Foresightgr Regulatory News (FSG)

14 Jun 2005 07:01

Focus Solutions Group PLC14 June 2005 FOR IMMEDIATE RELEASE 14 June 2005 Focus Solutions Group plc Preliminary Results for the year ended 31 March 2005 Focus Solutions Group plc, a leading provider of customer management solutionsfor the financial services industry, today announces its preliminary results forthe year ended 31 March 2005. Key Highlights • Profit before tax £26,000 (2004: loss before tax £0.4 million) • First annual profit as a public company • Second half operating profit of £0.8 million (H2 2004: £0.1 million) • Turnover £5.43 million (2004: £5.39 million) • goal:technology licence and related services revenue up 40 % to £5.2 million (2004: £3.7 million) • Cash and money market deposits of £1.0 million (2004: £1.5 million); debt free • Basic and diluted earnings per share of 0.1 pence (2004: loss per share 1.0 pence) • Significant MCA (Multi Channel Advice) orders during the year include: • £1.7 million Multi-tie Point of Sale contract with Zurich Financial Services • First phase of Extranet service for Prudential Plc • Development of new multi-tie Point of Sale solution for major retail bank • Good progress in mortgage market • Strategic partnership signed with Trigold • Three new customers in the mortgage market, Mortgages plc, a new mortgage distributor and Capital Home Loans Limited Commenting on the results and prospects, John Streets, Chief Executive, said: "Focus has delivered a very positive set of results, with the Group achievingits first full year profit as a public company. Whilst overall turnover was onlymarginally ahead, revenues for goal:technology and related services were up 40%compared with 2004. We have won some significant orders in our core life andpensions market, made good progress in the mortgage market and successfullylaunched Focus Software. The business has a robust platform for future growthand is in good shape to continue improving its financial performance." For further information please contact: FOCUS John Streets 01926 468 300Chief ExecutiveMartin Clements 077696 54527Financial Director Chairman's Statement Business review I am very pleased to be able to report a positive set of results for FocusSolutions Group for the year ended 31 March 2005. For the first time as a publiccompany, we have generated a full year profit and good progress was made in allareas even though turnover was only marginally ahead of 2004 at £5.43 million.This represents an exceptional achievement given the major change in thestructure of the business over the past three years, with significant growth insales of goal:technology licences and related services replacing the revenuegenerated by the major Point of Sale (POS) solution - RIO - developed forNorwich Union. goal:technology licences and services revenue grew stronglyduring the year, up by 40% whilst revenues from Norwich Union for RIO fell toless than £250k, down from £1.7 million last year. We have now reached a pointwhere the business has a robust platform for future growth. During the year, we continued to restructure the Group to meet the needs of themarkets in which we operate and we have formally split the business into twooperating units; Focus Business Solutions and Focus Software, supported by acentral services function. Focus Business Solutions (FBS), the principaloperating company in the Group, is responsible for the provision of businessprocess solutions supporting customer management processes within the UK retailfinancial services industry. Focus Software (FS) has been established to exploitthe value of the Group's XML development tool, "goal:technology". Initiallydeveloped to supply business process solutions to the financial servicesindustry, FS's objective will be to extend the use of goal:technology in othervertical markets through strategic partnerships. The central services functionprovides management, accounting, IT and administrative support to the Group. Focus Business Solutions FBS delivered an excellent trading performance during the period, with sales ofgoal:technology based solutions up by 40% compared with 2004, new customers inthe mortgage, retail banking and general insurance markets and good growth inbusiness with existing customers. During the year, FBS signed a five year contract with Zurich Financial Servicesfor the supply of a multi-tie POS for its Openwork network. This contract, whichrepresents the first phase of the project, is worth £1.7 million and reinforcesthe relationship between Focus and Zurich, which has grown every year over thepast four years. FBS also started on the development of a new multi-tie POS for a major UK retailbank, to support the sale of regulated life and pensions products for bothcorporate and personal business by over 800 field sales staff. We continued to build on our entry into the mortgage market, signing a contractwith specialist mortgage lender, Mortgages plc, to provide it with the abilityto respond efficiently to the requirements of the new mortgage regulations thatcame into force in October 2004 (known as "M-Day"). During the year, we also wona major contract with a newly formed distributor of mortgage products, and sincethe year end, we have secured a further customer in this market; Capital HomeLoans Limited. A strategic partnership was formed with the leading mortgagesourcing provider, Trigold, to develop electronic links between mortgageintermediaries and lenders. Trigold has over 130 lenders on its platform andover 20,000 registered users of its portal. We continue to offer market leading innovative business process solutions, andFBS is now a leading provider of customer management solutions to regulatedfinancial services institutions selling protection and investment products inthe UK. The UK life and pensions market remains the most important part of thebusiness: the majority of the top 10 life and pensions providers in the UK arecustomers and goal:technology has over 40,000 deployments in the UK. Focus Software Towards the end of the financial year, we set up FS as a separate division within the Group. The development team responsible for the production of goal:technology software have been joined by an experienced business development team, tasked with the objective of exploiting our innovative technology in other vertical markets. FS's sales and marketing activities will be focused through partners primarily.The relationship with BEA Systems Inc. to sell goal:technology, whereappropriate, as part of their WebLogic Platform 8.1TM is progressing well. BEAis a billion dollar enterprise software company quoted on NASDAQ and has over15,000 customers worldwide, including the majority of the Fortune Global 500Companies. The Board believe this will be an important partnership for the Groupover the next few years as it gives us the opportunity to grow internationallyin all market sectors. FS is putting particular emphasis on the Business Process Management (BPM) andService Oriented Architecture (SOA) markets, leveraging goal:technology, to addvalue to existing suppliers in these markets. In addition, they areconcentrating on the key vertical markets of government and multi-nationalenterprises where multi-channel internet based technologies such as goal:technology are strategic. FS continues to invest in innovative productdevelopment, and has entered into a distribution deal with Grey Matter, the UK'sleading specialist distributor of software to the technical developer community,for its XFormation product, the world's first commercially available XFormseditor. Review of results Focus' main priorities for the year were to grow new business to cover theexpected decline in revenues from the RIO project, to maintain a tight controlof costs and to continue the progress towards profitability. We achieved allthree. Turnover for the year ending 31 March 2005 was £5.43 million compared with £5.39million in the previous financial year. This small increase reflects the changein sales mix which continued in the year with the completion of the NorwichUnion POS, RIO and continued strong growth in goal:technology licence andrelated services up by 40% from £3.7 million in FY2004 to £5.2 million inFY2005. Over the past three years, sales of goal:technology licence and relatedservices have grown by over 400% from £1.0 million in FY2002. Despite the small improvement in top line revenues, a combination of the changein sales mix and the benefits of cost control measures implemented over the pasttwo years, meant that the Group delivered its first profit as a public company.Operating profit for the year as a whole was £26,000. In the second half of theyear, operating profit increased to £0.8 million compared with £0.1 million inthe second half of 2004. Total costs for the year were reduced from £5.9 millionto £5.4 million. Cash outflow from operating activities during the year totalled £0.5 million(FY2004: £0.9 million). In the second half of the period, the Group generated£0.7 million of cash from its trading activities and at the end of the year,cash balances exceeded £1 million. The balance sheet remains debt free. We do,however, have bank facilities totalling £350,000 with HSBC plc, should werequire them. Basic and diluted earnings per share for the year ending 31 March 2005 were0.1p, compared with a loss of 1.0p for the year ending 31 March 2004. The Board's primary objective is to provide the resources necessary for thebusiness to grow and create a business of sustained profitability and cashgeneration. In the long term, this represents the best opportunity for return oninvestment. Accordingly, we currently have no plans to pay a dividend in thenear future. Research and development The investment in research and development and in product development continuesto be substantial and totalled £0.9 million in FY2005 (FY2004: £0.9 million).This investment is fully written off in the year in which it is incurred. TheGroup has applied for research and development tax credits. However, theapproval process for claims has proved extremely drawn out. We remain confidentthat our claims are entirely appropriate and are hopeful of reaching anagreement with the Inland Revenue concerning our FY2003 claim shortly. We havealso made a claim for FY2004 but have made no provision in the accounts for thecredit due for FY2004, pending agreement of the FY2003 submission. People Lin Johnstone has announced that, due to increased work commitments, she plansto retire as a non-executive director at the annual general meeting, after threeyears involvement with the Group. We are extremely grateful to Lin for hercontribution and I would like to wish her all the best in her future endeavours. The continued improved financial performance of the Group is a testament to thereputation of our staff for both their technical expertise and responsiveness tocustomer requirements. The stability in our workforce is a prime factor in oursuccess. To achieve these results in the current environment is a reflection ofthis stability and has required both flexibility and commitment from our staff.These challenging times have created many pressures, in spite of which our teamhas continued to exceed our expectations time after time. I thank all of themfor their continued commitment to Focus and for their achievements andenthusiasm. Outlook Focus is well positioned within the UK retail financial services markets wheresignificant changes in regulation and distribution models continue to drivedemand for our propositions and products. Our strong customer base andinnovative XML technology solutions provide a strong basis for long term,sustained, growth. We believe that global strategic partnerships offer asignificant opportunity to increase sales of our technology outside of the UKfinancial services market and will continue to commit resources to grow salesthrough these channels. We have enjoyed our most successful year yet, and are ingood shape to continue to improve our financial performance and increase growthnext year. Alastair M TaylorChairman Chief Executive's Statement The primary aim for the management team over the past twelve months has been totake Focus through to profitability. The Group has come a long way since wefloated five years ago. To achieve this during a period when capital expenditurewas under pressure in our core markets is particularly noteworthy. Focusdelivered a very encouraging performance, growing sales of goal:technology andrelated services by 40%, adding new customers and successfully launching FocusSoftware. Underpinning our plans for the Group over the past two years has been therecognition that we must make the business sustainable and scalable. In terms of sustainability, our objective has been to extend the customer baseby entering additional retail financial services market sectors. A key mediumterm objective is for our recurring revenues to substantially cover our fixedcost base. We remain someway from achieving this goal, however, good progresswas made in the year. Focus Business Solutions is profitable, based on ourcurrent strategy to design, deliver and implement world class e-tradingsolutions for the financial services markets, built using goal:technology. In terms of scalability we see Focus Software as offering much greater long termopportunities. The exploitation of goal:technology in other markets throughglobal partners is a major plank of our strategy. Focus Business Solutions Over the past seven years, FBS has built a reputation in the UK life andpensions market for delivering leading edge customer management solutions acrossmultiple distribution channels, based on our goal:technology software. Thechallenge in this market has been to collect large amounts of information aboutcustomers and prospective customers and to record this information accuratelyand cost efficiently. The requirement for accuracy has been driven byregulation, with the life and pensions companies required to prove that theysold the right product to each customer. The need to collect this informationefficiently has come from the life and pensions companies themselves, as theyhave sought to maximise returns on investment and to cope with the world of 1%commissions. A wave of new regulation from the Financial Services Authority has followed andin the last year we have seen: •Depolarisation of the distribution of UK life and pensions •Mandatory electronic reporting across all regulated firms •Regulation of mortgage sales •Regulation of general insurance sales Depolarisation is the key driver for IT spending in the UK life and pensionsindustry. This will have a significant impact on distribution channels and theprocesses that support them. The old tied agent/ independent advisor split willbe supplemented by a new channel, multi-tied agents, who sell products from alimited number of providers. Although there are likely to be fewer players inthe market through consolidation, new combinations of providers, distributorsand advisors will emerge. Minimising the costs for these new distribution modelsis critical and represents a major opportunity for MCA, Multi Channel Advicebusiness process solutions provided by FBS. FBS has continued its penetration of the UK mortgage market, capitalising on itsability to provide the business process solutions required to handle the newregulated sales processes. As a result of the work undertaken by Focus,intermediaries dealing with Mortgages plc have been provided with the facilityto complete Key Facts Illustrations in line with the requirements of theFinancial Services Authority's mortgage regulation, which came into force inOctober 2004. FBS's ability to develop, deliver and deploy front-office solutions in shorttimescales, sometimes in less than 90 days from start to finish, remains one ofits principle differentiators in the market. FBS offers consultancy, businessanalysis, project management, systems integration, testing and support servicesto its clients in the UK retail financial services market based on customermanagement process solutions with the MCA process framework. Focus Software The establishment of Focus Software reflects the ambitions of the Group toachieve global scale. We have been convinced for some time that goal:technologyis suitable for markets and applications outside of the UK financial servicesmarket, and the recent collaborative relationships with BEA and Milliman USAInc. have been set up with this objective in mind. The goal:technology suite comprises four propositions. Three are targeted atglobal technology BPM vendors, such as BEA, to allow their customers to developbusiness applications, proof of concepts or user interfaces rapidly and costeffectively. The fourth, XFormation, is targeted at the R & D and academiccommunity, supporting the emerging XForms standards, in preparation forcommercial use as XForms become more widely adopted over the coming years. A newversion of XFormation has been completed and a European distribution agreementsigned with Grey Matter, one of the UK's leading suppliers of business,technical and development software, went live in May 2005. During the year, the FS business development team have been creating a greatdeal of interest in goal:technology in a wide variety of areas, with a number ofpartnerships in development and significant proof of concept collateral. Strategy It is our strategy to create a sustainable and scalable business. The provisionof business process solutions, focused on customer management, to the UK retailfinancial services market by Focus Business Solutions can generate sustainableprofits in the foreseeable future. FBS has an enviable client list in the UKlife and pensions market and is well placed to exploit the opportunitiesgenerated by the introduction of further regulation into the mortgage andgeneral insurance markets. These markets have the same need for extensivere-engineering including improved business sales processes, data collection,accurate recording and cost efficient straight through enterprise processing asthe UK life and pensions markets have experienced over the past few years. To achieve further growth, the Board believes there is significant opportunityin exploiting goal:technology more widely by Focus Software developingpartnership agreements with organisations operating in different geographicaland vertical markets. Prospects In the forthcoming year, our target markets will continue to look for solutionsthat cut the costs of distributing their products and help them meet thechallenge of the significant new regulations. Our blue chip customer base andtrack record of improvement in business process management based on innovativetechnology puts us in a strong position to exploit the opportunities this willgenerate. Our first partnership agreements for goal:technology offer significantopportunities for future growth and we will continue to focus resources onsupporting them. Tight control on costs, coupled with a closely targetedapproach to sales and partnership development will ensure that the Groupcontinues to make good progress in achieving a sustainable and scalablebusiness. John StreetsChief Executive Consolidated Profit and Loss Account31 March 2005 Year ended Year ended 31 March 31 March 2005 2004 (as restated see note 1) Notes £'000 £'000 Turnover 2 5,431 5,388 Cost of sales (1,361) (1,773) ________ ________Gross profit 4,070 3,615 OverheadsDistribution costs (1,221) (1,491)Administrative expenses (2,847) (2,594) ________ ________ (4,068) (4,085) ________ ________Operating profit/ (loss) before re-organisation costs 2 (470) Re-organisation costs - (119) ________ ________Operating profit/ (loss) 2 (589) Disposal of US operations - 167 ________ ________Profit/ (Loss) on ordinary activities before 2 (422)interest Net interest receivable 24 40 ________ ________Profit/ (Loss) on ordinary activities before 26 (382)taxation Taxation - 100 ________ ________Profit/ (Loss) on ordinary activities after taxation 26 (282)and retained profit/ (loss) for the year ======= ======= Earnings/ (Loss) per ordinary share Basic 3 0.1p (1.0p) Diluted 3 0.1p (1.0p) The operating profit for the year and loss for the prior year arises from thecompany's continuing operations. No separate statement of total recognised gains and losses has been presented asall such gains and losses have been dealt with in the profit and loss account. Group Balance Sheet31 March 2005 Year Ended Year Ended 31 March 31 March 2005 2004 £'000 £'000 Fixed assets Tangible assets 137 171 _____ _____Current assets Debtors 2,665 1,845Investments - money market deposits - 250Cash at bank and in hand 1,007 1,234 _______ ______ 3,672 3,329 _______ ______ Creditors: Amounts falling due within one year 1,598 1,331 _______ ______ Net current assets 2,074 1,998 _______ ______ Total assets less current liabilities 2,211 2,169 _______ ______Net assets 2,211 2,169 ======= ====== Capital and reserves Called up share capital 2,859 2,851Share premium 9,827 9,819Merger reserve 220 220Profit and loss account (10,695) (10,721) ________ _______ Shareholders' funds - equity interests 2,211 2,169 ======== ====== Approved by the Board on 13 June 2005 J B Streets M J ClementsDirector Director Consolidated Cash Flow Statement Year ended Year ended 31 March 31 March 2005 2004 £'000 £'000 Net cash outflow from operating activities (454) (927) Returns on investments and servicing of finance 24 40 Taxation - 56 Capital expenditure and financial investment (63) (56) _______ _______ Cash outflow before management of liquidresources and financing (493) (887) Management of liquid resources 250 406 Financing 16 676 ________ _______Increase in cash in the year (227) 195 ======== ======= Reconciliation of net cashflow to movement in net funds Year ended Year ended 31 March 31 March 2005 2004 £'000 £'000 (Decrease)/ increase in cash in the period (227) 195Cash outflow from decrease in liquid resources (250) (406) _______ _______ Movement in net funds in the year (477) (211) Net funds at start of year 1,484 1,695 ________ _______Net funds at end of year 1,007 1,484 ======== ======= Notes to the Accountsfor the year ended 31 March 2005 1. The financial information set out above does not constitute statutoryaccounts for the years ended 31 March 2005 and 2004, but is derived from thoseaccounts. Statutory accounts for the year ended 31 March 2004 have beendelivered to the Registrar of Companies and those for the year ended 31 March2005 will be delivered following the Company's annual general meeting. Theauditors have reported on those accounts; their reports were unqualified and didnot contain statements under s237(2) or (3) Companies Act 1985.In order to be consistent with standard industry practice, the format of theConsolidated Profit and Loss account has been changed. The prior year numbershave been restated in accordance with the revised format. 2. Turnover The geographical analysis of turnover by destination is: 2005 2004 £000 £000 United Kingdom 5,381 5,367North America 50 21 __ __ 5,431 5,388 ===== ===== 3. Earnings/(loss) per share The basic earnings per share is based on attributable profit /(loss) for theyear of £26,000 (FY2004: Loss £282,000) and on 28,588,000 ordinary shares(FY2004: 27,504,000) being the weighted average number of ordinary shares inissue during the year. The diluted earnings per share is based on attributable profit /(loss) for theyear of £26,000 (FY2004: Loss £282,000) and on 29,150,000 shares (27,504,000)calculated as follows: Year Year ended ended 31 March 31 March 2005 2004 £'000 £'000 Basic weighted average number of ordinary shares (000's) 28,588 27,504 Dilutive potential ordinary shares: Share Options 562 - _______ _______ 29,150 27,504 ====== ====== 4. Report and Accounts Copies of the Report and Accounts will be circulated to shareholders shortly andmay be obtained after the posting date from the Company Secretary, FocusSolutions Group Plc, Cranford House, Kenilworth Road, Leamington Spa, CV32 6RQ. 5. The AGM will be held at 4.30 pm on 21 July 2005 at the registered office of the Company (Cranford House, Kenilworth Road, Leamington Spa, CV32 6RQ) This information is provided by RNS The company news service from the London Stock Exchange