Idox Group Regulatory News (IDOX)

26 June 2012

IDOX plc

Interim adjusted* pre-tax profits up 54% on acquisitions and organic growth

IDOX plc (AIM: IDOX, 'IDOX' or the 'Group'), a leading supplier of software and services, announces interim results for the six months ended 30 April 2012.

Highlights

·; Revenue up 58% to £28.6 m (H1 2011: £18.1m)

·; Organic revenue growth of 10%

·; International revenues 31% of total (H1 2011: 9%)

·; Adjusted* pre-tax profits up 54% to £7.3m (H1 2011: £4.7m), reported pre-tax profit up 76% to £3.5m (H1 2011: £2.0m)

·; Adjusted* EPS up 56% at 1.58p (H1 2011: 1.01p); basic EPS 0.69p (H1 2011: 0.41p) 

·; Interim dividend up 15% to 0.275p per share (2011: 0.24p)

·; Completed three earnings-enhancing acquisitions in the first half of 2012 with a further one completed after the period end in May 2012

·; Net Debt £12.1m after funding three acquisitions totalling £15.0m, and increased dividend (H1 2011: net cash £4.1m)

·; Revenue blend between Public and Private operations moving towards parity

* Adjusted pre-tax profits & EPS - derived by adding back exceptional restructuring and corporate finance costs, amortisation and share option costs.

Martin Brooks, Chairman, said:

"The first half of 2012 saw the Group report significant growth in both revenue and profitability. As well as the Group recording strong organic growth, our recent acquisitions have quickly and effectively been integrated, allowing us to expand our operations across an international market place. This new international focus allows revenue to be spread across a number of sectors and geographies, reducing our reliance on the UK public sector.

"We continue to win major new clients across the Group, including the Greater London Authority in our Public Sector division and internationally within our enlarged Engineering Information Management division including Southern, Occidental and CH2M Hill. These new customers demonstrate our increasing ability to win and deliver major contracts to large governmental organisations and multi-national corporations"

Enquiries:

About IDOX plc

IDOX plc is a supplier of specialist document management collaboration solutions and services to the UK public sector and increasingly to highly regulated asset intensive industries around the world in the wider corporate sector.

Its Public Sector Software Division is the leading applications provider to UK local government for core functions relating to land, people and property, such as its market leading planning systems and election management software. Over 90% of UK local authorities are now customers. The Group provides public sector organisations with tools to manage information and knowledge, documents, content, business processes and workflow as well as connecting directly with the citizen via the web.

Through the Information Solutions Division IDOX also supplies, predominantly to the public sector, decision support content such as grants and planning policy information as well as related specialist services.

The Engineering Information Management Division delivers engineering document management and control applications to many leading companies in industries such as oil & gas, mining, utilities, pharmaceuticals and transportation around the world.

In addition the Group provides knowledge and content management skills to customers through its TFPL branded recruitment division.

The Group employs over 450 staff located in the UK, the USA, Europe, India and Australia.For more information see www.idoxplc.com

Overview

IDOX delivered a strong performance in the first half of 2012 against a background of global uncertainty and falling confidence in the world's major economies. It was particularly pleasing to see that across the Group there was a meaningful improvement in organic growth, particularly in the Engineering Information Division, as well as a 58% Group headline revenue growth rate. This has translated into a significant rise in adjusted pre-tax profits to £7.3m (H1 2011: £4.7m), a 54% uplift.

New initiatives and innovations across the Group have helped to achieve this excellent result and a new divisional management structure, together with the creation of lower level profit centre teams, have accentuated the focus on performance.

The acquisition of CTSpace completed early in the current financial year has now been fully integrated with McLaren Software, on schedule, to create the enlarged Engineering Information Management ("EIM") Division and is operating in line with the post acquisition strategy.

The year started strongly with the Information Solutions Division winning the landmark managed services outsourcing contract for the Greater London Authority (GLA) library. This has been successfully completed and went live at the end of April 2012, offering an improved service to GLA internal information service users.

The first half ended with a number of key customer deals in the Public Sector Software Division where there were further wins against incumbent competitors. The EIM Division further broadened its customer base with contract wins in utilities with Southern Corporation, in engineering and construction with CH2M Hill, and in the core oil & gas market with Occidental.

The Group completed two acquisitions either side of the half year. Opt2Vote, based in Northern Ireland, complements our previous acquisition in 2010 of Strand Electoral systems to give us a fully integrated elections solution product. In May 2012 Opt2Vote successfully provided the e-count solution for Scotland in the local government elections.

Dutch based Currency Connect, now renamed Innovation Connect, was acquired in May 2012 to expand the capabilities of our Information Solutions Division. In addition to grants information we now have an expanded offering to encompass grants training, consulting and management. Our existing Dutch grants business has moved to Goor, Netherlands to join Innovation Connect in a merged location.

Operational Review

The Public Sector Software Division has completed a wide ranging review of systems and internal processes to change the way it delivers services to customers to enable it to continue to improve performance. These changes will improve customer service and productivity with the introduction of a new ERP system in the second half of the year. Three of the four off-premise outsourcing contracts which closed at the end of last year went live during the period with the remaining one, Westminster, on track to go live in June 2012.

The EIM Division has recently launched a new website combining the legacy McLaren and CTSpace websites and started to offer an integrated enterprise and Cloud solution to meet customer demand. The integrated EIM team has now agreed on a combined integrated roadmap and work has commenced on a range of product enhancements to improve and broaden the current offering.

The Information Solutions Division's renewal rates were ahead of last year and its project work pipeline has continued to grow. The newly-acquired Interactive Dialogues e-learning products are now being used across the Group as well as launching a new product to cover corporate training and monitoring of the UK Bribery Act.

The Recruitment Division continues to make progress in a difficult market with steady growth in permanent and direct engagement revenues counteracting a fall in contract recruitment.

This year the Group has started to invest in its development resources in offices in London, Newbury and Pune as the business moves forward, adding young graduate talent as part of an initiative to unlock innovation from the knowledge base of the business.

Outlook

Orders closed in the first half of the financial year, together with continued robust recurring revenues and professional services order backlog, gives us good visibility and confidence in the achievement of management expectations for the full year despite the current Eurozone and potentially wider economic turmoil.

We will continue to work in close partnership with UK Local Government, which strives to find new and innovative cost effective ways of improving services through shared, hosted services and collaboration with organisations such as IDOX which provide the skills and capability to achieve this.

Our revenues are becoming increasingly diversified across both vertical markets and geographically through our Engineering Information Management business. We continue to diversify beyond our core oil & gas markets into global asset intensive markets such as utilities, construction and nuclear where we have recently won a small but significant contract in China.

As the Group's strategic direction progresses through acquisition, organic growth and international expansion, we expect to report a more even blend of revenue mix across the divisions, reducing reliance upon the public sector.

Financial review

Revenues and operating profits in the first half of the financial year were substantially ahead of 2011 as a combination of organic growth and acquisitions helped deliver a 58% growth in revenues to £28.6m (H1 2011: £18.1m) and a 54% increase in adjusted pre-tax profits (which exclude amortisation, share option costs and exceptional restructuring and corporate finance costs) to £7.3m (H1 2011: £4.7m).

The Public Sector Software division delivered an increase in revenues of 16% to £14.6m (H1 2011: £12.6m) with 3% organic revenue growth after stripping out the impact of the LalPac and Opt2Vote acquisitions. Revenue from new software and services sales to local government was encouraging, showing an increase of 17% and the pipeline of managed service and hosted opportunities continues to grow. Elections management company Opt2Vote, which was acquired in March 2012, delivered revenues of £1.2m as election activity and therefore revenue recognition is concentrated around the election cycle. Recurring revenues on a like-for-like basis accounted for 65% of revenues (H1 2011: 65%).

The EIM Division which in 2011 comprised McLaren Software was enlarged through the acquisition of CTSpace in November 2011 and delivered revenues of £8.9m (H1 2011: £1.5m), 31% of total Group revenues of which 46% were recurring (H1 2011: 45%). On an organic basis McLaren Software's revenues more than doubled to £3.7m, aided by the significant contract win with Oxy Inc. The integration of CTSpace is now complete and cost synergies with McLaren Software realised enabling the EIM Division to deliver a 29% EBITDA contribution of £2.6m (H1 2011: £0.1m).

The Information Solutions Division increased revenues by 44% to £3.6m (H1 2011: £2.5m), reflecting the positive impact of the Interactive Dialogues acquisition in November 2011. Subscription-based recurring revenues from the grants and policy information business now account for 69% (H1 2011: 67%) of divisional revenue on a like-for-like basis. The business delivered EBITDA of £0.6m (H1 2011: £0.4m), a 61% increase.

Gross margins in the Recruitment Division increased by 18% to £0.8m (H1 2011: £0.7m), reflecting the improved mix of higher margin permanent recruitment business despite a slight decline in top line revenues to £1.4m (H1 2011: £1.5m).

Gross margins at the Group level improved from 86% to 88%, reflecting the shift in mix across all divisions toward higher-margin recurring revenues, aided by the acquisitions.

Operating costs increased to £17.0m (H1 2011: £10.4m) as a result of acquisitions made over the past year. On a like-for-like basis, excluding acquisitions, operating costs rose by 7% reflecting investment in software development innovation and sales investment in growth areas such as Australia.

EBITDA increased by 58% to £8.2m at a margin of 29% (H1 2011: £5.2m, 29%) that reflected the strong revenue growth, increasing gross margins and swift realisation of acquisition synergies.

Net financing costs increased to £0.6m (H1 2011: £0.2m) as a result of an increase in acquisition financing facilities.

Reported pre-tax profits were £3.5m (H1 2011: £2.0m) after an intangible amortisation charge of £2.3m (H1 2011: £1.8m) related to acquisitions coupled with a share option charge of £0.3m (H1 2011: £0.5m) and exceptional costs of £1.2m (H1 2011: £0.4m) related to transactional acquisition costs (£0.9m) and acquisition restructuring charges (£0.3m).

Adjusted earnings per share increased by 56% to 1.58p (H1 2011: 1.01p). Basic earnings per share were 0.69p (H1 2011: 0.41p).

The Board continues to pursue a progressive dividend policy whilst ensuring the balance sheet remains robust to take advantage of future acquisition opportunities. The interim dividend has been increased by 15% to 0.275p (interim 2011: 0.24p). It will be paid on 22 August 2012 to shareholders on the register at 10 August 2012.

The recent acquisitions have been funded from new debt facilities provided by the Group's existing bankers, Lloyds Banking Group. A term loan of £12m together with a revolving credit facility of £10m and a flexible acquisition facility of a further £10m have been agreed. At 30 April 2012 there was a total drawdown of £23.7m against these facilities. Cash balances at the end of April were £11.6m resulting in a net debt position of £12.1m.

Since 30 April 2012, a payment of £3.5m has been made to acquire Currency Connect, a Dutch- based grants advisory business which will expand our current grants information service.

Consolidated Interim Statement of Comprehensive Income

For the six months ended 30 April 2012

The accompanying notes form an integral part of these financial statements.

Consolidated Interim Balance Sheet

At 30 April 2012

The accompanying notes form an integral part of these financial statements.

Consolidated Interim Statement of Changes in Equity

The accompanying notes form an integral part of these financial statements.

Consolidated Interim Statement of Cash Flows

For the six months ended 30 April 2012

The accompanying notes form an integral part of these financial statements.

Notes to the Interim Consolidated Financial Statements

For the six months ended 30 April 2012

1. GENERAL INFORMATION

IDOX plc is a supplier of specialist document management collaboration solutions and services to the UK public sector and increasingly to highly regulated asset intensive industries around the world in the wider corporate sector.  The Company is a public limited company which is listed on the Alternative Investment Market and is incorporated and domiciled in the UK. The address of its registered office is Chancery Exchange,10 Furnival Street, London, EC4A 1AB. The registered number of the company is 03984070.

2. BASIS OF PREPARATION

The financial information for the period ended 30 April 2012 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 October 2011 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006.

The interim financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 31 October 2012. The Group financial statements for the year ended 31 October 2011 were prepared under International Financial Reporting Standards as adopted by the European Union. These interim financial statements have been prepared on a consistent basis and format. The provisions of IAS 34 'Interim Financial Reporting' have not been applied in full.

3. SEGMENTAL ANALYSIS

In previous periods, the Group was organised into three main business segments. Following the acquisition and integration of McLaren Software Group and CT Space Group, the Group now includes an Engineering Software segment. As at 30 April 2012, the Group is primarily organised into four main business segments, which are detailed below. Segmental analysis for the comparative period to 30 April 2011 has been restated to show results for all four business segments.

Financial information is reported to the Board on a business unit basis with revenue and operating profits split by business unit. Each business unit is deemed a reportable segment as each offer different products and services.

·; Public Sector Software - delivering software and service solutions to mainly local government customers across a broad range of departments

·; Engineering Software - delivering engineering document management and control solutions to asset intensive industry sectors

·; Information Solutions - delivering both an information service and consultancy services to a diverse range of customers across both private and public sectors

·; Recruitment - providing personnel with information, knowledge, records and content management expertise to a diverse range of customers

Segment revenue comprises sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the board represents the profit earned by each segment before the allocation of taxation, interest payments and corporate finance costs. The assets and liabilities of the Group are not reviewed by the chief decision-maker on a segment basis.

The Group does not place reliance on any specific customer and has no individual customer that generates 10% or more of its total Group revenue.

The segment results for the 6 months to 30 April 2012 are as follows:

The segment results for the 6 months to 30 April 2011 (restated) are as follows:

Reconciliations of reportable profit:

Other financial costs relate to bank interest, exchange differences and bank facility fee amortisation, which have not been included in reportable segments. Amortisation arising on IFRS intangible assets has been allocated to business segments in 2012 and the 2011 comparatives have been restated.

4. TAX ON PROFIT ON ORDINARY ACTIVITIES

Unrecognised trading losses of £6,061,000 (30 April 2011: £8,938,000), which when calculated at the standard rate of corporation tax in the United Kingdom of 24%, amounts to £1,455,000 (30 April 2011: £2,324,000). These remain available to offset against future taxable trading profits. Unrecognised capital losses of £4,210,000 (30 April 2011: £4,210,000) remain available to offset against future capital profits. These deferred tax assets are not recognised as they are considered to have fair value of £nil.

5. EARNINGS PER SHARE

The earnings per share is calculated by reference to the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during each period, as follows:

6. DIVIDENDS

During the period a dividend was paid in respect of the year ended 31 October 2011 of 0.36p per Ordinary share at a total cost of £1,245,000 (2010: 0.35p, £1,204,000).

A dividend of 0.275p per ordinary share at a total cost of £952,000 has been proposed in respect of the interim period ended 30 April 2012 (2011: 0.24p, £823,000).

7. ACQUISITIONS

Interactive Dialogues Limited

On 7 November 2011, the Group acquired Interactive Dialogues Limited and Interactive Dialogues NV ("ID") for a total consideration of €2.2m (£1.9m) in cash. ID is a leading supplier of e-learning and information solutions in Europe enabling organisations to conduct 'dialogues' with employees, customers and suppliers to achieve legislative compliance in areas such as Competition Law and the UK Bribery Act. The acquisition of ID extends the range of solutions available within the Idox Information Solutions business and provides Idox with an e-learning platform that will be used to support customers across the Group.

An initial payment of €2m has been made on completion and a further €0.2m is payable one year after completion subject to the fulfilment of certain conditions. ID had revenues of €2.4m for the year ended 31 May 2011.

Goodwill arising on the acquisition of ID has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of ID with Idox. None of the goodwill recognised is expected to be deductible for income tax purposes. The purchase of ID has been accounted for using the acquisition method of accounting.

Satisfied by:

The fair values stated above are provisional. The fair value adjustment for the intangible assets relates to customer relationships, trade names and software. A related deferred tax liability has also been recorded as a fair value adjustment.

The fair value of trade debtors is equal to the gross contractual amounts receivable. All debts have been reviewed and are considered recoverable.

The revenue included in the consolidated interim statement of comprehensive income since 7 November 2011, contributed by ID was £1,372k . ID also contributed a profit after tax of £367k for the same period. If ID had been included from 1 November, it would have contributed revenue of £1,372k and a profit after tax of £342k.

Acquisition costs of £82k have been written off in the consolidated interim statement of comprehensive income.

CTSpace

On 15 November 2011, the Group acquired CTSpace, an engineering and construction sector document management and control business, for £11.6m in cash from Sword Group.

CTSpace provides document management and collaboration workflow applications for the global construction and engineering industry and will complement the McLaren Software business that IDOX acquired in December 2010. CTSpace provides both Software as a Service ('SaaS') and on-premise enterprise solutions, the latter of which leverage an organisation's existing investment in leading enterprise content management ('ECM') platforms such as IBM FileNet®, EMC Documentum® or Microsoft SharePoint®. When deployed with leading enterprise content management platforms, CTSpace's products provide an integrated, best practice environment that supports a project's entire lifecycle.

Goodwill arising on the acquisition of CTSpace has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of CTSpace with Idox. None of the goodwill recognised is expected to be deductible for income tax purposes. The purchase of CTSpace has been accounted for using the acquisition method of accounting.

The fair values stated above are provisional. The fair value adjustment for the intangible assets relates to customer relationships, trade names and software. A related deferred tax liability has also been recorded as a fair value adjustment. Other adjustments relate to depreciation, bad debt provision and accrued income to bring these in line with Idox Group policies.

The fair value of trade debtors is equal to the gross contractual amounts receivable. All debts have been reviewed and are considered recoverable.

The revenue included in the consolidated interim statement of comprehensive income since 15 November 2011, contributed by CTSpace was £5,216k. CTSpace also contributed a profit after tax of £540k for the same period. If CTSpace had been included from 1 November, it would have contributed revenue of £5,617k and a profit after tax of £407k.

Acquisition costs of £488k have been written off in the consolidated interim statement of comprehensive income.

Opt2Vote

On 27 March 2012, the Group acquired Opt2Vote Ltd, one of the UK's leading providers of electoral managed services and innovative democracy solutions, for a maximum cash consideration of £3.5m.

Opt2Vote provides expertise and knowledge across all areas of election management and specialises in the provision of managed services solutions and innovation in areas such as e-Counting and Early Voting. Opt2Vote supplies electronic vote counting solutions to the 32 Scottish local authorities as well as managed print services to UK councils. It is based in Londonderry, Northern Ireland. Opt2Vote products and services will complement solutions provided by Strand Electoral Software, acquired by IDOX in 2010 and will enable the Group to deliver a comprehensive range of democratic solutions and managed services.

Goodwill arising on the acquisition of Opt2Vote has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of Opt2Vote with Idox. None of the goodwill recognised is expected to be deductible for income tax purposes. The purchase of Opt2Vote has been accounted for using the acquisition method of accounting.

Satisfied by:

The fair values stated above are provisional. The fair value adjustment for the intangible assets relates to customer relationships, trade names and software. A related deferred tax liability has also been recorded as a fair value adjustment.

The fair value of trade debtors is equal to the gross contractual amounts receivable. All debts have been reviewed and are considered recoverable.

The revenue included in the consolidated interim statement of comprehensive income since 27 March 2012, contributed by Opt2Vote was £1,228k . Opt2Vote also contributed a profit after tax of £508k for the same period. If Opt2Vote had been included from 1 November, it would have contributed revenue of £1,737k and a profit after tax of £163k.

Acquisition costs of £58k have been written off in the consolidated interim statement of comprehensive income.

During the period a retention payment of £64,000 was made in relation to the acquisition of Grantfinder Limited in May 2010.

8. POST BALANCE SHEET EVENTS

On 3 May 2012 the Group acquired Currency Connect Holdings BV ('Currency Connect'), a significant Dutch based grants advisory business, for a maximum cash consideration of €4.7m (£3.8m).

Currency Connect provides expertise and knowledge that helps clients obtain funding for innovation projects through grant-based subsidies and research & development tax credits. It monitors and informs customers of innovation subsidies, prepares grant applications and administers the end-to-end process. In addition, Currency Connect provides grants management software and advises clients on process change to enable them to accelerate their innovation and consequent eligibility for related grants.

IDOX will pay an initial consideration of €4.3m (£3.5m), with a further payment of €0.4m (£0.3m) in 2013 dependent on the achievement of certain performance conditions. Currency Connect reported revenue of €2.7m (£2.2m) and operating profit of €1.1m (£0.9m) in the year ended 31 December 2011 and has €0.3m (£0.25m) of cash. The acquisition will be funded from IDOX's cash and existing debt facilities.

IDOX Information Solutions is already the leading grants information provider in both the UK and the Netherlands. This acquisition will extend the current offering, particularly in the growing innovation funding space. Leveraging Currency Connect's advanced processes, software and skills will accelerate the move into providing a full grants consultancy service in the UK, the Netherlands and other European Union countries such as Germany and France, utilising IDOX's existing infrastructure.

Full IFRS(3) disclosure has not been included in the financial statements due to the timing of the acquisition.

Independent Review Report to IDOX plc

For the six months ended 30 April 2012

Introduction

We have been engaged by the Company to review the financial information in the half-yearly financial report for the six months ended 30 April 2012 which comprises the Consolidated Interim Statement of Comprehensive Income, the Consolidated Interim Balance Sheet, the Consolidated Interim Statement of Changes in Equity, the Consolidated Interim Statement of Cash Flows and the related notes. We have read the other information contained in the half yearly financial report which comprises only the highlights, overview, operational review, outlook and financial review considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in Note 2.

Our responsibility

Our responsibility is to express to the Company a conclusion on the financial information in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 April 2012 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 2.

GRANT THORNTON UK LLPAUDITOR

London

26 June 2012