StatPro Regulatory News (SOG)

28 Feb 2005 07:00

Statpro Group PLC28 February 2005 Monday, 28 February 2005 STATPRO GROUP PLC ("StatPro" or the "Group") Preliminary Results for the Year ended 31 December 2004 StatPro Group plc, the AIM listed provider of portfolio analytics solutions forthe global asset management industry, announces its preliminary results for theyear ended 31 December 2004. Year ended Year ended Change 31 December 31 December 2004 2003 Turnover £9.07 m £8.43 m +8%Statutory Profit before tax £0.16 m £0.15 m +11%Adjusted Profit before tax, amortisation and exceptional items (note 1) £0.64 m £0.47 m +37%Basic earnings per share * 5.3p 0.6p +783%Adjusted earnings per share (note 7) 2.3p 1.6p +44% * including exceptional tax credit (note 5) Highlights • Recurring annualised software revenue up by 14% to £8.41 million (2003: £7.38 million) • Recurring software revenue for 2004 represents 83% of total revenue (2003: 79%) • Recurring annualised Risk product revenue up by 365% to £0.93 million (2003: £0.20 million) • Organic revenue in H2 2004 up 10% on H2 2003 and 13% on H1 2004 • Further year of strong operating cash inflow: • Over £3.00 million inflow in the last two years enabling repayment of outstanding debt • Year end 2004 net cash position of £0.90 million achieved (2003: net debt £0.20 million) Commenting on the results, Justin Wheatley, Chief Executive of StatPro said:"There was a marked improvement in trading in the second half, leading to anoverall improvement in underlying profits for the year as a whole. This trendhas continued into 2005 supported by an encouraging order pipeline. With anotheryear of strong operating cash generation expected, the Board is considering thepayment of a maiden dividend for the current financial year." - Ends - For further information, please contact: StatPro Group plcJustin Wheatley, Chief Executive On 28 February: (020) 7360 4900Andrew Fabian, Finance Director Thereafter: (020) 8410 9876 SmithfieldReg Hoare/Sara Musgrave 020 7360 4900 A briefing for analysts will be held at 9.15 for 9.30am today at the offices of Smithfield, 78 Cowcross Street, London, EC1M 6HE High resolution images are available for the media to view and download free of charge from www.vismedia.co.uk. Notes to Editors: StatPro Group plc is a leading provider of portfolio analyticssolutions for the global asset management industry. StatPro floated on theLondon Stock Exchange in May 2000 and transferred its listing in June 2003 toAIM. StatPro has grown its revenue from continuing operations from £1.8 millionin 1999 to £9.1 million in 2004. CHIEF EXECUTIVE'S REVIEW Highlights of 2004 There was a marked improvement in trading in the second half of 2004, leading toan overall improvement in underlying profits for the year as a whole. This trendhas continued into 2005 supported by an encouraging order pipeline. At the startof 2004 there was much activity from clients and prospects, but the rate ofsigning new business was similar to the level of the previous two years.However, by the third quarter of 2004, there was a pronounced improvement in allareas that continued through to the end of the year. The result was an increasein profitability and a strong operating cash inflow so that we ended the yearwith net cash of £0.90 million (2003: net debt £0.20 million). At the start of2004 we repaid the £1.00 million convertible loan note and we reduced our bankdebt by £0.30 million. Over the last two years we have generated more than £3.00million of operating cash and we remain focused on improving this. The annualised software revenue grew by 14% to £8.41 million. Two thirds byvalue of new software sales occurred in the second half with the result that themajority of this new revenue will be recognised in 2005. A key milestone is thatour annualised recurring software revenues now exceed our recurring cash costs.Revenue from professional services was £1.21 million, slightly down from £1.24million in 2003. However, there was a marked improvement from £0.46 million(2003: £0.58 million) in the first half to £0.75 million (2003: £0.66 million)in the second half of 2004. We remain focussed on improving the level ofprofessional services revenues in 2005. StatPro Risk Management (SRM) During the course of 2004 StatPro invested in the marketing of its StatPro RiskManagement system (SRM) as a credible alternative to other well-establishedsuppliers. When we invested in Riskmap in October 2003, the business had twomain Italian clients; we have since increased this to 15 during 2004 includingsome of the largest asset managers in the world. As a result, annualisedrevenues from SRM have increased from £0.20 million to £0.93 million by 31December 2004. The market place for risk products is significantly larger than that forperformance measurement. Although there are a number of established competitorsin this field, the market place for risk products is changing rapidly in theasset management sector. The prime driver for this is a raft of new regulationto control the use of derivative products. Traditional asset management risksystems focus on tracking error risk, with a bias towards equities. Often, thesesystems are not adapted to deal with assets that have complex risk profiles,such as derivatives. The result has been that asset managers have turned to thebanking sector to find systems that can analyse derivatives. However, mostbanking sector systems are not adaptable to asset management analysis and can beextremely expensive. SRM, which has its origin in the banking sector, has been adapted to the assetmanagement sector, and uses a historical simulation model that can analyse therisk of any type of asset. Importantly, we are able to market the system at aprice that is within the typical asset manager's budget, as well as help themcomply with local regulations. In Germany for instance, the new directive onrisk (based on UCITS III) requires asset managers to compute the Value at Risk(VaR) for each portfolio and to publish this measure on a monthly basis, and oneof our clients was the first German asset manager to achieve compliance withthese regulations. Regulatory organisations in other countries (including Austria, France, Ireland,Italy, Luxembourg and the Netherlands) have already published, or are about topublish, rules governing distribution of products with derivatives. Althoughregulations in each country may vary, the basic requirement is to calculate andpublish VaR for all public portfolios and to use risk models that havecomprehensive asset coverage. Whilst these developments are at an early stage,we believe that their impact represents a major opportunity for StatPro. Inaddition to regulation, the general increase in use of complex derivatives andgreater interest in alternative asset and absolute return strategies means thatwe anticipate further demand for SRM in countries even where no new riskregulation is currently planned. Regional Performance and Outlook Owing to the demand for risk systems, continental Europe was the largestcontributor to new business in 2004 with 58% by value of new business. Newsoftware contracts in the UK and US were at similar levels with both marketspicking up more in the second half. However, we signed two important contractsin the last quarter of 2004 that should provide opportunities to grow ourbusiness beyond our current market focus. One deal is with a US based providerof outsource solutions to the private banking sector. This client will use theStatPro Performance & Attribution system (SPA) to provide multi-currencyattribution analysis for their own clients, and our revenue is expected to growas we are charging on a per portfolio basis. Similarly, we have been selected bythe UK custodian of a US-based tier one investment bank to provide performancemeasurement and risk analysis on a bureau service basis to their clients; thisis also charged per portfolio. We are currently in discussion with a number ofother organisations that recognise StatPro's expertise in portfolio analyticsand are considering using our systems and services to supplement the servicesthey currently offer. We believe that leveraging the larger distribution of suchpartners is efficient and will not compete with our traditional direct salesapproach. Products In a competitive market it is important for a business to identify how it addsvalue. At StatPro our approach is to focus on making software that offers betterand more sophisticated analysis than any other provider. The new multi-currencyversion of our StatPro Fixed Income attribution system (SFI) system will belaunched later in 2005. Fixed income attribution is more complex than equityattribution as there are many more valid models compared to equity attributionanalysis. If we are able to offer a system that provides the analysis bond fundmanagers require and can also scale up to deal with the significant quantity ofdata to be processed, then we believe we will have a system, which will prove tobe unique in the market. Whilst we do not anticipate any material revenuegeneration this year from SFI, we believe that there will be solid demand forthe system from many of our existing clients and prospects, which enhances theoutlook for 2006. We are making excellent progress with our new Composites Manager system. This isdue to replace our market leading product StatPro Composites in early 2006.Composites Manager is an internet based product and the response we havereceived from clients who have seen early versions of it has been entirelypositive. We are hoping to start beta tests in the fourth quarter Many clients, and particularly those in the US, require the ability to handlevast quantities of data. Therefore a key focus of our development efforts is toincrease the speed of processing and capacity of each of our systems and we havealready made significant advances in this area during 2004. The original versionof SPA could manage only a few hundred portfolios. Now, the system can processtens of thousands of portfolios. SRM is already scalable, and we have one clientwhich will be processing risk analysis on around 1.8 million portfolios in totalper day. Summary Following three years of difficult market conditions we are seeing tentativesigns of recovery but cannot yet be wholly confident that the market has turned.However, given the improved market conditions, the opportunities provided to usby new regulations in the EU, and the increase in new business in the secondhalf of 2004, we feel positive about the outlook for 2005. Regardless of marketconditions, we will continue to focus the business on steadily improving bothprofits and cash flow, whilst also investing for the future growth of thebusiness. With around 40% of our staff working in product research anddevelopment, we are continuing to invest significantly in the future growth ofthe business. Given two years of positive cash generation and in the light of more favourablebusiness conditions, the Board is considering the payment of a maiden dividendfor 2005. I would like to offer all our staff my personal thanks for their excellent workin 2004. I believe the quality of the people that make up StatPro is exceptionaldue to the level of expertise in analytics and development and whilst this is anasset that does not show on the balance sheet, it is very valuable nonetheless. Justin WheatleyChief Executive OPERATING AND FINANCIAL REVIEW Overview StatPro has continued its record of growing revenue each half year since itsflotation in 2000 and the business has generated over £3.00 million of operatingcash flow during the past two years. The value of new software contracts signedin the second half of 2004 was more than twice the amount contracted in thefirst half of the year and as a result we achieved a 14% overall growth inrecurring software revenues to £8.41 million by the end of December 2004. TheGroup made investments in new products and further infrastructure, and generatedan operating profit and operating cash inflow, ending the year with a net cashposition of £0.90 million (2003: net debt £0.20 million). Our Risk product nowdelivers annualised recurring revenue of £0.93 million, representing a growth of365% in the value of contracts since acquiring RiskMap (now StatPro Italia) inOctober 2003. Turnover Group turnover increased by 8% (9% at constant exchange rates) to £9.07 million(2003: £8.43 million). Software licence revenue grew by 12% to £7.49 million(2003: £6.66 million) and represents 83% (2003: 79%) of our turnover in theyear. The level of professional services revenues of £1.21 million was at asimilar level to the prior year (2003: £1.24 million), but in the second halfthere was a marked improvement compared to the first half. The proportion ofconsulting to existing clients remained relatively high at around 70%. Otherrecurring revenue from the TAP royalties, a legacy product which has noassociated costs of delivery, fell by 30% to £0.37 million (2003: £0.53million). The split of revenue by type was as follows: Year to Year to Growth 31 December 31 December year on 2004 2003 year £ million £ million %TurnoverSoftware licences 7.49 6.66 +12Professional services 1.21 1.24 -2TAP royalties 0.37 0.53 -30 ------- ------- ------ 9.07 8.43 +8 ------- ------- ------ Recurring revenue The underlying recurring revenue from software licences at the end of December2004 grew to £8.41 million (2003: 7.38 million), an increase of 14% year on year(15% at constant exchange rates). New contracts net of cancellations amounted to£1.08 million (2003: £0.81 million). Overall, foreign exchange movementsresulted in a reduction of £0.05 million (1%) in the revaluation of the netvalue of contracts to the 2004 year-end rates compared with the 2003 year-endrates, mainly due to further weakness in the US dollar. The recurring revenue isanalysed as follows: Annualised value At 31 New contracted revenue Net impact of At 31 Growth£ million December (net of cancellations) exchange December year on 2003 rates 2004 year %Recurring revenuesSoftware licences 7.38 1.08 (0.05) 8.41 +14TAP royalties 0.53 (0.16) - 0.37 -30 ------- ------- ------- ------- -------Total recurring revenue 7.91 0.92 (0.05) 8.78 +11 ------- ------- ------- ------- ------- As well as gaining a number of important high value client contracts, around 55%of our new licence revenue was from existing clients. As a result we now have 28client groups each subscribing more than £100,000 per annum, of which 18subscribe more than £150,000 per annum. We concluded a number of strategicoutsourcing contracts for performance measurement bureau services which havevariable revenue amounts associated with them depending on the number ofportfolios processed. We expect this segment of our business to grow over thecoming years. The proportion of recurring revenue on multi-year contracts increased from 33%at the end of 2003 to 44% at the end of 2004. This percentage has increased from4% at the start of 2002, when we first changed our policy to multi-year deals. Operating expenses Operating expenses (before goodwill amortisation and exceptional item) increasedby 7% (9% at constant exchange rates) to £8.32 million (2003: £7.78 million).The main reasons for the cost increase compared to 2003 are the full year impactof our acquisition of RiskMap in October 2003 and the associated costs inproviding risk data, the opening of our South African office and the operatingexpenses (before goodwill amortisation) for SiSoft, for the six-month periodfollowing its acquisition in June 2004 (amounting to £0.06 million). Theexceptional item of £0.09 million (2003: nil) relates to compensation for lossof office and related expenses. Earnings before interest, tax, depreciation and amortisation and exceptionalitemsEarnings before interest, tax, depreciation, amortisation and exceptional items('EBITDA') before the impact of the acquisition of SiSoft in 2004, amounted to£1.03 million (2003: £0.89 million), an increase of 16%. Including the impact ofthe acquisition EBITDA increased by 9% to £0.97 million (2003: £0.89 million) asshown in the following table: Year to Year to Year to 31 December 31 December 31 December Year to 2004 2004 2004 31 December £ million £ million £ million 2003 Change Continuing Acquisition Total £ million % Revenue 9.07 - 9.07 8.43 +8Operating expenses * (8.04) (0.06) (8.10) (7.54) +7 -------- -------- -------- -------- EBITDA 1.03 (0.06) 0.97 0.89 +9Depreciation (0.22) (0.00) (0.22) (0.24) -8Goodwill amortisation (0.37) (0.01) (0.38) (0.32) +19 -------- -------- -------- -------- Operating profit (before exceptional item) 0.44 (0.07) 0.37 0.33 +13Exceptional item (0.09) - (0.09) - n/a -------- -------- -------- -------- Operating profit 0.35 (0.07) 0.28 0.33 -15 -------- -------- -------- -------- * before depreciation, goodwill amortisation and exceptional item Our strategy remains to invest a significant proportion of our revenue in newand improved products to ensure we remain at the forefront of performance andrisk analytics technology. We have now spent an average of 22% of our revenue onresearch and development since 2000 to improve our products and to maintain ourcompetitive advantage. Within our operating expenses of £8.32 million (beforegoodwill amortisation), £1.51 million (2003: £1.17 million) was spent onresearch and development. Employees There was an increase in the average number of employees during the year from 77to 85 mainly due to the full year effect of the acquisition of RiskMap, and theimpact of the employees joining with SiSoft. During the year we also opened anoffice in Cape Town to deal with our growing client base in South Africa. Weended the year with a total of 89 employees, situated in eight locations(London, Paris, New York, Milan, Frankfurt, Luxembourg, South Africa andBrisbane). Interest Net interest expense, which results from interest accrued on the bank loans,including related financing costs, and finance leases, less interest earned oncash and deposits, amounted to £0.12 million (2003: £0.18 million). Profit before tax and Taxation The profit before taxation grew by 11% to £0.16 million (2003: £0.15 million).The current corporation tax charge for the year is £0.04 million (2003: £0.01million) relating to an overseas subsidiary. An exceptional credit of £1.47million for deferred tax arose in the year relating to the recognition of grouptax losses. In the opinion of the directors this deferred tax asset will berecoverable with reasonable certainty against tax on trading profits in futureyears. The recognised deferred tax asset amounts to 53% of the potentialdeferred tax asset for the group (see note 5). Equity minority interests The equity minority interests amounting to £0.16 million (2003: £0.07 million)relate to the minorities' share of losses in StatPro Italia, StatPro Australiaand SiSoft. Earnings per share Basic earnings per share amounted to 5.3p (2003: 0.6p). Earnings per sharebenefited considerably from the tax credit referred to above. The earnings pershare before goodwill amortisation and exceptional items was 2.3p (2003: 1.6p).The diluted earnings per share in 2004 is 5.3p (2003: 0.6p) based on potentiallydilutive shares outstanding amounting to 371,770 (2003: 308,853). Balance Sheet The Group's net liabilities reduced to £1.12 million at 31 December 2004 from£2.71 million at 31 December 2003. The main movement in the year relates to therecognition of £1.47 million of deferred tax asset on the balance sheet. Thebalance sheet includes deferred income of £5.37 million (2003: £5.23 million),which is a non-cash liability and has a significant adverse impact on thereported net liability position of the Group balance sheet. Fixed assets Total capital expenditure amounted to £0.17 million in 2004 (2003: £0.10million). Goodwill arising during the year amounted to £0.06 million on theinvestment in SiSoft and there was a fair value adjustment of £0.05 million inrelation to the investment in RiskMap in 2003. The other main component of thetotal goodwill balance of £0.47 million (2003: £0.74 million) arose on theacquisition of AMS S.A. in 2000. Goodwill is amortised over a five-year period. Current assets The level of debtors increased to £4.11 million (2003: £3.03 million). Includedwithin debtors recoverable after more than one year is deferred tax of £1.47million (2003: nil). Further improvements in working capital management resultedin lower trade debtors, the largest component of debtors, amounting to £1.99million at the end of 2004 (2003: £2.24 million). The level of cash at bank andin hand reduced to £2.15 million (2003: £2.29 million). Creditors The main movement in creditors has arisen following the repayment of the £1.00million convertible loan note and £0.30 million of bank debt in early 2004.Deferred income increased by 3% to £5.37 million from £5.23 million. Of the£5.37 million, £5.29 million is expected to be recognised in 2004. The level ofshort-term creditors (excluding deferred income and short-term debt) increasedby 8% to £1.73 million (2003: £1.61 million). Long-term creditors include £1.19million of bank debt (2003: £1.46 million). Cash flow and financing We generated an operating cash inflow of £1.45 million during 2004 (2003: £1.57million). Whilst the operating cash flow was 8% lower than the previous year,the underlying cash flow in 2004 was stronger than 2003, which had benefitedfrom some one-off working capital movements. The net cash position at 31December 2004 was £0.90 million (2003: net debt £0.20 million). Share capital and reserves The issued share capital amounted to £0.33 million (2003: £0.33 million)representing 33,199,244 shares of 1p nominal value (2003: 33,089,244) as aresult of the issue of 110,000 shares issued on exercise of options underemployee share option schemes. The share premium account was £8.56 million(2003: £8.56 million). The equity minority interests of £0.23 million (2003:£0.07) have been deducted in computing the total capital employed. Dividend Following two years of cash generation, the directors are considering itsdividend policy. The directors are not proposing to recommend a dividend for theyear ended 2004 but plan to apply to the Court to reduce the Company's sharepremium account and eliminate the deficit on the profit and loss account so asto enable the payment of dividends in the future. A resolution to reduce theshare premium account will be proposed at the Annual General Meeting. Subject tothe confirmation of the reduction of share premium account by the Court, theCompany intends to be in a position to pay its maiden dividend for 2005. Andrew FabianFinance Director Consolidated profit and loss accountfor the year ended 31 December 2004 Unaudited Audited Note 2004 2003 £'000 £'000 Group turnoverContinuing operations 9,072 8,426 --------- ---------Operating expenses before goodwill amortisation and exceptional items (8,317) (7,775)Amortisation of goodwill (383) (321)Exceptional item 4 (93) - --------- --------- Operating expenses (8,793) (8,096) --------- --------- --------- ---------Continuing operations 349 330Acquisition (after goodwill amortisation of £7,000) (70) - --------- --------- --------- ---------Operating profit 279 330 Net interest payable (117) (184) --------- ---------Profit on ordinary activities before taxation 162 146Taxation (including exceptional deferred tax credit of £1,472,000 (2003: nil)) 5 1,435 (14) --------- ---------Profit on ordinary activities after taxation 1,597 132Equity minority interests 6 163 70 --------- ---------Retained profit for the financial year 1,760 202 ========= ========= Earnings per share - basic and diluted 7 5.3p 0.6p --------- ---------Earnings per share - before amortisation of goodwill and exceptional items 7 2.3p 1.6p --------- --------- The results above all relate to continuing operations Statement of group total recognised gains and losses Unaudited Audited 2004 2003 £'000 £'000 Retained profit for the financial year 1,760 202Exchange differences offset in reserves (11) (52) --------- ---------Total recognised gains and losses for the year 1,749 150 ========= ========= Consolidated balance sheetat 31 December 2004 Unaudited Audited Note 2004 2003 £'000 £'000 Fixed assetsIntangible assets 470 737Tangible assets 509 561 --------- --------- 979 1,298Current assets Debtors- Amounts falling due after one year (including deferred tax of £1,472,000 (2003: nil)) 1,758 297- Amounts falling due within one year 2,350 2,728Cash at bank and in hand 2,149 2,292 --------- --------- 6,257 5,317Creditors: amounts falling due within one year 8 (7,059) (7,690) --------- ---------Net current liabilities (802) (2,373) --------- ---------Total assets less current liabilities 177 (1,075) --------- ---------Creditors: amounts falling due after more than one year (1,296) (1,634) --------- ---------Net liabilities (1,119) (2,709) ========= =========Capital and reservesCalled up share capital 332 331Share premium account 8,562 8,559Warrant reserve 424 424Profit and loss account (10,204) (11,953)Equity shareholders' deficit (886) (2,639)Equity minority interests 6 (233) (70) --------- ---------Capital employed (1,119) (2,709) ========= ========= Consolidated cash flow statementfor the year ended 31 December 2004 Unaudited Audited 2004 2003 £'000 £'000 Net cash inflow from operating activities 1,453 1,572 --------- ---------Returns on investments and servicing of financeInterest received 16 34Interest paid (99) (138)Issue costs in respect of bank loan (5) (10) --------- ---------Net cash outflow from returns on investments and servicing of finance (88) (114) Taxation (44) - --------- --------- Capital expenditure and financial investment Purchase of tangible fixed assets (175) (99) --------- ---------Net cash outflow from capital expenditure and financial investment (175) (99) --------- --------- Acquisitions and disposalsCash subscription on acquisition of subsidiary undertaking (100) (282)Costs incurred on acquisition of subsidiary undertaking (6) (32)Cash acquired on acquisition of subsidiary undertaking 120 411 --------- ---------Net cash inflow from acquisitions and disposals 14 97 --------- --------- Net cash inflow before management of liquid resources and financing 1,160 1,456 Management of liquid resourcesMovement in short-term deposits 799 (448) Financing Repayment of bank loan (300) (499)Repayment of convertible loan (1,000) -Repayment of debt assumed on acquisition - (167)Proceeds from issue of ordinary shares 4 21Capital element of finance lease payments (7) (5) --------- ---------Net cash outflow from financing (1,303) (650) --------- ---------Increase in cash in the year 656 358 ========= ========= Reconciliation of operating profit to net cash inflow from operating activities Unaudited Audited 2004 2003 £'000 £'000 Operating profit 279 330Depreciation of tangible fixed assets 221 239Amortisation of goodwill 383 321Decrease in debtors 389 461Increase/(decrease) in creditors (excluding deferred income) 38 (9)Movement in deferred income 146 282Exchange differences (3) (52) --------- ---------Net cash inflow from operating activities 1,453 1,572 ========= ========= Reconciliation of net cash flow to movement in net cash/(debt) Unaudited Audited 2004 2003 £'000 £'000 Increase in cash in the year 656 358Movement in short-term deposits (799) 448Movement on finance leases 7 5Convertible loan repayment 1,000 -Bank loan repayment 300 499Loan assumed on acquisition (30) (167)Repayment of loan assumed on acquisition - 167Other non-cash movements (39) (79) --------- ---------Movement in net cash/(debt) 1,095 1,231Net debt at beginning of year (197) (1,428) --------- ---------Net cash/(debt) at end of year 898 (197) ========= ========= Analysis of net cash/(debt) Cash at bank and in hand (excluding short-term deposits) 1,749 1,093Short-term deposits 400 1,199Convertible debt (net of deferred issue costs) - (1,000)Bank loan (net of deferred issue costs) (1,191) (1,457)Other loans (35) -Finance leases (25) (32) --------- ---------Net cash/(debt) 898 (197) ========= ========= Notes to the preliminary financial statements 1. Profit before tax, amortisation and exceptional item Unaudited Audited 2004 2003 £'000 £'000 Profit on ordinary activities before taxation 162 146Add: Amortisation of goodwill 383 321Exceptional item 93 - --------- ---------Adjusted Profit before taxation, amortisation, and exceptional item 638 467 ========= ========= 2. Segmental Analysis Analysis of revenue by destination is as follows: Growth Unaudited Audited year on 2004 2003 year £'000 £'000 % United Kingdom 2,136 2,330 -8Rest of Europe 4,557 4,057 +12North America 1,552 1,350 +15Rest of the World 827 689 +20 -------- --------Total revenue 9,072 8,426 +8 -------- -------- 3. Acquisition. In June 2004 the Company invested £0.11 million (including related costs) in acquiring a 51% stake in a French company, SiSoft Sarl, which has developed an internet based composites management reporting system and SiSoft Sarl will receive commissions on sales of the product. StatPro has an option to acquire the remaining 49% of SiSoft between 31 March 2009 and 31 December 2014. 4. Exceptional items. The exceptional item of £0.09 million (2003 - nil) relates to compensation for loss of office and related expenses. Included within the taxation is an exceptional credit relating to deferred tax - see note 5 on taxation. 5. Taxation. The current tax charge for the year is £0.04 million (2003: £0.01 million) relating to an overseas subsidiary. There is a deferred tax credit of £1.47 million (2003: nil) relating to corporation tax losses, which in the opinion of the directors will be recoverable with reasonable certainty against trading profits in future years. The recognised deferred tax asset amounts to 53% (2003: nil) of the potential deferred tax asset for the group of £2.75 million (2003: £2.73 million). Unaudited Audited 2004 2003 £'000 £'000 Current tax (37) (14)Deferred tax credit (exceptional item) 1,472 - --------- ---------Taxation 1,435 (14) --------- --------- 6. Equity minority interests. The £0.16 million equity minority interests (2003: £0.07 million) relate to the minorities' share of losses in StatPro Italia, StatPro Australia and SiSoft. The cumulative equity minority interests of £0.23 million (2003: £0.07 million) have been deducted in computing the total capital employed. 7. Basic earnings per share. Basic earnings per share has been calculated based on the profit after taxation and minority interests of £1.76 million (2003: £0.20 million) and the weighted average number of shares of 33,115,271 (2003: 32,913,328). The adjusted earnings per share has been calculated based on the profit after taxation and minority interests, before exceptional items and amortisation of goodwill, amounting to £0.76 million (2003: £0.52 million). The diluted earnings per share in 2004 are 5.3p (2003: 0.6p) based on potentially dilutive shares outstanding amounting to 371,770 (2003: 308,853). 8. Creditors - amounts falling due within one year. The largest component of short-term creditors relates to deferred income, which is a non-cash liability, as shown in the following analysis: Unaudited Audited As at As at 31 December 31 December 2004 2003 £'000 £'000 Bank loans, other loans and finance leases 40 5Convertible loan - 1,000Trade creditors 394 335Corporation tax 7 14Other creditors and accruals 827 857Other taxation and social security 502 401Deferred income 5,289 5,078 --------- --------- 7,059 7,690 --------- --------- This announcement was approved by the Directors on 25 February 2005. Thepreliminary results for the year ended 31 December 2004 are unaudited. Thefinancial information set out in the announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2004 or 31 December2003. The financial information for the year ended 31 December 2003 is derivedfrom the statutory accounts for that year, which have been delivered to theRegistrar of Companies. The auditors reported on those accounts and their reportwas unqualified. This information is provided by RNS The company news service from the London Stock Exchange