |
Net cash used in investing activities |
| (3,266) | (1,673) |
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Cash flows from financing activities |
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Net proceeds from issuance of ordinary share capital |
| 536 | 18 |
Dividends paid to company's shareholders | 5 | (2,089) | (2,459) |
Repayment of loan |
| (3,000) | (3,000) |
Return of value to shareholders |
| (20,145) | - |
Sale of fractional shares |
| 1 | - |
Expenses relating to Return of Value |
| (175) | - |
Net cash used in financing activities |
| (24,872) | (5,441) |
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Net (decrease)/increase in cash and cash equivalents |
| (22,324) | 801 |
Cash, cash equivalents and bank overdrafts at beginning of year |
| 40,896 | 40,200 |
Exchange rate gains/(losses) on cash and cash equivalents |
| 28 | (105) |
Cash and cash equivalents at end of year |
| 18,600 | 40,896 |
Notes to the Audited preliminary results for the year ended 31 December 2015
1. Segmental analysis
Business segments
The Board has determined the operating segments based on the reports it receives from management to make strategic decisions.
The segmental analysis is split into the Aptitude Software and Financial Systems operating businesses.
The principal activity of the Group throughout 2014 and 2015 is the provision of IT services and solutions, including software based activity generating the majority of its revenue from software licences, maintenance, support, funded development and related consultancy.
The operating businesses are allocated central function costs in arriving at operating profit/ (loss). Group overhead costs are not allocated into the operating businesses as the Board believes that these relate to Group activities as opposed to the operating businesses.
1(a) Revenue and operating profit by operating business
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| |||||
Year ended 31 December 2015 |
| Aptitude Software | Financial Systems |
Group |
Total | |
|
| £000 | £000 | £000 | £000 | |
Revenue |
| 16,730 | 15,228 | - | 31,958 | |
Operating costs |
| (15,066) | (7,981) | - | (23,047) | |
Operating profit before Group overheads |
| 1,664 | 7,247 | - | 8,911 | |
Unallocated Group overheads |
|
|
| (1,322) | (1,322) | |
Operating profit before non-underlying items |
|
|
| 7,589 | ||
Non-underlying items |
| - | (2,208) | (108) | (2,316) | |
Operating profit/(loss) |
| 1,664 | 5,039 | (1,430) | 5,273 | |
Net finance cost |
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|
|
| (388) | |
Profit before tax |
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|
|
| 4,885 | |
Income tax expense |
|
|
|
| (1,151) | |
Profit for the year |
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|
|
| 3,734 | |
Year ended 31 December 2014 |
| Aptitude Software | Financial Systems |
Group |
Total |
|
| £000 | £000 | £000 | £000 |
Revenue |
| 15,395 | 14,419 | - | 29,814 |
Operating costs |
| (14,193) | (6,969) | - | (21,162) |
Operating profit before Group overheads |
| 1,202 | 7,450 | - | 8,652 |
Unallocated Group overheads |
|
|
| (1,273) | (1,273) |
Operating profit before non-underlying items |
|
|
|
| 7,379 |
Non-underlying items |
| - | (388) | (830) | (1,218) |
Operating profit/(loss) |
| 1,202 | 7,062 | (2,103) | 6,161 |
Net finance cost |
|
|
|
| (395) |
Profit before tax |
|
|
|
| 5,766 |
Income tax expense |
|
|
|
| (1,653) |
Profit for the year |
|
|
|
| 4,113 |
1(b) Geographical analysis
The Group has two geographical segments for reporting purposes, the United Kingdom and the Rest of the World.
The following table provides an analysis of the Group's sales by origin and by destination.
| Sales revenue by origin | Sales revenue by destination | ||
| Year ended | Year ended | Year ended | Year ended |
| 31 Dec 2015 | 31 Dec 2014 | 31 Dec 2015 | 31 Dec 2014 |
| £000 | £000 | £000 | £000 |
United Kingdom | 18,065 | 18,871 | 8,918 | 11,223 |
Rest of World | 13,893 | 10,943 | 23,040 | 18,591 |
| 31,958 | 29,814 | 31,958 | 29,814 |
2. Non-underlying items
| 31 Dec 2015 | 31 Dec 2014 |
| £000 | £000 |
Impairment of freehold property and associated costs of property disposal | 1,585 | - |
Acquisition and associated restructuring costs | 439 | 221 |
Amortisation of intangibles | 429 | - |
Share based payments on share options issued in 2013 | 97 | 830 |
South African reorganisation costs | - | 167 |
Customer settlement | (234) | - |
| 2,316 | 1,218 |
3. Income tax expense
| Year ended | Year ended |
| 31 Dec 2015 | 31 Dec 2014 |
Analysis of charge in the year | £000 | £000 |
Current tax: |
|
|
- tax charge on underlying items | (1,416) | (1,388) |
- tax credit/(charge) on non-underlying items | 117 | (110) |
- adjustment to tax in respect of prior periods | (17) | (17) |
Total current tax | (1,316) | (1,515) |
Deferred tax: |
|
|
- tax (charge)/ credit on underlying items | (27) | 14 |
- tax credit/ (charge) on non-underlying items | 191 | (149) |
- adjustment to tax in respect of prior periods | 1 | (3) |
Total deferred tax | 165 | (138) |
Income tax expense | (1,151) | (1,653) |
The total tax charge of £1,151,000 (2014: £1,653,000) represents 23.6% (2014: 28.7%) of the Group profit before tax of £4,885,000 (2014: £5,766,000).
After adjusting for the impact of non-underlying items, change in tax rates, share based payment charge and prior year tax charges the tax charge for the year of £1,546,000 (2014: £1,568,000) represents 21.46 % (2014: 22.45%), which is the tax rate used for calculating the adjusted earnings per share.
At the balance sheet date, the Group has unused tax losses of £5,058,000 (2014: £5,978,000) available for offset against future profits. A deferred tax asset has been recognised in respect of £575,000 (2014: £777,000) of such losses which is the maximum the Group anticipates being able to utilise in the year ending 31 December 2016. No deferred asset has been recognised in respect of the remaining £4,483,000 (2014: £5,201,000) due to the unpredictability of future profit streams.
The difference between the total tax charge and the amount calculated by applying the effective United Kingdom corporation tax rate of 20.25% (2014: 21.5%) to the profit on ordinary activities before tax is as follows:
| Year ended | Year ended |
| 31 Dec 2015 | 31 Dec 2014 |
| £000 | £000 |
Profit on ordinary activities before tax | 4,885 | 5,766 |
|
|
|
Tax at the UK corporation tax rate of 20.25% (2014: 21.5%) | (989) | (1,240) |
|
|
|
Effects of: |
|
|
Adjustment to tax in respect of prior periods | (16) | (20) |
Adjustment in respect of foreign tax rates | (51) | (63) |
Foreign exchange gains on intercompany balances | (44) | (20) |
Tax payable on restructuring of South African business | 53 | (139) |
Deferred tax charge on restructuring of South African business | - | (228) |
Expenses not deductible for tax purposes |
|
|
- Non-underlying costs not deductible | (318) | (154) |
- Other | (37) | (3) |
Recognition of tax losses | 147 | 214 |
Change in future tax rates | 104 | - |
Total taxation | (1,151) | (1,653) |
4. Earnings per share
To provide an indication of the underlying operating performance per share, the adjusted profit after tax figure shown below excludes non-underlying items and has a tax charge using the effective rate of 21.46% (2014: 22.45%)
| Year ended | Year ended |
| 31 Dec 2015 | 31 Dec 2014 |
| £000 | £000 |
Profit on ordinary activities before tax and non-underlying items | 7,201 | 6,984 |
Tax charge at a rate of 21.46% (2014: 22.45%) | (1,546) | (1,568) |
Adjusted profit on ordinary activities after tax | 5,655 | 5,416 |
Prior years' tax charge | (16) | (20) |
Non-underlying items net of tax | (2,008) | (1,477) |
Foreign exchange losses on intercompany balances tax charge | (44) | (20) |
Recognition of tax losses | 147 | 214 |
Profit on ordinary activities after tax | 3,734 | 4,113 |
| 2015 Number (thousands) | 2014 Number ( thousands) |
Weighted average number of shares | 61,777 | 74,554 |
Effect of dilutive share options | 5,073 | 5,954 |
| 66,850 | 80,508 |
| 2015 Basic EPS | 2015 Diluted EPS |
| pence | pence |
Earnings per share | 6.0 | 5.6 |
Non-underlying items net of tax | 3.3 | 3.0 |
Foreign exchange losses on intercompany balances | 0.1 | 0.1 |
Tax losses recognised | (0.2) | (0.2) |
Adjusted earnings per share | 9.2 | 8.5 |
Adjusted earnings per share are calculated using adjusted profit after tax.
5. Dividends
| 2015 pence per share | 2014 pence per share | 2015 £000 | 2014 £000 |
Dividends paid: |
|
|
|
|
Interim dividend | 1.4 | 1.1 | 812 | 820 |
Final dividend (prior year) | 2.2 | 2.2 | 1,277 | 1,639 |
| 3.6 | 3.3 | 2,089 | 2,459 |
|
|
|
|
|
Proposed but not recognised as a liability: |
|
|
|
|
Final dividend (current year) | 2.8 | 2.2 | 1,654 | 1,641 |
The proposed final dividend was approved by the Board on 3 March 2016 but was not included as a liability as at 31 December 2015, in accordance with IAS 10 'Events after the Balance Sheet date'. If approved by shareholders at the Annual General Meeting the proposed final dividend will be payable on 3 June 2016 to shareholders on the register at the close of business on 29 April 2016.
6. Trade and other receivables
| 31 Dec 2015 | 31 Dec 2014 |
| £000 | £000 |
Trade receivables | 3,662 | 2,214 |
Less: provision for impairment of receivables | (5) | (7) |
Trade receivables - net | 3,657 | 2,207 |
Other receivables | 224 | 91 |
Prepayments and accrued income | 772 | 857 |
| 4,653 | 3,155 |
7. Trade and other payables
| 31 Dec 2015 | 31 Dec 2014 |
| £000 | £000 |
Trade payables | 715 | 406 |
Other tax and social security payable | 875 | 1,163 |
Other payables | 60 | 171 |
Accruals | 2,336 | 1,866 |
Deferred income | 16,991 | 15,206 |
| 20,977 | 18,812 |
8. Financial liabilities
| 31 Dec 2015 | 31 Dec 2014 |
| £000 | £000 |
Bank Loan | 13,250 | 16,250 |
The borrowings are repayable as follows: |
|
|
Within one year | 3,000 | 3,000 |
In the second year | 3,000 | 3,000 |
In the third to fifth years inclusive | 7,250 | 10,250 |
| 13,250 | 16,250 |
Less: Amount due for settlement within 12 months (shown under current liabilities) | (3,000) | (3,000) |
Amount due for settlement after 12 months | 10,250 | 13,250 |
9. Provisions for other liabilities and charges
| Provisions | |
| 31 Dec 2015 | 31 Dec 2014 |
| £000 | £000 |
At 1 January | 276 | 302 |
Credited to income statement | (2) | - |
Utilised | (2) | - |
Arising on acquisition | 10 | - |
Foreign exchange movement | (7) | (26) |
At 31 December | 275 | 276 |
Provisions have been analysed between current and non-current as follows:
| Provisions | |
| 31 Dec 2015 | 31 Dec 2014 |
| £000 | £000 |
Current | 35 | 15 |
Non-current | 240 | 261 |
| 275 | 276 |
10. Share capital
Ordinary shares of 6 3/7p each (2014: 5p each) | Number | £000 |
Issued and fully paid: |
|
|
At 1 January 2015 | 74,610,669 | 3,730 |
Issued under share option schemes | 1,030,001 | 66 |
Share reorganisation | (16,580,149) | - |
At 31 December 2015 | 59,060,521 | 3,796 |
11. Notes to the Group Cash Flow Statement
Reconciliation of profit before tax to net cash generated from operations:
| Year ended 31 Dec 2015 | Year ended 31 Dec 2014 |
| £000 | £000 |
Profit before tax | 4,885 | 5,766 |
Adjustments for: |
|
|
Depreciation | 597 | 747 |
Amortisation | 429 | - |
Impairment of fixed assets | 1,532 | - |
Research and development credit | (101) | (200) |
Share-based payment expense | 110 | 830 |
Finance income | (104) | (196) |
Finance costs | 492 | 591 |
|
|
|
Changes in working capital excluding the effects of acquisition: |
|
|
(Increase)/decrease in receivables | (1,162) | 1,937 |
Increase in payables | 828 | 511 |
Decrease in provisions | (11) | (26) |
|
|
|
Cash generated from operations | 7,495 | 9,960 |
12. Statement by the directors
The preliminary results for the year ended 31 December 2015 and the results for the year ended 31 December 2014 are prepared under International Financial Reporting Standards as adopted for use in the EU ("IFRS"). The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2014.
The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 December 2015 or 31 December 2014. The financial information for the year ended 31 December 2014 is derived from the Annual Report delivered to the Registrar of Companies. The Annual Report for 2015 will be delivered to the Registrar of Companies in due course. The auditors' report on those accounts was unqualified and neither drew attention to any matters by way of emphasis nor contained a statement under either section 498(2) of Companies Act 2006 (accounting records or returns inadequate or accounts not agreeing with records and returns), or section 498(3) of Companies Act 2006 (failure to obtain necessary information and explanations).
The Board of Microgen approved the release of this audited preliminary announcement on 3 March 2016.
The Annual Report for the year ended 31 December 2015 will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company. The report will also be available on the investor relations page of our web site (www.microgen.com). Further copies will be available on request and free of charge from the Company Secretary at Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ.