Idox Group Regulatory News (IDOX)

9 Jul 2007 08:00

IDOX PLC09 July 2007 09 July 2007IDOX plc IDOX plc ('IDOX') Announcement of Interim Results IDOX plc (AIM:IDOX), the information management company, specialising in thedevelopment and delivery of software products, services and people principallyto the public sector, today announced its interim results for the half yearended 30 April 2007. Highlights: • Successful turnaround with profit before tax £0.24m (2006 £nil) • Cash balances up 15% to £6.19m (2006 £5.38m) • Earnings per share 0.24p (2006 loss per share 0.07p) • Maiden dividend paid • Core Software business achieved double digit revenue growth of 15% with continuing significant contract wins • Improved gross margins in the Information Solutions business • Slowly improving trading in the Recruitment business with discussions ongoing with a number of interested parties looking to acquire this division Martin Brooks, Chairman of IDOX, said, "We achieved the turnaround required in the profitability of the business in thefirst half of the year and the progress of our core software business has beenparticularly gratifying in terms of new orders and overall revenues. Thesubsequent acquisition of CAPS Solutions Ltd, on 7 June 2007, has demonstratedour renewed and focused commitment to the public sector software and servicesmarket. Integration of the businesses is proceeding well and we expect the Groupto deliver eventual benefits ahead of plan under the leadership of our new chiefexecutive, Steve Ainsworth working alongside Richard Kellett-Clarke as COO/CFO." For further information, call:IDOX plcMartin Brooks, Chairman 0870 333 7101Steve Ainsworth, CEO 0870 333 7101Richard Kellett-Clarke, COO/CFO 0870 333 7101 Noble & Company LimitedMatthew Hall, Director 020 7763 2200 Chairman's Statement IDOX made a good trading recovery in the first half of the year compared to thesame period last year and as a result Group profitability was in excess of thatachieved in the first half of 2005. This was accompanied by further improvementsin cash flow. This was principally due to an excellent improvement in revenue growth in ourcore software business, as well as maintenance of revenues in our informationsolutions business and a turnaround in profitability. There was a slow recoveryin the contract recruitment revenues from the low point in the second half oflast year, but it still remains at a level below the same period last year. As a result, whilst gross margins have improved, the headline Group revenuenumber was slightly below the 2006 figure. The recruitment business is scheduledfor divestment in the second half of the year. The transforming acquisition of CAPS Solutions Ltd (CAPS) was completed on 7June 2007 for a consideration of £21m before costs. This acquisitionconsolidates our position and makes us the leading provider of Land and Propertysoftware and solutions in the UK local authority market. The transaction wasfunded through a combination of a placing, which was heavily oversubscribed,debt, and through existing cash resources. This acquisition more than doubles the size of the Group. A new combinedmanagement team drawn from both CAPS and IDOX, and an integration plan whichwill yield significant cost benefits is at an advanced stage of consultationprior to implementation during the summer months. The acquisition also cements our stated intention at the end of the lastfinancial year, of a renewed focus on the local authority software business asthe best way of rebuilding and enhancing shareholder value. We have completed the first steps of the integration process ahead of scheduleand have already completed the actions necessary to deliver the forecast £1.5mof annual cost savings and have identified further savings which will yield ahigher total, on completion of consultation on further reorganisation and therationalisation of property assets. The acquisition allows us access to a combined customer base of over 320 localauthority customers which provides the Group with the exciting opportunity todeliver software and solutions to some 70% of the local authorities in the UK. Financial Review Revenues for the half year were 3% below the same period last year, with the lowgross margin contract recruitment revenues off-setting a strong performance inthe software division, where revenues were 15% ahead. The Group made a profit before taxation of £0.24m compared to a break-evenposition last year. The Company paid a maiden dividend but, through continued strong cash managementand a change in billing processes, ended the half year with cash of £6.19mcompared to £5.38m at the same time last year. Operational Review Software The division was reorganised in the last quarter of the 2006 calendar year andrefocused on quality of service and product. It achieved early success inclosing new Revenues and Benefits product sales and has gone on to successfullydeliver and install them in record time. The division's revenues grew strongly, up 15% on the same period last year andare continuing to make similar progress in the second half. The gross marginfell slightly, down 3% to 84% due, in part, to a change in mix of sales. Thesales organisation was strengthened with a greater emphasis on customer care andservice with the introduction of more client managers and a focus into regionalteams. Information Solutions Revenues for the first half were similar to the same period last year and thegross margin improved by 7% to 67%. This was due to a change in the mix ofservices provided. There have been some notable contract wins during the period,including one from one of the largest professional services organisations in theworld and another from an international business information company. Recruitment Revenues in the first half were 24% lower than the same period last year. Wepreviously reported a drop in contract sales and a shift to direct billing. On agross margin basis the first half of the year has improved 5% over the secondhalf of last year but as yet has not returned to the same level as the firsthalf of last year. With the change in mix of revenues the gross margin hasimproved by 4% from the same period last year to 43%. Divestment of the Recruitment Business The Group has commenced the process of drawing up a short list of potentialacquirers and circulating a sales memorandum. Discussions are on going with anumber of parties. Senior Management and Succession Last summer I indicated to the Board that I was prepared to take on the role ofinterim chief executive in addition to that of chairman to undertake a processof reorganisation and recovery, and to reset the strategic direction of thebusiness. This has now been largely accomplished, and on completion of the CAPSacquisition, I have handed over the role of chief executive to Steve Ainsworth,formerly managing director of CAPS, a year to the day since I took it on. Steve will now run the enlarged Group and I am very pleased that he and his teamfrom CAPS are now joining us. I have reverted to my former role as chairman. Iwould also like to thank Richard Kellett-Clarke who now assumes the additionalrole of Chief Operating Officer as well Chief Financial Officer, for all hisdedication and professionalism in achieving this with me. Strategy The acquisition of CAPS marks the first decisive step in the restatement ofstrategy we made last year namely; a renewed focus on the IDOX core business ofproviding software, solutions and services to government, particularly localgovernment and related bodies. The local government sector, in particular,accounts for the largest proportion of public sector ICT spend and we believethe outlook for future expenditure remains reasonable in a consolidatingsupplier market. We aim to continue developing our business with this market inmind and to take advantage of these consolidating opportunities. Outlook The immediate outlook for the combined IDOX and CAPS business continues to beencouraging. Since the half year end new business wins have continued. We haverecently won a significant software contract combining both the CAPS and IDOXproduct offerings at Newcastle City Council. Other software contracts alreadywon in the current half year include Clackmannanshire County Council and WestBerkshire District Council. In addition the information solutions business hasjust concluded a long-term consultancy agreement with the Countryside Commissionfor Wales (CCW). The Group has also been short listed as a potential supplier for the ScottishExecutive's planning system project. We expect the enlarged Group's performance in the second half of the year,following the acquisition of CAPS, to be in line with market expectations. Conclusion It has been a privilege to serve as chief executive during this past year, and Ilook forward to the continued progress of the Group during the coming years. I would like to thank our staff for their professionalism and support duringthis past year, and look forward to the opportunities that the newly enlargedGroup will offer them in the coming months and years. Martin BrooksChairman6 July 2007 This announcement was approved by the Board of Directors on 6 July 2007. Consolidated Profit and Loss AccountFor the six months ended 30 April 2007 Note 6 months to 30 6 months to 30 12 months to April 2007 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000Turnover (2) 6,686 6,912 13,031External charges (2,153) (2,604) (4,473) ________ _______ _______ 4,533 4,308 8,558Staff costs (2,935) (2,902) (5,931)Exceptional staff costs (3) - - (299)Other operating charges (1,455) (1,471) (2,992) ________ _______ _______Operating profit/(loss) 143 (65) (664)Interest receivable 96 66 149 ________ _______ _______Profit/(loss) on ordinary activities before taxation 239 1 (515)Tax on profit/(loss) on ordinary activities (4) 223 (130) (472) ________ _______ _______Profit/(loss) on ordinary activities after taxation 462 (129) (987) ________ _______ _______Earnings/(loss) per share (pence)Basic and diluted (5) 0.24p (0.07)p (0.51)p Consolidated Balance SheetAt 30 April 2007 Note At At At 30 April 2007 30 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Fixed assetsIntangible assets 3,735 4,313 4,024Tangible assets 423 511 433 ________ _______ _______ 4,158 4,824 4,457Current assetsDebtors 3,609 3,863 3,019DebtorsCash at bank and in hand 6,189 5,384 4,830 ________ _______ _______ 9,798 9,247 7,849 Creditors: amounts falling due within one year (5,071) (4,790) (3,899) ________ _______ _______ Net current assets 4,727 4,457 3,950 ________ _______ _______ Total assets less current liabilities 8,885 9,281 8,407 Creditors: amounts falling due after more than one year - (10) - ________ _______ _______ Net assets 8,885 9,271 8,407 ________ _______ _______ Capital and reservesCalled up share capital (7) 1,953 1,953 1,953Capital redemption reserve (8) 1,112 1,112 1,112Share premium account (8) 820 8,982 820Shares options reserve (8) 128 - -Other reserves (8) 1,294 1,294 1,294ESOP trust (8) (100) (90) (96) ________ _______ _______Profit and loss account (8) 3,678 (3,980) 3,324Shareholders' funds 8,885 9,271 8,407 ________ _______ _______ Consolidated Cash Flow StatementFor the six months ended 30 April 2007 Note 6 months to 30 6 months to 30 12 months to April 2007 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Net cash inflow from operating activities (9) 1,704 926 554 Returns on investments and servicingof financeInterest received 96 66 149 ________ _______ _______ Net cash inflow from returns on investments and servicing of finance 96 66 149 Capital expenditure and financialinvestmentPurchase of tangible fixed assets (139) (319) (378)Purchase of investment (ESOP trust) (4) (11) (17) ________ _______ _______ Net cash outflow from capital expenditure and financial investment (143) (330) (395) Equity dividends paid (98) - - AcquisitionsDeferred consideration paid (200) - (200) ________ _______ _______Net cash outflow from acquisitions (200) - (200) ________ _______ _______Increase in cash (10) 1,359 662 108 ________ _______ _______ Notes on the Interim ReportFor the six months to 30 April 2007 1 BASIS OF PREPARATION The interim financial information has been prepared in accordance withapplicable United Kingdom accounting standards and under the historical costconvention. The principal accounting policies of the Group are set out in theGroup's 2006 annual report and financial statements. The policies remain asstated in the annual report for the year ended 31 October 2006 with theexception of the adoption of FRS 20 'Share Based Payments'. This has resultedin a charge to the current period results of £128,000. There was no impact onthe results for prior periods as a result of adopting FRS 20. The financialinformation set out in this report does not constitute statutory accounts asdefined in section 240 of the Companies Act 1985. The figures for the year ended31 October 2006 have been extracted from the statutory accounts, which have beenfiled with the Registrar of Companies. The auditors' report on those financialstatements was unqualified and did not contain a statement under section 237(2)of the Companies Act 1985. The interim financial statements have been reviewedby the Company's auditors. A copy of the auditors' review report is attached tothis Interim Report. 2 SEGMENTAL ANALYSIS Turnover, operating profit and net assets by class of business are set outbelow: 6 months to 6 months to 12 months to 30 April 2007 30 April 2006* 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000TurnoverSoftware Solutions 3,054 2,661 5,204Information Solutions 1,703 1,711 3,271Recruitment 1,929 2,540 4,556 ________ ________ ________ 6,686 6,912 13,031 ________ ________ ________Operating profit/(loss)Software Solutions 665 411 286Information Solutions 86 (278) (436)Recruitment (191) 91 64 ________ ________ ________ 560 224 (86)Share options charge (128) - -Goodwill amortisation (289) (289) (578) ________ ________ ________ 143 (65) (664) ________ ________ ________ Net assetsSoftware Solutions 2,352 1,908 1,750Information Solutions 1,312 1,227 1,100Recruitment 1,486 1,823 1,533 ________ ________ ________ 5,150 4,958 4,383Goodwill 3,735 4,313 4,024 ________ ________ ________ 8,885 9,271 8,407 ________ ________ ________ * Results for the 6 months to 30 April 2006 have been restated to be in linewith segmental analysis for other periods. 3 EXCEPTIONAL STAFF COSTS Exceptional costs of £299,000 in the 12 months to October 2006 relate to theimplementation of the Group's announced policy of restructuring and refocusingthe business. 4 TAX ON PROFIT ON ORDINARY ACTIVITIES The tax (credit)/charge is made up as follows: 6 months to 6 months to 12 months to 30 April 2007 30 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000Current taxUK corporation tax 28 - 43 ________ ________ ________Adjustment in respect of prior periods - 41 - ________ ________ ________Total current tax 28 41 43 ________ ________ ________Deferred tax - origination and reversal of timing differences (251) 89 429 ________ ________ ________Tax (credit)/charge on profit on ordinary activities (223) 130 472 ________ ________ ________ During the period, £624,000 of tax losses surrendered in exchange for theresearch and development tax credits in respect of the year ended 31 October2003 were reinstated. Unrelieved trading losses of £1,394,000 (30 April 2006:£1,683,000), which when calculated at the standard rate of corporation tax inthe United Kingdom of 30%, amounts to £418,000 (30 April 2006: £505,000). Theseremain available to offset against future taxable trading profits. The deferred tax asset recognised is as set out below: At At At 30 April 2007 30 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000Accelerated capital allowances 61 105 75 ________ ________ ________Other timing differences 60 19 28 ________ ________ ________Tax losses carried forward 418 505 185 ________ ________ ________ 539 629 288 ________ ________ ________ There were no unprovided deferred tax assets or liabilities at 30 April 2007, 30April 2006 or 31 October 2006. 5 EARNINGS/(loss) PER SHARE The earnings/(loss) per share is calculated by reference to the earnings/(loss)attributable to ordinary shareholders divided by the weighted average number ofshares in issue during each period, as follows: 6 months to 6 months to 12 months to 30 April 2007 30 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000Profit/(loss) for the period 462 (129) (987) ________ ________ ________Weighted average number of shares in issue 194,229,779 190,479,843 192,517,399 ________ ________ ________Basic and diluted earnings/(loss) per share 0.24p (0.07)p (0.51)p The share options are anti dilutive under FRS 22. 6 DIVIDENDS 6 months to 6 months to 12 months to 30 April 2006 30 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000Final dividend paid in respect of the year ended 31 October 2006 108 - - ________ ________ ________Pence per ordinary share 0.05p - - ________ ________ ________ 7 SHARE CAPITAL At At At 30 April 2006 30 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000Authorised: 297,000,000 ordinary shares of 1p each 2,970 2,970 2,970 ________ ________ ________Allotted, called up and fully paid 195,260,900 ordinary shares of 1p each 1,953 1,953 1,953 ________ ________ ________ 8 SHARE PREMIUM ACCOUNT AND RESERVES Issued share Capital Share Share Other ESOP Profit and Total capital redemption premium options reserves trust loss account reserve reserve £000 £000 £000 £000 £000 £000 £000 £000 At 1 November2006 1,953 1,112 820 - 1,294 (96) 3,324 8,407Share optionsgranted - - - 128 - - - 128Equity dividends paid - - - - - - (108) (108)ESOP - - - - - (4) - (4)trust - - - - - (4) - (4)Profit forthe period - - - - - - 462 462 ______ _______ ______ ______ _______ _______ _______ _______At 30 April 2007 1,953 1,112 820 128 1,294 (100) 3,678 8,885 ______ _______ ______ ______ _______ _______ _______ _______ The capital redemption reserve for the Group and the Company was created during2003 when the entire deferred ordinary share capital was bought in exchange forone ordinary 1p share. Other reserves relate to the issued share capital andshare premium account in the Company's subsidiary undertaking, IDOX SoftwareLimited, and has been treated in accordance with FRS 6 under merger accounting.The share options reserve relates to the charge arising under FRS 20 in relationto the 4.5 million share options granted in the period. 9 NET CASH INFLOW FROM OPERATING ACTIVITIES 6 months to 6 months to 12 months to 30 April 2007 30 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Operating profit/(loss) 143 (65) (664)Depreciation 149 133 270Goodwill amortisation 289 289 578Share options charge 128 - -(Increase)/decrease in debtors (339) 139 642Increase/(decrease) in creditors 1,334 430 (272) ______ ______ ______Net cash inflow from operating activities 1,704 926 554 ______ ______ ______ 10 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 6 months to 6 months to 12 months to 30 April 2007 30 April 2006 31 October 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Increase in cash in the period, being movement in net funds in the period 1,359 662 108Net funds at 1 November 2006 4,830 4,722 4,722 ________ _______ ______Net funds at 30 April 2007 6,189 5,384 4,830 ________ _______ ______ 11 POST BALANCE SHEET EVENTS On 31 May 2007, the Group purchased 123,328 ordinary shares in the Company at aprice of 9p as part of the IDOX share investment plan. Of the shares purchased,half relates to the matching shares purchased by the Group. On 7 June 2007, the acquisition of CAPS Solutions Limited was completed at aconsideration of £21 million. CAPS Solutions Limited is a privately owned,profitable UK based company focused on the provision of software solutions,primarily to local authorities. In order to finance in part the acquisition, £11 million was raised (£9.6million after expenses) by way of a Placing of 146,666,667 New Ordinary Sharesof 1p each in the Company at 7.5p per share. The New Ordinary Shares rank paripassu with the existing ordinary shares of the Company. £12 million (£11.6million after expenses) in bank debt has been raised, comprising of two termloans totalling £8 million and a revolving credit facility of £4 million. Oncompletion of the acquisition, Martin Brooks stepped down as CEO of the Groupto resume his role as Chairman and Steve Ainsworth (CEO of CAPS SolutionsLimited) took over the role of CEO of the Group. On 7 June 2007 the Companygranted options over 4.5 million ordinary shares of 1p each in the Company, at aprice of 7.5p per share, to Steve Ainsworth on the recommendation of theRemuneration Committee. The options are granted under both the IDOX Plcenterprise management incentive scheme and the IDOX Plc Share Option Plan. INDEPENDENT REVIEW REPORT TO IDOX PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 April 2007 which comprises the consolidated profit andloss account, consolidated balance sheet, consolidated cash flow statement andthe related notes 1 to 11. We have read the other information contained in theinterim report which comprises only the Chairman's statement and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. Our responsibilities do not extend to any otherinformation. This report is made solely to the company's members, as a body, in accordancewith guidance contained in APB Bulletin 1999/4 "Review of Interim FinancialInformation". Our review work has been undertaken so that we might state to thecompany's members those matters we are required to state to them in a reviewreport and for no other purpose. To the fullest extent permitted by law, we donot accept or assume responsibility to anyone other than the company and thecompany's members as a body, for our review work, for this report, or for theconclusion we have formed. Directors' Responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. They areresponsible for preparing the interim report and ensuring that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review Work Performed We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists primarily of making enquiriesof management and applying analytical procedures to the financial informationand underlying financial data and based thereon, assessing whether theaccounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards of Auditing (UK & Ireland) and therefore provides alower level of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review Conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 April 2007. GRANT THORNTON UK LLPCHARTERED ACCOUNTANTSLONDON6 July 2007 Notes: 1. The maintenance and integrity of IDOX plc website is the responsibility of the directors: the interim review does not involve consideration of these matters and, accordingly, the company's reporting accountants accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. 2. Legislation in the United Kingdom governing the preparation and dissemination of the interim report differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange