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Half-Year Results

29 May 2012 07:00

RNS Number : 2655E

Electronic Data Processing PLC

29 May 2012

Electronic Data Processing PLC (EDP)

Half-year results - 6 months to 31 March 2012

EDP is an IT solution provider to the UK wholesale distribution industry and a supplier of Sales Intelligence software solutions more widely.

Financial Highlights

·; Turnover increased 5% to £2.89 million (2011: £2.75 million).

·; Adjusted operating profit improved 27% to £403,000 (2011: £316,000) giving an operating margin of 14.0% (2011: 11.5%).

·; Hosting revenues now represent 41% of total revenues (2011: 34%).

·; Contracted recurring revenues maintained at £2.2 million representing 76% of total revenues.

·; Continued R&D investment of £426,000 in first half (2011: £453,000).

·; Interim dividend maintained at 0.713p per share.

·; Strong, debt-free balance sheet with cash balances of £5.2 million.

Michael Heller, Chairman of EDP, said:

"We expect our customers to remain cautious while considerable uncertainty remains in the UK economy. However, the strength of our business model, product set and balance sheet mean that the business is well positioned to capitalise on opportunities that do arise."

-Ends-

For further information please contact:

Julian Wassell	James Storey	Toby Mountford
Chief Executive	Finance Director	Citigate Dewe Rogerson
0114 262 2006	0114 2622011	020 7638 9571 / 07710 356611

www.edp.co.uk

Chairman's Statement

I am pleased to report that turnover for the six months to 31 March 2012 was up 5% at £2.89 million compared with £2.75 million in the corresponding period last year.

Trading conditions have remained tough during the period as macro-economic conditions have continued to cause uncertainty and caution among SMEs in the markets we address. However, against this background, we have seen an increase in sales of both our main product sets, Quantum VS and Vecta.

Adjusted operating profit, before non-cash IFRS charges, improved 27.5% to £403,000 (2011: £316,000) which represents an operating margin of 14.0% (2011: 11.5%).

Pre-tax profit for the period was £363,000 (2011: £162,000 excluding profit on disposal of freehold property). Finance income (representing bank interest receivable) was marginally up at £36,000 compared with £28,000. Non-cash IFRS charges were £76,000 (2011: £132,000).

The level of contracted recurring revenues, which relate to annual software licences and hosting fees, has been maintained at £2.2 million and represented 76% of turnover during the period (2011: 80%).

Our existing customers and prospects continue to see the benefits of having their software applications delivered through the cloud using our hosting centre in Milton Keynes. The proportion of our business delivered using our hosting model has increased once again and now represents 41% of turnover (2011: 34%).

We are committed to the continued enhancement of our software products and our total R&D expenditure during the period was £426,000 (2011: £453,000).

Turning to the Group balance sheet, net assets were £7.24 million at 31 March 2012 compared with £7.29 million at 30 September 2011. This reflects profit after tax of £270,000, dividends of £251,000 and a reduction of £75,000 in the position of the Group's defined benefit pension scheme due to amended actuarial assumptions. Cash balances at 31 March 2012 were £5.20 million compared with £5.15 million at 30 September 2011. We continue to look at opportunities to utilise these cash balances to acquire similar software businesses.

Your Directors have resolved to pay an interim dividend of 0.713p per ordinary share, the same as last year. The interim dividend will be paid on 1 August 2012 to those shareholders on the register on 6 July 2012. The shares will be ex-dividend on 4 July 2012.

We expect our customers to remain cautious while considerable uncertainty remains in the UK economy. However, the strength of our business model, product set and balance sheet mean that the business is well positioned to capitalise on opportunities that do arise.

Michael Heller 28 May 2012

Chairman

Principal Risks and Uncertainties

The Group operates in a changing economic and technological environment that presents risks, many of which are driven by factors that we cannot control or predict. The key risks and uncertainties facing the Group are as follows:

Wider economic factors

As with most other businesses in the UK, the Group's operations can be adversely affected by a significant downturn in the economy. Restricted availability of finance for businesses and a stagnant or recessionary economy could have an adverse effect on the prospects for EDP, as potential customers, particularly in the builders and timber merchants sectors, may scale back their IT plans in response to funding difficulties and/or reduced prospects for their businesses. We seek to mitigate these risks by ensuring that a significant proportion of the Group's revenues are derived from long-term contracts with our customers, by ensuring that our products appeal to businesses operating in a range of business sectors and by generally seeking payment for our recurring licence fees annually in advance.

Competitive environment

The Group operates in a competitive environment. New entrants to our marketplace and actions taken by existing competitors could have an impact on our levels of business activity and product pricing in the market generally. We endeavour to provide excellent customer support together with high quality products at a competitive price in order to develop and protect strong customer relationships.

Key personnel

In common with all people-based businesses, the success of the Group will, to a significant extent, be dependent on the experience of the Board and senior management, the loss of one or more of whom could have a material adverse effect on the Group. The retention of the services of EDP's key employees cannot be guaranteed. Accordingly we are continually focused on the need to recruit, retain, reward and motivate staff with the appropriate skills.

Technological advances

The markets in which the Group operates are characterised by evolving technology, market practices and industry standards. Competitors could develop superior products or more cost-effective techniques which could render the Group's products uncompetitive or less acceptable to the market. We have an ongoing commitment to research and development which allows us to identify and adapt to any technological and market changes that do occur thereby ensuring that our products continue to meet the demands of our customers.

Systems and networks

The Group's business operations rely significantly on the efficient and uninterrupted operation of its information technology systems and networks. Any damage or interruption, however caused, could have a material adverse effect on the delivery of the Group's products and services.

The Group's computer network may be vulnerable to unauthorised access, viruses and other disruptive problems. A party that is able to override security measures could misappropriate proprietary information or cause disruption to the Group's operations. The Group continually reviews and tests security of internal systems and networks and has developed recovery plans in the event of systems disruption. Where reliance is placed upon externally provided systems and networks the Group undertakes regular performance ability reviews and ensures that contracts provide for an appropriate level of service maintenance.

Responsibility Statement of the Directors in Respect of the Half-Yearly Financial Report

We confirm that, to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;

• the half-yearly management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

J M Storey

Secretary

28 May 2012

The Directors who served throughout the period are:

M.A.Heller	Chairman (Non-Executive)
J.H. Wassell	Chief Executive
P.A. Davey	Sales Director
P.J. Davies	Application Software Products Director
A.R. Heller	Non-Executive Director
C.R. Spicer	Network Services Director
J.M. Storey	Finance Director

Condensed Consolidated Income Statement

For the six months ended 31 March 2012

	Unaudited	Unaudited	Audited
	six months to	six months to	full year to
	31 March 2012	31 March 2011	30 September 2011
	£'000	£'000	£'000

Revenue	2,886	2,747	5,600



Gross profit	2,657	2,561	5,272

Administrative expenses	(2,330)	(2,427)	(4,766)

Operating profit	327	134	506

Profit on disposal of property	-	335	335

Finance income	36	28	55

Profit before tax	363	497	896

Income tax expense	(93)	(47)	(158)

Profit for the period attributable to
equity holders of the parent	270	450	738


Earnings per share
- Basic	2.15p	3.59p	5.89p

- Diluted	2.15p	3.59p	5.88p

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 31 March 2012

	Unaudited	Unaudited	Audited
	six months to	six months to	full year to
	31 March 2012	31 March 2011	30 September 2011
	£'000	£'000	£'000

Profit for the period	270	450	738

Other comprehensive income
Actuarial (losses)/gains on defined benefit pension scheme	(111)	478	230
Income tax on other comprehensive income	36	(125)	(44)
Foreign exchange translation difference	-	3	3

Other comprehensive income for the period, net of tax	(75)	356	189

Total comprehensive income for the period
attributable to equity holders of the parent	195	806	927

Condensed Consolidated Balance Sheet

at 31 March 2012

	Unaudited at	Unaudited at	Audited at
	31 March 2012	31 March 2011	30 September 2011
	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	4,365	4,372	4,451
Deferred tax asset	94	10	64
Employee benefits	-	58	-
Intangible assets	381	456	427
	4,840	4,896	4,942
Current assets
Inventories	93	89	85
Trade and other receivables	1,579	1,601	1,514
Cash and cash equivalents	5,197	4,824	5,149
	6,869	6,514	6,748

Total assets	11,709	11,410	11,690


Current liabilities
Deferred income	(2,046)	(2,097)	(2,423)
Income tax payable	(250)	(214)	(157)
Trade and other payables	(1,427)	(1,409)	(1,182)
	(3,723)	(3,720)	(3,762)

Non-current liabilities
Deferred income	(110)	(141)	(124)
Employee benefits	(357)	-	(228)
Deferred tax liability	(280)	(294)	(285)
	(747)	(435)	(637)

Total liabilities	(4,470)	(4,155)	(4,399)


Net assets	7,239	7,255	7,291

Equity
Share capital	689	689	689
Share premium	119	119	119
Capital redemption reserve	625	625	625
Treasury shares	(627)	(627)	(627)
Retained earnings	6,433	6,449	6,485

Total equity attributable to equity holders
of the parent	7,239	7,255	7,291

Condensed Consolidated Cash Flow Statement

for the six months ended 31 March 2012

	Unaudited	Unaudited	Audited
	six months to	six months to	full year to
	31 March 2012	31 March 2011	30 September 2011
	£'000	£'000	£'000

Cash flows from operating activities
Profit for the period	270	450	738
Adjustments for:
Depreciation	108	107	223
Amortisation	85	73	148
Net profit on disposal of property, plant and equipment	(7)	(335)	(335)
Transfer of inventory from property, plant and equipment	4	10	12
Non-cash pension charge	25	56	94
Finance income	(36)	(28)	(55)
Income tax expense	93	47	158
Change in inventories	(8)	2	6
Change in receivables	(52)	(15)	68
Change in payables	(13)	(13)	11
Change in deferred income	(391)	(323)	(14)
Equity settled share-based payment transactions	4	4	8
Balance on translation reserve transferred to operating profit	-	3	3

Cash received from operations	82	38	1,065
Interest received	23	22	53
Income taxes received/(paid)	1	56	(94)
Net cash from operating activities	106	116	1,024

Cash flows from investing activities
Purchase of property, plant and equipment	(33)	(114)	(311)
Development expenditure	(39)	-	(46)
Net proceeds from sale of property, plant and equipment	14	2,011	2,011
Net cash (used in)/generated by investing activities	(58)	1,897	1,654

Cash flows from financing activities
Dividends paid	-	-	(340)
Net cash used in financing activities	-	-	(340)


Net increase in cash and cash equivalents	48	2,013	2,338
Cash and cash equivalents at beginning of period	5,149	2,811	2,811
Cash and cash equivalents at end of period	5,197	4,824	5,149

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 March 2012

			Capital
	Share	Share	redemption	Translation	Treasury	Retained
	capital	premium	reserve	reserve	shares	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000

At 1 October 2011 (audited)	689	119	625	-	(627)	6,485	7,291

Profit for the period	-	-	-	-	-	270	270
Other comprehensive income:
- actuarial loss on defined benefit pension scheme
net of tax	-	-	-	-	-	(75)	(75)
Total comprehensive income	-	-	-	-	-	195	195

Transactions with owners:
- share-based payment transactions	-	-	-	-	-	4	4
- dividends approved	-	-	-	-	-	(251)	(251)
Total transactions with owners	-	-	-	-	-	(247)	(247)


At 31 March 2012 (unaudited)	689	119	625	-	(627)	6,433	7,239


			Capital
	Share	Share	redemption	Translation	Treasury	Retained
	capital	premium	reserve	reserve	shares	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000

At 1 October 2010 (audited)	689	119	625	(3)	(627)	5,893	6,696

Profit for the period	-	-	-	-	-	450	450
Other comprehensive income:
- foreign exchange translation difference	-	-	-	3	-	-	3
- actuarial gain on defined benefit pension scheme
net of tax	-	-	-	-	-	353	353
Total comprehensive income	-	-	-	3	-	803	806

Transactions with owners:
- share-based payment transactions	-	-	-	-	-	4	4
- dividends approved	-	-	-	-	-	(251)	(251)
Total transactions with owners	-	-	-	-	-	(247)	(247)


At 31 March 2011 (unaudited)	689	119	625	-	(627)	6,449	7,255

Notes

Interim financial information

Electronic Data Processing PLC is a public limited company listed on the London Stock Exchange and incorporated and domiciled in England.

The condensed consolidated interim financial information was approved for issue on 28 May 2012.

The condensed financial information is not the Company's statutory accounts. The interim financial information for the six month periods ended 31 March 2011 and 31 March 2012 has not been audited. The comparative figures for the financial year ended 30 September 2011 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Basis of preparation

The unaudited condensed consolidated interim financial information for the six months ended 31 March 2012 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting' as adopted by the EU. The half-yearly condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 30 September 2011, which have been prepared in accordance with IFRSs as adopted by the EU.

Accounting policies

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2011, as described in those financial statements.

The following new standards, interpretations and amendments to existing standards were effective during the period to 31 March 2012 but had no material impact on this consolidated financial information:

- IFRS 7 (amended), 'Financial Instruments: Disclosures';

- IAS 24 (amended), 'Related Party Disclosures'; and

- amendments issued as part of annual improvements to IFRSs (May 2010).

The following new standards and amendments to existing standards are not yet effective and had not been endorsed by the EU at the date of approval of this consolidated half yearly financial information. None have been early adopted by the Group.

- IAS 1 (amended) 'Presentation of Financial Statements';

- IAS 12 (amended) 'Income Taxes';

- IAS 19 (amended) 'Employee Benefits';

- IAS 27 (amended) 'Separate Financial Statements';

- IAS 28 'Investments in Associates and Joint Ventures';

- IAS 32 (amended) 'Financial Instruments: Presentation';

- IFRS 7 (amended) 'Financial Instruments: Disclosures';

- IFRS 9 'Financial Instruments';

- IFRS 10 'Consolidated Financial Statements';

- IFRS 11 'Joint Arrangements';

- IFRS 12 'Disclosure of Interests in Other Entities'; and

- IFRS 13 'Fair Value Measurement'.

Significant judgements, assumptions and risks

In preparing these interim results the main areas of significant judgements and estimates made by management in applying the Group's accounting policies are the same as those that applied to the accounts for the year ended 30 September 2011, namely employee benefits, software intellectual property rights and freehold property valuation. These estimates and associated assumptions are based on historical experience and other reasonable factors which form the basis of determining the reported values of assets and liabilities.

In the six months to 31 March 2012 the only area identified above in which estimates have been changed in such a way that they have materially affected the half yearly financial information is employee benefits. Following a review of the key actuarial assumptions with the Group's defined benefit pension scheme actuary, including discount rate and inflation, the overall deficit on the scheme has increased over the period.

Segment information

The Group has identified its reportable segment based on the financial reports that internally are provided to the Group's Chief Operating Decision Maker ('CODM'). In line with its management structure, the Executive Directors collectively make the key operating decisions and review internal monthly management accounts and budgets as part of this process. Accordingly, the Executive Directors collectively are considered to be the CODM. The information reported regularly to the CODM presents the Group as a single segment supplying software and related services to customers operating in similar markets. The Group's software products share a common sales, development and implementation resource. Consequently the Group has determined that there is one operating segment and therefore one reportable segment, Software.

Segment performance is measured based on segment profit before tax and IAS 19 defined benefit pension scheme adjustments.

Unaudited

six months to

31 March 2012

six months to

31 March 2011

Software

£'000

Revenue - external sales

2,886

2,747

Profit

Adjusted operating profit

403

316

Temporary property costs

(50)

Segment non-cash net IFRS charges

(51)

(76)

Profit on disposal of property

335

Interest revenue

Segment profit before tax

388

553

Defined benefit pension scheme charge

(25)

(56)

Consolidated profit before tax

363

497

Adjusted operating profit

Unaudited

six months to

31 March 2012

31 March 2011

£'000

Operating profit

327

134

Adjustments for non-cash items:

Amortisation of intangible assets under IFRS

Defined benefit pension scheme charge under IFRS

Other (credits)/charges under IFRS

(28)

Adjusted operating profit before temporary property costs

403

266

Temporary property costs

Total adjusted operating profit

403

316

Taxation

The taxation charge is derived from the Directors' best estimate of the annual tax rate applied to the result for the period.

Earnings per share

Basic earnings per share is calculated by dividing the profit after tax of £270,000 (2011: £450,000) by 12,530,976 (2011: 12,530,976) being the weighted average number of shares in issue during the period. Basic earnings per share is 2.15p (2011: 3.59p).

For diluted earnings per share, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company has one class of dilutive potential ordinary share, share options granted to employees under its Enterprise Management Incentive Share Option Plan. These shares have been included in the diluted earnings per share calculation.

Diluted earnings per share is calculated by dividing the profit after tax of £270,000 (2011: £450,000) by 12,530,976 (2011: 12,546,878) being the weighted average number of shares in issue adjusted for the effects of all dilutive potential ordinary shares. Diluted earnings per share is 2.15p (2011: 3.59p).

Dividends

The 2011 final dividend of 2.0p per share was approved by shareholders during the period to 31 March 2012 and a liability of £251,000 has been recognised in this half-yearly report.

The Directors announce an interim dividend of 0.713p per share (2011: 0.713p) payable on 1 August 2012 to shareholders who are on the register at 6 July 2012. This interim dividend, amounting to £89,000 (2011: £89,000), has not been recognised as a liability in this half-yearly report.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR QVLFLLEFZBBX

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