Last checked at 10 Jun 2009 07:00
| Press Release | 10 June 2009 |
Focus Solutions Group plc
("Focus" or "the Group")
Preliminary Results for the year ended 31 March 2009
Focus Solutions Group plc (AIM: FSG), a supplier of enterprise solutions to the financial services industry, is pleased to announce its Preliminary Results for the year ended 31 March 2009.
Financial highlights
| ● | Sales revenue up 12% to £9.60 million (FY2008: £8.60 million) |
| ● | Profit before tax up 27% to £1.78 million (FY2008: £1.40 million) |
| ● | Operating profit before exceptional costs up 17% to £1.71 million (FY2008: £1.46 million) |
| ● | EBITDA before exceptional costs up 26% to £2.01 million (FY2008: £1.59 million) |
| ● | Operating profit up 34% to £1.60 million (FY2008: £1.19 million) |
| ● | Net operating margins 16.7% (FY2008: 13.8 %) |
| ● | Cash of £4.00 million (FY2008: £1.03 million); debt free |
| ● | Earnings per share: Fully diluted earnings per share 5.26 pence (FY2008: 5.99 pence) Adjusted fully diluted earnings per share up 28% to 5.43 pence (FY2008: 4.24 pence)* |
* As a result of the recognition of a deferred tax asset, the Directors consider that it is appropriate to provide information on a pre-deferred tax fully diluted Earnings per Share basis.
Operating highlights
| ● | Significant new contract wins during the year included: HSBC Point of Sale Phase Two £4.9 million HSBC Offline £0.8 million Wealth management division of major UK bank £1.7 million Towergate Financial £0.8 million Bank of Ireland Phase 1 £0.5 million |
| ● | Launch of focus:360° and associated versions |
| ● | Successful completion of phase one of the HSBC multi-channel point of sale solution |
| ● | Acquisition of The Coaching Platform, a specialist financial services consultancy and online training resource company |
| ● | New offices in Crewe and London |
Commenting on the results, Richard Stevenson, Chief Executive, said:
"The Group has again achieved record sales and profits which can be attributed to the investment we have made in our products, the dedication of our staff and the detailed market knowledge we have in our core sectors. We are excited about the opportunities we have moving forward as we look to diversify our products and geographic markets and also to continue to meet the needs of our clients who are facing significant regulatory changes."
For further information:
| Focus Solutions Group plc | |
| Richard Stevenson, Chief Executive | Tel: +44 (0) 1926 468300 |
| Martin Clements, Finance Director | www.focus-solutions.co.uk |
| Daniel Stewart & Company plc | |
| Graham Webster | Tel: +44 (0) 20 7776 6550 |
| www.danielstewart.co.uk |
Media enquiries:
| Abchurch | |
| Heather Salmond / Joanne Shears / Mark Dixon | Tel: +44 (0) 20 7398 7709 |
| Joanne.shears@abchurch-group.com | www.abchurch-group.com |
Notes to editors:
About Focus Solutions Group plc
Focus Solutions is an established and proven supplier of enterprise solutions to the financial services industry in the UK, Ireland and more recently across Europe.
Focus has delivered over 100 complex front office projects with multiple integration points and partners to a blue chip client base including 8 out of the top 10 UK Life & Pension providers, a number of leading bancassurers including the likes of HSBC and Irish Life, significant wealth management players such as St James's Place and a number of mortgage providers. The technology truly enables straight through processing whilst providing an engaging client and adviser experience to submit and service business electronically.
focus:360° is at the core of all client implementations providing a single, agile, multi-channel technology platform. Focus has brought together three key areas of expertise: software, consultancy and service delivery. This totally integrated approach means clients can distribute any product across any channel. At the same time they can maintain an enterprise-wide view of the customer value and risk.
For further information on Focus, please visit www.focus-solutions.co.uk
Chairman's statement
Introduction
I am pleased to be able to report on another successful year for the group, with record sales revenues and operating profit. The group continues to make good progress towards executing its strategy and these results represent further evidence of the improving performance of the business. We have entered the new financial year with a market-leading product, a strong pipeline and net cash of over £4.0 million.
During the year we have achieved a strong mix of business from both new focus:360° customers as well as winning new contracts with existing clients such as HSBC, Prudential and AXA. Moving forward, in addition to winning business within the UK, we will also focus on driving opportunities across Europe. To lead our business development effort and to promote focus:360° in Europe, we appointed a new sales director for wealth management in January. With this strategy, we expect to continue to deliver strong organic growth at attractive margins.
Operations
In the Chief Executive's report there is a more detailed review of our activities in the year. However, I would like to draw your attention to some significant events for the organisation across the 2009 financial year. We successfully launched our new product offering, focus:360°, to the market in May 2008 and achieved significant contract wins with Towergate Financial Services, Bank of Ireland Life and the wealth management arm of a major UK retail bank.
To address the requirements of the different markets in which we operate, we now have several variants of the focus:360° technology platform which are proving very successful. To date we have won contracts for:
| ● | focus:360° multi-channel distribution with Towergate Financial and Bank of Ireland Life |
| ● | focus:360° wealth management with the wealth management arm of a major UK retail bank |
| ● | focus:360° mortgage extranet with Tieto |
We have completed the implementation of Phase One of the HSBC multi-channel point of sale solution which has already brought significant benefits to the bank. Our success with this project has also seen us win further contracts with HSBC, worth a total of £5.7million.
In December 2008, we acquired The Coaching Platform, a leading training and consultancy organisation. With The Coaching Platform, the group is well placed to assist distributors with meeting the professional qualification requirements of the FSA's Retail Distribution Review ("RDR") and the acquisition complements both our focus:enterprise service and focus:360° product suite.
Finally, the group has increased its number of offices in the UK this year, opening one in London in the West End and adding an office in Crewe following the acquisition of The Coaching Platform. This means we are well placed across the country to reach our clients, prospects and partners.
Management and staff
As a technology based company, with strong domain knowledge of the markets we serve, our success is built upon retaining a highly skilled and motivated workforce. I would like to express my thanks to all our employees for their efforts over the past year. The enthusiasm, commitment and loyalty of our staff remain vital in enabling the group to deliver on its strategy.
During the year, Piers Brooke retired as a non-executive Director of the group after eight years. We would like to thank him for all his efforts and wise counsel. We also welcomed Nick Habgood as a non-executive Director in January 2009. Nick has brought with him significant expertise in investment management and providing capital for growing companies.
Outlook
The new financial year has started well and trading remains in line with management expectations. We are building a solid pipeline of opportunities and following the recent RDR regulatory proposals, we are seeing increased demand for our solutions despite tough market conditions.
Although we continue to focus our sales efforts on the UK and Irish markets, we are also exploring opportunities in regions outside the UK, through strategic partnerships and further development of our focus:360° wealth management solution in particular.
As has been previously outlined, the group has a clear strategy for both organic and non-organic growth and the Board is looking to accelerate the development of its business by a combination of partnerships, joint ventures and acquisitions.
Last year, we stated our intention to take the steps necessary to allow the company to pay a dividend. In order to do this we must apply to the court for the cancellation of share premium account to create distributable revenues. Prior to applying for court approval the shareholders must approve the application in a general meeting.
Alastair M Taylor
Chairman
9th June, 2009
Chief Executive's report
Overview
The group continues to develop and execute on its stated strategy of building the business through expanding our products and geographic markets. We have further invested in our focus:360° product suite and have evolved the platform into several distinct versions, which should see us attracting significant opportunities throughout the year. We have also drawn on our years of experience of working with global retail banks on change programmes for multi-channel distribution and wealth management to develop a truly unique proposition for the largest tier 1 retail banks. With the current scrutiny on this sector and the need to demonstrate compliance and risk management, we believe we have a compelling offering to meet their requirements.
We pride ourselves on our strong reputation with our key customers and this is underpinned by our delivery successes this year. We continue to attract and retain the highest quality individuals to our team.
Business performance
The Group again achieved record sales and profits in FY2009. Turnover increased by 12% from £8.60 million in FY2008 to £9.60 million in FY2009. This growth was driven principally through services provided to HSBC Bank plc and other established customers but also by revenues generated from focus:360°, following its launch in May 2008. At the trading level, operating profits before exceptional costs increased by 17% from £1.46 million to £1.71 million.
Basic and diluted earnings per share for the year ended 31 March 2009 were 5.85 pence per share and 5.26 pence per share respectively, compared with 6.71 pence for basic and 5.99 pence for fully diluted earnings per share for the year ended 31 March 2008. Our preferred measure of earnings per share, which excludes the impact of the recognition of tax losses which arose in the initial stages of the company's development, is pre-deferred tax adjusted EPS. Using this measure, "adjusted" basic EPS have increased to 6.03 pence from 4.75 pence last year and "adjusted" fully diluted EPS have increased to 5.43 pence from 4.24 pence.
As at 31 March 2009, cash deposits totalled £4.00 million (FY2008: £1.03 million). The group also has unused bank facilities totalling £0.75 million should we require them. The balance sheet remains debt free.
Markets
Through focus:enterprise and our focus:360° product suite, we have compelling propositions for each of our core markets; global retail banks, wealth managers, the largest IFAs and life & pension providers. We also have a clear understanding of the drivers and issues facing these organisations and have tailored our solutions to fulfil those requirements.
Largest IFAs
Within the IFA market, we have seen numerous challenges for organisations, following the latest regulation from the FSA. The Retail Distribution Review requires IFA firms to increase their level of professionalism by moving to a fee-based system, away from commission led practices, and also by increasing their level of qualifications. The former means that organisations will need new systems to support this change and the latter increases the need for training and testing capabilities. Through our focus:360° products and the capabilities of The Coaching Platform, we are well placed to assist IFAs with these challenges.
Life & pension providers
Another key market for us, life & pension providers, has also been affected by the FSA's latest regulation as it is driving them to consider new distribution channels beyond that of the traditional IFA channel. Equally, in the current economic climate they are looking at ways of reducing cost and increasing speed to market for new products in order to remain competitive.
Our focus:360° life & pension extranet enables life & pension providers to implement a single platform for all their different distribution channels, avoiding costly individual solutions. To date, we have won business with AXA Winterthur and Scottish Widows to help define and shape their business requirements to replace their existing intermediary extranet services.
Wealth managers
Our move to focus on the wealth management market has been driven by the increase in the number of wealth management firms as more organisations look to service the needs of High Net Worth Individuals in order to generate more profitable business. In addition, we have found that wealth management firms are now looking at how they can differentiate the level of service they provide to their clients in order to remain competitive and are exploring financial planning capabilities to help them achieve this. We have also seen this trend transcend geographical borders, making the market even more attractive. To date, we have had great success with our wealth management product, with contract wins with Towergate for £0.8m and a major UK bank for £1.7m.
Retail banks
The retail banking sector is probably under the most scrutiny in relation to compliant adviser processes, presenting a single understanding of the client and treating customers fairly. Due to the scale of the business and the inherent legacy systems, retail banks are being forced to look at technology as the only solution to solve these issues. We have the ability to help all banks address these challenges, with focus:enterprise for tier 1 global retail banks who require a solution tailored to their individual requirements and focus:360° multi-channel distribution for banks looking for an 'out of the box' solution with supporting services.
We continue to dominate in this sector, evidenced by our further contract wins with HSBC worth £5.7 million to develop a large-scale, multi-channel point of sale system.
Partners
It would be impractical for Focus to seek to develop every element of a possible multi-channel distribution solution itself; it is important to be able to offer a 'best of breed' option. To this end we have formed partnerships with Tieto and Unisys.
Development
It is essential for the future prosperity of the group that we continue to invest in product development. Our technology is one of the clear differentiators between us and our competition. Combining this technology with our business process knowledge and delivery expertise puts us in a strong position to win new business.
We have a clearly defined road map for our focus:360° product suite built on detailed market research and client demand, and delivering in line with this is integral to the success of the group.
Strategy
Our strategic goals are clear:
| ● | We want to become the vendor of choice for multi-channel product distribution projects for global retail banks. Through our years of experience in the financial services industry and recent achievements with HSBC, we have developed a unique service to assist the largest global banks with their multi-channel distribution and / or wealth management transformation programmes. The knowledge, expertise and technology capability behind focus:enterprise is unrivalled globally. |
| ● | We intend to increase our penetration of the wealth management market, both within the UK and Europe. The wealth management sector is undergoing significant change presenting lucrative opportunities, we are well positioned with our product and team to maximise these. |
| ● | We aim to lead the market in "direct to consumer" propositions. Through extensive market research and close client relationships we are in a strong position to shape the thinking of the industry on how to deliver simple financial products direct to the consumer. This will strongly underpin the success of our focus:360° consumer product. |
| ● | We intend to enter the mid market for distribution solutions through offering an Application Service Provider (ASP) model to service organisations with fewer than 50 users. |
| ● | Over the next two to three years we intend to increase the level of our turnover arising from annually recurring licence and support revenues. focus:360° is designed to be sold on a per user per annum basis and is central to achievement of this objective. |
We recognise that in today's market, Focus must grow faster to build a sustainable business. A central tenet of this strategy is to consider potential acquisitions which will strengthen our product and market coverage.
We are already beginning to see the benefits of our acquisition of The Coaching Platform which has broadened the overall service offering we have for the financial services industry by providing training and competency capabilities. Moving forward, our strategy will be based on extending our strong position of delivering multi-channel distribution solutions from life and pensions and mortgages into other associated verticals, thereby extending our product portfolio, expanding our client base and bringing added value to our customer base.
However, Focus isn't just about developing leading technology. We are committed to providing our clients with a wealth of industry knowledge, experience and insight through real-world practitioners. We have an in-depth understanding our both our clients' business and technical processes so we can assist them at every stage of their project and help them to develop solutions that dramatically reduce their costs and enable them to adapt to regulatory changes in the market.
Focus is well positioned in the financial services industry; we have competitively rewarded, talented individuals who have extensive industry knowledge and practical experience of implementing multi-channel distribution solutions into the largest players in the market. We have a very clear focus on key markets and have developed a profitable and cash generative business.
Outlook
We are seeing general economic conditions not known for a generation in the UK. Recent government actions will have an impact on the ability of our clients' customers to save and invest. This makes predictions on prospects for the future difficult. However the new financial year has started reasonably well and in line with management expectations. We look forward to continuing to execute the established strategy and further develop a successful, consistently growing, profitable and cash generative business.
Richard Stevenson
Chief Executive
9th June, 2009
Finance Director's Report
Financial review
FY2009 has been a record year for the group in terms of sales revenues and operating profits. Group revenues increased by 12% to £9.60 million (FY2008: £8.60 million). The increased sales revenues fed through to growth in operating profit. Operating profit for FY2009 before exceptional costs increased to £1.71 million (FY2008: £1.46 million). Operating profit margins before exceptional costs rose from 17.0% to 17.8%.
Exceptional costs comprised costs related to share based payments under IFRS2 (FY2008: Exceptional items comprised restructuring costs, principally redundancy costs, costs associated with aborted acquisitions and costs related to share based payments under IFRS2). After exceptional costs, the group made an operating profit of £1.60 million, compared to £1.19 million in FY2008.
Key Performance Indicators
| 2009 | 2008 | ||
| Revenue | £m | 9.60 | 8.60 |
| Gross margin | % | 53 | 55 |
| Operating profit before exceptional costs | £m | 1.71 | 1.46 |
| Operating profit before exceptional costs as % of total revenue | % | 17.8 | 17.0 |
| EBITDA before exceptional costs | £m | 2.01 | 1.59 |
| Operating cash inflow/(outflow) | £m | 4.37 | (1.16) |
| Total R&D spend | £m | 1.55 | 0.86 |
| Total R&D spend as % of total revenue | % | 16.1 | 10.0 |
| Number of customers spending more than £100k in year | no. | 11 | 10 |
| Number of customers spending more than £1,000k in year | no. | 1 | 2 |
Taxation
The group has tax losses of £3.68 million as at 31 March 2009 (FY2008: £3.86 million). A deferred tax asset (£0.97 million) in respect of losses has been recognised. The result of this action is a non-cash charge to the profit and loss account of £0.06 million, as the group utilises the remaining tax losses.
Profit for the year
Profit for the year of £1.72 million compared to £1.98 million in FY2008. This decrease is primarily due to movements in deferred taxation.
Earnings per share
As a result of the deferred tax charge this year (and credit last year), the basic and fully diluted EPS calculations exhibit a high degree of volatility. A more stable measure of EPS, which excludes the impact of the recognition of tax losses which arose in the initial stages of the company's development, is pre-deferred tax adjusted EPS.
Using this measure, "adjusted" basic EPS have increased to 6.03 pence from 4.75 pence last year and "adjusted" fully diluted EPS have increased from 4.24 pence to 5.43 pence.
Cash flow
As expected, operating cash flow was much improved in the year. This reflected the anticipated receipt of payments on two major projects in particular. As a result, this generated cash inflows from operating activities of £4.37 million (FY2008: £1.16 million outflow) leading to a net cash balance of £4.00 million at the end of FY2009 (FY2008: £1.03 million).
Martin Clements Finance Director 9th June 2009
Consolidated income statement for the year ended 31 March 2009
| 2009 | 2008 | ||
| Notes | £'000 | £'000 | |
| Revenue | 2 | 9,601 | 8,600 |
| Cost of sales | (4,477) | (3,851) | |
| Gross profit | 5,124 | 4,749 | |
| Overheads: | |||
| Distribution costs | (1,075) | (1,170) | |
| Administrative expenses (including exceptional costs of £106,000, FY2008: £270,330) | (2,449) | (2,388) | |
| (3,524) | (3,558) | ||
| Operating profit | 1,600 | 1,191 | |
| Operating profit before exceptional costs | 1,706 | 1,461 | |
| Share based payment expense | (106) | (87) | |
| Aborted acquisition costs | - | (148) | |
| Re-organisation costs | - | (35) | |
| Operating profit after exceptional costs | 1,600 | 1,191 | |
| Finance income | 179 | 219 | |
| Finance costs | (2) | (10) | |
| Net finance income | 177 | 209 | |
| Profit before income tax | 1,777 | 1,400 | |
| Income tax | (54) | 576 | |
| Profit for the year | 1,723 | 1,976 | |
| Attributable to equity holders of the company | 1,723 | 1,976 | |
| Earnings per ordinary share | |||
| Basic | 3 | 5.85 | 6.71 |
| Diluted | 3 | 5.26 | 5.99 |
The operating profit for both years arises from the company's continuing operations. The acquisition of The Coaching Platform Limited did not have a material impact on the results for the financial year.
Consolidation statement of changes in equity for the year ended 31 March 2009
| 2009 | 2008 | ||
| £'000 | £'000 | ||
| Profit for the financial year | 1,723 | 1,976 | |
| New equity issued | 2 | 34 | |
| Cost of employee share option scheme | 106 | 87 | |
| Opening shareholders' equity | 6,141 | 4,044 | |
| Closing shareholders' equity | 7,972 | 6,141 |
Consolidated balance sheet as at 31 March 2009
| 2009 | 2008 | ||
| £000 | £000 | ||
| Non current assets | |||
| Intangible assets | 2,083 | 746 | |
| Property, plant and equipment | 202 | 198 | |
| Trade and other receivables | 345 | 609 | |
| Deferred income tax | 972 | 1,026 | |
| 3,602 | 2,579 | ||
| Current assets | |||
| Trade and other receivables | 2,669 | 4,352 | |
| Cash and cash equivalents | 4,004 | 1,027 | |
| 6,673 | 5,379 | ||
| Total assets | 10,275 | 7,958 | |
| Current liabilities | |||
| Trade and other payables | 2,147 | 1,817 | |
| 2,147 | 1,817 | ||
| Net current assets | 8,128 | 6,141 | |
| Non-current liabilities Contingent consideration | 156 | - | |
| 156 | - | ||
| Net assets | 7,972 | 6,141 | |
| Capital and reserves attributable to equity holders of the company | |||
| Called up share capital | 2,947 | 2,946 | |
| Share premium | 9,900 | 9,899 | |
| Merger reserve | 220 | 220 | |
| Share option reserve | 255 | 149 | |
| Accumulated losses | (5,350) | (7,073) | |
| Total shareholders' equity | 7,972 | 6,141 |
Consolidated cash flow statement for the year ended 31 March 2009
| 2009 | 2008 | ||
| £000 | £000 | ||
| Cash generated/(absorbed) from operations | 4,189 | (1,368) | |
| Net finance income | 177 | 209 | |
| Net cash from operating activities | 4,366 | (1,159) | |
| Investing activities | |||
| Acquisition of subsidiary | (105) | - | |
| Purchases of intangible assets | (1,194) | (734) | |
| Purchases of property, plant and equipment | (93) | (119) | |
| Disposal of property, plant and equipment | 1 | - | |
| Net cash used in investing activities | (1,391) | (853) | |
| Financing activities | |||
| Issue of ordinary shares | 2 | 34 | |
| Net cash from financing activities | 2 | 34 | |
| Net increase/(decrease) in cash and cash equivalents | 2,977 | (1,978) | |
| Cash and cash equivalents at start of the year | 1,027 | 3,005 | |
| Cash and cash equivalents at end of the year | 4,004 | 1,027 |
Notes to the Accounts1. The consolidated financial statements of Focus Solutions Group plc have been prepared on a going concern basis, under the historical cost convention, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), IFRIC interpretations and the Companies Act 1985. The financial information set out herein (which was approved by the Board on 9 June 2009) does not constitute the Company's statutory accounts for the years ended 31 March 2009 and 31 March 2008 but is derived from those statutory accounts. The statutory accounts for the year ended 31 March 2008, have been delivered to the Registrar of Companies.
2. Segmental analysis
The group operates in one business and one geographical segment; the development and sale of software based solutions to the UK and Irish financial services market.
3. Earnings/(loss) per share
The basic earnings per share is based on attributable profit for the year of £1,723,000 (FY2008: £1,976,000) and on 29,462,933 ordinary shares (FY2008: 29,416,007) being the weighted average number of ordinary shares in issue during the year.
The diluted earnings per share is based on attributable profit for the year of £1,723,000 (FY2008: £1,976,000) and on 32,740,597 shares (FY2008: 32,976,779) calculated as follows:
| 2009 | 2008 | |
| '000 | '000 | |
| Basic weighted average number of ordinary shares | 29,463 | 29,416 |
| Dilutive potential ordinary shares: | ||
| Share options | 3,278 | 3,561 |
| 32,741 | 32,977 |
As a result of the recognition of a deferred tax asset, the directors consider that it is appropriate to provide information on a pre-deferred tax fully diluted earnings per share basis.
Pre-deferred tax adjusted basic earnings per share is based on the pre-deferred tax attributable profit for the year of £1,777,000 (FY2008: £1,400,000) and on 29,462,933 ordinary shares (FY2008: 29,416,007) being the weighted average number of ordinary shares in issue during the year.
The pre-deferred tax adjusted fully diluted earnings per share is based on the pre-deferred tax attributable profit for the year of £1,777,000 (FY2008: £1,400,000) and on 32,740,597 shares (FY2008: 32,976,779) calculated as follows:
| 2009 | 2008 | |
| '000 | '000 | |
| Basic weighted average number of ordinary shares | 29,463 | 29,416 |
| Dilutive potential ordinary shares: | ||
| Share options | 3,278 | 3,561 |
| 32,741 | 32,977 | |
| 2009 | 2008 | |
| Pence | Pence | |
| Basic earnings per share | 5.85 | 6.71 |
| Adjusted basic earnings per share | 6.03 | 4.75 |
| Diluted earnings per share | 5.26 | 5.99 |
| Adjusted diluted earnings per share | 5.43 | 4.24 |
4. Cash generated/ (generated) from operations
| 2009 | 2008 | |
| £'000 | £'000 | |
| Profit before income tax | 1,777 | 1,400 |
| Adjustments for: | ||
| Share based payment expense | 106 | 87 |
| Depreciation and amortisation | 301 | 126 |
| Net finance income | (177) | (209) |
| Changes in working capital: | ||
| Trade and other receivables | 1,947 | (1,114) |
| Trade and other payables | 235 | (1,658) |
| Cash generated/(absorbed) from operations | 4,189 | (1,368) |
5. Report and Accounts
Copies of the Report and Accounts will be circulated to shareholders shortly and may be obtained after the posting date from the Company Secretary, Focus Solutions Group Plc, Cranford House, Kenilworth Road, Leamington Spa, CV32 6RQ.
6. AGM
The AGM will be held at 10.00 a.m on 6 August 2009 at the registered office of the Company (Cranford House, Kenilworth Road, Leamington Spa, CV32 6RQ).