SIR.L Regulatory News (SIR)

12 Sep 2006 07:01

Sirius Financial Solutions PLC12 September 2006 Sirius Financial Solutions PLC Operating profit before goodwill amortisation increased 50% to £1.1m; recurringrevenue now 40.2% of total revenue Sirius Financial Solutions (AIM: SIR), the specialist supplier of software andservices to the insurance and financial services industry worldwide, todayannounced its interim results for the six months ended 30 June 2006. FINANCIAL HIGHLIGHTS • Total revenues increased 8% to £11,468,000 (H1 2005: £10,586,000) • Recurring revenues up 13% to £4,610,000 (H1 2005: £4,077,000), representing 40.2% of total revenues (H1 2005: 38.5%) • Gross margins improved to 47% (H1 2005: 44%) • Operating profit before goodwill amortisation increased by 50% to £1,101,000 (H1 2005 as restated: £734,000). After charging goodwill, operating profit was £615,000 (H1 2005 as restated: £253,000) • Pre-tax profits increased 154% to £573,000 (H1 2005 as restated: £226,000). Excluding goodwill amortisation, pre-tax profits increased 50% to £1,059,000 (H1 2005 as restated: £707,000) • Adjusted earnings per share* increased 45% to 4.8p (H1 2005 as restated: 3.3p). Significant increase in basic earnings per share to 2.0p (H1 2005 as restated: 0.5p) • A 10% increase in interim dividend of 0.55p per share (H1 2005: 0.5p) OPERATIONAL HIGHLIGHTS • Towergate Partnership, the UK's largest privately-owned insurance intermediary, signed a two-year contract to move 800 users onto Sirius 21. • First sale of Sirius 21 in New Zealand to General Insurance Brokers Ltd • Five new business deals for Sirius for Insurance across the UK, Australasia and North America and eight sales for Swift 21 • Indian development centre headcount reaches planned target of 60 *Adjusted earnings per share is based on profit for the half year beforededuction of goodwill amortisation Stephen Verrall, Chairman and Group Chief Executive of Sirius FinancialSolutions, said: "At this stage we remain confident that expectations for the full year will bemet. We have a solid and growing base of recurring revenues, strong servicesorder book and a healthy prospect pipeline. We continue to focus on building onthe Sirius 21 community and aim to secure new business wins for our Sirius forInsurance product." EnquiriesSirius Financial SolutionsStephen Verrall/ Richard Bowser 0121 779 8400 College HillCarl Franklin/Ben Way 020 7457 2020 CHAIRMAN AND GROUP CHIEF EXECUTIVE'S STATEMENT FINANCIAL REVIEW The Board is pleased to report that Sirius had an excellent first half of 2006following on from a strong performance in 2005. In the six months to June, bothrevenues and profits saw a marked increase over the same period last year. Our major product lines - Sirius 21, Sirius for Insurance and Swift - havebenefited from recent regulatory developments in general insurance as well as agreater recognition of the benefits of IT outsourcing across the insuranceindustry. Furthermore, our "reference" sites have enhanced the visibility of ourproducts in the insurance market, leading to an increased level of interest andlead generation. Revenues increased 8.3% to £11,468,000 (H1 2005: £10,586,000), benefiting from abetter than expected performance in services revenues and the improvement inrecurring revenues. The latter due in part to the ongoing move to term licenses,although this shift has had the impact of lowering year-on-year revenue growth,longer-term revenue visibility has improved significantly. At £4,610,000,recurring revenues now represent 40.2% of total revenues (H1 2005: £4,077,000and 38.5%). Gross margins improved to 47%, compared with 44% last year, as a result of ourcontinuing focus on reducing the cost base, the ongoing move towards the Sirius21 managed service, and the extension of our development facility in India,which is reducing costs and improving productivity. Operating profits before goodwill amortisation have risen 50% to £1,101,000 (H12005 as restated: £734,000). Pre-tax profits increased by 154% to £573,000 (H1 2005 as restated: £226,000). Adjusted earnings per share (excluding goodwill amortisation) increased 45% to4.8p (H1 2005 as restated: 3.3p). Basic earnings per share increased 300% to2.0p (H1 2005 as restated: 0.5p). The company continues to operate close to a net cash position. The company intends to increase its interim dividend by 10% to 0.55p (2005:0.5p) which will be paid on 20 October 2006. BUSINESS AND PRODUCT REVIEW Intermediary Systems Intermediary Systems is responsible for the sale and support of our hosted andmanaged service broking solution - Sirius 21 - and product distribution betweeninsurers and brokers. Turnover for this division was £5,181,000 (H1 2005:£5,144,000), representing 45% of Group revenues. As expected, top line revenue growth in this division appears modest as wecontinue the successful transition to our fully hosted and managed service;Sirius 21. This is driving margin improvement within the business unit as wereplace low margin sales of third-party hardware and software with highermargin, recurring services revenues. More than 140 brokers have signed up for the service since its launch at thestart of 2005 - an increase of 25 over the 115 brokers we announced in April, atthe time of the Preliminary Results. Of these, nearly 100 are now live, comparedwith 71 in April. During the first half, Sirius 21 enjoyed a major contract win with TowergatePartnership, the UK's leading privately-owned insurance intermediary, whichsigned a two-year contract to migrate 800 users within Towergate's commerciallines business onto Sirius 21. Furthermore, during this period we made our first sale of Sirius 21 in NewZealand to General Insurance Brokers Ltd. This significant event marks out thedelivery of the New Zealand version of Sirius 21. We believe the Australasianmarket has considerable potential for Sirius 21 and are confident that moresales will be made in 2006, following its demonstration at the IBANZ regionalbroker conference in August. We plan during September to launch the next phase of our Sirius 21 strategy.This will aim to further strengthen the value of the offering to our customersby enhancing their ability to compete in the area of e-commerce. It is believedthat this will enable us to build on the asset we have in Sirius 21 and therecurring service revenues it will generate in coming years. Insurance Systems The Insurance Systems division is responsible for three major product lines:Sirius for Insurance, Swift and Sirius Web services. Collectively, theygenerated £6,287,000 of revenues (H1 2005: £5,442,000) a 15.5% increase and54.8% of overall group turnover. Our enterprise product, Sirius for Insurance, continues to build on itsreputation as one of the fastest-growing IT solutions for insurance companieswith some 40 sites worldwide. During the first half of 2006, Sirius forInsurance secured four new business deals across the UK, Australasia and NorthAmerica. Noteworthy wins include Commitment Protection, Physicians LiabilityInsurance and Company Oklahoma (PLICO), and subsequent to the half year a secondwin at QBE in New Zealand. In addition seven customers have gone live in 2006, four of which are based inAustralasia: The Medical Indemnity Protection Society (MIPS), Calliden (atailored insurance provider), AIIL in Melbourne and QBE Asia Pacific's firstSirius for Insurance deployment. Other sites were Reliance (India), NEM(Caribbean) and Royal Insurance Malawi (Africa). Our hosted financial advisor product, Swift 21, generated eight additional salesin the first half, including Keay Insurance, Harris & Ford, MIC (GB) Ltd, DavidRoberts & Partners and Perry Appleton. On top of this, Openwork, the Zurichsupported multi-tied network for financial advisers, has gone live with a Swiftnetwork serving more than 2,300 professional advisers - one of the UK's largestSwift deployments. Sirius Web Services (SWS) has achieved year on year growth in both revenues andprofits across both its web and media activities. Strong demand for websolutions in all sectors, combined with increased requirements for mediaservices from corporate customers, produced a performance that exceeded theBoard's expectations. Notable successes for the half-year include the achievement of "preferredsupplier" status for a new client, Rolls Royce. SWS also deployed the firstfull-cycle e-commerce systems for www.propertyrisks.com, which already usedSirius 21. This ground breaking technology will enable all Sirius 21 customersto integrate their back-office systems with the web, providing a valuable newroute to the rapidly-growing market for financial services on the internet. In addition, Sirius Web services strengthened its ongoing relationship with TheBoots Company, which selected SWS to design, develop and deliver its webpresence following its merger with Alliance UniChem. Looking ahead, the rapid growth in internet based transactions and servicescontinues to provide many opportunities for SWS to deliver sophisticatede-trading and e-servicing solutions for both the core Sirius and Swift backoffice environments. This vision is fundamental to the planned launch of thenext phase of Sirius 21. INDIAN DEVELOPMENT CENTRE The planned expansion of our development centre in Delhi, India, has continuedwith staff increasing to 60 from 28 last year. Our Indian development centre hasgone from strength to strength and we now have a cost effective, highly skilledand productive team. MANAGEMENT The Board would also like to take this opportunity to welcome Duncan MacMillanto the company, who takes up the role of Chief Operating Officer on 2 October2006. Although currently a non main board position this appointment will furtherstrengthen the senior team and also increase 'bandwidth' of our ability tointegrate any possible future acquisition. OUTLOOK FOR 2006 The first six months has provided a strong foundation for the Group's aims in2006, with more global sales of Sirius for Insurance and continued run ratesales of our hosted Sirius and Swift 21 services for brokers and financialadvisers We will continue to focus on building the Sirius 21 community and with this inmind we have recently strengthened our sales team with additional recruits. Weare confident that our upcoming product launch will only enhance our propositionin 2007. We aim to secure further new win business for our Sirius for Insurance productin 2006. We have been focusing our efforts on the markets in which we have seenrecent success. In India for example; we are working closely with our partnersHP and Microsoft in presenting an attractive 'joined up' proposition as themarket transitions from tariff to non-tariff. Given our local capability, and areferenceable customer, we are optimistic that this alliance will soon generatefurther business in the region. Finally, the Board would like to thank all of Sirius's staff and customers fortheir loyalty and effort this year. Stephen J VerrallChairman and Group Chief Executive12 September 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTfor the six months ended 30 June 2006 As restated As restated (note 8) (note 8) Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000 Turnover 2 11,468 10,586 21,781 Cost of sales (6,072) (5,898) (11,843) Gross profit 5,396 4,688 9,938 Distribution costs (1,336) (1,270) (2,409) ------------------- --------- ---------- ---------- --------- Administrative expenses: - goodwill amortisation (486) (481) (967) - depreciation (237) (270) (493) - operating exceptional - - (743) - other (2,722) (2,414) (4,969) ------------------- --------- ---------- ---------- --------- - total administrative expenses (3,445) (3,165) (7,172) ------------------- --------- ---------- ---------- --------- Operating profit pre-goodwillamortisation and operating exceptional 1,101 734 2,067Goodwill amortisation (486) (481) (967)Operating exceptional - - (743) ------------------- --------- ---------- ---------- --------- Operating profit 615 253 357 Interest receivable 17 19 26Interest payable and similar charges (59) (46) (88) Profit on ordinary activities beforetaxation 573 226 295 Tax on profit on ordinary activities 3 (207) (115) (237) Profit on ordinary activities aftertaxation 366 111 58 Minority interests (6) (19) (13) Profit for the financial period 360 92 45 Earnings per ordinary 1p share: 5Basic 2.0p 0.5p 0.3pDiluted 2.0p 0.5p 0.3p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor the six months ended 30 June 2006 As restated As restated Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Profit for the financial period aspreviously stated 360 108 90Share-based payment charge (note 8) - (16) (45) Profit for the financial period as restated 360 92 45 Exchange difference on retranslation of netassets of subsidiary undertaking (49) 58 80 Total recognised gains and losses 311 150 125 Prior year adjustment (note 8) 82 - - Total recognised gains and losses since thelast annual report 393 150 125 GROUP RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the six monthsended 30 June 2006 As restated As restated Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Total recognised gains and losses 311 150 125Dividends (219) (173) (261)Shares issued net of expenses and amountsaccrued 74 78 95 Total movements during the period 166 55 (41) Shareholders' funds at 1 January 11,428 11,424 11,424Prior year adjustment (note 8) - 16 45 Closing shareholders' funds 11,594 11,495 11,428 CONSOLIDATED BALANCE SHEETAs at 30 June 2006 As restated As restated Unaudited Unaudited Audited As at As at As at 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000 Fixed assetsIntangible assets 4,318 5,237 4,816Tangible assets 2,039 1,871 1,840 6,357 7,108 6,656 Current assetsStocks 13 3 4Debtors 6 10,443 9,064 10,451Cash at bank and in hand 321 206 651 10,777 9,273 11,106 Creditors: amounts falling due withinone year (3,081) (2,823) (3,616) Net current assets 7,696 6,450 7,490 Total assets less current liabilities 14,053 13,558 14,146 Creditors: amounts falling due aftermore than one year (135) (223) (93) Provisions for liabilities and charges (283) - (370)Deferred income (2,052) (1,851) (2,272) 11,583 11,484 11,411 Capital and reservesCalled up share capital 178 177 177Share premium account 4,558 4,470 4,486Share-based payment reserve 8 137 53 82Merger reserve 5,892 5,892 5,892Profit and loss account 829 903 791 Shareholders' funds 11,594 11,495 11,428 Minority interests (11) (11) (17) Total capital employed 11,583 11,484 11,411 Shareholders' funds may be analysed as:Ordinary shareholders' funds 11,581 11,482 11,409Deferred shares 2 2 2 11,583 11,484 11,411 CONSOLIDATED CASH FLOW STATEMENTfor the six months ended 30 June 2006 Note Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Net cash inflow/(outflow) fromoperating activities 7 398 (294) 903 Returns on investments and servicingof finance (42) (26) (61) Taxation (paid) / refund (53) 117 (99) Capital expenditure and financialinvestments (436) (423) (727) Acquisitions (28) (32) (65) Equity dividends paid (219) (174) (261) Net cash flow before financing (380) (832) (310) Financing 50 (26) (141) Decrease in cash (330) (858) (451) NOTES TO THE UNAUDITED INTERIM ACCOUNTS 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 2005 with the exception of accounting for share-based payments. FRS 20"Share-based Payment" is effective from 1 January 2006 and is thereforeapplicable for the first time and has a prior year impact detailed in note 8. 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 December2005 are not the statutory accounts for that year of Sirius Financial SolutionsPlc. The statutory accounts for that year have been reported on by the company'sauditors and delivered to the Registrar of Companies. The report of the auditorswas 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 2006 2005 2005 £'000 £'000 £'000 United Kingdom and Europe 9,162 8,977 17,797North America and Caribbean 546 738 1,327Australia and New Zealand 814 739 1,472Rest of World 946 132 1,185 11,468 10,586 21,781 3. Taxation The charge for taxation for the six months ended 30 June 2006 reflects theanticipated effective rate for the period. 4. Dividend An interim dividend of 0.55p per ordinary share is declared and will be paid on20 October 2006 to shareholders on the register on 22 September 2006. 5. Earnings per share The calculation of basic earnings per ordinary share is based on the profit forthe half year of £360,774 (June 2005 as restated: £92,275; December 2005 asrestated: £45,648), and on 17,605,467 ordinary shares (June 2005: 17,363,053;December 2005: 17,410,126), 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 2006 isbased on the profit for the period of £360,774 (June 2005 as restated: £92,275;December 2005 as restated: £45,648) and on 17,996,707 ordinary shares (June2005: 17,489,117; December 2005: 17,632,540) calculated as follows: 30 June 30 June 31 December 2006 2005 2005 Basic weighted average number of 17,605,467 17,363,053 17,410,126sharesDilutive potential ordinary shares:- executive share options and employeeSAYE scheme 391,240 126,064 222,414 17,996,707 17,489,117 17,632,540 Adjusted earnings per ordinary share Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Adjusted basic earnings per share 4.8p 3.3p 10.1pDiluted adjusted earnings per share 4.7p 3.3p 10.0p The adjusted earnings per ordinary share is calculated from the profit for thehalf year before goodwill amortisation and operating exceptional item of£846,777 (June 2005 as restated: £573,506; December 2005 as restated:£1,755,490), and on 17,605,467 ordinary shares (June 2005: 17,363,053; December2005: 17,410,126), being the weighted average number of ordinary shares in issueduring 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. Debtors Group Group Group Unaudited Unaudited As Audited Restated Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Trade debtors 9,227 8,385 9,498Amountsreceivableundercontracteddeferredpayment scheme 176 25 66Deferred tax 270 91 272Other debtors 200 125 33Prepaymentsand accruedincome 570 438 582 10,443 9,064 10,451 The June 2005 comparatives have been restated on a consistent basis to the 2005full year and June 2006 half year figures. Trade debtors are now reported grossof any individual customer deferred income balances. The effect of thisrestatement is to increase trade debtors and deferred income by £788,000 at June2005. 7. Reconciliation of operating profit to net cash inflow/(outflow) from operating activities As restated As restated (note 8) (note 8) Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Operating profit 615 253 357Depreciation and amortisation charge 723 751 1,460Changes in working capital and othernon-cash items (940) (1,298) (914) Net cash inflow/(outflow) from operatingactivities 398 (294) 903 8. Prior year adjustment The Group has applied FRS 20 "Share-based Payment". Under this financialreporting standard a charge must be made to the profit and loss account for allshare-based payment transactions. Accordingly, adjustments have been made forthe following share-based payments: The prior year adjustment arising from the application of FRS 20 isanalysed as follows: £'000The closing shareholders' funds as at 31 December 2005 were restatedas follows: Shareholders' funds at 31 December 2005 as previously stated 11,428 Share-based payment charge for the year (45) Transfer to share-based payment reserve 45 Shareholders' funds at 31 December 2005 as restated 11,428 £'000 The opening shareholders' funds as at 1 January 2005 were restated asfollows: Shareholders' funds as at 1 January 2005 as previously stated 11,424 Cumulative share-based payment charge (37) Transfer to share-based payment reserve 37 Shareholders' funds at 1 January 2005 as restated 11,424 This information is provided by RNS The company news service from the London Stock Exchange