StatPro Regulatory News (SOG)

12 Mar 2007 07:03

Statpro Group PLC12 March 2007 Monday, 12 March 2007 STATPRO GROUP PLC ("StatPro" or the "Group") Preliminary Results for the Year ended 31 December 2006 StatPro Group plc, the AIM listed provider of portfolio analytics and datasolutions for the global asset management industry, announces its unauditedpreliminary results for the year ended 31 December 2006. Year ended Year ended 31 December 31 December 2006 2005 ChangeTurnover £14.60 million £10.79 million +35%Profit before tax (before exceptionalitems) (note 3) £2.56 million £1.64 million +56%Profit before tax (after exceptionalitems) £1.14 million £1.64 million -31%Basic earnings per share 3.3p 4.6p -28%Adjusted earnings per share (note 8) 5.8p 4.6p +26%Dividend per share - final proposedfor year 0.7p 0.5p +40%Dividend per share - total proposedfor year 1.0p 0.5p +100% Financial highlights • Recurring annualised revenue up by 75% to £17.66 million (2005: £10.10 million) • Recurring revenue recognised in the year of £12.48 million (2005: £9.13 million) represents 85% of total revenue (2005: 85%) • Net operating margin was 18.1% before exceptional items (2005: 15.4%) overall and 19.2% on continuing operations before exceptional items • Strong free cash flow (cash generated from operations less investment in internally generated intangible assets) of £1.95 million (2005: £1.42 million) • Year end net debt of £7.68 million (2005: net cash £1.82 million) lower than expected due to cash generation ahead of expectations and currency gain on debt • Increased final dividend recommended of 0.7p per share resulting in total dividend of 1.0p (2005: final and total for year 0.5p) Operational highlights • Completion of three strategic acquisitions in 2006 transforming the business resulting in: o increased opportunities in large North American market o StatPro's widest ever range of products o ability to offer integrated data and software solutions • FRI integration and reduction of annualised costs by £1.0 million in line with expectations - active cross selling underway • Average number of products for top 30 clients is now 3.7 products per client Commenting on the results, Justin Wheatley, Chief Executive of StatPro said: "Weenter 2007, as we did in 2006, with considerable confidence. We have a largepipeline of prospects, a growing number of existing clients and a wider range ofproducts and data that meet the complex requirements of increasingly demandingasset managers, who we believe are planning to increase investment in theirsystems. The average value of contracts is expected to be higher than inprevious years and our goal remains to achieve net operating margins of over20%. "We have had a satisfactory start to the current financial year with furtherprogress on the integration of FRI and our cross selling initiatives, andoverall performance is in line with our expectations. We will provide a furtherupdate on trading at our AGM on 16 May 2007." - Ends - For further information, please contact: StatPro Group plcJustin Wheatley, Chief Executive On 12 March: 020 7360 4900Andrew Fabian, Finance Director Thereafter: 020 8410 9876 SmithfieldReg Hoare/Miranda Good 020 7360 4900 Arbuthnot Securities LimitedTom Griffiths/Neil Kirton 020 7012 2000 A briefing for analysts will be held at 9.30am today at the offices of Smithfield, 10 Aldersgate Street, London, EC1A 4AH Notes to Editors: StatPro Group plc is a leading provider of portfolio analyticsand data solutions for the global asset management industry. StatPro floated onthe London Stock Exchange in May 2000 and transferred its listing in June 2003to AIM. StatPro has grown its recurring revenue from less than £1 million in1999 to £17.7 million in 2006. CHIEF EXECUTIVE'S REVIEW HighlightsThis year has been another one of solid performance by StatPro with strongorganic growth complemented by three significant acquisitions. Organic revenuegrew by 18% from £10.79 million to £12.74 million and including acquisitions,revenue increased by 35% (2005: 19%) to £14.60 million. More importantly, profitbefore tax and exceptional items increased by 56% to £2.56 million (2005: £1.64million) and adjusted earnings per share increased by 26% to 5.8p (2005: 4.6p).The net operating margin in 2006 was 18.1% before exceptional items (2005:15.4%) overall and 19.2% (2005: 15.4%) on continuing operations beforeexceptional items. The exceptional costs for 2006, totaling £1.42 million (2005: nil), primarilyrelate to restructuring costs incurred as a result of the acquisition of FRICorporation (FRI). Prior to the acquisition we had identified a series of costsavings we could make and we acted swiftly to implement these initiativesreducing costs for the combined business going forward by approximately £1.0million per annum. Following the acquisition, we implemented our accountingpolicies on software revenue recognition at FRI. This policy, which is moreconservative than FRI's in terms of revenue recognition, has had the effect ofreducing its contribution compared to that expected at the time of theacquisition. We issued 15.25 million of new shares raising £13.16 million beforeexpenses in two placings of ordinary shares during the year to strengthen thebalance sheet and to part fund the acquisition of FRI and we welcome all our newshareholders. At the end of 2006 StatPro's annualised recurring revenue contracts amounted to£17.66 million up from £10.10 million at the start of the year and recognisedrecurring revenue accounted for 85% of total revenues (2005: 85%). Cashgeneration was strong with £1.95 million free cash flow (2005: £1.42 million).In October 2006 we borrowed £12.0 million to complete the acquisition of FRI,but net debt at the end of 2006 was lower than expected at £7.68 million (2005:net cash £1.82 million) due to improved cash generation and a currency gain onour Canadian dollar debt. Acquisitions FRIWe made three acquisitions in 2006 the most significant of which was FRI basedin Canada which was completed on 24 October 2006 for a total considerationincluding expenses of CAD56.46 million (£26.62 million). FRI has two principallines of business; one is a price feed service for asset managers andcustodians; the other a portfolio management system for asset managers. StatProhas identified that there is significant synergy between the data requirementsof our existing clients and the FRI service. Furthermore, the Directors believe we can develop a series of new services bycombining StatPro's expertise with FRI's products. Most important amongst theseis a planned service to price complex assets such as Credit Default Swaps (CDS),Collateralised Debt Obligations (CDO) and Over-The-Counter structured products(OTCs) and many others besides. There has been a significant proliferation ofthese assets over the last few years to the extent that more and more assetmanagers use them. Having independent valuations of these assets is vital inorder to comply with the many new regulations that have been introduced. We areplanning to launch this service at the end of 2007. We also will be providing our clients with other data services such as an indexservice and a fixed income data feed for our product StatPro Fixed Income (SFI).This is in addition to improving and expanding the existing excellent price feedservice already offered by FRI. Early indications suggest that this data servicewill make a positive contribution to our numbers in 2007. FRI's portfolio management system (Raison) has been renamed StatPro PortfolioManagement (SPM). This is a market leading product with a strong client base inCanada. We intend to market this initially in North America only and we havechanged the business model from a licence fee and support model to an annuallicence model. Whilst this has a short term impact on the revenue, the directorsbelieve that in the long run this is the best way to build significantshareholder value. SPM has a solid pipeline of prospects and is expected to makea positive contribution to our results for 2007. AlphaiIn April 2006 we acquired an Australian business called Alphai that developsperformance software. We are integrating this product into our Web Serviceplatform and we expect to launch this late in 2007. This acquisition has alsogiven us a foothold in the Australian market and we recently won a significantnew client there for our SPA and SFI products which we hope will be the first ofmany in the territory. KizenIn May 2006 we acquired a South African business based in Cape Town thatdevelops compliance software. The acquisition has helped reinforce StatPro'sstrong existing position in the South African asset management market where theGroup now has recurring revenues of around £1.4 million. We have been pleasedwith Kizen's progress to date having sold five systems since the acquisition andwe expect to build on this in 2007. New BusinessSales were strong in all regions in 2006 compared with 2005 and previous years.In Europe we had another good year with our Risk, Fixed Income and Performanceproducts all doing well. In South Africa we had an outstanding year with eightnew clients and many sales to existing clients. The UK market was good, but anumber of opportunities were delayed into 2007. The US market finally improvedfollowing a few difficult years with new sales up strongly with a number ofsignificant deals signed with custodian banks. 60% of new business by value came from new clients and 40% from existingclients. The average number of products per client is 1.6. Following ouracquisitions this ratio tends to fall (as a result of an increased number ofclients with initially only one product), but the average number of products perclient for our top 30 clients by total recurring revenue is now 3.7 products andthose top 30 represent about 50% of our recurring revenues. Sales progress was made for all products, but the best performers were Risk(SRM) and Fixed Income (SFI). Indeed there is a strong interrelationship betweenthese two products as they are both required by clients to help analyse the riskand return from complex credit instruments and StatPro's continued expertise inthis domain has helped cement our position in the market as a leading supplier. StrategyOur strategy remains to build strong relationships with our clients and providethem with a coherent product platform that delivers both better value and betteranalysis. This means that we have grown the Group by acquiring new products andinvesting in such products for growth, rather than developing products frominception. Since StatPro was founded in 1994 we have made eight acquisitions intotal, all of them adding a new product, new skills, new clients and newterritories. The acquisition of FRI allows us to provide our clients with data for the firsttime so that we will now be able to offer a complete service. As we expand ourproduct base, we believe that our offering becomes more attractive not leastbecause our critical mass is now such that we can offer the highest qualityservice to asset managers of all sizes. Including FRI our regional balance nowmeans that approximately 43% of our recurring revenue comes from North Americaand 48% from the UK and Continental Europe with the Rest of the World(predominantly South Africa and Australia) having about 9%. Completing the acquisition of a company is the first step; integration andmaximisation of efficiencies in the enlarged group is the vital process togenerate value. Four months after completion, the integration of FRI isprogressing well and we have a number of specific integration projects for eachfunctional area of our business processes. Not least amongst these is to promoteour existing products to the FRI clients and the FRI products to the StatProclients in order to achieve cross-sales. Sales processes typically take anaverage of six months to a year, so we are very pleased that we already have ourfirst cross sell of a StatPro product to an FRI client and that the pipeline forfurther cross sells is looking promising. The integration stage will besubstantially completed by the end of the third quarter of 2007 when we will beable to launch a new range of services which combine software with data. The focus of our expertise is now firmly on the burgeoning market of complexassets and we believe that StatPro is very well placed to benefit from theexpertise and intellectual property that is vested in our software. Barriers toentry into this market are becoming higher and we believe that few competitorspossess both the expertise and the geographical infrastructure to deliver thelevel of global service that we offer. We will seek to build on this lead in2007. PeopleAs previously announced, Dominic Wheatley resigned from the Board in January2007. Dominic had been a non-executive director since 1999 helping guide theCompany through its major transition from an unquoted loss-making business to asuccessful profitable dividend paying AIM listed Company. The business has beentransformed over the past eight years and has grown both organically and byacquisition. The Board expresses its deep gratitude to Dominic for hiscontribution, advice and support and wishes him well in his other businessventures. StatPro's continuing success is all about people and the expertise in thebusiness. I welcome new colleagues who have recently joined and warmlycongratulate all my colleagues on an excellent performance in 2006 and once moreurge everyone to make 2007 StatPro's best year yet. DividendWe paid our maiden dividend for 2005 in May 2006 of 0.5p per share and aninterim dividend for 2006 of 0.3p per share in November 2006 and the Board nowrecommends the payment of a final dividend of 0.7p for 2006 on 30 May 2007 tothose shareholders on the register on 27 April 2007 making a total dividend of1.0p per share for 2006 (2005: 0.5p per share). We intend to maintain aprogressive dividend policy reflecting the balance between the investment needsof the business and growth in underlying cash and earnings per share. OutlookWe enter 2007, as we did in 2006, with considerable confidence. We have a largepipeline of prospects, a growing number of clients and a wider range of productsand data that meet the complex requirements of increasingly demanding assetmanagers, who we believe are planning to increase investment in their portfolioanalytics systems. The average value of contracts is expected to be higher thanin previous years and our goal remains to achieve net operating margins of over20%. StatPro is now a truly international business with just 16% of recurring revenuederiving from UK based clients. This has resulted in an increased exposure tocurrencies, predominantly US dollar, Canadian dollar and euro. Whilst we havecosts in all these currencies, we have a residual profit exposure on thetranslation of results into sterling. We will continue to take reasonablemeasures to hedge our exchange risk including matching currencies of loansagainst net overseas investments and expected cash flows. We have had a satisfactory start to the current financial year with furtherprogress on the integration of FRI and our cross selling initiatives, andoverall performance is in line with our expectations. We will provide a furtherupdate on trading at the AGM on 16 May 2007. Justin WheatleyChief Executive FINANCIAL REVIEW OverviewThree acquisitions were completed during the year including a majortransformational acquisition in North America (FRI Corporation). The recurringannualised value of new contracts signed during 2006 was 52% higher than thatachieved in 2005. With organic revenue growth and through acquisitions the Grouphas increased its recurring revenue substantially to £17.66 million (2005:£10.10 million) and there is now a greater weighting of contracts in the US andCanada. The Group increased its operating profit before exceptional items by 59%to £2.65 million (2005: £1.66 million) and by 47% on the continuing operationsbefore exceptional items. Acquisition of FRI CorporationThe acquisition of FRI Corporation was financed through a mixture of debt andequity. The balance sheet was strengthened by the issue of equity and thegearing was increased as a result of the bank debt finance but the directorsbelieve that the shareholders will benefit from the Group's financial gearing. TurnoverGroup turnover increased to £14.60 million (2005: £10.79 million), of which£1.87 million related to acquired businesses. StatPro has maintained its recordof growing revenue each year since its flotation in 2000 and the growth rate haspicked up in 2006 to 35% (2005: 19%) including the contribution fromacquisitions of 17%. We have applied StatPro's more conservative accounting policy to FRI in relationto revenue recognition. The impact of exchange rates on revenue and profit wasnot material to the Group's results for the year although the fall in theCanadian dollar in the last quarter of 2006 by around 9%, combined with thechange in accounting policy, did impact FRI's reported revenue and profit beforetax compared to our original expectations. Software licence revenue grew by 28% to £11.66 million (2005: £9.13 million).Around 60% of new licence revenue was from new clients. Data revenue (derivedfrom the acquisition of FRI), amounted to £0.82 million for the two months sincethe acquisition. Total recurring fees represent 85% (2005: 85%) of annualrevenue. The level of professional services revenues of £2.12 million was up by28% compared to the prior year (2005: £1.66 million) due to the higher level ofnew business and the contribution from acquisitions. The split of revenue for the year by type was as follows: Year to Year to Growth 31 December 2006 31 December 2005 year on year £ million £ million %Group revenueSoftware licences 11.66 9.13 +28Data fees 0.82 - n/a ------- ------- -------Total recurring fees 12.48 9.13 +37 Professional services 2.12 1.66 +28 ------- ------- ------- 14.60 10.79 +35 Recurring revenueThe annualised recurring revenue from software licences and data fees at the endof December 2006 grew to £17.66 million (2005: £10.10 million), an increase of75% year on year (21% before impact of acquisitions and exchange ratemovements). Included within recurring revenue is revenue from data which is notcommitted but relates to "overage". One of the initiatives since the completionof the acquisition of FRI is to endeavour to secure as much of this uncommittedrecurring revenue as possible and to move data contracts, which tend to be onlyone year commitments, to longer term contracts to secure the recurring revenuefurther. New contracts, net of cancellations, amounted to £2.10 million (2005: £1.37million). Contracts acquired amounted to £6.51 million based on the exchangerate at the relevant acquisition date. The net impact of the revaluation ofcontracts to the year end exchange rates amounted to a reduction of £1.05million due to a significant fall in the value of currencies (principally the USdollar and Canadian dollar) against sterling at 31 December 2006 compared with31 December 2005. Growth rate (excluding contracts Net acquired growth New contracted and rate At 31 revenue Contracts Net impact At 31 exchange (including Annualised December (net of acquired with of exchange December rate contractsvalue 2005 cancellations) acquisitions rates 2006 movements) acquired) £ million £ million £ million £ million £ million % % RecurringrevenuesSoftwarelicencesand data fees 10.10 2.10 6.51 (1.05) 17.66 +21 +75 The proportion by value of recurring software licences on multi-year contracts(licence agreements with more than one year remaining contractually committed)increased to 57% at the end of 2006 from 53% at the end of 2005. We now have 29(2005: 21) client groups each subscribing more than £150,000 per annum. The range of products in our current offering has been greatly enhanced in thelast year with the addition of StatPro Portfolio Management ("SPM"), StatProPortfolio Compliance ("SPC") and StatPro Data Service ("SDS"). The directorsbelieve that opportunities for selling data solutions in combination with ourenhanced analytics product suite will lead to future growth for the business. Operating expenses and exceptional itemsOperating expenses (before amortisation of intangibles and exceptional items)increased by 29% to £10.29 million (2005: £7.97 million) as a result of a 44%increase in the average number of employees during the year from 98 to 141,predominantly as a result of acquisitions. The major increase resulted from theacquisition of FRI, which brought 110 people in two offices (Toronto andMontreal). The Alphai acquisition resulted in us acquiring five new employeesand a Sydney office and the Kizen acquisition (six additional employees) allowedus to integrate our two offices in Cape Town. We ended 2006 with 233 employees(2005: 105) situated in eleven offices (London, Paris, Milan, Frankfurt,Luxembourg, Toronto, Montreal, New York, San Francisco, Cape Town and Sydney).Other costs for the business which have increased in the year relate to dataacquired from third parties, exchange fees and other costs such astelecommunications required to deliver an integrated data and software service. The operating expenses (excluding exceptional items) relating to theacquisitions amounted to £1.51 million. As part of the restructuring of thebusiness operations we incurred exceptional costs amounting to £1.42 million(2005: nil). These costs relate to redundancies and other terminations, onerouslease commitments and other integration and restructuring costs and are expectedto result in reduced annual operating expenses going forward of around £1.0million, in line with expectations. The cash element incurred in 2006 wasapproximately £0.33 million. Investment in research and developmentThe Group continues to increase its investment in research and development. Thecarrying value of development costs, including acquired technology and customercontracts, amounted to £4.55 million (2005: £2.31 million). Developmentexpenditure is amortised over a three year period as this is the period that thedirectors expect the benefits to arise from the investments. The estimateduseful life for customer contracts varies between three and seven years. Theamortisation of intangibles amounted to £1.67 million in 2006 (2005: £1.15million). The carrying values, which are analysed by product, are consideredcarefully by the Board and if there has been any impairment in any developmentcosts then the carrying value is written down accordingly. InterestPrior to the acquisition of FRI Corporation, which was partly debt financed, theGroup was generating net interest income. As a result of the interest on theloan drawn down in October 2006 to finance the acquisition of FRI there was anet interest expense for the year as a whole amounting to £0.09 million (2005:£0.02 million). Profit before taxThe profit before taxation and exceptional items grew by 56% to £2.56 million(2005: £1.64 million). The profit before taxation after exceptional itemsreduced by 31% to £1.14 million (2005: £1.64 million). TaxationThere was a net credit to taxation amounting to £0.08 million as a result of thedeferred tax credit exceeding the current tax charge of £0.05 million. In 2005there was a nil tax charge overall. The Group level of deferred tax recognisedincreased mainly as a result of deferred tax arising on acquisitions in 2006 to£2.27 million (2005: £1.52 million). In the opinion of the directors thisdeferred tax asset will be recoverable with reasonable certainty against tax ontrading profits in future years and the level of the deferred tax balance isconsidered reasonable in the light of future probability of recovery of thewhole amount of deferred tax. The recognised deferred tax asset amounts to 57%(2005: 61%) of the potential deferred tax asset for the Group. Earnings per shareBasic earnings per share amounted to 3.3p (2005: 4.6p). Adjusted earnings pershare before exceptional items were 5.8p (2005: 4.6p). Fully diluted earningsper share in 2006 were 3.2p (2005: 4.5p) based on potentially dilutive sharesoutstanding amounting to 1,587,334 (2005: 426,591). Balance SheetThe Group's net assets increased substantially to £19.68 million at 31 December2006 from £3.03 million at 31 December 2005. This was mainly as a result of anincrease in equity during the year of £14.94 million (including exchangeableshares on FRI acquisition) and the net profits attributable to equityshareholders of £1.32 million. Non-current and current assetsGoodwill arising on acquisitions during the year amounted to £28.76 million; theprincipal component related to the acquisition of FRI Corporation. The goodwillrelating to the acquisition of Delve, which was completed in 2005, has beenadjusted by £0.24 million reflecting an adjustment to the estimated deferredconsideration. Goodwill arising on all acquisitions has been reviewed and therehave been no impairments to any goodwill. Total capital expenditure amounted to £0.30 million in 2006 (2005: £0.19million). Included within non-current assets is deferred tax of £2.27 million(2005: £1.52 million). Deferred tax amounting to £0.49 million at 31 December2005 previously reported as current has been reclassified into non-currentassets. The level of current assets increased to £8.68 million (2005: £5.61million). Increased new business and acquisitions resulted in an increase intrade debtors, the largest component of debtors, amounting to £3.78 million atthe end of 2006 (2005: £3.09 million). The level of cash and cash equivalentsincreased to £3.33 million (2005: £1.85 million). Current and non-current liabilitiesThe main movements in creditors have arisen following the increase in deferredincome, creditors and accruals relating to the exceptional charges and the bankdebt arising in 2006. There is also an estimated £4.07 million deferredconsideration arising on acquisitions, which is the directors' currentprojection of the fair value that will ultimately be due under the varioustransactions. However, this amount is uncertain and the eventual payments may behigher or lower than this amount. The directors will review this estimate ateach balance sheet date and adjustments, if any, will be made to the goodwillcarrying value and the deferred consideration. The level of trade and otherpayables (excluding finance leases, corporation tax and deferred income)increased to £4.77 million (2005: £1.99 million). Deferred income, which is anon-cash liability, amounted to £8.67 million (2005: £6.56 million). Cash flow and financingThere was another year of solid cash generation; cash generated from operationsbefore investment in internally generated intangible assets during 2006amounting to £3.89 million (2005: £3.16 million). The free cash flow (cashgenerated from operations less investment in internally generated intangibleassets) of £1.95 million (2005: £1.42 million), was 38% higher year on year (seenote 5) and this includes the impact of approximately £0.33 million ofexceptional cash costs. The net cash investment in acquisitions amounted to£24.52 million during the year, the bulk of which related to the cashconsideration and associated costs payable for FRI Corporation. The net proceedsof share issues during the year amounted to £12.84 million. The acquisition of FRI Corporation was part funded by a new £14.5 millionfacility with our existing bankers, replacing our existing facility. £12 millionis a term loan repayable over five years in quarterly instalments, of whichapproximately £1.86 million is repayable during 2007; the remainder is a £2.5million working capital facility. The net debt position at 31 December 2006 was£7.68 million (2005: net cash £1.82 million). This net debt was lower thanexpected due to an improved cash generation and a currency gain on the Canadiandollar element of our debt. The directors believe that the gearing up of thebalance sheet is in the best interests of the shareholders. Share capital and reservesThe issued share capital amounted to £0.52 million (2005: £0.35 million)representing 52,168,820 shares of 1p nominal value (2005: 35,049,744) and theshare premium account has increased to £13.57 million (2005: £0.89 million) as aresult of the issue of 17,119,076 shares during the year. The bulk of thisrelated to the two placings made in the year; 3.25 million shares were placed inMay 2006 at 80p per share to strengthen the balance sheet and 12 million shareswere placed at 88p per share for the acquisition of FRI Corporation. As part ofthe acquisition of FRI Corporation 1,446,573 exchangeable shares in FRI werecreated and retained by the sellers of FRI, which exchangeable shares areexchangeable for ordinary shares in StatPro. During November and December 2006 atotal of 499,905 were exchanged resulting in the issue of an equivalent numberof StatPro shares. 946,668 exchangeable shares in FRI were outstanding at 31December 2006 and are classified as shares to be issued on the balance sheet. Aspart of the acquisition of Alphai, 1,000,000 shares were issued. The equity minority interests amounting to a net loss of £0.11 million (2005:net profit of £0.07 million) relate to the minorities' share of profits lesslosses for the year. The equity minority interests of £0.14 million (2005: £0.05million) have been deducted in computing the total capital employed. Post balance sheet eventsThe Company paid out £0.24 million of deferred consideration in early January2007 being the first instalment of the deferred consideration for Delvecompleted in July 2005. During March 2007 the directors expect to payapproximately £1.20 million consideration for the 49% of StatPro Italia that isnot currently owned by the Company, of which approximately £0.12 million will bereinvested by the recipients in StatPro shares to be issued at 97.5 pence pershare as announced on 21 December 2006 and the balance in cash. DividendThe directors are recommending a final dividend for 2006 of 0.7p per share(2005: 0.5p) making a total dividend for 2006 of 1.0p per share (2005: 0.5p). Itis intended to pay the dividend on 30 May 2007 to all shareholders on theregister at the close of business on 27 April 2007. Under IFRS, this dividend isnot accrued in these financial statements. A dividend of the same amount willare also be payable by FRI on each exchangeable share that remains outstanding,subject to having sufficient distributable reserves in FRI Corporation.Dividends paid in 2006 amounted to £0.30 million. Going forward we intend tomaintain a progressive dividend policy reflecting the balance between theinvestment needs of the business and the growth in underlying cash and earningsper share. Andrew FabianFinance Director Group income statementfor the year ended 31 December 2006 Notes Year to 31 Year to 31 Year to 31 Year to 31 December December December December 2006 2006 2006 2005 Unaudited Unaudited Unaudited Audited £'000 £'000 £'000 £'000 Continuing Acquisitions Total operations Group Revenue 2 12,737 1,867 14,604 10,786-----------------------------------------------------------------------------------Operating expensesbefore amortisationof intangibles andexceptional items (8,780) (1,508) (10,288) (7,969)Amortisation ofintangibles (1,511) (158) (1,669) (1,154)Exceptional items 3, 4 (674) (747) (1,421) ------------------------------------------------------------------------------------ Operating expenses (10,965) (2,413) (13,378) (9,123) -------- -------- -------- -------- Operating profit 1,772 (546) 1,226 1,663 ----------------------- Interest receivable 106 18Interest payable (195) (42) -------- -------- Profit beforetaxation 3 1,137 1,639 Taxation 6 77 - -------- -------- Profit for the year 1,214 1,639 ======== ======== Profit/(loss)attributable tominority interests (110) 69Profit attributableto equityshareholders 1,324 1,570 -------- -------- 1,214 1,639 ======== ======== Earnings per sharefrom continuingoperations - basic 8 3.3p 4.6p- diluted 8 3.2p 4.5p Statement of recognised income and expense Year to Year to 31 December 31 December 2006 2005 Unaudited Audited £'000 £'000Profit after tax 1,214 1,639Net exchange differences offset in reserves net oftax 738 (81) -------- --------Total recognised income for the year 1,952 1,558 ======== ========Attributable to:Minority interests (91) 78Equity shareholders 2,043 1,480 Consolidated balance sheetat 31 December 2006 As at As at 31 December 31 December 2005 2006 Audited Notes Unaudited (Restated) £'000 £'000AssetsNon-current assetsGoodwill 7 31,577 3,053Intangible assets 4,550 2,308Property, plant and equipment 846 466Other receivables 316 174Deferred tax assets 2,269 1,522 --------- --------- 39,558 7,523 Current assetsTrade and other receivables 5,352 3,759Cash and cash equivalents 3,327 1,853 --------- --------- 8,679 5,612 LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings (1,857) (35)Trade and other payables (4,767) (1,987)Current tax liabilities (53) (26)Deferred income (8,562) (6,487)Provisions - contingent consideration (1,484) - --------- --------- (16,723) (8,535) Net current liabilities (8,044) (2,923) Non-current liabilitiesFinancial liabilities - borrowings (9,145) -Deferred income (109) (75)Provisions - contingent consideration (2,581) (1,500) --------- --------- (11,835) (1,575) Net assets 19,679 3,025 ========= ========= Shareholders' equityOrdinary shares 10 522 350Share premium 10 13,570 891Shares to be issued 10 896 -Other reserves 10 1,824 (90)Retained earnings 10 3,008 1,924 --------- ---------Total shareholders' equity 19,820 3,075Minority interest in equity 10 (141) (50) --------- ---------Total equity 19,679 3,025 ========= ========= The consolidated balance sheet for 31 December 2005 has been restated (see note1) Group cash flow statementfor the year ended 31 December 2006 Year to Year to 31 December 31 December 2006 2005 Notes Unaudited Audited £'000 £'000Cash flows from operating activitiesCash generated from operations 5 3,889 3,155Interest received 106 18Interest paid (12) (13)Issue costs in respect of bank loan - (5)Tax paid (105) (31) --------- ---------Net cash from operating activities 3,878 3,124 --------- --------- Cash flows from investing activitiesAcquisition of/increased investment insubsidiaries (net of cash acquired) (24,517) (858)Investment in intangible assets -development 5 (1,939) (1,738)costsProceeds from sale of property, plant andequipment - 22Purchase of property, plant and equipment (302) (188) --------- ---------Net cash used in investing activities (26,758) (2,762) --------- --------- Cash flows from financing activitiesRepayment of bank loan - (1,200)Net proceeds from bank loan 11,788 -Proceeds from issue of ordinary shares 12,836 551Capital element of finance lease payments - (2)Dividends paid to equity shareholders (298) - --------- ---------Net cash from/(used) in financing activities 24,326 (651) --------- --------- Effects of exchange rate changes 28 (7) --------- --------- Net increase/(decrease) in cash and cashequivalents 1,474 (296) Cash and cash equivalents at start of year 1,853 2,149 --------- --------- Cash and cash equivalents at end of year 3,327 1,853 ========= ========= Reconciliation of net cash flow to movement in net (debt)/cash 2006 2005 Unaudited Audited £'000 £'000Increase/(decrease) in cash and cash equivalents in theyear 1,474 (296)Repayment on finance leases - 2Bank loan repayment - 1,200Net bank loan assumed in year (11,788) -Exchange gain on bank loan 825 -Other non-cash movements (4) 14 ---------- --------Movement in net (debt)/cash (9,493) 920Net cash at beginning of year 1,818 898 ---------- --------Net (debt)/cash at end of year (7,675) 1,818 ========== ======== Reconciliation of operating profit to net cash inflow from operating activities 2006 2005 Unaudited Audited £'000 £'000Operating profit 1,226 1,663Depreciation of tangible fixed assets 261 202Amortisation of intangibles 1,669 1,154Increase in debtors (490) (1,254)Increase in creditors (excluding deferred income) 898 193Movement in deferred income 232 1,130Share based payments 58 59Net loss on disposal of fixed assets 35 8 ---------- --------Net cash inflow from operating activities 3,889 3,155 ========== ======== Notes to the preliminary financial statements 1. AnnouncementThis announcement was approved by the Board of directors on 9 March 2007. Thepreliminary results for the year ended 31 December 2006 are unaudited. Thefinancial information set out in this announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2006 or 31 December2005. The financial information set out in the announcement has been prepared onthe basis of the accounting policies set out in the statutory accounts ofStatPro Group plc for the year ended 31 December 2005. The financial informationfor the year ended 31 December 2005 is derived from the statutory accounts forthat year, which have been delivered to the Registrar of Companies. The auditorsreported on those accounts and their report was unqualified. The consolidated balance sheet for 31 December 2005 has been restated asfollows. Deferred tax amounting to £0.49 million previously classified ascurrent has been reclassified as non-current. The translation reserve lossamounting to £0.09 million previously reported as part of retained earningstogether with the warrant reserve amounting to £2,000 have been included inother reserves. 2. Turnover by destination 2006 2006 2006 2005 Unaudited Unaudited Unaudited Audited £'000 £'000 £'000 £'000 Continuing operations Acquisitions Total Total United Kingdom 2,784 - 2,784 2,478Continental Europe 6,668 168 6,836 5,559North America 2,193 1,357 3,550 1,778Rest of World 1,092 342 1,434 971 -------- -------- -------- -------- Total 12,737 1,867 14,604 10,786 ======== ======== ======== ======== Analysis of recurring revenue by type Sterling value at 31 December 2006 UnauditedType £ millions PercentageSoftware licences 13.87 78.5%Data fees 3.79 21.5% -------- -------- 17.66 100.0%Data includes overage which is expected revenue but not committed amounting to£0.40 million Analysis of recurring revenue by region Sterling value at 31 December 2006 UnauditedRegion £ millions PercentageUnited Kingdom 2.86 16.2%Continental Europe 5.63 31.9%North America 7.54 42.7%Rest of World 1.63 9.2% -------- -------- 17.66 100.0% Analysis of recurring revenue by currency Sterling value at Currency Year end exchange 31 December 2006 value rate UnauditedCurrency Millions 31 December 2006 £ millions PercentagePounds sterling £3.20 1.000 3.20 18.1%Euro €8.33 1.484 5.61 31.8%US Dollar US$8.56 1.957 4.38 24.8%Canadian Dollar C$7.41 2.278 3.25 18.4%Other currencies 1.22 6.9% -------- -------- 17.66 100.0% 3. Profit before taxation 2006 2005 Unaudited Audited £'000 £'000Profit before taxation 1,137 1,639Add back: Exceptional items 1,421 - ---------- ---------Profit before tax and exceptional items 2,558 1,639 ========== ========= 4. Exceptional items. The exceptional items of £1.42 million in 2006 relates toseverance payments, onerous leases and other contracts, and costs relating torestructuring the operations of the combined Group. There were no exceptionalitems in 2005. 5. Free cash flow - reconciliation from statutory heading to businessperformance measure 2006 2005 Unaudited Audited £'000 £'000Net cash inflow from operating activities 3,889 3,155Investment in intangible assets - development costs (1,939) (1,738) --------- ---------Cash generated from operations less investment ininternally generated 1,950 1,417intangible assets ========= =========Cash generated from operations is after the impact of exceptional cash costs ofapproximately £0.33 million in 2006 (2005: nil) 6. Taxation The taxation reconciliation for the year is as follows: 2006 2005 Unaudited Audited £'000 £'000Profit before taxation 1,137 1,639 Current taxTax charge on profit before tax at standard rate ofcorporation tax in the (341) (492)UK of 30% (2005: 30%)Effects of:Expenses allowable/(not deductible) for tax purposes 140 (111)Accelerated capital allowances 6 (26)Other temporary differences (361) 108Differences in tax rates 6 -Tax losses utilised 497 471 ------- -------Total current tax on ordinary activities (53) (50) Deferred taxOrigination and reversal of timing differences 130 50 ------- -------Total taxation credit/(charge) 77 - The tax impact of the exceptional items is as follows: 2006 2005 Unaudited Audited £'000 £'000Tax charge on profit before tax and exceptional items (349) -Tax credit on exceptional items 426 -Net tax credit on profit before tax and after -------- -------exceptional items 77 - 7. Acquisitions During the year the Company acquired the entire share capital of Alphai PtyLimited and Kizen (Pty) Limited and the entire issued ordinary share capital ofFRI Corporation. The provisional fair values and goodwill arising on theacquisitions are as follows: Alphai Kizen FRI Unaudited Unaudited Unaudited £'000 £'000 £'000Share of net assets acquired 94 62 4,172Allocated to intangible assets (technologyand client contracts) 350 100 1,521Other fair value adjustments (10) - (3,911)Goodwill 2,196 1,729 24,839 --------- -------- -------- 2,630 1,891 26,621 ========= ======== ======== Initial cash consideration including costs andadjustments for net 843 639 24,774assets acquired (excluding cash acquired)Share consideration including shares to be issued 770 - 1,273Deferred consideration - provisional estimate 1,017 1,252 574 --------- -------- -------- 2,630 1,891 26,621 ========= ======== ======== The difference between the total movement in goodwill for the year of £28.52million and the goodwill on acquisitions during the year of £28.76 million wasdue to a reduction in provisional estimate for deferred consideration on Delveamounting to £0.24 million. 8. Earnings per share Basic earnings per share is calculated by dividing the profit attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the year as set out below. Earnings per share - basic and diluted Weighted Weighted average average number of Earnings number of Earnings Earnings shares per share Earnings shares per share Unaudited Unaudited Unaudited Audited Audited Audited 2006 2006 2006 2005 2005 2005 £'000 '000 Pence £'000 '000 PenceEarningsper share - 1,324 40,225 3.3 1,570 34,211 4.6basicPotentiallydilutiveshares - 1,587 (0.1) - 427 (0.1)Earningsper ------- -------- ------- ------- -------- -------share - 1,324 41,812 3.2 1,570 34,638 4.5diluted Adjusted earnings per share Weighted Weighted average average number of Earnings number of Earnings Earnings shares per share Earnings shares per share Unaudited Unaudited Unaudited Audited Audited Audited 2006 2006 2006 2005 2005 2005 £'000 '000 Pence £'000 '000 PenceEarningsper share - 1,324 40,225 3.3 1,570 34,211 4.6basicEffect ofoperatingexceptionalitem 1,421 - 3.5 - - -Effect oftaxcredit onexceptional item (426) - (1.0) - - - ------- ------- ------- ------ ------- ------ Adjustedearningspershare 2,319 40,225 5.8 1,570 34,211 4.6excludingexceptionalitems Potentiallydilutiveshares - 1,587 (0.3) - 427 (0.1) ------- ------- ------- ------ ------- ------Dilutedearningspershare 2,319 41,812 5.5 1,570 34,638 4.5excludingexceptionalitems The adjusted earnings per share information has been provided in order to assistthe reader to understand the underlying performance of the business on acomparable basis. 9. DividendThe directors are recommending a final dividend for 2006 of 0.7p per share(2005: 0.5p). This dividend is not accrued in these financial statements. Ifapproved by a resolution at the Annual General Meeting, it is intended to paythe dividend on 30 May 2007 to all shareholders on the register at the close ofbusiness on 27 April 2007. 10. Statement of changes in shareholders' equity Share Share Shares Retained Other Minority Total capital premium to be earnings reserves interests Unaudited account issuedGroup £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1January 2006 350 891 - 1,924 (90) (50) 3,025Shares issued 172 12,679 896 - 1,195 - 14,942Profit forthe year - - - 1,324 - - 1,324Dividends paid - - - (298) - - (298)Share basedpayments - - - 58 - - 58Minorityinterestacquired - - - - - (110) (110)Exchangedifferencesoffset inreserves - - - - 719 19 738At 31December ------- ------- ------ ------- ------- ------- -------- 2006 522 13,570 896 3,008 1,824 (141) 19,679 Other reserves includes warrant reserve, merger reserve, translation reserve(previously reported in retained earnings) This information is provided by RNS The company news service from the London Stock Exchange