SIR.L Regulatory News (SIR)

22 Sep 2005 07:00

Sirius Financial Solutions PLC22 September 2005 22 SEPTEMBER 2005 SIRIUS FINANCIAL SOLUTIONS PLC 2005 INTERIM RESULTS STRONG GROWTH IN PROFITS BUILDING ON ACHIEVEMENT - FOCUSING ON RECURRING REVENUES Sirius Financial Solutions, the specialist supplier of software and services tothe insurance and financial services industry worldwide, today announced itsresults for the half year ended 30 June 2005. HIGHLIGHTS • Total revenues ahead at £10,586,000 (H1 2004: £10,398,000) • Recurring revenues remain strong at £4,077,000 (H1 2004: £3,743,000) representing 38.5% of total revenues (H1 2004: 36.0%) • Operating profit before goodwill amortisation increase of 47% to £750,000 (H1 2004: £509,000). • Intermediary Systems: o Sirius 21 product launched successfully: significant take up with sales to 58 companies with 30 now live o Sirius 21 well received in the New Zealand market • Insurance Systems: o Sirius for Insurance continues to grow internationally o Swift 21, our new hosted product for financial advisers, launched o Sirius Web Services seeing increasing demand for web solutions across all sectors • India development centre already producing promising results and offers prospect of significant future cost reductions • Interim dividend maintained at 0.5p per share (H1 2004: 0.5p) • Adjusted earnings per share (profit before goodwill amortization) up 42% to 3.4p (H1 2004: 2.4p) • Gearing reduced to 4.6% at 30 June 2005 (H1 2004: 9.5%) Stephen Verrall, Chairman and Group Chief Executive of Sirius FinancialSolutions, said: "We had an excellent first six months in 2005, building on the achievements of2004. The Group continues to move forward with ever greater success." "The current financial year has started well and is in line with the Board'sexpectations. Our expanding geographical presence is increasing our marketpresence and allowing more use of our direct sales. As a result we have expandedour sales team and believe that Sirius is well placed to continue growing topline revenues and improve profitability through higher margins." Enquiries: Sirius Financial Solutions (0121 779 8400) Citigate Dewe Rogerson (020 7638 9571)Stephen Verrall - Group Chief Executive Martin JacksonRichard Bowser - Finance Director George Cazenove CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT REVIEW OF FINANCIAL PERFORMANCE Following on from last year's solid performance the Group continues to build onits achievements. I am pleased to report on an excellent first six months of thecurrent year in line with our expectations. Revenues of £10,586,000, slightlyahead of the prior year period (H1 2004: £10,398,000), and a 47% improvement tooperating profit before goodwill amortisation of £750,000 (H1 2004: £509,000).After charging goodwill, operating profit for the period was £269,000 (H1 2004:£75,000). This financial performance supports the Groups aim of continuing toimprove its profit performance. Gearing has further reduced to only 4.6% (H12004: 9.5%). The Group has continued to successfully focus on improving the contribution fromnon licence revenues which has enabled us to absorb the impact of lower initiallicence revenues arising from the transition to a term licence model. Thisapproach will over time ensure a much higher visibility of revenues and removemuch of the impact of the Group's historical dependency on new licence wins. Our three applications, Sirius 21, Sirius for Insurance and Swift, havecontinued to secure run-rate licence sales in the period. The successful markettake up of Sirius 21 together with our other new licence sales have contributedto a noticeable uplift in recurring revenues to £4,077,000 for the period,representing 38.5% of total revenues (H1 2004: £3,743,000 and 36.0%). Our Indian development centre, which was established in Delhi in June 2004, hasbeen highly successful both in terms of productivity and staff retention. Theoperation now has 28 staff and we have immediate plans to increase this to up to50 this year. Over the next two years we expect this cost benefit to flowthrough to improved margins on our professional services. The Company will pay an interim dividend of 0.5p per share on 28 October 2005 toall shareholders on the register at the close of business on 30 September 2005(H1 2004: 0.5p). BUSINESS AND PRODUCT REVIEW The Group continues to operate under its two principal divisions IntermediarySystems and Insurance Systems. INTERMEDIARY SYSTEMS Intermediary Systems is the largest of the Group's new operating units, andaccounts for all revenue derived from the sale and support of Sirius for Brokingto insurance intermediaries of all sizes. It is also responsible for ourinsurance distribution operation, which develops and supports productdistribution between insurers and our broking customers. Sirius 21 The January launch of Sirius 21 secured extensive media coverage and resulted inkey contract wins from competitors. Total sales of Sirius 21 have now been madeto 58 companies of varying sizes of which 30 companies have now gone liverepresenting in total over 800 users. More recently the New Zealand version of Sirius 21 was very well received at theannual broker conference in Christchurch. It is expected that sales orderstaken this year will be delivered from early 2006. Significant customers on the 21 model include Country Mutual Insurance Brokers(part of NFU) and more recently Oval Group West Midlands. INSURANCE SYSTEMS Insurance Systems is responsible for the sale, deployment and support of ourSirius for Insurance application for insurers, underwriters and underwritingagencies; and our Swift application for financial services organisations.Product deployments from this operation extend across territories including theUK, North America, Australasia, the Caribbean, Africa and the Far East. From 1January 2005 this division now includes Sirius Web Services (formerly known asMEDIAmaker) Sirius for Insurance Sirius for Insurance continues to grow internationally with 7 new customercommitments in the first half of the year. These included our first hosted ITsolution for the Insurance market. In Australia, winning AIIL and Calliden has underlined our dominance andcommitment to the Australasian market and in North America we have increased ourpresence with two further deals - leading Medical Malpractice providers; BPISand CIS. Other global signings in the first half of the year include EuropaGeneral and Royal East Africa. In addition 3 further customers have gone live in this period - RSA Curacao,Harmony General and New India. Swift During the period Swift 21, a hosted deployment of our successful Swift productfor financial advisers, has been launched. Also Skipton Financial Services with150 users has gone live with Swift and further services have been sold intoZurich which forms part of the UK's largest multi-tie software solution. Web Services Sirius Web Services (SWS) continues to see increasing demand for web solutionsin all sectors, as companies re-evaluate their web strategy based on the upsurgein internet traffic caused by the widespread adoption of broadband. As a result,revenues from the deployment of web solutions are expected to show growth. Notable successes for the half-year include The Boots Company commissioning andgoing live with a new web presence to support their entry into the US market andthe continued expansion of the SWS developed e-commerce platform for travelinsurance. The construction and deployment of technologies that enable both the core Siriusand Swift applications to be integrated with the web will open up a new layer ofopportunity for SWS. These services will provide for sophisticated e-trading ande-servicing, enabling end to end fulfillment for both clients and agents, directinto the back office environment. PROSPECTS As the number and quality of the live customers sites progresses in all three ofthe Group's products so to does the referenceability of the product and thereputation of the Group. This coupled with our growing geographical spread isstarting to increase our market presence and allow more effective use of ourdirect sales channel. The drive to improve the visibility of future revenues byselling to new customers under term licence arrangements will continue, and feedthrough to our growing base of recurring revenues. The focus continues on improving the contribution made by our professionalservices and non licence revenue which together with the expansion of our Indianoperation will further improve margins. In addition, the reduced customersupport requirements following the launch of Sirius 21 are bringing furtherbenefits to the cost base. In summary, your board is pleased with the progress made in the first half ofthis year. The successful launch of our Sirius 21 managed service offering to the widerbroking market has clearly come at an opportune time. Orders have built month onmonth since the beginning of the year and we are delighted by the acceptance ofthis new model into the market place. This will enable us to continue to buildon our recurring revenues for the years ahead as well as providing a much neededoutsourcing solution to solve the problem of increasingly complex and costly ITrequirements for our customers. In addition we are already seeing a significantreduction in the support demand from customers who have moved to Sirius 21 andthis in turn will enable us to continue to reduce costs and improve marginsgoing forward. We believe the investment we have made in acquiring thiscapability provides Sirius with considerable opportunities for the future. Withthis in mind we have recently extended this service with the launches of Sirius21 to our broking customers in New Zealand and Swift 21 for our IFA customers inthe UK. This year we set ourselves an ambitious target to achieve a record number ofsales of our Insurance company system Sirius for Insurance. The 7 sales reportedabove have without doubt got us off to a flying start in achieving this goal. Itis also pleasing to note that we achieved sales in all of our target markets;North America, Australasia, Africa and Europe. With a view to maintaining this growth momentum, we have this year furtherexpanded our sales team and are hopeful of success in Eastern Europe before theend of the year. Services revenues have remained strong throughout 2005 and we have a good orderbook to carry forward. This coupled with a strong prospect list for all of ourproducts make us optimistic about the prospects ahead. Whilst, as always, thereis much work to do, we do believe that Sirius is well positioned to continue togrow top line revenues and improve profitability through higher margins. I would like to thank both our customers and staff for their continued loyaltyand take this opportunity to welcome Phil Race to the board. He joined Sirius inAugust 2004 as Managing Director of the Insurance Division and has beeninstrumental in the growth and success of this division. As well as becoming aMain Board director, he will continue to be responsible for this division whichnow includes Sirius Web Services. Stephen J Verrall Chairman and Group Chief Executive 22 September 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the six months ended 30 June 2005 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 Note £'000 £'000 £'000 Turnover 2 10,586 10,398 21,704 Cost of sales (5,898) (6,085) (12,453) Gross profit 4,688 4,313 9,251 Distribution costs (1,270) (1,240) (2,479) Administrative expenses:- goodwill amortization (481) (434) (876)- depreciation (270) (201) (432)- other (2,398) (2,363) (4,972) - total administrative expenses (3,149) (2,998) (6,280) Operating profit before goodwill amortization 750 509 1,368Goodwill amortization (481) (434) (876) Operating profit 269 75 492 Interest receivable 19 18 70Interest payable and similar charges (46) (85) (177) Profit on ordinary activities before taxation 242 8 385 Tax on profit on ordinary activities 3 (115) (40) (145) Profit/(loss) on ordinary activities after taxation 127 (32) 240 Minority interests (19) - (3) Profit/(loss) for the financial period 108 (32) 237 Earnings/(loss) per ordinary 1p share: 5 Basic 0.6p (0.2)p 1.4p Diluted 0.6p (0.2)p 1.4p Dividends per share 0.5p 0.5p 1.0p EBITDA 1,020 710 1,800 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the six months ended 30 June 2005 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Profit/(loss) for the financial period 108 (32) 237Exchange difference on retranslation of net assetsof subsidiary undertaking 58 (3) (28) Total recognised gains and losses 166 (35) 209 Prior year adjustment (note 7) 173 - - Total recognised gains and losses since the lastannual report 339 (35) 209 CONSOLIDATED BALANCE SHEET as at 30 June 2005 As restated As restated Unaudited Unaudited Audited As at As at As at 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Fixed assets Intangible assets 5,237 5,163 5,687Tangible assets 1,871 2,289 1,599 7,108 7,452 7,286 Current assets Stocks 3 6 4Debtors 8,276 8,823 7,687Cash at bank and in hand 206 492 1,064 8,485 9,321 8,755 Creditors: amounts falling due within one year (2,823) (3,580) (3,243) Net current assets 5,662 5,741 5,512 Total assets less current liabilities 12,770 13,193 12,798 Creditors: amounts falling due after more than one year (223) (720) (329) Accruals and deferred income (1,063) (1,432) (1,075) 11,484 11,041 11,394 Capital and reserves Called up share capital 177 172 175Share premium account 4,470 4,171 4,393Merger reserve 5,892 5,892 5,892Profit and loss account 956 806 964 Shareholders' funds 11,495 11,041 11,424 Minority interests (11) - (30) Total capital employed 11,484 11,041 11,394 Shareholders' funds may be analysed as:Equity 11,482 11,039 11,422Non-equity 2 2 2 11,484 11,041 11,424 CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2005 Note Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities 6 (294) 1,304 2,613 Returns on investments and servicing of finance (26) (66) (100) Taxation refund/ (paid) 117 14 (248) Capital expenditure and financial investments (423) (576) (67) Acquisitions (32) - (547) Equity dividends paid (174) (85) (170) Net cash flow before financing (832) 591 1,481 Financing (26) (153) (471) (Decrease)/increase in cash (858) 438 1,010 NOTES TO THE UNAUDITED INTERIM REPORT 1. Basis of preparation The interim financial information has been prepared on the basis of theaccounting policies set out in the statutory accounts for the year ended 31December 2004, with the exception of events after the balance sheet date andearnings per share. FRS 21 "Events after the Balance Sheet Date" is effectivefrom 1 January 2005 and is therefore applicable for the first time and has aprior year impact which is detailed in note 7. FRS 22 "Earnings Per Share" alsoeffective from 1 January 2005 has been applied but has no impact. The financial information contained in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985, and hasbeen neither audited or reviewed. The figures for the year ended 31 December2004 are not the statutory accounts for that year of Sirius Financial SolutionsPlc. The statutory accounts for that year have been reported on by thecompany's auditors and delivered to the Registrar of Companies. The report ofthe auditors was unqualified. 2. Analysis of turnover Turnover is analysed by geographic destination as follows: Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 United Kingdom and Europe 8,977 8,865 18,630North America and Caribbean 738 737 1,805Rest of World 871 796 1,269 10,586 10,398 21,704 3. Taxation The charge for taxation for the six months ended 30 June 2005 reflects theanticipated effective rate for the period. 4. Dividend An interim dividend of 0.5p per ordinary share is declared and will be paid on28 October 2005 to shareholders on the register on 30 September 2005. 5. Earnings/(loss) per share The calculation of basic earnings/(loss) per ordinary share is based on theprofit for the half year of £107,929 (June 2004: loss of £32,144; December 2004:profits of £236,755), and on 17,363,053 ordinary shares (June 2004: 17,005,143;December 2004: 17,027,606), being the weighted average number of ordinary sharesin issue during the period. The diluted earnings per ordinary share for the half year ended 30 June 2005 and31 December 2004 is based on the profit for the period of £107,929 (December2004: £236,755) and on 17,489,117 ordinary shares (December 2004: 17,096,084)calculated as follows: 30 June 31 December 2005 2004 Basic weighted average number of shares 17,363,053 17,027,606Dilutive potential ordinary shares:- executive share options and employee SAYE scheme 126,064 68,478 17,489,117 17,096,084 For the half year ended 30 June 2004 the loss attributable to ordinaryshareholders and the weighted average number of ordinary shares for the purposeof calculating the diluted loss per share are identical to those used for thebasic earnings per share. This is because the exercise of share options wouldhave the effect of reducing the loss per ordinary share and is therefore notdilutive under the terms of FRS14. Adjusted earnings per ordinary share Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 Adjusted basic earnings per ordinary 1p share 3.4p 2.4p 6.5p The adjusted earnings per ordinary share is calculated from the profit for thehalf year before goodwill amortisation of £589,160 (June 2004: £402,028;December 2004: £1,113,065), and on 17,363,053 ordinary shares (June 2004:17,005,143; December 2004: 17,027,606), being the weighted average number ofordinary shares in issue during the period. The directors have chosen to present this adjusted earnings per ordinary shareas they believe that it provides a better indicator of the performance of theGroup. 6. Reconciliation of operating profit to net cash (outflow)/inflow from operating activities Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Operating profit 269 75 492Depreciation and amortisation charge 751 635 1,308Changes in working capital and other non-cash items (1,314) 594 813 Net cash (outflow)/inflow from operating activities (294) 1,304 2,613 7. Prior year adjustment The Group has applied FRS 21 "Events after the Balance Sheet Date". Under thisfinancial reporting standard, dividends which have been declared after thebalance sheet date are not recognised as a liability. Accordingly, adjustmentshave been made for the following dividends: Unaudited Audited Six months Year ended ended 30 June 31 December 2004 2004 £'000 £'000 Dividend previously provided 85 173 The prior year adjustment arising from the application of FRS 21 is analysed as follows: £'000The closing shareholders' funds as at 31 December 2004 were restated as follows: Shareholders' funds at 31 December 2004 as previously stated 11,251 Liability for 2004 final dividend not declared at 31 December 2004 173 Shareholders' funds at 31 December 2004 as restated 11,424 £'000 The opening shareholders' funds as at 1 January 2004 were restated as follows: Shareholders' funds as at 1 January 2004 as previously stated 11,071 Liability for 2003 final dividend not declared at 31 December 2003 85 Shareholders' funds at 1 January 2004 as restated 11,156 8. Circulation to shareholders Copies of this interim report are being sent to all shareholders. Furthercopies are available from the company's registered office: 2500 The Crescent,Birmingham Business Park, Solihull, West Midlands, B37 7YE. This information is provided by RNS The company news service from the London Stock Exchange