Foresightgr Regulatory News (FSG)

12 Jun 2007 07:01

Focus Solutions Group PLC12 June 2007 Embargoed until 07.00 12th June 2007 Focus Solutions Group plc ("Focus" or "the Group") Results for the year ended 31 March 2007 Focus Solutions Group plc (AIM: FSG), a leading provider of adaptive softwaresolutions to the financial services industry, is pleased to announce its Resultsfor the year ended 31 March 2007. Financial highlights • Sales revenue up 20% to £7.91 million (FY2006: £6.58 million) • Operating profit before exceptional costs £1.20 million (FY2006: £0.37 million) • Operating profit £0.99 million (FY2006: £0.09 million) • Net operating margins rose to 1.4% to 12.5% • Pre-tax profit £1.04 million (FY2006: £0.11 million) • Operating cash inflow of £2.80 million (FY2006: £0.83 million outflow) • Year end cash balance of £3.00 million (FY2006: £0.12 million); debt free balance sheet • Basic earnings per share 5.46 pence (FY2006: 0.39 pence) • Fully diluted earnings per share 5.22 pence (FY2006: 0.39 pence) • Pre-deferred tax adjusted fully diluted earnings per share of 3.72 pence (FY2006: 0.39 pence) Operating highlights • Significant new contract wins during the year included: • HSBC Bank plc • St James's Place • Irish Life • Lincoln Financial Group • BT plc • Strengthened relationships with existing clients, including Barclays, Openwork Limited and Home of Choice Commenting on the results and prospects, Richard Stevenson, Chief Executive,said: "We have taken a substantial step forward over the past year. These results aretestament to the improvements made by the business and to the efforts of all ouremployees. The new financial year has started well and in line with marketexpectations. We look forward to continuing to execute the established strategyto develop a successful, consistently growing, profitable and cash generativebusiness." Enquiries: Focus Solutions GroupRichard Stevenson Chief Executive 01926 468 300Martin Clements Finance Director 077696 54527 Seymour PierceMark Percy 0207 107 8032 SmithfieldTania Wild / Reg Hoare 0207 360 4900 Notes to editors:Focus is an established supplier of easily configured and re-usable componentbased software and business services, which enable faster, more effective andcost efficient processing of complex customer transactions. Focus has helped some of the world's leading public and private sectororganisations successfully automate their most demanding customer processes. Forfurther information on Focus, please visit www.focus-solutions.co.uk. Chairman's Statement Introduction I am delighted to be able to report on another successful year for the Group,which has exceeded our original expectations, with both revenue and profits oncemore showing significant growth. Having delivered our first ever profit as apublic company two years ago and made further improvements last year, this yearwe took a substantial step forward achieving operating profit before exceptionalcosts of £1.2 million. Cash generation in the year was also strong, and theGroup ended the year with a cash balance of £3.0 million and no debt. Theseresults represent further proof of the fundamentally improved prospects for thebusiness over the past two years. We have entered the new financial year withour order backlog standing at record levels. We remain focussed on delivering market leading Point Of Sale ("POS") solutionsto the UK financial services market, with particular emphasis on the life andpensions and mortgage markets. We expect to deliver further strong organicgrowth at attractive margins, and we will continue to consider suitableacquisition opportunities within our markets. Operations In the Chief Executive's Report there is a more detailed review of ouractivities in the year. However, I would like to draw your attention to thesignificant progress made in the year. The business won a series of importantnew contracts against strong competition including HSBC Bank plc, St James'sPlace, Irish Life and Lincoln Financial Group. These new contract wins haveconsolidated our position as the leading POS solution to the UK FinancialServices market. The continual change in regulation in the UK life and pensions and mortgagemarkets has driven demand for our solutions as leading financial institutionshave sought to fundamentally change their sales processes and their supportingtechnology, in order to sell products from a range of providers and remaincompetitive. Focus' e-trading solutions and extensive footprint in the UK lifeinsurance and mortgage markets has put it in a strong position to support theorganisations which have chosen to become distributors, or multi-tied, and thishas resulted in a number of major strategic projects. During the year, the Group won its biggest ever single order, a £6 millioncontract with HSBC Bank plc. This project continues to progress well and isexpected to go live in the first half of 2008. This contract was awarded afteran eight month consultancy services and project scoping exercise, at the end ofwhich HSBC were convinced that Focus was the best choice for the development ofthe new system, in close partnership with their own IT professionals. As well as winning new business, we have continued to generate increasingrevenues from our established customers including Openwork Limited, Barclays,Home of Choice, Prudential, AEGON Scottish Equitable, Axa Sun Life, Trigold,Skandia, Bankhall and Co-Operative Insurance. Focus now has 32 clients using oursoftware to support their POS operations. For some time we have recognised the value of our software and the value of itspotential application outside of the UK financial services market, and to thisend there has been progress in terms of identifying opportunities, securing longterm contracts with partners and developing a sales pipeline. The award duringthe year of an initial contract worth £120,000 with BT plc for the delivery ofan online company incorporation registrations system was an important stepforward. Management and staff In March 2006, Richard Stevenson assumed the role of Group Chief Executive. Hisimpact has been immediate, with the reorganisation of the management team toline up with our strategic objectives, improved operational efficiencies and thedevelopment of a coherent team and company ethos. I would also like to thank all our employees for their efforts, particularlyover the past year. The enthusiasm, commitment and loyalty of our staff remainvital if the Company is to deliver on the strategy and to build on its continuedsuccess. Outlook The new financial year has started strongly and trading remains in line withmarket expectations. We continue to focus our sales efforts on well definedopportunities within the wider UK financial services market, where regulationchange continues to drive demand. In addition, our established customer basecontinues to provide significant opportunities. The Group has a clear strategy for both organic and non-organic growth and theprospects remain good for the business. Following two successive years ofprofitable trading, the Board is now seeking to accelerate the growth in itsbusiness by a combination of partnerships, joint ventures and acquisitions. Our confidence in the future is reflected in our plan to introduce a dividendpayment at end FY2008. Alastair M TaylorChairman12 June 2007 Chief Executive's Report Overview I joined the Group in March 2006 with high expectations that the business wasready and able to take the next step forward. The Group's reputation with itskey customers is outstanding and the quality, expertise and commitment of itsemployees have been the foundation upon which the improved trading has beenbuilt. The opportunities available to us within our market should allow us tobuild a highly successful and sustainable business. However, there is much moreto be done to bring direction and momentum to all parts of the Group's businessand to build upon the progress made last year. Business performance The Group achieved record sales and profits in FY2007. Turnover increased by 20%from £6.58 million in FY2006 to £7.91 million in FY2007. This growth was drivenby a combination of new clients and new projects for our established customerbase. Gross profit increased by 21% from £4.53 million to £5.47 million. At thetrading level, operating profits before exceptional costs increased from £0.37million to £1.20 million. Basic and diluted earnings per share for the year ended 31st March 2007 were5.46 pence per share and 5.22 pence per share, compared with 0.39 pence for bothbasic and fully diluted earnings per share for the year ended 31st March 2006. Despite making great progress in a number of areas, revenues outside thefinancial services market in FY2007 were disappointing. We have thereforereduced costs in line with our revised expectations. We will continue to seekpenetration into other markets via partnerships, but we will seek to extend ourfootprint within the Financial Services Market. As at 31st March 2007, cash deposits totalled £3.00 million (FY2006: £0.12million) reflecting improved profitability and more effective working capitalmanagement. The Group also has unused bank facilities totalling £0.5 millionshould we require them. The balance sheet remains debt free. Markets The markets in which we operate (predominantly the supply of front officesolutions to the UK life and pensions and mortgage markets) have continued to befavourable over the past two years. The combination of increasing regulation andintensive competition has encouraged the leading players in these markets toseek competitive advantage through the utilisation of industry leading software.Focus has been one of the principal beneficiaries of this. While the outlook for these markets remains positive, we are mindful of thechallenges we face. We need to continue to invest in development and tointegrate new technologies into our applications and extend our productoffering. We cannot afford to stand still and will continue to ensure Focusoffers leading edge solutions to our customers. The development of successful partnerships is important for the future of thebusiness. As some leading financial institutions seek to operate fullyintegrated front, middle and back office solutions, it is important that Focusis able to offer a "best of breed" option. In March, we announced a partnershipwith Redland Business Solutions, a leading provider of consultancy services andprocess support tools to financial services and insurance industries. Under thispartnership agreement, it is intended that Focus becomes Redland's preferredpartner in the UK Point of Sale and Extranet market and that Redland shallbecome Focus' preferred partner in the UK for Business Intelligence andcompliant end to end process support tools. Developing our financial services business The majority of our revenue during the year has again been generated bydelivering online and offline POS solutions and extranets to UK financialservice companies to help them comply with regulatory requirements, improvetheir efficiency and reduce the cost of the sales process. Our solutions support the customer facing, front office elements of the salesprocess. To enhance our propositions we partner with other best of breedsuppliers, particularly those who focus on the back-office elements of theprocess within the life, pensions and mortgage markets. Over the past two yearsthere has been considerable consolidation in our market and we believe that thisapproach allows us to provide a compelling alternative to the offerings that ourcompetitors are aiming to bring to the market. To maintain our position in the market, we must ensure we recruit and retain thebest staff with the most appropriate experience to sell and deliver oursolutions to the customer. We employ some outstanding individuals within Focus. Life and pensionsThe leading bancassurers and life and pensions providers are looking to delivernew products to their customers ever more quickly and ever more costeffectively. In recent years, changes in legislation in the life and pensionsmarket directly led to high investment in technology to support the newdistribution models that have begun to evolve. As a result the level of newbusiness activity in FY2007 was at an all time high. We built on anexceptionally strong customer base, adding new business from HSBC Bank plc,Irish Life, St James's Place and Lincoln Financial Group while strengthening ourrelationships with new projects at existing customers such as Barclays, OpenworkLimited and Home of Choice. Our customers are looking for technology, in particular, Service OrientedArchitecture ("SOA") to secure competitive advantage by improving the customerexperience. Our solutions have been developed to work within an SOA environmentto support this goal. The most significant event in the year was the signing of a £6 million contractwith HSBC Bank plc for the development and supply of the first phase of alarge-scale, multi-channel POS system to support HSBC's multi-tie distributionchannel for life, pensions and investment products. The development for HSBC is for their wealth management business. This sectorhas seen a lot of activity this year, with investors becoming increasinglydemanding. Wealth managers need to be able to provide improved services to theirclients, with information on portfolios available on demand via a range ofchannels. A further significant contract win in the year was the development ofa POS solution for leading intermediary wealth managers, St James's Place. In the last quarter of the year, the Group won its first contract in Ireland,signing a contract with Irish Life plc for the development of an electronic POSsolution for the sale of a full suite of life, pensions, protection, savings andinvestment products. The new POS solution will include FactFind and SuitabilityLetter components and will be rolled out to around 600 Irish Life advisers fromJune 2007, providing them with a streamlined and more efficient sales process. During the period, we continued to develop the electronic POS solution"e-Script" delivered in FY2006 which supports the sale of regulated life andpensions products for Barclays' corporate and personal customers. The new POSsolution supports Barclays' new distribution network following depolarisation,providing links to six providers including Axa, Friends Provident, NorwichUnion, Legal and General, Prudential and Standard Life. E-Script is alsointegrated with the industry portal, Assureweb, allowing Barclays advisers tosubmit new business applications online and providing a straight throughelectronic process for the adviser. MortgagesProgress in the mortgage market was less dramatic than in FY2006. However, ourestablished mortgage customers continued to demand further developments. InFebruary the Group signed a new licence agreement with Trigold, the leadingprovider of software to the intermediary mortgage market. This agreement allowsTrigold to use Focus' technology to create electronic mortgage application formsto host on their industry portal and sourcing system, "Prospector AAA". Theelectronic forms, built with Focus' technology, will create a more efficientsales process for both the mortgage intermediaries and the lenders using theTrigold system. GovernmentOver the past two years, we have entered the government market. We haveidentified e-government solutions suppliers as our preferred channel to thegovernment market place to enable us to distribute our products widely, whilstmitigating the risk of entry into this complex market. Driven by legislative requirements for lower cost of development and ownership,together with increasingly onerous e-government targets, our solutions have wideappeal in central government, local government and in some specialist functionssuch as police forces. We have developed a set of offerings around the products, which give ourdistribution partners a wide choice of technologies, platforms and channels forthe delivery of rich citizen-facing applications. These range from "stop andsearch" applications using digital pen technology to advanced portal processingfor a major government department. All solutions are delivered using the Focusarchitecture. The award of a contract by BT plc for the delivery of an online companyregistration solution for Business Link was an important step forward for thisembryonic business. The Focus software will now be considered to form part of aframework available for other Business to Government transactions. The initialphase was worth £120,000. Development It is essential for the future prosperity of the Group that we continue with ourcurrent level of spending in R&D. Our technology is one of the cleardifferentiators against our competition, both in our established markets and inthe new sectors into which we are moving. Combining this technology with ourbusiness process knowledge and delivery expertise puts us in a strong positionto win new business. In March 2007, we launched our new POS solution, "focus:pos", for the life,pensions and mortgage markets, which is aimed at bancassurers, largeintermediary firms, pure mortgage networks and clubs and providers withcontrolled distribution. focus:pos is a generic single POS platform that enablesorganisations to trade life, pensions, investments and mortgage productselectronically through a single solution. This will allow our customers tosignificantly reduce their development costs but also allow them to benefit fromsimplified and streamlined sales processes. IFRS As an AIM listed company, the Group is required to adopt International FinancialReporting Standards (IFRS) for accounting periods starting after 1st January2007. When the FY2008 results are reported, the FY2007 numbers will be restatedunder IFRS. The first statements to be reported under IFRS will be the InterimResults for the six months ending 30th September 2007. We will work with our auditors to assess the impact of IFRS on our accounts. Wehave not yet quantified the impact although, in common with other softwarecompanies, the greatest change is likely to be in the area of research anddevelopment costs where some expenditure may have to be capitalised in future ifcertain criteria are met or in accounting for deferred taxation, goodwill andacquisitions. Strategy Our goals are clear and simple. We want to increase new business wins andcontinue to be recognised as the leading provider of front office solutions tothe UK financial services markets. It is the Group's strong position in the UKfinancial services sector that underpins its growth and profitability. Thestructural changes in the market as a result of competition and the regulatoryenvironment are continuing and we intend to increase our penetration of both thelife and pensions and mortgage market by exploiting our expertise in thesesectors. Focusing on winning a small number of high value contracts helps usdevelop close relationships with major financial institutions and leads toconsiderable on-going business. One of our key objectives over the next two tothree years is to increase the proportion of our turnover that is represented byannually recurring revenues. Our established strategy, to exploit opportunities outside of the UK financialservices market by making inroads into the Government market, is gainingtraction as we build on the partner relationships we have established this yearand continue to grow the specialist knowledge and resources we need to makeprogress in this market. We recognise that in today's market, Focus must grow faster to build asustainable business. A central plank of this strategy is to consider potentialacquisitions which will strengthen our product and market coverage in the frontoffice market. Our strategy is based on extending our strong position in thefront office space from life and pensions and mortgages into other associatedverticals, thereby extending our product portfolio, extend our client base andbringing added value to our customer base. This will be achieved by acombination of internal development and acquisition. We aim always to deliver much more than just technology. Our objective is tofully understand our customers' business processes and to deliver significantadded value to our customers by developing solutions that dramatically reducetheir costs and enhance their ability to adapt to changes in their markets. We have a good story to tell. We provide our staff with a positive workingenvironment, a strong work ethos and competitive salaries and associatedbenefits. We have a very clear focus on key markets and we have developed aprofitable and cash generative business. Outlook We have taken a substantial step forward over the past year. These results aretestament to the improvements made by the business and to the efforts of all ouremployees. The new financial year has started well and in line with marketexpectations. We look forward to continuing to execute the established strategyto develop a successful, consistently growing, profitable and cash generativebusiness. Richard StevensonChief Executive12 June 2007 Consolidated Profit and Loss Report 31 March 2007 Restated Year ended Year ended 31 March 31 March 2007 2006 Notes £'000 £'000 Turnover 2 7,908 6,585 Cost of sales (2,441) (2,055) -------- -------- Gross profit 5,467 4,530 OverheadsDistribution costs (1,407) (1,424)Administrative expenses (including exceptionalcosts of £209,000, FY 2006: £273,000) (3,070) (3,012) -------- -------- (4,477) (4,436) -------- -------- Operating profit 3 990 94 -------- -------- ------------------------------- ------ -------- --------Operating profit before 1,199 367exceptional costs Share based payment expense (13) (16)Re-organisation costs (196) (257)------------------------------- ------ -------- --------Operating profit after 990 94exceptional costs------------------------------- ------ -------- -------- Profit on ordinary activities before interest 990 94 Net interest receivable 45 18 -------- -------- Profit on ordinary activities before taxation 1,035 112Taxation 532 - -------- --------Profit for the year 1,567 112 ======== ======== Earnings per ordinary shareBasic 5.46p 0.39pDiluted 5.22p 0.39p The operating profit for both years arises from the company's continuingoperations. Statement of Group Total Recognised Gains and Losses Restated Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000 Profit for the financial year 1,567 79 ----------Prior Year Adjustment in respect of the adoption ofFRS20 "share based payments" (16) ----------Total recognised Gains and Losses since the lastAnnual Report 1,551 ---------- There are no material differences between the profit on ordinary activitiesbefore taxation and the retained profit for the year stated above and theirhistorical cost equivalents Consolidated Balance Sheet31 March 2007 2007 Restated 2006------------------------ -------- -------- £'000 £'000Fixed assetsTangible assets 218 135------------------------ -------- --------Current assetsDebtors- due within one year 3,625 3,657Debtors- due after more than one year 671 490Cash at bank and in hand 3,005 123------------------------ -------- -------- 7,301 4,270Creditors: Amounts falling due within one year (3,475) (2,056)Net current assets 3,826 2,214 Total assets less current liabilities being net assets 4,044 2,349------------------------ ======== ========Capital and reservesCalled up share capital 2,930 2,864Share premium 9,881 9,832Merger reserve 220 220Share option reserve 62 49Profit and loss account (9,049) (10,616)------------------------ -------- --------Shareholders' funds - equity interests 4,044 2,349------------------------ ======== ========Approved by the Board on 11 June 2007 R J Stevenson Director M J ClementsDirector Cash Flow Statement31 March 2007 Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000 Net cash inflow/ (outflow) from operating activities 2,799 (833) Returns on investments and servicing of finance 45 18 Taxation 82 - Capital expenditure and financial investment (159) (79) Cash inflow/ (outflow) before management of liquidresources and financing 2,767 (894) Financing 115 10Increase/ (decrease) in cash in the year 2,882 (884) Reconciliation of net cashflow to movement in net funds Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000Increase/(Decrease) in cash in the period 2,882 (884)Movement in net funds in the year 2,882 (884)Net funds at start of year 123 1,007Net funds at end of year 3,005 123 Notes to the Accounts 1. The financial information set out above does not constitute statutoryaccounts for the years ended 31 March 2007 and 2006, but is derived from thoseaccounts. Statutory accounts for the year ended 31 March 2006 have beendelivered to the Registrar of Companies and those for the year ended 31 March2007 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. Prior year adjustmentThe financial information has been prepared using the same accounting policiesset out in the statutory accounts for the year ended 31 March 2006, with theexception of the adoption of the new accounting standard. The Group has adoptedFRS 20 (share based payments) for the first time in these financial statements.This represents a change of accounting policy and prior year comparatives havebeen restated accordingly. 2. Turnover The geographical analysis of turnover by destination is: 2007 2006 £000 £000 United Kingdom and Europe 7,908 6,560North America - 25 ------ ------- 7,908 6,585 ------ ------- 3. Earnings/(loss) per share The basic earnings per share is based on attributable profit for the year of£1,580,000 (FY2006: £128,000) and on 28,717,745 ordinary shares (FY2006:28,629,000) being the weighted average number of ordinary shares in issue duringthe year. The diluted earnings per share is based on attributable profit for the year of£1,580,000 (FY2006: £128,000) and on 30,022,619 shares (FY2006: 28,852,000 )calculated as follows: Year Year ended ended 31 March 31 March 2007 2006 000's 000's Basic weighted average number of ordinary shares 28,718 28,629 Dilutive potential ordinary shares: 1,305 223 Share Options 30,023 28,852 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. AGM The AGM will be held at 10.00 a.m on 2 August 2006 at the registered office ofthe Company (Cranford House, Kenilworth Road, Leamington Spa, CV32 6RQ). This information is provided by RNS The company news service from the London Stock Exchange